Suisse Security Bank and Trust Ltd v Francis

• Jurisdiction: Bahamas
• Judge: Davis J.
• Judgment Date: 25 April 2003
• Court: Supreme Court (Bahamas)
• Docket Number: No. 18 of 2001
• Date: 25 April 2003

Supreme Court

Davis, J.

No. 18 of 2001

Suisse Security Bank and Trust Limited

and

Francis

Appearances:

Philip Davis Esq.; Damian Gomez Esq.; Derek Ryan Esq.; & Ms. Jewel Major, for the appellant.

William Blair Esq. Q.C.; Mrs. Claire Hepburn & Ms. Rochelle Deleveaux for the respondent.

Anthony Mckinney Esq.; holding a watching brief for the Provisional Liquidator Mr. Raymond Winder.

Banking - Revocation of banking licence — Whether revocation was in breach of an existing injunction — Whether under the Bank and Trust Company Regulation Act 2000 notice was required before suspension — Whether the Governor had delegated the power of revocation to an officer of the Central Bank — Whether there was a basis on which the respondent could be of the opinion that the appellant was carrying on his business in a manner detrimental to the public interest — Whether the respondent's action was taken in bad faith and for improper purpose and on irrelevant grounds — Whether the respondent's action was manifestly unreasonable irrational and one which no reasonable authority could make having regard to the evidence — Court found that the revocation was discretionary matter and the court could only interfere in exceptional circumstances — On the evidence there were facts on which the Governor could exercise his discretion — Also his actions were taken to protect the public depositors and creditors — There was no evidence of bad faith and the decision was within the range of justified actions.

Davis J.

On the 2nd April 2003 I gave an oral ruling in this matter and stated that I would deliver a written judgment at a later date. This I now do.

Prelude

This case is without doubt by its very nature of considerable importance to the banking community inasmuch as its result could, depending on its outcome, impact in a very serious way the banking and financial services industry — one of the pillars of the economy of The Bahamas. The action taken seeks to challenge in a court of law a decision of the Governor of the Central Bank (the Governor) — the chief regulator of banks and trust companies in this country. The decision is the revocation of the appellant's licence it is undoubtedly a most unusual event.

Although it was professed on all sides to be a matter which should he treated with great urgency, its gestation period took on elephantine proportions. There are several interesting features about the case. It has spawned a number of off-shoots in the form of some six satellite actions seeking one relief or another. The list of counsel and attorneys representing the parties at one stage or another numbered twenty or thereabouts. It was like a revolving cast in a theatrical production. Of them two were overseas based silks. One was later replaced by a top-ranking home-based junior. Other changes in representation were made on various occasions. The pre-trial period had some melodramatic moments. One such was an instance when the court was notified of the termination of the retainer of one of the attorneys by his client. He protested vehemently before the court and insisted that this could not be done. In due course good sense prevailed and he made his exit graciously and gracefully, albeit belatedly.

Another intriguing development occurred when counsel for one of the parties sought to have about one half of the personnel in the higher judiciary disqualified from presiding over the trial of any of the issues to be litigated in this case. The present adjudicator was also asked by one of the parties to recuse himself, but he did not oblige. Steps were taken to have the Governor committed for contempt of court. This was also unsuccessful.

There was an intractable delay in locating the record upon which the hearing of this matter should be based. A number of preliminary objections were made and supplementary skeletons produced. Certain aspects of the case made uneventful visits to the Court of Appeal.

Synopsis of the case

The facts of the case are not in dispute but the conclusions drawn from them by the parties are. On July 20, 1993 the appellant (SSBT) was granted a licence to carry on banking and trust business under the predecessor to the Banks and Trust Companies Regulation Act, 2000. On March 5, 2001, the Central Bank suspended SSBT's licence and on April 2, 2001, it revoked the licence. The reasons for the revocation revolve around three main issues. The first concerns a court action in the United States against SSBT as a co-defendant wherein it paid U.S. $1.6 million into a trust account, pending the outcome of an appeal, to prevent the accrual of further interest charges. The Central Bank required SSBT to provide a collateral in support of an alleged commitment from the principal shareholder of SSBT to underwrite the amount. The Central Bank has contended that none was produced. The second issue concerns a complaint from an investor in SSBT that SSBT had failed to repay a deposit of U.S. S10 million after demand was made. The third issue is the alleged non-cooperation of SSBT in dealing with various queries from the Central Bank seeking clarification of certain matters, which behaviour the Central Bank considered to be obstructive.

In the final analysis the Governor formed the opinion that the appellant was carrying on business in a manner detrimental to the public interest and to the interests of its depositors and other creditors, and proceeded to revoke its licence. SSBT has appealed against the decision of the Governor. The issues will become much clearer in the course of this judgment from the treatment of them by counsel as they expounded with considerable dexterity their arguments and submissions. This has caused me to apply self restraint in my own inputs lest I should burden this judgment beyond the tolerance level of its readers.

Fourteen grounds of appeal were filed on February 4, 2002, and an additional one on February 13, 2002, pursuant to section 22 (5) of the Banks and Trust Companies Regulation Act 2000 (the Act). They are as follows:

“1. The respondent acted unlawfully when he purported to suspend and revoke the licence of the appellant as he had no power to do so, as the power had been suspended by virtue of an Order of the Supreme Court of the Bahamas made on the 2nd day of March 2001 granting an injunction restraining the respondent from so doing.

The crucial question in this case can be put in several ways. One such is whether the Governor in exercising the power of revocation was demonstrably wrong in so doing in the prevailing circumstances. It is the contention of the appellant that he was and that of the respondent that he was not. For the purposes of parity of treatment and transparency I will set out hereunder in extenso the cases of the respective parties as contained in their skeleton arguments and as supplemented by their oral disputation. The appellant's case as presented by Mr. Davis in his skeleton argument was as follows:

Introduction

1.1

This is an appeal pursuant to Section 22(1) of the Banks and Trust Companies Regulation Act 2000 (“the Act”) relating to the revocation of the appellant's licence by the Governor of the Central Bank on the 2'1 April, 2001 under Section 14 of the Act. Notice of Appeal was given pursuant to Section 22(2) on the 18 April, 2001. The Appeal is in effect against the decision made by the Governor on the 5 March, 2001 pursuant to Section 14(1)(a)(i) of the Act. On this day the Governor was of the opinion that the licence should be revoked. 1.2 Whilst the Act does not contain a complete procedure for the appeal it does however provide at section 22(3) that the Attorney General shall upon receiving the Notice of Appeal transmit to the Supreme Court the Governor's decision and all papers relating to the appeal. This has been done and constitutes the record of the appeal. Further Section 22(5) provides that at the hearing of the appeal, the appellant shall before going into the case state all the grounds of the appeal on which the appellant intends to rely and shall not unless by leave of the court go into matters not raised by such statement. The grounds of appeal have been filed from 4 February, 2002 and supplemental grounds well in advance of the time prescribed by the Act. 1.3 The jurisdiction of the court on the hearing of the appeal is to be found in Section 22 (6) which provides that the court can either confirm, reverse, vary or modify the decision of the respondent or remit the matter to the respondent with the opinion of the court thereon. 1.4 The appellant is a company duly incorporated under the laws of the Commonwealth of The Bahamas, and was granted on 20 July, 1993 a licence to carry on banking and trust business within the said Commonwealth pursuant to section 4 of the Banks and Trust Companies Regulation Act Ch. 287 (now repealed) subject to the terms and conditions specified in The Banks Act Ch. 285. The capital of the appellant is US$3M divided into 3M shares with a par value of US$1. All shares have been issued and credited as fully paid up. 1.5 The appellant operated from 1993 to 5 March, 2001. The operation was not unsuccessful and audited accounts for the fiscal year ending 30 September, 1999 showed that it had retained earnings of US$2,891,280.00 and for the fiscal year ending 30 September, 2000 US$3,308,335.00. The total equity of the appellant as of 30 September, 2000 amounted to US$6,308,335.00. 1.6 In 2000 the Central Bank expressed concern about the strengthening of the appellant's capital base through the introduction of an institutional shareholder, the appellant's debit card operation and its desire that the appellant maintain a maximum ratio of third party deposits to capital of 5 to 1. These concerns were expressed in writing by letters dated 24 August 2000; 12 September 2000; 1 December, 2000; 22 December, 2000; and 16 January 2001. 1.7 To each of these...