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The plight of the Oveson Brothers at Levera

The construction being undertaken by the Chinese at Levera in the north of the island

The Oveson brothers from the United States are having an uphill task in court in their case against Levera Resort Development Ltd (LRDL) involving businessman Lyden Ramdhanny and local attorney-at-law, Dickon Mitchell in a deal that went sour over a development project at Levera in the north of the island.

High court judge, Raulston Glasgow has ruled that Robert and Randall Oveson who are originally from Utah will have to put down a sizeable sum of money in order to get the court to hear the case in which they lost millions from the project.

The two brothers are involved in the Grenada Citizenship Development Limited (GCDL), the developer of Levera Nature & Beach Resort, which was forced to abandon the multi-million dollar project.

The Ovesons’ are seeking damages in the region of US$19.6 million after LRDL kicked them off the project site and sold the lands to a wealthy Chinese businessman.

The warring parties had earlier agreed that the Ramdhanny outfit would lend GCDL some US$31.5 million, secured with a mortgage on the 256 acres to undertake the project.

A critical component of the agreement was a clause that granted the Oveson brothers use of the project’s passport-selling status that was obtained in 2015 but was ruled as illegal by the Grenada Citizenship by Investment Committee.

LRDL argued in the case before Justice Glasgow that GCDL is in financial difficulties and expressed fears that it might not be able to pay any cost in the matter.

Following is part 3 of the Glasgow ruling:

GCDL’s submissions in opposition

GCDL submits that:

(1)   it has “a genuine claim with a high public interest component'”. The public interest, it claims, lies in the fact that investors have already paid to acquire Grenadian citizenship by investing in the development of the Levera Project. GCDL claims that these persons have not received any compensation for their investment even though these investments have increased the value of Levera’s property. GCDL urges the court to follow the guidelines recited in Sir Lindsay Parkinson & Co Ltd v Triplan Ltd” to conclude that GCDL has an arguable claim as it is far more than a mere sham or nuisance;

(2) The court should not regard the applicants’ reference to claim nos GDAHCV 201710053 and GDAHCV 2019/0521 since they relate to different claims that have not been determined. GCDL charges that Mr. Mitchell is attempting to use these matters that came to his knowledge while he acted as legal counsel for the company. In this regard, GCDL claims that while the claims in those suits are public records, CPR 3.14 precludes Mr. Mitchell’s use of and access to the affidavits and records of oral examination. It is said that the applicants’ reliance on those claims to “repress the Claimant’s claim in this matter now borders on oppressive behaviour'”.

(3) The applicants have failed to disclose that the issue of GCDL’s solvency is before the court for determination. In the circumstances, the applicants cannot affirm with cogent evidence that GCDL is incapable of satisfying its debts. This is especially since in this case, Levera has had the full benefit of GCDL’s development of the subject property which Levera has utilised to its benefit by selling to a 3rd party;

(4) An order for security for costs would leave GCDL in “an undesirable position where it would be not be able to pursue this litigation.””

(5) GCDL recites Sir Nicholas Browne-Wilkinson’s admonition in Porzelack KG v Porzelack (UK) Ltd “to the effect that:

It is always a matter to take into account that any plaintiff should not be driven from the judgment seat unless the justice of the case makes it imperative. I am always reluctant to allow applications for security for costs to be used as a measure to stifle proceedings.

(6) GCDL present Deleclass Shipping Company Limited and another v lngosstrakh Insurance Company Limited” and Newman v Wenden Properties Ltd” as authority for the view that the court has a discretion in this case. That discretion, they argue, should be used not to grant the order sought by the applicants since it would lead to stifling and oppression.

(7) GCDL argues that any order would likely result in its failure to pursue its claim against the applicants who have “unjustly enriched themselves at the expense of the Claimant which has contributed considerable value added to the property of the First defendant an (sic) for which value the Claimant has received no compensation.””

(8) Lastly, GCDL relies on the court’s overriding objective of disposing of cases justly to plead that the court should not make an order for security for costs in this case.

Useful background

I believe it may be useful to recite some of the facts surrounding the present dispute between the parties before I discuss whether I will grant or refuse the request for an order for security for costs.

GCDL and Levera are parties to a Sale and Purchase Agreement (SPA) which agreement had the sole purpose of facilitating GCDL’s purchase of lands owned by Levera (the lands).

Prior to the conclusion of the SPA, Levera applied to the Government of Grenada (GOG) and obtained Citizenship by Investment (CBI) approval for a tourism project involving the lands subject to the SPA (the Levera Project). Levera was also successful in obtaining planning permission and certain tax concessions for the Levera project. GCDL agreed to buy the lands subject to the CBI approval and to pay Levera the sum of USD35 million for the same. Of particular significance to this discourse are the following terms:

(1) 1.3 – The Vendor, pursuant to an agreement dated 21st December 2015 with the Government of Grenada has negotiated certain concessions for a real estate development including a hotel and resort to be located on the Property and agrees to assign, with the consent of the Government of Grenada, the said agreement to the Purchaser on the Closing. In the event the Vendor does not get the permission of the Government of Grenada to assign the concession to the Purchaser by the Closing, the Purchaser shall grant the Vendor an extension of thirty (30) days within which to obtain the consent of the Government of Grenada;

(2) 1.4 – The Vendor shall obtain renewed outline physical planning permission for the real estate development including a hotel and resort and agrees to assign, with the consent of the Government of Grenada, the said planning permission to the Purchaser on the Closing. In the event the Vendor does not get the permission of the Government of Grenada to assign the planning permission to the Purchaser by the Closing, the Purchaser shall grant the Vendor an extension of thirty (30) days within which to obtain the consent of the Government of Grenada;

(3) 1.5 – The Vendor shall permit the Purchaser the use of the Citizenship by Investment approved status of the Vendor’s Levera Resort Project (CBI Program) for the purpose of permitting the Purchaser to undertake marketing investment opportunities through the CBI program. The Vendor agrees that the Purchaser shall be permitted to do so from the Execution Date provided that the Purchaser shall indemnify the Vendor from all claims, demands, losses, expenses, costs and fees including legal and other professional fees arising from the Vendor’s agreement to permit the Purchaser the use of its CBI Program;

(4) 2.1 – The Purchaser agrees to pay the Purchase Price for the Property in accordance with the following schedule:

First Instalment Payment USD500,000.00 – 18″ March 2016

Second Instalment Payment USD 500,000.00 – 18″ April 2016

Balance of Purchase Price USD 34,000,000.00 – 18″ May 2016

Comprised of USD 2,500,000.00 cash payment and Vendor Joan of USD31,500,000.00

(5) 2.2 -Any amounts not paid within thirty (30) days of the payment date set out in the schedule in paragraph 2.1 above shall accrue interest at the rate of 1% per month;

(6) 2.3 -In the event that the Purchaser does not make a or any payment which constitute the Deposit” the Purchaser shall be in default and the Vendor may immediately terminate this Agreement upon written notice and the Deposit, if any, already paid by the Purchaser shall be forfeited to the Vendor, which the Purchaser agrees represents liquidated damages for the Purchaser’s default. In the event that the Purchaser does not pay the Balance of the Purchase Price on or before the Closing, the Vendor shall grant the Purchaser an extension of thirty (30) days within which to pay the Balance of the Purchase Price. Should the Purchaser not pay the Balance of the Purchase Price by the extended date for Closing, The Vendor may immediately terminate this Agreement upon written notice and the Vendor shall be under no further obligation to the Purchaser with respect to this Agreement. Time shall be of the essence with respect to this clause.”

GCDL admits, and the applicants accept, that GCDL only met the obligations to pay the first and second instalments. GCDL did not pay the third instalment as scheduled. Levera granted GCDL a number of extensions over a number of months to make the agreed payments. On its application for the freezing order, Mr. Oveson’s exhibit number “R06″ outlines GCDL’s inability to make the USD 2.5 million payment due by May 2016. GCDL requested an extension of 30 days to make the required payment. Levera gave written approval on 19th May 2016 to GCDL’s requested extension. I note that Levera expressly stated that GCDL was not to treat the extension as a waiver of Levera’s rights in respect of GCDL’s breach of the SPA. Levera reserved its rights in that regard.

Notwithstanding Levera’s forbearance as outlined in the 19th May 2016 extension, GCDL sought a further extension. Levera granted the same via letter dated 17” June 2016. In that letter, the parties agreed to a revised payment schedule. The parties refer to the same as the “first supplemental agreement.” Pursuant to the first supplemental agreement, the parties extended the time limit for payment of the USD 2.5 million tranche of the purchase price to 31st August 2016. Levera again reversed all its rights under the SPA. GCDL did not meet this time limit. Rather, Levera contends that GCDL paid the sum on 30″ August 2018.

The parties also entered what is termed the “second supplemental agreement”. Under the second supplemental agreement, Levera undertook to transfer 2 acres of land to GCDL in order that it meet obligations to persons who had already paid monies to GCDL and had received CBI licences. Levera asserts in its defence and on its answer to the freezing order application that it never transferred the lands to GCDL.

Levera says that it did do so because this second supplemental arrangement was contingent on GCDL making timely payments under the SPA and the extended periods set out in the first supplemental agreement. Levera says that GCDL never met those payments as agreed notwithstanding much forbearance and as such there was no basis for the transfer of the land.

On 11″ June 2019 Levera gave notice of termination to GCDL. Thereafter much laing and froing occurred about the notice of termination. It would appear that at some point thereafter Levera sold the lands to a third party. GCDL then filed a claim before the courts seeking relief for losses incurred as a result of misrepresentation, wrongful repudiation etc. GCDL also filed the application for the freezing order.

GCDL’s claim form
On its claim, GCDL complains that Levera misrepresented (fraudulently) that it could lawfully permit GCDL to use its CBI approval to market the Project to investors. It claims that it relied on this representation to market the Project to its investors for a number of years until it received a letter dated 17″ April 2019 from the Citizenship By Investment Committee (“the committee”). The letter stated that Levera could not transfer its CBI approval to GCDL and that GCDL was required to seek its own CBI Approval. This misrepresentation, GCDL explains, caused it to suffer loss and damages in the sum of USD 11,378,331.00 since it was stymied in its efforts to market the Project and/or meet its obligations to persons who had already invested in the Project. GCDL claims that the claim for loss includes the sum of USO 8,252,500.00 owed to 3″‘ Party investors.

[28] GCDL also complained that Levera wrongly repudiated the SPA. GCDL says that based on the above outlined course of dealings, accommodations and extensions of time periods for payment, the conditions precedent to paying the sums due had not arisen. GCDL also claims that Levera never satisfied the obligation to obtain the GOG’s consent to the assignment of its tax concession to GCDL. Levera equally failed to obtain the GOG’s consent to assign Levera’s planning permission to GCDL. Additionally, Levera failed and/or refused to transfer the lands agreed to be transferred under the second supplemental agreement. GCOL also outlined Mr. Mitchell’s liability as attorney for the company.

The applicants’ defence

[29] A summarised version of Levera’s defence is that there was no fraudulent misrepresentation, proprietary estoppel or other breach as claimed by GCDL because, among other things:

(1) The assignment of the tax concessions and planning permission contemplated by clauses 1.3 and 1.4 of the SPA were conditional on –

(a) GCDL meetings its obligations to pay the purchase price by 18th May 2016.

(b) GOG giving its consent to the assignments;

(2)   Levera contends that in any event, GCDL was able to utilise Levera’s tax concessions and planning permissions as admitted in letter dated 5th May 2017;

(3)  In respect of clause 1.5, there was no requirement that Levera transfer or assign its CBI approval to GCDL but rather the clause expressly stated that Levera was to “permit” the use of its CBI Approval. The facts reveal that GCDL utilised Levera’s CBI approval status for a number of years in order to “secure” investments from third parties to the tune of USD 8,132,500.00;

(4) Levera did not wrongly repudiate the SPA. The SPA was a contract for sale of land with specific payment periods. The evidence demonstrates that GCDL did not meet any of the payment deadlines even when extended nor did it make the stipulated payments. Levera was therefore well within its rights to terminate the SPA and sell the lands to a third party. With respect to the claim against Mr. Mitchell, the applicants’ defence pleads much of the material set out above about his lack of any relationship with GCDL.

(TO BE CONTINUED)

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