Bahamas High Court Explains Why It Dismissed Suisse Security Bank Appeal

High Court Explains Why It Dismissed Suisse Security Bank Appeal





By Candia Dames

Nassau, Bahamas

15th November 2004




The Governor of the Central Bank acted in conformity with the law when he revoked the license of Suisse Security Bank & Trust Ltd. (SSBT) more than three years ago, the Court of Appeal says in its newly released written response to SSBT’s appeal.

The high court on June 29, 2004 reaffirmed the 2003 judgment of Supreme Court Justice Austin Davis who ruled that SSBT failed to prove any grounds of its appeal.

Controversial Iranian businessman Mohammed Harajchi, who is still fighting to get his license back, owns the bank.

The Governor revoked the bank’s license on April 2, 2001 after determining that SSBT was carrying on its business in a manner detrimental to the public interest and the interest of its depositors or other creditors.

In the written response, Justice Milton L. Ganpatsingh said despite the submission of SSBT, the Governor could not have been acting in bad faith when he revoked the license.

The main reasons stated for the revocation included the failure of SSBT to report that US $1.6 million of its assets had been frozen in a trust account pending the outcome of litigation in the United States; and that US $3 million of SSBT’s assets had been attached in an account at a brokerage firm in New York in an action to which the company was a third party defendant.

These sums together made up 74 percent of the bank’s capital base.

The reasons also included a failure to provide the Central Bank with evidence of collateral to its satisfaction and evidence that the risk presented by the potential loss of US $3 million was covered by insurance.

The Central Bank has also reported that Mr. Harajchi’s bank continuously failed to provide it with a financial statement.

The first ground of appeal brought by attorneys for SSBT was whether the governor’s power to suspend and revoke the license of SSBT was temporarily suspended by an interlocutory injunction granted by Supreme Court Justice Hartman Longley on March 2, 2001.

But the Court of Appeal said this ground for appeal failed because there were more serious issues outside the limited terms or scope of the injunction and the Central Bank still possessed its general regulator powers and was free to act on them.

The second ground of appeal was that Justice Davis erred in holding that the governor’s power to suspend and revoke SSBT’s license was exercised in accordance with the Bank and Trust Companies Act 2000.

SSBT argues that under law, it should have received notice about the revocation and should have been afforded the opportunity to state its objection in writing. But the court said this was not necessary, as pointed out by the Central Bank, because of certain practical reasons, including preventing loss to depositors and a run on the bank.

SSBT also maintained that the Central Bank Governor failed to give any or adequate reasons as required under law for revoking the license.

But the Court of Appeal, in support of Justice Davis’s view, disagreed.

It pointed out that SSBT had been made aware of all the concerns of the Central Bank and was not only “adversarial, but disingenuous in its response, so much so that it had initiated judicial review proceedings.”

“We do not agree that it was essential for the governor to set out a chronology of events touching and concerning the issues in order to establish that the regulatory demands had not been complied with,” the response from the high court said.

SSBT’s attorneys also submitted that there was no rational basis for the governor’s decision and that he failed to take into account certain important considerations before making his decision.

But the Court of Appeal held that the failure of SSBT to comply with certain regulatory requirements and the failure of the bank to inform the Central Bank of the US litigation involving US $3 million of the bank’s assets were “relevant considerations” in the governor’s determination.

“Both of those failures were as much a fact as the state of one’s digestion and demonstrated conduct which fell below the statutory requirements,” the judgment said.

Another ground of appeal was that Justice Davis erred in law in holding that the Governor did not act unreasonably or abused his power or acted in bad faith.

But the Court of Appeal justices said they can only judge the governor’s conduct in light of the prevailing circumstances.

“In the first place, it was entirely a matter within the Governor’s discretion to decide on reasonable grounds firstly, what would be required to protect the capital base of SSBT in terms of collateral to meet regulatory requirements;

“And secondly, what arrangement it would be necessary to put in place for Central Bank to obtain reliable and full information, which SSBT had failed to provide so far, concerning the US litigations,” the judgment said.

The final ground of the SSBT appeal was that the Supreme Court Justice erred in holding that the notice issued was not unlawful in that an officer of the Central Bank issued it.

But the judgment of the Court of Appeal said, “We do not understand the Governor to have delegated his power to suspend and revoke in the circumstances of this case by virtue of the fact that the notices were attached to a letter signed by an officer of Central Bank.”

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