William Lamar Chester v Darby Shores Ltd

• Jurisdiction: Bahamas
• Court: Supreme Court (Bahamas)
• Judge: Fraser, Snr. J
• Judgment Date: 18 October 2024
• Docket Number: 2023/CLE/gen/00670

IN THE MATTER OF the properties known as the Four (4) Darby Islands and being Big Darby Island, Little Darby Island, Guana Cay, Betty Cay and which are owned by Darby Shores Ltd.

AND IN THE MATTER OF Sections 23, 25, 25A and 25C of the Real Property Tax Act (Chap. 375)

AND IN THE MATTER OF Sections 81, 278, 279 and 280 of the Companies Act 1992 (Chap. 308)

Between

William Lamar Chester

Claimant/First Applicant

and

Darby Shores Ltd.

First Defendant

William Gordon Crichton Cook, Jr.

Second Defendant

Richard Henry Davis

Third Defendant

Aillen Marty

Fourth Defendant

William Saeger

Fifth Defendant

Before:

The Honourable Madam Senior Justice Deborah E. Fraser

2023/CLE/gen/00670

IN THE SUPREME COURT

Common Law and Equity Division

Contempt of Court — Breach of Court Order — Disobedience of Court Order Criminal Standard of Proof — Beyond a Reasonable Doubt — True Meaning and Intendment of Court Order — Purported Actions of alleged Contemnor in breach of Court Order — Clear Evidence Beyond a Reasonable Doubt — Public Policy

Appearances:

Mr. Damien Gomez K.C. and Mr. Jacy Whittaker for the First Applicant/Claimant

Mr. Christopher Jenkins K.C. Mr. Ramonne Gardiner, and Mr. McFalloughn Bowleg for the First, Second and Third Defendants

Mrs. Krystal Rolle K.C. and Mr. Darron Cash for the Fourth and Fifth Defendants (did not participate in proceedings)

Mr. V. Moreno Hamilton for Mr. Lindsey John Cancino and Ms. Marcia Woodside the Court Appointed Joint Receivers and Managers of Darby Shores Limited/Second and Third Applicants

RULING

Fraser, Snr. J

1 This is an application brought on behalf of Mr. William Lamar Chester (“ the Claimant”) against the First through Third Defendants (“ the DSL Parties”) alleging they are in breach of an order of the Court dated 29 August 2023 and should thus be held in Contempt of Court.

2 The Receivers of Darby Shores Limited have also filed a “Notice of Objection” (an application not recognized by the Supreme Court Civil Procedure Rules, 2022 - “ CPR”) relating to alleged contempt of the DSL Parties and have lodged submissions against the First to Third Defendants in relation to the Notice of Objection.

Background

3 The Claimant/Applicant (“ Claimant”) is a shareholder, alleged creditor, former director/officer of Darby Shores Limited (“ DSL”).

4 The First Defendant is a joint venture company that owns and manages four islands and/or cays in the Exuma chain of islands known as Big Darby Island, Little Darby Island, Guana Cay and Betty Cay (“ the Darby Islands”).

5 The Second, Third and Fourth Defendants were all directors and shareholders of DSL responsible for its management and operation.

6 The Fifth Defendant is also a shareholder of DSL.

7 The Receivers/Second and Third Applicants (“ Receivers”) are the Joint Receivers and Managers of the Darby Islands.

8 In or about 2010, the Darby Islands began accruing real property taxes. In response, DSL sought to sell a few of the islands and use the proceeds from sale to settle the taxes. A total of about $9,203,894.50 in real property taxes was due and owing at the material time.

9 On 10 July 2023, due to the mounting real property tax sums and demand notices from the Department of Inland Revenue (“ DIR”), the shareholders of DSL agreed to sell the Darby Islands.

10 The Second Defendant, as President of DSL, signed an exclusive listing agreement with Coldwell Banker Lightbourn Realty on 17 July 2023 relating to the sale of the Darby Islands. It was marketed for $44,500,000.00.

11 On 09 August 2023, DIR served its final demand on DSL in relation to the outstanding real property taxes.

12 By Notice of Application filed 11 August 2023, the Claimant sought orders declaring that the Defendants were acting in bad faith and mismanaging Darby Shores by allegedly failing to pay real property taxes owed to the Department of Inland Revenue in the sum of $9,203,894.30.

13 By an Ex Parte Order filed on 29 August 2023, Lindsey John Cancino and Marcia Woodside were appointed as Joint Receivers over the Darby Islands (“ Ex-Parte Order”). The body of the Ex-Parte Order reads as follows:

“ …A. IT IS ORDERED and DIRECTED that, subject to the TERMS and CONDITIONS of the Order, Lindsey John Cancino of Nassau, The Bahamas and Marcia Woodside of Nassau, The Bahamas, both impartial and qualified individuals, be and are hereby appointed as Joint Receiver-Managers over the Four (4) Darby Islands, namely Big Darby Island, Little Darby Island, Guana Cay, and Betty Cay and being the property of Darby Shores Ltd. (“the Assets”) and each of them for the purpose of resolving the outstanding real property taxes affecting the Darby Islands with the Inland Revenue Department of government of The Bahamas by taking charge of the Asset and taking charge of the process of the marketing, advertising and negotiating of the Darby Islands for a proposed sale or any one or more of them, or developing a plan for financing to settle the taxes, or coming up with any other plan, matter or thing that will cause a settlement of the taxes and prevent the Darby Islands being subject to a forced Bahamas government sale at auction, or other governmental confiscatory relief.

(1) Power and Duties of the Receivers and Joint managers

The Joint Receivers-Managers:-

• (a) shall take possession and control of the “Assets” but the Assets shall not be distributed, encumbered, sold, assigned, financed, leased or parted with until further Order.

• (b) are authorized to collect, manage preserve, secure and protect the Assets under their control to the best of their abilities and in accordance with the law.

• (c) are granted all necessary powers to carry out their duties effectively, including but not limited to the power to execute documents, manage financial transactions, and make necessary decisions to protect the Assets under their supervision.

• (d) Shall submit regular reports to this court, detailing the status of the assets, any action taken, and any major developments in the matter.

• (e) Shall apply to the court for approval of payments to all persons including creditors and shareholders.

• (f) Shall ensure that any act required or authorized under this Order is to be done by all the Join Receiver-Managers

(2) Duration of Appointment This Order shall remain in effect until further notice or order, or until such time as the Joint Receiver-Managers have fulfilled their responsibilities and have been properly discharged by this court.

(3) Compensation: - The Joint Receiver-Managers shall be entitled to reasonable compensation for their services, subject to the approval of this court.

(4) “ Cooperation of Parties: All parties involved in this case are hereby order to cooperate fully with the Joint Receiver-Managers and provide any necessary assistance or information required for the proper execution of their duties. In particular; all of the Respondents, their agents and business advisors including but not limited to Mr. Roland St. Louis, Heather Lightbourn and Coldwell Banker Bahamas shall provide the Joint Receiver - Managers with all Darby Island information on prospective sales, any ongoing or planned negotiations, potential buyers and contracts immediately on being served with a copy of this Order.

(5) Security - The Joint Receiver-Managers are not required to give Security.”

14 Based on tension and disagreement amongst the shareholders relating to the value of the Darby Islands, they each sought legal advice from different counsel on the best way forward. A flurry of applications were subsequently filed in these proceedings by the parties relating to the Darby Islands.

15 Based on the failure of DSL to settle the outstanding taxes, the DIR moved to sell the Darby Islands by its Power of Sale.

16 On 18 July 2024, the DSL Parties filed an urgent application requesting, inter alia,

(i) leave to commence Judicial Review Proceedings against the DIR relating to its decision to sell the Darby Islands and (ii) an interim injunction preventing any purported sale of the Darby Islands by the DIR. On 31 July 2024, Justice Darron Ellis delivered a ruling acceding to the DSL Parties' application (“ the Ellis Ruling”).

17 Prior to any of the substantive applications being heard, on 30 September 2024, the Claimant filed a “Notice of Preliminary Objection” alleging that the First through Third Defendant breached the terms of the Ex-Parte Order.

18 On 02 October 2024, the Receivers also lodged a separate “Notice of Objection” relating to the DSL Parties' alleged breaches of the terms of the Ex-Parte Order.

Issue

19 The Court must determine whether or not the First through Third Defendants are in Contempt of Court.

Evidence

Claimant's Evidence

20 The Claimant seeks to provide evidence through his submissions with no filed affidavit properly placing any evidence before the Court. Though I note a myriad of correspondence sent to the Court by email, this does not amount to evidence, as such ought to be placed in an affidavit and filed, should same wish to be relied on by a party in a formal application. As no affidavit has been filed on behalf of the Claimant relating to this application, no evidence from the Claimant is properly before me.

Receivers' Evidence

21 Similarly, I have not seen any filed affidavit relating to the Receiver's application for alleged Contempt of Court by the First through Third Defendants. Again, the Court's email has been inundated with a flurry of correspondence by counsel, however any correspondence which the Receivers seek to rely on was not reduced into a filed affidavit. Consequently, there is no evidence from the Receivers relating to this application which I can review and consider.

First to Third Defendants' Evidence

22 The First to Third Defendants filed the Affidavit of Khaliq Martin on 23 September 2024. Essentially, the affidavit provides evidence that Mr....