Published On: Tue, May 19th, 2020

Court holds attorney liable for Fralexia debacle

Court House Philipsburg square

PHILIPSBURG – The Court in First Instance has ordered HBN Holding to compensate its client Alexandre Bourbon for damages caused through the negligent actions of one of its attorneys. The amount of compensation will be determined in a separate procedure.

Bourbon hired HBN in March 2013 when he intended to invest in Fralexia, a company that had bought a parcel of land in Beacon Hill from Kildare, the former owner of the Caravanserai Resort (now Alegria). Fralexia bought the parcel for $1,050,000 but it later turned out that the transaction was null and void because Kildare did not have permission from the government to splits its right of long lease on the land.

When Bourbon asked his attorney whether Fralexia was a safe investment the attorney answered: “Long lease is usually for 60 years; in that sense it is safe.” He also sent Bourbon a deed that specified that Kildare was obliged to deliver the right of long lease to the parcel to Fralexia free of mortgages.

In April 2013, Bourbon paid $748,131.25 for 30 percent of the shares in Fralexia, unaware that the land in Beacon Hill was mortgaged to Scotia Bank. In August 2014 Scotia auctioned the whole Caravanserai property – including the part Fralexia erroneously thought it owned – for $14 million and in October of the next year the court ordered Kildare to pay Fralexia $1,650,000 because it knew the parcel it had sold was mortgaged and that there was no permission to split the right of long lease.

Fralexia then held the country, the cadastre, and notary Francis Gijsbertha liable for damages. While the court ruled that Gijsbertha was liable, it denied the claim against him on “process-technical grounds.”

On March 11, 2019, Bourbon initiated other steps to get money back from his failed investment: he now held HBN Holding liable and demanded the payment of $748,131.25 plus interest.

Bourbon asserted, not without reason, that HBN’s attorney (who charged $320 per hour and had received an advance payment of $1,500) researched the ownership rights to the parcel in Beacon Hill insufficiently and that he had provided him with incorrect and incomplete information.

The court ruled that the steps the attorney had taken – sending his client an excerpt from the cadastre and a copy of the notarial deed – were insufficient. “One cannot rely just like that on excerpts from the cadastre. Reliability appears only from the public registry,” the court ruled, adding that the HBN-attorney had not acted in a way that may be expected from a reasonably acting and reasonably skilled professional. “HBN is therefore liable for the damages Bourbon suffered,” the ruling states.

What those damages are exactly, remains for the moment unclear. Bourbon is of the opinion that his shares in Fralexia have become worthless but the court wants a further debate about actual damages in a separate procedure.