Appeal Court upholds judge's CL ruling and adds: Clico energy sale fraudulent

NOT ONLY has the Court of Appeal upheld a judge's ruling invalidating the sale of insurance giant Clico’s energy assets to Proman Holdings (Barbados), it has also made a finding of fraud in relation to the transaction.

The sale of Clico's energy crown jewels took place three days after Government bailed out the CL Financial conglomerate in early 2009.

The ruling came on Monday by Justices of Appeal Alice Yorke-Soo Hon, Gregory Smith and Vasheist Kokaram. In upholding Justice Devindra Rampersad's 2021 ruling, the Appeal Court judge also made a finding of fraud which Rampersad had declined to make.

The judges rejected the appeal of Proman Holdings (Barbados) Ltd and Process Energy (Trinidad) Ltd (PETL), formerly Clico Energy, upholding Rampersad’s findings except on the issue of fraud.

Commenting on the court’s decision, a Proman spokesman told Newsday, "We are disappointed by the Court of Appeal’s judgment, which runs contrary to the trial judge’s determination in relation to Proman’s role in the transaction.

"We have a strong case on appeal, which we will pursue before the Privy Council and are confident in our prospects of success."

The spokesman said Proman has been committed to Trinidad and Tobago for over 35 five years, "and we are proud of our track record as the largest investor and employer in the Point Lisas Industrial Estate."

At the appeal, heard in January, attorneys for CLF and Clico insisted the sale transaction between Proman and CLF jefe Lawrence Duprey for the sale of Clico Energy’s shares could not be ratified.

They also asked the court to make a finding of fraud on Proman’s part since it would have had a bearing on recovering efforts, if the CLF and Clico lawyers were successful at the appeal, especially since Proman had asserted it could not pay dividends owed to CLF and Clico.

The worth of Monday’s judgment for CLF exceeds $2 billion, which represents the sale transaction and dividends on shares.

At the time of Rampersad’s judgment in 2021, CLF and Clico claimed they would have received US$169 million in dividends had their stakes in PETL not been sold.

Proman has signalled its intention to appeal to the Privy Council.

The company’s attorneys asked for a stay, pending that appeal. One was partially granted since, according to Smith, both sides have indicated they cannot pay the judgment sum at the end of litigation – CLF because it is insolvent and Proman has said it could not pay.

As part of the conditions of the stay, CLF is entitled to appoint four directors to PETL while Proman will be allowed to appoint two, with immediate effect, while the sums representing the dividends already received, and future sums, are to be paid into the court pending the outcome of any further appeal.

At the time of the deal, CLF controlled 34 per cent, Clico another 17 per cent, with the remaining shares in PETL, being held by Proman.

In 2014, the International Court of Arbitration ordered Clico to sell its remaining shares in MHTL to Proman subsidiary, Consolidated Energy Limited (CEL), for US$1.175 billion (TT$7.485 billion).

In October 2021, Justice Devindra Rampersad ruled that Duprey acted oppressively and unfairly prejudicial to both companies’ interests when he cut the deal to sell CLF and Clico’s 51 per cent stake for a little over US$46.5 million.

The judge also ruled that the company was grossly undervalued, and voided the sale, ordering Proman Holdings to pay CLF the dividends it collected from the shares since 2009, plus interest. In return, CLF was ordered to reimburse Proman Holdings for the purchase price, plus interest.

Monday’s ruling was unanimous and written by Smith who admitted, in an executive summary, it was “high-stakes, full-blown, adversarial litigation” involving titans of trade and industry.

In an 85-page decision, Smith said since the act by Duprey in concluding the purchase and sale agreement was dishonest and lacked good faith, it could only be ratified by CLF/Clico’s shareholders and not by its directors or agents.

And, because of the bailout which saw CLF and Clico being put, at the time, under Central Bank control, Smith said the agreement could only be ratified with input from Government – the major creditor at the time – and not directors or even CLF and/or Clico shareholders.

As he went through the evidence in the same manner which Rampersad had, noting also that the trial involved over 12,000 documents, Smith said it “was difficult to resist the conclusion that Proman knowingly did not pay a fair price for the shares and knew they were obtaining it at a gross undervalue.”

On the finding of fraud, Smith said, “The sale at a gross undervaluation with the full complicity of Proman was a gamble indicative in my view of the recklessness or turning a blind eye to the obvious.

“These findings show the relevant, intentional or reckless, blind eye intention of both Duprey and Proman in respect of the negotiation and conclusion of the purchase sale agreement (PSA).”

“...The trial judge has found quite clearly that Duprey’s actions in concluding the PSA were dishonest, utterly reprehensible and reeking of impropriety and that Proman was complicit in this impropriety.

“Further, Proman knew of the MoU and that the PSA was an attempt to bypass the same and ‘steal a march on the GORTT’s steps to possibly get the shares in PETL’.”

Submitted into evidence at the trial were statements by former CLF/Clico executives given at the commission of inquiry into the collapse of Clico.

Last week, the Prime Minister spoke of the enquiry and the possibility of going to Parliament to stop further spending relating to it.

Proman and PETL were represented by Simon Salzedo, KC, Christopher Hamel-Smith, SC, and Jonathan Walker. CLF and Clico were represented by Fyard Hosein, SC, Deborah Peake, SC, Sasha Bridgemohansingh and Lauren Boyak.