Court orders CLICO bank to repay millions in deposits

The ruling centred on the definition of an investment note certificate (INC), and whether such deposits were guaranteed under the January 2009 government bailout of the cash-strapped CL Financial Group.

The INC is a short-term deposit designed to give customers a safe haven for their investments above market rates.

"An agreement was never honoured, it's just words you put on a piece of paper hoping to give parties comfort. It has no reasonable meaning, just a bunch of words strung together. You cannot dress up a deposit and change it in law. It cannot be done this way. No one said to us (by the way) it's not a security but an investment," said attorney Deborah Peak, who represented the insurance board.

CLICO bailout

In 2009, the Patrick Manning government bailed out CLICO, a subsidiary of CL Financial, and, in a bid to prevent a financial crisis on other CL Financial institutions, it gave control of CIB to the central bank.

However, a legal challenge emerged after the central bank took a position that the INC is not an approved financial instrument and not eligible for payment of full principal amount of all third-party deposits guaranteed by the Trinidad government following CIB's collapse.

The ruling on Tuesday follows a separate decision in July, when the High Court here ordered CLICO to repay approximately TT$58.7 million (US$9.7 million) to six executive flexible premium annuity policyholders.

And it also comes two weeks after Trinidad lawmakers passed new legislation that would effectively block future lawsuits against the central bank by CLICO policyholders. The policyholders are challenging the new law in court.

In his ruling on Tuesday, Justice Peter Rajkumar said an INC is in fact a deposit and not a security, as argued by attorneys representing CIB.

As a result of the ruling, 15 deposits with a value exceeding TT$700 million, will now have to be returned to the NIB.

The judge also ordered that interest at the rate of six per cent per annum from the date of the maturity of each INC be included.

Senior Counsel Reginald Armour, who defended the CIB, had urged the High Court to refrain from ruling on the issue of rates of interest, since Parliament amended the central bank bill two weeks ago.

Under the amendment, policyholders cannot engage in legal action to access their money in CL Financial subsidiaries like CLICO and CIB.

"The question of applied rate of interest is something which needs to be argued. I do not think you should proceed further to rule on cost," Armour said.

But Justice Rajkumar said the new law as crafted allowed him sufficient room to rule on the current case.

"I do not accept there is any breach between the legislative and judiciary. The legislation does not say delivering of judgements shall be stayed," he said.