The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The developer of a distressed $30 million Paradise Island condominium project has been given permission to appeal the Supreme Court order permitting CIBC FirstCaribbean International Bank (Bahamas) to sell it.

The Court of Appeal ruled that the ‘finality’ of the Order for Sale granted by Justice Isaacs meant Al Ballard, and his Peace Holdings vehicle, did not require permission to appeal the impending disposal of Ocean Place.

CIBC FirstCaribbean is seeking to sell the nine-storey, 79 unit property that dominates Paradise Island’s southern shoreline in a bid to recover the more than $30 million it had lent to finance its construction.

With a reluctant buyer unwilling to complete the purchase without the security of a Supreme Court Order for Sale, the commercial bank and the receivers it appointed, KPMG, duly obtained one from Justice Isaacs on February 27, 2014.

Mr Ballard and Peace filed their appeal notice on March 12, but CIBC FirstCaribbean and its attorneys, Lennox Paton, moved to strike this out.

They alleged that the appeal dealt with preliminary matters, and that Mr Ballard and Peace had not obtained leave to appeal from either the Supreme Court or Court of Appeal - something they argued was essential for the action to proceed.

Outlining the background to the case, Court of Appeal president, Justice Anita Allen, said CIBC FirstCaribbean had loaned Peace/Mr Ballard some $30 million in principal via six separate advances that began in 2006.

“The appellant defaulted on the loan, the development [Ocean Place] remains unfinished, and the loan remains unpaid,” Justice Allen wrote.

“The respondent [the bank] called in the loan on October 18, 2012, giving 30 days for repayment, and agreed to extend the facility for a further six months if $3 million was injected by the appellant.”

This did not happen, resulting in CIBC FirstCaribbean appointing KPMG as receivers on November 19, 2012.

This resulted in Mr Ballard and Peace starting Supreme Court proceedings a week later, alleging that CIBC FirstCaribbean was guilty of ‘breach of contract’ because it failed “to honour a performance bond and subsequent agreements for funding necessary, the appellant alleges, for the completion of the project”.

They also claimed that the bank had failed to provide capital to cover Ocean Place’s marketing and operational costs.

Mr Ballard and Peace also claimed that the debenture giving CIBC FirstCaribbean security over the development was “invalid and unenforceable” because the shareholders had not approved it, but this had already been shot down by previous Supreme Court and Appeal Court rulings.

The bank also counterclaimed, alleging that Mr Ballard acted as guarantor and countersigned an agreement for CIBC FirstCaribbean to provide a $5.4 million credit facility to Peace.

But, prior to the Court of Appeal decision on the debenture issue, Mr Ballard’s defence to the counterclaim “denied responsibility for repaying the debts” of Peace.

He then alleged that “both he and [Peace] were under extreme pressure. and that he acted under economic duress, and/or under the influence” of CIBC FirstCaribbean. Therefore, Mr Ballard and Peace are arguing - via new grounds - that the debenture is, once again, “invalid and unenforceable”.

In the meantime, though, CIBC FirstCaribbean filed for - and obtained - the Supreme Court Order for Sale, allowing it to sell Ocean Place to a buyer.

In moving to strike out the Peace/Ballard appeal, CIBC FirstCaribbean also argued that four paragraphs should be eliminated, as they dealt with the developer’s argument that the Supreme Court should have adjourned proceedings to allow them time to study ‘ninth hour affidavits’.

However, Justice Allen said these issues were “peripheral” to the appeal, which dealt with substantive matters such as the Supreme Court’s finding that “there was no reasonable basis on which Mr Ballard could advance the argument that the debenture was invalid on the ground of misrepresentation, undue influence and economic duress.

With the debenture’s validity central to the Ballard/Peace claims, Justice Allen said the Order for Sale was granted in a situation where Peace/Ballard had submitted a claim - already struck out - on a different basis.

And, from CIBC FirstCaribbean’s perspective, it had a”buyer for the properties who is reluctant to complete the sale without a court order”.

An Order for Sale is only made in “exceptional circumstances”, often when mortgage borrowers “continue to unreasonably resist and interfere” with a lender trying to exercise its power of sale.

The Supreme Court found that Peace/Ballard’s claim had an “utterly remote” chance of success. It also found little merit in the debenture argument, and that “it was a reasonable fear” on CIBC FirstCaribbean’s part that the sale would be lost without the order.

Justice Allen, though, found that as the Order for Sale was “a final Order”, Peace/Ballard did not need permission from any court to appeal it. She thus allowed the appeal to go ahead.

She added that if the Order stood upon appeal, any question over CIBC FirstCaribbean’s ability to sell Ocean Place under the debenture would be eliminated. And if it did not, the bank would still have the contractual power to sell the property under the debenture.

CIBC FirstCaribbean was represented by Brian Simms QC, and Peace/Ballard by Wayne Munroe.