Final arguments submitted
Stabroek News
May 5, 2002
Attorney for Globe Trust and Investment Company Ltd (GTICL), Stephen Fraser, has urged Chief Justice, Carl Singh, to order reorganisation of GTICL as there will be no return from an order of compulsory liquidation.
"...An order for reorganisation would be fair, just and reasonable as well as a proper exercise of this honourable court's discretion and in the best interest of GTICL's depositors," Fraser wrote in response to submissions by Senior Counsel Rex McKay and Keith Massiah on behalf of the petitioner, the Bank of Guyana (BoG).
The lawyer submitted to the judge that if reorganisation was ordered, there was provision for compulsory liquidation or modification if a reorganisation plan, put forward under section 50(4) of the Financial Institutions Act (FIA), was not accepted by the depositors of if it appeared to the BoG or administrator that circumstances rendered the plan inequitable or changes in its execution were desired.
Fraser urged Justice Singh to take comfort in the fact that in making a reorganisation order, GTICL would continue to benefit from the protection from its creditors now enjoyed under section 45 of FIA. He also pointed to the unanimous support for reorganisation by depositors and shareholders as a source of comfort to the court.
McKay and Massiah had argued that reorganisation was only possible in relation to a plan developed and submitted to the court in compliance with the provisions of section 50 but Fraser argued against this.
He said that a reorganisation order could be made if the court, in the exercise of its discretion, was not in favour of ordering compulsory liquidation. He pointed out that the time to submit a plan to the court for approval (section 50) had not yet arrived as this could only be done when the court ordered reorganization under section 49.
Fraser said that the proceedings were brought under section 48 and not section 50 and the submissions on behalf of the petitioner reflected a dubious interpretation of FIA and its functions. He insisted that a reorganisation plan was not necessary at this stage, but would become necessary upon the court ordering such reorganisation.
Fraser's 15-page rebuttal to arguments by McKay and Massiah posited that the bank abused the FIA and failed to follow or apply the statutory provisions and principles of natural justice in proceedings on and after it took possession of GTICL under section 42 of the FIA.
Fraser submitted that the court had to place emphasis not on the decision arrived at by the Bank of Guyana in seeking to have GTICL liquidated but rather with the decision-making process.
He said the court might ask itself whether the process employed by the bank in deciding to liquidate GTICL conformed to the statutory procedures laid out by FIA and satisfied the requirements of natural justice.
"If the court is satisfied that the petitioner was in breach of the statutory provisions or natural justice, this would be the strongest ground for refusing to make an order for compulsory liquidation. For if the court finds that no ... determination was made, then the Bank of Guyana had and has no basis to present a petition for compulsory winding up. An order for compulsory liquidation cannot be made. The court ought properly to make an order for reorganization...or an order terminating the seizure and returning the institution to its owners," Fraser told the chief justice.
Section 48(1) allows the BoG to make a determination on the reasonable prospect of a financial institution being returned to financial soundness. Fraser insisted that this determination was within the purview of the bank and not the court. The court, he argued, had to decide whether to order winding up, reorganization or otherwise under section 49 of FIA.
McKay and Massiah had submitted to Justice Singh that there was no reorganization plan for GTICL before him and his only option in determining the case was to order the compulsory liquidation of the firm or refuse the order and order its seizure terminated. The senior counsel said only the BoG could have submitted a reorganization plan to the court and as such for an order of reorganization to be made, it could have only been in the context of a plan by BoG.
They also told the judge that for the court to determine whether it should decree compulsory liquidation under section 49 of FIA, it had to ask itself whether there was any evidence before it showing that there was a reasonable prospect for GTICL to be returned to financial soundness via reorganization or otherwise. They argued that once reasonable prospects were ruled out, the question of reorganization did not arise. They further argued that a test for reasonable prospects did not mean a mere possibility but evidence that the purpose will more probably than not be achieved.
But Fraser submitted that the court had a much wider discretion than to determine whether there was any evidence before it showing reasonable prospects for GTICL's return to financial soundness. He insisted that the act in no way attributed reasonable prospects for the court's use in determining whether to order compulsory liquidation or not. Fraser said section 49 which gave the court powers to make the winding up order did not define on which basis the court was to exercise its discretion, save that it may be decreed upon a petition by the bank or if it rejected reorganization.
He said that the court never became the administrator and was bereft of the advantages an administrator would have in determining reasonable prospects and as such could not be expected to make a determination on reasonable prospects.
Alternatively, Fraser also submitted that there was evidence of reasonable prospects before the court and cited the testimonies of Dr Clive Thomas and Christopher Ram.
Further, Fraser said that reorganization would not mean termination of the seizure of the institution as the petitioner seemed to suggest, as BoG could protect GTICL during reorganization.
Fraser insisted that there was no evidence before the court that there was no reasonable prospect for GTICL to be returned to financial soundness as the Bank of Guyana did not make the statutory determination and there was no evidence to show how the bank came to its decision.
As to McKay's and Massiah's submission that the bank, after taking possession proceeded to consider reasonable prospects, Fraser said there was not such evidence before the court. He said all the evidence before the court was that an unauthorized and unlawful decision to liquidate was made by the board on 20 September before GTICL was taken possession of the next day.
As to the Board of Directors' consideration of the plan, request for further information and rejection of the plan, Fraser said there was no evidence before the court on this as no minutes were tendered and the petitioner's witness could not give evidence of what the board did or did not do.
Fraser said that the consideration of the plan by the board prior to the BoG taking possession as was proper procedure was to assault the court with the cane of illegality. He said FIA named the bank and not the board as the responsible authority to function under the Act.
The lawyer for the respondent also disagreed with McKay's and Massiah's submission that the BoG acted fairly, arguing that its actions were unlawful and ultra vires the FIA.
He agreed that the court had to consider whether there was an abuse of discretion by the bank or a breach of natural justice. He insisted that it was only after the court made an order for reorganization under section 49 that the BoG may develop a plan to do the things contained in 50(1).
Fraser argued that the rejection of the Ram & McRae plan on September 20 was ultra vires as the time for the section 48 determination had not yet arrived as the bank was not in possession of GTICL.
He said the BoG ably, advised as it was, confused its functions under section 42 of FIA with those of section 48. He said that the result of the BoG failing to lawfully carry out the section 48 determination had left the court without the benefit of a proper determination on reasonable prospects upon which it could rely in deciding whether or not to make an order for compulsory liquidation.
Fraser asserted that since the court could only make such an order if there had been a determination that there were no reasonable prospects under section 48(1), and in the absence of such determination, then the court had no jurisdiction to make an order for compulsory winding up.
The lawyer asked that if the court intended to decide on issues not raised in any of the arguments put before it, he would like to be heard before the court rendered its decision.
Justice Singh is to send out notices on when he is expected to rule on the case; the first compulsory liquidation hearing in the history of Guyana.