The Tribune

• Judge: No mortgage collusion with former Sky chief
• But finds Turnquest ‘breached duty’ to airline funder
• Former Sky financier’s KC says ruling ‘rather strange’

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

An ex-deputy prime minister last night asserted he has “emerged victorious against baseless conspiracy allegations” levied against himself and Sky Bahamas’ former principal by the airline’s chief financier.

K Peter Turnquest, whose late 2020 resignation from the Minnis administration was triggered by a series of lawsuits launched against himself and Captain Randy Butler, hit out after a Supreme Court judge ruled that Fred Kaiser had “failed to prove” the duo conspired to defraud him of his interest in the outstanding balance of a $399,000 mortgage.

However, Justice Carla Card-Stubbs also found that Mr Turnquest had “breached his statutory fiduciary duty, and the statutory duty of care, diligence and skill” owed to Mr Kaiser and his Alpha Aviation investment vehicle by releasing Mr Butler and his wife from their obligation to repay the mortgage even though a debt was still owing and no alternative security/collateral was provided.

Mr Kaiser had alleged the mortgage Deed of Release was executed behind his back, and without his permission as the lender’s principal, but the judge - despite affirming the former deputy prime minister’s “fiduciary duty” breach - found that Alpha Aviation had not proven it suffered any loss as a result.

She therefore declined to award Mr Kaiser and his company any damages, and instead appeared to invite them to launch a fresh, separate Supreme Court action in a bid to recover the $194,157 mortgage balance said to still be owed by Mr Butler and his wife, Larona.

Mr Turnquest, in a statement to Tribune Business last night, branded the breach of fiduciary duty claim against him as “unjust” despite Justice Card-Stubbs’ findings. He also pushed back against the judge’s assertions that his evidence was “riddled with inconsistencies”, with some parts appearing to be “hapless fabrication”, maintaining that he provided “truthful testimony under oath”.

“I am pleased The Bahamas’ Supreme Court has rejected the claims against me by Fred Kaiser and Alpha Aviation,” the former deputy prime minister said. “I have emerged victorious against their baseless allegations of conspiracy.

“Despite also facing an unjust breach of fiduciary duty claim, the court’s decision not to impose any financial penalties on me serves as a resounding affirmation of my defence. Whilst disappointed with the court’s characterisation of my testimony concerning the breach of fiduciary duty claim, I maintain, and continue to maintain, that I gave truthful testimony under oath.

“This victory not only vindicates me, but also stands as a testament to the enduring power of truth and integrity in the face of adversity. I remain committed to serving my community with honour, transparency and unwavering dedication. I am happy to put this matter behind me and look forward to moving on.”

The mortgage dispute is among a series of legal claims that Mr Kaiser has launched against Mr Turnquest and Mr Butler, with the Supreme Court yet to rule on the Sky Bahamas’ financier’s main case involving an alleged $28m “bogus loan conspiracy”.

Michael Scott KC, the attorney for Mr Kaiser and Alpha Aviation, yesterday branded the verdict as “rather strange” and said he and his client were still studying the 73-page judgment to determine their next move including whether they will appeal.

“It’s a rather strange ruling,” he told Tribune Business, “which we’re studying very carefully to attempt to understand the judgment and then decide the next steps. There are serious implications to this judgment. None of the three defendants can be happy with this ruling.” Mr Butler said he had not seen the verdict, and was still studying it last night after being sent a copy by Tribune Business.

Justice Card-Stubbs’ ruling only concerns Mr Kaiser’s claim that Mr Turnquest and Mr Butler, together with the latter’s wife, deliberately conspired to defraud himself and Alpha Aviation of their interest in a mortgage - originally for $279,000 - that was secured on a Winton Heights home formerly owned by the Sky Bahamas chief and his partner.

This sum, which was extended by Alpha Aviation on January 7, 2005, was to be repaid over a 20-year period by Mr Butler and his wife at a below-market interest rate of 4 percent. The sum secured under the mortgage was increased by a further $120,000 on March 28, 2007, but the couple decided to sell the property after “the unfortunate incident there which resulted in the tragic loss of their child”.

The Butlers executed a conveyance to sell the Winton Heights home to Mr and Mrs Smith on December 17, 2008. However, it took more than eight years for the Butlers and Mr Turnquest to execute a deed of release relieving the couple of their obligation to fully repay Alpha Aviation’s mortgage loan. This was signed on March 15, 2017, some two months before Mr Turnquest became deputy prime minister.

Mr Kaiser and Alpha Aviation alleged that the sale occurred without his “knowledge or consent”. And, given that “a significant sum” was still owing when the deed of release was signed and no alternative security was provided, they alleged that Mr Turnquest and the Butlers conspired to defraud them of their interest in the loan.

Mr Turnquest vehemently denied the allegations against him, including that he breached his fiduciary duty as an Alpha Aviation director, alleging that the original mortgage and its subsequent increase had been approved by Mr Kaiser. He added that Mr Butler informed him that Alpha Aviation’s loan security would be switched to the new home that the couple was acquiring.

The former deputy prime minister said he originally denied the request to execute a deed of release, first made in 2012 by the attorney for the Smiths’ who acquired the Winton Heights property, but did this five years’ later “following an in-person meeting” with Mr Kaiser who allegedly approved the move.

Mr Turnquest said he also agreed to the release because “he was advised that the validity of the mortgage could be challenged since [Alpha Aviation] did not have exchange control approval to make the loans and obtain security”. Other factors were Mr Kaiser’s alleged approval, the fact the Butlers had agreed to secure the debt via a mortgage on their new home, and that the couple were repaying the loans.

Mr Kaiser, though, in his claim argued that the deed of release had “extinguished” Alpha Aviation’s loan security while the Winton Heights sales proceeds were not used to pay it off. He alleged that Mr Turnquest and the Butlers “must have had a meeting of the minds with the clear intention of causing damage and did so by defrauding” him, thus resulting in financial loss.

The former deputy prime minister, though, countered that Mr Kaiser was aware of and approved ever move. He argued that the latter, for whom he worked as accountant and an Alpha Aviation director, “was very informal in his business dealings..... and that there were no director’s meetings, minutes or resolutions in connection with the deed of release”.

Justice Card-Stubbs, in her verdict, said the burden of proof lay with Mr Kaiser to show the defendants had agreed to pursue a fraudulent conspiracy. The Sky Bahamas financier asked the judge “to draw the inference from certain facts” that there was just such collusion.

“To my mind, the essence of the plaintiff’s complaint is captured in the beneficial owner’s evidence that ‘those two gentlemen did the whole transaction behind my back’,” Justice Card-Stubbs wrote in summing up Mr Kaiser’s complaint.

“By his witness statement, Mr Kaiser’s evidence is that he knew that the Butlers were thinking of moving house but that he was unaware of their intention to sell. On cross-examination he testified that ‘someone mentioned to me that, actually, Mrs Butler felt she couldn’t live in the home anymore....’ He denied being told of any intention on the part of the Butlers to sell.

“Mr Kaiser vehemently denies having a conversation with the first defendant about the validity of the mortgage or about exchange control permission, or about approving the execution of the deed of release. His evidence is that that he did not know of its existence until 2020 or perhaps 2019/2020. His evidence is that he would have objected to the execution of the Deed of Release ‘unless and until the mortgage was paid in full’.”

The Alpha Aviation chief said he spoke with Mr Turnquest in 2017 after he resigned from the company, following the general election that year and his appointment as deputy prime minister and minister of finance, but “denied being told about the deed of release”. Mr Turnquest, though, said his former boss in 2017 “verbally approved” releasing the mortgage security.

The ex-deputy prime minister, during trial testimony, indicated he had opposed granting the original mortgage to the Butlers. “We had a discussion about it, and I told him, I said, Mr Kaiser, you know, we’re not into the lending business,” he told the court. “I really want to deal with Bahamians like that because we’re not set out for that nor does our Central Bank approval give us the authority to enter into this.”

But, while Alpha Aviation’s mortgage security was to be switched to the Butlers’ new home in Adelaide, Mr Turnquest “did not know the value of the.. property” and whether it would provide sufficient collateral to secure the loan. And Mr Butler, who admitted no substitute loan security was put in place, “refuted” Mr Turnquest’s suggestion this was to be imposed on the Adelaide home.

Justice Card-Stubbs, preferring the evidence of Mr Kaiser and his witnesses, said of Mr Turnquest: “The evidence of the first defendant is riddled with inconsistencies. Some of it appears to be hapless fabrication and parts, in my view, were recently-fashioned.” Mr Butler, too, was described as “evasive, deflective and deliberately vague”, and the judge found it incredible he did not know the price his home sold for.

However, she concluded: “There is no gainsaying that the deed of release had the effect of depriving the plaintiff of its collateral, but was it as a result of a conspiracy to defraud the plaintiff? Was the deed of release executed by the defendants with an intention to enrich themselves? I do not find that that such a case has been made out.”

The Butlers also continued to make loan payments after the sale, and Justice Card-Stubbs continued: “The simple answer for me in this case is that I can find no agreement to act in concert for the purpose of defrauding the plaintiff. The plaintiff may understandably feel ‘defrauded’ by hitherto close-business associates.

“His evidence is that the sale of the Winton property and the execution of the deed of release were done without his knowledge. The very informality of doing business brought about a situation where the first defendant [Mr Turnquest] acted on his own on behalf of the plaintiff- sometimes without the knowledge of Mr Kaiser.

“However, the failure to disclose the existence of the deed of release and the execution of same is not enough to constitute a case of conspiracy. The Plaintiff is bound by its pleadings. The burden is on the plaintiff to prove a conspiracy and it has not proven an agreement, whether formal or informal, tacit or express, or otherwise,” she added.

“Having considered the evidence, I can find no agreement between the first, second and third defendants that would form the element of an actionable conspiracy. Nor has the plaintiff proven that the acts carried out were carried out with the intention to injure the Plaintiff as a predominant motive (lawful conspiracy) or otherwise.”

However, the judge found that Mr Turnquest breached his fiduciary duty to Alpha Aviation, as one of its directors, over the deed of release with Mr Kaiser asserting that he was “attempting to justify the unjustifiable”. The former deputy prime minister argued that there could be no breach because his actions were approved by the Sky Bahamas principal.

“I find that the first defendant procured the execution of the deed of release without the knowledge of the beneficial owner, the other director of the company,” Justice Card-Stubbs found. “I find that he acted alone - without the knowledge of Mr Kaiser.... The actions of the first defendant do not reflect the conduct of a director required to ‘act honestly and in good faith with a view to the best interests of the company’.”

She branded Mr Turnquest’s explanations as “fraught with inconsistencies and internally illogical”, and said it would be expected that companies retain collateral to secure loans they have made unless the Board of Directors determines otherwise.

“A prudent director acting in the best interest of the company would have either sought to ensure that the loan was paid off at the time of the execution of the deed of release or that substitute collateral had been secured. Indeed, this is what the first defendant indicated that he attempted to do. This is what he did not do,” Justice Card-Stubbs ruled.

“I find that the first defendant, in procuring the execution of the deed of release, and in executing same himself, acted against the company’s best interest. As a result, I hold that the first defendant failed in his fiduciary duty to the company to act in its best interest.

“Additionally, the first defendant by his own admission was aware that the plaintiff did not have the requisite approvals and permits to carry on the business of lending/investments in The Bahamas and any investments made must have received approvals of the Central Bank of The Bahamas.

“However, the first defendant proceeded with Mr Kaiser to enter into a mortgage agreement with the second and third defendants which also amounted to a breach of both his fiduciary duty and his duty to exercise due care, diligence and skill.”

However, the judge declined to award damages because Mr Kaiser and Alpha Aviation had not proven they suffered any loss from Mr Turnquest’s breach. Mr Turnquest was represented by Robert Adams KC.