COVID-19, Litigation and Dispute Resolution

COVID-19 – stand downs and other mechanisms to respond to lockdowns

5 August, 2021

As the world fights to contain and mitigate the impact of COVID-19, the economic impacts are likely to be severe: consumer confidence dropping, supply lines thwarted, public equities in free fall. With Australia’s economy being directly impacted by travel bans, obligatory quarantine periods and social distancing measures, many questions are being asked about ongoing contractual obligations which are becoming increasingly difficult to comply with.

In a prescient sign of things to come, it has been reported that by early March 2020, the China Council for the Promotion of International Trade issued at least 4,800 force majeure certificates due to the impact of the control measures1 implemented to contain and mitigate the coronavirus. As the effects of COVID-19 continue to spread across our economy, it is vital that businesses understand how to interpret and apply force majeure clauses and the doctrine of frustration to their own commercial affairs.

In this article, we break down the meaning of the legal principle force majeure. We will be separately writing shortly about a different legal pathway that parties may pursue, the doctrine of frustration, when significant disruption to contractual performance occurs by reason of COVID-19.

Force majeure

The term “force majeure” literally means “exceptionally strong force” and refers to an event or an imperative necessity that was not contemplated by the parties to a bargain when they entered the contract. A force majeure clause generally excuses “innocent parties” from performing contractual obligations or prevents them from enforcing a contractual right, because of a contractually defined event prohibits or thwarts contractual performance. The function of these clauses is to allocate risk when these supervening events occur.

Force majeure clauses are typically intended to provide a pathway for parties to keep the contract on foot during the disruption. Although the duration of force majeure event may be unknown, such clauses may also provide a regime in which to negotiate certain aspects of their commercial arrangements.

Force majeure clauses define, either exhaustively or not exhaustively, the “event” that intervenes contractual performance and the contractual consequences for this. Ordinary force majeure events that are expressly drafted in the contract include, “acts of God” (extreme natural occurrences such as floods, tsunamis, fires, lightening and earthquakes), strikes, riots, and acts of war.

A party will only be granted relief from the clause if it can be established that there is a causal connection between the event and its effect on performance of the contract. In Gardiner v Agricultural and Rural Finance Pty Ltd [2007] NSWCA 235, Spigelman CJ warned of the dangers of relying on economic impracticability as a simplistic basis to argue a force majeure event [at 93]:

“… changes in economic conditions, which significantly alter the commercial aspects of an arrangement, even though in one sense they are “beyond the control” of a party to a commercial agreement, may not fall within a phrase in a Force Majeure clause. Mere commercial impracticability may not be sufficient.”  

Importantly, force majeure is not a recognised common law doctrine, which means that if the “event” is not sufficiently defined in scope, content and consequence, the clause may have no legal effect by reason of it being void for uncertainty. For example, a supply of contract of steel with the provision “subject to force majeure conditions that the government restricted the export of the material at the time of the delivery” was held to be “vague and uncertain so as to have [no] precise meaning”; British Electrical & Associated Industries (Cardiff) Ltd v Patley Pressings Ltd [1953] 1 All ER 94.

Can COVID-19 constitute a force majeure event?

In short, whether COVID-19 constitutes a force majeure event depends upon the interpretation of the relevant clause/s.

Looking at common events in force majeure clauses, we can see some potential avenues, provided the causative link might be established:

  • “Pandemic” – Perhaps the most obvious and cleanest force majeure event, given the WHO’s classification of COVID-19 as “pandemic”;
  • “Act of God” – An “act of God” is considered to be an event caused “due to natural causes directly and exclusively and without human intervention unable to be prevented by any degree of foresight and care reasonably to be expected”; Nugent v Smith (1876) 1 CPD 423, 444 (endorsed by Latham CJ in Commissioner of Railways (WA) v Stewart (1936) 56 CLR 520 at 528-259). Most modern force majeure clauses define the type of natural events that are intended to be captured by an “act of God”;
  • “Acts of government” – With the Federal Government imposing indefinite 14-day quarantine period for individuals traveling to Australia and broader travel bans, it could be argued that an “act of government” has caused performance issues, particularly in the tourism sector.
  • “Hinder, delay or prevent” – These expressions are fairly broad and carry different meanings. For example, “hinder” suggests a reduced ability to perform, while “prevent” suggests impossibility. These words must be carefully construed as they may also carry conjunctive and less obvious meaning when interpreting the contract.

Practical tips

  • Review your contract for force majeure clauses with a view to seeking to understand how risk has been allocated under the contract and whether COVID-19 might fit within the definition of the clause.
  • Before seeking to rely on a force majeure clause, establish the causal connection between the COVID-19 and the inability to perform.
  • If you do have grounds to exercise the force majeure clause, comply with the contractual process, which typically involves issuing notice particularising the force majeure event, and how it has impacted your contractual obligations. Be as specific as facts would allow.
  • Force majeure does not necessarily mean that performance stops. Check to see whether the affected party has a contractual obligation to mitigate by performing certain obligations under the agreement.
  • A party who seeks to rely on a force majeure clause bears the onus of proving how that event has impacted the ability to fulfil contractual performance.
  • An improperly drafted clause which simplistically refers to ‘force majeure’, without specifying its scope in content and consequence, could be void for uncertainty and severed from the agreement.

1 China Council for the Promotion of International Trade, 13 March 2020,

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Canadian Court elevates thumbs-up emoji to signature status

In June 2023, a Canadian Court in South-West Terminal Ltd v Achter Land and Cattle Ltd, 2023 SKKB 116, held that the "thumbs-up" emoji carried enough weight to constitute acceptance of contractual terms, analogous to that of a "signature", to establish a legally binding contract.   Facts This case involved a contractual dispute between two parties namely South-West Terminal ("SWT"), a grain and crop inputs company; and Achter Land & Cattle Ltd ("ALC"), a farming corporation. SWT sought to purchase several tonnes of flax at a price of $17 per bushel, and in March 2021, Mr Mickleborough, SWT's Farm Marketing Representative, sent a "blast" text message to several sellers indicating this intention. Following this text message, Mr Mickleborough spoke with Mr Achter, owner of ALC, whereby both parties verbally agreed by phone that ALC would supply 86 metric tonnes of flax to SWT at a price of $17 per bushel, in November 2021. After the phone call, Mr Mickleborough applied his ink signature to the contract, took a photo of it on his mobile phone and texted it to Mr Archter with the text message, "please confirm flax contract". Mr Archter responded by texting back a "thumbs-up" emoji, but ultimately did not deliver the 87 metric tonnes of flax as agreed.   Issues The parties did not dispute the facts, but rather, "disagreed as to whether there was a formal meeting of the minds" and intention to enter into a legally binding agreement. The primary issue that the Court was tasked with deciding was whether Mr Achter's use of the thumbs-up emoji carried the same weight as a signature to signify acceptance of the terms of the alleged contract. Mr Mickleborough put forward the argument that the emoji sent by Mr Achter conveyed acceptance of the terms of the agreement, however Mr Achter disagreed arguing that his use of the emoji was his way of confirming receipt of the text message. By way of affidavit, Mr Achter stated "I deny that he accepted the thumbs-up emoji as a digital signature of the incomplete contract"; and "I did not have time to review the Flax agreement and merely wanted to indicate that I did receive his text message." Consensus Ad Idem In deciding this issue, the Court needed to determine whether there had been a "formal meeting of the minds". At paragraph [18], Justice Keene considered the reasonable bystander test: " The court is to look at “how each party’s conduct would appear to a reasonable person in the position of the other party” (Aga at para 35). The test for agreement to a contract for legal purposes is whether the parties have indicated to the outside world, in the form of the objective reasonable bystander, their intention to contract and the terms of such contract (Aga at para 36). The question is not what the parties subjectively had in mind, but rather whether their conduct was such that a reasonable person would conclude that they had intended to be bound (Aga at para 37)."   Justice Keene considered several factors including: The nature of the business relationship, notably that Mr Achter had a long-standing business relationship with SWT going back to at least 2015 when Mr Mickleborough started with SWT; and   The consistency in the manner by which the parties conducted their business by way of verbal conversation either in person or over the phone to come to an agreement on price and volume of grain, which would be followed by Mr Mickleborough drafting a contract and sending it to Mr Achter. Mr Mickleborough stated, "I have done approximately fifteen to twenty contracts with Achter"; and   The fact that the parties had both clearly understood responses by Mr Achter such as "looks good", "ok" or "yup" to mean confirmation of the contract and "not a mere acknowledgment of the receipt of the contract" by Mr Achter.   Judgment At paragraph [36], Keene J said: "I am satisfied on the balance of probabilities that Chris okayed or approved the contract just like he had done before except this time he used a thumbs-up emoji. In my opinion, when considering all of the circumstances that meant approval of the flax contract and not simply that he had received the contract and was going to think about it. In my view a reasonable bystander knowing all of the background would come to the objective understanding that the parties had reached consensus ad item – a meeting of the minds – just like they had done on numerous other occasions." The court satisfied that the use of the thumbs-up emoji paralleled the prior abbreviated texts that the parties had used to confirm agreement ("looks good", "yup" and "ok"). This approach had become the established way the parties conducted their business relationship.   Significance of the Thumbs-Up Emoji Justice Keene acknowledged the significance of a thumbs-up emoji as something analogous to a signature at paragraph [63]: "This court readily acknowledges that a thumbs-up emoji is a non-traditional means to "sign" a document but nevertheless under these circumstances this was a valid way to convey the two purposes of a "signature" – to identify the signator… and… to convey Achter's acceptance of the flax contract." In support of this, Justice Keene cited the definition of the thumbs-up emoji: "used to express assent, approval or encouragement in digital communications, especially in western cultures", confirming that the thumbs-up emoji is an "action in an electronic form" that can be used to allow express acceptance as contemplated under the Canadian Electronic Information and Documents Act 2000. Justice Keene dismissed the concerns raised by the defence that accepting the thumbs up emoji as a sign of agreement would "open the flood gates" to new interpretations of other emojis, such as the 'fist bump' and 'handshake'. Significantly, the Court held, "I agree this case is novel (at least in Skatchewan), but nevertheless this Court cannot (nor should it) attempt to stem the tide of technology and common usage." Ultimately the Court found in favour of SWT, holding that there was a valid contract between the parties and that the defendant breached by failing to deliver the flax. Keene J made a judgment against ALC for damages in the amount of $82,200.21 payable to SWT plus interest.   What does this mean for Australia? This is a Canadian decision meaning that it is not precedent in Australia. However, an Australian court is well within its rights to consider this judgment when dealing with matters that come before it with similar circumstances. This judgment is a reminder that the common law of contract has and will continue to evolve to meet the everchanging realities and challenges of our day-to-day lives. As time has progressed, we have seen the courts transition from sole acceptance of the traditional "wet ink" signature, to electronic signatures. Electronic signatures are legally recognised in Australia and are provided for by the Electronic Transactions Act 1999 and the Electronic Transactions Regulations 2020. Companies are also now able to execute certain documents via electronic means under s 127 of the Corporations Act. We have also seen the rise of electronic platforms such as "DocuSign" used in commercial relationships to facilitate the efficient signing of contracts. Furthermore, this case highlights how courts will interpret the element of "intention" when determining whether a valid contract has been formed, confirming the long-standing principle that it is to be assessed objectively from the perspective of a reasonable and objective bystander who is aware of all the relevant facts. Overall, this is an interesting development for parties engaging in commerce via electronic means and an important reminder to all to be conscious of the fact that contracts have the potential to be agreed to by use of an emoji in today's digital age.

Published by Foez Dewan
29 August, 2023

Venues NSW ats Kerri Kane: Venues NSW successful in overturning a District Court decision

The McCabes Government team are pleased to have assisted Venues NSW in successfully overturning a District Court decision holding it liable in negligence for injuries sustained by a patron who slipped and fell down a set of steps at a sports stadium; Venues NSW v Kane [2023] NSWCA 192 Principles The NSW Court of Appeal has reaffirmed the principles regarding the interpretation of the matters to be considered under sections5B of the Civil Liability Act 2002 (NSW). There is no obligation in negligence for an occupier to ensure that handrails are applied to all sets of steps in its premises. An occupier will not automatically be liable in negligence if its premises are not compliant with the Building Code of Australia (BCA). Background The plaintiff commenced proceedings in the District Court of NSW against Venues NSW (VNSW) alleging she suffered injuries when she fell down a set of steps at McDonald Jones Stadium in Newcastle on 6 July 2019. The plaintiff attended the Stadium with her husband and friend to watch an NRL rugby league match. It was raining heavily on the day. The plaintiff alleged she slipped and fell while descending a stepped aisle which comprised of concrete steps between rows of seating. The plaintiff sued VNSW in negligence alleging the stepped aisle constituted a "stairwell" under the BCA and therefore ought to have had a handrail. The plaintiff also alleged that the chamfered edge of the steps exceeded the allowed tolerance of 5mm. The Decision at Trial In finding in favour of the plaintiff, Norton DCJ found that: the steps constituted a "stairwell" and therefore were in breach of the BCA due to the absence of a handrail and the presence of a chamfered edge exceeding 5mm in length. even if handrails were not required, the use of them would have been good and reasonable practice given the stadium was open during periods of darkness, inclement weather, and used by a persons of varying levels of physical agility. VNSW ought to have arranged a risk assessment of the entire stadium, particularly the areas which provided access along stepped surfaces. installation of a handrail (or building stairs with the required chamfered edge) would not impose a serious burden on VNSW, even if required on other similar steps. Issues on Appeal VNSW appealed the decision of Norton DCJ. The primary challenge was to the trial judge's finding that VNSW was in breach of its duty of care in failing to install a handrail. In addition, VNSW challenged the findings that the steps met the definition of a 'stairwell' under the BCA as well as the trial judge's assessment of damages. Decision on Appeal The Court of Appeal found that primary judge's finding of breach of duty on the part of VNSW could not stand for multiple reasons, including that it proceeded on an erroneous construction of s5B of the Civil Liability Act 2002 and the obvious nature of the danger presented by the steps. As to the determination of breach of duty, the Court stressed that the trial judge was wrong to proceed on the basis that the Court simply has regard to each of the seven matters raised in ss 5B and 5C of the CLA and then express a conclusion as to breach. Instead, the Court emphasised that s 5B(1)(c) is a gateway, such that a plaintiff who fails to satisfy that provision cannot succeed, with the matters raised in s 5B(2) being mandatory considerations to be borne in mind when determining s 5B(1)(c). Ultimately, regarding the primary question of breach of duty, the Court found that: The stadium contained hazards which were utterly familiar and obvious to any spectator, namely, steps which needed to be navigated to get to and to leave from the tiered seating. While the trial judge considered the mandatory requirements required by s5B(2) of the CLA, those matters are not exhaustive and the trial judge failed to pay proper to attention to the fact that: the stadium had been certified as BCA compliant eight years before the incident; there was no evidence of previous falls resulting in injury despite the stairs being used by millions of spectators over the previous eight years; and the horizontal surfaces of the steps were highly slip resistant when wet. In light of the above, the Court of Appeal did not accept a reasonable person in the position of VNSW would not have installed a handrail along the stepped aisle. The burden of taking the complained of precautions includes to address similar risks of harm throughout the stadium, i.e. installing handrails on the other stepped aisles. This was a mandatory consideration under s5C(a) which was not properly taken into account. As to the question of BCA compliance, the Court of Appeal did not consider it necessary to make a firm conclusion of this issue given it did not find a breach of duty.  The Court did however indicated it did not consider the stepped aisle would constitute a "stairway" under the BCA. The Court of Appeal also found that there was nothing in the trial judge's reasons explicitly connecting the risk assessment she considered VNSW ought to have carried out, with the installation of handrails on any of the aisles in the stadium and therefore could not lead to any findings regarding breach or causation. As to quantum, the Court of Appeal accepted that the trial judge erred in awarding the plaintiff a "buffer" of $10,000 for past economic loss in circumstances where there was no evidence of any loss of income. The Court of Appeal set aside the orders of the District Court and entered judgment for VNSW with costs. Why this case is important? The case confirms there is no obligation in negligence for owners and operators of public or private venues in NSW to have a handrail on every set of steps. It is also a welcome affirmation of the principles surrounding the assessment of breach of duty under s 5B and s 5C of the CLA, particularly in assessing whether precautions are required to be taken in response to hazards which are familiar and obvious to a reasonable person.

Published by Leighton Hawkes
18 August, 2023
Litigation and Dispute Resolution

Expert evidence – The letter of instruction and involvement of lawyers

The recent decision in New Aim Pty Ltd v Leung [2023] FCAFC 67 (New Aim) has provided some useful guidance in relation to briefing experts in litigation.

Published by Justin Pennay
10 August, 2023