MacLean challenge an "abuse of process" - CJ

Developer Michael MacLean

Developer Michael MacLean’s Allied Development Partners Limited lost the right to challenge the validity of the voiding of his agreements to develop the Hamilton waterfront, but can come back to Supreme Court if he is not given adequate compensation in arbitration proceedings, Chief Justice Ian Kawaley has ruled.

The 37-page ruling, issued this afternoon, is a victory for Government which had sought to strike out the developer’s constitutional challenge.

But the high stakes multi-million dollar litigation is likely to continue for the foreseeable future.

“The Applicants can no longer seek to challenge the validity of the voiding of the Agreements and may only seek constitutional relief with a view to obtaining adequate compensation,” the ruling states.

“Such relief can only be pursued on the basis that, having exhausted their statutory remedies in the Arbitration under the 2013 Act, the relief obtained falls short of the constitutional standard or they are for other reasons entitled to additional constitutional compensatory relief.”

In 2013, Parliament approved amendments to the Municipalities Act which required approval for leases longer than 21 years.

The amendments were retroactive and targeted Allied’s 262-year lease of 26 acres of City of Hamilton property.

Subsequent amendments to the law clarified that such rejected agreements were void.

Parliament rejected MacLean’s waterfront lease in 2014 and the parties entered arbitration proceedings to determine how much compensation would be paid to the developer after a statutory 42-day negotiation period ended without an agreement.

But Allied abandoned the arbitration and filed a constitutional challenge earlier this year.

His suit claimed $90 million in compensation to cover loss of profits caused by the voiding but also advanced an alternative argument that the agreements could not have been properly voided.

Government responded with its own application seeking to strike out Allied’s argument that the agreements could not have been validly voided, saying such a challenge was an abuse of process because the developer had already accepted that the agreements were validly voided by entering the arbitration process.

Further, it argued that the legislation provided avenues for contesting the voiding but the developer did not do so within the prescribed timelines.

The Government also argued that ADP’s claim would harm the public interest by creating doubt as to who controlled the waterfront – jeopardizing plans to use the land for the America’s Cup World Series in October.

Allied argued that it had made a commercial decision to pursue arbitration after being led to believe that the government was serious about paying compensation but that turned out not to be true.

It emerged in court that Government had argued in the arbitration proceedings that the developer’s agreements were only worth $1.

Justice Kawaley heard from two leading QCs from the UK – Monica Carss-Frisk for the Government and Sir Jeffrey Jowell for the developer.

“The respective submissions on the correct legal approach had little common ground and passed each other like ships in the night. Ms. Carss-Frisk QC’s central thesis was, in effect, that the usual principles of abuse of process applied undiluted in the constitutional context,” the judgment states.

“The high point of Sir Jeffrey Jowell QC’s submissions was the proposition that constitutional rights can never be waived.”

Justice Kawaley continues: “His repeated mantra-like references to the importance of upholding the rule of law, only weeks after the 800th anniversary year of Magna Carta had been celebrated in England and elsewhere in the common law world, had an almost hypnotic effect.”

In the end, the judge agreed with the Government that the developer was bound by its decision to enter arbitration and had not reserved the right to challenge the validity of the voiding of the agreements.

He also accepted the Government’s arguments that the developer’s belated challenge could harm the public interest and “that international confidence in the ability of Bermuda to effectively host events such as the America’s Cup would be undermined.

“The direct and indirect economic benefit of the America’s Cup to the community as a whole is in my judgment a notorious fact of which I could take judicial notice in any event”.

He continues: “Although the America’s Cup may not have been in view when section 12 of the 2013 Act was enacted, the time limits enacted for challenging voided agreements were clearly designed to prevent precisely the sort of collision between private and public interests which the present proceedings have brought about.

“In circumstances where there is no satisfactory explanation for the delay and the Applicants have forsaken the appropriate statutory remedies for obtaining equivalent relief, the attempt to set aside the voiding of the Agreements in the present proceedings constitutes a gross misuse of the constitutional processes of the Court.”

The Chief Justice gave short shrift to allegations of misconduct by Government Ministers, saying they were not relevant to the constitutional challenge or the merits of the strike out application.

He added: “While in other places mere allegations may be considered to be of great import, such is not the approach of the courts. In civil litigation where most evidence is initially filed in written form, findings will not usually be made based on the contents of seriously contested portions of affidavits or witness statements without oral evidence and cross examination.

“And even then, findings will only be made on matters which are relevant to the issues in dispute, not on tangential issues, no matter how colourful those issues may be.”

And the Chief Justice noted that the fact that an investigation by the Ombudsman found maladministration in the process which led to the waterfront agreements provided “significant independent support for the bona fides of the decision of the Government to void the Agreements”. But he added that he was not taking a position on the merits of the Ombudsman’s findings or whether the voiding of the agreements was constitutional.

“Against this background, however, it is all the more abusive for the Applicants to fail to pursue their challenge promptly and by the most appropriate procedure, and to only seek to do so belatedly, in circumstances where there is no solid reason why their individual rights should trump the countervailing public interest.”

The ruling comes four weeks after a three-day hearing last month.

MacLean is off the island as is Government lawyer Alan Dunch.

Eugene Johnston, the developer’s local lawyer said he could not comment before consulting his client.

MacLean told Politica in a recent interview that the costs of the litigation was around $2 million. Government has spent a similar amount so far.

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