Court halts sale of Executive Motors home base pending bank appeal
The Court of Appeal has halted a Bahamas bank's sale of premises owned by Crown Motors at Marescaux Road in Kingston, pending the outcome of an appeal by the bank against a decision in favour of two associated companies, Key Motors and Executive Motors.
In a case that has been ongoing for almost two decades, Supreme Court Justice Lennox Campbell had ordered the sale of the premises in April 2004, following the automotive dealer's failure to honour a judgment debt of US$209,669.21 - about $25.46 million at the current exchange rate.
On March 10, 2005, the judge dismissed Crown Motors' application for a stay of execution from his order for sale of the premises pending the determination of its appeal against that order. Crown Motors subsequently appealed the order of Justice Campbell.
It outlining the case, Court of Appeal Justice Almarie Sinclair-Haynes said the matter had its genesis in an action filed in March 1997 by First Trade International Bank and Trust Limited against Crown Motors for US$209,669.21.
The bank also instituted claims against Executive Motors and Key Motors for US$89,876.69 (about $10.91 million) and US$233,075.37 (about $28.3 million), respectively. Key Motors and Executive Motors counterclaimed.
Crown, Executive and Key were dealers in cars and car parts imported from Japan and Korea. Desmond Panton was the chairman of all three companies.
According to the judgment handed down recently, the three Panton companies had an agreement with the Bahamas bank to deposit 50 per cent on letters of credit under a financing agreement for purchase of cars and car parts.
First Trade was to provide a loan for the other 50 per cent and, upon payment by Crown, Key and Executive, the bank ought to have confirmed the letters of credit to the suppliers and paid for the orders, after which the suppliers would ship the cars and parts.
In 1995, however, the bank began to fail and eventually went into voluntary liquidation. Consequently, the relationship between the parties ended with First Trade instituting legal proceedings.
The court noted that Crown Motors did take issue with its indebtedness to the bank. Instead, it contended that all three companies had made the requisite deposit to the bank, but that First Trade was unable to fulfil its part of the agreement because of liquidity problems.
They contended that they were informed by suppliers that their orders would not be filled because of the bank's failure to pay.
In September 1997, the bank's claims against the three car dealers were consolidated by an order of Justice Courtenay Orr. However, Crown's failure to file a defence resulted in Justice Karl Harrison entering judgment against it on June 25, 1998.
Justice Harrison ordered that the bank recover US$209,669.21 from Crown as well as interest at nine per cent per annum. He also ordered that that sum be lodged into an interest-bearing account in the joint names of the attorneys representing the parties at the Bank of Nova Scotia in Kingston pending the outcome of the trial of the consolidated actions.
However, Justice Harrison's order was not obeyed, and the bank subsequently obtained an order from Justice Campbell on April 2, 2004 for the sale of premises at 8 Marescaux Road to satisfy the judgment debt. Executive Motors currently conducts business from the property.
On February 7, 2005, Justice Marva McIntosh handed down her decision in favour of Key in the sum of US$309,320 and in favour of Executive Motors in the sum US$130,995.13, both with interest. Three days later, Key assigned its judgment of US$309,320 to Crown.
At the appeal, attorney Carol Davis, who appeared for the three companies, argued that in a scenario where the sale of the Marescaux property was allowed to proceed, if Key and Executive were successful in their appeal against First Trade, they would "join a line of creditors of the bank".
Davis contended that a fair and equitable procedure would be to set off the amounts owed by Crown against that owed to Key and Executive. Accordingly, she submitted that the judge exercised his judgment on the wrong principles, that it ought to be set aside and a stay of the order for sale be granted.
Dr Lloyd Barnett, who appeared along with attorney Keith Bishop for First Trade International Bank, submitted that Crown had not complied with Justice Harrison's order made 17 years ago.
He highlighted Panton's evidence that Crown was no longer trading because, in September 1997, it lost the dealership for Honda motor cars, and, as such, would suffer no prejudice if the property was sold.
However, Panton's evidence was that Executive had occupied the premises since 1987, that the property had been improved to facilitate its business, which would be affected by the sale.
Justice Sinclair-Haynes noted that payment of the US$209,669.21, which Justice Harrison ruled that the bank recover from Crown, was not ordered to be made directly to the bank. That was because of the understanding among all the parties that the matters were all viewed as consolidated.
The appellate judge found that the bank was not entitled to the judgment sum in light of the uncertainty as to the outcome of the other matters, that is, whether the bank would be found to be indebted to Executive and Key in a sum exceeding US$209,669.21.
First Trade's claims against Key and Executive were dismissed, while Key and Executive obtained judgment against the bank on their counterclaim.
Justice Sinclair-Haynes ruled that the amount awarded to Key and Executive was more than that awarded to the bank in its claim against Crown. She added that Key had assigned its judgment debt to Crown and, therefore, it was available to offset the sum due from Crown to the bank.
The court allowed the appeal and ordered the stay on the sale of the Marescaux Road property until the determination of the appeal filed by First Trade International Bank against the decision of Justice McIntosh in favour of Key and Executive.