A panel of three judges, led by Chief Justice Lensley Wolfe, yesterday dismissed Universal Merchants Limited’s contention that the Financial Sector Adjustment Company (Finsac) was illegally incorporated.

However the contention, which was brought before the court via a motion backed by several Finsac debtors, will be taken to the local appellate court, according to Universal’s attorney, Oswald James.

“My instructions are to appeal and an appeal will be filed in due course,” he told the Observer.

James, who argued the motion two months ago, had contended at the time that neither the government’s financial secretary nor its accountant-general had the constitutional right to subscribe to Finsac’s memorandum of association.

Finsac was set up by the government in 1997 to take over a number of financial institutions that crumbled due to insolvency. Refin Trust, a subsidiary of Finsac, was also set up to collect debts owed to the institutions which included Century National Bank and the Blaise Financial Group.

James, who also challenged the legality of Refin, argued that if Finsac turned over its bad debt portfolio and, by extension, the confidential information that his clients submitted in order to obtain loans from the failed financial institutions, their constitutional rights would have been breached.

However, yesterday’s judgement pointed out that the fact that Finsac had been incorporated, constituted conclusive evidence of its legality.

“The Certificate of Incorporation issued by the Registrar of Companies in respect of Finsac Limited under the Companies Act is conclusive. The remedy for its removal is available under the Companies Act and redress is, therefore, available in another forum under that act,” said Supreme Court judge Gloria Smith, who also heard the motion.

As far as the disclosure of the debtors’ financial accounts was concerned, it would be unrealistic to expect the new collectors to seal the deal without knowing the full story.

“When a debt is assigned, surely the person to whom the debt is being assigned must be privy to such information that will help in determining whether or not a prudent and wise decision is being made. Certainly, the assignee cannot be expected to accept an assignment blindfolded,” she said.

Yesterday’s ruling follows on the dismissal of a similar contention by another group of four Finsac debtors who had claimed that Finsac had handled their portfolios unfairly and arbitrarily.

Both court actions by the debtors had hoped to stave off the sale of Finsac’s bad debt portfolio. However, the sale to the Beal Bank of Texas went ahead regardless, much to the dismay of the debtors.