The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Ex-chairman Hannes Babak has been due $1 million per annum from the Grand Bahama Port Authority (GBPA) in each of the past four years, and will receive a further $20 million once it is sold.

The sums due to the Freeport-based Austrian businessman as part of the settlement that ended the four-year legal battle between the GBPA’s shareholders, the Hayward and St George families, have never been revealed until now.

Tribune Business, though, has obtained the original ‘statement of claim’ filed by the late Sir Jack Hayward’s children and grandchildren that kicked-off the battle for control over his estate and trust assets.

It discloses details of the Hayward/St George settlement and three failed attempts to acquire the 50 per cent equity stake in the GBPA that was owned by Sir Jack and his family, his children branding two would-be buyers as “manifestly undesirable purchasers”.

And the Hayward family, led by son Rick and daughter Susan, pointedly alleged that the fruitless legal battle with the St Georges had also cost their family trust “very significant sums” and devalued its major assets - the GBPA and its Port Group Ltd affiliate.

Their original statement of claim reveals that under the Easter 2010 ‘compromise agreement’ between the Hayward and St George families, all litigation - including 18 appeals - were dismissed with each side bearing their own costs.

Sir Jack dropped his claim to own an extra 25 per cent stake (collectively 75 per cent) in the GBPA and Port Group Ltd, ensuring that the shareholder split remained 50/50 between the Haywards and St Georges.

Both families at that point were to “pursue jointly a sale” of the GBPA and Port Group Ltd to an outside buyer, by selling their equity stakes in the immediate holding company, Intercontinental Diversified Corporation (IDC).

“And Mr Babak is to be paid $20 million from the proceeds of the sale,” the documents obtained by Tribune Business allege. “In the event that a sale has not been agreed by January 1, 2011, then interest accrues on the sum to be paid to Mr Babak at the rate of 5 per cent per annum.

“Sir Jack receives first $7 million personally from the proceeds of a sale, with the remainder being split 50/50 between the ‘Sir Jack Hayward interests’ and the St George family.

“Sir Jack also receives $4.5 million, and Mr Babak $1.5 million, from GBPA and Port Group Ltd for ‘indemnity legal costs’ incurred by them as directors.”

Based on the $20 million sale ‘pay out’, 5 per cent interest amounts to an annual $1 million per annum payment to Mr Babak for each year that the GBPA and Port Group Ltd remain unsold.

Given that the fifth-year anniversary of that sale deadline is approaching, the former GBPA chairman will soon be entitled to a further $5 million on top of what he receives when a purchase is consummated.

Tribune Business understands that Mr Babak has been accepting payments of around $400,000 to $500,000 per year, instead of the full $1 million.

However, several sources have suggested that these are funds coming directly out of the GBPA and Port Group Ltd, which could instead have been used for Freeport’s upkeep and maintenance.

The statement of claim makes plain the Hayward family’s unhappiness over what they perceived as the unnecessary legal battle with the St George estate.

“Nothing was achieved by the pursuit of the St George litigation by Sir Jack, facilitated by the trustees of the 1993 settlement, which has cost the 1993 settlement very significant sums in legal costs and has damaged the reputation and value of GBPA and Port Group Ltd, and hence devalued the assets within the 1993 settlement,” the Hayward family alleged.

The action, filed in late December 2010, was thought to have been settled until Sir Jack’s children obtained a Supreme Court Order on October 5, 2015, that appointed ex-Cabinet minister, Ryan Pinder, and his Deltec Bank & Trust colleague, Paul Winder, as Judicial Trustees for the ‘Sir Jack Hayward Discretionary Settlement’ 1993. They have also taken over control of Seashells Investments, the entity that holds the Hayward family’s 50 per cent GBPA stake.

The original statement of claim, meanwhile, discloses the fate of several efforts to acquire Sir Jack’s stake in the GBPA and Port Group Ltd - all deals that were intended to lead to the purchase of the St George shareholding, too.

Two of the would-be purchases - by Mid-Atlantic Projects and Fleming Family & Partners (FFP) - were revealed, and reported on extensively, by Tribune Business at the time.

The Hayward family alleged that the first acquisition offer came from Mr Babak himself, who sought to purchase Sir Jack’s 50 per cent equity stake in the GBPA for $100 million.

The children claimed that Mr Babak “persuaded Sir Jack to sign a handwritten contract for sale on terms particularly advantageous to himself”. They added that it was “most unlikely” that Mr Babak could raise the $100 million, and he had presented no proof to show otherwise.

However, that potential deal was superseded 12 days later by the Memorandum of Understanding (MoU) signed between Sir Jack and FFP, the merchant bank headed by UK citizen, Roddie Fleming.

Referring to Striker, the corporate trustee for the Hayward family trusts, the children alleged: “In early 2009, Striker accepted the repudiatory breach of the MoU by the Flemings, who did not have the funds to complete the agreement.”

Then, in late summer 2009, Sir Jack was approached by two separate purchasers - groups calling themselves Bluewater and Mid-Atlantic Projects.

The latter claimed to be acting as an agent for the multi-billion dollar Singapore government wealth fund, Temasek, but Striker’s inquiries found that it had “no knowledge of Mid-Atlantic”.

Sir Jack allegedly negotiated with Mid-Atlantic, with the two sides coming up with a November 2009 agreement whereby the latter would purchase all his GBPA equity for $106 million. Of that, $1 mjillion was to go to Sir Jack, with $105 million destined for the family trust via Striker.

“That agreement provided for the payment of certain deposits, which Sir Jack believed to be non-refundable but which Striker believed became mandatorily refundable in certain circumstances,” the Hayward children alleged. “Striker considered that Sir Jack had misunderstood the true meaning of the agreement.

“Striker did not believe that Mid-Atlantic had the funds to complete the transaction. Striker took the view that it would be better to pursue a sale of 100 per cent of IDC jointly with the St George family to achieve a higher purchase price.”

Striker allegedly tried to renegotiate the deal, but Mid-Atlantic refused. However, the latter failed to deliver on a third $10 million deposit that was due, and the agreement collapsed.

Sir Jack allegedly refunded Mid-Atlantic’s two previous deposits, $500,000 each, paying “a substantial premium”.