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$18m hotel loan dispute back in court

Hotel vision: An artist’s impression from 2009 of the St Regis resort proposed for the Par la Ville car park in Hamilton (File photograph)

A law firm yesterday asked a court to waive legal privilege in a dispute over an $18 million loan for a hotel development that was never paid back.

The move came after Mexico Infrastructure Finance, who provided the cash to jump-start the Par la Ville hotel development on a car park in Hamilton, accused legal firm Terra Law of negligence over a legal opinion that said the Corporation of Hamilton could guarantee the loan.

But Terra Law has applied to the Supreme Court to waive legal privilege on the basis that MIF could have taken legal advice from other sources such as Conyers, their law firm on the island.

The law firm also argued that MIF had been given a series of draft opinions from Terra Law, so it did not have to rely on the firm’s final opinion.

A draft opinion by Terra Law, sent in June 2013, said there was a possibility of a legal challenge “on the basis that as the Act does not give the Corporation the express power to mortgage its land to support the borrowing of a third party”.

The opinion added a challenge would require a “very narrow interpretation” of the law and, as the corporation had entered into similar agreements before, a challenge would be “unlikely”.

The legal dispute is over the $18 million loan made by MIF, a company based in Florida, to Par-la-Ville Hotel and Residences, also known as PLV, in 2014.

The loan was guaranteed by the Corporation of Hamilton, but PLV defaulted on the loan in December that year.

The Corporation at first said it would honour the guarantee, but later argued in court that it had not had the power to make it, so it was unenforceable.

The legal dispute went to the Privy Council in London, Bermuda’s final court of appeal, which found in favour of the Corporation.

MIF launched a series of legal actions to recover the lost money – including $12.5 million handed over to Gibraltar-based investment firm Argyle in a bid to raise more funds.

The source said the remainder of the $18 million had been spent on services for the development, that ranged from architects to lawyers.

A judge at the High Court in London ruled in July 2017 that Robert McKellar, the director of Argyle, had engaged in “unjust enrichment” and had spent the money.

Argyle was liquidated in 2019 to recover the cash, which Mr McKellar spent on an expensive Aston Martin sports car, an engagement ring, and two properties in the English county of Sussex, Overton Grange and Rystwood Farm.

The Supreme Court heard that some of the missing cash had been recovered, but the costs had almost “wiped out” any benefit.