The Tribune

• Unpaid $644k bill let to Eleuthera woes

• Verdict places PM at centre of events

• Judge slams utility’s debt ‘evasiveness’

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Water & Sewerage Corporation has been blasted as “the author of its own demise” over $644,000 in unpaid bills that resulted in water supply to central Eleuthera residents being cut-off for several days last October.

Justice Indra Charles, in a scathing August 6, 2021, verdict found that the state-owned water supplier’s “silence and/or evasiveness” on how it planned to pay these debts gave Aqua Design little choice but to cease supplying the Water & Sewerage Corporation’s customers from its reverse osmosis plant at the former US naval base.

Suggesting that the Water & Sewerage Corporation’s inaction had “broken the camel’s back”, Justice Charles said the sums owed to Aqua Design would likely have continued to soar if the latter had not taken “such a drastic step” of shutting off water supply. She added that the utility “continues to be delinquent”, requiring the Supreme Court to order that it pay a further $454,195 to Aqua Design while the parties awaited her ruling.

The Supreme Court verdict provides a completely different perspective on a saga in which both the government and Water & Sewerage Corporation accused Aqua Design of “endangering the lives of Bahamians”. Desmond Bannister, deputy prime minister, said the company’s behaviour was “the nastiest, most callous conduct I’ve ever seen” in deciding to cease water production at the height of the COVID-19 pandemic.

However, Justice Charles dismissed the Water & Sewerage Corporation’s case in its entirety and found completely in favour of Aqua Design’s contention that it had “properly executed” the termination of the water supply agreement between the two parties for Central Eleuthera. She also awarded costs to Aqua Design, which has potentially saddled Corporation customers (and Bahamian taxpayers) with a $221,265 legal bill.

And Justice Charles’ verdict has also embroiled the prime minister in the chain of events that led up to the Central Eleuthera cut-off. With Aqua Design becoming increasingly frustrated over “fruitless” efforts to address the arrears owed to it, it wrote to Dr Hubert Minnis on September 29, 2020, to warn of “the backlash that the termination” of its contract and supply agreement would have for Central Eleuthera communities.

However, despite receiving acknowledgement that its letter had been received and a response was imminent, no reply from Dr Minnis was received by October 9. This, and further inaction by the Water & Sewerage Corporation, resulted in Aqua Design cutting-off supply some ten days later on Monday, October 19.

Adrian Gibson MP, the Water & Sewerage Corporation’s executive chairman, could not be reached by phone for comment yesterday while this newspaper’s What’s App message was not returned before press time. However, the content of Justice Charles’ verdict raises serious questions that demand answers from himself, the Prime Minister, Board and executive management at the Water & Sewerage Corporation.

After obtaining an emergency injunction from Justice Charles on October 22, 2020, forcing Aqua Design to restore water supplies, the Water & Sewerage Corporation subsequently filed a summons alleging that it was Aqua Design that “breached its obligations” when it cut-off water supply and threatened to dismantle its reverse osmosis plant “during the peak of the global COVID-19 pandemic”.

The state-owned supplier sought multiple Supreme Court declarations, including that Aqua Design had committed “a repudiatory breach” of their water supply agreement and that it was not entitled to cut-off supply. It also sought declarations that Aqua Design turn over the reverse osmosis plant to itself and it become the utility’s property, and even if it had failed to make timely payments it was not a default event/material breach of their agreement.

The Water & Sewerage Corporation claimed that Aqua Design had “acted arbitrarily, irrationally and/or unreasonably” in terminating their central Eleuthera agreement, but the company, a subsidiary of SUEZ – Water Technologies & Solutions, stuck to its argument that the break had been done properly and that it needed two months to ‘demobilise’ the plant and remove all its materials and equipment.

Noting that the relationship between the two parties dated back to 2001, Justice Charles said they agreed on August 12, 2012, that Aqua Design would construct a reverse osmosis plant to supply central Eleuthera. The deal was due to expire this Friday, August 13, or when 2,190m gallons of water was supplied - whichever milestone was hit first.

The Water & Sewerage Corporation provided only the land for the reverse osmosis plant, but problems in the two sides’ relationship only arose when the state-owned water supplier “refused any direct dialogue with respect to payment of its invoices.

“In or about May 2020, Aqua Design brought it to the attention of Water & Sewerage Corporation that the arrears were growing at a disturbing rate. Water & Sewerage Corporation was unresponsive on the issue of providing a concrete schedule of payments to address the arrears,” Justice Charles wrote.

“On or about August 19, 2020, Aqua Design issued notices of default to six of its plants, including central Eleuthera, demanding payment within 30 days... The default for the central Eleuthera plant was said to be arrears in the amount of $644,010.

“Water & Sewerage Corporation failed to settle the arrears by September 20, 2020, as demanded although during the month of September 2020 it settled arrears with some of the plants excluding the plants at Exuma and central Eleuthera.”

Aqua Design sent two further letters in late September and early October 2020 to demand payment of the outstanding debts, and warned that if the Water & Sewerage Corporation’s default was “not cured” it would cease water production and dismantle the central Eleuthera reverse osmosis plant.

“Aqua Design made fruitless efforts to contact those in authority at Water & Sewerage Corporation to address the pressing issue of increasing arrears without meaningful response. Cognisant of the backlash that the termination of the [agreement] would have on the local communities, Aqua Design wrote to the Prime Minister on September 29, 2020,” Justice Charles wrote.

“Aqua Design received an acknowledgment that a response was forthcoming. By October 9, 2020, no response came from the Prime Minister. Fearing that their demands were being ignored by Water & Sewerage Corporation, Aqua Design notified Water & Sewerage Corporation that, if the default is not cured by October 16, 2020, the [agreement] would be immediately terminated.”

Aqua Design had expected this warning to trigger payment. It spoke with David Davis, permanent secretary in the Prime Minister’s Office, that same day who confirmed that it had been received but had been passed on to “the minister” (presumably Desmond Bannister, who holds ministerial responsibility for the Corporation) and Mr Gibson without the Prime Minister seeing it.

Mr Davis promised that he would inform the Prime Minister over the weekend, and that Aqua Design would hear from the Government on Monday, October 19. Aqua Design wrote to Mr Davis that day, setting out the $644,010 that was owed, but claimed “its efforts to have dialogues with the proper personnel were fruitless”.

It subsequently wrote to Elwood Donaldson, the Water & Sewerage Corporation’s general manager, that same evening to inform him that it was terminating the agreement and ceasing water production. That night it “cut off the supply of water to the residents of Central Eleuthera during the peak of a deadly COVID-19 pandemic”.

It appears that this finally triggered action from the Government. “On that same evening, the executive chairman of the Water & Sewerage Corporation made an urgent and direct plea to the Office of the Prime Minister, the minister of finance and the minister of works to provide funding so that Aqua could be paid the arrears,” Justice Charles wrote.

“The letter states that Water & Sewerage Corporation does not have the financial capacity to make the payments demanded by Aqua Design. It is alleged that the Prime Minister directed the treasurer to transfer the sum of $644,010 to Aqua Design by electronic bank transfer. On the day following the termination of the [agreement] for Central Eleuthera, Aqua was paid the sum of $644,010.”

Water & Sewerage Corporation subsequently persuaded Justice Charles to issue an injunction forcing Aqua Design to maintain water supply. She, however, also ordered that the state-owned utility continue to pay its bills as they come due - something it failed to comply with, as Aqua Design issued another letter on October 26, 2020, alleging that some $516,441 continued to be owed.

The Water & Sewerage Corporation asserted that Aqua Design’s conduct “to cut off the water supply amidst the COVID-19 pandemic was unashamedly disgraceful and the conduct was a serious criminal offence” under relevant Bahamian law, but the company asserted that the non-payment left it with little choice but to terminate their agreement.

Ferron Bethell QC, representing the Water & Sewerage Corporation, argued that the agreement enabled his client “at its option” to only pay interest to Aqua Design. However, Justice Charles branded this “a preposterous argument” as it would mean that the utility could pay interest-only on the overdue amounts until the contract expired without Aqua Design being able to demand full payment.

Finding that non-payment of Aqua Design’s invoices within 30 days was a default breach of the agreement by the Water & Sewerage Corporation, Justice Charles said “the clarion calls from Aqua Design fell on deaf ears” despite it giving the state-owned utility and the Government extra time - more than 60 days - to pay.

“Simply put, Aqua Design took the action to cut off the supply of water during a pandemic when the other party had been delinquent in paying its bills. Water & Sewerage Corporation blames the COVID-19 pandemic and argues that Aqua Design should have extended time to the end of the pandemic,” Justice Charles wrote, noting that the Government had even threatened to criminally prosecute the company and its employees. 

“It is plain that the delinquency of Water & Sewerage Corporation started before COVID-19 and, in any event, Water & Sewerage Corporation has failed to demonstrate any legal basis either in law or in the agreement to bolster its submission that Aqua Design should have extended time to the end of the pandemic......

“Instead, it refused and/or failed to respond to Aqua Design. It was only after Aqua Design turned off the water supply on the evening of October 19, 2020, that the chairman wrote the Prime Minister, minister of finance and minister of works,” Justice Charles added. 

“It seems to me that if Aqua did not take such a drastic step, the arrears would have continued to burgeon. Aqua has its employees and sub-contractors to pay also. But I believe that Water & Sewerage Corporation’s silence and/or evasiveness in dealing with this issue broke the camel’s back.”

Justice Charles, echoing Luther McDonald, attorney for Aqua Design, questioned why the Water & Sewerage Corporation had failed to behave like an “ordinary citizen” by not discussing how it intended to pay the arrears owed to its supplier.

“In my judgment, Water & Sewerage Corporation was the author of its own demise. Water & Sewerage Corporation could have cured the default with reasonable diligence,” Justice Charles wrote. 

“Mr McDonald argues that Water & Sewerage Corporation cannot be heard to speak of reduced cash flow, and that it had to wait on the Government for assistance. He correctly maintains that nowhere in the agreement is the liability of Water & Sewerage Corporation to pay made subject to its cash flow or to it receiving help from the Government.

“Even as the parties awaited the delivery of this judgment, Water & Sewerage Corporation continues to be delinquent necessitating Aqua Design to file a Notice of Motion on April 8, 2021, seeking payment of arrears. On 15 April 2021, the Court ordered that Water & Sewerage Corporation shall pay the sum of $454,195 on or before April 21, 2021,” Justice Charles added, noting that it was paid.

“While I am fully cognisant of the financial strains that COVID-19 and, prior to that, Hurricane Dorian, have caused to this fragile economy, priority must be given to an essential commodity, such as water, even if consumers are not paying their bills on time. In fact, many of us may be delinquent in paying our bills or loan repayments as they fall due, but we sit down with the lender and enter into some form of settlement discussion.”

Despite the $644,010 payment by the Government on October 20, Aqua Design continued to be owed $516,441 relating to its July-September 2020 invoices. Aqua Design was concerned debts owed for all its Bahamas plants were “ballooning”, and Mr McDonald asserted: “In a pique of moral self-righteousness, Water & Sewerage Corporation now turns around and says that the plant is their property.”

Justice Charles ruled that Aqua Design was entitled to remove all its materials and equipment at the plant, while leaving it in a neat and clean condition. The Water & Sewerage Corporation is only entitled to what is left behind.

“There is no legal basis to prevent Aqua Design from switching off its supply of water if the arrears are not paid within a reasonable timeframe,” she added. “There is also no legal basis for Aqua Design to give Water & Sewerage Corporation sufficient time to secure another supplier. Communication is key to a healthy relationship. Communication cannot be a one-way street.”

Still, Justice Charles has stayed execution of her judgment until September 10, 2021, at the request of attorneys for both sides as they seek to work out their differences.