Three former UTT directors lose appeal
By JADA LOUTOO Tuesday, June 10 2014
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JUSTICE NOLAN BEREAUX...
ANOTHER attempt by three former directors of the University of Trinidad and Tobago to have a lawsuit filed against them by the university to recover over $11.4 million, has been struck down by the Court of Appeal.
Former UTT directors Giselle Marfleet, Scott Hilton-Clarke and Errol Pilgrim, filed an appeal challenging the April 11 decision of Justice Vasheist Kokaram to proceed with the case against the three, former UTT president, Professor Ken Julien and former directors Dr Rene Monteil, Ravindra Nath-Maharaj and Lincoln Warner.
In their appeal, they argued that the judge did not get the law correct, and there was no realistic success of the claim against them since there was un-controverted evidence that they (Marfleet, Hilton-Clarke and Pilgrim) did not know of a report which purported to advise the university’s board against the sub-lease of a guest house in Aripo from Consolidated Services Limited, as the landlord was not authorised to sub-let the property to UTT. Stuart Young, attorney for the three who argued the appeal before Chief Justice Ivor Archie, and Justices of Appeal Nolan Bereaux and Gregory Smith, said the report was not known to the three former directors, until it was attached in the lawsuit.
UTT started the legal action against its former president and six other ex-directors in September 2012, seeking to recover money it claimed the university lost due to Julien and his ex-directors’ alleged involvement in accommodating Rev Juliana Pena, a spiritual adviser to former Prime Minister Patrick Manning, at UTT’s guest house in Aripo.
The lawsuit involved two transactions in which UTT claimed Julien and his board breached their fiduciary duty, and failed to exercise due diligence in the sub-leasing of the guest house in Aripo with Consolidated Services Limited, for a five year renewable lease at a monthly rental of $50,000, as well as accommodating Pena.
The former president and former directors, except for Maharaj, sought to dismiss the claim against them, as it related to the 2005 sub-lease with CSL for the guest house, arguing that there was no ground to bring the claim.
They have denied that they were in breach of their duty to UTT as they acted on the skill and competence of the legal department to ensure there were no impediments regarding the granting of the sub-lease, and that they took steps to mitigate, or eliminate any prospect of a possible defence in the title of CSL.
UTT’s corporate legal adviser Celeste Mohammed, in 2006 advised that the sub-lease was not a valid agreement, as the landlord was not authorised to sub-let the property to UTT, and should be terminated.
The sub lease with CSL, according to the lawsuit, continued until January 31, 2011. UTT’s main contention was that if Julien and the board acted prudently, they would have terminated the lease long before its expiration. Kokaram ruled that the case hinged upon Mohammed’s advice and whether in law the directors should have complied with it.
Kokaram ruled that the issue of loss was “inexorably linked with the knowledge and effect of the Mohammed report. The loss being the continued investment in a lease where if they acted prudently it would have ceased. The continued cost of the occupation therefore is a wasted cost if the directors were charged with the duty of avoiding unnecessary expenditure, or which is not in the best interest of the company.”
He also said the issue of causation as it related to alleged breaches of a director’s fiduciary duty was a triable issue.
Kokaram also pointed out that UTT’s case was not a simple case of negligence. “It is an alleged breach of trust, and breach of fiduciary duty of the defendants, as directors of the UTT,” and said to strike out UTT’s claim at this stage would be too draconian a remedy and disproportionate to the issues that required investigation.
Although it was pointed out to Young yesterday by the appellate judges that board minutes of November 14, 2006, which were produced in court, showed that the three directors were present when the issue of the lease was raised, the attorney argued that the “Mohammed report” was not before the board at that stage.
He said it is the position of his clients that the three were never told of Mohammed’s recommendation to terminate the lease and the trial judge should have taken this into consideration.
In response, UTT’s attorney British Queen’s Counsel Vincent Nelson questioned whether there should have been a placard at the board meeting announcing the “Mohammed report.”
“One has to question does one have to pull out a placard saying we have the Mohammed report?” he asked, adding that the three former directors were present when the issue of the lease was discussed at the November 14, 2006, board meeting.
In their ruling, Chief Justice Archie said the case before the judge was “at an early stage” and the court did not agree with the former directors’ contention that there was ‘un-controverted’ evidence that they did not know of in the “Mohammed report.”
“Certainly it (the Mohammed report) is central to the case and on perusal of the minutes it is clear that something in relation to title was discussed,” the Chief Justice said.
“We can find no fault with the judge’s analysis,” he added, ruling that it would be premature to strike out the lawsuit against the directors at this stage.
The appeal filed by the three was dismissed and they were ordered to pay two thirds of the UTT’s cost of defending the application.
Gerald Ramdeen and Varun Debideen also appeared for UTT while Anthony Bullock also represented the three former directors.
In a separate appeal listed for hearing which was filed by Monteil on the question of the quantum of cost which Kokaram ordered that he, along with the others, except for Maharaj-Nath, pay for the failed striking out application, the appellate judges ordered that costs be assessed since there was no agreement between the two parties.
Since it was indicated that Monteil had indicated his intention to withdraw his appeal against the quantum of costs, the judges ordered that he pay costs up to the time of filing his notice of discontinuance on June 3.