Case analysis – Covid-19 is no frustration

Recently, SLF Lawyers has successfully obtained a summary judgment on behalf of a creditor against debtors who raised the defence of frustration on the basis that the majority of their wealth was managed overseas and due to the border control, had no access to travel overseas or obtain their funds due as they alleged of Covid-19 restrictions.

One main issue arose in this case. Firstly, whether the payment agreement between the parties was subject to the defendants’ access to their funds overseas. Secondly, whether the border control and travel restrictions imposed in response to Covid-19 crisis constitutes a frustration event.

In hearing this matter, the Magistrates found for our client. By way of summary, her Honour observed that:

1.     The contract does not expressly state that it is subject to the debtors’ access to their overseas accounts;

2.     By no means can the payment agreement be constructed in a way that it is subject to the above condition;

3.     Even if it is so, where international traveling was restricted, the debtors could address the issue by making a power of attorney. In this regard, the creditor has allowed several months prior to it pressing for a judgment;

4.     Where the first attorney appointed by the debtors allegedly contracted Covid-19, the debtors could still overcome the problem by appointing a new attorney; and

5.     The debtors never appointed another attorney, nor acted in a positive manner to resolve this matter.

In light of the above, her Honour found that the debtors had “no real prospect” of defending the claim and that a trial was not necessary to resolve the dispute between the parties, whereby summary judgment was warranted. This applies the principles of the UCPR at rule 292.

Since the outbreak of the Covid-19 crisis, application of frustration and force majeure clauses in terminating contracts and dispensing the parties’ compliance with contractual obligations has occurred and been the subject of litigation. There are no universal rules in this area of law. Some States in Australia recognize frustration while others do not. We believe that whether there is border control, lockdowns or travel restrictions constitute a frustrating event must be discussed on a case by case basis. Advice should be sought to ascertain your rights for restoring such a contractual issue.

Therefore, if you are facing a hardship in compliance with contractual obligations due to Covid-19 travel restrictions, please contact us, where we offer a 15 minute consultation at no charge.

Article written by Henry Lin of our Brisbane office.

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