Adam Stewart Loses Injunction Bid to Block Gorstew Board Meeting
The Supreme Court has rejected Sandals hotel boss Adam Stewart’s application for an injunction to block directors of Gorstew Limited, a company his late father owned, from meeting, to in part, remove him as executive chairman.
However, one of his attorneys, Conrad George, says the Court of Appeal has since issued an injunction while Adam pursues an appeal against Justice David Batts’ March 3 judgment.
“I find that the claimant (Adam Stewart) has not demonstrated that there is a serious issue to be tried such as to support his request for injunctive relief,” said Batts in his 16-page ruling.
The judge said Adam Stewart is only a director of Gorstew, and that a new umbrella company that his father Gordon ‘Butch’ Stewart instructed to be established to oversee Gorstew and other businesses has not yet been formed. Adam is to be the majority shareholder of that future entity.
“He (Adam) is at this time beneficially entitled to that shareholding in a company yet to be formed. This state of affairs is my primary reason for finding that this application cannot succeed,” Batts said.
Along with appealing the decision, Adam Stewart is pursuing an injunction to block the Gorstew directors from meeting.
A hearing on the injunction application involving all the parties is set for March 25 before Justice Jennifer Straw, according to the court’s case list published last week. The injunction was granted shortly after the Supreme Court’s decision was made without the defendants’ participation, which is allowed.
“We have filed a notice of appeal and we are confident of its success,” George told The Gleaner last Wednesday. “There is an injunction in place from the Court of Appeal holding the position pending the appeal.”
Adam Stewart applied for the injunction in the Supreme Court on December 16, 2024, as an interim measure to restrain his brother Robert ‘Bobby’ Stewart, Dmitri Singh, Elizabeth Desnoes, and Laurence McDonald from proceeding with a Gorstew board meeting that was set for December 18.
Independent directors
According to the Batts judgment, Adam Stewart does not want the meeting to go ahead unless three independent directors are appointed or until a related lawsuit he also filed on December 16, has been tried.
In that lawsuit, Adam Stewart is seeking a court declaration that any attempt to remove him as executive chairman is oppressive, unfairly prejudicial, or an unfair disregard for his rights as a director, officer, and majority shareholder.
The injunction application was opposed, and an oral hearing was held on February 14. Batts noted that the application was not a trial and that he did not make any findings of fact.
The dispute, one of many since ‘Butch’ Stewart’s death in January 2021, stems from how his May 2020 will is to be administered to give effect to his wishes, including how his companies are to be organised after his death.
‘Butch’ Stewart indicated in his will that most of his companies were to be placed under a new umbrella company, which has yet to be formed. Gorstew, which he wholly owned and chaired, is one of the companies that would fall under the new entity.
‘Butch’ Stewart stated in his will that the ‘ATL Group’ would include Gorstew and its subsidiaries, as well as other businesses such as Appliance Traders Limited, the Jamaica Observer newspaper, the ATL motor vehicle businesses, the AC Marriott Hotel, and any other business outside the Sandals & Beaches Group, the Unique and HPI group. Sandals is led through a Bahamas-based trust.
Responsibility to implement
Under the future umbrella company, ‘Butch’ Stewart allocated a 52 per cent stake to Adam Stewart, 24 per cent to Bobby Stewart, and 24 per cent to Gordon Stewart, his son with his American common-law wife, Cheryl Hammersmith-Stewart.
The judge said the executors and trustees of ‘Butch’ Stewart’s estate “have a responsibility to implement his wishes and, in doing so, must identify and call in the assets, ensure they are duly protected, and undertake the process of distribution in accordance with the testator’s (Butch’s) instructions”.
However, Batts said Adam Stewart “is not yet the registered holder of the 52 per cent of the ‘ATL Group’ primarily because, as is apparent from the terms of the will, that entity does not yet exist.”
Batts further argued that Section 213A of the Companies Act – the “oppression remedy” under which Adam Stewart has brought his lawsuit –”speaks to things actually done and does not speak to future conduct. There is no remedy where proposed conduct is ‘likely to have an effect’”.
The judge also said Adam Stewart cannot claim relief as a shareholder since he has no shareholding in Gorstew.
“Similarly, he cannot claim as a shareholder of a company not yet in existence but in respect of which he expects to receive a majority of shares.”
Adam Stewart’s attorneys argued that Gorstew was the “effective holding company for the ATL Group” and should be treated as the owner of the 52 per cent stake since his father’s death.
However, the judge stated that the law is “clear” that it is the executor who represents a deceased shareholder and that Adam Stewart has no locus standi, or right to bring the claim as a shareholder.
He said Adam Stewart’s only right, based on the case facts, relates to his position as a director of Gorstew. “It means that any alleged relief to which he is entitled must concern disadvantages in his capacity as a director.”
Prior conduct, prior statements
Batts acknowledged that Adam Stewart has presented evidence “of the defendants’ prior conduct, prior statements, and other litigation, which suggests that the purpose of the agenda is to injure him”. However, he said, even if those assertions are accepted, “there is no evidence that the claimant will be impacted in his capacity as a director”.
Adam Stewart was invited to the December 18, 2024, meeting, which was called by his brother Bobby Stewart, who has sided with Hammersmith-Stewart and her three children with ‘Butch’ Stewart, in their lawsuits against Adam Stewart and two other siblings – Jaime Stewart and Brian Jardim – from ‘Butch Stewart’s Jamaican family.
A copy of the agenda included in Batts’ ruling lists six major items under “matters to be discussed”. They are Adam Stewart’s purported unauthorised use of the title “executive chairman” of Gorstew; a directive for him to stop using it; a directive for him to cease to exercise executive powers over the company; the appointment of a chairman, whom Adam Stewart believes will not be him; the addition of director Paul Soutter; and the formation of an audit committee.
Also on the agenda were a review of Gorstew’s management and the reorganisation of the Jamaica Observer board “to prevent [the] newspaper from being used as an instrument to attack and besmirch the character of persons on behalf of Adam Stewart, Jaime Stewart, and Brian Stewart”. Gorstew is the principal shareholder in Jamaica Observer Limited.
Aligned to the faction
Adam Stewart claimed that Soutter is “aligned to the faction which is against him,” the court ruling noted.
However, the judge maintained that except for the proposal to appoint Soutter, “none of the other agenda items directly impact the claimant (Adam) in his capacity as a director”.
Batts acknowledged that a new director may affect Adam Stewart by altering the balance of voting rights on Gorstew’s board, but he said that view is “somewhat speculative” unless there is evidence that the appointee will reflect positions hostile to Adam Stewart. “I do not think the evidence at this stage demonstrates that,” he concluded.
In case he was wrong in ruling that there were no serious issues to be tried rejecting the injunction application, Batts went on to assess whether damages would be an adequate remedy and whether the defendants were adequately protected.
Adam Stewart had argued that damages – monetary compensation awarded by a court to a party who has suffered harm or loss – were unavailable to him under the section of the law he is using to mount his challenge.
Batts disagreed, pointing out that Section 213A of the Companies Act allows for compensation to an aggrieved person, though he noted that “any loss will be difficult, if not impossible, to assess”.
Adam Stewart argued that his position as chairman of Gorstew is integral to the continuation of certain contracts and business arrangements and that the company “will suffer gravely if he is removed”.
However, the defendants countered that the contracts and arrangements are with subsidiary companies, not Gorstew, and that Adam Stewart’s removal as chairman would not negatively impact the company.
Unrealistic approach
The judge said that was an “unrealistic approach” as, given Adam Stewart’s “present stature and the nature of the corporate enterprise, the claimant’s removal… is very likely to resonate within and among the group”.
However, he noted that “given the grave allegations” made by some defendants about Gorstew’s current operations, an injunction blocking them from dealing with the company “could similarly have devastating and incalculable consequences.”
“It is clear to me that an award of damages may not be adequate to compensate either the claimant or defendants in the event either succeeds at trial,” Batts said, adding that the court had to “balance the inconvenience” to decide the matter.
On that, Batts said Adam Stewart’s case was “anticipatory,” as the Gorstew directors had not yet met, and Adam Stewart was asking the court “to restrain the calling of a meeting and the implementation of agenda items by a board charged with statutory and fiduciary responsibilities”.
“The justice of the case demands that the board of directors ought to be allowed to carry out the responsibilities entrusted to them by the testator and by law,” Batts ruled.
Batts rejected a request by King’s Counsel (KC) Denise Kitson to use his decision on the injunction application to end Adam Stewart’s lawsuit by determining which party was more likely to succeed at trial.
Batts said the questions in Adam Stewart’s lawsuit remain to be decided, regardless of the injunction outcome. The first hearing in that lawsuit is set for April 10.
Adam Stewart was represented by KCs Walter Scott and Ian Wilkinson, along with attorneys Conrad George, Lenroy Stewart, and Gabrielle Chin.
Several lawyers represented the defendants.
Bobby Stewart was represented by Symone Mayhew KC and Aaliyah Myrie. Michael Hylton KC, along with Kevin Powell and Timera Mason, appeared for Singh. Desnoes was represented by KC Daniella Gentles and attorneys Kathryn Williams and Stephen Nelson.