The pandemic caused Auckland's removal as a planned stopover for The Ocean Race
The High Court set aside a statutory demand, finding a genuine dispute over whether a COVID-19 force majeure clause relieved an event company from repaying funds to the Ministry of Business, Innovation and Employment (MBIE).
MBIE had provided financial support to Mayo & Calder Limited (M&C) under two agreements to assist in organizing the Auckland stopover of The Ocean Race. Following the pandemic, the race route was modified, and Auckland was no longer included as a stopover, leading M&C to terminate the hosting agreement with The Ocean Race organizers. As a result, MBIE demanded a refund of the funds paid to M&C, issuing a statutory demand for $100,000 under the second funding agreement.
M&C contested the statutory demand on several grounds, primarily arguing that a "genuine and substantial dispute" existed regarding the debt's validity. M&C cited a force majeure clause in the funding agreement, claiming that the COVID-19 pandemic, as an epidemic, qualified as a force majeure event. This clause, they argued, relieved them of liability due to the circumstances being beyond their control. M&C also argued that they had followed the proper procedures outlined in the agreement for such events, including maintaining communication with MBIE and taking steps to mitigate the impact.
MBIE, on the other hand, maintained that the force majeure clause did not apply in this case, stating that the company’s failure to repay the funds was not directly caused by the pandemic. They further asserted that M&C had not provided sufficient evidence of compliance with the force majeure process. MBIE also highlighted that M&C had received funds from the event's organizers under a separate termination agreement, implying that these funds could have been used to repay MBIE.
The High Court found in favour of M&C, determining that there was indeed a substantial dispute regarding whether the force majeure clause applied and whether M&C’s failure to repay the $100,000 arose directly from the pandemic. The judge also noted insufficient evidence to dispute M&C's claim that it had complied with the force majeure process.
In light of these findings, the court set aside the statutory demand, allowing M&C to avoid liquidation for the time being. However, the judgment leaves open the possibility of future litigation over the disputed debt.
