IN THE SUPREME COURT OF BERMUDA CIVIL JURISDICTION 2015 mo. IN THE MATTER OF THE BERMUDA CONSTITUTION ORDER 1968 AND THE IN MATTER OF THE MUNICIPALITIES AMENDMENT ACT 2013 AND IN THE MATTER OF THE MUNICIPALITIES AMENDMENT ACT 2014 (1) THE ALLIED TRUST (2) ALLIED DEVELOPMENT PARTNERS LIMITED Applicants and- (1) THE ATTORNEY-GENERAL OF BERMUDA (2) THE MINISTER OF HOME AFFAIRS Respondents ORIGINATING SUM MONS FOR CONSTITUTIONAL RELIEF AND FURTHER DECLARATORY RELIEF TO: The Attorney General of Bermuda Global House Penthouse Floor 43 Church Street Hamilton Bermuda HM 12 LET THE RESPONDENTS within 14 days after service of this Originating Summons on them inclusive of the date of service cause an appearance to be entered on the Originating Summons which is issue on the application of the Applicants by: Wake?eld Quin Limited 31 Victoria Street Hamilton, Bermuda HM10 Introduction The Originating Summons is presented in five Sections as follows: i. The Applicants and their constitutional and common law rights. ll. The Construction issue. Ill. The Constitutional Challenge. IV. Further claims. V. Prayer for Relief. The Applicants rely upon the affidavit of Michael R. MacLean sworn on 9?1 February 2015 served with this Originating Summons. The Respondents are parties to these proceedings by reason of their roles, respectively, as Chief Legal Adviser to the Government, and the department of Government responsible for the legislation which is the subject of challenge in these proceedings. The Applicants have locus to bring these proceedings before the Supreme Court under the Schedule to the Bermuda Constitution Order 1968 ("the Constitution?), section 1. By section 13(1)(c)(ii) of the Constitution they are also entitled to challenge the legality of the taking and acquisition of their property interests. They also enjoy locus at common law to bring these proceedings. The Applicants and their constitutional and common law rights The First Applicant, Allied Trust ("the Trust?), is a trust subject to the laws of Bermuda. The Second Applicant, Allied Development Partners Limited is a company incorporated pursuant to the laws of Bermuda. ADPL is wholly owned by the Trust, acting by its trustees. Michael R. MacLean is a director of ADPL and the Settlor of the Trust (on whose behalf, in addition to on behalf of ADPL, he IS authorised to submit evidence in these proceedings). 8. 10. 11. 12. The Trust and ADPL have operated at all material times as a single economic unit with the sole purpose of developing and exploiting the Hamilton Waterfront ("the Waterfront?), together with the Corporation of Hamilton (?the Corporation?). in this regard (and as more fully explained in the Affidavit of Michael R. MacLean at 111] 12) the Trust was to own the relevant real property interests in the form of a ground lease, and ADPL was the development vehicle. Pursuant to the above operating structure, the following agreements were executed: ii) A Cooperation Agreement dated 31 October 2012 .as between the Corporation and ADPL under which ADPL was appointed as the exclusive development partner of the Corporation in respect of the Waterfront and which also recorded in Clause 4.3.5 an intention that the "Exclusive Developer" and the Corporation should enter into 3 Ground Lease and Development Agreement. (ii) A Development Agreement dated 21 December 2012 as between Corporation, the ADPL and the Trust. The Development Agreement, by Clause 3.1, provided for the grant of a lease by the Corporation. By agreement dated 21 December 2012, a long leasehold interest of 262 years ("the Lease?) was granted to the Trust by the Corporation in respect the Waterfront. The Lease, to which ADPL was also a party, provided that the Trustee was the tenant, that ADPL was to be the developer and by Clause 1.2.3 of the Lease it was provided that it was to be read together with the Development Agreement. The Applicants will refer to the Cooperation Agreement, the Development Agreement and Lease collectively below as "the Agreements" and will rely at trial on the full terms, meaning and effect of those Agreements. In particular, the Applicants will contend at trial that the rights and benefits granted to them by the Agreements were in substance .3 single economic package. As at the date the said Agreements were executed they were valid, binding and enforceable agreements under the law of Bermuda. Further, as a matter of law under the Constitution: Lu 13. 14. 15. 16. (1) By Section 1 thereof, the Applicants were persons entitled to protection of the fundamental rights and freedoms set out in the Constitution; All rights, be they rights in personam or in rem, arising under or related to the Agreements and the package of rights and benefits conferred thereby, are and were ?property? entitled to protection within the meaning of Section 13(1) of the Constitution; and Absent the satisfaction of the strict grounds for interference with such property rights as set out in Section 13(1) of the Constitution, any act of the Legislature purporting to interfere with or to destroy the substance or value of the said rights would be unlawful and of no effect. The above contractual and real property rights enjoyed by the Applicants under the Agreements were and are also protected by under Bermuda common law and could not be taken away without express provisions of primary legislation. The Construction issue By section 14 of the Municipalities Amendment Act 2013 ("the MAA 2013?), given assent on 15 October 2013, the Legislature arrogated to itself a power to "reject" any agreement entered into by a municipal corporation (such as the Corporation} after 1 January 2012 for the sale of land belonging to such corporation or for the lease of such land for a term of 21 yea rs or more. Relying upon the said purported power, on 7 March 2014, after submission of the Agreements to the Minister (under section 14(1) MAA 2013) and their laying before the Legislature, the Legislature purportedly ?rejected? each of the Agreements relying upon section 14(4) of the MAA 2013. However, the MAA 2013 did not provide for any remedial consequence of such ?rejection? and the Government has wrongly claimed that, despite such lack of consequence, the effect of the rejection was a voiding ob inirio. Ill. 17. 18. 19. 20. 21. 22, 23. 24. That is wrong in law. There was no such consequence and the Agreements remain vaiid and subsisting. By the Municipalities Amendment Act 2014 (?the MAA 2014?), a new section was added to the regime for rejection in section 14 of the MAA 2013 and provided that ?Any agreement that is rejected by the Legislature under subsection (4) shall be void ab initio?. The said amendment was however given an operative date of 24 March 2014 and was not the subject of any express retrospective application so as to capture agreements which had in fact been historically "rejected" under section 14 of the unamended MAA 2013 (as purportedly had been the Agreements as pieaded in 1i15 above]. In the premises, the MAA 2014 did not have the effect of achieving a legislative voiding of the Agreements since their ?rejection? was as pleaded above on 7 March 2014. Further, the Applicants will contend that under common law principles of protection of property rights and statutory interpretation, the relevant legislation (both the MAA 2013 and the amendments thereto made by the MAA 2014} is not be construed as expropriating any rights absent express wording {which there was not in the present case). The Constitutional Challenge As pleaded above, each of the Agreements were and remained protected property within section 13(1) of the Constitution. It, contrary to the Applicants? case in Section II above, the effect of the MAA 2013 and/or the MAA 2014 was to achieve a legal voiding of the Agreements, the Applicants submit that their constitutional rights have been violated. Without prejudice to the submission that the Respondents bear the burden of discharging the heavy onus placed upon the Government in cases of interference or takings of property under section 13(1) of the Constitution, and subject to discovery from the Respondent revealing the true reasons for the making of the legislation, the Applicants will contend at trial that: (ii) UV) (V) There was no true public interestjustification within the terms of section l3(1)(a} of the Constitution for the claimed voiding of the Agreements; There was no consideration given by the Legislature nor any reasonable justification advanced for the hardship impOSed by the voiding of Agreements in the Applicants, nor in fact is there any such justification within the terms of section 13(1)(b) of the Constitution; specifically, even if there were compelling public interest justifications for the review and rejection process set out in section 14 of the MAA 2013 {as originally enacted and as amended by the MAA 2014], it was a disproportionate and unjustifiable interference with rights for such a process to be applied retrospectively to existing agreements and transfers of property even if a prospective review and rejection process might be justified; in this regard, the Legislature failed to have regard to the very powerful weight given at common law to upholding agreements including transfers of property made in good faith and on the basis of existing laws; that principle could have been respected (and hardship avoided to the Applicants) at the same time as making prospectively applying legislation which fulfilled any claimed public interest purpose the Legislature may have had in making the MAA 2013 and MAA 2014,- lndependently of these points, the scheme for compensation provided for by section 14(8) of the MAA 2013 does not provide for compensation for an entity in the position of ADPL since it does not have, within the terms of that section, an ?estate or interest? in land, and the Government of Bermuda in the arbitration proceedings referred to in Section IV below does not accept any of the losses ADPL has suffered as compensable through the Trust?s claim; By reason of this fact, the Respondents cannot show, at least as regards loss of its property, that there was ?y let alone "adequate compensation? within the terms of section l3(1)(c)lii) of the Constitution; and As regards the Trust, and subject to the points made in Section IV below, the Trust may not receive in the arbitral process adequate compensation for the loss of its property in the form of Lease since the Government contends in that process that the Trust is not permitted to recover consequential losses and/or that there are 25. 26. 27. 28. certain further restrictions on the approach to compensation which will, if correct in law (which is not accepted), substantially reduce the compensation it may receive and such reduction will lead to a violation of its rights to adequate compensation under section 13(1)(c)(ii) of the Constitution. In the premises, the claimed voiding ofthe Agreement is of no legal effect by reason of these violations ofthe Constitution. The Applicants reserve the right to add to their constitutional complaints as and when the Respondents plead (and provide discovery) in relation to the true motivations for the making of the legislation impugned above and the purported rejection. in particular, the right is reserved to submit that the said legislation was not enacted or applied in the case of the Applicants to deal with any true matter of general public concern but was in fact ad hominem legislation with the purpose of undoing specific binding agreements validly executed. The Applicants also reserve the right to add to their complaints (subject to discovery to be provided by the Respondents) a complaint that the rejection of the Agreements by the Legislature (on recommendation of the Cabinet) was for improper purposes and not related to any actual legitimate public interest reasons. Further relief As pleaded above, arbitration proceedings (?the Arbitration") have been commenced as between the Applicants and the Government of Bermuda. Those proceedings are brought under section 14(8) of the MAA 2013 and are premised on the assumption, in issue for the reasons set out in Section ill and Section IV above, that there has in fact been a relevant ?voiding? of the Agreements as a matter of construction of the MAA 2013 in the events which have happened and/or that the voiding was constitutionally valid and of effect. If in fact there has been an effective voiding, a number of issues of law and fact arise for resolution by the Supreme Court as follows: (1) The Arbitration cannot address the issue of the compensation due to ADPL because, as pleaded above, it is not an entityr with any ?estate or interest in land? for the purposes of section 14(8) of the MAA 2013. Accordingly, it is entitled to make a direct claim and (hereby makes a claim) to the Supreme Court as a party entitled under section 29. 30. 31. 13(l)(c)(ii) to have compensation assessed. ADPL claims the losses set out in ?Il?liEiZ of the Affidavit of Michael R. MacLean and seeks an order for assessment and payment thereof. (2) The adequacy of the compensation to be provided to the Applicants in the Arbitration depends on the way in which the following issues are to be determined as a matter of law: Should each of the Agreements and/or each of the holders of the Agreements be taken in isolation without regard for the other in assessing compensation? (ii) Can the Trust recover consequential losses as a result of the voiding, including on behalf of Can the Government of Bermuda rely on its hostile attitude to the Waterfront Development in assessing compensation? Can the Government of Bermuda rely on matters connected with the purported (iv) rejection, such as the Ombudsman's report of December 2013, in assessing compensation? The resolution of the above issues have a direct impact upon the adequacy of the compensation to be provided under section of the Constitution and accordingly (aside from being important issues of law for resolution now by the Supreme Court in advance of the Arbitration) they are important determinants of the constitutional legality of the claimed voiding of the Agreements. For those reasons the declarations sought in the Prayer for Relief in Section are sought. Prayer for Relief The Applicants seek the following orders: 31.1 A declaration that on a proper construction of section 14 of the Municipalities Amendment Act 2013 {in both its original form and in the form amended by the Municipalities Amendment Act 2014) that Act did not have the effect in law of voiding the Agreements which were rejected by the Legislature on 7 March 2014. 31.2 In the alternative, if the said voiding was the apparent legal consequence of the said rejection, a declaration that the voiding was of no legal effect because the voiding violated the Applicants' constitutional and common law rights to property. 31.3 in the further alternative, if there was a valid voiding, the Second Applicant claims compensation in the sum of at least pursuant to its rights under section of the Constitution. 31.4 In the further alternative, declarations as follows as to the correct legal approach to be adopted under the legislation in the calculation of compensation: That the Agreements, and/or the holders of the Agreements, should be treated as one. That the Trust is entitled to recover all consequential losses as a resulting of the voiding. That the Government of Bermuda?s claimed hostile attitude to the Waterfront Development is not to be taken into account in assessing compensation. That matters connected with the rejection are not to be taken into account in assessing compensation. 31.5 Costs and further or other relief that the court considers appropriate. if the Respondents do not enter an appearance, such judgment may be given or orderl?gnade against or in relation to them as the court may think just or expedient. DATED the day of February, 2015. REGISTRAR This Originating Summons was taken out of Wakefield Quin for the Applicants whose mailing address is 31 Victoria Street, Hamilton Bermuda. IN THE SUPREME COURT OF BERMUDA cum. JURISDICTION 2015 NO. IN THE MATTER OF THE BERMUDA CONSTITUTION ORDER 1968 AND THE IN MATTER OF THE MUNICIPALITIES AMENDMENT ACT 2013 AND IN THE MATTER OF THE MUNICIPALITIES AMENDMENT ACT 2014 IS) THE ALLIED TRUST (4) ALLIED DEVELOPMENT PARTNERS LIMITED Applicants -and- (3) THE ATTORNEY-GENERAL OF BERMUDA (4) THE MINISTER OF HOME AFFAIRS Respondents ORIGINATING SUMMONS FOR CONSTITUTIONAL RELIEF AND FURTHER DECLARATORY RELIEF WAKEFIELD QUIN LIMITED 31 VICTORIA STREET HAMILTON HMID REF: