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Objectors to the Bank of Guyana (BoG) petition for a compulsory liquidation order for Globe Trust and Investment Company Ltd (GTICL) have laid over written submissions to Chief Justice Carl Singh and the judge yesterday granted the petitioner ten days to submit and serve its response.
It is anticipated that the objectors may request time to make a further response to the submissions by attorneys for the petitioner -- Senior Counsel Rex McKay and Keith Massiah -- when the matter comes up for report on April 24, before a date is fixed for determination of the case.
The BoG has approached the court for a compulsory liquidation order for GTICL on the grounds that there was no reasonable prospect for the institution's return to financial soundness.
However, in his submission to the judge on Monday, GTICL's attorney, Stephen Fraser argued that the decision of the BoG's Board of Directors to have the institution liquidated through a compulsory order from the court was null and void and ought to be quashed.
In a 90-page written submission to Justice Singh, Fraser asked that an order for the reorganisation of the institution be made instead. Fraser asserted that the BoG failed to carry out its statutory obligations and committed a number of violations of natural justice and fairness - requirements in dealing with GTICL. Among these, he said, were its unlawful delegation of its statutory responsibility to the Board of Directors to determine whether the institution had a reasonable prospect of being returned to financial soundness through reorganisation or otherwise and acted on the directors' directions.
Fraser argued that the BoG's board had no statutory or other authority to make the decision to liquidate GTICL and only the court had the power to order compulsory liquidation. He set out that the board determined that it would liquidate GTICL before the bank took possession of the institution. The Financial Institutions Act of 1995 gives the Bank of Guyana 90 days after taking possession to seek a compulsory liquidation order if it determined that there was no reasonable prospect for the institution's return to financial soundness through reorganisation or to commence restructuring if there was such a prospect.
Fraser said the sole witness for the petitioner, Ramnarine Lall, admitted that the BoG did not take the decision to liquidate GTICL but the board.
Mandate
Fraser submitted that the decision to liquidate was not within the mandate of the BoG as it could only determine reasonable prospects for GTICL's return to financial soundness.
The lawyer further said that the regulations under which the Bank of Guyana operated in the application of Section 33(4) and Section 42 proceedings under FIA were not in force as they were not advertised in the Official Gazette as required by law.
Fraser told the judge that the decision to liquidate a financial institution was not one to be taken lightly and noted that in Guyana there no deposit insurance scheme and as matters now stood, the only hope for GTICL depositors to regain their deposits would be via revamping it.
"Once, however, a liquidation order is made, all hope of recovery is extinguished and thereafter the confidence of the depositors will truly be broken. In the present fragile economic position that Guyana finds itself, the danger of infection may be much higher than if we were enjoying a stable economy," the lawyer argued.
In setting out his arguments, Fraser said that throughout the court proceedings the BoG sought to shift its obligation to pursue reorganisation via a proposal. He asserted that once the bank took possession of GTICL, it was the administrator and only the administrator who could present a reorganisation plan to the court for its approval. He also asserted that only after taking possession could the determination be made about reasonable prospects for the institution's return to financial soundness and not before.
Premature
He contended that the Ram and McRae rescue plan was used to show cause why possession should not be taken and that the rejection of the plan did not mean that the BoG would decide to liquidate. The decision to liquidate, he said, was premature, made by the wrong body, unlawful and unauthorised. Fraser said it stripped GTICL of the benefits intended to be conferred on it by Section 48 of the FIA.
Fraser submitted to the court that the board of directors of the BoG was only empowered to make policy decisions and could not make a determination on the reasonable prospect for GTICL's return to financial soundness. He said there was no evidence before the court to show how the board came to its decision. He also argued that there was no provision in the FIA for the bank to take possession for the purpose of liquidation.
The attorney informed the judge that whether the Ram and McRae plan would work or not was a matter of opinion and the plan, in the context of the proceedings, was merely to establish reasonable prospects. He insisted that the BoG did not have the authority to consider reorganisation in the way it proposed to have done. He cited the steps necessary as the bank acting or appointing an administrator, the bank or administrator preparing a plan and then this plan being presented to the court for approval. Owners or shareholders may then object to the steps Fraser cited.
Senior Counsel Robin Stoby who laid over his submissions yesterday on behalf of the Globe Trust Pension Scheme, adopted the reasoning of the other submissions. His four-page submission argued that the FIA not only empowered the BoG to manage Globe Trust but to reorganise the institution.
He held to the position that the determination of which approach was to be taken had to be done within the 90 days allowed by the Act and said that the bank should be mindful of the consequences of each approach. He argued that the bank, while having the discretion to determine which of the approaches it ought to take, must be able to justify its decision by evidence and argument of law in presenting the petition.
He noted Section 48.1 of FIA: "...if it determines that there is no reasonable prospect for the institution's return to financial soundness through reorganisation or otherwise." Stoby argued that the successful representation to the court under Section 48.1 then hinged on the establishment of that probative requirement by the bank.
Stoby said that while it could be argued that GTICL might be unable to pay its debts, it was incumbent on the Bank of Guyana to address the question of what would be most advantageous to its creditors.
"There is no doubt that a winding-up would be virtually disastrous to the many depositors. The evidence clearly indicates that to be the case. I submit that it is therefore the duty of the bank, in exercising the discretion given to it, to have itself address the question of reorganisation or some other method to test whether the institution could survive even if for the limited purpose of maximising the return to the depositors," Stoby argued.
Stoby also submitted that the view of the BoG concerning the approach to be adopted with regards to deposits of trust monies held in accounts at GTICL was wrong. He said if those monies were deducted from workers' salaries with the express purpose of providing for and in accordance with the purposes of the trust, then the deposits of those sums at GTICL were not to be considered in terms of the usual case of creditor and debtor.
Basil Williams, who represents Oswald Kendall and a host of other depositors, submitted to the court that depositors were deprived of the legitimate or reasonable expectation of being heard or consulted by the BoG before the decision to petition the court for a liquidation order was made. He argued that the bank, being a statutory authority and having the power to affect the rights, interest and property of the depositors of GTICL was bound to hear them before exercising that power. Williams said that failure vitiated the decision of the bank to compulsory liquidate the institution.
He also submitted that if the order being sought was granted, the depositors' loss would entitle them to civil action against the bank and its directors to recover damages for such loss.
Emily Dodson and Dhanwanti Sukhdeo, representing a number of depositors, also made a written submission. The two lawyers urged the court to sanction a reorganisation plan to allow depositors to recover a substantial part of their deposits over a finite period. The lawyers argued that the depositors' monies would be better protected if GTICL were not liquidated and a restructuring plan instituted.