Republic Of Trinidad And Tobago In The High Court Of Justice-Free PDF

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BACKGROUND FACTS, 1 The Claimant is a body Corporate established by SECTION 3 i of the. NATIONAL INSURANCE ACT CHAPTER 32 01 as amended having its. principal office at Cipriani Boulevard Port of Spain in the island of. 2 The First and Second Named Defendants were at all material times. Directors in a Company by the name of Classic Caterers Limited and they. reside at Hummingbird Stables Opposite Arima Race Club Arima and LP. 1161 1162 Southern Main Road La Romaine respectively. 3 Classic Caterers Limited was at all material times a body corporate and an. employer registered under the Act as registration number 16605. 4 The Claimant through its authorized officer conducted an adult on Classic. Caterers Limited on the 9th April 2008 to ensure compliance with the Act. The audit revealed that there were periods in which no contributions were. remitted by Classic Caterers to the Claimant The periods were October. 2005 November 2005 June 2006 December 2007 January 2008 and. February 2008 The Accounting Officer at Classic Caterers indicated to the. Claimant s officers that the reason for the default in payment was cash. flow problems, 5 The outstanding payments were calculated by officers of the Claimant and. sent to Classic Caterers with a demand for payment The company made. several promises to settle the indebtedness to the Claimant but failed to. honour them despite letters sent to the company s directors by the. Claimant As a result HCA CV 2009 03834 was filed on the 21st day of. October 2009 against the Company, 6 An appearance was entered by Classic Caterers Limited on the 4th day of. December 2009 wherein the entire claim was admitted. 7 A request for entry of judgment on admission of the whole claim was. made by the Claimant on the 23rd day of December 2009 Judgment was. granted and registered on the 11th day of January 2010. 8 Pursuant to SECTION 65 of the NATIONAL INSURANCE ACT the. Claimant brought this action against the two registered Directors of Classic. Caterers Limited Mr Kenneth Prescott and Mr Gerard Ferreira. 9 The sum of 1 451 637 74 is due and owing as at the 31st May 2012 The. sum continues to attract statutory interest, Can a Director avoid liability under the National Insurance Act by resigning. before Judgment, 10 SECTION 65 A i of the NATIONAL INSURANCE ACT provides.
Where an employer being a body corporate fails to pay. to the Board any sum which such employer has been,ordered to pay by the courts every director and. manager of such body corporate at the time the body. corporate was required to pay that amount is jointly. and severally liable together with the body corporate to. pay the amount of interest and penalty thereto to the. 11 The First Defendant pleaded that he resigned as Director of Classic. Caterers on 3rd January 2009 However he has not denied that he was a. director at the time that the debt was incurred The First Defendant. contended that the earliest date by which a director was required to pay. the amount was at the date of the entry of the default judgment January. 11th 2010 by which date he had resigned as a director The First Defendant. also submitted that the Claimant not having filed a reply to challenge the. fact of his resignation cannot now argue that the First Defendant s. resignation did not take effect, 12 The First Defendant submitted that SECTION 65 A i does not state. that a director is personally liable for a company s unpaid national. insurance contribution if they were directors at the time that the company. was required to pay those contributions The First Defendant argued that if. it were the case that Parliament intended that a director were to be. personally liable for a company s unpaid national insurance contribution. then the language in such legislation should be clear however this is not. the case in SECTION 65 A i, 13 The Claimant argued that if the Court were to accept the interpretation of. SECTION 65 A i advanced by the First Defendant then the purpose of. the Section would be defeated to make directors of companies which. defaulted in their contributions to the Claimant liable except in cases. where the directors can show that they exercised the care diligence and. skill to prevent the default in payment which a prudent person would. have exercised in similar circumstances 1, 14 In the Department of Health and Social Security v Wayte2 the director of. the company sought to evade personal liability to pay NIS contributions. by arguing that he had ceased to be a director of the company when the. Order was made and there was no sufficient evidence that he knew or. could reasonably be expected to have known of the company s failure to. pay the contributions, 15 The Court held that upon a true construction of SECTION 95 8 iii of the.
NATIONAL INSURANCE ACT 1965 UK which is similarly worded to. our SECTION 65 A i the First Defendant was liable for the sum. because he was a director at the time that the contribution ought to have. been paid by the company and he was not exempt from liability because. he had ceased to be a director at the time that the Order of the Magistrate. under SECTION 95 iii was made Davies LJ opined3,The Magistrates Court Order crystallizes and. quantifies the amount of the unpaid contributions But. the contributions are payable from time to time,1 Section 65 A ii of the National Insurance Act. 2 1972 1 WLR 19,3 Pgs 23 24,weekly the Order made by the Magistrate coupled. with Section 95 8 impose a liability to satisfy the. Order on anyone who was a director at the time,when the contribution ought to have been paid. and were not even though he had ceased to be a, director at the time that the Magistrates Court s Order.
16 If the First Defendant s contention is correct that he is not liable because at. the time of the Court Order he was not a director then all a director had to. do to avoid liability is resign before judgment was given against the. company of which he was a director and so escape liability for the default. of the company, 17 In this case the First Defendant has admitted that he was a director during. the period that the default took place from 2005 to 2008 I therefore hold. that his resignation from Classic Caterers in January 2009 does not absolve. him from liability to settle the outstanding debt owed to the Claimant. Can the First Defendant avail himself of the Defence under Section 65 a 2 of. the National Insurance Act,18 SECTION 65 A ii provides. No director or manager shall be liable for the debt. where he exercised the degree of care diligence and skill. to prevent the failure to pay which a prudent person. would have exercised in comparable circumstances, 19 A similarly worded provision is to be found in SECTION 227 1 iii of the. CANADIAN INCOME TAX ACT which provides, A director is not liable for a failure under subsection. 1 where he exercised a degree of care diligence and. skill to prevent the failure that a reasonably prudent. person would have exercised in comparable,circumstances.
20 Both Sections permit a director to escape personal liability for the. company s failure to make statutory payments once the director acted with. the requisite standard of diligence, 21 The First Defendant argued that the evidence discloses that between 1995. to 2008 the persons charged with responsibility for ensuring that all. statutory deductions including national insurance payments were made. were the company s Accountant Jay Harrynarine and the Second. Defendant the company s Operations Manager and Director The First. Defendant contended that he relied in good faith on the financial. statements of the company presented to him by Messrs Harrynarine and. Prescott that all requisite salary deductions were being made. 22 Mr Ferreira submitted that at all material times that he held office as a. director of the company he exercised a degree of care diligence and skill. to prevent the company s failure to pay which a prudent person would. have exercised in comparable circumstances, 23 In Buckingham v R4 a decision of the Federal Court of Appeal of Canada. Mainville JA opined5,The assessment of the directors conduct begins. when it becomes apparent to the directors acting, reasonably and with due care diligence and skill that. the corporation is entering a period of financial,difficulties.
24 In Soper v Canada6 the issue to be decided was whether SECTION. 227 1 iii involves a subjective element in the sense that the personal. knowledge and background of a director is a relevant consideration or. whether it is an entirely objective standard to which all directors are. similarly held Robinson JA stated,the positive duty to act arises where a director. obtains information or becomes aware of facts which. might lead one to conclude that there is or could, reasonably be a potential problem with remittances. 4 2011 FCA 142,5 Paragraph 46,6 1998 1 FCR 124, 25 In Fengos v R7 Buckingham supra was followed The Court there held that. an outside director s evidence that he was not aware of the difficulties of. the company could not satisfy the diligence test In Bourdas v Canada8 the. Court stated, 23 But I come back to the obligation to do something and not. simply do nothing This is evidence first from the wording. itself of subsection 323 3 The subsection states that the. person must exercise the degree of care diligence and skill that. a reasonably prudent person would have exercised in. comparable circumstances A reasonably prudent person is. not a person who does not ask questions and who never. tries to find out what is happening with regard to. remitting net tax Therefore he or she must do, something because if one is uniformed it is impossible.
to prevent a failure, 24 This can also be seen in the case law and I will cite some. excerpts from the Federal court of Appeal decision in Canada. v Buckingham 2011 FCA 142 2011 G S T C 74 Although. that decision concerns an inside director it is clear that the. decision written by Justice Mainville states principles that. apply generally to all directors particularly at the end of. paragraph 33,The directors must thus establish that they. exercised the degree of care diligence and skill,7 2014 TCC 253. 8 2010 FCA 102 2010 G S T C 62, required to prevent the failure The focus of these. provisions is clearly on the prevention of failures to. 25 Then at the end of paragraph 38, Consequently a person who is appointed as a director.
must carry out the duties of that function on an active basis. and will not be allowed to defend a claim for malfeasance in. the discharge of his or her duties by relying on his or her own. 26 From the cases cited above it is clear that a director is liable even when he. is lied to by persons involved in the day to day operations of the. company9 A director must take concrete steps to avoid a failure to pay. contributions even if he was misled once there were clues which pointed to. financial difficulties in the company, 27 I will now examine the evidence in order to determine whether this First. Defendant exercised due diligence in order to prevent a failure to remit. contributions to the Claimant, 28 The Claimant in its submissions outlined the evidence given by the First. Defendant on this issue and I adopt it as outlined below. 9 Chantal Construction v The Majesty the Queen 2012 TCC 425. a The First Defendant started the Company around 1990 and was the. Company s managing director until 2003 During that period 1990. 2003 the First Defendant took an active part in the Company s day. to day business10, b By 2003 however the First Defendant had left11 the day to day. management and control of the company to one Mr Prescott who. was his housekeeper s son and had been a director for 3 years by. that time12 From that time onward the First Defendant s evidence. was that he himself took no active part in the day to day affairs of. the company including the making of statutory payments13. c In the First Defendant s absence Mr Prescott and one Mr. Harrynarine the Accounting Officer of the company would ensure. the requisite salary deductions and statutory payments were. d The First Defendant accepted in cross examination that though he. was an outside director he was well aware that the number of. employees of the company had increased in his absence from 150 in. 200315 to 350 by 200716, 10 Witness Statement of Gerard Ferreira Supplemental Bundle pg 44 para 5 6. 11 See Notes of Evidence pg 26 letters 4 8, 12 Witness Statement of Gerard Ferreira Supplemental Bundle pg 46 para 9 10.
13 Notes of Evidence pg 36 lines 20 28, 14 Witness Statement of Gerard Ferreira Supplemental Bundle pg 44 para 8. 15 Notes of Evidence pg 36 lines 44 47,16 Notes of Evidence pg 37 lines 3 8. e The First Defendant further accepted in cross examination that from. year to year the number of employees would fluctuate17. f The First Defendant acknowledged that because of the nature of the. business he knew that it was possible for the number of employees. to fluctuate from month to month18, g It was the First Defendant s evidence that he never asked about. statutory payments at board meetings and was never told about. them at such meetings19, h The First Defendant accepted that he had unrestricted access even. 1 republic of trinidad and tobago in the high court of justice cv2012 02186 between the national insurance board of trinidad and tobago claimant

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