Court declares $1.5 million land purchase again null and void (Even though buyer has a notarial deed)

POSTED: 08/10/14 5:59 PM

Corallo’s IFPS bid to halt Caravanserai auction fails

St. Maarten – The Court in First Instance rejected yesterday a request by Francesco Corallo’s company International Financial Planning Services (IFPS) to halt the auction of the Caravanserai property in Beacon Hill by Scotia Bank. The court repeated that the transfer of part of the property to IFPS on March 29, 2011, to IFPS is null and void, because the seller – Kildare Properties – had not asked permission from country St. Maarten to split the right of long lease before the transaction. IFPS paid $1.5 million for two pieces of land at Caravanserai.

The bank will now go ahead with the auction on Wednesday, August 13. The reserved price for the property is $12 million. Earlier attempts to auction Caravanserai (first for $20 million, then for $16 million) failed because there were no bids. Kildare Properties has a $17 million debt to Scotia Bank. In 2010, Kildare obtained a $26 million loan for the expansion of the resort, but the project was never finished. Kildare Properties owner Haresh Manek defaulted on the loan and construction company Liccom that had guaranteed jobs for 100 workers to complete the expansion by the end of 2011, abandoned the site and is stuck with an unpaid claim on Kildare of $1.7 million.

Yesterday’s court ruling is a blow to casino mogul Francesco Corallo’s IFPS; the company sees $1.5 million go up in smoke, because the court ruled that the purchase of March 29, 2011, never took place.

Vromi-Minister Maurice Lake attempted to repair the situation by signing on June 27 a decision to approve the split of the long lease, but that initiative failed because one condition – that all stakeholders approve the split – was not met. Scotia Bank, wishing to protect its mortgage rights, refused to agree.

Judge Koen Luijks ruled that country St. Maarten had not given permission on March 29, 2011, to Kildare or IFPS to split the long lease. Therefore, the court ruled, “the transfer of the assets cannot have taken place.” The transfer of the two pieces of land is invalid, because it is not possible to do this without the permission of the owner – Country St. Maarten.

The court rejected IFPS’s argument that the bank has no direct interest in calling on the invalidity of the purchase and the transfer of the rights to long lease. “The mortgage rights of the bank and the long lease rights of Kildare are at stake.”

The court furthermore ruled that the bank’s interest in reducing its considerable claim on the insolvent Kildare Properties Ltd. and in limiting its outstanding risks carries more weight than the interest of IFPS to be allowed to wait for a decision in the regular court procedure that is still pending.

Chances that IFPS will prevail in this regular court procedure are minuscule, the court ruling states. Suspending the August 13 auction with the lowered reserved price would only increase the uncollectible claim the bank has on Kildare. Furthermore, the court ruled, it is uncertain when the court will pronounce its verdict in the regular procedure. IFPS’s attorney Willem Nelissen said during the hearing in summary proceedings on July 29, that this ruling is expected in September, but the court did not accept that point of view.

In a second lawsuit in summary proceedings, Scotia Bank prevailed over Kildare Properties and its owner Haresh Manek. The court ruling prohibits Kildare – within one hour after the verdict has been served – to cooperate with passing any deed to split or transfer the rights to long lease or to change the long lease conditions for the property. In his decision on June 27, Minister Lake increased the long lease fee from 1 cent to 8 guilders per square meter, but Scotia Bank blocked that move by not agreeing with the split.

The court ruling also prohibits Kildare from submitting a request to country St. Maarten for splitting, transferring or changing the conditions of the long lease. Lastly, the ruling forbids Haresh Manek to perform directly or indirectly legal acts on behalf of Kildare that violate the interdictions the court imposed on Kildare. Violating any of these court orders carries a penalty of $16 million.

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