The Tribune

By NEIL HARTNELL

TRIBUNE Business Editor

nhartnell@tribunemedia.net

Attorneys representing the Bahamian entrepreneur seeking to restore Paradise Island’s lighthouse yesterday argued it was “a complete nonsense” for the Government to assert that lease documents it dispatched for signing were part of continuing negotiations.

Damian Falkowski, the UK-based counsel representing Toby Smith and Paradise Island Lighthouse and Beach Club in their bid to persuade the Privy Council they had a valid, legally-binding and enforceable five-acre Crown Land lease, challenged why Richard Hardy, then-acting director of Lands and Surveys, would send his client a lease with instructions on how to execute it if negotiations remained ongoing.

He also pointed to evidence given by Candia Ferguson, former director of the Bahamas Investment Authority (BIA), at the earlier Supreme Court trial when she said she was unable to think of any remaining issues to be decided over the lease for two parcels on Paradise Island’s western end - one for three acres, the other for two.

“The case the defendant can run is this part of ongoing negotiations,” Mr Falkowski said. “In my submissions, this is a nonsense. She [Ms Ferguson] could not think of anything to be agreed. Everything that had to be agreed was done, and the letter contains the answer.”

The dispute centres on a 21-year lease that the then-Minnis administration allegedly granted Mr Smith for two Crown Land parcels in the Colonial Beach area. The Bahamas Investment Authority (BIA), via a May 23, 2018, letter informed him that his $2m beach club project had been approved, although rather than the 17 acres initially sought, the Crown Land lease was to cover just five.

Then, on January 7, 2020, Richard Hardy, acting director of the Department of Lands and Surveys, sent Mr Smith and his company a letter headlined “approval for Crown Land lease”. This covered a two and three-acre parcel, respectively, with the first adjacent to the lighthouse at Paradise Island’s western end and the other for the ‘beach break’ destination.

The letter contained instructions on how the attached lease documents were to be signed, dated, sealed and notarised, then returned to the Department of Lands and Surveys. Once the minister responsible for Crown Lands, who was then-prime minister Dr Hubert Minnis, signed a copy of the lease was to be returned to Toby Smith.

Mr Falkowski yesterday challenged why Mr Hardy’s letter made no mention of the lease being a draft but, instead, contained detailed instructions for its signing and execution. “It would be the simplest thing for Mr Hardy to put ‘subject to contract’,” he argued. “Why send a counterparty a lease for signing, sealing and notarising?”

Describing this as “complete nonsense”, he reiterated: “If one says it’s subject to contract, why send this if it’s part of ongoing negotiations? Why on earth say sign, seal and notarise something that’s a draft?” Mr Smith, who was present in London for the appeal to the Privy Council, the highest court in the Bahamian judicial system, also appeared to be encouraged after one of the five UK law lords hearing the case noted the significance of the letter being headlined “approval for Crown Land lease”.

However, Charles Russell Speechlys, the UK law firm representing the Government, argued that former prime minister, Dr Hubert Minnis, in his capacity as minister responsible for lands, would have signed the lease before it was sent to Mr Smith if everything had been agreed and the intent was to bind the Government.

“If it was intended to bind the minister irrevocably in terms of the draft lease, the minister would have signed it first, sent it off and all Mr Smith was required to so was to sign-off,” the Charles Russell representative argued. “Because it was sent off without the signature of the Government, it was making sure the putative tenant was willing to accept those terms.”

He added that the January 7, 2020, letter was an “offer” and “intention to treat”, designed to test if Mr Smith was willing to accept those terms rather than a binding, enforceable lease agreement. Both sides were just as vigorous in the arguments contained in their written submissions.

“In this appeal, the appellant contends that the letter of 7 January, 2020, from the minister responsible for Lands and Surveys evidenced a binding agreement between the appellant and the minister for the grant of a lease,” Mr Smith and his attorneys argued. “There was a binding legal obligation to grant a lease to the appellant in the terms of the lease sent under cover of letter dated 7 January, 2020….

“The error in law was that the learned justices of appeal (by majority) asked themselves the wrong question. The real question was not whether the lease signed by the appellant, but not signed by the respondent, could be considered as a valid agreement for a lease. The real question was whether the essential terms of an agreement for lease were present.”

However, the Government countered: “Whether negotiated terms are intended by the parties to be final and binding at that stage, or are advanced ‘subject to contract’, depends on the context and the particular facts and circumstances of the case. It is plain in this case that the parties were negotiating towards a formal Crown lease.

“Either the negotiations would end in an executed Crown lease or they would not. Everything, in other words, was subject to contract. Whilst there are less formal scenarios in which a different conclusion might be inferred, these were negotiations for a lease from the state. It is obvious that there would be no deal until a contract was formally executed.”

The Government added: “This was precisely the finding made by the trial judge after careful consideration of the evidence and surrounding circumstances of the case. The Chief Justice held that the draft lease provided to the appellant was not an unconditional offer but depended on execution by the Government.

“The Board [Privy Council] can imagine, no doubt, why it might have been thought important to have the appellant, as potential lessee, consider and agree in advance to what would or may be the terms of the demise should it go ahead.

“But the minister, in sending the draft, was not irrevocably binding the Government to enter into the lease on those terms or at all. As the Chief Justice held, had that been the intention, the minister himself would have signed the lease and then sent it to the appellant for final signature,” it continued.

“On the basis of the evidence before him, the Chief Justice was entitled to hold that there was no final agreement. The potential demise was, as his lordship put it, ‘subject to execution’. This view is supported by the fact that the formalities required to demise Crown lands had not been complied with.”

The Privy Council questioned both sides over whether negotiations had been completed, and if the January 7, 2020, correspondence enclosing a completed lease, together with years of negotiations between the parties, amounted to an enforceable agreement without the signature of the responsible minister.

Mr Falkowski argued the dispute ultimately turns on a single question: Whether a binding agreement for lease had already been reached. He maintained the lease forwarded by the Government contained all of the essential commercial terms, leaving nothing further to negotiate before execution.

"The lease sent on January 7 had been prepared by the respondent's lawyers," he argued. "There was nothing further to be negotiated and agreed. All that was left was for the respondent to sign and seal the lease."

Mr Falkowski further contended the Government abandoned the transaction only after deciding to pursue what he described as "a better deal” with Royal Caribbean for its Royal Beach Club.

The law lords repeatedly tested that argument, questioning whether the signed letter from Mr Hardy enclosing the lease could itself constitute an agreement for lease, notwithstanding the absence of the minister's signature on the lease document itself.

One member of the Board asked whether the acting director's signature could effectively bind the Government, while another questioned whether, even if the negotiations had initially been conducted on a "subject to contract" basis, a binding agreement may nevertheless have arisen by the time the lease package was sent to the developer.

Mr Falkowski argued the accompanying letter instructed the company to sign, seal, witness and notarise the lease, language that he said would make little sense if negotiations were still ongoing or the document remained merely a draft.

However, Charles Russell rejected that interpretation, maintaining no binding contract was ever formed because the proposed Crown lease was never executed by the minister and the parties had not reached a final legally enforceable agreement.

Throughout the hearing, the judges also explored whether the case should properly be analysed as an "agreement for lease" or under more conventional principles of offer and acceptance, questioning both parties on how the claim had been pleaded and whether the legal basis advanced on appeal differed from earlier proceedings.

The Board also raised questions about whether Bahamian law governing contracts relating to land — including the Statute of Frauds — could have implications for the appeal. While the issue had not formed a central part of the parties' submissions, the judges indicated they may invite further written arguments if they determine additional consideration is required before delivering judgment.

The Privy Council reserved judgment. No timetable was given for a decision.