Former owner seeks payment for gym sale
A longtime gym owner said he “should get something” from the merger of his business with a rival, the Supreme Court heard this week.
Assistant Justice Jeffrey Elkinson reserved judgment Tuesday in the matter of Scott Stallard’s claim against defendants The Athletic Club Limited and its sole shareholder Kym Herron Scott, and a counter claim by the defendants.
The Athletic Club, owned and operated by Ms Herron Scott, agreed to acquire The Olympic Club, owned by Mr Stallard, in November 2014.
But Mr Stallard said he has received no payment under the deal.
Mr Stallard told the court: “This has been a very strenuous seven years. I want to get paid for spending 28 years of my life, working in the business six days a week. I raised a child, myself. At the end of the day, I should get something for it.”
The often acrimonious legal battle first came before the Court in 2019, but delays since then meant that the matter was not heard until this week.
Three adjournments, Assistant Justice Elkinson said, were at the request of the defendants, while a fourth adjournment request was denied by the court.
Mr Stallard gave evidence on Monday, the first day of the two-day hearing, as did Ms Herron Scott who testified by Zoom from Florida, where she now lives.
The plaintiff, who was not represented by legal counsel, continued his cross-examination on Tuesday of witness Wayne Scott, a former director of The Athletic Club and the husband of Ms Herron Scott.
Mr Stallard said The Athletic Club’s financials for 2014 and 2015 showed that income rose from $740,000 to $983,000.
He put to the witness: “What that shows is a $250,000 increase from one year to the next, which happens to be the year that The Athletic Club merged and took The Olympic Club.”
But Mr Scott told the Court that the merger was not responsible for the increase, attributing it instead to corporate programmes developed by Ms Herron Scott that “brought in significant revenue”.
Those corporate programmes “had absolutely nothing to do with The Olympic Club”, he added.
The afternoon session addressed the terms of the merger agreement.
Mr Stallard said he was due to be paid $3,000 a month for 42 months beginning two years after the merger agreement closed in November 2014.
He added that those terms were not met, and nor did The Athletic Club – now closed and in liquidation – pay amounts owing to Belco, landlords The Paragon Trust, Colonial Medical and the Bermuda Government which were to be paid by The Athletic Club under the agreement.
Mr Scott said all parties had been contacted, and payments were being made when the defendants “invoked indemnification” under the merger agreement.
The Athletic Club received gym equipment as part of the agreement.
Mr Stallard acknowledged selling some pieces of gym equipment for a total of $37,000 in April 2015 but said he was legally entitled to do so under the agreement which allowed him to sell “excess assets” that month and receive the proceeds.
But Mr Scott testified that Mr Stallard required the permission of Ms Herron Scott to do so.
The witness testified that “indemnity was invoked” after Mr Stallard locked the defendants out of premises, but Assistant Justice Elkinson questioned why the defendants, by then the legal tenants, did not invoke their tenant rights to a key.
Later, Mr Stallard said to Mr Scott: “You have taken a business and never paid a penny for it.”
In closing, defendants’ counsel Mark Pettingill submitted that Mr Stallard had a duty to facilitate the “seamless transfer of the business”, but had not done so, adding: “That’s what caused the house of cards to fall.”
Mr Pettingill said: “In the merger agreement, you have a duty if you want the money, to act properly at every level and facilitate the merger.”
Mr Stallard said he provided free consulting services to the defendants for a six-month period after the merger was agreed, which he said demonstrated that he went “above and beyond” in support of the agreement.
He added: “I volunteered to do this, to facilitate, it wasn’t an obligation. That was my gift to show that I wanted it to work. I take issue that I didn’t do my best efforts.”