Commercial litigation podcast series – Episode 19: General update

25 May, 2023

In this 19th episode of our series of commercial litigation update podcasts, we look at developments in a range of areas, including environmental litigation, privilege, class actions, claims against cryptocurrency exchanges, and force majeure.

This episode is hosted by Maura McIntosh, a professional support consultant in our litigation team, who is joined by Julian Copeman, a partner, and Gary Horlock, a senior associate.

Our podcast is available on iTunes, Spotify and SoundCloud and can be accessed on all devices. A new episode is released every couple of months. You can subscribe and be notified of all future episodes.

Below you can find links to our blog posts on the developments and cases covered in this podcast.

Maura McIntosh
Maura McIntosh
Professional support consultant
+44 20 7466 2608
Julian Copeman
Julian Copeman
Partner
+44 20 7466 2168
Gary Horlock
Gary Horlock
Senior associate
+44 20 7466 2917

Force majeure: general assertions as to impact of Covid-19 and Brexit not sufficient to defeat summary judgment application

15 May, 2023

The High Court has entered summary judgment in favour of a port operator against a sea ferry operator for the payment of a shortfall due for a failure to meet minimum volumes. The court rejected an argument that the operator could rely on a force majeure defence in light of Brexit and the Covid-19 pandemic: PD Teesport Ltd v P&O North Sea Ferries Ltd [2023] EWHC 857 (Comm).

This decision is a useful reminder that, while the Covid-19 pandemic and/or Brexit may be categorised as force majeure events, whether a force majeure clause is triggered will depend on a close analysis of the wording of the clause. Where the clause requires specific conditions to be met, it will be insufficient to rely on broad assertions as to the impact of the Covid-19 pandemic and/or Brexit.

In the present case, the force majeure clause required the claimant to have been affected by a force majeure event, and for that same event to have prevented the defendant meeting the minimum volumes guaranteed under the agreement. On the facts, the defendant had not established that it had a real prospect of showing that Brexit or the Covid-19 pandemic had affected the claimant, and thus the defendant could not rely on the force majeure clause.

The case also touches on obligations of good faith, emphasising the need to plead the content of an alleged good faith obligation and particularise any alleged breach. Continue reading →

Commercial litigation podcast series – Episode 16: General update

1 December, 2022

In this 16th episode of our series of commercial litigation update podcasts, we look at a couple of recent decisions relating to privilege, two interesting Court of Appeal decisions on good faith and force majeure respectively, and finally we discuss the recent Supreme Court decision in the BTI v Sequana case, which clarifies when directors owe obligations to consider the interests of creditors.

This episode is hosted by Anna Pertoldi, a partner in our litigation team, who is joined by Maura McIntosh, a professional support consultant, and Richard Mendoza, a senior associate.

Our podcast is available on iTunes, Spotify and SoundCloud and can be accessed on all devices. A new episode is released every couple of months. You can subscribe and be notified of all future episodes.

Below you can find links to our blog posts on the developments and cases covered in this podcast.

Anna Pertoldi
Anna Pertoldi
Partner
+44 20 7466 2399
Maura McIntosh
Maura McIntosh
Professional support consultant
+44 20 7466 2608
Richard Mendoza
Richard Mendoza
Senior associate
+44 20 7466 2024

Force majeure: Court of Appeal finds party was required to accept non-contractual performance in exercising reasonable endeavours to “overcome” force majeure event

7 November, 2022

The Court of Appeal has held, by a majority, that a shipowner was not entitled to rely on a force majeure clause in a shipping contract where its charterer’s parent company became subject to US sanctions: MUR Shipping BV v RTI Ltd [2022] EWCA Civ 1406.

The decision turned on the wording of the force majeure clause, which required that the force majeure event could not be “overcome by reasonable endeavors” on the part of the affected party. The High Court had held that, in exercising reasonable endeavours, the shipowner was not obliged to accept anything other than contractual performance (see our post on that decision).

The Court of Appeal disagreed, finding that the clause required the shipowner to accept a proposal involving payment in an alternative currency, which did not extend to full contractual performance, but which achieved precisely the same result as it: (i) fulfilled the underlying purpose of the relevant obligation; and (ii) caused no detriment to the shipowner. However, it was clear that, had these criteria not been met, the shipowner would have been entitled to rely on the force majeure clause.

The court emphasised that each case will turn on the drafting of the relevant clause as applied to the factual matrix. Parties must therefore be cautious in seeking to rely on previous decisions regarding the interpretation of a force majeure clause. Continue reading →

Force majeure and Covid-19: High Court decision turns on specific wording of FM clause

8 July, 2022

The High Court has held that a notice of termination served in April 2020, following the outset of the Covid-19 pandemic, under a force majeure (“FM”) clause in a contract for sale of a vessel was not valid: NKD Maritime Ltd v Bart Maritime (No. 2) Inc [2022] EWHC 1615 (Comm).

This decision turned on the specific construction of the FM clause, which applied if the seller was unable to “transfer title” in the vessel due to (among other things) “restraint of governments”. The court held that the clause could not be relied on as delivery of the vessel was not a condition precedent to transfer of title and, in any case, the vessel had been properly delivered in accordance with the contract.

Even if that was wrong, the Covid-19 restrictions imposed by the Indian government did not render the relevant party “unable” to transfer title in the vessel. The criterion was not hindrance or delay. While “inability” could have a temporal element, it was not enough that a party was unable to perform by the contractual deadline. It would require that the actual and anticipated delays were such as to materially undermine the commercial adventure (which would depend on similar considerations to those relevant in assessing frustration).

This decision illustrates that the ability of a party to rely on a FM clause boils down to the specific wording of the clause. Construction of the FM clause should therefore be carefully considered by a party before it is invoked as a basis for terminating a contract. Here, by wrongly relying on the FM clause, the buyer was found to have repudiated the contract and the seller was entitled to retain a substantial initial payment. The decision also highlights that the impact of Covid-19 restrictions on a commercial arrangement will not necessarily be found to prevent performance of relevant obligations, particularly where the Covid-19 induced delay is only temporary. Continue reading →

Party entitled to rely on force majeure clause where counterparty’s parent company became subject to US sanctions

21 March, 2022

The Commercial Court has held that a shipowner was entitled to rely on a force majeure clause in a shipping contract where its charterer’s parent company became subject to US sanctions – allowing an appeal from an arbitration award on a point of law under section 69 of the Arbitration Act 1996: MUR Shipping BV v RTI Ltd [2022] EWHC 467 (Comm).

The decision is of particular interest as the court allowed reliance on force majeure despite the fact that the sanctions did not directly bite on the shipowners, but rather would be likely to delay US dollar payments which in turn meant that shipowners were not prepared to go ahead with performance of the contract. The two key points arising from the court’s decision are as follows:

  1. In exercising reasonable endeavours to overcome the impact of a force majeure event, a party is not obliged to accept anything other than contractual performance. In this case, for example, the shipowners were not required to accept payment in Euros rather than the contractual currency of US dollars.
  2. There is no requirement that a force majeure event directly prevents or delays performance, without any intervening decision-making process on the part of the party relying on the clause. A party’s decision, taken in reaction to a force majeure event, will not necessarily break the chain of causation between the force majeure event and the non-performance, at least where the decision is reasonable.

Continue reading →

Commercial litigation podcast series – Episode 12: General update

3 February, 2022

In this 12th episode of our series of commercial litigation update podcasts, we outline some recent cases on witness evidence, privilege and the dangers of filing court documents on the last day for service. We also cover some decisions on jurisdiction, and finally we look at a few recent cases where the courts have had to interpret force majeure and material adverse change clauses. This episode is hosted by Anna Pertoldi, a partner in our litigation team, who is joined by Maura McIntosh, a professional support consultant, and James Robson, a senior associate.

Our podcast is available on iTunes, Spotify and SoundCloud and can be accessed on all devices. A new episode will be released every couple of months. You can subscribe and be notified of all future episodes.

Below you can find links to our blog posts on the developments and cases covered in this podcast:

Anna Pertoldi
Anna Pertoldi
Partner
+44 20 7466 2399
Maura McIntosh
Maura McIntosh
Professional support consultant
+44 20 7466 2608
James Robson
James Robson
Senior associate
+44 20 7466 2641

High Court finds Covid-19 pandemic amounted to force majeure event enabling party to terminate contract for rugby broadcasting rights

31 January, 2022

In a recent decision, the High Court has held that a broadcaster was entitled to terminate a media rights agreement relating to premier club rugby union competitions in Europe as a result of the postponement of the final stages of the 2019-20 season due to the Covid-19 pandemic: European Professional Club Rugby v RDA Television LLP [2022] EWHC 50 (Comm).

The relevant clause provided that, if a force majeure event prevented, hindered or delayed performance for a continuous period of more than 60 days, “the party not affected by” the event could terminate on 14 days’ written notice. The court found that the clause was triggered, rejecting an argument that it could not be relied on where (as here) both parties had been affected by the pandemic. It was also irrelevant that the party in breach had not served a notice expressly notifying force majeure. The right to terminate depended on the force majeure event having had the relevant effect for more than 60 days; it was not dependent on the party in breach having served notice of force majeure.

This decision illustrates how similar factual circumstances can give rise to very different results depending on the contractual protections parties have been able to negotiate. In this case, it was clear that the pandemic qualified as a force majeure event, as the relevant definition referred expressly to “epidemic”, and in any event was drafted non-exhaustively to cover circumstances beyond a party’s reasonable control including the circumstances listed. In contrast, in a recent case relating to a contract for football broadcasting rights (considered here), the clause was drafted more restrictively and neither party sought to rely on force majeure – the broadcaster seeking instead to rely (though unsuccessfully) on a material adverse change clause.

Continue reading →

Court of Appeal confirms buyer entitled to repayment of advance where seller failed to deliver diesel due to force majeure

11 January, 2022

The Court of Appeal has dismissed an appeal against a Commercial Court decision that a buyer was entitled to the repayment of an advance where there had been non-delivery of diesel for force majeure reasons: Nord Naphtha Limited v New Stream Trading AG [2021] EWCA Civ 1829.

The court found that, as a matter of construction, the contract between the parties obliged the seller to make repayment in the circumstances, both because that was the natural meaning of the language and because a different construction would offend business common sense.

The decision is of interest for the Court of Appeal’s comment that it would be “surprising” if a contract for the sale of goods did not include a provision requiring the return of an advance payment in the event of non-delivery. The court considered this to be a reasonable starting point for the construction of such a clause. Nonetheless, the court’s criticism of the contract’s “clumsy drafting” serves as a reminder that the terms of a repayment obligation – or indeed any contractual provision – should be clearly expressed to avoid the sort of dispute that arose in this case.

The decision is also a reminder that, as stated in the leading Supreme Court decision Wood v Capita [2017] UKSC 24 (considered here), construction is a “unitary exercise”, in which it does not matter whether the analysis starts with the contractual language or the relevant context so long as the court balances the indications given by each. The present case demonstrates the importance of considering the commercial consequences of differing contractual constructions as part of this unitary exercise. Continue reading →

High Court considers operation of force majeure clause where party had to self-isolate for 12 weeks due to Covid-19 pandemic

25 May, 2021

The High Court has found that, when exercising its discretion as to whether to designate a force majeure event under a plumbing franchise agreement due to the Covid-19 pandemic, the franchisor was in breach of duty in failing to consider the franchisee’s need to self-isolate: Dwyer (UK) Franchising Ltd v Fredbar Ltd & Bartlett [2021] EWHC 1218 (Ch).

The decision is of particular interest as one of the very few cases to date which has considered the operation of a force majeure clause in the context of the Covid-19 pandemic.

The relevant clause in this case was somewhat unusual in providing that the agreement would be suspended during any period that either of the parties was prevented or hindered from complying with their obligations  “by any cause which the Franchisor designates as force majeure”. The question for the court was whether the franchisor was in breach of the so-called Braganza duty, derived from the Supreme Court’s decision in Braganza v BP Shipping Ltd [2015] UKSC 17, which meant that this unilateral power to call a force majeure event had to be exercised honestly, in good faith and genuinely.

The court found that the franchisor was in breach of this duty in refusing to designate a force majeure, on the basis that plumbing services could still be provided during lockdown and a drop in demand was not sufficient for force majeure. This amounted to a failure to consider all relevant factors, in particular the need for the franchisee to isolate for his family’s welfare given that his son was in a vulnerable category for Covid purposes.

While it is highly fact-specific and involved consideration of an atypical force majeure clause, this case nevertheless demonstrates that English courts are willing in principle to recognise that the Covid-19 pandemic, or related factors, could amount to a force majeure event. As ever with force majeure, however, each case will depend on, and require close examination of, the specific circumstances and the precise wording of the force majeure clause in question. Continue reading →