The High Court in this case recognised the concept of economic duress.
Facts of the Case
The defendant held 50 taxi permits for operation of taxis in Kuala Lumpur, Petaling and Shah Alam. Through an agreement, the defendant appointed the plaintiff as one of their taxi drivers. The primary terms are as follows:
The plaintiff is required to pay a sum of RM3,000 to the defendant as a down payment towards the purchase of a vehicle “the taxi” which was supplied to the plaintiff during the term of the agreement which the purchase could only be made at the expiry of the taxi permit which was on 31 January 1997.
The plaintiff shall pay to the defendant a daily rental of RM43 per day for the use of the taxi and the license.
If the term of the agreement was breached by any one of the parties, the contract between them could be terminated by a notice in writing by way of a telegram
On 23 January 1996, the taxi was repossessed by the defendant due to the plaintiff’s failure to pay an outstanding amount of daily rental. A notice of repossession was sent to the plaintiff stating the reason. The plaintiff had attempted to secure the release of the taxi to him but failed. He then through his solicitor’s letter threaten to take legal action against the defendant since he alleged that the taxi was unlawfully repossessed. The defendant responded by sending a telegram informing him that his services as a taxi driver would be terminated with effect from 10 February 1996. After the plaintiff further attempt to get a reply from the defendant to his first letter failed, he sues the defendant for specific performance of the agreement, damages and costs.
Issue of the Case
Whether specific performance could be ordered?
Whether economic duress applicable?
Judgment of the Case
The defendant’s defence was that the plaintiff was in breach of the agreement in failing to pay his daily rentals causing the repossession of the taxi as permitted by a variation to the agreement dated 17 April 1995. As a result from the plaintiff’s breach, the defendant’s appointment was terminated and the relevant notice was sent by way of telegram. The defendant counterclaims for damages for the loss of daily rental, the costs of repossession, arrears of daily rental due by the plaintiff and interest and costs.
The plaintiff denied that the alleged variation agreement was intended or meant to change their agreement since it does not refer to the agreement itself and in alternative, he pleads that he signed the document under duress. He added that the defendant had allowed him to accumulate arrears of daily rentals to be paid at an appropriate period and thus the defendant had waived their right to terminate the agreement by reason of failure to pay the daily rental within the time specified.
The Court after examined the plaintiff’s pleadings and evidence available held that there is no challenge to the defendant’s termination of appointment as a taxi driver by the plaintiff. The entire case was focus on the return of the taxi to him. It was held that the essence of the agreement is the appointment of the plaintiff as the defendant’s taxi driver. This fact can be derived from the clauses of the agreement which regulates the obligations of both parties. In this case, the defendant supplies the taxi and the permit for daily rental while the plaintiff earns a living by charging fare from the passengers. It is not a sale and purchase agreement of the taxi.
According to the terms of their agreement, the option to purchase the taxi only becomes available to the plaintiff upon the expiry of the taxi permit on 31 January 1997. Although the telegram only specifies the termination of the plaintiff’s appointment, it means the termination of the entire agreement because the plaintiff’s employment is the essence of the agreement. The Court is of the opinion that the plaintiff’s claim for specific performance is fatal because the jurisdiction to order specific performance is based on the existence of a valid enforceable contract. The plaintiff in this case had not challenge his termination. Therefore, the court would not be able to order specific performance as there is no longer a valid enforceable contract.
Furthermore, sufficient particulars of the issues must also be elaborated in the claim for specific performance. The plaintiff in this case did not specify performance of which part of the agreement in their prayer. The Court held that without a precise and comprehensive prayer that is relevant to the facts pleaded, it would be in breach of Order 18 rule 15(1) of the Rules of High Court 1980 [Currently Order 18 rule 15(1) of the Rules of Court 2012] which states:
“A statement of claim shall state specifically the relief or remedy which the plaintiff claims; but costs need not be specifically claimed.”
From the reasons above, the Court dismiss the plaintiff claim with costs. Only a judgment of RM430 was allowed because the defendant’s counterclaims were not proved.
The Court also went the extra mile of addressing the issue which the Court presume is the substance of the plaintiff’s claim, i.e., the demand for the return of the taxi by insisting that it was not lawfully repossessed.
There is no doubt that the plaintiff was in arrears of daily rental payments. Through the receipt produced by the plaintiff’s he was in arrears for 12 days. The clauses in their agreement states that the plaintiff required to pay RM45 per rental days and any arrears should not be accumulated for more than 3 days. If it happens, a warning letter will be issued. All these were undertaken by the defendant against the plaintiff as he had breached the agreement. Finally, a telegram was sent to the plaintiff to dismiss him. Plaintiff’s only dispute is that the telegram contains no reasons for the termination but the plaintiff did not challenge that this termination notice is invalid due to breach of natural justice for not giving reason, or otherwise.
To determine whether the defendant can repossess the taxi prior to sending the notification of termination by telegram, the Court examined the foundation of the contract between them. the Court states that the main subject of the contract is the appointment of the plaintiff as the defendant’s taxi driver. This impliedly involves the supply of a taxi to the plaintiff for him to carry out his duties. Whether the defendant can take back the taxi when the plaintiff is in breach of the agreement? The agreement is silent on this issue. Usually, when there is a breach of contract, the innocence party is entitled to terminate the contract and thereafter claim for the return of goods or damages.
The defendant relied on the variation agreement dated 17 April 1955 which was made due to the previous occasion when the taxi was repossessed. The defendant had released the taxi upon plaintiff plea and on the condition that the plaintiff sign this document which he undertook to pay up the existing arrears of daily rentals, if daily rentals accumulated more than 7 days, the defendant can issue a letter of repossession and plaintiff acknowledge that this is the final warning to him. Thus, the defendant is entitled to repossess the taxi before the contract is terminated through these terms.
The plaintiff had argued that the document was not stamped, that he had executed the variation agreement under economic duress and that it was not witnessed.
On the third argument, the Court held that the plaintiff had expressly admitted that he had signed it and the contents were read to him. On the first objection, the entire contents refer to the subject of the taxi. The terms of this document can stand on its own. It is connected to the agreement and should be read together with the agreement. Since the main agreement is stamped, this additional part of the agreement, it cannot be said to be inadmissible on the ground that it is not stamped.
On the issue of economic duress, the plaintiff explained that if he did not sign the variation agreement at the material time, the defendant would not have released the taxi back to him and thus will lead to a deprivation of his livelihood. To determine the doctrine of economic duress, the Court states:
“Sinnathuray J in Third World Development & Anor v Atang Latief & Anor (1990) 1 SCR 533 limits it to 'unless it amounts to a coercion of his will which vitiates consent'. The principle to be applied in deciding this is an enquiry into whether the person alleged to be coerced did or did not protest; whether at the material time he did or did not have an alternative cause of action open to him such as an adequate legal remedy; a remedy that he was independently advised; and whether after entering the contract he took steps to avoid it; all quoted from a passage of Lord Scarman's judgment in Pao On v Lau Yiu Long [1980] AC 614 at p 635.”
Based on the facts and evidences before the Court, the plaintiff did not make any protest either before or after signing the variation agreement. He also admits that the contents were read to him and no force was also applied to make him sign. He does not have alternative cause of action available to him. He had breached the agreement by failing to pay the daily rental on time. On his request, the taxi was reinstated and defendant had stretched the period to seven days before the repossession notice will be issued. Under such favourable conditions to the plaintiff, the Court rejected the plaintiff objection of signing the agreement on economic duress. Hence, the objections raised by the plaintiff does not have any merit.
Principle of the Case
A claim for specific performance must be based on an existing valid enforceable contract and sufficient particulars of the claim must be elaborated.
Economic duress is a coercion of will which took away consent. The principle to be applied tin deciding this is an enquiry into whether the person alleged to be coerced did or did not protest; whether at the material time he did or did not have an alternative cause of action open to him such as an adequate legal remedy; a remedy that he was independently advised; and whether after entering the contract he took steps to avoid it.
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