High Court judge Ronnie Boodoosingh yesterday struck down the Central Bank (Amendment) Act, declaring that the legislation, which is a major plank in the Government’s bailout of CL Financial, “breaches the separation of powers under the Constitution and is therefore unconstitutional and void.” The act prevents any creditor, shareholder, depositor, policyholder or any other person from bringing legal action against a financial institution that has been taken over by the Central Bank.
The case was brought by Stone Street Capital, the private company of former CL Financial executive Andre Monteil, who wanted to pursue legal action against Clico Investment Bank (CIB), the CL Financial subsidiary now in liquidation that he once chaired. Monteil applied in March 2012 for leave to begin an action against Clico Investment Bank to protect some 5,708,893 Flavorite shares that the bank was holding as collateral for a loan to Monteil.
The Central Bank (Amendment) Act had been passed by Parliament by a special majority in September 2011 because it was inconsistent with the fundamental rights clauses of the T&T Constitution. The Government introduced the legislation in 2011 to prevent lawsuits being brought against Clico, CIB, British American or CMMB, which were part of the CL Financial empire, which collapsed in January 2009.
Justice Boodoosingh argued that the Central Bank (Amendment) Act took away a core function of the judiciary—the right of courts to impose a stay of proceedings—and placed it in the hands of a litigant (the Central Bank). He deemed the law “an encroachment on the judicial function” and said it “amounts to an impermissible direction to the court which infringes the separation of powers.” In putting forward an analogy to describe the impact of the law, Justice Boodoosingh said:
“The Amendment Act locks the door and takes away the key from the gatekeeper, the Judiciary, and gives the key to the Central Bank.” Although the judge declared the legislation was unconstitutional and void and ordered that the State pay Monteil two-thirds of the legal costs of the action, it was agreed that there should be a stay of his ruling “pending the filing and determination of a written appeal.”
If the Boodoosingh judgment is upheld on appeal, it would mean that litigants would be able to commence lawsuits to recover monies lost as a result of the collapse of the CL financial empire. Attorney General Anand Ramlogan said last night the ruling would be appealed.
In an affidavit submitted to the court, former Finance Minister Winston Dookeran argued that the Government’s “exposure to existing and pending litigation stands to the tune of $3.79 billion” and that if such claims were allowed to proceed that it would lead to the disorderly liquidation of Clico, CIB and British American.
The State was represented by Alan Newman, QC, who led Donna Prowell and Wayne Sturge, while Martin Daly, SC, who led Rishi Dass and Jason Mootoo, represented Stone Street Capital. In June 2011, the Central Bank and Clico filed civil proceedings against former Clico chairman Lawrence Duprey and Monteil, alleging they were responsible for the misapplication and misappropriation of its income and assets to the detriment of its policyholders and mutual fund investors.
Monteil refused to give evidence at the Anthony Colman commission of enquiry set up by the Government to investigate the collapse of the group, claiming his answering of questions would have infringed his constitutional and statutory rights, including the privilege against self-incrimination.