By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Sky Bahamas principal yesterday pledged to “keep fighting” after a verdict ordering the now-defunct airline to pay $220,000 plus interest to the owner of its hangar at Lynden Pindling International Airport (LPIA) was upheld.

Captain Randy Butler told Tribune Business he and his attorney, Ashley Williams, were still assessing the Court of Appeal decision which found there was “a valid and enforceable lease” between Sky Bahamas and AOG Maintenance Company that permitted the former to rent the 1.89-acre hangar. It also rejected the airline’s claim for compensation over the hangar owner allegedly selling-off its assets to cover unpaid rent. 

But, while Captain Butler hinted this review would include deciding whether to pursue a further appeal, AOC Maintenance’s attorney hailed the Court of Appeal ruling as “the end of the road for Sky Bahamas”. Michael Scott KC said Fred Kaiser, AOG’s principal, was now anticipating “speedy enforcement” of the original Supreme Court award together with the additional interest that has accrued since that June 2023 verdict.

Speaking to this newspaper following yesterday’s Court of Appeal verdict, Captain Butler asserted: “My position remains the same. I believe the judge erred in the [original] ruling. It’s in the legal world and realm, and we’ll look at it and see what the next step is. I have not read the entire document. I’ll study it with the attorneys and let you know what the next step is. We’ll keep fighting.”

A far more bullish Mr Scott, in response to Tribune Business inquiries, said: “It is with enormous satisfaction and delight that I have learned that Sky Bahamas’ misguided appeal against the decision of former justice, Diane Stewart, has been trounced by the Court of Appeal and her judgment upheld.

“Mr Kaiser is pleased and, despite having endured many lamentable delays in the course of justice, he now looks forward to a speedy enforcement process. This is the end of the road for Sky Bahamas.”

The hangar dispute is the first in a series of cases moving through the Bahamian court system as a result of the legal battle between Captain Butler, Sky Bahamas and Mr Kaiser, the latter of whom is a foreign investor and was the airline’s main financier.

Mr Kaiser’s companies, Alpha Aviation and Advanced Aviation, first initiated legal action over an an alleged $28m “bogus loan conspiracy” in late 2020, and the battle over the LPIA hangar is the first element to now pass through the Court of Appeal.

The legal controversy triggered the late 2020 resignation of former deputy prime minister and minister of finance, K Peter Turnquest, even though he was not named as a defendant in the original writ. He was described as “a director and manager” of both Mr Kaiser’s plaintiff companies, as well as “owning and/or controlling and/or managing” Sky Bahamas.

Mr Turnquest has consistently and vehemently denied the claims against him, and last year asserted that he had “emerged victorious against baseless conspiracy allegations” levelled by Mr Kaiser in a separate action spawned by the legal battle - this time over the financier’s claim he was defrauded of his interest in the outstanding balance of a $399,000 mortgage.

Yesterday’s Court of Appeal verdict, though, stemmed from the bid by Captain Butler and Sky Bahamas to overturn former Justice Stewart’s ruling that there was “a binding oral lease agreement” for the hangar between AOG Maintenance and Sky Bahamas.

She also dismissed the airline and Captain Butler’s counter-claim “for breach of contract and unlawful detention of assets” belonging to itself. Sky Bahamas had claimed itself, not AOG Maintenance, was “the true sub-tenant” of Nassau Airport Development Company (NAD) for the 1.89 acre parcel upon which the hangar stood.

AOG stands for Aviation Oversight Group, and Justice Stewart described AOG Maintenance as a commercial real estate investor in the June 6, 2023, Supreme Court verdict. She noted that “for a period of time the operations of AOG and Sky were intertwined” because Captain Butler was a director and shareholder in both entities and they “were not sufficiently separated”.

AOG’s annual general meeting (AGM), held on December 17, 2018, sought to achieve this separation with all shareholders - including Captain Butler - present. It was resolved that Captain Butler’s 25 percent AOG Maintenance stake, together with another 25 percent interest held by another investor, would be acquired and transferred to MCI Company.

Beginning on January 1, 2019, Sky Bahamas would be required to enter into a formal three-year lease of the commercial premises for $26,000 per month plus taxes, while Captain Butler would arrange for swipe cards to be provided to two other directors to give them access to the property.

No formal written lease agreement was prepared or executed by any of the parties, although AOG Maintenance sent monthly rental bills to Sky Bahamas. “Notwithstanding the agreement at the AGM, Sky never paid rent or applicable taxes,” Justice Stewart wrote.

“Consequently, AOG claimed that Sky was in arrears of rent and applicable taxes (as at August 1, 2019) in the amount of $204,826. Despite multiple demands by AOG to Sky, the outstanding debt remained owing.”

This triggered the legal battle, with Sky Bahamas alleging there was no lease agreement and it was the entity - not AOG - that had erected the maintenance hangar. It alleged that AOG “unlawfully, willfully and illegally occupied it at the expense and exclusion of Sky”. The airline also claimed that it was evicted, and AOG distrained and sold off assets belonging to itself.

Incoming Court of Appeal president, justice Milton Evans, detailing the background to the dispute in a unanimous verdict, said: “[AOG] submitted that there was a binding oral lease agreement between the parties by virtue of Captain Butler’s agreement made at the AGM where it was agreed that Sky would pay a monthly rent of $26,000 plus applicable taxes.

“The lease agreement was to take effect from January 1, 2019. AOG further submitted that there was never any agreement that Sky would occupy the building on a gratuitous basis. Further, that at common law... AOG was entitled to a reasonable sum for the use and occupation of the property by Sky. There was an implied term that Sky would pay a fair and reasonable rent for enjoyment of the building.

“AOG denied that the eviction was unlawful and submitted that AOG was legally allowed to remove Sky from the property for failure to pay rent. It further submitted that the counterclaim was misconceived as all goods found on the property were handled carefully and appropriately,” the Court of Appeal added.

“Further, AOG contends that there was no evidence confirming the purported value pled in Sky’s defence and counterclaim - being the $3.2m to $5m. AOG contended that the value of Sky’s goods did not exceed $1m. Only goods relating to the SAAB Beechcraft, and which belonged to Advanced Aviation, were sold. No items belonging to Sky were sold.”

AOG also alleged that it had incurred losses, involving personal and property security costs and expenses related to the alleged “illegal entry” to the hangar by Captain Butler and his agents in December 2019, as a result of the failure to pay rent. However, Sky Bahamas alleged there was no binding lease agreement and, as a result, its eviction was “unlawful and illegal” and interfered with its own lease with NAD.

The airline also claimed damages for the purported illegal seizure and sell-off of its assets, as well as trespass and loss of use of the hangar. Turning to Sky Bahamas’ appeal, the Court of Appeal said the only issues to be decided were whether there was a binding and enforceable lease between the two side and if AOG acted legally over the assets it sold.

“It is important to note that the foundation of the lease had its root in the AGM meeting where the parties were formalising a separation of the existing relationship between Sky and AOG. Captain Butler had parted with his shares in AOG and, at that meeting, new officers/directors were being put in place for AOG,” the Court of Appeal ruled.

“Captain Butler participated in that meeting, and the minutes do not reflect any objections on his part to anything which took place nor what was proposed. It is clear that the principals of AOG were of the opinion that the terms relative to the lease had been agreed as the formal document was submitted to Captain Butler for his signature.

“There was nothing placed before the learned judge to explain his failure to sign neither the minutes nor the lease document prior to his testimony at trial. As is reflected in her judgment, the learned judge did not accept his evidence.” The Court of Appeal also noted that Sky Bahamas’ attorney was unable to identify any parts of the lease deal that were undecided or where there had been non-performance.

“I am satisfied that the learned judge was right to find that the only position put forward by Captain Butler was that Sky had no obligation to pay rent as he never agreed to a lease. His evidence was contrary to that given by the two witnesses for AOG who were both present at the relevant meeting,” appeal justice Evans wrote.

“Mr Williams further sought to place significance on the parties’ relationship with NAD. However, there was no dispute that the hangar was financed and built by AOG on property which was leased from NAD. There was an issue raised by Mr Williams as to whether the property was leased to Sky or to AOG. It appears that the property was originally leased to Sky but there was a change made to transfer that lease to AOG.

“Mr. Williams argued that that transfer was not effective. However, in my view in the absence of evidence from NAD, who were not joined, the trial judge was right not to make any finding on that issue.... The proposed lease made provision for the rent to NAD to be paid for the use of its land, and for the rent due to AOG to be paid for the use of its hangar. It follows that based on the agreement any payment by Sky to NAD would not absolve them of the duty to pay rent for the use of the hangar.”

Having dismissed Sky Bahamas’ appeal over the hangar lease, the Court of Appeal did likewise with the airline’s accusation of “illegal and/or excessive distraint” by AOG selling off aircraft parts worth $930,000 compared to the $219,000 in allegedly outstanding rent.

It ruled that there was no evidence to support the $930,000 valuation, while Mr Kaiser had testified during the Supreme Court trial that he was unaware of any assets that had been sold. And, given that the lease was valid, AOG could “lawfully” seek to recover any unpaid rent by selling these items.