Sagicor gets $4b reprieve
Published:Thursday | May 14, 2015 | 12:19 PMMcPherse Thompson
The Court of Appeal has granted Sagicor Bank Jamaica Limited a stay on a $4 billion judgment in favour of contractor Y.P. Seaton, Y.P. Seaton and Associates and associated company, Earthcrane Haulage Limited, pending the determination of the appeal.
Justice Marva McDonald-Bishop who heard the application, also refused to strike out an affidavit given by Financial Secretary Devon Rowe, saying the Government has an interest in the enforcement of the judgment by virtue of an indemnity it granted RBTT Bank Jamaica at the time it acquired Union Bank.
Union Bank was formed from the merger of several failed banks, including Eagle Commer-cial, that were taken over by the Government in the 1990s.
The Seaton claim, which resulted in the judgment, originated with Eagle Commercial Bank some 22 years ago.
McDonald-Bishop ruled that by virtue of the indemnity the Government is, ultimately, the party to satisfy the judgment debt awarded in favour of the Seaton parties against RBTT Bank. RBTT Bank was acquired by Royal Bank of Canada and rebranded RBC Royal Bank. RBC Jamaica was acquired by Sagicor Group last year and merged with Sagicor Bank.
"All the adverse effects the arrangement to satisfy the judgment could have on the budgetary and fiscal affairs of Government, and the country on a whole, could well be far-reaching and irreversible if the appeal succeeds," said the judge.
The case emanated from a lawsuit filed by Eagle in the Supreme Court in 1993 against the Seaton parties, seeking to recover money the bank said it had erroneously overpaid to their accounts.
frozen accounts
Eagle claimed recovery of the overpayments with interest and a declaration that it was lawfully entitled to debit $15,254,583.69 from accounts in the name of Y.P. Seaton. Eagle had also frozen several of Seaton's personal accounts.
Seaton thereafter started proceedings against Eagle claiming that the Bank had wrongly frozen five foreign currency accounts in his name.
He claimed for payment of the principal sums in those accounts with interest, damages and an account in relation to the five accounts. Seaton claimed for an account on the basis that although Eagle had repaid some of the money it had frozen, he was not sure if he had received all of it, inclusive of interest.
RBTT was subsequently substituted for Eagle on the claims.
In a March 17, 2014 judgment handed down by Justice Bryan Sykes, the court refused to grant the declarations sought by RBTT and instead ordered the bank to repay Seaton with interest.
Sykes also ordered the bank to pay Seaton any sum found due and owing to him with interest.
Justice Sykes, at a hearing to consider the basis on which interest should be calculated, ordered in a second judgment on September 24, 2014 that the bank pay monthly compound interest on the sum owed at 27.3 per cent.
The accounting exercise started in the Supreme Court, with the Seaton parties submitting a summary of calculation of their claim for principal and interest of about $4 billion. This was arrived at after a computation done on the basis of compound interest at the rate stipulated by Justice Sykes.
RBTT filed an appeal challenging the orders contained in the two judgments and Sagicor later filed its application for a stay of execution pending the hearing of the appeal.
The entry of Sagicor's name on the record led the Seaton parties to argue that the bank was without locus standi in the proceedings and that the application should be dismissed since RBTT had ceased to exist in 2011.
However, Justice McDonald-Bishop ruled that Sagicor has locus standi and therefore a proper party to bring the appeal.
Despite name changes from RBTT to RBC Royal Bank in June 2011 and then to Sagicor in June 2014, the court records were never changed. Justice Sykes' judgments were entered in RBTT's name. McDonald-Bishop has ordered that the name be changed from RBTT to Sagicor.
The Seaton parties had also brought an application to strike out or to rule as inadmissible an affidavit given by the Financial Secretary and filed by Sagicor in support of its application.
Rowe's affidavit was filed as a result of the Government's interest and was aimed at showing the effect enforcement of the judgment would have on the state and the country if execution of the judgment was not stayed before the appeal is determined.
Seaton is being represented by Pamela Benka-Coker QC, while Michael Hylton, QC represented Sagicor. Hylton argued that Seaton had written the minister of finance and the Governor of the Bank of Jamaica concerning the existence of the judgment debt, and that by doing so, he had acknowledged the Government's interest in the proceedings.
Justice McDonald-Bishop said it was obvious on all the evidence that it is the Government, which will ultimately be liable for satisfaction of the judgment debt.
One of Sagicor's main complaints, which Justice McDonald-Bishop said may affect the quantum of the final sum to be paid, was whether compound interest could be awarded to a party who had not proved a claim for compound interest.
Sagicor has argued that a $4 billion judgement would harm its image, but Justice McDonald-Bishop said she was convinced by the existing evidence that payment of the sum would cause irreparable reputational damage to the bank.
"What I do accept is that the sum is 'a staggering' sum as the learned trial judge himself described it," she said.
"There is also a real and present risk, given the bureaucratic procedures of the Government, as described by Mr Rowe in his affidavit, that the Government would not be able to indemnify Sagicor within such a short time so as to stave off any effect the withdrawal of approximately $4 billion from its coffers could have on its resources," she added.
"I think it safe to conclude that Sagicor could well be adversely affected in a material way if the sum being claimed is paid before the appeal is disposed of."
The judge mentioned, however, that while the effect of the enforcement of the judgment on the Government is a relevant consideration, it cannot be used to override the rights and interests of a judgment creditor.
Nevertheless, she said, "we are not at the stage where we can safely say" the Seaton parties are conclusively entitled to the almost $4 billion submitted in their claim.
"In the light of such state of affairs, it would be grossly impracticable for the Government to be placed in a position to have to satisfy an indemnity to the tune of $4 billion which, in the end, could turn out to be unwarranted," said McDonald-Bishop.