The Auditor General has asked the Supreme Court to decide if it was illegal for Government and the Bermuda College to grant Coco Reef Resort a 125-year lease.

A writ was filed on August 30 stating: "The Auditor General vs. the Attorney General, the Bermuda College and Coco Reef Resort Ltd."

Auditor General Heather Jacobs Matthews told The Royal Gazette she was seeking some clarification over the interpretation of a clause in the Companies Act, which appears to limit the length a lease can be granted.

Section 120.4(a) of the Act, which deals with the acquisition of land by local companies, states: "A local company may take land in Bermuda by way of lease or letting agreement for a term not exceeding 50 years, being land bona fide required for the purposes of the business of the company; and with the consent of the Minister, take land in Bermuda by way of lease or letting agreement for a term not exceeding 21 years in order to provide accommodation or recreational facilities for its officers and employees."

Mrs. Jacobs Matthews said: "I have asked the Supreme Court to clarify that section of the legislation."

When asked about the writ Attorney General Kim Wilson said: "The action pertains to the legality of the Coco Reef lease and the interpretation of sections of the Companies Act.

"Essentially the suit is to determine the meaning of a section of the Companies Act 1981 as to what that section means.

"The section has to do with whether a local company can take a lease of land in Bermuda for more than 50 years."

Last year Coco Reef was granted a lease extension by the Bermuda College. Controversially it did not go before the House of Assembly for approval; the lease was made public earlier this year.

The current lease replaced the equally controversial first lease, which was also subject to an Auditor General investigation. In 2004 former Auditor General Larry Dennis issued a report, which raised several concerns over the 2002 lease between Government and Coco Reef Resort.

He said the whole lease should be re-tendered because it was "considerably more beneficial" to owner John Jefferis than the tender document specified. He said Mr. Jefferis had renegotiated the lease, after winning the tender, to lengthen it from 21 years to 50 and had reduced the rent he had to pay for the property.

He also queried why there was a clause in the lease which stated that when the 50 years were up Coco Reef would return the land, but not the condominiums.

Mr. Jefferis has received a Special Development Order to build 66 lease-back condominiums on the Paget property; he expects to start construction this year.

Yesterday United Bermuda Party MP Grant Gibbons, who has long questioned the lease, said: "I'm very pleased the Auditor General has decided to pursue this matter. I'm sure she wouldn't be taking this action unless she felt there was a problem with the Coco Reef lease.

"From our perspective, there have been serious questions about this lease and how it has been handled from the very beginning. When you compare legislation governing the rent or sale of other government property, this Government's decision to lease a substantial piece of Bermuda College property to Coco Reef Resorts for 125 years without seeking parliamentary approval is completely outrageous.

"In addition, I note that under the Bermuda College Act, the lease would also have required the approval of the Minister of Education at its inception in June 2003."

This is not the first time an Auditor General has asked the Supreme Court to clarify a point of law.

In 2006 former Auditor General Larry Dennis filed a writ against the Bermuda Housing Trust after it refused to open its accounts for inspection.

At the time Mr. Dennis said Government controlled the entity, and therefore he was supposed to audit his finances. The board disagreed and said they could choose an auditor of their liking.

In his 2006 report Mr. Dennis wrote: "The matter was eventually decided in the Supreme Court which, in January 2007, ruled that the Bermuda Housing Trust is Government-controlled."

A date for the hearing for this most recent writ has not yet been set. Bermuda College board director Walton Brown and Coco Reef owner John Jefferis declined to comment.