On 3rd September 2020, David Sawtell will be presenting his paper on the doctrine of frustration, property relations and Covid-19 at the 2020 Annual Conference of the Society of Legal Scholars.
David’s paper, ‘Intervening uncertainty in property relations and legal interventions into liability, remedies and enforcement: re-visiting the doctrine of frustration’, examines both how the doctrine of frustration affects obligations arising out of land (such as development agreements and leases) and how the UK government has modified the enforcement of those obligations in its response to Covid-19.
David looks at how the doctrine of frustration operates in English land law. In Canary Wharf (BP4) T1 Ltd v European Medicines Agency  EWHC 335, the court refused to find that there was a frustrated common purpose where EMA had chosen a London commercial lease before Brexit. Likewise, in National Carriers Ltd v Panalpina (Northern) Limited  AC 675, a lease was not frustrated even when the demised premises were inaccessible for a period of time. On the other hand, where a landslip had devastated the site of a block which developers were building and in respect of which they had agreed to sell flats, the Privy Council in Wong Lai Ying v Chinachem Investment Co Ltd (1971) 13 BLR 81 was willing to hold that this did amount to a frustrating event.
The paper then compares English law to the German BGB section 313(1), which grants a power to the court to re-adjust contracts if there has been a sufficiently serious supervening event, and the UNIDROIT Principles, which also gives courts and arbitral tribunals the power to ‘re-write’ agreements. David notes that under all three doctrines of frustration, the court is expected to give effect to the parties’ allocation of risk. In the case of a long-term lease or agreement for land, this risk is often borne by the party acquiring the title to the land. He argues that all doctrines of frustration deal with and affect risk allocation, and goes on to consider why agreements in respect of land are so rarely frustrated.
As for Covid-19, David notes that it would be unusual for its economic effects to amount to a frustrating event for an agreement in respect of land. Instead, the UK government has acted principally to remove a landlord’s ability to enforce obligations to pay rent. This was applied whether or not the tenant was actually affected by Covid-19 related economic hardship. Only later did the UK government enact the Corporate Insolvency and Governance Act 2020, which does require for some of its provisions to engage an analysis of the causal link between the debtor’s non-payment and Covid-19 economic effects. David compares this to the legislation enacted in Germany and Singapore, where such a causal link was required.
David reviews the possibility for English land law to develop a more flexible approach to short-term impossibility or illegality other than termination, and whether or not the British Institute of International and Comparative Law’s suggestion of the use of implied terms can be accommodated in existing English land law.
His ultimate conclusion is that we should take the lessons learned from 2020 forward, both in terms of how we draft agreements for land, and future emergency legislation in case of potential catastrophic events caused by climate change or future pandemics.
Details about the SLS Conference 2020, hosted this year by Exeter University, can be found at https://www.slsconference.com/ . His video presentation and paper is hosted by the conference.