By NEIL HARTNELL
Tribune Business Editor
A damages award of $9.67m has been upheld against the Bimini Bay resort's original developer over its demolition of a tenant's beach club in defiance of a Supreme Court order.
The Court of Appeal, in a 2-1 majority verdict, reinstated $6.8m in "general damages for consequential loss" that had been awarded to Therapy Beach Incorporated for the loss of its bar and restaurant facilities at the Bimini-based resort.
Gerardo Capo's RAV Bahamas and Bimini Bay Resort Management entities had successfully appealed to the Supreme Court against this aspect of the damages, which were initially awarded by retired Supreme Court justice, Cheryl Albury.
She acted as arbitrator in the developer's dispute with Therapy Beach, but Justice Ian Winder remitted 70 percent of the damages award back to retired justice Albury for "reconsideration" on the basis that a "serious irregularity" had occurred in determining the $6.8m.
But Therapy Beach, whose principal is Miami-based entertainment owner/promoter, Garrick Edwards, persuaded Appeal Court president, Sir Hartman Longley, and appeal justice Jon Isaacs, to find that the Supreme Court had failed to show any irregularities resulted in "substantial injustice" to Mr Capo and RAV Bahamas - as required under the Arbitration Act.
The developer's only ally at the Court of Appeal hearing was acting justice Sir Michael Barnett, who blasted the $6.8m award as "manifestly unfair and ambiguous" given that Therapy Beach and Bimini Bay had agreed in the original lease that the former would incur a "maximum estimated loss" of $7,500 per month if the Beach Club was to close.
He found that "the sum is so high that no arbitrator acting reasonably could properly have come" to such a conclusion, suggesting that ex-justice Albury must have included factors "she ought not to have taken into account" in calculating the award.
Yet the majority Court of Appeal verdict represents a triumph for Mr Edwards and Therapy Beach in their five-year legal battle with Mr Capo and RAV Bahamas following the demolition of their business, trading as Sakara Beach Club, in July 2013.
Sir Michael, as the then-chief justice, had already heard the Bimini Bay developer's claims that Therapy Beach's December 31, 2011, lease was "null and void", and that Mr Edwards had to vacate the lease.
"In March 2013, the respondent [RAV Bahamas] commenced proceedings by originating summons seeking a declaration that the lease agreement entered into with the respondent [Therapy Beach] was void, illegal and of no effect because its terms violated the International Persons Landholding Act," the Court of Appeal judgment recorded.
"The action came on for hearing before Sir Michael Barnett, (chief justice as he then was), who reserved judgment and ordered the status quo remain. In the interim, and before awaiting the judgment, the respondent demolished the premises, the subject of the lease. Subsequently, the Chief Justice ruled that the lease was valid."
Tribune Business previously revealed how Mr Edwards and Therapy obtained permission to apply to commit Mr Capo, and other Bimini Bay executives, to prison for alleged contempt of court because the demolition violated the Supreme Court's order.
The Therapy Beach principal also alleged in court documents that the restaurant and beach club facilities were bulldozed to pave the way for Mr Capo's new partner, the Genting-owned Resorts World Bimini, to operate its own food and beverage facility - which opened two days after Sakara's destruction.
Ultimately, the two sides agreed to resolve the dispute over Therapy Beach's "forcible eviction... from premises during the currency of a valid lease" through arbitration proceedings before ex-justice Albury, which took place in 201.
She ultimately awarded Therapy Beach some $9.67 million in total damages, with interest running at 5 percent, from July 18, 2013 - the date of demolition. While this sum included $2.5m in exemplary damages and $370,000 in special damages, it was the $6.8m balance that Mr Capo and RAV Bahamas were able to successfully challenge in the Supreme Court.
"The learned judge remitted the consequential damages component of the award in the amount of $6.8m back to the arbitrator for reconsideration, and he did so on the basis of his finding pursuant to section 90 of the Act that the consequential damages component of the award was seriously irregular because the arbitrator did not consider the issue of whether Therapy could claim losses occurring not only in the remaining term of the current lease but also in the renewal period," the Court of Appeal said.
Justice Winder also found that the $6.8m award was "ambiguous", and that it was "unfair" for the Bimini Bay developer not to have an opportunity to air its case on certain aspects of the arbitrator's decision.
This led to a "two-fold attack" on the Supreme Court verdict by Therapy Beach, which successfully argued that Justice Winder had failed to meet the Arbitration Act provisions that required him to determine whether the developer would suffer "substantial injustice" from any "irregularities" in the damages calculations.
The Court of Appeal agreed that RAV Bahamas had failed to prove this would happen, noting that the developer had left it late to plead that the option to renew Therapy Beach's lease "was void and unenforceable for uncertainty, and was illusory".
But Sir Michael, in his dissenting judgment, focused on the lease renewal option as an "essential issue" that the arbitrator had failed to consider when awarding damages. He found that the failure to do so naturally led to a "substantial injustice" against Bimini Bay's original developer.
"It seems to me that this award is manifestly unreasonable and unfair; $6.8m as damages for a breach of a lease agreement was ambiguous. It is unclear how that sum was determined, [and] the respondents ought to know the basis upon which the sum was arrived at by the arbitrator," he wrote.
"If the parties at the beginning of the lease agreed that the sum of $7,500 per month represented an estimate of the maximum loss the appellant would suffer as a result of the closure or non-operation of the club, the sum of $6.8 million as consequential damage as a result of the closure of the club over six years is manifestly unfair and ambiguous, and the arbitrator must have taken into account matters which she ought not to have taken into account.
"The sum is so high that no arbitrator acting reasonably could properly have come to the conclusion that it was a fair reflection of the loss suffered by the appellant. The arbitrator could not have properly considered all of the issues that she was obliged to consider."