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Parliament’s IBC error key in Bacardi rum fortune fight

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SIR BRIAN MOREE.

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The now-former chief justice has ordered that a Bahamian International Business Company (IBC) be resurrected from its dissolution more than 17 years ago to rescue multi-billion dollar litigation involving the Bacardi rum fortune.

Sir Brian Moree, in likely one of his last rulings before stepping down as chief justice, ruled that the Bahamian courts had the power to revive Baron’s Court Holdings from its grave and thus save multiple legal proceedings involving the estate of Lord Bacardi, great-grandson of the global spirits group’s founder.

His July 21, 2022, verdict resulted from numerous errors - including one made by the Bahamian Parliament in 2010 when it changed the IBC Act. Sir Brian said the reforms, whether MPs at the time intended it or not, eliminated the legal or statutory power to restore an IBC’s name to the companies register after it has been dissolved.

The error forced Sir Brian, who was yesterday sworn in as a Court of Appeal judge, to rely on common law - which is derived from custom and prior judicial rulings - for Baron’s Court Holdings’ restoration. His ruling noted that the absence of restorative powers in the existing IBC Act leaves The Bahamas “out of line” with the regimes in rival international financial centres (IFCs), and he gave a strong nudge to the Government/Parliament that this needs correcting.

Sir Brian wrote that, in its haste to give the Registrar General and the courts the power to restore the name of an IBC that was struck-off for non-payment of fees, the IBCs (Amendment) Act 2010 had unwittingly created another issue by eliminating the previously-existing section 166.

That “specifically conferred on the court the power to restore the name of an IBC to the registry after it has been dissolved”, but - to this day - such authority no longer exists. Sir Brian, hinting that this could undermine the competitiveness of a key financial services product, said: “The absence of such a provision in the IBC Act (as amended by the IBC Amendment Act) means that, currently in The Bahamas, there is no statutory power to restore the name of an IBC to the register after it is dissolved.

“I observe.. that this position is anomalous and is out of line with the legislative regime for IBCs (or their functional equivalent) in most jurisdictions which operate as IFCs. In 2000, through section 166(3) of the IBC Act, the court was specifically given the power to restore the name of a dissolved IBC. In my view, it is unlikely in passing the IBC Amendment Act in 2010... was intended to take away that power.”

Suggesting that this legal power was taken away “for unknown reasons” some 12 years ago, Sir Brian added: “It seems to me that this was an oversight, but this is a matter for Parliament. There is no ambiguity here which can be resolved by the court through the application of established principles of statutory interpretation.

“It is clear that the power for the court to restore the name of a dissolved IBC to the register was contained in section 166(3) of the IBC Act, and it is similarly clear that this power was repealed and not replaced in the new section 166 under the IBC Amendment Act. If, indeed, this was an oversight of the draftsman, it is for Parliament to correct it by the appropriate legislative intervention.”

Having made his clarion call to the Government and Parliament, Sir Brian’s ruling also exposed blunders in the late Lord Bacardi’s estate planning and in how Baron’s Court Holdings came to be dissolved. The latter was incorporated on May 18, 2004, with two nominee subscribers, Welwyn Ltd and Rosencrantz Ltd. Both are were owned by the corporate services arm of the Lennox Paton law firm, which acted as Baron’s Court Holdings’ registered agent.

Describing the late Lord Luis Gomez del Campo Bacardi as “a man of substantial means”, Sir Brian’s judgment recorded how the Bacardi heir held his 1,404,222 shares in the spirits and rum producer through two Liechtenstein-based companies, Arateo Anstalt and Rantex Anstalt. The former held 739,927 of the Bacardi shares, and the latter the 664,295 balance.

Lord Bacardi then sought to enhance his estate planning through the 2003 creation of the Bastille Trust. This was designed to be “a succession instrument” that would pass his fortune to his wife, Lady Monika Gomez del Campo Bacardi, and his only daughter, Maria Luisa Monika Gomez del Campo Bacardi, who was then a minor.

Besides Lord Bacardi, the three trustees for the Bastille Trust included Dr Ernst Walch, a director of Walpart Trust, the entity that formed it, and the Bacardi heir’s then-Swiss attorney, Louis Mudry. The 1.4m Bacardi shares were included among the trust assets, but Lord Bacardi failed to realise that he could be outvoted by the other two Bastille trustees in decisions involving his estate.

“In 2004, Lord Bacardi received advice from his Bahamian attorney, Lennox Paton, which caused him to reconsider the use of the Bastille Trust as a succession instrument for his wife and daughter,” Sir Brian wrote. “He was advised that two of the three trustees (acting without him) could make decisions affecting the Bastille Trust which might be adverse to his intentions.

“That was unacceptable to Lord Bacardi, and he concluded that the trust did not provide the intended level of security for his wife and daughter. In those circumstances, he wished to revoke the Bastille Trust and transfer the trust assets to a Bahamian company which he intended to incorporate.” That entity was Baron’s Court Holdings, and Lord Bacardi sought to transfer his 1.4m Bacardi shares to become registered in its name.

However, as warned by Mr Paton, the other two Bastille Trust trustees blocked the share transfer by telling Bacardi, the company, not to effect the re-registration. Lord Bacardi ultimately began legal proceedings to remove the due as trustees and retained Claude Brechbuhl, a Swiss attorney, to represent him personally eight months prior to his January 2005 death. The Bacardi shares still had not been transferred to Baron’s Court Holdings when he passed.

This, Sir Brian found, set the stage for another “misstep”. An attorney from the same Swiss law firm as the lawyer hired by Lord Bacardi to represent him personally wrote to Lennox Paton Corporate Services on February 25, 2005, requesting that Baron Court Holdings be liquidated and dissolved.

Mistakenly assuming that this attorney was acting for Lord Bacardi’s estate, Lennox Paton went ahead and dissolved Baron’s Court Holdings on March 29, 2005. Michael Paton, partner in the Lennox Paton law firm, in evidence before the Supreme Court voiced fears that this mistake “may nullify legal proceedings” in which Baron’s Court Holdings must play a central role. It could be involved in ten separate actions brought by Lady Bacardi and her daughter over the estate.

Despite the absence of a statutory pathway, Sir Brian said he was satisfied that the Supreme Court has the necessary powers to restore a dissolved IBC’s name to the Companies Registry even though 17 years have now elapsed - something he said would “normally be a formidable and, perhaps, insuperable obstacle” to doing so.

However, in ordering that Baron’s Court Holdings be restored, Sir Brian said Lord Bacardi’s daughter was a minor until 2019, and she and her mother were unaware the company had been dissolved until an investigation that same year.

Comments

ThisIsOurs 1 month, 3 weeks ago

"verdict resulted from numerous errors - including one made by the Bahamian Parliament in 2010 when it changed the IBC Act. Sir Brian said the reforms, whether MPs at the time intended it or not,..."

Our poor quality MPs, their willingness to bang on the desk for anything, accept anything once the leader wants it and their clear absence of any analytical skills is one of our country's greatest risks. I'm positive some of them dont even read the Bill's they vote for. And if they dont read they certainly dont analyze what might be negative repercussions of changes. And then what about the Senate? The body that's supposed to have the really deep legal knowledge and is supposed to catch these legal traps with their crack legal minds and eagle eyes? Well today they've bastardized it to a place where you go for political experience, the exact polar opposite of its purpose. I remember reading the CEB bill and my first impression was, who wrote this thing? It read like a C grade college assignment. But they approved it

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tribanon 1 month, 3 weeks ago

Suggesting that this legal power was taken away “for unknown reasons” some 12 years ago, Sir Brian added: “It seems to me that this was an oversight, but this is a matter for Parliament. There is no ambiguity here which can be resolved by the court through the application of established principles of statutory interpretation.

Moree was absolutely right when he said ".....but this is a matter for Parliament." So why in hell did he take it upon himself to usurp the role of Parliament and absurdly attempt to enact legislation by way of a court ruling?!! And to think Moree then has the chutzpah to instruct Parliament to align the IBC Act to accord with his ruling no matter what Parliament's earlier legislative intent may have been.

One must wonder whether Moree's old law firm, MBH, had any skin in this matter. Also, why did Moree elect to issue such a highly controversial and contentious ruling just before stepping down as Chief Justice of the Supreme Court and ascending to the Appellate Court where his ruling on this matter would be heard on appeal?

And just think how many other cases of IBC's removed from the register but not restored upon request of their owners and other stakeholders may now come before the courts.

All of this really stinks to high heaven, especially given that Parliament, the courts and many in our legal community have known about these Bacardi family legal skirmishes for nearly two decades.

Could it be that Moree is trying to save the hides of certain partners at the Lennox Paton (LP) law firm?

The Bacardi family are well-known tax dodgers which makes the sympathy and great favours Moree has bestowed on them even more intriguing to say the least. Way too many questions are begged in all that has gone on here. But with Moree now on the appellate court they are unlikely to get a fair hearing on appeal and therefore no public airing. On the face of it, this entire matter smells ideally ripe for a hearing by the Privy Council.

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