The Trinidad and Tobago government suffered a major setback in the courts after a High Court judge ruled that the government's bailout plan of Colonial Life Insurance Company (CLICO) was unlawful.
High Court judge Joan Charles Tuesday ordered the State to pay a group of Executive Flexible Premium Annuity (EFPA) policyholders all the money they invested in the failed insurance giant, plus interest.
Soon after it won the May 2010 general election, the Kamla Persad-Bissessar-led coalition People's Partnership administration announced a new bailout plan for CLICO policyholders.
The Bailout Plan
It said it would make an initial partial payment of a maximum of TT$75,000 (US$12,500) to depositors in the short-term investment, and mutual funds and those whose principal balances exceeded TT$75,000 would be paid through a government IOU amortised over 20 years at zero interest.
The policyholders had filed a lawsuit contending that the original bailout plan presented by the Patrick Manning government amounted to a guarantee that policyholders would be reimbursed the funds they held in the cash-strapped conglomerate.
"It is declared that the claimants are the beneficiaries of legitimate expectations engendered by representations made to them by or on behalf of the government that the government would ensure that their funds in CLICO would be safe and that it would guarantee repayment of all monies due to them, and the government would make good the deficit in the Statutory Fund," the judge said in her ruling.
"It is ordered that the defendant do make good the said legitimate expectation by making suitable arrangements to ensure that the claimants, less those who have already accepted the government's offer, receive a sum equal to 100 per cent of CLICO's contractual liability to them," Justice Charles ruled.
"Interest at the rate of three per cent from September 2010 to March 12, 2013 be paid on the said sum," the judge said.
She disagreed with the government's argument that it did not have the money to abide by the promise made by the last government.
Former Attorney General Ramesh Lawrence Maharaj, who was among a team of lawyers representing the policyholders, told reporters that the ruling showed "that when the last government made the decision to honour the guarantee given to policyholders ... the country was in a worse economic situation than when this government decided to break the promise."
He said policyholders had left their money with the insurance company because of the promise of the last government.
The government has 28 days in which to file an appeal.