Two parties were at loggerheads as to valuations and interim payments until, eventually, the claimant took their labour off site.
As you might have guessed, this ended up in the Technology & Construction Court before His Honour Judge David Wilcox. In the case [Capital Structures PLC v Time & Tide Construction Ltd [2006] EWHC 591], there was an application for summary judgment to enforce an adjudicator's decision, but not in the way you might have expected. What happened was that the parties, following negotiations, entered into a settlement agreement in writing which contained an agreement allowing a party to take the dispute to adjudication if a party defaulted on the terms of the agreement.
The main terms were that the Claimant (sub-contractor) would release certain goods and the Defendant (main contractor) would pay the Claimant a sum of about £100,000, and then a further £20,000. The first payment was made, but not the second, so the Claimant referred the dispute over the non-payment of the £20,000 to an adjudicator.
The Defendant complained that the settlement agreement had in fact been obtained under "economic duress". It appears that the Defendant's employer told the Claimant that its failure to deliver the goods would lead to the employer stepping in and taking over the development from the Defendant. The defendant claimed that such action would cause it financial difficulties, to the extent of a possible liquidation. A representative of the Defendant said that because of the pressure brought to bear he had no alternative but to agree to the settlement.
The Defendant's plea of economic duress was rejected by the adjudicator. What is "economic duress"? The judge reviewed the authorities and summarised the law by saying that it involved pressure having the practical effect of meaning that the victim was under compulsion or with a lack of practical choice, where that pressure was illegitimate and which was a significant cause in inducing the victim to enter into the agreement.
The judge pointed out that the illegitimate pressure had to be "distinguished from the rough and tumble of the pressures of normal commercial bargaining", and that "commercial pressure without coercion is insufficient".
A contract entered into under duress is voidable, not void. That means that the victim must take steps to set it aside as soon as he is free of the duress, otherwise he may be taken to have affirmed it. The appropriate steps range from formal unequivocal correspondence to seeking a declaration from the court.
In this case - where the words "commercial blackmail" were used, the judge found that there was an arguable ("albeit shadowy") case, and refused enforcement.
For further information or advice, please contact Peter Tugwell or Philip Harris in our Construction and Engineering Department.
This article was first published in Construction News, Spring 2007
