By NEIL HARTNELL
Tribune Business Editor
Baha Mar's main contractor is using a Bahamian Supreme Court ruling to argue it has not breached Sarkis Izmirlian's rights by obtaining confidential legal documents prepared for him.
Attorneys for China Construction America (CCA), in a letter and other documents filed with the New York State Supreme Court on Wednesday, alleged that the original Baha Mar developer's demand for the papers' destruction or return should be rejected because he does not hold legal professional privilege over them.
The documents detail Mr Izmirlian's potential claims against CCA for failing to complete the $4.2bn mega resort on time and on budget, but the Chinese state-owned contractor is arguing that the "privilege" preventing their disclosure does not now belong to the former developer or his BML Properties vehicle.
Instead, CCA and his attorneys are arguing that these rights belongs to Baha Mar Ltd, the entity which was taken over by the Deloitte & Touche accountants appointed by China Export-Import Bank as the project's receiver/managers following the failure of Mr Izmirlian's Chapter 11 bankruptcy protection filing.
And, even though Bahamian Supreme Court justice, Ian Winder, ruled at end-March 2019 that the two legal opinions at the heart of this dispute remain sealed, CCA appears to be cherry-picking parts of his judgment to justify obtaining them for use in its defence to Mr Izmrilian's $2.24bn fraud and breach of contract lawsuit in the New York courts.
CCA, arguing that the receiver/managers now "control" the rights to both opinions, has seized on a portion of Justice Winder's ruling where he finds that the Deloitte & Touche accountants waived legal privilege to a "limited" extent by using the documents at the August 2016 Supreme Court hearing that approved Baha Mar's sale.
Seizing on this, the Chinese contractor and its US attorneys are alleging that disclosure of the legal opinions prepared for Mr Izmirlian is a similar "limited waiver" of legal privilege - not its complete abandonment.
"The privilege belongs to Baha Mar Ltd, a distinct legal entity from BML Properties, [which] commissioned the valuation reports," CCA and its attorneys alleged to the New York court. "BML Properties has no joint privilege with Baha Mar Ltd; the joint receiver/managers control Baha Mar Ltd's privilege.
Drawing on Justice Winder's ruling, they continued: "The joint receiver/managers may make a limited waiver of the privilege, and did not effect a general waiver by submitting the BML reports to that court.
"The joint receiver/managers' disclosure of the BML reports to [CCA] was a limited waiver of Baha Mar Ltd's privilege." Arguing that the matter was governed by New York rather than Bahamian law, CCA also alleged that Mr Izmirlian had "refused" to provide evidence showing the legal opinions had been sought by BML Properties rather than Baha Mar Ltd.
The Chinese state contractor is also arguing that it was "entitled" to access the two legal opinions when they were created because its parent company, China State Construction and Engineering Corporation (CSCEC), was a Baha Mar Ltd shareholder and held a seat on its Board.
Tribune Business exclusively revealed Mr Izmirlian's accusation earlier this month that the Deloitte & Touche accountants had "surreptitiously delivered" the legal opinions to CCA just one day before the Bahamian Supreme Court heard arguments over its bid to gain access to them.
This newspaper has now obtained a copy of the May 1, 2019, judgment referred to by his attorneys, and which makes plain Justice Winder's unease over CCA's bid to have the documents unsealed on the grounds of "open justice" and transparency.
The Chinese contractor, which was represented at the earlier March 26, 2019, hearing by now-Chief Justice, Brian Moree QC, also argued that there was no reason for them to remain confidential as the Baha Mar sales process had finished.
"It does not escape me that the party asking that the opinions be unsealed is the very party that is the subject matter of these opinions," Justice Winder wrote pointedly. "Mr Moree QC for CCA nonetheless says that this is not an application by CCA to obtain access to these documents.........
"CCA says that they are not applying to have these documents, and is simply supporting the application to lift the seal since the reason why it was imposed is now spent." The Chinese state-owned contractor added that how the legal opinions might be used in the future was a totally separate matter from their unsealing.
Justice Winder, though, was unpersuaded, and wrote" "Notwithstanding Mr Moree's assurances, I would only say that it would indeed have been unusual that, in the ordinary course, Baha Mar would voluntarily waive privilege in those legal opinions from its lawyers so that CCA and CSCEC, the subject matter of the opinions, can have access."
Finding that the legal professional privilege covering the two documents "is not seriously disputed", Justice Winder noted CCA's arguments that "transparency was an essential element of the process" and that there was a need "to attract the confidence of the public that something was not going on behind closed doors..... to deliver this property [Baha Mar] to a specific party".
"CCA's concern, that transparency required the public to be satisfied as to whether an adequate price was secured for the construction contract, is severely weakened when we look at the terms of the sale relative to the construction contract," the judge ruled. "The process approved by the court pegged the sale to an independent valuation."
The transparency and "open justice" call also comes from a company that has raised objections to Tribune Business's coverage of the New York case with the presiding judge, and also mounted a failed bid to take the matter into arbitration and out of the public eye.
Justice Winder's ruling, meanwhile, backed arguments by Mr Izmirlian's attorneys that there was no reason for the legal opinions to be placed in the public domain. He added that their use at the sale approval hearing amounted to a "limited" waiver of privilege, not a "general waiver" where all protection is "lost against the whole world".
Both legal opinions were ordered to remain sealed until a further decision from the Supreme Court.