The Bank of N.T. Butterfield and Son Ltd.'s legal advisor never saw a letter sent by Bermuda Fire & Marine Co. Ltd.'s law firm denying any opinion had been given on whether the company's 1991 reorganisation could be considered a fraudulent conveyance of property, a court heard yesterday.

Conyers Dill & Pearman lawyer John Collis wrote the letter in response to queries by Bank of Butterfield legal advisor Peter Rodger regarding a $5 million loan the bank was making to BF&M Ltd., the company set up to hold Bermuda Fire's profitable domestic business.

The liquidators are suing on the claim that the set up of BF&M as a separate entity and the special share dividend in the new company to Bermuda Fire shareholders was a fraud on the international creditors.

Mr. Rodger testified yesterday about a memorandum he wrote on August 14 1991 suggesting that the bank receive a "clear and unequivocal opinion from BF&M's attorneys that the transfers of assets pursuant to the reorganisation are not fraudulent conveyances under Section 37 of the Conveyancing Act, 1983''.

He added that "The word `defraud' does not necessarily entail criminal fraud but means depriving creditors of timely recourse to property which would otherwise be applicable for their benefit''.

The memorandum was written to Michael Collier, who was at the time general manager of the bank and a director of Bermuda Fire. Mr. Collier and four other directors who sat on the company's finance committee are being sued. The bank was in the process of making a $5 million loan to BF&M that would be used as part of the price paid to Bermuda Fire for the domestic business.

Mr. Rodger said at the time he did not have any views "one way or the other as to whether the transfers might be caught by section 37, because I did not have sufficient knowledge of the overall factual matrix to be able to take a view.'' He also disputed suggestions by Bermuda Fire's liquidators that he had "cause'' to question the reorganisation.

"It is also too strong to say that I had `concerns','' Mr. Rodger stated in a witness statement. "All that had happened was that this point had occurred to me, and I was suggesting to Mr. Collier that the bank should obtain some legal advice in relation to it.'' In an August 28 response to the memorandum John Collis subsequently wrote that Conyers Dill & Pearman was unable to give an opinion on the issue as it was a question of fact relating to the intent of the directors. The law firm could only give an opinion on law, he wrote.

An amended loan document was sent to BF&M asking that the company also supply a legal opinion that the "transfers of assets pursuant to the reorganisation are valid and enforceable'' under the Conveyancing Act.

Subsequently the law firm wrote a September 5 opinion letter relating to the loan, which Mr. Rodger said at the time satisfied his request.

"I wrote back to John Collis, telling him that I was pleased that he had changed his mind and that he had been able to give the opinion which the bank required,'' he said.

The bank subsequently made the $5 million loan to Bermuda Fire. However, Mr.

Collis wrote to Mr. Rodger denying he had given an opinion on the fraudulent conveyance section.

"Our opinion of 5th September, 1991 in no way is intended, nor should be taken to suggestion that the transactions could not be set aside under section 37 of the Conveyancing Act,'' Mr. Collis wrote. Mr. Rodger said he did not recall getting the response and that no copy of it existed in the legal department's records. He said under questioning that someone in the bank must have received the letter.

The first time he became aware of the letter was when it was quoted the liquidator's statement of claim against the defendants.

"If I had seen the letter at the time, my reaction would have been that it was simply too late to pursue further,'' he said. "By the date of his letter, the loan had been made and so I would have considered the matter closed.'' BUSINESS BUC