Judgment in the appeal of the case of Ennia vs. Ansary

Today, the Court of Appeals has rendered judgment in the appeal of the case of Ennia vs. Ansary and others, after having held hearings on March 13th, 14th, and 16th of this year. In its verdict of November 29th, 2021, the Court of First Instance granted Ennia’s claims up to an amount of over 1 billion NAf. The Court of Appeals rendered decisions on part of Ennia’s claims. In order for the Court to be able to decide on the remainder of the claims, investigation by an independent expert is required. Furthermore, the parties will have to submit additional information.

Background

Since July of 2018, an emergency measure has been in place for Ennia. The Central Bank of Curacao and Sint Maarten is tasked with its implementation, and has initiated this procedure with the objective of resolving the solvency problem presented by Ennia. The extent of the solvency deficit itself is not the subject of this procedure, rather it concerns compensation for a number of specific cost items and events. Ennia accuses the shareholder (Parman International) and its former directors and commissioners (Ansary and others) of having acted unlawfully towards companies belonging to the Ennia group. According to Ennia, since the takeover of the Ennia group in late 2005/early 2006 by Parman International, of which Ansary is director and majority shareholder, the Ennia group has not been managed in accordance with the specific nature of insurance companies and the associated regulatory supervision. In that context, according to Ennia, unwarranted large expenses were incurred, such as (dividend) payments, donations, salaries, and bonuses, and investment profits were unjustly withheld from Ennia.

The ruling of the Court of Appeals

General

The Court of Appeals extensively mentions the criteria relevant to the assessment of the claims. Those directors and commissioners of Ennia companies who engage in insurance business (the insurers) must exercise due care in their duties regarding the policyholders' interests. This also applies to directors and commissioners of Ennia Holding and Ennia Investments, since the insurers depend on them.

Joint liability

Ennia argues that all respondent parties are jointly liable for the entire damages it claims, since they acted as a group. The Court disagrees, because the requirements set by law and case-law of the Supreme Court are not met.

Investment in S&S and oil platforms

The investment in the American company S&S, of which Ansary was director and one of the shareholders, in itself yielded a reasonable return. However, the Court rules that Ansary and others are liable for the damages resulting from a specific transaction in 2014, in the context of the investment in S&S. In this case, Ennia’s shares in S&S were sold to another Ansary- owned company in exchange for a promissory note. This transaction severely disadvantaged Ennia's interests, since the purchase price for Ennia was set to a value that was far too low. The Court estimates the damages in this case at approximately USD 117 million (rounded off). The Court also rules that Ansary and others are liable for the damages arising from the investment in S&S oil platforms in 2009. This investment is not appropriate and pertinent for a company like Ennia. The Court estimates the damages in this regard at over 11 million USD.

(dividend) Payments

The Court has to assess if Ennia’s assets were sufficient to deem several (dividend) payments made to the shareholder (Parman International) from 2009 to 2015 permissible.

The value of Mullet Bay, a plot of land in Sint Maarten that Ansary contributed to Ennia, is of decisive importance in said assessment. Mullet Bay is a former golf resort and a timeshare location that was damaged by hurricane Luis in 1995. One hotel remains, the rest of the plot has not been further developed. Mullet Bay was included in Ennia’s annual accounts for high amounts. The parties dispute Mullet Bay’s value. The Court is of the opinion that in the years in which the (dividend) payments mentioned by Ennia were made, Mullet Bay was incorrectly included in the annual accounts for a value that was derived from appraisals of an assessor that were too limited. Therefore, it cannot be assumed that the (dividend) payments were made in accordance with the law and the articles of incorporation. The Court cannot yet answer the question if Ansary and others are liable, since it cannot be ruled out that, with a proper appraisal, a (dividend) payment of some amount would still have been made. Therefore, the Court primarily deems further expert information necessary, regarding the value that in the relevant years could reasonably be attributed to Mullet Bay. Should it become clear that Ennia, in the context of the overvaluation of Mullet Bay, made more payments to its shareholder than is legally and statutorily permissible, then the Court shall assess the amount to be (re)paid to Ennia.

Excessive expenses

The Court rules that whenever expenses are incurred, such as donations or above-average travel and accommodation costs, the first requirement is for Ennia’s financial capacity to be sufficient for such expenditure. However, even if said financial capacity is sufficient, any expenditure must still be justified in light of Ennia's interests.

The Court holds Ansary and others liable for several cost items related to donations (only to a private cause and of no interest to the company), services provided that are fully unrelated to Ennia’s business operations, personal assistants to Ansary, and 'ghost staff,' as well as costs for private airplanes. In its ruling, the Court has already deemed a (combined) amount of over Naf 25.8 million admissible.

The compensation of the commissioners and their travel and accommodation costs shall be further assessed when the independent expert submits their appraisal report regarding Mullet Bay.

Further clarification and debate are still required regarding some issues. There will be an opportunity to do so when the parties are called upon to respond to the expert's report.

Conclusion

Firstly, the parties shall now be given the opportunity to express their views on the person to be appointed expert for an appraisal of Mullet Bay in the relevant time period, as well as on the phrasing of the question to be asked. In this ruling, the Court has already been able to provide clarity regarding part of Ennia’s claims, namely USD 117 million (rounded off), (over) USD 11 million, and NAf 25.8 million.