Chief Justice (ag) Ian Chang yesterday ordered the liquidation of Clico (Guyana) in a long delayed ruling which said that available material points “unerringly” in the direction of its insolvency and against the interests of policy holders that it be allowed to continue.
Justice Chang ordered that the Bank of Guyana be appointed as liquidator to execute the wind-up order and this is expected to pave the way for the government to make good on its assurance of guaranteeing the policies and investment held by Guyanese in Clico.
The judge, in his seven-page ruling, also addressed the investment of more than half of Clico’s assets outside of the country.
The Chief Justice referred to the investment move as an “illegal transmission,” saying that from all appearances the company has little or no chance of recouping the US$34 million it transmitted to its sister company, Clico (Bahamas).
The Bahamas investment represents about 53% of Clico’s total assets and according to the Justice Chang, the law does not allow any insurer carrying on long term insurance business to invest more than 15% of its statutory fund outside of Guyana.
Chang’s ruling signaled the end, perhaps temporarily, of a bruising court battle between the insurance company, which came crashing down earlier last year, and the state. Government had placed the company under judicial management in February 2009 after Clico (Bahamas) was ordered wound up to a deficit of assets relative to liabilities in the sum of US$30 million.
Clico (Guyana) fought its way through the court system, initially challenging the petition to have the company wound up and later accusing the system of denying it a fair hearing. Clico managed to stop Justice Chang’s ruling last December, but earlier this week Justice Diana Insanally dismissed a constitutional motion by the company and paved the way for the Chief Justice to rule in the case.
Reacting to the ruling yesterday Clico’s lead attorney, Roysdale Forde said he was not surprised by the judgment based on “previous rulings of the court.” Forde said he had no instructions at the time as to whether the company would appeal. “The clear picture is that not only that total liabilities of Clico far exceed its assets but that the company is on rapid decline,” Justice Chang said in his ruling, noting that this state of financial affairs was apparently triggered by the “illegal transmission of US$34M ($7B) externally in favour of Clico (Bahamas) Ltd.
Justice Chang pointed out that the total assets of the company do not exceed its total liabilities by any amount-let alone by 25% of the net amount of premiums received in respect of long-term insurance business for the preceding financial year. He said that disregarding the US$34M transmitted for the benefit of Clico (Bahamas) Ltd and paid into a US account, the level of the statutory fund fell well below the level of its liabilities with respect to long-term insurance businesses.
He said too that the actuarial reports of Canadian consultants Cheong and Ngai spoke to Clico being insolvent and should be wound up, stating that Prescience Insurance Consultants in its report dated July 24, 2009 also underlined the urgent need for Clico to be wound up.
“Although the Affidavit of local valuer, Hugo Curtis, dated September 11, 2009, placed high valuations on Clico’s immovable properties in an effort to make the point that the company may still be in a position to meet its liabilities, yet when bids were invited for the purchase of such properties, the amounts in the bids fell way below the respective values stated by Mr. Curtis,” Chang stated.
The Chief Justice also referred to a September 11, 2009 affidavit of the Bank of Guyana, which presently performs the functions of the Office of Commissioner of Insurance that pointed to the statutory funds of Clico being illiquid. Further, he said the report of chartered accountant Nizam Ali showed that, as at February 27, 2009 Clico was in deficit of $7 billion at best and at worst, $11 billion.
Further, he said that the Judicial Manager’s report showed that up to the February 28, 2009, surrender of policies amounted to $1.7 billion, and in a later affidavit, she deposed that up to April 2009, within 2 months, 829 policyholders had surrendered their policies to the tune of $9.6B. “Even Mr. Ramalho, the director who represents Clico in these proceedings, and his wife surrendered their policies to the tune of $45 million,” the CJ said.
Maria van Beek
Justice Chang said that Clico’s former Judicial Manager, Maria van Beek presented the petition and became unavailable for cross-examination after she was shot and left the jurisdiction. However, he said that her affidavit evidence did not for reason of her unavailability become inadmissible. The affidavit evidence became susceptible of being viewed as unreliable, but according to Justice Chang a distinction must be drawn between inadmissibility and unreliability.
He continued that the opinions and conclusions of van Beek, although affected by her unavailability for cross-examination, had to be viewed in the light of the support they received from independent professionals whose reports were in consonance with her conclusions and opinions. Therefore, he said her evidence can hardly be found to be unreliable. He also referred to section 74 (5) of the Evidence Act, chapter 5:03 which states, “If a witness does not become incapable of being further examined at any stage of his examination, the evidence given by him before he became incapable is good”.
Statutory fund
Referring to claims made by the company, he said that it is not for Clico to claim that any part of its business falls outside of and is not caught by section 46 of the Insurance Act which mandates the establishment and maintenance of a statutory fund in respect of each class of insurance business comprising of assets which do not fall in terms of value below its liabilities in respect of that class of insurance business.
Justice Chang said also that it was not open to Clico to contend in the proceedings that it has been acting illegally in contravention of the Financial Institutions Act in an effort to reduce the level of liabilities so that such liability would not match, overtop or surpass the level of assets of the statutory fund relating to long-term insurance business.
Ruling that the Commis-sioner of Insurance as a petitioner has not been party to the alleged illegal transactions of the company, Justice Chang said that Clico was prohibited from contending that part of its business transactions with third parties was not in the nature of insurance business (and therefore unauthorized, illegal and unenforceable) in order to reduce its liabilities arising from the application of Section 46 under the Insurance Act.
On a consideration of the petition as a whole, Justice Chang said that the available material points in the direction of insolvency, and he ordered that the Bank of Guyana be appointed liquidator to execute the order for its winding-up.
