By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A world-famous magician/illusionist has defeated the Government's bid to obtain a summary judgment in their $2m-plus real property tax dispute involving his private Exuma resort destination.

Justice Ian Winder ruled that David Copperfield, described by Forbes magazine as the most commercially successful magician in world history, faces a "hard road" but said the Treasurer's claim for nine years' worth of allegedly outstanding taxes was not impregnable "in the circumstances of this case".

The Government, through the Treasurer, had sought a summary judgment on the basis that Mr Copperfield's Imagine Nation Company had no viable defense to its claim. The magician, though, alleged he received "oral" assurances from the "then-Prime Minister" that real property tax breaks and other concessions would be extended to additional islands he acquired if certain conditions were fulfilled.

The identity of the "then-Prime Minister" is not revealed in the Supreme Court judgment, but it can only be one of Perry Christie or Hubert Ingraham. Given that Mr Copperfield acquired the two islands at the centre of the dispute on July 13, 2006, the same date as he bought his principal property of Musha Cay, it is likely to be a reference to Mr Christie.

Mr Copperfield and the Government eventually agreed an amended Hotels Encouragement Act agreement on February 26, 2016, which extended the real property tax breaks to the two islands. However, the Treasurer is claiming that this exemption was not made retroactive by the Government's National Economic Council, and that taxes from early 2016 back to 2007 remain due and owing.

However, rejecting the Treasurer's bid for a quick victory, Justice Winder ruled: "While I think the road ahead for the defendant is a hard one, I am not prepared to conclude there is no defense to the claim.

"Whilst the claim of the Treasurer, on an examination of the evidence, appears formidable it is not undefendable in the circumstance of this case.... The defendant's case is that representations were made by the executive, specifically the then-Prime Minister, that the exemptions would be extended on certain terms which it says has been fulfilled.

"The evidence in the defendant's case appears to consist considerably in oral communications between Mr Copperfield, the principal of the defendant, and members of the executive. Whilst the direct evidence is principally oral in nature, the defendant also relies on certain circumstantial evidence."

This, Justice Winder said, included fulfilling all conditions placed on Imagine Nation and the permit to purchase Rudder Cut Cay which referred to its use in the expansion of the Musha Cay resort development.

The case as presented raises a number of issues, not least the advisability of foreign investors relying on oral - rather than written - promises and assurances by the Government and Cabinet ministers. It also sends a potentially troubling message to other investors, while some may also view it as raising questions as to whether wealthy developers are paying all their due taxes as a time when the Public Treasury needs every cent it can get.

A statement sent to Tribune Business last night via Mr Copperfield's Bahamian attorney, Gail Lockhart-Charles, said he had "engaged in extensive discussions with the Government as to the investment and the extensive refurbishment, development and re-branding of the resort, including the addition of major new facilities" at the time of purchase.

It added: "Since the purchase of the properties, Mr Copperfield has invested millions of dollars in upgrades, and The Bahamas is the beneficiary of a constant stream of favourable publicity in the international media as a result of the spectacular resort that Mr Copperfield has created.

"Mr Copperfield is excited about the opportunity and wonderful possibilities that exist for continued collaboration with The Bahamas government to promote our islands and retain a strong presence in the top echelons of international tourism.

"Mr Copperfield’s resort also provides employment for numerous Bahamians, including more than 25 full-time positions as well as other positions on an as-need basis. Mr Copperfield has also been heavily involved in assisting in the Hurricane Dorian relief effort, including by offering employment and housing to displaced Abaco residents following the storm."

Justice Winder's ruling, delivered just before Christmas 2019, said: "The Treasurer brings this claim.. seeking the collection of outstanding real property tax in the amount of $2.032m and penalties with respect to two properties owned by the defendant [Mr Copperfield and Imagine Nation],"

"The two properties are Rudder Cut Cay and Landing Cay, both situated in the Exuma Cays.... The Treasurer says that the real property taxes remain unpaid from 2007." While Musha Cay had previously enjoyed Hotels Encouragement Act concessions under its previous owner, John Melk, co-founder of the former Blockbuster Video chain, the other islands had not.

Mr Copperfield and Imagine Nation responded that the two islands were acquired along with Musha Cay amid plans to combine them into one destination. They "understood" that the Government would extend Hotels Encouragement Act incentives, including the real property tax breaks, to the entire development - including the two islands - in exchange for creating a "world-class luxury resort".

The "understanding" involved the extension of such tax breaks to Rudder Cut Cay and Landing Cay in exchange for completing "the considerable task of cleaning up" the former island and "making it safe", Mr Copperfield and his company countered.

The Government, they added, had warned that "the removal of many tons of waste and dangerous toxic debris, including chemicals, abandoned and corroded machinery and vehicles, and dilapidated, dangerous and uninhabitable buildings and other structures", would have to be undertaken before Rudder Cut Cay could be included in the resort complex.

Mr Copperfield and Imagine Nation said they accomplished this, and also agreed to work with the Government in marketing The Bahamas to other investors, wealthy homeowners and tourists. They gave permission for use of the name, the Islands of Copperfield Bay, in tourism advertising that marketed the islands as a single destination, together with photos of the properties.

"[Mr Copperfield] consented, and also donates his name, his brand and his time to promoting The Bahamas via the Ministry of Tourism's 'Behold' campaign, a Super Bowl campaign and numerous print campaigns and media appearances," his defense alleged.

"Since the purchase of the properties, the defendant has invested in excess of $20m in upgrades. The Bahamas is the beneficiary of a constant stream of favourable publicity in the international media as a result of the spectacular resort that the defendant has created."

Justice Winder noted that the first salvo in the long-running tax dispute was fired more than a decade ago by the Ministry of Finance. It told Imagine Nation that the acquisitions of Musha Cay and Big Lansing Cay "have not been declared to our offices for tax purposes".

It called for the relevant conveyancing documents to be sent to it "to regularise their status on our property tax roll", and urged that Imagine Nation settle a then-outstanding real property tax bill of $803,704. This was broken down into $641,850 for Rudder Cut Cay, with the near-$162,000 balance due on Little Lansing Cay.

Mr Copperfield and Imagine Nation replied on October 12, 2010, through their then-attorney, Richard Lightbourn, the former FNM MP, and partner at McKinney, Bancroft & Hughes.

He reiterated his clients' belief that an "understanding" had been reached with the Government that all "islands of Copperfield Bay" would be exempt from real property taxes, and said they were seeking a meeting with the Ministry of Tourism and other authorities to clarify the situation.

"Our clients are anxious to resolve the apparent misunderstanding and are hopeful that a meeting can be arranged in the near future so that we can put the issue behind us," Mr Lightbourn wrote.

This was effectively rejected two days' later by Rosemary Pintard-Bowe, on behalf of the Department of Inland Revenue, who said the National Economic Council (the Cabinet or a Cabinet committee) had not agreed to exempt the two islands from real property taxes. She reiterated the previous demand that the sums be paid "as a matter of priority".

Creswell Sturrup, the then-permanent secretary in the Prime Minister's Office, also informed Imagine Nation and its attorneys on January 23, 2017, that the revised Hotels Encouragement Act agreement of early 2016 did not apply the real property tax breaks retroactively. That meant taxes were still owing from 2007, he argued, broken down into $1.935m for Rudder Cut Cay and $96,515 for Little Lansing Cay.