Attorney General of the Virgin Islands v Global Water Associates Ltd [2020]

Court: Privy Council

Facts: The Government of the British Virgin Islands and Global Water Associates Ltd (GWA) entered into two contracts: a Design Build Agreement (DBA) for constructing a water reclamation plant and a Management, Operation, and Maintenance Agreement (MOMA) for operating the plant for 12 years. The Government’s failure to provide a prepared project site led to GWA terminating the DBA and claiming damages, including lost profits under the MOMA. Initially, arbitrators deemed the damages too remote, but the BVI High Court disagreed. The BVI Court of Appeal reversed this, prompting GWA to appeal to the Privy Council.

Issue: Were the profits GWA expected to earn under the MOMA too remote to be recoverable as damages for the Government’s breach of the DBA?

Held: The Privy Council held that the losses from GWA’s inability to earn profits under the MOMA were not too remote. These losses were reasonably foreseeable when the parties entered into the DBA, as the contracts were interconnected and formed part of the same transaction.

Key Judicial Statement: Lord Hodge stated, “Recoverable damages for breach of contract must be those losses which could reasonably be contemplated as a serious possibility by the parties at the time of the contract."

💡Leveluplaw: This case reinforces the principle that damages for loss of profits under one contract can be recoverable for the breach of another, if the losses were within the reasonable contemplation of the parties when they entered into the contracts. It underscores how remoteness of damage is assessed in commercial agreements.