Less than a year ago, the ruling New National Party (NNP) administration was ordered to pay DIPCON Engineering the tidy sum of eleven million plus interest (now estimated at approximately 22 million dollars) for breach of contract.

The Trinidad-based company was hired by the 1990-95 Sir Nicholas Brathwaite government to engage in road construction work on the island. Now a Belgian Bank has won a massive $16.3 million judgement against the Keith Mitchell government in St. George's and american national, Ekram J. Miller over their failure to repay the financial institution for monies loaned to them with respect to the controversial Ritz Carlton hotel project at Mt. Hartman.

Miller had managed to get the Grenada government in 2000 to sign a guarantee for the loan that he secured and made drawn-downs on from Forstis Bank of Belgium. Like the Dipcon matter, the Mitchell government failed to put in a defense in the high court matter in London and was not represented at the hearing in October.

The judgement was delivered on October 22, 2004 by Justice Cresswell at the QUEEN'S BENCH DIVISION COMMERCIAL COURT, Royal Courts of Justice. The case was brought by FORTIS BANK against Miller's INTERCONTINENTAL GRENADA LTD. and the Mitchell government in St. George's.

GRENADA TODAY was able to obtain a copy of the multi-million dollar judgement against the cash-strapped Grenada government which is looking for millions of dollars to rebuild the island after the passage of Hurricane Ivan on September 7.

Following is an edited version of the JUDGMENT by Justice Creswell:

This is an application by the Bank for summary judgment in relation to a credit facility.

The application is against the borrower (Mr. Miller) and the guarantor (Grenada Government, the first and second defendants, to whom I will refer as ICG and Grenada.

The claimant is a Belgian bank. ICG is a Grenadian company. It is administered from the United States of America by its President and sole director,Mi. Ekram J. Miller, a United States citizen, who has attended this hearing.

Grenada is the Government of the island of Grenada and two other nearby smaller islands. Grenada has not been represented at the hearing.

The Credit Agreement dated 19 December 2000, the subject of this claim, was provided for preliminary investigations into the building of a luxury Ritz- Carlton Hotel complex on a part of Grenada at Mount Hartman and Hogg Island.

The financing arrangements were not to build the Ritz-Carlton complex itself but in order to fund various studies by a Belgian company called N.V. Besix S.A.

The Bank was approached to provide preliminary funding, and it agreed to do so. The Credit Agreement governs the liability of
ICG to the Bank. The parties to it are the Bank and ICG ("the borrower").

The Agreement came into force on 21 February 2001. The first draw downs occurred on 23 February 2001, and the sums advanced under the facility were: $1.5 million on 23 February 2001; $215,900 on 23 February 2001 in respect of insurance premium; $2 million on 27 June 2001; $62,989.61 on 21 August 2001 in respect of interim interest; $1.5 million on 3 December 2001; $500,000 on 20 February 2002; $89,322.59 on 21 February 2002 in respect of interim interest; $77,636.98 on 21 August 2002 in respect of interim interest.

These sums total $5,945,849.18, and include the interim interest applied on 21 August 2002. Pursuant to the permission given by ONID, the Belgian Export Credit Organisation, after the suspension of the facility on 29 May 2002.

From 21 August 2002 until 21 February 2003 further interest in the sum of $71,900.67 accrued. These sums aggregate to the sum of $6,017,749.85, demanded from ICG in a letter of demand dated 13 March 2003.

No dispute has been raised in respect of the quantum of the sums claimed. The claim form was issued on 26 November 2003 with particulars of claim attached. The claim was served on ICG on 1 December 2003, and Grenada on 9 March 2004.

This application for summary judgment was issued on 23 June 2004 at a time when neither defendant had acknowledged service.

The evidence before the Court on this application is as follows: a witness statement from Mn. Francis, solicitor at Allen & Overy, dated 23 June 2004, together with exhibits; a witness statement from Mn. Rosshandlen, partner in Speechly Bircham, dated 4 October 2004, together with exhibits; a witness statement from Mr. Francis dated 15 October, together with exhibits; and a witness statement from Mn. Rosshandlen dated 22 October, today's date.

The Credit Agreement replaced an earlier agreement dated 27 October 2000. The Credit Agreement provided a credit facility of up to $8.5 million, subject to the terms of the agreement.

This included a sum to allow ICG to pay interim interest and bank charges. The Credit Agreement stipulated that the loan was a term loan. It had a defined repayment date.

The "Effective Date of the Credit" was 21 February 2001. The 2 February 2003 was the latest date by which the facility was repayable.

Although formal demand was not required, the Bank made formal demand by letter dated 13 March 2003. ICG did not and has not made any payment to the Bank.

First Defendant's Submission

Casey, for the first defendant, submitted as follows:

It is averred that the true effect and construction of the Agreement is that in the event that ICG is unable (but not where it is unable by reason of its own wilful conduct designed to bring about such inability) to pay to Fortis amounts drawn down under the Agreement, it is relieved of liability to the extent that Fortis has been indemnified by Ducroine.
In this respect ICG avers as follows:

* at no material time did ICG or Fords contemplate that, in the
event that ICG was not retained by Gnenada for the purposes of the project (beyond the initial phase to be funded by the Agreement) or otherwise put in funds by it, ICG would be able to pay to Fords any amounts under the Agreement;

* accordingly, the Agreement provided for insurance to be obtained from Ducroine to cover the risk of non-payment;

* the parties intended that such insurance should endure to the
benefit of ICG and Fords (in the event of an inability on the part of ICG to make payment);

* In the event of any non-payment by ICG (other than wilful non-
payment), ICG would be relieved of liability to the extent that Fords were indemnified or entitled to be indemnified by Ducroire; and/on

As set out below, ICG's non-payment has in fact been caused by
Grenada refusing to continue the project with ICG, and such non-
payment has not been wilful but has been brought about by inability to pay.

Accordingly it is averred that, to the extent that Fortis has been indemnified by ICG, it has no claim against ICG.

The parties cannot have contemplated that ICG could or would make any payment to Fortis in the event that it did not carry the project beyond the initial phase.

Hence the Agreement provided that credit insurance would be paid for. On a true construction, Fortis was obliged to apply US$215,900 to the payment of such premium.

No further draw downs were allowed by the Bank from May 2002. Prima facie, that was in breach of the 27 November 2001 agreement. If that agreement was limited to the effect that there would be no suspension for the two reasons specified in Mn. Vermeensch's letter, nevertheless it appears that one on a combination of those reasons must have provided the motive for the suspension (and no other reason has been advanced by the Bank.

ICG's case is that the loss caused to it by the freezing of the facility is not one that is amenable to easy or short distillation in a witness statement or statement of case.

The Bank's Submissions

Mn. Ayres, for the Bank, submitted as follows:

ICG did not have an insurable interest in its own failure to repay the debt. The idea of a borrower having an insurable interest in his own failure to repay his debts is absurd:

The Bank's right to suspend on terminate is contained in clause 15 of the Credit Agreement, which states:

"The BANK will have the right to declare that all on part of its obligations under this AGREEMENT shall be suspended or terminated forthwith, whereupon all such obligations shall be so suspended or terminated forthwith and/or declare that the repayment of the aggregate outstanding amount of the ADVANCES will become immediately due should any of the following events occur and be continuing

"(f) if the BELGIAN AUTHORITIES order or instruct the BANK to suspend on terminate the credit."

OND had what was in effect an agreed veto over the extension of the credit on further credit to ICG. There was no obligation on the part of the Bank to investigate the reasoning given, if any, by OND.

The final (and therefore operative) suspension took place pursuant to the fax sent by OND to Besix and the Bank dated 29 May 2002.

The basis of OND's decision to order suspension is set out in the first paragraph. It expresses the view that OND's request for a mortgage over the land owned by ICG (on the basis that the land was free from other encumbrance) has not been met and is not likely to be met.

Even if the Bank was somehow under an obligation not to comply with any order or instruction to suspend on terminate as asserted by ICG, the basis put forward in the first paragraph of 29 May 2002 fax has nothing to do with any such promise:

(i) the Bank has not reacted to a request from Grenada but from OND; and

(2) the bank's decision to suspend is not based on any doubt as to the second defendant's intention or capability to honour its guarantee, but based on OND's communication.

ICG cannot possibly demonstrate any breach of promise, even if a promise was made contrary to the Bank's submission. OND's communication has nothing to do with Grenada; there is no logical or evidential connection between OND's desire for mortgage security and a fear that Grenada neither intended nor was capable of honouring the guarantee.

The Set-Off Defence

The letter dated 27 November 2001 read:

"We refer to our meeting of today in offices of the Belgian Credit Agency

"Enclosed you will find the letter signed by Mr. Miller.

"We understood from our meeting today that, based upon the attached letter, the Belgian Credit Agency will confirm before tomorrow evening to Intercontinental Grenada Limited ... with copy to Fortis Bank that it will not instruct Fortis Bank to suspend or to terminate the Credit Agreement based upon a request thereto from the Grenadian Government or any other Grenadian authority nor based upon any doubt which it might have with respect of the intention or capability of the Grenadian Government to comply with its undertakings in connection with the Credit Agreement."

I draw attention to the use of the word "understood". The letter refers to an understanding that the Belgian Credit Agency (OND) would confirm before "tomorrow evening" certain matters.

It does not record or purport to record an agreement reached at the meeting. There is no evidence that the particular terms of the attached letter had been previously agreed (as opposed to representing an undertaking proffered by ICG).

The letter contemplates confirmation by OND, not the Bank. Thus the contemplated confirmation (and it is not suggested that this was forthcoming) was from a third party, not from the Bank.

I refer again to clause 21.2 and clause 14(f) of the Credit Agreement. The requirements of these clauses were followed in the document dated the 12th February 2001.

There is no evidence that OND instructed the Bank to suspend the Credit Agreement (1) based upon a request thereto from the Grenadian Government or other Grenadian authority, or (2) based upon any doubt which it might have with respect to the intention or capability of the Grenadian Government to comply with its undertakings.

The document dated 29 May 2002 stated, in translation:

"Re: Project Ritz Carlton Hotel - Grenada

"Further to the decision of the Board of Directors of 14 May 2002 and as previously mentioned in our fax of 17 May 2002, it appears that the first request imposed by our Board being the possibility of benefiting from a mortgage over the land owned by ICG to the extent that such land is free of all charges, has not been met.

Further, it seems highly unlikely that this condition can be met going forward. For this reason, Ducroire demands that Besix S.A. does not incur additional costs in relation to the aforementioned project.

Accordingly, we confirm that, as of today's date, no further drawdowns can be made.

In addition, without it being prejudicial, we request that Besix provide us with an up to date loss account of the costs associated with the cessation of activities on the project."

"It is plain from 29 May 2002 fax to Besix/the Claimant that the
relevant instruction from (OND) was premised upon one of the reasons that it had specifically been agreed would not lead to a suspension, namely a fear that the Second Defendant (Grenada Government) might not comply with its undertakings in relation to the Agreement (hence the desire to have a change over the land)") is not justified.

A lender will frequently require security from more than one source. The document dated 29.5.02 refers to a failure to provide security over the land.

On 15 October 2002 ICG wrote to the bank as follows:

"Our negotiations to finance the second phase of the project are
progressing well.
"It is apparent now that in any case the loan provided by your bank will have to be paid in full at the due date of February 24, 2003.
Please provide me with the following information at your earliest convenience.

"1. Full amount to be paid at maturity on February 24, 2003 including the interest and all charges, with an understanding that upon receipt of the funds indicated in your letter, ICG will be released of all responsibilities on the loan agreement.

"2. Payment is to be made by wire transfer to your designated account. Please verify once more the name of the bank, account number and reference to the loan to ICG, if any.

"Thank you for your kind co-operation."

On 25 February 2003 the Bank wrote to ICG as follows:

"Credit Agreement -19 December 2000 between Intercontinental Grenada Ltd. and Fortis Bank for an amount of USD 8,500,000.00, amended on 12 February 2001 - maturity of February 21 2003 - principal USD 5,945,849.18 -Interest 71,900.67.

Referring to your demand of February 20 2003 requesting 60 days payment extension of the above-mentioned maturity, please note that we cannot agree with your demand.

Consequently, by the present we give you notice to pay us in the shortest delays the above-mentioned amounts. In case of non-payment we shall have to take the legal measures which are necessary.

Please take the necessary steps in view to cover us without further delay with the amount of USD 6,017,749.85 into the account No.10 950 886 of Fortis Bank - Brussels, with Citibank - New York, for the attention of the undersigned .. ."

1 consider that the first defendant has no prospect of successfully defending the claim by relying on the set-off defence.

The Claim Against the Second Defendant (Grenada Government)

Pursuant to clause 10 of the Guarantee the Bank and Grenada agreed that the Guarantee would be governed by and construed in accordance with English law and that the English court ("the Court of London") would have sole jurisdiction to hear all disputes which may arise in connection with the existence, interpretation, validity and performance of the Guarantee.

Ordinarily sovereign states are immune from suits in the English courts
Exceptions to this immunity are provided by submission to the jurisdiction, s.2, and entry into commercial transactions, s.3.

In the present case the Guarantee contains a prior written agreement in clause 10 ("The Court of London will be solely competent to hear all disputes ...").
I refer to the Guarantee for its full terms and effect. The Government of Grenada, through its Minister of Finance, is described as the guarantor.
The Guarantee is signed by the Grenadian Minister of Finance, Mr. (Anthony) Boatswain, on behalf of Grenada. In it, Grenada guaranteed to the Bank all payments by ICG under the Credit Agreement.
The terms included the following:

"2. In order to induce the BANK to enter into the AGREEMENT, the GUARANTOR (Grenada Government) hereby irrevocably and unconditionally guarantees, as a continuing obligation, to the BANK the punctual payment of any amount due by the BORROWER under the AGREEMENT and consequently undertakes, as a continuing obligation, to pay as and for its own debt to the BANK, at the BANK's first written demand by registered mail or by telex, any amount payable to the BANK pursuant to the AGREEMENT which is not received when due for any reason whatsoever.

"3. From the date of the BANK's first written demand here above mentioned, any amount due by the GUARANTOR (Grenada Government under the GUARANTEE and not received by the BANK will bear interest for late payment on a day-to-day basis from the due date up to the date of the actual payment at a rate per annum equal to the day-to-day rate quoted for the USD then applicable as determined by the BANK plus 2% (two per cent) per annum.

"7. All costs reasonably incurred and reasonably documented by the BANK, stamps, registration and similar taxes or charges which may be payable in the State of Grenada, W. 1., in connection with the issuance of the enforcement of this GUARANTEE (including the fees and expenses of legal advisers) are to be borne by the GUARANTOR and shall, if paid or incurred by the BANK, be reimbursed by the GUARANTOR to the BANK."

Formal demand was made by the Bank under the Guarantee by letter dated 5 March 2003. Despite various communications in which Grenada has promised the Bank that it would honour its obligations, it has failed to pay any sum.

I refer to the letters dated 15 July 2003,27 July 2003 and 15 December 2003.

The latter letter read:

"I write in response to yours dated November 26, 2003, in which reference is made to Claim Form No.2003 Fo.l062 in the High Court of Justice, Queen's Bench Division, Commercial Court, Royal Courts of Justice, between Fords Bank N.V. and International Grenada Ltd. and the Government of Grenada.

"The Government of Grenada expresses its regrets over the extraordinary delay in bringing about closure to this matter, and seeks your further indulgence in having this matter concluded extra judicially.

"As stated in one of our earlier correspondence to Fortis, it was the Government's anticipation that the outstanding sum would have been settled by June of this year, since the government is in an advanced stage of negotiation with an investor who is desirous of purchasing the Mount Hartman and Hogg Island properties.

"However, due to the intervention of General Elections in Grenada, the Government' s timetable was affected as the negotiations were put on hold.

"Now that the Elections are behind us, Government is optimistic that these negotiations will proceed to finality by the end of January 2004, by which time the Government would be in a position to settle the sum it had agreed to pay by June of this year.

"Therefore, the Government of Grenada further seeks your cooperation for an extension of time to the end of January 2004 to settle this sum, and requests that all pending litigation by Fortis be stayed."

Grenada has not been represented before the court today. This, of course, is regrettable. In my view, the Bank's solicitors, Allen & Overy, have made all appropriate efforts to alert Grenada to the importance of this hearing.

Besides the service of the proceedings in 2003 and 2004, and the service of the application notice and evidence in support, Allen & Overy wrote to Grenada on the 20 August this year, and again on the 7 October this year, in terms to which I refer.

There has been no reply, but there can be no doubt that Grenada is aware that this is an effective hearing and that the Court will consider the matter on the merits.

In my judgment, Grenada has no prospect of successfully defending the claim. Interest was payable by Grenada pursuant to clause 2 of the Guarantee which provided:

"From the date of the BANK's first written demand hereabove mentioned, any amount due by the GUARANTOR under the GUARANTEE and not received by the BANK will bear interest for late payment on a day-to-day basis (from) the due date up to the date of actual payment at a rate per annum equal to the day-to-day rate quoted for USD and then applicable as determined by the BANK plus 2% (two pen cent) per annum."

According to the claimant's calculations, interest calculated up to the 22 October 2004 brings the total sum owed to $6,348,598.32 (assuming the same daily interest for 21 and 22 October as 20 October). Interest continues to accrue at the rate prescribed in clause 2. It follows that, in my judgment, the bank is entitled to the order sought against both ICG and Grenada.

I add the following. It appears from the material before the Court that disputes between ICG and Grenada are the subject of or are intended to be the subject of London arbitration.

I understand the concerns expressed on behalf of Mr. Miller of ICG in relation to that arbitration. It seems to me that that arbitration will determine the true position as between ICG and Grenada.
But for the reasons set out in this judgment, the Bank is entitled to judgment against both defendants. I order accordingly.

MR. A. AYRES (instructed by Allen & Overy LLP) appeared on behalf of the Applicant/Claimant.

MR. A. CASEY (instructed by Messrs. Speechly Bircham) appeared on behalf of the First Defendant (ICG).