North Sea Ferries loses contract dispute involving Brexit and Covid

The ferry company has failed to use a force majeure clause to avoid liability for not meeting the requirements laid out in a contract with a port operator.

The dispute arose from a written agreement with PD Teesport Ltd in 2021. Under the agreement, North Sea was permitted to use PD’s port in exchange for a fee and a "minimum volume" guarantee in respect of the number of units it would transport each year. Failure to achieve the minimum volume would result in the ferry operator having to make a shortfall payment. Clause 11.3 of the agreement provided that if the ferry operator could demonstrate that it was impossible to achieve the minimum volume in the first contract year, solely due to economic factors resulting from Brexit, then the parties should attend a meeting to reasonably consider reducing the minimum volume. The agreement also contained a clause stating that pandemics and "circumstances beyond a party's reasonable control" were force majeure events. 

In the first year of the contract, North Sea failed to transport the minimum volume. Although the parties met to discuss the minimum volume, no reduction was agreed, and the port operator issued a claim to recover the shortfall payment. North Sea denied that it was liable to make the payment because the port operator had breached cl.11.3 by not attending the meeting in good faith, its mind having been closed to the possibility of reducing the minimum volume. It also argued that the force majeure clause was engaged because its failure to achieve the minimum volume was caused by the Covid-19 pandemic and post-Brexit transition arrangements. 

The High Court ruled in favour of PD on both points. It held that North Sea did not have a real prospect of establishing that the port operator had closed its mind to the possibility of reducing the minimum volume. Its case turned on the contents of a single email. However, rather than supporting its case, that email showed that the port operator had comprehensively considered the cause of the failure to transport the minimum volume; had kept an open mind about the possibility of reducing it; and had a reasonable justification for ultimately not agreeing a reduction. As for the force majeure clause, the court noted that it was not sufficient for the force majeure event merely to be capable of affecting the port operator; the event had to actually affect it. However, North Sea had not pleaded that a force majeure event affecting the port operator was the cause of its inability to transport the minimum volume of units, and the port operator contended that neither the Covid pandemic nor Brexit had affected it. Although the court could take judicial notice of the fact that both Brexit and the pandemic had at times had an impact on individual travel, it knew nothing about how either matter had affected the operation of freight ports in 2021. Indeed, the available evidence suggested that any impact had not been significant.

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