By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The 40-acre development that sparked a Canadian government warning on Bahamian real estate transactions has concluded its Privy Council appeal over the ownership of 11 lots, arguing that the new Planning and Subdivisions Act strengthens its case.

The controversy-plagued Oceania Heights project in Exuma, which has seen bitter in-fighting between its developers and a group of homeowners, is seeking to reinstate a Supreme Court ruling that found the sale of those lots by the previous owner ‘null and void’ because it had failed to comply with the Private Roads and Subdivisions (Out Island) Act.

The ruling by then-senior justice John Lyons set a legal precedent, and caused temporary upheaval in the real estate development market, because it meant that unless developers had either lodged a performance bond with the Ministry of Works or completed infrastructure work (roads, utilities) themselves, they could not ‘sell or convey’ lots to buyers because their subdivisions were unapproved.

That verdict, though, was overturned by the Court of Appeal. But Oceania and its lead counsel, Callenders & Co partner, Fred Smith QC, argued before the Privy Council that the new Planning and Subdivisions Act showed how the Private Roads and Subdivisions (Out Island) Act, which it replaced, ought to be read.

The new Act, which came into effect in the Family Islands on October 1 last year, expressly forbade the sale of lots in subdivisions that did not have government approval.

Yet attorneys for WCE and the lot purchasers - Rev Dwight Bowe and Nancy Bowe, Peter Burrows, Coastline Company, Linton Grey and Bernadette Weech - argued that their clients still had good title even if there was non-compliance with the Act. And they said the Supreme Court had misconstrued the Private Roads and Subdivisions (Out Island) Act.

The Privy Council’s final verdict on the matter could trigger another flashpoint between Oceania’s developers - Bahamian attorney, Anthony Thompson, and Canadians Howard and Donna Obront - and the homeowner group (although not including all owners) opposing them. This is because the 11 disputed lots are among the many issues they have been at odds over.

A May 2011 letter from the attorney representing many of the upset homeowners, Andrew O’Brien, alleged that sales of the 11 lots accounted for 50 per cent, or half, of the conveyances lodged by Oceania Heights with the Registry of Records.

Mr O’Brien, a Glinton, Sweeting & O’Brien partner, wrote to the developers’ Canadian attorney: “Oceania has sold (if such sales are enforceable) all of the 11 lots that are specifically excluded in the conveyance from WCE.”

Describing this as “remarkable”, Mr O’Brien questioned the title roots for the 11 lots. And he added: “There is no recorded conveyance of these 11 lots to Oceania. Yet Oceania is purporting to convey a fee simple interest free from encumbrances to other purchasers. At best, Oceania has an equitable interest in these lots, if Oceania wins its appeal.”

And, noting that the Court of Appeal verdict meant Oceania presently had no interest in the 11 disputed lots, Mr O’Brien alleged the grounds of its Privy Council appeal - that the properties were sold without prior subdivision approval - were “ironic” given that 10 were sold prior to the Obronts and Mr Thompson getting subdivision approval in 2005.

In response to those claims, the Obronts and Mr Thompson earlier this year in a series of e-mailed responses to Tribune Business described the 11 lots as “a non-issue”, and challenged their opponents to identify who they had sold these properties to.

Denying the claims, they said: “We won at the Supreme Court and had a right to sell. Then we unfortunately lost at the Court of Appeal, which then put the title to 11 lots in question. Now we are on way to the Privy Council, where we hope the Court of Appeal will be reversed.

“There is nothing illegal, or fraudulent, going on. Eleven properties were held back. In one of these properties I [Howard Obront] built a home for myself and my family. Who else have we sold any of the 11 properties to?”

Outlining the case’s history in his written submissions to the Privy Council, Mr Smith said Oceania purchased the 125 lots for its real estate development from Willard Clarke Enterprises (WCE).

That firm’s president, John Marshall, had previously agreed to sell 11 lots to other buyers, and in the original September 1995 deal with Oceania it was agreed that those would be ‘carved out’ from the sales agreement.

In other words, Oceania would buy all the land from WCE bar those lots. “It later transpired that WCE could not afford to put the necessary infrastructure in place in order to be permitted to sell any subdivided lots, and that the previous arrangements with Oceania and other parties were therefore void under the Private Roads and Subdivisions (Out Island) Act,” Mr Smith argued.

As a result, WCE and Oceania entered into a new agreement in January 1996 that would see the former convey the entire property (including the 11 lots) to the new developer.

Relying on the second agreement, Mr Smith said Oceania “expended substantial sums (in excess of $2 million) putting in the required infrastructure”.

Alleging that the Ministry of Works had confirmed to Oceania that no subdivision/lot sales approval was granted, Mr Smith alleged the developers had agreed to indemnify Mr Marshall against claims from the 11 lots’ intended purchasers.

But, after the 1996 agreement was recorded at the Registry of Records, WCE’s attorney, L B Johnson, told Mr Thompson in June 1998 that his client was proceeding with the title conveyances for six lots.

Despite Mr Thompson pointing out that the original subdivision boundaries had been changed to comply with government approvals, and that Oceania Heights had been “transformed into a luxury gated community”, WCE in 1999 refused to convey the land and tried to reinstate the first agreement.

While Oceania was successful in getting WCE to convey all bar the 11 disputed lots to it in February 2000, it then discovered that WCE had passed title to nine of those over to the intended purchasers that same month. Legal proceedings then started.

Setting out Oceania’s case, Mr Smith said the conveyancings between WCE and the purchasers could not be enforced because, with the exception of Mr Burrows, there were no sales agreements in writing.

And, arguing that any agreements were with Mr Marshall, not WCE, Mr Smith said the fact that the 1996 agreement was the first to make the Registry of Records meant it trumped the conveyances to the 11 lot buyers. The Supreme Court had also thrown out the buyers’ contention that Mr Marshall was subject to “duress or undue influence”.

But, getting to the crux of his case, Mr Smith argued that Court of Appeal Justice Blackman had misread a 1970 Ministry of Works letter to WCE as giving approvals for sale.

The Callender’s & Co partner added that the letter instead, subject to the payment of fees, merely approved the subdivision’s layout. It made clear that section five of the Private Roads and Subdivisions (Out Island) Act, which approved lot sales, still had to be complied with.

“The clear and unambiguous purpose of section five was to prohibit the sale of lots with no infrastructure in place or with no provision having been made therefore,” Mr Smith alleged.

“The Court of Appeal’s decision therefore took no account of the true purpose behind the statute, which was to protect purchasers of lots ‘off-plan’ from purchasing lots without infrastructure or guaranteed financial provision therefor first being in place.

“And, it is submitted, to further the general public interest in having new developments serviced with proper infrastructure funded not out of the public purse but by those profiting from the development.”

Mr Smith also challenged Appeal Justice Newman’s finding that a maximum $4,000 penalty was enough to provide proper planning safeguards.

“It is submitted that it cannot be right that the statutory purpose of ensuring that new developments have proper infrastructure in place, funded by the developer, could be met by the imposition of a measly $4,000 fine on defaulting developers,” the Callenders & Co attorney argued.

“There are obvious public policy reasons, serving not just potential purchasers but the wider community and general public interest, for the infrastructure needing to be in place.

“If agreements prohibited by section five are nonetheless upheld there is then no obligation on the purchasers or on anyone else to put the infrastructure in place, and no one to pay for it. The purpose of the Act is therefore frustrated. Transfers in the absence of approval and provision for infrastructure will also have an adverse impact on the new purported owners’ ability to market and sell the lots.”

Mr Smith further argued that the new Planning and Subdivision Act, with its express wording that lot sales in unapproved subdivisions were “null and void”, merely clarified the public policy intent in Section five of its predecessor Act.

But attorneys Charles Mackay and Joseph Moxey, acting for Rev Dwight Bowe and Nancy Bowe, argued that even if WCE breached the Private Roads and Subdivisions (Out Island) Act, title to the four lots had properly passed to their clients.

They alleged that it was only in 2010, with the passage of the Planning and Subdivision Act, that Parliament decided conveyances were to be voided if subdivision approval was not in place.

And Harvey Tynes QC and Ntshonda Tynes, acting for Peter Burrows, and Elliott Lockhart, representing WCE, Coastline Company, Linton Gray and Bernadette Weech, both gave similar arguments on behalf of their clients.

While also trotting out the line that their clients still had good title to the lots, they both argued that the Private Roads and Subdivisions (Out Island) Act did not make it illegal to purchase property in an unapproved subdivision - only the selling of it.

Referring to Justice Lyons’ original ruling, both Messrs Tynes and Lockhart argued: “If the trial judge were right in his conclusion, the result would be that an unscrupulous owner of land in an unapproved subdivision could act with impunity and contravene the provisions of Section five of the Act, then abscond with the moneys received from innocent purchasers of lots in an unapproved subdivision while retaining the title to lots he has conveyed to the purchasers.”