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Wednesday, March 31, 2010

A farmer, a logging road and economic duress

The British Columbia Supreme Court has just decided an interesting case involving a defence of "economic duress".  A B.C. farmer held permits for a road across Crown land allowing him access to his farm.  The road extended across his farm, and in exchange for the Crown permits, he granted the government a right-of-way across his farm.  A logging company with harvesting rights in the area required access to the road and approached the farmer about a road access agreement.  The two sides could not reach a deal, but the logging company was making use of the road.  That is, until the farmer parked an excavating machine across the road to block access.

Following this move, negotiations continued and a contract was ultimately signed.  On this basis, the farmer allowed access to resume.  However, the logging company refused to pay on the contract and the farmer sued for breach of contract.  The logging company argued in its defence that the contract signed with the farmer was signed under "economic duress".  The B.C. Supreme Court notes some of the history of the defence:
Early this century the law recognized that improper payments made involuntarily, for the purpose of avoiding some threatened action, were not voluntary payments but were payments made preserving the right to dispute the legality of the demand. Such payments were made under the compulsion of urgent and pressing necessity, analogous to duress. Maskell v. Horner (1915), 84 L.J.K.B. 1752, [1915] 3 K.B. 106 .
The Court also cites a test for economic duress:
There is no issue between the parties as to the law which applies to a claim of economic duress. The concept is discussed in the case of Gordon v. Roebuck reflex, (1993), 9 O.R. (3d) 1 (Ont. C.A.). At para. 3 of the Reasons of McKinlay J.A., it is stated:
To succeed on the ground of economic duress, the plaintiff must prove that his will was coerced and the pressure exerted to do that was not legitimate. Lord Scarman [in Pao On v. Law Yiu, [1979] 3 All E.R. 65 at 78] has set out four factors to consider in determining if a party's will has been coerced. They are:

1) Did he protest?

2) Was there an alternative course open to him?

3) Was he independently advised?

4) After entering the contract did he take steps to avoid it?
In the B.C. case, the Court found that economic duress was not made out.  The logging company signed the contract and resumed use of the road knowing that the farmer's belief was that it would pay the amount owed under the contract.  It continued to use the road, but did not move to resolve the dispute it had with the landowner over the rate to be paid.  Under those circumstances, the logging company could not avoid the contract by pleading economic duress.

Read the decision at: Schneider v. Mid Mountain Ventures Ltd.