1170 All England Law Reports [1978] 3 AI ER North Ocean Shipping CoLtdv Hyundai, Construction Co Ltd and another The Atlantic Baron (QUEEN'S BENCH DIVISION MOCATTA J b 6th, 7th, 8th, oth, r2th, 13th, 14th, 15th, ré6th, roth yung, 20th suLy 1978 Contract ~ Consideration ~ Performance of contractual duty ~ Performance of existing contractual duty — Contract to build ship — Builders contracting to open etter of credit as security for repayment of instalments of price if they failed to perform contract ~ Currency of contract devaiued ~ Builders claiming increased price to cover devaluation ~ Owners agreeing to pay increased price ~ Builders agreeing to increase letter of credit to correspond with increased price — Owners claiming return of excess over original contract price — Whether sufficient consideration for agreement to pay increased price— Whether promise by builders to fulfil existing contractual duty to build ship good consideration — Whether their promise to increase letter of credit good consideration or merely ‘fialfilment of existing contractual duty. Contract — Duress ~ Economic duress — Economic duress by threat to break contract ~ Contract to build ship ~ Contract fixing price for ship — Currency of contract devalued ~ Builders claiming increased price to cover devaluation — Builders threatening to terminate contract unless owners agreed to increased price - Owners chartering ship to important client — Owners wishing to fulfil charter ~ Owners agreeing to pay increased price for ship — Agreement to pay increased price made without prejudice to owners’ rights — Owners paying increased price and accepting delivery of ship without protest — Owners not intending to affirm agreement to pay increased price — Owners claiming return of excess over original price - Whether agreement to pay increased price voidable — Whether agreement entered into under economic duress ~ Whether owners affirming agreement. By a shipbuilding contract dated roth April 1972 the shipbuilders (the builders’) agreed to build a tanker for the shipowners (‘the owners) for the price of US $30,950,000. The contract provided that the price was not to be subject to adjustment except in certain events which did not occur. The price was payable in five instalments. The contract required the builders to open a letter of credit to provide security for repayment of instalments in the event of their default in the performance of the contract. ‘The owners duly paid the first instalment on 28th April 1972. On rath February 1973 the US dollar was devalued by ten per cent and on 23rd April the builders put forward a claim for an increase of ten per cent in the remaining four instalments. The owners were advised that there was no legal basis for the claim and rejected it, but in May 1973 they reached an advantageous agreement with an important client to charter the tanker for three years, and being anxious to fulfil the charter they proposed that the builders’ claim be submitted to arbitration. The builders did not wish to go to arbitration, and by telex dated 26th June 1973 requested the owners to give a final and decisive reply by 30th June to their claimn for the increased price, failing which they threatened to terminate the contract. ‘The owners agreed by telex dated 28th June to pay the increased price in order to maintain amicable relations with the builders but ‘without prejudice to [the owners’] rights’, and requested the builders to increase their letter of credit to correspond with the increased price. On 29th June the builders replied acknowledging the settlement of the parties’ differences, and assured the ‘owners that the letter of credit would be increased. The owners paid the remaining four instalments, together with the additional ten per cent on each instalment, without protest. They also accepted delivery of the ship on 27th November 1974 without protest, and signed the protocol of delivery and acceptance without protest. There was no evidence that if the owners had protested and withheld the final instalment, the builders would not have delivered the ship. In fact the owners never intended to affirm the agreement to payQBD North Ocean Shipping v Hyundai 1171 the increased price made on 28th/29th June, or to waive any of their rights in regard to payment of the increased price, and on 3oth July 1975 they claimed the return of the additional ten per cent on the contract price and nominated an arbitrator. They contended that the agreement made on 28th/29th June was void for lack of consideration and that the ten per cent was recoverable as money had and received or, alternatively, that the agreement of 28th/2gth June was voidable because it had been made involuntarily under economic duress, and that the agreement had been avoided. Held - (i) Although the rule that a promise by one party to a contract to fulfil his existing contractual duty towards the other party did not constitute good consideration was still good law, so that the builders’ original contractual liability to build the ship did not constitute good consideration for the agreement of 28th/2oth June to pay the further ten per cent, the increase by the builders in the amount of their letter of credit was sufficient consideration on theit part for that agreement since by agreeing to increase the letter of credit they had undertaken an additional-obligation, or had rendered themselves liable to an increased detriment, and were not merely fulfilling their existing contractual duty. ‘Accordingly, there was consideration for the agreement of 28th/2oth June (see p 1176 j top 1177 bande and p 1178 cd, post); Stlk v Meyrick (1809) 2 Camp 317 followed; Ward v Byham [1956] 2 All ER 318 and dictum of Denning L} in Williams v Williams [1957] 1 All ER at 307 considered. (ii) The recovery of money on the ground that it had been paid under duress, other than under duress to the person, was not limited to cases where there had been duress to goods: the duress could also take the form of economic duress, which could be constituted by a threat to break a contract. Accordingly, where a threat to break a contract had led toa further contract, that contract, even though it was made for good consideration, was voidable by reason of economic duress. If, however, a party who had entered into a contract under economic duress later affirmed the contract he was then bound by it. On the facts, the owners had entered into the agreement of 28th/29th June to pay the further ten per cent under economic duress by the builders to terminate the original contract, and the agreement was initially voidable. However, by failing to take any action by way of protest between the date of that agreement and the commencement of the arbitration in July 1975, the owners had affirmed the agreement, and the fact that it was not their intention to affirm it did not entitle them to avoid the agreement if that intention had not been indicated to the builders. It followed that the owners were not entitled to claim the return of the ten per cent on the contract price (see p 1182 ¢ tog, p 1183 a toc and fto p 1184 b, post); dictum of Isaacs J in Smith v William Charlick Ltd (1924) 34 CLR at 56 applied; Skeate v Beale (1840) 11 Ad & El 984 considered. Notes For compliance with existing contractual obligations as consideration for a new contract, see 9 Halsbury’s Laws (4th Edn) para 328, and for cases on the subject, see 12 Digest (Reissue) 260-261, 1825-1830. For contracts entered into under duress, see 9 Halsbury’s Laws (ath Edn) para 297, and for cases on the subject, see 12 Digest (Reissue) 124-125, 675-686. Cases referred to in judgment Astley v Reynolds (1731) 2 Str 915, 2 Baron KB 40, 93 ER 939, 12 Digest (Reissue) 398, 2908. Close v Phipps (1844) 7 Man & G 586, 8 Scott NR 381, 135 ER 236, 1 Digest (Repl) 771, 3032. D&C Builders Ltd v Rees[1965] 3 All ER 837, [1966] 2 QB 617, [1966] 2 WLR 288, CA, 12 Digest (Reissue) 553, 3852. Deacon v Transport Regulation Board [1958] VR 458. Fernsley v Branson (1851) Cox M & H 460, 20 LJQB 178, 16 LTOS 486, 15 Jur 354, 2 Digest (Repl) 550, 849. Great Western Railway Co v Sutton (1869) LR 4 HL 226, 38 LJ Ex 177, 22 LT 43, 33 JP 820, HL, 22 Digest (Reissue) 68, 421.1172 All England Law Reports [1978] 3 AIIER Hills v Street (1828) 5 Bing 37, 2 Moo & P 96, 6 LJOSCP 215, 130 ER 973, 12 Digest (Reissue) 689, 4967. a Hooper and Grass’ Contract, Re[1949] VLR 269, [1949] ALR 1005, 12 Digest (Reissue) 690, 2306. King Construction Co v Smith Electric Co (1966) 350 SW 2d 940. Knutson v Bourkes Syndicate [1941] 3 DLR 593, [1941] SCR 419, 12 Digest (Reissue) 685, *2280. Maskell v Horner [1915] 3 KB 106, [1914-15] All ER Rep 595, 84 LJKB 1752, 113LT 126, 79 JP 406, 13 LGR 808, CA, 12 Digest (Reissue) 688, 4960. Nixon v Furphy (1925) 25 SR (NSW) 151. Ormes v Beadel (1860) 2 Giff 166, 66 ER 70; rvsd 2 De GF & J 333, 30 LJ Ch 1, 3 LT 344,6 Jur NS 1103, 45 ER 649, LC, 12 Digest (Reissue) 125, 686. Parker v Great Western Railway Co (1844) 7 Man & G 253, 7 Scott NR 835, 3 Ry & Can Cas 563, 13 LTCP 105, 2 LTOS 420, 8 Jur 194, 135 ER 107, 44 Digest (Repl) 338, 1734 ¢ Siboen, The, and The Sibotre, Occidental Worldwide Investment Corpn v Skid A|S Avanti [1976] 1 Lloyd's Rep 293. Sinclair v Brougham [1914] AC 398, [1914-15] All ER Rep 622, 83 LJ Ch 465, 111 LT 1, 12 Digest (Reissue) 666, 4804. ‘Skeate v Beale (1840) 11 Ad & El 983, 3 Per & Dav 597, 9 LJQB 233, 4 Jur 766, 113 ER 688, 12 Digest (Reissue) 122, 663. d Smith v William Charlick Ltd (1924) 34 CLR 38, 12 Digest (Reissue) 690, 2302. Still v Meyrick (1809) 2 Camp 317, 6 Esp 129, 170 ER 1168, 42 Digest (Repl) 704, 4562. ‘Sundell (TA) & Sons Pty Ltd v Emm Yannoulatos (Overseas) Pty Ltd [1956] SR (NSW) 323. Tamvaco v Simpson (1866) LR 1 CP 363, Har & Ruth 374, 35 LICP 196, 14 LT 893, 2 Mar LC 383, 41 Digest (Repl) 500, 2719. Wakefield v Newbon (1844) 6 QB 276, 13 LJQB 258, 3 LTOS 160, 8 Jur 735, 115 ER 107, 12 @ Digest (Reissue) 687, 6956. Ward v Byham [1956] 2 All ER 318, [1956] 1 WLR 496, CA, 3 Digest (Repl) 439, 327. Watkins v Carrig (1941) 21 A 2d 591 Williams v Williams [1957] 1 All ER 305, [1957] 1 WLR 148, 121 JP 93, CA, 27(1) Digest (Reissue) 256, 1883. Special case By a shipbuilding contract dated roth April 1972 and made between the claimants, North Ocean Shipping Co Ltd as prospective owners (‘the owners’), and the respondents, Hyundai Construction Co Ltd and Hyundai Shipbuilding and Heavy Industries Co Ltd (‘the yard’), as builders the yard agreed to build for the owners a single steel screw steam turbine tanker of 259,000 tons deadweight, subsequently named the Atlantic Baron (‘the vessel). The g shipbuilding contract incorporated all the terms and conditions of a memorandum of agreement (‘the memorandum’) made on and February 1972 with such modifications and amendments as were provided for in the contract. Article XIII of the memorandum called for arbitration in London in the event of disputes arising between the parties, each party to appoint an arbitrator. Disputes arose between the parties and a claim by the owners for US $3,010,250 in respect of alleged overpayments to the yard was referred to arbitration. The owners contended that during June 1973 they were compelled to submit to the yard's illigitimate demand for an increase of ten per cent in the purchase price of the vessel and that their agreement co do so was made under duress and voidable for that reason By way of an amended pleading made after the conclusion of the hearing the owners contended that alternatively their agreement to submit to the demand for an increase in the purchase price was void for lack of consideration. The yard denied liability in full, contended that i the agreement of June 1973 was valid and binding on the owners, and counterclaimed US $209,678:03. The owners admitted liability in this respect subject to a set-off against the sum claimed by them. The arbitrators (C A L Clarke Esq and D Davies Esq) held that the owners’ claim failed completely and the yard’s counterclaim succeeded in full; and awarded and adjudged that the owners should pay to the yard the sum of US $209,678-03 plusQBD North Ocean Shipping v Hyundai (Mocatta J) 1173 interest in the sum of US $31,400°70 in full and final settlement of the matters in this reference. At the request of the parties the arbitrators stated their award in the form of a special case. The question of law for the opinion of the court was: Whether the owners were entitled to recover from the yard sums paid by the owners to the yard in excess of the price provided in the memorandum dated and February 1972 and the agreement dated roth April 1972, less the sum admitted to be due from the owners to the yard under the yard’s counterclaim. ‘Andrew Longmore for the owners. Adrian Hamilton QC and David Hunt for the yard. Cur adv vult 2oth July. MOCATTA J read the following judgment: This special case stated by two ¢ atbitrators raises questions of considerable difficulty, novelty and importance. The claimants (the owners’) are a ship owning company in the Livanos group who on roth April 1972 entered into a shipbuilding contract in writing with the first respondents, a South Korean shipbuilding company. Before the ship had been completed, there was on zoth February 1974, an assignment by the first respondents of their rights under the contract to the second respondents and in the arbitration the two respondents were both q{ teated as one. A point does arise on the assignment of 2oth February 1974, with which 1 will deal later. It does not appear, however, to have featured very largely in the arbitration and the joinder of the second respondents was made with the agreement of all concerned. Both respondents were South Korean companies and are called in the special case and this judgment ‘the yard’. The contract was to build for the owners a single steel screw steam turbine tanker of @ 259.000 deadweight tons subsequently named the Atlantic Baron. The purchase price was fixed at US $30,950,000. Article III, which was headed ‘liquidated damages’, stated that the contract price should not be subject to adjustment except in the event of certain contingencies thereinafter set out dealing with insufficient speed, excessive fuel consumption and variations in the deadweight tonnage. None of these contingencies is relevant to the present dispute. f By art XI the price was to be paid in five instalments, the first on the signing of the shipbuilding contract, the second on notification that prefabrication had been commenced, the third within six working days of advice that the keel had been laid and the fourth within six working days of advice that the vessel had been floated. The fifth and final instalment was expressed to be payable on tender by the yard and acceptance by the owners of delivery of the vessel. g__,, The first instalment was duly paid on 28th April 1972. The difficulties in the case however arose from the fact that on 12th February 1973 the United States dollar was devalued by ten per cent, the Korean currency following suit. Consequent on this the yard put forward a claim to an increase in the purchase price of the ship of ten per cent in respect of all instalments of the price after the first, which had of course already been paid before the American devaluation. This excess was eventually paid under circumstances which fh have to be carefully examined and the claim in the arbitration by the owners is for US $3,010,250 in respect of alleged overpayments subject to an admitted counterclaim by the yard for a relatively small sum of US $209,678-03 which the owners admitted as an allowance to be set off against the large sum claimed by them. The question of law for the decision of the court is whether the owners are entitled to recover from the yard sums paid by the owners to the yard in excess of the price provided ; in the agreement dated roth April 1972, less the small sums admittedly owing from the owners to the yard already mentioned. Subject to the decision of the court on the question of law the two arbitrators held that the owners’ claim failed completely and that the yard’s counterclaim succeeded in full. The owners’ claim is for money had and received in that the additional ten per cent in fact paid by them on all instalments subsequent to the first was paid involuntarily either1174 All England Law Reports [1978] 3 AI ER under a contract made for no consideration or, if there were consideration, by the threat by the yard to break their contract by ceasing to construct the ship, a form of conduct by the yard described by the owners as economic duress, for which as a basis for rendering an agreement voidable I was referred to a number of authorities, mainly Australian, The claim for the uplift by ten per cent of the price for the vessel was put forward by the yard for the first time in a letter dated 23rd April. On receipt of this request the owners ‘ook legal advice. They were advised and thereafter believed, taking legal advice at all stages, that there was no possible legal basis for this request. No legal basis was ever advanced and at the hearing the yard accepted there was no possible legal ground for the request. “There was not unnaturally a considerable correspondence between the parties consequent on the yard’s claim, This was rejected out of hand on 8th May by reference to the articles of the building contract already mentioned, to which there was a reply on 14th May by the yard that the circumstances that had occurred were entirely unexpected and constituted force majeure making it inequitable to continue to enforce the original contract provisions. The owners during the course of this correspondence despatched the second and third instalments to the yard, the first on prefabrication and the second on the laying of the keel, without the additional ten per cent but the sums were returned pending the resolution of the argument between the parties. It is unnecessary to refer in much detail to the correspondence which passed between the parties, though the owners made the very telling point that as shipowners they also were adversely affected by the devaluation of the dollar but had not thereon claimed an increase in freight or rates of hire under running contracts. Both sides maintained their original standpoints and on 22nd June the owners suggested that the yard, if they felt themselves entitled to an increase, should put forward a claim in arbitration under the arbitration clause in the building contract. The owners said they would co-operate in every way and to show their good faith were prepared to put ten per cent of the instalments due down to that date into a special bank account pending the arbitrators’ decision and also ten per cent of any future instalments that might fall due before such decision was announced. This however did not appeal to the yard who took the view that the dispute was not one to be settled by arbitration, In their telex of 26th June they accordingly requested the owners to give a final and decisive reply not later than 3oth June. Should they fail to receive such reply the yard said they would have no alternative but to terminate the shipbuilding contract by refunding the first instalment already received together with interest thereon. All rights and obligations of both parties under the shipbuilding contract would then be terminated and the amicable business relations between the parties would be likely to be discontinued. This very strongly worded telex from the yard was submitted by counsel for the owners asa threat to break their contract. It put the owners in a very difficult position and on 28th June the owners sent the following telex, which is of great importance in this dispute: “We are in receipt of your telex dated 26th June, 1973. Although’ we are convinced we are under no obligation to make additional payments which you ask, we are prepared as you demand in your telex of the 26th June 1973 and in order to maintain an amicable relationship and without prejudice to our rights, to make an increase of, 10% in instalments payable subsequent to the 12th February, 1973. No doubt you will arrange for corresponding increases in the letter of credit provided for in article XI (2) (ii).” The letter of credit referred to, to which I shall have to return, provided security for the repayment to the owners of money paid to the yard in the event of instalments of the price being returnable owing to default by the yard in the performance of the contract. Having received the owners’ telex of 28th June the yard replied on agth June acknowledging with thanks that the minor difference of opinion between the two companies had been settled thanks to the owners’ generous understanding of the yards» ° © ~ > ~ QBD North Ocean Shipping v Hyundai (Mocatta J) 1175 position and assuring the owners that there would be a corresponding increase in the amount of the letter of credit provided for in art al (2) (ii). This in turn was acknowledged by the owners in a telex in which they noted that ‘the friendly relationship between the parties will continue’ and stated that they were remitting the second and third instalments of the price, which it will be remembered had already been returned by the yard, together with the additional ten per cent. For these two instalments as well as for the fourth, which became due in February 1974, on the vessel being floated, the owners sent separate payments in respect of the original instalments and the additional ten per cent on each, They did not adopt this policy of separation of the ten per cent in relation to the final payment which was in fact made in two parts, one in July 1974 and the last on 26th November. The vessel was delivered on 27th November 1974, and the claim by the owners was first advanced by telex dated 3oth July 1975, in which they claimed repayment of over US $3 million as having been paid under duress and/or mistake and nominated their arbitrator. Meanwhile the owners had been making enquiries for fixing the vessel, when she should have been completed, from as early as February 1973, and had begun negotiations with Shell in March of that year. Ultimately an agreement was reached with Shell for a three year time charterparty on world scale 80 on 2nd May 1973. This was then a very good rate and the special case finds that the owners were going to make and did make a substantial profit out of the fixture even after paying a further ten per cent over and above the original contract price of building the ship. The final fixing of the three-year time charter was made at a time when on the correspondence between the parties it looked as if the yard were insisting on their claim for an increase of ten per cent and had in fact already returned the second and third instalments made by the owners, though this had not come to the owners’ knowledge by 22nd May when the shree-year time charter was fixed. The yard were never made aware by the owners of the three-year Shell time charter. There are important findings in para 13 of the special case in relation to the claim based ‘on economic duress. By the time that the owners proposed arbitration they believed that any default on the time charter would be detrimental to their relationship with Shell, who are clearly very important clients of shipowners like Livanos, as well as leaving them with a potential liability of about US $8 million over and above the rate of hire payable by Shell even if, which the owners thought doubtful, Shell would have been prepared to accept a substitute vessel chartered in for che purpose in place of the new vessel. There was no practical possibility of placing a substitute order for a ship to be delivered in 1974't0 meet the cancelling date of the Shell charterparty; had there been such a possibility the cost of the substitute vessel would have been in the region of $60 million. Although the paragraph is not as clear as might be desired it would appear that owing to the buoyant state of the freight market the figure of US $8 million already mentioned would have been the figure payable over and above world scale 80 had it been possible to charter in a vessel to perform the three-year time charter. In relation to the very important telex containing the words ‘without prejudice to our rights’ sent by the owners on 28th June the special case finds that the yard did not appreciate the significance of the reservation contained in that telex. The special case continues, however, that the owners from the yard's reply did realise that the yard had not appreciated the significance of the reservation and further finds that the owners deliberately did not draw to the yard’s attention the significance of the reservation at any subsequent time. It appears fairly clearly from these passages in the special case that the two arbitrators themselves took the view that the owners’ telex of 28th June did clearly reserve their rights by the use of the words ‘without prejudice to our rights’. It is further found that the owners made no protest in respect of the additional sums of ten per cent which they did pay for the remaining instalments although, as I have already said, they made separate payments in respect of the additional ten per cent due on the second, third and fourth instalments. The special case finds that not only were no protests made when making such instalments, but none was made later when making the final1176 All England Law Reports [1978] 3 AIER instalments, nor when agreeing a document called ‘ships price status’, nor in signing the protocol of delivery and acceptance. The final instalment was in fact expressed to be ‘in full and final settlement’ again with no protest. On 2oth February 1974 the other party to the original building contract, whom I have so far been calling the yard and whose real name was Hyundai Construction Co Ltd, with the agreement of the owners, assigned their right, title and interest in, and to, the shipbuilding contract to an associated company with a slightly different name and the final instalments were paid to that company. The assignment document in question however referred only to the contract of roth April 1972, and made no mention of any agreement to increase the price thereunder by ten per cent. The special case finds that no formal objection was taken to the fact that the assignee company were not a party to the arbitration. originally and by the agreement of all concerned they were joined as second respondents and the two Korean companies are in effect referred to indiscriminately as ‘the yard’. Again the special case finds that no protest was made at the time of the assignment in relation to the additional ten per cent and for the same reason. The special case makes further findings as to the changed market situation at the time the vessel was due for delivery in November 1974. The tanker chartering market and the tanker sale and purchase market had then gone down very substantially and it is found there is no ground for inferring that at that time the yard would have refused to deliver the vessel had the owners protested in connection with the additional ten per cent; on the other hand, there is no finding that had the additional ten per cent been withheld the yard would have been prepared to have delivered the vessel. There was apparently another contract for a sister ship entered into between the two parties, the other vessel being known as the Atlantic Baroness, and at the arbitration the owners by a witness stated that had they earlier initiated arbitration proceedings for the recovery of the increased ten per cent payment in respect of the Atlantic Baron before the Atlantic Baroness was tendered, which was in July 1975, the yard might have refused to deliver the Atlantic Baroness, However the special case finds there is no ground for making such an inference. Finally the special case finds that the owners never intended to affirm the agreement for the extra payments in respect of the vessel nor to waive any of their rights in relation thereto. The owners always thought that they were acting in such a manner as to protect themselves against any damage with legal rights of recovery being preserved. I have to determine whether they were right in taking that view. In the original pleadings in the arbitration the owners based their claims solely on the agreement made by the telex of 28th June 1973 and the reply thereto as having been made under duress. They pleaded that they had avoided the agreement, since it had been made under duress and was therefore voidable, presumably by their claim in the arbitration of 3oth July 1975, and that they were therefore entitled to recover the sum of US $3,010,250 from the yard. However towards the end of the arbitration they put forward an alternative claim, that the agreement reached at the end of June 1973 was void for lack of consideration and that accordingly the same sum could be recovered as money had and received having been paid involuntarily in respect ofa void contract. They were given leave to amend their pleading by adding this additional ground and the amendment was made after the close of the argument by counsel before the arbitrators. No objection was taken to the proposed amendment and it was not suggested that the owners were debarred from this line of argument by any equitable or promissory estoppel. Accordingly, counsel for the owners argued that this particular point was not open fo counsel for the yard to argue before me ‘owing to the absence of certain necessary findings of fact. However no request was made by either side for the case to be remitted for further findings of fact to be found and, if necessary, I must accordingly do the best in relation to this matter as I can on the material before me. Counsel's argument for the owners that the agreement to pay the extra ten per cent was void for lack of consideration was based on the well-known principle that a promise by one party to fulfil his existing contractual duty towards his other contracting party is not goodQBD North Ocean Shipping v Hyundai (Mocatta J) 1177 consideration; he relied on the well-known case of Stile » Meyrick! for this submission. Accordingly there was no consideration for the owner's agreement to pay the further ten per cent, since the yard were already contractually bound to build the ship and it is common ground that the devaluation of the dollar had in no way lessened the yard’s legal obligation to do this, There has of course been some criticism in the books of the decision in Stilk v Meyrick! which is somewhat differently reported in the two sets of reports, but Campbell's reports have the better reputation and what I have referred to as being the law on this point is referred to as ‘the present rule’ in Chitty on Contracts: see, also, Cheshire and Fifoot?, The law seems still to be the same in Australia: see T A Sundell é Sons Pty Ltd -y Emm Yannoulatos (Overseas) Pty Ltd’. Counsel for the yard relied on what Denning LJ said in two cases dealing with very different subject matters. The earlier was Ward v Byham’, There the father of an illegitimate child who had lived with her mother for some years turned the mother out of the house, retaining the child for a while for himself. Later he made an offer to let the mother have the child and pay an allowance of {'1 a week, provided the child was well looked after and happy and was allowed to decide for herself where she wished to live. When the mother married, the father discontinued payment, but on being sued by the mother he was held liable. The mother was by statute bound to maintain her illegitimate child, but Denning LJ said® that he thought there was sufficient consideration in the promise to perform an existing duty or in its performance. Apart from the fact that the existing duty on the mother was imposed on her by statute law, which I think differentiates the case, the other two members of the Court of Appeal thought that compliance with the special terms of the father’s letter, about keeping the child happy and leaving her freedom of choice constituted ample consideration. Again in Williams v Williams’, whilst Denning LJ said that ‘a promise to perform an existing duty is, I think, sufficient consideration to support a promise’, nonetheless he went on to find two separate grounds for good consideration for the husband's promise. Similarly Hodson LJ 8and Morris LJ? found good consideration for the husband's promise. I do not therefore think either of these cases successfully enables counsel for the yard to avoid the rule in Still v Meyrick’. What I have, however, found more difficult is whether the yard did not give some consideration for the extra ten per cent on the contract price, on which they insisted, in the form of their agreement to increase pro tanto what was called for short in argument ‘the return letter of credit’. The reference here is to some somewhat confusingly drafted provisions in the shipbuilding contract headed ‘terms of payment’. This begins by dealing with the first payment of five per cent of the contract price which was to be paid on the signing of the contract. It there provides that should the yard fail within 31 days to provide the owners with all of the documents referred to below the contract should at the owners’ option become null and void and the first payment plus interest would be returned by the yard. The third of the documents mentioned is described in a complicated way. It starts by referring to a letter of credit issued by the Korean Exchange Bank guaranteeing the payments and refunds by the yard to the owners which might become refundable under the contract. It then says that the letter of credit, which covers the initial payment of five per cent, is to be provided on signing of the contract and continues: ‘and the [yard] (1809) 2 Camp 317, 170 ER 1168 2th Edn (1977), vol 1, General Principles, para 172, p 86 Law of Contract (9th Edn, 1976), p 83, [1956] SR (NSW) 323 [1956] 2 All ER 318, [1956] 1 WLR 496 [1956] 2 All ER 318 at 319, [1956] 1 WLR 496 at 498 [1957] 1 All ER 305 at 307, [1957] 1 WLR 148 at 151 [1957] 1 All ER 305 at 309, (1957] « WLR 148 at 153 [1957] 1 All ER 305 at 310, [1957] 1 WLR 148 at 155 we evansune1178 All England Law Reports [1978] 3 AIlER will provide a letter from the Korean Exchange Bank covering the three subsequent payments by [roth February}. This date was no doubt inserted because an original contract between the parties dated and February came to nothing and was replaced, though very much on the same terms, by the contract of roth April on which the special case is founded. The three subsequent payments are there set out separately and in detail in paras headed B, C and D and deal with the instalments of a further five per cent of the total price each, namely US $1,547,500, payable respectively on the commencement of prefabrication, the laying of the keel and the floating of the vessel. The ‘return letter of credit’ was, therefore, to cover specific detailed sums. I have already mentioned that in their important telex of 28th June 1973 the final sentence read ‘No doubt you will arrange for corresponding increases in the letter of credit provided for in article XI (2) (iii)’ and this was readily and quite naturally accepted and given effect to by the yard, I remain unconvinced, however, that by merely securing an increase in the instalments to be paid of ten per cent the yard automatically became obliged to increase the return letter of credit pro tanto and were therefore doing no more than undertaking in this respect to fulfil their existing contractual duty. I think that here they were undertaking an additional obligation or rendering themselves liable to an increased detriment. I therefore conclude, though not without some doubt, that there was consideration for the new agreement. In view of this conclusion it is unnecessary for me to deal with a number of the additional points which counsel for the yard advanced against the argument that there was no consideration. I shall have to deal with some of them on counsel's alternative argument for the owners that the increased price agreement and the additional payments made in consequence thereof resulted from a form of duress. 1 think, however, that I should say something about two of them. One was that acceptance of the increased price enabled the contract t0 be performed on the basis of amicable relations, which was particularly important to the owners who wanted the vessel before the end of December 1974, which was the cancelling date for the Shell charterparty. I cannot think that this can amount to anything the law would regard as consideration moving from the yard. Secondly counsel for the yard argued that the American case of Watkins v Carrig! required the present circumstances to be treated as if the original contract were rescinded by mutual agreement and the new one substituted. The case is cited by Professor Treitel in his Law of Contract? not as being the law of England but as an example of unforeseen circumstances arising in the performance of a contract, which ought to disentitle the promise from taking an unconscionable advantage of the promisor. Further, the facts here are in my opinion far removed from a case of rescission. Having reached the conclusion that there was consideration for the agreement made on 28th and 29th June 1973 I must next consider whether even if that agreement, varying the terms of the original shipbuilding contract of roth April 1972, was made under a threat to break that original contract and the various increased instalments were made consequen- tially under the varied agreement, the increased sums can be recovered as money had and received. Counsel for the owners submitted that they could be, provided they were involuntary payments and not made, albeit perhaps with some grumbling, to close the transaction. Certainly this is the well-established position if payments are made, for example, to avoid the wrongful seizure of goods where there is no prior agreement to make such payments. The best known English case to this effect is probably Maskell v Horner?, where the plaintiff had over many years paid illegal tolls on his goods offered for sale in the vicinity of Spitalfields Market. The plaintiff had paid under protest, though the process was so prolonged that the protests became almost in the nature of jokes, though the 1 (1941) 21 Aad 591 2 4th Edn (1975), p 67 3 [1915] 3 KB 106, [1914-15] All ER Rep 595,QBD North Ocean Shipping v Hyundai (Mocatta J) 1179 plaintiff had in fact suffered seizures of his goods when he had not paid. Lord Reading C} did not say that express words of protest were always necessary, though they might be useful evidence to negative voluntary payments; the circumstances taken as a whole must indicate that the payments were involuntary. Buckley LJ! regarded the making of a protest before paying to avoid the wrongful seizure of one’s goods as ‘a further factor’, which went to show that the payment was not voluntary. Pickford LJ? likewise regarded the fact of protest as some indication that the payer intended to resist the claim. fp _ There are a number of well-known examples in the books of English cases where the payments made have been involuntary by reason of some wrongful threatened action or inaction in relation to goods and have subsequently been recovered, but where the issue has not been complicated by the payments having been made under a contract. Some of these cases have concerned threats to seize, seizure, or wrongful detention of goods, Maskell v Horner? being the best known modern example of the former two categories and Astley v Reynolds‘ a good example of the latter category, where a pawnbroker refused to release plate when the plaintiff tendered the money lent and, on demand, more than the legal rate of interest, since without this the pawnbroker would not release the plaintift’s plate. The plaintiff recovered the excess, as having paid it under compulsion and it was held no answer that an alternative remedy might lie in trover. Counsel for the owners referred me to other cases decided in this country bordering on d what he called economic duress as distinct from duress to goods. Thus in Parker v Great Western Railway’, approved in Great Western Railway v Suttons, it was held that the railway was not entitled to differentiate adversely between charges on goods made against one carrier or packer using the railway and others. Excess charges payable by such persons were recovered. In advising the House of Lords, Willes J said”: . [have always understood that when a man pays more than he is bound to do € _ by law for the performance of a duty which the law says is owed to him for nothing, or for less than he has paid, there isa compulsion or concussion in respect of which he is entitled to recover the excess by condictio indebiti, or action for money had and received. This is every day's practice as to excess freight.” Another case, decided in 1844, on which counsel for the owners relied was Clase v f Phippst, in which the attorney of a mortgagee threatened to sell the mortgaged property unless certain costs, to which he was not entitled, were paid in addition to the mortgage money. The additional costs were paid under protest and were subsequently recovered as money had and received. It was stressed in argument, rightly I think, that this was a case of money paid under duress, the duress being a threatened breach of contract, though in Goff and Jones on The Law of Restitution®, the case is categorised as an example of duress ‘of goods. Another very unusual case is Fernley v Branson'!®, In that case there was a submission to two arbitrators and an umpire the terms including that ‘the costs and expenses of the submission and reference and award to be made shall be in the discretion of the arbitrators or their umpire, who may award and direct by and to whom the same shall be paid’. When the award, made by the umpire alone, was ready, he informed the parties that this was ready to be taken up on payment of over {/379, made up mainly of fees fp and expenses of the umpire and arbitrators. Eventually the award was taken up and the [1915] 3 KB 106 at 124, 1914-15] All ER Rep 595 at Gor 1 2 [1915] 3 KB 106 at 126, [1914-15] All ER Rep 595 at 602 3. [1915]3 KB 106, [1914-15] All ER Rep 595, _ 4 (1731) 2 Str915, 93 ER 939 45. (1844) 7 Man & G 253, 135 ER 107 6 (1869) LR 4 HL 226 7 LR 4HL 226 at 249 8 (1844) 7 Man & G 586, 135 ER 236 9 (1966), p 149 " (© (1851) 20 LJQB 1781180 All England Law Reports [1978] 3 AILER fees requested paid but these were by the consent of the umpire and one arbitrator taxed by a taxing master and reduced, the reductions being accepted by the two mentioned, but not by the other arbitrator, Mr Branson. He was accordingly sued in the county court for the excess of some [49 and held liable to pay this. The decision was upheld on appeal on the basis that the payment was due as money had and received. Wightman J thought it unnecessary to refer to the decisions respecting money paid under duress of goods, since these cases were not questioned by counsel. He relied on the terms in the submission I have quoted but the court decided that these only gave the tribunal the power to decide who should pay the costs, but not to fix costs which were unreasonably high. I is difficult to know how to categorise this case, since there was no duress of goods. In Goff and Jones! it is attributed to the quasi-public position of the arbitral tribunal, but counsel for the owners rightly pointed out that the role of the arbitrator is contractual and that he can sue for his fees. There has been considerable discussion in the books whether, if an agreement is made under duress of goods to pay a sum of money and there is some consideration for the agreement, the excess sum can be recovered. The authority for this suggested distinction is Skeate v Beale?, It was there said by Lord Denman CJ that an agreement was not void because it was made under duress of goods, the distinction between that case and the cases of money paid to recover goods wrongfully seized being said to be obvious in that the agreement was not compulsorily but voluntarily entered into. In the slightly later case of Wakefield v Newbon?, Lord Denman CJ referred to cases such as Skeate v Beale? as ‘that class where the parties have come to a voluntary settlement of their concerns, and have chosen to pay what is found due’. Kerr J in The Siboen and The Sibotre', gave strong expression to the view that the suggested distinction based on Skeate v Beale would not be observed to- day. He said’, though obiter, that Skeate v Beale? would not justify a decision that— “if, for instance, I should be compelled to sign a lease or some other contract for a € nominal but legally sufficient consideration under an imminent threat of having my house burnt down ora valuable picture slashed, though without any threat of physical violence to anyone, I do not think the law would uphold the agreement.’ I was referred to a number of cases decided overseas: Nixon v Furphy®, Knutson v Bourkes Syndicate? and Re Hooper and Grass’ Contract’, all of which have a similarity to Close v ¢ Phipps?. ‘Perhaps their greatest importance, however, is the quotation in the first mentioned from the judgment of Isaacs J in Smith v William Charlick Ltd", where he said: ‘It is conceded that the only ground on which the promise to repay could be implied is “compulsion”. The payment is said by the respondent not to have been but “forced” from it within the contemplation of the law ... “Compulsion” in relation to a payment of which refund is sought, and whether it is 9 also variously called “coercion”, “extortion”, “exaction” or “force”, includes every species of duress or conduct analogous to duress, actual or threatened, exacted by or on behalf of the payee and applied to the person or the property or any right of the person who pays... Such compulsion is a legal wrong, and the law provides a remedy by raising a fictional promise to repay.” 1 Law of Restitution (1966), p 155 2 (1840) 11 Ad & El 983, 113 ER 688 3 (1844) 6 QB 276 at 281, 115 ER 107 at 109 4 [1976] 1 Lloyd's Rep 293 . 5 [1976] 1 Lloyd's Rep 293 at 335 J 6 (1925) 25 SR (NSW) 151 7 8 9 [i941] 3 DLR 593 [19.49] VLR 269 (1844) 7 Man & G 586, 135 ER 236 10 (1924) 34 CLR 38 at 56QBD North Ocean Shipping v Hyundai (Mocatta J) 1181 These cases do not, however, expressly deal with the position arising when the threat or g compulsion results in a new or varied contract. This was, or something very like it, however, the position in T A Sundell & Sons Pty Ltd v Emm Yannoulatos (Overseas) Pty Ltd’. In that case the plaintiff had originally entered into a contract to buy from the defendant a quantity of galvanised iron at {100 158 a ton and had established a letter of credit in favour of the defendant seller accordingly. ‘The iron was to come from France and some months after the contract had been entered into the seller said that an increase in price of b probably £27 was inevitable and requested that the letter of credit be increased, otherwise the plaintiff would not get his iron. Eventually the buyer on 17th April sent the seller a fresh order for the same quantity of iron at [140 per ton, but asking the seller to acknowledge that the buyer should have the right to contend that the original contract required the seller to supply the iron at £109 15s. ton. The buyer amended and increased his letter of credit accordingly, but the seller in acknowledging the buyer's letter did not ¢ accept the terms laid down in it. Eventually the iron arrived before the argument had been resolved and full use was made of the increased letter of credit. The buyer thereafter sued to recover the excess he had paid through the increased letter of credit as having been paid under ‘practical compulsion’. The first point taken in answer to this was that the original contract was varied or superseded by a new contract made on 17th April and that accordingly the buyer was obliged thereunder to pay. This argument failed since the court found there was no consideration for the provision of the increased letter of credit. ‘The second point argued was that a payment could not be said to have been made under ‘practical compulsion’ where a threat was made by the payee to withhold from the payer a contractual right as distinct from a right of possession of property, a statutory right or some proprietary right. This it was argued would be to break new ground and would be contrary to what was said by Lord Sumner in Sinclair v Brougham? against ¢ extending the action for money had and received. These arguments were rejected by the court who cited the passage from the judgment of Isaacs J?, set out above emphasising by italics the words ‘or any right’ of the person paying under compulsion. It would seem, therefore, that the Australian courts would be prepared to allow the recovery of excess money paid, even under a new contract, as the result of a threat to break an earlier contract, since the threat or compulsion would be applied to the original contractual right of the f party subject to the compulsion or economic duress, This also seems to be the view in the United States, where this was one of the grounds of decision in King Construction Company v Smith Electric Co*.. This view also accords with what was said in D é& C Builders Ltd v Rees* per Lord Denning MR: ‘No person can insist on a settlement procured by intimidation.’ Counsel for the owners also relied on two English cases of the last century as showing that even when a contract has been entered into to pay an excess amount the remedy by g wy of a claim for money had and received is available. The first of these was Hills v StreetS. There a broker was in possession of goods distrained for rent. The party distrained ‘on was anxious to have time to pay the rent and that the goods should not be sold. A written request was demanded by the broker and an undertaking to pay expenses given. Yet despite what appears to have been an agreement the party distrained on was held entitled to recover excess expenses charged by the broker. There was no voluntary fh Payment. The second was Tamvaco v Simpson’, cited in Goff and Jones® as being inconsistent 1 [1956] SR (NSW) 323 2 [1914] AC 398 at 453-454, [1914-15] All ER Rep 622 at 649 5 Smith » William Charlick Ltd (1924) 34 CLR 38 at 56 4 (1961) 350 SW 2d 940 5 [1965] 3 All ER 837 at 841, [1966] 2 QB 617 at 625, 6 (1828) 5 Bing 37, 130 ER 973, 7 (1866) LR 1 CP 363, 8 Law of Restitution (1966), p 1511182 All England Law Reports [1978] 3 AI|ER with the so-called rule based on Skeate v Beale!. The case is, however, a difficult one to follow and draw conclusions from since the courts were limited to answering two questions on a case stated. Counsel for the owners further relied on the Chancery case of Ormes v Beadel?, reversed on appeal on the ground of affirmation or acquiescence’, as showing that in equity a contract entered into under circumstances of acute economic pressure, increased by the refusal of an architect to pay a builder a sum which the court found was a fair and just demand for work done, would be set aside in equity. Imay here usefully cite a further short passage from the valuable remarks of Kerr J inp The Siboen and The Sibotre*, where after referring to three of the Australian cases I have cited he said: ‘Ieis true that in that case, and in all the three Australian cases, it was held that there had been no consideration for the settlement which the Courts reopened. But I do not think that it would have made any difference if the defendants in these cases had also insisted on some purely nominal but legally sufficient consideration. If the contract © is void the consideration would be recoverable in quasi-contra is voidable equity could rescind the contract and order the return of the consideration.” It is also interesting at this point to quote a few sentences from an article entitled ‘Duress asa Vitiating Factor in Contract’ by Mr Beatson, Fellow of Merton College, Oxford: ‘It is submitted that there is no reason for making a distinction between actual @ payments and agreements to pay. If that is so there is nothing to prevent a court from finding that duress of goods is a ground upon which the validity of a contract can be impeached ... The law was accurately stated by the courts of South Carolina as early as 1795, when it was said that“. . . whenever assumpsit will lie for money extorted by duress of goods, a party may defend himself against any claim upon him for money to be paid in consequence of any contract made under similar circumstances”.” e Before proceeding further it may be useful to summarise the conclusions I have so far reached. First, I do not take the view that the recovery of money paid under duress other than to the person is necessarily limited to duress to goods falling within one of the categories hitherto established by the English cases. I would respectfully follow and adopt the broad statement of principle laid down by Isaacs J® cited earlier and frequently quoted ¢ and applied in the Australian cases. Secondly, from this it follows that the compulsion may take the form of ‘economic duress’ if the necessary facts are proved. A threat to break a contract may amount to such ‘economic duress’. Thirdly, if there has been such a form of duress leading to a contract for consideration, I think that contract is avoidable one which can be avoided and the excess money paid under it recovered. I chink the facts found in this case do establish that the agreement to increase the price _g by ten per cent reached at the end of June 1973 was caused by what may be called “economic duress’. The yard were adamant in insisting on the increased price without having any legal justification for so doing and the owners realised that the yard would not accept anything other than an unqualified agreement to the increase. The owners might have claimed damages in arbitration against the yard with all the inherent unavoidable uncertainties of litigation, but in view of the position of the owners vis-a-vis their relations fp with Shell it would be unreasonable to hold that this is the course they should have taken: (1840) 11 Ad & El 983, 113 ER 688 / (1860) 2 Giff 166, 66 ER 70 (1860) 2 De G F & J 333, 45 ER 649 [1976] 1 Lloyd's Rep 293 at 336 [1974] CL] 97 at 108 ‘Smith v William Charlick Ltd (1924) 34 CLR 38 at 56QBD North Ocean Shipping v Hyundai (Mocatta J) 1183 see Astley v Reynolds', The owners made a very reasonable offer of arbitration coupled with a security for any award in the yard'’s favour that might be made, but this was refused. They then made their agreement, which can truly I think be said to have been made under compulsion, by the telex of 28th June without prejudice to their rights. I do not consider the yard's ignorance of the Shell charter material. It may well be that had they known of it they would have been even more exigent. If I am right in the conclusion reached with some doubt earlier that there was b consideration for the ten per cent increase agreement reached at the end of June 1973 and if it be right to regard this as having been reached under a kind of duress in the form of economic pressure, then what is said in Chitty on Contracts’, to which both counsel referred me, is relevant, namely that a contract entered into under duress is voidable and not void— ‘that a person who has entered into the contract may either affirm or avoid such e contract after the duress has ceased; and if he has so voluntarily acted under it with a full knowledge of all the circumstances he may be held bound on the ground of ratification, or if, after escaping from the duress, he takes no steps to set aside the transaction, he may be found to have affirmed it.’ On appeal in Ormes v Beadel? and in Kerr J’s case* there was on the facts action which was held to amount to affirmation or acquiescence in the form of taking part in an arbitration pursuant to the impugned agreement. There is nothing comparable to such action here. On the other hand, the findings of fact in the special case present difficulties whether one is proceeding on the basis of a voidable agreement reached at the end of June 1973 or whether such agreement was void for want of consideration, and it were necessary in consequence to establish that the payments were made involuntarily and not with the @ intention of closing the transaction. Ihave already stated that no protest of any kind was made by the owners after their telex of 28th June 1973, before their claim in this arbitration on 3oth July 1975, which was shortly after, in July of that year, the Atlantic Baroness, a sister ship of the Atlantic Baron, had been tendered, though, as 1 understand it, she was not accepted and arbitration proceedings in regard to her are in consequence taking place. There was therefore a delay f between 27th November 1974, when the Atlantic Baron was delivered and oth July 1975, before the owners put forward their claim. The owners were, therefore, free from the duress on 27th November 1974 and took no action by way of protest or otherwise between their important telex of 28th June 1973 and their formal claim for the return of the excess ten per cent paid of zoth July 1975, when they nominated their arbitrator. One cannot dismiss this delay as of no significance, g_ though I would not consider it conclusive by itself. do not attach any special importance to the lack of protest made at the time of the assignment, since the documents made no reference to the increased ten per cent. However by the time the Atlantic Baron was due for delivery in November 1974 market conditions had changed radically, as is found in the special case and the owners must have been aware of this. The special case finds, as stated earlier, that the owners did not believe that if they made any protest in the protocol of hy delivery and acceptance the yard would have refused to deliver the vessel or the Atlantic Baroness and had no reason so to believe. Counsel for the owners naturally stressed that in the rather carefully expressed findings in the special case, there is no finding that if at the time of the final payments the owners had withheld payment of the additional ten per cent, the yard would not have delivered the vessel. However, after careful consideration, (1731) 2 Str 915, 93 ER 939 2ath Edn (1977), vol 1, para 442, p 207 (1860) 2 De GF & J 333, 45 ER 649 The Siboen and The Sibotre [1976] 1 Lloyd's Rep 2931184 All England Law Reports [1978] 3 AIIER Ihave come to the conclusion that the important points here are that (i) since there was no danger at this time in registering a protest, (ii) the final payments were made without any g qualification, and (iii) were followed by a delay until 31st July 1975 before the owners put forward their claim, the correct inference to draw, taking an objective. view of the facts, is that the action and inaction of the owners can only be regarded as an affirmation of the variation in June 1973 of the terms of the original contract by the agreement to pay the additional ten per cent. In reaching this conclusion I have not, of course, overlooked the findings in the special case [that the owners never intended to affirm the agreement for extra payments] but | do not think that an intention on the part of the owners not to affirm the agreement for the extra payments, not indicated to the yard, can avail them in view of their overt acts, As was said in Deacon v Transport Regulation Board! in considering whether a payment was made voluntarily or not: ‘No secret mental reservation of the doer is material. The question is—what would his conduct indicate to a reasonable man as his mental state.’ I think this test is equally applicable to the decision this court has to make @ whether a voidable contract has been affirmed or not and | have applied this test in reaching the conclusion I have just expressed. think I should add very shortly that having considered the many authorities cited, even if Thad come toa different conclusion on the issue about consideration, I would have come to the same decision adverse to the owners on the question whether the payments were made voluntarily in the sense of being made to close the transaction. d Laccordingly answer the question of law in the negative with the consequences set out in the award. Judgment for the yard. Solicitors: Richards Butler & Co (for the owners); Norton Rose, Boterell & Roche (for the yard). K Mydeen Esq Barrister. 1 [1958] VR 458 at 460