The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The eight dolphins at the centre of the Blackbeard’s Cay controversy are embroiled in a bitter legal dispute over their ownership, which threatens to cause the $8 million project “irreparable harm” and “destroy its business.”

Tribune Business can reveal that the Honduran company which supplied the dolphins for the Blackbeard’s Cay project is suing its operator, Blue Illusions Ltd, and its principal, Samir Andrawos, for alleged breach of contract and failing to deliver on promises relating to their business partnership.

In particular, Institute de Ciencias Marinas (IMS) is alleging that Mr Andrawos’s failure to properly obtain the necessary permits and approvals for Blackbeard’s Cay has jeopardised their $850,000 investment in the project.

This stems from last July’s Supreme Court ruling, in which Justice Stephen Isaacs found that the Government had failed to follow its own legal processes in granting Blackbeard’s Cay its various permits.

Valuing the dolphins at a collective $2 million-plus, IMS said in court papers that it attempted to repatriate them from the Bahamas back to Honduras in the wake of Justice Isaacs’ ruling, which quashed all Blackbeard’s Cay’s approvals - including those related to the dolphins.

But Mr Andrawos then allegedly prevented IMS from obtaining the necessary export permits from the Government by “falsely representing” the dolphins were owned by Blue Illusions.

Mr Andrawos has since filed his own counter-suit, in which he alleges that IMS is unjustly interfering with their business partnership.

He is also claiming that IMS is in breach of its fiduciary duty, and is seeking to enrich itself via the “unauthorised removal of the dolphins” from the Bahamas.

Mr Andrawos then alleges that their joint venture will “suffer irreparable harm”, and would be destroyed and forced into liquidation, should the dolphins be taken from the Bahamas. It seems likely that such a description would also apply to Blackbeard’s Cay itself.

The legal drama, which is being played out in Florida’s 11th circuit court for Miami Dade County, reveals several other stunning details relating to the controversial project.

• Blackbeard’s Cay is continuing to operate as a ‘cruise passenger getaway’ destination as if Justice Isaacs’ decision had never happened.

Both IMS and Blue Illusions’ filings reveal that the July 17, 2014, verdict has yet to be enforced, and that the project has been operating as normal for the past nine months.

This once again challenges the ‘rule of law’ in the Bahamas, and the ability of the courts - and the winning parties - to enforce judgments.

It also raises questions about how a project, for which all permits and approvals were quashed by the Supreme Court, can continue operating without them and in seeming defiance of the judiciary.

Included in that is why the Government itself has not acted on Justice Isaacs’ directions. This is likely due to the impact on employment and the economy if Blackbeard’s Cay was forced to close.

The project’s attorney, Desmond Bannister, warned in a December 16, 2014, affidavit: “The loss of employment locally would be felt throughout the tourist industry in Nassau if the company is forced to cease its operations.”

• Mr Andrawos and Blue Illusions dismiss Justice Isaacs’ ruling as “a mere finding of fact”, and suggest that since they were not parties in the Judicial Review proceedings they “are not bound” by the verdict. More ‘rule of law’ questions.

• They then state, in their May 4, 2015, complaint that Blackbeard’s Cay’s “licensing deficiencies are being corrected by the Bahamian government”.

This suggests that Mr Andrawos/Blue Illusions and the Government are now working overtime to ensure that the necessary permits and approvals are issued by the proper procedures this time.

• It appears that Bay Street’s fears about the potential competition that Blackbeard’s Cay posed for the cruise ship trade may have been justified.

IMS’s lawsuit, filed on April 24, 2015, alleges that Mr Andrawos told them there were plans for a Starbucks outlet (owned by a John Bull affiliate) and a Diamonds International store on Blackbeard’s Cay.

IMS is claiming that this was used to induce them to invest in the project, and Blue Illusions has failed to deliver on such plans.

• The Government has itself now become embroiled in the dolphin ownership fight. It has initiated Supreme Court proceedings to resolve the issue, and required both parties to the Blackbeard’s Cay project, which is located on Balmoral Island opposite Sandals Royal Bahamian off New Providence’s north coast, to “present their claims”.

The court filings obtained by Tribune Business show the dispute has its roots in Nassau Dolphin Ventures, the company that was created to specifically manage Blackbeard’s Cay’s dolphin attraction and associated facilities - a photo shop and gift store.

Nassau Dolphin Ventures was structured as a 50/50 joint venture partnership between IMS and Carib Resorts, the latter an affiliate of Blue Illusions.

IMS alleged that its representative, Samir Galindo, met Mr Andrawos in April-May 2012 to discuss Nassau Dolphin Ventures’ creation.

“Andrawos represented to Galindo that he had a lot of experience running tour facilities in the Bahamas, that he was familiar with all the licences and permits required in the Bahamas, and he knew many of the Government officials,” IMS alleged.

“Andrawos also represented to Galindo that he would be able to get an exclusive contract with Carnival Cruise Lines, where Carnival will only bring its passengers to their dolphin facility... Andrawos also made projections regarding the profits the facility would earn.

“Finally, Andrawos represented that he had a huge Master Plan for Blackbeard’s Cay. He said there would be a ‘lazy river’ pool area, he would have a Starbucks coffee restaurant there, and Diamonds International, a jewellery chain, would lease space on the island. He also stated there would be a gift shop that would sell dolphin-related merchandise.”

IMS subsequently entered into the joint venture, making a $500,000 capital contribution into Nassau Dolphin Ventures as its share of the company’s equity.

The Hondurans alleged that they also invested between $300,000-$350,000 into transporting the dolphins to the Bahamas, and claimed the operating agreement for the mammal attraction stated the animals - valued at between $450,000 to $600,000 - belonged to IMS.

Blue Illusions, via Carib Resorts, was responsible for the day-to-day management, and IMS alleged that it was supposed to provide Nassau Dolphin Ventures’ financial reports and accounts to it.

The Hondurans, though, alleged that Carib Resorts reneged on this part of the agreement, including the stipulation that dividends “preferably” be paid out monthly.

“After numerous requests from IMS, and after involvement of counsel, in 2015 Carib finally provided a profit and loss statement for Nassau Dolphin Ventures,” IMS alleged. “However, the report only covered profits and losses through December 2013; it did not include any financials for 2014.”

IMS said it had only received $240,000 in dividends from Nassau Dolphin Ventures since inception, and further claimed: “Although Carib Resorts has failed to provide IMS the necessary financial reports to evaluate the profits of Nassau Dolphin Ventures, IMS has been receiving information from Carnival Cruise Lines reflecting how many passengers have participated in the dolphin and stingray attraction.

“Given the number of passengers that have been attending the dolphin facility, the revenues and profits should have been substantial. Accordingly, IMS should have received substantially more than $240,000 as its share.”

Then came Justice Isaacs’ verdict, which IMS said “has not been enforced thus far, and Carib Resorts and Blue Illusions continue to manage and operate the dolphin facility”.

IMS alleged that it had been unable to return the dolphins from the Bahamas, and use them in other ventures, due to Blue Illusions’ claim that it owns them.

The Hondurans alleged that their agreement had been breached by Mr Andrawos and Blue Illusions failing to obtain the necessary government approvals, even though Justice Isaacs’ verdict “has not been complied with”.

“Following the July 17, 2014, Order by the Bahamas Supreme Court, the dolphin facility was prevented from operating,” IMS alleged. “Accordingly, IMS petitioned for an export licence to return its dolphins home to Honduras.”

It claimed, though, that Blue Illusions’ ownership claims meant Bahamian officials denied it an export permit until the matter was resolved.

The dolphins remain under Blue Illusions’ control at Blackbeard’s Cay, and the issue of their ‘ownership’ is now set to be determined by the Supreme Court.

The Government has itself become involved in the matter, having filed an injunction summons asking the court to determine the dolphins’ ownership. Brian Moree QC, senior partner at McKinney, Bancroft & Hughes, represents IMS, while Charles Mackay is thought to be acting for Blue Illusions.

Carib Resorts, in its May 4, 2015, filing with the Miami-Dade court, said IMS was not a party to the management agreement between Nassau Dolphin Ventures and Blue Illusions.

“The dolphins are an essential element to the success of Nassau Dolphin Ventures and its contractual relationship with Blue Illusions,” Carib Resorts alleged.

“Any breach of the management agreement will materially affect the business and viability of Blue Illusions, and will subject Nassau Dolphin Ventures to monetary claims for breach of contract and cause Nassau Dolphin Ventures irreparable harm and its demise.”

Carib Resorts then dismissed Justice Isaacs’ ruling as “a mere finding of fact.. that there were deficiencies in the licensing process for the Government’s failure to give notices under the new statute.

“No order had been entered requiring any action. Neither Blue Illusions nor IMS are parties to the proceedings, and the findings of fact do not apply to them, and therefore they are not bound by any decision or order in these proceedings.”

Carib Resorts then alleged: “The licensing deficiencies are being corrected by the Bahamian government, and the management agreement between NDV and Blue Illusions remains in full force and effect.

“There is no immediate requirement for Blue Illusions, Nassau Dolphin Ventures or any other party that anything be done to relocate the dolphins.”

Carib Resorts alleged that IMS applied for a dolphin export licence from the Department of Marine Resources on February 16, 2015, claiming it had “a valid power of attorney from Blue Illusions”.

It claimed, though, that such a power only took effect once the management agreement ended. The Attorney General’s Office then issued a summons to both Blue Illusions and IMS on April 2, 2015, asking them to present their cases.

“IMS knows that the removal of the dolphins will be a breach of Nassau Dolphin Ventures’ agreement with Blue Illusions, and will destroy the business of Nassau Dolphin Ventures,” Carib Resorts alleged.

“By the breach if IMS’ fiduciary duties that it owes to the company, Nassau Dolphin Ventures has been damaged and will continue to suffer irreparable harm.”

Carib Resorts alleged that the “several millions of dollars” invested in developing the Blackbeard’s Cay dolphin facility was now in jeopardy.

And it added: “The unauthorised taking and distribution of the dolphins by IMS will render Nassau Dolphin Ventures incapable of paying its creditors and will cause the liquidation of the company.”

Justice Isaacs, in ruling in favour of the Judicial Review application brought by environmental activist group, reEarth, found the Government effectively breached the Marine Mammals Protection Act and the Planning and Subdivisions Act in granting Blackbeard’s Cay its approvals.

The Blackbeard’s Cay case revolved around whether or not the Government had followed the statutory processes set out in law for granting the approvals and permits required by the developers.

Justice Isaacs found that it had not, and among the highlights of his ruling were:

• The minister of agriculture and marine resources, V Alfred Gray, failed to issue the Premises Licence before approving the dolphin import and facility’s operational licence.

As a result, the Supreme Court found that Mr Gray’s decision to issue the dolphin import licences was “clearly premature” in the absence a Premises Licence.

• The ‘preliminary’ site approval did not amount to full approval, which the judge found Blue Illusions had to obtain under the Planning and Subdivisions Act.

Craig Delancy, the building control officer at the Ministry of Works, had offered a building permit issued to the Blackbeard’s Cay project as being “equivalent” to Site Plan Approval, but Justice Isaacs said it was “patently clear” that the two were completely different.

• Justice Isaacs also criticised the “silence” and “deaf ears” approach adopted by the Government to reEarth’s concerns and requests for information on Blackbeard’s Cay.

• The initial Crown Land lease of the seabed to Blackbeard’s Cay’s initial developer, which was then sub-let to current operator Blue Illusions, was for a stingray attraction only - not a dolphin facility. And the original lease could not be “underlet” to anyone else.