British Virgin Islands Electricity Corporation Applicant/Claimant v Delta Petroleum (Caribbean) Ltd Respondent/Defendant

• Jurisdiction: British Virgin Islands
• Judge: Ellis, J.
• Judgment Date: 14 July 2015
• Judgment citation (vLex): [2015] ECSC J0714-5
• Court: High Court (British Virgin Islands)
• Docket Number: CLAIM NO. BVIHCV2015/158
• Date: 14 July 2015

[2015] ECSC J0714-5

EASTERN CARIBBEAN SUPREME COURT

TERRITORY OF THE VIRGIN ISLANDS

IN THE HIGH COURT OF JUSTICE (Civil)

CLAIM NO. BVIHCV2015/158

Between:

British Virgin Islands Electricity Corporation

Applicant/Claimant

and

Delta Petroleum (Caribbean) Ltd

Respondent/Defendant

Appearances:

Mr. Terrence Neale and Ms. Elizabeth Ryan for the Claimant

Ms. Willa Travenier and Ms. Nadine Whyte for the Defendant

JUDGMENT

Ellis, J.

[1] This is an Application brought by the Claimant in which it seeks interim injunctive relief compelling the Defendant to continue to deliver fuel to it in accordance with the terms of the Refined Petroleum Supply Agreement dated 30^th August 2014 (the Agreement) pending the determination of the Claimant's claim for specific performance of the Agreement and damages. The Claimant also seeks its costs of the Application.

[2] The grounds on which the Application is brought are set out in the Notice of Application filed on 11^th June 2015 which provides the factual background to the dispute.

[3] On August 30, 2014, the Claimant and the Defendant entered into an Agreement for the sale and purchase of No. 2 diesel fuel and unleaded gasoline. The Claimant agreed to purchase diesel fuel exclusively from the Defendant for 4 years from September 1, 2014 to August 31, 2018 (the "Supply Period") and the Defendant agreed to supply and deliver diesel fuel and unleaded gasoline to the Claimant during the Supply Period. The Defendant is the sole supplier of fuel to the Claimant.

[4] At the time of the signing of the Agreement, the Defendant was receiving its supplies of fuel from Hovensa storage facilities in St. Croix, USVI ("Hovensa"). Clause 10 of the Agreement contains provisions that relieve the Parties from their failure to fulfil their respective obligations under the Agreement if the failure is caused by any of the six events listed in sub-clause 1. The event that is relevant to the dispute between the Claimant and the Defendant is paragraph (d) which excuses performance if there is –

"Any curtailment, failure or cessation of supplies of crude oil or refined petroleum products from any of the Seller or its suppliers' sources of supply or Seller's leased storage facilities on St. Croix, USVI, which are in fact sources of supply or storage for the purposes of this present Agreement."

[5] So that if there was a delay, interference or curtailment of the Defendant's supplies within the meaning of sub-clause 10(1), it could apply under the further provisions of Clause 10 for performance relief. On December 1, 2014 Hovensa gave notice to the Defendant that it would be closing the Hovensa facilities and terminating supplies of fuel to the Defendant effective March 1, 2015. Subsequently, the Defendant applied for performance relief as follows:

1. a) Weather– By letter dated January 27, 2015 on account of adverse weather conditions.

2. b) In relation to the Hovensa closure–

   1. (i) Letter dated January 27, 2015 on account of delays encountered at Hovensa related to the closing of the facilities.

   2. (ii) Letter dated February 2, 2015 because of the closing of the Hovensa facilities and the transition to the new loading facility in Antigua.

3. c) In relation to the Antigua loading facility –

   1. (i) Letter dated March 12, 2015 on account of delays in loading in Antigua.

   2. (ii) Letter dated April 30, 2015 on account of "berthing in Antigua as was cited in previous Performance Relief correspondence".

[6] The Claimant contends that from March 12, 2015 and April 30, 2015 the requests for performance relief had nothing to do with the Hovensa closure, but rather difficulties it encountered with its supplier in Antigua. Despite these requests for performance relief, the Defendant continued to deliver fuel in accordance with the Agreement.

[7] By letter dated February 19, 2015 the Defendant claimed that the cost of supplying fuel from Antigua was more expensive than the cost of supplying fuel from the Hovensa facility to the point of making the Agreement unprofitable and asked for a renegotiation of the Agreement price.

[8] By letters dated March 4, 2015 and May 28, 2015, the Claimant rejected the Defendant's request for an increase in the price for fuel, but indicated that it was prepared to discuss other proposals that could help to mitigate the effects of an increase in the cost of supplies.

[9] Nonetheless, the Defendant continued to insist that it was entitled to performance relief on the basis of an increase in the price of fuel and that it was entitled to renegotiate the price for the fuel. The Claimant's position is that the Defendant does not have the right to renegotiate and increase the price of the fuel supplied under the Agreement.

[10] On May 26, 2015 the Claimant received a letter from the Defendant dated May 18, 2015 stating that a supply of fuel could be loaded for delivery to the Claimant at a price above the contracted price. The Claimant responded on May 30, 2015 by rejecting the offer of fuel unless it was delivered at the contracted price. The shipment of fuel was later delivered on May 31, 2015 and invoiced at the agreed price.

[11] On June 1, 2015 the Claimant received another request for performance relief on the ground that as a result of the closure of the Hovensa facilities, the Defendant was no longer able to supply the Claimant with fuel at the agreed price.

[12] On June 4, 2015 the Claimant advised the Defendant that it was treating the letter on June 1, 2015 as a further breach of the Agreement and advised the Defendant by its letter of June 4, 2015 that it intended to bring a claim against the Defendant for specific performance of the Agreement.

[13] By its letter dated June 5, 2015, the Defendant advised the Claimant that it was willing to supply fuel in the interim while the Claimant attempts to locate an alternative source of supply via the tender process. The Defendant further advised that the interim supply would not be at the contracted price because such supply would be outside the terms of the Agreement.

[14] On June 8, 2015, the Defendant again requested performance relief on the basis of the Hovensa closure and on June 9, 2015, the Claimant received notification of a shipment of fuel from the Defendant arriving in Tortola on May 12, 2015. By letter dated June 9, 2015, the Claimant indicated its willingness to accept the shipment if it was supplied at the contracted price.

[15] The Claimant contends that the requests for performance relief by the Defendant on June 1, and June 8, 2015 on the basis of the closure of Hovensa and the increased in price were not valid requests pursuant to clause 10 of the Agreement since the Defendant, having been advised of the Hovensa closure, took steps to find and did in fact find another source of supply. In addition, it contends that there is no provision in the Agreement for getting performance relief on account of an increase in the price of supplying the fuel.

[16] As a result, the Claimant has commenced legal proceedings against the Defendant seeking a declaration that the Defendant has breached the Agreement, an order for specific performance of the Agreement and damages.

COURT'S ANALYSIS AND CONCLUSIONS

[17] The guidelines for the grant of an interim injunction (or interlocutory injunction) are set out in the now classic case of American Cyanamid v. Ethicon Ltd1. That judgment prescribes that a court must consider the following factors:

1. (a) Is there a serious issue to be tried? If there is a serious question to be tried and the claim is neither frivolous nor vexatious, the court should then go on to consider the balance of convenience generally.

2. (b) As part of that consideration, the court will contemplate whether damages are an adequate remedy for the applicant; and if so, whether the Defendant is in a position to pay those damages.

3. (c) If on the other hand, damages would not provide an adequate remedy for the applicant, the court should then consider whether, if the injunction were to be granted, the Defendant would be adequately compensated by the applicant's cross-undertaking in damages.

4. (d) If there is doubt as to the adequacy of the respective remedies in damages, then other aspects of the balance of convenience should be considered. If the balance of convenience does not clearly favour either party, then the preservation of the status quo will be decisive.

[18] Only as a last resort is it proper to consider the relative strength of the cases of both parties and only when it appears from the facts set out in the affidavit evidence as to which there is no credible dispute (or where the case largely involves construction of legal documents or points of law) that the strength of one party's case is disproportionate to that of the other.2

[19] However, in the case at bar, the Claimant is seeking interlocutory injunctive relief which is mandatory in nature. Courts have notoriously been far more reluctant to grant such relief and this is reflected in recent case law. The appropriate approach which a court must adopt in such scenario is usefully set out in the judgment of Seecomm Network Service Claimant v Colt Telecommunications.3 At paragraph 13 of the judgment Treacy J states:

"The principles applicable to the approach to this type of application are not in dispute. Both parties have referred me to Zockoll Group Limited v Mercury Communications Limited, (1998) F.S.R p 354 and, in particular, page 366. At that point Phillips LJ, as he then was, summarised the principles to be applied by the Court in considering an application to grant a mandatory interlocutory injunction. I quote from the report:

'First, this being an interlocutory matter the over-riding consideration is which course is likely to involve the least risk of injustice if it turns out to be wrong in the sense described by Hoffman J.

"Secondly, in considering whether to grant a mandatory...