Roberts v Toor Bros (Aust) P/L - [2022] SADC 77

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil: Minor Civil Review)
ROBERTS v TOOR BROS (AUST) P/L
[2022] SADC 77
Judgment of his Honour Judge Burnett
30 June 2022
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH - IMPOSSIBILITY OF PERFORMANCE - IN WHAT CASES PERFORMANCE EXCUSED - FRUSTRATION
The issue raised in these proceedings is whether a contract is frustrated because of COVID-19 and the public health measures that were taken as a consequence of the pandemic.
The applicant, Mr Anthony Roberts, has instituted a review of a Minor Civil Action in which the Magistrate dismissed his claim for breach of contract in which he sought damages in the sum of $8,000. The Magistrate found that the contract had been frustrated.
Mr Roberts was the owner of taxi plates. In March 2020 he entered into an agreement to lease to Toor Bros (Aust) Pty Ltd (Toor Bros) the taxi plates for a fixed term commencing on 13 March 2020 and expiring on 12 March 2021. Toor Bros agreed to pay Mr Roberts the sum of $160 per week for the rental of the plates. Mr Roberts and Toor Bros had entered into a similar agreement the previous year at the price of $220 per week but had reduced the amount for the next year because COVID-19 had already commenced, although its full effects were not known. Toor Bros paid two payments of the weekly rental totalling $320 but did not make any further payment. Mr Roberts therefore claims the balance of the rental due.
In late March 2020 the effects of COVID-19 became more pronounced and the State Government shut the borders, with restricted entry into South Australia for interstate visitors, and many businesses were required to shut down or alter the structure of their businesses. It was at this time that Toor Bros handed the taxi plate back. Mr Roberts did not accept that return. Toor Bros accepted that the State Government did not ban the use of taxis during the period of the lockdown but many taxis were not on the road as there was very little work and the operation of taxis was not profitable.
HELD:
1. Allowing the review, rescinding the judgment, and awarding judgment in favour of Mr Roberts in the sum of $8,000 plus costs and interest.
2. Frustration occurs when without default by either party, a contractual obligation becomes incapable of being performed because the circumstances in which performance is called for would render a thing radically different from that which was contemplated by the contract. Davis Contractors Limited v Fareham Urban District Council [1956] AC 696 and Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 applied.
3. The Courts do not readily find frustration. Ooh! Media Roadside Pty Ltd v Diamond Wheels Pty Ltd [2011] VSCA 116 applied.
4. Frustration extends beyond physical impossibility and supervening illegality and includes frustration of a commercial purpose. Krell v Henry [1903] 2 KB 740 and Herne Bay Steam Boat Co v Hutton [1903] 2 KB 683 applied.
5. The absence of a warranty as to future financial performance made it unlikely that the effect of COVID-19 was to frustrate the contract as Toor Bros bore the risk that performance would be impaired. The basis of the agreement was the licence of the taxi plate by Mr Roberts to Toor Bros for use in the taxi industry and the payment by Toor Bros of the licence fee. In these circumstances Toor Bros assumed the risk of poor performance. There was no warranty as to profitability and Toor Bros assumed the risk that an event might occur which would impact on the profitability of the taxi operations. Dyco Hotels Pty Ltd v Laundy Hotels (Quarry) Pty Ltd [2021] NSWSC 504; Salam Air Saoc v Latam Airlines Group Sa [2020] EWHC 2414 applied.
6. The surrounding circumstances show that the parties were aware of COVID-19 and that it was a foreseeable and foreseen event. COVID-19 itself could not therefore be a supervening event that has caused the frustration of the agreement. The unexpected effect of the public health orders such as the lockdown was not foreseen, but did not prevent the agreement from being able to be performed.
Magistrates Court Act 1991 (SA) s 38; Passenger Transport Act 1994 (SA) s 46(1); Frustrated Contracts Act 1988 (SA); Public Health Act 2010 (NSW), referred to.
Harradine v District Court of South Australia [2012] SASC 96; Gillott v District Court of South Australia [2019] SASC 132; Trittenheim Pty Ltd v H & H Gill Nominees Pty Ltd (1994) 63 SASR 434; Griggs v Norris Group of Companies (2006) 94 SASR 126; Wilczynski v District Court of South Australia [2016] SASC 51; Wilczynski & Anor v District Court of SA [2017] SASCFC 102; Heydon on Contract LawBook Co 2019 ; Brisbane City Council v Group Projects Pty Ltd (1979) 145 CLR 143; Scanlan’s New Neon Ltd v Tooheys Ltd (1943) 67 CLR 169; Pioneer Shipping Ltd v BTP Tioxide Ltd (The Nema) [1982] AC 724; Lee Chee Wei v Tan Hor Peow Victor [2007] 3 SLR 537; National Carriers Ltd v Panalpina Ltd [1981] AC 675; Herne Bay Steam Boat Co v Hutton [1903] 2 KB 683; Dyco Hotels Pty Ltd v Laundy Hotels (Quarry) Pty Ltd [2021] NSWCA 332; The Sea Angel [2007] EWCA Civ 47 ; Empresa Exportadora De Azucarer v Industria Azucarera Nacional SA [1983] 2 Lloyds Rep 171; Maritime National Fish Ltd v Ocean Trawlers Ltd [1935] AC 524; Edwinton Commercial Corporation v Tsavliris Russ (Worldwide Salvage and Towage) Ltd (The Sea Angel) [2007] 1 CLC 876; An introduction to frustration and force majeure (2011) 25(4) Commercial Law Quarterly 3; Importance of the doctrines of frustration and force majeure in light of COVID-19 (2021) 50 Australian Bar Review 370; COVID 19 and frustration in English Law” published in SG Long “Derecho de los Desastres: COVID-19” (Pontificia Universidad Catolica del Peru, 2020) , considered.

ROBERTS v TOOR BROS (AUST) P/L
[2022] SADC 77
Civil
Introduction

The issue raised in these proceedings is whether a contract is frustrated because of COVID-19 and the public health measures that were taken as a consequence of the pandemic.
This is a review pursuant to s 38(6) of the Magistrates Court Act 1991 (SA) in which the applicant to these proceedings, Mr Anthony Roberts (Mr Roberts), is dissatisfied with a decision made by the Magistrate. On 14 January 2022, the Magistrate dismissed the claim of Mr Roberts.
On 24 March 2021, Mr Roberts instituted a claim against the respondent, Toor Bros (Aust) Pty Ltd (Toor Bros) in the sum of $8,000. The claim was for breach of a contract. By a written agreement (the Agreement), Mr Roberts agreed to lease to Toor Bros taxi plate TX1115 for a fixed term commencing on 13 March 2020 and expiring on 12 March 2021. Toor Bros agreed to pay Mr Roberts the sum of $160 per week for the rental of the plates. Toor Bros made two rental payments each of $160, but then refused to make any other payment. Toor Bros denied liability on the basis that the contract was frustrated as a result of the COVID-19 pandemic.
The Magistrate found that there was a valid and binding contract, but that it had been frustrated because of the COVID-19 pandemic.
In his Notice of Review, Mr Roberts has sought a review of the decision of the Magistrate on the ground that the Magistrate ought not have found that the contract was frustrated. Mr Roberts contended that the doctrine of frustration required there to be impossibility of performance, which there was not in this case. Mr Roberts further contended that at the time of the entering into of the Agreement, COVID-19 could not be considered an unforeseen event and there was no radical change in the performance contemplated at the time of the entry into of the agreement. Mr Roberts further contended that Toor Bros had been compensated, by government subsidies, for the effect of the pandemic and could have made the lease payments.
Application for Review
This review is conducted pursuant to s 38(6) to 38(9) of the Magistrates Court Act 1991 (SA). On this review, the Court may inform itself as it thinks fit and in doing so is not bound by the rules of evidence. The Court may also, if it thinks fit, rehear the evidence taken before the Magistrates Court. In hearing and determining this review, the Court must act according to equity, good conscience and the substantial merits of the case, without regard to technicality and legal form. It is important to note that this review is a review of the matter and not a review of the judgment.
The conduct of a minor civil action must be considered in the context of the comments made by Blue J in Harradine v District Court of South Australia.[1] Blue J explained that the role of the Magistrate in such an action is that of an inquirer, rather than managing an adversarial contest between the parties.
[1] [2012] SASC 96 at [40].
In Gillott v District Court of South Australia,[2] Peek J discussed the meaning of the phrase ‘equity, good conscience and substantial merits of the case’ and quoted from the decision of Olsson J in Trittenheim Pty Ltd v H & H Gill Nominees Pty Ltd,[3] in which His Honour noted that the meaning of that phrase must be construed by reference to the nature of the issues involved and, where appropriate, the clear purpose of any relevant statute. Olsson J went on to hold that in certain cases the phrase required that the Court should adopt a broad approach of common sense and common fairness, eschewing all legal or other technicality. In Griggs v Norris Group of Companies,[4] White J referred to the phrase in the context meaning the good sense and natural justice of the matter. At times, he held the expression that the decision maker was empowered to do whatever he or she might think necessary to achieve fairness between the litigants.
[2] [2019] SASC 132 at [40]-[46].
[3] (1994) 63 SASR 434 at 442.
[4] (2006) 94 SASR 126,137; [2006] SASC 23 at [31].
Given the nature of the minor civil review and its purpose to achieve an economical and efficient disposition of the matter, I consider that the phrase ‘equity, good conscience and the substantial merits of the case’ is used in the context described above, that being that the Magistrate is required to act according to good sense and the natural justice of the matter and to do whatever was necessary to achieve fairness between the parties in relation to their legal rights, eschewing legal, or other technicalities. Regard must be had to the substance of the claim and permitting the parties to have an opportunity to address the real issues in dispute.
In the present case, there is very little dispute on the facts. The question is a legal question: on the undisputed facts, does the doctrine of frustration apply in the circumstances of this case. If I find that the Magistrate has wrongly found the contract to be frustrated, there has been an error of law and a failure to conduct the hearing according to ‘equity, good conscience and the substantial merits of the case’.
The decision of this Court on review is final and is not subject to appeal pursuant to s 38(8) of the Magistrates Court Act.
Upon the review, I can affirm the judgment of the Magistrate or rescind the judgment and substitute a judgment that I consider appropriate.
Conduct of the trial in the Magistrates Court
The trial in the Magistrates Court was conducted in an inquisitorial style as required by s 38(1)(a) of the Magistrates Court Act. Mr Roberts gave evidence and Mr Singh, a director of Toor Bros, gave evidence. Both Mr Roberts and Mr Singh gave evidence about the Agreement and the effect of COVID-19. None of this evidence was controversial. They also gave evidence about the government subsidy.
Mr Roberts tendered a number of documents. Most relevantly, Mr Roberts tendered a copy of the Agreement, the certificate for the taxi lease and a fact sheet from the Department of Planning, Transport and Infrastructure explaining the financial support that was being provided by the State government. Mr Roberts also tendered some documents showing the amount paid by Toor Bros which was not in dispute.
Conduct of the Review
In Harradine v District Court of South Australia,[5] Blue J set out the principles that apply to a review by the District Court of a minor civil action. In relation to the relevance of the facts found by the Magistrate, Blue J held:
[5] [2012] SASC 96 at [40].
1.The review is not in the nature of an appeal stricto sensu.
2.The review is not necessarily a hearing de novo in that the Court is entitled to have regard to the evidence adduced before a magistrate and “may” rehear that evidence.
3.The review is not necessarily an appeal by way of rehearing in that it is a “review” (not an “appeal”), the Court may inform itself as it thinks fit, the Court must act        according to the substantial merits of the case and the Court may rehear evidence     without being confined by the “fresh evidence” rules which apply to appeals by way of rehearing.
4.The Court can tailor the nature of the hearing to the circumstances. In a case where       the review will not turn on findings of fact or credibility of witnesses, the Court       might simply have regard to the evidence adduced before a magistrate and a magistrate’s findings of fact. In a case which does turn on disputed issues of fact or credibility, the Court might simply proceed to hear the evidence afresh.
5.If the District Court concludes that a magistrate made an error vitiating the judgment      and had not made findings of fact necessary to determine the matter, it will be     necessary for the Court itself to hear the evidence relevant to those findings of fact    (as it does not have power to remit the matter for rehearing).
6.To the extent that the Court does itself hear evidence, it should proceed in a similar manner to that provided by section 38(1), namely adopting the form of an inquiry by the Court rather than an adversarial contest between the parties. This is because section 38(7) provides that the Court may inform itself as it thinks fit and also because it would be incongruous if the District Court were to adopt a radically different approach to the hearing to that required to be adopted by a magistrate at first instance given that there is no power of remitter.
These principles were considered by Doyle J in Wilczynski v District Court of South Australia.[6] Although that decision was reversed for other reasons on appeal,[7] Doyle J held that s 38 of the Magistrates Court Act contemplated a range of different approaches that the judge on review may take. Those approaches included:
[6] [2016] SASC 51.
[7]    Wilczynski & Anor v District Court of SA [2017] SASCFC 102.
1.     Re-hearing all the evidence and deciding the matter entirely on that basis.
2.     Hearing no evidence and determining the matter based entirely on the evidence in the Magistrates Court.
3.     Adopting some hybrid approach involving the receiving of some evidence or the hearing or receiving of some additional evidence, but also having regard to the evidence before the Magistrate.
In the circumstances of this case, I considered that it was not necessary to hear further evidence and that I could determine the matter on the evidence taken in the Magistrates Court. The relevant evidence was not in dispute. What was in dispute was whether from that undisputed evidence, the determination that the contract was frustrated was the correct legal conclusion.
Findings of fact by the Magistrate
The following facts are not disputed and are set out in the judgment of the Magistrate or can be ascertained from the evidence.
Mr Roberts held a taxi plate licence pursuant to s 46(1) of the Passenger Transport Act 1994 (SA). Toor Bros operated a fleet of taxis through Adelaide Independent Taxis.
In the period from March 2019 to March 2020, Mr Roberts and Toor Bros entered into an agreement pursuant to which Mr Roberts agreed to lease to Toor Bros the right or licence to use the taxi plate for the sum of $220 per week.
That agreement came up for renewal in March 2020. At that time, COVID-19 had already commenced, although its full affects were not known. At the time of the renewal, no public health restrictions had been imposed. Because COVID-19 was already affecting the taxi industry at the time that the agreement was being renewed, Mr Roberts and Toor Bros agreed to reduce the weekly payment to be paid by Toor Bros to $160 per week from $220 per week.
On 13 March 2020, Mr Roberts and Toor Bros entered into the Agreement whereby Mr Roberts agreed to lease to Toor Bros the right or licence to use the taxi plate for the sum of $160 per week for the period commencing on 13 March 2020 and expiring on 12 March 2021. It is this Agreement that is the basis of the claim by Mr Roberts. Toor Bros agreed to pay the rental weekly in advance without any deduction.
The Agreement provided that in default of payment by Toor Bros or in default of the performance and observance of any of the terms and conditions of the Agreement, Mr Roberts may, by seven days notice in writing, terminate the Agreement, whereupon all the rights of Toor Bros in the licence will cease. The Agreement also provided for termination by mutual consent in writing and by Mr Roberts for default or upon Toor Bros being convicted of an offence under the Passenger Transport Act if that offence was committed whilst Toor Bros was the driver of or in charge of the taxi cab.
The Agreement provided that the weekly rental shall be processed through Adelaide Independent Taxis and Mr Roberts and Toor Bros agreed to keep the plate in the Adelaide Independent Taxi fleet during the term of the Agreement.
Only in one circumstance (which is not relevant to this dispute), does the Agreement expressly provide for an event of frustration. Clause 5 of the Agreement provides:
If any time the said Licence is forfeited by the Passenger Transport Board and such forfeiture is not attributable to any default or neglect on the part of the Lessor [Mr Roberts], then this Agreement shall forthwith cease and determine without prejudice however to any accrued rights of either party against the other in respect of any antecedent breach of any of the terms and conditions herein contained.
Toor Bros made two payments of the weekly rental totalling $320. It has not made any further payments. Mr Roberts therefore claims the balance of the rental due, namely 50 weeks at $160 per week which totals $8000.
In about late March 2020, the effect of COVID-19 became more pronounced. The State government shut the borders which restricted the entry into South Australia of interstate visitors and many businesses were required to shut down or alter the structure of their business. Many employees worked from home. There were also restrictions as to how businesses could operate - eg restaurants, cafes and hotels all had restricted conditions. At about this time, Toor Bros handed the taxi plate back to Adelaide Independent Taxis. Mr Roberts advised Toor Bros that he did not accept the return, although Adelaide Independent Taxis did accept the return of the plate.
It was accepted by Toor Bros that the State government did not ban the use of taxis during the period of the lockdown, but many taxis were not on the road as there was very little work and they could not make any money.
Toor Bros operated a fleet of some 38 taxis. During the period of the lockdown, Toor Bros was not operating its fleet but after the lockdown, it started operating at least some taxi cabs.
The State government provided financial assistance to the taxi industry in response to the COVID-19 pandemic. The assistance package consisted of an ex-gratia payment of $4300 per taxi to the registered owner of a taxi as at 21 April 2020 or the most recent registered owner if the vehicle was registered as at 1 March 2020. The ex-gratia payment was aimed at offsetting government charges including registration and compulsory third party insurance premiums. There was also a waiver of government fees for operator accreditation for operators of taxi vehicles and licence holders for a 12 month period from 27 April 2020. Toor Bros accepted that it did receive some subsidies from the government.
Legal principles

The effect of frustration is to discharge the parties from their respective obligations under the Agreement.[8] In this case, if the Agreement is frustrated, Toor Bros would be relieved of its obligation to pay the licence fee.
[8] JD Heydon “Heydon on Contract” LawBook Co, 2019 at [23.100].
The Frustrated Contacts Act 1988 (SA) does not define when frustration of a contract occurs. It instead deals with the consequences of frustration. Therefore, the common law rules as to when a contract is frustrated continue to apply.
The accepted test for determining when a contract is frustrated was expressed by Radcliffe LJ in Davis Contractors Ltd v Fareham Urban District Council[9] in the following terms:
[9] [1956] AC 696 at 729.
[F]rustration occurs when the law recognizes that without default of either party a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract.
That test was accepted in Australia by Stephen J (Murphy J agreeing) in Brisbane City Council v Group Projects Pty Ltd[10] and in Codelfa Construction Pty Ltd v State Rail Authority of NSW[11] per Mason J,[12] Aicken J[13] and Brennan J.[14]
[10] (1979) 145 CLR 143 at 161.
[11] (1982) 149 CLR 337
[12] Ibid at 356-357.
[13] Ibid at 378.
[14] Ibid at 408-409; See also Ooh! Media Roadside Pty Ltd v Diamond Wheels Pty Ltd [2011] VSCA 116 at [63].
In Ooh! Media Roadside Pty Ltd v Diamond Wheels Pty Ltd,[15] Nettle JA (Redlich and Weindberg JJA agreeing) approached the question of frustration in the following way:[16]
[15] [2011] VSCA 116
[16] Ibid at [70].
I take the law to be that a contract is not frustrated unless a supervening event:
(a) confounds a mistaken common assumption that some particular thing or state of affairs essential to the performance of the contract will continue to exist or be available, neither party undertaking responsibility in that regard; and
(b) in so doing has the effect that, without default of either party, a contractual obligation becomes incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract.
Frustration can occur because of a single event or arise from a series of events.[17]
[17] JD Heydon “Heydon on Contract” LawBook Co, 2019 at [23.20].
There is some debate as to the time at which an alleged frustrating event is to be assessed. In the usual course, the assessment of whether there has been frustration of a contract, is made by reference to the facts and circumstances existing at the time of the alleged act of frustration. In Scanlan’s New Neon Ltd v Tooheys Ltd, Latham CJ held:[18]
[18] (1943) 67 CLR 169 at 184.
The question of frustration or no frustration must be decided at the time when the relevant alleged event happens, that is, upon probabilities and not upon a certainty arrived after the event.
That statement of principle requires further refinement, a least in cases of delay. In such cases, Heydon suggested the following formulation of principle:[19]
[19] JD Heydon “Heydon on Contract” LawBook Co, 2019 at [23.20].
The second position is that if a reasonable person in the position of the parties would believe that on the reasonable commercial probabilities there will be a defeat of the commercial purpose of the contract, the contract is there and then frustrated even though the actual future events, had they been known at the critical time, reveal that the commercial purpose would not have been defeated.
Heydon went to state that on this approach, where a court finds that a contract has not been discharged, later events may mean that a contract is discharged through the doctrine of frustration at that later time.[20]
[20] Ibid.
Beale and Twigg-Flesner state that:[21]
[21] H Beale and C Twigg-Flessner “COVID 19 and frustration in English Law” published in SG Long “Derecho de los Desastres: COVID-19” (Pontificia Universidad Catolica del Peru, 2020).
Whether the change makes performance in the new situation “radically different” must be ‘determined by an informed judgment based upon all the evidence of what has occurred and what is likely thereafter to occur’.[22]
[22] Pioneer Shipping Ltd v BTP Tioxide Ltd (The Nema) [1982] AC 724.
Generally, the Courts do not readily find frustration and have kept the doctrine within a narrow compass. The rationale for such an approach was set out by V K Rajah JA in Lee Chee Wei v Tan Hor Peow Victor:[23]
[23] [2007] 3 SLR 537; [2007] SGGA 22 at [48].
To establish that a frustrating event has occurred is always an uphill task, and rightly so, in order that legitimate commercial expectations may be preserved and protected. Parties to a contract could always guard against vagaries or unforeseen contingencies through express stipulation and should they voluntarily choose to accept and undertake an absolute and unconditional obligation, they forfeit the right to complain if events do not unfold as planned. Imprudent commercial bargains cannot be aborted or modified merely because of an adverse change of circumstances.
Nettle JA in Ooh! Media Roadside Pty Ltd v Diamond Wheels Pty Ltd expressed the same sentiment when he held:[24]
[24] [2011] VSCA 116 at [101].
Authority is clear that the doctrine of frustration is not lightly to be invoked and is to be kept within narrow bounds.[25] As Lord Simon of Gladesdale said in National Carriers Ltd v Panalpina Ltd,[26] in order to frustrate a contract, a supervening event must radically alter the nature, not merely the expense or onerousness, of the performance of contractual obligations.
[25] See eg Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696 at 715, 727.
[26] [1981] AC 675 at 700.
The Courts have repeatedly stated that hardship or expense or delay or onerousness is not sufficient.[27]
[27] Beale and Twigg-Flesner at 10; The Sea Angel [2007] EWCA Civ 547 at [111] per Rix LJ.
It is clear that frustration extends beyond physical impossibility and supervening illegality and extends to frustration of purpose.[28] The doctrine of frustration of purpose arises where performance of the contract is still possible, but the supervening event makes the contract of no value to the recipient[29] or it would be pointless to carry out the acts of performance.[30] The high mark of frustration of purpose is the decision in Krell v Henry[31] where the plaintiff licensed a flat to the defendant with the object of viewing the coronation of King Edward VII. The coronation was postponed due to the appendicitis of the King. It was held that contract was frustrated because the commercial object of the contract, to view the coronation, could not be achieved. A different result was achieved in another coronation case, Herne Bay Steam Boat Co v Hutton,[32] where it was held that there was no frustration of the contract (which involved a contract to hire a boat to view a naval review in honour of the coronation, which was also cancelled). It has been suggested that there are two basis for reconciling those cases; first that in Krell there had been a total failure of consideration whilst in Herne Bay the contract had only been partially frustrated and secondly because the naval review had not been contemplated by the parties as the basis and foundation of the contract.[33] Carter states that the deterioration of the domestic or international economy does not typically raise serious issues of frustration and that the doctrine of frustration in Australia “embraces legal impossibility and commercial impossibility but … is not enlivened by commercial impracticality”.[34]
[28] Kariyawasam and Palliyaarachchi “Importance of the doctrines of frustration and force majeure in light of COVID-19” (2021) 50 Australian Bar Review 370 at 373; Heydon (above) at [23.80].
[29] Kariyawasam and Palliyaarachchi (above) at 374.
[30] Heydon (above) at [23.80] citing Empresa Exportadora De Azucarer v Industria Azucarera Nacional SA [1983] 2 Lloyds Rep 171 at 181.
[31] [1903] 2 KB 740.
[32] [1903] 2 KB 683.
[33] Heydon (above) at [23.80]; Kariyawasam and Palliyaarachchi (above) at 375.
[34] JW Carter “An introduction to frustration and force majeure” (2011) 25(4) Commercial Law Quarterly 3 cited in Kariyawasam and Palliyaarachchi (above) at 377.
There are accepted limitations on the doctrine of frustration.[35] They are:
[35] Kariyawasam and Palliyaarachchi (above) at 378.
1.     The parties must have not provided for the event of frustration in the contract;
2.     The event must not have occurred as a result of the fault of one of the parties to the contract;
3.     The frustrating event must not have been an event that could have been foreseen at the time of the entry into of the contract.
The first two matters are self-explanatory. As to the third requirement, it appears that it is not sufficient to exclude the application of the doctrine of frustration unless the supervening event was foreseeable and foreseen. In in Ooh! Media Roadside Pty Ltd v Diamond Wheels Pty Ltd, Nettle JA held:[36]
[36] [2011] VSCA 116 at [72].
A number of the single instance decisions to which Stephen J referred in Brisbane City Council were concerned with application of the doctrine of frustration in circumstances where a supervening event was foreseeable or foreseen at the time of entry into the contract. As Lord Wright said in Maritime National Fish Ltd v Ocean Trawlers Ltd,[37] where a supervening event is not only foreseeable but actually foreseen at the time of entry into a contract, it is more difficult to conceive of the parties as having entered into the contract on the basis of a common understanding that the event could not occur during the life of the contract. Where, however, a supervening event, although foreseeable, was not foreseen at the time of entry into the contract, the fact that it was foreseeable may not be of much significance unless the degree of foreseeability is particularly high.
[37] [1935] AC 524, 529.
Nettle JA went on to hold:[38]
[38] Ibid at [73].
Consequently, as later cases demonstrate, it is important to be precise about the nature and degree of foresight. So far as foreseen events are concerned, the parties to a contract may have foreseen an event but not foreseen the nature or extent of it. In The Sea Angel, Rix LJ gave as an example, based on The Nema, Pioneer Shipping Ltd v BTP Tioxide Ltd (The Nema) [1982] AC 724. a case where the possibility of an industrial strike was foreseen, and actually provided for in the contract, but lasted so long as to go beyond the risk assumed under the contract. It was held to have frustrated the contract. Cheshire and Fifoot’s Law of Contract [9^th ed at [19.12]. suggests that in some cases it may also appear that, ‘Failure to provide expressly for an event that was foreseen [is] due to ... a deliberate decision to leave matters to be sorted out by the parties, or by the law’.
In Dyco Hotels Pty Ltd v Laundy Hotels (Quarry) Pty Ltd,[39] Darke J considered the issue of whether a contract was frustrated because of the impact of COVID-19 on the performance of the contract. The judgment was successfully appealed[40], but not on the issue of frustration. That case involved the sale and purchase of a hotel. One of the obligations of the vendor was to carry on business in the ordinary course of business pending settlement. COVID-19 health orders made under the Public Health Act 2010 (NSW) restricted the vendor to selling take-away food and drink in the period prior to settlement. The purchaser, inter alia, claimed that the contract was frustrated because the hotel was not able to be operated as a going concern or in the usual and ordinary course of business.[41] The purchaser accepted that hardship, inconvenience or material loss was usually insufficient to make out a case of frustration, but submitted that the inability to operate in the usual way went beyond those descriptors and constituted a fundamental change in the nature of the business.[42]
[39] [2021] NSWSC 504.
[40] Dyco Hotels Pty Ltd v Laundy Hotels (Quarry) Pty Ltd [2021] NSWCA 332.
[41] Ibid at [7].
[42] Ibid at [91].
Darke J observed that a contract could be frustrated even though it remained possible to perform the contract,[43] citing Krell v Henry and Stephen J in Brisbane City Council v Group Projects Pty Ltd. In determining the question of frustration, the Court must consider the terms of the contract, the nature of the contract and any relevant surrounding circumstances.[44]
[43] Ibid at [90].
[44] Ibid at [95].
Two matters led the Court to conclude that the contract had not been frustrated. First, the Court considered that the obligation to continue to operate the business pending settlement was ancillary to the principal obligations under the contract. Darke J held:[45]
[45] Ibid at [105].
The obligations to carry on the business have to be seen in the context of the contract as a whole and its relevant surrounding circumstances. It may be accepted that the effect upon the performance of the obligations was significant. Following the short cessation of trading between 23 March 2020 and 25 March 2020 the trading was very limited and unlike the usual and ordinary course. Moreover, there was great uncertainty about how long trading would remain restricted to some degree or another. The situation was understandably most concerning to the plaintiffs. Nevertheless, I agree with the submission of the defendant to the effect that the obligations to carry on the business ought not be regarded as of cardinal significance. Rather, the essential nature or purpose of the contract is a sale and transfer of particular assets for the agreed price. The obligations to carry on the business until completion of the sale can be seen to further that essential purpose by ensuring that in the short period until settlement the defendant, as far as it was lawful to do so, continued to operate the business in the usual and ordinary manner, thereby supporting the preservation of the goodwill of the business. The obligations are important, but I agree that they ought be regarded as ancillary to the principal promises to sell and transfer the hotel assets and pay the agreed price.
Secondly, the Court considered the terms of the contract as a whole and the absence of any warranty as to the future financial performance of the contract. Darke J held:[46]
[46] Ibid at [106].
These provisions indicate that insofar as the public health orders may have had an adverse effect upon the financial performance of the Business after settlement, that is a risk of a type the plaintiffs were apparently prepared to take, even if the actual circumstances that unfolded were not foreseen by them at the time of contract. Accordingly, the main focus of the case on frustration must necessarily be upon the unexpected effect the public health orders had upon the actual performance of the defendant’s obligations to carry on the hotel business until completion.
Darke J concluded:[47]
[47] Ibid at [110].
In all the circumstances I am not prepared to conclude that the unexpected situation the parties found themselves in from about 21 March 2020 gave rise to such a fundamental commercial difference between actual and contemplated performance, or such a fundamentally different situation for which the parties made no provision, that it would not be just to hold the parties bound to the terms of the contract. I consider that the terms of the contract, in particular the promises to sell and transfer the assets in return for the agreed price in circumstances where no warranties were given as to future financial performance, are wide enough to apply to the new situation that emerged.
A decision of the Queen’s Bench Division in England, Salam Air Saoc v Latam Airlines Group Sa,[48] also concerned the application of the doctrine of frustration to a contract affected by COVID-19. Salam Air involved an application for an injunction by Salam Air preventing the demand under letters of credit confirmed by Barclays Bank in respect of the payment of rent under 3 aircraft leases.[49] The issue for determination was whether there was a sufficiently arguable case that the aircraft leases had been frustrated by the effects of COVID-19 and in particular the restrictions imposed by authorities in Oman where the aircraft were based.[50] Foxton J refused the injunction and held that Salam Air’s case for frustration was weak.
[48] [2020] EWHC 2414.
[49] Ibid at [1] and [2].
[50] Ibid at [3].
In reaching that conclusion, Foxton J approached the issue of frustration in a similar way to Dyco Hotels. First, Foxton J approved the comments of Rix LJ in Edwinton Commercial Corporation v Tsavliris Russ (Worldwide Salvage and Towage) Ltd (The Sea Angel)[51] that the doctrine of frustration is not lightly invoked and that:
[51] Ibid at [46]; [2007] 1 CLC 876 at [111]-[112].
…the mere incidence of expense or delay or onerousness is not sufficient; and there as to be as it were a break of identity between the contract as provided for and contemplated and its performance in the new circumstances.
Secondly, Foxton J considered what was the basis of the contract - ie what were the core obligations of the parties.[52] He observed that the lessor assumes very limited obligations under the contract-essentially only that of ensuring quiet possession of the aircraft in return for the income stream with the lessor assuming the commercial risks and rewards of operating the aircraft. The lessor is not concerned how frequently the aircraft was used. Foxton J went on to hold that the risk that Salam Air might be unable to undertake passenger flights or that there might be a dramatic and long-lasting fall in demand were risks inherent in the commercial operation of the aircraft and assumed by Salam Air under the Aircraft leases.
[52] Ibid at [48].
Was the Contract frustrated?
In determining whether the Agreement has been frustrated, I will apply the test expressed by Radcliffe LJ in Davis Contractors Ltd v Fareham Urban District Council (and approved by the High Court in Brisbane City Council v Group Projects Pty Ltd and Codelfa Construction Pty Ltd v Sate Railway Authority of NSW) namely whether the Agreement was incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was contemplated by the contract. The time for the assessment of whether an act of frustration has occurred is made by reference to the facts and acts existing at the time of the alleged act of frustration,[53] although reference may be had to whether a reasonable person would believe on reasonable probabilities that the commercial purpose of the contract would be defeated.[54]
[53] See Scanlan’s New Neon Ltd v Tooheys Ltd (1943) 67 CLR 169 at 184.
[54] Heydon (above) at [23.20].
Commercial impossibility is sufficient to involve the doctrine of frustration.
In determining whether or not the Agreement is frustrated, I must consider its terms, the nature of the agreement and any surrounding circumstances.[55]
[55] Dyco Hotels Pty Ltd v Laundy Hotels (Quarry) Pty Ltd [2021] NSWSC 504 at [95].
In the present case, in my opinion the basis of the Agreement was the licence of the taxi plate by Mr Roberts to Toor Bros for use in the taxi industry and the payment by Toor Bros of the licence fee. This is in line with the findings in Salam Air. There was no warranty by Mr Roberts as to the profitability of the licence, indeed such a warranty would have been impossible as it would depend on the use made by Toor Bros of the taxi plate. Toor Bros was the operator of a fleet of taxis and therefore would have been in a position to make its own conclusions as to the profitability of the hire of the taxi plate.
I consider that in these circumstances, Toor Bros assumed the risk that an event might occur that would impact on the profitability of the taxi operations.

The Agreement did not provide for the consequences of any frustrating event except for the case where the licence was forfeited by the Passenger Transport Board, without fault on the part of Mr Roberts, in which case the Agreement shall forthwith cease. The surrounding circumstances and in particular the negotiation as to the price payable for the licence and its reduction from the price paid in the previous year, indicates that the parties were aware of COVID-19 and agreed to adjust the price payable under the Agreement accordingly.
In the circumstances, I do not consider that COVID-19 itself can be considered to be a supervening event that has caused the frustration of the Agreement. COVID-19 itself was an event contemplated and foreseen by the parties. It did not cause the performance of the Agreement to be impossible or commercially impossible. The event that was not foreseen was the unexpected effect of the public health orders such as the lockdown. Darke J in Dyco Hotels made a finding that it was the unexpected effect of the public health orders that was not foreseen and I consider such a finding is also applicable in the present case. Such a finding is also consistent with the approach taken in Ooh! Media where the Court first ascertained the mistaken common assumption. In the present case, the mistaken common assumption was not COVID-19 but the measures taken as a consequence of COVID-19.
This case concerns an alleged frustrating event that does not render performance of the Agreement impossible or illegal but which, it is contended, renders it commercially impossible. The authorities to which I have referred, including Krell v Henry, Herne Bay and Ooh! Media confirm that commercial impossibility is an event that can give rise to a frustration of contract.
However, the basis of the Agreement has not been destroyed either by the lockdown and other steps taken for public health measures or COVID-19 itself. The Agreement has still been able to be performed, although not as profitably. There has been no total of failure of consideration. Applying the test proposed by Carter, there may have been commercial impracticality, but there was no commercial impossibility.
Matters that may have an effect on the profitability of a contract do not typically constitute an event of frustration. Any number of events may affect the profitability of the Agreement, but do not constitute an event of frustration. Toor Bros, in the absence of some profitability warranties, are to be regarded as having accepted that risk.[56]
[56] See Dyco Hotels Pty Ltd (above) at [91]; Carter (above) at [377.1].
As stated earlier in these Reasons, an accepted restriction on the doctrine of frustration is that the frustrating event must not be an event that was foreseeable and foreseen at the time of the entry into of the contract. Insofar as Toor Bros seeks to rely on COVID-19 itself as the frustrating event, that was an event that was foreseeable and foreseen at the time of the entry into of the Agreement. That was a risk that Toor Bros was prepared to accept under the terms of the Agreement. The licence fee was adjusted to accommodate that risk.
I accept that the consequences of COVID-19 such as the lockdown may have not been able to have been foreseen at the time of the entry into of the Agreement. However, as stated by Kariywasam and Palliyaarachchi,[57] it was not those lockdowns which were the cause of the alleged commercial impossibility, but the reduction in use of the taxis. That reduction in use of the taxi was a reasonably foreseeable commercial risk.
[57] Kariyawasam and Palliyaarachchi (above) at 379-380.
For all of these reasons, I do not consider that the Agreement was frustrated.
Other matters
Mr Roberts, in the hearing before the Magistrate, referred to the payment received by Toor Bros as a result of the government subsidy. In my view, the Magistrate was correct in holding this payment was irrelevant to the question of whether the Agreement had been frustrated.
Toor Bros had raised in the hearing to the Magistrate the consent of Adelaide Independent Taxis to the return of the taxi plate. Again, I consider that the Magistrate was correct in holding that the conduct and actions of Adelaide Independent Taxis (as it was not a party to the Agreement) were irrelevant to the Agreement and whether it had been breached or whether Toor Bros was relieved of its obligations under the Agreement.
Conclusion
Pursuant to s 38(7)(d)(ii) of the Magistrates Court Act, I allow the review and rescind the judgment of the Magistrate. I substitute a judgment in favour of Mr Roberts in the sum of $9,542.30, inclusive of costs and interests. This amount comprises the claim of $8000, costs consisting of fees paid to the court of $156 (filing fee), service fee of $41.30, setting down fee of $668, and filing fee on review to this Court of $177 (these are the costs of which there is evidence of payment) and pre-judgment interest on the claim which I will award in a lump sum of $500. Had the agreement been performed, Mr Roberts would have received the payments each week through the period from March 2020-March 2021, not in a lump sum in March 2020.