Nevis Electricity Company Ltd v AF Power Ltd; Karen Hill-Hector

• Jurisdiction: Saint Kitts and Nevis
• Judge: Moise, J
• Judgment Date: 16 June 2021
• Neutral Citation: KN 2021 HC 10
• Court: High Court (Saint Kitts and Nevis)
• Docket Number: CLAIM NO. NEVHCV2021/0023

EASTERN CARIBBEAN SUPREME COURT

IN THE HIGH COURT OF JUSTICE (CIVIL)

Before:

His Lordship, the Honourable Justice Ermin Moise

CLAIM NO. NEVHCV2021/0023

Between:

Nevis Electricity Company Limited

Claimant

and

(1) AF Power Limited

(2) Karen Hill-Hector

Defendants

APPEARANCES:

Mr. James Bristol Q.C. with Ms. Michelle Slack of Counsel for the Claimant

Mr. Sylvester Anthony with Ms. Rénal Edwards of counsel for the 1 ^st defendant

Moise, J

1 This is a claim for an injunction against arbitration proceedings and other orders and declarations. The claimant and 1 ^st defendant are parties to a Power Purchase Agreement (PPA) dated 21 ^st June, 2019. Various disputes have arisen regarding fulfillment of the terms of the PPA. As a result, the 1 ^st defendant commenced arbitration proceedings by way of notice dated 10 ^th January, 2020. The claimant mainly contends that the 1 ^st defendant has not complied with the pre-conditions to arbitration as set out in the agreement, therefore providing no basis upon which arbitration proceedings can commence. It is argued further, that as a result of the failure to comply with the pre-conditions as set out in the PPA, the 2 ^nd defendant, who was unilaterally appointed by the 1 ^st defendant, has no jurisdiction to conduct the arbitration proceedings. Counsel for both parties have put forward very cogent and thoughtful arguments to the court, for which I am grateful. However, after careful consideration I have determined that the claim should be denied with costs to the 1 ^st defendant and the matter remitted to the arbitrator for consideration of the issues raised in this claim. These are the reasons for my decision.

2 Before addressing the facts of this case in any detail, I make one brief observation at this stage. The evidence will no doubt show that there are genuine disputes between the parties as it relates to the fulfillment of their obligations under the PPA. The PPA has also clearly provided the option for disputes to be resolved by arbitration, should the parties be unable to resolve them amicably. Therefore, insofar as the facts are outlined in this judgment, this court would not wish for its interpretation of them to be viewed in any way to mean that it has ruled on matters which are entirely for an arbitrator to deal with if that option takes place. I would wish merely to highlight the chronology of the facts in order to determine the substance of the issues which are before me. Counsel for the parties have helpfully identified these issues as follows:

• (a) Whether the provisions of Clause 15.1 of the PPA are preconditions to arbitration;

• (b) If yes to (a), whether the preconditions to arbitration as specified in clause 15.1 of the PPA have been complied with; and

• (c) If no to (b), whether the 2 ^nd Defendant has jurisdiction over the parties, and or the purported arbitration proceedings

3 For reasons which will become apparent later on in this judgment, I am of the view that the issue of jurisdiction must be addressed before the first two of the issues identified are considered, as it may determine the matter in full. However, before addressing my mind to these issues, I wish to briefly outline the relevant facts upon which this claim is based.

The Facts

4 The claimant (NEVLEC) is the sole provider of electricity services on the island of Nevis. On 21 ^st June, 2019, NEVLEC entered into a Power Purchase Agreement (PPA) with the 1 ^st Defendant (AF Power). In short AF Power was contracted to design and install a power generating facility in Nevis to complement the infrastructure already in use on the island. In turn, NEVLEC agreed to provide AF Power with an irrevocable bank guarantee in the sum of $1,200,000.00US. This guarantee was to be provided within one month from the date of the signing of the PPA. The parties also agreed that, in the event that NEVLEC delayed in providing the guarantee, AF Power's time for the installation of the generating facility shall be extended by an equivalent length of time.

5 As set out in clause 15 of the PPA, the parties also agreed to a dispute resolution procedure, should the need arise. In particular, clauses 15.1 of the PPA states as follows:

“ 15. DISPUTE RESOLUTION

15.1 If any dispute arises between the Parties in connection with or relating to the Agreement (a “Dispute”) the Parties shall try to amicably resolve the issues through discussion and negotiations. If a Dispute is not resolved within twenty Business Days by discussion either Party may by notice to the other require the Dispute to be referred to Arbitration.”

6 Clause 15.2 of the PPA stipulated that upon receipt of the notice of intention to arbitrate, each party would have 20 business days within which to appoint an arbitrator of their own. Once the two arbitrators are appointed, it would be for them to select a 3 ^rd arbitrator to act as chairman of the tribunal.

7 It is not disputed that NEVLEC experienced some difficulties in providing the bank guarantee as required by the PPA. Instead, they provided a guarantee from the Nevis Island Administration (NIA). The NIA, through the office of the Premier by letter dated 17 ^th July, 2019, agreed to guarantee the sum of $1,200,000.00US on behalf of NEVLEC. This came only after the 1 ^st defendant's representative agreed to such a guarantee on 8 ^th July, 2019. However, I note that even in its correspondence of 8 ^th July, 2019, AF Power continued to insist on a bank guarantee or standing order to its own bankers in the sum of $300,000.00US, as a complement to the NIA's own guarantee. The parties apparently continued to discuss this issue and by letter dated 9 ^th September, 2019, AF Power conceded and agreed to proceed with its obligations by accepting the guarantee from the NIA. I do note however, that the letter of 9 ^th September, 2019 also sought an extension of time from NEVLEC, within which to complete the installation of the infrastructure. This request was denied. NEVLEC's assertion is that in reliance on this assurance of 9 ^th September, 2019, it was of the view that its obligations under the agreement had been satisfied.

8 Despite this, according to NEVLEC, on 12 ^th December, 2019, it was served with a Notice of Default by AF Power alleging that NEVLEC had failed to comply with the terms of the agreement, in that a bank guarantee had not been provided within the time frame stipulated in the agreement. However, the default notice also goes on to complain that AF Power's time for the installation of the infrastructure was not extended as it ought to have been under the terms of the PPA, given NEVLEC's own delay in providing the bank guarantee. The Notice issued on 12 ^th December, 2019 also requested that the breach which it had identified and attributed to NEVLEC be cured within 14 business days. I pause here to note that in the evidence led by AF Power, there was exhibited a notice of event of default issued by NEVLEC in December, 2019. That notice was unsigned and it is unclear as to whether NEVLEC intended to enforce this notice in any way.

9 In addition to that, AF Power issued a notice of intention to commence arbitration on 10 ^th January, 2020. That notice asserted firstly, that NEVLEC and been in breach of its own duty to provide the bank guarantee. Secondly, it acknowledged that AF Power had agreed, in good faith, to satisfy its own end of the bargain and had sought an extension of time within which to do so, in its letter of 9 ^th September, 2019. The notice of intention to commence arbitration also indicated that this request was denied. This appears to be the substance of the dispute raised by AF Power in order to justify commencing arbitration proceedings. In keeping with clause 15.2 of the agreement, NEVLEC was invited to appoint an arbitrator within 20 business days of the notice. NEVLEC did not oblige and on 7 ^th February, 2020 AF Power gave notice that it had appointed the 2 ^nd defendant, Mrs. Karen Hill-Hector as its arbitrator. In keeping with the provisions of section 7(b) of the UK Arbitration Act of 1950 (the legislation currently in force in Saint Christopher and Nevis), on 12 ^th March, 2020, AF Power served a section 7(b) notice on the claimant appointing Mrs. Hill-Hector as the sole arbitrator given that there was no selection made by NEVLEC.

10 By way of letter dated 7 ^th July, 2020, Mrs. Hill-Hector wrote to both parties, stating that she had accepted the appointment on the premise that both parties had expressly or impliedly consented. Mrs. Hill-Hector also attached her terms of reference and appointment. However, by letter dated 17 ^th July, 2020, NEVLEC, through its solicitors, claimed not to know the context within which Mrs. Hill-Hector had sent her letter of 7 ^th July, 2020. The letter of 17 ^th July, 2020 claimed that her appointment as arbitrator was unilateral and sought further clarification from her on the issues which had been raised therein. Mrs. Hill-Hector, on 20 ^th July, 2020, provided NEVLEC's attorneys with the information regarding her communication with AF Power's solicitors and her acceptance of the appointment as arbitrator.

11 NEVLEC objected to this and, in correspondence with attorneys for AF Power, pointed to clause 15.1 of the PPA. The clause also stipulates that a period of 20 business days from the commencement of negotiations must expire before arbitration can commence. It is also apparent that NEVLEC's attorneys did not respond to Mrs. Hill-Hector after the initial communication in July, 2020. However, on 26 ^th October, 2020, Mrs. Hill-Hector wrote to NEVLEC's attorneys indicating that she had received the deposit of $1,500.00US from AF Power but had not received a response from NEVLEC. She indicated that she was available to meet on various dates in November, 2020 and attached a draft agenda to her letter.

12 By letter dated 3 ^rd November, 2020, NEVLEC's attorneys responded to Mrs. Hill-Hector...