The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Supreme Court was yesterday said to have “expressed the highest possible condemnation” of the Government and Bahamas Customs’ conduct during a six-year legal battle with a prominent Freeport retail/wholesale business.

Justice Estelle Gray-Evans, in a March 31 ruling, ordered that the Government and Customs pay Kelly’s (Freeport) “80 per cent of its legal costs on an indemnity basis” over a case that was vital to upholding the city’s bonded goods regime.

Fred Smith QC, who represented Kelly’s (Freeport), told Tribune Business that Justice Gray-Evans had awarded “the highest scale of costs” possible against the Government and Customs.

“It is an expression of condemnation by the court of the Government’s conduct throughout the litigation period,” he said.

“There are different scales of costs ordered in a court case, and this is the highest amount allowable by a court against the losing party.

“It makes Kelly’s very much whole economically on the costs of the litigation. It is the highest scale of costs which a court can order against a losing party.”

It is extremely rare for courts in a UK-based legal system to award costs on an indemnity basis. This usually occurs only when the presiding judge determines that a party to the case has behaved in an appalling manner,

Justice Gray-Evans’ ruling stems from Judicial Review proceedings initiated by Kelly’s (Freeport) in late 2010 over Customs “unprecedented demand” that it submit a report on monthly ‘over-the-counter’ bonded goods sales to it.

Kelly’s (Freeport) alleged that the demand was made with no prior notice or consultation and, moreover, it had no basis in “lawful authority”.

And Customs’ offence was “compounded” by its decision to detain 11 of Kelly’s (Freeport’s) imported containers, while also refusing to accept or process its documents because it had not submitted the ‘bonded good’ sales report.

The Supreme Court, in its main ruling in December 2016, handed Kelly’s (Freeport) around 80 per cent of the declarations its was seeking, with Justice Gray-Evans ordering a subsequent inquiry into damages by the court’s registrar.

The wholesaler and the Government were given 14 days to make submissions on the issue of costs, with the latter electing not to do so.

Justice Gray-Evans, in her March 31, 2017, ruling, said she had previously indicated that the Government/Customs should be 80 per cent of Kelly’s (Freeport) costs, which were to be taxed if not agreed.

Mr Smith and his client, though, argued that the costs should be awarded “on a full indemnity/solicitor own client basis”. Rather than allowing each party to bear its legal costs, they wanted the Government to also cover Kelly’s (Freeport’s) Bill.

In his arguments, Mr Smith pointed to the Supreme Court’s original findings that the detention of Kelly’s (Freeport’s) 11 containers was “arbitrary” and “calculated to disrupt its business in an attempt to force it to comply”.

The Callenders & Co partner also argued that the Government/Customs had caused “delay and protraction of the proceedings at every stage”, including stalling on releasing the containers, and seeking strike outs and adjournments just before the trial date.

Mr Smith also quoted legal precedent for the awarding of costs on an indemnity basis, namely that a party to litigation was guilty of conduct that was “disgraceful, or deserving of moral condemnation”.

With no opposition from the Government, the Supreme Court accepted Mr Smith’s argument and gave Kelly’s (Freeport) the award its was seeking, together with interest at 3 per cent per annum covering the six-year trial period. She increased the post-judgment rate to 6.75 per cent until the award is paid.

Her earlier December 20167 ruling found that the right of Kelly’s (Freeport) - or any other GBPA licensee - to sell ‘over-the-counter’ bonded goods did not depend on submitting a monthly report on such sales to Customs.

And Justice Gray-Evans blasted Customs’ decision to detain Kelly’s (Freeport’s) imported containers, and refusal to process its entries, as having “no lawful basis”.

She issued a blanket injunction preventing Customs from taking similar action in future against any other GBPA licensee that failed to submit a ‘bonded goods’ sales report - something that was not “sanctioned by law”.

She also ordered Customs to pay Kelly’s (Freeport) damages for the “wrongful detention” of its goods and failure to process its entries, before adding aggravated damages for the Government agency’s “arbitrary and high-handed actions”.

Freeport’s ‘over-the-counter’ bonded goods regime has been a key feature of the city’s business environment for almost three decades, and is now an established practice under the Hawksbill Creek Agreement.

It allows GBPA licensees to sell goods duty-free (bonded) to fellow companies within the Port area for use in the latter’s own business. But any sales to a consumer or household do attract duty, and these taxes have to be submitted in a report - together with the full tax owed - to Customs by the 15th of the following month.

While post-paid duty sales have to be reported, there had never been a similar requirements for so-called ‘bonded’ sales, until Customs wrote to Kelly’s (Freeport) on August 5, 2010, warning that its continuing ability to sell ‘bonded’ goods depended on providing such a report.