(Trinidad Guardian) The Court of Appeal has granted an interim stay blocking CL Financial’s liquidators from enforcing its judgment over the sale of it and its subsidiary Clico’s lucrative energy assets to Proman Holdings (Barbados) Limited.
Appellate Judges Alice Yorke-Soo Hon, Gregory Smith and Vasheist Kokaram granted the stay following a virtual hearing on Wednesday morning.
The legal dispute between CLF, Clico and Proman stems from an agreement over shares in Process Energy (Trinidad) Limited (PETL) that was made by former CLF executive chairman and Clico director Lawrence Duprey three days after the Government bailed out the companies in early 2009.
At the time of the deal, CLF controlled 34 per cent, Clico another 17 per cent, with the remaining shares in PETL, which previously operated as Clico Energy Company Limited, being held by Proman.
The deal resulted in Proman controlling the entire company, which held a sizeable portion of the group’s stake in Methanol Holdings Trinidad Limited (MHTL) and other minor stakes in profitable energy companies.
In 2014, the International Court of Arbitration ordered Clico to sell its remaining shares in MHTL to Proman’s subsidiary, Consolidated Energy Limited (CEL), for US$1.175 billion (TT$7.485 billion).
Delivering a judgment over the validity of the deal in October last year, High Court Judge 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.
He also ruled that the company was grossly undervalued, as he voided the sale and ordered Proman Holdings to pay CLF the dividends it collected from the shares since 2009, plus interest.
In turn, CLF, which is currently in liquidation, was ordered to reimburse Proman Holding for the purchase price, plus interest.
Although he noted that Proman officials were wrong to go ahead with Duprey, Rampersad ruled that their conduct did not constitute fraud.
“In the circumstances, the court is of the respectful view that Proman knew of the existence of the sub-committee for the disposal of assets and the renewed requirements for shareholder resolutions thereby curtailing Duprey’s prior ostensible authority and also failed to make any inquiry whatsoever on the evidence before this court as to whether or not he was authorised to enter into this share purchase agreement in the very unusual circumstances that prevailed at the time,” he added.
Proman appealed the decision and applied for a stay of the judgment pending the outcome.
Presenting submissions on behalf of CLF and Clico, Senior Counsels Fyard Hosein and Deborah Peake claimed that Proman should not get the stay as its substantive appeal was doomed to fail based on a recent commercial law precedent set by the Privy Council, which aligned with Justice Rampersad’s ruling.
They claimed that their clients were concerned by Proman’s claims that it could not afford to pay them the US$169 million in dividends that they would have received had their stakes in PETL not been sold.
“There is a real risk that we cannot enforce the judgment if we are eventually successful on appeal,” Peake said.
Peake and Hosein also raised concerns about Proman’s refusal to allow the companies to elect three members to PETL’s board of directors as they claimed that the move would ensure Proman’s directors do not further divest the company’s assets.
Responding to the submissions, Proman’s lawyer Simon Salzedo, KC, maintained that his client had a strong case on appeal.
Although he admitted his client had difficulties in paying the full dividends as ordered by Justice Rampersad, he noted that it had placed its revenue from its subsidiaries from October last year, totalling US$83 million, on escrow pending the outcome of the case.
Salzedo noted that his client offered to appoint one to three independent directors but the suggestion was rejected by CLF and Clico.
In deciding to grant the stay, Justice Smith rejected CLF and Clico’s claims over the strength of the appeal.
“We are satisfied that it is not a totally frivolous appeal,” he said.
However, he stated that he and his colleagues were “gravely concerned” by Proman’s claim over its inability to pay the full judgment debt.
While the appeal panel agreed to grant the stay, it sought to impose several conditions.
Proman was ordered to pay the US$83 million to the court and to pay it (the court) all future dividends of PETL pending the outcome of the appeal.
CLF and Clico were also allowed to appoint two directors to the board, who would be allowed to access PETL’s financial records.
The case is set to come up for a hearing on December 12, when the parties are expected to report back on compliance with the orders.
A date for the hearing of the substantive appeal is yet to be set.
