Kent Herrera et Al v Alma Gomez (Supervisor of Insurance) et Al
| Jurisdiction | Caribbean States |
| Judge | Saunders, J.CCJ.,Wit, J.CCJ.,Hayton, J.CCJ.,Anderson, J.CCJ.,Rajnauth-Lee, J.CCJ |
| Judgment Date | 29 March 2018 |
| Court | Caribbean Court of Justice |
| Docket Number | CCJ Appeal NO. BZCV2017/002; BZ Civil Appeal No. 30 of 2014 |
| Date | 29 March 2018 |
Caribbean Court of Justice
Saunders, J.CCJ.; Wit, J.CCJ.; Hayton, J.CCJ.; Anderson, J.CCJ.; Rajnauth-Lee, J.CCJ.
CCJ Appeal NO. BZCV2017/002; BZ Civil Appeal No. 30 of 2014
Mr. E. Andrew Marshalleck, SC for the appellant.
Ms. Leonia Duncan and Mrs. Samantha Matute-Tucker for the respondents.
Insurance - Regulation — Establishment and maintenance of a statutory fund to protect against loss in liquidation of insurance companies — Duty of the Supervisor of Insurance — Whether defendants acted in good faith.
The appellants were Executive Flexible Premium Annuity (“EFPA”) policyholders of CLICO (Bahamas) Limited (“CLICO”). They suffered serious financial loss when The Company went into liquidation in 2009 and they were unable to recoup their investment in The Company. As a result, they instituted action against the respondents seeking to recover their losses. The action was premised primarily on the basis that section 26 of the Insurance Act Cap 251 (“the Act”) required the establishment and maintenance of a statutory fund designed to protect them against the type of loss they suffered. The appellants claim that they suffered loss because the respondents, in particular, the Supervisor of Insurance (“the Supervisor”) was reckless in her conduct of regulating CLICO in accordance with the Act and specifically in her duty to maintain the statutory fund in a proper manner.
The Supreme Court held that section 26 of the Act, did not confer on the Supervisor an implied duty that was actionable by the appellants. The judge also held that section 4(3) of the Act conferred on the respondents blanket immunity from suit. The Court also held that the Supervisor had not acted recklessly. The Court of Appeal, on the hand, found that the statutory fund constituted security for the benefit of the appellants and that in accordance with X (Minors) v. Bedfordshire C. C [ (1995) 3 ALL E.R. 353] the respondents were in breach of the Act. The Court of Appeal gave a declaration to that effect. That Court, however, upheld the trial judge's findings that the respondents were protected from suit as the Supervisor had acted in good faith in the exercise of her duties under the Act. The appellants appealed to the CCJ (“the Court”).
The Court found that the main issue to be decided was whether the respondents could avail themselves of the statutory bar contained in section 4 (3) of the Act. That subsection states that the respondents and any officer or person acting pursuant to any authority conferred by the Minister or the Supervisor, as the case may be, shall not be liable to any action in respect of any matter done or omitted to be done in good faith in the exercise or purported exercise, of the functions conferred by or under the Act.
The Court proceeded to examine whether the respondents had acted in good faith and were therefore protected from suit. The Court was of the view that before the good faith immunity could be addressed, it needed to establish whether there was a breach of statutory duty to maintain the statutory fund and if there was such a breach, whether it gave rise to a private law action by the appellants. The Court, noting that the Court below had answered both questions in the affirmative and that there had been no appeal against those findings, affirmed the holdings of that Court in this regard. The Court was of the view that the legislature's purpose for establishing the statutory fund, was to ensure that policyholders such as the appellants were protected from financial loss in circumstances such as these. To deny such affected persons a cause of action would have rendered the statutory provision meaningless.
The Court examined section 4 (3) of the Act and found that it restricted private law actions to instances where those responsible were not acting in good faith. The Court found that statutory good faith defences were intended to relieve from liability to suit public officials who acted with honesty of purpose. It placed the onus on the respondents to adduce sufficient facts and circumstances to avail themselves of the defence. The Court distinguished the case of Gulf Insurance v. The Central Bank [UKPC] 10 which the appellants relied on, and held that, unlike the Trinidad provision that was in issue in that case, section 4 (3) of the Belize Act expressly extended its protection to acts and omissions that fell outside the performance of the statutory functions of the relevant public official provided the official was acting in good faith or purporting to act in fulfilment of duty.
The Court then went on to consider the statutory good faith defence. The Court noted that public officials should be held to basic standards of performance commensurate to the office that they hold. Where a public official recklessly disregarded those standards, it would be difficult, if not impossible to hold that they were acting in good faith. If, however, the public official made genuine, honest attempts to meet the standards but failed to achieve them, then the public official could rely on the good faith defence. The defence offered protection to public officials who were not fraudulent, or dishonest or in wrongful collusion with the impugned company, or who were so irresponsible as to be recklessly indifferent to the occurrence of foreseen risks. The Court concluded that recklessness, in this context, was another way of establishing lack of good faith.
The Court then considered whether the supervisor was reckless. In so doing, the Court examined the Act as a whole and found that the Act afforded the Supervisor a great degree of discretion in her administration and regulation of the insurance industry. In particular, the Court noted that while section 13 (2) of the Act empowered the Supervisor to sanction companies that failed to comply with pre-conditions for licencing and or licencing renewals, and section 16 (1) empowered her to cancel licences, these sections did not suggest that the Supervisor must invariably take the most drastic actions available. Similarly, section 31(b) expressly authorised the Supervisor to consider any explanations made on behalf of The Company before giving directions where The Company had neglected to furnish, in a timely manner, documents relating to their statutory fund requirement.
The Court examined the Supervisor's conduct in the regulation of CLICO under three broad headings; i) the treatment of the EFPA's; ii) CLICO's licence renewals and its obligations to provide stipulated financial statements and; iii) CLICO's statutory fund. The Court found that the overall impression was that the Supervisor was mindful of CLICO's noncompliance issues and had taken steps to continuously prod The Company to fulfil its statutory responsibilities. While the Court refrained from commenting on whether the Supervisor could have been less lenient with CLICO, the Court emphasised that neither lack of robustness nor inadequate results from her efforts were sufficient to take her acts and omissions outside the realm of statutory protection the Act afforded her.
The Court remarked that neither the Supervisor nor anyone else could have foreseen CLICO's sudden collapse. The Court also noted that the Supervisor's testimony that section 16 (2) of the Act precluded her from cancelling CLICO'S licence when it had consistently neglected to establish its statutory fund at 100% was consistent with her approach towards CLICO in continually pressing The Company rather than pulling the plug on it. In all the circumstances, the Court held that the Supervisor had acted in good faith and the respondents were accordingly protected from suit.
During the proceedings before the Court, the appellants also sought to fix liability directly to the State. They submitted that the good faith defence under section 4 (3) of the Act was available to the Minister and the Supervisor, but not the State. The Court noted that this argument was raised for the first time on appeal and agreed with the respondent's objection that it was too late for it to be accommodated because the State would have been unfairly denied the opportunity to marshal its defence to meet this new contention. The Court noted, however, that even if it was minded to allow the submission, the immunity would extend to the State as well by virtue of Section 4 (4) of the Crown Proceedings Act.
The Court accordingly dismissed the Appeal.
British Fidelity Assurance Limited, through a corporate Branch Office, had been licensed to carry on insurance business in Belize as a long-term insurer from 1971. In 2005 The Company changed its name to CLICO (Bahamas) Limited. Throughout this judgment we refer to this regional insurance behemoth, both to the Headquarters in The Bahamas and to the Branch Office in Belize, simply as “CLICO” or “The Company”.
In 2009 both the Headquarters and the Belize Branch Office went into liquidation. The appellants were policyholders with The Company. They had all purchased Executive Flexible Premium Annuities (EFPAs). Like so many others across the Caribbean, they lost substantial sums of money when The Company collapsed in the wake of an international financial crisis.
The policyholders instituted this action against the Supervisor of Insurance, the Minister of Finance and the Attorney General (“the respondents”). They are seeking to recover their losses. The action hinges principally on the fact that the Insurance Act [Cap.251 of the Laws of Belize] required the establishment and maintenance of a fund precisely to protect against losses of the type they suffered. The policyholders say that it is the reckless conduct of the respondents, in particular, the Supervisor of Insurance, that ultimately caused them to be out of pocket. They...
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