Settlement of Court Cases: Legitimizing incompetence and corruption

By Mohabir Anil Nandlall, MP., Attorney-at-Law

There is no other Government  in the Commonwealth that has settled more cases and paid out more public funds, as a consequence thereof, over a sixteen month period than the coalition Government. In this regard, the Administration has demonstrated such an incomparable proclivity and haste to dole out public funds and write off debts owed to the State, that it puts a strain on the rational mind not to conclude, that either incompetence overwhelms or, that there is a corrupt motive, or both.

In this piece, I will examine three (3) of such cases to demonstrate my point.

1. The Demerara Distillers Limited (DDL) case

This case involved a legal challenge launched in the High Court by DDL in 2002, to the assessment by the Commissioner General of the Guyana Revenue Authority, of consumption taxes owed by that company in a sum exceeding  $1 billion, for the period January 2001-September 2002. This assessment by the Commissioner-General was eventually quashed by the High Court on the 1^st of February, 2005. GRA appealed that decision to the Court of Appeal.

On the 31st of July, 2008, the Court of Appeal dismissed this appeal on the ground that the Commissioner-General had used a wrong formula for the calculation of the consumption taxes. The Court prescribed a formula to be used. In 2009, the Commissioner-General, utilizing the Court recommended formula, assessed DDL’s consumption tax liabilities for the period 2001-2007 (since after 2007 Consumption Tax was abolished with the introduction of VAT). The newly assessed liability of DDL for that period was in excess of five billion dollars.

Again, DDL filed legal proceedings challenging  this assessment. GRA retained external Senior Counsel and was steadfastly defending this challenge when this Government  took office. Instead of continuing to defend GRA’s assessment done in accordance with the Court of Appeal’s formula, this Administration settled these proceedings, for the paltry sum $1.5 billion and gave DDL more than a year  to pay. So, after fifteen (15) years of litigation, with DDL having the use of several billion dollars of State funds, interest free, this Government settles for $1.5 billion. The Opposition Leader, an expert in the financial field, pegged the loss to the treasury by this settlement, at approximately $20 billion. The reasons publicly proffered by the Minister of Finance for this settlement are equally preposterous. Among the reasons he advanced, is that the company’s tax liability to the State declined with the passage of time! Up until that time, like me, most people thought that debts increase with the accrual of interest, with the passage of time.

A significant consequence of this settlement is that Banks DIH Ltd, who in like circumstances, paid billions of dollars in consumption taxes, assessed by the Commissioner-General, utilizing the same method used to calculate DDL’s Consumption Tax liabilities, has signaled an intention to claim a refund of consumption taxes paid. Banks paid far more consumption tax than DDL as their production line is larger. Therefore, the refund that will be sought will be several times the $5 billion for which DDL was assessed.

To sum it all up, the settlement of this one case is likely to cost the taxpayers over $50 billion.

2. Haags Bosch/BK International settlement

A ten year  contract in excess of US$10m signed between BK International and Puran Brothers (a joint venture), with the Government of Guyana in 2009, for the construction and management of a garbage disposal site at Haags Bosch. From on or about 2013, the Government began to complain to the contractor about sub-standard works being done under the contract. Notices and letters were sent identifying these defects and calling for their rectification. Several meetings were held, chaired by the President, to persuade the contractor to correct the breaches. All efforts proved futile. In 2015, the international funding agency of the project gave the Government an ultimatum to terminate the contract. As a result of several fundamental breaches of the contract, the PPP/C Administration made a decision to terminate the contract, remove the contractor from the site and to sue for compensation for breach. A termination notice was issued in February 2015, terminating the contract. In March 2015, BK launched legal proceedings in which a number of prerogative writs were sought, quashing the termination notice and prohibiting the Government from removing the contractor from the site.

Upon the change of Government, the coalition Government made great hue and cry in the press about the state of the dump site. Ministers Patterson and Bulkan led teams of public officials on site visits. For days, they publicly lambaste the sloppy and sub-standard works done at the site. They publicly criticized the contractor for negligent works. Minister Bulkan and Mr. Brian Tiwarie had exchanges in the press. In November 2015, the Court quashed the termination notice and restrained the Government from ejecting the contractor from the site. The Attorney-General appealed. One must assume that he had good grounds to do so. In my view, he did. The Court erred in using public law principles to determine a private law contractual dispute.

Having publicly castigated the contractor for shoddy works and having appealed the aforementioned Court ruling, one would have expected that the Attorney-General would have prosecuted his appeal and then sue the contractor for damages for breach of contract for the substandard work about which his Government  complained. Instead, and to the public’s absolute surprise, this Government negotiated a “settlement” with the contractor, whereby, rather than the Government  receiving compensation for the contractor’s breach of contract, the Government agrees to pay to the contractor US$5.7M.  It is as if the Government is rewarding the contractor for the same shoddy and substandard works about which the Government itself publicly complained. When questioned about this bizarre settlement, three Government Ministers conveyed the clear impression that the contractor had sued the Government for compensation in the sum of US$10m, and that the Government managed to persuade the contractor to accept just over 50% of the claim. Indeed, the Attorney-General, on the 8^th of August, 2016, in the Committee of Supply, expressed great fear that if the case is not settled, then the Government may be forced to pay a huge judgement. He cites, the Rudisa judgment in support of his argumentation.

My inquiring mind propelled me to get a copy of this “case”, because I wanted to examine the claim of the  contractor. I diligently searched the Supreme Court Registry for the years 2015 and 2016, but could not find any case filed by BK against the Government, claiming compensation in the sum of US$10M as was alleged, or at all. So, again, the nation was misled. This $1.7 billion of taxpayers’ dollars, which is being paid, is in relation to a non-existing case. To sum it up: this contractor received hundreds of millions of dollars under the PPP with respect to this contract; that it breached the contract, there is no doubt; rather than demand from or sue the contractor for compensation, this Government rewards the contractor in the sum of $1.7b and allows him to exit in 2015, a contract that was to end in 2021. In the end, when all the monies paid to this contractor under this contract are totaled, this contractor would have received the full contract price of US$10m for less than 5 years of sub-standard work under a 10 year contract.

3. The Rudisa case

This case was filed by Rudisa in the Treaty Jurisdiction of the CCJ claiming a refund from Guyana, of monies paid under a section of the Customs Act, which was found to be in violation of the Treaty of Chaguaramus. While these proceedings were pending, the Attorney-at-Law for Rudisa, indicated to the Court, his client’s readiness to withdraw the proceedings if the offensive section of the law is repealed. The Court adjourned the matter for several months to allow Guyana to repeal that provision. Twice, we piloted bills in the APNU/AFC controlled tenth parliament to do so. On each occasion, I detailed to the House the facts of the pending litigation and the consequences that will flow if the section is not repealed. On both occasions, my pleas fell on deaf ears. On both occasions, the APNU/AFC rejected the amendments. Judgment was eventually granted against Guyana in sum of G$1.2b. Had the APNU/AFC supported the amendments, Guyana would have been saved this  money. As an aside, what can be only described as unparalleled sophistry, the Attorney-General still blames the PPP for this debt.

Significantly, during the hearing of this matter, a senior functionary of the distributor of Rudisa’s products in Guyana, admitted under cross examination, that these products were under-valued by Rudisa before shipped to Guyana, in order to compete with Guyanese products. By this admission, Rudisa was guilty of under-invoicing and, therefore, never pay the correct amount in taxes on these products. If an assessment is to be done, using the market value of those products, Rudisa would be indebted to Guyana in the billions. These monies can be set off against the judgment. In the end, Guyana would not have had to pay a cent and Rudisa may still have been indebted to us. This was our plan. Although,  it was made known to the Government, rather than pursue this course and save the country over $1.2b, with bewildering alacrity, they paid the judgement.