Home' Trinidad and Tobago Guardian : July 4th 2013 Contents JULY 2013 • WEEK ONE www.guardian.co.tt BUSINESS GUARDIAN
COMMENTARY | BG3
Chief editor-business: ANTHONY WILSON
Editing and design: NATASHA SAIDWAN
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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:
• The Government exercises or is entitled to exercise
control directly or indirectly over the affairs of the enter-
• The Government is entitled to appoint a majority of
directors of the board of directors of the enterprise; or
• 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
After deliberating on this straight-forward matter of inter-
pretation 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 Gov-
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 inter-
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 share-
holding in NEL;" and
3) "With respect to TSTT, an examination of the legal
sources of control, namely the shareholding and the share-
holders 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 com-
panies 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
In my view, the reason for the error was a lack of under-
standing of NEL s raison d être.
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
NEL was NOT a bona fide divestment of the State s control
Is Appeal Court wrong to
redefine state enterprises?
Chief Justice Ivor Archie
Justice of Appeal Gregory Smith
Continued on page 11
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