Government files writ against insurer in schools case

The Cayman Islands government issued a writ of summons late last year against an insurance firm in connection with ongoing legal battles between Cayman and its former high schools construction project contractor, Tom Jones International.

According to the writ, filed on 2 December, 2011, the government is seeking payment of CI$3.2 million it claims is due under two performance bonds issued by Royalstar Assurance Ltd. The bonds were issued in July 2008 and November 2008 “in respect of any and all obligations and liabilities of Tom Jones International Ltd., arising under the terms of construction contracts [dated May 2008 and September 2008, respectively].”

Both of those contracts were terminated by the Cayman Islands government on 2 December, 2009. After the Tom Jones contracts were voided, government re-bid the construction of the two high schools, Clifton Hunter in Frank Sound and the new John Gray High School in George Town, to different subcontractors. Neither project has been completed to date.

According to a statement issued by the government’s Ministry of Education on Friday concerning the writ: “The reason why payment is not automatic under the bonds is that they are not subject to ‘payment on demand’ clauses. Consequently, and in keeping with the specific requirements of the bonds, a writ action has been filed against Royalstar Assurance, Ltd. for payment of the bond monies.

“The bonds are the subject of a separate dispute between the Cayman Islands government and Tom Jones International, and the service of the writ on Royalstar Assurance Ltd. further serves to preserve the government’s position until such time as the dispute with Tom Jones International has been resolved. The government is also pursuing Tom Jones International in arbitration proceedings to recover all of its losses suffered as a result of having to terminate this company.”

The Clifton Hunter and John Gray High School projects have been plagued by controversy almost from their inception. In early 2008, Tom Jones International bid significantly lower on the schools than other construction firms.

The bidding process – now being reviewed by the Cayman Islands Auditor General’s office – came under criticism when the completion date for the school was extended for one year after Tom Jones International was awarded the contract. The cost of the two schools, some $120 million combined, drew sharp criticism as well.

After the May 2009 general elections, the new United Democratic Party government revealed that Tom Jones International was already in a dispute with the government over $17 million in cost overruns, which the contractor said involved change orders.

The UDP government said the schools would not be completed by the beginning of the 2010/11 school year as scheduled. The government has since said it will complete the Clifton Hunter High School construction project first, possibly by September 2012.

By September 2009, severe problems between the government and Tom Jones over payments became public, leading to Tom Jones contractors and subcontractors walking off the John Gray project site. Although they returned shortly thereafter, they walked off both the John Gray and Clifton Hunter work sites in November 2009, stating they believed government had insufficient funding to complete the projects.

In November 2009, Tom Jones International was sued for $2.24 million for amounts due on work completed by one of its major subcontractors on the high school projects, Caribbean Mechanical (High Schools 2008) Ltd. Shortly afterward, Tom Jones sued the Cayman Islands government for $2.95 million for work it said was completed and not paid for.

The government proceeded to terminate the company’s contract in early December 2009 and counter-sued Tom Jones, but that suit was thrown out of court by a judge, who said he found it “forensically embarrassing” because of a lack of details.

The original Tom Jones International lawsuit for $2.95 million is still unresolved.