SXMElections.com

PHILIPSBURG--The Court of First Instance ruled in favour of Bank of Nova Scotia (Scotiabank) in two summary proceedings concerning the Caravanserai property in Beacon Hill on Friday.

The bank won the injunction filed by International Financial Planning Services (IFPS) to halt the auction of two plots in the resort, as it claimed ownership of the part of the property where Dunes Casino is located.

IFPS had requested the Court to exclude the sale of these properties from the auction until the Court has made a decision in the proceedings on the merits.

Scotiabank also emerged victorious in the summary proceedings it had filed against Kildare Properties Ltd. and its statutory owner Haresh Manek.

Scotiabank wants to auction off the entire property, as Kildare had failed to meet its financial obligations to the Bank on a mortgage on the Caravanserai property amounting to some US $14.2 million, including interest and cost.

At a first auction, held February 12, the property was priced at US $20 million, but there was no buyer. A second auction, held April 3, against a reduced price of US $16 million also did not lead to a sale. A new auction has been set by notary Tjon Ajong for Wednesday, August 13, with a "reserved price" of US $12 million.

According to Scotiabank, Kildare and buyers of so-called "deductions" had repeatedly tried to thwart and prevent the auctioning of the Bank's mortgage rights.

Kildare had tried to illegally, and without its permission, alienate long-lease rights on parcels of property, the Bank claimed.

This happened on three occasions. On March 29, 2011, a piece of property on which the casino is located was transferred for US $1.5 million to IFPS. On June 22, 2011, long-lease rights on a lot were transferred to NHKK Enterprises Ltd. against payment of US $130,250, and a third plot was transferred to Fralexia Ltd. for US $1,050,000.

As a consequence, the Bank stated, it is having difficulties selling off its rights of mortgage on the resort. This was only aggravated by the fact that the ground-rent was also "exorbitantly" increased.

In the injunction, the Bank requested the Court to forbid Kildare and Manek to cooperate with the passing of deeds leading to the split and or transfer of long-lease rights and the change of long-lease conditions, such as an increase of ground-rent charges.

In case of non-compliance, Scotiabank requested that the Judge impose a US $20 million penalty for each violation.

The Court ruled in the Bank's favour as it could not be ascertained that the properties in question had been transferred to their new owner with government's and the bank's permission.

It was also stated that the bank's interests in this case concerning its claim with Kildare should weigh higher than IFPS's interests in awaiting the Judge's decision in the court case on the merits.

In this decision, the Court took into consideration that the Bank had already made considerable cost in its previous two efforts to sell off the long-lease rights. These cost would only have increased would the Court have decided to suspend Wednesday's auction, it was stated.

Kildare had rejected the Bank's claims. The company has been the owner of the Carvanserai property since 1996. It had negotiated several bank loans, for which the land was given in property to finance the construction of a hotel and apartments.

However, the loan did not prove to be sufficient to finance construction.

Caravanserai in fact consists of several different buildings and apartments, which can be sold separately. Kildare sold long-lease rights to IFPS, Fralexia and NHKK and denied that this was done without the Bank's permission and approval. Kildare claimed that the mortgages were transferred and approved according to the rules.

The Court, however, found that Kildare had defaulted in selling off long-lease rights to the previously mentioned companies without Scotiabank's permission and, as a consequence, had seriously harmed the Bank's interests.

Kildare is having a current debt with Scotiabank of approximately US $17 million, whereas the "reserved price" of Wednesday's auction has been set at "only" US $12 million.

The bank would probably remain with irrecoverable debts, which would only increase if Kildare would continue selling and delivering long-lease rights. Therefore, the Court ordered Kildare and Manek to refrain from such actions.

On June 27, Minister of Public Housing, Environment, Spatial Planning and Infrastructure Maurice Lake had signed a decree in which the ground-rent on Kildare properties were increased from NAf. 0.01 to NAf. 8.

The Court said the increase "frustrates the success of the auction while no insight has been provided why at this moment it was decided to exorbitantly increase the ground-rent."

The Court ordered Kildare and Manek to immediately cease with the splitting or transfer of long-lease rights and terms and also forbade them to request Country St. Maarten's permission for such acts, against payment of US $16 million, in case of non-compliance.

The Court orders apply until the long-lease rights have been auctioned, the purchase price has been paid to a notary and the long-lease rights have been delivered and entered in the public register.