Capital Structures Plc v Time & Tide Construction Ltd

Economic duress requires pressure which compels the claimant or removes practical choice, is illegitimate, and significantly induces the contract. Commercial pressure alone is insufficient. Relevant factors include threatened breach, good or bad faith, realistic alternatives, protest, and subsequent affirmation or avoidance.

For summary judgment enforcing an adjudication award, it is sufficient to show an arguable case that the underlying settlement was avoided for duress before the adjudicator completed the adjudication. If the settlement was avoided, its adjudication provision would also cease to support jurisdiction. The court should, however, guard against weak jurisdictional challenges founded on strained interpretations of ordinary commercial negotiations.

The claimant sought summary judgment under Part 24 of the Civil Procedure Rules for an adjudicator’s award arising from a settlement agreement concerning construction subcontract works. The defendant alleged that the settlement had been procured by economic duress and that it had been avoided before the adjudicator assumed jurisdiction.

The settlement required payment for materials and specified remedial work, released mutual claims, and permitted disputes arising from default to be referred to adjudication under the statutory scheme. The defendant paid part of the settlement sum but disputed liability for the balance and challenged the adjudicator’s jurisdiction.

The central issues were whether there was an arguable case of economic duress, whether the settlement had been avoided, and whether avoidance would deprive the adjudicator of jurisdiction.

1. Summary judgment. The application was not suitable for determination in the claimant’s favour because the defendant had an arguable, although shadowy, case of economic duress and an arguable case that its adjudication response unequivocally avoided the settlement before completion of the adjudication.
2. Economic duress. The relevant inquiry required pressure which practically compelled the victim or left no practical choice, illegitimate pressure, and pressure which significantly induced entry into the agreement. Relevant factors included threatened breach, good or bad faith, realistic alternatives, protest, and subsequent affirmation or avoidance. Commercial pressure without coercion was insufficient.
3. Avoidance and jurisdiction. A contract induced by duress is voidable, not void. It may be affirmed or avoided after the duress ends. The payment of £108,000 did not necessarily affirm the settlement because it secured release of the materials, and non-payment of the further £20,000 did not itself establish avoidance. However, the absence of formal avoidance before the adjudication did not conclusively defeat the defendant’s case, since the adjudication response expressly stated that the defendant elected to set aside the settlement.
4. Effect on the adjudication provision. An adjudication provision may survive repudiation or termination of a contract for the purpose of resolving disputes arising under it. The position is different where the contract has been avoided for duress. In that event, there was arguably no contract from which the adjudicator’s jurisdiction could derive, and the adjudication provision would also be void.
5. Leave to defend was granted on terms requiring payment into court of £29,000, the amount of the award, pending the outcome of the proceedings. Costs were provisionally reserved to the trial judge.