The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Supreme Court has overturned the receivership of a major Bahamian food retailer on the grounds that attorneys acting for its landlord, Hannes Babak, made a “material non-disclosure” over a botched attempt to serve legal papers on their counterparts.

Justice Estelle Gray-Evans, in a ruling handed down last Thursday, found that Tynes & Tynes failed to properly serve a summons on Butler’s Food World’s Nassau-based attorney, Reginald Shephard, in time to alert him to the September 3, 2012, hearing which ratified the receivership.

Ntshonda Tynes, in a subsequent November 5, 2012, affidavit, admitted that after a fruitless search to find Mr Shephard’s office at King’s Court on Bay Street, she ultimately handed the receivership summons to Renae Woodside, compliance officer at Trident Trust.

All this took place on August 29, 2012, but Ms Woodside and Trident are not connected in any way to Mr Shephard or Butler’s Food World. And Mr Shephard, while “reluctant to say exactly when” he received the summons, eventually told the court they came into his possession one week after the receivership hearing - on September 10, 2012.

All this was unknown to the Supreme Court when the initial ruling was made. As a result, Justice Gray-Evans overturned her initial September 6, 2012, ruling that appointed HLB Galanis principal, Philip Galanis, as Butler’s Food World’s receiver on this technicality.

She agreed with Mr Shephard’s argument that Tynes & Tynes’s omission of the botched service was “a failure to provide full and frank disclosure”, and went to the heart of the initial receivership Order.

“Frankly, I do not know what would have been the outcome of the hearing had the details as disclosed in Ms Tynes’ November 5 affidavit been disclosed to me on September 3, 2012,” Justice Gray-Evans wrote.

“I may, nevertheless, have heard the application and given the Order appointing the receiver and manager. However, because of the nature of the relief sought, it is likely that I may have adjourned the matter to ensure that notice of the Summons had come to the attention of the counsel for [Butler’s Food World] or I may have taken some action.

“But, as I understand the authorities, where full disclosure is not made the Order will be set aside, even if the non-disclosure would not have prevented the Order being made.”

Justice Gray-Evans dismissed arguments by Harvey Tynes QC that the disclosure failure was not material, given Butler’s Food World’s failure to file a defence to claims by Mr Babak and his company, L. T. Investments, that it owed them $152,000.

And Ntshonda Tynes alleged in her affidavit that Ms Woodside, while in her presence, made a phone call from Trident and said she was authorised to accept service on Mr Shephard’s behalf.

But, while the Butler’s Food World receivership is over - at least for the moment - the legal battles between its owner, Jeff Butler, and Mr Babak appear to set run for some time.

For Mr Babak and L. T. Investments won at least a partial victory in the same judgment, as Justice Gray-Evans rejected the attempt by Mr Butler and the retailer’s parent, Harbour Lobster & Fish Company, to overturn the $152,000 default judgment they obtained on August 9, 2012.

Tracing the dispute’s history, the judgment said the $152,000 consisted of unpaid rent, allegedly owed by Butler’s Food World to Mr Babak under the terms of an August 24, 2010, lease agreement. Rent, at the rate of $19,000 per month, was said to be due for the period December 2011 to July 2012.

While the writ was served on Harbour Lobster & Fish Company’s then-registered office in Freeport, and the company entered an unconditional appearance at the Supreme Court on July 13, 2012, it failed to file a defence within the prescribed time and enabled Mr Babak to file for a default judgment.

After the Supreme Court found that the process for serving the August 9 default judgment was “not irregular”, Mr Shephard had argued that Butler’s Food World had a strong defence and counterclaim to the action. He suggested this outweighed, and should overturn, the default judgment.

In his counterclaim, Mr Butler had alleged that Mr Babak and L. T. Investments owed him more than $200,000 - a sum that “exceeded” the $152,000 claimed by the latter.

Mr Butler alleged that the lease agreement stipulated that any dispute between the parties must first be referred to arbitration, rather than go to the courts.

And, detailing the issue allegedly at the heart of their dispute, Mr Butler was said to have alleged: “The matters that are in dispute are whether there is in a fact a debt owed to [Mr Babak] due to the fact that [Butler’s Food World] has been paying the electricity bill for the chiller system that has been cooling the entire building (approximately 50,000 square feet_ although [Butler’s] only used approximately 18,000 square feet of space.

“There is also a question of whether or not [Mr Babak/L. T. Investments] has been tortuously interfering with [Butler’s] quiet enjoyment of the use of the space by blocking access to the building.”

However, Justice Gray-Evans noted that Butler’s Food World did not deny failing to pay its rent as due.

She agreed with Mr Tynes that the lease agreement obligated Butler’s Food World to continue paying its rent despite the dispute, finding “there is no way around” this stipulation.

As a result, Justice Gray-Evans refused to overturn the default judgment, leaving Butler’s Food World liable to pay the $152,000 to Mr Babak and L. T. Investments.