By NEIL HARTNELL
Tribune Business Editor
A Cacique award winner is “absolutely terrified” that he will face financial ruin this Thursday when a bitter loan dispute with CIBC FirstCaribbean International Bank (Bahamas) is scheduled to reach its climax in the Supreme Court.
Malcolm Spicer, well-known in sporting and teaching circles, and his attorneys are set to present their last-ditch defence to the bank’s bid to foreclose on his family home and Abaco-based investment project, which was designed to provide for his family in retirement.
CIBC FirstCaribbean is arguing that the case is a simple asset/security repossession following the borrower’s default, but Mr Spicer and his advisers are instead alleging that the responsibility lies largely with the bank.
Court documents seen by Tribune Business claim that CIBC FirstCaribbean knew it was lending a sum, $855,500, that was inadequate to complete the first stage of what was to be a rental apartment and bar/restaurant complex located near the Abaco Club at Winding Bay.
Mr Spicer alleged in an affidavit filed last year that $1.2 million was required to complete the first two apartment buildings, and that he only agreed to proceed with the loan after receiving assurances from CIBC FirstCaribbean’s Abaco branch manager that further funding would be forthcoming once he and his family could demonstrate “satisfactory progress”.
Mr Spicer and his advisers, though, are alleging that CIBC FirstCaribbean withheld from him the fact that the original loan amount was based upon a fundamentally flawed calculation.
A realtor’s March 2006 appraisal report on Mr Spicer’s property, commissioned by the bank, came up with the following calculation:
4 at 4,014 square feet = 12,042 square feet.”
Based on the maths, the appraisal report should have produced a 16,056 square feet calculation. However, it went on to base the ‘replacement method’ for valuing Mr Spicer’s property on the 12,042 square feet.
Using a price of $125 per square foot for the buildings, and a $210,000 valuation for the existing undeveloped land and improvements, the appraisal valued the potential project at $1.715 million.
Given that the ‘first stage’ involved just two (half) of the four proposed buildings, Mr Spicer is alleging that he should have been eligible to receive $253,500 more on the original loan which, at $855,500, was based on 50 per cent of the incorrectly calculated $1.7 million.
Claiming that the mistake exacerbated the project’s under-funding, Mr Spicer alleged that a Bahamas Realty appraisal of his property in October 2007 showed that construction work had increased the property’s value by 33.5 per cent.
Arguing that this should have been sufficient to satisfy CIBC FirstCaribbean’s demand for ‘progress’, Mr Spicer alleged that his requests for further funding to complete the project were met with silence for a 10-month period.
Yet he was still having to pay $6,000-$7,000 per month to service the original loan, without any income coming in from the apartments as planned to meet the payments.
When the extra funding from the bank failed to materialise, Mr Spicer’s project ground to a standstill. He was forced to sell his Abacom Wireless Services business in 2010 “to keep his financial affairs afloat”, while also having to use the profits and cash flow from his other company, Abacom Computer Services, to service the CIBC FirstCaribbean loan.
Ultimately, he fell into default, and the bank is now moving - through the Supreme Court - to repossess not just what remains of the apartment/restaurant project, but also his family home - which was offered as additional security.
Mr Spicer and his advisers are alleging that, based on the initial under-funding, which was exacerbated by the flawed appraisal calculation and its non-disclosure, and failure to follow through on claimed verbal assurances, CIBC FirstCaribbean effectively condemned the project to falling into “bankruptcy”.
However, CIBC FirstCaribbean is vehemently denying the allegations by Mr Spicer and his attorneys that it was negligent, or guilty of misrepresentation, in its dealings with the project.
Bryan Thompson, its Abaco branch manager, alleged in a November 6, 2014, affidavit, said that “at no time did the bank agree to” or indicate that it would definitely provide further financing beyond the original loan.
“Whilst the bank received requests from the defendants [Mr Spicer, his wife and company] for further loans, at no time did I or any other officer of the bank agree to facilitate any further borrowings to the defendants,” Mr Thompson alleged.
“The state of the defendants’ loans at the bank reveal that they fell into default when Mr Spicer requested further financing, and I recall that Mr Spicer requested further financing, and I recall that Mr Spicer indicated that he could not continue to service the loans from his Abacom account at the bank.
“This led the loans at the bank to fall into serious default in light of the non-payment of the agreement to pay the interest on the larger loan of $855,500.”
He added that CIBC FirstCaribbean followed its standard practice of assessing the borrower’s payment history and collateral security to determine if Mr Spicer’s project qualified for further funding.
“In this regard, we formed a view that the value of the completed construction at the phase in 2007-2008, did not justify any further borrowings,” Mr Thompson alleged.
However, Mr Spicer’s claim that he received verbal assurances of more financing to come was backed by his project contractor, Martin McCafferty, in a March 26, 2015, affidavit.
Having pointed out to the CIBC FirstCaribbean branch manager that $855, 500 was not enough to complete a $1.2 million first stage, Mr McCafferty alleged: “I remember the conversation with Mr Thompson vividly: He not only agreed it was not enough funds for the bank’s and Mr Spicer’s objective of completing stage one of the project - two apartment buildings out of the four proposed buildings - but went further, saying provided we made ‘good progress’ the bank would ‘obviously’ lend more monies to complete our mutually agreed Stage 1. His words to me were: ‘We’ll take care of you’.”
Mr McCafferty alleged that he and Mr Spicer first made their proposal to the bank in February/March 2005, which only confirmed it was willing to lend $855,500 on July 2006.
Admitting that he was “at a loss” as to how CIBC FirstCaribbean had come up with such a sum, Mr McCafferty alleged that he tried to squeeze the construction budget to fit, while explaining to the bank that the amount as insufficient to complete stage one.
“In my over 30 years’ experience of being a contractor I could not understand why the bank was so adamant on doing this – lending us an amount that they knew would be insufficient to complete Stage 1 of the project as we had all agreed to and planned,” Mr McCafferty alleged.
“I wish to emphasise that if I had not received the above undertaking on behalf of the bank [by Mr Thompson] I would not have proceeded with the project, as it would have been akin to walking into a trap, and it is not unreasonable to suggest this would arguably be a bankruptcy trap - we will not lend you what you need, we will lend you what we say you need, which is 25 – 30 per cent less than what you do need, and we will not lend you any more funds when it falls short.”
Mr McCafferty alleged that it was only in December 2012, after CIBC FirstCaribbean had initiated legal proceedings to repossess Mr Spicer’s home and the project, that he saw the 2006 appraisal and its incorrect calculation - thanks to digging by his-then attorneys, Callenders & Co.
Describing this as a “colossal error”, Mr McCafferty alleged: “It is deeply troubling and, candidly, disturbing to me to witness what the Spicers have been through, and how Abaco has lost a good project.”
Mr Thompson, though, denied that CIBC FirstCaribbean “miscalculated the value of the appraisal” based on the March 22, 2006, realtor’s report, or that this was “a fundamental error which undermined the funding of the project”.
Sounding somewhat unsure, Mr Thompson claimed: “As far as I can recall, the bank was aware of the errors contained in the appraisal report.
“However, the errors had no material bearing on the bank’s decision relating to the amount to be loaned to the defendants.
“The bank also spoke to he appraiser about the report. However, the defendants were not privy to this conversation and the discussions with the appraiser about the report.”
Mr Spicer and his advisers have seized upon this as confirmation that CIBC FirstCaribbean made a material non-disclosure, as they knew about the appraisal mistake but never disclosed it to the borrower.
Mr Thompson’s affidavit then alleged that the bank employed a different formula to determine the sum advanced to Mr Spicer.
“Based on the bank’s financing ratio, that is either 65 per cent or 70 per cent of total costs, the loans were granted at the ratio of 85 per cent of the overall costs,” he argued.
Mr Spicer and his advisers, though, are alleging that the formula applied by Mr Thompson does not correspond to the $855,500 that the bank ultimately lent. They are adamant that this figure could only have been derived, and based upon, 50 per cent of the $1.7 million stated in the original 2006 appraisal.
They also claim that Mr Spicer was never asked to produce a 15 per cent downpayment, as implied by Mr Thompson.
Both sides are thus embroiled in what appears to be, according to one of the filed affidavits, “a material dispute as to the facts” of the case.
This newspaper understands that the “miscalculated appraisal” argument cuts little ice with CIBC FirstCaribbean, and that the bank is eager to get the Spicer matter before the Supreme Court and adjudicated.
Mr Spicer, when contacted by Tribune Business about his battle with the bank, relied: “I’m terrified, absolutely terrified. I could lose my life and everything.” He declined to say more because the matter is before the courts.
Mr Spicer, who won a Cacique Award in 2013 for sports tourism, is understood to have assembled a petition containing 200 signatures from fellow Abaconians, supporting his position, within five days.
However, the only opinion that is likely to count is that of the Supreme Court’s.