Rotamead Ltd v Durston Scaffolding Ltd & Ors

Economic duress is not established merely because a party uses lawful commercial pressure. Where the party applying pressure honestly believes, in good faith, that it is entitled to make the relevant demand, the resulting agreement is not ordinarily voidable for economic duress. A novation transfers contractual payment obligations to the new contracting party and does not require the original invoices to be written off or reissued where there is no new supply. A clear guarantee covering the company’s obligations under general trading terms may extend to historic liabilities transferred by novation, as well as later liabilities, particularly where the guarantee contains an indemnity and no express limitation.

The claimant, a scaffolding supplier, claimed unpaid hire charges, delivery up of equipment or damages in lieu, interest and contractual or procedural costs against Durston Scaffolding Ltd, Jamie Ryan and Paul Durston. The claims arose after Paul Durston Ltd, which was in serious financial difficulty, transferred its historic debt and certain contractual obligations to Durston Scaffolding Ltd. Guarantees were given by Paul Durston and Jamie Ryan.

The defendants alleged economic duress, disputed the construction and scope of the guarantees, relied on an alleged agreement involving Higgins Construction concerning equipment and shortages, and advanced an overpayment case. The central issues were whether the agreements were enforceable, whether the guarantees covered the historic debt, whether the alleged Higgins agreement had legal effect, and what sums and equipment remained due.

1. Judgment for the claimant. The court dismissed the First Defendant’s counterclaim and declared that the Second and Third Defendants were liable to indemnify the claimant for losses caused by the First Defendant’s breaches.
2. Economic duress was not established. The court accepted the elements advanced by the defendants—illegitimate pressure, causation and sufficiently severe consequences—but found no illegitimate pressure. The claimant was entitled to refuse continued use of its scaffolding without agreement and to seek possession of its equipment. Applying Times Travel UK Ltd v Pakistan International Airlines Corporation [2019] 3 WLR 445, lawful pressure applied in the bona fide belief that the demand is justified does not ordinarily make the resulting agreement voidable for economic duress.
3. The novation was binding. It transferred the obligation to pay the historic invoices from Paul Durston Ltd to Durston Scaffolding Ltd. Even if the agreement had been voidable, later dealings affirmed it. The alleged absence of new VAT invoices did not invalidate the novation because no new supply occurred.
4. Jamie Ryan’s guarantee was clear and unambiguous. It guaranteed due and punctual performance of Durston Scaffolding Ltd’s obligations under the claimant’s general terms and indemnified the claimant against breach. It was not limited to invoices raised after the guarantee date and covered the transferred historic debt.
5. The alleged tripartite agreement concerning Higgins Construction, the quantities of equipment and liability for shortages was unpleaded, unsupported by the evidence, inconsistent with the contemporaneous correspondence and, in any event, did not involve Durston Scaffolding Ltd.
6. The claimant’s comprehensive and largely unchallenged records established the unpaid hire charges and equipment remaining on hire. The defendants were ordered to pay £492,514.19, deliver up specified scaffolding equipment by 4 pm on 24 September 2020, or pay the prescribed sum in lieu, together with continuing daily hire charges and costs.