‘A very stressful ordeal’

A businessman who invested over $120 million in two companies, but was secretly removed as a shareholder and director from one of them, has won his case against his business partner whom he claimed had mismanaged the companies and denied him years of profit.

Coast to Coast Quarries Limited (first defendant) and Coast to Coast Concrete Company (second defendant), which is to be audited, have been ordered to pay over any profit made to the businessman, Carliston Graham.

Graham had individually purchased 19 per cent of shares in Coast to Coast Quarries Limited and 30 per cent of shares in partnership with Clifton Johnson (the third defendant), the majority shareholder in both companies.

Justice Stephane Jackson-Haisley, in granting judgment to Graham, also gave an order for the fair market price of the shares to be determined from the forensic audit and for any of the defendants or a buyer of Graham’s choice to purchase his shares. The companies and Johnson will have 60 days, or, failing that, a wind-up order will take effect.

Graham had also sued Johnson’s wife, Shelly-Ann Simpson, and a company she started, Ideal S and J Trucking Services Company Limited, claiming he was entitled to profits from that company because funds from both Coast to Coast companies were used to set it up.

The court, however, found that he was not entitled to any interest in the company, which was started using a $27-million loan that her husband had borrowed through the concrete company.

Graham contended that Johnson mismanaged the companies, failed to provide financial information, improperly removed him as a shareholder and director, transferred his shares into his wife’s name, and also made her a director without his knowledge.

UNFAIRLY PREJUDICED

The court subsequently found that Johnson’s actions, including the failure to hold annual general meetings and provide Graham with financial statements, violated Graham’s reasonable expectations as a shareholder.

The judge also found that Graham was unfairly prejudiced and had suffered oppression.

“I am very much overwhelmed and elated with the verdict,” said Graham when contacted.

The businessman, who had been involved in the legal battle since 2015, said, “It was a very stressful ordeal” but that the justice system saw it fit to order an audit, and he was confident things would work out.

“The concrete company by itself has been making billions,” he claimed, while heaping praises on his attorney, Hugh Wildman, who he said came into the matter midway and was able to get the job done.

Graham’s evidence was that Johnson approached him with an opportunity to invest in the quarry, and he invested and later became a shareholder and director. Johnson again approached him to partner with him in the concrete company, which he did.

Graham said he paid Johnson US$1,250,000 in 2007 to acquire a 25 per cent shareholding in the quarry. However, his share percentage was reduced to 19 per cent after he was informed that there were significant overruns in expenditure to establish the quarry.

He said that, a year later, Johnson gave him $5 million as a profit share in the quarry company, and he used it to acquire 30 per cent while Johnson had 40. However, he said Johnson later purchased an additional 30 per cent in a private arrangement.

Graham said the concrete company experienced several challenges, resulting in him having to pump an additional $2 million and US$10,000 to make it operational.

Despite his investment, Graham was informed at the end of 2009 that the concrete company had suffered a loss due to the recession. He requested an accounting of the records but was never provided with any.

During a meeting two years later, he said he was told by Johnson that both companies were operating at a loss, as they were incurring expenses for existing debt, equipment acquisition, and servicing. However, when he made checks, he found out that there were a number of contracts with China Harbour Engineering Company and other smaller contractors.

He said he was told the same thing in 2012 and 2013 – that the companies were not profiting – and was not provided with any records of account.

According to Graham, in 2014, he had discussions with Johnson about selling his shares, as he was concerned about the management and was offered US$1,700,000 in the quarry company but requested that the company be valued. He said he was also offered $7 million in the concrete company but was not happy and ended the discussion.

However, Graham said he attended a September 2018 meeting where an income and expenditure report from the auditors was presented, which showed that the concrete company made a net profit of $56,637,133.16 for the period January 2018 to September 2018, which refutes Johnson’s statement that the companies were operating at a loss.

Graham brought copies of the annual returns from the Companies Office to show that, between 2018 and 2023, three million shares were assigned to Shelly-Ann Johnson, and he was not listed as a director of the companies. The evidence also showed that the said document was amended in 2023 to reflect Graham being a director and the shares he owned.

Among the witnesses called were two expert witnesses – accountants who had each prepared reports that were submitted to the court.

Donna Thompson-Watt, who appeared for the defendants, concluded that the concrete company made cumulative losses as a result of the crisis during the period 2008 to 2010, when a number of companies went under with low or no sales, reductions in investment, and a number of projects being put on hold. She further indicated that there were some improvements in 2011 and, up until 2012, the company was still struggling as it was a period when sales were less than projected.

Peter Lee, who appeared for Graham, in his report found that the financials of both companies had been maintained in a very informal, haphazard, and irregular manner. He also said he could find little evidence to determine if the couple’s expenses were written off as company expenses due to the poor manner in which the accounts were kept.

Jackson-Haisley, in assessing the evidence, said it was clear to her that the couple had removed Graham as a shareholder in the concrete company without his knowledge and tried to rectify the situation after they were sued.

“There was an attempt to either conceal this or failure to admit,” she said.

The judge, however, noted that although Graham had accused Johnson of fraudulently enriching himself by acquiring greater shares in the two companies by using loans which were secured and repaid by both companies and not by him, that was not proven.

Similarly, she said Graham’s submission that “this was a massive fraud case” had little merit, as he was not able to prove the falsification of documents or to identify any instance of fraud or fraudulent conduct.

While noting that the companies were operated in an “ ad hoc way”, the judge accepted that there were some irregular practices by Johnson, but indicated that it was not to be equated with “falsifying documents or fraud”.

Meanwhile, the two companies, in a counterclaim, sought orders to have the court declare that Graham had invested US$765,000 in the first company and that he was to be paid US$515,000, subject to deduction from interest on the loan he had borrowed and other monies paid to him by the company. The companies also sought an order for him to be paid $7 million that was invested in the second company.

The companies’ lawyer said the companies wanted a buy-out and the removal of Graham as a director owing to irreconcilable differences. But the judge said the counterclaim failed because the companies were seeking to refund Graham’s investment, and that could not stand, as he is a shareholder and would be entitled to a sum representing his shareholding in the companies.

The judge also ruled against granting Graham orders for mesne profits (profits earned by someone in wrongful possession of property), aggravated, punitive, and exemplary damages.

Graham was also represented by Luke Foote, while King’s Counsel Georgia Gibson-Henlin, attorneys Stephanie Williams and Keisha Spence represented the couple and the trucking company.

King’s Counsel Ransford Braham represented the two companies.

tanesha.mundle@gleanerjm.com