#10029 - Duress - Restitution of Unjust Enrichment

DURESS

TWO-STAGE TEST

1. Leading HL cases on duress (The Universe Sentinel and The Evia Luck) show that there is a 2 stage test for restitution:

1. the pressure/threat was illegitimate. This is an objective inquiry into the quality of the threat; and

2. the payment (or rendering of a benefit in kind) was caused by that threat. This is a subjective investigation into the claimant’s state of mind

CLEARING UP A FEW BAD VIEWS

1. Relationship to Mistake

1. Birks saw duress as being similar to mistake in that they both relate to impaired consent. However, unlike mistake (which only consider’s the claimant), duress considers the conduct of the person exerting the duress as well as the effect on the claimant. In other words, as Burrows says, one cannot have ‘unilateral duress’

2. Defences that aren’t so

1. Sometimes suggested that it is a defence to restitution for duress that the claimant paid ‘in submission to an honest claim’ (Woolwich v IRC)

2. Burrows says that this is vague. Probably best viewed as synonymous with saying that causation has not been satisfied or that a threat to sue is not illegitimate

3. Duress has to be tortious

1. Despite what Lord Scarman said in The Universe Sentinel, duress doesn’t have to be tortious to constitute duress in the context of unjust enrichment AS CONFIRMED BY

2. Lord Goff in The Evia Luck

4. Duress Constitutes Overborne Will

1. The person under duress still intends D to have the money. So their will is not overborne. The objection is rather that C does not reach that decision freely but rather under illegitimate pressure

5. Third Parties

1. Burrows says that despite no cases confirming this, in principle duress can be invoked against a third party who has not itself exerted the duress

2. This makes it abundantly clear that restitution for duress is not concerned with reprehensible conduct of D

6. Benefits in Kind

1. Cases have only acknowledged so far where duress in relation to money HOWEVER

2. In principle can have duress for benefit in kind. Plus, the fact that D demanded it overcomes subjective devaluation

MAIN HEADS OF ILLEGITIMATE PRESSURE

1. Lord Goff said the categories are not closed.

2. But, these are the ones that have been recognised:

1. duress of the person

2. duress of goods

3. illegitimate threats (other than by a public authority ultra vires) to support a demand for payment above what is statutorily permitted

4. economic duress

5. illegitimate threats to prosecute or sue or publish information

6. illegitimate threats by public authorities made to support ultra vires demands (swallowed up by Woolwich principle though)

CLARIFYING TWO POINTS

1. Implied threat

1. Lord Goff in Woolwich Equitable Building Society stated that the ‘compulsion may be expressed or implied’ SO

2. Implied threats do count

2. Causation Test

1. Barton v Armstrong – test for illegitimate threat only has to be ‘a reason’ for C’s conduct (not necessarily the sole or main reason)

2. Even stated that the burden of proving a reason test was on the defendant BUT

3. Huyton v Peter – suggested that ‘but for’ test should apply to economic duress

CONTRACTS ENTERED INTO BY DURESS

1. Burrows essentially says there should be no separate rule for contracts entered into under duress as there are for non-contractual payments HIS REASON

2. Duress can have an impact on whether there was consideration, thus causing difficulties in determining whether there was a contract ALTHOUGH

3. REMEDIES: the restitutionary remedies are different though where payment was made under contract:

1. No contract = remedy is an action for money had and received

2. Contract = C’s remedy is rescission with a consequential repayment of the money

DURESS OF THE PERSON

1. Barton v Armstrong

1. FACTS: Claimant sought a declaration that the contract, which had been executed, was void on the ground that it had been induced by D threatening C with murder

2. DECISION (Privy Council) – granted the declaration because D’s threats had been a reason for C making the contract

2. Causation

1. In Barton Lord Cross (giving leading judgment) referred to the ‘a’ reason test. SIMILARLY

2. Lords Wilberforce and Simon said: ‘the illegitimate means was a reason (not the main reason, nor the predominant reason, nor the clinching reason)

3. Also said that burden of proof was on D to prove otherwise

DURESS OF GOODS

1. What?

1. Where D improperly threatens not to return C’s goods or to seize them, unless C pays him money, C can recover that money, assuming causation, in an action for money had and received

2. Astley v Reynolds

1. This case shows that primary focus is whether C has freely chosen to pay

ECONOMIC DURESS

GENERAL

1. Scope of doctrine is unsettled

2. Principally includes threats to break a contract or induce another to break a contract

3. The extent to which it extends to threatened lawful acts is uncertain

THREATS TO BREAK A CONTRACT

1. Old Approach

1. Pao On (Privy Council) – used to be that a threatened breach of contract was always regarded as illegitimate. Whether this constituted economic duress was then determined by considering whether C’s will was overborne. So, the old approach focused more on the causation question, rather than both illegitimate question and causation question now required

2. Problems with this overborne will Approach

1. C’s will isn’t overborne. He intends to give D the benefit – it’s just that he was forced into it

2. Burrows suggests that there are two possible interpretations of what is meant by this overborne will language. He takes issue with both.

3. Interpretation 1

1. It refers to a more stringent causation test ie. the predominant cause

2. Birks – critical of such a test, as its impossible to conduct such an inquiry into will

3. Burrows – this is true of most causation tests though he says? BUT

4. Huyton v Peter – Mance J seemed to support at least a ‘but for’ test. So whether there is a more stringent test is not apparent

4. Interpretation 2

1. It means C did not have a free choice – there wasn’t a reasonable alternative to giving into the illegitimate threatened breach of contract

2. Victor Green Publications – ‘over a barrel, he had no alternative but to pay’

3. Subsea v Petroleum – Dyson J said that this ‘no practical alternative’ should even be a third requirement to a duress claim (alongside illegitimacy and causation)

4. OBJECTIONS TO THIS VIEW:

1. Burrows – inconsistent with other areas of duress (eg. Astley v Reynolds)

2. Goff and Jones – its not fair that a person without reasonable courage to go against the threat would be prejudiced

5. Better view

1. Burrows – better approach is for the courts to analyse whether the particular threatened breach of contract is or is not illegitimate (as well as considering the causation question)

How does one decide whether the threatened breach of contract is illegitimate?

1. Tests

a) Burrows – he highlights three tests for this

2. Birks’ Test

1. Birks - whether the threat was made in bad faith ie. intended to exploit weakness of person receiving it

2. D and C Builders v Rees – this decision would fit this bad faith test BUT

3. Atlas Express v Kafco – duress was made out, despite there being no bad faith

4. Burrows – so not only does this not explain previous decisions, but it’s also hard to know what motivates a threatening party.

3. Birks’ 2^nd Proposed Test

1. Is it a threat or a warning?

2. Burrows – but given implied threats are included (Woolwich Equitable) this is too ambiguous

4. 3^rd proposed approach

1. Consider whether the terms proposed by the threatener were fair

2. Burrows – this borrows from presumed undue influence. But nearly all reported cases, whether duress was held to be made out or not, the terms demanded were fair so this is not particularly useful test. Consequently it would produce an extremely narrow doctrine of economic duress ALSO

3. To threaten breach to correct a wrong (eg. where the original bargain was a bad one) is hardly a wrong. Hence why Williams v Roffey economic duress was not made out

5. Burrow’s proposed approach

1. He says that the bad faith approach is the best. But proposes modifications from the other 2 tests. These are:

1. a threat should not be considered illegitimate (made in bad faith) if it’s a reaction to circumstances that almost constitute frustration

2. A threat should not be considered illegitimate if it merely corrects what was already a bad bargain

6. Competing forces in how to decide?

1. Burrows highlights 2 competing forces here:

1. allowing genuine negotiations to continue undisrupted

2. protecting threatened parties (Atlas Express v Kafco went too far in this regard)

7. Contract proposal

1. Burrows proposes that much like mistake, where there is no...