#6757 - Huyton V. Peter Cremer - Restitution of Unjust Enrichment BCL

Huyton v. Peter Cremer

Facts

In this action the plaintiff, Huyton S.A. ("Huyton"), seeks declaratory and injunctive relief to prevent the defendant, Peter Cremer G.m.b.H. & Co. ("Cremer"), from pursuing a claim which Cremer has referred to London arbitration by GAFTA. The claim which Cremer wishes to arbitrate seeks to establish that demurrage under a sale contract entered into with Huyton should have been measured at a rate of U.S.$6500 per day, rather than the U.S.$11,000 which Huyton insisted upon Cremer paying.

The factual background starts with the sale contract dated Sept. 13, 1995 for the shipment and sale by Cremer as seller to Huyton as buyer of 30,000 tonnes Romanian milling wheat plus or minus 10 per cent. at buyer's option at U.S.$175 per tonne f.o.b. spout trimmed Constantza in September/October, 1995.

Cremer is based in Hamburg. It had previously contracted to buy equivalent wheat from Romanian suppliers. Huyton is a Swiss company, owned I was told by Sudanese interests, but represented for most PUrpoSes by a London company, Agrimpex Co. Ltd. Huyton also had a pre-existing commitment, made Aug. 31, 1994, to sell to Sotisco Trading Co. Ltd. ("Sotisco") of Khartoum.

The vessel arrived at Port Sudan on Dec. 22, 1995. Discharge took place and was completed by Jan. 2, 1996. On Jan. 4, 1996, Sotisco complained to Huyton about the gluten content of the wheat, while acknowledging that the contract contained no express term regarding gluten, and ended: Finally, pls be notified tht above cargo will be kept in silo at Port Sudan for your account own risk and expense till this quality dispute is finalized. Contrary to this message, by Jan. 4, 1996, the 7251 tonnes had in fact been removed inland. Huyton did not at this stage pass on Sotisco's complaint to Cremer. On the contrary, it responded to Sotisco on Jan. 3 and 4, rejecting the relevance of gluten content under the contract terms and further relying on the provisions making condition on shipment final.

On Jan. 9, 1996 Cremer presented shipping documents to Huyton's bank, notifying Huyton that it had done so. At 15 29 hours on Jan. 12 Huyton informed Cremer that Huyton's buyer was claiming the wheat to be very dry and of poor quality and said that it would have no alternative but to pass on my claim for damages which it might receive. At 17 05 hours on Jan. 12, 1996 Huyton rejected the shipping documents for a number of alleged discrepancies.

By a message also prepared on the 15th, but not apparently transmitted until Jan. 17 Cremer responded to Huyton's rejection of the shipping documents. Cremer asserted that the cargo had been "accepted upon completion of discharge" on Jan. 2 and that Huyton had thereby "waived any right to reject the documents as presented to you on 10^th.

Agreement to not arbitrate between Huyton and Cremer

On Feb. 6 Cremer said that it found Huyton's attitude "completely unreasonable", and that the simple facts were that -

... you have obtained delivery of the contract goods and you are refusing to pay the full contract price. Despite of what you say we know that you are not in a position to place the goods at our disposal at the port of discharge. Part of the goods have already been removed by your sub-buyers and we know that further quantities are being removed every day.

This last, erroneous statement was doubtless based on the erroneous information received by Cremer from its local agent on Jan. 30. Cremer went on:

Due to your breach of contract we are left in an impossible position. We must accept that we have no real choice but to accept your terms for obtaining payment.

Huyton on Feb. 6 re-presented the documents to the bank under the letter of credit opened by Sotisco, but on Feb. 7 asked Cremer for confirmation that -

...you regard presentation of the amended documents as the first proper presentation of documents and that you irrevocably withdraw your demand to arbitrate on demurrage and the guarantee charges.

Cremer replied that it agreed these points with, for the reasons previously stated, "the greatest possible reluctance". Huyton instructed its bank to pay and it paid the net sum of U.S.$4,502,813.94 on Feb. 9, 1996.

Cremer’s Claim: On Feb. 14, 1996, Cremer confirmed receipt of payment and said that it did not consider itself bound by the so called agreement to allow the deductions and give up the right to arbitrate about demurrage and guarantee expenses. It said that it had been forced to agree these terms by Huyton’s breach of contract and threat to refuse to pay the price despite the fact that Huyton had delivered the goods to its sub-buyers who were removing them from the port of discharge. Cremer therefore confirmed its appointment of its arbitrator. Huyton rejected Cremer's stance and indicated that it would if necessary commence the present action to restrain pursuit of any such arbitration.

Holding

Was there an illegitimate pressure?

One example of illegitimate pressure, in Mr. Schaffs submission, is an actual or threatened breach of contract. That, in Mr. Schaff's submission, is this case. Mr. Schaff accepts that an actual or threatened breach of contract may lead to a valid compromise. Mr. Schaff's primary contention is that Huyton broke or threatened to break the contract with Cremer by refusing to Pay the Price.

There was no breach of contract: The result is that Cremer had no continuing right after 19th or alternatively Jan. 23, 1996 either to present conforming documents and to claim payment of the price or, if it be material, to require payment of the price or any equivalent sum by Huyton on any other basis. Assuming that by the end of January Cremer had obtained amended documents which would have conformed with the contract requirements, this is irrelevant in circumstances where the contract had come to an end at least a week earlier.

It follows from these conclusions that Cremer is unable to establish, in any shape or form, the illegitimate pressure on which it relies in support of its claim that the agreement of Feb. 6/7, 1996 is voidable for duress. The illegitimate pressure pleaded is wrongful failure to pay the purchase price. If one looks at the matter more widely, as Mr. Schaff did during the hearing, Cremer has not shown that there was any other illegitimate pressure in the form of failure to pay the equivalent value of the goods in restitution or damages.

One is left with an agreement made because Cremer found itself faced with a situation where it was unattractive to seek to recover the goods in the Sudan, and to dispose of them there or elsewhere. In the absence of any illegitimate pressure from Huyton to make that arrangement, there is no basis for avoiding the arrangement, and Huyton is entitled to relief preventing Cremer from pursuing an arbitration in breach of it.

In the alternative, did the pressure cause Cremer’s agreement?

Mr. Males submits that other considerations are or may also be relevant, on one or other of various bases. He starts by suggesting a third ingredient of economic duress, that the illegitimate pressure must have left the innocent party with no reasonable alternative to the course he took. He distinguishes in this context between "commercial pressure", even if consisting of an actual or threatened breach of contract, and coercive pressure justifying legal protection.

Significant Cause test for “economic duress”: I start with the requirement that the illegitimate pressure must, in cases of economic duress, constitute "a significant cause" (cf. per Lord Goff in The Evia Luck, at p. 120; p. 165, cited above). This is contrasted in Goff and Jones on The Law of Restitution (4th ed.) p. 251, footnote 59 with the lesser requirement that it should be "a" reason which applies in the context of duress to the person. The relevant authority in the latter context is Barton v. Armstrong, [1976) A.C. 104 (a case of threats to kill).

“Alternate choice” as a Causal Requirement:

The use of the phrase "a significant cause" by Lord Goff in The Evia Luck, supported by the weighty observation in the footnote in Goff & Jones, suggests that this relaxed view of causation in the special context of duress to the person cannot prevail in the less serious context of economic duress. The minimum basic test of subjective causation in economic duress ought, it appears to me, to be a "but for" test. The illegitimate pressure must have been such as actually caused the making of the agreement, in the sense that it would not otherwise have been made either at all or, at least, in the terms in which it was made. In that sense, the pressure must have been decisive or clinching. There may of course be cases where a commonsense relaxation, even of a but for requirement is necessary, for example in the event of an agreement induced by two concurrent causes, each otherwise sufficient to ground a claim of relief, in circumstances where each alone would have induced the agreement, so that it could not be said that, but for either, the agreement would not have been made. On the other hand, it also seems clear that the application of a simple "but for" test of subjective causation in conjunction with a requirement of actual or threatened breach of duty could lead too readily to relief being granted. It would not, for example, cater for the obvious possibility that, although the innocent party would never have acted as he did, but for the illegitimate pressure, he nevertheless had a real choice and could, if he had wished, equally well have resisted the pressure and, for example, pursued...