COLE BAY–Problems seem to be piling up for the developer of Carbon Grove Estates in Cole Bay after the Court of First Instance ruled in favour of money lender Pays Holding Limited in Vanuatu in summary proceedings on October 22.
According to Pays, Melbon Enterprises, the holding company of Carbon Acquisition Group led by Chief Executive Officer and founder Dwain Carbon, was in default pertaining to payments on a loan and sales agreement closed on February 25 for the principal amount of US $2,410,000.
With the proceeds of the loan agreement, Melbon intended to continue and complete the Carbon Grove residential project. The delivery of apartments should have taken place no later than December 31, 2020, but complete delivery has not yet taken place.
Pays negotiated a number of securities for the loan, including a $210,000 promissory note, a mortgage on a plot of land in Guana Bay and a lien on an excavator, a cement pump truck and a concrete mixer.
Pays also negotiated the transfer of two plots in Cole Bay, which have since been delivered. In addition, Pays claims a first mortgage on two plots in Simpson Bay and beneficial ownership of these leasehold rights. Pays leases the plots in Cole Bay and Simpson Bay to Melbon since February 25, 2021.
Melbon petitioned the court to forbid Pays to evict and sell the properties in Cole Bay and Simpson Bay; to remove the Simpson Bay plots from sale by a real estate agent; and to forbid Pays to sell or auction the movable properties.
Melbon claimed that the loan agreement was invalid and stated that the consequences for the buyers of the apartments in Carbon Grove would be catastrophic if Pays was not stopped in exercising its rights.
Bankruptcy will become “inevitable” if phase-1 of the Carbon Grove project cannot be completed “on time” – in November 2021 – the developer said, as late completion will lead to a recall of a bank credit. As a result, the 100 to 150 buyers of the apartments will be left out in the cold.
The Court of First Instance concluded that Pays’ interest in being allowed to obtain security on the loan outweighed the developer’s interest in being exempt from this.
As a professional project developer, plaintiff has knowingly entered into the loan agreement, the court said. “Plaintiff was and is in financial distress as a result of the execution and completion of the Carbon Grove Residential project. In order to be able to carry out this project, he started looking for additional financial resources. Apparently, bank financing and the advance payments made by the buyers of the apartments were insufficient to finalise this project.”
The need to raise funds must have been very high, given that he accepted a “ridiculous” lending fee of $985,000. However, this is entirely attributable to the way in which he designed and implemented the Carbon Grove Residential project, according to the court.
The judge ruled that Pays may enforce the rights and securities as stipulated in the loan agreement up to a maximum of $450,000, plus interest and costs. Any surplus must be paid out to Melbon and/or third parties.
The Court recognised that a (possible) termination of the Carbon Grove project will have major financial consequences for the buyers. “It is a well-known fact that many buyers have made deposits on the purchase prices owed, and often more than they were obliged to, while the apartment right has not yet been delivered to them. It is not unlikely that they will lose their money permanently.”
Since this loss can only be attributed to the actions and decisions of Melbon and the buyers of the apartments, and Pays does not play a role in this, the interests of the buyers do not carry sufficient weight, the court said.
Melbon will have to pay $210,000 to Pays, with 12.5 per cent interest per year from February 11, 2021, until the day of complete satisfaction. It will also have to vacate the Simpson Bay and Cole Bay properties within five days after delivery of the verdict. The 2012 Volvo excavator must be handed over to Pays against forfeiture of a daily $500 penalty, up to a maximum of $100,000, in case of non-compliance.
Bron: Daily Herald