McPherse Thompson, Assistant Editor - Business
The developers of the Palmyra Resorts & Spa have filed a lawsuit against their bankers, National Commercial Bank Jamaica (NCB) and RBC Royal Bank Jamaica, to reclaim the property which was placed in receivership 18 months ago.
They are also seeking damages for negligence relating to delays in the distribution of promised funding, and a declaration from the Supreme Court that they owe no debts to the banks.
In the alternative, the resort developers led by investor Robert Trotta want the court to determine what is owed to their financiers.
They are claiming losses of at least US$110 million.
The filers of the lawsuit are Palmyra Resorts, Palmyra Properties, Caribbean Green Power Systems, Sanctuary Systems and Caribbean Overseas Holdings - all of which are in receivership - who are claiming a breach of agreement surrounding a US$88-million syndicated loan agreement dated April 23, 2007 with NCB and RBTT Bank Jamaica for the construction of the luxury condominium and hotel. RBTT has since been rebranded RBC Royal Bank.
The other defendants named in the suit are RBC Royal Bank (Trinidad and Tobago), NCB Capital Markets Limited, and Palmyra's receiver/ manager Kenneth Tomlinson.
Dave Garcia, chief counsel and company secretary at NCB, said the bank's lawyers would vigorously defend the claim. NCB will also be taking steps to recover the loan, he said.
Karen Watson-Pink, manager of corporate communications at RBC Jamaica, said they were aware of the claim. "We cannot comment any further as all client information is confidential," she said via email.
The claimants are represented by the firm Grant, Stewart, Phillips and Company.
Dating from June 2009
The syndicated loan agreement was followed by other loan agreements with RBC dating from June 2009.
The lawsuit, which was filed in January, claims that a senior executive of RBC in September 2008 communicated with then president of Palmyra Resorts Dennis Constanzo and led him to believe that the bank wished to furnish a further loan of US$20 million for construction and that the money would be forthcoming in November 2008.
They also claim that Constanzo informed the RBC executive that if the bank was not interested in providing the loan, it should say so immediately so that funding could be sought elsewhere.
On the basis of that assurance, the developers included the US$20-million loan in an internal cash flow projection prepared in November 2008.
RBC executives continued to give assurance after November 2008 that the money would be provided and hence Caribbean Overseas Holdings - an investor, funder and the ultimate owner of Palmyra, as well as other companies in the group - committed further equity funding to the project.
However, the bank did not provide the funds until 2010, a delay they said partly occasioned by disagreement between RBC and NCB as to priority over the repayment of the additional funding and 'completion loans'', which the court document said were advanced by RBC for construction of the development and a power plant.
If RBC had not given the assurance that the loan would be forthcoming, the suit contends, Caribbean Overseas Holdings would have advanced only limited sums between September 2008 and December 2010 for the benefit of Palmyra Resorts and associated companies.
Caribbean Overseas Holdings would not have advanced the money unless an alternative lender had agreed to finance the development and provide sufficient sums for the project to be completed and operated for a period to be in a position to repay the money to the holding company, the documents said.
The claimants are contending that they have suffered losses totalling about US$90 million as a result.
In addition, the suit claims that at the time of the appointment of the receiver, Palmyra Properties and Sanctuary Systems were pursuing legal action in Jamaica, Toronto in Canada, and Hong Kong, China, among other places in relation to a fraudulent conspiracy, which caused those two companies more than US$55 million in losses.
The claimants are contending that Tomlinson, the receiver, failed to respond to requests for ratification and did not ratify the further conduct of such litigation until March 2012. They say that this action has prejudiced the position of Palmyra Properties and Sanctuary Systems in such litigation and the ability to make recovery.
They suit also alleges that refusal of the receiver to complete purchase contracts for Palmyra units - because the banks indicated that the development should not be broken up for sale - have also exposed Palmyra to litigation from purchasers of condominium units.
They say the refusal of the receiver to complete purchase contracts - because the banks indicated that the development should be broken up for sale - have also exposed Palmyra to litigation from purchasers of condominium units.
Claims for lost revenue
In addition, they are claiming about US$20.5 million in lost revenue relating to the non-completion of condo unit sales for which contracts had been entered, and from sales of units to potential purchasers, as well as from the closure of the hotel in November 2011.
The claimants said that as a result, Sanctuary Systems and/or Caribbean Green Power Systems are entitled to set off all sums due to them from RBC against all sums owing under the completion loans.
Sanctuary Systems is the developer for the construction of the interior of individual units, and Caribbean Green Power Systems is the proprietor of land adjacent to the development, including that upon which a power plant has been constructed.
Sanctuary Systems and Caribbean Green Power Systems are also seeking a declaration from the court that no sums are presently owing under the completion loans.
Further, they are asking the court to order that the receiver be removed as manager of Sanctuary Systems and Caribbean Power Systems and return their properties to the original owners.
The claimants said NCB and RBC have asserted that in December 2010, US$4.6 million of interest fell due and owing on portions of the loan. However, they are contending that all sums which fell due had already been paid.