• Former BEST head loses bid to appeal $4.85m gas station seizure

• Judge blasts 'cavalier attitude' in not servicing loans for 15 years

• Upholds vacant possession for Bank of Bahamas bail-out entity

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas' former top environmental regulator was "grasping at straws" with his last-ditch bid to prevent the $4.85m seizure of his Shirley Street gas station by the Bank of The Bahamas' bail-out vehicle.

Justice Loren Klein, in a December 28, 2023, verdict, rejected efforts by Dr Donald Cooper, the ex-Bahamas Environment, Science and Technology (BEST) Commission chief, to obtain permission to appeal a prior Supreme Court order granting Bahamas Resolve "vacant possession" of the property which had been pledged as security for a delinquent loan.

The judge found the evidence presented before him showed "minimal efforts" were made by Dr Cooper and his DLC Investments company "to service what were on any account significant and multiple loans", as he upheld the original order while suggesting the former BEST Commission chief had zero "reasonable prospects of success" with his appeal.

The gas station in question, formerly branded by Rubis and located just west of the Mackey Street and Shirley Street junction, was being fenced in and secured by workmen just prior to the Christmas holidays. The loan to Dr Cooper and DLC Investments was among the 13 'bad borrowers' transferred to Bahamas Resolve as part of the first $100m taxpayer-funded Bank of The Bahamas bail-out in 2014.

Justice Klein, in his ruling, noted that the BISX-listed institution had advanced some $4.85m to DLC Investments via series of mortgages, debentures and agreements over an eight-year period between 2005 and 2012. The first $1.1m mortgage was secured on the gas station on July 26, 2005, and a further $350,000 and $152,000 were added via supplemental debentures and charges in 2006.

A December 23, 2011, "commitment letter" increased Bank of The Bahamas' credit facility to $3.9m, while a further up-stamping worth $958,000 took place on November 21, 2012. Mr Cooper, meanwhile, had already guaranteed DLC Investments' debts and liabilities up to $3.9m when the first mortgage was advanced on July 29, 2005.

Justice Klein said the December 23, 2011, agreement restructured DLC Investments' credit facilities via the granting of a $3.9m, ten-year demand loan carrying a 7.75 percent interest rate. The first six months mandated interest-only payments of $32,017, with blended principal and interest payments of a monthly $43,494 thereafter until full repayment at year-end 2011.

Mr Cooper and DLC Investments defaulted on the loan terms and repayments and, on October 30, 2014, Bank of The Bahamas transferred their facilities to Bahamas Resolve as part of the bail-out that saw it shed a portion of its toxic commercial credit portfolio.

Bahamas Resolve demanded repayment of $4.965 from DLC Investments, and $3.9m from Dr Cooper as guarantor for these debts, on October 3, 2019. It subsequently initiated legal action in the Supreme Court on February 3, 2021, demanding these sums and "vacant possession" of all collateral/security for the loans.

Besides the gas station, this security also included a residential property in the eastern Port New Providence subdivision. Bahamas Resolve obtained a Supreme Court order, granting all that it was seeking, on May 11, 2021, which Mr Cooper and DLC Investments sought permission to appeal on the basis that it was an "interlocutory" or interim - and not a final - order.

Justice Klein, though, found that the order was a final one and that, as a result, the appeal to the Supreme Court is "not necessary and misplaced" as it should have gone to the Court of Appeal. He also ruled that Bahamas Resolve was within its rights not to seek vacant possession of the Port New Providence property - only the gas station - as CIBC FirstCaribbean held a first mortgage charge on the home.

Noting that persons seeking permission to appeal must either show "a realistic prospect of success", or that a public interest issue is at stake, the judge added that this threshold is set higher for mortgage-related disputes. He added that the main ground of appeal appeared to be an already-existing legal battle between DLC Investments and Bank of The Bahamas over the loan dating from 2015.

"This was a claim for 'breach' of agreement and negligence, which it says resulted from Bank of The Bahamas' failure to honour certain promises which it alleges were made to DLC Investments during 2013," Justice Klein said of the borrower's case.

"The main promise was said to be an agreement to reorganise and 'write-off 50 percent of the outstanding mortgage balance on the loan' and to pay weekly installments of $3,800 on the loan." Bank of The Bahamas denied the existence of any such agreement to write-off half of the $4m owed and "compromise" at $2.3m, and said there were no deeds or documents to prove DLC Investments' case.

Justice Klein found Bank of The Bahamas was entitled to transfer the loan to DLC Investments without its approval, even though the latter's late former attorney, Stephanie Wells, argued that it could not. And he ruled that the 2015 action was irrelevant, especially given that the claim was not prosecuted with "greater urgency".

Janet Johnson, DLC Investments' manager, had alleged in an April 19, 2021, affidavit that Rubis had offered $1.35m to acquire the debt but this was never communicated to the company, which was told Bahamas Resolve was seeking $4.4m.

However, Charles Barnett, Bahamas Resolve's manager, explained that Rubis, rather than buy out DLC Investments' bad debts, had made an offer to acquire the Shirley Street gas station from the Bank of The Bahamas bail-out vehicle for $1.125m.

"According to the evidence of the plaintiff [Bahamas Resolve], when the debt was held by Bank of The Bahamas, the defendants only paid the first interest-only payment on the loan and then a lump sum of $20,000 which was apparently sent through Mrs Wells' chambers and nothing else since," Justice Klein ruled.

"Also, it is not in dispute that no payments whatsoever were made after the debts were transferred to Bahamas Resolve. As conceded by Mrs Wells, there were no payments since the matter was transferred to Resolve 'because that was something that they were always waiting to have the mortgage adjusted as the bank promised. And I think that is why nothing happened since the account went to the other place'....

"In the instant case, the evidence placed before the court (which was not controverted) shows that at best the defendants made a few payments of interest at the commencement of the loan and, from 2014 onwards, concede that they made no payments. Indeed, it might be said that the defendants took a rather cavalier attitude to the obligations which they undertook under the loan," he added.

"It might also be observed that the original lender and the transferee were extremely lenient in not calling in their security sooner. The long and short of it is that, whatever discussions the defendants might have been involved in with the bank in 2013, it does not excuse the almost complete failure to service the loan over the period of nearly 15 years."

DLC Investments also exhibited an offer from its new accountant, Kingman Ingraham, dated April 15, 2021, offering to Bahamas Resolve to pay off the debt owed for $1.75m spread over 12 years. And it claimed to be owed $2.08m by Rubis, but neither matter was placed into evidence before the Supreme Court at the original hearing.