In a 43-page written ruling yesterday, Chief Justice Ivor Archie and Justices of Appeal Rajendra Narine and Gregory Smith allowed the Attorney General’s appeal of Justice Joan Charles’ ruling in March of last year.
Charles had ruled the People’s Partnership (PP) Government failed to keep a promise made to the EFPA policyholders by the previous PNM administration that they would be paid the full amount due on their EFPAs.
Government was ordered to “make good” on the promise made to the EFPA policyholders and put in place suitable arrangements to ensure they received 100 percent of Clico’s contractual liability to them as well interest of three percent from September 2010 to March 12, 2013, as ordered by the judge.
The lawsuit, which was filed under the name the United Policyholders’ Group (UPG), Madan Singh, Basdeo and Sandra Rajkumar and Stacey Noelle Williams, challenged the decision of the Government to refuse to honour the promise made in 2009 for EFPA policyholders to be fully compensated for their policies.
In a statement yesterday, the UPG vowed to take their fight to the Judicial Committee of the Privy Council in London. The UPG was represented by a team of attorneys including Peter Knox QC, Ramesh Lawrence Maharaj SC, Peter Strand, Vijaya Maharaj, and Nyala Badal. The State was represented by Allan Newman QC, Russell Martineau SC, Kelvin Ramkissoon and Zelicia Haynes.
According to the group, promises made by the previous PNM administration amounted to a guarantee that policyholders would be paid sums that were held in the cash-strapped conglomerate.
The group also claimed Government’s plan was materially different from the initial offer in January 2009, during the Central Bank bailout of Clico.
They contended that to receive the principal balances on their policies over a period of 20 years was unlawful, arguing that they were entitled to get full payment on their policies.
The group of EFPA policyholders was among thousands who, in the original plan outlined by former finance minister Winston Dookeran, were told that they would be paid an initial sum of $75,000 and the balance would be paid over 20 years by issuing Government bonds with zero interest rate.
Dookeran’s plan was revised to pay those with investments of $75,000 or under the full value of their investments and a Clico Investment Fund was launched in November, of 2012, with trading for the units of those persons who exchanged their 11 to 20 year bonds for units beginning earlier 2013.
The assets underlying the Clico Investment Fund were the insurance company’s ownership of 51.8 million Republic Bank shares, which were transferred to Government and then to the fund. The policyholders were given the option of converting their 11 to 20 year zero-coupon bonds to the equivalent number of units in the fund at a one-to-one ratio. The policyholders who did not accept either option, chose instead to take their chances in the courts.
The State’s attorneys argued that to repay all Clico policyholders in full, would put a strain on the economy and have very significant impact on other areas of Government’s expenditure, but Charles found contrary to this submission, saying there was no evidence to support this contention. She said contrary to the submissions of its attorneys, the “Government did not take into account that it had made promises to the policyholders or that it was breaking them.”
Justice of Appeal Narine, who wrote the judgment, disagreed with the trial judge’s assessment of the evidence before her, saying it could hardly be said that the alleged promise made by the Government was clear and unambiguous.
“The premise on which the promise was given did not materialise. CLF (CL Financial) did not carry out its obligations to sell assets and place the proceeds into the statutory fund, so that the Government’s obligation to finance any deficit in the fund was not triggered. The result was that Clico remained insolvent and remained unable to fulfil its contractual obligations to its policyholders,” he pointed out.
He also noted there was no time stipulation attached to the Government’s guarantee of repayment given to policyholders nor was a specified time frame given.
“It must considered that the guarantee was given in the context of the deficit in the statutory fund being regularised and Clico becoming solvent and restructured as a going concern. These events never materialised,” he noted. According to Narine, the plan that was put into place envisaged a statutory fund that was not in deficit and a solvent company which was to be restructured and placed on a solid financial footing.
“It must also be emphasised that both the 2010 plan and the revised plan were entirely voluntary. An EFPA policyholder had the option of subscribing to the plan or holding on to his policy until such time as Clico achieved solvency. The 2010 plan and the revised plan simply provided the EFPA policyholder with the means of liquidating his investment at an earlier time at a discounted rate. It was open to the policyholder to cash in his policy or hold on to it if in his view it was not advantageous to him to accept the offer. Viewed in this way, it is difficult to see how the 2010 plan or the revised plan breached any legitimate expectation held by the policyholder,” he held.
Narine also noted that because CLF could not sell its shares in Republic Bank or Methanol Holdings, there were no proceeds of sale to be placed into the statutory fund and as such Clico’s parent body could not carry out its obligations under the Memorandum of Understanding signed between CLF’s former boss Lawrence Duprey, former finance minister Karen Nunez-Tesheira and the Central Bank in 2009, when the PNM government agreed to bail out the cash-strapped insurance giant.
Narine also noted that when considering the revised plan announced by the PP administration in 2010, and the other factors considered by Dookeran it was “clear that the balance is overwhelmingly in favour of the public interest.”
“In my view the Government has clearly established that there was an overriding public interest that they were compelled to satisfy in devising any solution to the financial crisis that confronted it,” he said, to which Archie and Smith agreed.
Narine further added that the factors considered by Dookeran in formulating the revised plan were macro-economic and macro political in nature, and the court will not intrude.
(See Page 9A)