develop the old Bermudiana Hotel left in its wake a tangle of civil litigation. Business reporter David Fox looks at the outcome of a recent Supreme Court challenge by one of the players -- First Bermuda Securities Ltd.

-- to recover some of their losses.

As foundation work proceeds full speed on ACE/EXEL's $100-million construction project at the site of the old Bermudiana Hotel, ripples continue from the collapse of the Bermuda Financial Centre Ltd. (BFCL).

Puisne Judge Richard Ground has recently dismissed a Supreme Court claim for nearly $800,000 by plaintiff First Bermuda Securities Ltd. (FBS) against Canadian financial consultant, defendant Gordon Capital Corporation.

In 1993, BFCL engaged the Canadian firm as a financial advisor and to raise capital for the project.

Gordon Capital subsequently contracted FBS to help it sell BFCL securities related to the project and to provide financial advice to both Gordon Capital and BFCL.

That alliance has now ended with FBS's unsuccessful action against Gordon Capital for $791,668.33, relating to commissions on three items of financing for the ill-fated BFCL bid.

The commissions included: two percent of a $7.5-million three year mortgage-secured loan from the Bank of Bermuda; eight percent of a seven month, $7-million loan from Argus Insurance Ltd., secured by a first charge on the shares of BFCL's property holding company; and, eight percent of a $3-million Christiani & Nielson Ltd. investment through the purchase of preferred shares within two weeks of the signing of the construction project for stage two of the development.

Christiani is an international construction company that entered into a joint venture with local firm, Sea Land Construction Ltd., to build the project.

FBS was introduced to the project by Gordon Capital partner Joslin Bennett.

Gordon Capital permitted her to service the BFCL account through her Bermuda exempted company Treleven Ltd., and she moved to Bermuda to do that.

Mr. Justice Ground stated in his judgment of the case: "It appears that this was an unusual arrangement, and was due to her personal tax position in Canada.

"The arrangement was that the plaintiff would engage Treleven under a back-to-back commission agreement, which it did on the same date as its agreement with the defendant, 17th November, 1993.

"Under that, the plaintiff was to pay Treleven a $50,000-engagement fee, a work fee of $7,500...and commissions. Mirroring the provisions in the other agreements, the engagement and work fees were to be deducted from commission earned; there were similar termination provisions; and Treleven's entitlement was to be limited to amounts actually received by the plaintiff from the defendant.'' The court determined at least half of the money at issue in the action was being claimed on behalf of Treleven.

BFCL was to buy the Bermudiana site for $14.35 million, paying an initial non-refundable deposit of $250,000 and a further deposit of $1.185 million in October 1993, as they executed a purchase agreement. The balance of $12.915 million was due on the closing date December 7, 1993.

But on that fateful day, BFCL didn't have the money, and faced with the utter loss of the project, they borrowed to bridge the gap. And while the purchase was completed, the project of establishing the financial centre was not.

Christiani was to invest some $2 million in May 1994, and upon the signing of the contract for stage two of the development, was to invest a further $3 million by purchasing BFCL preferred shares.

Even through the $3 million was never invested by Christiani, FBS argued that the commission was due upon the whole sum to be invested upon agreement being reached for the investment, or at the latest upon payment of the first $2 million.

Gordon Capital argued the signature of the contract for the second stage was required for the investment, which was never fulfilled.

Gordon Capital never received the commissions claimed from BFCL and the FBS claim to commission was limited by a November 1993 agreement to amounts recovered by Gordon Capital from BFCL.

But on May 24, 1994, Bermuda Day, BFCL officers, including president Mike Winfield, flew to Toronto and told Gordon Capital they were not happy with their performance and they wanted the relationship ended. It was agreed, subject to the payment of owed fees.

But Mr. Winfield understood that to mean that Gordon would not claim for commission or expense in relation to the bridge financing provided by Argus and the Bank of Bermuda.

Jeffrey Conyers of FBS, and Ms Bennett say that concession threw away any bargaining position they had, and rendered the recovery of the commissions impossible. And they resented the termination of their engagement without prior consultation or warning.

A week later, they met with BFCL and agreed the relationship was terminated, although they were told there was a possibility that they might be involved in future financing arrangements.

But there was also a dispute over what was owed should there be no continuing relationship. In fact, Gordon Capital wrote to BFCL claiming $710,000 was owed for fees in relation to the bridge financing. Later, they said $950,000 was owed, when fees from the Christiani participation were added in.

Mr. Justice Ground found Gordon Capital never received any part of the commission on advances to, and an investment in, BFCL.

He said, "The defendant never received any part of those commissions from BFCL, and it is accepted by all that it cannot now recover them from the company, which is defunct.

"The plaintiff, therefore, has no direct contractual claim upon the defendant for its commission. Instead, the plaintiff is thrown back upon a claim for damages for breach of two terms which it contends should be implied into its contract with the defendant.'' Justice Ground said while he accepted the terms, he could not see where the plaintiff could prove they had been breached. He had not been shown how Gordon Capital waived any contractual entitlement to the claimed commission. And although Gordon could have sued BFCL, it would have been for nought, because the affairs of BFCL were already quickly going down hill.

"In any event,'' said Mr. Justice Ground, "in order to succeed in its claim for damages, the plaintiff has to prove that any breach has caused it to suffer loss. I do not think that it has succeeded in doing so. Its loss, if any, was caused by the demise of BFCL. I therefore dismiss the claim.'' FALLEN FORTUNES -- As workers cleared the physical remains of the old Bermudiana Hotel, lawyers moved into courts to clean-up the financial mess left after the collapse of the Bermuda Financial Centre Ltd.