A former business partner of a director of Cornerstone United Holdings Jamaica Limited (CUHJL) has filed a lawsuit against the company, its sister entity Cornerstone Financial Holdings Limited, and six of their directors over the ownership of more than 400,000 shares.

The lawsuit comes four months after Sagicor Investments Jamaica Limited (SIJL) filed a lawsuit in the Supreme Court of Barbados against CFHL and its directors seeking damages in excess of US$4 million in connection with two rights issues.

In the current suit, filed in the Jamaica Supreme Court, businessman Robert Smith is asking the court for a declaration that he is the beneficial owner of 425,000 ordinary shares in CUHJL and a similar number of shares in CFHL.

Smith is also seeking damages for alleged breach of trust and is claiming that the value of his shares were diluted after rights issues by Cornerstone in 2020 and 2021.

In his particulars of claim filed on April 4, 2022, Smith said that since 1997 he and James Godfrey — the first defendant — had invested in and/or operated several businesses in Jamaica, including S&G Road Surfacing Materials Limited, S&G Limestone Limited, The Quad Night Club, and PaveCon Paving & Construction Limited.

Smith said that in 2013 he was invited by Godfrey to invest and acquire shares in a venture that Godfrey described as “Commonwealth”. They agreed that they would each invest US$500,000 from funds they were each entitled to from S&G Road Surfacing Materials Limited, and that Godfrey would invest an additional US$500,000 of his own resources.

They also agreed that Godfrey would be the only legal shareholder in respect of the shares acquired by the total investment, as a convenience to both men.

According to Smith, Godfrey used the investment funds to purchase ordinary shares in Cornerstone Jamaica and Cornerstone Financial at US$1.00 each.

Smith said that on September 17, 2015, Godfrey was appointed a member of the board of directors of Cornerstone Jamaica, and since then he has continuously been a member of the board.

He said that on July 16, 2018 Cornerstone Jamaica allotted to Godfrey 210,000 ordinary shares in its capital, at a price of US$1.00 each.

In about 2015 or 2016, the relationship between both men became strained, and Smith proposed to Godfrey that they take steps to sever all business connections. At that time their business relations comprised S&G Road Surfacing, S&G Limestone, PaveCon Limited, and their investment in the Cornerstone companies.

Smith claimed that he had invited Godfrey and other shareholders of S&G Road Surfacing and PaveCon to purchase his shares in those two companies, which they did.

He said that starting in about 2018 he made verbal requests about the status of his interests in the venture Commonwealth. He also said he sought documentary acknowledgement of his beneficial ownership in shares in the Cornerstone companies and ultimately wanted to separate his shares from those of Godfrey in the companies.

However, according to Smith, Godfrey had alleged that he (Smith) had no interests in the Cornerstone companies and that Smith had “invested in him” and not the Cornerstone venture.

Smith then claimed that Godfrey had offered to return his US$500,000 investment within six months with simple interest at five per cent per annum.

Smith said he declined the offer and in January 2019 brought the dispute to the attention of other shareholders/directors in the Cornerstone companies by speaking with Paul Simpson and Mark Myers, whom he has named as the fourth and fifth defendants in his suit.

Smith also said he wrote a letter to Myers, “who at all material times was the chairman of the board of directors”, outlining his position with Godfrey and with what he (Smith) sought to achieve.

Smith said he then engaged an attorney who threatened legal action if the dispute was not resolved. That, he said, resulted in Godfrey acknowledging his ownership of shares in the Cornerstone companies, but demanded that Smith compensate him for his time and effort in the venture on Smith’s behalf.

In his claim, the businessman said that with the assistance of a mutual friend as informal mediator, they agreed that as compensation for Godfrey’s time and effort, Smith would renounce beneficial ownership of 75,000 of his 500,000 shares in each of the Cornerstone companies.

“Accordingly, the parties, each represented by counsel, documented this agreement by a declaration of trust and indemnity and a deed, both duly executed on 26th June 2019 by the parties,” Smith stated in his claim.

However, Smith has now accused Godfrey of a range of alleged breaches of duty and is asking the court for restitution for loss and damage. He is also seeking an account of the dividends properly accruing on the shares owned by Godfrey for the period 2019 to the date of judgement, and is asking for an independent valuation of “all the issued shares in the capital of Cornerstone United Holdings Jamaica Limited, and each of all the issued shares in the capital of Cornerstone Financial Holdings Limited”.

Since last Friday, repeated attempts by the Jamaica Observer, via phone and WhatsApp, to get a response from Godfrey were not successful. We have also been unable to determine whether the defendants have been served.

The other defendants named in the suit are Arnold Aiken, Nigel Chen See, and Hugh Coore.