The Judicial Committee of the Privy Council Decisions

Gulf Insurance Ltd v The Central Bank of Trinidad and Tobago (Trinidad and Tobago) [2005] UKPC 10 (9 March 2005)

ADVANCE COPY

Privy Council Appeal No. 78 of 2002

Gulf Insurance Limited Appellant

v.

The Central Bank of Trinidad and Tobago Respondent

FROM

THE COURT OF APPEAL OF

TRINIDAD AND TOBAGO

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JUDGMENT OF THE LORDS OF THE JUDICIAL

COMMITTEE OF THE PRIVY COUNCIL,

Delivered the 9^th March 2005

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Present at the hearing:-

Lord Hoffmann

Lord Hope of Craighead

Lord Scott of Foscote

Lord Walker of Gestingthorpe

Baroness Hale of Richmond

[Delivered by Lord Hoffmann]

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1. The Trinidad Co-operative Bank Ltd ("TCB") was for many years a familiar if modest presence on the Trinidad financial scene. Incorporated in 1914 as a savings institution ("to inculcate in the people the virtue of thrift … and to provide a quick, easy, safe means for children and poor people to save small sums and put by for the coming of the rainy days"), it was popularly known as the Penny Bank. In 1976 it obtained a banking licence and expanded its activities to provide a full range of services including personal and commercial lending. Its management does not appear to have been able to cope with this transformation. During the period of economic expansion which occurred in Trinidad and Tobago in 1976-1982, following the steep rise in oil prices, the new TCB appeared to prosper. But the down turn exposed its weaknesses. An on-site investigation in 1985 by the Inspector of Banks disclosed a string of management deficiencies which led to a devastating auditor's report by Price Waterhouse dated 21 January 1986. In the absence of Central Bank assistance, TCB would have collapsed.
2. The Central Bank and Financial Institutions (Non-Banking) (Amendment) Act 1986, which conferred powers of emergency intervention on the Central Bank, received the President's assent on 8 February 1986. It inserted into the Central Bank Act Chap. 79:02 a new Part VA, headed "Special Emergency Powers of Bank" and consisting of 25 new sections numbered 44C to 44AA. The amending Act was passed by a special majority under section 13(2) of the Constitution with a declaration under section 13(1) that it should have effect even though inconsistent with the fundamental rights and freedoms declared by sections 4 and 5 of the Constitution. No doubt one reason for this procedure was to avoid any argument that the drastic powers of interference with private property conferred by the Act were inconsistent with the right to "the enjoyment of property and the right not to be deprived thereof except by due process of law" declared by section 4(a).
3. For the moment it is necessary to refer only to certain provisions of section 44D and 44E:

"(1) Where the Bank is of the opinion ?

(a) that the interests of depositors or creditors of an institution are threatened;

(b) that the institution is likely to become unable to meet its obligations or is about to suspend or has suspended payment; or

(c) that an institution is not maintaining high standards of financial probity or sound business practices;

the Bank shall, in addition to any other powers conferred on it by any other law, have power ?

(i) to investigate the affairs of the institution concerned and any of its affiliated institutions and to appoint a person or persons for that purpose;

(ii) to such extent as it thinks fit, to assume control of and carry on the affairs of the institution and, if necessary, to take over the property and undertaking of the institution;

(iii) to take all steps it considers necessary to protect the interests and to preserve the rights of depositors and creditors of the institution;

(iv) to restructure the business or undertaking of the institution or to reconstruct its capital base;

(v) to provide such financial assistance to the institution as it considers necessary to prevent the collapse of the institution;

(vi) to acquire or sell or otherwise deal with the property, assets and undertaking of or any shareholding in the institution, at a price to be determined by an independent valuer;

(vii) to appoint such persons as it considers necessary to assist in the performance of the functions conferred by paragraphs (i) to (vi); …

(2) The powers of the Bank under sub-section (1) shall not be exercised unless the Bank is also of the opinion that the financial system of Trinidad and Tobago is in danger of disruption, substantial damage, injury or impairment as a result of the circumstances giving rise to the exercise of such powers.

(3) Pursuant but without prejudice to its powers under subsection (1), the Bank may appoint any person or persons to act as Receiver or Manager and such appointment shall take effect as though made by the depositors and other creditors of the Company pursuant to a charge over all the fixed and floating assets of the institution and without prejudice to any other powers vested in such Receiver of Manager the Receiver or Manager shall have power ? ...

(c) forthwith to sell or concur in selling … all or any of the property of the institution and to carry any such sale … into effect by conveying … in the name and on behalf of the institution; and any such sale may be for cash … other obligations … or other valuable consideration …

44E.(1) Where the bank proposes to exercise powers under section 44D(1)(ii) it shall publish in the Gazette and in such newspaper as it thinks appropriate a notification to that effect.

(2) The notification shall state ?

(a) the property and undertaking it proposes to take over,

(b) the powers to control it proposes to exercise,

and shall give such particulars as the Bank considers necessary for the information of persons having business dealings with the institution."

4. On 21 February 1986 the Central Bank published notice in the Trinidad and Tobago Gazette, pursuant to section 44E, that it proposed to assume control of TCB, restructure its business and reconstruct its capital base, provide it with financial assistance, reconstitute its Board of Directors and appoint a new Chief Executive. It proceeded to clear out and replace a good deal of the old Board and senior management and to appoint Mr Ganace Ramdial (seconded from the National Commercial Bank (Trinidad and Tobago) Ltd ("NCB")) as the new Chief Executive.
5. The Central Bank provided substantial immediate financial assistance to TCB by buying $56 million of bad or doubtful loans at the barely discounted price of $52.3 million and lending TCB $26.5 million for ten years, interest-free for 2 years, and then at 3% for 3 years. This loan was discharged in 1988 by the transfer to the Central Bank of another $26.5 of doubtful loans at face value, followed by the purchase of $2.4 million more loans in 1989. TCB agreed to collect these loans as agent for the Central Bank but by 1993 only $1.8 million out of $81.2 million had been recovered.
6. Under its new management, TCB produced successive annual financial statements, audited by Price Waterhouse, which showed a steady recovery from what Mr Ramdial described as the "traumatic events" of early 1986. It reported profits of $611,000 in the year ending 31 March 1987, $539,000 in 1988 and $1.1 million in 1989, when it paid a dividend of $360,000. In 1990 it reported a profit of $2.5 million and paid a dividend of $420,000. In 1991 it reported a profit of $2.8 million and eliminated its accumulated deficit by selling some properties and moving some liabilities off its balance sheet.
7. The restructuring of the balance sheet after the profits declared in previous years was the preliminary to a 1 for 1 rights issue at $2.30 a share which took place in October 1991. The prospectus described TCB's situation as a "solid base for continued profitability". All the rights were taken up and the value of TCB's equity capital increased by £13.8 million. The Central Bank, which since the 1986 reconstruction had held (through a subsidiary) a majority share holding in TCB, took up its rights in full. In 1992, after the rights issue, TCB reported a profit of $2.3 million.
8. This was the public picture presented by TCB when, in 1992, the appellant Gulf Insurance Limited ("Gulf") bought 64,978 shares (or about 0.54% of the issued share capital) in the market as an investment.
9. Behind the scenes, however, there had been a running dispute between the new management under Mr Ramdial and the Inspector of Banks, Mr Henry Jeffers (a professional economist and former Director of Exchange Control) over whether TCB was presenting a true and fair view of its financial position. Mr Jeffers did not think that the new management was much better than the old. The provision for irrecoverable loans was in his opinion still far too low and TCB was inflating its profits by taking credit on profit and loss account for interest overdue and unlikely to be recovered. In particular, Mr Jeffers did not think that TCB could justify the payment of dividends and made a formal recommendation that it should not do so without the consent of the Central Bank. Mr Ramdial protested that the directors were acting on the basis of audited accounts and that the decision to recommend a dividend should be a matter for them. It would have been open to the Central Bank in the exercise of its statutory powers assumed in 1986 to direct TCB not to pay dividends or to restate its accounts. But the Governor appears to have maintained a position of neutrality, refusing on the one hand to relinquish the Central Bank's control but equally refusing to interfere with TCB's accounting and dividend policies.
10. In 1989 there was a crisis at another small indigenous bank, the Workers' Bank of Trinidad and Tobago. Again the Central Bank acted under its emergency powers. It stripped out the assets and undertaking of the Workers' Bank and vested them in a new company called the Workers Bank (1989) Ltd ("WB"), over which it assumed control under section 44D(1)(ii). At the time when WB was restructured, and again in 1990, Mr Ramdial raised with the Central Bank the question of a merger between TCB and WB. But the matter does not appear to have been pursued until about June 1992, when a third indigenous bank, NCB (from which Mr Ramdial had come to manage TCB), found itself in serious difficulties. A merger of all three banks was then proposed and in July 1992 the Central Bank declared itself to be in favour. On 27 July 1992 representatives of the three banks and the Central Bank signed a memorandum of understanding by which they agreed to set up a Merger Committee to recommend terms of amalgamation.
11. The Committee reported in January 1993. It recommended the formation of a new vehicle for the amalgamated bank ("First Citizens' Bank Ltd" or "FCB") which would issue shares in exchange for the shares in the three existing banks. The Boards of all three banks and the Central Bank accepted this general principle, but there was no agreement on how the share allocations should be calculated. The Central Bank thought that it would first be necessary to have a comprehensive independent audit of the assets and liabilities of each bank. It set up a "merger team" to supervise an audit by Ernst & Young. They began work in April 1993.
12. In August 1993 Ernst & Young presented draft reports which presented a gloomy picture of TCB's financial position. There is a considerable dispute over whether the accounting standards used by Ernst & Young were appropriate or reasonable. If, however, the draft report represented a true and fair view, TCB was insolvent and its shares (which were trading at over $2 on the stock exchange) were worthless. But TCB's problems were as nothing compared with those of NCB, which was a much larger bank and appeared to have an enormous deficiency, mostly on account of a poor quality loan book.
13. The report appears to have been leaked to the press, because on Friday 10 September 1993 a well informed article appeared in "The Bomb", headed "$1b NCB Debt Headache" which said that the bad debt portfolios of NCB ("conservatively put at one billion dollars") and WB ("reportedly some $800m") meant that FCB was likely to start life insolvent.
14. The Governor of the Central Bank, Thomas Harewood Ainsworth, formed the view that in consequence of this article there was likely to be a run on NCB first thing Monday morning and that it was therefore necessary to implement the merger immediately. There is a dispute over whether the Governor also formed the view that TCB was in danger (a matter as to which the article said nothing) and the Board will postpone its consideration of that question until later.
15. It is necessary at this point to examine carefully what happened on Sunday 12 September 1993. First, the Central Bank published a notice pursuant to section 44E in an Extraordinary edition of the Gazette stating that it was proposing to assume powers over TCB additional to those specified in the Gazette of 21 February 1986. These were to:

"1. Acquire or sell or otherwise deal with the property, assets and undertaking of or any shareholding in the institution, at a price to be determined by an independent valuer.

2. Appoint the Inspector of Banks as Manager of the Institution under section 44D(3) of the Central Bank Act.

3. Appoint such other persons as it considers necessary to assist in the performance of the functions conferred by section 44D."

16. Next, the Governor wrote to Mr Dumas, the Chairman of TCB:

"In accordance with its powers under section 44D(1) of the Central Bank Act Chap. 79:02 as amended, the Central Bank has decided, inter alia, to transfer the property, assets and undertaking of Trinidad Co-operative Bank Limited to First Citizens' Bank Ltd. Further, the Central Bank has appointed Mr Henry Jeffers, Inspector of Banks to be Manager of the Trinidad Co-operative Bank Ltd."

17. At the same time, the Governor wrote to Mr Jeffers:

"In accordance with section 44D(3) of the Act, you are hereby appointed Manager of Workers' Bank (1989) Ltd, National Commercial Bank of Trinidad and Tobago Ltd and Trinidad Co-operative Bank Limited (the banks) with effect from the 12^th day of September 1993 …

You will be required to execute certain agreements for the purpose of effecting the transfer of the business of the banks to a new institution - First Citizens Bank Ltd. This transaction will take effect from 12th September 1993." …

18. Afterwards, Mr Jeffers on behalf of TCB executed an agreement to which the Central Bank and FCB were the other parties. TCB was described as "the Vendor" and FCB as "the Purchaser". It recited that the Central Bank had assumed control of the Vendor under section 44D(1)(ii), that by notice in the Gazette it had published the additional powers which it intended to exercise and that ?

"(e) The Central Bank will cause the Vendor to sell the Vendor's business to the purchaser which business shall be transferred to the Purchaser by way of a Vesting Order. The purchaser proposes to apply to the Minister of Finance under section 49 of the Financial Institutions Act 1993 for a Vesting Order."

19. The operative clauses then provided that the Vendor would transfer to the Purchaser "the business of the vendor including the goodwill and all tangible assets and the liabilities thereof" including specifically a list of assets which included all debts owing to TCB. The consideration was stated to be that the purchaser would "pay satisfy and discharge" all the debts and liabilities of the Vendor "including obligations to staff under the Pension Plan … but not including obligations to the personnel and staff of the Vendor".
20. Section 49 of the Financial Institutions Act 1993 gives the Minister of Finance power to transfer the assets and liabilities of a financial institution licensed under the Act to another person. On the same Sunday, the Minister made a Vesting Order under the Act.
21. The effect of the transaction was to leave TCB as an entity with no assets and, as liabilities, only the "obligations to the personnel and staff" excluded from the liabilities transferred to FCB. On Monday 13 September 1993 the Governor wrote to the shareholders in all three banks. He told them that a merger had been under discussion for some time and had now been effected by the vesting of assets in FCB. The letter ended:

"The report of the independent valuer is due shortly following which shareholders will be informed on the valuation of the shareholding in respect of the individual institutions."

22. On receipt of this letter, Gulf reacted at once. On 14 September its solicitors wrote to TCB at its offices in Port of Spain, claiming that the vesting of its assets in FCB was ultra vires and unlawful. It asked for the permission of the directors to use the company's name "in an action to redress this wrong". It asked for an urgent reply, failing which it would be assumed that consent had been refused. There was no reply.
23. On 17 September 1993 Gulf applied for leave to move for judicial review of the Central Bank's decisions to assume the additional powers and to transfer the assets and undertaking of TCB to FCB. The relief sought included a declaration that the acts in question were null and void and a claim for damages. Gulf was itself the applicant and the Central Bank the only respondent. Leave was granted on the 28 September 1993. Affidavit evidence in support, opposition and reply was filed before the end of the year.
24. On 12 November 1993 the Central Bank followed up its letter to shareholders with a letter stating that the (presumably final) report of Ernst & Young, commissioned by the Merger Team, had now been received. It was said to value the shares in TCB as at 12 September 1993 at $1 a share. The Central Bank accordingly offered Gulf $1 a share, subject to acceptance by 15 December 1993. Gulf did not accept.
25. After this flurry of activity, things proceeded more slowly. There was an objection to the admissibility of some of the evidence. It was heard and ruled upon in January 1997. Leave was given to cross-examine some of the deponents, particularly Mr Harewood, the Governor of the Central Bank, on their affidavits. This began in January 1998 and proceeded on various dates until November 1998. The parties filed written submissions in June 1999 and the judge (Mrs Justice Barnes) gave judgment on 24 February 2000.
26. The judge dealt with a number of issues, some of which are no longer material. One of the principal issues was whether the Central Bank had held the opinions which, under section 44D, would entitle it to exercise its emergency powers. It will be recalled that the powers arise only if the Central Bank is satisfied of one or other of the matters specified in paragraphs (a), (b) and (c) of subsection (1) and, further, that by subsection (2) they are not to be exercised unless the Central Bank is also satisfied that the financial system of Trinidad and Tobago was, putting it shortly, in peril, "as a result of the circumstances giving rise to the exercise of such powers".
27. On this point the judge found in Gulf's favour. It is not altogether clear on what basis she did so. At one point in her judgment she said -

"It would appear that the operations of the bank since control was assumed by the Central Bank had been so greatly improved that the conditions precedent to the Central Bank exercising powers under section 44D(1) … could no longer be tenable."

28. The Court of Appeal afterwards treated this as a finding of fact (which they proceeded to reverse) but the structure of the judgment suggests that it may simply have been recording Gulf's submissions. However, the judge certainly said that the ?

"dealing with the assets property and undertaking of the [TCB] by the Central Bank on 12 September was … not because of any deterioration in the operations of [TCB] but rather … to shore up as far as possible the [NCB] which was in a parlous state and the ailing [WB]"

29. She went on to hold that the acts of the Central Bank to have been ultra vires, perhaps because the Central Bank did not hold one or other of the opinions required by section 44D(1) and (2) or perhaps because, whatever opinions it held, it was exercising its powers for an improper purpose. However, she held that the Manager had been validly appointed and that he was duly empowered (presumably under section 44D(3)(c)) to sell the assets and undertaking of the company and had done so. The agreement and vesting order were therefore valid.
30. She then turned to the offer to buy the shares, which she said was in truth a compulsory acquisition under section 44D(1)(vi) rather than a consensual agreement and said that it was valid because there was no evidence that the price had not been determined by an independent valuer.
31. Finally, the judge held that the Central Bank was protected from liability for damages by section 44H. This is a section to which their Lordships have not yet referred:

"The State, the Minister or the Bank, its directors and officers and any persons appointed by the Bank under section 44D are not subject to any action, claim or demand by, or any liability to, any person in respect of anything done or omitted to be done in good faith and without negligence in the performance, or in connection with the performance of functions conferred on the Bank under this Part."

32. The judge said that there was no evidence of negligence or bad faith and that section 44H therefore gave the Central Bank immunity from suit. The application for judicial review was dismissed.
33. Gulf appealed against the dismissal of the application and the Central Bank cross-appealed against the finding that it had acted ultra vires. On 26 March 2002 the Court of Appeal (Hamel-Smith, Nelson and Kangaloo JJA) dismissed the appeal and allowed the cross-appeal. In a judgment given by Nelson JA, the Court said that on the evidence, particularly that of Mr Jeffers and the draft Ernst & Young report, the Central Bank was entitled to hold the opinion that one or other of the requisite opinions in section 44D(1)(a),(b) or (c) was satisfied. As for the further opinion required by section 44D(2), it was enough that the Central Bank thought that a systemic risk to the financial system existed. It was not necessary that the risk should have been created by the fact that TCB was in difficulties. It was sufficient if it arose from another source such as a potential collapse of NCB, and in turn put at risk the interests of the depositors in TCB. Accordingly the Court of Appeal held that the Central Bank was entitled to exercise all its powers under section 44D and did so for the proper purpose of avoiding damage to the financial system and the possible collapse (by a domino effect) of TCB. It therefore allowed the cross-appeal against the finding of ultra vires.
34. Dealing with the appeal, the Court agreed with the judge that the transfer of assets was valid because it was a disposition by Mr Jeffers under section 44D(3)(c). Nelson JA specifically held that the transfer was not effected by the Central Bank pursuant to section 44D(1)(vi) and therefore did not have to be at a price fixed by independent valuation.
35. Like the judge, Nelson JA thought that the "offer" of $1 for the shares was in fact an acquisition under section 44D(1)(vi). In fact Nelson JA went further and said that the equitable interest in the shares passed to the Central Bank on 12 September, when it gave notice in the Gazette that it proposed to exercise powers which included the power to acquire shares. The process of acquisition was completed by notification of the valuation by Ernst & Young as independent valuers. The shareholders would have been entitled to contest the valuation but that did not affect the validity of the acquisition.
36. Finally, Nelson JA dealt with the relief the court might have granted if it had considered that the Central Bank's acts were ultra vires. He would not have granted a declaration to that effect because it would affect the rights of third parties (share holders and depositors in FCB) who had for years been treating the merger as having been validly consummated. Nor would he have awarded damages, both because such a claim had not been properly pleaded and because the Central Bank was entitled to rely on section 44H.
37. Mr Alvin Fitzpatrick, SC, who appeared for Gulf before the Board, submitted that the Court of Appeal should not have reversed the judge's finding on ultra vires, depending as it did upon questions of primary fact as to the Central Bank's opinions on the matters specified in sections 44D(1) and (2) and the purpose for which the powers had been exercised. For reasons upon which the Board will shortly enlarge, they do not think it necessary to rule upon this question. Nor is it necessary to decide whether the Court of Appeal was right in giving section 44D(2) the broad construction which it did. They will only make two observations.
38. First, although it is true that the judge had the advantage of seeing the Governor Mr Harewood cross-examined, it must in fairness be recorded that he said on affidavit that –

"I was fearful that if no immediate action was taken there might have been a run on the three banks when they opened for business on Monday 13 September. The Central Bank was of opinion that the interests of TCB's depositors and creditors was threatened, that TCB was likely to become unable to meet its obligations, and, consequently, that the financial system of Trinidad and Tobago was in danger of disruption, substantial damage, injury or impairment. It was to forestall the actualisation of these threats that the Central Bank took the actions described …"

39. Although he was cross-examined at great length, it was never put to Mr Harewood that he did not honestly hold those views or act for those purposes. Furthermore, he repeatedly said, both in his affidavit and in cross-examination, that he had relied upon the advice of Mr Jeffers, and Mr Jeffers, whose affidavit contained chapter and verse to support his opinion of the vulnerability of TCB, was not cross-examined at all.
40. The second observation, on the question of construction, is that the concluding words of section 44D(2) – "as a result of the circumstances giving rise to the exercise of such powers" – do seem to suggest that the threat to the financial system must be a result of the situation of the bank in respect of which the powers are to be exercised. The Board must therefore not be taken as approving of the construction adopted by the Court of Appeal.
41. The reason why the Board does not find it necessary to decide whether the Court of Appeal was right on these questions is that, assuming in favour of the Central Bank that its powers of intervention had properly arisen and were exercisable, a sale of the assets and undertaking of TCB under section 44D(vi) still had to be "at a price to be determined by an independent valuer". Mr Michael Brindle QC, who appeared for the Central Bank, accepted that the assets and undertaking had been transferred for a consideration which was not either determined by an independent valuer or agreed to be so determined at a later date. The consideration was simply the indebtedness of TCB (apart from debts due to officers and employees). Mr Brindle therefore accepted that if the Central Bank had purported to sell or otherwise deal with the assets under section 44D(vi), such a sale or dealing would have been ultra vires. He submitted however that the judge and the Court of Appeal were right in saying that the Central Bank did not act under section 44D(1)(vi) at all. There had been a sale by Mr Jeffers as manager, pursuant to his power of sale under section 44D(3)(c). That did not have to be at a price fixed by an independent valuer, although no doubt Mr Jeffers as manager owed a duty to TCB to obtain the best price obtainable in the circumstances and would be personally liable if he sold at an undervalue. But that would not affect the validity of the transaction.
42. The Board does not accept this interpretation of what happened. It is contrary to the contemporary documents, the inherent probabilities and what Mr Harewood said in evidence. The letter of 12 September 1993 to the chairman of TCB said quite unequivocally:

"In accordance with its powers under section 44D(1) of the Central Bank Act Chap. 79:02 as amended, the Central Bank has decided, inter alia, to transfer the property, assets and undertaking of Trinidad Co-operative Bank Limited to First Citizens' Bank Ltd."

43. This is consistent with recital (e) to the sale agreement, which said that "the Central Bank will cause the Vendor to sell the Vendor's business to the purchaser". Likewise, the letter to Mr Jeffers told him that he would be required to "execute certain agreements for the purpose of effecting the transfer of the business of the banks to a new institution". The execution of the agreement was plainly not an act of management undertaken by Mr Jeffers upon his own authority but a ministerial act undertaken at the direction of the Central Bank. It seems to the Board improbable that Mr Jeffers would have thought it proper, upon his own authority, to transfer the assets and undertaking without any attempt at a valuation and thereby to expose himself to liability for selling at an undervalue. He must have considered, quite properly, that he was protected by the fact that he acted pursuant to the directions of the Central Bank. But the Board considers that it would be an unreasonable construction of the draconian powers conferred by section 44D that the Central Bank should be able to avoid the need for an independent valuation by directing Mr Jeffers to execute the agreement and that Mr Jeffers should escape any possible liability for selling at an undervalue on the ground that he acted upon the directions of the Central Bank.
44. The Governor too thought that the Central Bank was exercising its powers under section 44D(1)(vi), although he seemed a little confused over whether this required an independent valuation of the assets and undertaking of the TCB or only a valuation of its shares. It was put to him in cross-examination:

"Q. Let us go back to the powers you exercised. You knew that they would have to pay a fair value for the undertaking that was transferred?

A. Yes.

Q. The power you exercised was at section 44D(1)(vi) [when] you sold the undertaking of the Trinidad Co-operative Bank?

A. Yes."

45. The Governor appeared to think that it was sufficient that the price of the shares in TCB was, in his opinion, determined by an independent valuation. But the Board thinks that this was wrong. The Act required the sale to be at a price to be determined by an independent valuer. That does not mean that the valuer had to produce his valuation on that very Sunday. The contract could have provided that he should report at some future date. But the contract itself had to specify that his valuation would be the price.
46. There are three further points to be made. First, there is no document in which the Central Bank purported to exercise its power under section 44D(1)(vi) to purchase Gulf's shares. The only letters to Gulf were a notice that a valuation would be obtained and an offer to purchase which was rejected. Gulf therefore remains the legal and beneficial owner of its shares. Secondly, the price of $1 a share determined by Ernst & Young as "independent valuers" is inconsistent with a sale of the assets and undertaking which appears to assume that the equity in the company is valueless. Thirdly, the Board doubts whether Ernst & Young could possibly be described as independent. They had been engaged by the Central Bank, and they undertook the valuation (originally for the benefit of the merger team) as agents of the Central Bank. The shareholders were given no opportunity to comment on their selection or make representations to them. Gulf were simply told ex post facto that Ernst & Young had been independent valuers. Neither Gulf nor the courts have seen their valuation.
47. In these circumstances, the Board did not hear submissions from Mr Brindle on whether the Court of Appeal were right in holding that the powers under section 44D were exercisable. The Board considers that even if they were, the transfer of the assets and undertaking of TCB was unlawful because the agreement did not provide for an independent valuation. Gulf is entitled to a declaration to that effect. It is not seeking a declaration that the transfer was null and void. It is now far too late to try to undo what happened that Sunday. But that does not make the original transfer lawful. Gulf are entitled to the declaration as a basis for such other remedies as they may be entitled to claim.
48. The main additional remedy sought by Gulf is damages. The fact that the proceedings were for judicial review is not in itself an obstacle to an award of damages. RSC Ord 53, r.7(1) provides:

"On an application for judicial review the Court may, subject to paragraph (2), award damages to the applicant if -

(a) he has included in the statement support of his application for leave under rule 3, a claim for damages arising in any matter to which the application relates, and

(b) the Court is satisfied that, if the claim had been made in an action begun by the applicant at the time of making his application, he could have been awarded damages."

49. In this case, the application for leave included a claim for damages. Rule 7(2) provides that a defendant shall be entitled to particulars of the damages claimed but no such particulars were requested. In the Court of Appeal Nelson JA expressed a tentative view that the claim for damages was inadequately pleaded, but their Lordships think that in the present case, in which it was clear that the complaint was that the Central Bank had unlawfully disposed of the assets and undertaking of the company, the reference to a claim for damages was sufficient: compare Millette v McNicholls (unreported) 11 December 1998, Court of Appeal of Trinidad and Tobago (CA 155 of 1995.)
50. The more serious difficulty is the requirement in rule 7(1)(b) that the applicant should have been entitled to bring an ordinary action for damages. Gulf is complaining of a conversion of the assets and undertaking of TCB, a claim for which TCB is the only proper plaintiff: see Foss v Harbottle (1843) 2 Hare 461; Prudential Assurance Co Ltd v Newman Industries Ltd (No. 2) [1982] Ch 204. The individual shareholder is not entitled to bring separate proceedings in his own name for a diminution in the value of shares which would be made good by damages awarded to the company. Exceptionally, however, a shareholder is entitled to bring a derivative action on behalf of the company when it is controlled by persons alleged to have injured the company who refuse to allow the company to sue: Wallersteiner v Moir [1974] 1 WLR 991. In the present case, these conditions were satisfied. On 14 September 1993 Gulf's solicitors wrote to TCB asking for permission to use its name and they received no reply. Gulf are therefore entitled to sue in the name of TCB for the wrong to TCB.
51. Gulf did not however join TCB as a party to the proceedings. The Board was told that at about the same time as these proceedings were begun, a Mr Emile Elias, suing on behalf of himself and all other shareholders in TCB, launched a constitutional motion in which TCB was joined as a respondent, seeking payment of damages to TCB. The cause of action was alleged to be infringement of TCB's constitutional right not to be deprived of its property without due process of law. That action presently stands adjourned, awaiting the outcome of this appeal.
52. Mr Brindle suggested that the right way to deal with the matter was to dispose of this appeal by simply making a declaration that the disposal of TCB's assets had been ultra vires section 44D(1)(vi) and unlawful. That declaration would be treated as binding in Mr Elias's motion, which could then proceed as a properly constituted derivative claim. But the Board considers that this would only cause unnecessary delay and expense. Especially in view of the existence of the Elias proceedings, the Central Bank would suffer no prejudice if Gulf were allowed even at this stage to amend the proceedings by joining TCB as a party and seeking payment of damages to TCB rather than to itself. If TCB does recover damages, then this will of course also be for the benefit of Mr Elias and the other shareholders (subject to the indemnification of Gulf for the unrecovered costs of this litigation) and, since TCB cannot recover twice over, their motion will fall away.
53. That leaves the question of whether TCB is entitled to damages at all. Prima facie, the unlawful disposal of its assets by the Central Bank was a conversion. But the question is whether the Central Bank is, as the judge and the Court of Appeal thought, immunised from liability by section 44H. That section applies to acts done "in the performance, or in connection with the performance of functions conferred on the Bank under this Part". The Board considers that the judge and the Court of Appeal gave it too wide a construction in applying it also to acts which purported to be in performance of functions conferred by the Act but which were in fact outside the powers which it conferred. This is particularly true when the acts in question deprived TCB of its property. The Board considers that provisions of this nature should be restrictively construed. They should not be treated as a licence for unlawful expropriation without compensation, provided only that the acts are done in good faith and without negligence.
54. Gulf are therefore entitled to an order that Central Bank pay to TCB damages to be assessed, representing what would have been a fair valuation of its assets on 12 September 1993, less the value of the liabilities transferred to FCB, with interest. The Board are very conscious of the fact that in the opinion of Ernst & Young and Mr Jeffers, such an assessment would produce a negative figure. But they are in no position to say whether these opinions are correct or not. It will not be easy to establish what the true value of TCB's business was more than 12 years ago. It would therefore be greatly in the interests of all parties if valuers from both sides could agree upon a figure, positive or negative, which would resolve the matter without the need for a judge to adjudicate between competing valuations.
55. If the matter does have to proceed to a formal assessment of damages, Gulf will have to amend the claim, pursuant to the leave granted by the Board, to join TCB as a party and to claim damages in the name of TCB. As a condition of such leave, Gulf will have to give an undertaking to apply to restore TCB to the register if it has been struck off and in any event to apply for TCB to be wound up so that any damages are paid into the hands of an independent liquidator for distribution to all shareholders.
56. Subject to these amendments, the Board will allow the appeal and make an order for the payment to TCB of damages to be assessed. The Central Bank must pay Gulf's costs before the Board and in the Court of Appeal. The costs before the judge are reserved to the judge who hears the assessment of damages, with leave to either party to apply to the High Court for costs if no such assessment takes place.