#6783 - Dimskel Shipping Co. V. International Transport Workers Federation - Restitution of Unjust Enrichment BCL

Dimskel Shipping Co. v. International Transport Workers Federation

Facts

A vessel owned by the plaintiffs, manned by 10 Greek and 20 Filipino nationals and flying the Panamanian flag, berthed at a Swedish port and commenced loading. An official of the Swedish Transport Workers' Union, an affiliate of the defendants, acting as an agent of the I.T.F. and in pursuance of the I.T.F.'s campaign against the registration of vessels under flags of convenience, informed the master, officers and crew that the vessel would be blacked unless the plaintiffs entered into I.T.F. employment contracts with the crew. Subsequently an employee of the Swedish Seamen's Union, acting as an agent of both the I.T.F. and the union, in pursuance of the flags of convenience campaign demanded, inter alia, payment of crew members' wages calculated in accordance with I.T.F. wage scales and backdated to the commencement of the employment of the crew members; provision of a bank performance guarantee in the sum of U.S.$200,000 in London; deeds of undertaking that the plaintiffs would not institute proceedings against the Filipino crew members; provision of I.T.F. employment contracts for all crew members; that the plaintiffs should sign a document declaring that they were complying voluntarily with the I.T.F.'s demands; and letters of indemnity for all crew members. Those demands were accompanied by a threat that if they were not met the vessel would be blacked.

On 7 March, as a result of the threatened and actual blacking, the plaintiffs signed the required and other contractual documents and procured the issue of a performance bond.

The plaintiffs subsequently sought declarations that they had lawfully avoided on the ground of duress all the contracts entered into with the I.T.F. in consequence of the latter's actions, and claimed restitution of the sums totalling U.S.$111,743 and damages for the torts of intimidation and interference with contractual rights.

Note: Under the 1974 Labour Relations Act as it stood when the case of Universe Tankships was decided, immunity was available or actions of this nature. But by the time this case came to be decided, the 1974 legislation had been amended by the 1980 Act which provided no immunity for “secondary actions”. This case fell into that category of cases because the threatened blacking was to be carried out by employees of the Swedish Port authority.

Claim: In the present action, the owners claimed declarations that they had lawfully avoided all the above contracts on the ground of duress, including the contracts with the I.T.F. and the contracts with the Filipino seamen. They claimed restitution in respect of the payments made to the I.T.F., including the backdated wages for the Filipino seamen, and the entrance fees, membership fees and welfare fund contributions; these sums were claimed as having been paid under contracts avoided for duress, or alternatively as having been paid under duress. They also claimed the total sum of U.S.$140,067.31 as damages in tort, the torts relied on being intimidation and interference with contractual rights.

Holding

Lord Goff

It appears to have been common ground between the parties that under English law the pressure exerted by the I.T.F. which induced the owners to enter into the contract under which they made the payments to the I.T.F. would amount to duress unless such pressure was legitimised under the relevant system of law. The point at issue between the parties related to the identity of the legal system by reference to which the question whether such pressure had been so legitimised had to be answered. For the owners, it was submitted that it had to be answered by reference to English law as the proper law of the contract, which at the relevant time did not legitimise such action. For the I.T.F., on the other hand, it was submitted that the relevant system of law was Swedish law, as the law of the country where the pressure was exerted; and, as I have recorded, at the relevant time such pressure was lawful by Swedish law.

Need to avoid the contract before granting restitution

It follows that, before the owners could establish any right to recover the money, they had first to avoid the relevant contract. Until this was done, the money in question was paid under a binding contract and so was irrecoverable in restitution. But once the contract was avoided, the money paid under it was recoverable in restitution, on the ground either of duress or possibly of failure of consideration.

The present case is, however, concerned with the anterior question whether the pressure exerted by the I.T.F. constituted duress enabling the owners to avoid the contract on that ground, as they claim to have been entitled to do.

Economic Duress

Causation: It is now accepted that economic pressure may be sufficient to amount to duress for this purpose, provided at least that the economic pressure may be characterised as illegitimate and has constituted a significant cause inducing the plaintiff to enter into the relevant contract (see Barton v. Armstrong [1976] A.C. 104, 121)

Coercion of the Will of the Claimant: It is sometimes suggested that the plaintiff's will must have been coerced so as to vitiate his consent. This approach has been the subject of criticism: see Beatson, The Use and Abuse of Unjust Enrichment (1991), pp. 113-117; and the notes by Professor Atiyah in (1982) 98 L.Q.R. 197-202, and by Professor Birks in [1990] 3 L.M.C.L.Q. 342-351. I myself, like McHugh J.A., doubt whether it is helpful in this context to speak of the plaintiff's will having been coerced. It is not however necessary to explore the matter in the present case. Nor is it necessary to consider the broader question of what constitutes illegitimate economic pressure, for it is accepted that blacking or a threat of blacking, such as occurred in the present case, does constitute illegitimate economic pressure in English law, unless legitimised by statute.

The question which has fallen for decision by your Lordships is whether, in considering the question whether the pressure should be treated as legitimised, the English courts should have regard to the law of Sweden (where the relevant pressure was exerted on the owners by the agents of the I.T.F.) under which such pressure was lawful.

It is enough to state that, by parity of reasoning, not only may an action of restitution be rejected as inconsistent with the policy of a statute such as that under consideration in The Universe Sentinel [1983] 1 A.C. 366, but in my opinion a claim that a contract is voidable for duress by reason of pressure legitimised by such a statute may likewise be rejected on the same ground.

I start from the generally accepted proposition, embodied in rule 184 set out in Dicey & Morris, The Conflict of Laws, 11th ed. (1987), vol. 2, p. 1213, that the material or essential validity of a contract is governed by the proper law of...