The Tribune

• Chief Justice rules Crown Land deal not valid

• Not binding because Minnis did not execute

• Verdict boost for Royal Caribbean’s plans

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamian entrepreneur battling to restore Paradise Island’s lighthouse yesterday suffered a setback in his fight with the Government and Royal Caribbean after the Supreme Court found he does not possess a valid Crown Land lease.

Sir Ian Winder, the chief justice, ruled that “regrettably” there was no binding lease agreement between Toby Smith’s Paradise Island Lighthouse and Beach Club and the minister then-responsible for Crown Lands (ex-prime minister, Dr Hubert Minnis) because the latter did not execute the necessary paperwork by applying his signature.

Mr Smith last night declined to comment when contacted by Tribune Business, so his next moves - including the likelihood of an appeal - are uncertain. However, the chief justice’s verdict potentially removes much of the leverage he held over both the Government and cruise giant as a result of the ongoing legal proceedings.

His position would have been immeasurably strengthened had Sir Ian found in his favour, but Mr Smith now faces the prospect of having to negotiate with both the Government and Royal Caribbean - and having to rely on their goodwill - for his project to survive and move forward in its present form in the absence of valid Crown Land leases. An appeal, though, would keep the two subject parcels - involving a collective five acres - tied up at least temporarily in the courts.

Mr Smith had based much of his three-year legal fight on a January 7, 2020, letter from Richard Hardy, acting director of the Department of Lands and Surveys, which was headlined “approval for Crown Land lease” over the two tracts he wanted. These covered a two and three-acre parcel, respectively, and included the lighthouse at Paradise Island’s western end and a ‘beach break’ destination in the Colonial Beach area.

The Bahamian entrepreneur signed the lease forwarded by Mr Hardy, and returned it to the Government for execution by the minister responsible for Crown Lands, who was then Dr Minnis. The latter, though, did not sign the lease on the Government’s behalf as it emerged that Royal Caribbean Cruise Lines had rival designs on two of the Crown Land acres also sought by Mr Smith for its own $110m Royal Beach Club project.

Mr Smith has always maintained that, as a Bahamian entrepreneur, he was shoved aside to make way for a major foreign investor even though he had received his approvals and allegedly-binding Crown Land leases first. As a result, he initiated legal action against the Government - namely the attorney general - for breach of contract and exemplary damages over its purported failure to uphold a binding lease agreement.

The Chief Justice, in yesterday’s ruling, noted that Mr Smith initially applied in April 2012 to lease 17 acres of Crown Land at Paradise Island’s western end for a project that included “restoration and upkeep of the lighthouse”. Paradise Island Lighthouse and Beach Club was incorporated in 2018, and on May 23 that year, Mr Smith was informed by the Bahamas Investment Authority (BIA) that he had been approved to lease five acres for a 21-year term.

“Smith’s evidence was that in or about 2012 he noticed that the lighthouse at Paradise Island was ‘derelict and abandoned’,” Sir Ian recorded in his ruling. “He says he decided to save and preserve the lighthouse, considering it to be a cultural asset. His aspiration was to restore it along with the Keeper’s Quarters.

“He also intended to install docks for ease of access, as well as develop and build a beach club for tourists and residents. In this vein, he carried out some research which revealed that the lighthouse and its surrounding land belonged to the Crown.”

The Crown Land ultimately offered was less than one-third of what had been originally requested for a $2m project designed to offer lighthouse tours, and recreational and entertainment, as part of a beach break destination designed to lure both Bahamians and visitors. A Memorandum of Understanding (MoU) was signed with the Antiquities, Monuments and Museums Corporation (AMMC) on October 2, 2018, and Mr Smith’s project seemed to be moving forward.

Mr Hardy’s January 7, 2020, letter enclosing the lease agreement duly arrived and was signed by Mr Smith, who returned it to the Department of Lands and Surveys for execution. The yearly rent was fixed at $5,224 per acre or $1 per paying visitor - whichever was greater.

“Smith executed the lease agreement on behalf of Paradise and returned it to the Department of Lands and Surveys on January 9, 2020, for execution by the minister,” the Chief Justice noted. “The minister did not execute the lease agreement. On February 27, 2020, he met with then-attorney general Carl Bethel KC, Candia Ferguson [then-director of investments- and Joshua Sears.”

The latter was Dr Minnis’ senior policy adviser. “During the meeting Smith was told that there was no agreement between Paradise and the minister responsible for Crown Lands,” Sir Ian said. “Smith says that at that meeting he was informed that the January 7, 2020, letter, MoU and draft lease agreement that he received were of no effect and not valid.

“Smith’s evidence is that the lease did not materialise as the land outlined in the lease provided to Paradise was instead promised to Royal Caribbean Cruise Lines for their development.” This prompted Mr Smith to initiate his legal claim challenging the Government’s position and assertions, and to seek judicial validation that he had a lease that was binding and legally enforceable.

“The central issue to be determined in this action is whether there was an agreement for a lease between Paradise and the minister responsible for Crown Lands, and therefore an enforceable lease,” Sir Ian wrote. “This calls for a determination as to whether the lease delivered to Paradise, absent the signature and/or execution of the minister, constitutes a valid and/or enforceable lease agreement once signed by Paradise.”

Mr Smith argued that Mr Hardy’s letter and the attached lease, which he signed, proves there was an agreement and “an equitable lease” in place. The Government, though, rejected this interpretation by arguing that Mr Hardy’s letter was “part of the continued negotiations” and “an ongoing approval process”. It argued that the absence of a ministerial signature and seal meant the lease was invalid under the Conveyancing and Law of Property Act.

Siding with the Government, Sir Ian ruled: “Having considered the evidence as a whole, I am not satisfied there was a valid agreement entered into as I find the agreement was subject to execution, and/or there was no part performance. Regrettably for Paradise there must be a meeting of the minds for there to be an agreement.”

The Chief Justice described Mr Hardy’s letter as “more akin to an offer” as it contained proposed lease terms and a description of the property. He added: “I am not satisfied, however, that it was an unconditional offer” because it depended on the minister’s execution to become valid.

And Sir Ian found that Mr Smiths’ February 12, 2020, letter to Dr Minnis, where he voiced fears about being double-crossed in favour of Royal Caribbean, “betrays its own view that the document was subject to execution by the minister”. Mr Smith wrote that Dr Minnis had advised him that “the land I am asking for in the Crown Land lease would not be compromised with Carnival, Royal Caribbean or any other cruise company”.

The Chief Justice also noted Mr Smith writing “there is no update other than it awaits your signature” in reference to the lease, while describing the Crown Land as something “that I have applied for”. As a result, he dismissed Mr Smith’s claim.

It now remains to be seen whether Royal Caribbean had supplied the Davis administration with a revised project proposal that reduced the seven acres of Crown Land it had secured from its Minnis predecessor via an effective 150-year lease. It had been suggested that the cruise line would accept five acres, and relinquish two that were the subject of Mr Smith’s claim.

However, the Government neither confirmed nor denied that Royal Caribbean had submitted such revisions although it said talks over the latter’s Royal Beach Club destination were continuing. Chester Cooper, deputy prime minister and minister of tourism, investments and aviation, told this newspaper in a statement: “Government is in ongoing dialogue with Royal Caribbean in relation to its proposed development on Paradise Island.

“This does not include any discussion in relation to land that is in dispute. The matter with Toby Smith remains before the court and we are not at liberty to speak to it.” Prime Minister Philip Davis KC, while in Opposition, had pledged that he would cancel any Crown Land lease in favour of Royal Caribbean.

This promise came when Mr Smith asserted that he secured his deal before the cruise giant, and that the former Minnis administration sought to ditch his project to make way for Royal Caribbean after realising its mistake. Royal Caribbean has amassed around 13.5 acres on Paradise Island’s western end by buying out private landowners in the area, or taking options on their properties, but its efforts to lease the seven Crown Land acres brought it into conflict with Mr Smith.

The Royal Beach Club is forecast to generate $26m in extra annual visitor spending, a figure that rises to $650m when extended over the initial 25-year lease term. Royal Caribbean previously said its $110m Paradise Island investment will boost overall visitor spending by $1bn over a ten-year period, although it is uncertain where this impact falls.

The cruise line, though, has repeatedly said that the Royal Beach Club does not have space to accommodate all its Nassau visitors and it has no intention of keeping them there for the day. It added that they will be able to circulate freely in Nassau.