The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Freeport condominium complex has successfully prevented its water and sewerage services from being cut-off over an unpaid $300,000 bill due to concerns over post-Hurricane Dorian supply quality.

Justice Loren Klein, in an October 21, 2022, ruling extended Grand Bahama Utility Company’s (GBUC) frustration over its near four-year battle to disconnect the Lucayan Towers South Condominium Association by granting a further injunction blocking any such move.

However, the injunction is only for a six-month period and is conditional on the Association bringing the case to trial “expeditiously” following a legal fight that has been raging since December 2018. And Justice Klein issued the injunction on the basis that contamination of Grand Bahama Utility Company’s wellfields with salt water from Dorian’s storm surge meant it was unable to supply customers with a “wholesome water quality” for several years post-storm.

The Supreme Court, which was only required to find the Association had an arguable case, and did not rule on the merits of the action, said assertions of an “inferior water supply” could impact the amount of outstanding arrears owed to the Grand Bahama Utility Company, create a potential claim for damages and, possibly, provide the basis to resist disconnection.

Describing this as “a serious issue to be tried” by hearing the Association’s substantive case, Justice Klein said the injunction should also be granted given that the condo complex would “suffer far greater harm” than Grand Bahama Utility Company, a member of the Grand Bahama Port Authority (GBPA) Group of Companies, if it were refused.

“The injunction is sought to restrain the first defendant, the Grand Bahama Utility Company (GB Utility), from disconnecting water and sewerage services to the condominium property managed by the plaintiff pending trial of the claims for declaratory and other relief,” Justice Klein’s verdict said. “GB Utility claims to be entitled to disconnect the supply over an outstanding bill of nearly $300,000.”

The Association first sought an injunction to prevent Grand Bahama Utility Company from disconnecting its water and sewerage supplies via legal action that was initiated on December 17, 2018. Then-Justice Keith Thompson ultimately granted that relief at an April 9, 2019, hearing where only the condo complex’s attorneys were present and no reasons for the decision were provided.

Justice Klein, in his verdict, noted that the outstanding bill owed to Grand Bahama Utility Company had accumulated during a ferocious legal battle within the Association itself over which one of two separate Boards of residents was to head the complex. Besides splitting the residents into duelling factions, this also resulted “in near paralysis” of the Association and “crippled” its finances.

Pointing to this background, Justice Klein wrote: “The claim for injunctive relief arises in somewhat unusual circumstances. Firstly, it concerns the provision of utilities in the unique constitutional context of the Hawksbill Creek Agreement.....

“Secondly, this is a renewed application for an injunction by the plaintiff following the discharge of an earlier injunction that had been granted to restrain GB Utility from disconnecting the supply. Curiously, the first injunction was imposed pending the disposition of outstanding litigation between members of the Association and was not based on any claim then articulated against the first defendant. Subsequently, the Association pleaded discrete claims against the GB Utility.”

GB Utility, “concerned that the Association’s account was falling further into arrears”, sought to have the initial injunction imposed by Justice Thompson discharged via legal papers filed on October 30, 2019. However, the COVID-19 pandemic intervened before the case could be heard by the Supreme Court, and GB Utility suspended disconnection of customer accounts in any event.

Having granted the Association extra time to file the substantive merits of its claim against GB Utility, due to the delays caused by COVID-19 and Dorian, Justice Klein then turned his attention to whether it had raised “a serious issue” worthy of determination at a full trial.

He turned first to its claims of “nonfeasance and ultra vires” conduct against GB Utility relating to the “duties and obligations” it was alleged to owe customers by virtue of Freeport’s founding treaty, the Hawksbill Creek Agreement. “The gravamen of the complaint is that the GBPA failed to promote bye-laws to authorise the provision of the utilities. This, the plaintiff says, is mandated by the Hawksbill Creek Agreement,” the judge wrote.

“The main claim is that the supply of water and sewerage services by GB Utility, and the imposition of fees and penalties in relation to such supply, is unlawful in the absence of any law authorising the same.” Meryl Glinton, the Association’s attorney, alleged that the Hawksbill Creek Agreement and related Acts “were only enabling” and did not give the GBPA and GB Utility statutory authority to provide water and other utility services in the Port Area.

As a result, the Association alleged that disconnection and the imposition of other penalties was unlawful in the absence of bye-laws permitting the same. But Edward Marshall III, GB Utility’s attorney, denied that there was any issue worthy of trial, arguing that his client was empowered by the Hawksbill Creek Agreement which itself has statutory force.

Justice Klein, finding in GB Utility’s favour on this point, said GB Utility’s right to disconnect for non-payment does not depend on legal authority. “In other words, the outcome of this case could never be that the first defendant could be enjoined from disconnecting supply because of the want of bye-laws,” he added.

The Supreme Court also dismissed concerns over whether GB Utility could charge 10 percent VAT on its bills or if it could increase rates by only seeking permission from the GBPA. The Association, though, enjoyed more success over its assertions that GB Utility’s supply was “sub-standard and non-potable” for several years due to “contamination from hurricane damage”.

“The first defendant [GB Utility] did not address any arguments as to whether the issue of water quality raised a serious issue to be tried between the parties. Significantly, it did not deny that the water was non-potable for certain periods, although it contends that quality had been restored before the date of the first hearing of the injunction application [on] 23 November, 2021,” Justice Klein wrote.

“Thus, although the allegations in the pleadings are not specific, it is possible to perceive a cause of action in the draft [claim] sounding either in breach of contract or breach of statutory duty, or otherwise at common law, for failure to provide wholesome water of the quality indicated.

“Moreover,the plaintiff has indicated that it intends to argue whether GB Utility is entitled to charge for non-potable water, and/or whether such charges and fees ought to be adjusted and/or are reasonable in such circumstances. As indicated, the claim does contemplate potential damages payable for inferior water supply. I am, therefore, prepared to resolve this issue in favour of the plaintiff and conclude that there is a serious issue to be tried here.

“If the plaintiff is right - and the court has no impressions of the merits of the claim at this point - it could affect the amount of the arrears owed based on any possible adjustments and, as indicated, might possibly ground a claim for damages. This state of affairs conceivably creates an equitable right to prevent disconnection pending the determination of those issues.” Hence the injunction was granted.