The Tribune

By NEIL HARTNELL

Tribune Business Editor

A NEW Providence businessman who took over a company that failed to obtain approval for a $650 million LNG project is urging the Court of Appeal to stay a judgment that required the firm to pay $468,477 "into court" by Friday last week, on the grounds it has "less than $20,000 in liquid assets" available to meet it.

A June 5, 2012, affidavit by businessman Tony Myers, who took over the lease formerly held by US-based energy giant, AES, on Ocean Cay - the man-made island off Bimini - alleged that if the Court of Appeal did not stay the payment into court ordered by a Supreme Court judge, his company's ability to defend the substantive case against a Grand Bahama construction services firm would be rendered "moot and nugatory".

Tribune Business has obtained a batch of documents filed in the Supreme Court and Court of Appeal relating to the dispute between the now-Ocean Cay Ltd, whose president is Mr Myers, and City Services, a Freeport-based horizontal construction services firm.

The documents show the dispute has its origins in the alleged failure of AES Ocean Cay, the then-owned AES company, to pay City Services the $493,478 balance said to be owing for environmental clean-up work conducted on Ocean Cay during 2004.

Mr Myers was alleged to have acquired the Ocean Cay lease held by AES in May 2009, after the US energy giant finally gave up on obtaining a Heads of Agreement with the Bahamian government for its proposed LNG regasification terminal and pipeline, which would have supplied Florida's - and , potentially, the Bahamas' - power needs.

As part of the $400,000 deal between Mr Myers and AES, it was alleged that the former agreed to pick-up all potential liabilities associated with the litigation launched by City Services in September 2006.

The May 9, 2012, judgment issued by Justice Estelle Gray-Evans in the battle between Ocean Cay Ltd and City Services also appears to show that AES (not Mr Myers) made the payment of outstanding monies owed to Bahamian contractors conditional on obtaining a Heads of Agreement for the LNG project with the Bahamian government. That, of course, never happened.

Detailing the origins of the dispute, Justice Gray-Evans said City Services was claiming $493,477 as the balance owing for work it was contracted to do at Ocean Cay by AES between February-May 2004.

The judge noted that the Grand Bahama-headquartered company had been hired to carry out "the excavation and complete removal of four diesel underground storage tanks; recovery of floating fuel oil at Ocean Cay; removal, transportation and stockpiling of petroleum-impacted soils; and back filling and compaction for purposes of returning impacted areas to their original elevations".

City Services used its 'The Bahamas Sky' vessel to conduct these works, and completed them in June 2004. It sent invoices of $370,000, $1.365 million and $40,217 to AES, the first on April 6, 2004, and the latter two on June 15 that year.

"The defendant made several payments on account of the aforesaid invoices, leaving a balance due and owing in the sum of $493,477. The last payment appears to have been made on August 24, 2006," the judgment said.

However, on September 6, 2006, 'The Bahamas Sky' was said to have rolled over and damaged the AES Ocean Cay pier. Ultimately, while City Services sought damages for the $494,477 allegedly owed to it, Ocean Cay sought an Order that the action be stayed on the grounds that the two parties had agreed to take any dispute over the contract to arbitration first.

City Services argued that there was no dispute capable of being taken to arbitration, alleging that AES had already admitted the debt that its former Ocean Cay subsidiary owed.

It noted a July 29, 2004, e-mail received from AES's Eric Whitehouse, which said: "A payment of $200,000 can be released immediately - we would like to continue to pay in installments over time against the balance of the invoice.

"If the project Heads of Agreement gets approved and the project gets full funding, the invoice would be paid in full at that time. If City Services were to initiate legal action against the project to collect at this time, it should be anticipated that no further payments would be made until the matter was settled."

To prove there was no dispute that needed to be referred to arbitration, City Services also alleged that Summit Insurance Company was released from its performance bond obligations, indicating the work had been completed satisfactorily.

Ultimately, Justice Gray-Evans refused to stay the proceedings, even though AES had alleged that a dispute had arisen with City Services over dockage fees. As for the dock damage, the latter had agreed to deduct $25,000 from the sum owed to it to cover repair costs.

Noting that the dockage fees' dispute was not included in a draft settlement being proposed between AES and City Services, requiring the former to pay two separate instalments of $250,000 each, "no later than" 15 days and 105 days, respectively, after a Heads of Agreement for the LNG project was signed, Justice Gray-Evans said that if this was a 'bond fide' claim it would likely have been contained in this contract.

"I am therefore inclined to agree with counsel [for City Services] that the alleged claim by [Ocean Cay] for dockage fees is a sham, calculated to delay these proceedings and [Ocean Cay] satisfying its debt to [City Services]," the judge ruled.

But, not giving a definitive ruling on the dockage fees issue, Justice Gray-Evans said Ocean Cay had raised a "triable issue" that it had a right to defend, thus leading her to refuse City Services' demand for summary judgment.

Instead, she gave Ocean Cay leave to defend on condition that within 30 days (by June 8, 2012) it pay $468,477 "into court". This sum represented the $493,477 minus the $25,000 for the Bahamas Sky damage, but failure to pay would give City Services leave to file for summary judgment.

Justice Gray-Evans also refused to stay this payment, leading to Mr Myers and his attorneys, Gail Lockhart-Charles & Company, to appeal this to the Court of Appeal on the grounds that Ocean Cay Ltd did not have the $468,477 required.

Describing Ocean Cay Ltd as an International Business Company (IBC), Mr Myers alleged in a June 5, 2012, affidavit: "[Ocean Cay] has less than $20,000 in liquid assets.

"[Ocean Cay's] assets consist primarily of heavy equipment used in its sand mining operations, and this equipment is required to fulfill potential contracts which [Ocean Cay] hopes to gain. At the moment, [Ocean Cay] has contracts in negotiation, but there are no firm contracts in place at this time.

"[Ocean Cay] does not have the ability to pay into court the sum of $468,477 within 30 days of May 9, 2012, or at any time in the foreseeable future." Mr Myers said he feared that the inability to make this payment would open the way for City Services to file for summary judgment, rendering his appeal on the substantive issues "moot and nugatory".

A May 22, 2012, affidavit from AES's former Ocean Cay island manager, Bruce Fitzgerald, provides details on how Mr Myers came to take over AES Ocean Cay from AES.

Detailing that the lease obliged AES to pay the Government $5,000 per year as a base lease fee, along with royalties of $2-$3 per metric tonne of aragonite sales, Mr Fitzgerald said the lease is due to expire in 2013.

"In or about May 2009, after this action had been commenced, AES assigned the lease to another entity known as Ocean Cay Ltd and/or its owner, Tony Myers," Mr Fitzgerald alleged.

"To the best of my knowledge, in consideration for AES assigning the lease to Ocean Cay and/or Mr Myers, they agreed to pay AES a sum of $400,000 and to assume full responsibility for AES' pending litigation with City Services, and pending litigation between AES and another entity known as Southport Dredging."

Mr Fitzgerald said he was retained by Mr Myers as Ocean Cay island manager until November 2010.

City Services is represented by Callender's & Co attorney and partner, Fred Smith.