Pakistan International Airlines Corp v Times Travel (UK) Ltd [2021]

Pakistan International Airlines Corp v Times Travel (UK) Ltd [2021] UKSC 40 revolved around economic duress and the attempt by Times Travel, travel agents, to set aside an agreement with Pakistan International Airlines Corporation (PIAC).

PIAC was the sole operator of direct flights from the UK to Pakistan, constituting a significant portion of Times Travel's business. The background involved claims for nonpayment of commissions, prompting PIAC to initiate new contracts and compel the agents to accept them, thereby waiving existing claims for unpaid commissions. While Times Travel initially accepted the terms, it later asserted that it entered the new agreement under economic duress and sought to recover its commissions.

In the High Court, Warren J ruled in favour of Times Travel, finding economic duress. However, the Court of Appeal overturned this decision, asserting that the pressure exerted was lawful, and there was no evidence of bad faith on PIAC's part.

The Supreme Court ultimately sided with PIAC, determining that there was no duress. The notice given by PIAC regarding the termination of the previous contract and the reduction in Times Travel's ticket allocation was not deemed reprehensible conduct in the legal sense. The court accepted that PIAC genuinely believed it was not liable to pay the disputed commissions.

Lord Hodge, delivering the judgment, emphasised the cautious approach required in extending the doctrine of lawful act duress, especially in contractual negotiations between commercial entities. He highlighted the existing remedies in equity, such as the doctrines of undue influence and unconscionable bargains, and underscored the absence of a general doctrine of good faith in English contract law.

The judgment outlined two circumstances where the English courts have recognised and provided a remedy for lawful act duress. The first involves the exploitation of knowledge of criminal activity by the claimant or their close family member to obtain a personal benefit. The second occurs when a defendant, facing a civil claim by the claimant, manoeuvres the claimant into a vulnerable position through illegitimate means, forcing them to waive their claim.

The absence of a doctrine of inequality of bargaining power and a principle of good faith in English law limits the scope for lawful act economic duress in commercial negotiations. The court highlighted that the pressure applied by a negotiating party would rarely meet the standard of illegitimate pressure or unconscionable conduct in the context of commercial negotiation.

In conclusion, the Supreme Court rejected the claim of economic duress by Times Travel, emphasising that PIAC's conduct did not amount to illegitimate pressure. The judgment provided clarity on the limited circumstances where lawful act duress might be recognised in English law, particularly within the commercial negotiation framework.
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