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Chancery Denies Specific Performance in De-SPAC Transaction Based on Difficulty of Enforcement and Plaintiff’s Inequitable Conduct

 
26 Capital Acquisition Corp. v. Tiger Resort Asia Ltd., CA No. 2023-0128-JTL (Del. Ch. September 7, 2023)
Even where the parties have contractually agreed that specific performance is the preferred remedy for a breach, the decision whether to award that relief nevertheless remains within the Court of Chancery's discretion. In this decision, addressing the availability of specific performance, the Court assumed without deciding that the defendant target of a SPAC had not used its reasonable best efforts to close the transaction in breach of the agreement, that the SPAC was ready, willing, and able to close, and that money damages were an inadequate remedy at law.

Although the agreement expressly called for specific performance against the target for this breach, the Court nevertheless held that specific performance was unavailable. The Court reasoned that enforcing an order of specific performance would be difficult based on the defendant company's international location in the Philippines and its history of poor governance. The Court explained that there were not clear sanctions that the Court could effectively impose on the defendant if it failed to comply with a court order of specific performance in the circumstances. Further, under principles of comity, an order of specific performance potentially could violate a status quo order from the Philippine Supreme Court involving the company. Moreover, the plaintiff itself had engaged in conduct that was inequitable – secretly partnering with a hedge fund that disloyally advised the defendant target for the SPAC's benefit in the transaction. The plaintiff would have to seek a remedy, if any, in damages.

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