The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Supreme Court allegedly “erred” in relying on “unfiled evidence” from Baha Mar’s receivers to reject Sarkis Izmirlian’s bid to acquire the $192 million damages claim against the project’s contractor.

Mr Izmirlian and his Granite Ventures vehicle, in their ‘motion of appeal’, alleged that Justice Ian Winder had used “what he expressly acknowledged to be”an ‘unfiled affidavit in rejecting their claim with his June 29, 2016, judgment.

That affidavit, from Deloitte & Touche (Bahamas) managing partner, Raymond Winder, one of the three-strong Baha Mar receivership team, was Ordered to be filed - and sealed - on the same day that the judgment was issued.

“The learned judge later ordered (by a separate Order of the same day as the ruling) that [Mr Winder’s affidavit] should be filed and sealed until further order,” the appeal motion, filed by the Harry B. Sands Lobosky law firm, alleged.

“There was no basis for the judge to have taken into account unfiled evidence when reaching the determinations made in the ruling.”

Mr Izmirlian and Granite Ventures are also arguing that the Supreme Court failed to consider whether the Companies Act was “intended to be a mechanism for empowering creditors to seek the court’s assistance in the case of inactive or ineffective receivers”, adding that this was an important “public interest” point.

The July 12, 2016, appeal motion shows that Justice Winder granted permission for Granite Ventures to go to the Court of Appeal following a July 7 hearing.

Besides hearing Granite Ventures (and Mr Izmirlian), Justice Winder will also likely have heard arguments against the appeal from Baha Mar’s receivers and the $2.45 billion secured creditor who appointed them, the China Export-Import Bank.

Granite Ventures seems, though, to have successfully overcome such objections. Confirming that they were appealing the denial of its bid to purchase the $192 million claim against its contractor’s parent, the China State Construction Engineering Corporation (CSCEC), Mr Izmirlian and his vehicle again argued that they were acting in the best interests of all unsecured Bahamian creditors of Baha Mar.

“These valid claims could represent real value to the Baha Mar estate and their realisation, in turn, could benefit Baha Mar’s unsecured creditors,” they said in a statement.

“Granite has proposed that the claims be pursued by the joint provisional liquidators, or, alternatively, by a committee of the unsecured creditors.”

The $192 million claim seeks to enforce a May 12, 2011, guarantee that Baha Mar’s contractor, China Construction America (CCA), would perform all necessary obligations under the terms of its Baha Mar construction contract.

The action was filed in the UK High Court on June 30, 2015, one day after Baha Mar sought Chapter 11 bankruptcy protection - a move that was ultimately defeated in the Bahamian and Delaware Courts.

However, Mr Izmirlian argued that the Deloitte & Touche receivers were “failing to properly pursue” the $192 million claim - allegedly one of the most valuable potential recovery sources for the project’s creditors.

Granite Ventures thus petitioned the Supreme Court on February 18, 2016, to approve a process whereby the $192 million action could be pursued in the UK High Court without the involvement of the receivers.

It provided the Supreme Court with two options for ‘monetising’ the value of Baha Mar’s claim against its contractor for the benefit of all creditors, including itself.

Granite Ventures sought an Order that would place “custody and control” of the CSCEC action into the hands of either a Baha Mar creditors’ committee or the project’s joint provisional liquidators.

Justice Winder, though, has ruled that it is legally impossible for Mr Izmirlian and Granite Ventures to acquire the rights to Baha Mar’s $192 million damages claim against China Construction America’s (CCA) parent.

He instead found in favour of the arguments advanced by Brian Simms QC, attorney for Baha Mar’s receivers, ruling that the project’s original developer had no standing to ‘purchase’ the action lodged in the UK High Court.

Justice Winder ruled that the Supreme Court “has no jurisdiction” to hear Granite Ventures’ application. He explained that while Mr Izmirlian and Granite had brought their action under the Baha Mar winding-up case, which fell under the purview of the joint provisional liquidators, the $192 million claim was an asset that had been transferred to the Deloitte & Touche receivers.

And secured assets, such as the $192 million claim, “are protected and immune from winding-up proceedings”, with secured creditors - such as the China Export-Import Bank - able to realise their interest outside these cases.

However, Granite Ventures’ appeal is alleging that Baha Mar’s receivers failed to prove the $192 million claim was a ‘secured asset’.

“At its highest, the learned judge could have found that the Baha Mar claim was merely a ‘potentially secured asset’,” the appeal alleged.

As a result, Granite Ventures claimed that because there was “no proper basis” to deem the $192 million claim ‘a secured asset’, the Supreme Court was mistaken in finding it had no jurisdiction to hear the matter.

Justice Winder, though, also found that Granite Ventures had no standing to bring the claim because it was “not an interested person” under section 148 of the Companies Act.

He ruled that whether a creditor was “an interested person” depended on the circumstances of the case. And, in Baha Mar’s case, it was not only in receivership but provisional liquidation.

As a result, unsecured creditors such as Granite Ventures only had an interest in the provisional winding-up estate. Justice Winder found that because of this, only the joint provisional liquidation team of Bahamian accountant, Ed Rahming, and the UK duo of Alastair Beveridge and Nicholas Cropper, could do what Granite Ventures was seeking.

“As Granite is not supported by the joint provisional liquidators it therefore could never, in these circumstances, lawfully obtain the outcome desired,” he ruled. “Granite would therefore not be an interested person to move such an application.”

Granite Ventures, though, is challenging this on the grounds that Justice Winder have “insufficient weight” to the case laws cited by its attorneys to support their arguments.

It is arguing that the Supreme Court should not have treated the joint provisional liquidators as “a significant or even a relevant factor”.