By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Baha Mar’s current owner is becoming increasingly embroiled in a legal battle with Sarkis Izmirlian related to the latter’s $2.25bn fraud and breach of contract claim against the project’s main contractor.

Legal papers reveal Chow Tai Fook Enterprises (CTFE) and its affiliates have been sucked into the original developer’s battle with China Construction America as they seek to obtain an injunction barring Mr Izmirlian from obtaining more evidence to strengthen his case.

CTFE is alleging its Delaware-based affiliates have already provided “substantial files plus other data” to the original developer. It is claiming Mr Izmirlian agreed not to seek additional evidence from its Bahamian or other affiliates.

CTFE is alleging that the original developer has now broken this deal by seeking the assistance of the Attorney General’s Office and Bahamian judicial system to obtain further documents from Perfect Luck Assets.

This was the vehicle created by Baha Mar’s then-$2.45bn lender, the China Export-Import Bank, to facilitate the project’s sale out of receivership to CTFE. A May 27, 2021, letter from CTFE’s attorneys to New York State Supreme Court judge, Andrew Borrok, who is presiding over Mr Izmirlian’s case over CCA, reveals that Perfect Luck Assets is now 100 percent owned by their client.

“The documents plaintiff [Mr Izmirlian] is seeking from Perfect Luck are central to this matter,” the New York court said in its judicial assistance request. “Defendants’ [CCA] alleged fraud and delay resulted in the Government of the Bahamas initiating liquidation proceedings, and the Export-Import Bank of China, which had partially financed the project, initiating receivership proceedings, seizing plaintiff’s interest in Baha Mar, and selling Baha Mar’s assets to Perfect Luck, a Chinese entity owned by Export-Import Bank of China.

“Perfect Luck thereafter re-engaged defendants as construction manager, awarded them lucrative work packages, and attempted to amend the contracts that had originally governed the parties’ relationship. Perfect Luck’s documents are therefore material to defendants’ intentional and knowing conduct to remove plaintiff from the project and attempt to strip plaintiff of its rights to the benefit of defendants.”

Communications between Perfect Luck and Baha Mar’s provisional liquidators; receiver-managers; and its China Export-Import Bank owner are Mr Izmirlian’s targets, along with details on the revisions made to the construction contract with CCA after Mr Izmirlian was removed as the project’s developer.

CTFE’s attorneys, alleging that this breaches the agreement with Mr Izmirlian, reveal in their letter that the latter initiated legal proceedings in the Delaware Superior Court in October 25, 2019, to obtain documents and files from both its US and Bahamian affiliates - including Perfect Luck and Baha Mar’s immediate owner, CTF BM Holding Ltd.

The two sides ultimately engaged in “cordial and productive” negotiations whereby CTFE’s Delaware subsidiary “caused the Baha Mar affiliates to produce substantial files to BML Properties, plus other data”.

“A condition of the signed agreement, which is governed by Delaware law, was that BML Properties would not seek document discovery in any forum (including in The Bahamas) from the CTF Baha Mar affiliates that had been requested in the Delaware subpoena,” CTFE’s attorneys wrote.

“In recognition that CTF Delaware had complied with the agreement, BML Properties voluntarily dismissed with prejudice the Superior Court action governing the Delaware subpoena on February 2, 2021.” However, Mr Izmirlian then sought judicial assistance from The Bahamas on April 4, 2021, barely two months later.

“The proposed letter rogatory, if endorsed, would request assistance from The Bahamas’ courts to obtain discovery from Perfect Luck – a CTF Baha Mar affiliate – on issues covered by the Delaware subpoena. It is CTF Delaware’s position that, in filing this request, BML Properties directly breached the agreement with CTF Delaware,” CTFE’s attorneys wrote.

After Mr Izmirlian and his attorneys allegedly refused to withdraw their judicial assistance request, CTFE’s Delaware subsidiary initiated legal action in the US state’s chancery court on May 25, 2021, seeking “temporary, preliminary and permanent injunctive relief against BML Properties for breach of the agreement.”

CTFE’s attorneys, stating that they were acting to bring the matter to the New York court’s attention, said: “This includes a request for an injunction restraining BML Properties from pursuing the proposed letter rogatory and/or requesting any other information from Perfect Luck that was previously sought by BML Properties from CTF Delaware in the Delaware subpoena.....

“CTF Delaware has moved for expedited treatment of its claim and for a temporary restraining order against BML Properties.” The disclosure of the deepening legal battle between Baha Mar’s current owner and original developer emerged just as Mr Izmirlian earned another preliminary legal victory over CCA.

For Judge Borrok, in a May 25, 2021, decision ruled that the Chinese state-owned contractor cannot use two legal opinions on the potential damages that Mr Izmirlian could claim as part of its legal defence to the fraud and breach of contract case.

“BML Properties objects to use of these legal opinions because it contends that it shared Baha Mar’s privilege either as a joint client or due to a common legal interest. Therefore, BML Properties has moved for a protective order over these documents,” the judge wrote.

“The defendants object, arguing that the legal opinions were prepared solely for Baha Mar, not BML Properties, and that BML Properties cannot assert any privilege as to these legal opinions. Put simply, the defendants are wrong.”

Judge Borrok made his ruling on the basis that “BML Properties has established a joint privilege over the legal opinions by submitting two attorney affidavits stating that they provided the legal opinions as counsel to BML Properties, as well as two affidavits from BML Properties officers attesting to that same understanding”.

He added that Thomas Dunlap, Baha Mar’s former president under Mr Izmirlian, had satisfactorily clarified his error in previous court testimony where he said he was not president of BML Properties.

“There is simply no question about joint privilege where, as here, the lawyers and the clients all agree about the scope of representation,” Judge Borrok added. “Nor did waiver occur, as the defendants argue. As the court noted, The Bahamas court said that there would be no waiver, and this court never disturbed that ruling.”

The papers in question are legal opinions prepared by two foreign law firms, Kobre & Kim (UK) and Glaser Weil LLP, for Mr Izmirlian in 2015 when he was still Baha Mar’s principal developer. They provided estimates of the value of Baha Mar’s legal claims against CCA.

CCA obtained the disputed legal papers one day before a court hearing on the matter in The Bahamas, where the unsealing of the legal opinions was rejected.

Justice Ian Winder, in a November 3, 2020, verdict, disclosed that he was “troubled” by CCA’s failure to inform himself - and its own Bahamian attorneys - of that development prior to hearing arguments on whether the Supreme Court should “unseal” the documents in question.

The Glaser Weil report dealt with Mr Izmirlian’s claims for “delays, workforce sufficiency, and alleged failures by CCA to disclose that it allegedly could not achieve construction completion dates”. The Kobre & Kim (UK) document related to the $192m completion guarantee that CCA’s parent had given to Mr Izmirlian.