Lake
Barbara Gayle, Staff Reporter
RIO BLANCO Development Company Ltd., whose hotel and properties were sold in 1993 by a receiver appointed by the National Commercial Bank (NCB), has brought a suit in the Supreme Court contending that several breaches were committed when the properties were sold.
Mr. Justice Wesley James is hearing evidence in the case in which the company is claiming that the 63-room hotel on a 27-acre property was worth $167 million when it was sold on May 3, 1993 for $63.5 million.
The hotel was sold to Caricom Investments Ltd., of which Richard Lake, a then director of NCB Merchant Bank and Trust Company Ltd., was a principal shareholder.
The company claims that it owed far below the sum of $63.5 million and is accusing the NCB of charging illegal and excessive interest charges.
NCB and Karl Aird, a former credit manager at NCB who was appointed receiver for Rio Blanco Development Ltd., are contending that the properties were sold under a debenture which NCB had on the properties and no fraud or breaches were committed.
Rio Blanco, of which Dr. A. C. Marsh was managing director, is contending that, in 1990, it applied to NCB for banking facilities in the sum of $25.4 million to facilitate the completion of its development known as Rio Blanco Village Hotel at White River, St. Mary.
NCB advised by letter dated June 29, 1990 that the application was approved and the facilities amounted to $25.5 million.
The facilities included a construction loan of $14.1 million repayable within 12 months of full draw down.
The security for the loan of $25.5 million included debenture over fixed and floating assets of the company, mortgage over resort property at White River, St. Ann, consisting of studio and one and two bedroom apartments, three resort lots at White River and mortgage over 29 acres of undeveloped lands at White River.
Prior to the mortgage, the claimant company had given a debenture to NCB dated September 1989 which was on February 5, 1991 upstamped to cover an aggregate liability of $31 million.
The company is contending that the loan was recalled before the full draw down and the receiver went in in October 1992.
NCB attempted to sell the mortgaged lands by public auction. The auction was aborted as NCB's reserved price was not met.
By an agreement for sale dated May 3, 1993, Aird who was appointed receiver on October 15, 1992 sold the hotel to Caricom Investments Ltd. for $61 million and the chattels for $3.5 million.
The company claims that, on the date of the sale, its total indebtedness to NCB was stated by NCB to be $63,574,957.62.
The company is contending that the hotel was valued at $97.8 million when it was sold, the 27 acres of lands were worth $60.4 million and the chattels in the hotel were worth $9.5 million making a total of $167,909,652.
The company claims that immediately prior to the sale, the Workers Bank (now RBTT) had agreed to take over its indebtedness and NCB was aware of the negotiations.
FAILING TO TAKE REASONABLE CARE
It has accused the NCB and the receiver of failing to take reasonable care to obtain the true market value of the mortgaged properties and of selling the properties by private treaty .
NCB, in its defence, claims that when the properties in the agreement for sale were sold, the proceeds were applied to the company's account leaving a balance of $24,326,153.47 as at August 26, 1994.
NCB said interest accrued on the amount at the rate of 41 per cent per annum compounded from August 27, 1994 to the date of payment.
It has blamed the plaintiff of failing to deliver the four certificate of titles and is seeking an order that the company, its attorneys-at-law, and directors forthwith deliver the relevant certificate of titles.
The defendants have denied the plaintiff's allegations as to breaches.
Mr. Aird testified last week that when he was appointed receiver, the principal was $18 million and the interest was $29 million.
He admitted, under cross-examination by attorneys-at-law, Crafton Miller and Chukwuemeka Cameron who are representing the company, that over a six-month period the company's indebtedness amounted to $63.5. million. He said $16 million had accrued on the interest in six months.
Mr. Aird said he was surprised that Mr. Handy, the then assistant general manager who was in charge of the company's accounts, had said that there was no overdraft outstanding at the bank to Rio Blanco.
Mr. Aird said he left the bank in 1994 and Mr. Handy was senior to him. Mr. Aird was appointed receiver from October 10, 1992 to May 6, 1994.
He said he decided not to include two lots in the sale because the valuation he received for the hotel and adjoining property was adequate to cover the liabilities at the bank. It was his intention, he said to return those two lots to Rio Blanco. He later admitted that the two properties were subsequently sold by him to Caricom Hotels.
Mr. Aird admitted under cross-examination that it was to the bank's advantage and the client's (Rio Blanco) disadvantage when, instead of paying off the loan from the receipt of the sales, he decided to put it on a fixed deposit account.
He agreed that the interest accrued on the debt was far greater than the interest on the fixed deposit.
The trial which has been going on for 40 days over a four-year period has been adjourned until September.
Attorneys-at-law Charles Piper and Emil Leiba, instructed by Piper and Samuda, are representing NCB.
