National Bank of Anguilla et Al v Caribbean Commercial Bank of Anguilla Ltd et Al

• Jurisdiction: Anguilla
• Judge: Moise, J.
• Judgment Date: 12 October 2023
• Neutral Citation: AI 2023 HC 11
• Court: High Court (Saint Christopher, Nevis And Anguilla)
• Year: 2023
• Docket Number: CLAIM NO: AXAHCV 2016/0032

Between:

[1] National Bank of Anguilla (Private Banking and Trust) Limited (In Administration)

[2] Caribbean Commercial Investment Bank Limited (In Administration)

Claimants

and

[1] National Bank of Anguilla Limited (In Receivership)

[2] Caribbean Commercial Bank of Anguilla Limited (In Receivership)

[3] National Commercial Bank of Anguilla Limited

[4] Eastern Caribbean Central Bank

[5] Martin Dinning

[6] Hudson Carr

[7] Shawn Williams

[8] Robert Miller

Defendants

Before:

His Lordship The Honourable Justice Ermin Moise

CLAIM NO: AXAHCV 2016/0032

EASTERN CARIBBEAN SUPREME COURT

IN THE HIGH COURT OF JUSTICE

(CIVIL)

Appearances:

Mr. Ronald Scipio, KC with him Ms. Eustella Fontaine and Ms. Yanique Stewart of counsel for the Claimants

Mr. James Christopher Willan, KC with him Mr. J. Alex Richardson and Mr. William Hare of counsel for 3 ^rd Defendant

Mr. Paul Dennis, KC with him Ms. Navine Fleming and Ms. Nadine Whyte of counsel for the 4 ^th to 7 ^th Defendants

Moise, J.

1 This is a claim for breach of fiduciary duties as well as the accounting and tracing of assets allegedly held on trust. The claimants assert that the 5 ^th to 8 ^th defendants owed them fiduciary duties in their capacity as de facto or de jure directors for the period 12 ^th August, 2013 to 22 ^nd April, 2016. It is alleged that these duties had been breached and, as a result, the claimants are entitled to recover various sums deposited into accounts with the 1 ^st and 2 ^nd defendants during the relevant period. This includes a personal claim as against the 5 ^th to 8 ^th defendants. Insofar as it is alleged that the 1 ^st to 4 ^th defendants are in knowing receipt of those funds and or their traceable proceeds, the claimants have also requested declarations of trust and an order for the tracing and accounting of those assets.

2 The matter came for trial on 14 ^th to 25 ^th November, 2022. Prior to the trial, the parties had filed pre- trial submissions. On 25 ^th November, 2022, the court heard oral closing submissions from counsel. Having reviewed the evidence and the submissions made, I have determined that the claims should be dismissed with costs to the defendants. These are the reasons for my decision.

The Facts

3 The facts of this case arise out of a very unfortunate period in the history of the banking sector in Anguilla. In the case of National Bank of Anguilla (PBT) v. The Chief Minister et al 1 the Court of Appeal described the situation as one in which the territory was “gripped in a financial crisis which threatened its banking system.” The 1 ^st and 2 ^nd defendants were domestic banks which held 76% of the total banking assets in Anguilla. Those 2 banks were however facing significant challenges in their liquidity and the situation was such that the entire economy was under threat. As a result of regulatory intervention, and at the backend of a period of conservatorship, the 1 ^st and 2 ^nd defendants have been placed into receivership. The claimants, who are currently under insolvent administration, are wholly owned subsidiaries of the 1 ^st and 2 ^nd defendants and are seeking redress in relation to assets which had been deposited into the 1 ^st and 2 ^nd defendants during the period of conservatorship. In order to adequately address the issues for consideration in this case, it is

important to establish a background of the events leading up to the dispute which has arisen between the parties

4 The first defendant is the National Bank of Anguilla Limited (NBA). The second defendant is the Caribbean Commercial Bank (Anguilla) Limited (CCB). Both banks were initially incorporated under the laws of Anguilla and licensed to carry on local banking business on the island. They are in fact indigenous banks which played a leading role in the banking sector on the island. Their market share and the proportion of their assets to that of the banking sector in general were significant. For the purposes of this judgment, whenever these two defendants are referred to jointly, I will refer to them as the “Domestic Banks”. Both banks were regulated by the 4 ^th Defendant, the Eastern Caribbean Central Bank (ECCB) which was incorporated in 1983 as the regulatory body for domestic banks within the Eastern Caribbean Currency Union (ECCU). After a period of conservatorship instituted by the ECCB, both Domestic Banks were placed into receivership on 22 ^nd April, 2016.

5 In accordance with the Anguilla Trust Companies and Offshore Act 2000, domestic banks on the island are prohibited from conducting banking business in any currency other than the Eastern Caribbean Dollar. It is apparent from the evidence that the Domestic Banks each had a portfolio of customers with whom they conducted business in foreign currencies. As a result of the prohibitions contained in the legislation, the Domestic Banks each established wholly owned subsidiaries in order to conduct offshore banking business. These companies are the claimants in this matter. The first claimant is the National Bank of Anguilla (Private Banking and Trust) Limited (PBT). The second claimant is the Caribbean Commercial Investment Bank Limited (CCIB). On 22 ^nd February, 2016, these offshore banks were placed in insolvent administration and Mr. William Tacon (Mr. Tacon) was appointed as administrator. Where I refer to those institutions jointly I shall refer to them as the “Offshore Banks”.

6 It is also important to note that offshore entities in Anguilla are regulated by the Anguilla Financial Services Commission (AFSC) and not the ECCB. However, at paragraph 26 of his witness statement, Mr. Kennedy Byron (Senior Specialist in the Office of the Governor of the ECCB) noted that as at the date of intervention in August, 2013, there was in place a Memorandum of Understanding between the ECCB and the Governor of Anguilla to collaborate in the supervision and regulation of the Offshore Banks based on certain principles. There was no elaboration on what those principles were.

7 PBT was incorporated in 2005 and is wholly owned by NBA. On 1 ^st April, 2005, NBA and PBT entered into a Service Agreement as well as a Memorandum of Agreement. In Schedule 1 of the Service Agreement, NBA agreed to provide certain operational and administrative services to PBT. It is not necessary to outline the full breadth of the services to be rendered in this judgment. It would suffice to say that these relate to facilitating the establishment and functioning of a Board of Directors and other associated corporate services for PBT. The agreement also covered a wide range of services provided in the areas of accounting and other administrative functions of PBT. In exchange for these services, PBT agreed to pay the sum of One Hundred Thousand United States Dollars (US$100,000.00) to NBA on an annual basis.

8 Insofar as the Memorandum of Agreement is concerned, this document appears to relate primarily to the transfer of NBA's offshore portfolio to PBT in order to ensure compliance with the Anguilla Trust Companies and Offshore Act 2000. The Memorandum also sought to provide for the secondment of staff from NBA to PBT as well as make provision for the payment of salaries, wages, benefits and other operations of PBT. PBT was to become fully operational on 1 ^st April, 2005.

9 In similar fashion, CCB entered into what was referred to as an Agreement of Service with CCIB. Although the document which was exhibited in this matter was not dated, it appears to have been executed sometime in May, 2010. This agreement is not particularly comprehensive and states simply that CCB will provide support services to CCIB in the areas of Credit, Internal Audit, Compliance, Proof and Certifications, Teller Services (Encashment/Deposits), Foreign Exchange, Finance, E-Payments, Messenger Services and Human Resources. These services were to be provided for a fee of Forty Eight Thousand, Five Hundred and Sixty Six Eastern Caribbean Dollars and Eighty Seven cents (EC$48,566.87) per annum.

10 It would appear, from the evidence provided, that the Offshore Banks had established no distinct corporate or banking relationships with any institution other than their parent banks. The operations of the Offshore Banks were linked primarily to that of the Domestic Banks on whom they were entirely dependent. There were no separate bank accounts or any relationship with correspondent banks outside of Anguilla. All of those services were provided within the corporate structures of the Domestic Banks. As I understand it, the offshore and domestic banks also shared a common directorship.

11 It is also important to note that funds deposited by clients of the Offshore Banks were then placed in the intercompany accounts held at the Domestic Banks. According to the evidence presented, the Offshore Banks would keep a record of the individual depositors and their transactions in their own books. No distinct accounts were opened at the Domestic Banks for any customer of the Offshore Banks in particular. Each offshore bank held an intercompany account with the parent bank. However, those funds were not reported to the ECCB as separate deposits, but were rather listed as other liabilities. There was therefore a comingling of the funds of the Domestic and Offshore Banks. It was also not a point in contention at trial, that this comingling meant that funds deposited by the Offshore Banks were up-streamed into the Domestic Banks' own funds. This provided one pool of resources for the operations of the domestic and offshore institutions. This practice would have a significant bearing on the issues raised by the parties in this case and is a matter to which I will return later on in this judgment.

12 Before addressing the circumstances under which the ECCB came to intervene into the affairs of the Domestic Banks, it is important to note that prior to the intervention, the AFSC expressed some concern with the management structures...