LONDON – The Supreme Court of England has turned down an appeal filed by a British-Pakistani travel agent against the Pakistan International Airlines (PIA) over alleged reprehensible conduct.
In a landmark decision, the five judges of the top court unanimously ruled that Pakistani national carrier was right to use lawful act under economic duress on the travel agency named Times Travel while signing a new contract for sales of tickets in 2012.
The Birmingham-based firm had claimed in its petition that it was subjected to economic pressure in 2012 and forced into signing a new contract without paying the previously unpaid commission. It further argued that it could revoke the new agreement for lawful act economic duress.
Farani Taylor Solicitors represented PIA in the case against the Times Travel – a small family-owned travel agency. He argued before the court that Pakistani national carrier acted lawfully when it terminated the contracts of its UK-based Pakistani agents, offering them new deals.
The Supreme Court said there are two essential elements that a claimant needs to establish to rescind the contract: first, that the threat or pressure by the defendant must have been illegitimate and, second, that the threat or pressure must have caused the claimant to enter the contract. Economic duress also has a third element: the claimant must have had no reasonable alternative to giving in to the threat or pressure. The appeal solely concerned whether PIAC’s threat illegitimate.
In judgment, the Supreme Court ruled that Times Travel cannot rescind the new agreement and PIAC had not displayed reprehensible conduct in the sense used in the case law.
Lord Hodge said that PIA was not liable to pay the disputed commission, he said.
‘Lawful act economic duress was not made out on the facts of this case because the threatened lawful act was not coupled with a bad faith demand. On the facts found by Warren J, Times Travel failed to establish bad faith by PIAC in the specific sense relating to PIAC’s genuine belief as to its not being contractually liable for the unpaid commission. The Court of Appeal correctly applied the “bad faith demand” requirement in this case. I would therefore dismiss the appeal, ‘ the lawgazette cited the judgment as saying.
The Case
PIAC entered into a contract with Times Travel in 2008, under which Times Travel agreed to act as ticketing agent for the airline. At the relevant time, PIAC was the only airline operating direct flights between the UK and Pakistan, and Times Travel relied almost exclusively on the sale of its tickets.
By 2012, a large number of PIAC’s ticketing agents had either commenced or threatened proceedings to recover substantial sums they said PIAC owed by way of commission. The same year, PIAC gave lawful notice of the termination of its existing agency contracts and offered Times Travel a new contract. The new contract contained a waiver by Times Travel of its claims for unpaid commission under the prior arrangements. Times Travel accepted and signed the new contract.
However, the travel agency subsequently brought a claim against PIAC for the unpaid commission, arguing that it could rescind the new agreement for lawful act economic duress.
