The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The developer behind a failed Rum Cay mega resort project must now get Supreme Court permission before launching new legal challenges to its lender’s bid to collect on an unpaid $22.75m debt.

Justice Neil Brathwaite, in an October 3, 2024, verdict “struck out” the latest attempt by Montana Holdings to block a Guernsey-based investor from enforcing its loan security and moving to sell-off the 875-acre tract that was to be the location for the much-touted $700m Rum Cay Resort Marina development.

Describing the developer’s latest action as “an abuse of the court’s process”, the judge also “prohibited” Montana Holdings from launching fresh proceedings against the Matrix General Portfolio Limited Partnership and its general partner without first obtaining the Supreme Court’s permission.

Noting that Montana Holdings had launched no less than four previous legal actions over the failed project, only to then withdraw or dismiss them itself over so-called “technical or procedural deficiencies”, Justice Brathwaite described the developer’s behaviour as “vexatious”. For that reason, he added that the Supreme Court was justified in imposing conditions over any new challenges it may bring.

The verdict reveals the fate of what the first Christie administration proclaimed as Rum Cay’s ‘anchor’ investment project when it signed a Heads of Agreement with for the Rum Cay Resort Marina some two decades ago in 2004. Montana Holdings, headed by UK investor, John Mittens, pledged a $700m investment to construct a condos, second homes and an 80-slip megayacht marina.

The development, which was to be located along Rum Cay’s southeastern shore at St George’s Bay, was billed as creating up to 400 construction jobs by 2008-2009 when building ramped up and a similar number of full-time jobs when it became fully operational on an island that only has an existing population of about 60-70 persons.

However, the project subsequently stalled and little has been heard about its fate until now. It is seemingly yet another example of a failed Family Island investment project that has resulted in a massive tract of Bahamian real estate being tied up in legal disputes that have rendered it unusable for years.

One source, describing the limited construction progress to-date, said Montana Holdings had gotten as far as digging out a marina which is unable to accommodate any boats because it had not completed access to the sea. “It’s a big old, partially built marina but they haven’t even broken open to the sea,” they said. “There’s nothing else. It’s just bush; hard Out Island bush.”

Justice Brathwaite, in his verdict, revealed that Matrix has stepped into the shoes of Montana Holdings’ initial financier, the UK-based Bank of Scotland, by taking over the loan security that still encumbers the 875-acre project site.

“The plaintiff [Montana Holdings] is a developer of a tract of land situated in Rum Cay, The Bahamas, who has secured by way of debenture a mortgage from the Bank of Scotland to fund the development of the cay,” the judge wrote. “After some time, the defendant [Matrix] took over the debenture from the Bank of Scotland and appointed a receiver over the land to sell said property due to the plaintiff’s alleged failure to repay the loan.”

Michelle Curtis, Montana Holdings’ director of operations, in a February 25, 2021, affidavit alleged that Matrix had acted as an “intermediary on-lender” between Bank of Scotland and the developer when the $22.75m loan was agreed and secured on October 11, 2005. 

However, she alleged that Matrix “was in breach of the agreement and raised issues of the legality of the appointment of a receiver by the intended defendant and the enforceability of the facility”. Ms Curtis alleged that Montana Holdings “had a good cause of action”, and further claimed that Matrix was “liable... for damage and for unlawfully creating an encumbrance on the property over which it has no lawful claim”.

Justice Brathwaite’s verdict identifies Andrew Davies, the Crowe (Bahamas) accountant and partner, as the receiver. He declined to comment yesterday, but Tribune Business understands that while Matrix successfully petitioned for his appointment some years ago, they eventually released Mr Davies from the role after offers to acquire the 875-acre property failed to meet its price and terms.

Montana Holdings sought the Supreme Court’s permission to serve the legal challenge backed by Ms Curtis’ affidavit on Matrix outside The Bahamas, and was initially given the go-ahead. However, Matrix argued that this was riven by procedural irregularities including non-compliance with the Supreme Court’s rules, and the latter’s assistant registrar duly struck it out as an “abuse of process”.

The developer appealed this to Justice Brathwaite, arguing that Matrix breached their agreement by serving the demand for repayment of the $22.75m loan in August 2015 then “terminating” the facility in December 2018. 

However, Matrix argued that Montana Holdings had breached its duty to make “full and frank disclosure to the Supreme Court” in applying for permission to serve it outside The Bahamas. It accused the developer of failing to mention “that it has not met any of its performance obligations under the debenture, has not repaid any of the sums advanced or even failed to mention the action that was brought by Montana UK”.

The lender alleged that Montana UK had initiated legal action to prevent a sale of the Rum Cay property some seven days before Montana Holdings did likewise in 2018, even though the latter said there was no connection between the two entities;

A glossy website for the ‘Rum Cay Ocean Resort & Spa’, which is still active, lists Montana Holdings (UK) as the contact and developer of the project. Tribune Business research of filings with the UK Companies House reveals that Montana Holdings (UK) is now in liquidation in Britain, with its remaining sole asset said to be “a leasehold interest in 85 acres of land located on the island of Rum Cay in The Bahamas’.

The filings list John Faraday as Montana Holdings (UK’s) company secretary, director and a shareholder. He is named in a 2019 Court of Appeal judgment as “an agent” of Montana Holdings, and chief operating officer of the developer’s marina affiliate.

The liquidator for Montana Holdings (UK), meanwhile, said the Rum Cay real estate was acquired “by a connected company”. Montana Holdings (UK) had been granted a 99-year lease over an 85-acre tract, for just $1, and was planning to build private apartments that would be marketed to potential buyers.

“Unfortunately, the development was besieged with unforeseen setbacks largely attributable to the inclement weather conditions and, consequently, the development did not move forward,” the UK liquidator wrote. “Following the failure of the development, one of the company’s creditors was able to secure a judgment against the company.”

Justice Brathwaite, finding for Matrix’s argument, ruled that Montana Holdings’ failure to correctly initiate the latest proceedings and comply with the rules for serving parties outside The Bahamas “constitute fundamental irregularities incapable of curing”.

While rejecting the claim that the developer had failed to “make full and frank disclosure, he nevertheless agreed that Montana Holdings had launched - only to withdraw - three previous legal proceedings on the same subject.

“There must be some finality to litigation, and the plaintiff ought to have put its entire case correctly and completely before the court,” Justice Brathwaite said. “It is unfair to the defendant to face the prospect of litigation over and repeatedly, on four different occasions, only for the actions to be dismissed or withdrawn at the hand of the plaintiff for technical or procedural deficiencies.”

Agreeing that “it is vexatious to be the subject of proceedings carried on in this fashion”, the judge said it was appropriate to deem the latest action “an abuse of the process”. To launch new proceedings, he added that Montana Holdings must show it has “complied with all preliminary matters and that the claim is properly before the court”.

One source said of Matrix’s efforts to find a buyer for the 875-acre site on Rum Cay: “The market earlier was horrific. No one came forward; there were no buyers. We had people making offers and seeking acceptance, and then they would go to the Government with their plans. Outstanding property taxes are likely up there.

“But it’s still 800 acres in The Bahamas and there seems to be quite a bit more appetite from people in that market. It’s an enormous chunk of land and 70 people on the island. It’s a bare rock and there’s no infrastructure there. There are cows on the runway.”