Ruling says more costs due to pandemic did not trigger force majeure clause
In a case involving agreements regarding units of an apartment development in Queenstown, New Zealand’s Supreme Court found a proper application of the rule that a cancelling party should be willing and ready to perform its side of the bargain.
Upon incurring delays and additional expenses, the developer invited the purchasers to agree to a unit price increase. The developer provided a cancellation notice when the purchasers demurred.
In response to the purported cancellation, the purchasers breached the agreements’ no-caveats clause by lodging caveats. The developer relied on that breach to justify cancelling two agreements for the sale and purchase of apartment units.
The issue was whether the developer could rely on the COVID-19 pandemic’s consequences to invoke the force majeure clause to cancel the agreements. The developer appealed against two High Court decisions.
First, in a 9 April 2024 order, Associate Judge Paulsen found that the purchasers’ caveats should not lapse, pending a further court order. Second, in a 31 July 2024 summary judgment, Associate Judge Lester granted each purchaser a specific performance order against the developer.
On 29 September 2025, in FCL CL Limited as Trustee of the FCL CL Trust v Lynch [2025] NZCA 501, the Court of Appeal of New Zealand dismissed the appeals and upheld the High Court’s caveat order and summary judgment.
The appeal court ordered the appellant to pay one set of standard costs on a band A basis, plus the usual disbursements.
First, the appeal court addressed the appeal against the summary judgment and the proper meaning of the force majeure clause in connection with cost increases. The appeal court considered cancellation premature because a force majeure triggering event had not occurred.
The appeal court rejected the developer’s argument that the development becoming much more expensive, as an indirect effect of the COVID-19 pandemic, necessarily triggered the force majeure clause.
According to the appeal court, deciding otherwise would permit the developer to reach its own profitability decisions.
The appeal court explained that an event beyond the developer’s reasonable control that prevented it from commencing or continuing construction would trigger the force majeure clause.
The appeal court added that the evidence did not establish that the project funder had made funding clearly conditional on the cancellation of the purchasers’ agreements.
Given its findings, the appeal court found it unnecessary to decide whether:
The appeal court ruled that the no-caveat clause did not entitle the developer to cancel the agreements because it had not been willing and ready to perform its obligations under the agreements.
Next, the appeal court addressed the appeal against the caveat judgment. The appeal court held that its conclusions on the summary judgment appeal rendered the caveat judgment appeal moot.
The developer sought leave to appeal. It argued that the appeal court made wrong factual findings, applied the wrong test for summary judgment, and committed a legal error by determining that the no-caveats clause did not justify cancellation.
On 13 March 2026, in FCL CL Ltd v Lynch [2026] NZSC 17, the Supreme Court of New Zealand dismissed the application for leave to appeal and ordered the applicant to pay the respondents one set of costs of $2,500.
The Supreme Court ruled that the appeal court did not misdirect itself relating to the test for summary judgment.
Regarding applying the principles to the facts, the Supreme Court saw no issue of general or public importance, commercial significance, or apparent substantial miscarriage of justice in the proposed appeal.
