1

IN THE SUPREME COURT OF BELIZE, A.D. 2011

ACTION NO. 80 of 2011

(1) THE BELIZE BANK LIMITED CLAIMANTS (2) BCB HOLDINGS LIMITED (3) BRITISH CARIBBEAN BANK INTERNATIONAL LTD.

AND THE CENTRAL BANK OF BELIZE DEFENDANT

Hearings 2011

15 th February 21 st February 2 nd March 29 th March 19 th April 11 th May 25 th May

Mr. Eamon Courtenay SC and Ms. Pricilla Banner for the Claimants. Ms. Lois Young SC for the Defendant.

LEGALL J.

JUDGMENT

The Facts

1. The claimants are all incorporated companies carrying on business

2

in the banking sector with offices in Belize City. The No. 2 Claimant

(BCB) is the parent company of the No. 1 claimant (BBL); and the

No. 3 claimant (BCBIL) is a subsidiary of BBL. The defendant

(CBB) is a body corporate established by section 4(1) of the Central

Bank of Belize Act, Chapter 262 (the Act). There is another bank

incorporated and located in the Turks and Caicos Islands, named

British Caribbean Bank Limited (BCBL) in which BBL is a

shareholder.

2. BCBL was in 1998 solely owned by BBL and there was, in place at

that time, an agreed Memorandum of Understanding (MOU) and later

a 2004 Multi Lateral Memorandum of Understand (MMOU) for the

exercise of consolidated supervision of the banks, and the sharing of

information, by the Financial Services Commission of the Turks and

Caicos Islands (FSC) and the CBB. In spite of the MOU and MMOU

the FSC without informing the CBB, permitted, by the process of the

issuing of shares, BCB to be the new owner of BCBL in place of BBL

which had previously held 100% shares in BCBL, but reduced to 23%

of the shares in BCBL, which was later increased to 25%, thereby

removing BCBL from the regulatory control by CBB through the

control of BBL. The CBB in a letter dated 21 st February, 2011

therefore informed the FSC, in critical language that, among other

matters, because of the above reduction of shares, CBB will “continue

to act unilaterally as it sees fit in the interest of Belize, the MMOU

not­withstanding.” The CBB submitted that this new ownership

structure brought into place a parallel banking situation.

3

3. A reference to the main parts of several letters between the parties

would give an idea of their thinking on some of the issues in this

matter. On receiving a letter from Mr. Phillip Johnson, President of

BBL, that BBL was a minority shareholder in BCBL, the CBB by

letter to BBL dated 6 th July, 2009 wrote that it was “concerned that

this may be a case of parallel banking and requested BBL to submit to

CBB by 30 th July, 2009 an updated group structure chart, and “a list of

all shareholders (5% and over) and directors of BBL, BCBL and

BCBIL along with the number of shares held by those shareholders.”

It is not clear whether the requested information was submitted to the

CBB. But it seems that the next letter on the issue of parallel banking

was not sent by CBB to BBL until between September and 16 th

December, 2010, more than one year after the letter of July 2009.

4. In a letter dated 16 th December, 2010 on parallel banking, the

governor of CBB wrote as follows to the chairman Mr. Guiseppi of

BBL:­

“The fact that BBL and British Caribbean Bank International Limited (BCBIL) are owned and controlled by the same holding company as BCBL and do not come under consolidated supervision, is sufficient evidence that a parallel owned banking structure exists. The fact that you, Micheal Coye, Dr. Uric Bobb, Phillip Johnson, Phillip Osborne and Peter Gaze are directors and/or officers of all three banks or their parent companies is further evidence.”

4

5. The letter concludes that there is reason for CBB to proceed under

section 36 of the Banks and Financial Institution Act, Chapter 263

(BFIA), and that BBL would be afforded the opportunity to address

all its concerns in relation to the allegation of parallel banking. In

another letter of the same date – the said 16 th December, 2010 – to Mr.

Guiseppi and Mr. Johnson of BBL, the CBB wrote:

“In late July 2010, the Central Bank completed a Special Examination of BBL in respect of the transactions of 31 March 2010, relating to a BZ $55.5 million reduction of BBL’s loan facilities to the Luke Espat Group (“LEG”).” ….. The Central Bank is thus of the view that the facts and circumstances, as set out in the Special Examination Report and other related correspondence, constitute reasonable grounds for the Central Bank to conclude that BBL, in conducting the business of a licensed Bank, has carried out and is pursuing a course of conduct that is detrimental to the interest of its depositors and its customers. The Central Bank proposes to issue Order or Directives to BBL in respect of its conduct. In accordance with section 36(4) of the BFIA, BBL is here notified that it is entitled to make objections to the Issuance of Orders or Directives, in respect of the aforesaid conduct, on or before 17 January 2011. Any BBL objections can be made at the office of the Central Bank of Belize on Goal Lane, Belize City, Belize, at 11:00 a.m. At this time, the Central Bank will hear BBL’s objections (if any) and determine whether or

5

not Orders or Directives should be issued to BBL.”

6. The CBB came to the conclusion that a parallel banking structure

existed. By letter dated 3 rd September 2010, to BBL, CBB

accompanied the letter with a Basel Committee Report on Parallel­

owned Banking Structures. The Basel Committee published the

report in January 2003 which was prepared by members of a Working

Group on Cross Border Banking consisting of persons with

experience in monetary policy, and banking supervisors from several

countries, including the UK, France, Germany, Japan, Singapore and

the USA and the Caribbean. The claimants do not object to the

admissibility of the Basel Report in evidence; but object to the Report

on the ground that it is not part of the law of Belize. But at the same

time, the claimants rely on aspects of the Report in support of their

written submissions.

7. In another letter dated 21 st December, 2010 to the second claimant,

the CBB wrote:

“That the change in the shareholding structure of British Caribbean Bank Limited (BCBL) that took place on 1 December 2008 effectively made BCB Holdings the owner of a parallel banking structure. This resulted from the reduction of the Belize Bank Limited’s (BBL) shareholdings in BCBL, to 23.1% which changed BCBL’s status from an affiliate as defined by Section 2(1) of the Banks and

6

Financial Institutions Act (BFIA). For purposes of consolidated supervision, this effectively excludes BCBL from the BBL group.

8. In the said letter, the CBB states that a parallel banking structure

exists because:

(a) BCBL has the same holding company as Belize Bank Limited (BBL) and British Caribbean Bank International Limited (BCBIL);

(b) All three banks share common directors and officers;

(c) BCBL and BCBIL share similar names;

(d) All three banks conduct interlinked banking business and are known to act in consert;

(e) All three banks are indirectly controlled by the same person; and

(f) BCBL is not subject to consolidated supervision by the Central Bank.

The said letter concluded that the CBB had recommended voluntary

acceptance through BBL of consolidated supervision, inclusive of

BCB and BCBL, but this offer was rejected. The CBB then informed

the No. 2 defendant that it would take regulatory action under section

36(1) of the BFIA. The relevant parts of section 36(1) state:

“36.­(1) Where the Central Bank has reasonable grounds to believe that a

7

licensee, a holding company, an affiliate or an official of such a licensee (hereinafter the “subject person”), in conducting the business of the licensee, holding company or affiliate, is committing or pursuing or is about to commit or pursue any act or course of conduct that is detrimental to the interests of its depositors or customers or a violation of this Act, or any regulation, circular, order, directive, notice or condition imposed in writing by the Central Bank, the Central Bank may direct the subject person to do any or all of the following­

(a) cease or refrain from doing the act or pursuing the course of conduct, or

(b) perform such acts as, in the opinion of the Central Bank, are necessary to rectify the situation. In particular, but without limiting the generality of the foregoing, the Central Bank may­ (i) require the subject person to refrain

from adopting or perusing a particular course of action or to restrict the scope of its business in a particular way. …..

(iv) require the revision of any contract to which the subject is a party, or order the subject person to make restitution or recompense to any person aggrieved by its actions.

8

9. In the letter above dated 16 th December, 2010 from CBB giving a time

period to BBL to object to the issuance of the Directives, Mr.

Guiseppi replied by letter dated 23 rd December, 2010 as follows:

“We note that in your shorter letter of 16 December 2010 you state that the Central Bank proposes “to issue Orders or Directives to BBL in respect of its conduct” and you outline the time period BBL has within which to object to the issuance of such Orders or Directives. Although we would hope that this issue will become moot …… you will appreciate that it is prudent that BBL seeks to protect its legal position in the meantime. In this regard BBL is not able to prepare objections to any proposed Orders or Directives in circumstances where the Central Bank has not yet provided the terms of those Orders or Directives. Understandably, BBL will need details of the Orders and Directives that the Central Bank proposes to make in order to consider them and formulate any objections that it may have. We therefore look forward to receiving the terms of the proposed Orders or Directives and also your confirmation that BBL will have 30 days from that date to make any objections.”

10. The CBB replied on 4 th January, 2011 to Mr. Guiseppi letter as

follows:

“In your letter you say that The Belize Bank Ltd. “It is not able to prepare objections to

9

any proposed Orders or Directives in circumstances where the Central Bank has not yet provided the terms of those Orders and Directives.” Please review section 36(4) under which the Central Bank issued the notice of 16 December 2010 as well as the contents of the notice. The Central Bank has notified you in detail of the circumstances in which it is considering issuing Orders or Directives. This notification is in accordance with the section of the law.” Also in keeping with the law, The Belize Bank Ltd. is entitled to present objections to the making of any Orders or directives based on the actions or course of conduct of the bank that have been set out in the notice. The section does not require the Central Bank to provide a licensee with actual Orders or directives. Formulation of these, (if any), will depend on the representations of the licensee. Accordingly, the 30 day period in which to object to the issuance of Orders or Directives on the circumstances set out by the Central Bank, remains as stipulated in my notice of 16 December 2010.”

Mr. Guiseppi replied by letter dated 7 th January, 2011 pointing out

that BBL is entitled to know what action is being proposed in order to

make informed objections. Mr. Guiseppi refers to a precedent from

CBB in another matter where the CBB provided a text of the proposed

directive. This text was given in a letter dated 5 th August, 2010 from

CBB to BBL informing BBL of its intention to issue a directive,

giving the text of the Directive and inviting BBL to make

10

representations why the directive should not be issued. The claimants

submit that this precedent should be followed; and it is unfair and in

breach of natural justice not to do so.

11. On 17 th January 2011 BBL, although previous requests for a copy of

the text of the Directives were not complied with, still submitted to

the CBB its written objections to the CBB proposal to issue the

Directives. Having received the objections, the CBB on the 9 th

February, 2011 sent to the BBL the Directives which are the subject

matter of this case. The Directives were issued under section

36(1)(b)(i) and (iv) above. On the 10 th February, 2011 the CBB

issued revised terms and conditions of the licence of the BCBIL (the

Revisions) under the International Banking Act Chapter 267 (IBA).

The Revisions replaced a licence previously granted to BCBIL on 3 rd

August, 2009. These Directives and the Revisions are given as item

A in the Appendix to this judgment.

12. In response to the Directives, in so far as they affected the BCBL in

the Turks and Caicos Islands, the FSC on 16 th February, 2011 wrote to

the Central Bank in relation to the Directives as follows:

“The Commission regards such instruction as an attempt to deliberately destablise a licensed financial institution within the Turks and Caicos Islands jurisdiction and in direct contravention to the Multicultural Memorandum of Understanding between The Regional Regulatory Authorities to

11

which both the Central Bank and the Commission remain signatories.”

But in previous correspondence dated 16 th January, 2011, the said

FSC had written to the Central Bank stating that “The Commission

has had the “current group structure reviewed by our Senior Bank and

Trust Consultant who has concluded that your assertion is correct and

that under the Basel Working Group on Cross border Banking

definition the current structure does constitute parallel banking.”

Applications

13. The claimants, based on the facts, believe that the Directives and

Revisions are ultra vires the BFIA and IBA; and on 15 th February,

2011made an application for interim relief that:

“1. this application and any return dated application be heard in private;

2. access to this and any subsequent applications, the pleadings, written submission and any other relevant matter shall remain under seal and access thereto is limited to the parties involved and to the Judiciary and the staff of the Registry of the Supreme Court. Access by the general public to these documents shall not be granted without the Court’s permission, such permission to be made on application to the judge on 48 hours notice to the Claimants;

3. the application of Bank Directive No. 1 of 2011 and Bank Directive No. 2 of

12

2011 issued to The Belize Bank Limited on 9 February 2011 under cover of a letter from the Governor of The Central Bank of Belize be suspended until trial of Further Order of the Court.

4. pursuant to Rules 56.1(4) and 17.1 of the Supreme Court (Civil Procedures) Rules that the Defendant be restrained, by way of an injunction, whether by itself, its servant or agents or otherwise howsoever, from acting upon, in consequence of or seeking to enforce (i) Bank Directive No. 1 of 2011

and Bank Directive No. 2 of 2011 issued to The Belize Bank Limited on 9 February 2011 under cover of a letter from the Governor of The Central Bank of Belize; and

(ii) the revisions to the terms and conditions attached to the License of British Caribbean Bank International Limited issued to British Caribbean Bank International Limited by the Central Bank on 10 February 2011

until trial or further Order of the Court.

5. The costs of this application be costs in the cause.”

14. A fixed date claim form was subsequently filed on 21 st February, 2011

requesting administrative orders on numerous of grounds alleging that

13

the CBB acted ultra vires the BFIA and IBA when it issued the

Directives and Revisions. The grounds are given below.

15. On the said 15 th February, 2011, the court made orders, including

granting the injunction as at paragraph 4(i) of the application, and

made an order that the application be heard in private. Before these

orders were perfected, learned senior counsel for the claimants

requested that paragraph 4(ii) of the application be also granted. The

court then granted paragraphs 4(ii); and both paragraphs and the other

orders granted were perfected on 17 th February, 2011. The orders are

given as item B in the Appendix .

16. By an application dated 22 nd February, 2011, the defendant applied to

discharge the orders, and for the following orders:

“(1) An Order discharging the orders of the Court granted on the 15 th day of February 2011, and an order for costs.

(2) An Order that the first Claimant follow the statutory appeal procedure to the Banks and Financial Institutions Appeals Board in respect of the orders and directives.

(3) An Order for costs.”

17. Among the grounds stated to discharge the orders are the following:

“4. Section 6(8) of the Constitution guarantees a hearing in public and there is no basis

14

upon which to urge the Court to order that the public be excluded from the hearing of this claim.

5. There is no basis upon which to urge the Court to seal the court records.”

18. Based on the application and the supporting grounds as drafted, the

court had to decide, as preliminary issues, whether to hold the hearing

in public or private, and whether the first claimant ought to access the

appeal process under the BFIA before approaching the Supreme

Court. This caused some delay in hearing the application with respect

to the injunction.

19. During the hearing of the preliminary issue of whether to hear the

matter in public or private, the fact that Directives were issued to BBL

was published in a bold headline, entitled “Belize Bank Puts

Depositors money at risk?” in newspapers in Belize. There was also

some publication in the UK. The court felt that the matter had been

made public by the publications, and that the public knew of the

directives and therefore no useful purpose would be served by further

hearing the matter in private. The court therefore discharged

paragraphs 1 and 4 of the order as granted which dealt with a private

hearing and sealing of the record. The court then proceeded to hear

arguments with respect to continuing or discharging the remaining

parts of the order, and the appeal procedure application.

15

Appeal Procedure

20. Section 70 of the BFIA provides for the appointment and composition

of an Appeal Board as follows:

“70.­(1) The Minister shall cause to be appointed a Banks and Financial Institutions Appeal Board (referred to in this Act as “the Appeal Board”) to hear and determine all appeals in respect of matters which may be referred under this Act to the Appeal Board. (2) An Appeal Board for the purpose of

this Act shall be constituted of­ (a) the Chief Justice or other judge

of the Supreme Court nominated by the Chief Justice, who shall be the Chairman of the Board;

(b) two other members appointed by the Minister from among persons who have knowledge of banking, finance or other related disciplines.”

21. Decisions of the CBB which are appealable to the Appeal Board, are

stipulated in section 71 of the BFIA, and include decisions of the CBB

made under section 36 of the BFIA which include the directives.

Section 36(6) of the BFIA states that a person who is the subject of a

directive may appeal the directive to the Appeal Board. A decision of

the Appeal Board may be by majority of its members, the majority to

include the judge. Section 77 of the BFIA provides for an appeal to

the Court of Appeal from a decision of the Board; and the Court of

Appeal can affirm, set aside, a decision of the Board or remit the

16

matter to the Board for a rehearing. Section 71 also states that a

person who is aggrieved by a decision of the CBB “may appeal

against the decision of the Appeal Board.”

22. The defendant submits that the claimants, if aggrieved by the making

of the directives under section 36 of the BFIA, are required to follow

the statutory appeal process under the BFIA before approaching the

Supreme Court. The defendant in support of this submission relies on

The Belize Bank Limited v. Central Bank of Belize No. 196 of 2008

(unreported) (where Muria J refused an application by the CBB to

vacate previous orders of the Court restraining the CBB from taking

enforcement measures under two directives, until the Appeal Board

was seized of the Appeals), and R v. IRC Exparte Preston 1985 AC

835; Smeeton v. Attorney General 1980 1 Ch 85; Reg. (Cowl and

others) v. Plymouth City Council 2002 1 W.L.R. 803 and Belize

Telemedia Limited v. The Attorney General of Belize No. 464 of

2008 Supreme Court of Belize (unreported). The defendant has

further submitted that the claimants have appealed under section 36(6)

and 71of the BFIA, the decision of the CBB to the Appeal Board; and

therefore the claimants recognize that the right procedure is by way of

the appeal procedures under the BFIA; and therefore it is an abuse of

the process of the court to approach the Supreme Court before

following the appeal procedures.

23. Sections 36(6) and section 71 of the BFIA do not make it mandatory

that a person aggrieved by a decision of the CBB, or a person who is

the subject of a directive, to appeal to the Appeal Board. The material

17

parts of the sections state that “any person who is aggrieved by a

decision of the Central Bank ….. may appeal against the decision to

the Appeal Board” and that “a person who is the subject of the order

or directive may appeal such order or directive to the Appeal Board”:

see section 71 and 36 (6) respectively. The sections give that person a

discretion or an option to appeal which he may or may not, in my

view, exercise. The legislature by using the generally discretionary

“may” in the sections did not, in my view, intend that an appeal under

the sections is mandatory. If the legislature so intended it could have

easily used language indicating that an appeal is mandatory before

approaching the Supreme Court.

24. The claimants did file an appeal to the Board, but they contend that it

was done to comply with the ten days limit to appeal prescribed by

section 36(6); and the notice of appeal itself states at paragraph (3)

that it is made without prejudice to the claim in this matter. Even

though the claimants have filed the appeal, they were not in this case

statutorily bound to do so; and consequently are not statutorily

compelled or mandated to go through with it, before approaching the

Supreme Court. For this reason, it seems to me, that it cannot be an

abuse of the process of the court to come to the Supreme Court for

redress, rather than previously adopting the appeal process which the

claimant by statute is not mandated or compelled to do.

25. Moreover, this court had occasion to examine the principles in the

authorities referred to by the defendant in relation to following the

appeal procedure before approaching the Supreme Court: see Belize

18

Bank Limited v. The Central Bank of Belize Supreme Court of

Belize No. 433 of 2011; Dean Boyce v. The Attorney General of

Belize, Supreme Court of Belize No. 472 of 2010. The principles

may be stated thus: Where there is an alternative remedy and where

Parliament has provided a statutory appeal procedure, it is only rarely

and exceptionally that judicial review would be granted before

following the appeal procedures. A claimant would be entitled to

come straight to the Supreme Court, instead of following the appeal

procedures, if there are exceptional circumstances to justify granting

judicial review, rather than following the appeal procedures under the

Act. In determining whether exceptional circumstances exist and

judicial review should be granted, it is necessary for the court to look

carefully at the suitability of the statutory appeal procedures in the

context of the particular case, and to ask itself: What in the context

of the statutory provisions, is the real issue to be determined and

whether the statutory procedure is suitable to determine it. A

challenge to jurisdiction of a statutory authority, board or body is

unusual, and the circumstances exceptional which carry the matter

outside the general principle that the statutory appeal procedure

should be followed prior to approaching the Supreme Court: see

Exparte Preston, Smeeton v. The Attorney General, Dean Boyce v.

The Attorney General, and Belize Bank v. Central Bank above; and

the Court of Appeal decision in Bevans v. Public Service

Commission BLR 155

19

26. The claimants allege that the issues to be determined are the following

which, according to them, show that the CBB acted ultra vires, and

show that they are challenging the jurisdiction of CBB:

1. That the requirement in the directive that the Belize Bank take immediate steps to divest its entire shareholding in BCBL is impossible to achieve and therefore unreasonable.

2. That the CBB did not comply with section 36(4) before issuing the Directives by giving notice to the claimants, and the letter dated 16 th December, 2010, purporting to give the notice did not constitute a notice as required by the section.

3. The Basel Working Group Principles on which CBB relied on to issue the directives are not part of the law of Belize.

4. That the CBB exceeded its jurisdiction under section 36(1)(b) of the BFIA when it issued the directives as it is not shown that the directives are “necessary” as required by section 36(1)(b).

5. That the CBB further exceeded its jurisdiction under section 36(1)(b)(i) and 36(1)(b)(iv) when the directive required BBL to ensure that none of its directors or officers serve on boards of BCBL, and when the directive requires reversal of a transaction, when the section 36(1)(b)(iv) provides not for reversal, but revision.

6. The CBB exceeded its jurisdiction under the section 27(1)(b) of the International Banking Act, which

20

provides for the amendment or revocation of conditions of the licence of the BCBIL, when it issued the directive to BBL to revise the conditions of BCBIL licence, since CBB failed to provide evidence, which it is legally required to do, that BCBIL was not acting in the best interest of its depositors and customers; and therefore CBB acted contrary to the section and ultra vires.

7. That the Directives are disproportionate and are more than was necessary in that: (a) BBL increased its

shareholding in BCBL and this gave the CBB the consolidated supervision it required. Therefore the directives were not necessary;

(b) The Directives are disproportionate to deal with parallel banking and exceeded what was necessary;

(c) The Directives are disproportionate unlawful and more than was necessary as they require BBL to get permission from the bank for everyday transactions;

(d) The CBB should have first approached the FSC before issuing the Directives as recommended by the Basel Working Group. By not previously approaching the FSC the CBB acted disproportionately and exceeded what was necessary.

8. The CBB adopted an unfair procedure when it failed to give claimants a

21

proposed text of the Directives prior to the issue of the Directives thereby preventing the claimants of the opportunity to comment or respond on the Directives before their issue, in breach of the rules of natural justices.

9. The decrease in BBL shareholding in BCBL, though it occurred in October 2008, it took one year for the CBB to express it concerns in relation to the decrease which the CBB states removed BCBL from the status of “affiliate” of BBL under 36(1) of BFIA. Though BBL increased its shareholding in BCBL thus restoring BCBL to the status of “affiliate” and removing the concerns of CBB that a parallel banking structure exists. There was therefore no need for the Directives.

10. BBL provided objections without previously given a proposed text of the Directives by CBB and this was unfair and unreasonable.

11. The Directives are unworkable because the consent of CBB would be needed for everyday transactions and therefore the Directives are unreasonable.

12. That BBL does not have the power to comply with much of the Directives, and therefore the CBB erred in law as to the ability of BBL to undertake some of the requirements of the Directives.

13. There were erroneous views of the facts by CBB­ (a) when it concluded that the BBL

directed its reduction of shares in BCBL when the reduction was as a result of the conversion by a holder of $100 million of preference shares to ordinary shares.

(b) when it made an assertion, which was “apparently” the basis for issuing the Directives, that the MOU between FSC and CBB was

22

entered into on the condition that BBL continued to hold 100% shares in BCBL when there was no “clear evidence that such a condition ever existed.”

(c) when it held that consolidated supervision was rejected by the claimants.

14. That CBB took irrelevant matters into consideration when it concerned itself about transactions between BBL and BCBL, although BBL told CBB that there was “no inter company indebtedness or inter company dealings between BBL and BCBL and that agreement has been reached between the two banks that their position will not change for the time being.

15. That CBB failed to consider relevant considerations as outlined in paragraph 58 of claimants skeleton arguments.

16. That the Directives are not aimed at a legitimate goal. For instance, the CBB refusal to accept that the increase of BBL shareholding in BCBL from 23% to 25% addressed the CBB concerns on parallel banking.

17. It was also submitted that, in relation to the Revisions, the Central Bank had no power under the IBA to issue revised terms and conditions of the BCBIL licence, which in fact replaced the BCBIL licence, since this power was given to the Minister under section 27(1) of the IBA and not CBB.

23

27. The above paragraphs 1 to 17 are allegations of ultra vires behaviour

of the CBB made by the claimants. In essence, the claimants allege

that the CBB when it issued the Directives and the Revisions did not

act in accordance with the legal requirements of the BFIA and IBA

and therefore the Directives and the Revision cannot stand. In other

words, the allegations are that the CBB when it issued the Directives

and the Revisions did not act within the statutory powers conferred by

the above Acts: that the CBB exceeded its powers or jurisdiction and

therefore acted ultra vires. I will hereinafter refer to the said

paragraphs as the “Ultra Vires Allegations.”

28. These Ultra Vires Allegations are the real issues to be determined,

which raise a challenge to the jurisdiction of CBB; and the question is

whether the statutory appeal procedure is suitable to determine them.

It is true that a member of the Appeal Board is a judge of the Supreme

Court sitting with two other persons with training in accounting and

finance. According to “the composition of the board, the judge would

likely be the only member with legal knowledge”: see Carey JA in

Belize Bank Limited v. Central Bank of Belize No. 25 of 2008

Court of Appeal Belize (unreported). To decide the Ultra Vires

Allegations requires a person with knowledge of, and training and

experience in Public Law issues. On the Appeal Board there is only

one such person, – the judge – and decisions of the Board are to be

taken by a majority, not by any single person. For this reason, and the

other reasons above, including the discretion to appeal to the Appeal

Board, I do not find that the Appeal Board as a body is suitable to

determine the Ultra Vires Allegations; and I also do not find that the

24

claimants have to follow the appeal process before approaching the

Supreme Court.

The Injunction

29. At this interlocutory stage of an application for an injunction, it is not

the function of court to make a decision on the Ultra Vires

Allegations, or to make a decision whether the Directives and

Revisions are ultra vires the BFIA or the IBA. These decisions are for

the trial judge. At this interlocutory stage, the court must no doubt be

satisfied that the claim is not frivolous or vexatious; in other words,

that there are serious questions to be tried. One of the main reasons

for the legal requirement of requiring an undertaking as to damages

upon the grant of an interlocutory injunction, is that it aided the court

in doing that which was its great object, namely abstaining from

expressing any opinion upon the merits of the case until the hearing.

30. American Cyanamid 1975 AC 396 at page 408 establishes, in

addition to the requirement of a serious question to be tried, that the

plaintiff must show at the interlocutory stage that there is a real

prospect of succeeding in his claim for a permanent injunction at the

trial. Browne LJ in Smith v. Inner London Education Authority

1978 1 AER 411 at page 419 stated that the real prospect requirement

in Cyanamid was not meant to state a different test from the serious

question to be tried test. But it seems that the serious question to be

tried test is not necessarily synonymous with the real prospect of

succeeding for a permanent injunction at the trial test. Denning LJ

seems to see a difference between the two tests; for he states, in

25

relation to cases against local authorities in Public Law that “A local

authority should not be restrained, even by an interlocutory injunction,

from exercising its statutory powers or doing its duty towards the

public at large, unless the plaintiff shows that he has a real prospect of

succeeding in his claim for a permanent injunction at the trial”: see

Smith v. Inner London Education Authority above at page 418.

31. The test of a real prospect of the claimant succeeding in the claim for

permanent injunction at the trial, if laid down as the general principle

in this regard, has in its favour, the potential of causing a greater

resolution of matters at the interlocutory stage; and in this regard may

be more effective than the serious question to be tried test which, it

seems to me, is different from the real prospect test. But I am bound

by several decisions of the Court of Appeal of Belize, including the

most recent decision in Dean Boyce v. The Attorney General of

Belize and the Minister of Public Utilities No. 31 of 2010

(unreported) in which Morrison JA in chambers endorsed the serious

question to be tried test.

32. The Utra Vires Allegations, in my view, raise serious questions to be

tried. Since there are serious questions to be tried, the court must

move to the second stage of the enquiry, whether damages would be

an adequate remedy, because if damages would be an adequate

remedy, and the defendant would be in a position to pay the damages,

even though there are serious questions to be tried, no interlocutory

injunction should normally be granted.

26

33. The claimants state that the Directives would cause damage to their

reputation, standing in the business community, loss of business and

depositors and customers; and damage to them by the likelihood of

criminal proceedings, if the Directives are enforced pending the

hearing and determination of the claim. The directives could,

according to the claimants, lead to a loss of confidence in the

claimants by the public, and this would have an effect on their

business and customers, and may result in them banking elsewhere.

The claimants therefore submit that damages are not an adequate

remedy.

34. As indicated above, the fact that the CBB issued the Directives to the

claimants was published in newspapers with wide circulation in

Belize and was also published in United Kingdom. These

publications brought the issuing of the Directives to the knowledge of

members of the Belizean public and elsewhere. The publication in

Belize in the Guardian newspaper carried the headline “Belize Bank

puts depositors money at risk’? The Governor of the CBB, in an

affidavit, states that “no one has claimed that the publications have

had the slightest impact on the bank.” How the Governor came to this

conclusion is unknown. But the claimants, since the publications,

have not produced detailed evidence of the above alleged damage to

their business and reputation, though the claimants allege prior to the

publications, that they would suffer reputational and business harm if

the directives are enforced pending the determination of the claim.

The argument is that if the Directives are enforced this would come to

the attention of the public; and hence the claimants would suffer

27

business and reputational harm for which damages would not be an

adequate remedy.

35. Mr. Guseppi has deposed elaborately in his affidavits of the damage

that would occur to the claimants business and reputation if the

directives are enforced. He deposed that the claimants would suffer

reputational harm, would lose customers and depositors; there would

be administrative problems, and there would be delays in processing

transactions and possible criminal sanctions if the directives are

enforced. These contentions were made prior to the publication of the

fact of the Directives in the newspapers in the United Kingdom and

Belize. But Mr. Peralta, the Secretary of BBL, in an affidavit sworn

after the publications, did not depose to delays or loss of business, loss

of customers and depositors of the claimants or financial loss or that

the claimants reputation suffered harm or administrative problems

because of the publications of the fact of the Directives in the

newspapers. In relation to the publications, this is what Mr. Peralta

swore:

“The Claimants have also received calls from customers who have raised concerns regarding the soundness of BBL following the publication of The Guardian article. The Claimants are concerned that this article demonstrates how information obtained by the media (and alarmist headlines) can have the effect of diminishing the bank’s reputation in the view of the public.”

28

36. What amount of customers called? What were the specific details of

their concerns? Did the customers withdraw their business with the

claimant or claimants? Did the claimants lose business, depositors or

customers? Did the customers complain of delays in transactions?

Did the claimants suffer financially? Answers to these questions

would have assisted the court. The burden is on the claimants to

prove that they suffered or would suffer loss of reputation, loss of

business, customers, depositors as a result of the fact of the

publications. After the said publications under the alarming caption

one would have expected, considering the evidence of Mr. Guiseppi

given prior to the publications, that Mr. Peralta would have given the

court detailed evidence of the extent of damage, if any, suffered by the

claimants as a result of the publications. From Mr. Peralta’s

evidence at this stage, I cannot say, with some accuracy the damage

the claimants suffered by the publications, though concerns were

raised. In Graham v. Dedderfield and other 1992 Fleet Street

Report p. 313 at p. 315 Dillion L.J. agreed that in deciding whether

damages would be an adequate remedy in the context of an

application for an interlocutory injunction, there must be some

material from which the court could say “with some accuracy” the

damage suffered by the Plaintiff.

37. Mr. Guiseppi in an affidavit dated 16 th February, 2011 at paragraph

57 referred to a letter written by a US bank, (not­named) to BBL for

confirmation that substantial deposits of BBL were not at risk because

of what the US bank was seeing in the Belizean Press. This letter, a

copy of which was not exhibited, could not have been referring to the

29

publication in the newspaper of the fact of the Directives, because the

affidavit of Mr. Guiseppi was filed before the said publications which

was on March 13 th 2011.

38. On the facts at this stage, I cannot say, with any accuracy, the damage

that would be suffered by either party; and I have doubts whether

damages would be an adequate remedy. Lord Diplock in Cyanamid

above at p 511 states that it is “where there is doubt as to the adequacy

of the respective remedies in damages available to either party or to

both that the question of balance convenience arises.”

39. I now go to consider the balance of convenience or balance of justice

as it is sometimes called. The principle to be applied under the

heading balance of convenience was given in D.T.C. v. Phang 1962

LRBG 378 at p 384 where it is stated that “the Court, in determining

whether an interlocutory injunction should be granted, takes into

consideration the balance of convenience to the parties and the nature

of the injury which the defendant, on the one hand, would suffer if the

injunction was granted and he should ultimately turn out to be right,

and that which the plaintiff, on the other hand, might sustain if the

injunction was refused and he should ultimately turn out to be right.”.

40. The burden of proof that the inconvenience which the claimant will

suffer by the refusal of the injunction is greater than that which the

defendant will suffer, if it is granted, lies on the claimant. The court

must consider the evidence on the affidavits and make a decision as to

who would suffer the greater disadvantage if the injunction was or

30

was not granted. But in making such a decision it “would be unwise

to attempt even to list all the various matters which may need to be

taken into consideration in deciding where the balance lies, let alone

to suggest the relevant weight to be attached to them: see American

Cyanamid above at p 512.

41. In National Commercial Bank of Jamaica Ltd. v. Olint, Privy

Council Appeal No. 61 of 2008, Lord Hoffmann said that among the

matters which the court may take into account in deciding where the

balance lies, are “the prejudice which the plaintiff may suffer if no

injunction is granted or the defendant may suffer if it is; the likelihood

of such prejudice actually occurring; the extent to which it may be

compensated by an award of damages or enforcement of the cross­

undertaking; the likelihood of either party being able to satisfy such

an award; and the likelihood that the injunction will turn out to have

been wrongly granted or withheld, that is to say, the court’s opinion of

the relative strength of the parties’ cases.”

42. The claimants state that they will suffer serious consequence if the

Directives are enforced as shown above. One such consequence is

that they and their officers will be exposed to the risk of criminal

prosecution under section 36(7) of the BFIA, which states generally

that any person who fails to comply with a directive commits an

offence and is liable to a fine or imprisonment or both. Secondly

Directive (i) requires the BBL to take immediate steps to implement

that directive and the claimants submit it is impossible to comply with

31

this immediacy requirement because for BBL to divest itself of its

shareholding in BCB is impossible to achieve on its own because it

has to find a buyer and obtain FSC approval and this cannot be

achieved “immediately.” Moreover, says the claimant, the Directives

are unworkable because it is not viable for BBL to have to request the

permission of the CBB to carry out everyday transactions covered by

the Directives. Moreover, the directive that no person is allowed to be

a director or officer of BBL and BCB would affect management

personnel and structure of these banks and this cannot be implemented

immediately. The claimants say that compliance with the Directives

would have substantial adverse effects on the claimants in the conduct

of their business. Mr. Guiseppi in addition to the above, outlined the

adverse effects in his first affidavit. In addition the claimants claim,

as we saw above, economic and reputational harm as well of the loss

of customers and depositors if the Directives are enforced. The

claimants therefore submit that the balance of convenience lies on

their side and the injunction should be continued.

43. In relation to the allegations of reputational harm and loss of business,

customers and depositors that the claimants will suffer, we have seen

above, that the fact of the directives were published and there is no

detailed evidence from the claimants that the publications have caused

loss of business, loss of their customers or the depositors; or caused

delays in transactions or financial loss or reputational damage.

Moreover, the Directives require that immediate steps be taken to

implement the Directive No. 1, not that the Directive be implemented

immediately as was submitted. A careful look at, for instance

32

Directive No. 1, shows that the claimants are restricted from engaging

in certain transactions, “without the prior written approval of the

Central Bank,” to use the words of the Directive 1: see paragraph (ii)

(iii) and (iv). The Directive intends that the claimants may request

such approval for transactions; and the Directive therefore provides as

follows:

“Request for any such transactions as described in ii), iii) and iv) above should be presented to the Director Financial Sector Supervision at the Central Bank building on Gabourel Lane, Belize City, Belize with all supporting documentation. The Central Bank upon the request of the Belize Bank Limited may grant standing approval for small recurring transactions at its discretion.

This directive comes into effect immediately and the restrictions contained in ii), iii), iv) and v) above will remain in place until such time as the Central Bank is satisfied that BCB Holdings Limited has effectively relinquished ownership control of the British Caribbean Bank Limited. The Central Bank may vary this directive or any part thereof as it may deem fit.”

44. Under the Directive No. 1 the claimant can request, for instance,

relief from any everyday transactions, any immediacy requirements

they observe in the Directive.

45. On the other hand, the CBB submits that the balance of convenience

is in its favour. The CBB refers to the effects of parallel banking on

33

the CBB and the public. The Governor of the CBB in his evidence

given by affidavit highlighted problems associated with parallel

banking as follows:

“Parallel banking is undesirable in and of itself. The particular risks associated with parallel­owned banking structures stem primarily from the possibility that officers or directors of one of the parallel banks will expose the bank, either intentionally or unintentionally, to higher risks through transactions with related parallel banks. There is a risk that transactions may not be conducted at arms­length, or that the relationship may be used to fabricate the financial position of one or more of the institutions. For instance, the following may result:

“∙ One parallel bank may seek to evade legal and other regulatory lending limits by carrying out transactions through its related parallel banking, thereby increasing concentration risk.

∙ Assets, earning and losses may be artificially allocated between parallel banks. Similarly, low­ quality assets and problems loans can be shifted between parallel banks to manipulate earning or losses and to avoid regulatory scrutiny.

∙ Capital can be generated artificially through the use of stock purchase loan from one parallel bank to the

34

other. As a result, capital for one of the parallel banks is increased even though there is no external capital injection into either bank.

∙ One of the parallel banks may be the conduit or participant in a transaction that violates local law or the laws of a foreign country, or that is designed to benefit one of the banks, to the detriment of the other.

∙ One bank that experiences financial difficulties may pressure the related institution to provide liquidity or other support in excess of legal limits or prudential norms.

∙ Money­laundering concerns may be heightened, especially when the foreign parallel bank is situated in a country where anti­money laundering standards are not robust.

The parallel banking structure also facilitates decision by boards of directors and or officers common to both banks that are not necessarily in the best interests of the supervised bank but not subject to Central Bank control because made by a bank which is not subject to the Central Bank’s consolidated supervision.”

46. These problems could have an impact on CBB and on the communities

or the public in which one or more of the banks operate. The Governor

also swore that in consideration of the best interest of the banking

35

system in Belize, the stability of BBL, its depositors and creditors,

these contributed to the issuing of the Directives. The Directives were

issued to protect the banking system and depositors and creditors and

members of the public. The Governor swore that the Directives and the

Revisions are designed to prevent parallel banking. As a regulator, the

CBB has a duty to protect the public from such problems or impact of

parallel banking; and this has to be considered, as well as the claimants

concerns above, on making a decision on where the balance of

convenience lies or which course seems likely to cause the least

irremediable prejudice to one party or the other.

47. The Central Bank, a public authority, has by statute a public role or

objective to achieve. Within the context of the economic policy of the

Government, the CBB has as its objectives, fostering monetary

stability, and promoting credit and exchange conditions conducive to

the growth of the economy of Belize: see section 6 of the Central Bank

of Belize Act Chapter 262. The claimants are public companies, but

their general role is not, statutorily speaking, as wide as the statutorily

objectives of the CBB. Bearing in mind the lack of detailed evidence of

harm to the business and reputation of the claimants after the

publications, and bearing in mind the opportunity in the directive for

the claimants to apply for written approval to conduct matters in the

directive 1: and also bearing in mind the evidence of the Governor on

problems associated with parallel banking; and also bearing in mind the

claimants many concerns referred to above, including harm to their

reputation and business, loss of customers and depositors and possible

36

criminal sanctions against them, where does the balance of convenience

lie?

48. It is required in cases where a party is a public authority, carrying out

general duties of a public nature, conferred upon it by statute, that the

court “must look at the balance of convenience more widely and take

into account the interest of the public in general to whom these duties

are owed”: See Brown LJ in Smith v. Inner London Education

authority 1978 1 A.E.R. 411 at page 422, approved by Lord Goff in

Exp Factorame Ltd. (N0. 2) 1991 1 AC 603. In considering the

balance of convenience in relation to a public authority discharging

statutory duties particular stress should be placed upon the importance

of upholding the law of the land, in the public interest, bearing in mind

the need for stability in our society and the duty placed upon certain

authorities to enforce the law in the public interest. Lord Goff in Exp

Factorame said at p 673:­

“Particular stress should be placed upon the importance of upholding the law of the land, in the public interest, bearing in mind the need for stability in our society, and the duty placed upon certain authorities to enforce the law in the public interest. This is of itself an important factor to be weighed in the balance when assessing the balance of convenience.”

49. A fundamental principle to be considered when adjudicating on

whether or not to grant an interlocutory injunction is that the court

37

should take whichever course appears to carry the lower risk of

injustice if it should turn out to have been wrongly granted: see Lord

Jauncey in Exp Factorame above at page 683. This is generally

consistent with the views expressed by Lord Hoffman in Olint above

that the “basic principle is that the court should take whichever course

seems likely to cause the least irremediable prejudice to one party or

the other.” By statute the court may grant an injunction in all cases in

which it appears just or convenient to do so: see section 27(1) of the

Supreme Court of Judicature, Act Chapter 91.

50. I think when one considers the problems associated with parallel

banking as sworn in evidence to by the Governor above, the opinions

of their Lordships in Factorame and Smith above in relation to the

public interest; the statutory role of Central Bank, the provisions

under the Directives 1 for relief from the terms of that Directive; that

although the fact of the Directives were published, there is no detailed

evidence after the publications of damage to the reputation of the

claimants or their business or any delay, loss of customers or

depositors has occurred; and also considering the full text of the

directives, and the submissions of the claimants above including

reputational harm, loss of business, and loss of customers and

depositors and possible criminal prosecution, what is the just or

convenient thing to do? Where does the balance of convenience lie?

Should the defendant be prevented from carrying out its statutory

duty, taking into account the interest of the public in general to whom

the duty is owed? What is the just or convenient thing to do based on

the evidence at this stage? Doing the best I can, on the evidence at

38

this stage, I think the balance of convenience lies in favour of the

defendant.

Conclusion

51. I therefore make the following orders:

(1) The application for an order that the first claimant to follow the

statutory appeal procedures under the Banks and Financial

Institution Act before approaching the Supreme Court is

dismissed.

(2) The orders and the injunctions made in this matter dated 15 th

February, 2011 and perfected on 17 th February, 2011 are

discharged.

(3) The claimants shall pay costs to the defendant to be agreed or

taxed.

Oswell Legall JUDGE OF THE SUPREME COURT

25 th May, 2011

SEE APPENDIX

ITEM A Paragraph 10

Directives and Revisions

ITEM B Paragraph 13

Orders

P.T.O.