Horne under fire in Arc bankruptcy claim
A COURT is being asked to declare that businessman Norman Horne, who leads one of Jamaica’s largest construction materials companies, is responsible for the “concealed fraudulent transfer” of assets owned by Arc Systems Limited to himself or other persons.
The damning allegation is contained in a claim filed by trading firm Arc Systems, which is in bankruptcy and under the control of court-appointed trustee Kenneth Tomlinson.
The claim, filed on May 29, names six defendants: Horne, who founded Arc Systems; Charlotte Ann Hayles; his brother, Lackie; Arc Properties; Arc Manufacturing; and Altruistic Investments Limited.
Arc is seeking various orders and declarations by alleging acts of fraud and dishonesty in the transfer of monies and assets to related entities, assistance in the illegal acts, and for restitution.
Arc is trying to recover millions owed to suppliers.
The first hearing was held in chambers before Supreme Court judge David Batts, who has since recused himself from the case. No orders were made, and the matter is to continue on June 22.
Horne is the chairman of ARC Manufacturing, a leading building materials company incorporated in Jamaica in 2010. Horne, his brother, Hayles, and St Lucia-registered H10 investment are the listed shareholders. Horne and Hayles are also the shareholders of ARC Properties.
Horne, a former treasurer of the Opposition People’s National Party, and his wife, Ashley-Ann Foster, an ex-PNP candidate, are the directors and shareholders of Altruistic Investments.
The defendants’ lawyers on record at Tuesday’s hearing were all King’s Counsel (KC) - Ian Wilkinson for Horne, Hayles, and Lackie; Ransford Braham for Arc Properties; Symone Mayhew for Arc Manufacturing; and Peter Champagnie for Altruistic. They all declined to comment, with Braham and Champagnie noting that they had just received the case.
Arc’s claim is being led by Maurice Manning, KC.
In the May 29 claim, Arc, among other things, wants it declared that Horne and Hayles are “liable in damages” for the alleged breach of their fiduciary duties as directors and “for the concealed fraudulent transfer” of Arc Systems’ monies and assets to themselves or other parties, including defendants.
A declaration is also being sought that Arc Systems is “entitled to trace such monies, profits, other benefits and all other assets acquired by” Horne or “representing the unlawful and/or fraudulent transfer” of Arc’s monies and assets.
Horne’s brother has been accused of “breach of fiduciary duty and/or breach of trust and/or dishonest assistance”.
It is being alleged that Arc Properties “knowingly received” lands owned by Arc Systems. A restitution order, among other things, is being sought against it.
Regarding Arc Manufacturing, one of the orders being sought is a declaration that sums of monies allegedly belonging to Arc Systems were received and are being held by the manufacturing outfit “due to the unlawful and fraudulent actions and breaches of fiduciary duty by Horne or Hayles.
Altruistic Investments is being asked to account for lands it allegedly received “and holds” on the claimant’s behalf. The receiver also wants to trace all assets and monies acquired by the company.
MAY 2021 JUDGMENT
The background to the claim against Horne and his fellow defendants may be found in the May 2021 judgment in which Batts ruled in favour of the Fred Smith-led St James-based Exclusive Holidays of Elegance firm that has been battling to get $26 million it claims Arc Systems owes it for supplying steel.
Batts placed Arc Systems in receivership, granting the request of Exclusive Holidays. The judge also appointed Tomlinson receiver and trustee of the property and estate of Arc Systems. Under the receivership, Tomlinson is empowered to track down Arc System’s assets with a view to recovering them.
Exclusive Holidays contended that Arc Systems may have been ‘stripped’ of its assets, but Arc’s representatives argued that the company ceased doing business in 2013 and hat there are no assets to find.
Batts relied on aspects of Tomlinson’s reports that he made as interim receiver, noting that the evidence suggests that there were moves to dodge paying debts owed.
“The reports contain details suggestive of fraudulent preference and systemic efforts to hide assets rather than to pay lawful debts,” Batts said, drawing reference to nearly $822.5 million that was transferred from Arc Systems’ NCB account between January 2012 and May 2013.
Batts also referred to the report regarding several properties, valuing $189 million, that were transferred from Arc Systems to a St Lucian corporation, called Hilda Corporation, and then further transferred to Arc Properties, without any evidence that Arc Systems had been paid the $189 million total value in the first place.
“The commonality of directors of these various companies and the fact that they all use a Bell Road (St Andrew) address add to the real possibility that there has been a fraudulent preference or other unlawful effort to evade payment of lawful debts,” Batts said. Altruistic’s registered address is 17 Ruthven Road, Kingston.
But the judge noted that he had no authority to do anything more than express concern at that stage of proceedings. “This judgment is a public document, and any relevant agency or department may take such steps as, on the information revealed, its duty demands,” Batts said.