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The Privy Council has today handed down an important judgment in an appeal concerning waiver by election and the inherent power of an appellate court to restore money paid or property transferred under an order which is reversed on appeal.  The judgment is of particular significance to the law on remedies for final orders for specific performance which were wrongly made.

The appeal concerned the construction of a contract for the supply of fuel by the seller, Delta Petroleum (“Delta”), to the buyer, the British Virgin Islands Electricity Corporation (“BVIEC”).  The contract contained a clause entitling Delta to claim relief from further performance of its obligations under the contract (“performance relief”) upon the closure of the refinery from which it obtained the fuel which it supplied.  Upon the closure of the refinery, Delta continued to supply fuel which it purchased and shipped from an alternative source but sought a price increase from BVIEC to offset the increased costs of doing so.  Upon the failure of the negotiations in relation to a price increase, Delta informed BVIEC that it would no longer be able to continue to supply fuel under the contract as it had not been able to identify an alternative supply on similar terms.  BVIEC rejected the claim for performance relief stating that the right to claim it had been lost as Delta had continued to supply fuel under the contract via an alternative supplier.  BVIEC obtained an interim injunction from the High Court of the Eastern Caribbean Supreme Court (“the High Court”) requiring Delta to continue to perform the contract pending trial followed by a final injunction requiring performance until the expiry of the contract.  The final injunction was upheld by the Court of Appeal of the Eastern Caribbean Supreme Court.

The appeal raised the question of whether a party with a right to claim relief from further performance of its obligations under a contract had in law to make an election between exercising the right and continuing to perform the contract such that, if the latter choice was made, the right to claim performance relief was lost.  The Board found that the right to claim performance relief did not present Delta with a binary choice between putting an end prospectively to all the parties’ obligations or treating those obligations as still binding.  There was no inconsistency between Delta’s continued supply of fuel from an alternative source and its decision to stop supplying fuel because of the closure of the refinery and the inability to mitigate the loss caused by that occurrence.  The right to claim performance relief did not therefore require the making of an election and the lower courts were wrong to hold that Delta made an election in continuing to supply fuel from an alternative source by which it waived its right to claim performance relief.

The Board found that the BVIEC was liable for any damages suffered by Delta by reason of the interim injunction pursuant to the cross-undertaking in damages given.  The Board further observed that no cross-undertaking in damages was given when the final injunction was made, in accordance with normal practice.  However, the Board considered the jurisprudence in relation to the inherent jurisdiction of an appellate court to make a restitutionary award requiring a respondent to an appeal to restore to the appellant money paid or property transferred under an order which is reversed on appeal.  The Board considered that it was appropriate to make an order requiring BVIEC to restore to Delta the value of fuel transferred to BVEIC pursuant to the order for specific performance insofar as this exceeded the contract price paid for the fuel, together with interest on that sum.  The Board noted that the relevant amount to be paid by BVIEC to Delta would need to be assessed by the High Court.

The full judgment can be found here.

Naina Patel acted for Delta.

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