Introduction

It has been several years since the world first grappled with the upheaval caused by COVID-19. The memories of sudden travel restrictions, mandatory quarantines, and the uncertainty of the ever-changing government policies remain vivid. These disruptions did not just impact our daily lives, they shook the very foundations of how businesses and employees interacted.

Can the COVID-19 pandemic and resulting travel restrictions “frustrate” an employment contract, discharging the parties from further obligations?

In Stahl Matthew Ian v Brilliant Jet Limited [2025] HKCFI 2013, the Court of First Instance (“CFI”) said “No”, at least not on the facts of the case. This article examines how the courts approach the doctrine of frustration in the context of employment relationships during COVID-19, and the lessons that continue to shape our understanding of frustration in employment contracts in a post-pandemic world.

Background

Mr Stahl (“Employee”), a private jet pilot, was employed by Brilliant Jet Limited (“Employer”), a business aviation management services company as Lead Captain under an employment contract. Key terms of the employment contract include: 

1.      the Employee was required to use his best efforts to pursue any and all applications for the necessary work visas and permits, with the Employer providing reasonable assistance;

 

2.      while primarily based in Shanghai, the Employee could be deployed globally, including temporary or permanent relocations to other cities; and

 

3.      either party could terminate the contract without cause upon three months’ written notice or payment in lieu, and the Employer could also terminate the contract for cause immediately without notice or payment in lieu.

 

In early 2020, COVID-19 disrupted global travel, and when China imposed entry restrictions, the Employee was unable to re-enter Mainland China. The key events were:

1.      2 January 2020: The Employee commenced employment.

 

2.      15 February 2020: The Employee arrived at Shanghai after training in Hong Kong, and began flying duties.

 

3.      28 March 2020: The Mainland Government imposed restrictions on entry to Mainland because of COVID. At the time the Employee was in Cambodia, in accordance with arrangements made by the Employer. Although the Employee had a valid China Business visa, he was not able to re-enter Mainland China to continue with his flying duties. He attempted to apply for a China Crew visa (“Type C Visa”), which would have enabled him to re-enter Mainland China, but was unsuccessful.

 

4.      4 to 17 April 2020: The Employee was placed on annual leave after failing to secure a Type C Visa.

 

5.      30 April 2020: The Employer directed the Employee to fly to Hong Kong to apply for a Type C Visa.

 

6.      7 May 2020: The Employee arrived in Hong Kong.

 

7.      8 May 2020: The Employee submitted his application.

 

8.      11 May 2020: The Employee gave three months’ notice of resignation.

 

9.      14 May 2020: The Employee’s application for Type C Visa was refused. After the refusal, the Employee asked the Employer to provide documents to assist in a further application, but the Employer refused.

 

10.   15 May 2020: The Employer placed the Employee on unpaid leave due to his inability to obtain a Type C Visa.

 

11.   16 June 2020: The Employer summarily dismissed the Employee, alleging visa non-compliance, unauthorized expenses, and failure to remain in Shanghai.

Tribunal’s decision

The Employee filed a claim at the Labour Tribunal for (1) arrears of wages; (2) wages in lieu of notice; (3) annual leave pay; and (4) reimbursement of expenses. The Tribunal awarded all his claims except (2) wages in lieu of notice, ruling that the employment contract was “frustrated” on 16 June 2020 due to China’s unpredictable visa policies during the pandemic.

The Tribunal found that the visa refusal and entry restrictions rendered performance of the employment contract “impossible”. The unforeseen event (COVID-19) radically altered the contract terms, making performance fundamentally different from what the parties originally contemplated.

The Employee appealed against the decision.

Legal principles: Frustration of contract

On appeal, the CFI affirmed that frustration requires a fact-sensitive assessment of:

1.      the contract terms;

 

2.      the parties’ knowledge and expectations; and

 

3.      the nature of supervening event.

 

The CFI emphasized that mere expense or delay does not suffice. The doctrine applies only when performance becomes radically different from what was agreed upon and without either party’s fault.

Frustration cannot be established if:

1.      alternative performance options exist; or

 

2.      the circumstances resulted from a party’s failure to act (as with the Employer’s refusal to assist with the Employee’s further application after his application was refused on 14 May 2020).

 

To succeed, the asserting party must prove:

1.      an unforeseen external event renders performance impossible or fundamentally different from the parties’ original contemplation; and

 

2.      that such event and its consequences occurred without fault of either party.

Was the contract frustrated?

The CFI concluded that the Tribunal erred in law by finding frustration:

·           The employment contract expressly allowed the Employee to be posted anywhere in the world, not just Shanghai. Alternative performance was possible. The Employee’s inability to work in Mainland China did not make it impossible for him to perform his duties elsewhere.

 

·           The evidence showed that while the visa situation was uncertain, it was not impossible for the Employee to obtain the necessary visa. Other pilots succeeded, and the process depended on factors such as having spent 14 days in Hong Kong before applying. The Employer could have assisted in a reapplication, but declined.

 

·           The Tribunal’s finding of impossibility was therefore unsustainable; there remained a real (albeit uncertain) possibility that the contract could have continued.

 

The CFI found that:

·           The employment contract was not frustrated.

 

·           The Employer was not entitled to summarily dismiss the Employee. Even if frustration had applied, section 8A of the Employment Ordinance (Cap. 57) protected the Employee’s right to wages in lieu of notice.

 

·           The Tribunal’s order regarding wages in lieu of notice was set aside, and ordered the Employer to pay the Employee wages in lieu of notice plus costs.

Takeaway

Stahl v Brilliant Jet is a significant authority on frustration in the employment context, especially concerning COVID-19. The decision confirms that the threshold for frustration remains high. Uncertainty or difficulty in performance, even during a pandemic, will not suffice if alternative means of performance exist. Employers must carefully consider the contractual terms and all options before asserting that a contract has been frustrated. For employees, the case is a reminder that statutory and contractual rights to notice and pay remain robust, even in extraordinary times.

 

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Important: The law and procedure on this subject are very specialised and complicated. This article is just a very general outline for reference and cannot be relied upon as legal advice in any individual case. If any advice or assistance is needed, please contact our solicitors.

Published by ONC Lawyers © 2025