THE ATTORNEY GENERAL OF TRINIDAD AND TOBAGO THE UNITED POLICYHOLDERS GROUP MADAN...

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TRINIDAD AND TOBAGO

IN THE COURT OF APPEAL

Civil Appeal No: 82 of 2013 Claim No: CV2011- 04702

BETWEEN

THE ATTORNEY GENERAL OF TRINIDAD AND TOBAGO Appellant

AND

THE UNITED POLICYHOLDERS GROUP

MADAN SINGH BASDEO RAJKUMAR SANDRA RAJKUMAR

STACEY NOELLE WILLIAMS Respondents

***************

PANEL:

I. ARCHIE C.J.

R. NARINE J. A.

G. SMITH J. A.

Appearances: Mr. A. Newman Q.C., Mr. R. Martineau S.C., Ms. E. Donaldson-

Honeywell S.C, Prof. S. Juss, Mr. K. Ramkissoon instructed by Ms. Z. Haynes and Ms. P. Alexander for the Appellant.

Mr. P. Knox Q.C., Mr. R.L. Maharaj S.C. and Ms. N. Badal instructed by Ms. V. Maharaj for the Respondents.

Date Delivered: 23rd June, 2014.

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I have read the judgment of Narine J.A. and agree with it.

I. Archie

Chief Justice.

I too, agree.

G. Smith

Justice of Appeal.

JUDGMENT Delivered by Narine, J.A.

1. This matter arises out of the collapse of the CL Financial Group of Companies

(C.L.F.) in January 2009. CLF is the parent company of a group which owned or

controlled over thirty companies and subsidiaries located in the Caribbean, the United

States of America, Europe and the Middle East. The group included companies

engaged in a wide range of business activities including banking and financial services,

manufacturing, trading, retail distribution, general and life insurance, forestry and

agriculture, real estate, energy and petrochemicals, marine services, media and

communication. CLF was the largest private conglomerate in Trinidad and Tobago.

2. Colonial Life (Trinidad) Limited (CLICO) was a member of the group engaged in

the business of life insurance, pensions, health insurance and short term investment

products, which included Executive Flexible Premiums Annuities (EFPAs), which

offered high annual returns of 10% or more.

3. Following the collapse of CLF, the group approached the Government of Trinidad

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and Tobago for financial assistance. On 30th January 2009 a Memorandum of

Understanding (MOU) was reached, setting out the terms and conditions under which

the government would provide financial assistance to the group.

4. In the months that followed certain public officials, including the Governor of the

Central Bank and the Minister of Finance made public statements about the terms and

conditions under which the government intended to assist the group. The respondents,

who are EFPA holders contend in this case that these public statements and the MOU

itself, gave rise to certain legitimate expectations, inter alia, that the government would

guarantee payment of all monies due to them on their investments.

5. In May 2010, there was a change of government in Trinidad and Tobago. In

September, 2010, the new administration proposed a plan to pay off EFPA

policyholders by an initial payment of $75,000.00 and the balance by a government IOU

amortised over twenty years at zero interest (the 2010 Plan).

6. In September 2011, the government announced a revised plan under which the

EFPA holders would be issued 20 year bonds for the balances outstanding. Over the

first ten years, the bonds would be discounted at a rate of 20%. Over the ensuing 11 to

20 years, the bonds could be exchanged for units in a new entity to be known as

National Enterprises Limited 2 (NELL 2). Under this revised plan, the government

estimated that the EFPA policyholders would receive 92 cents on the dollar for their

investments. The 2010 plan and the revised plan were entirely voluntary. It was open

to EFPA holders to accept the offer, or hold on to their investments.

7. By an amended fixed date claim form filed on 22nd November, 2012 the

respondents sought judicial review of a decision of the government of Trinidad and

Tobago (the Government) to proceed with the revised plan.

8. The respondents further claimed, inter alia, a declaration that all EFPA

policyholders in Trinidad and Tobago are the beneficiaries of legitimate expectations

engendered by representations made to them by or on behalf of the government:

(a) that the government would ensure that their funds in CLICO would be

safe and that it would guarantee repayment of all monies due to them.

(b) that the government would make good the deficit in the statutory fund,

(c) that the government would treat all policy holders equally.

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9. The respondents further sought a declaration that to implement the CLICO plan

would be unfair and unlawful unless the government makes suitable arrangements

(whether by guarantee from itself or a bank) to ensure that, within a reasonable time, it

will in fact yield to the respondents as promised, a sum equal to 100% of CLICO’s

contractual liability including interest.

10. Having heard full legal submissions from both sides, and having considered the

evidence before her, the trial judge held that the respondents were the beneficiaries of

legitimate expectations engendered by representations made to them by or on behalf of

the government that:

(i) the government would ensure that their funds in CLICO would be safe

and that it would guarantee repayment of all monies due to them, and

(ii) the government would make good the deficit in the statutory fund.

The trial judge made declarations accordingly, and ordered the government to

make “suitable arrangements” to ensure that the respondents receive a sum equal to

100% of CLICO’s contractual liability to them.

THE FACTS:

11. The facts of this matter are largely undisputed. By letter dated 13th January

2009, Mr. Lawrence Duprey, then chairman of CLF, wrote to the Governor of the

Central Bank of Trinidad and Tobago (CBTT) requesting CBTT’ s assistance in

providing temporary liquidity support for CLF, which he said was experiencing

temporary liquidity challenges due to the adverse effects of the global financial crisis.

12. Mr. Ewart Williams the Governor of CBTT brought this letter to the attention of

the then Minister of Finance (Ms. Karen Nunez-Tesheira). There followed several

meetings between officials of CLF, the CBTT, the Ministry of Finance and the Inspector

of Financial Institutions. The then Prime Minister, Mr. Patrick Manning was informed of

continuing developments, and became involved in discussions.

13. On 24th January 2009 the Governor of CBTT and the Minister of Finance held a

meeting with the Prime Minister at his official residence to appraise him of the latest

developments. The Governor explained that the situation at CLICO Investment Bank

(CIB) another member of the CLF group and CLICO posed a systemic risk to the

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financial sector and advised that the government needed to act urgently and decisively,

in order to resolve the liquidity problems at CIB and CLICO due to a substantial

increase in the rate of withdrawals in these institutions. The Governor further advised

that there was a very real risk to the stability of the financial sector and the economy

should there be a run at CIB and CLICO.

14. As explained by Ms. Nunez-Teshira in paragraph 28 of her affidavit filed on 30th

July 2012 the government and the CBTT had to intervene for the following reasons:

“(a) Key companies in the CLF Group, namely CLICO, CIB and British

American Insurance Company Ltd. (BA) were experiencing serious

solvency issues with assets of the companies within the group

being too encumbered to meet liquidity needs, and deficits in

CLICO’s, CIB’s and BA’s respective Statutory Funds being in the

order of several billions of dollars.

(b) Those solvency issues created a real potential for systemic risk to

the financial system given that the CLF group owned assets

reportedly worth in the vicinity of TT$101 billion, which was the

equivalent of 76% of Gross Domestic Product (GDP), of which 43%

was owned by companies in the group that operated in the

financial sector.

(c) Among those companies was Republic Bank Limited (RBL), whose

stability could have been threatened by insolvency within the

group, news of which could have triggered a run on the bank.

(d) The risk to the financial system was heightened by the tremendous

exposure of other key institutions in the country such as First

Citizens Bank Limited (“FCB”), Unit Trust Limited (UTC), National

Insurance Board (NIB) and National Gas Company (NGC).”

15. On 30th January 2009, a MOU was concluded between the Minister of Finance

on behalf of the government of Trinidad and Tobago and CLF, for itself and as agents

for CLICO, CIB and BA. The relevant provisions of the MOU are:

“1. CLF agrees to take steps to correct the financial condition

of CIB, CLICO and BA by:

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a. Selling all of its shareholdings in Republic Bank

Limited (RBL);

b. Selling all if its shareholdings in Methanol

Holdings (Trinidad) Limited (MHTL);

c. Selling all of its shareholdings in Caribbean

Money Market Brokers Limited (CMMB); and

d. Selling all or any of their other assets as may be

required to achieve the said correction.

The proceeds of the sale of assets referred to in

clause (a), (b), (c) and (d) above will be applied to

satisfy the Statutory Fund requirement of CLICO

and BA under the Insurance Act, 1980 and the

balancing of the third party assets and liabilities

portfolio of CIB.

2. In the event that there is a shortfall after the application of

the proceeds realized from the sale of the assets set out in

clause 1(a),(b),(c) and (d) above, CLF warrants and

undertakes to provide collateral which may include a

secured charge on the fixed and floating assets of CLF,

CLICO and BA sufficient to secure any financial assistance

to be provided by the Government of Trinidad and Tobago

(GORTT) in respect to that shortfall for the purpose of

maintaining public confidence and stability in the financial

system.

. . . . . . . . . .

10. CLF shall establish and make full and true disclosure to

GORTT regarding the Statutory Fund position of CLICO

and BA based on the valuation and admissibility

requirements of the Insurance Act, 1980 for the year ended

December31, 2008.

11. For the discharge of its obligations herein in respect of

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CLICO, CLF, will sell, dispose of or collateralize the

following assets as required to ensure that the Statutory

Fund requirements for CLICO and BA are satisfied:

a. Shareholding in RBL owned by CLF and the

other members of the CLF group of companies

and not required for the discharge of the

obligations at clause 6 above:

b. Shareholding in MHTL owned by CLF and all

other members of the CLF group of companies,

to GORTT with an option for CLF to repurchase

on terms to be agreed; and

c. Other assets of the CLF group of companies, of

such quality and value as agreed to by the

GORTT and as may be required,

e. and CLF shall provide the relevant Board

resolutions as specified in clause 19 in relation

to such sales.

12. The GORTT agrees to provide collateralized loan financing

to CLICO and BA to meet any residual Statutory Fund

deficit, as confirmed by the Central Bank, which may arise

after the discharge of the obligation at clause 11 above.

. . . . . . . . . .

19. During the course of this Memorandum CLF (including all

agency parties) shall issue to GORTT (through the Minister

of Finance) detailed monthly progress reports (report(s))

which shall highlight the progress of the disposal of the

assets. Upon receipt of these reports the GORTT may and

has the explicit power to make request for further and other

information or to issue such other directives or

requirements in furtherance of the purposes of this

Memorandum of Understanding. In the interest of clarity

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these reports are due by the 25th day of each month and if

the 25th day falls on a Saturday, Sunday or public holiday

these reports are due on the first working day following”.

16. On the same day, CBTT took control of CIB pursuant to its powers under section

44D of the Central Bank Act Chapter 79:02.

17. On the same day, the Minister of Finance issued a statement to the media, at a

press conference in the presence of the Governor of CBTT and Mr. Duprey. In the

release, the Minister indicated that the situation might require an infusion of liquidity and

additional measures for the purpose of protecting the depositors, life insurance

policyholders and pension fund beneficiaries. She further indicated that the government

supported the intended action of the CBTT which would permit an orderly restructuring

of the institutions and safeguard the interests of citizens who are depositors, insurance

clients and pension fund members. In closing she reiterated “this government’s

commitment to ensure that depositors assets will not be at risk”.

18. On 2nd February 2009, the Finance Minister laid the MOU in Parliament. During

the course of her contribution she made the following statements:

“The terms of the Memorandum of Understanding require

that CL Financial dispose of its shareholding in Republic

Bank Limited, Methanol Holdings (Trinidad) Limited,

Caribbean Money Market Brokers Limited and all or any

other asset to meet the statutory fund obligations of CL

Financial affiliates.

. . . . . . . . . .

With respect to CLICO and British American Insurance, the

strategy takes into account first and foremost, the

protection of depositors and policyholders to ensure that

the integrity, stability and confidence in the institution

remain intact.

. . . . . . . . . .

At present the statutory fund is in deficit. By this I mean

that this fund, which under the Insurance Act must be

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established to meet the obligations falling due to

policyholders, cannot now meet these obligations and this

must be corrected.

. . . . . . . . . .

Further, the government, through the Corporation Sole will

acquire CL Financial shareholdings in the Methanol

Holding (Trinidad) Limited, the net proceeds of which will

be deposited into the statutory fund of the institutions.

. . . . . . . . . .

It is only after these arrangements are exhausted that

government will provide funding support to meet any

remaining deficit to cover medium and long term liabilities

by CLICO and British American in the statutory fund . . . As

a first recourse, the government has opted to apply the

proceeds of the sales of the shareholdings of CL Financial

and its affiliates to fund outstanding fund obligations. It

would also ensure that the Group’s assets are first used to

meet its outstanding obligation.

. . . . . . . . . .

The government believes that the actions it has taken will

permit an orderly restructuring of the institutions and

safeguard the interest of our citizens who are depositors,

insurance clients and pension fund members.

To you citizens of Trinidad and Tobago, many of whom

may have financial ties of one kind or another, to a greater

or lesser degree with the CL Financial companies, I want to

assure you that this intervention was necessary and timely.

It was taken to protect our financial system, to ensure that

it remains healthy, and that we can all both in the private

and public sector, individuals and companies alike depend

on those systems which are essential to our future

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prosperity”.

19. On 6th February, 2009 Act No. 4 of 2009 was passed amending the Central

Bank Act, and extending CBTT’s powers under section 44 D to insurance companies.

20. On 13th February 2009, CBTT announced that it was taking control of CLICO. In

a media address on the same day, the Governor of CBTT remarked that the

government and the CBTT had taken steps, including taking control of CLICO “to

protect policyholders of CLICO and BA and to maintain stability and confidence in the

financial system”. The Governor also indicated that the Cabinet had approved a first

tranche of a funding package to ease the liquidity pressures on CLICO and BA, and that

the focus in the first round would be on meeting policyholders’ liabilities and payments

to pensioners. He added that these steps should convince policyholders that CLICO

had the full backing of the government and the CBTT. Policyholders should feel

confident that their funds are protected and this should encourage the maximum roll-

over of policyholders’ funds. In order to facilitate an orderly recovery of CLICO, he

urged policyholders not to seek withdrawals before their maturity dates.

21. On 15th February 2009, CLICO placed full page advertisements in the

newspapers, under the signature of its Managing Director assuring policyholders and

clients that normal business operations would continue, that CLICO would honour all

terms and conditions of existing policies and that all policyholder funds were guaranteed

by the government and CBTT.

22. On 12th June 2009 the Ministry of Finance issued a press release in which it

announced that the Acting Minister of Finance Mr. Conrad Enill had signed an

agreement with the directors and shareholders of CLF, under which four (4) directors of

CLF were to be nominated by the government and three (3) directors by CLF

shareholders. The release further stated that the purpose of the agreement was to

place management and control of the assets of CLF in the hands of the new board with

a view to:

a. correcting the financial position of CLICO, BA and CIB.

b. protecting the interests of policyholders of CLICO and BA, and the depositors

of CIB.

c. ensuring that the debts of the CLF group were properly managed.

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d. repaying sums expended by the government in furtherance of (a) and (b).

The release further noted that the MOU imposed requirements on CLF to sell its

assets in order to pay the government for advances and costs incurred in the closure of

CIB and the restructuring of CLICO and BA, which required “continuing goodwill,

cooperation and participation of CLF over a period of several years since there is no

intention of engaging in a fire sale of CLF assets”.

23. On 19th June 2009, the CBTT issued a press statement in which it stated inter

alia:

“As regulator of the financial sector we wish to assure the

public that:

The Government of Trinidad and Tobago has committed to

meet obligations of Trinidad and Tobago third party

policyholders of Colonial Life Insurance Company

(Trinidad) Limited, (CLICO), consistent with the

Memorandum of Understanding between the Government

of Trinidad and Tobago and CL Financial.

. . . . . . . . . .

In summary, we are committed to a transformed and

vibrant CLICO in which existing and future policyholder

funds are safe”.

24. On 24th June 2009, an opposition member of Parliament Mr. R.L. Maharaj SC

(who appears in this matter for the respondents) sought clarification of the phrase

“Trinidad and Tobago third party policyholders” contained in the media release issued

by CBTT on 19th June, 2009. In response the Minister of Finance, Ms. Nunez-Tesheira,

referred to s. 37(4) of the Insurance Act Chapter 84:01 which requires an insurance

company carrying on long term business to maintain a statutory fund in which it must

“place in trust in Trinidad and Tobago assets equal to its liability and contingency

reserves with respect to its Trinidad and Tobago policyholders . . .” The Minister went

on to state:

“However, the government . . . is committed to

restructuring CL Financial as a going concern to ensure

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that if investments are realized and all those persons

including the creditors, shareholders and all those other

persons are not left wanting, they, at the end of the day will

get back even and recoup all of their losses or potential

losses, but to guarantee (sic) is not a guarantee to them.

We guarantee the policyholders and residents of this

country, that is our guarantee, but we are committed to

seeing that CLICO becomes a going concern because we

want to ensure that the moneys that the taxpayers have

invested are recouped, and in so doing the persons to

whom you spoke will therefore benefit because that will be

part of the whole exercise of solvency for CLICO and CL

Financial”.

25. On 13th January 2010, the Business Express, carried an interview with the

Finance Minister which it published under the caption “Finance Minister tells CLICO

policyholders to have patience”. During the course of the interview certain statements

were attributed to her inter alia:

“I just want to say that the government has given the

guarantee and we do recognize that had the government

not done that, the question of when you would get it would

be a very moot point because it would not have been a

“when” situation . . . It just simply would have been a

private company that would have gone under . . .

. . . . . . . . . .

I would say everyone would get their money but in the

context of the enormity of the situation and the fact that it

will affect us all. It is just not those who invested. If you

do not contain it, it can have a contagion effect for (sic)the

whole economy. What it requires is the confidence of the

people of Trinidad and Tobago and the patience and

understanding that it is a national issue . . . It will require

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patience”.

26. In May 2010, there was a change of Government in Trinidad and Tobago. In

June 2010, the government decided to set up a Select Committee to provide

recommendations on the way forward. The committee comprised persons who

possessed considerable expertise and experience in the fields of banking and finance,

economics, trade and accounting. On 29th July 2010, the Select Committee advised

that the government had three options:

1. No additional funding and liquidation based on the currently available assets.

2. Full funding of the asset shortfall and repayment based on contractual terms.

3. Initial partial payments and deferral of remaining liability for repayment over a

longer term.

27. The government considered all three options, and decided to implement option

three. On 8th September 2010, the new Finance Minister in his maiden budget speech

outlined the government’s plan for dealing with the CLICO issue. The government

proposed:

1. To separate the insurance business from short term investment and mutual

fund business in order to protect the holders of traditional policies. The

obligation to 225,000 traditional policy holders would be honoured, backed by

the Statutory Fund.

2. To make an initial partial payment to EFPA policyholders to a maximum of

$75,000.00 (TT) and

3. To pay the remaining balances of EFPA policyholders via a government IOU

amortised over 20 years at zero interest.

28. On 14th September 2011, the Finance Minister announced a revised plan in

Parliament. The first two elements of the 2010 plan were retained. However, the

payment of balances to EFPA holders in excess of $75,000.00 was enhanced. It was

proposed that the 20 year bonds could be discounted during the first 10 years at an

expected discounting rate of 80%. Bonds with a maturity of 11 to 20 years could be

exchanged for shares in a new entity to be named National Enterprises Limited 2, at a

rate expected to yield 92 cents on the dollar, which was a significant increase over the

67 cents on the dollar contemplated under the 2010 Plan. The respondents contend

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that the rate of return works out to be considerably less that the estimated 92 cents on

the dollar. Curiously though, the respondents did not seek judicial review of the 2010

Plan. Instead they have sought to challenge the implementation of the revised plan

announced in September 2011, which was expected to yield a significantly enhanced

rate of return on their investments.

GROUNDS OF APPEAL:

29. The appellant filed 21 grounds of appeal. The major grounds of complaint were:

1. The finding of fact and the declaration granted cannot be justified having

regard to the weight of the evidence and the circumstances of the case.

2. The judge was wholly wrong in finding that there was a legitimate expectation

that the government would make good the deficit in CLICO’s statutory fund,

that CLICO would be returned to stability and would be in a position to fulfil

all its obligations. There was no such promise which was clear and

unambiguous and devoid of relevant qualification. The promise to make

good the deficit in the statutory fund was premised on a material qualification

that proceeds of sale of certain assets referred to in the MOU would be first

applied to satisfy the requirements of the statutory fund and was given only to

resident policyholders.

3. The judge was wholly wrong in her findings that there was a legitimate

expectation that the respondents’ assets would be protected and funds

guaranteed. The promise of the government was to take steps to protect the

interest of policyholders consistent with the MOU, and was given only to

resident policyholders. It was also on condition that CLICO be given time to

take the steps proposed by the government and CBTT and for CLICO to

return to a position of solvency. The promise was not clear and

unambiguous.

4. The judge was wrong in making a declaration that the government would

make good the deficit in the Statutory Fund and in ordering that the appellant

make good the legitimate expectation by making arrangements to ensure that

the respondents receive 100% of CLICO’s contractual liability to them. Not

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only was there no clear unambiguous promise devoid of qualification to give

rise to such an expectation, but there was no given by the government that it

would ensure that the respondents received 100% of such liability on or

before the date of the judgment. In addition, the order was detrimental to

good administration.

5. The judge was wrong in finding that the appellant had failed to show that it

took into account that the government had made promises that it was

breaking them and that it had given the promises due weight before resiling

from them.

6. The judge was wrong in finding that none of the options considered by the

government involved making good the deficit in the Statutory Fund.

7. The judge was wrong in finding that the appellant had breached the

legitimate expectation of the respondents.

8. The judge was wrong in holding that there was no overriding public interest to

justify the alleged breach of the legitimate expectation.

9. The judge was wrong in finding that in order to fulfil the legitimate expectation

of the respondents it was open to the Minister to amend the Second

Schedule of the Insurance Act so as to include assets not currently

permitted in the fund, or to explain the overriding public interest which

prevented the government from so doing.

10. The judge was wrong in holding that the appellant had failed to show, even in

relation to 2010, that there was a material change in circumstances between

the making of the promise, and the decision to resile from it.

11. The judge was wholly wrong in holding that this matter did not lie within the

macro-economic/political field, and that she should not defer to the

government’s decision.

12. The learned judge was wrong in granting the relief which she did because of

the delay in the respondents’ commencing the judicial review proceedings.

30. On 8th May 2013 the respondents filed an Amended Counter-Notice, asking the

court to uphold the judge’s decision on additional grounds upon which she had declined

to rule, namely:

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1. That the revised plan was unlawful and irrational.

2. That the judge should have held that there was no sufficient public interest to

override the respondents’ legitimate expectations because the market value

of the assets in CLICO’s statutory fund as at September 2011 and at all

material times thereafter was sufficient to meet its liabilities to resident

policyholders, and so the government would not sustain any material loss if it

honoured the expectation by buying out the respondent’s rights against the

fund at full value.

3. The judge should have held that the respondents had made out their case

that they had the legitimate expectations that she found, not only because

this was conceded by the appellant, but also because they were established

by the evidence.

THE ISSUES:

31. We have had the benefit of both oral and written submissions which were quite

elaborate and thorough. There is little value in rehearsing them at this stage. They will

be set out and examined as they arise. Suffice it to say that having considered the

submissions, the broad issues that fall for determination in this appeal are as follows:

1. Were the statements in question capable of engendering legitimate

expectations in the respondent?

2. If so, was there a breach of these legitimate expectations?

3. If there was a breach, was there a sufficient overriding public interest which

justified the breach?

4. In any event, did the decision involve matters of a macro-economic or macro-

political nature, in which case the court should have accorded due deference

to the decision-maker?

5. Was the revised plan unlawful or irrational?

ISSUE 1 – The Statements

32. The first statement to be considered is the MOU, which embodies an agreement

concluded between the Minister of Finance, (acting on behalf of the government of

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Trinidad and Tobago) and CLF acting for itself and as agent for its affiliates including

CLICO, CIB and BA). The respondents were not a party to the agreement.

33. Under the MOU, CLF agreed to sell its shareholdings in Republic Bank Limited

(RBL) Methanol Holdings (Trinidad) Limited (MHTL) and Caribbean Money Market

Bookers Limited (CMMB), and any of their other assets as may be required and to place

the proceeds of sale into the statutory fund of CLICO and BA. In the event that there

was a shortfall after the deposits of the proceeds of sale, CLF undertook to provide

collateral sufficient to secure any financial assistance to be provided by the government

in respect of the shortfall. The government agreed to provide “collateralized loan

financing” to CLICO and BA to meet any residual statutory fund deficit.

34. The basis of the agreement, as reflected in the first and third recitals of the MOU,

was to correct the financial condition of CIB, CLICO and BA in order to protect the

interest of depositors, policyholders and creditors. Under the agreement CLF agreed

that CLICO and BA would restructure their business and operations to conform to

traditional life insurance business.

35. Under the MOU, CLF agreed to make full disclosure to the government regarding

the statutory fund position of CLICO and BA and to provide monthly progress reports

highlighting the progress of its disposal of the assets.

36. It is well settled that in order for a promise to form the basis of a legitimate

expectation, the promise must be “clear, unambiguous and devoid of relevant

qualification” (per Bingham LJ in R v. Inland Revenue Comrs, Ex. P. MFK

Underwriting Agents Ltd. (1990) 1 WLR 1545 at 1569.

37. It is clear from the terms of the MOU that the government’s obligation to provide

financing to meet any residual deficit in the statutory fund of CLICO, would only arise

after CLF sold its shareholding in RBL, MHTL, CMMB and any of its other assets and

applied the proceeds of sale to the statutory fund. It is clear from the evidence that CLF

never sold its shareholding in these companies and so there were no proceeds of sale

to be applied to the statutory fund. Accordingly, the government’s promise was not

“devoid of relevant qualification”. Clearly, the promise was “qualified” in that it was

conditional upon CLF first selling its assets and applying the proceeds of sale to the

statutory fund. In any event, the respondents were not a party to the MOU, and the

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mutual obligations contained therein could hardly be relied on as representations or

promises made to them.

38. On the same day that the MOU was signed the Minister of Finance issued a

statement to the media (see para. 17 ante) in which she spoke of the government’s

support for the proposed measures to be contributed for the purpose of:

1. permitting an orderly restructuring of CLICO;

2. safeguarding the interest of citizens who are depositors, insurance clients

and pension members; and

3. ensuring that depositors’ assets will not be at risk.

39. These statements are broad and general in nature. They do not contain any

promises by the government to perform any specific acts. They indicate generally the

government’s commitment to provide support with a view to achieving the objectives set

out in paragraph 38. These statements can hardly be devoid of relevant qualification.

40. In laying the MOU before the Parliament on 2nd February 2009, (see para. 18

ante) the Minister outlined the broad purpose of entering into the MOU, and emphasised

that the plan was to sell CLF’s assets and apply the proceeds to the statutory fund of

CLICO and BA. She reiterated that it was only after these “arrangements” are

exhausted that the government would provide “funding support” to meet any remaining

deficit in the statutory fund. She once again expressed her belief that the actions taken

by the government would “permit an orderly restructuring” of these institutions and

safeguard the interest of citizens who are depositors, insurance clients and pension

fund members. Once again, the statements of the Minister are broad and general in

nature. They speak of measures to be undertaken first by CL Financial and then by the

government to top up the statutory fund and to restructure CLICO and BA, with a view

to safeguarding, the interest of its citizens

41. There followed the media address of the Governor of CBTT on February, 2009

(see para 20 ante). The Governor indicated in his address that the government and

CBTT had taken certain steps to protect policyholders of CLICO and to maintain stability

and confidence in the financial system. He added that:

1. Government had approved the first tranche of a funding package to ease

liquidity pressure;

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2. Policyholders should feel convinced that CLICO had the backing of the

government and should feel confident that their funds are protected and this

should encourage the maximum rollover of policyholder funds;

3. In order to facilitate an orderly recovery of CLICO, he urged policyholders not

to seek withdrawals before their maturity.

42. Clearly the purpose of the press release was to encourage policyholders to

rollover their policies upon maturity, and not to seek withdrawals before maturity in order

to facilitate an orderly recovery of CLICO, which was in any event in the interest of the

policyholders. In order to encourage policyholders not to withdraw their funds, the

Governor indicated that CLICO had the full backing of the government, and so

policyholders should feel confident that their funds were protected.

43. It is to be noted that the release emanated from the Governor of the Central

Bank, which is an institution that is independent of the government set up under section

3 of the Central Bank Act Ch. 79:02 as a body corporate. The Governor, Deputy

Governor and Director of the CBTT are appointed by the President and cannot be a

member of Parliament or of, a municipal corporation, or a person in the service of the

government. The Governor of the CBTT occupies an office that is separate from and

independent of the political directorate. Statements made by the Governor cannot be

attributed to the government, unless the government adopts them expressly or by

implication.

44. Even so, taken at its highest, the statement of the government assures

policyholders that CLICO has the full backing of the government and they should feel

confident that their funds are “protected”. This can hardly be interpreted as a promise

which is clear unambiguous and devoid of relevant qualification.

45. The CLICO full page advertisement of 15th February, 2009 appears to go further

than the statement of the Governor made two days earlier. In this advertisement CLICO

sought to assure their clients that CLICO would honour all terms and conditions of

existing policies and that all policyholder funds were ”guaranteed” by the government

and CBTT.

46. It must be borne in mind that this advertisement was placed in the local media by

CLICO, not the government or CBTT. CLICO is of course a separate

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legal entity from the government, controlled by its Board of Directors. This

advertisement pre-dated the appointment of four (4) Directors on the Board of Directors

nominated by the government on 12th June 2009. The statements contained in the

advertisement cannot create obligations on the part of the government unless the

statements are adopted expressly or by implication by the government.

47. On 12th June 2009, the Acting Minister of Finance announced the signing of an

agreement between CLF and the government, under which both the government and

CLF would nominate Directors to sit on the Board of CLF. In issuing the release, the

Acting Minister stated that the purpose of the agreement was to place management and

control of the assets of CLF in the new Board with a view to inter alia, correcting the

financial position of CLICO, BA and CIB, and protecting the interest of policyholders of

CLICO, BA, and depositors in CIB. As indicated earlier the use of the expressions

“protecting the interest” of policyholders and depositors can hardly be relied on as a

clear or unambiguous promise, so as to found a legitimate expectation. In the context

in which it is contained, it is one of the four objectives to be achieved by giving

management and control of the assets to the new Board of CLF. The first objective was

to correct the financial position of CLICO, BA and CIB.

48. The statement of the Minister of Finance on 24th June 2009 may be summarised

as follows:

(i) The government was committed to restructuring CLF as a going concern with

a view to ensuring that all persons including creditors and shareholders

would “get back even” and “recoup all their loses”, but there was no

“guarantee to them”.

(ii) The guarantee was to “the policyholders and residents of this country”.

(iii) The government was committed to ensuring that CLICO became a going

concern so that taxpayers’ funds would be recouped, and foreign investors

would also benefit from the “whole exercise of solvency for CLICO and CLF”.

49. In an interview carried in the press on 13th January 2010, the Minister recognised

that the government had given a “guarantee”. She explained that if the government

had not done so, it would simply have been a case of a private company going under.

While she gave the assurance that “everyone will get their money”, she urged the

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policyholders to have patience in view of the “enormity of the situation”.

50. It is clear from the words spoken by the Minister in Parliament on 24th June 2009,

and in her subsequent interview in January 2010, that the government was providing “a

guarantee” to policyholders and residents of Trinidad and Tobago. The question that

must be considered is whether the words that were used were clear, unambiguous, and

devoid of relevant qualification, so as to provide a legal basis for the legitimate

expectations claimed by the respondents.

51. The Concise Oxford Dictionary (11th Ed.) defines “guarantee” as “a formal

assurance that certain conditions will be fulfilled, especially that restitution will

be made if a product is not of a specified quality”. To guarantee is “to provide

financial security for; underwrite” or “promise with certainty”.

52. Black’s Law Dictionary (8th Ed.) defines “to guarantee” as “to assume a

suretyship or obligation; to agree to answer for a debt or default. 2. To promise

that a contract or legal act will be duly carried out. 3. To give security to”.

53. The authors of “Words and Phrases Legally Defined” 4th Ed. define guarantee as

“an accessory contract by which the promisor undertakes to be answerable to

the promisee for the debt, default or miscarriage of another person, whose

primary liability must exist or be contemplated”.

54. In this case, the respondents did not base their claim on any contract of

guarantee. Their case is premised on a legitimate expectation based on statements

made, which they interpret to be a promise by the government to repay to them all

monies due to them from CLICO under their EFPA policies. This interpretation of the

words “to guarantee” is one which is supported by the ordinary and legal meanings

which the word is capable of bearing as shown by the dictionary meanings set out

above.

55. Even so, the words used are not clear, unambiguous or devoid of relevant

qualification for the following reasons:

1. The statements made do not specify what is being guaranteed, whether it is

principal alone, or principal plus interest.

2. There is no indication of when the payment is to be made.

3. The guarantee was premised on:

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(a) assets of CLF being sold and the proceeds deposited into the statutory

fund of CLICO.

(b) The undertaking of the government to provide collaterised financing

after CLF carried out its obligations at (a)

(c) The restructuring of CLICO, and its solvency as a going concern.

56. For the reasons stated at paragraph 55 (1) and (2) above it can hardly be said

that the promise was clear and unambiguous. For the reasons given at paragraph 55

(3), it cannot be said that the promise was devoid of relevant qualification. The premise

on which the promise was given did not materialise. CLF 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, including the respondents.

57. The initial burden of proving the legitimacy of the expectation lies on the party

that relies on it: Paponette & Ors v. A.G. of T & T (2010) UKPC 32 at paragraph 42. In

this case, the respondents have been unable to establish that the promises made were

clear, unambiguous and devoid of relevant qualification. It follows that the trial judge

was wrong in granting the declarations that she did, and the appeal should be

dismissed.

58. However, in the interests of dealing with the remaining issues raised in this case,

it is assumed that the statements made by the Minister were capable of forming the

basis of the legitimate expectations claimed by the respondents.

59. For the respondent Mr. Knox has submitted that Mr. Newman conceded before

the trial judge that the respondents had in fact fulfilled the burden of providing a

legitimate expectation. The record shows that Mr. Newman made the following

statements in his closing address before the trial judge:

“. . . the burden of proof is on the claimants to show that a

statement giving rise to a legitimate expectation was made.

Well, they have crossed that threshold, I am not trying to

argue that the various statements that you have heard fall

short of giving rise to a legitimate expectation, so they have

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crossed that hurdle; the burden of proof then shifts to the

government, objectively to justify departure from the

statement made”.

60. In his closing address before the trial judge Mr. Martineau stated:

“And it was an emergency situation as Minister Tesheira has

said in her affidavit, and very urgent action had to be taken.

And one would expect in those circumstances that whatever

promises the government of the day may make in an effort to

save the economy from collapsing, as they say, the details of

filling out those promises . . . would not have been worked

out at that time, certainly in any great detail. I think it’s only

fair to expect that. And I think, therefore, the promises that

were made , and I think we do accept that there were

promises, there is no question about that, have to be seen

against that background”.

61. It is readily apparent that Mr. Martineau acknowledged in his address that certain

“promises” were made by the government. He did not concede that these promises

gave rise to legitimate expectations in the respondents. However, Mr. Newman

expressly stated that the respondents had crossed the threshold of proving that a

statement giving rise to a legitimate expectation had been made. Mr. Newman however

did not go on to define what were the terms of the legitimate expectation that was

engendered. Mr. Knox argues that it could only have been the legitimate expectations

that were claimed by the respondents.

62. In her judgment the trial judge noted that in his oral submissions Mr. Newman

had concluded that the previous government had made promises which amounted to a

legitimate expectation of a substantial benefit. She did not go on to analyse the

evidence in order to satisfy herself that the statements did in fact amount to a legitimate

expectation, or indeed the legitimate expectations which the respondents were

advocating. In failing to carry out a proper analysis of the statements that were made

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within the context in which they occurred, and then considering the legal effect of the

statements, the trial judge in effect surrendered to the Attorneys the very basis of her

decision in the matter.

63. The relief which was sought in this case was first and foremost declaratory in

nature. Certain consequential orders were sought as well, but these depended on the

declarations, which the court was asked to make. In granting declaratory relief, the

court must satisfy itself on the evidence and the law that there is a proper basis for

granting such relief. In this case the trial judge deprived herself of the opportunity to

examine the evidence, and to make her own decision as to whether or not the

statements were capable of giving rise to the legitimate expectations claimed. In simply

accepting the general concession made by Mr. Newman the trial judge erred in finding

that the representations made to the respondents amounted to legitimate expectations,

as claimed by the respondents.

ISSUE 2 - Breach of the Legitimate Expectations

64. It is the respondents case that the government was in breach of the following

legitimate expectations:

1. that the government would ensure that their funds in CLICO would be

safe and that it would guarantee repayment of all monies due to

them, and

2. that the government would make good the deficit in the statutory

fund.

65. It must be noted that there was no time stipulation attached to the government’s

guarantee of repayment given to “policyholders and residents” of this country. In fact, in

January 2010, the Finance Minister called upon the persons affected to be patient, in

view of the enormity of the situation. At no time was any commitment given by the

government that policy holders would be paid within a specified time frame. It follows

that assuming that there is a promise to guarantee repayment of the contractual liability

of CLICO, there was no evidence before the court that the guarantee had fallen due.

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66. It must also be 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. The promise or the

guarantee cannot simply be plucked out of the statements that were made by the

Finance Minister and viewed in isolation. 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.

67. It must also be emphasized 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.

68. The government’s promise to make good the deposit in the statutory fund of

CLICO arose in the context of the MOU made between the government and CLF, under

which CLF agreed to sell its shareholding in RBL and MHTL and apply the proceeds of

sale to the statutory fund. In the event that there was a shortfall after this was done, the

government agreed to provide collateralized loan financing to CLICO to meet the

shortfall.

69. As it turned out, for a variety of reasons CLF’s shareholdings in these companies

could not be sold and so CLF did not carry out its obligations under the MOU to place

the proceeds of sale into the statutory fund. Accordingly, the government’s obligation to

finance any residual deficit in the statutory fund never arose. In any event, as

mentioned earlier, the MOU was an agreement between CLF and the government. The

Respondents were not a party to the agreement, and could hardly have harboured any

legitimate expectations from it. Even so, assuming that the MOU could give rise to such

a legitimate expectation, the government’s obligation to meet any residual deficit in the

statutory fund simply did not arise due to the inability of CLF to meet its own obligations.

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70. It follows that even if the statements of the government were capable of

engendering the legitimate expectations claimed, there is no evidence that the

government was in breach of same. However, for the sake of dealing with the further

issues that were raised, it is assumed that the government was in breach of the

legitimate expectations that are claimed.

ISSUE 3: Overriding Public Interest

71. Once an applicant fulfills the burden of establishing the legitimate expectation,

the burden shifts to the authority to justify the frustration of the legitimate expectation.

The authority must identify the overriding interest on which it relies to justify the

frustration of the legitimate expectation. It will then be a matter for the court to weigh

the requirements of fairness against that interest: Paponette (supra) paragraph 37.

72. It is for the authority to provide evidence to explain why it has acted in breach of

a representation or promise made to an applicant. It must give details of the public

interest, so that the court can balance the overriding interest of the public against

considerations of fairness to the applicant. If the authority fails to provide such

evidence, it runs the risk of the court deciding that there was no sufficient public interest

and that its conduct is so unfair as to amount to an abuse of power: Paponette (supra)

paras. 38 and 42.

73. In Madarajah v. Secretary of State for the Home Department [2005] EWCA

Civ. 363 at para. 68, Laws LJ observed:

“The principle that good administration requires public

authorities to be held to their promises would be undermined if

the law did not insist that any failure or refusal to comply is

objectively justified as a proportionate measure in the

circumstances” (cited with approval by the Privy Council in

Paponette (supra) at para. 38).

74. In Paponette (at paragraph 46) Sir John Dyson SCJ emphasised the

importance of an authority recognizing that it is acting in breach of a legitimate

expectation.

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“Where an authority is considering whether to act inconsistently

with a representation or promise which it has made and which

has given rise to a legitimate expectation, good administration

as well as elementary fairness demands that it takes into

account the fact that the proposed act will amount to a breach

of promise. Put in public law terms, the promise and the fact

that the proposed act will amount to a breach of it are relevant

factors which must be taken into account”.

75. In attempting to demonstrate that the government had provided sufficient

evidence of an overriding public interest, Mr. Newman referred the court extensively to

the affidavit of Mr. Dookeran filed on 25th July, 2012, which set out the following facts:

- as at December 2007, CLF’s assets were declared to be in the region of

$100b.(TT), 43 % of which related to companies operating in the financial

services sector;

- $100 b.(TT) was broadly equivalent to 70% of the GDP of Trinidad and

Tobago in 2009;

- given the magnitude and diversity of the group’s operations, any solvency

issues within the group would have created the potential for systemic risk to

the financial system of Trinidad and Tobago;

- the group borrowed $6b.(TT) from local financial institutions, a large portion

of which was from two financial institutions, upon which the collapse of the

groups would have impacted negatively, and such a collapse would have

affected citizens directly and indirectly, and would have put at risk the stability

of the financial system of Trinidad and Tobago;

76. By June 2010 the financial position of the government had become increasingly

difficult in that:

- the economy had shrunk by 3.5%, with the non-energy sector contracting by

7.2%;

- oil and natural gas prices had declined, resulting in declining revenues, and a

budget deficit of 7% in 2008/2009;

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- public debt as a percentage of GDP had jumped from 25.4% in 2007/2009 to

39.8% in 2009/2010;

- unemployment had increased significantly to 6.7% in the first quarter of 2010.

77. In the International Monetary Fund (IMF) Report of March 2012, the IMF

identified the containment of additional costs in relation to CLICO’s restructuring as a

key recommendation. The major international rating agencies considered the CLICO

situation to be a major concern. Standard and Poor regarded the higher than

forecasted costs of the bailout of CLICO could lead to negative ratings. Moody’s report

in June 2010 noted that the sizeable accumulated debt, derived from the bailout, could

change the rating downwards. The government considered that the negative reports of

the IMF and the credit rating agencies could have a negative impact on a small

economy like Trinidad and Tobago. A credit downgrade would have increased the cost

of servicing the country’s debt. This would have reduced the amount of money

available for public spending in particular, in the areas of education, health and welfare.

It could also have triggered a serious recession leading to significant unemployment

and attendant social problems.

78. By March 2010 the EFPA’s were at the core of the challenges facing CLICO,

accounting for over $10 b.(TT) of CLICO’s insurance liabilities of which $9 b.(TT) were

expected to mature over the ensuing three years.

79. The Report of the Select Committee set up by the government in June 2010,

identified five major stakeholder groups who would be affected by any decision. They

were:

- 225,000 traditional policy holders;

- 25,000 EFPA policy holders, and investors in mutual funds, who earned

returns on this investment in excess of the prevailing market returns;

- 460 insurance agents;

- about 5000 employees, and

- the taxpayers, who had no direct benefits to receive from CLICO, but who

had an overriding interest in the avoidance of systemic financial instability

and who would be indirectly affected by a substantial reduction of public

spending.

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80. As noted in paragraph 26 ante, the Select Committee suggested three options for

consideration by the government. The government considered the cost of implementing

the three options suggested by the Select Committee. The first option involved no

additional government funding, and liquidation of CLICO, which would have resulted in

a payment to policy holders of an estimated 70 cents on the dollar.

81. The second option involved the full funding of the asset shortfall and repayment

based on contractual terms. This would have resulted in no loss to policy holders, but

would have required the injection of a further $7.2 b.(TT), about 18% of the national

budget. This assumed the short-term monetization of CLICO and BA assets, since

$10.8b. of EFPA and mutual fund liabilities would fall due over the ensuing twenty

seven months.

82. Option 3 involved an initial partial payment and deferral of the payment of

remaining liability over a longer term. The committee recommended an initial payment

of $75,000 and payment of the balance over 20 years. This option would require an

investment by the government of 4.2 b.(TT), which represented 8.6% of the national

budget, considerably less than the 18% which option 2 would have involved. Option 3

was expected to provide a better return to EFPA policy holders than option 1. Option 2

would have entailed severe cuts to public expenditure on basic needs of the country,

and significant borrowing by the government. In those circumstances, balancing the

interests of EFPA policy holders against the public interest, the government decided

that option 3 was the most appropriate course to be followed.

83. In his affidavit of 25th July 2012, Mr. Dookeran noted that he took into account

that of the 25,000 holders of the short term investment products (STIPS) some 40% had

investments of $75,000 or less, 72% of EFPA holders had invested less than

$250,000.00 and 12% invested more than $1m. (TT). This last group accounted for

72% of CLICO’s liability.

84. At a media briefing held on 28th September 2010, Mr. Dookeran explained that

the government’s action was “based on the principle of fiscal responsibility and also on

the principle of satisfying the legitimate needs of the people of Trinidad and Tobago”.

He noted further that the former administration had made statements about a guarantee

to be given to CLICO’s policyholders, but it had not sought parliamentary approval to

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have the necessary funds allocated for this purpose. Accordingly, he commented that

the guarantee could only be effective if it was backed up by a parliamentary

appropriation of funds.

85. During the period October/November 2010 there were consultations with the

major stakeholders involved including the CLICO policyholder group, and an

interministerial committee. The implementation of the 2010 plan was delayed to allow

further consultation with the stakeholders. Certain alternative solutions were proposed.

The government examined these alternatives and found them to be financially unsound.

86. On 1st October 2010, the Prime Minister made a statement in Parliament in which

she reiterated that the country could not afford to spend an additional $7 b. to pay off

investors in CLICO and BA over a shorter period than 20 years. Such a course would

be fiscally irresponsible, and would deprive 1.2 m. citizens, who did not invest in CLICO

and BA, of much needed expenditure for infrastructure, education and security.

87. In March 2011, the IMF recommended that the government should resolve the

delay in restructuring the outstanding CLICO liabilities in an effort to contain additional

fiscal costs.

88. In August 2011, Cabinet considered two further options to increase the return to

policyholders under the 2010 Plan. These were:

1. To allow EFPA investors to exchange the last 10 years of the

government bonds for units in an equity based investment fund to be

sponsored by the government, and

2. The government to provide funding to commercial banks to meet the

shortfall in cash between the return that was initially expected on the 20

year bond option (estimated to be 67%) and the desired return of 80%.

89. The government decided on the first option for a number of reasons including an

estimated return for the policyholders in the range of 92%, and a reduction of

government spending of TT 512m. per year over a 10 year period. On 14th September

2011 the government announced the revised plan in Parliament.

90. Having regard to the comments of Mr. Dookeran outlined in paragraphs 75 to 90

above, the government clearly considered the public’s interest in coming up with the

2010 Plan, which was later enhanced in September, 2011 with a view to providing a

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higher rate of return for investors who held policies in excess of $75,000. The public

interest entailed a solution that would not involve the risk of instability of the country’s

financial system that is:

- that would not result in downgrading of the country’s credit rating by

the international rating agencies;

- that would be consistent with the recommendations of the IMF;

- that would not have a negative impact on the economy given the small

size of the economy in relation to CLICO’s liabilities to its clients;

- that would take into account the interest of all the stakeholders, including

225,000 traditional policyholders and 25,000 EFPA holders;

- that would not result in recession, unemployment and social unrest;

- that would not deprive the other 1.2 million citizens of basic needs in the

areas of health, education and security.

- that would show some measure of proportionality in satisfying the interests

of the policyholders while balancing the burden to be placed on the

taxpayer.

91. The government has placed before the court in some detail, evidence that it

considered the public interest in deciding how best it could satisfy the interests of the

policyholders, without endangering the public interest. It is for the court to weigh the

public interest against considerations of fairness to the respondents, who complain that

their legitimate expectations have been frustrated.

92. It must be borne in mind that the EFPA holders comprised some 25,000

policyholders as against some 225,000 traditional policyholders. The EFPA

policyholders voluntarily undertook an investment which yielded a high rate of return

(over 10% in some cases) with a private limited liability company. Any investor would

ordinarily understand that a high yield investment generally carries a commensurate

level of risk. In addition the revised plan was entirely voluntary. An EFPA policyholder

was not obliged to accept it. If he was not satisfied with the estimated 92 cents on the

dollar, he could decide to hold on to his investment until the restructuring of CLICO was

complete, and the company was in a position to meet its liabilities.

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93. The promises made by the former administration and the assurances given by

CLICO, and the Governor of CBTT must also be placed in the balance in assessing the

question of fairness to the respondents.

94. Having placed all the relevant factors in the scale, it is 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.

95. For the respondents, Mr. Knox submitted that the government has not shown a

sufficient public interest in going back on its promise. His main submission on this issue

is that unless the government can show that there is a major discrepancy between the

value of the statutory fund including assets that CLICO can put into the fund, and the

cost to the government of buying out the respondents’ investments at full value, then it

has not established that there is a sufficient public interest to override the respondents’

expectation that they would recover 100% of their investments.

96. Subsidiary to his main submission on this issue is that the time for assessing the

public interest was September 2011, and not September 2010, when the 2010 plan was

put forward. In September 2011, according to Mr. Knox the prevailing economic

situation had improved significantly over that which obtained in 2010.

97. A key element in Mr. Knox’s submission is that the statutory fund was not in

deficit in September 2011, or if it was in deficit, it could have been topped up.

98. The main submission is clearly based on the premise not only that the

government will acquire an asset equal in value to what it is paying out, but that it has or

is able to borrow the funds required for an immediate payment. The argument

completely ignores the economic realities set out in Mr. Dookeran’s affidavit and his

reasons for rejecting option 2 in favour of option 3. Further, there is a fallacy in the

argument in that it assumes that since the government will receive an asset equal in

value to what it pays out, it has the financial resources to immediately acquire that

asset. The reasons given by the government for its inability to implement option 2

proposed by the Select Committee, have already been set out earlier in this judgment

(at paragraphs 81 to 83) and I see no need to repeat them. Suffice it to say that Mr.

Knox’s main submission does not bear scrutiny.

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99. A crucial aspect of the respondents’ submission is the time at which the public

interest is to be assessed. Mr. Knox submits that the relevant time is September 2011,

when the revised plan was announced. Mr. Newman holds the view that the relevant

time for consideration is September 2010, when the 2010 plan was introduced.

100. An examination of the 2010 Plan and the 2011 plan shows that the latter is in fact

essentially the same as the 2010 Plan, except that it provides for the exchange of bonds

for units in a new entity during the second ten years of the twenty year repayment

period. This represented an enhancement of the 2010 plan, and was expected to yield

an estimated ninety-two cents on the dollar, which was a significant increase over the

sixty-seven cents contemplated under the 2010 Plan. It seems illogical in the

circumstances that the respondents would seek to challenge the 2011 plan, rather than

the 2010 Plan, which was less advantageous to them.

101. I am of the view that the decision that the respondents sought to review was

effectively made in September 2010 when the original plan was introduced. Mr. Knox

argued that the issue was decided before the trial judge, who gave leave to apply for

judicial review of the decision announced on the 14th September, 2011. It must further

be borne in mind that the application for judicial review was not brought until May 2012,

after a period of considerable delay, even for the September 2011 decision. The

respondents clearly would have encountered even greater difficulty in persuading a

court to grant review of the September 2010 decision, and this may account for their

challenge of the September 2011 decision. In any event, having regard to the evidence,

it is clear that public interest and macro-economic considerations would have prevailed,

whether the decision was made in September 2010 or September 2011.

102. Consistent with his position, Mr. Knox submitted that while Mr. Dookeran’s

affidavit contains an abundance of material relevant to public interest factors in 2010, it

does not contain evidence to demonstrate an overriding public interest as at September

2011.

103. Mr. Knox argued that the economy of Trinidad and Tobago improved in 2011.

He referred to an IMF Report dated 21st January 2011 which stated that economic

growth was expected to pick up in 2011. Mr. Knox also referred the court to the

Economic Bulletin for July 2011 published by CBTT, which showed a surplus of $1.2 m.

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for the period October 2010 to June 2011. However, the same table shows a budgeted

deficit of $8.5 b. for the period October 2010 to September 2011. In my view, the

statistics do not support Mr. Knox’s submission that there was a significant improvement

in the economy as at September 2011.

104. Mr. Knox further submits that the statutory fund of CLICO was not in deficit as at

September 2011, or if it was, CLICO was in a position to meet the deficit. This

submission appears to be inconsistent with the respondents’ case that the government

was in breach of the respondents’ legitimate expectation that it would finance any

shortfall in the statutory fund, so that it could meet its liabilities to the Respondents. If

there was no deficit, then the government could not have been in breach of its promise.

105. Mr. Knox’s submission appears to be based on several premises:

(1) that the MHTL shares could all be placed in the statutory fund;

(2) that these shares are to be valued at market value;

(3) that the shares in MHTL were deemed to be in the fund; and

(4) that the government could force CLICO top up the fund; through its

majority of directors on the Board of CLF and through the CBTT, which

effectively took control of CLICO.

These assumptions could not be supported on the evidence for the reasons that

follow.

106. Section 37(4) of the Insurance Act Chap. 84:01 provides that every company

carrying on long-term insurance business in Trinidad and Tobago shall place in trust in

Trinidad and Tobago assets equal to its liability and contingency reserves with respect

to its Trinidad and Tobago policy holders. The second schedule of the Act prescribes

the type of assets that may be placed in the fund. The Minister of Finance has the

power to amend the second schedule under section 46 of the Act. Under section 214

(1) of the Act the Minister is empowered to make regulations for the purpose of giving

effect to the Act, including regulations governing the valuation of the assets in the fund.

The Insurance (Admissible Assets and Valuation of Assets) Regulations (AVAR) passed

under section 214 (1)(K) of the Act provide the regulatory basis for the admissibility and

valuation of assets that may be placed in the statutory fund. The regulations provide for

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a valuation of assets based on a percentage of their market value, not their value as

reflected in the company’s balance sheet, or the full market value.

107. In an affidavit filed on 21st December, 2012, Ms. Carolyn John, Acting Managing

Director of CLICO pointed out that it was inaccurate to state that either all or most of the

MHTL shares were pledged to the statutory fund since under the AVAR regulations the

fund could only have lawfully accommodated a portion of the MHTL and MHIL shares.

In order for the balance of these shares to be pledged to the fund, the second schedule

of the Insurance Act would have to be amended by the Minister of Finance. In addition

the MHTL shares could not qualify for admission in the fund because the AVAR

regulations specifically provide that shares can only be pledged in respect of a company

that has been paying dividends for at least four years. Ms. John further deposed that

the MHTL and MHIL shares are subject to shareholders agreements and covenants.

Any pledging of these shares (other than the MHTL shares originally pledged) would

require permission from the lenders and co-owners. Ms. John further sets out why

CLICO’s shares in Lascelles de Mercado, CD Distillers, CL Capital, CL World Brands,

CMMV and CLICO Energy could not be pledged to the fund. Therefore these shares

were not available for inclusion in the fund.

108. Mr. Knox recognized that his submission on the issue of overriding public

interest would be untenable if the assets did not qualify for admission in the fund or if

admissible, were to be valued in accordance with the AVAR regulations. He goes on to

submit that in May 2011 all MHTL shares or a very large part of them were put into the

statutory fund, and even before that occurred, all available CLICO assets were deemed

by CBTT as qualifying for inclusion in the statutory fund. In support of the latter

submission, Mr. Knox referred to an unsigned and undated document intituled “Note on

Comprehensive Approach to CLF, CLICO and Related Matters” in which it is stated:

“Where the deficits in the Statutory funds was larger than the

requirements to make the company legally solvent, the Central

Bank as supervisor and regulator of insurance companies

would deem all assets as qualifying for inclusion in the

statutory fund for as long as was required to stabilize the

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company; return it to operational effectiveness and release it

from Central Bank control”.

109. The source from which this document emanated is not identified. Instructing

Attorney for the respondent located the document on the website of a Commission of

Enquiry appointed to investigate the circumstances surrounding the financial collapse of

CLICO. It is difficult to say whether the statement quoted above represents an intended

course of action which was actually implemented. There is no evidence that it was. In

any event, the assets could not have been lawfully placed in the statutory fund unless

there was compliance with the second schedule of the Insurance Act and the AVAR

regulations made under section 214(1)(k).

110. In any event the “deeming” submission is inconsistent with Mr. Knox’s further

submission that by May 2011 all or a very large portion of the MHTL shares were placed

in the fund. If the shares were in fact deemed to be in the fund, why bother to put them

in at a later stage? In support of the latter proposition, Mr. Knox referred to an extract

from Hansard, dated 25th February, 2011, in which the Minister of Energy is recorded as

saying that 21:52% of CLICO’s MHTL’s shares were already in the fund, and the

Minister of Finance intended to admit the balance of 35.01% of shareholding resulting in

100% of CLICO’s shareholding in MHTL being held in the Statutory Fund. In an

interview in a daily newspaper dated 19th May 2011, the Finance Minister was quoted

as saying that CLICO’s statutory reserves had been restored by the government’s

transfer of a percentage of MHTL shares. The article then refers to the statement of the

Energy Minister referred to above, and concluded that this meant that CLICO’s entire

56.53 % shareholding “conservatively valued at $8 billion” would be in the fund. On 14th

September, 2011 in Parliament Mr. Dookeran was asked pointedly by the opposition

leader whether the statutory fund was restored. In response Mr. Dookeran stated that

“new shareholding in the methanol company” were introduced into the fund, and the

results of that would be “a movement in the right direction”.

111. In his further supplemented affidavit filed on 16th November, 2012, Mr. Dookeran

clarified the position. He reported that the statements made by the Energy Minister in

Parliament in February 2011 were “statements of intent”. All of MHTL’s shares could

not be placed in the statutory fund. Only a certain percentage could have been

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“approved” to be in the fund. There were legal obstacles in placing 100% of CLICO’s

shareholding in MHTL in the fund. This was because of “other competing ownership” in

MHTL and “the position in law”. Accordingly, the remaining shares were not placed in

the statutory fund.

112. Mr. Knox further submitted that in order to get the MHTL shares into the

statutory fund, the Minister of Finance could have amended the Second Schedule of the

Insurance Act on the recommendation of the Central Bank pursuant to section 46(2) of

the Act. The trial judge in fact held that in order to fulfill the legitimate expectation of

the respondents, it was open to the Minister to amend the Second Schedule under

section 46(2), so as to include assets not currently permitted in the fund, or to explain

the overriding public interest which prevented the government from so doing. In my

view the trial judge was wrong in so holding. The purpose of the Second Schedule and

the AVAR regulations is to prescribe the kind of assets and the quality of assets of a

particular kind, and the method of valuation of assets placed in the fund, with a view to

protecting policy holders in all insurance companies in Trinidad and Tobago to which

section 37(4) applies. It would be quite wrong to amend the Second Schedule simply to

achieve a particular result in relation to CLICO alone without considering the effect of

such an amendment on the insurance industry. In addition, the submission and the

finding of the judge assume that the Central Bank acts at the behest of the Minister.

As indicated earlier, the Central Bank is an independent institution, which is expected to

exercise its own independent judgment in making decisions and recommendations to

the government. Accordingly, we find no merit in this submission.

113. Finally, Mr. Knox submitted that in making its decision, the government did not

take into account the fact that it had made a promise and was breaking it. The trial

judge in fact held that the government had failed to show on the evidence that:

(a) it took into account the fact that promises had been made by the previous

government;

(b) it took these promises into account during the decision making process and

gave due weight to them, and

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(c) it took into account the fact that the promises gave rise to a legitimate

expectation, and that the revised plan amounted to a breach of these

legitimate expectations.

114. The evidence reveals that the government did in fact recognize that promises

had been made by the previous administration, and these promises were taken into

account in the decision-making process. In para. 69 of Mr. Dookeran’s affidavit, he

deposes that as early as the period January to April 2010, the government was aware

that certain statements had created certain expectations on the part of CLICO

policyholders. In paragraph 90 Mr. Dookeran noted that the government was conscious

that in forming the Select Committee to report on a variety of options for CLICO in 2010,

some of the options may not have been consistent with statements made by the former

administration. At para. 101, Mr. Dookeran deposes that the Select Committee

suggested the government’s decision should be taken against the background of the

statement made by or on behalf of the former administration. At paragraph 104 Mr.

Dookeran stated that at the time the government considered the options, it was well

aware of and considered the various statements made by the former administration, and

concluded that option three would have meant no loss to policyholders. At para. 114,

Mr. Dookeran refers to his budget speech on 8th September 2010 in Parliament, in

which he acknowledged that the previous Minister of Finance, CBTT and CLICO had

made numerous public statements assuring depositors that their money was safe and

would be protected by government. Having regard to the evidence as contained in the

affidavit of Mr. Dookeran referred to above, we hold that the trial judge was plainly

wrong in coming to her finding that the statements made by the former administration

were not taken into account in the decision-making process.

115. For these reasons we hold that assuming that there was a breach of a legitimate

expectation, the evidence before the trial judge established that there was a sufficient

overriding public interest to justify the breach.

ISSUE 4 - Macro-economic or Macro-political Matters

116. Where decisions involve matters of macro-economic or macro-political

considerations, the court will be slow to exercise its supervisory jurisdiction of

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administrative action. This proposition is succinctly expressed by Laws LJ in Reg. v.

Education Secretary Ex. p. Begbie [2000] 1 WLR 1115 at 1131C:

“The more the decision challenged lies in what may be

inelegantly called the macro-political field, the less intrusive will

be the court’s supervision. More than this: in that field, true

abuse of power is less likely to be found, since within it changes

of policy, fuelled by broad conceptions of the public interest

may more readily be accepted as taking precedence over the

interest of groups which enjoyed expectations generated by an

earlier policy”.

117. Judicial reluctance to enter into the realm of macro-economic or macro-political

issues is consistent with the basic constitutional principle of separation of powers which

underlies our system of government. Judges are not policymakers and cannot arrogate

unto themselves powers that the populace has accorded to the executive.

118. In this case the evidence as contained in Mr. Dookeran’s affidavit as set out in

paragraphs 76 to 90 of this judgment, clearly establishes that this decision is firmly

anchored in macro-economic and macro-political issues, . Mr. Dookeran has set out:

- the assets of CLF were roughly equivalent to 70% of the Gross Domestic

Product of this country;

- the potential for systemic risk to the financial system;

- the negative impact on two major financial institutions, and the direct and

indirect impact on citizens;

- the concerns articulated by the IMF;

- the possible downgrading of the credit rating of the country by the

international credit rating agencies;

- the impact on monies available for education, health and welfare, and

- possible recession and consequent unemployment and social interest.

119. Clearly, these matters are macro-economic and macro-political in nature, and the

court should not intrude in these areas. In spite of this evidence which was before the

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trial judge, it appears from paragraph 76 of the judgment that she glossed over the

issue, and conflated it with the issue of overriding public interest. Accordingly, we set

aside the finding that this matter did not lie within the macro-economic/macro-political

field.

ISSUE 5 – Illegality and Irrationality

120. The trial judge declined to rule on these issues. By their amended counter-notice

filed on 8th May 2013, the respondents have asked this court to consider these issues.

121. The respondents allege that the revised plan is unlawful for the following

reasons:

(i) this plan involved transferring to the CLICO Investment Fund (CIF) the RBL

shares not dedicated to the statutory fund for no consideration;

(ii) the plan involved assets being transferred out of CLICO, or out of the

statutory fund, while there was still a deficit in the fund;

(iii) the plan entailed an unlawful interference with the exercise of the

independent judgment of the trustees of the CLICO fund, as to what assets

should go into the fund or remain in the fund; and

(iv) the plan unlawfully discriminated against resident EFPA policyholders and in

favour of traditional policyholders, since the former were to be paid only 75%

(the government estimated 92%) of the value of their rights against CLICO,

while the latter would receive full payment. This resulted in a breach of the

respondents’ constitutional rights to equality of treatment under section 4(d)

of the constitution.

122. Mr. Martineau’s response to the first three submissions outlined above, is that

there is no evidence to support them. Indeed, we have not been referred to any

evidence that the RBL shares were transferred out of CLICO or out of the statutory fund

for no consideration or that there was any interference with the exercise of the trustee’s

discretion as to what assets go into or remain in the fund. Accordingly, the respondents

failed to make out a case that the alleged transactions were illegal.

123. In relation to the issue of equality of treatment, it must be borne in mind that the

plan was purely voluntary. An EFPA policyholder who wished to hold on to his

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investment until such time as CLICO could honour its contractual obligations to him,

remained free to do so. In addition the basis of the decision to separate traditional

insurance policies from EFPAs was fully explained by the government. It was a

decision which involved consideration of the interests of 225,000 traditional

policyholders as against 25,000 EFPA holders, of which 12% accounted for 72% of

CLICO’s liability. Taking these matters into account, a plan was devised based on the

cost of settling CLICO’s liability to the vast majority of its clients and what the

government could afford, without causing serious damage to the economy. In these

circumstances, the decision cannot be challenged on the basis of unequal treatment. It

was a policy decision based on macro-economic and macro-political considerations.

124. The respondents contended that the revised plan was irrational for the following

reasons:

(i) the government intervened in CLICO to restore public confidence in

the financial system. If it fails to fulfill its promises, it would destroy

that confidence;

(ii) the plan punishes EFPA policyholders, who relied on the

government’s assurances and kept their funds in CLICO when they

could have surrendered their policies;

(iii) the plan had the effect of giving full protection to non-resident

traditional policyholders who did not have the protection of the

statutory fund, or of the government’s promise to guarantee;

(iv) the government did not consider the limited option of settling

CLICO’s liability to resident policyholders only, in which case they

would have been able to pay 100% of CLICO’s liability to resident

EFPA policyholders.

124. In order to succeed on the ground of irrationality, the respondents must show that

the decision is unreasonable in the Wednesbury sense that is that the decision is so

unreasonable on its face that no reasonable government could have arrived at it. In Ex.

p. Begbie (supra) Laws LJ considered this point at page 1130G:

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‘In some cases a change of tack by a public authority, though unfair

from the applicant’s stance, may involve questions of general policy

affecting the public at large or a significant section of it (including

interests not represented before the court); Here the judges may well

be in no position to adjudicate save at most on a bare Wednesbury

basis, without themselves donning the garb of policy-maker, which

they cannot wear. The local government finance cases, such as Reg.

v Secretary of State for the Environment, Ex parte Hammersmith and

Fulham London Borough Council [1991] 1 A.C. 521, exemplify this.

As Wade and Forsyth observe (Administrative Law, 7th ed. (1994),

p.404):

“Ministers’ decisions on important matters of policy are not

on that account sacrosanct against the unreasonableness

doctrine, though the court must take special care, for

constitutional reasons, not to pass judgment on action

which is essentially political.”

125. As we have seen the decision in this case was macro-economic/macro-political

in nature. It is for the respondents to show that the decision is unreasonable in the

Wednesbury sense. The reasons put forward by the respondents on the issue of

irrationality do not satisfy the Wednesbury test. They may be regarded as criticisms of

the plan, rather than indications of irrationality. In his affidavit, Mr. Dookeran has set out

in some detail the prevailing economic realities and the reasons why the government

chose option three from among the options placed before it by the select committee.

Taking into account the reasons set out in the affidavit, and the matters that were

considered, the decision of the government to choose option 3, and to enhance its initial

plan when the economic situation improved slightly by September 2011, can hardly be

described as unreasonable in the Wednesbury sense. In fact the government’s

approach was methodical, reasonable and proportionate in the circumstances.

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DISPOSITION:

126. It follows that this appeal is allowed. The declarations and orders of the trial

judge are set aside. The respondents must pay the appellant’s costs certified fit for two

Senior and one junior counsel in the court below and 2/3 of the costs so assessed in

this appeal.

Dated this 23rd day of June, 2014.

Rajendra Narine Justice of Appeal.

THE ATTORNEY GENERAL OF TRINIDAD AND TOBAGO THE UNITED POLICYHOLDERS GROUP MADAN...

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