These out of court settlements by Govt. must be questioned

Aug 20, 2016 Letters

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Dear Editor,

There is no other Govt. 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 Commissioner General’s of the Guyana Revenue Authority, assessment 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 1st 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 Govt. 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 Govt. settles for $1.5b. 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 Govt. of Guyana in 2009, for the construction and management of a garbage disposal site at Haags Bosch. From on or about 2013, the Gov’t 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 Govt. an ultimatum to terminate the contract. As a result of several fundamental breaches of the contract, the PPPC 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 Govt. 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 Govt. 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.
Anil Nandlall
Attorney-at-Law

Editor’s note: the final part of this letter will be published in a forthcoming edition

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