Special state enterprise must pay contractor $15-$23m

A HIGH Court judge has sounded a warning about special-purpose state enterprises (SPSE) acting like runaway horses by owing hundreds of millions of dollars to contractors, but circumventing payments.

Justice Frank Seepersad was ordering Palo Seco Agricultural Enterprises Ltd (PSAEL) to pay between $15 million and $23 million to Point Lisas Construction Ltd (PLCL). He called for a review of how such SPSE operate. They are circumventing the legitimate authority of the Central Tenders Board, he said in the San Fernando High Court on Wednesday.

SPSE are semi-independent business organisations formed by a larger entity (Ministry of Finance) to carry out smaller projects. The PSAEL, since 1985, has been involved in contruction and maintenance of bridges, drainage, pavilions, land and estate management, roads and landslips.

Accountable to the Ministry of Finance, in 1994 the PSAEL was mandated to manage and divest the agricultural and residential landholdings of the now defunct State-owned Petrotrin.

PLCL sued PSAEL for summary judgment for $23,269,497.04, representing money owing under a 2015 contract for work it had done.

PSAEL's defence was that it depends on funds from the state enterprise it falls under and that the National Gas Company (NGC) owes it $15,162,138.12. In fact, Clause 5.3 of the contract, provided that PSAEL would pay PLCL within a week upon receipt of funds from NGC.

In a 14-page ruling, Seepersad said it made business sense for PSAEL to have such a clause. However, it ought not to operate as a bar to enable it to breach its own obligation to pay PLCL. The clause, he added, is not an unwavering restriction on PLCL, "who must indefinitely wait to be compesated until such time the defendant (PSAEL) is paid by the NGC."

Attorneys Jagdeo Singh, Dinesh Rambally and Kiel Taklalsingh, instructed by Jamie Maharaj, represented PLCL.

Seepersad said, "Special purpose state enterprises must pay their debts and ought not to rely on defences which merely attempt to delay payment. Where financial constraints operate, these entities should adopt an approach which seek to enter into negotiations or mediation in an attempt to either obtain a discount on the contract price, or, seek sufficient time to discharge its debt, but the filing of defence which lacks merit should not be entertained."

Saying there are numerous cases involving SPSE worth hundreds of millions of dollars, the judge called for a review of how these entities operate. In fact, he said, "One is not certain as to the intent which led to the formation of special purpose state enterprises but their modus operandi circumvents the legitimate authority fo the Central Tenders Board and this already challenged economy and its taxpayers can ill afford unregulated runaway horses."

Seepersad dismissed PSAEL's defence as fanciful, ruling that PLCL was not a party to PSAEL's arrangement with NGC.

He granted summary judgment for the moneyas well as a stay of execution for 14 days in the event of an appeal.