The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government is poised to enjoy a $9m-plus real property tax boost from the sale of four private islands in the Exuma cays which have been caught up in an acrimonious legal battle.

Damian Gomez KC, who is representing one of the Darby Shores Ltd owners, confirmed to Tribune Business that the deal to offload the four-strong island group - Big Darby Island; Little Darby; Guana Cay; and Betty Cay - for a net purchase price of around $40m is anticipated to close within the next several weeks.

Once the sale closes, he said a significant portion of the funds received will be used to pay-off at least $9.2m in outstanding real property tax arrears that has accumulated over the past 14 years. The Darby Shores Ltd shareholders, all of whom are foreign investors, were forced to obtain an injunction earlier this year to prevent the Department of Inland Revenue seizing the islands and selling them off via auction.

“It’s in the middle of a sale now. That’s true. That’s confirmed,” Mr Gomez, a former minister of legal affairs, said of the island group which is located around 100 nautical miles south-east of Nassau between Farmer’s Cay and Barraterre. 

“The real property tax will be paid as soon as that deal is closed. We’re hoping this week, the latest within December. What you heard is accurate. That [$40m price] sounds about right. That’s where we expect the amount to be.”

With everything hinging on the sale closing, Mr Gomez said once that occurs the Department of Inland Revenue’s payment demand as well as the Supreme Court injunction blocking it from selling off the islands will fall away.

“This will actually make that very academic because they’ll [the Department of Inland Revenue] will be paid and they will have nothing to do from their point of view,” he added. “Once that tax is paid the company can do what it has to do with its shareholders.”

Efforts to resolve the Darby Islands’ fate have been complicated by the falling-out, and subsequent legal dispute, that has embroiled their owners in a Supreme Court battle. However, it is understood all sides agreed to a Supreme Court Order affirming that they would accept the present purchase offer and work towards the deal’s completion, with a portion of the sales proceeds earmarked to liquidate the unpaid property tax debt.

The impending sale comes as Senior Justice Deborah Fraser rejected a bid by one of the Darby Island owners to have his partners held in “contempt of court” for breaching a previous court Order requiring all sides to co-operate over efforts to market the islands to potential buyers. Mr Gomez represented the claimant, Dr William Chester, against fellow shareholders William Cook, Richard Davis and William Saeger.

The complaint was backed by Lindsey Cancino and Marcia Woodside, who had previously been appointed as receivers for the Darby Islands by the Supreme Court with a mandate to “resolve the outstanding property taxes” via selling the Darby Islands or any other method that would “prevent [their] being subject to a forced Bahamas government sale at auction”.

Detailing the background to the latest action, senior justice Fraser said: “In or about 2010, the Darby Islands began accruing real property taxes. In response, Darby Shores Ltd sought to sell a few of the islands and use the proceeds from sale to settle the taxes. A total of about $9.204m in real property taxes was due and owing at the material time.

“On 10 July, 2023, due to the mounting real property tax sums and demand notices from the Department of Inland Revenue, the shareholders of Darby Shores agreed to sell the Darby Islands.” Mr Cook, as the company’s president, signed an exclusive agreement with the Coldwell Banker Lightbourn Realty real estate firm some seven days later to market the four islands at a collective purchase price of $44.5m.

“On August 9, 2023, the Department of Inland Revenue served its final demand on Darby Shores in relation to the outstanding real property taxes,” senior justice Fraser added. Two days later, Dr Chester “sought orders declaring that the defendants were acting in bad faith and mismanaging Darby Shores by allegedly failing to pay real property taxes owed to the Department of Inland Revenue in the sum of $9.204m”.

This led to the receivers’ appointment and a Supreme Court Order setting out their powers and mandating that all involved “co-operate fully” with efforts to market the islands for sale. “Based on tension and disagreement amongst the shareholders relating to the value of the Darby Islands, they each sought legal advice from different counsel on the best way forward,” senior justice Fraser added.

“A flurry of applications were subsequently filed in these proceedings by the parties relating to the Darby Islands. Based on the failure of Darby Shores to settle the outstanding taxes, the Department of Inland Revenue moved to sell the Darby Islands by its power of sale.” This led to the injunction blocking the seizure by the tax authorities and permission launch of Judicial Review proceedings.

Senior justice Fraser, dismissing the contempt action by Dr Chester, ruled: “It appears that the Darby Shores parties sought to keep all parties – particularly the receivers – abreast of and fully aware of all matters relating to the Darby Islands. In my view, this seems consistent with the very wording of the order....

“I believe it was the Darby Shores parties’ intention to co-operate with the receivers and ensure they were well informed of any and all actions taken relating to the Darby Islands. Indeed, the Darby Shores parties also ensured that any documents relating to such proceedings were delivered to the receivers even before they were filed and after.

“Furthermore, I do not see how such actions prejudice the claimant. In fact, securing the injunction and initiating Judicial Review proceedings have, in my view, preserved and protected the assets of Darby Shores and has now brought the decision of the Department of Inland Revenue to sell the Darby Islands before the court for review.”

The real property tax arrears are split between the four islands with some $4.656m owed on Big Darby Island; a further $3.441m on Little Darby; $986,279 for Guana Cay; and $120,346 on Betty Cay.

Big Darby Island and Little Darby cover some 793 acres combined. Coldwell Banker Lightbourn Realty, in a brochure to market the property, said: “Big Darby, a 554-acre island, boasts an historic structure known affectionately by locals as ‘The Castle’, which was built by a previous owner, Sir Guy Baxter, in 1938.

“During his ownership, Big Darby island was a working plantation with goat, cotton, palm oil and fruit as its products. The ‘castle’ is in great need of repair, but will make an incredible private home or community club house for a future investor. Darby Island is home to over 14 beaches, two miles of ocean frontage and features a few stunning caves dotting its perimeter.

“Positioned in close proximity to Darby, only about 50 metres between them, the 238-acre island of Little Darby includes a 1,600 foot runway, a three-bedroom main home, three renovated cottages offering a total of seven bedrooms and multiple powder sand beaches.”