Thursday 21st April 2005


Privy Council

Central Bank transfer of assets unlawful

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Law Report prepared by Mark James Morgan

Privy Council Appeal 78 of 2002.

Gulf Insurance Ltd v The Central Bank of Trinidad and Tobago.

Before: Lords Hoffman, Hope of Craighead, Scott of Foscote, Walker of Gestingthorpe and Baroness Hale of Richmond.

Judgment delivered March 9.

Alvin Fitzpatrick SC and Joan Byrne for Gulf and Michael Brindle QC and Veronique Buehrlen (both of the English bar) for the Central Bank.

The facts

Gulf was a shareholder of the Trinidad Co-operative Bank Ltd (TCB). In 1986, the Central Bank under its emergency powers assumed control of TCB.

In 1989 the Central Bank also under its emergency powers assumed control of the Workers’ Bank. In 1993 a merger was proposed between TCB, Workers’ Bank and the National Commercial Bank (NCB) into a new bank—First Citizens Bank (FCB).

In its September 10, 1992 edition, the Bomb newspaper reported that NCB’s bad debt portfolio was such that FCB was likely to start life insolvent.

The Central Bank took the view that the effect of this article would be a run on NCB the following Monday and decided to implement the merger immediately. They did by causing the assets of TCB to be transferred to FCB over the weekend in consideration of FCB paying and discharging all of TCB’s debts and liabilities other than its liabilities to its personnel and staff.

The agreement under which the assets were to be transferred did not provide for an independent valuation.

The judgment

The Privy Council held that the power under which the Central Bank purported to transfer TCB’s assets was that conferred by section 44D(vi) of the Central Bank Act. But, under that section the Central Bank could only exercise its power to transfer TCB’s assets at a price to be determined by an independent valuator. Since the agreement under which the assets were to be transferred did not provide for an independent valuation, the transfer was contrary to section 44D(vi) and was unlawful.

Accordingly TCB was entitled to damages from the Central Bank for the unlawful disposal of its assets and undertaking which it could hold for the benefit of its shareholders including Gulf.

The Privy Council also held that where, as in this case, the Central Bank had acted outside of its powers under the act, it could not rely on the provisions of section 44H. This provided that the bank was not liable for any action done in good faith and without negligence in the performance of its duty, since such a limitation of liability clause was to be construed restrictively and not treated as a licence for unlawful expropriation without compensation.


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