Nico loses legal fight with Scotia

McPherse Thompson, Assistant Editor - Business

Nico Distributors Limited has lost its legal fight to recover three cold rooms valued at J$3.6 million, which were affixed to property seized by Billy Craig Investments Limited to recover a debt.

The Montego Bay-based food distribution company had also sought damages against Billy Craig and its parent company, Scotia Investments Jamaica Limited, for loss of rental income totalling J$15.9 million on the cold rooms.

Supreme Court Justice Ingrid Mangatal ruled that Nico failed to prove its claim against the investment firms after hearings extending from last year October to March 22.

Nico contended in the suit that it was a tenant on property owned by Fletcher & Company but owned the equipment.

However, it said Scotia DBG, formerly operating as Dehring, Bunting and Golding, but now known as Scotia Investments, refused permission to remove the cold rooms when Billy Craig took possession of the premises.

Fletcher & Company had granted a mortgage over the property at Pimento Way to Billy Craig, which took possession in July 2006 when the mortgagor defaulted under the terms of the agreement.

Billy Craig subsequently sold the property, including the three cold rooms, to Indies Pharma Jamaica Limited for J$50 million.

The judge noted that in a demand loan statement of account from Scotia Investments in respect of Fletcher and dated December 24, 2008, the debt was nearly J$60 million, with per diem interest of over J$49,000.

Justice Mangatal found that there was some blurring of the operations, assets and liabilities of Nico and Fletcher & Company, which had shareholder and managing director in common in the person of Robert Joseph.

Imported a chill room

Nico, which filed its claim on May 3, 2011, said it imported an Isowall chill room and an Isowall freezer room from Trinidad in July 1998, and a freezer room from the United States in 1995.

Joseph said Fletcher & Company granted a licence to Nico and allowed the cold rooms to be installed on the property because the distributor did not have its own real estate at the time.

The court observed that in an October 8, 2007 letter to Scotia Investments requesting permission to remove the cold rooms and other items, Joseph stated that Billy Craig took possession of the property in or about July 2006, and that Fletcher & Company was evicted in February 2007.

Said Justice Mangatal: "One wonders why Nico did not seek to claim possession of the cold rooms immediately that it says were wrongly detained."

She also referred to the evidence of Lissant Mitchell, chief executive officer of Scotia Investments, who testified that on October 7, 2007 Billy Craig gave Fletcher & Company notice of its intention to exercise its power of sale.

"This notice was given to Fletcher only a day before Nico's letter to Scotia Investments which now claimed that Nico was entitled to the cold rooms," the judge noted.

Nico claimed that Scotia Investments had converted the equipment to its own use and was renting it for commercial use, which Scotia Investments and Billy Craig both denied.

The distributor said that before Billy Craig's intervention, the cold rooms were rented to Coldfield Manufacturing Limited for a monthly fee of US$3,166.

Nico started business in the early 1990s, supplying foodstuff to hotels and restaurants on the north coast and used the cold rooms as storage facilities for the business.

Joseph said that in 2001, the Revenue Protection Division (RPD) sued Nico for breaching the Customs Act, which severely disrupted the distribution business. It was in those circumstances that Joseph said he decided to rent the cold-storage facilities to Coldfield.

However, he said it was always the intention that once the lawsuit with the RPD was concluded Nico would continue its distribution business.

The lawsuit was dismissed against Nico in 2007, but the food distributor was unable to get access to the equipment, Joseph told the court.

Rent collected

He said that, for convenience, Fletcher & Company collected all the rent from Coldfield Manufacturing for the Montego Bay premises, under an arrangement where 42 per cent of the rental was accorded to the building and 58 per cent to the cold room.

However, in October 2006, Joseph wrote to Coldfield requesting that all amounts outstanding for rent be paid to Scotia DBG.

Under cross-examination, Joseph conceded that the letter did not specifically advise Coldfield to pay only the 42 per cent of the rental portion due to Fletcher & Company to Scotia DBG, because he was trying to negotiate with the investment firm in good faith.

Justice Mangatal rejected Joseph's statement that there was an agreement with Coldfield.

"if Nico really was entitled to a portion of the rent, why would Mr Joseph ... direct Coldfield to pay all of the rent, not just some portion allegedly due to Fletcher to Dehring, Bunting and Golding?" said the judge.

"The explanation as to good-faith negotiations strains credibility and it seems far more likely that there was some blurring of the operations, assets and liabilities of Nico and Fletcher, which had shareholder and managing director in the person of Mr Joseph."

Moreover, she said she had a "hard time accepting" that there was an arrangement for on-leasing of the cold rooms by Fletcher to Coldfield because nothing in the lease spoke to the arrangement, and there was no correspondence to that effect prior to Billy Craig exercising its right under the security.

Mangatal said it was self-serving for Nico to claim that it continued to be a tenant after November 1, 2002 when the lease between Coldfield and Fletcher took effect. The lease for five years, with an option to renew for another five years, makes no reference to apportionment of the rent and does not mention Nico as a party, the judge said.

mcpherse.thompson@gleanerjm.com