New Judgment: R (on the application of Majera (formerly SM (Rwanda)) (AP) v Secretary of State for the Home Department [2021] UKSC 46

On Appeal from: [2018] EWCA Civ 2770

The Appellant is a national of Rwanda who had been granted indefinite leave to remain in the United Kingdom. After being convicted of serious criminal offences in 2006, he received a sentence of imprisonment and in 2012 was made the subject of a deportation order which has never been implemented. When he was later released on licence, the Secretary of State decided that The Appellant should be detained under paragraph 2 of Schedule 3 to the Immigration Act 1971 (“the 1971 Act”), pending his removal or departure from the United Kingdom.

The Appellant was later released on conditional bail. The Respondent sought a condition prohibiting the Appellant from continuing to perform unpaid work, but the Tribunal decided not to impose such a condition. The Bail Order did not require the Appellant to appear before an immigration officer at a specified time and place, despite paragraph 22(1A) of Schedule 2 to the 1971 Act requiring that it do so.

A few days after Bail was granted, an immigration officer gave the Appellant a notice which stated that the Secretary of State had decided to now impose further restrictions, including that he “may not enter employment, paid or unpaid” and that he be subject to a curfew.

The Appellant’s requests for the withdrawal of the prohibition on him carrying out voluntary work and for the relaxation of the curfew restriction were refused. The Appellant applied for judicial review of those decisions, on the ground that the Respondent could not lawfully impose conditions which the Tribunal had declined to order. In response, the Respondent argued that it was lawful to impose the conditions because the Bail Order was legally defective and therefore void.

The Upper Tribunal decided that the Respondent’s decisions were unlawful and made a declaration that the Appellant remained on bail in accordance with the Bail Order. The Secretary of State then appealed, successfully, to the Court of Appeal, which made a declaration that the Bail Order was invalid and had no effect in law. The Appellant appealed this decision.

 

Held – appeal allowed. The order of the Upper Tribunal was restored, and the Appellant remains on bail in accordance with the original Bail Order.

The Court held that it is well-established that a court order must be obeyed unless and until it has been set aside or varied by the court. This rule applies to court orders whether they are valid or invalid, regular or irregular.

The Court of Appeal’s decision that the Bail order had no legal effect at all was an ‘over-simplification’. The present case was concerned not with an unlawful administrative act but with an order of a tribunal, and so gives rise to different issues and is governed by different principles.

In this case, even if the Bail Order was invalid, the Respondent was obliged to comply with it, unless and until it was varied or set aside. The allegation that the Bail Order was invalid was not, therefore, a relevant defence to the application for judicial review. As there was no other basis on which the Court of Appeal reversed the decision of the Upper Tribunal, and the Respondent does not ask the Supreme Court to dismiss the appeal on other grounds, it follows that the appeal should be allowed.

The Court added that the Respondent had every opportunity to challenge the Bail Order. They could, and should, have raised the matter with the First-tier Tribunal, and could alternatively have applied to the Upper Tribunal for permission to apply for judicial review.

 

For judgment, please download: Judgment (PDF)

For Court’s press summary, please download: Press summary (HTML version)

For a non-PDF version of the judgment, please visit:  Judgment on BAILII (HTML version)

Watch hearing

10 May 2021 Morning session  Afternoon session

 

This week in the Supreme Court- w/c 25th October 2021

Hearings in the Supreme Court are now shown live on the Court’s website.

On Tuesday 26th October, the Supreme Court will hear the appeal of Commissioners for Her Majesty’s Revenue and Customs v Coal Staff Superannuation Scheme Trustees Ltd. This is an appeal of the decision in [2019] EWCA Civ 1610 and will be heard at 10:30 in Courtroom One. It will consider the UK tax treatment of “manufactured overseas dividends” and their compatibility with EU law.

On Wednesday 27th October, the Supreme Court will hand down judgment in two cases:

Kostal UK v Dunkley and others. This was first heard on the 18th May 2021 and considered s. 145B Trade Union and Labour Relations Consolidation Act 1992. The decision appealed was [2019] EWCA Civ 1009 and the citation will be [2021] UKSC 47.
Kabab-Ji SAL (Lebanon) v Kout Food Group (Kuwait) was heard from the 30th June to the 1st July and appealed [2020] EWCA Civ 6. The judgment will consider an arbitration agreement between the two parties and the applicable law and determination. The citation will be [2021] UKSC 48.

A full list of the cases scheduled for the Michaelmas Term can be found here.

 

The following Supreme Court judgments remain outstanding: (As of 25/10/2021)

The Law Debenture Trust Corporation plc v Ukraine (Represented by the Minister of Finance of Ukraine acting upon the instructions of the Cabinet of Ministers of Ukraine) Nos. 2 and 3, heard 9-12 December 2019
Crown Prosecution Service v Aquila Advisory Ltd, heard 27 April 2021
Lloyd v Google LLC, heard 28 and 29 April 2021
BTI 2014 LLC v Sequana SA and Ors, heard 4 May 2021.
Bott & Co Solicitors v Ryanair DAC, heard 20 May 2021
In the matter of an application by Margaret McQuillan for Judicial Review (Northern Ireland), In the matter of an application by Mary McKenna for Judicial Review (Northern Ireland), and In the matter of an application by Francis McGuigan for Judicial Review (Northern Ireland), heard 14-16 June 2021
East of England Ambulance Service NHS Trust v Flowers and Ors, heard 22 June 2021
R (on the application of O (a minor, by her litigation friend AO)) v Secretary of State for the Home Department and R (on the application of The Project for the Registration of Children as British Citizens) v Secretary of State for the Home Department) (Expedited), heard 23 and 24 June 2021
Alize 1954 and Anor v Allianz Elementar Versicherungs AG and Ors, heard 7 and 8 July 2021
R (on the application of Elan-Cane)  v Secretary of State for the Home Department, heard 12 and 13 July 2021
A Local Authority v JB (by his Litigation Friend, the Official Solicitor) (AP), heard 15 July 2021
Maduro Board of the Central Bank of Venezuela v Guaidó Board of the Central Bank of Venezuela, heard 19 to 22 July 2021.
Basfar v Wong, heard 13th-14th October
Her Majesty’s Attorney General v Crosland, heard 18th October
Secretary of State for the Home Department v SC (Jamaica), heard 19th October

Case Comment: Pakistan International Airline Corporation v Times Travel (UK) Ltd [2021] UKSC 40

In this post, Stephanie Cheung, Mitchell Abbott and Jana Blahova of CMS Cameron McKenna Nabarro Olswang LLP, comment on the decision handed down by the UK Supreme Court in Pakistan International Airline Corporation v Times Travel (UK) Ltd [2021] UKSC 40 and consider how the decision impacts on the doctrine of lawful economic duress.

A claimant needs to establish the following in order to succeed with a claim of economic duress (1) that there was an illegitimate threat or pressure, (2) that illegitimate threat or pressure caused the claimant to enter into the agreement (which the claimant is now trying to rescind) and (3) the claimant had no reasonable alternative but to give in to the threat or pressure. This case concerns the scenarios in which lawful actions (e.g. the lawful termination of a contract) will amount to an illegitimate threat or pressure.

The facts of the case are as follows: Times Travel is a travel agency whose business primarily relied upon its ability to sell tickets for Pakistan International Airlines Corporation’s (“PIAC”) flights to Pakistan. Disputes arose between PIAC and a number of its affiliated travel agents concerning the commission payable by PIAC to its agents (following the events discussed below, some agents were successful in legal proceedings).

In response to the disputes, PIAC reduced Times Travel’s fortnightly ticket allocation from 300 to 60 tickets and it gave notice that it intended to exercise its right of termination (which existed in all its contracts with its agents). PIAC subsequently offered Times Travel new terms of appointment as an affiliated travel agent, and those the new terms included a provision that waived Times Travel’s right to claim for unpaid commission. PIAC also advised Times Travel that its ticket allocation would be restored to 300 tickets if it agreed to the new terms. Times Travel agreed to the new terms.

Times Travel subsequently issued proceedings against PIAC arguing (1) it felt it had no alternative but to agree the new terms and (2) the new terms should be rescinded on grounds of economic duress.

Times Travel was successful at first instance, however, as set out in our Case Preview, the Court of Appeal overturned the decision and rejected Times Travel’s claim of economic duress. The Court of Appeal’s decision hinged upon the fact that PIAC did not make its demands in bad faith – PIAC mistakenly believed that its position in the disputes was correct. The Court of Appeal was unwilling to find that PIAC’s termination of Times Travel’s contract (which was legal) and its demand that new terms were entered into amounted to economic duress without bad faith.

Leading Judgment: Lord Hodge

The leading judgment which was given by Lord Hodge who dismissed Times Travel’s appeal. Lord Hodge identified two categories of cases where, historically, the courts have accepted lawful actions have amounted to economic duress:

The first category of cases concerns where one party has exploited knowledge of criminal activity by an individual or a member of their family to procure an agreement.

For example, in Williams v Bayley 1 HL 200 a son forged his father’s signature to obtain promissory notes from a bank. The bank threatened to prosecute the son unless the father agreed to undertake to repay the sums, which he did. Upon the father’s application, the House of Lords rescinded the contract.

The second category of cases concerns where illegitimate means have been used to manoeuvre the claimant into a position of weakness to force him or her to waive their claim.

For example, in The Cenk K [2012] EWHC 273 (Comm) Party A chartered a vessel from Party B. The contact specified a date of return of the vessel to permit it to be sent on to its next charter. However, Party A did not return the vessel, instead, it chartered it out to a third party. Party A promised Party B that it would provide another vessel to allow Party B to meet its next charter and promised to pay damages arising from the failure to provide the contracted vessel. When it was too late for Party B to do anything but accept, and in breach of their prior agreement, Party A advised it would not pay the  damages – and it refused to provide the vessel unless Party B waived its claim for damages. Left with no alternative, Party B agreed to waive its claim. The court later upheld an arbitrator’s award finding that the settlement was rescinded on grounds of economic duress.

The majority agreed PIAC’s actions did not fall within the categories of cases identified above, and more was needed for Times Travel to succeed, in particular – “morally reprehensible behaviour” which rendered the contract “unconscionable” was required in order to establish an illegitimate threat or pressure.

In reaching its decision, the majority noted that there are no general principles of “inequality of bargaining power” or “good faith” in English law. The courts have generally taken the view that unequal bargaining power is a matter that should be regulated by the legislature and whilst good faith might be relevant in limited circumstances, generally, English law has never adopted a general requirement of good faith in contractual dealing. As a result, the doctrine of lawful act economic duress, particularly in commercial contexts, must be “extremely limited”. Leverage and/or pressure applied in negotiations will rarely meet the required standard of “illegitimate pressure or unconscionable conduct”.

The majority did not accept that PIAC used illegitimate means to expert pressure on Times Travel and in the absence of the principles referred to above there was no lawful act economic duress. The majority were satisfied that the approach adopted by other common law jurisdictions with similar contract law foundations (and no general principles of good faith) supported the restrictive approach they had chosen to adopt. Whilst Lord Hodge did not rule out scope for development of the doctrine of economic duress, he identified 3 difficulties in doing so, namely:

In the absence of a general principle of inequality bargaining power and/or good faith, there was no recognised principle on which to base another interpretation/approach;
A broader interpretation may give rise to uncertainty; and
A broader interpretation may be of limited use because it will be difficult to establish subjective bad faith.

Dissenting Judgment: Lord Burrows

Lord Burrows’ dissenting judgment reached the same conclusion as those of the majority, he accepted that it was necessary to dismiss Times Travel’s appeal. However, Lord Burrows had a different view on what constitutes an “illegitimate threat or pressure”. The main focus of Lord Burrows’ dissent, similar to the Court of Appeal, concerned the requirement of a “bad faith demand”.

In Lord Burrows’ view, if a party deploys a bad faith demand whilst, at the same time, creating or worsening the other party’s vulnerability, then that could constitute an illegitimate threat and it should be relevant for the purposes of a claim of lawful act economic duress.

Lord Burrows stated the illegitimacy of the threat would have been determined with reference to the justification for the demand. A demand motivated by commercial self-interest is, in general, justified. For the demand to be unjustified, PIAC would have had to deliberately create or increase Times Travel’s vulnerability to the demand.

Conclusion

Whilst this judgment clearly confirms that the concept of lawful act economic duress does exist in English law (the majority rejected academic commentary suggesting the contrary), this doctrine is, as stated by Lord Burrows, “in its infancy”.

Beyond the two categories of case law already identified by Lord Hodge it is not clear what other actions (if any) might amount to “morally reprehensible conduct” and/or what behaviour might render a contract “unconscionable”. Claimants who feel that they have been subjected to illegitimate threats or pressure may choose to pursue alternative causes of action (for example, undue influence) following this judgment because of the cautious approach adopted by the Supreme Court.

 

New Judgment: Kostal UK Ltd v Dunkley and others [2021] UKSC 47

On appeal from: [2019] EWCA Civ 1009

The Appellant and 56 others are all members of the trade union “Unite” and are employed by the Respondent. They began formal annual pay negotiations and the Respondent made a pay offer. Union members were balloted and rejected the offer. The Respondent then made the same offer to its employees directly, bypassing Unite, also saying that if no agreement was reached “this may lead to the company serving notice on your contract of employment”.

In May 2016, the claimants complained to an employment tribunal that the direct offers made to them by the Respondent contravened section 145B of the Trade Union and Labour Relations (Consolidation) Act 1992. The tribunal upheld the complaints and made the statutory award of £3,800 to each claimant for each offer made to him. The Respondent appealed to the Employment Appeal Tribunal which, by a majority, dismissed the appeal. They then appealed to the Court of Appeal, which allowed the appeal and set aside the decisions of the tribunal and the EAT. The claimants were given permission to appeal to the Supreme Court.

 

HELD – appeal allowed and the awards made by the tribunal are restored. It held that the direct offers to workers who were Unite members breached section 145B(2) of the 1992 Act.

 

The key provisions of the 1992 Act provide: section 145B (1) A worker who is a member of an independent trade union … has the right not to have an offer made to him by his employer if – (a) acceptance of the offer, together with other workers’ acceptance of offers which the employer also makes to them, would have the prohibited result. (2) The prohibited result is that the workers’ terms of employment, or any of those terms, will not (or will no longer) be determined by collective agreement negotiated by or on behalf of the union.

The Court held that what section 145B prohibits is not an offer with a particular content (as argued by the parties) but an offer which, if accepted by all the workers to whom the offer is made, would have a particular result. What is required is a causal connection between the presumed acceptance of the offers and the prohibited result specified in section 145B(2). That requirement will not be satisfied unless there is at least a real possibility that, had the offer not been made and accepted, the workers’ relevant terms of employment for the period would have been determined by a new collective agreement. On this interpretation there is nothing to prevent an employer from making an offer directly to its workers in relation to a matter which falls within the scope of a collective bargaining agreement provided that the employer has first followed, and exhausted, the agreed collective bargaining procedure. What an employer cannot do with impunity is what the Respondent did here: make a direct offer to its workers, including union members, before the collective bargaining process which the employer has agreed to follow has been exhausted.

 

For a PDF version of the judgment, please see: Judgment (PDF)

For the Press Summary, please see: Press summary (HTML version)

For a non-PDF version of the judgment, please see: Judgment on BAILII (HTML version)

 

Watch hearing

18 May 2021
Morning session
Afternoon session

 

New Judgment: Kabab-Ji SAL (Lebanon) v Kout Food Group (Kuwait) [2021] UKSC 48

On appeal from: [2020] EWCA Civ 6

The Appellant, a Lebanese company, entered into a Franchise Development Agreement with a Kuwaiti company, granting a licence to operate its restaurant franchise in Kuwait for ten years. In 2005, the company became a subsidiary of the Respondent. A dispute arose under the FDA and linked Franchise Agreements, which was referred to arbitration.

The Respondent argued that it was not a party to the FDA, the arbitration agreements contained in the FDA, or the Franchise Agreements, and that they took part in the arbitration under protest. The majority arbitrators found that, applying French law, the Respondent was a party to the arbitration agreements. They also found that, applying English law, the Respondent was an additional party to the FDA by “novation by addition” and was in breach of the FDA and linked agreements. They made an award against the Respondent for unpaid licence fees and damages in the principal sum of US$6.7 million. The Respondent applied to the Paris Court of Appeal to set aside the award. Soon afterwards, the Appellant issued proceedings in the Commercial Court in London to enforce the award.

On a trial of preliminary issues relating to the FDA the Commercial Court held that the validity of the arbitration agreement in the FDA was governed by English law and that, subject to a point left open, as a matter of English law the Respondent was not a party to the FDA or the arbitration agreement. The court postponed making a final decision on enforcement pending the decision of the Paris Court of Appeal. Both parties appealed to the Court of Appeal which upheld the judge’s decision, save that it held that the judge should have made a final determination. It held that that there was no real prospect of it being shown that the Respondent became a party to the arbitration agreement and that summary judgment should be given refusing recognition and enforcement of the award.

The Appellant appealed to the Supreme Court.

 

HELD – appeal dismissed.

The Court held that: (i) that the arbitration agreement is governed by English law; (ii) that in English law there is no real prospect of a court finding that the Respondent became a party to the arbitration agreement; and (iii) that, procedurally, the Court of Appeal was right to give summary judgment refusing recognition and enforcement of the award.

 

The choice of law issue

The effect of the relevant clauses in the FDA is plain. The FDA’s governing law clause provides that “this Agreement” shall be governed by English law and this clearly extends to the arbitration agreement.

The party issue

The Appellant contended that the Respondent became a party to the arbitration agreements by becoming a party to the FDA by novation because of the parties’ conduct and the performance of various contractual obligations over a sustained period of time. It could not, however, point to any agreement in writing to this effect between itself. The FDA contained a number of provisions which prescribe that it may not be amended save in writing signed on behalf of both parties – “No Oral Modification Clauses”. The No Oral Modification clauses are therefore an insuperable obstacle to the Appellant’s case of novation by addition as the Appellant could not adduce evidence to prove that it was done so in writing.

Watch hearing

30 June 2021
Morning session
Afternoon session

1 July 2021
Morning session
Afternoon session

 

For a PDF version of the judgment, see: Judgment (PDF)

For the Press Summary, see: Press summary (HTML version)

For a non-PDF version of the Judgment, see: Judgment on BAILII (HTML version)

This Week In the Supreme Court – w/c 1st November 2021

Hearings in the Supreme Court are now shown live on the Court’s website.

On Wednesday 3rd November, the Supreme Court will hand down judgment in Crown Prosecution Service v Aquila Advisory Ltd. This case was heard on 27th April 2021and was on appeal from [2019] EWCA Civ 588. The judgment will consider proprietary claims brought by a company against its directors to recover proceeds of crime received in breach of fiduciary duty, and whether the illegality of the directors can be attributed to the company itself. The neutral citation for the judgment will be [2021] UKSC 49.

A full list of the cases scheduled for the Michaelmas Term can be found here.

The following Supreme Court judgments remain outstanding: (As of 01/11/2021)

The Law Debenture Trust Corporation plc v Ukraine (Represented by the Minister of Finance of Ukraine acting upon the instructions of the Cabinet of Ministers of Ukraine) Nos. 2 and 3, heard 9-12 December 2019
Lloyd v Google LLC, heard 28 and 29 April 2021
BTI 2014 LLC v Sequana SA and Ors, heard 4 May 2021.
Bott & Co Solicitors v Ryanair DAC, heard 20 May 2021
In the matter of an application by Margaret McQuillan for Judicial Review (Northern Ireland), In the matter of an application by Mary McKenna for Judicial Review (Northern Ireland), and In the matter of an application by Francis McGuigan for Judicial Review (Northern Ireland), heard 14-16 June 2021
East of England Ambulance Service NHS Trust v Flowers and Ors, heard 22 June 2021
R (on the application of O (a minor, by her litigation friend AO)) v Secretary of State for the Home Department and R (on the application of The Project for the Registration of Children as British Citizens) v Secretary of State for the Home Department) (Expedited), heard 23 and 24 June 2021
Alize 1954 and Anor v Allianz Elementar Versicherungs AG and Ors, heard 7 and 8 July 2021
R (on the application of Elan-Cane)  v Secretary of State for the Home Department, heard 12 and 13 July 2021
A Local Authority v JB (by his Litigation Friend, the Official Solicitor) (AP), heard 15 July 2021
Maduro Board of the Central Bank of Venezuela v Guaidó Board of the Central Bank of Venezuela, heard 19 to 22 July 2021.
Basfar v Wong, heard 13th-14th October
Her Majesty’s Attorney General v Crosland, heard 18th October
Secretary of State for the Home Department v SC (Jamaica), heard 19th October
Commissioners for Her Majesty’s Revenue and Customs v Coal Staff Superannuation Scheme Trustees Ltd, heard 26th October

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