Update: Arc Systems court case takes unexpected turn
The hearings into the winding up of Arc Systems will move to open court at the next hearing on July 12, according to different parties in the case.
The decision was made by Justice David Batts at a closed-door hearing on June 20 at the Supreme Court in Kingston.
Papers filed ahead of that hearing included a second affidavit from Arc Executive Director Sholton Brown, and a preliminary report by interim receiver Ken Tomlinson that alleged a series of property transactions between Arc Systems and a company called Hilda Corporation, and a subsequent transfer of properties from Hilda to Arc Properties.
Some of the properties were used to secure loans totalling more than $1.4 billion in 2011 and 2013, according to the documents.
It also emerged that Exclusive Holiday of Elegance Limited, the Montego Bay-based creditor seeking to have Arc Systems wound up over a $25.8-million debt for steel rebars supplied to Arc Systems in 2008, was itself once placed in receivership.
A search of Companies Office of Jamaica records turned up at least one report over the signature of provisional liquidator Keith Hartley Cooper regarding inflows and payments for the period July to December 2003 laying out inflows and payments for the period. However, the document itself was stamped as received by the Companies Office more than a decade later, in May 2014.
Other Companies Office records categorise Exclusive Holidays as an active company. Owner of Exclusive Holiday, Fred Smith, confirmed to the Financial Gleaner that the company had been placed in liquidation, but asserted on Monday that the matter had been resolved.
“They [the attorneys] can give you the information, because that was cleared up by two lawyers, Clayton Morgan and Dorothy Lightbourne,” said Smith. “That was cleared up long, long ago,” he said.
It’s understood that Justice Batts has asked for a report on Exclusive Holiday’s official status. The legal question it appears to raise is whether it would affect Exclusive Holiday’s standing to bring a case against Arc Systems. On that issue, Smith referred the Financial Gleaner’s request for comment to his lawyer, Winsome Marsh, who also declined to comment.
Arc System’s lawyer, Jacqueline Cummings, also declined to weigh in on the issue, saying it’s her policy not to comment on any case she is arguing before the court. Cummings noted, however, that she has no objections to Justice Batts’ decision to move the hearings to open court.
At the end of May, Batts gave Arc Systems three months to turn over all company records to the interim receiver, and also tasked Tomlinson to track down the company’s assets.
Tomlinson, who was appointed by the court on May 20, has requested a list of the 17 companies reported to be part of the Arc Group, and all the books and records for Arc Systems for the accounting periods 2008 to 2018. The Arc Group is headed by Executive Chairman Norman Horne.
His preliminary report also included a list of 24 properties that, he said, were transferred to a St Lucia-registered company, Hilda Corporation, between June 2009 and January 2012; and documentation indicating that all the assets and liabilities of Hilda Corporation were transferred to a company called Arc Properties less than two years ago, between September and October 2017, under a reconstruction and merger agreement between the parties.
Some of the properties were mortgaged to National Commercial Bank as collateral for loans totalling $1.405 billion.
The receiver says aspects of his findings will be followed by deeper investigations, including the consideration for the 24 properties that were transferred.
Tomlinson on Thursday reiterated that the case was sensitive and declined to comment.
CORRECTION: This story has been updated to correct information that the Interim Receiver Ken Tomlinson will be looking into the value of 24 properties. What Tomlinson will be looking into is the monetary consideration relating to the property transfers.