Pao On and Others v Lau Yiu Long and Others: PC 9 Apr 1979

(Hong Kong) The board was asked whether a contract of guarantee had been obtained by duress.
Held: Lord Scarman said: ‘Duress, whatever form it takes, is a coercion of the will so as to vitiate consent. Their Lordships agree with the observation of Kerr J. in Occidental Worldwide Investment Corporation v. Skibs A/S Avanti [1976] 1 Lloyd’s Rep. 293, 336 that in a contractual situation commercial pressure is not enough. There must be present some factor ‘which could in law be regarded as a coercion of his will so as to vitiate his consent.’ This conception is in line with what was said in this Board’s decision in Barton v. Armstrong [1976] A.C. 104, 121 by Lord Wilberforce and Lord Simon of Glaisdale – observations with which the majority judgment appears to be in agreement. In determining whether there was a coercion of will such that there was no true consent, it is material to inquire whether the person alleged to have been coerced did or did not protest; whether, at the time he was allegedly coerced into making the contract, he did or did not have an alternative course open to him such as an adequate legal remedy; whether he was independently advised; and whether after entering the contract he took steps to avoid it. All these matters are, as was recognised in Maskell v. Horner [1915] 3 K.B. 106, relevant in determining whether he acted voluntarily or not.’
The Board also considered (obiter) whether english law recognises ‘economic duress’ and said: ‘the pressure must be such that the victim’s consent to the contract was not a voluntary act on his part. In their Lordships’ view, there is nothing contrary to principle in recognising economic duress as a factor which may render a contract voidable, provided always that the basis of such recognition is that it must amount to a coercion of will, which vitiates consent. It must be shown that the payment made or the contract entered into was not a voluntary act.’
Lord Wilberforces, Viscount Dilhorne, Lord Simon of Glaisdale, Lord Salmon, Lord Scarman
[1980] AC 614, [1979] UKPC 2, [1979] UKPC 17
Bailii, Bailii
Citing:
CitedOccidental Worldwide Investment Corporation v Skibs A/S Avanti (The Siboen and Sibotre) 1976
The effect of a rescission of a compromise agreement settling the dispute may be to revive the original agreement. As to the liability of a principal for misrepresentations by his agent: ‘If one agent makes a fraudulent statement to another agent, . .
CitedSkeate v Beale 1841
The tenant resisted a claim for the balance due under a contract, saying that the landlord in persuading him to agree to a rate of payment had subjected him to duress in threatening a distress.
Held: The plea of duress failed. . .

Cited by:
CitedJones v Morgan CA 28-Jun-2001
The claimant appealed against an order refusing him enforcement an agreement for the purchase of a one half share in a property. The judge had found the agreement to be unconscionable.
Held: The appeal was dismissed. The judge had wrongly . .
CitedUniverse Tankships Inc of Monrovia v International Transport Workers Federation HL 1-Apr-1981
A ship belonging to the appellants had been blacked by the defendant union. Negotiations to clear the threat resulted in payment by the appellants to a welfare fund of the defendant. The company sought its refund saying that it had been paid under . .
CitedProgress Bulk Carriers Ltd v Tube City IMS Llc ComC 17-Feb-2012
The claimant sought to set aside an arbitration saying that the arbitrator had misapplied the test for economic duress. . .
CitedCTN Cash and Carry v Gallaher CA 15-Feb-1993
The buyer paid a sum demanded by the seller who threatened otherwise to withdraw the credit facilities it provided to the buyer. The sum was not in fact due, but the demand had been made honestly. The buyer said the agreement was voidable for . .

These lists may be incomplete.
Updated: 17 February 2021; Ref: scu.372847