The former joint liquidators of Indies Suites Ltd., Russell Smith and Chris Johnson, have responded to comments made during and after the Court of Appeal proceeding that overturned the Grand Court’s decision to allow the liquidation.
Ronnie Foster, one of the owners of Brac Construction Ltd., the sole shareholder of Indies Suites Ltd.., implied last week that the liquidators had tried to maximize their fees at the expense of Indies Suites club members.
‘This thing could have been resolved already,’ Mr. Foster said. ‘The only way liquidators can make money is by stretching the thing out.
‘I really feel like this [decision] was a victory for the club members.’
Mr. Foster also said the decision would now allow for a reasonable settlement with club members.
Brac Construction Ltd. attorney, QC Ramon Alberga, stated during the proceedings that liquidators need not have been involved in the situation because they only diminished the assets available for distribution to club members.
Mr. Johnson and Mr. Smith strongly disagreed with those statement.
‘Far from diminishing the assets available for the club members, (our) actions have assured that, at the very least, the club members will now likely benefit from the US$1,538,000 held by the Grand Court,’ they said in a joint statement released Tuesday.
Mr. Johnson and Mr. Smith outlined some of the background of the case to justify their actions.
‘Under the terms of the Indies Suites club member rules, the company had… obligations to the club members to adequately insure the facilities… in the event of destruction; to restore the facilities within two years of destruction; and (to only) sell the facilities subject to the rights of the members.’
The liquidators’ statement said Indies Suites Ltd. made a conscious decision in 2002 to reduce its insurance coverage from US$4 million to US$2 million.
‘As a result of this purposeful reduction of coverage to well below true property value, the insurance proceeds received as a result of Hurricane Ivan fell well short of those which would have been received had the property been insured in accordance with the company’s obligations to the club members.’
Mr. Johnson and Mr. Smith said that as a direct consequence of management’s failure to meet the adequate insurance coverage obligation, no attempt was made by management to restore the facilities for the club members.
‘Instead, and with no notification or consultation with club members, the property was sold without any general marketing for sale having taken place beforehand.
‘Despite the fact that negotiations for a sale appear to have commenced as early as October 2004, which culminated in an actual sale on January 27, 2005, the club owners were not informed of the disposal until a May 31, 2005 posting was made on the company’s website.’
The former liquidators said club members had believed until that time every effort was being made to restore the facilities.
‘Indeed, (in the May 31 website posting)… the management stated ‘the proprietor has spent the past eight months since Ivan trying to settle the insurance claim, and obtaining advice from experts, claims consultants, engineers and others on the feasibility of rebuilding the property and once again operating a resort’. As the property was sold in January, this statement is clearly untrue.’
Mr. Johnson and Mr. Smith also think the property might have been sold undervalue.
‘Post-hurricane valuation reports obtained by (us) place a value of approximately US$4.8 million on company’s property and land. However, management sold the property and land for just US$2.8 million.’
Indies Suites only received US$1.125 million as insurance settlement.
‘Of this amount… $120,000 was purported used to pay off trade creditors and employees and US$120,000 was purportedly paid to the company’s shareholder to clear site debris to allow access to insurance assessors,’ the liquidators’ statement said.
‘The balance of US$885,000 was paid to a Myers & Alberga client account again held in the name of (Brac Construction). (We) believe that had these insurance proceeds been truly intended for the benefit of club members they would have been held in the company’s own client account and not that of the shareholder.
‘This belief is supported by the fact that on the very same day that the settlement was finalized, and the US$885,000 paid over, management passed a (directors’) resolution that US$1,538,000 be paid over to the company’s shareholder in part settlement of a loan, evidence of which was not subsequently provided to (us) despite requests having been made and which (we) could find no corroboration of.
‘Most notably is the fact that the payment equals the sum of both the property sale and insurance settlement net proceeds.’
The liquidators’ said those facts, plus others, had been established only as a direct result of their involvement.
‘It is against the background of these facts that (we) feel that the statements made [by Ronnie Foster and Mr. Alberga] are incorrect, unjustified and misleading.
‘Had (we) not immediately discovered the fact that the insurance proceeds had been paid across to the company’s shareholder, and that the property sales net proceeds had also been paid to the company’s shareholder some months previously, (we) firmly believe that the club members would not be in the position today whereby the total of those funds is presently in the protective custody of the Grand Court and which might later become available… as a result of a second successful petition.’
Mr. Johnson and Mr. Russell said their costs and fees to Indies Suites totalled US$79,828 to date.
‘These costs arose as a direct result of the extensive and necessary investigations undertaken by (us) and which were exacerbated by what (we) believe to be the wilful and purposeful destruction of a large amount of company records, just two working days before the provisional liquidator was appointed, and the consistent failure of the shareholder and management to adequately provide meaningful information and/or documentation required by (us) following (our) appointments.’