Global Vantage: A possible COVID crack to a shut force majeure floodgate?

The Singapore Court of Appeal has recently handed down the decision of Ser Kim Koi v GTMS Construction Pte Ltd and others (and another appeal) [2022] SGHC(A) 34, offering some interesting commentary regarding the definition of a ‘force majeure’ clause under a contract in relation to the COVID-19 Pandemic.

Background

The case involved the construction of three bungalows under a Singapore Institute of Architects, Articles and Conditions of Building Contract (the “SIA Conditions”).  The SIA Conditions contained the following as set out in the Judgment:

‘Under cl 23(1) of the SIA Conditions, an architect is given the power to issue an EOT to a contractor for certain specified events and circumstances provided the contractor has complied with the condition precedent under cl 23(2). The events and circumstances under which the contractor is entitled to an EOT are set out in cll 23(1)(a)–(q) and the relevant events for which EOTs may be given in this appeal, are as follows:

23(1)     The Contract Period and the Date of Completion may be extended and re-calculated, subject to compliance by the Contractor with the requirements of the next following sub-clause, by such further periods and until such further dates as may reasonably reflect any delay in completion which, notwithstanding due diligence and the taking of all reasonable steps by the Contractor to avoid or reduce the same, has been caused by:

(a) Force Majeure’

The matter on appeal related to the employer pursuing a claim for liquidated damages for delay and disputing an extension of time awarded to the contractor by the appointed architect under the SIA Conditions.  The delay in question related to a statutory authority’s requirement for an overground distribution box to be installed, which the contractor argued constituted a ‘force majeure’ under the SIA Conditions.

Ultimately the Singapore Court of Appeal found that the delay was not a ‘force majeure’ but a ‘statutory obligation’ as provided for under another extension of time event.  The SIA Conditions did not contain a definition of ‘force majeure’ and therefore, the Court undertook an analysis of extrinsic materials and in coming to its decision, provided some commentary on what could constitute a force majeure event.

Implications regarding COVID-19

In the Court’s view; ‘the essence of a force majeure event is a radical event that prevents the performance of the relevant obligation (and not merely making it more onerous), and which is due to circumstances beyond the parties’ control’.  Particularly, these are events that were ‘radical’ and ‘external’, and not due to the fault of the contracting parties or could generally not, at the time the contract was entered into, have been contemplated or reasonably foreseen to occur during the performance of the contract.

In the absence of a definition, of particular interest was the commentary on what could constitute a ‘force majeure’ event, with the Court noting:

‘Clearly, many of the events and circumstances set out in cll 23(1)(b)–(e) could fall within the meaning of force majeure events and circumstances. However, the fact that they have been separately placed in succeeding paragraphs of sub-clause (1) shows that force majeure events and circumstances under cl 23(1)(a) covers force majeure events and circumstances other than those set out in cll 23(1)(b)–(e). What cl 23(1)(a) covers will therefore be … radical external events and circumstances that prevent the performance of the relevant obligations and which are due to circumstances beyond the parties’ control – for example, the COVID-19 pandemic and the “lock down” that followed over much of 2020 and 2021, the shortage of labour and materials due to the COVID-19 pandemic lock-downs, the prohibition of travel between countries and the ensuing disruption of supplies and manufacture of goods and material. We note, for completeness, that cll 23(1)(l) and (m) specifically cover the shortage of labour and the shortage of goods or materials respectively resulting from domestic and foreign government actions.’

As always, the outcome of any matter is dependent on the specific circumstances and particular drafting of the contract in question, with the caveat raised whether an event fitting the description of one definition had been expressly provided for under another.  In this instance, being that of an extension of time event.  By extension, the ability to claim for an event will be precluded where the contract specifically excludes it.

However, where the drafting of a contract does not specifically provide for the impacts caused by the COVID-19 pandemic, the decision in Ser Kim Koi provides contractors a small sign that courts might be prepared to consider this as a ‘force majeure’ event to their project.  Given the current energy crisis and recent economic instability being experienced in the UK, as well as the war in Ukraine, where the contract does not cover these events and impacts from these are also outside of the control of a party to it, the path worked through by the Court to find a definition for ‘force majeure’ where the contract did not have one could be argued to extend to these events as well.

For further reading, a copy of the decision can be found here.