Illegitimate Pressure Can Amount To Duress Even If It Does Not Involve An Unlawful Act

Progress Bulk Carriers Limited v Tube City IMS LLC [2012] EWHC 273 (Comm)

TC sold a cargo of shredded scrap to buyers. The cargo had to be shipped by TC from Mississippi to China, so TC chartered a vessel owned by PBC for the purpose. The identity of the vessel was important to the buyers, so the charter did not give the owner a right to substitute the vessel for another. Following execution of the charter, PBC chartered the vessel elsewhere without telling TC – which was a repudiatory breach of contract. When TC discovered this, PBC offered to provide an alternative vessel and to compensate for all damages, as a result of which TC took no further steps to find an alternative vessel. PBC subsequently proposed a substitute vessel. TC passed on details to the buyers for their consideration. The buyers agreed to the substitute vessel, but only on condition that they receive a discount because of the delay. The price of the cargo was falling and TC was incurring expenses in Mississippi as a result of the delay, so TC accepted PBC's offer, reserving all rights in respect of a damages claim. Soon after, when TC had no other way to ship the cargo, PBC informed it that they would only charter the vessel if TC waived all claims. TC accepted this demand, taking the view that it had no alternative if it was going to avoid catastrophic losses, but did so under protest. [It should be noted that the stance taken by PBC did not involve an unlawful act, as the promise to supply a substitute vessel and pay damages was not contractually binding.]

The matter went to arbitration where it was held that the agreement to waive all claims for damages had been procured by economic duress and that the settlement agreement was voidable. PBC appealed on the grounds that its behaviour could not amount to illegitimate pressure, because the arbitrators had not found that PBC had been involved in an unlawful act. It had not been threatening to break a contract, nor had...