Privy Council: ruling on $33 million UHS debt - 10/26/11 02:43 PM
The controversy over a $33 million debt that the Musa administration had guaranteed for the Universal Health Services, now Belize Healthcare Partners, has been catapulted back into the public spotlight after the London-based Privy Council ruled Thursday, October 20, that the loan note the Musa administration had sealed between the Government and the Ashcroft-controlled Belize Bank, to pay off the private hospital’s debt was “not invalid by reason of section 7 of the Act.”
That part of the Finance and Audit (Reform) Act requires that any loan of $10 million or more has to be approved by Parliament to be valid.
The 20-page Privy Council judgment explained that the debt of BZ$32,320,698.05 was erased from UHS’s Belize Bank account, leaving a “ZERO” balance, but BZ$33,545,820 was posted as a debt on a new account opened under the name of the Government of Belize.
On top of this, the Government, according to the court, accrued nearly $4 million in interest, making the total due as at 30 January 2008, just before the change in administration, nearly $40 million.
The chain of events began with a decision by then Minister of Finance and Prime Minister, Said Musa, to have the Government of Belize issue a loan guarantee for UHS. When UHS failed to pay, however, the government was on the hook for the funds.
In a joint suit, the Association of Concerned Belizeans (ACB), Senator Godwin Hulse, as well as the trade unions sought declarations from the court about the legality of the transaction. The Belize Bank had lost in the lower courts, but it won on the final round of appeal in London.
The court noted that, “The issue [brought for settlement to the court] in this appeal is whether a ‘Loan Note’ dated 23 March 2007...is invalid as being contrary to section 7(2) of the Finance and Audit (Reform) Act No 12 of 2005 (“the Act”) on the ground that the Bank of Belize...made a loan to the Government of Belize which could only lawfully be made pursuant to a resolution of the National Assembly authorizing the loan. It is common ground that no such resolution was passed.”
The Privy Council said that, “...on its true construction, the Loan Note is a Promissory Note... and as a Promissory Note, the Loan Note is enforceable quite apart from validity of the underlying transaction.”
It does caution, however, that if the governing law makes the promissory note illegal, then such a promissory note would not be enforceable.
Senior Counsel Lois Young, who represented the ACB, said that the decision may appear to mean that the Belize Bank could come after the Government of Belize for its money; however, she notes, that the question of the legality of the underlying government guarantee, which sparked the loan note/promissory note, has still not been resolved in the courts. Young said that Supreme Court Justice Minnet Hafiz didn’t make a ruling on this point when the case was before her.
In concluding its judgment, the Privy Council says that, “contrary to the decisions by the judge and the Court of Appeal, the Loan Note was not invalid by reason of section 7 of the Act. It will therefore humbly advise Her Majesty that the appeal be allowed and that the parties make written submissions on costs within 28 days.”
The Belize Bank, the appellant, was represented by Nigel Pleming, QC, of England and the Belize-based attorney, Senior Counsel Andrew Marshalleck.
Caribbean lawman, Dr. Lloyd Barnett, also joined Young in representing the respondents in the appeal.