(1) First Montana Services LLC (2) First Montana Capital Corporation (3) Robert G Mullendore v Best Concrete Corporation and Others

• Jurisdiction: Anguilla
• Judge: GEORGE-CREQUE, J.
• Judgment Date: 29 April 2008
• Judgment citation (vLex): [2008] ECSC J0429-1
• Date: 29 April 2008
• Court: High Court (Saint Christopher, Nevis And Anguilla)
• Docket Number: CLAIM NO. AXAHCV/2007/0053

[2008] ECSC J0429-1

THE EASTERN CARIBBEAN SUPREME COURT

IN THE HIGH COURT OF JUSTICE

(CIVIL)

AD 2008

CLAIM NO. AXAHCV/2007/0053

Between:

(1) First Montana Services LLC

(2) First Montana Capital Corporation

(3) Robert G. Mullendore

Applicants/Claimants

and

(1) Best Concrete Corporation

(2) Anguilla Asphalt Corporation Ltd

(3) Derrick Romney

(4) Claire Romney

(5)Romney & Associates Developers Ltd.

Respondents/Defendants

APPEARANCES:

Mr. Gerhard Wallbank for the Applicants/ Claimants

Mr. Saul Froomkin Q.C, Ms. Jean Dyer and Mr. Patrick Thompson for the Respondents/Defendants.

GEORGE-CREQUE, J.

1 The Applicants/Claimants ("the Claimants"), prior to the filing of their claim, made application without notice on 14 ^th November, 2007, for an order appointing on an interim basis, a receiver of the Respondents'/Defendants' ("the Defendants") property and assets and also ancillary orders including an order restraining the Defendants from dealing with their assets and bank accounts to the detriment of the the Claimants.

2 The basis for moving the court without notice as summarized in the Application and further contained in the affidavit of the Third Claimant ('RM') was that it was in the interest of justice to do so and that to commence a claim before making the application and to give notice would give the opportunity to the Defendants to place their property and assets beyond reach of the Claimants. Further, that the matter was urgent as the Claimants had learnt on 7 ^th November, 2007, that the Defendants had terminated the commercial relationship between them in breach of contractually agreed termination procedures and were resorting to informal self help to safeguard their interest.

3 The claims contemplated against the Defendants are in contract for relief for breach of and to enforce outstanding contractual obligations owed by the Defendants to the Claimants and for an accounting to the Claimants of sums said to be properly payable to them as well as for repossession of plant and machinery by the Defendants over which the Claimants have a charge. These claims are said to arise out of six (6) contractual agreements between the parties, namely:

• (i) A Bill of Sale dated 12 ^th April, 2001, between the Second Claimant (FMCC) and the First Defendant (BCC) in respect of a concrete pumping unit;

• (ii) A Bill of Sale dated 12 ^th April, 2001, between FMCC and BCC in respect of a hydraulic wheel loader;

• (iii) A promissory Note Agreement/ Revolving Line of Credit from FMCC to BCC for up to US$200,000.00 and dated April 25 ^th, 2001;

• (iv) A promissory Note Agreement/ Revolving Line of Credit from FMCC to BCC for up to US$100,000.00 and dated February, 14 ^th 2003;

• (v) A personal Agreement dated March 21 ^st, 2004, between the Third Claimant ("RM") and the Third Defendant (DR) providing for a profit split between them based upon a formula specified therein (the Personal Agreement); and

• (vi) A Services Agreement and Addendum (the Services Agreement) effective as of October 1st, 2005, between the First Claimant (FMS) and the Defendants.

The Parties

4 RM is the president and sole owner of both FMS and FMCC both corporations registered and doing business in Montana USA. BCC and the Second Defendant (AAC) are Anguillian companies solely owned by DR. DR and the Fourth Defendant (CR) are husband and wife and both are directors of BCC and AAC. Mr. Keithley Lake, a lawyer practicing in Anguilla of the firm of Keithley Lake & Associates (KLA), is also a director of AAC. At the time when this matter came on for hearing exparte on 20 ^th November, 2007, it was not clear as to whether the Fifth named Defendant was in existence although such an entity bearing that name was contemplated and when such came into existence, was said to4be bound by the terms of the Services Agreement. DR, CR, BCC and AAC will hereinafter together be referred as "the Defendants."

The background

5 I set out in summary a background to the current proceedings so as to place this matter within context:

(a) RM and DR have known each other for some twenty plus years. During that period they entered into a commercial relationship. This is notwithstanding that DR and CR along with their company CNA Enterprises, Inc. had run afoul of the US Government in respect of their business dealings in the USVI and had pleaded guilty to a criminal charge of conspiracy to defraud the US government in 1999.

(b) RM and his companies supply raw materials for construction projects as well as business management services and played a role in the development of the business of DR and his companies who are or were customers of RM and his companies. DR and his companies inter alia, supply ready mixed concrete, other construction materials and heavy equipment services to contractors in Anguilla including the Government of Anguilla.

(c) Under the Bill of Sale in respect of the Schwing Concrete pump, a sum of US$598,022.00 was advanced by FMCC to BCC. This sum was secured by the said pump. The loan carried interest at the rate of 10% declining per annum and was payable by monthly instalments of $11,078.86 for 71 successive months commencing on 1st June, 2001.

(b) Under the Bill of Sale in respect of the Wheel Loader, a sum of US$130,000.00 was advanced by FMCC to BCC. This sum was secured by the said Wheel Loader and bore interest at the rate of 10% declining per annum and was payable in monthly instalments of $2,408.36 over a period of 71 successive months commencing 1 ^st June, 2001.

(c) The first Promissory Note/ Revolving Line of credit granted by FMCC to BCC in the sum of US$200,000.00, was dated April 25 ^th, 2001. Interest accrued at the rate of 10% on each advance from the date of same. The due date under this Note was May 1 ^st, 2002.

(d) The second Promissory Note granted by FMCC to BCC was in the sum of US$100,000.00 and carried interest also at the rate of 10% with the due date as August 14 ^th, 2003.

(e) DR and RM then entered into the Personal Agreement. This agreement provided inter alia, for the sharing of cash distributions from the income earned in the use and operation of equipment owned by DR. It goes on further to state that RM was to have a perfected interest in all such equipment to secure a 'settlement payment' upon termination of the agreement calculated as per the formula set out in Clause 5 of the Agreement.

(g) The Defendants entered into a Services Agreement with FMS whereby FMS in essence was to install maintain and operate accounting systems for the Defendants' "Business Operations" by installation of computers and accounting systems and produce inter alia, statements of account, cash flow reports and projections. All books and records were to be open for inspection by each party and all information relating to the Business Operations were to be made available. Business Accounts were also to be set up for the deposit of Operating Revenues derived from the Business Operations. This Agreement also provided for compensation to be paid for the provision of these services by FMS based upon a formula set out in Clause 2 thereof and also provision for immediate payment out to FMS on termination of the agreement pursuant to the provisions contained in Clause 3.

(h) An addendum to the Services Agreement effective as of 1st October, 2005 was entered into between the Defendants and FMS in which real estate and home building activities were added to the Business Operations and said to be covered by the Services Agreement.

(i) Until November, 2005, there was no formal accounting system in place in respect of the Defendants' Business Operations. A Quickbooks system was installed at FMS' expense but the Defendants were the primary overseers of the accounting function. The Claimants were not happy with the manner in which the Defendants were conducting this function as they saw many bank overdrafts, and learnt of creditors with excessive unpaid bills or that debts were being paid selectively. But no payments were being made to the Claimants by the Defendants as DR asserted that the business was not making sufficient money.

(j) The result was that the Claimants took over the accounting functions of BCC in December, 2005. They then paid a number of BCC's creditors from income earned by BCC and also used some of the income earned to pay down on the Bills of Sale and Promissory Notes. Some $450,000.00 was said to be applied in this manner towards accrued interest owing to the Claimants with the result that some 1.7 million dollars is now said to be outstanding in respect of the Bills of Sale and Promissory Notes.

(k) The Defendants took issue with this approach by the Claimants. The result was that the Defendants took back primary control of the accounting function in July, 2007. The relationship between the parties became further strained. Correspondence was then being exchanged between the parties' solicitors. Even though the Defendants were apparently acknowledging their indebtedness to the Claimants, this was being tied to a request for an accounting by the Claimants in respect of that period during which the Claimants carried out the accounting functions for the Business Operations.

(l) By the first weekend of September, 2007 the electronic data files containing all the accounting data of the Defendants including data for the Claimants on the computer server hosted in Montana by the Claimants, was either deleted or could no longer be accessed with the result that the accounting information in respect of the Defendants was no longer accessible or visible to the Claimants save for dealings on some bank accounts which gives limited information only. The Claimants accused the Defendants of data theft in this regard and demanded a return of the data.

(m) By October, 2007, the strained relations between the Claimants and the Romney Parties had spilled over into other third party contractual relations such as the one...