Sarkis urges dismissal of 'moot' CCA oppression

Baha Mar's original developer Sarkis Izmirlian.

Baha Mar's original developer Sarkis Izmirlian.


Tribune Business Editor


Sarkis Izmirlian, pictured, yesterday urged that the "shareholder oppression" claim against him by Baha Mar's main contractor be dismissed because it is "moot" and can only be heard in The Bahamas.

The latest legal filings by Baha Mar's original developer argued that there were multiple grounds for the New York State Supreme Court to reject this aspect of China Construction America's (CCA) counterclaim as well as its bid for "punitive damages".

Alleging that the latter was "impermissible and should be stricken", Mr Izmirlian and his BML Properties vehicle said CCA and its affiliates were unable to claim "shareholder oppression" because its investment in the Baha Mar project - some $150m of preference shares - had no voting rights.

While Bahamian law prevented the New York court from hearing such arguments, they also claimed that CCA's case was "moot" and had been rendered irrelevant because the entity in which it had held preference shares - Baha Mar Ltd - no longer exists following its winding-up and dissolution in January 2019.

Mr Izmirlian's argument was backed by an affidavit sworn by Oscar Johnson, managing partner and head of litigation at Higgs & Johnson, who alleged that CCA's "shareholder oppression" claim was flawed from the outset because it was based on Bahamian law.

He argued that a claim grounded in the Companies Act's section 280 can only "be validly made" before the Bahamian Supreme Court and no other - not even the New York State Supreme Court or any other in the US federal or state system. Otherwise this "would constitute an abuse of process under Bahamian law".

"I believe that such application can only validly be made to the Supreme Court of The Bahamas," Mr Johnson said. "I do not believe the section 280 protections to be intended for inclusion (as a cause of action) in proceedings relating to a now-dissolved company."

He added that the Companies Act's "shareholder oppression" remedy dealt with ongoing or present conduct, rather than what happened in the past, creating a "fatal flaw" in CCA's case.

"For an application to 'bite' present oppression is needed as the target," Mr Johnson added, otherwise the Supreme Court can grant no relief. He further pointed out that Baha Mar Ltd's dissolution on January 28, 2019, meant the company had "ceased to exist" before CCA brought its counterclaim and that the Chinese state-owned contractor was no longer a shareholder.

Tribune Business questioned at the time the counterclaim was made how CCA and its affiliates can bring a "shareholder oppression" action based on Bahamian law - namely section 280 of the Companies Act - before a New York court.

This newspaper also pointed out that CCA is likely to have been more than adequately compensated for the "wipe out" of its $150m Baha Mar investment in any event. Besides being reimbursed for the sums said to be owed to it by Baha Mar at the time of the Chapter 11 filing, it was also the recipient of a $600-$700m contract to complete the mega resort once Mr Izmirlian had been removed from the project.

Mr Izmirlian's challenge to the "shareholder oppression" counterclaim is merely the latest in a series of preliminary legal skirmishes as the two sides gear up for the substantive hearing of the original Baha Mar developer's case against his former contractor partner.

Even if Mr Izmirlian's latest legal initiative proves successful CCA still has two other elements to its counterclaim that have yet to be challenged, and both parties appear equipped for a long, costly fight that will take years and plenty money to resolve.

Taking their cue from Mr Johnson's legal testimony, Mr Izmirlian and BML Properties argued that CCA's affiliate "purports to predicate its counterclaim on Bahamian law" but this did not apply to the two sides' investors agreement which the New York court has already found governed the relationship between the two parties.

And, with all Baha Mar's assets sold to the China Export-Import Bank's Perfect Luck vehicle prior to the purchase by Chow Tai Fook Enterprises (CTFE), the original developer added: "Baha Mar Ltd is no more, and for this and other reasons set forth herein no 'oppression' claim in connection with that entity lies against plaintiff."

Mr Izmirlian argued that CCA's "punitive damages" claim should also be dismissed on the basis that these are not recoverable in breach of contract cases, which is exactly what the Chinese state-owned contractor's remaining counterclaims are based on.


MonstaDong 4 years, 7 months ago

Time for CCA to get chow tai FOOKED like they deserve ... long overdue


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