CTN Cash and Carry v Gallaher [1993] EWCA Civ 19 (15 February 1993)

CTN Cash and Carry paid £17,000 to Gallaher for stolen cigarettes after Gallaher threatened to withdraw credit facilities. Gallaher genuinely but mistakenly believed payment was owed. The Court of Appeal held that lawful commercial pressure exercised in bona fide pursuit of a believed debt did not constitute economic duress enabling recovery of payment.

Facts

CTN Cash and Carry Limited operated a cash and carry business purchasing cigarettes from Gallaher Limited, the sole English distributor of popular brands including Silk Cut and Benson & Hedges. In November 1986, a consignment of cigarettes worth approximately £17,000 was mistakenly delivered to CTN’s Burnley warehouse instead of Preston. Before Gallaher could arrange transfer to Preston, the goods were stolen in a robbery.

Gallaher invoiced CTN for the stolen goods, genuinely believing the goods were at CTN’s risk. CTN rejected the invoice. Subsequently, Gallaher’s representative made clear to CTN that unless payment was made, credit facilities would be withdrawn. CTN paid the disputed sum, considering it the lesser of two evils, and later sought recovery.

Issues

The central issue was whether the doctrine of economic duress entitled CTN to recover the payment made under threat of withdrawal of credit facilities, where the supplier acted in bona fide belief that the sum was owed.

Judgment

Lord Justice Steyn, delivering the lead judgment, identified three critical characteristics of the case:

Commercial Context

The dispute arose from arm’s length commercial dealings between two trading companies. Although Gallaher held a monopoly position, the common law does not recognise inequality of bargaining power in commercial dealings as converting otherwise lawful conduct into duress.

Lawful Conduct

Gallaher was entitled to refuse future contracts with CTN for any reason or no reason, and was equally entitled to withdraw credit facilities. The demand coupled with the threat was neither breach of contract nor tort.

Bona Fide Belief

Critically, Gallaher genuinely believed the goods were at CTN’s risk and that payment was owed. The court accepted that lawful pressures can sometimes constitute duress, but held that extending the doctrine to cover lawful-act duress in a commercial context in pursuit of a bona fide claim would be radical with far-reaching implications.

It would introduce a substantial and undesirable element of uncertainty in the commercial bargaining process. Moreover, it will often enable bona fide settled accounts to be re-opened when parties to commercial dealings fall out.

The Vice-Chancellor, while agreeing duress was not established, expressed discomfort at the overall outcome, noting it would be unconscionable for Gallaher to retain money demanded under a mistaken belief as to legal entitlement. However, no restitution claim on this basis had been pursued.

Implications

This case establishes important limits on the doctrine of economic duress in commercial contexts. While the categories of duress are not closed, courts will be reluctant to find lawful-act duress where a party acts in bona fide belief of legal entitlement. The judgment emphasises policy considerations favouring certainty in commercial dealings over extending relief for morally questionable but legally permissible commercial pressure. The case suggests alternative remedies based on unjust enrichment might be available in such circumstances.

Verdict: Appeal dismissed. The plaintiff's claim for recovery of payment on grounds of economic duress failed. The defendant was permitted to retain the £17,000 payment.

Source: CTN Cash and Carry v Gallaher [1993] EWCA Civ 19 (15 February 1993)