Tuesday, July 16, 2019
By NEIL HARTNELL
Tribune Business Editor
Bank of The Bahamas has accused companies jointly owned by an ex-Cabinet minister’s family trust of “already abandoning” claims worth $10m in their bid to enforce a default judgment.
Callenders & Co, the BISX-listed institution’s attorneys, are arguing that the “vastly inflated” damages claimed by entities controlled by the family trusts of Damian Gomez, former minister of state for legal affairs, and David Jennette are but one reason to stay their enforcement bid.
Besides “substantial irregularities” associated with the $6m damages calculation by acting deputy registrar, Stephana Saunders, it was alleged on Bank of The Bahamas’ behalf that there were “extensive” and “good” defences to all the claims against it.
Noting that the six companies and persons involved all had liabilities owing to Bahamas Resolve, the vehicle created to facilitate the two Bank of The Bahamas bail-outs, the bank and its attorneys warned it would be “very difficult” to recover any monies paid out if the judgment was enforced as they would likely be used “to satisfy other creditors.”
However, Mr Jennette argued in a May 27, 2019, affidavit that Bank of The Bahamas’ bid to set aside the default judgment and stay the acting deputy registrar’s damages award was “vexatious, frivolous and an abuse of process”.
Alleging that Bank of The Bahamas’ failure to comply with the March 9, 2019, damages award was the latest phase of failing to follow court orders and instructions, Mr Jennette urged the Supreme Court to impose a Mareva Injunction to freeze the BISX-listed institution’s assets so that they could be used to settle the judgment.
He added that former Philip Galanis, the accountant and former PLP MP; Sir Baltron Bethel, senior policy advisor to former Prime Minister Perry Christie; ex-minister of state for finance, Michael Halkitis; and former Family Guardian president, Patricia Hermanns, had all agreed to act as receivers for Bank of The Bahamas if necessary to help enforce the judgment.
However, Callenders & Co is alleging on Bank of The Bahamas’ behalf that many of the claims made are “unmeritorious and are unlikely to be successful at trial”, adding that Messrs Gomez and Jennette’s family trusts and companies “appear to have accepted” this several times.
“Whereas the plaintiffs included claims for $14.086m in the statement of claim, at the assessment of damages hearing counsel for the plaintiffs stated that ‘there were numbers there that we could not claim as right’ and that ‘there was a legitimate claim for some $4m plus’,” the bank’s legal arguments alleged.
“By the bank’s calculation the total sum of the claims pursued at the assessment of damages hearing was in fact $3.741m. The plaintiffs have therefore already abandoned claims with a value of over $10m. It is of concern that the plaintiffs were willing to claim from the bank an amount which they must accept were vastly inflated.”
Arguing that “there is a real prospect” that Bank of The Bahamas will not be held liable for many of the sums claimed, even if the default judgment was enforced, the bank’s legal filings attacked the deputy registrar’s $6m damages calculation and alleged it would likely “be substantially reduced”.
Callenders & Co said that $6m had been awarded even though just $3.741m in damages was pursued, alleging that $3.339m was granted to one company even though the claim had been dropped.
“The bank does know that the plaintiffs have liabilities to Bahamas Resolve,” the legal filings added. “In the circumstances, there is good reason to believe that any monies paid to the plaintiffs by the bank will be used to satisfy other creditors or paid to third parties by the plaintiffs. This will make it very difficult for the bank to recover money from the plaintiffs in the event that the default judgment is set aside.”
The $6m default judgment obtained by Mr Gomez and Mr Jennette on behalf of their family interests, and efforts to enforce it, plunged Bank of The Bahamas back into multi-million dollar losses and halted its financial recovery efforts.
The BISX-listed bank, which had been inching towards consistent profitability following five successive years of heavy losses prior to 2018, unveiled a $4.039m net loss for the three months to end-March 2019.
The “red ink”, which wiped out first-half profits worth more than $3.5m, drove Bank of The Bahamas into a $209,604 loss for the first nine months of a financial year that ends on June 30 - resulting in what management described as a 119.52 percent “decrease” in net income compared to the $1.074m earnings for the same period in 2018.
Kenrick Braithwaite, Bank of The Bahamas’ managing director, blamed the hike in operating expenses - and the institution’s return to making heavy losses - on provisions taken after the third quarter’s end for potential losses relating to the $6m default judgment.
“Subsequent to March 31, 2019, the bank was made aware of a judgment in default against the bank for approximately $6m plus interest and cost,” Mr Braithwaite wrote. “The bank has filed the applications to set aside the default judgment and the said damages, and also to stay or, in certain circumstances, strike out enforcement proceedings. Adequate provision has been made in the financial statements for any loss that might ultimately be determined.”