DPP seeking to have Chief Magistrate prohibited from treason case
Stabroek News
July 26, 2002
Chief Justice Carl Singh yesterday ordered the Bank of Guyana (BoG) to
reorganise Globe Trust and Investment Company Ltd (GTICL) in a historic
decision and ruled that the Central Bank acted “unfairly” towards the
financial institution.
“... the Bank of Guyana has been found wanting in the carrying out of its
statutory responsibilities towards Globe Trust but in the same vein, the
Directors of Globe Trust must be criticised for allowing this sorry
episode in the institution’s history by its failure to act decisively in
the face of lax, loose and grossly incompetent management,” the Chief
Justice said in a five-page written decision handed down yesterday.
His ruling caught many by surprise yesterday but was welcomed by
supporters of GTICL. Christopher Ram, author of the reorganisation plan at
the centre of the hearing expressed the view that with the amount of time
that has elapsed, reorganising the institution now becomes much more
“challenging.”
None of the senior officers of the Bank of Guyana could be contacted for
comment on the ruling and the bank’s attorneys said they would prefer not
to comment.
However, attorney for Globe Trust, Stephen Fraser, is upbeat because of
the protection afforded by the Financial Institutions Act (FIA) of 1995
for reorganisation. He said finding an investor under these conditions
would be easy as the act offers the institution protection during
reorganisation from creditors.
“Globe Trust is in a very good position to stabilise itself and attract
investors once the Bank of Guyana sensitises investors on the protection
offered,” Fraser said. He is certain that Globe Trust would come on board
to ensure that the Bank of Guyana acts in a responsible manner and does
not see a time limit for such a reorganisation. If reorganisation should
fail then the bank can go back to the court for an order of liquidation.
The Bank of Guyana, in September 2001, took possession of Globe Trust with
the intention of liquidating it and in November, filed a petition in the
High Court to secure a compulsory liquidation order. Globe Trust through
Fraser, its depositors via Basil Williams and others as well as staff
through Robin Stoby, SC, objected to the petition on grounds that the bank
did not exercise its statutory obligations in full with respect to Globe
Trust and in accordance with FIA.
Justice Singh yesterday dubbed the decision of the Bank of Guyana to take
possession of Globe Trust for the purpose of liquidation a “misconception
of its powers.
“All the parties to these proceedings recognise and accept that
liquidation was an option for the court only,” the Chief Justice said. He
noted that the decision by the bank to take possession and liquidate came
two days after the BoG had given Dr Clive Thomas, acting chairman of Globe
Trust, a single working day to furnish a host of information.
“It demonstrates for me, that at the time the Bank of Guyana made its
decision to take possession of Globe Trust, it had a mindset, which was to
have the assets of Globe Trust liquidated,” Justice Singh said. He said
this was important in his consideration as according to the law, once the
bank takes possession of a licensed financial institution it assumes full
and exclusive powers to act as administrator of that institution. He noted
that the bank is enjoined by law to close the financial institutions
within 90 days of taking possession and petitioning the court for a
compulsory liquidation order after making a determination that there was
no reasonable prospect for its return to financial soundness through
reorganisation or otherwise.
The judge further noted that closure was not the only option available to
the bank as reorganisation could have been ordered if there was a
reasonable prospect of restoring the institution to financial soundness or
the seizure could have been terminated if the statutorily recognised
grounds for seizure no longer existed.
“It is my view that the determination by the Bank that Globe Trust could
not be restored to financial soundness was one made in a manner that was
unfair to Globe Trust. The position of Globe Trust was that in its
discussions with the Bank of Guyana, it expected an administrator to be
appointed, with whom it expected to enter into a detailed review of the
plan for resuscitation,” the judge said. The judge added that it was on
the basis of this theme of unfairness that he rested his decision, as
Globe Trust was not heard on the bank’s consideration of whether or not it
could be restored to financial soundness.
The judge said he considered that only one working day was given to Globe
Trust by the bank in September 2001 to provide very detailed information
regarding the restructuring plan, the schedule of prospective investors as
well as information on the valuation of Globe Trust properties among other
things. He said this was a tall order in the time-frame given but Thomas
endeavoured to provide a response. The judge said he also considered that
within two days of the submission of the information by Globe Trust there
was a bank announcement that it would take possession of Globe Trust and
thereafter liquidate its assets.
“The bank in my view did not avail itself of the 90-day period allowed it
by law to make such a very important determination. These circumstances
lead me to the conclusion that Globe Trust was unfairly treated in the way
the Bank of Guyana made its determination and to the further conclusion,
that its determination was not in law a proper determination at all,”
Justice Singh said.
The judge declared that he found the proceedings to have been particularly
worrying as they raised a spectre of huge financial loss of varying
degrees for a countless number of persons. Globe Trust has 4,428
depositors with deposits up to $100,000 and 976 depositors with amounts
over $100,000. The institution holds $743 million in deposits but if it
were liquidated $577 million of this would have been lost to depositors as
the liquidation plan by the Bank of Guyana was only to pay in full the
4,428 depositors and to pay $100,000 to each of the other depositors.
The judge’s ruling noted that the Bank of Guyana, between 1997 and 2001,
conducted a number of inspections of the business of Globe Trust and found
many
statutory violations. “It however, seems that the Bank of Guyana remained
largely inactive in the face of the infringements of the Financial
Institutions Act unearthed by its inspections,” the judge said.
His decision set out the moves by the bank to have Globe Trust remedy a
worsening situation in 2001 and the responses it has had before the bank
took a decision that the violations established a course of conduct which
constituted unsafe and unsound practices which could prejudice the
interest of the depositors and cause significant financial loss to Globe
Trust. The bank on July 18 2001 had issued wide-ranging remedial
directions to Globe Trust to be achieved between three and thirty days.
However, Justice Singh noted that nine days later, the bank wrote to the
institution asking it to show cause why it should not be taken possession
of. The Ram and McRae Plan was submitted to impress upon the bank that the
plan offered reasonable prospects for the resuscitation of Globe Trust.
The judge said he agonised on coming to a decision, as liquidation would
have resulted in many persons possibly losing their life-savings. He noted
that Director of the Bank Supervision Department, Ramnarine Lall, in his
evidence said the bank was very concerned about depositors’ money and went
on to say that the bank rejected the Ram and McRae Plan but did not
consider a reorganisation plan of its own.
The judge stated that after carefully reviewing the evidence of both
Thomas and Ram, he accepts their evidence that with a properly crafted
plan, there are reasonable prospects for Globe Trust’s restoration to
financial soundness.
He did not agree with the BoG’s attorneys, senior counsel Rex McKay and
Keith Massiah that he could not order reorganisation because the bank had
not submitted such a plan.
He directed the Bank to pursue reorganisation of Globe Trust as set out in
Section 50 of the FIA.
Winston Tyrell, one of the depositors challenging the liquidation
petition, yesterday said that now the hard work would have to start to
restructure Globe Trust and if this can be achieved, then the stakeholders
can congratulate themselves.
Lorri Alexander found the judge’s decision to be well-reasoned and that
the legal presentations by the respondents fell on fertile ground. He said
he expects that the Bank of Guyana would now assiduously pursue the
reorganisation of Globe Trust.
“It is good that a second lease of life has been given to Globe Trust and
that people’s hard-earned money would not be lost,” Alexander, who was
present for the ruling, said.
Williams, in brief comments, said that the decision was excellent and that
the judge adopted the arguments by lawyers on his side that the FIA
imposed a statutory obligation on the bank to make a determination on
whether Globe Trust had reasonable prospects of being returned to
financial soundness before seeking liquidation.
Fraser feels the decision was in accordance with the law but also feels
that the hard work now begins. He admitted that his clients were surprised
by the decision.
Ram, who was also there for the decision, said it was well-reasoned. He
said he is hopeful that restructuring of Globe Trust can still be done and
feels this will depend on all the stakeholders working to give real
substance to what he dubbed an “historic decision.”
The Ram and McRae plan envisaged the injection of new capital, the
conversion of some deposits into longer term deposits/shares, directors
repaying $30-$50M immediately, renegotiating of loans and the sale and
leasing back of Globe Trust’s headquarters among other things.