Rad­hi­ca Sookraj

A day af­ter fil­ing a 20-page pre-ac­tion pro­to­col let­ter against Gov­ern­ment on be­half of Cli­co pol­i­cy­hold­ers, at­tor­ney Ramesh Lawrence Ma­haraj made a call for all pol­i­cy­hold­ers to stand unit­ed.If they fail to unite, Ma­haraj said they could ei­ther lose their monies by al­low­ing Gov­ern­ment to tram­ple on their rights.Dur­ing a press con­fer­ence held at Paria Suites, La Ro­maine yes­ter­day, Ma­haraj met with the Unit­ed Cli­co Pol­i­cy­hold­ers Group and sup­plied mem­bers with a copy of the let­ter which was de­liv­ered to the Of­fice of the Prime Min­is­ter on Fri­day.Ma­haraj has giv­en Gov­ern­ment 21 days to re­spond to the let­ter or risk le­gal ac­tion on the grounds of un­fair­ness and frus­tra­tion of le­git­i­mate ex­pec­ta­tion, breach of con­sti­tu­tion­al rights to en­joy­ment of prop­er­ty, un­fair­ness and il­le­gal­i­ty aris­ing from un­equal and ar­bi­trary treat­ment and ir­ra­tional­i­ty and un­rea­son­able­ness.

Ma­haraj said he spent the last nine months col­lab­o­rat­ing with two Eng­lish Queens Coun­sel re­gard­ing the Cli­co mat­ter, which he said would be suc­cess­ful­ly won in court if the pol­i­cy­hold­ers were unit­ed in their fight."The lawyers will come to T&T to ap­pear be­fore the courts to get an in­ter­im or­der pend­ing the hear­ing and de­ter­mi­na­tion of the mat­ter to pre­serve the as­sets of Cli­co and CL Fi­nan­cial," Ma­haraj re­vealed.How­ev­er, he re­fused to di­vulge the names of the at­tor­neys. Ma­haraj said le­gal ac­tion was jus­ti­fi­able be­cause Gov­ern­ment had "killed the in­vest­ment cli­mate of T&T by killing Cli­co."

He con­tend­ed that while Prime Min­is­ter Kam­la Per­sad-Bisses­sar was at­tempt­ing to boost eco­nom­ic in­vest­ments by fly­ing to Brazil, her Gov­ern­ment had failed to un­der­take do­mes­tic poli­cies that would stim­u­late the econ­o­my."This pol­i­cy of the new Gov­ern­ment which re­neged on the clear and un­am­bigu­ous com­mit­ment giv­en by the pre­vi­ous Gov­ern­ment to guar­an­tee the fi­nan­cial safe­ty of the pol­i­cy­hold­ers has al­ready caused a loss of in­vestors con­fi­dence in the new Gov­ern­ment," Ma­haraj said.

He added that Gov­ern­ment's pol­i­cy had re­sult­ed in a loss of con­fi­dence in the fi­nan­cial sys­tem of T&T."The rip­ple ef­fect of this pol­i­cy there­fore is that for­eign gov­ern­ments and in­vestors do not trust the Gov­ern­ment. This pol­i­cy has re­sult­ed in the tor­ture and suf­fer­ing of pen­sion­ers, sin­gle-par­ent fam­i­lies, stu­dents, re­tirees, the sick and oth­er sec­tions of so­ci­ety," Ma­haraj said.He added that a range of de­tails were be­ing sought from Gov­ern­ment in­clud­ing full dis­clo­sures of all rel­e­vant in­for­ma­tion re­lat­ing to the as­sets, sale and re­ports con­cern­ing Cli­co.

THE IS­SUES

1. It is our con­tention that if a de­ci­sion were to be made to im­ple­ment the Dook­er­an plan it would be un­law­ful for the fol­low­ing rea­sons:

i. it would be con­trary to the pro­vi­sions of the In­sur­ance Act Chap­ter 84:01, be­cause:

(a) it would cause Cli­co not to make good, so far as pos­si­ble, the deficit in the Statu­to­ry Fund which it is still bound to main­tain for the equal ben­e­fit of all pol­i­cy­hold­ers (in­clud­ing EF­PA pol­i­cy­hold­ers); and (b) it would cause the Trustees of that fund, in breach of trust, to ap­ply it un­equal­ly, to the ben­e­fit of the tra­di­tion­al pol­i­cy­hold­ers and detri­ment of the EF­PA pol­i­cy­hold­ers.

ii it would frus­trate the le­git­i­mate ex­pec­ta­tions of the Claimants aris­ing out of the gov­ern­ment's re­peat­ed promis­es to all Cli­co pol­i­cy­hold­ers, to the ef­fect that:

(a) Cli­co's oblig­a­tions to all of them would be ho­n­oured and all their funds in it would be guar­an­teed by the gov­ern­ment;

(b) the statu­to­ry deficit would be made good; or at least

(c) all pol­i­cy­hold­ers would be treat­ed equal­ly.

iii it would amount to un­fair and un­equal treat­ment;

iv it would be ir­ra­tional.

2 Fur­ther, it would ap­pear that over the past two years, the gov­ern­ment, in the knowl­edge of the statu­to­ry deficit, has ad­vanced to Cli­co funds and as­sets amount­ing to $5 bil­lion ($1.9 bil­lion in the form of cash or re­pay­ment of loans, $3.1 bil­lion in the form of a trans­fer of in­ter­est-bear­ing gov­ern­ment bonds which pay Cli­co some $200 mil­lion per an­num in in­ter­est) with­out, it seems, re­quir­ing it to ap­ply these as­sets to mak­ing good the deficit in the Statu­to­ry Fund, but in­stead al­low­ing it to pay out cer­tain oth­er pol­i­cy­hold­ers in full.

This amount­ed to a breach of the Claimant's le­git­i­mate ex­pec­ta­tion that (save for cer­tain spe­cif­ic ex­cep­tions) the gov­ern­ment would re­quire Cli­co to ap­ply any funds or as­sets it ad­vanced to mak­ing good the statu­to­ry fund deficit in fur­ther­ance of its promise that all its oblig­a­tions to pol­i­cy­hold­ers would be met.This breach of le­git­i­mate ex­pec­ta­tion amount­ed to a breach of our clients' con­sti­tu­tion­al right to prop­er­ty pro­tect­ed by s.4(a) of the Con­sti­tu­tion which (un­less the promise is now made good) has caused them loss and dam­age for which they are en­ti­tled to con­sti­tu­tion­al re­lief.

3 We set out our ar­gu­ments in sup­port of this con­tention in more de­tail be­low, af­ter first set­ting out the his­to­ry of this mat­ter.

HIS­TO­RY

The Back­ground

4 Cli­co is a com­pa­ny reg­u­lat­ed by the In­sur­ance Act Chap­ter 84:01. The EF­PA was an in­sur­ance prod­uct of a type known as a de­ferred life an­nu­ity, falling with­in the de­f­i­n­i­tion of "or­di­nary long-term in­sur­ance busi­ness" in para­graph 1 of Sched­ule 1 of that Act. Suc­ces­sive ver­sions of the EF­PA were sold by Cli­co fol­low­ing their ap­proval for sale as in­sur­ance poli­cies by the Cen­tral Bank (or be­fore 2004, its pre­de­ces­sor the Of­fice of the Su­per­vi­sor of In­sur­ance) un­der sec­tion 119 of the Act.

5 The Act pro­vides for the es­tab­lish­ment of a Statu­to­ry Fund by each in­sur­ance com­pa­ny to cov­er its li­a­bil­i­ties to pol­i­cy­hold­ers. In re­spect of long-term in­sur­ance busi­ness, sec­tion 37(4) re­quires every com­pa­ny car­ry­ing on such busi­ness to place in trust in Trinidad and To­ba­go as­sets to match its li­a­bil­i­ty and con­tin­gency re­serves with re­spect to its Trinidad and To­ba­go pol­i­cy­hold­ers.

6 The In­sur­ance Act ap­points the Cen­tral Bank as the su­per­vi­sor and reg­u­la­tor of the in­sur­ance sec­tor. Un­der sec­tion 65, the Cen­tral Bank may in­ter­vene in the af­fairs of an in­sur­ance com­pa­ny.

7 The Cen­tral Bank al­so has pow­ers grant­ed to it by sec­tion 44D of the Cen­tral Bank Act Chap­ter 79:02 (as amend­ed by Act No. 4 of 2009) in cer­tain cir­cum­stances (among oth­er pow­ers) to take con­trol of and car­ry on the af­fairs and take over the prop­er­ty and un­der­tak­ings of fi­nan­cial in­sti­tu­tions, in­clud­ing in­sur­ance com­pa­nies, where it is of the opin­ion that the fi­nan­cial sys­tem of Trinidad and To­ba­go is in dan­ger.

The fi­nan­cial cri­sis in 2009

8 Cli­co is a sub­sidiary of the CL Fi­nan­cial Group, as is the British Amer­i­can In­sur­ance Com­pa­ny (BAICO). Cli­co and CL Fi­nan­cial both held shares in an­oth­er sub­sidiary, the Cli­co In­vest­ment Bank.

9 In Jan­u­ary 2009 the fi­nan­cial cri­sis led to a loss of con­fi­dence in and a run on the Cli­co In­vest­ment Bank, that is, a rush of de­pos­i­tors seek­ing to with­draw as­sets.

10 As a re­sult on 30th Jan­u­ary 2009, the Cen­tral Bank took con­trol of the Cli­co In­vest­ment Bank pur­suant to its pow­ers un­der sec­tion 44D of the Cen­tral Bank Act and on the same day, CL Fi­nan­cial and the gov­ern­ment came to an agree­ment set out in a Mem­o­ran­dum of Un­der­stand­ing ("the Mem­o­ran­dum") signed by Mr. Lawrence Duprey on be­half of CL Fi­nan­cial and Ms Karen Nunez-Tesheira, the then Fi­nance Min­is­ter, on be­half of the gov­ern­ment.

11 The Mem­o­ran­dum record­ed that CL Fi­nan­cial had asked for the gov­ern­ment's in­ter­ven­tion in the re­ha­bil­i­ta­tion of Cli­co In­vest­ment Bank, Cli­co and BAICO and that the par­ties had agreed steps to pro­tect the in­ter­ests of de­pos­i­tors, pol­i­cy­hold­ers and cred­i­tors of these in­sti­tu­tions. In par­tic­u­lar:

i CL Fi­nan­cial agreed (amongst oth­er things) to sell its share­hold­ings in a num­ber of iden­ti­fied com­pa­nies and to sell such oth­er as­sets as might be nec­es­sary, and to ap­ply the pro­ceeds (a) to cor­rect Cli­co In­vest­ment Bank's fi­nan­cial po­si­tion, and (b) to en­sure that Cli­co's and BAICO's statu­to­ry fund re­quire­ments were sat­is­fied.

ii The gov­ern­ment agreed to pro­vide col­lat­er­al­ized loan fi­nanc­ing to Cli­co and BAICO to meet any resid­ual statu­to­ry fund deficit which might still ex­ist af­ter this sale of CL Fi­nan­cial's share­hold­ings and as­sets.

12 On the same day, 30th Jan­u­ary 2009, the Min­is­ter of Fi­nance and the Gov­er­nor of the Cen­tral Bank, Mr. Ewart Williams, held a me­dia con­fer­ence to pub­li­cise these steps. The gov­ern­ment and Cen­tral Bank is­sued a joint me­dia re­lease on that date which in­clud­ed the fol­low­ing state­ments:

"The key el­e­ments of the agree­ment be­tween the Gov­ern­ment and CL Fi­nan­cial are as fol­lows:

3. CL Fi­nan­cial will sell, liq­ui­date or col­lat­er­al­ize its as­sets and al­lo­cate the pro­ceeds to meet­ing in full all the re­quire­ments of the Statu­to­ry Fund for both Cli­co and BAICO, there­by pro­tect­ing in full all its in­sur­ance and pen­sion fund clients.

4. The Gov­ern­ment will pro­vide fund­ing sup­port to ful­ly back Cli­co and BAICO to meet any Statu­to­ry Fund deficits that might emerge af­ter the com­pa­ny has made all pos­si­ble arrange­ments to place sat­is­fac­to­ry lev­els of cash and oth­er as­sets in­to the Statu­to­ry Fund ...

The Gov­ern­ment has tak­en these steps to as­sure the in­vest­ing pub­lic in Trinidad and To­ba­go, in­clud­ing de­pos­i­tors and pol­i­cy hold­ers of the af­fect­ed com­pa­nies of the safe­ty of their in­vest­ments and the re­quire­ments for sta­bil­i­ty and or­der in the mar­ket place."

13 The Fi­nance Min­is­ter's pub­lic re­marks to the me­dia con­fer­ence of the same date in­clud­ed the fol­low­ing state­ment:

"I wish to re­it­er­ate this Gov­ern­ment's com­mit­ment to en­sure that de­pos­i­tor's as­sets will not be at risk"

14 In news­pa­pers on the fol­low­ing day, 1st Feb­ru­ary 2009, the gov­ern­ment and Cen­tral Bank pub­lished in­for­ma­tion an­swer­ing ques­tions on "the gov­ern­ment's res­cue of CL Fi­nan­cial". It in­clud­ed the fol­low­ing ques­tion and an­swer:

"Q. I'm a proud Cli­co pol­i­cy­hold­er ... Cli­co in­sured my par­ents, now my wife and my­self ... what hap­pens to my pol­i­cy now?

A. Cli­co con­tin­ues to be a com­pa­ny of which we can feel proud – its achieve­ments are many. As the Min­is­ter of Fi­nance in­di­cat­ed in her state­ment: '... sub­stan­tial steps have been tak­en to pro­tect the de­pos­i­tors and oth­er li­a­bil­i­ty hold­ers of the group, es­pe­cial­ly life in­sur­ance clients and pen­sion fund ben­e­fi­cia­ries... I wish to re­it­er­ate this Gov­ern­ment's com­mit­ment to en­sure that de­pos­i­tors' as­sets will not be at risk.'"

15 On 2nd Feb­ru­ary 2009 the Min­is­ter of Fi­nance laid a copy of the Mem­o­ran­dum in Par­lia­ment and made a state­ment to the House of As­sem­bly on the ac­tions she had tak­en. She told the House that the statu­to­ry fund deficit "must be cor­rect­ed" and she went on to say, among oth­er things:

"As a first re­course, the Gov­ern­ment has opt­ed to ap­ply the pro­ceed­ings of the sales of the share­hold­ings of CL Fi­nan­cial and its af­fil­i­ates to fund out­stand­ing statu­to­ry fund oblig­a­tions. It would al­so en­sure that the group's as­sets are first used to meet its out­stand­ing oblig­a­tions."

16 On 4th Feb­ru­ary 2009, pur­suant to the Mem­o­ran­dum, the gov­ern­ment ap­point­ed a new board to run Cli­co and a new man­ag­ing di­rec­tor, Claude Mu­saib-Ali.

17 On the same day Act No. 4 of 2009 was passed, amend­ing the Cen­tral Bank Act to ex­tend the Cen­tral Bank's pow­ers un­der sec­tion 44D to take con­trol of in­sur­ance com­pa­nies.

18 On 13th Feb­ru­ary 2009 the Cen­tral Bank an­nounced that it was tak­ing con­trol of Cli­co and BAICO pur­suant to its new pow­ers un­der sec­tion 44D. The Gov­er­nor of the Cen­tral Bank's me­dia re­lease ex­plain­ing this step in­clud­ed the fol­low­ing state­ments:

"In­vo­ca­tion of these pow­ers is de­signed to achieve sev­er­al ob­jec­tives in­clud­ing

...

5. Pro­vid­ing a le­gal ba­sis for ad­vanc­ing the fund­ing to which the Gov­ern­ment is com­mit­ted in or­der to en­sure the pro­tec­tion of pol­i­cy­hold­ers of Cli­co....Ladies and gen­tle­man, the Govt and the Cen­tral Bank have un­der­tak­en a num­ber of steps, in­clud­ing to­day's ac­tions, to pro­tect pol­i­cy­hold­ers of Cli­co and BA, and to main­tain sta­bil­i­ty and con­fi­dence in the fi­nan­cial sys­tem.I am pleased to see that the steps we have tak­en so far have al­ready suc­ceed­ed in re­duc­ing the ini­tial con­cerns.There is a greater sta­bil­i­ty in the bank­ing sys­tem as a whole and cus­tomers of Cli­co, CINB and CMMB have shown tremen­dous ma­tu­ri­ty in re­spond­ing to the cur­rent fi­nan­cial sit­u­a­tion. There is still a con­sid­er­able way to go and I there­fore urge all mem­bers of the pub­lic to con­tin­ue to sup­port Cli­co and BA based on the com­mit­ments made by the Govt and the Cen­tral Bank."

19 On 15th Feb­ru­ary 2009 the new man­ag­ing di­rec­tor of Cli­co, Claude Mu­saib-Ali is­sued the fol­low­ing pub­lic state­ment:

"Cli­co [Trinidad] wish­es to as­sure all its Pol­i­cy­hold­ers and Clients that our nor­mal busi­ness op­er­a­tions will con­tin­ue.

Con­tin­ues to­mor­row