JavaScript is disabled in your web browser or browser is too old to support JavaScript. Today almost all web pages contain JavaScript, a scripting programming language that runs on visitor's web browser. It makes web pages functional for specific purposes and if disabled for some reason, the content or the functionality of the web page can be limited or unavailable.

Friday, July 4, 2025

BG View

Is Appeal Court wrong to redefine state enterprises?

by

20130704

Last Thurs­day, the Court of Ap­peal de­liv­ered a judg­ment in a case in­volv­ing the in­ter­pre­ta­tion of the en­ti­ties that are sub­ject to the ju­ris­dic­tion of the In­tegri­ty Com­mis­sion.

The case was brought by TSTT, the ma­jor­i­ty state-owned telecom­mu­ni­ca­tions provider, which want­ed the High Court to in­ter­pret whether the sen­tence: "Mem­bers of all statu­to­ry bod­ies and state en­ter­pris­es in­clud­ing those bod­ies in which the State has a con­trol­ling in­ter­est," in para­graph 9 of the Sched­ule to the In­tegri­ty in Pub­lic Life Act 2000 ap­plied to TSTT di­rec­tors.

In oth­er words, would TSTT di­rec­tors be re­quired to dis­close their as­sets to the In­tegri­ty Com­mis­sion.

High Court judge Ju­dith Jones found that the sched­ule re­ferred to the mem­bers of the man­age­ment or de­ci­sion-mak­ing body of or­gan­i­sa­tions es­tab­lished by statute and all busi­ness­es or com­pa­nies owned or con­trolled by or on be­half of the State.

In de­ter­min­ing con­trol by the State, Jus­tice Jones sought as­sis­tance from sec­tion 119 (9) of the Con­sti­tu­tion, which states that "an en­ter­prise shall be tak­en to be con­trolled by the State" if:

�2 The Gov­ern­ment ex­er­cis­es or is en­ti­tled to ex­er­cise con­trol di­rect­ly or in­di­rect­ly over the af­fairs of the en­ter­prise;

�2 The Gov­ern­ment is en­ti­tled to ap­point a ma­jor­i­ty of di­rec­tors of the board of di­rec­tors of the en­ter­prise; or

�2 The Gov­ern­ment holds at least 50 per cent of the or­di­nary share cap­i­tal of the en­ter­prise.

The learned judge al­so ar­gued that the phrase "con­trolled by or on be­half of the State" was in ac­cord with the pur­pose and in­tent of the In­tegri­ty in Pub­lic Life Act which is to pro­mote and pre­serve the in­tegri­ty of per­sons ex­er­cis­ing ex­ec­u­tive func­tions on be­half of the State.

The Court of Ap­peal–com­pris­ing Chief Jus­tice Archie and Jus­tices of Ap­peal Al­lan Men­don­ca and Gre­go­ry Smith–heard ar­gu­ments at the end of June 2010 and re­served its de­ci­sion, which was de­liv­ered on Fri­day last by Jus­tice of Ap­peal Smith.

Af­ter de­lib­er­at­ing on this straight-for­ward mat­ter of in­ter­pre­ta­tion for al­most ex­act­ly three years–and more than eight years af­ter the mat­ter was first filed in the High Court, Jus­tice of Ap­peal Smith de­liv­ered a 20-page judg­ment.

Both Chief Jus­tice Archie and Jus­tice of Ap­peal Men­don­ca wrote that they agreed with the judg­ment and "have noth­ing to add" to it. This could mean that the Chief Jus­tice and Jus­tice of Ap­peal Men­don­ca felt that the judg­ment was so com­pelling­ly cor­rect that there were no changes they would or could have sug­gest­ed.

In his judg­ment, Jus­tice Smith ar­gued that TSTT is not a state en­ter­prise be­cause in 1999 the State trans­ferred its 51 per cent share­hold­ing in TSTT to Na­tion­al En­ter­pris­es Ltd (NEL) and that if one were to ap­ply a le­gal con­trol test, it would show that NEL con­trolled TSTT and not the Gov­ern­ment.

Jus­tice of Ap­peal Smith looked at the same sec­tion 119 (9) of the T&T Con­sti­tu­tion as did Jus­tice Jones and con­clud­ed that af­ter the for­ma­tion of NEL, the Gov­ern­ment was no longer en­ti­tled to ap­point a ma­jor­i­ty of the di­rec­tors to the TSTT board. Those di­rec­tors were now ap­point­ed by NEL. He con­clud­ed, as well, that the Gov­ern­ment no longer held the 51 per cent share­hold­ing in TSTT. Those shares were now held by NEL.

Most com­pelling­ly, it is im­por­tant to note that the Court of Ap­peal was asked to in­ter­pret whether the sen­tence: "Mem­bers of the boards of all statu­to­ry bod­ies and state en­ter­pris­es in­clud­ing those bod­ies in which the State has a con­trol­ling in­ter­est," would have cov­ered TSTT di­rec­tors.

On this point, in my view, the im­por­tant ques­tion that the Court of Ap­peal should have analysed was whether TSTT is a com­pa­ny "in which the State has a con­trol­ling in­ter­est."

In­stead, the Court of Ap­peal con­clud­ed that TSTT is not a state en­ter­prise for the pur­pose of the In­tegri­ty pro­vi­sions and based its judg­ment on a false di­choto­my be­tween NEL and the Gov­ern­ment.

Jus­tice of Ap­peal Smith ar­gued:

1) "NEL and not the Gov­ern­ment is now the hold­er of the 51 per cent share­hold­ing in TSTT;"

2) NEL and not the Gov­ern­ment is en­ti­tled to ap­point a ma­jor­i­ty of di­rec­tors to the board of TSTT be­cause "...it is at least very ar­guable that the Gov­ern­ment can ex­er­cise con­trol in­di­rect­ly over TSTT by the use of its ma­jor­i­ty share­hold­ing in NEL;" and

3) "With re­spect to TSTT, an ex­am­i­na­tion of the le­gal sources of con­trol, name­ly the share­hold­ing and the share­hold­ers' agree­ment re­veals that NEL and Ca­ble & Wire­less have con­trol of TSTT, not the Gov­ern­ment. As such, TSTT is (pri­ma fa­cie) not a state en­ter­prise."

In­stead of view­ing NEL and the Gov­ern­ment as al­most two sep­a­rate en­ti­ties, what should have been clear to the Court of Ap­peal is that NEL is a com­pa­ny that was cre­at­ed to hold the State's shares in five prof­itable com­pa­nies–three ma­jor­i­ty stakes and two mi­nor­i­ty po­si­tions.

NEL is the State ve­hi­cle–the prop­er de­scrip­tion is an in­vest­ment hold­ing com­pa­ny–that was es­tab­lished to al­low T&T in­di­vid­u­als and in­sti­tu­tions to own shares in lo­cal com­pa­nies in which the State has an own­er­ship in­ter­est.

There can be no doubt that the State has a con­trol­ling in­ter­est in TSTT, by virtue of the 51 per cent of the com­pa­ny that is held by NEL and the 83 per cent of NEL is owned by the State–66 per cent by Cor­po­ra­tion Sole and 17 per cent by NGC, 100 per cent of which is owned by the State.

By virtue of these facts, which are eas­i­ly ver­i­fi­able, it is be­yond dis­pute that TSTT must be de­fined as a com­pa­ny "in which the State has a con­trol­ling in­ter­est." It fol­lows, there­fore, that the Court of Ap­peal erred in con­clud­ing that TSTT is not a state en­ter­prise and its di­rec­tors are not sub­ject to the In­tegri­ty pro­vi­sions.

Why did the Court of Ap­peal err on this im­por­tant point?

In my view, the rea­son for the er­ror was a lack of un­der­stand­ing of NEL's rai­son d'�tre.

Ac­cord­ing to the Court of Ap­peal, at page 8 of the judg­ment: "The pur­pose be­hind NEL was for the Gov­ern­ment to di­vest it­self of its share­hold­ings in three com­pa­nies name­ly, Na­tion­al Flour Mills, Trin­gen and TSTT."

And, again at page 12 of the judg­ment, in de­cid­ing that there were no ex­cep­tion­al cir­cum­stances that war­rant­ed the ap­pli­ca­tion of the de fac­to or fac­tu­al test of con­trol to be ap­plied, the Court of Ap­peal stat­ed: "There is no sug­ges­tion that the Gov­ern­ment's di­vest­ment of its share­hold­ing in TSTT to NEL was any­thing oth­er than a bona fide di­vest­ment of its 'con­trol' over TSTT."

The sug­ges­tion that in cre­at­ing NEL the Gov­ern­ment un­der­took a "bona fide di­vest­ment of its 'con­trol' over TSTT" is a to­tal mis­read­ing of the pur­pose for which NEL was es­tab­lished.

NEL was NOT a bona fide di­vest­ment of the State's con­trolover TSTT, NFM and Trin­gen. Far from it. The ra­tio­nale be­hind the cre­ation of NEL was for the State to main­tain con­trol over TSTT, NFM and Trin­gen–plus mi­nor­i­ty hold­ings in Phoenix Park Gas Proces­sors and At­lantic LNG Train 1–by trans­fer­ring the shares in these five com­pa­nies in­to an in­vest­ment hold­ing com­pa­ny, which could then fa­cil­i­tate in­vest­ment by T&T in­di­vid­u­als and in­sti­tu­tions.

The idea was to cre­ate an op­por­tu­ni­ty for the pop­u­la­tion to own shares in the com­mand­ing heights of the econ­o­my while at the same time re­tain­ing con­trol of the telecom­mu­ni­ca­tions back­bone, two prof­itable am­mo­nia plants, a flour miller as well as shares in At­lantic LNG and Phoenix Park Gas Proces­sors.

To re­peat for em­pha­sis, the State DID NOT "di­vest it­self of its share­hold­ings in NFM, Trin­gen and TSTT" and how­ev­er the Court of Ap­peal ar­rived at that con­clu­sion, it did so in er­ror. What the State did was trans­fer its shares in NFM, Trin­gen and TSTT to a com­pa­ny it con­trols, which at­tor­neys rep­re­sent­ing TSTT re­al­ly ought to have known.

The Court of Ap­peal, there­fore, mis­di­rect­ed it­self when it con­clud­ed that "NEL and not the Gov­ern­ment is now the hold­er of the 51 per cent share­hold­ing in TSTT" as TSTT is clear­ly a com­pa­ny "in which the State has a con­trol­ling in­ter­est."

The Court of Ap­peal may have erred on this im­por­tant point be­cause it may have been too quick to dis­count the test of di­rect and in­di­rect con­trol as be­ing "not an ap­pro­pri­ate one to be ap­plied to the In­tegri­ty Act and sec­tions 138 and 139 of the Con­sti­tu­tion" be­cause it is "too wide and pro­duces an un­in­tend­ed con­se­quence as well as too much vague­ness in the ap­pli­ca­tion of the In­tegri­ty Act to the mem­bers of the board of state en­ter­pris­es."

As­sis­tance from Con­sti­tu­tion

The High Court judge had sought the as­sis­tance of Sec­tion 119 (9) of the Con­sti­tu­tion, which re­ferred to the State "ex­er­cis­ing con­trol di­rect­ly or in­di­rect­ly" to as­sist her in defin­ing what is a state en­ter­prise.

The 2013 bud­get doc­u­ment, State En­ter­pris­es In­vest­ment Pro­gramme, iden­ti­fies 56 com­pa­nies that are de­fined as state en­ter­pris­es.

Of those 56 com­pa­nies, 45 are whol­ly owned, sev­en are ma­jor­i­ty owned and four are con­sid­ered to be state en­ter­pris­es even though the State owns less than 50 per cent of the share­hold­ing of the com­pa­nies.

Of the sev­en ma­jor­i­ty-owned com­pa­nies, Alutrint must be dis­count­ed as the Gov­ern­ment can­celled the con­tract with the Chi­nese short­ly af­ter it came to pow­er. The six ma­jor­i­ty owned com­pa­nies are: ADB–97.2 per cent, Busi­ness De­vel­op­ment Com­pa­ny–64.4 per cent; NEL; Plipde­co–51 per cent; CAL 84 per cent and Na­tion­al He­li­copter Ser­vices–82.3 per cent.

The four mi­nor­i­ty-owned com­pa­nies that are con­sid­ered to be state en­ter­pris­es are:

�2 DFL Caribbean Hold­ings Ltd–28.1 per cent Gov­ern­ment; 38.8 per cent In­ter­na­tion­al Fi­nan­cial In­sti­tu­tion; 33.1 per cent pri­vate

�2 TT Mort­gage Fi­nance–49 per cent Gov­ern­ment; 51 per cent NIB

�2 Met­al In­dus­tries Com­pa­ny Ltd–46.7 per cent Gov­ern­ment; 14.9 per cent DFL; 38.4 per cent oth­er

�2 LI­AT–2.9 per cent Gov­ern­ment; 29.2 per cent BWIA; 26.6 per cent re­gion­al gov­ern­ments (one doubts the ac­cu­ra­cy of BWIA's share­hold­ing in LI­AT)

Giv­en the small num­ber of com­pa­nies over which the State ex­er­cis­es in­di­rect con­trol, can the ar­gu­ment about the test of di­rect or in­di­rect con­trol be­ing too wide be sus­tained?

The Court of Ap­peal seems to agree with TSTT that the judge of first in­stance was wrong to re­sort to sec­tion 119 (9).

One of the rea­sons for the Court of Ap­peal opt­ing to re­ject 119 (9) as an aid to in­ter­pre­ta­tion is that if Par­lia­ment had in­tend­ed the sec­tion to ap­ply to the In­tegri­ty pro­vi­sions, Par­lia­ment would have done so, as it did with sec­tions 116 (3) and 119 (8). But it seems to me that all 119 (9) does is de­fine a state en­ter­prise for the pur­pos­es of sub­sec­tion 119 (8) and 116 (3).

In re­fus­ing sec­tion 119 (9)'s of­fer of as­sis­tance, the Court of Ap­peal does the clause the ad­di­tion­al dis­cour­tesy of mis­read­ing her.

In his judg­ment, Jus­tice of Ap­peal Smith quotes sec­tion 119 (9) thus: "For the pur­pos­es of sub­sec­tion 8 and sec­tion 116 (3) an en­ter­pris­es shall be tak­en to be con­trolled by the State if the Gov­ern­ment..." (ex­er­cis­es con­trol etc). The sen­tence ac­tu­al­ly reads "...an en­ter­prise shall be tak­en to be con­trolled by the State if the Gov­ern­ment or any body con­trolled by the Gov­ern­ment...."

In my view, the omis­sion of the sev­en words "or any body con­trolled by the State" by the Jus­tice of Ap­peal, throws an en­tire­ly dif­fer­ent light on how a state en­ter­prise is to be de­fined. In­clu­sion of the sev­en words al­lows the Gov­ern­ment to ex­er­cise con­trol over a state en­ter­prise by way of an­oth­er com­pa­ny/en­ti­ty/en­ter­prise that the State con­trols. In oth­er words, it al­lows for the State ex­er­cis­ing its con­trol in­di­rect­ly as well as di­rect­ly.

And in­deed, the Gov­ern­ment ex­er­cis­es its con­trol over TSTT through NEL, as it ex­er­cis­es its con­trol of Trin­gen through NEL and as it ex­er­cis­es its con­trol of NFM through NEL.

One of the three rea­sons the Court of Ap­peal chose to ap­ply the de ju­re or le­gal test of con­trol as its "first guide" (rather than the de fac­to or fac­tu­al test of con­trol) was be­cause sec­tion 119 (9) on­ly sub­jects an en­ter­prise to the Au­di­tor Gen­er­al, while the In­tegri­ty pro­vi­sions di­rect­ly af­fect in­di­vid­u­als and ex­pose them to "oner­ous per­son du­ties."

(It is not­ed, with ab­solute­ly no com­ment, that the ap­peal court judge us­es neg­a­tive phras­es such as "oner­ous du­ties," "heavy du­ties" or "heavy bur­dens" on six oc­ca­sions in this short judg­ment to de­scribe the re­quire­ment to file the an­nu­al In­tegri­ty re­turns.)

In its ar­gu­ments, the In­tegri­ty Com­mis­sion's at­tor­neys sug­gest­ed that "re­sort may be had to the de fac­to or fac­tu­al con­trol test in cas­es where for in­stance the de ju­re test is be­ing used as a ruse to evade the statute," (page 10 of the judg­ment).

The Court of Ap­peal ar­gued that "giv­en the un­con­test­ed ev­i­dence, there are no ex­cep­tion­al cir­cum­stances here which call for the ap­pli­ca­tion of the de fac­to or fac­tu­al test to be ap­plied."

I take this to mean that it did not oc­cur to the Jus­tice of Ap­peal that the mere fact that TSTT sought an in­ter­pre­ta­tion of whether it was a com­pa­ny "in which the State has a con­trol­ling in­ter­est," may have been in­dica­tive of an at­tempt by its di­rec­tors to es­cape the In­tegri­ty pro­vi­sions.

If, as the learned judge ar­gued, "it is at least very ar­guable that the Gov­ern­ment can ex­er­cise con­trol in­di­rect­ly over TSTT by the use of its ma­jor­i­ty share­hold­ing in NEL," could Prime Min­is­ter Kam­la Per­sad-Bisses­sar have an­nounced on Oc­to­ber 7, 2010 that for­mer po­lice com­mis­sion­er Ever­ald Snag­gs would be the new chair­man of TSTT?

The an­nounce­ment by the Prime Min­is­ter fol­lowed a lengthy Cab­i­net ses­sion where over 300 na­tion­als were ap­proved for ap­point­ments to 38 state boards, statu­to­ry bod­ies and re­gion­al health au­thor­i­ties, ac­cord­ing to a sto­ry by Guardian po­lit­i­cal re­porter, Gail Alexan­der.

Could the Prime Min­is­ter have an­nounced the new TSTT chair­man–along with four oth­er gov­ern­ment-ap­point­ed TSTT di­rec­tors–if the Gov­ern­ment did not "ex­er­cise con­trol in­di­rect­ly over TSTT by the use of its ma­jor­i­ty share­hold­ing in NEL?"

For all in­tents and pur­pos­es, NEL is the Gov­ern­ment and TSTT is sim­ply a state en­ter­prise that is con­trolled by an­oth­er state en­ter­prise (NEL), which is an in­vest­ment hold­ing com­pa­ny for the State.

As then Min­is­ter of Fi­nance, Bri­an Kuei Tung said of NEL when he de­liv­ered the 2001 bud­get: "Through this mech­a­nism the pub­lic and es­pe­cial­ly the em­ploy­ees of the en­ter­pris­es con­cerned could par­tic­i­pate in own­er­ship and build as­sets."

And as then Min­is­ter of Fi­nance, Ger­ald Yet­ming, added when he de­liv­ered the 2002 bud­get on Sep­tem­ber 14, 2001: "This ini­tia­tive would al­low our cit­i­zens to share in the wealth of some of our most prof­itable en­ter­pris­es."

What about CL Fi­nan­cial?

Were Mr Kuei Tung and Mr Yet­ming–the cur­rent chair­man of CL Fi­nan­cial, Cli­co, An­gos­tu­ra and Home Con­struc­tion Ltd–wrong about NEL?

And on the is­sue of Mr Yet­ming, if a state en­ter­prise is de­fined as com­pa­nies "in which the State has a con­trol­ling in­ter­est," can it not be ar­gued that the share­hold­ers' agree­ment be­tween the Gov­ern­ment and CL Fi­nan­cial makes the group once con­trolled by Lawrence Duprey a state en­ter­prise for the life of the agree­ment?

Is the de­cid­ing fac­tor the fact that the share­hold­ers' agree­ment en­ti­tles the State to ap­point a ma­jor­i­ty of the CL Fi­nan­cial di­rec­tors? Even though the State does not own one share in CL Fi­nan­cial, does the fact that four of the sev­en di­rec­tors are ap­point­ed by the Gov­ern­ment not make CL Fi­nan­cial a state en­ter­prise?

And if TSTT is not a state en­ter­prise, sub­ject to the po­lit­i­cal con­trol of Cab­i­net, why did Sam Mar­tin sub­mit his res­ig­na­tion as the chair­man of TSTT on June 23, 2010, one month af­ter the 2010 gen­er­al elec­tion?

In fact, if TSTT is not a state en­ter­prise, would the Cab­i­net, meet­ing on No­vem­ber 3, 2005, have been able to ap­point Mr Mar­tin as chair­man, while dis­ap­point­ing Chris­t­ian Mout­tet, with ab­solute­ly no ref­er­ence to NEL.

If TSTT is not a state en­ter­prise, Ca­ble & Wire­less would be jus­ti­fied in ne­go­ti­at­ing ex­clu­sive­ly with NEL to sell its 49 per cent stake in TSTT, rather than hav­ing to ne­go­ti­ate with the Min­is­ter of Pub­lic Util­i­ties and the Min­is­ter of Fi­nance.

The judg­ment of the Court of Ap­peal al­so has se­ri­ous im­pli­ca­tions for the Gov­ern­ment's con­trol of the state en­ter­prise sec­tor as, if TSTT is not a state en­ter­prise, nei­ther are Phoenix Park Gas Proces­sors, Trin­gen or NFM, which are al­so con­trolled by NEL.

Phoenix Park is 20 per cent owned by NEL and 31 per cent owned by NGC. Fifty-one per cent of Trin­gen, like TSTT, is owned by NEL, while 49 per cent is owned by a for­eign com­pa­ny, Yara. NFM is 51 per cent owned by NEL and 49 per cent owned by lo­cal in­di­vid­u­als and in­sti­tu­tions.

And if TSTT is not a state en­ter­prise, can Trinidad & To­ba­go Mort­gage Fi­nance (TTMF) and the Home Mort­gage Bank–which are both 51 per cent owned by the NIB and which both serve pub­lic pur­pos­es–be de­fined as state en­ter­pris­es?

It is in­ter­est­ing that TTMF in in­clud­ed in the State En­ter­pris­es In­vest­ment Pro­gramme doc­u­ment re­ferred to ear­li­er, but HMB is not.

Does the fact that the Gov­ern­ment's own doc­u­ment not con­sid­er HMB to be a state en­ter­prise cast any doubt on the pro­posed merg­er of HMB and TTMF and the ini­tial pub­lic of­fer­ing of shares in the merged en­ti­ty?

In­deed, is the NIB it­self a state en­ter­prise?

The NIB was es­tab­lished by an Act of Par­lia­ment. It serves a pub­lic pur­pose. Its ac­counts are au­dit­ed by the Au­di­tor Gen­er­al and it is sub­ject to the Pub­lic Ac­counts Com­mit­tee. The NIB board com­pris­es 11 di­rec­tors, three each from gov­ern­ment, busi­ness and labour, the ex­ec­u­tive di­rec­tor who is an ex-of­fi­cio mem­ber of the board and an in­de­pen­dent chair­man (Calder Hart was once its chair­man).

If con­trol by the State, ei­ther di­rect­ly or in­di­rect­ly, is cru­cial to the de­f­i­n­i­tion of a state en­ter­prise, then it is clear that NIB is not con­trolled by the State and there­fore is not a State body.

One hopes that the Gov­ern­ment ap­pre­ci­ates the slip­pery slope that the Court of Ap­peal judg­ment presents for the de­f­i­n­i­tion of state en­ter­pris­es and that the State acts ap­pro­pri­ate­ly by di­rect­ing that the judg­ment be ap­pealed to the Privy Coun­cil.

It seems to me that if the judg­ment is al­lowed to stand, it sets a prece­dent for the de­f­i­n­i­tion of state en­ter­pris­es for the pur­pos­es of the In­tegri­ty pro­vi­sions and it can then be ar­gued that TSTT, Trin­gen and NFM (and oth­er com­pa­nies) are not state en­ter­pris­es for oth­er pur­pos­es.

This could re­sult in os­ten­si­bly state-owned com­pa­nies ar­gu­ing that they do not need to sub­scribe to the Au­di­tor Gen­er­al, the Pub­lic Ac­counts (En­ter­pris­es) Com­mit­tee, guid­ance from the Chief Per­son­nel Of­fi­cer or di­rec­tions from the line min­is­ter.

Is that what the coun­try wants?

?


Related articles

Sponsored

Weather

PORT OF SPAIN WEATHER

Sponsored