Legal clash over $1b insurance tax fund heads to Privy Council

The Motor Insurance Bureau Association plans to take its legal challenge against the State to the Privy Council over the government’s collection of more than $1 billion in motor insurance premium taxes since 2008, which it claims was intended to compensate victims of uninsured drivers but has not been used for that purpose.

The Bureau has already secured conditional leave and is scheduled to appear before the Court of Appeal on April 28 for final leave.

In July 2024, Justices of Appeal Prakash Moosai, Charmaine Pemberton and James Aboud upheld a 2017 High Court ruling by Justice Ricky Rahim, dismissing the Bureau’s lawsuit. Rahim had found that the Bureau’s claim, which was supported by Davindra Maharaj, lacked legal merit. He ruled there was no evidence showing the finance minister or the Board of Inland Revenue acted unreasonably by allowing the tax collection.

Maharaj and the association argued that the levy contradicted the Miscellaneous Taxes Act and that the BIR had been unjustly enriched by collecting taxes under false pretences. Maharaj also sought repayment of $5,456 in collected premiums.

The Bureau sought a court declaration that the ministry’s failure to establish a Motor Insurance Bureau to disburse compensation was unreasonable, given the taxes had been levied ostensibly for that purpose. Both parties requested an order requiring the ministry to pay all collected funds into court.

The government first proposed the fund during its 2008 budget presentation. By 2017, when Rahim delivered his ruling, the collected amount had surpassed $1 billion, but none of it had been distributed.

According to State submissions, the disbursement of funds was not possible due to the absence of legislative instruments needed to authorise such payments. As a result, the fund remained dormant, with no additional allocations made since 2017.

Justice Pemberton, who delivered the appellate ruling, said Rahim’s judgment was well-reasoned. She referenced testimony from former finance ministry permanent secretary Vishnu Dhanpaul—now finance minister—who stated legislation was required to establish a fund separate from the Consolidated Fund.

In the absence of that legislation, taxes were deposited into a suspense account, while actual tax collections by the BIR went directly into the Consolidated Fund under the Exchequer and Audit Act. Rahim had noted that taxes collected as insurance premiums were not intended to compensate victims of uninsured drivers.

During the appeal, Maharaj and the Bureau cited past finance ministers’ budget speeches as creating a legitimate expectation. However, Pemberton ruled that such expectations must be backed by Parliamentary approval, which had not occurred.

The State had also maintained that any such scheme must be authorised by Parliament under the Appropriation Act. Pemberton held that the judiciary could not interfere with matters not enacted into law and noted no evidence had been presented of fund misuse.

She further ruled that ministerial budget speeches could not serve as the basis for legal expectations and questioned whether inaction alone, without misuse, was grounds for court intervention.

In dismissing the appeal, Pemberton noted the persistent threat posed by reckless driving.

“Trinidad and Tobago has a serious challenge when it comes to the carelessness and sometimes callousness of road users.

“Many do not understand or appreciate that a motor car in the hands of an impaired person is a lethal weapon. One only needs to ask surviving victims and their families, and sadly, the families of those who do not survive the truth of the unfortunate and sometimes devastating consequences, both financially and emotionally, of that statement.

“It is a cost as well that this society has met and will continue to meet until we take some concrete steps to alleviate the causes and effects of these distressing consequences.

“...This situation is one of national importance, since, as we deliver this judgment, the carnage on our roads remains unabated, whether involving drivers, whether insured or uninsured.”

As it seeks to take its case to the apex court, the Bureau wants to know government’s plan for the fund and the money collected so far. Attorney Seana Baboolal represents Maharaj and the Bureau.