CTN Cash and Carry Limited v Gallaher Limited

Lawful pressure may in principle amount to economic duress; the fact that the threatened action is lawful is not conclusive. In arm’s-length commercial dealings, however, a threat to withdraw credit is unlikely to be illegitimate where the supplier is entitled to refuse future dealings and genuinely believes that the customer owes the disputed sum. A monopoly position alone does not establish duress, and the common law does not recognise inequality of bargaining power in ordinary commercial dealings. Lawful-act duress should not be expanded so broadly that settled commercial accounts are routinely reopened. On the combination of features present, the payment was not recoverable for duress.

The appellant operated a cash-and-carry business and bought cigarettes from the respondent on credit. A consignment delivered to the wrong warehouse was stolen before being moved to the intended warehouse. The respondent mistakenly believed that the risk had passed to the appellant and demanded payment of about £17,000.

When the appellant disputed liability, the respondent stated that future credit would be withdrawn unless payment was made. The appellant paid and later sought repayment. The deputy High Court judge rejected the claim on the ground that economic duress was not established. The appeal concerned whether lawful commercial pressure, exerted by a supplier acting under a bona fide belief in its entitlement, vitiated the payment.

1. Disposition. The appeal was dismissed unanimously with costs. It was immaterial whether the payment followed an agreement or was a unilateral act: recovery depended on establishing economic duress.
2. Lawful pressure. Per Steyn LJ, lawful means do not automatically take a case outside economic duress. Earlier authorities, including Thorne v Motor Trade Association [1937] A.C. 797, Mutual Finance, Limited v John Wetton & Sons, Limited [1937] 2 K.B. 389 and Universe Tankships Inc. of Monrovia v International Transport Workers Federation, The Universe Sentinel [1983] 1 AC 366, showed that a lawful threat may in some circumstances be illegitimate.
3. Application. The court identified three decisive features. The dealings were arm’s-length commercial dealings, not dealings involving a protected relationship or a consumer. The respondent was legally entitled to refuse future contracts and to withdraw credit, so its conduct involved neither breach of contract nor tort. It also genuinely believed that the appellant owed the money. A monopoly position could not, by itself, establish duress, since the common law did not recognise inequality of bargaining power in ordinary commercial dealings; the relevant principle was supported by National Westminster Bank Pic v Morgan [1985] AC 686. The combination meant that the pressure was not economic duress.
4. Policy and further observations. Steyn LJ considered that extending lawful-act duress to a commercial demand made under a bona fide claim would create uncertainty and encourage the reopening of settled accounts. Such duress might be rare outside protected relationships, but he deliberately declined to say that it could never arise. The Vice-Chancellor added that, once the risk point was resolved against the respondent, retention of the money might prima facie be unconscionable and a restitutionary claim might be available. That issue was not argued or decided.

1. Court of Appeal (Civil Division): In [1993] EWCA Civ 19, the court unanimously dismissed the appeal with costs.
2. High Court of Justice, Queen’s Bench Division: His Honour Judge Michael Kershaw QC, sitting as a deputy High Court judge, rejected the economic-duress claim in a judgment dated 8 August 1991.