The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

An Eleuthera resort developer was left “under siege” after title defects prevented its project from moving forward for four-and-a-half years and threatened valuable investment incentives granted by the Government.

Gail Lockhart-Charles, the Bahamian attorney who ultimately resolved the final woes facing Governor’s Harbour Resort & Marina, outlined “the great deal of urgency” needed to move its French Leave project forward during a deposition given for a Florida court action.

Apart from successfully resolving the Government’s demand for five years’ worth of real property taxes in favour of her client, Mrs Lockhart-Charles’s testimony also revealed that:

• She disagreed with the legal opinion offered by her fellow Bahamian attorney, George Mackay, who argued that “feeding of the estoppel” vested good title in Governor’s Harbour Resort & Marina and its real estate purchasers once the Government delivered conveyances.

• While conceding that “nothing with the Government is simple”, Mrs Lockhart-Charles diplomatically defended the Bahamas when under pressure from attorneys representing the developer’s title insurer, and agent, over the then-Ingraham administration’s failure to attach the necessary affidavit to a land conveyance that would allow it to be recorded in the Register of Records.

Mrs Lockhart-Charles was hired by Governor’s Harbour Resort & Marina’s principal, Edward Lauth, in early 2011 to cure the remaining obstacles blocking the developer’s ability to obtain clear title to its property.

Governor’s Harbour’s problems started after it decided to expand its project beyond the former Club Med property that it acquired in 2003. It acquired 13 land parcels - totalling 240 acres - from a company called Urania Nominee Holdings (UNHL) in August 2005, paying $10 million.

The developer was allegedly assured by First American Title Insurance Company, its title insurer, and its agent that there were no title defects with this real estate - an assessment that proved incorrect.

In an earlier corporate restructuring, the liquidator for three UNHL subsidiaries had failed to transfer the real estate they owned - which was subsequently bought by Governor’s Harbour - before he wound-up those companies.

As a result, under the Companies Act, these land parcels were automatically vested in the Treasurer - not UNHL and, eventually, Governor’s Harbour.

Mrs Lockhart-Charles, describing the impact on the project, said in her deposition: “The impression I got from Mr Lauth was we had a developer that was just under siege because he could not move forward with this development.

“He had pressure because he had commitments to the Government that he had to do certain things in certain timeframes. I think he had Hotels Encouragement agreements that entitled him to certain duty exemptions, provided he did certain things.

“He could not move forward until he had title to the land. So there was a great deal of urgency here.”

Apart from the title defects, the then-situation facing Governor’s Harbour was further complicated by the Government’s demand that it real property tax on the problem land parcels for the period 2005-2010 - despite the fact these were owned by the Treasurer, not the developer.

Without payment of these taxes, the Government would not issue an International Persons Landholding permit to Governor’s Harbour, making any conveyance of the land invalid.

Mrs Lockhart-Charles successfully negotiated with David Cates, chief valuation officer at the Real Property Tax Department, and officials from the Attorney General’s Office to resolve the matter.

“If you’re going to succeed in maintaining that the Government should not collect these taxes, you’re going to have to put forward a persuasive argument, she said in testimony.

Mrs Lockhart-Charles disagreed, though, with suggestions that the doctrine of estoppel could have been used to cure the title woes, adding: “In my opinion, Governor’s Harbour was not in a position to deliver marketable title to purchasers prior to the issuance of the permit that validated the conveyance of the land to Governor’s Harbour.”

The ‘estoppel’ argument was that, even if Governor’s Harbour did not own the land when it conveyed it to real estate buyers, but ultimately came to own it via the Government conveyances, it would be “estopped from denying the validity” of the earlier representations that it had good title.

Governor’s Harbour asserted the ‘estoppel’ defence in its Florida battle with its real estate purchasers, but Mrs Lockhart-Charles disagreed with Mr Mackay’s position that “the feeding of the estoppel caused title to be vested in the [buyers] and Governor’s Harbour” once the first conveyances arrived from the Government in 2010.

“I don’t agree with his position,” Mrs Lockhart-Charles said under oath. “In fact, his position is inconsistent with the statute. So it’s not that - it’s not that I disagree with him. It’s that the statute says something different, and the statute is what governs here.”

She then had to defend her clients from suggestions that it was tardy in getting the Government to swear affidavits to validate the land conveyances to Governor’s Harbour.

“Nothing with the Government is simple,” Mrs Lockhart-Charles replied. “I mean, they have a lot of things that are of much higher priority to them than that.

“I mean, as important as these things are to us and our clients, the Government has a lot more things that it would prioritise in advance of this.

“And so it would be simple, you know, if they have nothing else to do and if this is the only thing on their desk and this is what they’re planning to do for the day, but to just get somebody to focus on your matter, sometimes it’s not a simple task at all,” she added.

“So I would not say it is as simple as that. Before they sign anything, they need to have it looked at by usually somebody in the Attorney General’s Office, and they want to make sure that this is a valid request.....

“So, no, they take putting their signature on things quite seriously, the Government does. And so I wouldn’t say that we could just walk there and ask them to sign it the way that, you know, as if it’s an inconsequential thing. I don’t agree with that.”

Mrs Lockhart-Charles dismissed the suggestion by the title insurers’ attorneys that signing the affidavit should be “a foregone conclusion” on the Government’s behalf.

“They may take the opportunity not to sign the affidavit because they’re unhappy with you on something else that you’ve done,” she added.

“I think dealing with any government is not to be assumed to be a straightforward process. I mean, the Government has a lot of bureaucracy, and they’re very careful about the way that they do things, and especially something like the Government conveying land that belongs to the Government that’s vested in the treasurer, that holds the land on behalf of the people of the Bahamas.

“Getting the Government to convey that land to a private individual means they’re not going to just sign that without looking at it, scrutinising it, and being completely comfortable that it is correct for them to do.”

Tribune Business previously reported that a Florida jury found that First American Title Insurance Company breached the policy it provided to Governor’s Harbour “by failing to act diligently to cure the title defect”, a breach that resulted in the latter incurring $1.57 million in “out-of-pocket” damages.

The Palm Beach County jury also found that problems with the title to its real estate cost Governor’s Harbour $1.48 million in lost real estate sales.

And it also found that First American Title Insurance should indemnify Governor’s Harbour for the $995,717 it paid out via promissory notes to settle with real estate purchasers once the title defects became known. All told, the developer won a $4 million verdict.

The French Leave project has now put these woes behind it. Mr Lauth, subsequent to the court dispute, partnered with the Pennsylvania-based Shaner Hotel Group, which owns/operates more than 34 resort properties around the US and Italy, to bring his vision for French Leave to fruition, and their efforts are starting to pay off.