The court has rescinded the decision of the trustee to bar a representative of Sygnus Credit Investments Limited from overseeing the bankruptcy proceedings for Mystic Mountain Limited, MML, saying she had overstepped her authority.
Gordon had disallowed a US$1-million claim against the Mystic Mountain estate made by Sygnus as an unsecured creditor, after removing the financial firms inspector.
The company, which is MML’s largest unsecured creditor, responded with a lawsuit against the trustee, Debbie Ann Gordon, and secured a victory on Friday when Supreme Court judge David Batts ruled that her decision was a contravention of the Insolvency Act, and that she had acted ” ultra vires”, that is, outside of her authority, when she removed the inspector appointed by Sygnus to watch the proceedings on its behalf.
Gordon was ordered to pay half of Sygnus’ legal costs from her own pocket, while the other half would be borne by the MML estate.
“The trustee is directed to treat the claimant’s claim in bankruptcy as proved pursuant to Section 188 of the Insolvency Act,” said Batts in an order issued on Friday.
“It is declared that the trustee’s act of removing the inspector appointed as the claimant’s representative was ultra vires,” he said.
Sygnus Credit’s lawyer, Kwame Gordon of the law firm Samuda & Johnson, said Gordon removed SCI’s representation from the committee of inspectors last November, and then disallowed the claim in April of this year.
“The inspectors are appointed by the creditors to supervise or oversee the administration of the bankruptcy and, where necessary, instruct the trustee. It is therefore important to have inspectors, as they keep an eye on the bankruptcy proceedings, and they ensure accountability on the part of the trustee,” Kwame Gordon said.
“We asked the court for an order for the SCI’s entire costs to be personally borne by the trustee. The court made an order for her to bear half of SCI’s costs. The other half is to be borne by the bankrupt estate,” he told the Financial Gleaner.
The size of the legal costs are still to be determined.
The trustee’s office said the order by Batts would be appealed, and declined further comment. She was represented in the lawsuit by attorney Dr Christopher Malcolm.
The trustee has had other run-ins with the committee of inspectors, a subset of which had sued to have her removed as MML trustee after she disband them. Gordon survived the attempt, but the court also gave its approval for the appointment of five inspectors, delivering a win for both sides. That matter was also adjudicated by Justice Batts.
Mystic Mountain, which operates an adventure park in Ocho Rios, was placed in receivership by secured creditor and debenture holder Sky High Holdings when it failed to service its bonds worth $1.1 billion amid the decimation of the hospitality and tourism markets during the coronavirus pandemic.
A report filed by receiver Wilfred Baghaloo with the Companies Office of Jamaica reported the debt in the hard-currency equivalent, at US$7.2 million. However, this week a person in the receiver’s office said the debt was now “about US$9 million plus interest, plus default interest, plus other costs typically associated with a debt instrument”. That would translate to, at minimum, $1.4 billion in local currency, before interest and costs.
There is a current offer to buy Mystic Mountain, but Baghaloo has declined to disclose the offer price. The sale is pending approval from the court, the hearings for which are set for August 2 to 4.