D55

[2008] Bus LR Digest

A

Opel v Mitras (QBD)

Queen
s Bench Division

Adam Opel GmbH and another v Mitras Automotive (UK) Ltd

[2007] EWHC 3205 (QB)
B

2007 Nov 1923;

Dec 18

David Donaldson QC sitting as a deputy High Court judge

Contract
Validity
Economic duress
Contract for supply of motor parts to

vehicle manufacturer
Threatened breach of contract by sole supplier

Whether injunction realistic practical alternative to capitulation
Whether
illegitimate pressure rendering contract voidable
C

The rst claimant, Adam Opel GmbH, a wholly-owned subsidiary within the
General Motors Group, entered into a joint venture with the second claimant,
Renault SA, to produce a van. The defendant, Mitras Automotive (UK) Ltd, was the
sole supplier of a particular part, a moulded plastic front bumper mount, used in the
manufacture of the van in the UK. Production commenced in 2001 but in 2005
the claimants decided to source the bumper mount for a new model of the van from
a dierent supplier. On being informed, in February 2006, that its role as sole
supplier would terminate in August 2006, the defendant advanced certain nancial
demands, pointing out that the amortisation of its development costs had been
based on estimated supply of a large number of units over a period of 12 years, and
that the price at which the units had been supplied reected the expected longevity
of the project and volume of vehicles to be built. It sought payment of 560,000
plus a price increase backdated to January 2006 on all remaining units to be
supplied, but the claimants were only willing to oer 19,118 for what they
calculated as the defendant
s shortfall in amortisation. The defendant refused to
continue production of the existing bumper mount at less than its revised price and
said, in a fax from its managing director You have a choice of either accepting the
price or procuring the goods elsewhere

. From this and other statements from the
defendant, the claimants understood that supply would cease unless they capitulated
to the defendant
s demands. On 13 March 2006 they applied without notice for an
injunction to compel supply by the defendant, but the judge, Tugendhat J, was
unwilling to deal with the matter in the absence of the defendant and suggested that
short notice be given. The following day, the claimants were informed that their
haulier had been refused collection that morning. They decided to capitulate and
agreed to pay the sums then being demanded. That afternoon their haulier was
permitted to take delivery of the parts. In October 2006 the claimants sought
repayment of a total of 451,021.80 paid under the new agreement made in March,
on the grounds, inter alia, that it was unenforceable as having been entered into
under economic duress. In its defence, the defendant argued that since the claimants
had the realistic practical alternative of pursuing their claim for an injunction, there
was no economic duress.
David Donaldson QC sitting as a High Court judge considered, at paras 2527,
factors relevant to economic duress and found, at paras 28 and 37, that the defendant
had indeed applied illegitimate pressure. He rejected, at paras 3233, the suggestion
that the injunction alternative was adequate to nullify the pressure created by the
defendant
s threat, and concluded, at para 37, that the claimants were entitled to
(i) a declaration that the March 2006 agreement was voidable and had been voided
and (ii) recovery of the sums paid thereunder.
Donald McCue (instructed by Duane Morris) for the claimants; Mark
Cawson QC and Guy Vickers (instructed by Stephen Black Solicitors) for the
defendant.

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Opel v Mitras (QBD)

David Donaldson QC

[2008] Bus LR Digest

DAVID DONALDSON QC said, at paras 2528, 3133 and 37 of his judgment:

25 The general principles of the law relating to economic duress have been
elaborated over the last 40 years in a number of decided cases, and were not in issue
before me. It was common ground that they are accurately summarised by Dyson J
in DSND Subsea Ltd (formerly known as DSND Oceantech Ltd) v Petroleum Geo
Services ASA [2000] BLR 530, para 131 and repeated in his later decision in Carillion
Construction Ltd v Felix (UK) Ltd [2001] BLR 1, para 24 as follows:

The ingredients of actionable duress are that there must be pressure, (a) whose
practical eect is that there is compulsion on, or a lack of practical choice for, the
victim, (b) which is illegitimate, and (c) which is a signicant cause inducing the
claimant to enter into the contract: see Universe Tankships Inc of Monrovia v
International Transport Workers Federation [1983] AC 366, 400BE, and Dimskal
Shipping Co SA v International Transport Workers Federation (The Evia Luck)
[1992] 2 AC 152, 165G. In determining whether there has been illegitimate
pressure, the court takes into account a range of factors. These include whether
there has been an actual or threatened breach of contract; whether the person
allegedly exerting the pressure has acted in good or bad faith; whether the victim
had any realistic practical alternative but to submit to the pressure; whether
the victim protested at the time; and whether he armed and sought to rely
on the contract. These are all relevant factors. Illegitimate pressure must be
distinguished from the rough and tumble of the pressures of normal commercial
bargaining.

26 I do not understand that summary to have been presented as a precise

analytic tool, nor would it be possible to use it as such. There is plainly scope for
overlap between the three ingredients of pressure, illegitimacy, and causative eect.
The list of matters to be considered in assessing legitimacy is not exhaustive, and the
weight to be attached to each of them will depend on the facts of the individual case.
And the decision on the fundamental question whether the pressure has crossed the
line from that which must be accepted in normal robust commercial bargaining
involves at least some element of value judgment.
27 The pressure mayand in the case of economic duress normally does
consist of a threat to breach a contract. That is exemplied by the decision in
the Carillion case [2001] BLR 1, where a sub-contractor supplying cladding for the
construction of an oce building refused to continue supplies necessary for the
completion of the works, exposing the main contractor to liability to the employer
for substantial damages. In the present case, the pressure alleged by the claimants
(GMR

) was a threat by the defendant (Mitras

) to breach the obligation owed by
Mitras to GMR to supply units to [the manufacturers].
28 I am satised that Mitras did indeed threaten to stop supplies unless its
demands for payment of compensation and increase in price were accepted and
met . . .
31 The reason for making the application on 13 March 2006 without notice, as
was explained to the judge, was the fear that notice might provoke Mitras into
immediate discontinuance of supply. When the judge refused to entertain the
application without notice, GMR was left in a quandary, compounded by a concern
that failure by GMR in inter partes proceedings might lead Mitras to increase its nal
demands (though of course this would also have been a risk if an injunction had been
obtained ex parte but subsequently discharged). In the event, the resolution of this
delicate problem was pre-empted by the news early the next morning that supply
had been stopped. GMR now saw capitulation as the only certain way to ensure
resumption of supplies.
32 Mitras argued that application for an injunction inter partes was a practical
alternative to capitulation. Mr Cawson submitted that a court would have beyond
all doubt have granted an injunction compelling supply. He stressed that there was
a clear threatened (and indeed actual) breach of contract devoid of any possible

D57

[2008] Bus LR Digest

A

Opel v Mitras (QBD)

David Donaldson QC

justication, and suggested that the balance of convenience was overwhelmingly in

favour of granting the relief. Indeed, he submits that the case against his clients was
so strong that their legal advisers would have compelled them to give a undertaking.
This line of argument might be thought worthy of admission to Alice
s wonderland:
the more blatantly unjustied and illegal the action threatened, the more readily the
defendant would escape liability in duress. However that may be, the situation
cannot in my view be as simply resumd as Mr Cawson
s submissions suggested.
GMR had to take a rapid decision in circumstances where the threat had already
become reality. Capitulation would ensure with certainty the restoration of supplies
and at a price which, though seen by GMR as extortionate, would be a fraction
of the loss which would otherwise be suered. By contrast, there were serious
imponderables about the injunction route, and despite what is now said Mitras could
not necessarily have been expected to oer an undertaking. It was uncertain when a
hearing inter partes might have been secured, and GMR were in my view entitled to
consider that the outcome would not inevitably be in their favour. Apart from the
uncertainties of any litigation, the contractual documentation was far from
transparent, particularly as regards the central question of what, if any, obligation
Mitras was under to supply the units, and the court
s attitude to the grant of a
mandatory interim injunction to supply an indeterminate number of units on an
indeterminate timetable could not in my view have been assumed.
33 Given GMR
s legitimate concern to ensure security of supply, I do not in
these circumstances consider that the injunction route was an alternative adequate to
nullify the pressure created by Mitras
threat. . .
37 Pulling the threads together, I am satised that Mitras threatened to stop
supplies, and that the pressure created by this threat caused GMR to conclude the
agreement of 15 March 2006 and make the payments thereunder which they now
seek to recover. My consideration and evaluation of the matters analysed above has
also led me to conclude that the pressure was illegitimate. In these circumstances,
GMR are entitled to a declaration that the agreement was voidable and has been
avoided and to the recovery of the monies paid out by reason of that agreement.
PMM