Mon | Jul 22, 2019

Exclusive Holidays twice ordered into liquidation - Fred Smith insists there is no impediment to pursuit of Arc Systems case

Published:Wednesday | July 10, 2019 | 12:15 AMNeville Graham/Business Reporter
Director of Exclusive Holidays Fred Smith.
Director of Exclusive Holidays Fred Smith.

The hearings into the winding-up of Arc Systems Limited for unpaid debt of nearly $26 million will resume in court Friday, but the status of the creditor, which itself has been placed in liquidation twice over the course of a decade, will be as much in the spotlight as the company from which it is seeking to recoup commercial debt.

Arc Systems has produced information on separate court-ordered liquidations of Exclusive Holidays of Elegance Limited, a Montego Bay-based company owned by businessman Fred Smith.

In an effort to counter those moves, Exclusive Holidays has produced its own documents indicating that the foreign metals supplier that placed it in liquidation five years ago, ASE Metals NV, had agreed to a settlement and repayment schedule for the debt owed.

Smith insisted in documents filed with the court last week that despite facing “ups and downs”, his company was not in liquidation or receivership. The company also produced a schedule spanning May to November 2014 for payments totalling US$800,000 to ASE Metals and has argued in filings to the court that the liquidation order was never enforced and that the debt was fully paid up.

However, Deputy Supervisor at the Office of the Supervisor of Insolvency Fayola Evans Roberts told the Financial Gleaner last week that the second liquidation order against Exclusive remains in effect. And on Tuesday she said the Office of Insolvency was “not aware of any agreement between ASE and Exclusive”.

As for the first liquidation order in July 2003, that was rescinded by the court three months later in October 2003.

Arc Systems is using the liquidation orders against Exclusive Holidays in court to argue that its creditor was not fully forthcoming about its corporate status and lacked standing to bring a legal case against it, and is also looking to challenge the appointment of the interim receiver.

Arc System’s lawyers first broached the subject of Exclusive’s status at a June 20 hearing presided over by Justice David Batts, who had earlier approved the winding-up order for Arc Systems in May.

Exclusive Holidays was first placed in liquidation in July 2003 on the application of creditors Executive Motors and Key Motors Limited, but that court order was eventually stayed by another order later that year, according to Evans Roberts. The debt amounted to $6.06 million, and the provisional liquidator then was Trustee in Bankruptcy Keith Hartley Cooper.

The second liquidation order was based on an application from foreign supplier ASE Metals, which Exclusive Holidays owed more than US$885,000. The Montego Bay company was ordered liquidated in 2014 by Supreme Court judge Evon Brown, but no liquidator was appointed.

“In matter 2013HCV06734, a winding-up order was made against Exclusive Holidays of Elegance on the 8th May, 2014. There are no records indicating that the order was discharged or the winding-up proceedings stayed,” Evans Roberts said.

She explained that in circumstances where the court does not appoint a liquidator, it is left to the trustee of bankruptcy to assume the role of ‘provisional liquidator’, as was done for Exclusive Holidays. The deputy supervisor said the agency’s files show that the liquidation order had not been rescinded or stayed, but that the Office of Insolvency had not yet taken any actions to effect the wind-up.

Belgium-based ASE petitioned the court to liquidate Exclusive Holidays after winning a judgment in the Court of Appeal in 2013 that ordered Smith’s company to pay up US$885,747, plus interest of 12 per cent per annum dating back to August 2008.

The local lawyers representing ASE, from the firm Nigel Jones and Company, did not respond to multiple messages and emailed questions for comment. It’s unclear whether the metals company itself considers the debt fully paid and whether it has made any attempt to have the liquidation order against Exclusive lifted.

The debt owed to ASE related to an April 2008 shipment of steel reinforcing bars that Exclusive Holiday acquired from the metals company for distribution in Jamaica.

Exclusive Holidays is itself is attempting to have Arc Systems wound up over $25.8 million of billings for rebars that were supplied but not paid for.

Smith previously told the Financial Gleaner that his company been in liquidation in the past but said the matter had been cleared, while referring comments to his lawyers. The Financial Gleaner subsequently came into possession of the 2014 order, but efforts at further direct comment from Smith were unsuccessful.

The firm of one of his lawyers, Clayton Morgan, to whom Smith initially referred the Financial Gleaner, said Friday they were awaiting instructions from their client to comment.

Exclusive Holidays, which trades as a transport company, is classified as ‘active’ on Companies Office records, but the agency says it does not consider the company to be in good standing as its last annual returns were filed for December 2015.

Neither Executive Chairman of Arc Group Norman Horne nor his attorneys are commenting on the current developments. Horne told the Financial Gleaner that all the documents available to his company are in the public domain and that they speak for themselves.

“The matter you are inquiring about is one of public record, and once you read all of the documents clearly, I think you’ll get a true picture of what’s happening,” he said.

Winsome Marsh, one of the lawyers representing Exclusive in the Arc Systems case, also declined to comment.

Batts is expected to decide at some point on whether Exclusive Holidays’ status is a game changer in the case or whether the liquidation of Arc System under interim receiver Ken Tomlinson should proceed. The next hearing is on July 12 in open court.

Tomlinson was appointed by Batts in May on the recommendation of Exclusive Holidays. Arc Systems, which, by its own account, began facing financial difficulties in 2008, was given three months to hand over records to the interim receiver.

Tomlinson has already produced at least one preliminary report to the court. Asked about the questions surrounding Exclusive’s status and what it means for him, Tomlinson said it was up to the court to decide whether the receivership proceeds.

neville.graham@gleanerjm.com