A legal battle over a failed hotel project has returned to court — with the future of a Hamilton car park at stake.

Mexico Infrastructure Finance LLC, the company that provided a loan for construction of the hotel, has asked the Supreme Court to uphold a mortgage on the Par-la-Ville car park on Par-la-Ville Road and Church Street.

The car park was used as collateral by the Corporation of Hamilton to guarantee the $18 million loan for the hotel — but the courts later ruled the guarantee was unenforceable.

MIF now want damages on the grounds that the guarantee and the mortgage are “legally separable and distinct”.

The company also asked the court to rule that the corporation should have to honour its agreement, that MIF would be entitled to sell the property and appoint a receiver, if PLV Ltd, the developer behind the hotel project, defaulted on its loan.

Both parties appeared in the Supreme Court in October when MIF applied to amend their writ against the municipality.

Puisne Judge Shade Subair Williams had presided over the case.

Mrs Justice Subair Williams said in a decision, dated January 16: “The plaintiff’s currently pleaded case comprises of a contractual claim for breach of the mortgage agreement, under which the defendant conveyed the car park to the plaintiff.

“On the proposed draft of the amended writ, the plaintiff seeks to add a claim of negligence for breach of duty of care.”

The amended claim also said that MIF sought “equitable title to the property” if the court finds that the mortgage was not legally valid.

Mark Diel, lawyer for the corporation, argued in the October hearing the court should refuse the amendments as they were “bad in law or on the undisputed facts”.

He also said the amendments should be cast aside as “irrelevant” and “useless”.

But Keith Robinson, lawyer for MIF, said that an analysis of the merits of the case should be saved for a strikeout application or the trial.

Mrs Justice Subair Williams ruled that the company could amend its writ.

She said: “The term ‘useless’, in my judgment, is applicable to pleadings which are non-coherent and are incapable of argument at any level of skilled advocacy.

“That is because a non-coherent pleading which is incapable of argument is of no use.

“With that said, I see no reason to characterise the negligence claim as irrelevant or useless. Wrong or not in substance, on its face, the pleading is legally coherent.”

The legal action is not the only one before the courts related to the failed hotel project.

The Supreme Court also refused an application to stay a case filed by Fidelity National Title Insurance Company against Trott & Duncan, a Bermuda-based law firm.

The insurance company has alleged that Trott & Duncan did not warn them the guarantee by the Corporation of Hamilton might not have been enforceable.

Trott & Duncan applied last October to have the case delayed until after the mortgage case between MIF and the Corporation was completed.

They argued that, if MIF was successful in its case against the municipality, the damages would be significantly less.

But Mrs Justice Subair, in a decision dated January 17, said the case could proceed. She said: “The mortgage action will not decide the question of liability in this cause. At best, the mortgage action might be decided in such a way so as to forcibly reduce the claim for quantum of loss.

Mrs Justice Subair added: “I see no good reason to prevent the plaintiff from prosecuting its claim on this basis.”

The Corporation of Hamilton signed an agreement in 2014 to guarantee a bridging loan from the company to Par-la-Ville Hotel and Residences Ltd, which planned to build a $350 million luxury hotel in the city.

PLV defaulted on the loan after the agreement was signed. The city at first accepted a consent judgment and began to arrange financing. The municipality later appealed the judgment on the basis that it was not empowered to issue the guarantee as it was not for a “municipal purpose”.

The legal battle went to the Privy Council in London, which found in January 2019 that the corporation had acted beyond its remit, which meant the guarantee was not valid.

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