By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bank of The Bahamas’ bid to collect on a $1.5m loan debt owed by the late Chris Mortimer and his now-defunct Galleria Cinemas has survived efforts to strike it out in the Supreme Court.

Justice Neil Brathwaite, in an August 20, 2024, verdict rule against claims by the former Democratic National Alliance (DNA) deputy leader, who passed last year, and his companies that the BISX-listed lender plunged the group into financial turmoil by “unlawfully withholding” as collateral a 50 percent ownership interest in his restaurant business.

Bank of The Bahamas, which is more than 82 percent owned by the Government via the Public Treasury and National Insurance Board (NIB), had initiated legal action against Mr Mortimer and his companies to recover the $1.5m advance on November 20, 2020.

The loan, made to Galleria Cinemas before it closed its doors in April 2022 due to COVID-19’s devastating impact on its business operations, was guaranteed by Mr Mortimer personally and his other companies Island Bloom Restaurant and Grand Bahama Theatres. Research showed Island Bloom is the holding entity for the Outback Steakhouse restaurant, which was also located at the Mall at Marathon.

However, prior to his passing and Galleria’s shutdown, the former DNA deputy leader and his companies invoked the Supreme Court’s then-rules to argue that Bank of The Bahamas’ action should be struck out on the grounds it “discloses no reasonable cause of action, is scandalous, frivolous or vexatious” and represented an abuse of process. Alternatively, they asked that the case continue by different means.

Mr Mortimer, in an affidavit setting out his case, confirmed he was the beneficial owner and president and director of all three companies. He added that Bank of The Bahamas was familiar with his practice of using the revenues, assets and earnings of all three companies to help support and repay loans taken out by one entity individually.

“Bank of The Bahamas, by its officers and managers, well knew that as far as repayments to Bank of The Bahamas were concerned I utilised the assets and revenues of each one of Galleria Cinemas, Island Bloom Restaurant and Grand Bahama Theatres to assist the others including by way of using the assets and revenues of either of those companies to service, manage or pay off any Bank of The Bahamas loans of any of those other companies,” Mr Mortimer alleged.

He then claimed that a debenture security granted to Bank of The Bahamas by Island Bloom Restaurant in 2013 was not secured by the guarantees provided as evidence by the BISX-listed lender. Mr Mortimer added that these guarantees “only arose after Bank of The Bahamas unlawfully withheld” one of his two shares, representing a 50 percent equity interest in Island Bloom, for 20 months.

This, he said, lasted from March 7, 2016, to November 27, 2017, and was only “eventually and belatedly released” to him by Bank of The Bahamas after the latter was threatened with Supreme Court legal action. Mr Mortimer said the loss of this share for a 20-month period left without collateral to pledge as security for new financing that would pay off the $1.5m loan to Galleria Cinemas.

“Island Bloom was my most profitable business venture at that time and, but for Bank of The Bahamas’ unlawful withholding of my Island Bloom share, I would have had no difficulty in servicing the Bank of The Bahamas loan to Island Bloom and my other business ventures by short-term financing from financiers who had, in the past, repeatedly and consistently financed such short-term business loans to me upon the pledging of my shares in my companies,” Mr Mortimer alleged.

“Regrettably but predictably I was not able to access any short-term business loans over the shares of Island Bloom Restaurant as one of those shares was unlawfully being withheld by Bank of The Bahamas.” This, Mr Mortimer said, had caused him “tremendous loss and damage”.

Mr Mortimer and his companies claimed that no personal or corporate guarantees had been given to back the 2013 debenture, while also arguing that Bank of The Bahamas’ case was “fatally flawed as drafted” and that. They also alleged that the guarantees were “not under seal”, and therefore unenforceable, “null and void and of no effect” so that no reliance can be placed upon them.

And, based on the late Galleria chief’s affidavit, they also asserted that Bank of The Bahamas’ alleged “unlawful withholding” of the Island Bloom share had interfered with the companies’ ability to repay the $1.5m loan. In such cases where a creditor interferes with the debtor’s ability to repay, they argued that this has the effect of releasing a guarantor from his obligations.

The BISX-listed lender, though, alleged that Mr Mortimer and his companies had “mischaracterised” the claim and remain “jointly and severally liable” to repay the $1.5m. They added that there was no dispute that the monies had been advanced, Galleria had agreed to repay it and Mr Mortimer and his other companies had promised to guarantee this. Galleria had now “breached its repayment obligations”.

Justice Brathwaite, while finding that Bank of The Bahamas’ action could have been more specific, said it did not rise to the level where it should be struck out. He added that documents filed with the Supreme Court included a “commitment letter” showing the $1.5m was advanced to refinance an earlier loan granted in August 2013, plus payout overdraft and credit card facilities. Some $1.191m was disbursed.

“I am not satisfied, on the evidence before me, that there is a substantial dispute as to the validity of the debentures,” Justice Brathwaite said. As for the Island Bloom share and its allegedly “unlawful withholding”, he noted that had been pledged to secure earlier financial obligations.

And the $1.5m loan at the centre of the dispute was advanced on December 4, 2017, after the Island Bloom share had been returned to Mr Mortimer. As a result, Justice Brathwaite said Galleria Cinemas’ ability to repay could not have been damaged by Bank of The Bahamas because it no longer possessed this security and could not interfere with Mr Mortimer’s efforts to secure new financing.

As a result, he dismissed the bid to strike out Bank of The Bahamas’ case.