THA loses fraud case against two businessmen in zipline lawsuit

The Tobago House of Assembly (THA) suffered a major legal blow as the High Court dismissed fraud claims against two businessmen involved in the failed construction of a zipline project in Tobago’s Main Ridge Forest Reserve, ruling that the case had no realistic prospect of success.

Justice Karen Reid granted summary judgment in favour of Richard Graham (also known as Rick Graham) and Darren Hreniuk, who were accused by the THA of fraudulent misrepresentation in securing a contract to develop a high-angle canopy tour course in Tobago.

The judge ruled that the claims against them were unsubstantiated and speculative, and the freezing of the men’s assets was lifted.

However, the judge ruled that THA’s case against OCT Enterprises Ltd, the third defendant, is to continue.

The project comprised 12-14 platforms and 11-13 lines, including a special observation platform for birdwatchers and photographers.

The dispute stemmed from a 2015 services agreement between the THA and OCT Enterprises Ltd, a British Virgin Islands (BVI)-registered company, for the construction of the canopy tour for US$531,610. The THA paid US$416,900 upfront, but the project was never completed.

The THA alleged it first became aware of the fraud in May 2022 and claimed Graham and Hreniuk falsely represented OCT Enterprises Ltd as a legitimate BVI-registered company. It also alleged the two misled the THA into believing they were directors of the company and failed to deliver the promised services, and auctioned materials in a Miami warehouse without accounting for the proceeds.

In their defences, Graham and Hreniuk denied any fraudulent intent, arguing that OCT Enterprises Ltd was a legitimate company, incorporated in 2001.

They maintained they never misrepresented their roles, and all company documents were provided to the THA. The two further contended the project’s failure resulted from THA’s defaults, not fraud and pointed out that payments were made directly to OCT Enterprises Ltd, not to them personally.

In her ruling, Reid said, “The evidence does not disclose any issue of fact to be determined as to whether the first and second defendants were acting at all times for the third defendant.

“There is simply no evidence before the court to the contrary.

“In my view, the claimant’s case in fraud against the first and second defendants is hopeless.”

She added, “The claimant’s evidence, taken at its highest, establishes that it paid for services it did not receive. It does not establish any deceit on the part of the first or second defendant of the kind alleged by the claimants in its pleadings or that any statement made by the first or second defendant was untrue.

“The claimant’s arguments in relation to fraud/fraudulent misrepresentation against the first and second defendants were entirely speculation and conjecture based on the incorrect results of a search of the BVI companies’ registry.

“More than this is required to establish fraud – there must be proof of fraud.

“In respect of the remainder of the claim, that is, whether the third defendant was fraudulently held out as being willing and able to perform the services it contracted to perform under the services agreement and whether the services agreement ought to be rescinded on the ground of fraud, this is a matter to be determined between the parties to the services agreement, that is, the claimant and the third defendant.”

Reid also held that OCT Enterprises was a limited liability company which had a separate legal personality.

“Piercing the corporate veil in order to attach personal liability to its directors is exceedingly rare. Any action in respect of the third defendant’s failure to perform the services under the services agreement will lie against the third defendant only and not its directors through whom it acted.

“In the circumstances, I find that the first and second defendants have established that the claimant’s claim against them has no realistic prospect of success.”

John Jeremie, SC, Timothy Affonso and Whitney Jacobs represent the THA while the three defendants are represented by Sophia Chote, SC, and Kijana De Silva.

In the campaigning ahead of the January 2021 THA election, now THA chief secretary Farley Augustine raised the issue, saying the former PNM administration had to answer to taxpayers on the failed project.

Augustine claimed a 2016 auditor general's statement expressed concern over the project, noting a visit to the stores section of the tourism division revealed only some ropes on hand.

"Imagine that we spent $2.5 million and the only thing the auditor general could find was some rope. Now that must be the most expensive piece of rope in the world,” he said then.