Force Majeure: General Assertions As To Impact Of Covid-19 And Brexit Not Sufficient To Defeat Summary Judgment Application

• Published date: 24 May 2023
• Subject Matter: Coronavirus (COVID-19), Litigation, Contracts and Force Majeure
• Law Firm: Herbert Smith Freehills
• Author: Nora Van Meerwijk

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.

Background

In 2021, the operator of Teesport, a sea port in Teesside (the "Claimant"), entered into an agreement with a sea ferry operator (the "Defendant"), under which the Claimant was to be paid a fee in return for permitting the Defendant to use the port and for providing it with services (the "Agreement"). Under the Agreement, the Defendant guaranteed to import or export via the port a minimum volume of 120,000 units per year (the Minimum Volume Guarantee or "MVG"), failing which it would need to pay a shortfall payment per unit (the "Shortfall Payment").

The Agreement contained provisions that:

1. if it was impossible for the Defendant to achieve the MVG in 2021 "solely due to economic factors resulting from the UK's exit from the European Union", the parties had to attend a meeting inter alia to "reasonably consider any amendment" to the MVG for 2021 (the "Brexit Clause"); and
2. if a force majeure event affecting the Claimant prevented the Defendant from importing or exporting units at the port, the relevant number of affected units was to be deducted from the MVG for that year (the...