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Duress : English and Malaysian Law

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Melissa Ping

on 5 May 2015

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Transcript of Duress : English and Malaysian Law

Duress : English and Malaysian Law

Introduction
Effect of Duress
The Common Law
recognised threats of unlawful physical violence
Recent
recognised economic duress
giving rise to a valid claim
- contract voidable but not void
Remedies
A remedy is a form of court enforcement of a legal right resulting from a successful civil lawsuit.
Damages - monetary compensation for the plaintiff's losses, injury, and/or pain or restitutionary measures designed to restore the plaintiff's status to what it was prior to the violation of his or her rights,
Coercive remedies - requiring a party to do or omit doing a specific act through injunctive relief or a court order of specific performance (a court mandates that the party fulfill contractual obligations.
Duress of the Person
Definition : refers to the unlawful pressure exerted upon the claimant or to the members of his family to coerce them to perform an act that they ordinarily would not perform.

Barton v Armstrong
duress need not be the sole reason for entry into the contract
sufficient that the threats were a factor influencing the victim to enter into the contract.
applies similarly in Malaysian Law.
Duress of Goods
Definition: a wrongful threat to detain or the actual detaining of another party's property that leaves the party no alternative but to agree to a transaction.
Reform
General scope and limitation to defense of duress in English law was given by the House of Lords in R v Hasan
Primary Issue
denial of the defense
defendent exposed himself to the risk of threats

Economic Duress
Definition : Economic duress arises where one party uses his superior economic power in an 'illegitimate' way so as to coerce the other contracting parties to agree to a particular set of terms.
English Law
Duress
- one party has been induced into a contract by another, through the means of illegitimate pressure of some kind.

Three types of Duress:
1) Duress of the Person
2) Duress of Goods
3) Economic Duress
Malaysian Law
Coercion
- committing, or threatening to commit any act forbidden by the Penal code, or the unlawful detaining or threatening to detain any property, to the prejudice of any person whatever, with the intention of causing any person to enter into an agreement.
English Law
Malaysian Law
Section 15 is broader in the sense that it covers unlawful detention of property, it expressly recognizes duress of goods
Differences
The position of duress to goods under the English Common Law is slightly narrower compared to the definition of coercion provided under section 15 of the Contracts Act 1950.
English Law
IFR LTD v Federal Trade Spa
agreement between English company and Italian company
Italian law - give rise to compensation
English law - no such compensation payable
Federal raise duress, render agreement void
Took advantage of Italian right to compensation

Effect of duress
Federal acted on contract
no rights to rescind
Malaysian Law
Coercion cover under Penal code

S.19 - contract voidable at the option of the party whose consent was not free

S.2 (i) - only party whose consent was not free has the right to have the contract voidable


English
entitle to have the contract set aside for operative duress
victim may rescind

If contract not rescind
raise duress as defense

Atlantic Baron
opportunity to consider economic duress


Effect of rescission under Penal Code

S.65 of Contract Act 1950
the other party excused from further performance
rescinding party restore any benefits received under voidable contract

S.66 of Contract Act 1950
contract becomes void
party receiving advantage under the contract must restore any advantages received
or make compensation

S.76 of Contract Act 1950
contract has been rescind for breach
rescinding party entitled to compensation for any damages sustained through non-fulfillment contract


Malaysia
The 'Siboen' and The 'Sibotre'
- First recognised but not accepted.
- To amount to economic duress there had to be
coercion of the will so as to vitiate consent.
- Commercial pressure was not sufficient
Four factors to be considered
1. Did the person claiming to be coerced protest ?
2. Did that person have any other available course of action?
3. Was he independently advised?
4. After entering into the contract, did they take steps to avoid it?
The 'Universe Sentinel' [1983]
- The requirement of vitiation of consent was
replaced in this case with the lack of practical choice
available to the victim.

- Two elements of duress were identified :
i) Illegitimacy of the pressure exerted
ii) Pressure amounting to the compulsion of the will
of the victim
Based on Jim Harvey's speech structures
Malaysian
CONCLUSION
North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd ( The 'Atlantic Baron' )
- Duress could arise as much by economic as by
threats of physical violence.
- Economic pressure could amount to duress
- Essence of duress is the 'compulsion of will' - However, claim was dismissed.
Case : Pao On V Lau Yiu Long [1980]
Compulsion of will of the victim
The common law of duress only addresses and recognizes actual or threatened violence to persons and threats to property that were held to insufficient to amount to duress.


A threat made in relation to goods, under the common law are insufficient to render an agreement or in other words, to make payment, voidable for duress.
Case
: Skeate v Beale (1841)

Held:
This plea of duress was rejected. It was held that threats in relation to goods are insufficient to render an agreement voidable.
However, under common law, the money already paid under an agreement reached due to duress to goods could be recovered.
Case:

Astley v Reynolds (1731)

Facts:
The plaintiff pawned goods with the defendant. The defendant wrongfully refused redemption of the goods unless the plaintiff made payment in excess of the interest chargeable legally. The plaintiff paid the extra sum to redeem his goods and later sought recovery of the excess [arguing that it was paid pursuant to a contract voidable for duress of goods.


Held:
The plaintiff was entitled to recover money paid under duress of goods.
The current position of duress of goods under the English Common Law however, is that a threat made in relation of goods may render a contract voidable.
Case:

Occidental Worldwide Investment Corp v Skibs a/s Avanti & Ors (The ‘Siboen’ and The ‘Sibotre’)
Where
Kerr J
stated as an orbiter dicta that “If I should be compelled to sign a…contract…under an imminent threat of having my house burnt down or a valuable picture slashed through without any threat of physical violence to anyone, I do not think the law should uphold the agreement."
Case:

The ‘Evia Luck’ [1992]
Lord Goff
mentioned that since the case of The ‘Siboen’ and The ‘Sibotre’, the case of Skeate and Beale is no longer good law.

Differences
Malaysian wider scope than English.
Penal code covers wide range of criminal offences
Express states duress of goods
Prejudice of any person not mandatory in Common Law
Intention not an integral part under duress of Common Law
Elements
1) Overborne Will
2) Illegitimate Pressure
- Traditional formula : ' coercion of will '
- Professor Atiyah convincingly exposed the difficulties
inherent in this theory
- What is wrong with the contract is not the absent of
consent but the wrongful nature of the threats
- Claimant has to prove the existence of a sufficient causal
link and show that the pressure applied was a significant
cause inducing him to enter into the contract.
- Case :
Huyton SA v Peter Creme
- The courts have begun to distance themselves from this
theory given all the criticisms.

Illegitimacy of the Pressure
Nature of the Pressure
Nature of Demand which the pressure is applied to support
1.
If the threat is unlawful, it generally amounts to duress

- Unlawful threats will generally amount to illegitimate
pressure
- The more difficult case will be the one which the
pressure is said to take form of a threatened breach of
contract.
2. Where the threat is lawful but used to support a demand which is unlawful may constitute duress
- Lord Hoffman observed that it is necessary to extend the category of illegitimacy to catch case the case of blackmail. ( threat is lawful but it is used to attain a goal which is unlawful)
- General Rule : A defendant who threatens to do what he is entitled to do will not be held to have applied illegitimate pressure upon the claimant.
- A refusal to waive existing contractual obligations should not amount to duress
- A threat to refuse to contract should not constitute duress. However, this cannot be stated in unqualified terms.
R v A-G for England and Wales
CTN Cash and Carry Ltd v Gallaher
Held : Compulsion of will proven
Legitimacy of pressure - threat was lawful and the demand supported by the threat could be justified. Hence, there was no illegitimate pressure and no duress
Held : A threat to refuse to contract did not constitute duress.
- only commercial pressure and no illegitimate
pressure.
- Party applying pressure
did not act in bad faith
Malaysian Law
- The issue of whether S.15 of CA 1950 covers economic duress?

- Economic duress is not expressly stated in S.15 of CA 1950 as the definition of coercion is very limited.

- High Court held that Contract Act 1950 does not provide for any form of coercion other than as defined by Section 15.
Case : Perlis Plantations Berhad v Mohamad
Abdullah Ang
- Economic duress is recognised in principle
but was not established in cases.
Teck Guan Trading Sdn Bhd v Hydroteck Engineering Sdn Bhd
Mohd Fariq Subramaniam v Naza Motor
Held : There was no coercion as it was neither penal code offence nor unlawful detention of property. There was no economic duress as this was a transaction in the ordinary course of business.
There was no evidence of coercion of plaintiff's will which vitiated his consent. Thus, there was no economic duress. The plaintiff made no protest before or after the agreement was executed. The contents in the agreement were read to him and no force was applied to make him sign the agreement. Furthermore, he had not taken any steps subsequently to repudiate the agreement.
English
R v Hassan
defendent convicted of burglary
use duress as defense in trial
defendant was an associate
conviction quashed
because he was plead harmed

House of Lords
defendent's conviction restored
defendent not allow to exclude his conviction just because he was threaten
it is a duress of circumstances
and need more limitation
Penal Code
wide range of offences covered
law wider than English Common Law of duress
duress to goods, expressly recognised
tortious and civil wrong not covered
S.15 CA 1950
it does not state that the person committing the coercive acts must be a party to the agreement
Reforms
duress to goods under Penal Code should be narrow down
S.15 needs to be reviewed to overcome the uncertainty
Duress in English law is a complete common law defense
operating in favour of those who committed tort because being forced or compelled to do so
In Malaysia, a defense against committing an act forbidden by Penal Code
Application needs to have its limits
Some developments need to be done before being relied on


Held: There was a wider restitutionary rule that money paid to avoid goods being seized or to obtain their release could be recovered. Further, it was held that in the present case there was a compulsory agreement to enter into, whereas in Skeate the agreement was entered into voluntarily.
Case: Maskell v Horner [1915]
Full transcript