Barbara Gayle, Staff Reporter 
Chen Young
THE CENTRAL Bank came under judicial fire yesterday when the Court of Appeal said it allowed certain irregular procedures to take place in relation to the failed Eagle Merchant Bank and Crown Eagle Life Insurance Company.
The court made the comment when it dismissed an appeal brought by financier Dr. Paul Chen Young and his companies and ruled that his assets must remain frozen until the Government's billion-dollar suit against him has been disposed of. He was chairman and chief executive officer of the failed companies.
The Court criticised the Bank of Jamaica for allowing "a most unusual" feature to take place, in that Eagle Merchant Bank had owned Eagle Commercial Bank. The court said that, as a general rule, it was the commercial bank which usually owned the merchant bank.
"This must have caused the regulator, the Bank of Jamaica, immense problems and it is strange that it was permitted in the first place," the court held.
The court noted that Jellapore Investment Ltd., a Caymanian Company, had controlled the banks and the insurance companies. The court also described that as a curious arrangement. The Bank of Jamaica was aware of this extraordinary arrangement from 1993, when there was a sale of shares by Chen Young's company, Ajax Investment Ltd., in Eagle Commercial Bank and Eagle Merchant Bank, the court said.
"There was a polite enquiry by the Director of Bank Supervision and a reply from the Group Financial Controller in the office of Eagle Commercial Bank," the Court said.
"Equally curious is the fact that Crown Eagle Life was controlled by Jellapore which owned 51 per cent of the shares. This also must have caused great problems for the regulator of insurance companies. The imprudence of having important financial institutions such as a merchant bank, and an insurance company controlled by a private company incorporated in a tax haven ought to have been evident to the regulators," the court ruled.
Chen Young and his companies also failed yesterday to get an order to strike out the statement of claim which the Government has filed against them to recover more than $1 billion in loans to Chen Young's companies. Chen Young is also accused of breaches of fiduciary duty which he is denying.
Eagle Merchant Bank of Jamaica and Crown Eagle Life Insurance Company Ltd. (formerly under the control of FINSAC) are now controlled by the government Financial Institutions Services (FIS).
Attorney-at-law Conrad George, one of the lawyers representing Chen Young, said yesterday that Chen Young will be seeking leave to take the matter to the United Kingdom's Privy Council.
The Mareva injunction, which was granted by the Supreme Court, freezes Chen Young's assets locally and abroad. The Government applied for the injunction in November 1998 after it sued Chen Young and his companies, Ajax Investment Ltd., a provident society and Domville Ltd. The bulk of the assets owned by those two companies is real estate.
Chen Young sold the failed bank and the insurance company to FINSAC for $1 on March 12, 1997.
"If he were free to dispose of his assets there would be no means to satisfy a judgment, if he lost at the trial stage. This would be regrettable as the issues in this case are of general public importance. The taxpayers had to meet a bill of $120 billion to rescue the depositors and policy holders in the failed banks and insurance companies," the Court of Appeal, comprising Mr. Justice Henderson Downer, Mr. Justice Paul Harrison and Mr. Justice Seymour Panton, said.
In the 84-page judgment, written by Mr. Justice Downer, The Court of Appeal referred to submissions by Emil George, Q.C, one of the lawyers representing Chen Young. Mr. George had argued that Chen Young should not be solely blamed in the transactions because it was a collective decision of the Board.
In response, the court said that on the issue where the allegation "is that Chen Young has caused the expenditure in relation to Grenada Crescent; be it noted Mrs. Daisy Coke, an actuary and Deputy Chairman of the Public Services Commission and by virtue of that office, she is a member of the Judicial Services Commission. She is also credited with ownership of 50 per cent of Eagle Holdings and investments."
The court said further that Senator Oswald Harding, a former Attorney General, is a member of the board. The court said the board was one with outstanding members.
The government is contending that Eagle Merchant Bank expended about $64.5 million on alterations and improvements to the four-storey building at Grenada Crescent and that was done at the request of Chen Young and Ajax.
The court said there was no indication in the minutes of the board meeting of March 11, 1997 that Chen Young declared his interest in the contract having regard to his controlling interest in Ajax.
The court said further that Chen Young failed to disclose that Paul Chen Young and Co. Ltd. owned 1,799 shares and that Jellapore, a family company, owned 64.6 per cent of Paul Chen Young and Co. Ltd. In dismissing Chen Young's appeal, the court said those were factors to take into account when considering the respondents' fear that Chen Young would dispose of his assets in Jamaica, if the Mareva Injunction were to be discharged.
The Court of Appeal has ordered that the Attorney-General give an undertaking as to damages in the Supreme Court within the next 14 days that Chen Young would not be prejudiced if he succeeded at the trial. The Court described the case as an important one, in which the respondent's are challenging Chen Young's conduct as a director of the two institutions which became insolvent under his watch.
Chen Young is charged with breach of fiduciary duties, negligence, as well as other serious charges.
The court said that, if those charges were sustained, there would be serious consequences for Chen Young's preferred career as a merchant banker as well as his assets.
"It was therefore appropriate to restrict Chen Young's rights to his property, as it was rightly feared that he would remove his assets from this jurisdiction if judgment went against him and his two companies, especially since he now resides in Florida."
