By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
ArawakX’s largest investor has moved to intervene in its dispute with Bank of The Bahamas by alleging that the two sides’ agreement to unfreeze the crowd-funding platform’s accounts “seriously prejudices” his interests.
James Campbell, who invested close to $1.6m via a mixture of “capital injection” and loans, is alleging that ArawakX and the BISX-listed commercial bank effectively kept him in the dark over the terms of a Supreme Court “consent Order” issued on May 16, 2023, that restored the crowd-funding platform’s access to accounts it had previously been locked out of for more than six months.
The former Colina Insurance Company president, in an October 11, 2023, affidavit and accompanying legal documents, is now demanding that this Order be altered or discharged entirely on the grounds that it makes him liable to pay both sides’ legal costs even though he is not named as either a plaintiff or defendant in the litigation between ArawakX and Bank of The Bahamas.
Branding the situation as “perverse, or at the very least unfortunately irregular”, Mr Campbell is asserting that himself and his investment vehicle, PJ Enterprises, are “secured creditors” of ArawakX due to the terms struck over their original $1.34m investment in the crowd-funding platform. This, he is arguing, secured the funding’s repayment via a series of fixed and floating charges over the crowd-fund platform’s revenues and bank accounts.
Describing the investment as “a capital injection loan”, Mr Campbell said in return PJ Enterprises was issued 1.34m non-voting convertible notes that could be transformed into an equity ownership stake in ArawakX. The original July 12, 2021, deal was then altered on January 10, 2022, to specify that the conversion would give the former Colina chief a 30.63 percent equity stake in the crowd-fund platform through being issued 3.063m shares.
In addition, Mr Campbell’s PJ Enterprises was to be “treated as a co-founder of the company” and granted ordinary shares equal to those issued to the other founders, D’Arcy Rahming, ArawakX’s president, and his son, D’Arcy junior, its chief technology officer.
And PJ Enterprises “would be entitled to appoint 50 percent of the Board” at the crowd-funding platform, with Mr Campbell appointed as director and chairman with a casting vote. Board resolutions to give effect to this were allegedly lodged with the Registrar General’s Department on March 14, 2022, with ArawakX’s articles of association altered to allow “certain overriding provisions” in the company’s corporate governance for Mr Campbell.
The latter also claimed that part of the wide-ranging conditions, in return for his capital investment, “implemented and adopted certain internal control measures governing the operation of its bank accounts” such that Mr Campbell was authorised as a signatory on all ArawakX’s operational and fiduciary bank accounts - including those held by Bank of The Bahamas.
Further loans were advanced by Mr Campbell to Arawak X which, in turn were secured “by a first charge over all funds received by MDollaz”, the crowd-fund platform’s parent, and a floating charge on all bank accounts. The interest rate charged on the loan was to be 10 percent per annum.
“In the circumstances, PJ Enterprises is and was, at all material times, a secured creditor of Mdollaz, holding security over its bank accounts held at the bank,” the former Colina chief alleged. Within months, though, he and the Rahmings had fallen out, which sparked a battle for control that ultimately resulted in Bank of The Bahamas freezing ArawakX’s bank accounts and their ongoing legal battle.
Mr Campbell’s October 28, 2022, letter to Yvette Johnson, Bank of The Bahamas’ premier banking manager, triggered the freeze by warning that he “intends to take immediate action to enforce this security” over ArawakX’s bank accounts that was granted in return for the loans.
Tara Cooper-Burnside, a Higgs & Johnson attorney, told Ms Johnson her client acted after the Rahmings allegedly sought to revoke Mr Campbell’s appointment as a director, plus his signatory authority on the accounts as well as the corporate governance “overriding provisions”, via Board resolutions passed on October 4-5 last year.
“At this time, the Board of Directors comprised the Rahmings, Hillary Deveaux and Mr Campbell,” Mrs Cooper-Burnside wrote. “However, Mr Deveaux nor Mr Campbell became aware of the purported resolutions until Mr Campbell’s access on the accounts was revoked....
“We hereby put the bank on notice that the purported resolutions are ultra vires the Articles of Association of each of the companies and are void and without legal effect. On October 20, 2022, Mr Campbell informed the bank that he had been wrongfully removed as a signatory on the account, whereupon an operational hold was implemented upon the accounts to restrict all transfers, payments, cheques or other disposition of the funds.”
ArawakX and the Rahmings temporarily persuaded Bank of The Bahamas to remove the freeze by producing the disputed October Board resolutions. However, Mrs Cooper-Burnside’s letter, warning that Bank of The Bahamas would be “exposed” to liability and damage if it did not reinstate the hold, ensured the BISX-listed institution again blocked the accounts - a bar that would remain in place until May 16, 2023.
Mr Campbell, in his recent affidavit, said he holds the position that he need not participate in the battle between ArawakX and the bank. “I note that MDollaz now seeks to challenge the validity of the said directors’ resolutions and the internal controls for financial accounts by its claims advanced in these proceedings vis-a-viz the bank,” he alleged.
“Importantly again, however, MDollaz does not seek to challenge the validity of the secured charges upon its accounts held at the bank, which secure the interest of PJ Enterprises, which was curiously not sought to be joined as a party to this action by the bank or MDollaz.”
However, Mr Campbell argued that the May 16, 2023, consent Order that was signed by Justice Simone Fitzcharles, requiring Bank of The Bahamas to “forthwith restore the claimant’s [ArawakX] access to, and operation of, all of the accounts” that had previously been frozen, will “adversely effect me and my interests” and “significantly prejudice my legitimate personal and contractual rights and interests” as well as those of PJ Enterprises.
The consent Order stipulates that Mr Campbell, “and all persons claiming under, by and through Mr Campbell, shall not continue or subsequently prosecute” any claims against Bank of The Bahamas as set out in “the Higgs and Johnson letter dated October 28, 2022”. Yet he is also to pay the legal costs of both ArawakX and Bank of The Bahamas relating to two previous applications.
“It appears that MDollaz and the bank struck an accord amongst themselves contrary to my interests (and those of PJ Enterprises) and sought the consent Order by their unilateral agreement, without notice to me and without affording me an opportunity to make any representations to the court, and without affording me an opportunity to otherwise oppose the terms of the consent Order sought by their apparent unilateral agreement,” Mr Campbell said.
“The presentation and entry of the Consent Order in these circumstances is manifestly unjust and seriously prejudices my legitimate personal and contractual rights and interests, and those of PJ Enterprises.” The former Colina chief said the consent Order, and its terms, were only provided to him after Higgs & Johnson made a formal written request for them.
And “in what appears to be an unfortunate pattern of willful delay and a wanton disregard for me and my interests, and those of PJ Enterprises”, the hearing record before Justice Fitzcharles was only made available to him on September 14, 2023, some four months later. The reason provided was that Mr Campbell had allegedly not complied with the courts’ civil procedure rules and is not on record as a party to the proceedings.
However, the former Colina chief is seeking to have the consent Order either varied or overturned in its entirety, with the stipulation that he pay both ArawakX’s and Bank of The Bahamas’ legal costs removed. He is arguing that, as it stands, the Order’s terms are “unfair” and “in breach of natural justice and/or otherwise wholly unconscionable” because it was made without him being present and able to make representations.
Comments
TalRussell 1 year, 2 months ago
Perplexed as to whose financial books, did ArawakX’s largest 'intelligent investor', --- Laid the foundation for' value investing' suffcently to write a $1.6 million cheque. --- Yes?
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