GB Europe Management Services Limited v RMH Asset GmbH

Economic duress requires proof of illegitimate commercial pressure, causation and the absence of a reasonable alternative. Causation is assessed subjectively by asking whether the pressure caused entry into the contract; the reasonable-alternative question is objective. A contract entered into under duress is voidable, but the right to rescind may be lost by affirmation after the duress has ceased. Rescission is also unavailable where counter-restitution cannot be made and the result would unjustly enrich the claimant.

The claimant sought recovery of sums due under a secured term loan made to the defendant. The defendant resisted the claim and counterclaimed for rescission, alleging that the facility had been entered into under economic duress. It alleged wrongful assertions of default, delay in releasing security, interference with alternative funding and demands for fees. The claimant denied wrongdoing, causation and the absence of alternative funding, and relied on affirmation.

The defendant served no witness evidence and was debarred from giving oral evidence at trial. The central issues were whether economic duress had been established, whether it had caused entry into the facility, whether reasonable alternative funding existed, and whether the agreement had subsequently been affirmed.

1. Outcome. The claim succeeded and the defendant’s counterclaim for rescission was dismissed.
2. Economic duress. The court accepted that rescission for economic duress requires proof of:
   • illegitimate commercial pressure or threats;
   • causation, assessed subjectively; and
   • the absence of a reasonable alternative, assessed objectively.
   The court treated the causation inquiry as whether the defendant would have entered into the facility but for the illegitimate conduct.
3. Evidence and findings. The defendant bore the burden of establishing its right to rescind. Its pleaded case could not be proved through submissions, and its verified statement of case could not be relied upon as evidence at trial. The court accepted the claimant’s witness evidence and found that the asserted default was real, the delay in releasing security was administrative rather than deliberate, no break-up fee had been demanded, and alternative financing was likely to have been available. There was no positive evidence of illegitimate conduct, causation or the absence of alternatives.
4. Alternative grounds. Even if economic duress had been established, the defendant had not shown that it caused entry into the facility or that no reasonable alternative lenders existed. Further, the facility had been affirmed by payment of monitoring fees, payment of interest after the contractual term and the request for an extension. The suggestion that duress continued during those acts went beyond the pleaded case.
5. Counter-restitution. Independently, rescission was unavailable because the defendant could not make counter-restitution and would otherwise be unjustly enriched.