Crawford
Barbara Gayle, Staff Reporter
FOUR YEARS after Financial Institutions Services (FIS) took over the Century financial firms, it has not been able to recover over $400 million from two companies owned by Donovan Crawford.
Mr. Crawford who was the former head of the Century financial entities is appealing a Supreme Court ruling that he and his companies should pay $1 billion to FIS.
Michael Hylton, Q.C. who is representing FIS, in responding to submissions made by Mr. Crawford's lawyers last month, said that at the time when the Minister of Finance took over the Century financial institutions in July 1996, two of Mr. Crawford's companies, CNB Holdings Limited and Century National Development Limited, owed the bank (Century National Bank) over $400 million. He said FIS had not been able to recover the money from those companies. He pointed out that Chief Justice Lensley Wolfe had ordered at the trial in the Supreme Court that Mr. Crawford should be responsible for the repayment.
Mr. Hylton submitted that the chief justice was right in making that order because the loans were unsecured and were given in breach of Mr. Crawford's fiduciary duties to the bank. He argued that even if Mr. Crawford did not personally guarantee the loans, he should be liable to repay them.
FIS is asking the Court to re-transfer to it, Mr. Crawford's House at 1A Paddington Terrace. Mr. Hylton argued that the premises which was the residence of the Italian Ambassador, was wrongly transferred from Century Bank to Mr. Crawford's company, Regardless Limited. He argued that as chairman of the bank, Mr. Crawford owed the bank a fiduciary duty to act in its best interests. The bank agreed to sell the Paddington Terrace property to Mr. Crawford in 1991 for the book value which was calculated to be $1.8 million and which Mr. Crawford paid.
Mr. Hylton argued that the evidence was that Mr. Crawford had obtained a valuation of the property which showed it was worth $4 million, but that he did not disclose that valuation to the bank's board. He said in addition there was evidence that the book value at the time of the sale was more than the sum paid by Mr. Crawford. Mr. Hylton argued that the property should be re-transferred to FIS.
Century bank lost US$25.5 million over a transaction with First Trade, a Bahamian bank. It is being contended that money was given to companies owned by Mr. Crawford. Mr. Hylton argued that Mr. Crawford should be liable because no reasonable director could possibly have concluded that the First Trade transaction could have benefited the bank.
Balmain Brown, former president of the bank, is also appealing the chief justice's ruling that he should be responsible to repay the various sums lost by the bank. He is contending that there was no evidence that he received any benefit or any of the money being claimed , but the chief justice said he ought to have known about those various improper transactions, and that he "turned a blind eye."
Dr. Lloyd Barnett who represented Mr. Brown, argued that there was no evidence that he caused any of the transactions or that he even knew about them.
Attorney Sandra Minott-Phillips, argued on behalf of FIS that the chief justice was right in his ruling. She submitted that Mr. Brown was responsible for the bank's credit operations and for investments of its foreign exchange. She said Mr. Brown was well aware that the bank had given an undertaking to the Bank of Jamaica that it would not engage in hazardous lending practices. Also that it would reduce existing credit facilities. It was further submitted that Mr. Brown had authorised an increase in loans to Mr. Crawford's companies without any proper security being in place.
Mrs. Minott-Phillips pointed out that during the years that Mr. Brown was president of the bank (1993 to 1996), the indebtedness of Mr. Crawford's companies went from less than $100 million to more than $400 million. She said Mr. Brown, had in fact admitted in evidence that the credit facilities allowed to Mr. Crawford's companies were not allowed in accordance with prudent banking practice.
In relation to the First Trade transaction, she argued that it was unlikely that such a large sum could have been taken out of the bank without the president noticing, especially since at the time, the bank was experiencing severe cash flow problems and other financial difficulties. Mr. Brown had written a memo to Mr. Crawford in 1994 describing the First Trade transaction as " a winner." Mrs. Minott-Phillips argued that the chief justice was right in ordering that Mr. Brown should be liable to compensate FIS for the losses suffered by the bank.
Mr. Brown counter-claimed for wrongful dismissal but attorney Michele Champagnie submitted that Mr. Brown's dismissal was justified because the evidence showed a pattern of habitual neglect over the three years that he was president of the bank. She said Mr. Brown had issued misleading financial statements and sent out unauthorised communication after temporary management had begun. She pointed out that Mr. Brown repeatedly failed to act in the bank's interest. She added that for those reasons, the temporary manager was entitled to dismiss Mr. Brown summarily without compensation or notice.
The Court of Appeal comprising the Ian Forte, president of the Court of Appeal, Justice Donald Bingham and Justice Ransford Langrin heard the appeal last month and reserved judgment. The court has promised to give its decision at an early date.
