Where a court case was filed to uphold arbitral award against Belize, District of Columbia Circuit rejects Belize's immunity claim since exchanges at issue were basically the offer of land and thus commercial in nature; New York Convention's meaning of "business" isn't the same as the FSIA's definition

In 2005, Belize Telemedia Limited ("Telemedia"), Belize's biggest private broadcast communications organization, and the Government of ("Belize"), acting under the course of then-Prime Minister Said Musa, went into an assention styled "The Accommodation Agreement" to buy properties from Belize which the nation wanted to offer keeping in mind the end goal to better suit the Government's correspondence needs. As indicated by this assention, Telemedia was to acquire alleviation from charge and administrative weights generally material to the organization, and get other huge advantages. The gatherings additionally conceded to the accompanying discretion statement:

Any debate emerging out of or regarding this Agreement including any inquiry with respect to its reality, legitimacy or end, which can't be settled agreeably between the gatherings will be alluded to lastly settled by intervention under the London Court of International Arbitration (LCIA) Rules which Rules are esteemed to be fused by reference under this Section.

In 2008, the Prime Minister Dean Barrow took office. The Prime Minister Barrow repudiated the Accommodation Agreement, attesting that it was repulsive to the laws of Belize and in this manner invalid. At the point when Belize stopped to respect its legally binding commitments, Telemedia presented the question to mediation before the LCIA in London. Belize declined to take an interest in the mediation procedures, fighting that the assertion provision was invalid and that the authorities needed ward. On March 18, 2009, the arbitral court decided that the Accommodation Agreement was legitimate and authoritative on Belize; that the council had locale over Telemedia's cases; and that Belize had ruptured the Accommodation Agreement. The court conceded Telemedia revelatory alleviation, and granted more than 38 million Belize dollars in harms. Telemedia allocated the financial part of this honor to Belize Social Development Limited ("BSDL").

In November 2009, compliant with area 207 of the Federal Arbitration Act ("FAA"), BSDL got suit the District Court for the District of Columbia to affirm the arbitral honor. Belize moved to stay affirmation of the honor pending determination of related suit in Belize, which the locale court conceded. BSDL at that point requested.

The United States Court of Appeals for the District of Columbia Circuit turned around, taking note of that under the FAA, the stay arrange was not in similarity with government law and worldwide duties. The Court remanded and trained the locale court to audit and concede BSDL's appeal to affirm the Final Award truant a finding that an identified special case to implementation connected. On remand, Belize contended that the Prime Minister at the season of the passage of the understanding needed expert to enter either the agreement or the assertion assention, and that the area court needed topic purview over the debate guaranteeing its sovereign insusceptibility under the Foreign Sovereign Immunities Act ("FSIA"). Since Belize had not offered help for its case concerning the discretion assention, the region court held that locale was appropriate under the intervention special case to the FSIA, and allowed BSDL's request of to affirm the honor. Belize bid.

The United States Court of Appeals for the District of Columbia Circuit confirms the judgment of the District Court. The key issue here is whether and under what conditions the Foreign Sovereign Immunities Act (FSIA), 28 U.S.C. § 1605(a)(6), assertion special case applies to a case in which the activity was brought to affirm a honor made compliant with a consent to parley. “The Foreign Sovereign Immunities Act is ‘the sole basis for obtaining jurisdiction over a foreign state in the courts of [the United States].’ Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 443 (1989). Its terms are absolute: Unless an enumerated exception applies, courts of this country lack jurisdiction over claims against a foreign nation. Saudi Arabia v. Nelson, 507 US. 349, 355 (1993). BSDL claims the arbitration exception applies to this case.” [Slip op. 3]

“The arbitration exception provides: ‘A foreign state shall not be immune from the jurisdiction of courts of the United States or of the States in any case . . . in which the action is brought, either to enforce an agreement made by the foreign state with or for the benefit of a private party to submit to arbitration all or any differences which have arisen or which may arise between the parties with respect to a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration under the laws of the United States, or to confirm an award made pursuant to such an agreement to arbitrate, if . . . the agreement or award is or may be governed by a treaty or other international agreement in force for the United States calling for the recognition and enforcement of arbitral awards.’ 28 U.S.C. § 1605(a)(6).”

“Where a plaintiff has asserted jurisdiction under the FSIA and the defendant foreign state has asserted ‘the jurisdictional defense of immunity,’ the defendant state ‘bears the burden of proving that the plaintiff’s allegations do not bring its case within a statutory exception to immunity.’ Phoenix Consulting Inc. v. Republic of Angola, 216 F.3d 36, 40 (D.C. Cir. 2000). […]” [Slip op. 3-4]

Belize argued that the arbitration exception does not apply. First, it argued that the arbitration exception to sovereign immunity does not apply because there was no “agreement made by the foreign state.” 28 U.S.C. § 1605(a)(6). Belize deducted that the Prime Minister lacked authority to bind the sovereign in an unconstitutional agreement; and that the Accommodation Agreement violated the Constitution and laws of Belize. Therefore, the Prime Minister lacked authority to bind Belize in the Accommodation Agreement and execute it on behalf of Belize. Belize concluded that the agreement was void ab initio, and that every provision in the agreement, including the arbitration provision, was void.

The Court does not agree with this argument.

“The language of the FSIA arbitration exception makes clear that the agreement to arbitrate is severable from the underlying contract. The exception only requires a valid ‘agreement . . . to submit to arbitration,’ 28 U.S.C. § 1605(a)(6). It also distinguishes between the underlying ‘legal relationship’ and the agreement to arbitrate disputes arising from that relationship. Id. As we have previously noted, the agreement to arbitrate is ‘separate from the obligations the parties owe to each other under the remainder of the contract.’ Marra v. Papandreou, 216 F.3d 1119, 1123, 1125 (D.C. Cir. 2000). It is, for all intents and purposes, ‘a distinct contract in and of itself.’ Id.; see Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 40304 (1967) (distinguishing between the agreement to arbitrate and the underlying contract). In order to succeed in its claim that there was no ‘agreement made by the foreign state . . . to submit to arbitration,’ 28 U.S.C. § 1605(a)(6), Belize must show that the Prime Minister lacked authority to enter into the arbitration agreement. This Belize has failed to do.” [Slip op. 4]

“More briefly put, this case turns on the proposition that Belize entered two agreements: the Accommodation Agreement and the Agreement to Submit to Arbitration, albeit the two were entered simultaneously. The argument of Belize that the Accommodation Agreement was beyond the authority of the Prime Minister might provide a defense if we were considering this controversy de novo on its merits. However, in order to bring that argument before us, Belize must first establish that the arbitration provision of the contract is void, so that we would not be bound to honor the arbitral tribunal’s determinations. We cannot determine the merits of the defense if the arbitration clause applies. Since Belize has not negated the clause, we do not reach the merits defense.” [Slip op. 5]

Second, Belize argued that the arbitration exception does not apply because the award is not “governed by a treaty or other international agreement . . . calling for the recognition and enforcement of arbitral awards.” 28 U.S.C. § 1605(a)(6). Belize contended that the New York Convention does not govern the award because the treaty requests that the award arise from a commercial transaction while this award arose from a governmental transaction.

“The Convention on the Recognition and Enforcement of Foreign Arbitral Awards (also known as the New York Convention) is a multilateral treaty providing for ‘the recognition and enforcement of arbitral awards made in the territory of a State other than the State where the recognition and enforcement of such awards are sought.’ Convention on the Recognition and Enforcement of Foreign Arbitral Awards (‘New York Convention’), art. I(1), 21 U.S.T. 2517 (1970). For most signatories, the New York Convention applies to all private arbitral agreements, regardless of the subject matter. Restatement (Third) of Foreign Relations Law § 487 cmt. f (1987). The United States, however, made a declaration, authorized by Article I(3) of the Convention, that the Convention would be applicable ‘only to differences arising out of legal relationships whether contractual or not, which are considered commercial under the national law of the State making such declaration.’ New York Convention, 21 U.S.T. 2517. The United States implemented the Convention in the Federal Arbitration Act, 9 U.S.C. § 201 et seq. See id. at § 202 (applying the Convention to an award that arises ‘out of a legal relationship, whether contractual or not, which is considered as commercial’).”

“The New York Convention, as codified in the FAA, does not define the term ‘commercial.’ ‘When a statute uses [a term of art], Congress intended it to have its established meaning.’ McDermott Int’l, Inc. v. Wilander, 498 U.S. 337, 342 (1991). In the context of international arbitration, ‘commercial’ refers to ‘matters or relationships, whether contractual or not, that arise out of or in connection with commerce.’ Restatement (Third) of U.S. Law of Int’l Comm. Arbitration § 11 (2012); see Restatement (Third) of Foreign Relations Law § 487 cmt. f (1987) (‘That a government is a party to a transaction does not destroy its commercial character; indeed, the fact that an agreement to arbitrate is in the contract between a government and a private person may confirm its commercial character. . . .’). As the Comment to the Restatement on International Commercial Arbitration explains, ‘A matter or relationship may be commercial even though it does not arise out of or relate to a contract, so long as it has a connection with commerce, whether or not that commerce has a nexus with the United States.’ Restatement (Third) of U.S. Law of Int’l Comm. Arbitration § 11 cmt. e; see Island Territory of Curacao v. Solitron Devices, Inc., 356 F. Supp. 1, 13 (S.D.N.Y. 1973) (‘[I]t seems clear that the full scope of ‘commerce’ and ‘foreign commerce,’ as those terms have been broadly interpreted, is available for arbitral agreements and awards.’ (quoting Leonard V. Quigley, Convention on Foreign Arbitral Awards, 58 A.B.A. J. 821, 823 (1972))). Using the Restatement’s definition of ‘commercial,’ the New York Convention applies to the Accommodation Agreement.”

“The text of the FAA’s codification of the New York Convention is consistent with this conclusion. While the New York Convention, as codified in the FAA, does not expressly define ‘commercial,’ it does expressly encompass any ‘transaction, contract, or agreement described in’ 9 U.S.C. § 2. 9 U.S.C. § 202. Section 2 in turn includes contracts ‘evidencing a transaction involving commerce,’ 9 U.S.C. § 2 — a term the Supreme Court has interpreted ‘as the functional equivalent of the more familiar term `affecting commerce’ — words of art that ordinarily signal the broadest permissible exercise of Congress’ Commerce Clause power,’ Citizens Bank v. Alafabco, Inc., 539 U.S. 52, 56 (2003). The Accommodation Agreement falls within that term’s broad compass.”

“The Agreement involves the sale of real property in exchange for certain accommodations, a transaction with a connection to commerce. See Holzer v. Mondadori, No. 12 Civ. 5234, 2013 WL 1104269, at *5 (S.D.N.Y. Mar. 14, 2013) (noting that the sale of property is commercial under the New York Convention). The provision of telecommunication services has an even more obvious connection to commerce. Indeed, in today’s technological age, telecommunication services are often a ‘crucial segment of the economy.’ AT&T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 397 (1999). The taxes Belize levies against a company also have a connection with commerce, see Commonwealth Edison Co. v. Montana, 453 U.S. 609, 61415 (1981) (noting the impact taxes have on commerce), as do the duties Belize charges (or forgoes charging). We thus conclude that the Accommodation Agreement is commercial and is governed by the New York Convention.” [Slip op. 5-7]

Furthermore, Belize argued that the court should adopt the definition of “commercial” as articulated by the Supreme Court in Republic of Argentina v. Weltover, Inc., 504 U.S. 607 (1992). In examining the scope of the FSIA’s “commercial activity” exception, 28 U.S.C. § 1605(a)(2), the Supreme Court held in this case that a foreign state engages in commercial activities when it acts in the manner of a private player within the market; and reasoned that the FSIA “largely codifies the so-called ‘restrictive’ theory of foreign sovereign immunity”; that the word “commercial” was a “term of art”; and that Congress therefore intended the word to have “the meaning generally attached to that term under the restrictive theory at the time the statute was enacted,” i.e., distinguishing between “state sovereign acts, on the one hand, and state commercial and private acts, on the other.” Weltover, 504 U.S. at 614.

“Belize’s reliance on Weltover is misplaced. Unlike with the FSIA, Congress was not codifying the restrictive theory of foreign sovereign immunity when it ratified and implemented the New York Convention. Rather, the treaty concerns international arbitration. We thus recognize that: (1) the Convention’s purpose was to ‘encourage the recognition and enforcement of commercial arbitration agreements in international contracts,’ TermoRio S.A. E.S.P. v. Electranta S.P., 487 F.3d 928, 933 (D.C. Cir. 2007); (2) the word ‘commercial’ is a ‘term of art’; and (3) in implementing the Convention, Congress intended that word to have the meaning generally attached to that term in the international commercial arbitration context. As we discussed above, ‘commercial’ in the context of international arbitration refers to matters which have a connection to commerce. Belize’s argument to the contrary will not sell.” [Slip op. 7]

The Court affirms the District Court’s decision.

Citation: Belize Social Development Ltd. v. Government of Belize, No. 14-7002 (D.C. Cir. 2015).

U. K. Privy Counsel surveys judgment of Bahamas Court of Appeal and objects disappointment of Florida chapter 11 judge to watch global comity when it entered orders that indicated to drop requests of Bahamas court relating to offer of Bahamas land

This very muddled case before the Privy Council manages an offer of Bahamas genuine property under a court arrange. The property being referred to is a one story living arrangement on a plot of land known as Lot 32, North Cat Cay. In spite of the fact that in an alluring area, the house is in a poor condition of repair and appears to have been vacant for extensive stretches.

Some portion of the trouble is that despite the fact that the suit has so far delivered seven requests (some interlocutory and some last) made by Bahamas first occasion Judge Lyons, it was just at the hearing paving the way to Order (6) that the judge heard oral proof from deponents took after by round of questioning.

Another inconvenience has been the simultaneous Florida insolvency case including Mr. James F. Walker, one of the Petitioners, at first with flawed respect to the standards of worldwide comity.

The initial 5 orders incorporate Order (1) of September 3, 2002 for the offer of Lot 32 (at that point possessed by the bankrupt and his better half) to Susan Lundborg (Respondent); Order (2) of July 7, 2003 that the gatherings finish the deal inside 14 days; Order (3) of July 21, 2003 (not in the record) exemplifying an endeavor that Respondent would not continue pending an application for a stay of the request available to be purchased made by Mr. Walker's Florida trustee in chapter 11; Order (4) of March 23, 2004 permitting Respondent's mediation and dismissing the trustee's application for a stay; and Order (5) dated July 26, 2004 and connected for by Mrs. Walker which remained the request available to be purchased until the point when the court could resolve the questioned issues by interviewing the deponents.

Two more requests require thought: Order (6) of December 7, 2004 (after the lower court had heard some oral proof) putting aside the request available to be purchased; and Order (7) dated February 28, 2005 putting aside a cash judgment which an insolvency Plaintiff, Eleanor C. Cole, had gotten against Mr. Walker in the Supreme Court of the Bahamas on December 3, 1996, which indicated to implement a before Florida judgment against the bankrupt.

The Petitioners' interest to the Judicial Board of the Privy Council is from a November 15, 2005 request of the Bahamas' Court of Appeal It put aside Orders (6) and (7). The Board needs to determine the interest in view of the focuses at issue, and, deficient as they seem to be, on Judge Lyons discoveries of actuality.

Offended party, the Petitioners and the Respondent are all U.S. residents living in Florida. The Petitioners, nonetheless, at one time resided in the Bahamas. In 1983, they purchased Lot 32 as joint inhabitants. They promptly sold it back to the past proprietors and have since paid off that home loan.

In October 1990, Plaintiff sued Mr. Walker in the Bahamas' court to uphold a November 1989 Florida judgment for about $300,000 which she had gotten against him. Mr. Walker had entered an unlimited appearance and the court had given synopsis judgment against him in April 1991. Multi month later, notwithstanding, he got a request putting aside the judgment on the ground that he was testing the first Florida judgment. Five years passed by yet the Florida judgment in fact stayed essentially. On December 3, 1996, Plaintiff again got rundown judgment in her authorization procedures in the Bahamas.

Under Section 63 of the Supreme Court Act, this judgment set an enforceable impartial charge on Mr. Walker's enthusiasm for Lot 32. The charge did not influence Mrs. Walker's advantage, however it enabled Plaintiff to apply to the court under Order 31 of the Supreme Court Rules for a request to offer every one of the interests in Lot 32. This charging request separated the joint tenure. A large portion of the net continues would go to Mrs. Walker and the court would have connected the other half to fulfill Plaintiff's judgment obligation.

There was then a further postponement before Plaintiff's lawyers, Callenders and Co. of Nassau, found a way to uphold the fair charge. Offended party's lawyers acquired an expert evaluation in June 1997 that esteemed Lot 32 at $326,250. On June 18, 1999 they at last looked for a request available to be purchased. Those are the procedures in which the lower court made everything except the remainder of the seven requests; the court issued Order (7) in Proceedings 1355 of 1990.

At the point when the Court practices its capacity to arrange a deal, the typical course is to make a request by and large terms, entrusting the lead of the deal to a predefined gathering, and giving general headings with regards to the way of offer (e.g. by open sale or private arrangement), the base cost, et cetera. That was the help Plaintiff looked for by the starting summons with Petitioners as the first respondents, and previous proprietor Mrs. Krafft Keims, now a dowager, included as a third respondent in June 1999.

On August 18, 1999, Sidney Collie, a Nassau lawyer, entered an appearance for Petitioners through Gary Rotella, a Florida lawyer, whom Mr. Walker had trained; them three met at Rotella's office in Fort Lauderdale on August 14, 1999. Mr. Walker approached Collie to represent the two Petitioners. Collie's confirmation, which the judge acknowledged, was that his solitary contact was with Mr. Walker (and not his significant other) and even those contacts were rare.

Whatever is left of 1999, the entire of 2000 and a large portion of 2001 passed by with no advance. Offended party's Nassau lawyer, a Mr. Turnquest of the Callenders firm, kept in touch with her on July 31, 2001 apologizing for the deferral. His letter expressed that he didn't imagine that another examination of the property was fundamental.

Offended party (who was at this point an elderly woman in weakness) at last swore her first sworn statement in help of the starting summons on January 9, 2002. Offended party's testimony asserted that Respondent, who lived in Florida, had connected with her and said she was keen on purchasing Lot 32. On January 27, 2002, Respondent sent Plaintiff a record portrayed as a "letter of purpose" for the deal and buy of the property for $400,000. Offended party appeared to be, at first in any event, to have been appreciative to Respondent for her mediation.

Amid the mid-year of 2002, there was restored contact between the bankrupt and Collie. The bankrupt appears to have gotten some answers concerning Respondent's enthusiasm for the property and about the possibility of the beginning summons in the end preceding the court. The preliminary court heard the starting summons on the evening of September 3, 2002. That morning, Saunders, a Nassau lawyer, swore out a sworn statement displaying the multi year old examination. In his first sworn statement, he requested that the court set a hold cost of $326,250.

Mr. Saunders at that point pledged to a second sworn statement, the content of which to some extent was as per the following: "1. I am approved by the Plaintiff ... [to present] to this Honorable Court ... a true blue offer to buy [Lot 32 by "private contract"], the Plaintiff being inhabitant out of the Bahamas in the State of Florida. There is presently delivered and appeared to be stamped 'JMS 1' a genuine duplicate of a composed offer dated September 3, 2002 made by [Respondent] a U.S. National, to purchase Lot 32 for $400,000. ... In the premises I implore that this Honorable Court approve an offer of the subject property to the said [Respondent] at the cost showed."

Neither Saunders nor Turnquest has since clarified how this offer had fortunately touched base at their association's office on the simple morning of the hearing, or how he had gotten Plaintiff's power to show the offer to the Court. Respondent swore an oath on May 22, 2003 ousting that Turnquest “represents Plaintiff generally but myself as well for the purposes of this transaction.”

Against that, Plaintiff’s daughter, Caroline, deposed on July 26, 2004: “I also assisted my mother in communicating with her then lawyer, Stephen Turnquest. Mr. Turnquest was not authorised to represent to this Court on September 3, 2002, that my mother consented to the $400,000 offer, which she had rejected on numerous occasions over the course of the previous eight months.”

Judge Lyons (as to Order (6)) accepted Petitioners’ and Collie’s evidence about this: “ ... I have had the opportunity of observing Petitioners. What they both said was that they never gave Collie express instruction to accept the $400,000 offer from Respondent.”

“It seems therefore that ... Collie came to court full of good intentions. On November 3, he had ... general instructions to do what he could to help Bankrupt’s predicament. But he accepts he never had express instructions to bind the Petitioners to Respondent’s $400,000 offer ...” Judge Lyons then ordered the sale of Lot 32 ... to Respondent within the terms of her offer.

Turnquest, whose evidence in Florida was that he had started to act for Respondent at Plaintiff’s express request but found himself in the awkward position of having two clients with sharply conflicting interests.

Mr. Walker’s bankruptcy in Florida had a great influence on the U.S. parties’ conduct in the Bahamas litigation. In retrospect, it had only a marginal relevance to the issues that the Board has to decide. Nor has the Board heard any argument about any issues of private international law.

“In the Bahamas, there are no statutory provisions for cross-border assistance in insolvency with an international element involving the U.S. Under general principles of private international law, one country will usually recognise the status of a trustee in bankruptcy (or similar officer) appointed by another country, and will also recognise his title to moveable (but not to immoveable) property situated in the recognising country.”

“Mr. Walker’s interest constituted immoveable property. Even if, under Florida bankruptcy law, Mr. Walker’s world-wide estate, moveable and immoveable, vested in his bankruptcy trustee, courts in the Bahamas would not recognise the trustee’s title to immoveable property within its jurisdiction.” [¶ 25]

On January 10, 2003 a Florida bankruptcy judge (FBJ) appointed Linda Walden as receiver for Plaintiff to get hold of Mr. Walker’s assets. During February, the FBJ subpoenaed Respondent to produce documents for the purposes of the receivership. On April 25, 2003, Mr. Walker (through his Florida attorney, Rotella) filed for Chapter 7 bankruptcy.

Plaintiff proved in the bankruptcy and proposed Ms. Walden as trustee, an appointment the FBJ confirmed on July 9, 2003. On July 17, (as a direct result of the Walkers finally finding out about the sale order), the FBJ held an emergency hearing at which he took it upon himself to declare that “the orders issued on or about July 7 2003 by the Commonwealth of the Bahamas” were null and void. The FBJ ordered that there should be no sale of the property without his authority.

Ms. Walden faxed a copy of the Florida order directly to Judge Lyons, who was “understandably affronted.” On May 5, 2004, the FBJ withdrew his declaratory order after a hearing.

Although Plaintiff had proved in the bankruptcy, she seems to have become increasingly disillusioned about legal processes both in the Bahamas and in Florida. At some point, the Florida court removed Ms. Walden from office. Plaintiff herself ceased to take part (either personally or by a legal representative) in either branch of the litigations.

The FBJ discharged Mr. Walker from bankruptcy on September 21, 2005. On November 20, 2007, there was a further order setting aside the original Florida judgment of November 14, 1989.

Meanwhile, back in the Bahamas, Turnquest found himself with two clients, Plaintiff and Respondent with conflicting interests. Plaintiff was telling him (through Ms. Gwynn, her Florida attorney,) not to deal with Respondent. Her later evidence to Judge Lyons (which he accepted) was that, in the course of giving the deposition, she became aware of a sale of the property, to which she was not a party. Petitioners both claimed persuasively that they only became aware of the full facts on July 25, 2003, when an associate of Collie passed the information to Rotella.

Shortly before this, Turnquest had obtained Order (2) of July 7, 2003. This order raised a number of puzzling questions. It still listed Turnquest as appearing on behalf of Plaintiff although the relief he applied for was contrary to her instructions. Petitioners knew nothing about it either.

On or about July 11, 2003, Respondent deposited $402,000 with the Callenders firm. According to Turnquest’s evidence to the FBJ on May 5, 2004, the above sum about equaled the full purchase price. Turnquest deducted about $44,000 for professional fees due to him from Plaintiff – but without telling her. He ceased to act for her on July 21, 2003. Mr. Knox, QC for Petitioners, told the Board that the balance of the $402,000 has since been repaid to Respondent.

The Florida bankruptcy now began to directly impact the Bahamas litigation. Ms. Walden, the then trustee, faxed the nullifying declaratory order to Judge Lyons on July 17, 2003. Ms. Walden arrived in Nassau soon after. She hoped to have the local court vacate the Lot 32 sale order. On July 21, 2003, there was a hearing before Judge Lyons attended by Turnquest (for Respondent), Moxey (for the trustee), Collie (for the Petitioners) and Ms. Gwynn and another Florida attorney (for Plaintiff).

Turnquest agreed on behalf of Respondent not to go ahead with the sale pending resolution of Ms. Walden’s formal application to intervene and seek a stay. On the same day, the Callenders firm gave notice of their appointment as attorneys for Respondent, although she was not yet a party to the proceedings. She moved to intervene on January 14. 2004.

In March 2004, Respondent deposed that she was fairly experienced in, and knowledgeable about, business matters, including property values, and she did not look upon Lot 32 as worth even $326,000.

Plaintiff’s daughter Caroline (who lived with her), however, contradicted this evidence. She deposed that her mother was not willing to sell for $400,000 and that Respondent “persisted in harassing my mother by calling at our house until I obtained a restraining order prohibiting her from contacting my mother.”

Only Petitioners and Collie have been cross-examined on their affidavits in these proceedings. On March 23, 2004, Judge Lyons heard the applications by Ms. Walden and Respondent together, Order (4). Turnquest, Moxey and Collie were present. Judge Lyons gave a short judgment which suggests that he was still annoyed about the FBJ having purported to nullify his sale order. He concluded that there was “absolutely no doubt in my mind that there is a binding contract for purchase/sale between Respondent and Petitioners.”

On April 27, 2004, Plaintiff made an affidavit in the bankruptcy proceedings averring that she had never met Saunders and had never given him authority to make his affidavit dated September 3, 2002. She also made an affidavit sworn on June 15, 2004 in the Board’s proceedings. It deposed that Turnquest had been acting contrary to Plaintiff’s instructions when the first and second orders were made.

In June of 2004, Mrs. Walker, acting through new attorneys, Lockhart & Munroe of Nassau, applied for an order staying the sale to Respondent under Orders (1) and (2) on the grounds (1) that the attorneys’ representations to the court on her behalf lacked her knowledge or authority; (2) that the orders had first come to her attention long after they were made; and (3) that Respondent’s offer was far below the true value of the property. She added that she would rely on affidavits by herself, her husband and Rotella. There were also affidavits from Collie, Miss Cole, and the local appraiser, a Mr. Lowe of HG Christie Real Estate.

Mr. Lowe valued Lot 32 at $950,000 as of June 16, 2004, with a retrospective valuation of $640,000 as of September 3, 2002. Mrs. Walker made her application eleven months after she had learned the full facts and just under three months after the rejection of the trustee in bankruptcy’s application.

Finally, on February 28, 2005, Judge Lyons set aside Order (7) dated December 3, 1996 made in the proceedings 1355 of 1990. The judge based his decision on the fact that Mr. Walker was not a resident in the Bahamas at the time of service but Plaintiff had not obtained leave to serve him out of the jurisdiction.

At the hearing on Order (6), Mr. Lockhart’s skeleton arguments relied on two main points: first, that Plaintiff had no cause of action against Mrs. Walker, since the charging order did not bind her share; and second, that Mr. Collie had no authority, actual or ostensible, to agree or consent to the sale order on behalf of Mrs. Walker.

Mr. Turnquest’s skeleton arguments relied on four main points: first, that the court had no jurisdiction to set aside the first and second orders because there had been no “new occurrence” within Order 45 rule 11; second, that Mr. Collie had implied or ostensible authority to bind Mrs. Walker; third, that the first order had been perfected for more than two years; and fourth, that the order was not impeachable, as against Respondent under Section 57 of the Conveyancing and Law of Property Act.

“... [T]he only oral evidence was from Collie, Mr. Walker and Mrs. Walker. The judge accepted their evidence. In his heavily edited “extempore” judgment , the judge held that he must set aside Order (1) because Collie had no authority to bind Mrs. Walker to it. That was effectively the only surviving ground of Mr. Lockhart’s application. Mr. Turnquest clung to the four main points in his skeleton argument. The judge ... seems to have forgotten, or not to have accepted, Mr. Lockhart’s concession about Order 31. ...” That was an error because, although Plaintiff’s security extended only to Mr. Walker’s share in the property, Order 31 enabled the court to authorise a sale of the property as a whole. An undivided share of a residential property is not a marketable asset. ...”

“Their Lordships consider that the judge made a further error in his analysis ... of Order (1) He treated the order not as a judicial exercise of the court’s inherent and statutory jurisdiction, but essentially as a contractual document. This led to his making contradictory findings: that Turnquest initialled the order ... on behalf of Respondent as well as Plaintiff and later that he was acting for Respondent and not Plaintiff. ... [T]hey were simply not an issue before the judge.”

“Judge Lyons did consider the issue of delay, but he did so ... exclusively on behalf of Mr. Walker. He referred to Mr. Walker’s bankruptcy and to his having taken the ‘reasonable step’ of approaching the Florida court for a stay of the sale order ... He concluded that Mr. Walker’s delay in coming to his court was ‘explainable’.”

Respondent lodged separate appeals against Orders (6) and (7). The Court of Appeal allowed both appeals.

“We pause here to comment briefly on these grounds in the context of Order 31 which gives the court an unqualified power to order a sale of land. Petitioners had retained Collie to represent both Petitioners. He entered an appearance on behalf of both. His instruction was to agree on a sale of the property. He now says he had no specific instruction from Mrs. Walker to accept a sale to the intervener with whom he had no dealings. As Order 31 makes clear, there is no need for there to be a contract of sale or a consent by the owners to a sale.”

“Once a buyer has been identified who is prepared to pay the best price to the satisfaction of the Court, the procedural provisions for the sale can be invoked. Collie’s attempt to resile from the terms of the order which he consented to, and in which the purchaser’s name is mentioned, cannot be a ground for setting the order aside. Relying on Collie’s representation that the offer of the Respondent was acceptable to Petitioners; the Court was satisfied that the price offered was the best one in the circumstances, so as to properly make an order of sale disposing of Mr. Walker’s beneficial half interest, which must necessarily involve a sale of the property.”

“Furthermore, the purchaser had partly conformed or complied with the order by paying over the purchase price to the persons appointed to conduct the judicial sale. Liberty to apply could not, in our view, give the Court a jurisdiction to set aside the order in the circumstances of this case when all the requirements of a judicial sale had been satisfied.”

“ ... But in concluding that all the requirements of a judicial sale had been complied with, the Court of Appeal was paying insufficient regard to the judge’s findings of fact ...and other credible evidence. Collie had gone beyond his instructions from Mr. Walker, and had no instructions whatsoever from Mrs. Walker. The sale had not been completed either by a conveyance or by payment of half of the net proceeds to Mrs. Walker. The $402,000 must have been held by Turnquest as Respondent’s attorney since he apparently repaid most of it to her without the authority of the court. Turnquest was plainly not an appropriate person to have conduct of the sale. On the occasion of Order (3), Respondent had, through Turnquest, given an undertaking not to proceed with the sale, and that undertaking remained in force until it was overtaken by Order (5).”

The Court of Appeal pointed out that, in making Order (7), Judge Lyons had been wrong in supposing that, in the proceedings 1355 of 1990, Plaintiff needed leave to serve process out of the jurisdiction. “At the material time, Mr. Walker had a residence in the Bahamas and voluntarily submitted to the jurisdiction. The judge fell into error in setting aside a regularly obtained summary judgment to which Plaintiff was entitled on the pleadings.”

Counsel agreed that there are two main issues in the appeal to the Board relating to Order (6): (1) did the judge have jurisdiction to make the order? and (2) if so, was he right to exercise his discretion in favour of Mrs. Walker? The first issue raises, apart from common law and procedural issues as to jurisdiction, a point of statutory construction on Section 57 of the Conveyancing and Law of Property Act.

“Mr. Dingemans QC (for Respondent) contended that there was no jurisdiction to set aside Order (6). He pointed out that neither Petitioner had appealed against Orders (1), (2) or (4). In reply, Mr. Knox contended that an appeal would have been inappropriate in a case like this.”

Order (1) was based on consent. ... “An order made by consent can be set aside at common law if sufficient grounds are shown, subject to the well-known principles which always constrain the court in granting discretionary relief.”

“Their Lordships are satisfied that Judge Lyons did have jurisdiction, at common law, to set aside the first order on the ground of a mistake, ... as to Collie’s authority to act for Mrs. Walker. None of [the precedents] permits a first-instance judge to set aside a final order, ... without some special reason, usually involving a material change of circumstances. But a change of circumstances is not, in this context, to be interpreted narrowly. It can include the discovery of new information, even if that information was, in a sense, always available.”

“As a separate and ... conclusive point, Mr. Dingemans relied on Section 57 of the Conveyancing and Law of Property Act . ...The judge’s omission to refer to it was probably because he analysed the order for sale as essentially a contract which happened to be embodied in an order. ...”

“Section 57(1) is in the following terms: ‘An order of the Court under any statutory or other jurisdiction shall not, as against a purchaser, be invalidated on the ground of want of jurisdiction, or of want of any concurrence, consent, notice, or service, whether the purchaser has notice of any such want or not.’”

“In all the English authorities, ... there was unquestionably a contract, sometimes completed by conveyance, sometimes still uncompleted (hence the reference to .. intending purchaser). Where the contract remained uncompleted , the purchaser was questioning whether the statutory provisions were wide enough to ensure that he would get a good title ...”

If, on the other hand, the contract had been completed, the purchaser or his successor in title would be relying on the statutory provisions to defend his title. Whether they did provide protection depended, in short, on whether the alleged defect in title was in the court order (or the way in which it was obtained) on the one hand or was anterior to the order, on the other hand. But in either case there was no doubt about the party’s status as a purchaser.

“In the present case, there is real doubt about Respondent’s status as a purchaser. It is the central issue in the case. Respondent is seeking to use Section 57 to confer on herself the status of purchaser or intending purchaser which is the precondition of obtaining protection under Section 57. That is a circular and question-begging process of reasoning which their Lordships do not accept.”

“Mr. Dingemans’ strongest resistance to the appeal was on the issue of discretion. He relied on seven [overlapping] points ...: [1] the need for finality in litigation; [2] the submission that Collie had ostensible authority to agree to a compromise on behalf of Mrs. Walker; [3] the Respondent’s failure to appeal against any of the Orders (1), (2) or (4); [4] Mrs. Walker’s delay in making her application to set aside Orders (1) and (2); [5] the prejudice to third-party rights (those of Respondent), [6] the part-performance of the transaction by Respondent and [7] the absence of notice to Respondent of the alleged deficiencies in the sale order.”

“The need for finality in litigation is an important general principle. [Cite]. But it has to be balanced against the need to remedy injustice wherever possible. The need for finality means that the court starts with a disinclination to reopen concluded transactions. But it cannot by itself be decisive. There is a balancing exercise to be performed.”

“Once the Court of Appeal recognised that the transaction was essentially a judicial sale, albeit under a consent order, the crucial questions were whether a mistake had been made, and whether (as a matter of discretion) the mistake should be put right. An attorney’s consent given with ostensible but not actual authority would still be a mistaken consent, although one which the court would be less ready to correct at the expense of third-party rights.”

“The failure of Petitioners to appeal Orders (1) and (2) was excusable, since (as the judge found) they knew nothing about them until long after the time for appealing had expired. In any event, it is doubtful whether an appeal against those orders would have been more appropriate than the course that Mrs. Walker eventually took. Order (4) is more problematical, because by then Petitioners did know the facts but were still apparently represented ... by Collie.”

“As to delay, their Lordships have already noted that in dealing with the issue of delay the judge focussed on Mr. Walker to the exclusion of his wife. That was an error ... His share was subject to the charging order but hers was not. He was made bankrupt but she was not. He instructed Collie ... but she never actually instructed him. The application made by Mr. Lockhart on June 15, 2004 was her application, and it is Mrs. Walker who had the burden of explaining and excusing her delay. ... [T]here is still a period of eleven months’ delay to be accounted for.”

“The only explanation given by Mrs. Walker was in her affidavit sworn on June 15, 2004. Almost the whole of that affidavit is concerned with emphasising the absence of instructions and communications between herself and Collie. By contrast she said little about the period after she learned about the sale order. ... It would be remarkable if her husband had not kept her informed about his financial problems, including his bankruptcy, and the steps which his trustee in bankruptcy was taking in the Bahamas. Mr. Rotella, who was acting as Mr. Walkers U.S. attorney, was also acting for Mrs. Walker. But in her affidavit she gave no explanation for her inactivity after July 2003.”

“Mrs. Walker seems to have done nothing for eight months after learning the facts to stop Collie from continuing to claim to act for her. The most likely inference is that Mrs. Walker stood back, from July 2003 until March 2004, to see whether the trustee in bankruptcy would be successful in her application, and that when it failed, Mrs. Walker decided to launch her own application through Mr Lockhart.” 75 “... [I]t was for Mrs. Walker to satisfy the court, by a full and detailed explanation, that it should show exceptional indulgence to her. Her affidavit did not do that.”

“Mr. Dingemans’ last three points all concern aspects of prejudice to Respondent’s third-party rights. They are another factor to be taken into account, .... Respondent was not cross-examined and the judge’s findings about Mr. Turnquest acting for Respondent (rather than Mrs. Cole) are not supported by either side. It would not be right for their Lordships to draw any serious adverse inferences against Respondent.”

“Nevertheless it seems likely that [Respondent] as an experienced business woman, must have realised from an early stage that this was an unconventional transaction. She was on notice from July 21, 2003 at the latest, and probably a good deal sooner, that it was being seriously challenged. On or before July 11, 2003, she had paid $402,000 to Turnquest, but ... he must have received it as her attorney, and he has since, it seems, repaid most of it. Nevertheless Respondent has certainly suffered some prejudice by the disruption of her financial affairs during this protracted litigation.”

“The judge considered the issue of delay but his analysis was flawed because he concentrated on Mr. Walker. Moreover, he did not pay sufficient regard to the prejudice to [Respondent]. He misdirected himself in exercising his discretion. In their Lordships’ opinion, Mrs. Walker, as a litigant asking for an extraordinary exercise of discretion in her favour, failed to act sufficiently promptly and failed to provide the court with a full and frank explanation of her delay. On those grounds the judge should have declined to make [Order (6)] and the Court of Appeal were right to set it aside (although their Lordships do not concur in all the Court of Appeal’s reasons).” The Court of Appeal was also right, for the reasons which it gave, in setting aside the seventh order.

“The judicial sale to [Respondent ] has still to be completed. Even at this late stage it may be appropriate for a wholly independent attorney to be appointed to have conduct of the sale and see it through to completion. That course may be particularly desirable if there is to be yet more litigation as to the effect on the charging order of the Florida orders of April 12, 2005 and November 29, 2007. Their Lordships express no opinion whatever on that matter. For these reasons, their Lordships will humbly advise Her Majesty that both appeals should be dismissed.” [¶¶ 41-80].

Citation: Walker v. Lundborg, 2008 WL 576820 (Privy Council No. 79, 2008).