by Linda Straker
- Garden Group was incorporated as company number 39 of 2002 on 23 May 2002
- Government guaranteed a loan of US$8.9 million for Garden Group
- None of the properties was able to complete construction
- Fleming Estates Limited owned Maffiken Apartments
High Court Judge Raulston LA Glasgow has described the legal action of one of the property owners of the failed Garden Group hotel project who is seeking the Court’s permission to have the land and property return to their possession as parsimonious.
“I must confess that Fleming Estates’ pleadings are rather parsimonious in respect of identifying the specific cause of action that is before the court,” Judge Glasgow said in the ruling after hearing arguments in the matter in March 2021.
“I do not believe that Fleming Estates has brought a claim that has reasonable prospects of succeeding against either party. As such, I must dismiss this claim,” said the Judge, who recommended other options that can be considered to pursuing the matter.
Glasgow said that a derivative claim brought by Fleming Estates on the Garden Group’s behalf regarding breaches by Government in respect of contractual obligations to the Garden Group and possible mismanagement of the affairs of Garden Group that resulted in its alleged dire financial state and ultimately the alleged injuries and losses suffered by Fleming Estates and the other shareholders was an alternative.
“A claim by Fleming Estates against Garden Group for oppressive conduct that resulted in the alleged injuries and losses suffered by Fleming Estates; A claim by Fleming Estates against Garden Group for breach(es) of the Sale of Business Agreement or the terns of the deed of conveyance of its property to Garden Group and a claim by Fleming Estates against Government for breach(es) of any agreement between Fleming Estates and the Government,” were other options available.
Fleming Estates Limited was the owner of a small hotel property called Maffiken Apartments. In May 2002, Fleming Estates along with several other small hoteliers entered into an arrangement termed a preformation agreement. These hotels were No Problems Limited, Cedars Inn Mall 21, the Village Hotel and Camerhogne Park Hotel.
The parties, according to court documents, designed the preformation agreement to create, fund and operate a company called Garden Group Hotels Limited. The preformation agreement obligated the parties to sell certain properties to Garden Group in exchange for, among things, positions of directorship and an allotment of shares equal to the agreed value of their respective business that was to be sold to Garden Group which was a private entity in which the Government of Grenada was also a shareholder. Garden Group was incorporated as company number 39 of 2002 on 23 May 2002. The authorised shares to be allotted amounted to 4,000,000 common shares. The principals of Fleming Estates and the other hoteliers were listed as the initial directors of Garden Group Limited.
Fleming Estates wants the land returned to them, but after listening to the argument presented to the Court from the lawyers representing Fleming Estates and from the Attorney General Dia Forrester the Judge dismissed the matter. “There is no basis set out on the pleading for a claim by one shareholder against another. However, Fleming Estates’ position may be that Government undertook certain obligations to Garden Group that Government has failed to honour. If this is the case, then Garden Group may have a cause of action against Government for any breach(es) of those obligations,” said the judgment.
“All of the shareholders or some or one of them may have suffered loss(es) because of the injuries inflicted on Garden Group due to Government’s alleged failure to keep those promises to Garden Group,” said Glasgow.
“A shareholder may only pursue remedies for the wrongs done to the company with the leave of the Court. Conversely, Fleming Estates may assert that it entered an agreement with Government that obligated Government to do certain things with respect to Fleming Estates,” said the ruling.
The Government of Grenada guaranteed a loan of US$8.9 million for the Garden Group but none of the properties was able to complete construction. The parties signed a preformation agreement which obligated the parties to sell certain properties to Garden Group in exchange for, among things, positions of directorship and an allotment of shares equal to the agreed value of their respective business that was to be sold to Garden Group.
All the hoteliers, including Fleming Estates sold their properties to Garden Group, had their liabilities liquidated and were awarded shares. Fleming Estates transferred its properties by deed of conveyance dated 20 February 2003. The deed notes, among other things, that Fleming Estates would sell its property to Garden Group in exchange for the discharge of Fleming Estates’ obligations to the bank and the allotment of fully paid common shares to the value of $764,992.
Deloni Edwards who represented Fleming Estates said that a decision is yet to be made about the next step that his clients will pursue in their quest to have the deed and land returned.
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