Century National Merchant Bank Limited and Others v Davies and Others

Publication Date01 March 1998
Date01 March 1998
AuthorLords Goff of Chieveley,Lloyd of Berwick, Steyn, Hoffman,Hope of Craighead
SubjectAccounting & finance
Journal of Financial Regulation and Compliance Volume 6 Number 3
Privy Council challenge to lawfulness of
Jamaican Ministry of Finance action
Century National Merchant Bank Limited and
Others v Davies and Others
Privy Council: Lords Goff of Chieveley, Lloyd of Berwick, Steyn, Hoffman
and Hope of Craighead
Date of Judgment: 16th March, 1998
This appeal to the Privy Council from the
Court of Appeal of Jamaica concerned the
lawfulness of action taken by the Minister
of Finance on 10th July, 1996 under statu-
tory powers to assume temporary manage-
ment of three financial institutions, and the
remedies available to aggrieved parties in
the event that such action were indeed
unlawful. Three financial institutions were
concerned (1) Century National Bank
Limited, a bank licensed under the Banking
Act 1987; (2) Century National Merchant
Bank and Trust Company Limited, a mer-
chant bank licensed under the Financial
Institutions Act; (3) Century National
Building Society, a building society
licensed under the Building Societies Act
Lord Steyn, in the judgment of the
Privy Council, set out the factual back-
ground in some detail:
'Through various corporate entities Mr
Donovan Crawford, together with his
mother, held a controlling interest in all
three financial institutions. The Board of
Directors of the three institutions were
virtually the same and they shared
management services and
several years before 10th July 1996 the
three institutions experienced serious
financial and managerial problems. In
the view of the Bank of Jamaica the
operations of these entities were charac-
terised by unsafe and unsound practices.
Despite undertakings to remedy matters,
the position in the view of the Bank of
Jamaica became progressively worse.
During this period the institutions were
heavily dependent on support provided
by the Bank of Jamaica. Protracted
negotiations with a view to restructuring
the institutions and placing them on a
sound footing took place between the
Minister of Finance, the Bank of Jamaica
and the beneficial owners and senior
management of the three financial insti-
tutions. There was never a successful
outcome to these negotiations. One of
the principal differences related to the
insistence of the authorities on the repla-
cement of the existing senior manage-
ment of the three financial institutions.
By the end of June 1996 unaudited in-
house accounts showed (1) in the case of
the bank an excess of liabilities over
assets of $2.5 billion; (2) in the case of
the building society an excess of liabil-
ities over assets of $347 million; and (3)
in the case of the merchant bank a
surplus of assets over liabilities of S35
Journal of Financial Regulation
and Compliance, Vol. 6, No. 3,
pp. 278-285
© Henry Stewart Publications,
Page 278

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