Two significant events in the previous week heralded a fresh round of Board Games, as we strive for higher standards of governance and accountability in our State Enterprises.

1. The first of those events was the Privy Council ruling on Monday 19th February 2018, in the case which eTeck brought in 2011 against its former Board, chaired by Professor Ken Julien, related to alleged negligence for a US$5M investment gone awry.

   

2. The second event was the publication of Transparency International’s 2017 Corruption Perception Index on Wednesday 21 February 2018, in which T&T improved its score from 35 to 41 and moved up the scale from 101st out of 176 countries in 2016 to 77th out of 180 countries in 2017. The average country score in the 2017 CPI was 43, so T&T is still below average, but the improvement in that perception has already been welcomed by the current administration.

The eTeck case was one of the three lawsuits brought against their previous Board Directors by State Enterprises during the PP government (See appendix below). Those were the first cases in which the provisions specifying Directors’ duties to the Company under S.99 of the Companies Act 1995 were being litigated in our Courts. Those lawsuits are outlined in the sidebar, which shows that two of them were discontinued for various reasons, with this eTeck case being the only one to go right to the Privy Council.

The actual issue of whether there was negligence by the eTeck Board in making that failed investment was not ruled on by any of the Courts. Consideration of the substantive issue in eteck’s original lawsuit was deferred for the Courts to decide the submissions by the former Board Directors that the lawsuit should be time-barred as the losses had occurred in 2005, but the lawsuit was not started until 2011. The basic time-limit of four years between a breach and the filing of the lawsuit arising was invoked to halt the proceedings. eTeck responded by invoking S.14 of the Limitation of Certain Actions Act which starts the four-year period from the time the fraud or mistake is, or ought to have been, discovered. eTeck’s point being that it was only when the PP won elections in May 2010 that it would have been realistic for that kind of alleged fraud or mistake to have been detected, given that those Board appointments are political.

So this case, therefore, has two aspects which warrant our attention –

1. Directors’ Duties – the S99 duties of Board Directors is to be tested in an investment situation, with due diligence processes and business risk to be argued before the court. Those aspects are yet to be litigated and that will be examined;
2. Limitation aspects – All three levels of our Court system have now ruled in support of the eTeck submission that the actual ‘time of discovery’ was indeed May 2010, when the PP won the general election. It is therefore possible to launch a lawsuit over six years after an alleged fraud or mistake, that is the real impact of those three successive court rulings. On its own and even without the fact that S.99 is now up to be delved into, that is a serious development which should give us pause. Of course it is possible to see this as related only to a PNM vs UNC/PP kind of seesaw, but no. I asked myself – ‘Does this ruling stretch to privately-owned companies?’ At para 8 of the Privy Council ruling is the obiter dicta, speaking to that very issue – “…Since there is no suggestion that the applicable limitation or company law of Trinidad and Tobago differs materially from that of England, or of the other main common law jurisdictions, in a world in which companies now frequently have sole shareholders, particularly in group structures, this is a point of potentially wide application and real importance…” (the emphasis is mine).

Those three lawsuits were clearly politically motivated, that is my opinion, given that the three Boards were headed by key PNM technocrats, Professor Ken Julien and the late Malcolm Jones. That said, there is no doubt that an important new avenue of accountability for State Enterprises has now been created, albeit by political necessity.

This ruling now makes the role of Board Director of a State Enterprise more risky, given that subsequent political administrations can audit or investigate upon taking office and then sue. The scope for acts of political revenge appears to have been expanded. As explained above, the scope goes beyond State Enterprises.

The big question in my mind, given the current administration’s discontinuance in the Petrotrin lawsuit, is whether the lawsuit against the previous ETeck Board Directors, will be pursued.

If we are to maintain our tiny steps against the menace of corruption it is important that stern political will to do the right thing must be shown. Do we yet possess a leadership which can place national interests ahead of party interests? We will soon see.