IN THE HIGH COURT OF JUSTICE BETWEEN (1) CENTRAL BANK OF TRINIDAD AND TOBAGO (2) COLONIAL LIFE INSURANCE COMPANY (TRINIDAD) LIMITED AND

Transcription

1 REPUBLIC OF TRINIDAD AND TOBAGO CV IN THE HIGH COURT OF JUSTICE BETWEEN (1) CENTRAL BANK OF TRINIDAD AND TOBAGO (2) COLONIAL LIFE INSURANCE COMPANY (TRINIDAD) LIMITED AND (1) LAWRENCE DUPREY (2) LOUIS ANDRE MONTEIL (3) CL FINANCIAL LIMITED (4) DALCO CAPITAL MANAGEMENT LIMITED (5) STONE STREET CAPITAL LIMITED (6) GITA SAKAL Claimants Defendants BEFORE THE HONOURABLE MR. JUSTICE ROBIN N. MOHAMMED Appearances: Mr. B. St. Michael Hylton, Q.C., Mr. Ian Benjamin, Mr. Jagdeo Singh and Mr. Roger Kawalsingh instructed by Ms. Elena Araujo for the Claimants Mr. Martin Daly, S.C., and Mr. Jason Mootoo instructed by Ms. Sarah Sinanan for the 2 nd and 5 th Defendants Mr. John Jeremie S.C., and Mr. Frederick Gilkes instructed by Ms. Kahaya Nanhu for the 6 th Defendant DECISION ON CLAIMANTS APPLICATIONS FOR PERMISSION TO FILE REPLIES TO AMENDED DEFENCES OF THE 2 ND AND 5 TH DEFENDANTS AND DEFENCE OF THE 6 TH DEFENDANT Page 1 of 37

2 Introduction and Applications 1. Before this Court are the applications of the Claimants filed on the 16 th December 2013 for permission to file Replies to the Amended Defence of the 1 st and 4 th Defendants 1, the Amended Defence of 2 nd and 5 th Defendants 2, the Amended Defence 3 of the Third Defendant 4 and the Defence of the 6 th Defendant Pursuant to the Order of this Court dated the 17 th January, 2014 the Claimants filed affidavits containing their proposed Replies in final form to the aforementioned Defences on the 19 th February, On the 18 th March, 2014 the 2 nd and 5 th Defendants filed written submissions in opposition to the Claimants application for permission to file a Reply. Written submissions in opposition to the said application were also filed by the 6 th Defendant on the 21 st March Revised submissions of the 6 th Defendant were thereafter filed on the 24 th March, Permission was granted to the 3 rd Defendant to extend the time for filing of written submissions in opposition to the Claimants application. However, no such submissions were filed. 3. On the 17 th April, 2014, the Claimants filed submissions in support of their applications for permission to file replies to the Defence of the 6 th Defendant and the Amended Defence of the 2 nd and 5 th Defendants. On the 8 th May, 2014, Counsel for the 2 nd and 5 th Defendants and Counsel for the 6 th Defendants orally addressed the Court on the issue. On that occasion, Counsel for the 1 st and 4 th Defendants and Counsel for the 3 rd Defendant indicated to this Court that they had no objections to the Claimants application for permission to file replies. Accordingly, it is the paragraphs in issue in the proposed Reply to the Amended Defence of the 2 nd and 5 th Defendants and the Defence of the 6 th Defendant to which this Court must now address its mind. Abbreviations 4. The following abbreviations are used in this judgment: CPR: Civil Proceedings Rules 1998 CBTT: The Central Bank of Trinidad and Tobago 1 Filed on the 18 th September, Filed on the 9 th September, The Claimants Notice of Application erroneously referred to the Amended Defence of the 5 th September, With leave of the Court, the 3 rd Defendant filed a Re-Amended Defence on the 5 th February, In the circumstances, it will be taken that the Claimants Notice of Application applies to the Re-Amended Defence. 4 Filed on the 21 st September, Filed on the 16 th September, Page 2 of 37

3 RASOC: Re-amended Statement of Case CA: The Companies Act, Chap. 81:01 CL: Common law CLICO: Colonial Life Insurance Company of Trinidad & Tobago CIB: Clico Investment Bank Limited CLF: CL Financial Limited CLF group: CLF group companies LDM: Lascelles, demercado and Company Limited BSD: Burn Stewart Distillers Limited MHTL: Methanol Holdings (Trinidad) Limited HMB: Home Mortgage Bank Proposed Reply to the 2 nd and 5 th Defendants Amended Defence 5. In their written submissions filed on the 18 th March, 2014, the 2 nd and 5 th Defendants indicated that save for paragraphs 8, 11, 12, 14 and 19 of the proposed Reply, they take no objection to the draft Reply. Paragraph 8 6. Paragraph 8 of the draft Reply states as follows: As to paragraphs 41 of the Amended Defence the Claimants say that the Defendant Monteil owed to CLICO a statutory duty not to self-deal which: a. Is found in sections 93 to 99 of the Companies Act; b. Requires each CLICO director to make written disclosure of the nature and extent of his or her interest; c. Requires consideration as to whether the transaction ought to be approved by the board of directors or its shareholders; d. In any event requires that the transaction ought not to be unreasonable and/or unfair to CLICO; e. Makes no provision for what is said to be technical breach by non-disclosure; and The Claimants further say that where the CLICO director has failed to make disclosure the Court has power to set aside the transaction. 7. The 2 nd and 5 th Defendants submit that the plea at paragraph 8 is ostensibly introduced by the Claimants in answer to paragraph 41 of their Amended Defence. It opens with a positive assertion that the 2 nd Defendant was under a statutory duty not to self-deal and thereafter proceeds to set out what the Claimants contend are certain requirements of that statutory duty. The Defendants submit that the said paragraph 8, when considered against the backdrop of both paragraph 69 of the RASOC and paragraph 41 of the Amended Page 3 of 37

4 Defence of these Defendants, amounts to a wrongful attempt to introduce matters which the Claimants should have frontally introduced in the RASOC and/or attempt by the Claimants to wrongly bolster matters pleaded by them in the RASOC. 8. In this regard, the Defendants state that nowhere in the RASOC did the Claimants contend that the 2 nd Defendant was under a statutory duty not to self-deal. Whilst the Claimant s (sic) did contend that the 2 nd Defendant and other directors of CLICO were under a duty not to self-deal, they contended that such duty arose as a matter of common law by reason of, or as incidents of the directors Companies Act s. 60 and 99 duties and common law fiduciary, contractual and tortious duties (see paragraph 69(4) of the RASOC). Accordingly, the plea in the reply as to a statutory duty not to self-deal is a wholly new plea. 9. Paragraph 69(4) of the RASOC states as follows: Such duty ( no self-dealing duty ) arose by reason of, or as incidents of, the directors CA s.60 and 99 duties and CL fiduciary, contractual and tortious duties. The Defendants accept that the Claimants did indeed contend that the 2 nd Defendant and other directors were under a duty not to self-deal but submit that the Claimants RASOC was limited to such duty arising as by way of common law by reason of or as incidents of the CA s. 60 and s. 99 duties and common law fiduciary, contractual and tortious duties. However, insofar as the Defendants rely on paragraph 69(4) in support of this assertion, I am of the view that paragraph 69(4) is clear. It says that the duty not to self-deal arose by reason of, or as incidents of, s. 60 and s.99 of the Companies Act - which would constitute the statutory duty not to self-deal and CL fiduciary, contractual and tortious duties, the abbreviation CL referring to common law 6. Accordingly, as I see it, paragraph 69(4) of the RASOC refers to the duty not to self-deal arising by way of statute and arising by way of the common law. Accordingly, insofar as the 2 nd and 5 th Defendants claim that the RASOC did not contend that the 2 nd Defendant was under a statutory duty not to self-deal, I disagree. Consequently, I disagree with their submission that the plea in the Reply regarding a statutory duty not to self-deal constitutes a wholly new plea. 10. The 2 nd and 5 th Defendants further submit that alternatively, if the Court were the find that the Claimants have, by the RASOC, raised an allegation as to the breach of statutory duty on the part of the 2 nd Defendant by paragraph 69 of the RASOC (which it is not accepted they did): 6 See paragraph 64 of the RASOC. Page 4 of 37

5 (a) such duty ought to have conclusively been addressed therein by including all of the requirements and/or elements thereof and/or qualifications thereto and the Claimants should not now be allowed to supplement any shortcomings and/or deficiencies in their original plea through a Reply; and (b) the opening words of paragraph 8 which govern all the subparagraphs which follow are essentially a repetition of an allegation previously set out in the Statement of Case, that is, that the 2 nd Defendant as a director of CLICO was under a statutory duty not to self-deal. Such repetition is not permissible. 11. The Claimants submit that paragraph 8 of the proposed Reply deals with paragraph 41 of the Amended Defence. In paragraph 41 of the Amended Defence these Defendants admit that every director of CLICO was under a duty not to self deal and that such duty arises by reason, or as an incident of the s.60 and s.99 duties of the CA. The Defendants then state what they consider to be the legal content of the statutory duty not to self-deal. 12. The Claimants further submit that in the proposed Reply, they are simply putting forward what they consider to be the content of the Companies Act duty not to self-deal. They contend that by this averment, they seek to define the issues between these parties on this point by setting out their case. They further submit that this could not have been pleaded in the RASOC as the Claimants could not have known what these Defendants interpretation of the duty not to self-deal would be prior to the filing of the Amended Defence. 13. Regarding what a reply ought to contain, both the Claimants and the 2 nd and 5 th Defendants rely upon and agree with the dicta of Pemberton J. in Mayfair Knitting (Trinidad) Limited v. McFarlane s Design Studio Limited CV Therein the learned Judge stated that- The Claimant must set out his case. That is his duty. All relevant facts must be pleaded. That is mandated by CPR Part 8.6. The CPR introduced a fresh approach to the necessity to Reply to a Defence. Part provides that a Claimant may not file or serve a Reply without the consent of the Court or if it is filed before the case management conference with the consent of the Defendant. Further, the Court may only give permission at a case management conference. The application therefore must be heard as an inter partes hearing. Page 5 of 37

6 It is therefore clear that the ability of the Claimant to Reply is based on necessity, all with a view to saving costs a component of the court s duty to further the overriding objective of dealing with cases justly. What must a reply contain? I wish to associate myself with BLACKSTONE S statement of the learning on this matter:.a reply may respond to any matters raised in the defence which were not, and which should not have been, dealt with in the particulars of claim, and exists solely for the purpose of dealing disjunctively with matters which could not properly have been dealt with in the particulars of claim, but which require a response once they have been raised in the defence Once however, a defence has been raised which requires a response so that the issues between the parties can be defined, a reply becomes necessary for the purpose of setting out the Claimant s case on that point. The reply is, however, neither an opportunity to restate the claim, nor is it, nor should it be drafted as, a defence to a defence. 14. Bearing in mind the aforementioned, the Claimants had a duty to set out their case. This duty, as is set out at rule 8.6 of the CPR, is not circumscribed or conditional upon their knowledge of what the Defendants case would be. Having contended that the Defendants had a statutory duty not to self-deal, it was for the Claimants to flesh out that duty in their particulars of claim. Indeed, the Claimants had three opportunities to put forth their Statement of Case. They cannot now seek to do what ought to have been done there by relying essentially upon an inability at that point to anticipate the direction of the Defence. In any event, applying the test of necessity as alluded to by Pemberton J. in Mayfair Knitting, it may be said that it is not necessary for them to reply to the Defendants interpretation of the particular provisions in issue. Indeed, this is something that can be adequately dealt with by them during cross-examination. Having raised the statutory duty to self-deal in their Statement of Case, it would not be beyond their scope to challenge the Defendants interpretation of same at trial. In the circumstances, I am of the view that paragraph [8] of the Claimants proposed Reply should not be permitted. Paragraphs 11 and Paragraph 11 of the draft Reply is as follows: 11. As to paragraphs 55, 57, 79A, 88 and 89 of the Amended Defence the Claimants will rely upon the following matters among others to show that these Defendants had no or no reasonable belief that CIB, CLF and CLICO were financially sound: a. the CLF acquisitions were acquired substantially with funds provided to CLICO by its policy holders and mutual fund holders or with loans serviced from such funds; b. such funds did not attract regular or timely payments of interest or principal whether under the debentures or under the current account; Page 6 of 37

7 c. as a result each of the debentures was for increasing amounts and/or in partial substitution for unpaid debt; d. CLF s free assets were not sufficient to repay its debts; e. CLF s failure to repay in full or service regularly its debts meant these receivables were liable to have been impaired; f. CLICO s ability to generate additional income was restricted by its intercompany balances being non-interest bearing and no regular repayments being made; g. CLF had not paid any or any sufficient monies to CLICO so as to reduce its intercompany debt and exposure such that in or around the end of 2006 the Defendant Monteil was involved in the provision and transfer of assets for the purpose of reducing CLF s debenture related intercompany debt to CLICO; h. the impact of the 2006 and 2007 Credit Derivative agreements was to conceal the extent of the mutual fund guarantee losses on CLICO s books of account, (which it could not repay) and thus further exposed CLICO to CLF; i. CLICO did not have sufficient assets in its statutory fund in or around the end of 2006 such that the Defendant Monteil was involved in the identification of assets to be transferred for the purpose of improving CLICO s statutory fund position; j. CLICO failed to support its statutory fund over the years up until 2008; k. CLICO failed to value its admissible assets in the statutory fund in accordance with the Insurance Act; l. in any event CLICO assets were overstated and its insurance liabilities were understated in its IFRS accounts and Insurance Act accounts; m. the Defendant Monteil participated in the divestment of shares and/or other assets from CLICO to these Defendants contrary to CLICO s and its policyholders and mutual fund holders interests; n. neither CLICO s board nor its members in general meeting, approved the payment of dividends in 2005 and/or 2006; o. CLF and/or CIB were not able to repay their liabilities to CLICO when called upon to do so and had to approach the Central Bank for liquidity support and were bailed out by the Government of Trinidad and Tobago to date in excess of TT$16 billion; and p. PWC s management letters identifying issues of concern to CLF, CLICO and CIB. 16. Paragraph 12 of the proposed Reply states as follows- In the circumstances, these Defendants had no or no reasonable grounds for believing that a. CLF, CLICO or CIB were financially sound; or b. their assets exceeded their liabilities and/or that the realizable value of their assets would be more than the aggregate of their liabilities and stated capital of all classes; or Page 7 of 37

8 c. The CLF or CLICO or CIB audited accounts were reliable. 17. The Defendants submit that the matters at paragraph 11 which the Claimants contend show that the Defendants had no or no reasonable belief that CIB, CLF and CLICO were financially sound were extensively pursued by the Claimants in the RASOC 7 where the Claimants, with reference to a series of transactions, pleaded that the 2 nd Defendant knew or ought to have known that CIB, CLF and CLICO were unable to meet their respective liabilities. The Defendants contend that the Reply cannot now be used by the Claimants to restate their original case or supplement it by reference to new facts which allegedly demonstrate that these Defendants knew that the said entities were not financially sound. Such facts can only be introduced by way of re- re amendment to the RASOC (that is, if the Court permits such re 18. The Defendants further submit that as paragraph 12 of the draft Reply is hinged upon the matters contained in paragraph 11 (which should not be included in a Reply for the reasons set out above) it follows that permission to include paragraph 12 in a Reply should similarly be refused. 19. The Claimants submit that by paragraphs 55, 57, 58, 79A, 88 and 89 of the Amended Defence, the Defendants answer allegations contained in section J of the RASOC which deal with the actual position of the CLF group. The Defendants state in these paragraphs, among other things, that they had no reason to believe that the CLF group of companies was not reasonably sound, that any circumstances prejudicial to CLICO existed at the material time and that at all material times the assets of CLICO exceeded its liabilities. 20. The Claimants contend that by so doing the Defendants have brought into issue their knowledge relating to the actual financial position of the CLF Group and so, the Claimants are entitled to reply so as to put forward their case in response to these Defendants position on their alleged knowledge. The Claimants contend that the proposed Reply deals specifically with the facts and matters that indicate these Defendants knowledge. Accordingly, it is the Claimants submission that they are not restating the case that has already been pleaded or bolstering their case. They further contend that these are not matters that could have been pleaded in the RASOC as they could not have known what the Defendant s position would be. Having regard to the nature of the allegations a response is required and a reply in relation to these paragraphs is necessary in order to define the issues between the parties in relation to the true position of CLICO. 7 Paragraphs 112,130,142,161,162O,183(5),199(3),202(3),203(2) and 206(4). Page 8 of 37

9 21. As was stated above, according to Blackstone a reply may respond to any matters raised in the defence which were not, and which should not have been, dealt with in the particulars of claim, and exists solely for the purpose of dealing disjunctively with matters which could not properly have been dealt with in the particulars of claim, but which require a response once they have been raised in the defence. 22. What I understand from the above is the right to reply to matters raised in the defence is conditional upon such matters not being such which were or ought to have been dealt with in the particulars of claim. The Claimants submit that the Defendants reply went beyond responding to the Claimants claim regarding the actual vs. portrayed position of CLF group to raising the issue of their knowledge of the actual position. Accordingly, they say that the raising of this by the Defence entitles them to respond to such. However, it being taken that the right to reply depends on whether such matters ought to have been dealt with in the particulars of claim, I note that throughout the RASOC, the Claimants allege facts which the Defendants knew or ought to have known concerning the financial position of CLICO and the other companies in the CLF group and extensively set forth their version of events and material upon which they rely in support. 23. Thus, even if, as the Claimants contend, the Defendants have raised the issue of their knowledge of the actual position of CLICO in response to paragraphs which do not raise same, the fact remains a reply may respond to any matters raised in the defence which were not, and which should not have been dealt with in the particulars of claim. The issue of their knowledge of CLICO s actual financial position, given the Claimants claim, is such which I am of the view was dealt with in the particulars of claim. Accordingly, I find paragraph 11 for the most part to amount to a restatement of alleged facts contained therein. As for the remaining part, I find that such allegations, which relate to the Defendants reasonable belief that CIB, CLF and CLICO were financially sound, are directly linked to the Claimants claim that they knew or ought to have known of the true financial positions of the companies in the CLF group when entering into certain transactions which were detrimental to CLICO. It is not enough for the Claimants to assert that they could not have provided the information which they now seek to provide in the draft Reply in the particulars of claim because they essentially did not know what would be the approach of the Defendants in their Defence. The Claimants have a duty to set out their case as is stipulated in rule 8.6 of the CPR. More particularly, rule 8.6(1) provides that- The claimant must include on the claim form or in his statement of case a short statement of all the facts on which he relies. [Emphasis mine] Page 9 of 37

10 Much of the Claimants case turns on what they allege the Defendants knew or ought to have known in relation to the financial position of CLICO and other companies in the CLF group. Thus, the Defendants knowledge is a key ingredient of the case. All facts relating to same ought to have been set out by the Claimants in the Statement of Case at the outset. They cannot claim to only now be able to provide such facts based on having had sight of the Defence. 24. In the circumstances, I am of the view that the material raised by the Claimants at paragraph 11 of the proposed Reply consists of that already raised in the RASOC and that which ought to have been raised there. Even if, as the Claimants claim, the 2 nd and 5 th Defendants raised the issue of their knowledge of the actual state of financial affairs of the companies in the group in response to pleas concerning the companies actual vs. portrayed position, I do not find that it can be said that the matter required a response by the Claimants to define the issues between the parties, this already being clear given the allegations put forth by the Claimants in the RASOC concerning what the Defendants knew or ought to have known of the CLF group s financial state. Accordingly, paragraph 11 of the proposed Reply ought not to be allowed. 25. Paragraph 12 of the proposed Reply states that- In the circumstances, these Defendants had no or no reasonable grounds for believing that a. CLF, CLICO or CIB were financially sound; or b. their assets exceeded their liabilities and/or that the realizable value of their assets would be more than the aggregate of their liabilities and stated capital of all classes; or c. the CLF or CLICO or CIB audited accounts were reliable. As the 2 nd and 5 th Defendants rightly contend, Paragraph 12 hinges upon the matters contained in paragraph 11. As paragraph 11 of the proposed Reply has not been allowed, it follows that permission to include paragraph 12 is also not to be allowed. Paragraph Paragraph 14 of the proposed Reply is as follows- As to paragraphs 61 and 61 A(c) & (f) of the Amended Defence in respect of CLICO s inability to redeem the CIB fixed deposits the Claimants say as follows: a. At all material times no demand for any CIB deposit could be made without unwinding the RBL swap transaction and that such unwinding could not occur without the Defendant Monteil s or the Defendant Duprey s sanction; and Page 10 of 37

11 b. The Claimants repeat paragraphs 10(a), 11 and 12 above. 27. The 2 nd and 5 th Defendants submit that the proposed paragraph 14 has been included by the Claimants in the draft Reply on the basis that it is an answer to paragraphs 61 and 61A(c) and (f) of the Amended Defence. They say, however, that the said paragraph is not an answer to those paragraphs and therefore ought not to be allowed and contend that support for this submission is to be found upon an examination of the relevant paragraphs in conjunction with paragraph The 2 nd and 5 th Defendants say that at paragraph 14 the Claimants plead what amounts to reasons for CLICO s inability to redeem fixed deposits held by CLICO at Clico Investment Bank. It is therefore submitted that for them to raise such a plea by way of Reply, there must have been some assertion on the part of the Defendants in paragraph 61 and 61A (c) and (f) of the Amended Defence that the said fixed deposits could not have been redeemed. The 2 nd and 5 th Defendants contend that there was no such plea in the Amended Defence. 29. Additionally, the 2 nd and 5 th Defendants further object to paragraph 14 on the basis that by same the Claimants wrongly seek to bolster and/or expand upon and/or repeat: (a) allegations of wrongdoing set out in the RASOC against the 2 nd Defendant; (b) allegations of the poor financial condition of CIB and CLF; (c) allegations of mismanagement and/or poor regulation on the part of CLICO, as reasons for CLICO being unable to redeem its fixed deposits with CIB. The Defendants contend that these allegations were all repeatedly made throughout the RASOC and therefore the Reply ought not to be allowed to be used by the Claimants as a vehicle for repeating them In further objection to paragraph 14, the Defendants submit that sub-paragraph a. seeks to introduce a new allegation never before raised in the RASOC, namely, that the RBL Swap Transaction could not be unwound without the sanction of the 1 st and 2 nd Defendants. 31. In response, the Claimants submit that the Defendants are plainly wrong when they submit that the averments in paragraph 14 of the proposed Reply do not answer any averment in the Amended Defence. They refer to paragraph 61(a) of the Re-amended 9 8 As to CIB the Defendants refer to paragraphs 81,95-98 of the RASOC, as to CLF the Defendants refer to paragraphs 80,92-94 of the RASOC and as to the RBL Swap transaction and allegations of the 2 nd Defendant s involvement therein the Defendants refer to paragraphs ,197(3) and (4) and 222(4)(ii) of the RASOC. 9 The Claimants refer in their written submissions to the Re-amended Defence of the 2 nd and 5 th Defendants. It is taken that this was stated in error, there being no re-amended Defence but rather, an Amended Defence of the 2 nd and 5 th Defendants. Page 11 of 37

12 Defence where the Defendants say that at no time whilst the Defendant Monteil was a director of CLICO and/or CLF and/or CIB did CLICO seek unsuccessfully to recover a deposit held with CIB. The Claimants assert that when one examines paragraphs 61 and 61A of the RASOC it will be seen that these Defendants are dealing with the issue of fixed deposits. 32. The Claimants refer to paragraphs 61 and 61A of the Amended Defence where the Defendants contend amongst other things that the Defendant Monteil whilst a director of CLICO had no reason to believe that CIB and/or CLF were unable to satisfy their present and future liabilities. They contend that the averment in relation to the RBL Swap Transaction is made to deal with this issue that has arisen on the Amended Defence and to put forward the Claimants version, that is to say, that the Defendant Monteil knew that a demand for the CIB fixed deposits could not have been made unless the RBL Swap Transaction was unwound. It is further submitted that this could not have been pleaded in the Statement of Case as this is an issue that has now arisen and which requires a response. 33. The Claimants submit that paragraph 14 of the proposed Reply deals with this new issue raised by the Defendants in their Defence and which the Claimants are entitled to answer so that this issue may be clearly defined. 34. I note that at paragraph 102 of the RASOC the Claimants claim that the 2 nd Defendant procured CLICO not to seek to recover sums owing to it from CLF and/or CIB and that CLICO accept fresh certificates of deposit in relation to sums owing from CIB. This assertion alleges certain actions on the part of the 2 nd Defendant- procuring CLICO not to take a certain course of action (the attempt to recover sums) and to take a certain course of action (to accept fresh certificates of deposit). It does not speak to the 2 nd Defendant s knowledge. It is the Defendants who go further in answering the claim at paragraph 102 and raise the issue of the Defendants knowledge at (61)(c) of the Amended Defence. That being said, in the proposed Reply, the Claimants seek at paragraph 14(b) of the draft Reply to repeat paragraphs 10(a), 11 and 12 of same. I am of the view that the Claimants already addressed the issue in their RASOC of the 2 nd Defendant s knowledge as it pertains to CIB and/or CLF s inability to satisfy its present and future liabilities to CLICO and for that reason disallowed paragraphs 11 and consequently 12 of the proposed Reply. Accordingly, parts of 14(b) which purport to rely on those two paragraphs of the RASOC are disallowed. 35. The Claimants refer to the Defendants contention amongst other things at paragraph 61 and 61A of the Amended Defence that the Defendant Monteil whilst as a director of Page 12 of 37

13 CLICO had no reason to believe that CIB and/or CLF were unable to satisfy their present and future liabilities and contend that their (the Claimants) averment concerning the RBL Swap Transaction was made to deal with this issue that the Defendants gave rise to in the Amended Defence and to put forward the Claimants version. The Claimants contention in the proposed Reply that at all material times no demand for any CIB deposit could be made without unwinding the RBL swap transaction and that such unwinding could not occur without the Defendant Monteil s or the Defendant Duprey s sanction appears to be a further extension or expansion of the Claimants contention at paragraph 102 of the RASOC that the 1 st Defendant, 2 nd Defendant and/or CLF each procured CLICO not to seek to recover sums owing to it from CLF and/or CIB, by pointing to CLICO s inability to do so and linking this inability to a course of action solely within the 1 st and 2 nd Defendants power. Accordingly, I find the statement to fall more squarely in the realm of expanding upon the allegations raised in the RASOC as opposed to seeking to answer an issue raised in the relevant paragraphs of the Amended Defence and accordingly paragraph 14(a) of the proposed reply will be disallowed. 36. With respect to 14(b) the portion of same which seeks to repeat paragraphs 11 and 12 of the draft Reply is not permitted, my having concluded earlier in this judgment that paragraphs 11 and 12 of the draft Reply ought to be excluded. Paragraph Paragraph 19 of the proposed Reply is as follows:- As to paragraphs 136 and 145 of the Amended Defence as to the Defendant Monteil s knowledge of BSD & LDM drinks transactions the Claimants say as follows: a. The defendant Monteil was at the material time a director of Angostura with responsibility for investments in or about October 2002 and November 2003; b. the Defendant Monteil s fiduciary duties required him not to abdicate his obligations to supervise executive management in relation to any Drinks acquisitions; c. CLICO received no dividends from BSD; could not pledge the shares to the statutory fund at the time it serviced debt liabilities in relation thereto and was not therefore in its interest; d. that no board approval whether by resolution or board meeting was provided to enter into the LDM transaction on or about September or December; e. the Claimants will rely upon the following as reasonable grounds for the Defendant Monteil believing that CLICO would be unable to pay its liabilities as they become due and/or that the realizable value of its assets would be less than the aggregate of the company s liabilities and stated capital of all classes Page 13 of 37

14 i. CLICO s general financial condition and inability to provide assets to the statutory fund once it provided financial assistance to and for the LDM transaction; ii. CLF s failure and/or inability to service or repay to CIB related party debts or receivables or investments; iii. CIB s poor financial condition; its failure to meet regulatory capital requirements in 2007; its illiquidity and inability to make loan disbursements or repay maturing liabilities; iv. The absence of any LDM related due diligence or any detailed or considered plan as to the risks to and exposure of CLICO; and v. Repeats paragraph 9 above and these Defendants conflict of interest in relation to Monteil as Chairman of HMB as financial sponsor and Stone Street as advisors to CLF. 38. In their written submissions in opposition to the proposed Reply, the 2 nd and 5 th Defendants submit that on a reading of the governing words of paragraph 19 of the draft Reply, the Claimants say that the said paragraph constitutes their answer to matters raised in paragraphs 136 to 145 of the Amended Defence insofar as such matters concern the 2 nd Defendant s knowledge of the BSD and LDM transactions. In the circumstances, objection is taken by the Defendants to paragraphs [c], [d] and [e] of paragraph 19 of the proposed Reply. Paragraph 19(c) 39. The 2 nd and 5 th Defendants submit that this sub-paragraph does not address the question of the 2 nd Defendant s knowledge in relation to the BSD and/or the LDM transaction in consequence whereof it ought not to form part of paragraph 19 having regard to the governing words thereof. It is further submitted that the substance of sub-paragraph (c) amounts to an allegation that the BSD transaction was not in the interest of CLICO coupled with an explanation as to why the Claimants contend it was not. The 2 nd and 5 th Defendants contend that these very issues were canvassed by the Claimants in the RASOC 10 and that a Reply cannot now be used by the Claimants for the purpose of amplifying or bolstering those issues or introducing new facts relative thereto. The 2 nd and 5 th Defendants submit that the appropriate course, if necessary would be for the Claimants to seek to amend the RASOC. 40. In response, the Claimants submit that in their Amended Defence at paragraphs 136 to 145 the Defendants allege that the BSD transaction was part of a legitimate business 10 See paragraphs 158C, 158D, 201A(1), 201A(2), 201A(7) 201B and 222(5) of the RASOC. Page 14 of 37

15 transaction and that the 2 nd Defendant has not breached any of his duties or acted contrary to the interest of CLICO in relation to this transaction. The proposed Reply goes to the issue of the 2 nd Defendant s knowledge of the transaction and advances the Claimants response that the transaction was in the best interest of CLICO 11. The Claimants contend that it defines the issues that have been raised in the pleading. 41. Indeed, a perusal of the opening two lines of the proposed paragraph 19 appears to indicate, as the 2 nd and 5 th Defendants contend, that the Claimants Replies contained at [a] to [e] thereof purport to address the issue of the 2 nd Defendant s knowledge of the BSD and LDM transactions. I agree with the 2 nd and 5 th Defendants insofar as they contend that the substance of sub-paragraph (c) amounts to an allegation that the BSD transaction was not in the interest of CLICO coupled with an explanation as to why the Claimants contend it was not. I am of the view that this paragraph does not address the issue of the 2 nd Defendant s knowledge of the BSD and LDM drinks transactions. In their written submissions, the Claimants contend that in their Amended Defence at paragraphs 136 to 145, the Defendants allege that the BSD transaction was part of a legitimate business transaction and that the 2 nd Defendant has not breached any of his fiduciary duties or acted contrary to the interest of CLICO in relation to this transaction. 42. The Claimants contend in their written submissions that paragraph 19 goes to the issue of his knowledge of the transactions and advances the Claimant s response that the transaction was not in the best interest of CLICO. [Emphasis mine]. However, I am of the view that the first two lines of paragraph 19 of the draft Reply, which contain the words in light of which the rest of paragraph 19 is to be read, do not go so far. There, the Claimants simply state that their Reply relates to the 2 nd Defendant s knowledge of the BSD and LDM transactions. It is to that context that their Reply ought to be confined. In their written submissions, the Claimants refer to paragraphs 136 to 145 of the Amended Defence as containing allegations that the BSD transaction was part of a legitimate business transaction and that the 2 nd Defendant has not breached any of his duties or acted contrary to the interest of CLICO. However, by the governing words of paragraph 19, the Claimants have imposed a limit as to what they intend to reply to therein and it does not extend to the issue of whether the 2 nd Defendant acted contrary to the interests of CLICO. I find that paragraph 19 [c] addresses the issue of why the transaction was not in CLICO s best interest as opposed to addressing the Defendant s knowledge of the transaction. Accordingly, at paragraph 19[c] they cannot be permitted to extend their reply beyond the ambit to which they have confined themselves by their governing words at the beginning of paragraph In light of the thrust of their case, it is taken that the Claimant meant was not in the best interests of CLICO. Page 15 of 37

16 43. I note that the Claimants themselves confirm in their written submissions that their Reply at paragraph 19 inter alia, advances their response as to why the transaction was not in the best interest of CLICO. I agree with the Defendants insofar as they claim that this issue was covered extensively in the written submissions or, in the alternative, ought to have been so covered given the breaches of fiduciary duties alleged by the Claimants in their RASOC. I find that the proposed Reply at paragraph 19[c] amounts to a thinly veiled attempt to bolster the material contained on this issue in the RASOC 44. In the circumstances, paragraph 19(c) of the proposed Reply is not permitted. Paragraph 19(d) 45. The 2 nd and 5 th Defendants object to this sub-paragraph for essentially the same reasons outlined above in relation to sub-paragraph (c). They submit that like sub-paragraph (c), the contents of sub-paragraph (d), which speak to the alleged absence of board approval for entry into the LDM transaction, do not go to the question of the knowledge of the 2 nd Defendant in connection with the BSD and/or LDM transactions and therefore ought not to form part of paragraph 19 having regard to the governing words thereof. 46. The 2 nd and 5 th Defendants further submit that in the RASOC 12 the Claimants thoroughly set out their understanding of the LDM transaction including the way it was planned, structured and implemented (including any perceived shortcomings or failures) and losses allegedly suffered by CLICO by reason of CLICO s involvement in same with particular attention being paid to the role of the 2 nd Defendant. They contend that the plea which the Claimants seek to introduce by sub-paragraph (d) is nothing more than a repetition of the plea already made by them of paragraph 202(7) of the RASOC and they ought not to be permitted to use the Reply to repeat allegations already made by them in the RASOC or bolster existing allegations by way of the addition of new material. 47. The Claimants have advanced one response in their written submissions whereby they deal with paragraph 19 as a whole and so the response set out above pertains to paragraph 19[d] as it did to paragraph 19[c], that is, they state that in their Amended Defence at paragraphs 136 to 145 the Defendants allege that the BSD transaction was part of a legitimate business transaction and that the Second Defendant has not breached any of his duties or acted contrary to the interest of CLICO in relation to this transaction. The proposed Reply goes to the issue of the 2 nd Defendant s knowledge of the transaction and advances the Claimants response that the transaction was in the best interest of CLICO 12 See paragraphs ,201A,202 and 22(6) to (8) thereof. Page 16 of 37

17 (perhaps was not is what was intended). The Claimants contend that it defines the issues that have been raised in the pleading. 48. As with paragraph 19(c) I find that paragraph 19(d) falls outside of the narrow scope to which the governing words of paragraph 19 confine the responses thereafter. I find that paragraph 19(d) goes, not to the issue of the 2 nd Defendant s knowledge of the BSD and LDM drinks transactions, but rather goes to support the Claimant s contention that the transactions were not in CLICO s best interest and perhaps seeks to establish that the transaction was not legitimately carried out, neither of which arise on the narrow constructs of the opening words of the proposed Reply. 49. The 2 nd and 5 th Defendants contend that the plea at paragraph 19(d) amounts to a repetition of the plea already made by the Claimants at paragraph 202(7) of the RASOC. Having considered same, I am inclined to agree. Paragraph 19 (d) of the proposed Reply provides as follows: That no board approval whether by resolution or board meeting was provided to enter into the LDM transaction on or about September or December Paragraph 202(7) of the RASOC alleges that Mr. Duprey and/or Mr. Monteil failed to obtain the approval of the CLICO Board and/or CLICO Investment Committee to the assistance provided by CLICO in relation to the LDM acquisition. In the circumstances, despite its purported context (the Claimants claim to raise paragraph 19(d) in the context of the 2 nd Defendant s knowledge of the BSD and LDM transactions, of which as I indicated above, I am not convinced) the fact remains that paragraph 19(d) amounts to nothing more than a restatement of particulars already provided in the RASOC and ought not to be permitted. Paragraph 19(e) 50. The 2 nd and 5 th Defendants say that this sub-paragraph, when read together with the opening words of paragraph 19, addresses the concept of the knowledge of the 2 nd Defendant in relation to CLICO s ability to repay its liabilities in connection with the BSD and LDM transaction. The Defendants submit that there is no basis for the Claimants to advance this plea in a Reply as paragraphs 136 to 145 of the 13 Defence (to which the said paragraph 19(e) purports to respond) does not contain a plea to the effect that these Defendants or either of them had a basis to believe that CLICO was able to meet its liabilities. The 2 nd and 5 th Defendants contend that the matters set out at 13 It is taken that they are referring to the Amended Defence Page 17 of 37

18 paragraph 19 (e) cannot be said to amount to a response to the allegations set out in paragraphs 136 to 145 of the Defence and therefore ought not to be allowed. 51. As I indicated earlier, the Claimants advanced the blanket response covering paragraph 19 as a whole set out at paragraph [47] above. I accept the Defendants contention that paragraph 19(e) when read conjunctively with the opening words of paragraph 19 addresses the concept of the knowledge of the 2 nd Defendant in relation to CLICO s ability to repay its liabilities in connection with the BSD and LDM transactions. Having read paragraphs of the Amended Defence it appears that the Defendants seek thereby to establish the legitimacy of the transactions in question and further, to establish that it cannot be said that they were not done in the best interests of CLICO. However, I have not found the said paragraphs to contain pleas to the effect that the Defendants had a basis to believe that CLICO was able to meet its liabilities. Accordingly, in seeking to address the concept of the knowledge of the 2 nd Defendant in relation to CLICO s ability to repay its liabilities in connection with the BSD and LDM transactions, the Claimants purport to answer something which was not raised by the Defence. That being the case, the information contained at paragraph 19(e) of the proposed Reply, not being such as to answer the specific paragraphs referred to, does not seek to define the issues raised in the pleading as the Claimants contend, but rather, seeks to supplement or restate allegations made in the RASOC. This is not the intended purpose of a Reply and accordingly paragraph 19 (e) of the draft Reply is not permitted. Proposed Reply to the 6 th Defendant s Defence 52. In written submissions filed on the 21 st and 24 th March, 2014 the 6 th Defendant stated that only the matters appearing in paragraphs 1, 2.[a to f(i)], 2.[g] and 6 of the draft Reply filed on 19 th February, 2014 are the proper subject matter of a Reply. Necessarily, this implies that that the 6 th Defendant is contending that matters contained in all other paragraphs of the draft reply are not the proper subject matter of a Reply. 53. The 6 th Defendant further indicated that objection is taken to paragraphs 2.[f(ii)], 3, 4, 5, 7, 9 and 12 of the draft Reply. In terms of general objection, the 6 th Defendant submits that matters contained in the aforementioned paragraphs amount to either fresh particulars of broad, or on occasion, specifically particularized allegations contained in the RASOC which do not arise from any averment or from the mere denials contained in the relevant paragraphs of the 6 th Defendant s Defence, or from that Defendant s broad assertions that she has no knowledge of certain facts and matters pleaded in the Claim and accordingly requires the Claimant to strictly prove the said facts and matters. Page 18 of 37

19 54. Notably, other than implying that matters contained in paragraphs 8, 10 and 11 of the draft Reply are not the proper subject matter of a Reply, the 6 th Defendant goes no further in justifying her objection. These paragraphs are not addressed along with the other paragraphs as indicated at paragraph [53] above and further, unlike paragraphs 3, 4, 5, 6, 7, 9 and 12, are not addressed in the table of the 6 th Defendant s written submissions whereby the 6 th Defendant seeks to explain the reasons for her objections. Thus, the 6 th Defendant has only by implication contended that paragraphs 8, 10 and 11 are not the proper subject matter of a Reply and in any event, has failed to provide reasons as to why they contend such. Indeed, in their written submissions in support of their draft Reply, the Claimants have not addressed paragraphs 8, 10 and 11 and have not treated them as paragraphs to which objection was raised by the 6 th Defendant, instead referring to the 6 th Defendant s contention that the matters contained in paragraphs 2(f)(ii),3,4,5,7,9 and 12 are objectionable. 55. The 6 th Defendant has thus failed to mount any real challenge to paragraphs 8, 10 and 11 of the draft Reply. That being said, in accordance with rule of the CPR and the learning set out in Blackstone as referred to in the Mayfair Knitting case, it is the Court s duty to ensure that what is contained in the Reply is necessary. Being mindful of this duty and having taken into account the 6 th Defendant s failure to object in any real way to paragraphs 8, 10 and 11 of the draft Reply, I find that those paragraphs are not objectionable and accordingly they are allowed. Paragraph 2 (f)(ii) 56. Apart from the general objection stated at [53] above, the 6 th Defendant submits that this paragraph is an attempt to plead a matter that ought to have been pleaded in the RASOC. 57. In response, the Claimants contend that at paragraphs G and H of her Defence the 6 th Defendant raises as a defence the Limitation of Certain Actions Act and section 6 of the Trustee Ordinance. According to the Claimants, this is an assertion by the Defendant to which they are entitled to respond. They submit that their response will serve the purpose of defining the issue in relation to the relevant time period in bringing the claims and to inform this Defendant of the facts and matters relied upon. 58. Paragraph 2(f)(ii) of the draft Reply states as follows: 2. As to paragraphs Introduction G and H of the Defence the Claimants will contend: f. further the Claimants rely upon section 66 of the Trustee Ordinance Ch. 8:03 and say that all allegations of breach of trust and/or fiduciary duty as set out in the Reamended Statement of Case are claims either Page 19 of 37

20 ii. seeking recovery or tracing of CLICO s property or its proceeds against this Defendant who has in her possession or has received and converted for her own use such property or proceeds 59. In paragraphs G and H of the Introduction to the 6 th Defendant s Defence it is contended essentially that some or all of the Claimants claims are statute-barred. More particularly, the 6 th Defendant contends that some or all of the Claimants claims are statute-barred by virtue of the Limitation of Certain Actions Act Chap. 7:09 and further, that the Claimants allegations against the 6 th Defendant in the RASOC are statute-barred by virtue of section 6 of the Trustee Ordinance Chap. 8: The 6 th Defendant raises the issue of the claims being statute-barred and more specifically at paragraph [H], places reliance on the Trustee Ordinance. The 6 th Defendant having raised the issue of the claims being statute-barred in her Defence, a response is required by the Claimants to this issue and the Claimants are entitled to do so. This they do at paragraph 2 f(ii) by indicating their reliance on section 66 of the Trustee Ordinance to effectively establish that the matter is not statute-barred 15. Accordingly, paragraph 2(f)(ii) of the draft Reply in my mind is necessary and will therefore be permitted. Paragraph Paragraph 3 of the draft Reply states as follows: 3. As to paragraphs Introduction I(ii), 47, 50 to 51, 56, 90, 121, 132 to 133, 140, 161, 189 to 191, 201, 202 and 204 and all other paragraphs of the Defence where the same or similar allegations are made the Claimants will say among other things that: a. this Defendant was at all material times an officer of CLICO and CLICO paid her a retainer of $40,000 each month in respect of her services and the discharge of her obligations to CLICO; b. this Defendant participated in the acquisition and subsequent monitoring and supervision of companies funded by CLICO whether through the inter company account or otherwise; c. this Defendant authorized the incurring of expenditure for the benefit of CLF or its subsidiaries to be met by CLICO, whether through the inter company account or otherwise; 14 Section 6 of the Trustee Ordinance provides that a trustee shall not be liable for breach of trust by reason only of his continuing to hold an investment which has ceased to be an investment authorized by the trust instrument or by the general law. 15 Section 66 (1) of the Trustee Ordinance provides that No period of limitation prescribed by any enactment relating to the limitation of actions shall apply to an action by a beneficiary under a trust, being an action- (a) in respect of any fraud or fraudulent breach of trust to which the trustee was a party or privy; or (b) to recover from the trustee trust property or the proceeds thereof in the possession of the trustee, or previously received by the trustee and concerted to his use. Page 20 of 37