The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The “sole purpose” behind a developer’s legal action was to delay CIBC FirstCaribbean International Bank (Bahamas) in realising its $37 million security on a controversial 12-storey Paradise Island condominium project.

Justice Anita Allen, the Court of Appeal’s president, ruled that the action brought by Ocean Place developer, Albert Ballard, could have been struck out at the Supreme Court level for being “vexatious” or “an abuse of process”.

Dismissing the appeal by Mr Ballard and his company, Peace Holdings, for leave to appeal a Supreme Court ruling ‘out of time’, Justice Allen said the reasons cited for the delay in filing their case were “not sufficient”.

“Moreover, the prospects of success in this appeal are not good,” the Court of Appeal said.

And, turning to the initial Supreme Court proceedings, it added: “We say that this claim could have been struck out as disclosing no reasonable cause of action, or on the basis that it was vexatious, or as an abuse of process, in as much as its sole purpose was to delay [CIBC FirstCaribbean] in realising its security.”

Tribune Business revealed last year how Ocean Place had been out into receivership by CIBC FirstCaribbean, which provided debt financing to fund its construction, after just 25 per cent of the available units were sold.

Simon Townend, a Bahamas-based KPMG partner and head of its corporate finance arm for the Caribbean, and colleague Nicholas Brearton were appointed as receivers/managers for the 79-unit development.

An April 4, 2013, judgment by Supreme Court Justice Stephen Isaacs noted that $37 million had been loaned by the bank for Ocean Place’s construction.

The development, he added, was being operated by KPMG, who were “managing, repairing and maintaining the common areas at significant expense.

“The bank is also currently funding the share of the budget of the Ocean Place Heads of Agreement attributable to the unsold units held by Peace Holdings in the approximate amount of $75,000 per month,” Justice Isaacs found.

Mr Ballard and Peace Holdings had attempted to overturn the receivership on the grounds that the debenture security held by CIBC FirstCaribbean was “invalid and unenforceable” - a statement that the bank moved to strike out.

The crux of Peace Holdings’ claim was that the debenture, and associated deposit of deeds, was not in compliance with Section 156 of the Companies Act.

This section sets out the various ways for how Bahamian companies can sell, transfer or lease more than 50 per cent of their assets other than “in the usual manner or regular course or their business:”.

Peace Holdings alleged that CIBC FirstCaribbean, in its defence and counterclaim, had admitted there was non-compliance with Section 156 in relation to the loan security (debenture).

Yet the bank, in its filings, alleged that the Memorandums of Association for Peace Holdings and an affiliate, Lake Property Holdings, “expressly state that any mortgage or charge” over their assets would be regarded as the normal course of business - preventing Section 156 from applying.

And it claimed that Peace Holdings, in entering into the debenture, warranted that section 156 of the Companies Act was not being broken.

As a result, CIBC FirstCaribbean alleged that Section 156 was not applicable to this case, and gave Peace Holdings and Mr Ballard no remedy to overturn the receivership.

While Lillymae Thompson and Clarissa Williams were identified as the holders of one share each on Peace Holdings and Lake Property Holdings, respectively, it was argued that they invalidated the debenture by failing to sign the members’ resolution in accordance with section 156.

But with Mr Ballard declaring himself to be the beneficial owner of both entities, the judgment noted that he was empowered to authorise a debenture’s issue as if it was a unanimous shareholder’s agreement.

“It seems a matter of settled commercial practice of the nature in the case that to argue that the debenture and deeds of deposit are invalid on the basis that the two nominee shareholders did not approve the issue... is unsustainable on the authorities,” Justice Isaacs found.

“Ballard, as the beneficial owner of both Peace Holdings and Lake Properties, is the only person that can authorise the transaction.”

And, by granting CIBC FirstCaribbean’s request to strike out the offending statement in Peace Holdings’ statement of claim, Justice Isaacs said the foundation of the latter’s claim to overturn the receivership had been removed.

Ocean Place was the subject of much controversy some four years ago at the height of its construction. Lawsuits seeking injunctions to block its further development were filed by neighbours, who claimed building materials were falling from it on to their properties.

There were also allegations that the developers ignored agreed setback and ‘non-obstruction’ lines, and built Ocean Place much higher than agreed in the 2004 purchase of the property.

Many observers also questioned how Ocean Place was able to obtain all the necessary approvals from the Ministry of Works, Department of Physical Planning and Building Control Department, when its size dwarfs all neighbouring properties and seems ‘out of kilter’ with the rest of Paradise Island’s real estate development.

In the most recent court action, CIBC FirstCaribbean was represented by Brian Simms QC and Marco Turnquest from Lennox Paton, while Mr Ballard and Peace Holdings were represented by Wayne Munroe.