Embarrassing though it may be, I must admit I’d never heard of the Humanities Award winner, renowned author and philosopher Thomas Sowell until Sunday morning when a close friend with whom I share a proclivity or two introduced him via his following wise words: “It is hard to imagine a more stupid or more dangerous way of making decisions than by putting those decisions in the hands of people who pay no price for being wrong!”
Especially ironic was that at time of receipt I was enthusiastically engaged in some important research prompted by a lawyer I hold in high regard. During an exchange the previous evening that centered on my published review of the last performance of the Senate of the Apes, he had killed me softly with his current favorite song: “The trouble with you guys who are taking issue with this belated-guarantees thing is rooted in your misinterpretation of the word ‘guarantee.’ ”
My own contention was that Section 41 of the Finance (Administration) Act had several times in the last few weeks been twisted to serve purposes other than intended by its framers. In short, our lawmakers were with impunity making a mockery of the law.
Said I to my friend the lawyer: “Indicate to me the section that covers belated guarantees.” His earlier stated reaction sent me back to my drawing board. But before moving on to fresh meat, dear reader, please permit me to share with you what my research uncovered.
According to Richard Millet QC, who by reliable account not only has a broad commercial practice covering a variety of different specialist areas with an emphasis on advocacy in court and in arbitration and other tribunals, but also regularly appears as lead counsel in international arbitrations of all kinds:
“A contract of guarantee is a contract whereby the surety (or guarantor) promises the creditor to be responsible, in addition to the principal, for the due performance by the principal of his existing or future obligations to the creditor, if the principal fails to perform those obligations.”
It turns out that Millett QC has appeared frequently in the BVI, Anguilla, the Cayman Islands, Bermuda and the Isle of Man—by no stretch of the imagination some avocat ti papier! Then there is this, taken from Halsbury’s Laws: “A guarantee is an accessory contract by which the promisor undertakes to be answerable to the promise for the debt, default or miscarriage of another person whose primary liability to the promisee must exist to be contemplated.”
According to my own humble lexicon, on which I rely for the ordinary meaning of words: “A deed of guarantee is usually used when a lender has reservations about the ability of a borrower to repay mortgage installments and requires another, usually more financially secure person to guarantee the loan.”
Only a month or so ago the House guaranteed a million-dollar loan for UWI’s open campus, evidently because the bank had reservations about the institution’s ability to repay. For similar reason the RBTT had in 1997 refused to finance the construction of the now famous hotel formerly known as Hyatt—until the developers had persuaded the recently elected Kenny Anthony government to guarantee the required multi-millions.
We know that particular story’s sad ending. Or do we? The report from the 6 May 2009 Ramsahoye Commission of Inquiry is there to remind us “there was no direct authority for money payable under the guarantees to be taken out of the Consolidated Fund as is contemplated by Sections 41 and 42 of the Finance (Administration) Act.” We know, too, that politicians will always have their way where there are only sheeple!
The Ramsahoye Report goes on: “In December 2002 [some six months after the hotel formerly known as Hyatt had been sold by a bank-appointed receiver to its new owner and renamed] the government of Saint Lucia wanted to borrow US$41 million from the Royal Merchant Bank to meet capital expenditure and to pay debts incurred by Frenwell Limited. A motion to enable the money to be borrowed was put before parliament. It was approved by the House of Assembly on the motion of the prime minister and minister of finance Kenny Anthony on 17 December 2002. The motion was passed by the senate on 20 December 2002 . . .”
The motion presented to parliament invoked as its authority the provisions of Section 39 of the Finance (Administration) Act, which authorizes the minister, by resolution of parliament, to borrow from any bank for “any purposes” including the capital or recurrent expenditure of the government.
“The reason for invoking Section 39,” the report explained, “was because a part of the US$41 million was intended to meet expenditure on capital works which the government had undertaken, but it was also intended that the other part should be used to refinance government’s obligations in respect of the former Hyatt Hotel.” (My emphasis)
How remarkable that the report speaks of what the government had “intended.” It seems to me, considering what follows, that “claimed” might’ve been more appropriate, but then, unlike the chairman of the commission, I am no QC!
The report went on: “The truth was that the obligations which the government of Saint Lucia intended to meet were the loan monies which Frenwell Limited had borrowed and the interest which the government was obliged to pay to the Royal Merchant Bank under the Deed of Guarantee and Indemnity and the Put Option Agreements.
“It was presumed that the members of the legislature knew that the loan monies were used to support Pigeon Point Hotel Limited. We conclude that the nature of the proceedings by which the resolution was passed were irregular; but since the members of parliament must have known that the government was borrowing to satisfy obligations it undertook in connection with the resort, the payment, although done through an irregular procedure, was not unlawful.”
Since word interpretation is crucial to our understanding of how our parliament has been operating at least for the last two decades, we may as well consider now the ordinary meaning of presumed and irregular. In the first instance: “To suppose something is the case on the basis of probability”—synonymous with “surmise, speculate, guess, imagine.”
As for irregular: “Contrary to the rules or to that which is normal or established”—according to my dictionary, synonymous with “improper, illegitimate, unscrupulous, unethical, unprofessional, unacceptable.” An example of usage, again according to my dictionary: “Irregular financial dealings.”
It remains conjectural what the Ramsahoye Commission sought to convey to the ordinary man on the Gros Islet transit by its conclusion that an “irregular procedure” involving multi-millions of dollars was “not unlawful.” Did the commission mean to say the cited “irregular procedure” was lawful?” The commission also reported that “the money paid was lost and that the government and people of Saint Lucia received nothing in return for the money so paid the Royal Merchant Bank, even though it was intended by the terms of the development and concession agreement of 17 December 1997—that if the government was called upon to pay it would receive a corresponding equity in the hotel . . . The money paid to settle the debt of Frenwell Limited was a loss which the people of Saint Lucia bore without compensation.
“We consider that the loss which the government and people of Saint Lucia suffered in this matter was the result of maladministration and we would recommend that where the government enters into contracts for the procurement of goods and services the law regulating such agreements should be strictly followed.”
And what does my dictionary say of maladministration? “A situation where the individual or group in charge is unjust, dishonest, or ineffective in their leadership. In many cases, maladministration means that a circumstance is so bad it must be investigated or reprimanded. Maladministration is commonly used in the medical field for the situation where a drug is either incorrectly or illegally administered to a patient. Also frequently used to describe corrupt behavior by any public official.”
Back to Ramsahoye: “We also consider that where the government guarantees the debts of other persons the resolution under the Finance (Administration) Act should give details of the liability so that both the members of parliament and the national community should understand the liability undertaken by the taxpayer in order that the demands of accountability and transparency required by good governance will be satisfied.”
How ironic that the campaigning SLP’s mantra in 1997 had been “transparency and accountability!” To return to my earlier-cited lawyer and his determination that the anti-belated-guarantee brigade had misinterpreted Section 41 of the Finance (Administration) Act, the word “guarantee” in particular.The act states: “No guarantee involving any financial liability shall be binding upon the government unless that guarantee is given in accordance with an enactment or unless approved by resolution of parliament.”
“What does that mean?” asked Justice Saunders in the appealed Martinus Francois v The Attorney General matter (2004). “The key phrase in the section is ‘shall be binding.’ The section is saying that guarantees may exist but if those guarantees involve any financial liability they can only bind the government if one of two conditions is satisfied: they must either be given in accordance with an act of parliament or they must be approved by a resolution of parliament. When therefore the prime minister gave the guarantee he was doing nothing wrong or unlawful.He was perfectly entitled to do so.
“However, because that guarantee involved a financial liability, parliamentary approval was required before it could be binding.” [Dear reader, please keep in mind that at the time of the guarantee to which Justice Saunders refers less than a dozen people, including the judge, had heard of Frenwell!]
Justice Saunders went on to say, apropos of Francois v The Attorney General: “In a constitutional democracy such as obtains in Saint Lucia the executive conceives and executes policy but parliament has control of the purse strings of the state. Representatives of the executive authority invariably enter into contracts from time to time but no funds can be taken out of the Consolidated Fund unless such funds are approved by parliament. Such approval may be granted at any time before a charge is made upon the Consolidated Fund to satisfy any liabilities thereby incurred.”
Additionally, and Justice Saunders cited Spencer v A.G. of Antigua, during which he [Justice Saunders] had noted: “A government contract is not unconstitutional because it provides for payments to be made at some future date and at the time the contract is entered into parliament has not yet approved the required expenditure. Invalidity would only arise if parliamentary approval had not been obtained by the time the monies were due and payable.” (My emphasis)
Curiously, the judge went on to say: “Mr. [Martinus] Francois seemed to be of the view that the phrase, ‘capital or recurrent expenditure of government’ pertained only to monies expended on such matters as roads, schools, hospitals, payment to civil servants. He construed the phrase narrowly, restricting its range to expenditure of the state or works engaged in or projects conceived or owned by the state. He appeared not to appreciate that expenditure on ‘the refinancing of government’s obligations in respect of the former Hyatt hotel’ could be embraced within the scope of capital or recurrent expenditure of government.”
Could be embraced, yes—but was it?
Five years later, this was how the Ramsahoye Commission answered the question: “The truth was that the obligations which the government of Saint Lucia intended to meet were the loan monies which Frenwell Limited had borrowed and the interest which the government was obliged to pay to the Royal Merchant Bank . . . We conclude that the nature of the proceedings by virtue of which the resolution was passed were irregular . . .”
As earlier stated, Justice Saunders had no way of knowing back in 2004 the above proven “truth” involving Frenwell. Neither the fact that at least three MPs had, two or three days after the House had “unanimously voted in favor” of the 2002 resolution, publicly acknowledged they had been misled. To this day the government has not met those “obligations to the hotel formerly known as Hyatt.”
But just what does Justice Saunders mean when he says parliamentary approval for money to be taken out of the Consolidated Fund “may be granted at any time before a charge is made upon the Consolidated Fund to satisfy incurred liabilities?”
Does he mean to say, by “at any time,” at the government’s convenience, regardless of whether parliament is misled? Might this be the ruling the government is relying on when it invokes Section 41 of the Finance Act to give “belated guarantees” that may well be altogether unnecessary, except as some kind of decoy?
On the other hand a host of other legal authorities, including Justice Saunders, have interpreted the section as saying no monies can be drawn from the Consolidated Fund without parliamentary approval. Conceivably, to do so would not only be “irregular” but may even be downright unlawful. In all events, what about a belated approval by parliament of such irregular or unlawful act?
By all the prime minister has in recent times led the House to believe the so-called belated guarantees at issue apply to contracts already paid for, in full or in part—allegedly without the approval of parliament. Did the particular contracts receive, as now-opposition MPs insist, House approval following Prime Minister Stephenson King’s presentation of the 2011 Estimates of Expenditure? Will the House have the last word on that?
Let me return to Thomas Sowell and the place I started from: “It is hard to imagine a more stupid or more dangerous way of making decisions than by putting these decisions in the hands of people who pay no price for being wrong!’
By the way, “sheeple are people compared to sheep in being docile, foolish, or easily led,” this according to my Oxford Dictionary.