Judge rules Port Royal case must be heard
A judge has rejected businessman Wendall Brown’s attempt to have a government lawsuit against him and one of his companies thrown out.
The civil action accused Mr Brown and Zane DeSilva, a Progressive Labour Party MP, of profiting from their former positions as trustees of Port Royal Golf Course by “causing or permitting” construction contracts at the publicly owned course to be awarded to their own companies.
Mr Brown is alleged to have been the owner and one of the “controlling minds and wills” of SAL Ltd when it supplied concrete to another firm which had won a contract to build cart paths at Port Royal in 2008 as part of a $24.5 million taxpayer-funded refurbishment project.
The Government claimed Mr Brown did not disclose his interest in SAL and failed to remove himself from discussions about the contract.
It is further claimed he did not get permission from the Government to contract with the board and made a profit because of his position as a trustee.
Puisne Judge Stephen Hellman disagreed with the grounds for a strikeout of the government case.
He said it was “properly arguable” that Mr Brown owed fiduciary duties to the Government, as a trustee of Port Royal.
The legislation governing Bermuda’s public golf courses requires trustees to act on behalf of the Government and for the board to follow ministerial instructions on the spending of public money on capital development.
The judge said: “I am satisfied that, in light of the provisions in the Golf Courses (Consolidation) 1988 Act, it is properly arguable that Mr Brown owed fiduciary duties to the Government.”
He added he was satisfied that on the material before him that it was also properly arguable that Mr Brown, the president and a director of SAL, had an interest in SAL.
SAL is accused of “dishonestly assisting Mr Brown in the breach of trust by entering into the contract for the supply of concrete, and is therefore liable to the plaintiff”.
Saul Froomkin, representing Mr Brown and SAL, both of whom deny any wrongdoing, argued at a May 9 hearing that the case against his clients should be thrown out for being “scandalous, frivolous and vexatious” or “otherwise, an abuse of process”.
He said Mr Brown, as chairman of Port Royal’s board of trustees between 2007 and 2009, did not owe a fiduciary duty to the Government, as alleged in papers submitted to the court, but to the board itself, a body corporate with the power to sue.
Mr Froomkin also denied that Mr Brown had an underlying beneficial interest in SAL and said that even if he did, the contract to build the cart paths was with a different company.
The Government’s lawsuit also alleged that Mr Brown and Mr DeSilva “caused or permitted” a fourth defendant, fellow former trustee Delano Bulford, to have received a $10,000 “secret commission” payment from the board in relation to another contract.
Norman MacDonald, from the Attorney-General’s Chambers, alleged that board members approved the commission payment and attempted to conceal it from the Government and had acted in breach of their individual fiduciary duty to Government.
Mr Froomkin said as the board acted collectively its decisions could not give rise to individual liability.
Mr Justice Hellman ruled: “Suffice it to say that I am satisfied that the plaintiff’s position is properly arguable.”
A lawyer for Mr DeSilva was present at the May 9 hearing, but did not make representations.
The fifth defendant in the case is Mr DeSilva’s Island Construction, which is accused of “dishonestly assisting” him to “secure the award of contracts to it”.
Mr DeSilva, who resigned as a Cabinet minister in January, earlier pledged to fight the lawsuit “to the end”, insisting the board of trustees “did everything by the book”.
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