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The Clico Policyholders judgment

Monday, August 29, 2016

On June 28, 2016, the Privy Council delivered its judgment in the case of The United Policyholders Group and others (the Appellants) v The Attorney General of Trinidad and Tobago (the Respondent) [2016] UKPC 17. 

The appellants were all holders of a Clico policy called the Executive Flexible Premium Annuity (EFPA). Their claim arose from the financial crisis Clico and the CL Financial Group faced in 2009, and the government’s intervention in those companies. 

Their claim was that the then government gave assurances of support for Clico creating a “legitimate expectation” that they would be fully protected, which the new government failed to honour by its new bailout plan announced in 2010/2011. The case succeeded at the High Court but failed in the Court of Appeal.

On appeal to the Privy Council (the Board) the two main issues were:

• Whether the assurances/ representations made by the government during 2009 gave rise to a legitimate expectation. 

• If so, was the government entitled in law to depart from that expectation? 

Was there a legitimate expectation?

On the first issue, the Board examined the concept of legitimate expectation in law.

The principle stated broadly is where a public body states that it will do (or not do) something, a person who has reasonably relied on the statement should, in the absence of good reasons, be entitled to enforce it through the courts. 

However this is subject to exceptions and qualifications. The statement must be clear, unambiguous and unqualified. There are also circumstances where it becomes inappropriate to permit a person to invoke the principle to enforce compliance. 

In this case, the appellants relied on a number of public statements (qualified and unqualified) made during 2009 about the nature of government’s support for Clico— in essence that policyholder funds would be “guaranteed by the government.”

The Board was prepared to accept that the appellants had a legitimate expectation, as a result of the assurances, that the government would ‘make good the deficit in Clico’s Statutory Fund, and the company would be placed in a position to fulfil all of its obligations including that of the claimants.’

Was the government entitled to depart from the assurances?

The Board, however, accepted that government was entitled to depart from any legitimate expectation created by the previous assurances for what it perceived to be good reasons in the national economic interest. 

The Board found there was sufficient evidence that macro-economic considerations played a very prominent part in the government’s decision to abandon the assurances and embark on the 2010/2011 policy. 

There were wider policy implications of the assurances including significant evidence that Clico’s position was worse than it previously appeared, the difficult financial position of the country in September 2010, and the need to ensure IMF approval and confidence. These were issues about which a court would be very slow to interfere.

Although there was a concern whether the government properly considered the implications of departing from the assurances, the Board was satisfied that in all the circumstances they did. For those reasons, among others, the Board upheld the judgment of the Court of Appeal and dismissed the appeal. 

The full judgment and reasoning of the Privy Council is available online.

This column is not legal advice. If you have a legal problem, you should consult an attorney-at-law. 


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