City plans appeal of $22m court award in failed hotel case
A New York court has granted an award of more than $22 million to Mexico Infrastructure Finance in a longstanding dispute with the Corporation of Hamilton over the failed Par-la-Ville hotel project.
The Southern District of New York found this year that the municipality was liable for losses suffered by MIF including more than $12.5 million of a defaulted loan and 9 per cent annual interest.
According to the latest documents, dated October 11, it was estimated that the interest had reached $9.92 million, bringing the total award to $22.47 million.
The corporation had 30 days to file an appeal, which would likely require it to post a bond to cover the judgment amount in addition to any interest that may accrue during the appeal process.
A spokeswoman for the City said yesterday: “We respectfully disagree with the decision of the New York federal court and intend to pursue an appeal vigorously.”
The legal action related to a July 2014 loan to Par-la Ville Hotel and Residences, which was intended to jump-start financing to build a hotel on the site of the Par-la-Ville parking lot.
A total of $12.5 million of the money borrowed by PLV was transferred to Argyle, a Gibraltar-based investment firm. The funds were never invested on PLV’s behalf and the PLV quickly defaulted on the loan.
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.
While some of the missing cash was recovered, it was reported that the recovery costs had almost “wiped out” any benefit.
The Corporation of Hamilton had guaranteed the loan but argued in court that the guarantee was ultra vires, meaning the body did not have the power to make the guarantee and it was, therefore, unenforceable.
The Privy Council in London, Bermuda’s final court of appeal, found in the Corporation’s favour but MIF initiated further legal actions in Bermuda and New York.
In the case heard last month in the Southern District of New York, MIF argued that the corporation had the power to enter into the escrow agreement.
The fund claimed that the corporation breached the agreement when it sent the bank a document that said the funds could be released because a “senior loan or an equivalent” had been secured.
However, the corporation maintained that, like the guarantee, the escrow agreement was ultra vires and MIF was “acutely aware” of the risk when it signed the agreement.
District Judge Denise Cote found in July that the corporation had “turned a blind eye” to potential risks and was liable for losses suffered by MIF.
Judge Cote said that representatives of Hamilton were aware that the deal with Argyle did not guarantee a return of principal or a profit, despite the escrow agreement requiring at least $18 million to cover the bridge loan.
“In essence, Hamilton knew that PLV planned to send the bridge loan funds to a gambler who would try, but would not guarantee, to earn at least $18 million in return,” she wrote.
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