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DeFreitas Holdings to get $4m payout

DeFreitas Holdings to get $4m payout

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The Government of St. Vincent and the Grenadines has been ordered to pay De Freitas Investment Holdings Ltd. (DIHL) EC$4,140,000 in costs and compensation for a property which was acquired in 2004, and for which the Government had offered $1,743,785.{{more}}

This is according to the report of the Land Acquisition Act Board of Assessment, which was presented to His Excellency the Governor-General Sir Frederick Ballantyne on Friday, October 3rd, by Chairman of the Board, High Court Judge Frederick Bruce-Lyle.

Trans Caribbean Traders Ltd, a wholly owned subsidiary of DIHL, operated a hardware business from the property located at Murray’s Road. The Managing Director of DIHL is Marcus DeFreitas, a former Minister of Government under the New Democratic Party administration.

According to the report, DeFreitas claimed a total of EC$6,810,933.63 in compensation for his property and business. In addition to the $4,130,850 claimed for the land and buildings, he made a submission for an additional $2,680,083.63 for “loss of business, loss of profit, loss of potential profit, and deprivation of business as a going concern.”

The Board of Assessment, however, found that DIHL “should have long foreseen the consequences on not relocating and restructuring its business operations.” According to the report, “The business operated outside the guidelines laid down in the local area plan. It had faced a plethora of complaints and protests, and had defended legal attempts to shut down its operations.”

“It would be right to say that the Claimant (DIHL)

had adequate indication for a long time that his operations would cease at some time. Therefore, for him to ask the Respondent (Government) to fully compensate the loss of future profit and disturbance is without merit. The Claimant must bear a good measure of responsibility to mitigate its loss.”

The Board also noted that DIHL’s business operations were not well suited for the general area where the property was situated. “We find it highly inconceivable that cement selling operations could have been allowed to flourish in a residential area and close to educational institutions and Government offices with its attendant dust and health hazards.”

The Board, however, was of the view that the Government should bear some responsibility to “fairly compensate DIHL for loss of profit” in the two and one-half years from June 2004 when the Government acquired the property, to early 2007 when the property was finally vacated by DIHL. The Board is of the view that a reasonable pre-tax profit expectation would have been between $300,000 and $350,000 per annum and a reasonable rent to be paid to Government would have been $140,000 per annum. The company was, therefore, awarded $370,000 for loss of profit.

DIHL’s claims to be compensated for goodwill value were dismissed by the Board. The Board states that they were “unable to attribute any goodwill value to the operations of DIHL,” based on their re-calculations of the computation of goodwill presented to the Board by Marcus DeFreitas’ brother, accountant Mr. Stanley DeFreitas, and “considering all the testimony and evidence before the Board.” The report notes that they had “no quarrel with Stanley De Freitas’ qualifications and experience,” and while they also noted his relationship to the Claimant, they said that there was no direct evidence that Stanley DeFreitas’ conclusions “were influenced by the potential conflict of interest.”

The Board received appraisals of the value of the land and buildings from Chris Browne, Franklyn Evans and Chief Surveyor Adolphus Ollivierre. The Board applied a rate of $80 a square foot for the land, which is the average of the adjusted Evans and Browne rates at June 2003, resulting in an overall valuation of $3,252,720 for the entire 40,659 square foot parcel, which the Board considers to be “appropriately conservative.”

Describing the valuation of the buildings as “somewhat more problematic”, the Board came up with a weighted average of $507,072 from the three appraisals, giving twice the weight to Evans and Browne appraisals as to those of Ollivierre. “Accordingly, the majority of the Board concludes that fair compensation for the lands and buildings of DIHL as at June 2003 is … $3,750,000.”

The Government was also ordered to pay DIHL costs of $20,000, with interest accruing on the whole judgment at 5 per cent per annum from October 2nd, 2008, the date on which the judgement was delivered.

The report notes that Mr. John Thompson, who represented the Government on the Board, while agreeing that the $1,743,785 originally offered by the Government to DIHL was understated, felt that only an additional $200,000 should be paid. According to the report, “the majority of the Board did not agree with this view.” The report was signed only by the two other members of the Board, Justice Frederick Bruce-Lyle and Greg MacLeod, who represented DIHL.

Lawyers Joseph Delves appeared for DIHL and Arthur and Richard Williams appeared for the Government.