The Judicial Committee of the Privy Council in England has reiterated a fundamental principle in company law to remind both TT’s Appeal and High court judges, in a case involving a Mayaro businessman and this country’s High Commissioner to India.
The law lords held there was deviation from the legal principle in which certain acts must be established before a judge determines he or she could invoke the court’s inherent power to “pierce the corporate veil” in determining whether a company or its director is liable for debts. They found the judge in the High Court wrongly decided that High Commissioner Dave Persad, and not his company, was personally liable for debts owed.
Piercing the corporate veil refers to a situation in which courts may put aside limited liability of a company, and hold its shareholders or directors personally liable for the corporation’s actions or debts.
Lords Neuberger, Keer, Reed, Hughes and Hodge said in an eight-page judgment, they meant no disrespect to Justice Charmaine Pemberton because at the time of her ruling against Persad, a certain judgment of the UK Supreme Court had not been made available. However, they were not very complimentary to the Appeal Court judges who upheld Pemberton’s decision.
Persad had negotiated with businessman Anirudh Singh to lease his premises in Mayaro in 2002 to establish Chicken Hawaii Trinidad Ltd (CHTL). Though Persad personally negotiated and drafted the lease, refurbished and paid the rent on the premises, the signatories to the lease was Singh and Persad’s company, CHTL.
During the course of the business operations, Singh served all documentation on CHTL.
In September 2004, Singh sued Persad and CHTL for arrears of rent of $16,000 and compensation for breach of covenant and profits.
CHTL counter-sued Singh for disrupting the restaurant business, repayment of a loan and reimbursement for cost of improvement to the premises.
Adjudicating on the case, Pemberton held that Persad and CHTL were personally liable to Singh for $21,569 and awarded $17,833.33 for arrears of rent and profits at $5,000 per month, plus interest.