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Progress Bulk Carriers Limited v Tube City IMS LLC [2012] EWHC 273 (Comm)

Economic duress; arbitration agreement

(333 words)

Facts

The dispute arose out of the sale of a load of shredded scrap that the charterers (hirers of a cargo ship) had to ship to China from Mississippi. The owners of the ship agreed to hire out the ship to the charterers for this voyage. Despite the agreement, the owners then hired the ship out to a third party, rendering the performance of the original contract impossible. However, in order to make up for their repudiatory breach, the owners offered to compensate the charterers’ losses and promised to find another ship to perform the agreement. The charterers relied on this and agreed to a later date of delivery with their buyers. In the meantime, the cargo’s value dropped and the buyers claimed a discount for late delivery. The charterers notified the owners of their intention to claim these losses as well as damages for breach of contract.

Issue

The owners refused to provide the charterers with a ship, unless the charterers withdrew their claims. The owners argued that their promises were not binding. In the absence of an alternative, the charterers were forced to accept the owners’ demands. The charterers later decided to sue the owners on the basis of economic duress. The arbitration tribunal found in favour of the charterers. The owners applied to the High Court for the arbitration award to be set aside on the basis that their actions were lawful.

Held

The High Court held that despite the fact that the owners’ refusal to provide a substitute ship was not a crime, a tort, or even a breach of contract, it still amounted to economic duress. The Court explained that the owners’ unethical behaviour of offering help and withdrawing it in the very last moment was already preceded by a repudiatory breach. Furthermore, the owners action left the charterers without an alternative. Putting the charterers into a situation of false sense of security was in fact a manoeuvre to corner them – and thus it amounted to illegitimate pressure.


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