| Pages | |
| Acknowledgements | i - v |
| Chronology - including Diary of Oral Hearings | vi - xii |
| Dramatis Personae | xiii - xxv |
| PART I: INTRODUCTION | 1 - 34 |
| A: Background to the Commissions of Inquiry | 1 |
| B: Role of Commission of Inquiry counsel | 9 |
| C: Funding of Commissions of Inquiry | 21 |
| D: Guidelines on procedure for public inquiries | 27 |
| PART II: EVENTS UNDER INQUIRY | 35 - 112 |
| A: THE CASE OF THE THREE HYDROFOILS | |
| (1) The sale and purchase of the hydrofoils | 35 |
| (2) The signing of the guarantee to the Credit Agreement 4 April 1986 |
48 |
| (3) The financial aspects | 60 |
| (4) The law applicable to the Credit Agreement of 30 May 1986: contractual and tortious liability |
68 |
| (5) The aftermath of the draw-down, post-31 October 1986 | 86 |
| (6) The meeting of 2 November 1992 | 92 |
| (7) The Letters Rogatory 1996-2000 | 98 |
| (8) Conclusions | 104 |
| Notices of provisional criticisms of Tapley Seaton QC and Kennedy Simmonds |
109 |
| B: THE INSURANCE ISSUES | |
| (1) The National Caribbean Insurance Company: its status and function | 113 |
| Notices of provisional criticisms of Fitzroy Jones | 127 |
| (2) The Hurricane Hugo insurance claims | 129 |
| Notices of provisional criticisms of Kennedy Simmonds, Hugh Heyliger, William Liburd, Robert Manning, Austin Joseph, Ivan Buchanan and Kenneth Kelly |
141 |
| (3) The fire at the Democrat | 148 |
| Notices of provisional criticisms of Eugene Hamilton, Robert Manning, William Liburd, Kenneth Kelly, Ernest Pistana |
157 |
| PART III: FINANCIAL ADMINISTRATION 1980 - 1999 | 162 - 166 |
| PART IV: CONCLUSIONS AND RECOMMENDATIONS | 167 - 178 |
| A: Good governance and small states | 167 |
| B: List of recommendations | 175 |
APPENDICES
Acknowledgements
No Commission of Inquiry can hope, let alone expect to function with any degree of efficiency, thoroughness and fairness to all the participants in the Inquiry without the total commitment of members of its secretariat. Mr Sam Franks, who was appointed secretary to the Commission by the warrant of the Governor-General had not previously experienced service in the public sector (other than as a school teacher) and was thus unprepared for the inevitable frustrations of bureaucracy. If at times he displayed irksomeness at the task of satisfying rival demands for his attention, he retained a remarkable equilibrium (with the broadest of amiable grins) and a high degree of administrative efficiency. He was also effective in keeping the Commission on the rails, despite attempts at derailment from those imbued with the political dimensions of the Inquiry. He must have despaired at the irritation that his chairman sometimes exhibited. If so, he is to be forgiven, if only for restraint in showing any counter-irritation. Over and above his secretarial duties, his warm friendship did much to soften the rigours of the Inquiry. He handled the media, which covered the Inquiry through the TV cameras and radio, with consummate ease.
The administrative back up to Mr Franks was solidly personified. Shirley Adams churned out the correspondence with cheerfulness and ease. Her assistant, Roxan Phillip, was a model of administrative assistant.
Counsel for the Commission is always the key figure in an Inquiry, if only because he or she elicits the evidence and steers the Commission through the Scylla and Charybdis of modern-day inquiry procedures, always susceptible as they are nowadays to challenge by way of judicial review. Dr Richard (Johnny) Cheltenham QC (Barbados) was appointed counsel to the Commission, having previously appeared as counsel for the Government of St Kitts and Nevis in the judicial review proceedings which prohibited the Williams Inquiry from investigating certain aspects of its terms of reference, and which led to the establishment of this Commission of Inquiry (see Part I A). His local background knowledge, in addition to being a much-respected practitioner at the Bar of the various Caribbean jurisdictions, was invaluable to the Commission of Inquiry. He supplied, moreover, that vital ingredient to the Commission - namely, Caribbean cultural traditions and habits that I, in spite of many years of affectionate association with the West Indies, have never fully acquired. His handling of the documentary material, exemplified through his two excellent opening statements, was of enormous assistance in my fathoming, in particular, the complex financial transactions relating to the funding of the sale and purchase of the three hydrofoils. Extra-curricularly, he very kindly steered me through the issues raised in the Part I B on the role of Commission counsel. He takes no responsibility whatsoever for what I have written, although I am encouraged to think that he approves most, but decidedly not all, of my views on the subject.
The Commission of Inquiry was quite exceptionally fortunate in one vital respect. Inspector Sid Bloxom of the Royal Canadian Mounted Police was requested by the Government of St Kitts and Nevis in July 1997 to undertake an investigation into the circumstances of a guarantee given by Government in May 1986 in the financing of the purchase of three hydrofoils by Nautical Trading (St Kitts) Ltd. Ordinarily, the task of obtaining and collating the documentary material and witness statements, preparatory to oral hearings, presents no insuperable difficulties. Inspector Bloxom quickly discovered that his was no ordinary task. A government file on the Credit Agreement of 30 May 1986 and any documentation leading up to it was not, and still has not been located. There were two minutes of meetings held by the Board of Directors of Frigate Bay Development Corporation, dated 15 May 1985 and 26 March 1986, some post-1986 documents in government departments revealing the default in servicing the loan to Nautical Trading, and there is a file, post-1996, pertaining to Letters of Rogatory from the Italian prosecuting authorities. Otherwise, such documentation as has been uncovered came from Europe (mainly from the files of Morgan Grenfell and from professional advisors, legal and accountancy, to the Englishmen, Mr William Adams and Mr Roger Morgan, who were the authors of the hydrofoil project). Thus, the investigation into a suspected fraud or other criminal activity led Inspector Bloxom to range far and wide. That the Commission has, first and foremost, been able to put together enough of the pieces of the puzzle of the events of 1985/6 to form a picture, albeit incomplete, is due in large, even overwhelming part to the unflagging efforts and investigative skills of Inspector Bloxom. His task was not rendered any the easier by the lack of co-operation in certain quarters and by the lapse of time since the events under investigation. Nevertheless, the report made by Inspector Bloxom on 23 June 1998 is a model of its genre and greatly facilitated the work of this Commission when it began its task in July 1999.
During the ensuing period, from October 1999 to January 2000 when the Commission has been at work in St Kitts, Inspector Bloxom has been alongside, ferreting out more material and responding to the Commission’s entreaties for urgent help and discussion. His role, both as investigator and retriever of data, has literally been invaluable. Without him, the Commission would never have been in a position to report on the hydrofoil affair. Inspector Bloxom was ably assisted by Inspector Renold Benjamin of the Royal St Christopher and Nevis Police Force until he went in October 1999 to the University of the West Indies in Barbados to read for a law degree. Sergeant Andre Mitchell assisted in island interviews and in other police work with uncomplaining efficiency. Inspector Reginald Christmas joined the team for the last laps of the Inquiry. All three were everything one expects from a disciplined policeman.
Inspector Bloxom was aided in his investigation by an extremely able forensic accountant, Doug Kalesnikoff. His contribution was far greater than the delivery of expert evidence.
Thanks are due to many people in government service. The Commission dealt directly with Government only through its Attorney-General, Mr Delano Bart. He was a model of how Governments should behave towards an independent Commission of Inquiry. He dealt with every administrative problem that arose, always maintaining a discreet distance on all matters touching the Inquiry’s task. His office, likewise, observed the proprieties of detachment. Likewise, the Stenographers - Patricia Herbert and Claudia Williams - coped remarkably well with recording the evidence and producing the transcripts. Mr Denis Merchant, Crown Counsel, readily smoothed the Commission’s path through the thickets of case law, by providing law reports and the like. Mr William Dore, secretary to the Williams Inquiry was extremely helpful in answering some of our problems of procedure and supplying transcripts of the Williams Inquiry. Cecilia Phipps-William and Avonel Thornhill, both working for the Williams Commission, willingly loaned able hands when necessity demanded. Giles Dickenson, Mervin Sage and the Government Information Service were unobtrusive recorders of our proceedings.
Then there were the police drivers who ferried the Commissioner and counsel to the Commission to and from Horizon Villas at Frigate Bay. They were always punctual often waiting for their passengers to emerge from some extended session of Inquiry or some protracted meeting. The Inquiry owes particular thanks to Constable’s Rodney Francis, Cecil Richardson and Simeon Liburd. Further members of the Royal St Kitts and Nevis Police Force who are owed the gratitude of the Commission staff, particularly for their assistance in the early stages of the Inquiry, are Calvin Fahie, Commissioner of Police, Robert Jeffers, Deputy Commissioner of Police and George Fough, Fire Commissioner. Sergeant Nathaniel Jack and Sergeant Douglas Tyson who dealt with matters of security are also owed our thanks.
ZIZ TV and Radio caused no obstacle to the functioning of the Commission, indeed Birtel Browne is due our particular thanks for his assistance in dealing with the international audio-link up in November.
The staff at the Factory Social Centre - Lascelles Rawlins and Avonel Noland - are due our thanks for smoothing our passage in the Commission room.
Others assisted the Inquiry in a number of disparate ways. The Commissioner consulted with Sir Fred Phillips CVO, QC about aspects of his Constitutional Commission and Task Force. His wisdom and wealth of experience in government administration were valuable assets to the Inquiry.
One has always to enter a self-denying ordinance in acknowledging indebtedness to one’s offspring. My daughter, Hannah, nevertheless deserves the huge gratitude of her father. She fetched and carried like the most eager beaver during six separate trips to St Kitts in a manner that lightened, not just a physical burden but also softened the impact of jet-lag, travelling and the stress of a public inquiry that constantly challenged its chairman. Her transposing my execrable handwriting into the computerised word and frequently amended typescript on the print-out, enormously eased the burden of composition. If she has benefited from an unusual experience for one starting out on a career in the law, the immediate beneficiary has been the Commission of Inquiry and all associated with it. Her friendly relationship with Mr Franks and his staff injected a moderating role in the dealings between Commissioner and Secretariat.
Counsel for Dr Simmonds and Mr Tapley Seaton QC appeared, as of right, at the Inquiry. Ms Constance Mitcham and Senator Vernon Veira for the former and Mr Anthony Gonsalves for the latter performed their respective tasks of defending the interests of their clients with appropriate vigour. At times Ms Mitcham tended to lose sight of counsel’s primary function of assisting the Commission, to the detriment of her professionalism.
At the London end I would like to thank the Foreign Office; the Serious Fraud Office; Professor Mike Faber; Kate Ford and Sunder Katawala at the Foreign Policy Centre and Kim Roberts for their generosity in sharing knowledge and technical assistance with the Inquiry.
Chronology of St Kitts and Nevis Commission of Inquiry,
14 July 1999 - 3 February 2000
| 28 July 1997 | Appointment of the Commission of Inquiry under the chairmanship of Professor Randolph Williams | |
| 27 September 1997 | Kennedy Simmonds applies to High Court for certiorari on the basis of Commission bias. | |
| 2 October 1997 | Interlocutory injunction against Williams from proceeding until 17 October | |
| 15 October 1997 | Mr Heyliger and Mr Cains start like proceedings | |
| 10 November 1998 | Mr Justice Neville Smith refuse the application | |
| 12 March 1999 | Justice of Appeal Satrohan Singh orders a stay of proceedings of the Commission of Inquiry. | |
| 25 May 1999 | Court of Appeal reverses the decision of Mr Justice Neville Smith. Williams Commission prohibited from continuing Inquiry to the extent that it involved Dr Kennedy Simmonds. | |
| 14 July 1999 | Governor-General signs warrant setting up a fresh Commission of Inquiry with limited terms of reference. | |
| 23 July 1999 | Preliminary Hearing. | |
| 12 January 2000 | Conclusion of Oral Hearings. | |
| 3 February 2000 | Delivery of Report to Governor-General. |
Diary of Oral Hearings,
August 1999 - January 2000
Day 1 - Monday 16 August 1999
Dr Richard Cheltenham QC counsel for the Inquiry - Opening Statement in relation to the Alleged Insurance Overpayments, 1989 and the Payment to the Democrat Publishing Company 1994.
Application by Constance Mitcham (counsel for Kennedy Simmonds, Hugh Heyliger and The Democrat Publishing Company) for additional witnesses to show discrimination on the part of the National Caribbean Insurance Company Ltd board of directors towards other senior politicians.
Day 2 - Wednesday 18 August 1999
Opening of evidence.
Judith Attong - Secretary to the board of the National Caribbean Insurance Company in 1989
Ivan Buchanan CBE - Director of National Caribbean Insurance Company in1989 and 1992/3/4
Edmund Lawrence - Manager of St Kitts-Nevis-Anguilla National Bank
Kenneth Kelly MBE - Director of National Insurance Company in 1989 and 1992/3/4
Ms Mithcham’s attack on Mr Lawrence with regard to dismissal from National Bank in 1982.
Day 3 - Thursday 19 August 1999
Robert Manning - Director of National Caribbean Insurance Company 1989
William Liburd - Director of National Caribbean Insurance Company, currently manager of Democrat 1989 and 1992/3/4
Walter Simmonds - Chartered Accountant with the firm Simmonds and Associates
Day 4 - Friday 20 August 1999
Cedric Jeffers - Manager of Operations Department at National Caribbean Insurance Company in 1992/3/4
Austin Julius - Claims and Underwriting Assistant at National Caribbean Insurance Company 1992/3/4
Austin Joseph - Director of National Caribbean Insurance Company present at the meeting of 16 October 1989
Day 5 - Monday 23 August 1999
Bertrand Doyle - Loss adjuster from Bertrands Doyle Ltd Port of Spain, Trinidad
Althea Byron - Manager of Claims Department at time of insurance claim by Democrat Printing Company 1992/3/4.
Hugh Heyliger - Minister of Agriculture, Lands, Housing and Development 1984 - 1995 and leader of the opposition since 1995.
Dr Kennedy Simmonds - Premier and Prime Minister 1980-1995. Minister of Finance 1983-1995.
In response to request by Mr Hugh Heyliger, Commissioner indicates that he will consider all three Ministers (including Mr Michael Powell then Deputy PM) in relation to the insurance payment, as indicated by the minutes of the 16 October 1989.
Day 6 - Tuesday 24 August 1999
Eugene Hamilton - Employee of the National Caribbean Insurance Company 1989 - 1995. General Manager and Secretary to the Board of Directors in 1992/3/4.
Application by Mr Cedric Jeffers to ask questions of Mr Hamilton - application accepted by the Commissioner on the basis that Mr Jeffers had been personally criticised by Mr Hamilton.
Day 7 - Monday 4 October 1999
Mr Delvin Hodge - Police Officer in CID in September 1993 (16 years service 1982 - 1998). Attended the Democrat Printery on the morning of Friday 24 September 1993 following the report of a fire and conducted further investigation into the cause of the fire for the next 2 months.
Uriel Hensley - Superintendent of Police officer in charge of the Fire Department in September 1993 (30 years service with the police). Attended the Democrat Printery on the morning of 23 September 1993 put out fire and reported damage done.
Commissioner made further statements in relation to the structure of the October sittings. Including time to make submissions on Insurance Claims, Video-Link for London witnesses, the evidence of Mr Fitzroy Jones and the timing of each session.
Day 8 - Tuesday 5 October 1999
Commissioner Louis Blom-Cooper’s opening remarks on the role of the Opening Statement by Counsel Dr Cheltenham.
Dr Richard Cheltenham QC counsel for the Inquiry - Opening Statement in relation to the matter of Nautical Trading (St Kitts) Ltd and the three missing hydrofoils.
Further to a number of interruptions and protests by Constance Mitcham and Vernon Viera Commissioner grants counsel for Kennedy Simmonds the opportunity to make an opening statement to counter remarks made by Dr Cheltenham.
Inspector Sid Bloxom - Royal Canadian Mounted Police, primary investigator in relation to the matter of Nautical Trading (St Kitts) Ltd and the hydrofoils.
Day 9 - Wednesday 6 October 1999
Inspector Sid Bloxom - resumption of oral evidence
Constance Mitcham counsel for Dr Kennedy Simmonds delivers opening statement in order to counter remarks made in the opening statement of Dr Cheltenham.
Inspector Sid Bloxom - resumption of oral evidence
Doug Kalesnikoff - Forensic Accountant of Kalesnikoff Martens Chartered Accountants, Canada. Expert evidence in relation to the matter of Nautical Trading (St Kitts) Ltd.
Day 10 - Thursday 7 October 1999
Calvin Farier - Cabinet Secretary 1980 - 1995 gave evidence on the Cabinet decision of 4 April 1986 to approve the Credit Agreement of 30 May 1986
Valda Richardson - Personal Assistant to Michael Powell 1984 - 1992 when he was Minister for Tourism and (part of the time) Deputy Prime Minister
Hilary Wattley - Assistant Secretary in the Ministry of Tourism 1984 - 1988 currently Permanent Secretary for Ministry of Tourism, Culture and Environment
Yvonne Charles - Accountant General previously in the Audit Office 1970 - 1996 left there as Audit Manager
Stanley Franks - Commissioner of Police 1980 - 1993 as Commissioner was also responsible for the Coast Guard
Day 11 - Friday 8 October 1999
Walter Simmonds - Accountant who gave opinion on profitability of hydrofoil operation in 7 June 1985
Ernest Pistana - General Manager of St Kitts-Nevis-Anguilla National Bank in 1985/86
Submissions from Mr Eugene Hamilton in relation to Part B.
Submissions from Ms Mitcham on behalf of Dr Simmonds, Mr Heyliger and the Democrat in relation to Part B.
Day 12 - Monday 18 October 1999
Uklin Richardson - Managing Director of Kisco Travel, St Kitts
Patrick Paterson - Solicitor General 1995/96
Dahlia Claxton-Morris - Crown counsel working with Patrick Paterson and Fitzroy Bryant.
Larkland Richards - Permanent Secretary in Ministry of Tourism 1980 - 1992, and Director on Board of Frigate Bay Development Corporation 1980 - 1995.
Ingle Rawlins - Second secretary at Eastern Caribbean High Commission in London in 1985/6
Simon Jackson - Employee of Morgan Grenfell & Company Ltd merchant bank, January 1984 - October 1986
(Cross examination of final witness deferred until Day 13)
Day 13 - Tuesday 19 October 1999
Simon Jackson - questioned by Ms Mitcham
Uhral Swanston - Nevis Reform Party representative in cabinet 1984 - 1995
Simeon Daniel - Nevis Reform Party representative in cabinet 1984 - 1995
Wendell Lawrence - Auditor General from 1984-1989. Financial secretary since 1989.
Simon Jackson - questioned by Mr Tapley Seaton QC
Sessions adjourned until 15 November due to arrival of Hurricane Jose.
Day 14 - Monday 15 November 1999
Commissioner opens with statement on status of legal assessor and allows for questioning by Ms Mitcham.
Nicholas Padfield QC - Legal Assessor appointed by the Commissioner as an expert on English Commercial Law.
Hugh Heyliger - Minister for Agriculture, Lands and Housing 1984 - 1995, leader of the opposition since 1995.
Via audio-link from London
Ian Fieldhouse - Auditor with Price Waterhouse between 1979-1991
Day 15 - Tuesday 16 November 1999
Via audio-link from London
Rupert Wright - Lawyer who represented Roger Morgan and Nautical Trading (St Kitts)
Via audio-link from Milan
David Mills - Lawyer for Rodriquez and director of Nautical Trading
The Commission meets to hear the evidence of Mr Michael Powell - Deputy Prime Minister and Minister of Tourism 1980 - 1992. Mr Powell does not attend and the Commissioner gives instructions to subpoena him for 9:30 Wednesday 17 November 1999.
Sessions adjourned due to the arrival of Hurricane Lenny
Day 16 - Saturday 20 November 1999
Special Session of Commission of Inquiry - Held at Conference Centre, Ocean Terrace Inn, Basseterre.
Egone Ratzenberger - Deputy Inspector General of the Inspectorate of the Ministry of Foreign Affairs, Rome, Italy in 1992. Currently the Italian Ambassador to Republic of Slovakia.
Day 17 - Thursday 16 December 1999
Michael Powell - Minister of Tourism and Deputy Prime Minister 1980-1992
Day 18 - Monday 10 January 2000
Nicholas Padfield QC - Legal Assessor, questioning by Anthony Gonsalves legal representative for Mr Tapley Seaton QC
Tapley Seaton QC - Attorney General 1980-1995
Dr Kennedy Simmonds - Premier 1980-1983, Prime Minister 1983-1995
Day 19 - Wednesday 12 January 2000
Submissions from Anthony Gonsalves on behalf of Tapley Seaton QC
Submissions from Constance Mitcham on behalf of Dr Kennedy Simmonds
DRAMATIS PERSONAE
Part II A - THE CASE OF THE THREE HYDROFOILS
| NO. | NAMES | PARTICULARS |
| 1. | William Charles Adams a.k.a. Bill Evans (WA) | Consultant/businessman from South Wales. |
| 2. | Winifred May Adams | Wife of William Charles Adams - one of the shareholders of Bluematt Investment Ltd. (BIL) |
| 3. | Ageash Co. Ltd. (Isle of Man) (Anguilla) | Company formed on instruction of Rodriquez or Adams to facilitate receipt of commission from sale of the hydrofoils. Directors: Patrick Diamond & Anita Costain |
| 4. | Agencia Navemar de Puerto Rico | In October 1986 agent of NTK along with Caribbean Hydrofoils Inc. (Puerto Rico) |
| 5. | Aliscafi SNAV S.p.A. (Italy) | Subsidiary of Rodriquez Cantieri Navali Shipyards - owned by Rodriquez. Vendor of the hydrofoils. Becomes 25% shareholder in NTK October 1986. |
| 6. | Ashbury Services Ltd. (UK) | Roger Morgan’s company |
| 7. | Dr Hayes Blackman | Chief Magistrate appointed to examine Kennedy Simmonds and Tapley Seaton QC in response to the Letters Rogatory of the Italian Government. |
| 8. | S. G. V. Bloxom, Insp. | Royal Canadian Mounted Police. Carried out investigation on NTK from July 1997 - October 1999. Reported on NTK in June 1998. |
| 9. | Bluematt Investment Ltd. (BIL) | 100% Shareholder in NTK from July 1985 - October 1986 - see (5) above. |
| 10. | Bramhall Ltd. (Isle of Man) | One of two companies used to deposit funds taken as commission. Roger Morgan was at all relevant times a director. William Adams was `a beneficial owner and account holder. |
| 11. | Fitzroy Bryant (St Kitts) | Counsel acting for the government in relation to the Letters Rogatory (deceased end of 1996) |
| 12. | Hyacinth Byron (St Kitts) | Original shareholder of NTK - signs resolution of 19 July 1985 increasing capital of NTK to US $100.00. |
| 13. | Terence Byron (St Kitts) | Attorney/Solicitor - incorporated and represented NTK and arranged for sale of shares to BIL. |
| 14. | Vincent Byron (St Kitts) | Father of Terence and original shareholder of NTK - signs resolution of 19 July 1985 increasing capital to $100.00. Now deceased. |
| 15. | Richard Llewellyn Caines | Junior Finance Minister 1980-1995. |
| 16. | Celebrity Investments Ltd. (St. Kitts) | Incorporated 21 September 1985 No.45. Telex to Michael Powell (8 April 1987) mentions Celebrity Investments in connection with possible purchase of hydrofoils. Shareholders - Hyancithe Byron and Carmen Archibald Gerefury. |
| 17. | Yvonne Charles | Audit Office 1970-1996, Accountant General 1997- |
| 18. | Dahlia Claxton-Morris | Crown Counsel 1997/98 dealing with Letters Rogatory. |
| 19. | Simeon Daniel | Attorney/solicitor. Nevis Reform Party representative on National Assembly and premier of Nevis 1980-1995 |
| 20. | Dolanlight Ltd. (UK) | Personal Company of Roger Morgan - involved in sale of automobiles and motorcycles |
| 21. | Bill Evans a.k.a. William Adams | See above |
| 22. | Rupert Evans | Director of Fast Craft NE Ltd (see below) most likely to be nominee director as representative of Leopoldo Rodriquez |
| 23. | Calvin Farier | Cabinet Secretary from 1980-1995 |
| 24. | Fast Craft NE Ltd. (Guernsey) | Rupert Evans director along with Leopoldo Rodriquez and Carlo Rodriquez. |
| 25. | Ian Fieldhouse | Employee of Price Waterhouse (Windsor UK) providing accounting services for NTK from Oct. 1986. |
| 26. | Derek Francis | Brother-in-Law of Roger Morgan. Company secretary to BIL. |
| 27. | Stanley Franks | Commissioner of Police 1980-1993 as commissioner was responsibly for the Coast Guard |
| 28. | Riccardo Fuzio | Assistant Public Prosecutor in Italy dealing with criminal prosecution of Leopoldo Rodriquez, Vittorio Morace and SACE officials |
| 29. | Guinness Mahon Ltd. | Commercial Bank. Arranges bridging finance with Morgan Grenfell (US $4.47m) |
| 30. | William Herbert | Founder of People’s Action Movement party. |
| 31. | Hugh Heyliger | Leader of the opposition. Minister for Agriculture, Lands and Housing 1980 - 1995 |
| 32. | J. Hubad | Engineer of Federal Institute of Technology, Switzerland. Writes report March1982 “Project by a company of ship owners to navigate rapid sea routes in the Archipelago of the Lesser Antilles with hydrofoil boats” |
| 33. | Simon Jackson | Employee of Morgan Grenfell from January 1984 - October 1986 handled Credit and Loan Agreement on behalf of consortium of banks. |
| 34. | Doug Kalesnikoff | Forensic Accountant of Kalesnikoff Martens Chartered Accountants, Canada |
| 35. | Kisco Travel St. Kitts (Uklin Richardson see below) | Operators of temporary hydrofoil service August 1985 - March 1986. |
| 36. | Wendell Lawrence | Auditor General in 1984/5/6; now Permanent Secretary to Ministry of Finance. |
| 37. | Nicolas Le Seelleur | Employee of Morgan Grenfell |
| 38. | David Mills | Rodriquez’s lawyer July 1986 onwards |
| 39. | Constance Mitcham | Minister of Women’s Affairs 1986-1995 |
| 40. | Victorio (or Gionvanni) Morace | Business associate of Rodriquez - managing director of Aliscafi SNAV Spa also believed to be director of Winnerstar eventual purchasor of the hydrofoils. |
| 41. | Morgan Grenfell Co. Ltd. (MG) | Commercial Bank. Agent/Manager responsible for acquiring financing and arranging mechanics for loan, credit agreement etc. - provided financing along with 6 other banks. |
| 42. | Roger Morgan | Promoter of hydrofoil project with William Adams. Director of NTK |
| 43. | Nautical Trading (St Kitts) Ltd (NTK) | Incorporated 15 December 1984 by Roger Morgan and William Adams, with initial share capital of US $2. |
| 44. | Nicholas Padfield QC | Legal Assessor to Commission of Inquiry |
| 45. | Patrick Patterson | Solicitor General 1996/7 dealing with the matter of the Letters Rogatory. |
| 46. | Ernest E. Pistana | General Manager of St. Kitts-Nevis-Anguilla National Bank 1982-1995 |
| 47. | Michael Oliver Powell (MP) | Deputy Prime Minister and Minister of Tourism 1980 - 1992 |
| 48. | Enrico Ramatelli | Director of NTK March 1988 |
| 49. | Amb. Egone Ratzenberger | Deputy Inspector General of the Inspectorate of the Ministry of Foreign Affairs, Rome, Italy in 1992. Currently the Italian Ambassador to the Republic of Slovakia |
| 50. | Bernice Rawlins | Registrar - Board of Social Security |
| 51. | Ingle Rawlins | Second Secretary to High Commissioner in London 1985/86. Added note to Ernest Pistana’s letter dated 22 June 1985 on instructions of High Commissioner Dr Claudius Thomas |
| 52. | Mr Justice Albert Redhead | High Court judge, member of the Eastern Caribbean Court of Appeal. |
| 53. | Larkland Richards | Permanent Secretary in Ministry of Tourism 1980 - 1992, director on board of Frigate Bay Development Corporation 1980 - 1995 |
| 54. | Uklin Richardson | Owner of Kisco Travel, St Kitts. Ticket agent for trial run of hydrofoils. Handed over to Delisle Walwyn. |
| 55. | Valda Richardson | Personal assistant to Mr Powell in the Ministry of Tourism between 1983 - 1992. |
| 56. | Carlo Rodriquez | Uncle to Leopoldo Rodriquez. Engineering expert in relation to construction of hydrofoils. Now deceased. |
| 57. | Leopoldo Rodriquez | Italian businessman and hydrofoil expert. Now deceased. Previously subject of criminal prosecution in Italy. |
| 58. | Rodriquez Cantieri Navali | Family company. |
| 59. | Dott. Vincenzo Roselli | Investigating magistrate in Italy |
| 60. | Dott. Rosellini | Italian Ambassador to Santo Domingo (with responsibility of the Caribbean) in 1992 |
| 61. | SACE - Italian Export Credits Insurance Agency | Provided ‘insurance guarantee’ - Italian Government Agency. [85% of loans $25.33 million] Provides guarantees to loans for which developing sovereign nations are signatories as primary guarantors. |
| 62. | Captain Giovanni Sciarrone | Captain of hydrofoils during trial run August 1985 - March 1986 |
| 63. | S. W. Tapley Seaton, QC (TS) | At all relevant times Attorney General |
| 64. | Dr. Kennedy Alphonse Simmonds (KS) | Prime Minister 1982-1995. Minister of Finance |
| 65. | Simmonds & Associates. W. Simmonds | Accountants, St. Kitts. Firm of Walter Simmonds, cousin to Dr Kennedy Simmonds |
| 66. | Mr Justice Neville Smith | Judge who dealt with the matter of the Letters Rogatory 1996/1997 |
| 67. | Uhral St C. Swanston | Nevis Reform Party Nevis representative in Government 1984 - 1995 |
| 68. | Sycamore Ltd (Isle of Man) | Roger Morgan director and account holder company used to deposit money taken from commission. |
| 69. | Dr Claudius Thomas | High Commissioner for the Eastern Caribbean in London during 1985/86 (now deceased) |
| 70. | Andrea Vardaro | Assistant Public Prosecutor in Italy dealing with prosecution of Leopoldo Rodriguez, Vittorio Morace and SACE officials |
| 71. | Delisle Walwyn | Became ticket agent for trial run of hydrofoils in January 1986 following breakdown of vessel in St Maarten |
| 72. | Hilary Wattley | Assistant Secretary in Ministry of Tourism Culture and Environment between 1984 - 1988 |
| 73. | Winnerstar Shipping Co. Ltd (Cyprus) | Agrees to purchase 3 hydrofoils March 21 1992 for $380.000. |
| 74. | Rupert Wright | Solicitor acting for NTK, Roger Morgan and William Adams |
| NO. | NAMES | PARTICULARS |
| 1. | Anthony Skeete Associates | (St. Kitts) - Builder / Contractor |
| 2. | Judith Attong | At all relevant times General Manager, Secretary to the board of directors and Principal Officer of National Caribbean Insurance Co. Ltd. Accompanied Mr Doyle to Dr Simmonds’ house on 14 October 1989. Attended and took minutes of meeting of 16 October 1989. |
| 3. | Ivan Buchanan CBE | At all relevant times director on board if NCI. |
| 4. | Althea Byron | At all relevant times Claims Manager at NCI. Processed applications of KS on 12 August and 5 December 1988. |
| 5. | J. I. Clarke | At all relevant times Senior Loans Officer at Royal Bank of Canada |
| 6. | Bertrand Doyle | At all relevant times loss adjuster based at Bertrand Doyle Limited in Port of Spain, Trinidad the Caribbean representative of Caribbean Claims Inc. Had long-standing connection to NCI and was Dean of the Insurance Academy. |
| 7. | Dawne Heyliger | Wife of Hugh Heyliger and joint insurance policy holder. Bank Loan Officer. |
| 8. | Hugh Carlisle Heyliger | Minister of Agriculture, Lands, Housing and Development 1984 - 1995. Leader of the Opposition since 1995. Insurance claimant for Hurricane Hugo damage. |
| 9. | Everton Huggins | Supervisor of loans - National Bank Trust Co. Ltd. |
| 10. | Fitzroy P. Jones | Chairman of Board of Directors of NCI. Minister of Trade and Industry 1984 - 1995 (re-elected 1989) and Minister of Tourism 1992 - 1995. Left St. Kitts 20 September 1996. Lives in USA. |
| 11. | Austin Joseph | At all relevant times Director of Board of NCI |
| 12. | Kenneth Kelly | At all relevant times Director of Board of NCI |
| 13. | William Liburd | At all relevant times Director of NCI. |
| 14. | Robert Manning | At all relevant times Vice Chairman of Board of Directors of NCI. |
| 15. | Michael Martin | Manager of General Insurance at NCI. Stand-in Life Manager in October 1989. |
| 16. | National Bank Trust Co. (NBTC) | Holding Company of NCI and in turn wholly owned subsidiary of SKNA National Bank |
| 17. | St. Kitts-Nevis-Anguilla National Bank Ltd. (SKNA National Bank) | Holding Company of NBTC - majority shareholding (60%) owned by the Government of St. Kitts. |
| 18. | National Caribbean Insurance Co. Ltd. (NCI) | Company holding insurance policy of Dr. Simmonds and Mr. Heyliger |
| 19. | Romig Phipps | Director of NCI. Campaign Manager for People’s Action Movement. Deceased. |
| 20. | Michael Powell | Minister of Tourism and Labour, and Deputy Prime Minister 1980 - 1992. Owner of Quick Photo Colour Lab (see below). |
DRAMATIS PERSONAE
Part II B(3) - THE FIRE AT THE DEMOCRAT
| NO. | NAMES | PARTICULARS |
| 1. | Ivan Buchanan CBE | At all relevant times Director of National Caribbean Insurance Company Ltd (NCI) |
| 2. | Alethea Byron | At all relevant times Claims Manager at NCI. In that capacity Mrs Byron supervised the running of the claims department |
| 3. | The Democrat | Bi-weekly Newspaper owned by Democrat Printing Company used as “organ” of PAM. |
| 4. | The Democrat Printing Company Ltd | Owner of the Democrat Newspaper. Policyholder with NCI. |
| 5. | Eugene Hamilton | At all relevant times General Manager and Secretary to the board of NCI. |
| 6. | Wendell Huggins | At all relevant times Director of NCI |
| 7. | Cedric Jeffers | At all relevant times Operations Manager dealing with non-life applications. |
| 8. | Fitzroy P. Jones | At all relevant times Chairman of the board of directors of NCI. “Manager” and key-holder of premises of Democrat Printing Company. Minister for Trade and Industry 1980 - 1995 and Minister for Tourism 1992 - 1995. Left St Kitts on 20 September 1996. Lives in USA. |
| 9. | Austin Julius | At all relevant times underwriting claims assistant. Inspected Democrat Printing Company building at Buckley’s site on 14 July 1992 on instructions of Cedric Jeffers. Checked for coverage when claim was processed February 1994 and reported to Althea Byron. |
| 10. | Kenneth Kelly | At all relevant times Director of NCI |
| 11. | Edmund Lawrence | General Manager SKNA National Bank. |
| 12.D | William Liburd | At all relevant times Director of NCI |
| 13. | Robert Manning | At all relevant times Vice Chairman of the Board of Directors of NCI |
| 14. | Michael Martin | Current General Manager and Secretary to the Board of Directors of NCI |
| 15. | Romig Phipps | At all relevant times Director of NCI. Now deceased. |
| 16. | Ernest Pistana | At all relevant times Director of NCI. |
| 17. | Joseph Reynolds | At all relevant times Director of NCI. Now deceased. |
| 18. | Wilfred Richards | Superintendent of Police writes report on fire at Democrat on 7 July 1994 |
| 19. | Walter Simmonds (Simmonds & Associates) | Accountant. Provided auditing services for NCI for the financial years ending June 30th 1990, 1993,1994 |
| 20. | Anthony Skeete | Managing director of building contractors firm whom provided quote of 23 February 1994. |
| 21. | National Bank Trust Company (NBTC) | Holding Company of NCI and in turn wholly owned subsidiary of SKNA National Bank |
| 22. | National Caribbean Insurance Company (NCI) | Company holding insurance policy of the Democrat Printing Company |
| 23. | Peoples Action Movement (PAM) | Political party in government in St Kitts and Nevis 1980 - 1995 |
| 24. | The People’s Action Movement Publishing Company Ltd (PAMPUBCO) | Owner of Democrat Printery building in Cayon Street, Basetterre |
| 25. | St Kitts-Nevis-Anguilla National Bank | Mortgagee of property under insurance policy |
PART I A
Background to the Commissions of Inquiry
The Commission of Inquiry was established by the warrant of the Governor-General on 14 July 1999 as a direct result of the decision of the Eastern Caribbean Court of Appeal on 26 May 1999 prohibiting the continuation by an earlier Commission of Inquiry of certain parts of its terms of reference. That Commission was set up as long ago as 28 July 1997, appointing Professor Randolph Williams to inquire into and report upon the methods employed in the conduct and operations of certain public corporations and ministries of government including the Ministry of Finance. The judicial prohibition related solely to the former Premier (1980-83) and Prime Minister (1983-1995) the Rt. Hon. Dr Kennedy Simmonds. The court order prohibited Professor Williams “from making any determination, findings or recommendations which specifically relate to the conduct, decision-making or activities” of Dr Simmonds.
The grounds upon which the Court of Appeal made the order of prohibition was that the actual bias of counsel for the Commission of Inquiry automatically infected the Commissioner such as to infer perceived bias in him. As I indicate in the next chapter on the role of counsel to a Commission of Inquiry, it is not my function to review, let alone criticise the Court of Appeal’s decision. But it might be helpful in any future challenge to the appointment of a Commissioner under the Commissions of Inquiry Act if I refer to two matters. First, in my report in July 1999 on Standards in Public Life in St Lucia, I indicated (pp 22-23 of the report) that any challenge to such appointment must be directed at the appointing authority, the Governor-General, and not at the Commissioner. In his speech to the National Assembly on 28 July 1999, the Prime Minister of St Lucia, Dr Kenny Anthony, himself a distinguished academic public lawyer, agreed with that observation. Second, the English Court of Appeal recently, in a crop of cases heard jointly, Locabail (UK) Ltd v Bayfield Properties Ltd has carefully re-fashioned the law’s approach to allegations of bias against a judge or any decision-maker in judicial or quasi-judicial proceedings.
The terms of reference in the Governor-General’s warrant of 14 July 1999 are set out in Appendix 1 to this report. They cover four topics: (1) the disappearance of the hydrofoils in March 1986 and the Credit Agreement of 30 May 1986 entered into in order to finance the sale and purchase of the hydrofoils; (2) the insurance claims arising out of the damage caused by Hurricane Hugo in 1989; (3) the claim to insurance for the fire at the premises of the Democrat newspaper in September 1993; and (4) the loan and credit from the Republic of Taiwan in October 1983.
The terms of reference item ‘c’ (see Appendix 1) include an inquiry into the circumstances leading up to and surrounding a memorandum signed at Taipei on 13 October 1983 between the Government of St Kitts and Nevis and the Republic of China (Taiwan). Specific inquiry is directed to the receipt, disbursement, control and repayment of an unconditional loan of US $1 million provided by Taiwan to the Government of St Kitts an Nevis and disbursement by the St Kitts-Nevis-Anguilla Bank Ltd. The Taipei memorandum of 13 October also contained an agreement by the Taiwan Government to grant to the Government of St Kitts and Nevis the sum of US $605,000 for supporting three projects - agricultural project in Nevis ($75,000); Livestock project for St Kitts ($350,000) and equipment for agriculture and irrigation ($180,000)
At an early stage (August 1999) of the Inquiry, it became clear that it would not be possible, given the timetable for reporting by 31 December 1999, for the Commission to undertake this term of reference. Government was immediately informed. Part of the reason for concluding that this term of reference could not be accommodated in the programme for the Commission was the fact that, in common with other aspects of the Inquiry, there was a dearth of relevant files in the Ministry of Finance (The Commission’s Secretary wrote to the Accountant-General on 9 August 1999 requesting the production of relevant documentation, to which the Accountant-General indicated an inability to assist in any meaningful way).
In these circumstances I recommend that information on the action taken after October 1983 by the Ministry of Finance in pursuance of Taipei memorandum should be subjected to forensic accountancy. I further recommend that Mr Doug Kalesnikoff, a forensic accountant, should conduct the investigation. Mr Kalesnikoff’s work for the Commission on the hydrofoil affair was outstanding such as to commend himself to the Government.
The terms of reference were amended on 13 October 1999. The reason for that amendment was to remove any doubt about the aspect of the inquiry into the disappearance of the hydrofoils. The Commission had indicated in the course of the oral hearings and in Dr Cheltenham’s opening statement on 5 October 1999 that it was interpreting its existing terms of reference to cover the response of Dr Simmonds and Mr Tapley Seaton QC to the request from the Italian authorities that they should give evidence on commission before the Chief Magistrate, Mr Blackman in November 1996. The amendment was thus truly a “mere formality”. The Commission requested that the Governor-General should amend the warrant and accordingly the matter was submitted to Government House for processing. For some inexplicable reason, the timing of the publication of the amendment caused uproar in the circles of the People’s Action Movement (PAM). The issue of the Democrat for 13 November 1999 went so far as to allege fraudulent conduct by the Governor-General’s office. The impetus for this journalistic outburst was the fact that the amended warrant was signed, in the absence of the Governor-General, by the Deputy Governor-General, Mr Edmund Lawrence, a pet aversion of PAM. Somehow it was assumed that there had been a deliberate delay in gazetting the amended warrant so that a long-standing opponent of Dr Simmonds’ party would alter the Commissioner’s remit. Nothing could have been further from the truth. The amendment was about as innocuous as could be conceived. It was to avoid any lingering doubt about the scope of the terms of reference. This was, once again, a piece of irresponsible journalism (see chapter Part II B(1)). Counsel for Dr Simmonds (and Dr Simmonds himself) objected to the interpretation I had placed upon the terms of reference so as to include his and Mr Tapley Seaton QC’s response to the letters of request form the Italian authorities in 1996 (and ever since) that the two men should give evidence on commission in the Italian criminal proceedings against two officers of Aliscafi (the suppliers of the hydrofoils) and two officials of SACE (the Italian export credit agency). Irrespective of the amendment on 13 October 1999 to the warrant, the objection is unsustainable. At this stage, at least, the question of the interpretation of the Commission’s terms of reference are entirely a question for the Commission. That much is supported by a decision in July 1998 of the Supreme Court of Ireland in Haughey v Moriarty.
The second of the two hurricanes that disrupted the oral sessions of the Commission of Inquiry produced a contretemps. Dr Kennedy Simmonds had been due to give evidence on 18 November 1999, the second of the three days lost as a direct result of the hovering passage of Lenny. At the conclusion of Mr Ratzenberger’s evidence on 20 November it was intended that the postponed hearings would be resumed either in the weeks commencing 20 December 1999 or 3 January 2000; in the event an announcement was made on 30 November that the Commission would sit on 16 December and the two following days to complete its oral hearings, which would include the important evidence of Mr Tapley Seaton QC and Dr Simmonds. On that day, Ms Mitcham, leading counsel for Dr Simmonds, wrote to the Commission advising it that “due to previous commitments” she would be unavailable until the week beginning 10 January 2000. No previous intimation of her “previous commitments” had been conveyed to the Commission.
The convenience of counsel appearing at a Commission of Inquiry is always a matter to be considered in fixing dates of hearings, but it is only one of a number of factors to be taken into account. In this Inquiry I have consistently deferred to counsel before determining the dates and times of the public sessions. Since there was an urgent need to arrange for the postponed hearings at the earliest possible time, the dates in mid-December seemed to suit all participants in the Inquiry, in addition to having the Factory Social Centre available for some at least of the dates fixed. There was a further compelling need to arrange those dates, since Mr Gonsalves, counsel for Mr Tapley Seaton QC, had indicated a wish to take up the offer for the commission to have Mr Nicholas Padfield, Legal Assessor, recalled for questioning. Since Mr Padfield would, fortunately, be available at that time, but doubtfully in the New Year, there was the further reason for opting for the pre-Christmas period.
Following on Ms Mitcham’s communication of her unavailability, Dr Simmonds told the Commission that, without Ms Mitcham appearing as his legal representative, he was unwilling to attend to give evidence on the re-arranged days. On 3 December 1999 Dr Simmonds personally visited the Commission’s office and handed the Commission Secretary a hand-written letter. I reproduce the letter (Appendix 7) both to indicate the immoderacy of language used by Dr Simmonds, the unsubstantiated allegations of bias and of the political manipulation of the Commission by the Government. Any delay of the final stages of the Commission was highly undesirable since the Governor-General’s warrant required submission of the report by 31 December. It became necessary to seek an extension of time in order to accommodate Dr Simmonds’ request. Accordingly, a date for taking Dr Simmonds’ oral evidence and submissions on his behalf was fixed for 10 January 2000.
There were three novel features of the Commission of Inquiry. First, witnesses in London gave their evidence on 15 and 16 November 1999 by audio-link from offices in London (and David Mills in Milan) to the Factory Social Centre where the Commission was sitting. It had earlier been intended to arrange a video-link, but Cable & Wireless found the technology beyond their capabilities. As events turned out, the listening to questions and answers on the telephone line proved to be useful. The absence of the witness in the flesh - normal for the taking of oral testimony - did not appear seriously to detract from the full reception of evidence. But in future Commissions of Inquiry the optimum of video-linkage should be the order of the day. The second matter related to the requirement of expert evidence on English law relating to the Credit Agreement of 30 May 1986 which provided the funding of the sale and purchase of three hydrofoils (see Part II A and Appendix 13).
In her opening statement on 6 October 1999 Ms Mitcham on behalf of Dr Kennedy Simmonds put in issue the legal status of the Credit Agreement of 30 May 1986. While she did not describe Dr Simmonds’ signature to the Agreement, in his capacity as both Prime Minister and Minster of Finance, as a “mere formality” (the phrase used by the Government of St Kitts and Nevis in its faxed message to the Italian Government on 30 April 1993) she argued vehemently that, first, there never had been any legal liability on the part of the Government and, second, that since the lenders of US $25,330,000 had been paid that amount plus interest (a total of US $40 million) there could be no question of any monies due from the Government of St Kitts and Nevis. She asserted that, since SACE had not been a contracting party to the Agreement (but only a supporter by way of the provision of an insurance guarantee through Italy’s export credit agency) SACE could have no conceivable claim under the contract to recover the monies paid to the lenders. Given that assault upon the legal nature and scope of the Credit Agreement, I decided to seek expert legal advice.
Since there are no parties in a Commission of Inquiry, any expert evidence must be obtained by the Commission in much the same form as is provided in the assessor system in English law. The assessor advises and assists the decision-maker and is not ordinarily a witness who can be questioned, orally or in writing. He is independent and impartial. I chose Mr Nicholas Padfield QC as my legal assessor. He is a member of the English Bar, called in 1972, was made Queen’s Counsel in 1991 and is a Master of the Bench of Inner Temple. I have known him as a professional colleague (in one case I remember I led him in court) of intellectual distinction. He practices in the field of commercial law, internationally and domestically. He possesses the additional attribute that he has had experience of jurisdictions in the Eastern Caribbean countries; recently he appeared before Mr Justice Neville Smith in a substantial piece of litigation in the High Court in Nevis. Some doubt cast by Ms Mitcham on Mr Padfield's expertise seemed to be wholly unwarranted and misplaced. Mr Padfield's written opinion on the Credit Agreement (Appendix 14) and his oral evidence (which exceptionally I allowed to be challenged by Ms Mitcham) was of immense help to me in the composition of my report on the legal issues surrounding the Credit Agreement. Mr Padfield’s advice and my reliance on it are dealt with in Part II A(4) (below). The Third matter, which is dealt with in the following chapter, is that counsel for the Commission made no closing speech, which is the normal practice of public inquiries.
The Commission of Inquiry sat for 19 days in sessions held in August, October, November, December 1999 and in January 2000 (see Chronology p.vi). It heard 41 witnesses and accumulated a quantity of documentary material, although in an investigation of governmental administration the paucity of relevant documentary material in St Kitts has exposed a serious weakness in public administration. How much of the relevant documentation was in existence, but has been lost, cannot be gauged. But there is a strong suspicion that in some instances no minute or record of an event was ever raised. The whole question of proper record-keeping in government departments should urgently be reviewed.
The final session of the Inquiry, on 10 January 2000, when the important evidence of Dr Kennedy Simmonds and Mr Tapley Seaton QC was taken, was so close to the deadline for the report to the Governor-General that, instead of waiting for the inevitable delay in securing the transcript of the day’s proceedings, a tape-recording was taken. This allowed me to replay the tape immediately afterwards, and in sufficient time to take full account of the evidence in composing my report. Likewise, on 12 January 2000 the oral submissions by Ms Mitcham and Mr Gonsalves were tape-recorded in addition to Ms Mitcham’s written submissions, a copy of which was supplied to the Commission on floppy disc. This proved to be helpful in my concluding my views on the legal aspects of the Credit Agreement of 30 May 1986.
I should refer to a request from Ms Mitcham on 10 January 2000 that if the evidence of Dr Simmonds and Mr Seaton was not completed, the Commission should not sit on the following day because the National Assembly was due to be in session and, as a result, the television and radio coverage would give preference to parliamentary activity over the hearings of the Commission of Inquiry. This, Ms Mitcham submitted, would be unfair to her client since his evidence would not receive the same, extensive televisual coverage as other witnesses. I explained that I was unwilling to accede to her request. The relaying of the Commission’s proceedings, either by instant transmission or recorded for later transmission, is a matter entirely for the broadcasters, not for the Commission of Inquiry to give any directions. Moreover, Ms Mitcham misunderstands the purpose of a Commission of Inquiry that sits in public to conduct its hearings. A public inquiry is not the public’s inquiry. It is an inquiry conducted by a Commission of Inquiry in accordance with terms of reference given by the sponsoring authority in full light of self-selected audience at the hearing and media coverage. It is not intended by the legislation in the Commissions of Inquiry Act that the participants in the Inquiry should use the process of the Inquiry as a forum for political debate. Even if the reality is that certain participants will carry over their political activities onto the platform of the Inquiry, nevertheless they should be severely discouraged from indulging their appetite to score political points at any conceivable opportunity. The most glaring instance of this was Ms Mitcham’s parting shot on 12 January 2000 - literally the last words spoken to the Commission. She advised me to write my report hastily, otherwise I might find myself handing over my report to “the Rt. Hon. Dr Simmonds, as he returns to his post shortly, as Prime Minister of St Kitts and Nevis”. As I comply with the warrant in reporting, hastily, by 7 February, I will not speculate whether Dr Simmonds (if he were to be returned to office as Prime Minister) would honour the Government’s promise to publish this report.
Part I B
The Role of Commission Counsel
The genesis of this Commission of Inquiry was the outcrop of the successful challenge, by way of judicial review, of its predecessor under the chairmanship of Professor Randolph Williams, when the established bias of Commission counsel was held to infect the Commissioner. In the course of its judgment, the Eastern Caribbean Court of Appeal made certain observations about counsel’s role in a Commission of Inquiry, in support of its finding of communicated or imputed bias. It is not my business to question that finding, nor to quarrel with the Court’s approach to the function of counsel in relation to the Williams’ Inquiry. But it is evident from what I have heard during this Commission that there is some misunderstanding about the role of counsel to Commissions of Inquiry. Hence I express my understanding of that role, and how I have given effect to it in this, and other public inquiries which I have conducted both in the United Kingdom and in no fewer than three jurisdictions in the British West Indies (Turks & Caicos (twice in 1986), Antigua (1990) and St Lucia (1998)).
Legal Status of Commission Counsel
There is a degree of uncertainty about the legal status of counsel appointed to a tribunal of inquiry. Under the UK Tribunals of Inquiry (Evidence) Act 1921 it was, until 1966, the invariable practice for the Attorney-General to appear on behalf of the tribunal, but the Royal Commission on Tribunals of Inquiry (the Salmon Commission) recommended that the practice should cease, on the grounds that it injected an undesirable political ingredient into the Inquiry process. Thereafter, 1921 Act tribunals and other Commissions of Inquiry have used leading practitioners from the Bar to act as independent and impartial assistants to the Commission. The selection of counsel should be left to the Commissioner and ought not to be appointed by the sponsoring authority. (In an article in the New Law Journal for 26 November 1999, Mr Brian McHenry, a government lawyer who acted as solicitor for the North Wales Child Abuse Inquiry and the BSE Inquiry, said that the English practice is that counsel for the Inquiry is appointed by the chairman of the Inquiry with the approval of the Attorney-General.) This may emphasise the appearance of a double act by the Commissioner and counsel of his choice, but it is preferable to the appointment that may not prove congenial to the Commissioner. The two need to act harmoniously for the benefit of the Inquiry, without becoming a unitary voice which might create the impression that because counsel is the Commission’s or Commissioner(s)'s counsel, everything that counsel does or says is instantly attributable to the Commission, or more particularly to the Commissioner(s). If counsel is engaged in political life; that will feed the suspicion that the Inquiry is politically motivated. There is no escape from the Commissioner(s) being appointed by the sponsoring authority, although the law in Israel is interesting. There, once the Government has decided to set up a Commission of Inquiry, the legislation provides that the Chief Justice is under a duty to nominate the Commissioner(s).
In the process of questioning witnesses, it is necessary to avoid a criticism that was made of Sir Richard Scott in the Arms to Iraq Inquiry. True, counsel is subject ultimately to the direction of the Commission, but does it follow that the actions of the one become the actions of the other? An Australian author sums it up neatly:
There is a tendency to equate the role of Commission counsel with that of a prosecutor in criminal proceedings. If that equation confuses the principles of the adversarial system of criminal justice with the aims of an inquisitorial process to find the truth about some public scandal or disaster, the parallel may not be entirely inexact. One Canadian Commissioner in 1976 observed that the “duties of Commission Counsel….in fact, are virtually identical with those of a prosecutor.” He explained:
In my view, this definition of the role of the Crown Prosecutor is also an apt description of the duty of Commission Counsel in an Inquiry such as this one.”
A prosecutor in a criminal trial does not function under the direction of the judge, although the manner of his advocacy is subject to control from the court and the admissibility of evidence that the prosecutor seeks to adduce is judicially determined. Nothing the prosecutor does or says is attributable to the judge. The prosecutor is in that sense remote from the judge; he certainly does not participate in the preparation of the judge’s summing-up to the jury or the composition of the judge’s judgment, although the judge may be powerfully influenced by the prosecutor’s presentation of the Crown’s case, both evidentially and forensically. These factors distinguish the role of the prosecutor from that of counsel to a Commission of Inquiry. Whereas the former intrinsically possesses impartiality, the latter needs to have impartiality thrust upon him by the precise procedure laid down by the Commissioner(s). How counsel for the Commission performs his role in the various facets of the Inquiry, therefore, depends on the tasks assigned to him. What are in practice assigned may be common to all Commissions of Inquiry, but they may not be typical. Each Commission of Inquiry will determine for itself what precise functions are assigned to counsel, in accordance with the statutory remit to decide its own practice and procedure (Section 9 of the Commissions of Inquiry Act provides that the Commissioners “may make such rules for their own guidance, and the conduct and management of proceedings before them…..”). What follows herein is a discussion of the stages of the Inquiry relating to the role of counsel.
Preparation for Oral Hearings
From the material gathered by the Commission, generated by the events giving rise to the Inquiry, counsel for the Commission will be involved in two matters. First, he will, as a member of the Commission’s team (including the secretariat) be involved in the selection and ordering of the material to be provided to all the participants in the Inquiry. This may or may not be done under the direction of the Commissioner indicating the scope of the documentary material to be disclosed in the Inquiry. (Much will depend on the Commissioner being permanently resident in the jurisdiction during the currency of the Inquiry. In the absence of the Commissioner, counsel will make decisions about documentation.) Second, the same considerations will apply to the selection of persons from whom witness statements will be sought and, from among such persons, who will be asked to give oral evidence. In order to supplement the documentary material by witness statements, interviews must be arranged. This may be done by counsel to the Commission or, more often than not, by some other member of the Inquiry team. (This Inquiry had seconded to it an Inspector from the Royal Canadian Mounted Police and an Inspector from the The Royal St Christopher & Nevis Police Force, both of whom undertook interviewing of the witnesses. This, and the collating of evidence, was done under the joint direction of the Commissioner and counsel). Where any witness is granted legal representation it is the practice for that legal representative to prepare that witnesses’ statement for submission to the Commission. The influence of Commission counsel to the totality of written material will thus vary according to the part played in the process of information-gathering.
Before the Commission begins its oral hearings it will ordinarily formulate the procedure it proposes to adopt. The rules for each Commission will vary according to the nature of the subject matter of the Inquiry, the terms of reference and the predisposition of the chairman in approach to inquisitorial proceedings. While, no doubt, counsel for the Commission may advise on appropriate procedures, experience indicates that most Commissioners will compose the rules themselves. But procedural issues are likely to arise during the course of the Inquiry, in which case the Commissioner will inevitably turn to counsel for advice and guidance. Preliminary matters, which include applications for legal representation, applications for legal aid, requests from the electronic media to cover the proceedings and participants’ desire for clarification of the Inquiry’s terms of reference, will engage the assistance of counsel to the Commission. It is counsel’s duty to advise on all such maters; he should do so publicly by taking part in the submissions. He thereby is identified as part of the inquiring body.
Ordinarily, counsel for the Commission is able to advise the Commission, not just on matters of practice and procedure but also on any issue of law that might arise in the course of investigating the substance of the inquiry. Quite exceptionally, the legal issue might be complex and difficult such that specialist expertise is required. The Commission should be free, in such circumstances, to appoint a legal assessor. Just as in civil litigation an assessor is not a witness but advises the judge, so in a Commission of Inquiry an assessor might properly be asked to give a written opinion, in which case counsel for any of the participants should be supplied with a copy. The Commission may wish to supplement the written opinion by oral questioning of the assessor, first by its own counsel and, if necessary, by counsel for any of the participants.
The Oral Sessions
(a) The Opening Statement of Counsel
It is the invariable practice of Commissions of Inquiry to begin with a statement from counsel, outlining the matters to be inquired into, having regard to the documentary material and witness statements so far produced in the bundles of documents. The purpose of the opening statement, unlike that of counsel presenting a case to a judge (and jury, where applicable) where the issues in dispute and the evidence to substantiate them are complete, is largely for the information of the participants and the public. First, it is to inform those participating in the Inquiry of an outline of the matters to be canvassed during the evidence of witnesses. Second, it is to inform the public in a manner that will make the evidence of the witnesses more intelligible than it would be if the evidence were called without any introduction.
The opening statement is, therefore, what it says it is, an opening - an introduction to the issues under the terms of reference. It is not the function of counsel to draw any firm conclusions from the material - that is the function of the Commissioner after he has read all the material and heard all the evidence, including the submissions of participants’ counsel. But it is the Commission counsel’s function to analyse the material up-to-date and pose the questions that the Commission will have to answer. In posing the questions, counsel will inevitably make observations about the state of the evidence thus far.
While Counsel for the Commission is there to advise on law and evidence, and to present the evidence, his role is one of strict impartiality. Any observations that he makes are his alone. They are not automatically the Commissioner’s by virtue of the relationship of inquirer and adviser. But his observations will always be helpful to guide the Commissioner, and to the participants’ legal representatives to know what the Inquiry is precisely inquiring into.
The opening statement in an Inquiry differs markedly in content from proceedings in a court of law, primarily because it will be less specific. This is due to the fact that the Inquiry deals with matters that are, to a greater or less extent, largely unknown - at the stage there are no definable areas of dispute - whereas in a court action, the parties have ascertained the facts, although there may be dispute between them. An Inquiry, by definition, is exploratory and expository. It is not adjudicatory as between rival contentions. It is not a court of law; it does not administer justice. Commission counsel will be careful at this stage of the Inquiry to refrain from drawing conclusions which may reflect adversely on the conduct of persons involved and which may not, after all the evidence has been heard, be borne out. Otherwise, the intense media interest at the start of an inquiry may result in damage to the reputations of persons identified in the opening statement, which may turn out not to be justified. If there are conclusions, however tentatively or provisionally they are couched, fairness may dictate that those participants who feel aggrieved at the initial impact of counsel’s opening statement should, exceptionally, be given the opportunity to make an opening statement. That should be exceptional because to allow such a procedure will tend to inject into the inquisitorial process a dose of adversarial legalism that is antipathetic to an Inquiry. In this Commission I did invite Ms Mitcham, who appeared for the former Prime Minister, Dr Kennedy Simmonds, to make an opening statement; she accepted the invitation, which was helpful in identifying some of the emerging issues.
(b) Questioning Witnesses
Since all witnesses are called exclusively by the Commission of Inquiry - participants may always invite the Commission to call other witnesses - the logical presentation of the witnesses evidence is that questions should be asked in chief by counsel to the Commission, subject to possible exceptions which may be sought by special application to the Commissioner. The alternative is to leave the calling of those witnesses who are given legal representation to the witnesses’ counsel, with counsel for the Commission taking part only to the extent of filling the gaps in the testimony. Where there are only a few counsel appearing for interested or concerned persons, the compromise might be to invite their legal representatives, exceptionally to ask the first questions of the witness. Participants who are willy-nilly dragged into an Inquiry should not have to defend themselves against an anticipated criticism of their conduct, or to adduce evidence against themselves. The duty to lead the evidence belongs to the Commission. But a participant might gleefully accept an invitation.
An example of an exception to the rule that witnesses are questioned by the Commission was provided in a case in Ontario in 1967 where a witness was someone against whom some misconduct had been alleged. In Re Shulman the Ontario Court of Appeal reversed the ruling by the Commissioner who required the witness to be examined in the first instance by counsel for the Commission. Aylesworth J A said:
One aspect of the questioning of witnesses by counsel for the Commission deserves particular mention. It is inevitable that, in the course of the Commission’s hearings, the Commissioner will wish to intervene and ask his own questions. If the questioning of a witness appears to be hostile, the danger of a double-barrelled forensic weapon is all too apparent. It was precisely this aspect of the conduct of the Arms to Iraq Inquiry that provoked the most vocal objection to the conduct of the public hearings. Sir Richard Scott sat side by side with his counsel, Ms Presiley Baxendale QC, alternating in the questioning of witnesses, described by Lord Howe of Aberavon as “like partners in a double barrel inquisition”. One experienced Minister of the Crown, Sir Richard Luce, the first witness before the Scott Inquiry, said that he was at a loss to understand why he “faced an aggressive interrogation by questioners who would appear to act as prosecuting advocates rather than independent seekers of the truth”. Sir Richard Luce amplified that in his evidence to the Council on Tribunals in its report to the Lord Chancellor in November 1996: “The presence of a judge accompanied by a barrister sitting side by side immediately creates an atmosphere whereby the judge is identified with the barrister; if the barrister then acts as though in a prosecuting role this immediately leads towards the adversarial approach. This is what happens in this inquiry from the very first day and it is this which led to charges of injustice by witnesses, including me”. The Council on Tribunal expressed a clear view on this matter: “It is important…that counsel should not be seen to be part of the Inquiry panel….the roles of the tribunal and counsel should be seen to be distinct…the perception of their separate role is greatly enhanced if they are physically separated from each other in the inquiry room”. I am not sure if the Council on Tribunals has got it quite right. While it is true that counsel “should not be seen as part of the Inquiry Panel” and that their roles are distinct, there is however a symbiotic position. While counsel pursues the questioning in the manner he or she thinks fit, he or she asks only about the matters the inquiry wants asked, and not otherwise. Counsel should not pursue avenues of inquiry, however pertinent or interesting, simply because he finds them so. After all, the inquiry, not its counsel, selects the witnesses and selects the area of evidence it wishes to hear, and it is the Inquiry which issues notices of criticisms, known in the British systems as Salmon letters. But, for all the separate functioning of counsel, the objectives of the panel and its counsel are precisely the same; only the methods are different. Counsel seeks to probe and question, while the panel remains the controller of the procedure and, most important of all, remains the sole decision-maker. (It has to be added that no witness in the Scott Inquiry was allowed legal representation in the hearings. Had the witnesses been represented, no doubt the position would have been different. But even then the danger of unfairness in the process of questioning is ever present.)
(c) Further Questioning
Whether counsel for the Commission starts the questioning of witnesses or not, there is the overriding obligation on him to ascertain the truth; to that end counsel must be free to challenge any witness or evidence. The extent to which he does so will depend whether all points of view have been fully canvassed at the Inquiry. Thoroughness and fairness, are the twin hallmark of the task to “make a full, faithful, and impartial inquiry” (see section 7 of the Commission of Inquiry Act, Appendix 2). As with the opening statement, counsel should guard against becoming (or appearing to become) the advocate emphatically for one point of view. Counsel, accustomed to the adversarial process, will need to curb an instinct to favour one side or the other. Questioning by anyone other than counsel for the Commission is a privilege and not an entitlement. This was made clear in the classic statement of Lord Scarman in the Red Lion Square Inquiry in 1974:
There are two further stages in the Inquiry process that crucially affect the nature and extent of counsel’s role - namely, closing submissions and the preparation of the Commissioner’s report. Of all the facets of the Inquiry, the role of Commission counsel in making final submissions and in the composing of the report produces the greatest disagreement. Both facets directly impinge upon the Commission’s decision-making process. Decision-making in this context encompasses the finding of fact in order to determine what happened, how it happened, and in what circumstances; and (if necessary) who is to blame for the untoward event.
Closing Speech
It is common practice for counsel assisting an Inquiry to make the final closing speech. Counsel representing the various interests will present the evidence in the most favourable light with regard to those interests: participants are fiercely partisan. It would be logical that counsel for the Commission should have the last word, as he is the one neutral participant who can most usefully assist the Commission. The opportunity is there for him to present a balanced, unbiased, non-partisan view of the evidence, to the manifest benefit to the Commission. Some Commissioners, recognising the potential impact of a final speech by counsel for the Commission, call for a very full argument, on the strict understanding that counsel’s views do not represent the Commission’s views. While appearances of influence may not be overcome by the declared undertaking, the argument for such an approach has one powerful basis: it is infinitely preferable that counsel’s advice to the Commission should be expressed publicly rather than behind closed doors. A second basis is that the participants and the public will at least know what the Inquiry team will be thinking in helping the Commissioner to compose his or her report. My personal practice has been, invariably, not to allow a final submission of counsel to the Commission, and I make it known at the preliminary hearing that counsel’s role begins and ends with the eliciting of evidence. Thus, the public knows that the evaluation of the evidence will be made by me and that the report will be mine and mine alone.
The Report
One of the most fundamental rights of any public process involving decisions affecting individuals - be it a court of law, an administrative tribunal, or a Commission of Inquiry - is that any adjudication or finding should stem from a free and independent mind. Rules of evidence and procedural safeguards may be modified in the interests of maintaining the equality of arms as between rival disputants or opposing views. But in the process of decision-making civilised society demands a fair hearing before an independent and impartial body. That principle is enshrined in section 10(1) of the Constitution of St Christopher and Nevis, and conforms to international norms. Any system recognises, however, that decision-makers will often require the assistance of staff. The extent to which staff have to be relied upon is generally unquestioned, unless of course the member of staff is identified with any participant or any persons interested in the proceedings. If the latter pertains, the tolerance that existed disappears. Commission counsel is for this purpose a member of staff.
If counsel has, at any stage, been regarded as an adversary towards a participant or some faction or person outwith the Inquiry process, and then plays a role in the writing of the report, fair play may not be seen to be done. In spite of this implied injunction, some Commissioners of Inquiry have enlisted the aid of their counsel in preparing a report. If they do so, it will appear that counsel, in the process of evidence-gathering, may have his vision clouded by the dust of the arena. The better - and safer - way is for the Commissioner to compile his report unaided, beyond the permissible reliance on counsel and other staff on the Commission to check the final draft for accuracy.
Conclusion
Everything that counsel for the Commission says or does is a major, even invaluable contribution to the process of the Inquiry. Little, if any, of that contribution needs, however, to be made applicable to the decision-making segment of the Commission’s task. How much of counsel’s contribution to the totality of the Inquiry process is indirectly attributable, or to be imputed, to the decision-maker must always be a matter of conjecture and surmise.
PART I C
Funding of Commissions of Inquiry
Commissions of Inquiry are costly affairs, increasingly so. The contemporary fashion of instinctively resorting to the device of public inquiries threatens the existence of a valuable institution in democratic society; the cost is, moreover, in danger of putting the process out of the reach of the public purse of small countries and rendering this valuable tool of good governance inappropriate or even counter-productive in certain cases. I hasten to say that this Commission of Inquiry does not fall into that category, although there is much to be said for Ms Mitcham’s submission, on 8 October 1999, that there should be an inquiry into whether Commissions of Inquiry are cost-effective. In my report of July 1999 into Standards in Public Life in St Lucia, I noted the preliminary steps taken by OECS towards a review of Commissions of Inquiry legislation in the member-states (Appendix 3). Such a review should urgently tackle the associated, initial question, what scandals, disasters or other untoward events should attract the instrument of a Commission of Inquiry, in the light of the costs to the member-state. I so recommend.
That question is essentially a political question for Government and the people. All that the statute can, and should do is to set the parameter. The current legislation in OECS countries provides generally for the appointment of Commissions of Inquiry with power to inquire into the conduct and management of any department of the public service, or of any public or local institution, or any other public officer. Inquiries are also empowered to conduct and inquire into any matter, which in the opinion of the sponsoring authority (the Governor General acting on the advice of the Government) “would be for the public welfare”. Whenever public confidence is undermined by some public scandal or disaster or impugned integrity of Ministers or the public service, the public inquiry is the means whereby public disquiet can be allayed. But the level of the inquiry needs to be tailored to the specific issue. The full panoply of the Commission of Inquiry should be severely restricted to the major scandals or disasters; lesser events should be investigated by other, inexpensive means; otherwise cost-effectiveness will inevitably be called into question. Given the ever-present financial constraints, Government needs to resort to a Commission of Inquiry sparingly.
The primary costs of a Commission of Inquiry - the Commissioner(s), counsel to the Commissioner and the staff of the Secretariat - inevitably fall on Government as the sponsoring authority. In addition there will be the costs of living premises and offices for housing the Commission and its secretariat and of the oral sessions. Witnesses will need to be paid their expenses in addition to the administrative costs associated with the arrangements for the Commission hearings. It is frequently argued - and was argued vehemently in front of me - that the Government which has decided to set up a Commission of Inquiry should fund participation by particular individuals or organisations exercising their entitlement to be legally represented, the more so when the individual whose conduct is under review faces criticism in the final report. In my statement of 23 July 1999 on the proposed procedure for conducting the Commission of Inquiry I indicated that I intended to adopt the decision of Mr Justice Farara in Compton v Attorney General of St Lucia on 25 November 1997, to the effect that the statutory right of legal representation gave rise to no implication of liability on the Government to pay the costs of such legal representation (the point was not argued on appeal). During the period of the Inquiry, there have been rumblings of discontent from Dr Simmonds and his counsel that their resources are strained. They assert that it is unfair that the costs of their legal representation should be foisted on them, by reason only that the Government has ordered a public inquiry which, moreover, they feel is not publicly warranted, but is motivated by partisan politics. At the oral session on November 15 I indicated that I would be prepared to review my early ruling that there was no legal liability on the Government to pay participant’s legal costs. I further indicated that I was prepared to listen to submissions that the Commission of Inquiry was always entitled to recommend in its report who should be funded, and to what extent. On 10 January 2000 Ms Mitcham renewed her submission that I should respond to the claim by Dr Simmonds that he should receive the costs of his legal representation out of public funds.
The Law
Section 11 of the Commissions of Inquiry Act in its original form of 29 July 1880 (unamended since) provides that “any person whose conduct is the subject of inquiry….or who is in any way implicated or concerned in the matter under inquiry, shall be entitled to be represented by counsel at the whole of the inquiry”; the section goes on to give the Commission a discretion to grant legal representation to anyone else “who may consider it desirable that he should be so represented”. The only provision dealing with costs is section 16. This provides for the remuneration of the Commissioner(s) and the Secretary, “and to any other person employed in or about any such commissioner, and may direct payment of any other expenses attendant upon the carrying out of any such commission…” On the face of the enactment, the legislature in 1880 was defining the area of funding the Commission, and ring-fencing the personnel of the Commission and persons employed by the Commission. It would appear not to be contemplating any state-aided funding of those who claimed the right to legal representation. The law appeared to follow the rule of private litigation that parties were bound to fund their lawyers out of their own pockets, with the prospect of recovery of some of the outgoings from their losing advisory. Until the legal aid scheme began in 1948 in England there was no suggestion of public funds in financing dispute-resolutions before the courts of law.
The argument advanced by Ms Mitcham is that fairness (or natural justice) demands, as a corollary to the statutory right to legal representation, that the sponsor of the Commission of Inquiry should pay the reasonable costs of such representation. That argument failed before Mr Justice Farara in the St Lucian case. Was he right? For the following reasons I think he was.
The ambit of procedural fairness in relation to the costs of participants in a public inquiry has been helpfully explored by the High Court of Australia in New South Wales v Canellis. In that case a Commissioner who had been appointed to inquire into doubts concerning the guilt of a person convicted of crime, was empowered to summon and examine on oath all persons likely to give material information at the Inquiry. Attendance at the Inquiry could be compulsorily enforced and any false statement wilfully made by the witness was punishable. The relevant legislation also provided that any witness who gave evidence at the criminal trial and whose reputation might be affected by the Inquiry must be allowed to be present at the Inquiry and be allowed to examine any witness attending the Inquiry. There was, however, no specific right in the witness to be legally represented before the Inquiry. (I interpose the thought that the witness compelled to be examined by the Inquiry is in a more vulnerable position than the person who has the right to be legally represented under the Commission of Inquiry Act, but is only potentially liable to be criticised in the Commission’s report.) The court held that, while at common law an accused at trial is not entitled to publicly-funded legal representation, the court nevertheless has jurisdiction to grant an adjournment or order a permanent stay of proceedings until such time as an accused is provided with legal representation necessary for a fair trial. That principle did not, as a matter of procedural fairness, apply to civil proceedings, let alone to publicly-funded legal representation in a public inquiry.
The reasoning of Mason CJ, Dawson, Toohey and McHugh JJ, for holding that procedural fairness did not dictate that, in the case of witnesses, the Inquiry could not proceed unless the witnesses were represented by counsel, was as follows:
In a separate, concurring judgment Brennan J. said:
Other Considerations
Whether, in extra-legal terms, the position is different is open to argument. The third of the six cardinal principles of the report of the Salmon Commission states that a person coming before the Commission should, (a) be given an adequate opportunity of preparing his case and of being assisted by legal advisers; and (b) have his legal expenses normally be met out of public funds. If the moral imperative of Government is to acknowledge responsibility for providing legal assistance to participants in public inquiries, it may be that some statutory provision should be introduced to prescribe the ambit of legal aid that would be available to a claimant for funds.
An alternative approach might be for the sponsoring authority to ask the Commission of Inquiry to make recommendations about financial support to the participants granted legal representation. This was done by the Home Secretary in the inquiry into the Brixton Riots Inquiry in 1981 when he asked Lord Scarman to make recommendations, which were then acted upon. The problem about such a procedure is that the provision, although qualified as being only a recommendation, is open-ended. Few Governments feel able to expose its Treasury to pay out unspecified large sums of money. Without a specific request to make any such recommendation I do not think I can accede to the blandishments from Ms Mitcham that I should, unsolicited, make any such recommendation. Were I to contemplate making any recommendation I would not find the task any easy one. In the case of Mr Tapley Seaton QC’s representation I would willingly recommend the payment of reasonable costs of his legal representation. Mr Gonsalves has appeared only fleetingly and only where strictly necessary. While I have criticised his client, his blameworthiness is secondary to that of Dr Kennedy Simmonds. On the insurance claim, since I have not criticised the latter, in principle, I would be prepared to recommend a small part of the costs of his representation. I found that, in resisting the potential criticism, Ms Mitcham took up more time of the Inquiry than was reasonable. On the hydrofoil issue I have concluded that Dr Simmonds was primarily responsible for the Government becoming the primary guarantor to the Credit Agreement of 30 May 1986. If Dr Simmonds had not put his signature to that agreement, as I have found he should not have done, there would have been no funding by the consortium of banks and the only sufferers would be Nautical Trading Co who would have been unable to finance the hydrofoil project. Given that finding by me, I would not be prepared to recommend that he should be granted out of public funds his costs of legal representation before the Commission of Inquiry.
I remind myself that in the Air New Zealand case - Mahon v Air New Zealand - the chairman of the New Zealand Royal Commission was empowered by the relevant statute to order any person, found to be at fault, to pay costs, and the Commissioner did so; his finding of fault on the part of Air New Zealand, however, was reversed by the Court of Appeal and the Judicial Committee of the Privy Council.
It is my view that, if legislation is introduced to provide for state-aided legal assistance for those participants in a public inquiry who realistically face potential criticism in the final report, there should be a corresponding power in the Commission of Inquiry to order costs against a participant who has been found to have, wholly or in part, been liable for the public scandal or disaster.
Part I D
Guidelines on procedure in Commissions of Inquiry
A public inquiry is “master of its own procedure” although a statutory inquiry may contain elements of a prescribed procedure - such as the right to legal representation.
The classical statement is still that of Lord Scarman in the Red Lion Square Inquiry, but since then there have been developments which amplify or modify the Scarman formula. Since 1985 I have conducted, either alone or with others, no fewer than twelve public inquiries. Drawing on that experience I proffer the following guidelines.
1. Overriding Principle
It is my firm resolve that any Inquiry shall be conducted with thoroughness and fairness to all participants and to the public. Procedural aspects should emphasise flexibility and informality, and should so far as it is compatible with fairness, be free from the legalism of the civil or criminal process. Every effort should be made to remove the paraphernalia of the courtroom and turn towards the style of the committee room. The choice of public building and the facilities of the committee room and retiring rooms should be carefully selected. Avoid aping the ordinary court of law, if possible.
2. Time Frame
At the outset, the Commission of Inquiry needs to set a time frame. Commissions of Inquiry must allow ‘lapse of time’ in order to get hold of documents, from whatever source, analyse and collate the documents and decide which witnesses are to be called. In some instances (particularly disasters) the time frame will be much longer in order to allow for proper technical investigation to be undertaken and expert opinion sought.
Time must also be allowed for every participant (and their representatives) to familiarise themselves with the documentation.
Although I am sympathetic to the view that the Commission of Inquiry needs to maintain the momentum engendered at the moment of the announcement of a Commission of Inquiry, more haste is often less speed.
3. Terms of Reference
The Commission is the sole interpreter of its terms of reference, at least during the Inquiry. While the courts will not accept any challenge to the interpretation to the terms of reference it is the duty of the Commission to explain to the participants and to the public what it proposes to inquire into within its terms of reference; if there remains any ambiguity, the Commission should seek an amendment to the terms of reference from the sponsoring authority. This became a live issue in the instant Inquiry in relation to the Letters Rogatory (see Part II A(7)).
4. Proper Preparation of Documentation
Like the dutiful boy scout, the key to success in the conduct of a Commission of Inquiry is to be well prepared. There is no substitute for it. Failure to be well-prepared is a recipe for arguments, delay and even disruption of the Inquiry.
The relative effectiveness of the oral hearings exists within the boundaries of proper preparation of the documentary material into a comprehensive and logical format from which all participants (including the Commissioner(s)) can work. Although there is always an urge to get on with oral hearings Commissions of Inquiry will operate effectively and efficiently only if preparation is done well in advance of the oral hearings. Try to hold the Inquiry on consecutive days. Continuity as well as momentum is to be preferred. If there are to be truncated sessions, give the participants ample notice of the dates of sittings.
From the outset, the swearing in of the Commissioner(s) and the issuing of terms of reference under warrant from the sponsoring authority, the primary task for the Commission Team is the location and synthesis of the documentary material based upon the principle of relevance, remembering there are no issues of privilege, save for a claim by Government for public interest immunity. It is within the nature of the inquiry process that documents will be supplemented to the initial bundles. Any document submitted for inclusion by any participant should be assessed for relevance and, if necessary, included in supplemental bundles. I take the view that documents provided to the Inquiry should be selected by the Commission, even if introduced by an individual participant it is, therefore, unnecessary for any witness to bring documentary material at the oral hearings as evidence. Any documents supplied merely form part of the whole body of material.
In preparation of documentary material for the oral hearings there should be some user-friendly method of organising the material - weeding out amounts of unnecessary material is a useful task which should be kept on one side, undistributed, so that it can be referred to, if necessary. Clear labelling and pagination are essential for ease of reference. It is my inclination to separate the written statements of prospective witnesses from the documentary material gleaned from the disparate sources.
Finally, multiple copies must be made available - Commissions of Inquiry are not environmentally-friendly. Until such time as computerisation of documentary material envelopes the administration of ‘tribunals’, photostat copies in identical form must be provided for all participants and their counsel. The next step is to assimilate all the documentary evidence and to organise it into a logical manner and decide what evidence one will need from witnesses in order to explain and to supplement the documentary material. They should be supplied well before the trial hearings begin.
5. Witnesses
Having identified the witnesses, the Commission of Inquiry must arrange interviews. In the case of witnesses to whom legal representation is given, the lawyers should be invited to compose their client’s statements. To facilitate that process, the Commission of Inquiry should administer questionnaires.
All witnesses should be asked to provide a written statement, reduced into as short a form as possible, and be told that they will be called to give evidence only as and when their written statements are to hand and have been distributed. It is the Commission that calls witnesses to give evidence. If a participant to the Inquiry wishes a particular person to give evidence, or an individual not previously involved comes forward expressing the wish to give evidence, then a written statement must be taken first and submitted to the Commission for analysis. On the basis of what is said in the statement, it is for the Commission to decide whether or not to call that witness. The Commission may indicate that the written statement suffices, without it being repeated by way of oral questioning.
6. Preliminary Hearing
At a very early stage after appointment the Commission should announce publicly the procedure it proposes to adopt (see Appendix 4), and invite applications for legal representation and any other representations that any interested person might want to make.
The Preliminary Hearing should precede the compilation of the documentary material and witness statements. A period of time should elapse between the Preliminary Hearing and the Oral Hearings, of not less than 4-6 weeks, depending upon the length of time it is likely to take in preparing the documentation. So that all participants will have the documentation in good time before the oral hearings (this does not preclude of course, additional material at later stages in the Inquiry) the fixing of the date for the commencement of oral hearings should allow for participants to prepare themselves for the Inquiry.
7. Salmon Letters/Letters of Provisional Criticism
In all the Inquiries that I have conducted I have been guided by the Salmon Commission in relation to delivering letters of provisional criticism to prospective witnesses whose conduct may later be criticised in the report, although the stage at which they should be served will depend on what emerges during the Inquiry. Such letters should be treated as confidential, until such point as the witness chooses to make them public, or until publication of the report. The letters are ‘provisional’ and it should be made clear to participants at the Preliminary Hearing that anyone who receives such a letter may have it supplemented or superseded, particularly as the taking of evidence at the oral hearings progresses.
It is important to keep an up-to-date record of all Salmon Letters sent and insure that all provisional criticisms are dealt with in the report, preferably at the end of a relevant chapter and in tabular form (see sample).
8. The Oral Hearings
The Oral Hearings should be conducted on the basis that it is expressly not litigation. There are no parties; there are merely participants, some of whom will have greater interest in the proceedings than others. There is no right to question the witness, save to the extent allowed by the Commission.
Television and Radio Coverage
Access should be allowed to all media allowing for the confines of physical space, save where the Commission orders the hearings in private for good reason. Multiple television cameras should not be accommodated at the expense of a live audience. They should be unobtrusive and noiseless. Cameramen should likewise not intrude.
Evidence
Evidence should be taken in four stages:
Counsel to the Commission should lead the evidence of each witness, except where that witness has been granted legal representation, in which case the opportunity should be offered to counsel for that participant to lead the evidence of his/her own client.
Where one witness is criticised by another, the Commissioner may entertain an application for further questioning by the criticised witness.
Witnesses at the Oral Hearings should be there to answer questions to which the Commission seeks an answer. Therefore, the Commissioner should, at all times, control the questioning of witnesses, whether by counsel for the participants or by Commission counsel.
The Oath
Although I do not favour administering it; one cannot pick and choose. While Commission of Inquiry legislation usually provides for witnesses to be administered the oath, I think the idea of the oath, which has all the connotations of the courtroom, particularly in criminal proceedings (and sometimes in civil proceedings) are not apt for public inquiries. Witnesses come to the inquiry with the duty to assist the Commissioner and therefore I regard it as unnecessary that any witness should take the oath of affirm. Always thank the witness for coming to the Inquiry, fulsomely or less so. Subpoena powers, if available, should be used sparingly, if at all.
Credit of a Witness
The credit of any witness must not be called into question at any time, unless there are exceptional reasons which are made clear to the Commissioner prior to any such line of questioning.
Burden of Proof
There is no burden of proof. Every piece of evidence will be weighed in arriving at any conclusions. The standard of proof must be uniform to all events under inquiry; it should be on a balance of probabilities, and no higher, even if the conduct indicates criminality.
Transcripts
A word about transcripts. The availability, for all participants, of transcripts of oral evidence is essential to a Commission of Inquiry. Apart from their use as a tool of reference in writing the report, transcripts should be available throughout the oral hearings in order that witnesses can be properly questioned by participants. In which case the turnaround should be 24 hours. This, I understand, is often an extremely tall order, but should be made a priority. I am eagerly awaiting the development of Time-Line techniques which I have been fortunate to experience and have benefited from.
9. Challenges to Procedure
A Commission of Inquiry should always be prepared to accept a challenge to its procedure, and indeed should invite such at the Preliminary Hearing. The proper time for such a challenge, however, would be at the preliminary stage and although applications can be entertained later, once the oral hearings have started it is fair to assume that the procedure, as enunciated, is accepted by the participants, other than in very exceptional circumstances. Judicial review of procedural matters ought to be resorted to only in rare cases. The public inquiry must be allowed to get on with its task, unhindered by visits to the courts of law.
Part II A(1)
The Sale and Purchase of the Hydrofoils: their presence in St Kitts August 1985 - March 1986
[A list of participants in the events under Part II A(1)-(8) appears at p.xiii]
This sorry tale begins with a visit to London by Mr Michael Powell, then Deputy Prime Minister and Minister of Tourism, in or about November 1984 (he assisted the Inquiry in coming to give oral evidence willingly). At the offices of the High Commission for the Eastern Caribbean States he was introduced to Mr William Adams (and subsequently through him) to Mr Roger Morgan who was represented by many people as a wealthy businessman, with a suggestion of aristocratic background. The two men were the prime movers in starting the scheme to run a hydrofoils service around the Caribbean islands out of St Kitts.
Mr Adams, then aged 55, had a significant criminal record. At Cardiff Crown Court on 1 December 1980 he was sentenced to 4 years’ imprisonment; fined £50,000 (to be paid within 12 months, failing which a sentence of 12 months would run consecutively to the 4 years’ imprisonment0; ordered to pay £7,500 prosecution costs; and a criminal bankruptcy order for £289,088 in favour of the Department of Industry for an offence of conspiracy to cheat and defraud. As a company director of Galebourne Ltd he, and a co-director, had obtained plastic extrusion manufacturing machines in the United Kingdom, Switzerland and Taiwan, then invoiced the machinery to themselves, thus obtaining inflated Development Grants from the Department of Industry to the value of £269,723. He was discharged from Leyhill Open Prison on 26 July 1982 (having been in custody for eighteen months), his parole licence expiring on 27 July 1983. Over that year he reported to the Probation Officer at Brecon, Powys, Wales. Mr Adams’ association with Mr Morgan preparatory to their joint venture in the supply of hydrofoils to St Kitts (and the incorporation of Nautical Trading (St Kitts) Ltd on 15 December 1984, began in the wake of Mr Adams’ imprisonment for fraud. Documents reveal that Mr Morgan hired Mr Adams on 2 April 1984 as an advisor. Later in 1984 they both came to St Kitts.
No one involved in the subsequent events of the sale and purchase of the hydrofoils in March/April 1985 or of the Credit Agreement of 30 May 1986 was ever aware of Mr Adams’ criminal record. It is a matter of some surprise that those providing finance to Nautical Trading (St Kitts) Ltd never bothered to make inquiries about the credentials of the promoters of the hydrofoils project, let alone about the true nature of the project (see Part II A(3)). The main employee of Morgan Grenfell, which was the agent and manager for the consortium of funding banks (including itself) Mr Simon Jackson, a functionary in the South European Department of Morgan Grenfell, was unaware of any previous criminal records and had not thought to check up on the architects of the hydrofoil project. Yet Mr Jackson admitted to the Inquiry that he thought that Mr Adams (who often functioned under a pseudonym of Bill Evans and was known to possess two passports) was a “shady character”, although he seemed to exhibit much knowledge of the Caribbean and was in touch with prominent persons in St Kitts.
Whether or not that was remiss of Morgan Grenfell, it cannot excuse the St Kitts and Nevis Government from making its own, separate inquiries. After all, governments are able to obtain information about the criminality of private citizens a good deal more readily than others. As and when the Government was contemplating its decision to sign the Credit Agreement as primary guarantor to the lending of US $25,330,000 to the borrower, Nautical Trading Ltd, it should have instigated an inquiry into the credentials of the prime movers of the project who were seeking and obtaining substantial finance for their business enterprise. By 1985 the names of Morgan and Adams (alias Evans) were known in government circles. The Government’s failure to make the necessary inquiries which this Inquiry managed to do thirteen years later, was serious. Had it been uncovered that one of the persons behind the activities of Nautical Trading was a fraudster, there would not have been any funding or any guaranteeing of the service of the loan agreement. Dr Kennedy Simmonds, both as Prime Minister and particularly as Minister of Finance, was remiss in not ordering officials in his departments to make inquiries. His failure was a serious lapse in financial administration responsibility. Likewise, Mr Tapley Seaton QC, as Attorney-General must share some of the responsibility for failing to uncover the background of the promoters of Nautical Trading (St Kitts) Ltd. Mr Seaton’s certificate of 3 June 1986 under clause 8(a)(vi) of the Credit Agreement, stating that Nautical Trading was “in good standing” was inaccurate to the extent that it did not reveal Mr Adams ‘ criminal record. Mr Seaton is to be criticised for this failure. Also in the autumn of 1986, both Michael Powell, the former Deputy Prime Minister and Minister of Tourism and Labour, Constance Mitcham, Minister of Women’s Affairs, were reporting that the company records were defective.
The Inquiry has not had evidence from the High Commissioner Dr Claudius Thomas, since he is deceased. But one might have questioned him about his investigations (if any) about the “wealth” of Roger Morgan, who clearly was impecunious.
The Inquiry has not had the advantage of taking oral evidence from Mr Adams, but it has seen transcripts of two interviews - of 30 October 1997 and 1 May 1998 - conducted in London by officials of the Serious Fraud Office, at the second of which Inspector Sid Bloxom of the Royal Canadian Mounted Police attended as investigator on behalf of the Government of St Kitts and Nevis to determine whether there was any evidence of fraud or other criminal activity in connection with the sale and purchase of the hydrofoils and the ensuing financing of the sales agreement. Inspector Bloxom’s invaluable investigations in 1997 and 1998 culminated in a detailed report and oral evidence before the Inquiry on 5/6 October 1999. Much of what follows is gleaned from Inspector Bloxom’s statement and evidence, supported as it is by documentary evidence obtained from persons abroad - namely, Ian Fieldhouse (who in 1987 conducted an audit of Nautical Trading (St Kitts) Ltd for Price Waterhouse) Mr Rupert Wright (a lawyer who provided legal services to Nautical Trading (St Kitts) Ltd, Mr Morgan and Mr Adams from May/June 1986 in the aftermath of the signing of the Credit Agreement of 30 May 1986) and Mr David Mills (a London solicitor, specialising in Anglo-Italian legal matters, who acted for Mr Leopoldo Rodriguez from July 1986 onwards). All three London-based professional people gave evidence on 15 and 16 November by audio-link with St Kitts; their evidence was helpful in providing some of the background information and material concerning various transactions and in filling the huge gaps in the documentation absent from the files of government offices in St Kitts.
Government records of the relevant Ministries were searched by Inspector Bloxom. No files were found; the only document relevant to this aspect of the Inquiry which was located were two sets of minutes for meeting held by the Board of Directors of Frigate Bay Development Corporation. The minutes were dated 15 May 1985 and 26 March 1986, to which reference will be made. During the hearings in the autumn of 1999 three references were located in minutes of 17 May and 30 August 1985 and 4 April 1986.
Not even the Credit Agreement of 30 May 1986, to which the Government of St Kitts and Nevis was a party as primary guarantor was to be found in government files. A copy of the signed Credit Agreement was obtained eventually by the Attorney-General via a request to the Italian Embassy, Santa Domingo, Dominican Republic. This copy was provided to Inspector Bloxom in July of 1997 and became the springboard for Inspector Bloxom’s energetic investigation. Mr Wendell Lawrence, Financial Secretary to the Ministry of Finance and in the relevant years (1985/86) was director of Audit in the Ministry. In 1991 he was first made aware of correspondence form Morgan Grenfell about the hydrofoil affair and searched in vain for any departmental file containing the Credit Agreement. Copies of the agreement and ancillary documentation were supplied to Inspector Bloxom mostly by officers at Morgan Grenfell. The absence of official documentation is appalling. Either the documentation was never raised - which is unthinkable in the administration of a national government - or it has been lost, a distinct possibility since files were stored at a warehouse in Bird Rock which was destroyed during the damage done by Hurricane Hugo in 1989. Mr Powell told the Inquiry that he maintained a locked cabinet of files when he was Minister of Tourism, up to 1992. His offices were located at Government Headquarters, although the Permanent Secretary and staff were based at Development Bank Building. Mr Powell’s personal assistant, Ms Valda Richardson, told the Inquiry that she did not have access to the locked cabinet, nor did she open a file on the hydrofoil matter. She stated that she knew nothing about the matter; nor does she recall any discussions or documents in relation to the hydrofoils and Nautical Trading. Mr Larkland Richards, the permanent secretary in the Ministry also stated that he knew nothing whatsoever about the hydrofoils. In his statement Mr Richards said “I know zero about the matter.” The absence of knowledge in civil servants dealing with this important financial matter is astonishing. Even if they never saw the hydrofoils during 1985-1986 it is odd that they did not acquire knowledge of their existence through the media. The Inquiry has not spent any time investigating the cause for such a lamentable state of affairs. If the facts are indicative of a general malaise in the late 1980s in public administration in St Kitts and Nevis, steps need to be taken urgently to rectify the situation. From the way in which the present administration has functioned in relation to the working of the Commission of Inquiry, I am reasonably confident that what was happening in 1985/6 in the Prime Minister’s office, in the Ministry of Finance, in the Attorney-General’s Office and in the Ministry of Tourism, was a temporary aberrance. In Part III, below, I shall have to consider the events of the 1980s in the context of financial administration over the whole period of 1980-1999.
Nautical Trading (St Kitts) Ltd
On 15 December of 1984 Nautical Trading (St Kitts) Ltd was incorporated by the law firm of Terence Byron. The Director was Vincent Byron and the Secretary was Hyacinthe Byron. The initial share capital of the company was $2.00 EC which was later increased to $100.00 US. On 19 July 1985 a minute of the company shows that Roger Morgan representing Bluematt Investments Ltd (an Isle of Man Company) had offered to purchase the company for $100.00 US. In January 1986 the original directors were replaced by Roger Morgan and Stanley Gunter. Derek Francis became secretary for the Company. Gunter is the father-in-law of Morgan and Francis is a brother-in-law. At this point Bluematt Investments Ltd (BIL) became the 100% owner of Nautical Trading. Company documents show that Winifred May Adams, wife of William Adams, and Molly Morgan, wife of Roger Morgan, each held one share of BIL.
Mr Adams appears to have been the organiser and brains behind the formation of Nautical Trading and also is believed to have handled most of the arrangements and negotiations required in purchasing the hydrofoils and acquiring the necessary financing. The Inquiry has seen the Articles and Memorandum of Association, but nothing else. In a memorandum, dated 2 November 1992, Mr Tapley Seaton QC, records in two and a half A4 pages annual returns to the Registrar of Companies for 1987, 1988, 1990 and 1991. The memorandum ends: “ The above represents the entirety of the documentation in respect of Nautical Trading (St Kitts) Limited at the Companies Registry, Basseterre, St Kitts.” The Inquiry sought to obtain further information about Nautical Trading during the period of its contractual arrangements with the suppliers of the hydrofoils (and their trial run from August 1985 to March 1986) together with correspondence relating to the borrowing by Nautical Trading from the consortium of lender-banks of US $25,330,000 and any correspondence passing between Nautical Trading and the Government of St Kitts and Nevis relating to the primary guarantee of the loan. The Inquiry approached Mr Terence Byron whom the Inquiry was aware had handled the legal affairs of Nautical Trading, but he was unwilling to cooperate, ostensibly for reasons of legal privilege. Since any material would be unlikely to further the Inquiry’s investigation, the matter was not pursued. But it may be of assistance to future Commissions of Inquiry to note that legal privilege is overridden by the power of the Commission to order the delivery up of documents. Mr Byron would have been bound to hand over his files on Nautical trading, had the Commission issued him with a subpoena duces tecum. The Inquiry had hoped that, without issuing a subpoena, Mr Byron would nevertheless have assisted the Commission. He declined to do so.
When Mr Tapley Seaton QC on 3 June 1986 gave his certificate of “good standing” in favour of Nautical Trading (see Part II A(2)) he can hardly have been in a position to judge the validity of Nautical Trading. The company’s annual return for 1985 was filed only on 10 December 1986 and for the year 1986 not until 4 February 1988. Mr Seaton does not reveal whether, perhaps, he obtained a more positive response from Mr Terence Byron than did the Commission of Inquiry thirteen years later.
The Sale and Purchase of the Hydrofoils
The sale and purchase of hydrofoils was initially for five vessels. The contract, dated 4 March 1985, was between Aliscafi Snav Spa (SNAV) and Nautical Trading (St Kitts) Ltd. Two amendments, dated 4 April 1985 and 20 January 1986, were appended to the contract, the former amendment provided for parts, loading equipment and engine modifications; the latter altered the terms of the original contract from five vessels to three vessels, with the option to purchase the additional two vessels. The purchase price of the three vessels was US $29,800,000. A down payment of 15% of the purchase price - US $4,470,000 - was required as one of the conditions precedents to the Credit Agreement of 30 May 1986. (In this report I have, if only in the interests of brevity, not traced the labyrinthine transactions relating to the down payment of $4,470,000. I am satisfied that no one in St Kitts (other than Nautical Trading (St Kitts) Ltd) became involved in those monies).
It may be helpful, in understanding the role of the Government of St Kitts and Nevis, if at this stage I outline the background to the Credit Agreement of 30 May 1986 financing the purchase of the three hydrofoils. Seven international banks provided the finance. Morgan Grenfell, a merchant bank in the City of London was included as one of the lenders and acted as agent and manager of the lending-banks (Morgan Grenfell was a highly respected merchant bank until it was discredited as a result of its involvement in 1986 as banking advisers to Guinness plc. Guinness was alleged to have offered secret indemnities and success fees to certain purchasers of Guinness stock, the alleged effect of which was artificially to inflate or maintain the Guinness share price. The case resulted in the prosecution for corruption of Mr Ernest Saunders, the managing director of Guinness. Morgan Grenfell was subsequently sold to Deutsche bank, a German commercial bank). Morgan Grenfell handled the arrangements for the loan and for obtaining the insurance guarantee from the Italian export credit agency, Sezionne Speciale Per L’Assiciazione del Credito All’Esportazine (SACE).
The Credit Agreement of 30 May 1986 between Nautical Trading (St Kitts) Ltd as borrower, the Government of St Kitts and Nevis, as guarantor, Morgan Grenfell, as manager, the several banks as lenders and Morgan Grenfell, as agent “with the support of” SACE provided for a loan of 85% of the purchase value of the hydrofoils amounting to US $ 25,330,000. By a separate agreement between SACE and the lending banks, SACE agreed to indemnify the lending banks against loss arising out of the servicing of the loan. No valuation of the vessels was required, and no collateral was held to minimise the risk of default. Given the insurance guarantee by SACE, the seven banks were fully secured; there was no financial risk to the lenders entering into the financial arrangement. In turn SACE looked to the Government of St Kitts and Nevis as the primary guarantor of the loan. The legal effects of the Credit Agreement are fully dealt with in Part II A(4) below.
The banking arrangements for the loan were handled chiefly by Mr Simon Jackson who now works for the European Bank for Reconstruction and Development. Mr Jackson gave oral evidence before the Inquiry on Monday and Tuesday 18 and 19 October 1999. He was extremely helpful in taking the Inquiry through the thickets and masses of merchant banking and export credit agencies. He was disarmingly candid about the role of Morgan Grenfell. While he was of the opinion that the Government of St Kitts and Nevis “had not done its due diligence” on the commercial standing of Nautical Trading, he acknowledged that if the matter was being handled to-day, when financial regulations in the City of London have been tightened up, Morgan Grenfell might have felt a greater sense of duty to protect the guarantors of the loan. Accepting that Morgan Grenfell was a major lender and interested primarily in protecting its own interests, nevertheless it is my view that the St Kitts and Nevis Government could justly feel that it had been let down by such a reputable house of finance. That is not to say that the Government could be excused for not having taken all the necessary steps to protect is own financial situation and reduce or prevent financial exposure in the national interest.
The Feasibility of the Hydrofoil Project
Roger Morgan sent a telex on 26 March 1985 to Mr Simon Jackson outlining a feasibility study for hydrofoil operation in the West Indies. The document was the only feasibility proposal uncovered by the Commission of Inquiry, save for a report, completed in 1982 by J Hubard entitled “Project by a company of ship owners to navigate rapid sea routes in the archipelago of the Lesser Antilles with hydrofoil boats”. The Hubard report contains no costings or revenue forecasts. Copies of the feasibility study do not appear to have circulated widely. Mr Michael Powell thinks that he may have seen it. And Mr Ernest Pistana, managing director of the National Bank, was uncertain about whether he had received a copy, however he did produce a telex (from Roger Morgan to Simon Jackson) dated 26 March 1985 similar to the 1982 study. (His evidence on the financial aspect of the hydrofoil project is dealt with in Part II A(3) below.) At most he feasibility study was disseminated to one Minister, Michael Powell (responsible for tourism) and a banker advising on financial viability of the operator of the hydrofoil service, Nautical Trading. There are even doubts about that. Walter Simmonds of Simmonds & Associates, a St Kitts accountant appears to have received information from Mr Powell quoting the content of the Feasibility Study. Had the St Kitts and Nevis Government taken seriously its role as primary guarantor to the loan it would have informed itself of the feasibility study and submitted it to examination in the form of a departmental submission to Cabinet. It is another instance of the failure of Government to inform itself of the propriety of signing the guarantee to the loan of US $25,330,000. The main responsibility for that failure lies with Dr Simmonds, both as Prime Minister and as Minister of Finance.
The “Trial Runs”, August 1985 - March 1986
Two - not three - hydrofoils arrived in St Kitts on 5 August 1985. ZIZ Radio and Television in a news item proclaimed the arrival of a hydrofoil which was “as advanced and as well-equipped as any currently afloat” and was to become “the flagship of a central fleet of five [sic] such hydrofoils which will introduce a luxurious inter-island ferry service to the Caribbean.” This glowing report could hardly be sustained eight months later. The arrival of the two hydrofoil vessels, named the San Christobel II and the Jomanda, have always been viewed as pilot projects or trial runs. Under the 1985 sale and purchase agreement, the seller was bound to deliver the vessels which became the purchaser’s property on the draw-down date of 30 October 1986. The evidence suggests that the manufacturers sent down two second-hand vessels 9 months in advance of actual ownership to assist Nautical Trading to establish its service between the islands. Nevertheless, the Inquiry has adduced evidence to demonstrate the dismal results from the “trial runs”. Leopoldo Rodriguez wrote on 9 October 1985 that he had sent two hydrofoils down to St Kitts “to help Nautical Trading…to get on its feet financially and to help the company establish the routes. There will be no charge to Nautical Trading St Kitts Limited as it is a charge built into the purchase price. All takings will be paid to NTSK Ltd.” - hardly the language of a pilot project rather a part of a contract of purchase. The hydrofoils were intended to be in place at the start of a continuous service. Their early departure in March 1986 from St Kitts to San Juan in Puerto Rico and ultimately for sale in 1992 at a deflated price of US $380,000 to one of the seller’s Italian companies strongly suggests, not a trial run but part of the deceptive conduct of the fraudsters in Europe.
The financial results have never been reported in any financial statement. Some information - incomplete though it is - was obtained from Kisco Travel, the St Kitts agent for the operation of the service (Mr Uklin Richardson, the managing director of Kisco gave oral evidence at the Inquiry on 18 October 1999). Mr Kalesnikoff the Canadian accountant prepared a schedule documenting the known revenues.
The average monthly revenue was US $19,302 representing the transportation of 5,336 passengers over a six-month period. Information of expenses was likewise incomplete and suspect; expenses averaged US $22,970 per month. While the disclosed figures suggested a modest operating profit, the forensic accounting would conclude that it was “most probable that the hydrofoil operation recorded an operating loss”. The average monthly expenses of US $22,970 exceed the average monthly revenues of US $19,302 - a loss of US $3,668 per month.
There is some confirmation of the lack of financial success of the “trial runs” from correspondence in June 1987 passing between Mr David Mills (London solicitor, acting for Leopoldo Rodriguez after July1986) and Mr Rupert Wright (English solicitor acting for Roger Morgan and Nautical Trading). On 5 June 1987 Mr Mills writes:
Again on 25 June 1987 Mr Mills confirms that “there was no net income”. Contemporaneously, Mr Ian Fieldhouse the independent accountant from Price Waterhouse was providing gloomy prognostications of the whole venture. From internal documents from the files of Mr Ian Fieldhouse, an employee of accountants Price Waterhouse engaged to verify financial statements of Nautical Trading, the forecasts of profitability had been wildly optimistic. An internal memorandum of 5 June 1987 referred to the draft letter of 4 June 1987:
The letter from Mr Fieldhouse to Roger Morgan was sent on 8 June 1987 and read as follows:
Mr Fieldhouse’s assessment in June 1987 is confirmed by Mr Kalesnikoff after an exhaustive examination of all the information available. “…the Hydrofoil operation of NTS was never a viable proposition, it was destined to fail from the outset. The level of debt serving left NTS in no chance of success. Any responsible Government, entering upon a loan agreement is a prime guarantor to the loan, would indubitably have undertaken a study in early 1986, which would instantly have uncovered the inevitable predictions of a hopeless venture. That no such study, or anything remotely comparable, was undertaken discloses a serious, if not cataclysmic failure in financial administration. The Prime Minister, Dr Kennedy Simmonds must take the blame for such failure.
The Disappearance of the Hydrofoils
Sometime in March 1986, at a time when the Prime Minister must have been actively considering signing the Credit Agreement - the Cabinet meeting at which the Prime Minister sought and obtained approval for putting his signature on behalf of the Government as primary guarantor was only a matter of days, on 4 April 1986 - the hydrofoils left St Kitts, never to return. That fact must have been known to Dr Simmons at the time it happened. Yet no steps were taken by anyone in authority to find out the whereabouts of the vessels, and what was intended to happen to them. The Commissioner of Police at the time, Mr Stanley Franks, told the Inquiry that he was not given any instructions by Government to conduct an investigation of the hydrofoils; nor did he initiate any inquiry on his own motion. Dr Simmonds admitted to the Inquiry that he took no steps to find out what had happened to the hydrofoils. His interests were focussed on the hotel projects promised by Roger Morgan; the two hydrofoils were, for him, of little interest. He regarded that as a private commercial matter of no direct interest to Government. The total indifference by Government to the fate of the hydrofoil project is consistent with the inattention, indeed oblivious approach to the project in relation to the Government’s impending acceptance of a substantial legal liability. It is to the acceptance of that liability that I now turn.
Part II A(2)
The Signing of the Guarantee to the Credit Agreement on 4 April 1986
Dr Kennedy Simmonds derived his authority to sign the guarantee to the Credit Agreement, other than by virtue of his office as Prime Minister and Minister of Finance, from Cabinet on 4 April 1986 (Appendix 10). There was no item on the agenda for that meeting relating to the Credit Agreement; nor was there any formal submission from either the Prime Minister’s office or from the Ministry of Finance. (No documentation has been uncovered from the files of either Ministry relating to the agreement. Even the Credit Agreement itself came into possession of the Inquiry only from abroad).
Item 2 in the Minutes of the meeting of 4 April 1986 read as follows:
No discussion is noted in Cabinet minutes as having taken place, although Mr Powell, then Deputy Prime Minister and Minister of Labour and Tourism thought that some discussion did take place both at the Cabinet meeting and previously at informal meetings of Ministers, together with legal advisers, which he was unable to specify. And Mr Tapley Seaton QC, in answer to the questionnaire administered to him, said that negotiations leading up to the signing of the Credit Agreement were discussed on several occasions in Cabinet. He added that there were formal minutes of Cabinet kept in relation to the Credit Agreement. Mr Seaton is wrong about that.
At a late stage in the hearings of the Commission of Inquiry - in fact at the final session on 10 January 2000 - it was suggested that the minutes of the Cabinet agendas and meetings from 1 January 1985 to 23 May 1986 were incomplete. It was pointed out that Cabinet at that time met regularly every week; hence there were minutes missing from the bundle provided by the Commission from the files of the Cabinet secretariat which would (or should) have recorded a formal submission, Cabinet discussions and decisions about Nautical Trading and the hydrofoils affair. The suggestion appeared to be wholly implausible. The evidence refutes any question of omission of Cabinet minutes during the period. Cabinet simply did not meet formally each and every week, as was suggested by Dr Simmonds in his oral evidence.
The chart for dates of Cabinet meetings in 1985 and from 1 January to 23 May 1986 - annexed to this report (Appendix 11) - reveal the following. In 1985 there were in all 39 meetings of Cabinet. Each meeting in that year was given a minute reference number - a label - in serial form, 1 through to 39. for the period of 1986 there was a similar numbering in serial form, from 1 through to 16 (for the first nineteen weeks in that year). If there had been any Cabinet meetings which did not find their way into the documentation, how could they have been fitted into a serial numbering, other than by way of a lettering or further numbering - e.g., 22A or 34-1? There were two occasions - 23 August 1985 and 16 May 1986 - when the minutes of Cabinet meetings due to be held on those days were missing. The agendas and any formal submissions for the two days are available and do not disclose any item referable to the Credit Agreement. Moreover, in August 1985 there was not in existence any draft of the Credit Agreement (the earliest appears in January 1986) and on 16 May 1986 the Cabinet had, on 4 April 1986, already given its approval for the Government’s signature to be affixed in advance of the dating of the Credit Agreement as 30 May 1986. Given those two omissions from the records of Cabinet activities, I find nevertheless that there is no bias for suggesting that the Credit Agreement was ever discussed in Cabinet other than on 4 April 1986. The only possibility is that additional Cabinet meetings, to make up the complement of 52 for 1985 and 19 for the first nineteen weeks of 1986, were held informally and hence unrecorded by the Cabinet secretariat. But those who made the suggestion of omitted Cabinet minutes discounted that alternative possibility. The suggestion of additional Cabinet meetings omitted from the Commission’s documentation is without foundation, other than as a flight of forensic imagination, conjured up to obfuscate the obvious. I find as a fact that the minutes of agendas and Cabinet meetings - 39 for 1985 and 16 for the period in 1986 - are a complete record of all formal Cabinet meetings. They contribute the totality of documentation relative to Cabinet attention to the Credit Agreement of 30 May 1986.
Cabinet Approval
By clause 8(a)(iii) of the Credit Agreement it was a condition precedent that a copy of a Cabinet Minute, certified by the Prime Minister and Minister of Finance, approving the Agreement should be received by the agent of the loaning Banks. The duly certified copy of the Cabinet meeting of 4 April 1986 was sent by letter to Morgan Grenfell on 29 April 1986. The letter also confirmed, under paragraph (iv) of Schedule B of the Credit Agreement (p.41 of Appendix 13), that there were no authorisations other than the Cabinet meeting of 4 April 1986 approving the Agreement.
Since I have found that at no relevant time was the issue of the hydrofoils ever brought to Cabinet, I am inclined to think that, were it not for the need to satisfy the condition precedent in clause 8(a)(iii) (p.15 Appendix 13), the Cabinet’s approval to signing as guarantor would never have been brought by the Prime Minister. The absence of any formal submission strongly suggests that no great significance was attached to the Credit Agreement.
The minute of 4 April 1986 referred to Cabinet being “updated regarding a Credit Agreement which was in respect of a loan of US $25,330,000.00 to Nautical Trading (St Kitts) Ltd….” If there had ever been an earlier account given to the Credit Agreement (which was certainly in circulation in draft not earlier than January 1986) the matter was never formally considered by Cabinet. The Cabinet minutes and agendas from January 1985 until 23 May 1986 were disclosed to the Inquiry, by order of Cabinet of October 1999. They revealed nothing pertaining to the Credit Agreement or, with two exceptions, to Nautical Trading (St Kitts) Ltd. They were:
The contrast of that treatment by Cabinet with the way that the Credit Agreement was handled on 4 April 1986 is stark. There was no submission from a department of government indicating that the loan to Nautical Trading, as the borrower of $25,330,000, was being underwritten by the Government; there was no indication from the Prime Minister of the huge liability which the Government was undertaking - one-third of the country’s annual budget; neither the Prime Minister nor the Attorney General appeared to tell Cabinet the legal implications of guaranteeing this gigantic loan, although Mr Seaton told the Inquiry that he certainly gave his Cabinet colleagues his oral opinion of the Credit Agreement; the agreement itself does not appear to have been tabled for members’ consideration; at no time, from January 1986 to April 1986 is the matter of the hydrofoils and the financing of their sale and purchase ever brought to Cabinet. It is to be noted that a senior Minister in Dr Simmonds’ Cabinet of that time, Mr Hugh Heyliger, told the Inquiry that he had no idea that the guarantee in the Credit Agreement was restricted to the funding of the purchase price of the hydrofoils, and not to all the other projects which had been discussed in 1985. Yet at the Cabinet meeting the following week - on 11 April 1986 - the Prime Minister was, by contrast, giving “a detailed account” of a meeting with representatives of the Bank of Credit and Commercial International and negotiating a resolution from Cabinet for the Government to borrow US $1.5 million towards the payment of certain sugar lands and US $2.1 million for the purchase of shares in the national Bank from BCCI. What does one make of such a casual, not to say cavalier approach to the guaranteeing of a loan of over US $25 million? Either Dr Simmonds (and his Attorney-General) genuinely thought that the St Kitts and Nevis Government, as a party to the Credit Agreement of 30 May 1986, was truly engaging in “a mere formality” or, for reasons which are not clear, they were deliberately underplaying the financing of the sale and purchase of the hydrofoils. At the Inquiry it has been suggested that the Government’s liability (whatever it was) was being underwritten by a guarantee from Roger Morgan.
Whatever is the answer to that conundrum the action of the Prime Minister disclosed a serious failure of duty at the very minimum, to inform his Cabinet colleagues of the Government’s participation in an agreement which involved such a large sum of money, irrespective of any liability which the Government itself might be incurring or the fact of an indemnity from one of the promoters of the hydrofoil project.
In his written statement to the Inquiry Dr Simmonds acknowledged that a guarantee was required of Government “and this was initially refused, and only agreed to when an indemnity was obtained from Roger Morgan.” I set out, with comment, his “understanding of the transaction”,
It is necessary to amplify the bald comment in two respects. First, in order to demonstrate his frame of mind immediately prior to 4 April 1986, Dr Simmonds produced for the first time in evidence on 10 January 2000, a draft of a letter, which was never completed, in answer to a letter (unseen by the Commission) of 18 March 1986 from Mr Michael Powell to the Prime Minister. (When I made a mild protest to Dr Simmonds of the failure to disclose this document, after frequent requests to him and his counsel to hand over to the Commission all relevant documents, no satisfactory answer was forthcoming). The letter, which I append herewith in manuscript and transcribed form, certainly reveals some informal cabinet discussions about the funding of the hydrofoil project. (In so far as it suggests a formal cabinet discussion about putting in place certain safeguards, I have already found that it could not have been formally decided upon.) The letter also disclose differences between Dr Simmonds and his Deputy Prime Minister about Government policy and strategy towards the development of tourist trade. None of that emerges from the Cabinet meeting of 4 April 1986, at which both men were present; the minute of that date merely records Cabinet approval to signing the Credit Agreement by Dr Simmonds.
Second, Dr Simmonds insists that there was in existence then an indemnity from Mr Roger Morgan. Had such a document ever existed, there would have been copies at least in the files of Morgan Grenfell and in possession of Mr Morgan and his legal adviser, Mr Rupert Wright. While these three English sources have supplied a great deal of the Commission’s documentation (indeed, almost exclusively) it is strange that the vital indemnity from Mr Morgan is crucially missing. That such an indemnity exists finds support, it is claimed, from written evidence that Roger Morgan was engaged in discussions with the St Kitts and Nevis Government to indemnify a trilogy of projects (hotels, Hawaiian Village and a hydrofoil service) during negotiations in March 1985. But these could not have been related to the Credit Agreement which was linked exclusively to the sale and purchase of the hydrofoils and was considered only at the earliest by the autumn of 1985. One can conclude only that there is here a conflation of two unrelated events which have the barest verisimilitude of common facts. I find that there never was at any time any question of Roger Morgan providing an indemnity to the primary guarantor of the St Kitts and Nevis Government under the Credit Agreement.
Dr Simmonds’ responses are unsatisfactory on two accounts. First, they disclose an appalling lack of attention to detail. Second, they are inaccurate and demonstrate only too graphically that little, if any attention was ever paid to the Government’s responsibilities (whatever they might be) for its part in the framing and completion of the Credit Agreement.
There was a total failure (a series of failures) by Dr Simmonds to comply with the standards expected of a Prime Minister of a sovereign state.
Mr Tapley Seaton QC
As Attorney General and a member of Cabinet, Mr Tapley Seaton QC was responsible for advising the Government of St Kitts and Nevis on all legal matters. It was he to whom the Cabinet of Dr Simmonds would look for advice on the Credit Agreement of 30 May 1986. In his answer to the questionnaire (as noted above) Mr Seaton stated that the negotiations leading up to the signing of the Credit Agreement “were discussed on several occasions by Cabinet”. There is no record of the Agreement ever having been considered other than on 4 April 1986, let alone discussed. Mr Seaton’s memory is faulty in that respect. He does acknowledge that a formal minute of Cabinet was kept on 4 April 1986 in relation to approval of Dr Simmonds to sign the agreement. What is startlingly absent is any record that the members of Cabinet saw, and were taken through, the elaborate terms and conditions of the Credit Agreement. And Mr Seaton does not state positively that this was ever done. Above all, it was imperative for proper approval of Government’s signature as primary guarantor that Cabinet should be alive to the liabilities that Government was undertaking. Even if (as Dr Simmonds has frequently asserted) his signature was a “mere formality”, it was incumbent upon the Attorney-General to reassure his Cabinet colleagues either that the Prime Minister’s assertion was indeed the true legal effect of the Government’s signature as primary guarantor. Or, if (as is manifestly clear) the signing of the agreement involved the Government in potentially a massive financial liability, the Attorney-General should have explained that in some detail. Without that knowledge and information, there could be no valid approval to the Government entering into the Credit Agreement. I would have expected that any Law Officer, faced with a complex agreement providing financial assistance to a borrower within the jurisdiction, to have sought independent legal advice by seeking an opinion from leading counsel elsewhere in the Caribbean or in England. Mr Padfield expressed his astonishment that no opinion was sought at that time from independent counsel. That Mr Seaton appeared to rely on his uncommunicated legal judgment - his “in-house” expertise being adequate, according to him - is to disclose a serious failure on his part to act appropriately.
Mr Seaton, by his answers to the questionnaire, does not to this day, appreciate the nature and scope of the Credit Agreement. He states:
The Credit Agreement was solely concerned to finance the sale and purchase of the three hydrofoils; it had nothing to do with any “Project” concerning hotels and tourist attractions. There was no indemnity from “Morgan and Company”. The insurance guarantee by SACE, by an instrument dehors the Credit Agreement, was itself demonstrably dependent upon the primary guarantee of the loan by the St Kitts and Nevis Government. Any lawyer worth his salt would know that the systems of export credit guarantees is invariably linked to an assurance from the country that is the ultimate recipient of the development being funded from export credit agencies of the western world. Here again, Mr Seaton exhibits a serious failure to understand the legal consequences of the Credit Agreement.
Under clause 8(a)(vi) of the Credit Agreement (p.16 Appendix 13) the Attorney-General was obliged to give a legal opinion to Morgan Grenfell as agent for the consortium of the financing banks and to the banks itself.
In that opinion, given on 3 June 1986 as a condition precedent to the drawdown of the finance, Mr Seaton wrote:
In his answers to the questionnaire Mr Seaton states that he:
He did not know if a full review of the feasibility study of March 1985 was ordered by the Government. He was unable to state “what market studies, business plans, proforma financial statements” were done and presented. Nor whether they were discussed in order that Government could make a decision to sign as guarantor of the loan to Nautical Trading. In short, Mr Seaton seems to have done little to verify his certificate of “good standing” of Nautical Trading.
Mr Anthony Gonsalves submitted that in giving the legal opinion of 3 June 1986, pursuant to clause 8(a)(vi) of the Credit Agreement, the Attorney General was interpreting the phrase “in good standing” as referring to no more than the formal requirements of a limited liability company - incorporation, memorandum and articles of association, registration and the like - and did not refer to Nautical Trading’s financial status. The submission deserves consideration. Mr Tapley Seaton QC could be criticised only if plainly he had failed to investigate the affairs of Nautical Trading in order to assess its financial status.
Clause 8(a)(vi) of the Credit Agreement requires, as a condition precedent, “an opinion of the Attorney-General….to the effect set forth in schedule B” to be sent to the agent of the lending Banks. Schedule B provides:
Subsequent paragraphs - under Roman numerals (ii) to (xii) (p.40 - 43 of Appendix 13) - contain other matters of formality. They are in brief: the Borrower’s and the Guarantor’s power to enter and perform the Credit Agreement, including the Guarantor’s full faith and credit obligations; the executing, delivery and performance of the Credit Agreement; compliance with any requirement of government and public bodies; interest paid on loan not being subject to any tax; contractual obligations constituting “direct, unconditional and general obligations”; no proceedings in the opinion of the Attorney General are currently pending or threatened which might have a “material adverse effect on the right or ability to perform” the contractual obligations; ability to sue and be sued, the choice of English law being a valid choice; the Borrower’s representatives being the authority to execute and deliver the Credit Agreement; and the continuing truth and correctness up to the making of the loan.
The legal opinion of 3 June 1986 signed by Mr Tapley Seaton QC recited, word-for-word, the whole of Schedule B (Clause 8(a)(vi) was not so emphatic or prescriptive; it called merely for an opinion “to the effect” of Schedule B). It would appear that Mr Seaton went through the items set forth in Schedule B almost mechanistically. Other than draw upon the formal information obtained from the Registrar of Companies, Mr Seaton admitted he made no inquires about Nautical Trading; and indeed his approach to 8(a)(vi) was that there was no requirement for him to do so, save possibly the requirement of his personal belief that Nautical Trading was not involved in litigation.
What meaning, then, should be given to the phrase, “in good standing”? In common parlance it refers to a person’s (including a legal person’s) reputation. And reputation is assessed from those with whom the individual has some relationship or connection. In the case of a limited liability company it would involve an assessment of trading activities and its financial dealings. As at June 1986, by which time the hydrofoils were no longer providing an inter-Caribbean island ferry service and Nautical Trading had ceased to receive any income, there would be a substantial query mark over the company’s financial status. Some doubt would be injected in the minds of any creditor of, or lender to the company. It cannot be that the funding banks were interested to know from the Attorney General only the formal requirements of company law. Indeed, their interest needed to be reassured, apart from the SACE guarantee and the primary guarantee by St Kitts and Nevis of the loan, that the Borrower of US $25 million was sufficiently financially sound to make the repayments on the loan. Any study in 1986, such as has been undertaken by the Commission in 1999 would have revealed predictably the precariousness, not to say parlous state of Nautical Trading’s financial affairs. My conclusion is that Mr Tapley Seaton QC wrongly judged that his function under Clause 8(a)(vi) was only the limited one argued for by Mr Gonsalves. But I cannot escape the fact that, at first blush, the phrase, “in good standing” is puzzling. It is only on a closer study of Clause 8(a)(vi) and Schedule B that one has to conclude that Mr Gonsalves’ ingenious submission is unarguable. In the circumstances it would be wrong to criticise Mr Seaton for what is, in essence, an error of legal judgment. I do not uphold the provisional criticism of which he was given notice. I would add only this: the nature of the obligation under 8(a)(vi) adds force to the valid criticism of Mr Seaton that he should have sought independent counsel’s opinion on the legal aspects of the Credit Agreement. Had he done so he would have been alerted to the fact that he was required to give his opinion on the financial status of Nautical Trading. Furthermore since there was a continuing obligation to inform the parties to the Credit Agreement, Mr Seaton should have been telling them by the autumn of 1986 that Nautical Trading was being financed out of debt and was insolvent (see Clause 11(b)(ii) of the Credit Agreement - p.25 of Appendix 13). This he failed to do.
Part II A(3)
The Financial Aspects
Forensic accountancy has become an integral part of expert evidence sought by courts of law and other forms of tribunal whenever financial matters need to be addressed. Expert evidence of accountants is employed across a broad spectrum of legal issues, and questions of complex financial calculation may be raised in relation to many different forms of legal proceedings. Such expertise played a vital part in this Commission of Inquiry in demonstrating the intrinsically financial hopelessness of the hydrofoil project and pointing out some major deficiencies in financial administration by the Government.
Mr Doug Kalesnikoff is a qualified chartered accountant from Saskatoon, Saskatchewan, Canada, practising for the last twelve years in the field of forensic and investigative accounting services, and providing expert evidence in the courts of Canada (on no fewer than 35 separate occasions). He prepared a forensic accounting review of the financial underpinning of the Frigate Bay Development Corporation to the Williams Commission of Inquiry and subsequently on the hydrofoil operation to this Inquiry. As the expert appointed by the Commission, he was demonstrably independent and impartial, not always the case where an expert is called by one party or another in an adversarial process. His final report in September 1999 covered those areas of direct concern to the Inquiry - (a) the capital structure of Nautical Trading (St Kitts) Ltd; (b) the cash flow requirement of the hydrofoil operation; and (c) the “trial run” of the hydrofoil operation, August 1985-March 1986, the last of which I have covered in the previous chapter, where I have drawn on Mr Kalesnikoff’s expertise.
Mr Kalesnikoff’s report was circulated to the participants in the Inquiry and he summarised his report orally before the Commission. His evidence was unchallenged. Indeed, in my view, such was the impressive quality of his report and its thoroughness that it was unchallengeable. I have no hesitation, therefore, in accepting in totality his findings on financial matters, and agreeing with his general conclusions. In the latter respect, I have been able to take into account a good deal of other evidence pertinent to the three topics.
Capitalisation of Nautical Trading
The first financial statement of the company was for the period from incorporation on 15 December 1984 until 21 December 1987. The capital structure, as at that latter date, was:
| US $ | |
| Amounts owing to general creditors | 1,638,472 |
| Unpaid balance of syndicated bank loan | 21,711,428 |
| Called up share capital | 13,000,000 |
| (The share capital on incorporation was US $2.00, two shares of one dollar each.) | |
The “called up share capital” was further explained in a note to the statement. Prior to 6 February 1986 Bluematt Investments Ltd (BIL) owned 100% of the allotted shares of the company. By an agreement of 27 January 1986 the share capital was increased to US $6,000,000 on 6 February 1986 and 25% of the allotted shares were transferred to SNAV, the sellers of the hydrofoils on 17 October 1986; the share capital was increased by a further US $7,000,000 on 17 October 1986. BIL and SNAV were allotted 75% and 25% respectively of the new shares. Note 2 of the financial statement stated that “certain shares allocated to BIL are unpaid”. The reported paid-up capital of US $13 million was made up as follows:
| US $ | |
| Down payment on hydrofoil purchase (15% of purchase price) |
4,470,000 |
| Preliminary expenses incurred on the company’s behalf by BIL | 1,530,000 |
| Share capital increase on 17 October 1986 | 7,000,000 |
| Total | 13,000,000 |
The financial statements, as presented, gave the appearance of the existence of equity capital of US $13,000,000. Investigation by the Inquiry revealed that there was no equity provided. Mr Kalesnikoff’s comment was: “NTS was entirely financed through debt”. He went on to conclude that the company effectively became insolvent immediately after the draw-down (30 October 1986) of the loan. Once the position of the financing that was set aside to service the debt was extinguished - which happened by early 1988 - the loan became in default.
Cash Flow Requirements of Hydrofoil Operation
The annual cash flow demands of servicing the loan were substantial. NTS assumed an indebtedness of US $25,300,000 on 30 May 1986. That required payment of between US $5 and 6 million a year for the early years. Mr Kalesnikoff’s assessment of the reasonableness of hydrofoil service, at a level sufficient upon which to service the debt, was dismal. Significantly, since the only figures ever made available in 1985/86 to anyone in Government in St Kitts and Nevis were contained in the Feasibility Study, Mr Kalesnikoff’s conclusion was the figures contained in a ‘Feasibility Study’ dated March 1985 and the projections endorsed by W B Simmonds and E E Pistana - to which reference will be made - “are entirely unattainable and bear no resemblance to realistic projections.”
There is no evidence, at the very least before the Inquiry, to support the view that the Government made any inquiries about the financial state of NTS, save for Mr Tapley Seaton QC’s unsubstantiated, vapid claim in his certificate of 3 June 1986 that the company was “in good standing” (see Part II A(2)). Since Mr Seaton submitted that “no good standing”, in his view, referred only to the formal requirements of company law, he made no inquiries other than of the Company Registry. There is no evidence that the Prime Minister’s office or the Ministry of Finance performed any audit of the operations of the hydrofoils in late 1985 and early 1986. Apart from the Feasibility Study, no business plans, market studies, demographic analysis, operational budgets, capital budgets or financing plans were prepared. Indeed Dr Simmonds stated in evidence that he took no note of the estimates made by Mr Walter Simmonds and Mr Ernest Pistana (see below). In my view, it was essential that, before signing the loan agreement of 30 May 1986, some estimate of the viability of the hydrofoil operations based on those considerations should have been made. Had that been done, the dismal results of the hydrofoil service over that period, together with a review of NTS accounts would have revealed the imprudence and improvidence of taking on the obligations of a primary guarantee of US $25,330,000.
The Simmonds and Pistana Letters (Appendix 9)
The only evidence of some estimate of the profitability of the hydrofoil operation were two pieces of documentary material, which have emerged from sources other than governmental, in practice emanating from Mr Walter Simmonds (an accountant) and Mr Ernest Pistana (a banker). I deal with them separately. Although their written responses were addressed directly to Mr Michael Powell, the Deputy Prime Minister and Minister of Tourism, I have not regarded them as estimates supplied in response to a request directly from Government. As I have noted, Dr Simmonds placed no reliance on them.
The Walter Simmonds Letter of 7 June 1985
Mr Walter Simmonds (of Simmonds and Associates) was asked by Mr Michael Powell to give an opinion about the profitability of the hydrofoils, which by then had not yet arrived in St Kitts; hence there were no results of any “trial run”. The request from Mr Powell was received telephonically. Mr Simmonds made no note of the figures transmitted on the telephone; no accountancy fee was offered or paid. Mr Simmonds told me that he was unaware of the precise use to which information he supplied was subsequently to be put. Importantly, he did not think that the information he imparted was other than a rough estimate, based on inadequate material.
In his letter of 7 June 1985 Mr Simmonds wrote to the Deputy Prime Minister, Mr Powell, at Government Headquarters:
No calculations and/or projections were supplied with the letter. The reference to projections regarding Nautical Trading could only have been a reference to the “Feasibility Study” sent by Roger Morgan to Simon Jackson. At that time it was anticipated that five hydrofoils would be supplied. The feasibility study at one point projected revenues at 100% occupancy for three hydrofoils, which would appear to amount to US $26,956,000. Mr Simmonds’ estimate of US $40-45 million of annual gross income surpasses even the optimistic forecast in the Feasibility Study, which, Mr Kalesnikoff thought, bore “little or no relation to reality and thus are wholly unreliable”. (Mr Kalesnikoff calculated the number of hydrofoil passengers required to attain Mr Simmonds’ sales estimate that would require 1,818,182 passengers per year or 4,981 per day. The “trial run” produced an average of 29 passengers a day).
Mr Pistana’s Letter of 22 June 1985
Mr Ernest Pistana, at the time, was managing director of the National Bank. He wrote on 22 June 1985 to Mr Michael Powell, Deputy Prime Minister, c/o the High Commissioner, Dr Claudius Thomas (now deceased) at the High Commission in London. The letter stated:
In an addendum to the letter, on different typeface, with the High Commission’s date-stamp of 26 June 1985, there appears the following:
Mr Ingle M E Rawlins, who was then a junior diplomat at the High Commission, signed the addendum. Mr Rawlins gave oral evidence. Put bluntly, he was adamantine. He wrote the words, he told the Inquiry, at the instruction of the High Commissioner. Mr Pistana, likewise adamantine, denied that the Bank had ever asked for the additional words to be inserted. Mr Powell, to whom the letter was addressed, did not recall ever having given instructions to Mr Rawlins or to Mr Pistana. It is impossible now - in 1999 - to know the truth about the authorship of the addendum to Mr Pistana’s letter. It matters not how it came about. In any event the content of the addendum can be discounted as having any value. Mr Kalesnikoff’s comment on it is that the addition of value assets and years turnover to equate the value of shares is not in accordance with business valuation principles. He adds: “Thus, value of the shares at 91 million US dollars is grossly overvalued, even if the projections outlined by Mr Simmonds were attainable”: Which they were not.
My conclusions about the Simmonds/Pistana letters of June 1985 can be clearly stated. At that time, the arrangements by Morgan Grenfell for funding the sale and purchase of the hydrofoils were barely under way. A letter, dated 11 January 1985 containing a draft of clause 9 of the Credit Agreement, written by Morgan Grenfell to Mr Powell, must have the wrong year on it: it should have been 11 January 1986. That would fit in with the period between the sale and purchase of the hydrofoils in the spring of 1985 and the Credit Agreement of 30 May 1986. I have made a reference to this obvious error in dating, only because Ms Mitcham created much fuss and pother over the fact that some bit of the text of the letter on the bottom of page 1 did not attract the eye of the photocopying machine; the original of the letter has not been traced. Ms Mitcham submitted, rhetorically; “Can you be satisfied with this Mr Commissioner? Can you be satisfied that this letter has not been tampered with?” I am entirely satisfied that, given the context of the letter, there is nothing untoward about the content. The fact that Mr Powell put his signature to each page of he draft of Clause 9 (the Guarantee) indicates that the proposed guarantor was at the St Kitts end. Government consideration to its commitment as primary guarantor would not have been imminent, even if, by June 1985, it was even contemplating such action. Given the absence, post-June 1985, of anything - even a morsel - of governmental appreciation of the financial implications of its potential involvement in a substantial loan, the Simmonds/Pistana episode was, at best, peripheral, and at worst, irrelevant, to the Government’s thoughts and action about the forthcoming position as primary guarantor to the loan.
Neither Mr Simmonds nor Mr Pistana was ever officially instructed to provide estimates. Neither of them was paid for providing a service that, on the face of it, appeared to be professional. Mr Simmonds gave unsupported opinion on the profitability of the hydrofoils. I accept from him that he was unaware of the use to which his opinion would be put. Mr Pistana also was uncertain about the use to which the National Bank’s opinion would be put. When asked, at the oral hearings, whether in referring to “they” he meant the Government he said “I don’t think so.”
His denial of any question of responsibility for the addendum, renders it impossible to say that he thought that he was involved in any serious evaluation of the financial position of the hydrofoil project. Both men would have been professionally irresponsible, had they for one moment considered that they were engaged in giving professional advice. Contrariwise, I think they were supplying a ministerial friend with estimates which would be required in order to obtain the financing of the purchase price of the hydrofoils, and I suspect, although it is only a suspicion, that both men knew that this was what they were engaged in. The plain fact is that no responsible Minister (or indeed any civil servant) could conceivably have acted upon the opinions that were given unofficially and were never followed up by any study or analysis of the hydrofoil project. Moreover, the “trial runs” of the hydrofoils had not begun. Anyone providing an estimate would be bound to await the results of those “trial runs". Both Mr Simmonds and Mr Pistana could not have imagined that what they were engaged in, or been aware that their estimates formed part of any serious consideration by Government towards the hydrofoil project. Government was displaying total indifference to the hydrofoil project other than as part of a package of developments in tourism being proposed in the Spring of 1985. No question had arisen at that time about guaranteeing a huge loan to the borrower, a St Kitts company. Questions about guarantees to the Credit Agreement came along by, at the earliest, the end of 1985.
Whatever reliance could be placed on the Simmonds/Pistana letters - and I conclude that they constituted no more than the merest of guesses - no Government could be absolved from obtaining sound, professional advice, either upon professional opinion based on formal instructions or from civil servants within the Ministry of Finance advising Ministers. No such advice was ever sought or obtained. The Simmonds/Pistana letters are a total diversion from the consideration of the Inquiry to the duty of Government to protect national interest in matters of financial administration. Had any reliance been placed on the Simmonds/Pistana estimates, they would surely have been subjected to detailed study within the Ministry of Finance. None took place. Had the Government performed in 1986 any audit of the operations of the hydrofoils, from August 1985 to March 1986 the dismal results would have evident and thereby prompted extreme caution about becoming a guarantor to the Credit Agreement. There would also have been revealed the stark fact that Nautical Trading was entirely financed through debt.
Part II A(4)
The Law Applicable to the Credit Agreement: Contractual and Tortious Liability
As long ago as 30 April 1993 (in a telex to the Italian Government), the Government of St Kitts and Nevis had stated that, in becoming a primary guarantor under the Credit Agreement of 30 May 1986, the Prime Minister’s signature to the Agreement was “a mere formality”. It became apparent only at the beginning of the oral hearings of the Commission on 5 October 1999 how serious a legal issue it raised. (Indeed it was only when Ms Mitcham, the following day, made an opening statement (at my invitation) to counter Dr Cheltenham's opening statement that she pinpointed the legal issue. Did the Government of St Kitts and Nevis in 1986 and thereafter undertake an enforceable (albeit contingent) liability by signing as primary guarantor to a loan of US $25,330,000 to Nautical Trading (St Kitts) Ltd as the borrower of 85% of the purchase price of the three hydrofoils from an Italian supplier?
Since the Credit Agreement of 30 May 1986 was governed by English Law and the legal issues seemed to me to be of some complexity, if ultimately the law was clear, I decided to appoint a legal assessor to the Commission. (Elsewhere I have described the role and function of an expert giving evidence as an assessor.) Accordingly, I invited Mr Nicholas Padfield QC to provide that expert evidence. (His qualifications and professional practice are provided in an appendix, together with his written opinion. He supplied the Commission with his written opinion on 7 November 1999, which was distributed to the participants and is annexed to this report at Appendix 14.) He gave oral evidence on 15 November 1999 and was questioned on behalf of Dr Simmonds. At that time Mr Tapley Seaton QC was not available to attend to ask any questions, but later I indicated that he would be given an opportunity to ask questions. It had been hoped that that would have taken place when the Commission sat on 16 December 1999. Mr Padfield was at that time conveniently on the island. That turned out not to be possible. Mr Padfield kindly agreed to return to St Kitts and was present for questioning by Mr Gonsalves on behalf of Mr Tapley Seaton QC on 10 January 2000.
In seeking expert evidence on the legal issues relating to the Credit Agreement of 30 May 1986, in conjunction with the associated agreements and financial arrangements, I should make it clear what my function is, and what is not my function.
The legal issues relating to the Credit Agreement revolve around the applicable law, both of contract and of tort. Faced with such legal issues of contractual and/or tortious liability, a Commission of Inquiry must be careful not to usurp the function of the courts of law. If and when there is litigation afoot, to determine the claims and counter-claims of the parties to the litigation, the courts will be the final arbiters (unless the parties choose some form of alternative dispute resolution). The Commission of Inquiry could not in any event anticipate how any claim might be framed, or predict what defences to any claim there might be. There could be issues about fraudulent misrepresentation, interpretation of any relevant statute, or an assertion that any period of limitation had run its course. It would, therefore, be unhelpful (if not a discourtesy) to any judicial body for the Commission even to use the language of the law of contract or of tort. Breaches of contract or negligence are terms of art referable to legal proceedings and not to maladministration in government affairs. Ms Mitcham on 12 January 2000 posed the question - why is the Government wasting millions of tax payers’ dollars to prove it has a debt? Proving or disproving a debt is a judicial function, not mine.
The Commission of Inquiry is, on the other hand, empowered by the Commission of Inquiry Act and the specific terms of reference to investigate and (if necessary) to criticise the conduct of those who had the responsibility for committing the Government of St Kitts and Nevis to the obligations entered into by the guarantee in the Credit Agreement. Did Dr Simmonds and Mr Tapley Seaton QC, in their respective ministerial and administrative roles commit a serious failure (or a series of failures) to attain the standard of public duties expected objectively from a Prime Minister of the Government of a sovereign state (albeit a small country) and from the Government’s Law Officer? The answers to those questions can follow a review of the governmental approach to the relevant events that led up to the signing of the Credit Agreement on 4 April 1986, and continued thereafter.
The Law
The expression, “a mere formality” would normally signify that the penning of a signature to a document confirmed the contractual arrangements already entered into; the signing goes to form and not substance. But the signature on the document was not an empty gesture, importing no contractual or other liability. The creation of legal relations occurs, moreover, independently of a signed document. Yet the Government of St Kitts and Nevis in 1993 clearly meant to convey the idea that it had not entered into any legal relations. Dr Simmonds in his evidence on 10 January 2000 said that the phrase indicated that the guarantee carried with it no liability for any losses suffered by anyone connected with the Credit Agreement. It did, however, represent to the Italian Government that its signature of 1986 acknowledged, extra-legally, that it fully supported the hydrofoil project; that it would refrain from any political action which could jeopardise the investment; and that when the hotel was built (a project in an earlier agreement of March 1985) the Government’s “guarantee would be replaced by proper legal authority”. The final paragraph in the faxed message invited SACE to look to others to satisfy their requests for payment, since the Government of St Kitts and Nevis had never derived any profit or any money from the hotel project or the hydrofoils. These matters, extraneous to the Credit Agreement, were added ostensibly to indicate that the guarantee was in essence a “mere formality”.
The legal view of the previous Government, propagated now by the then Prime Minister, Dr Kennedy Simmonds, that no potential liability was incurred by the Government was, and is fundamentally flawed. My views on the law are based upon the valuable expert advice from my legal assessor, Mr Nicholas Padfield QC. The failure of the Government, then and now, to appreciate the legal nature and scope of the Credit Agreement is a prime factor in my concluding the responsibility of Dr Simmonds and Mr Tapley Seaton QC in their respective roles of Prime Minister and Law Officer.
The legal issues resolve themselves into three discrete questions:
Contractual Liability, or Not
A signature to an agreement binds the signatory - in this case the Government of St Kitts and Nevis. This rule stems from the law’s approach, that the signatories to the agreement of a commercial nature intend to create legal relations. In a commercial contract the burden - a heavy one - of proving that there was no intention to create legal relations is on the party asserting that no legal effect was intended. It might be suggested that “a mere formality” was a way of saying that there was no intention on the part of the Government that the Credit Agreement should have any legal effect. Mr Padfield has advised me (and I accept his advice) that, in his view, there can be no doubt that there was an intention to create legal relations. During the questioning of Mr Padfield on 10 January 2000, Mr Gonsalves, on behalf of Mr Tapley Seaton QC, cited the judgment of Mr Justice Donaldson in Brown Shipley & Company Ltd v Amalgamated Investment (Europe) BV to the effect that legal consequences may flow even if they were not intended by the parties to a contract. I regard that proposition as wholly exceptional on the facts of the case, and does not detract from the general principle that the words used in a contract objectively indicate the creation of legal relations. The reasons for any lack of doubt about the intention to create legal relations are manifest.
The Credit Agreement was a lengthy, complex international commercial credit agreement involving a substantial loan of US $25,330,000. It was prepared by a leading firm of London solicitors, Allen & Overy, and was plainly treated by the parties as an important agreement. Its subject matter was the advancement of a loan by an international syndicate of Banks of 85% of the purchase price of three hydrofoils (spare parts and other equipment) exported from Italy under an export credit by the Italian governmental agency which provides insurance guarantees to Italian exporters for projects in developing countries. The Government of St Kitts and Nevis was the vital link in the chain; without its guarantee of performance by Nautical Trading (St Kitts) Ltd of servicing the loan, no performance of the agreement could take place. The only inference that can be drawn from this elaborate contractual arrangement was that a main beneficiary would be the tourist economy of St Kitts. The seriousness with which the parties treated that arrangement and the detailed agreement was the requirement for conditions precedent to be carried out. These were in Clause 8(a)(iii) and (vi). These conditions precedent involved certifications of certain matters by Dr Simmonds and Mr Tapley Seaton QC. These certificates were anything but “a mere formality”.
Clause 8(a)(iii) required the acknowledgement by the Government (with certified documents to Morgan Grenfell, the agent of the Banks) that all relevant consents and authorisations had been obtained “necessary for the making and performance of the Agreement by and for the validity and enforceability of this Agreement against….the Guarantor (viz., the Government) and/or required in connection with….the guaranteeing of the Borrower’s obligations hereunder….” A copy of the minute of the Cabinet meeting, certified by Dr Simmonds approving the Agreement, was an express requirement of the Clause. The agent, Morgan Grenfell, duly received it. (I shall deal fully with the Cabinet meeting of 4 April 1986 at a later stage.)
Clause 8(a)(vi) required the opinion of the Attorney General as to the corporate status of the borrower, Nautical Trading Co. The written opinion of Mr Tapley Seaton QC , which was given on 3 June 1986 (as subsequently amended by letter dated 15 September 1986) stated, among other things, that (1) the Credit Agreement was valid and binding on the Government of St Kitts and Nevis and was enforceable against the Government in accordance with its terms; (2) the liabilities of the Government would be accorded “full faith and credit obligations of Saint Kitts and Nevis, irrespective of any future change in the composition of the government….; and (3) the Government’s obligations under the agreement will constitute direct unconditional and general obligations of, respectively, the Borrower and Guarantor (viz., the Government)”. Specifically, in his opinion of 3 June 1986 the Attorney-General stated:
These steps, taken by Dr Simmonds and Mr Tapley Seaton QC, in compliance with the requirements of conditions precedent, suffice to make any suggestion, that the Government of St Kitts and Nevis was not intending to create legal relations, almost risible.
The matter does not rest there. Clause 10(a)(i) and (iii) (p.20 - 21 Appendix 13) of the Agreement, providing for representations and warranties given by the Government, mirrors the conditions precedent contained in Clause 8(a)(i) and (vi). Clause 10(b) has a special significance: the representations and warranties are continuing - “the representations and warranties…..shall survive the execution of this Agreement and the making of the Loan hereunder and shall be deemed to be repeated at the time for the making of the Loan and at all times while any amount payable hereunder is outstanding as if made at each such time with reference to the facts and circumstances existing at such time (Italics supplied)” Clause 11(b)(ii) reinforces the continuing obligation. It provides that the Guarantor will obtain and promptly renew, from time to time, all the contractual requirements to enable the Borrower and/or the Guarantor to perform their obligations. This means that, as events unfolded after May 1986, there was a continuing obligation on the part of the Government of St Kitts and Nevis to inform the parties of matters relevant to the Credit Agreement.
In short, the Credit Agreement could come into force only as and when the Government of St Kitts and Nevis complied with the conditions precedent. By its signature, it did just that. The Government accepted that the agreement was valid, binding and enforceable according to its terms. It accepted, moreover, that its obligations would constitute “direct unconditional and general obligations of, respectively, the borrower and guarantor (the Government)”. It finally recognised that its liabilities “were full faith and credit obligations”, irrespective of any change in Government.
Indubitably, the Government became legally liable under the Credit Agreement of 30 May 1986 when Dr Kennedy Simmonds signed as Prime Minister and Minister of Finance on its behalf. It is nonsense to claim otherwise. The compliance with the conditions precedent triggered off the drawdown of the loan of $25 million. It is not even a sustainable viewpoint, to the claim by Dr Simmonds, that he reasonably thought that the Government was not undertaking any legal liability. The plain fact is (as I shall find) that he never gave the matter the careful, indeed any sufficient consideration due to an important document containing such onerous obligations. At the very least, he should have armed himself with a legal opinion in writing, either from the Attorney-General or independent counsel. That he did neither is a factor of which I will have to take account in determining the question of maladminstration. It is conceded that any opinion was given orally by the Attorney-General who asserted that he had all the necessary expertise “in-house”. I do not agree. The Credit Agreement presented to him was such an important contract, involving a very large sum of money, that it demanded the kind of expert opinion that I have received from Mr Padfield. That similar legal advice was not obtained in 1986 was, according to Mr Padfield, astonishing. I agree.
The Government’s contractual obligations: their extent
Although the Government is described throughout the Credit Agreement as “guarantor” (its obligations as a “guarantee”) there is nevertheless a question whether the liability was confined to guaranteeing the servicing of the loan. From my stance as Commissioner of Inquiry, and not as a legal adviser to the Government, the point is academic. Yet, for the sake of completeness and because Mr Gonsalves was at pains to argue in favour of a guarantee and not an indemnity, I have thought it helpful to indicate now what precise liabilities the Government was undertaking. Mr Gonsalves argued in favour of a conclusion that the Government of St Kitts and Nevis was only a guarantor under the Credit Agreement. If that were the right conclusion (and I do not think it is) he goes on to assert that the Government’s liability to SACE would be dependent upon whether the insurance guarantee of 14 August 1986 was an insurance policy or a guarantee, on which point there appeared to be doubt under Italian law. Whatever maybe the position under Italian law as to the nature of the SACE agreement of 14 August 1986 the right to subrogation is unaffected. It was an express term of that agreement. It is precisely because the Commission of Inquiry must not usurp the function of a court that such an issue, as that raised by Mr Gonsalves of events post-May 1986, does not arise in the Inquiry.
The fact that no consideration has hitherto been given to the extent of the liabilities serves only to demonstrate how vital it was that, in entering upon the Credit Agreement, the Government should have known precisely what it was exposing its exchequer to. The total amount of any future indebtedness should have been one of the calculations in deciding where the Government should sign the Credit Agreement. That no such calculation was ever made is again a factor in determining the responsibility of Ministers. Mr Seaton told the Inquiry that in advising the Cabinet he took into account all the factors including specifically the Government’s policy towards the development of tourism. Whether he was right in that respect, it did not absolve him from giving a strict legal opinion on the scope and extent of the Credit Agreement based preferably upon independent advice or on advice from within his own department, irrespective of extra-legal considerations. The confusion of legal and extra-legal factors leads me to recommend that the function of the Attorney-General under sections 53(2) and 64(1) of the Constitution should be reviewed.
The Government’s liability as “guarantor” in Clause 9(a) (p.18-20 Appendix 13) - the governing Clause of the guarantee - is expressed in the following terms:
By the use of the phrase, “not merely as a surety”, the Government committed itself as a surety or guarantor, and the creditor Banks were also entitled to treat the Government either as a primary obligor or principal debtor. This point is reinforced by the wording in Clause 9(a) that “the Guarantor will on first demand make good the default and pay all sums which may be payable as if the Guarantor instead of the Borrower were expressed to be the primary obligor (Italics supplied)”. The guarantor was, of course, not the principal debtor: that was the borrower. But in certain circumstance, the guarantor will, “on first demand”, become liable to “make good the default of and pay all sums which may be payable” by the borrower (the principal debtor) as if the guarantor were expressed to be the primary obligor (or principal debtor) and not the borrower.
The inclusion of such Clauses, which entitles the creditor to treat the guarantor as a principal debtor, does not convert the guarantee into an indemnity, but it may create a hybrid. As Lord Donaldson of Lymington MR (when he was Mr Justice Donaldson) said in General Surety & Guarantee Co Ltd v Francis Parker Ltd, if the Clause is a hybrid it means that the considerations of guarantee or indemnity overlap. There are indicators in the agreement that point to the liability being exclusively that of guarantor. Mr Padfield in his written opinion sets out the rival arguments:
His conclusion - which he reiterated in answer to Mr Gonsalves’ questioning on 10 January 2000, and which I readily adopt - is that the nature of the obligation which the Government of St Kitts and Nevis undertook was a secondary liability as guarantor in the event of default by the borrower, the principal debtor. It also undertook a liability as the principal debtor in substitution of the borrower in the circumstances outlined. The extent of the Government’s liability was co-extensive with that of the borrower, irrespective of the Government being the guarantor or being treated as the principal obligor. Its obligations related to principal and interest due and payable by the borrower “until payment of such sums in full”. It was, and is a continuing obligation; and it is enforceable directly against the Government as a principal debtor. On any view of the legal liability incurred, the extent was commercially comprehensive, socially burdensome - the more so for a tiny state with limited resources - and politically vulnerable. Those factors alone called for the most anxious consideration based upon a full and detailed study of the legal obligations involved. No study was ever undertaken.
The Role of SACE
In its faxed message of 30 April 1993 the Government boldly, if not imprudently (in an early draft the word was “impudently” which would not be too far off the mark) told the Italian Government that SACE should look to others than the Government of St Kitts and Nevis to satisfy requests for payment of US $40 million (the loan plus interest) that it had outlayed to the creditor Banks. That retort to the demands from Italy has been, in effect, repeated before the Inquiry. Indeed, Ms Mitcham asserted that SACE was never a party to the Credit Agreement: QED, no claim lay against the Government. It was further claimed, with breath-taking boldness that, since the Banks had been fully refunded the loan with interest, that was effectively the end of the matter. The opposite is the simple, legal truth. True enough, SACE was not a party to the Credit Agreement, although the recital - (B) - stated that the agreement was predicated upon the “support of Sezione Speciale per L’Assicurazione del Credito all ‘Esportazione (SACE)”, a fact that appears on the cover of the Credit Agreement. The fact that SACE was never a contracting party is of no importance. The material fact is that the creditor Banks made an agreement, dated 14 August 1986, with SACE, whereby the risk of default under the Credit Agreement was provided for. SACE was, thereby, subrogated to the rights of the creditor Banks. Before I develop the consequence of subrogation, it may be helpful to describe the nature and function of SACE, as it appears from the opinion of Dott. Proc. Antonino Samperi, a partner in the law firm of Studio Avv. Ercole Graziadei, which is derived from the documentation sent by Morgan Grenfell with the Credit Agreement.
SACE
Export guarantees are given by Government agencies in the countries of the developed world for the purpose of encouraging trade with territories in the under-developed world. Italy’s export credit agency, SACE, is a special department of the National Insurance Institute. The Law No.227 of 24 May 1977 recognised SACE’s “public” legal status with independent management. The Republic of Italy automatically guarantees the insurance commitments undertaken by SACE, provided that SACE does not exceed the maximum amounts comprised within the state annual budget.
By an agreement (the SACE agreement) of 14 August 1986 (be it noted, during the period leading up to the draw-down under the Credit Agreement) with the creditor Banks, SACE provided a guarantee to cover the loan guaranteed by the Government of St Kitts and Nevis. By Article 4 of the SACE agreement its guarantee was governed not only by the specific legislation relating to export guarantees “but also by provisions in the Civil Code referring to insurance in general and insurance against damages….” Dott. Proc. Antonino Samperi, an Italian lawyer, provided the parties to the Credit Agreement with an opinion that there were arguments for saying that, contrary to SACE’s own view, the agreement was not an insurance policy, but a guarantee - that is to say , a secondary obligation which would be dependent on the initial validity and enforceability of the underlying obligation. It matters not which is the correct view, because SACE has in practice paid out the full amount of the guarantee. The SACE agreement, which specifically recognised and inter-linked with the Credit Agreement, provided for SACE to be subrogated to the rights of the creditor Banks. Article 15 of the SACE agreement, under the rubric of SUBROGATION, provides as follows:
The discharge by SACE of the obligations of Nautical Trading (St Kitts) Ltd did not mean that the Government of St Kitts and Nevis was, as a result, itself discharged from its obligations as guarantor. Quite the contrary: it was not Nautical Trading that discharged the obligations to the creditor Banks, but SACE. Since SACE was subrogated to the rights of the creditor Banks, and since the creditor Banks could call on the Government of St Kitts and Nevis as “primary obligor” under Clause 9(a) of the Credit Agreement, SACE can claim back from the Government the full amount of what it has paid out to the creditor Banks. That is the full amount which Nautical Trading as the borrower should have paid. Mr Padfield’s advice to me is that the Government of St Kitts and Nevis can be treated as the “primary obligor” and not merely as a guarantor of the principal debtor’s obligations under the Credit Agreement. I accept that advice. Since SACE is subrogated to the rights of the creditor Banks, and since the Government is the “primary obligor” under Clause 9(a) of the Credit Agreement, SACE likewise can treat the Government as a primary obligor. SACE may recover what it has paid out to the creditor Banks, on the basis that the Government is to be treated as if it were the borrower of the monies loaned to Nautical Trading.
I should note an argument advanced by Ms Mitcham. She submitted that there was no indebtedness of US $25 million, since (among other things) “there can be no subrogation of the debt by SACE to recover any money from St Kitts and Nevis since it was the borrower who paid to insure the loan.” In fact the premium was paid by Mr Rodriquez, the Italian seller of the hydrofoils. In any event I reject this submission. Whoever pays the premium on an insurance guarantee in a complex international commercial transaction is irrelevant to the right of subrogation. In this case the right of subrogation was central to the whole Credit Agreement of 30 May 1986 and its surrounding arrangements, but for which the Credit Agreement would never have happened.
A Different Perspective
Even if it were arguable that the Government of St Kitts and Nevis was not contractually liable to SACE for the amounts paid out by SACE to the creditor Banks, there is an alternative way in which the law would affix responsibility on the Government of St Kitts and Nevis for the loss suffered by SACE. Given the interlocking relationship between the Italian exporter, the St Kitts company borrowing from a consortium of Banks the money to purchase the hydrofoils from the exporter, and the Italian export credit agency, expressly on the face of the Credit Agreement, supporting the lending of the money under an agreement with the creditor Banks, English law will readily import a duty on the part of the Government of St Kitts and Nevis to take care in performing its acknowledged tasks.
Starting from a House of Lords decision in 1963, called Hedley Byrne & Co Ltd v Heller Partners Ltd, up to 1999, the courts have developed a principle that it is a normal requirement from the circumstances of related activities that a person undertakes some responsibility outwith the law of contract - namely, in the field of tort liability. Where there is a contract, there is no difficulty about the contracting parties: the question is whether there is a warranty to perform some stated task. In order that a person can claim from another some legal remedy, there must be established a proximate relationship between that person and the person causing the former some loss or damage which brings them virtually into the position of persons contracting with each other.
In Hedley Byrne advertising agents had placed substantial forward advertising orders for a company on terms that they were personally liable for the cost of orders. They asked their bankers to inquire into the company’s financial stability; their bankers duly made inquiries of Hedley Byrne, merchant bankers, that gave favourable references - but stipulated that they were “without responsibility”. In reliance on the reference, the advertising agents placed orders that resulted in a loss of £17,000. The House of Lords held that a negligent, though honest misrepresentation, could give rise to an action for damages for financial loss caused thereby, apart from a contractual or fiduciary relationship. The basis for the action was that the law implied a duty of care when a party seeking information or assistance from a party possessed of a special skill or judgment trusts him to exercise due care, and that party knew or ought to have known that reliance was being placed on that skill and judgement. (The express disclaimer by the bankers in that case excluded a duty of care). The Hedley Byrne decision has been consistently applied in a number of analogous situations.
In Caparo Industries plc v Dickman and others the House of Lords, in five separate, concurring speeches, unanimously applied the Hedley Byrne decision and in the process indicated the factors to which significance was to be attached as guides to the existence, scope and limits of the varied duties of care which the law imposes. I cite only one passage from the lengthy judgments. Lord Oliver of Aylmerton said (at p.637E-F):
That decision was again applied in the Court of Appeal in James McNaughton Paper Group Ltd v Hicks Anderson & Co (a case incidentally in which Mr Padfield appeared for the successful defendant). Neill LJ (p.122G - 123C) basing himself on Hedley Byrne and Caparo, adopted the analysis of recent jurisprudence in the Privy Council and the House of Lords made by Lord Bridge of Harwich in Hedley Byrne said (p.617-8):
Neil LJ added (p.123F-G) that “at this stage the common law of England will develop step by step” and (p.123H) that “in the absence of some general principle, to examine each individual case in the light of the concepts of foreseeability, proximity and fairness…” I should add that in both Caparo and Hicks Anderson, the courts found that there was no duty of care; in Caparo (the liability for economic loss due to negligent misstatement was confined to cases where the statement or advice had been given to a known recipient for the specific purpose of which the maker was aware and upon which the recipient relied and acted to his detriment; auditors were deemed not to have a special relationship with shareholders of the audited company who, like any other investor, might purchase additional shares. In Hicks Anderson, accountants who prepared draft accounts inaccurately describing the financial state of a group of companies under a threat of a take-over, owed no duty of care to the successful bidder who suffered loss as a result of the take-over.
In Hedley Byrne Lord Devlin (p.532) concluded his lengthy judgment by stating that the question of liability in negligence for careless misrepresentation is whether the person harmed can set up “a claim equivalent to contract, and rely on an implied undertaking to accept responsibility”. “Equivalent to contract” and “assumption of responsibility”, as the key elements of tortious liability, were affirmed most recently by the High Court of Australia in Esanda Finance Corp. Ltd v Peat Marwick Hungerfords.
The acceptance by the Government of St Kitts and Nevis in 1986 to be primary guarantor under the Credit Agreement classically exemplifies the twin elements. I have no doubt that the courts in England would consider that, in becoming a party to the Credit Agreement as a guarantor of the lending by the creditor Banks, the Government of St Kitts and Nevis was contractually liable to all the participants in the two interlocked contractual agreements in ensuring that it was appropriately taking on the burden of guarantor. It is the variegated contractual obligations with the representations and warranties that underpin the law’s imposition of a duty of care, made the more imperative by the continuing obligations of the guarantor, an obligation that survives to this day. Manifestly, there was both proximity between SACE and the Government of St Kitts and Nevis and, by the nature of the financial arrangements for the loan to Nautical Trading that the Government voluntarily assumed responsibility such as to impose a duty of care.
During the course of the oral questioning of Mr Padfield on 15 November 1999, I floated the idea of this different approach to the law’s imposition of liability on the Government of St Kitts and Nevis. He did not demur. He accepted the proposition that, given the circumstances of the interacting contractual obligations, English law would not be stultified in applying the law in the manner I have described. Neither Ms Mitcham nor Mr Gonsalves at any time addressed any argument to me on the lines of a tortious liability; they concentrated entirely upon the contractual liability under the Credit Agreement. Apart from the clear contractual liability, the question posed for me is: Given the duty of care, was the Government of St Kitts and Nevis in breach of that duty in signing the guarantee? Put another way, were there acts of maladaministration or mismanagement in the manner in which the Government should have satisfied itself of the propriety of its commitments under the Credit Agreement of 30 May 1986?
A footnote to the question: was the Prime Minister’s signature a “mere formality”? I have indicated that to describe the legal consequence of the signature as primary guarantor to the Credit Agreement as a “mere formality” was, and is wholly inappropriate, since it completed the liability for the loan. That description could be made only if the manner in which the Government of St Kitts and Nevis dealt with the negotiations leading up to 30 May 1986 was perfunctory, i.e., was simply setting the seal to an acknowledged liability of indemnity to lending Banks. That was not the case, although I confess that at times the inaction and lack of proper processing of the primary guarantee displayed inattention, indeed indifference to the administrative details.
Since I have concluded - as indeed any legal adviser should have concluded in 1986 - that the Government exposed itself to contractual and tortious liability on the default in the servicing of the loan, the conclusion must be a serious failure by Government. At every stage of the formation of the Credit Agreement (probably the end of November 1985 till 30 May 1986) there was an absence of attention to the facts of a complex document. It is not without interest that the letter of 11 January 1986 from Roger Morgan to Michael Powell, containing an early draft of Clause 9 of the Credit Agreement, was initialled by Mr Powell on each page of the Clause. Mr Powell, in his evidence to the Inquiry, had no recollection of seeing the document, although he acknowledged that the initials were his. I conclude that the document did not pass into the hands of Mr Powell’s government colleagues; no such document has been uncovered from government files, although it is asserted by both Dr Simmonds and Mr Tapley Seaton QC that the documentation relating to the Credit Agreement would have been in existence at least in 1992 and 1993 when the exchanges were taking place between the Governments of Italy and St Kitts and Nevis.
A tailpiece: It is asserted that it would invariably be wrong for a tribunal to conclude that something is unarguable if the legal issues or the documents to be construed are inherently complex. Thus, the assertion goes, Mr Padfield’s view that the Government’s submission that it incurred no liability in reality under the Credit Agreement is unarguable, is unsustainable; he should have concluded that the Government’s liability was at least in doubt.
I am reminded of what Lord Greene MR said in Cow v Casey:
Having fully canvassed the provisions of the Credit Agreement, I am convinced that the assertion that the Government of St Kitts and Nevis in 1986 undertook no legal liability is unarguable.
Part II A(5)
The Aftermath of the Draw-down, Post-31 October 1986
At the draw-down of the loan on 31 October 1986 everything was in place for the monies to be paid to the Italian suppliers in payment by Nautical Trading the borrower under the Credit Agreement. The two hydrofoils that went to Puerto Rico in March 1986 had not reappeared, and there was no prospect of them doing so; they turned up in Cyprus in 1992. Nautical Trading was, therefore, without income from the hydrofoil service that had ostensibly been contemplated by the sale and purchase of the three hydrofoils in early 1985. What transpired between the draw-down date and the breakdown in the repayments on the loan was to a great extent beyond the knowledge of Government, let alone any ability to influence events to stem the tide of financial losses to SACE and the Government of St Kitts and Nevis. The ministerial actions, such as they were, responded to a realisation that the whole enterprise was a fraud and that attempts at rescuing the situation were correctly tried and inevitably failed. What follows in the rest of this chapter is merely a chronicle of the major events, interspersed with reference to occasional ministerial action.
On 31 October 1986 the money transactions took place. Rodriguez of SNAV received US $25,330,000, the purchase price of the hydrofoils. On the same day SNAV, the supplier, forwarded US $12.2 million from Banco di Sicilia, Messina, to Morgan Grenfell. There were two transactions, one of US $10,450,000 for payment of 25% ownership acquired in Nautical Trading; the other, US $1,750,000 was to be separated in the accounts of Bluematt Investments Ltd, and Nautical Trading. (At this point Bluematt was 75% owner of Nautical Trading. SNAV owned the other 25%.) The US $10,450,000 was used to pay the deposit of US $6,465,634.41 & Deutsche Bank Luxembourg to satisfy a deed of indemnity and security for the first three payments of the loan and 85% of the third payment. US $270,310.11 was credited to Nautical Trading for operating capital. US $1,777,938.74 and US $1,936,116.74 was paid, through Morgan Grenfell, to Chase Manhattan Bank NA Luxembourg, in the names of Sycamore and Bramhall respectively, separate trust accounts that were corporate veils for Mr Morgan and Mr Adams, and represented their commissions on the sale of the hydrofoils. Around this time the directors of Nautical Trading were no longer in control of daily operations. Aliscafi SNAV S.p.a, the 25% shareholder (Rodriquez) was effectively controlling the operations of Nautical Trading.
The amount of US $1,750,000 was deposited to the account of Nautical Trading and used to pay Morgan Grenfell its management fee of US $506,000, expenses of US $150,000, first agency fee of US $15,000 and a bank commitment fee of US $53,826.25. The outstanding amount of US $1,025,173.35 was placed on deposit, alongside the US $270,310.11. It appears that Mr Rodriguez paid all the costs associated with the contract, in addition to the purchase of 25% shareholder interest in Nautical Trading. He also paid the premium on the insurance guarantee from SACE, an amount of US $861,760.
By the autumn of 1986, revenues to Nautical Trading began to dry up. Information from Puerto Rico (where the hydrofoils were apparently operating) is lacking. Bits of documentation did emerge from the London end of the various money transactions. By then the Government of St Kitts and Nevis had become alive to the problem, having indicated that it wanted to acquire a shareholding in Nautical Trading. On 1 December 1986 Roger Morgan’s legal adviser, Mr Rupert Wright telexed his client that a call had been received from Ms Constance Mitcham, the Minister for Women Affairs. She said that the Government had received the share certificate for US $1.25 million, but was concerned that the company documents were not current, the tax needed to be paid in relation to the share capital, and that a Board meeting should be held in St Kitts (they had invariably been held in Brecon, Wales) and a representative of the Government be appointed to the Board. The Government also wanted to be informed how much of the money had been drawn-down in relation to the loan.
Over the next three months Mr Morgan instructed Mr Ian Fieldhouse, Price Waterhouse, to investigate NTS ltd and also prepare statements of affairs for NTS Ltd. On 8 April 1987 Mr Michael Powell sent a telex to Rupert Wright advising him that the Government had concerns with NTS Ltd. It appears at this point that the Government no longer wanted to be involved in the operation. On 13 April 1987 Roger Morgan, Bill Adams, Rupert Evans and Ian Fieldhouse met to discuss the action that should be taken. Mr Fieldhouse completed both minutes of the meeting, as well as “off the record notes” of this meeting. It is evident from the contents of the “off the record notes” that Mr Adams clearly misrepresented and deceived Mr Fieldhouse as to his business activities and background.
Documentation from Price Waterhouse indicated that Mr Tapley Seaton QC attended a meeting on 20 May 1987 at the High Commission in London to discuss the problems with NTS Ltd. There is also a letter from Mr David Mills (solicitor for Leopoldo Rodriguez) to Mr Seaton concerning the problems with NTS Ltd company status and the provision in the agreement to transfer 20% of the shares of the company to the government. Mills again wrote on 5 June 1987 referring to the meeting of 20 May at the High Commission. Ian Fieldhouse’s notes of a telephone conversation with Rupert Wright on 7 October 1987 indicated that a meeting had occurred with the Attorney-General of St Kitts and Nevis, Wright and Morgan, and the content of the meeting concerned the transfer of shares to the Government. Another note of a call presumably on the same date:
The Attorney-General apparently believed there was still a future for NTS Ltd. Rupert Wright subsequently sent a draft agreement that had been approved by David Mills. He stated in his letter that he understood that the Government was meeting shortly to approve the proposed sale of shares to the Government, agreed to at that meeting in London on Tuesday 6 October 1987. The agreement is eleven pages in length.
On 19 November 1987 Mr Tapley Seaton QC sent a telex to Morgan Grenfell:
Under the terms of the Credit Agreement the first instalment became due on 30 April 1987. The security deposit placed with the Deutsche Bank, Luxembourg, covered the first three principal instalments, and 85% of the fourth instalment. By the end of 1988, however, NTS Ltd was in default of its loan, and SACE was required to make the payments. The third instalment became due on 30 April 1988 and the fourth due in October 1988.
On 21 March 1992 Winnerstar Shipping Company Ltd, Cyprus agreed to purchase the three hydrofoils: San Christobal II, Princess Zoe and May W Craig. Winnerstar Shipping Company was incorporated 4 July 1991 and was represented by David Mills. The Italian authorities report that the actual owner and directing mind of Winnerstar is Vittorio or Giovanni Morace, the former General Manager of Aliscafi Snav SpA. The vessels were sold for US $380,000, a very low sale price, given the purchase value of US $29,800,000 in 1986.
By May of 1988, the Government of St Kitts and Nevis received telexes from the Embassy of Italy, Caracas, Venezuela notifying them that payments and interest due 29 April 1988 had not been paid by NTS Ltd and SACE had to pay the relative indemnity to Morgan Grenfell by 3 June 1988. The Italian Embassy indicated they would be grateful for any prompt and useful action to settle the matter. The Government of St Kitts and Nevis replied stating that the Attorney General would travel to Italy the week of 19 June 1988 to discuss the matter. The reply also states “…The Government of St Kitts and Nevis is taking all necessary prompt and useful action to ensure the payment by Nautical Trading St Kitts Limited of the outstanding interest due”. Mr Seaton did travel to Italy for this purpose and met with SACE officials, as well as Mr Cavalchini of the Ministry of Foreign Affairs, Italy.
A two-page report, dated 28 June 1988, titled “Director Announcement” (SACE - Special Division for Credit Insurance In Exports) was made. The report states that Mr Tapley Seaton QC was in the offices of SACE to explain the situation. Mr Cavalchini of the Ministry of Foreign Affairs also received him. The report states:
The report stated that Mr Seaton was striving to solve the matter out of court and the Government was examining the possibility of buying back the share of NTS Ltd. Subsequent to this report, there appears to be no other contact between the Government of St Kitts and Nevis and the Italian Government for some time, until the meeting between Mr Egone Ratzenberger and Dr Simmonds on 2 November 1992 (see Part II A(6)).
Around this time, the Italian prosecuting authorities began a criminal investigation of Leopoldo Rodriguez and Vittorio (or Giovanni) Morace of SNAV and officials of SACE the former two are alleged to have:
For reasons of the inadequacy of the documentation (particularly at the St Kitts end of the transactions) the unavailability of crucial witnesses from abroad who could fill in some of the gaps in the Commission’s present state of knowledge, I make no findings in respect of anyone in Government in St Kitts and Nevis during the period from 31 October 1986 until to-day, save for two exceptions. First, the meeting of 2 November 1992 between the Italian envoy and the Prime Minister throws light on the attitude of the Government of St Kitts and Nevis to its liability under the Credit Agreement. Second, there is the response of Dr Simmonds and Mr Tapley Seaton QC to the Letters Rogatory of 1996 (see Part II A(7)).
Part II A(6)
The Meeting of 2 November 1992
Italy’s interests in the Caribbean are exercised principally out of its mission at Santo Domingo in the Dominican Republic. The Italian Ambassador in 1992, Dott. Rosselini, felt concern about the consequences to his country resulting from the default by Nautical Trading Co of St Kitts on the Credit Agreement. He reported back to his Government in Rome that someone from the Inspectorate within the Ministry of Foreign Affairs should conduct an investigation and meet with Ministers in the Kennedy Simmonds administration to clarify the circumstances of the hydrofoils and discuss the Italian Government’s disquiet about the huge liability which SACE had suffered under its insurance guarantee of 1986.
Mr Egone Ratzenberger, who was then the Deputy Inspector General in the Ministry, was sent as Ambassador-Pleinipotentiary to conduct the investigation. Together with Ambassador Rosselini, he arrived in St Kitts on All Saints Day 1992, and the next day the two Italian diplomats were received by the Prime Minister, Dr Kennedy Simmonds and one other Minister for a meeting at government Headquarters lasting about an hour. The meeting was not attended by any civil servant, and no official note came into existence. Mr Ratzenberger made his own contemporaneous note, from which he composed his report of 28 November 1992. This report was an internal document, not intended for circulation. Subsequently, when the Italian authorities on 13 November 1995 sought judicial assistance in the form of Dr Simmonds and Mr Tapley Seaton QC being examined in St Kitts as witnesses in Italian criminal proceedings, an English translation of Mr Ratzenberger’s report accompanied the letters of request. The English version of the report was circulated to participants in the Inquiry for any observations.
Mr Ratzenberger came to St Kitts to give oral evidence on 16 November 1999, but due to the activities of Hurricane Lenny he was unable to be called to give evidence until the morning of 20 November 1999. The circumstances of the Inquiry arranging for Mr Ratzenberger to be taken on a Saturday morning in the wake of the devastation caused by Hurricane Lenny provoked a minor storm from Dr Simmonds. On Friday 19 November 1999 on the local radio he denounced the Commission of Inquiry for its insensitiveness, and concluded that it showed how “evil” the Commission was. The Commission issued a statement that evening (which was similarly broadcast) explaining that Mr Ratzenberger had to return on the Saturday to his post as Ambassador to the Republic of Slovakia in Bratislava. Counsel for Dr Simmonds were contacted in order that they might attend to ask questions of Mr Ratzenberger. In the event Mr Vernon Viera alone, on behalf of Dr Simmonds, did attend. With pronounced courtesy and gentle effectiveness, he asked Mr Ratzenberger a number of pertinent questions (Mr Viera was insistent that he was not “questioning” Mr Ratzenberger; rather he was putting the matter relating to the 1992 meeting “in its context”. The impression that Mr Viera gave was that he was, in effect, apologising for his client’s outburst on the radio the previous day.)
Mr Ratzenberger produced before the Commission of Inquiry the original version of his report in the Italian language, and stated that he regarded the translation into English as “very good”. Hence, no point was taken by Mr Veira of any difference in meaning between the Italian and English versions. But Mr Viera prefaced his questioning by saying that Mr Ratzenberger’s report and oral evidence relating to what Dr Simmons is recorded as having said had to be interpreted in the diplomatic context of the meeting of 2 November 1992. Mr Ratzenberger did not demur from that proposition, so far as it was intended to reflect Dr Simmonds’ interpretation of what he was recorded as having said on that occasion. I have no hesitation in so deciding the full impact of that meeting. It would have helped me to arrive at that position, had there been on the files of the Prime Minister’s office a record from the Kittitian side of what was said. I am unsure whether in similar situations in other democratic countries there would have been present a civil servant taking a note. But since transparency and public accountability - the twin pillars of good governance - were not notable features of the Simmonds administration, I am not surprised that no record appears to have been made. Without a Kittitian version of the meeting, the Commission is, once again, handicapped. The natural inclination is to prefer the version that is recorded. But, in fairness, I have adopted initially a neutral stance.
While Mr Ratzenberger was highly critical of the Government of St Kitts and Nevis - “ The Government of St Kitts and Nevis is certainly responsible of serious negligence and disconcerting irresponsibility towards our country.” - he did not spare Morgan Grenfell - “the bank never expressed uncertainty towards operations in territories” until recently under the British Crown, therefore the banking system had the “possibility to get concrete information. It would be necessary to present a denunciation of a similar attitude by the appropriate banks.” - or his own country’s agencies - “it is also necessary….to question the Italian maritime authorities, the export company and everybody else capable to contribute to reconstruct the different phases of the affair…” The responsibility of all those who participated in arranging the loan for the purchase of the hydrofoils is a matter for later considerations on two matters which Mr Ratzenberger recorded responses form Dr Simmonds. Most of the talking on the Kittitian side was conducted by the other person present. Dr Simmonds in his evidence to the Inquiry has been unable to recall who it was accompanied him; he could not say whether it was a fellow Minister or an officer in the Ministry of Foreign Affairs. Mr Ratzenberger could say only that he thought it was the person responsible for the harbour.
The two matters were: first, on the question of providing information about the movements of the hydrofoils. Dr Simmonds, in confessing that “nothing was done” in that regard, was recorded as being “embarrassed, but not too much”. That confession was confirmed by Dr Simmonds when giving evidence to the Inquiry. The failure to trace the whereabouts of the hydrofoils, post-March 1986, is a topic for a later chapter.
Second, Mr Ratzenberger asked Dr Simmonds what he thought about the development of the affair, to which Dr Simmonds is recorded as having “limited himself to make his apologies and to hope that our government would ‘give a pardon’ for this debt.” Before the Commission of Inquiry, Mr Ratzenberger affirmed Dr Simmonds’ remarks and stressed how he was certain that the word “pardon” was used. On the face of it, it would appear that Dr Simmons was conceding the liability (at least in part) of his Government as the guarantor of the loan and was seeking release from the legal consequences of the admitted indebtedness. It was more than an apology because, unlike the apologist, the giving of the pardon had to come from the Italian Government. Initially, in his written responses to the Commission Dr Simmonds would have me interpret it as simply an expression of regret for what has happened without conceding that the Government of St Kitts and Nevis had incurred any legal liability. It is true that this liberal, even generous interpretation of “seeking a pardon” is consistent with all other pronouncements from the St Kitts and Nevis government. For example, in response to the faxed message of 30 April 1993 from the Italian Government - no doubt a direct follow-up of the report which Mr Ratzenberger made to his Government - the St Kitts and Nevis Government was hotly denying any legal liability by the reference to the signing of the guarantee as a “mere formality”. Indeed, Dr Simmonds was simultaneously giving the impression to Mr Ratzenberger that the Government of St Kitts and Nevis would not meet its obligation. Mr Ratzenberger records that, in respect of the failure to trace the hydrofoils, “perhaps also for other reasons that cannot be confessed the persons in charge of St Kitts preferred to wait, since the Government was aware that they would not pay nothing for the debt they imprudently contracted.” Allowing for the dubiety of the double negative, I interpret Mr Ratzenberger as having ruefully, if critically accepted that nothing financial was forthcoming from this Caribbean source. And so it has proved to be. The Italian Government has taken no legal action, either in the courts of St Kitts, in Italy or England where the law relating to sovereign immunity from suit would not appear to allow any escape for the St Kitts and Nevis Government. In the result, Dr Simmonds, speaking for his Government has, in effect been given “the pardon” he asked for. And since “the pardon” has been granted, without resort to any legal proceedings, Dr Simmonds might interpret that consistently with his assertion - incorrectly, as I have found in chapter Part II A(4) on the relevant law - that the guarantee he signed did not give rise to legal liability. In the questioning of Dr Simmonds, it appeared that Dr Simmonds had been willing to accept his Government’s liability if the Italian Government was in turn agreeable to assist in developments on a broader basis in the future.
There is no conflict in the factual evidence. What Mr Ratzenberger heard, and recorded in his report of 1992 (and endorsed in 1999) carries total conviction. The only area of difficulty arises from a possible cultural gap. Mr Ratzenberger understands and speaks English with a fluency that one would expect of an Italian diplomat of distinction. He readily conceded in his oral evidence that Dr Simmonds may not have been confessing to legal indebtedness. With that Mr Ratzenberger would have no quarrel, save for the emphatic point that the Italian Government was insisting on St Kitts’ legal liability. The “pardon” is a word susceptible to demonstrate a subtle difference between a confessed liability from which relief was sought, and an expression of sorrow for a failed enterprise for which liability lay elsewhere than with the borrower and any guarantor.
Irrespective of any rival contentions over legal liability for the loss suffered by SACE (and hence the Italian Government) there was the clearest indication on all sides that the affair of the hydrofoils was a scandal waiting to be fully investigated. On any view a number of persons and organisations were partially to blame. But who, when and how? Any responsible Minister would instinctively have responded to the exchange of information and views at the meeting on 2 November 1992, by setting up a Commission of Inquiry. At that time it might have been possible to engage the interests of both the Italian and British Governments in a joint inquiry, or an inquiry in St Kitts supported and in part funded by the two European countries. There is no evidence that Dr Simmonds (as Minister for Inquiries) gave the slightest consideration to such a move. And even now the idea of a Commission of Inquiry would not be regarded by Dr Simmonds as permissible. If, as appears to have been the case, the Italian government, via SACE, was deciding to forego legal proceedings, the forebearance of the Italians deserved to be matched by a willingness on the part of the St Kitts and Nevis Government to find out the truth and to determine where blameworthiness lay. Good governance, in my view, dictated the deployment of a Commission of Inquiry. It ill-becomes Dr Simmonds, in 1992 and now in 1999, constantly, with manifest partisanship, to berate the present Government for setting up the Commission of Inquiry in 1997, albeit belatedly and at considerable cost. No doubt any commission of Inquiry in 1993 would, as I have found now in 1999, have come to the conclusion that the Government in St Kitts and Nevis was seriously at fault in 1986 in entering into a palpably imprudent and improvident contract of guarantee of a loan of US $25,330,000. The fact that Dr Simmonds and his political colleagues would inevitably have been found wanting in their administration of affairs pertaining to the Credit Agreement is no excuse for denying the public an exposure of a commercial scandal involving its Government. Indeed, the suspicion of governmental maladminstration rather than external fraud is a factor that should have weighed heavily in favour of a Commission of Inquiry. Such a step taken by the Government of St Kitts and Nevis might have gone a long way towards assuaging the understandable irritation felt by the Italian Government. The meeting of 2 November 1992 should have proposed Dr Simmonds to set up a Commission of Inquiry at the latest in 1992.
Part II A(7)
The Letters Rogatory 1996 - 2000
Mr Egone Ratzenberger’s translated report of 28 November 1992 was received as an enclosure to a letter of request, dated 13 November 1995, from two assistant prosecutors in Rome investigating in connection with criminal proceedings against officials of SACE and officers of ALISCAFI SNAV. In the light of information revealed in Mr Ratzenberger’s report about the Italian Government’s inability to verify the various responsibilities for the disappearance of the hydrofoils, the Rome prosecutors were requesting that the former Prime Minister, Dr Kennedy Simmonds and the former Attorney General, Mr S W Tapley Seaton QC, should give evidence in the Italian criminal proceedings concerning, among other things, “the non-payment of the state of St Kitts that vouched for the operation [and] for the credit misstatements concerning the financing granted” by the seven banks to Nautical Trading. The two prosecutors asked to be allowed to be present at the examination [see over]. The letter of request was made through the recognised diplomatic channels to the Minister of Justice (i.e. the Attorney-General) of St Kitts asking for judicial assistance from the authorities of foreign country in pursuance of the comity of nations. The formal Letter of Request (Rogatory Commission) was received by the St Kitts and Nevis Government from the Italian Embassy in Santo Domingo on 17 January 1996; a supplementary letter was received on 4 March 1996. There had been an intimation in November 1995 of the forthcoming request. On 22 May 1996, Crown counsel appeared before Mr Justice Neville Smith who requested that material about the criminal proceedings in Rome should be supplied. On 25 June 1996 Crown counsel filed a supplementary affidavit exhibiting the further information from the Italian Government. On that day an ex parte order was made by Mr Justice Redhead, and a date for examination of the two witnesses was set for October 1996; fresh dates were set for November 1996. Dr Haynes Blackman, the Chief Magistrate, was appointed to be the examiner. By letter, dated 19 November 1996, Dr Blackman indicated that he would await the outcome of the summons, which had been filed on 13 November 1996, to set aside the subpoena on Dr Simmonds and Mr Seaton to attend for examination as witnesses. It had been made abundantly clear in the letter of request that Dr Simmonds and Mr Seaton were in no way liable as witnesses to any penal sanction. This evidence was simply designed to gather material for the criminal proceedings.
To complete the events that followed the application to set aside the subpoenas, hearings on the application by Dr Simmonds and Mr Seaton took place before Mr Justice Neville Smith in November 1996 and January 1997. Judgment on the summons to set aside the subpoenas was delivered by the judge on [date] February 1997. The judge upheld a submission that since the independence of St Kitts and Nevis in September 1983, the English legislation governing the jurisdiction to supply evidence to foreign tribunals had lapsed, and that nothing had replaced it under the laws of St Kitts and Nevis. The letter of request was therefore invalid. The Attorney General gave notice of appeal against the judgment of Mr Justice Neville Smith. Indeed, I am bound to proceed on the assumption that the judge accurately stated the law of St Kitts and Nevis; unless and until such time as the Eastern Caribbean Court of Appeal reverses him, that is the law. Under the existing law, there is no formal machinery for examining Dr Simmonds and Mr Seaton before the Chief Magistrate as witnesses in the Italian proceedings.
The point for this Inquiry remains, however, whether Dr Simmonds and Mr Seaton acted properly in their approach to the request from the Italian authorities for evidence in the criminal court in Rome. In other words, should Dr Simmonds and Mr Seaton have indicated their unqualified willingness to assist the Italian prosecutors and, if necessary to that end, to waive any jurisdictional hurdle to giving evidence? Why did they frustrate the Italian request by issuing the subpoena to se aside the ex part order of Mr Justice Redhead?
Mr Seaton in his answers of 4 October 1999 to a questionnaire, said that “when the letters of request came from the Italian prosecuting authorities in November 1995/January 1996 I did not give any reason for not readily acceding to the request that I give evidence as a witness. I passed the documents to my solicitors for review. They advised that the matter was not in order and that the documents were significantly defective. They informed counsel [Mr Fitzroy Bryant, now deceased] that he should put his documents in order and that once that was done I would have no difficulty in acceding to the request. I could not accede to an improper and invalid request. The court [referring to the judgment of Mr Justice Neville Smith] agreed with the position of my counsel”. Dr Simmonds’ response was to like effect. In their oral evidence on 10 January 2000 the two men reaffirmed their written evidence. Mr Seaton was insistent that throughout he desired to co-operate and as and when the defect was remedied he would be only too happy to comply. Dr Simmonds did not adopt that stance. He indignantly claimed that it was his “constitutional right” to consult his lawyer and object to defective procedure in the letters of request and that in any event it was improper for the Commission of Inquiry to be engaged in considering this matter since it was not within the terms of reference. It was pointed out to Dr Simmonds that as long ago as 5 October 1999 counsel for the Commission had indicated in his opening statement that the Commission was interpreting its terms of reference to include the issue of the letters rogatory; indeed Ms Mitcham on the following day, in her opening statement, made no objection to that interpretation. She could hardly have done so because interpretation of terms of reference is a matter for the Commission of Inquiry. Subsequently, because there appeared to be some doubt about whether the Commission’s interpretation was correct, the Governor-General’s warrant of 14 July 1999 was amended on 13 October 1999 to include the letters rogatory issue within the terms of reference - for the avoidance of doubt (Appendix 1).
For what purpose did the two men hand over the documents to their legal advocate? Was it done with a view to facilitating their appearance before the Chief Magistrate? Or were they seeking some advice which could avoid compliance with the letters of request? If the former was the true position, the advice that the documentation was not in order ought not to have led to the issue of the subpoena to set aside the order for the public examination made by Mr Justice Redhead. Assuming (as it turned out, a valid assumption) that in the early part of 1996 the legal advice was correct in indicating a lack of jurisdiction, the choice was available to Dr Simmonds and to Mr Seaton to accept the lack of jurisdiction, to inform the Attorney-General’s office of this viewpoint and offer to find a way round the dilemma. This was not done; instead the legal advice was adopted - I am tempted to add “gleefully” - in order to frustrate the process of giving evidence in court of a friendly foreign state. Issuing the subpoena to set aside the court orders is hardly the message of someone wanting to accede to a request, but finds himself unable to do so on some technical legal ground. The proper responses would have been to acknowledge the legal hurdle and seek to find a way round the difficulty. In that they did not adopt such a stance, they are to be criticised for not assisting the Italian authorities, particularly since neither of them was in any conceivable way in jeopardy from either Italian or St Kitts tribunals. Any expressed desire to achieve the outcome of becoming witnesses was, and is in my view insincere. They had no need whatsoever of challenging the letters of request in court proceedings, unless, of course, they had some reason or motive for not wishing to co-operate. Could there be an explicable reason why Dr Simmonds and Mr Seaton were unwilling to expose themselves publicly, even if they were immune from any direct consequence of giving evidence to the Italian criminal court?
The stance adopted by Dr Simmonds and, by reference, Mr Seaton was always that the Government of St Kitts and Nevis never at any time undertook any legal responsibility for the non-servicing of the Credit Agreement. That stance has been maintained before me in this Inquiry. By appearing as witnesses before the examiner and being subject to cross-examination on oath, their remonstrating of “no liability” would be put to the test, as it has been in the course of this Inquiry, with the conclusion that there was a demonstrable liability.
At the time of deciding to avoid the examination before the Chief Magistrate - that is in 1996/1997 - there was no Commission of Inquiry looking into the hydrofoil affair. The Commission of Inquiry was initiated in July 1999, long after the ruling of Mr Justice Neville Smith. The problem facing Dr Simmonds and Mr Seaton was that their protestation of a “mere formality” or “no liability” might be severely tested by the two assistant prosecutors. Dr Simmonds would undoubtedly have been faced with the report form Mr Ratzenberger that Dr Simmonds had, contrary to the declared position of his Government, admitted liability (in part at least) and had asked for a “pardon”. That would be embarrassing, even if he was able to refute the precise utterance.
Mr Seaton faced a similar dilemma. In June 1988 he had visited the offices of SACE and to the Italian Ministry of Foreign Affairs in order to explain the situation which arose whereby the insurance guarantee had to be implemented. SACE observed that the insurance guarantee would never have been granted, save for the guarantee of the loan by the Government of St Kitts and Nevis. An announcement of 26 June 1988 from the Special Division for credit insurance in exports stated “...the financing is supported by a complete guarantee of refund by the Government of St Kitts”, to which Mr Seaton is reported to have “admitted the validity of this consideration”. Mr Seaton was further reported as saying that his Government “will try to solve the question out of court as to the new terms of the loan”, and later, “...the authorities of St Kitts agree that the observance of the previous obligations affects any other commercial relationship between the two countries...” All these factors point strongly to an acceptance (if qualified) by Mr Seaton of financial obligation as at June 1988, when there had been only the first default on repayment of the loan.
My conclusion is that Dr Simmonds was not keen to undergo the examination by the Italian prosecutors, and readily seized upon the legal advice from Mr Terence Byron that the documentation on the letters of request was faulty. Much too readily, he (together with Mr Seaton) then took the opportunity of the available challenge in the courts, so as potentially to avoid the embarrassment of any query about their actions over the Credit Agreement. I do not find acceptable the motivation for not co-operating fully with the Italian authorities. Even if they were reluctant to comply with the letters of request, that was not a valid reason for declining to assist in the Italian criminal proceedings. Either way - a sincere desire to accede “readily” to the request to give evidence, or finding an excuse to challenge the legal process of letters of request - the two men are to be criticised. If the former was the case, the choice was theirs to circumvent any procedural defects in the documentation. If the latter, they were impermissibly taking refuge in any procedural defect to avoid facing awkward questions in the public forum of the Chief Magistrate. Dr Simmonds protested that he was bound to act on his lawyer’s advice. When I pointed out to him that the aphorism - “lawyers should always be on tap, but never on top” - Dr Simmonds disagree that the choice was his to reject any legal advice, if he thought that it was proper to do so.
Now that any such embarrassment no longer pertains, because the evidence about the responsibility of Dr Simmonds and Mr Seaton has been fully explored in the Inquiry, the two men should feel uninhibited in giving assistance to the Italians in the criminal proceedings. Those proceedings are extant; in November 1999 the Rome court adjourned the trial pending the obtaining of a report by a forensic accountant. Dr Simmonds and Mr Seaton should, on reading this report, instantly agree to collaborate with the Italian authorities in finding some way of providing their evidence, other than by way of (defective) Letters Rogatory. If the Italian authorities are willing to pay all their expenses to Dr Simmonds and Mr Seaton, the evidence could be given in Italy, thereby circumambulating the formal international requirements of obtaining foreign evidence. On giving of an undertaking to give such evidence, the Government of St Kitts and Nevis should discontinue its appeal against the decision of Mr Justice Neville Smith. I am confident that the Attorney-General will respond on the undertaking being given in writing by both men. By the nature of the Letters Rogatory, it will require an undertaking from both. In that way, public funds will be saved. I would further recommend that the Government should introduce legislation in accordance with modern statutes to give effect to Letters Rogatory.
PART II A(8)
Conclusions
The role played by the Government of St Kitts and Nevis as a primary guarantor in the financing of the sale and purchase of the three hydrofoils was a fiasco. It was a breakdown in the functioning of government and in the administration of its financial obligations - in this instance, in the context of an international commercial transaction involving major European institutional support for a project in a developing country. Everything that happened up to the signing of the Credit Agreement of 30 May 1986 was predicated upon the Government of St Kitts and Nevis accepting the legal obligations of a primary guarantor to the loan of US $25,330,00 to Nautical Trading (St Kitts) Ltd. The acts and omissions, which demonstrated the breakdown in the financial administration, were primarily, if not exclusively traceable directly to the Prime Minister and Minister of Finance, Dr Kennedy Simmonds. The Attorney-General, Mr Tapley Seaton QC, as the government’s legal adviser and member of the Cabinet bears some responsibility for the failure of the Government to meet the standards of public administration that should have been manifest in the signing by Dr Kennedy Simmonds of the Credit Agreement. (The list of the serious failures in public (financial) administration is provided at the end of this chapter).
It will not have escaped the reader of this part of the Inquiry that the conclusions are confined to the role of the Government of St Kitts and Nevis, through its Prime Minister and Minister of Finance in putting his signature to the Credit Agreement of 30 May 1986. But that role is part only of a wider picture of, what can only be described as an Anglo-Italian fraud whose tentacles stretched out to an unsuspecting (perhaps insufficiently suspicious) unsophisticated small state in the Caribbean.
The Inquiry has seen much documentation that discloses a massive raid on funds supplied by an export credit agency (the Italian SACE) and guaranteed by a consortium of banks, in turn guaranteed or indemnified by the Government of St Kitts and Nevis. The Commission has heard evidence that pointed strongly to a fraud and the likely fraudsters: criminal proceedings are afoot in Italy against officers of the Italian hydrofoil sellers and officials of SACE. While the Commission has been able to obtain written statements from three professional advisers to either the lender or borrower under the Credit Agreement (and was able to take oral evidence from them by audio-link with London and Milan) and to hear directly from Mr Simon Jackson, a former employee of Morgan Grenfell which was part of the consortium of the lending banks, there were large gaps in the knowledge of the Commission. While it had transcripts of interviews, conducted by the serious fraud office, of both Roger Morgan and William Adams (alias Evans) it has not been able to take evidence directly from them. Neither has the Commission been able to hear any evidence from the Italian end of the various transactions, save for the invaluable evidence from Mr Egone Ratzenberger about a meeting in 1992. Hence the picture is incomplete. In consequence, the Inquiry has perforce had to limit its findings to those aspects of the total purchase that focus on the action of the Government of St Kitts and Nevis. It cannot be too strongly emphasised that there has not been a scintilla of evidence in the totality of the material before the Inquiry that anyone connected with Government in St Kitts and Nevis (or indeed any Kittitians) has been a party to any fraud; or more important, that anyone in St Kitts and Nevis received any bribe or engaged in a corrupt bargain over the hydrofoil affair. Corruption, only in the narrowest sense of improper use or a serious failure to use, executive power can be laid at anyone’s door. It is mismanagement or maladministration of the affairs of state that have been exclusively under scrutiny by the Inquiry. Thus most of this Part of the report is focused on what led up to the Prime Minister’s signature on the Credit Agreement of 30 May 1986, the date of the draw-down of the loan under the Credit Agreement because they touch on aspects of public administration in St Kitts and Nevis are dealt with - namely, the activities of the Attorney General when default on the loan began in 1988; the meeting of Dr Kennedy Simmonds with the Italian envoy, Mr Egone Ratzenberger on 2 November 1992; and the response of Dr Simmonds and Mr Seaton to the issues of the Letters Rogatory in 1996. Otherwise, the larger issues about the nature and scope of the Anglo-Italian fraud find no place in this report.
The reader of this report might, nevertheless reasonably expect to be told of some explanation for the serious failures in public administration over the signing of the Credit Agreement. Absent any financial gain, directly or indirectly to any individual in St Kitts and Nevis, the answer seems to point to one driving force on the part of Dr Simmonds and his administration. I detect that the Government of the day had an overweening desire, born out of a misplaced sense (or, rather, an arrogance) of political power, to derive benefit to the islands of St Kitts and Nevis from foreign sources in the promotion of tourism, to the detriment (almost non-observance) of the demands of good governance.
In his submissions to the Commission of Inquiry Mr Tapley Seaton QC claimed that in tendering his legal advice to Cabinet on 4 April 1986 (and informally earlier) he took into account a number of non-legal factors and concluded that the decision to approve the Prime Minister’s signature to the Credit Agreement was a “matter of Government policy”. He misunderstood his role at that juncture. This result leads me to think that the role of the Attorney-General under the Constitution should be reviewed.
Managerial judgment, administrative skills, financial transparency and accountability, if they were ever in contemplation, were simply jettisoned or ignored in pursuance of a wrongly-assumed non-liability. No attention was paid to matters of good governance. The thorny issue of compatibility between good governance and small states is addressed in Part IV A below.
List of Serious Failures
I have not the slightest hesitation in coming to the conclusion that Dr Simmonds and Mr Seaton failed in a variety of respects to achieve the standard required of, respectively, a Prime Minister and an Attorney General. I list them:
1. There never was a proper survey or study by a Government department of the viability of the hydrofoil project. It does not appear that the feasibility study, sent to Morgan Grenfell in March 1985 by Mr Roger Morgan, was ever examined by Ministers or officials in the St Kitts and Nevis Government, with the exception of Mr Michael Powell. What Mr Powell provided, by way of Walter Simmonds’ assessment of profitability and Mr Pistana’s evaluation of Nautical Trading’s shareholding was wholly inadequate for any governmental purpose. These assessments were so crude as to be no more than informal guesses on which no reliance could be placed by executive government. It appears the project was never viable nor was there a remote chance the it would ever be.
2. There was never any legal opinion of sufficient weight and scope given to the potential liability of a guarantor under the Credit Agreement. In so far as Mr Seaton was providing legal advice it was deficient for such a serious issue as the signing of the guarantee with the potential financial exposure to the Government.
3. The terms and conditions of the Credit Agreement were never made the subject of a formal submission to Cabinet, and were never subjected to any scrutiny by Ministers.
4. The Cabinet approval on 4 April 1986 for Dr Simmonds to sign the guarantee was improperly considered, since there was no formal submission. The Agreement was not placed before Cabinet members and the minute disclosed no information about the loan to Nautical Trading, or its size.
5. The certificate given by Mr Tapley Seaton QC to the lenders that Nautical Trading was a company in “good standing” was founded on little or wholly inadequate inquiry about the trading activities of Nautical Trading.
6. Government never subjected the terms and conditions of the loan of US $25,330,000 to any public scrutiny, either through the National Assembly or by way of departmental review, or any public statement to the media.
7. No inquiry was ever made by any member of the St Kitts and Nevis Government of the credentials of Mr William Adams (alias Evans) or Mr Roger Morgan who were the promoters of Nautical Trading, which was the borrower under the Credit Agreement.
8. Reliance by the Government of St Kitts and Nevis on Morgan Grenfell to conduct an inquiry into the credentials of Mr Adams and Mr Morgan was misplaced. Morgan Grenfell’s interests, primarily if not exclusively, were both the protection of the consortium of Banks (including itself) from any loss and the insurance guarantee from SACE.
9. The Government of St Kitts and Nevis ought to have made an assessment of the value of the assets which it was guaranteeing. Was that not a failure of public administration; after all, the value was inflated five times?
10. The Government failed both to investigate properly (or at all) the background of the persons who were the foreign promoters of St Kitts company, Nautical Trading, and to have a voice and/or presence on Nautical Trading’s Board of Directors. The attempt made after May 1986 to be represented could be likened to an attempt to close the stable door after the horse had bolted.
11. The Government failed to make sure that St Kitts and Nevis remained the headquarters of the hydrofoil operations; the indifference of the Government to investigate the departure from St Kitts waters was a serious omission, since the protection of the guaranteed assets was very much Government business.
12. There is no reliable evidence that any senior civil servant was ever involved in preparing the Government’s response to the requirement to sign the guarantee on the Credit Agreement.
NOTICE OF PROVISIONAL CRITICISMS
Mr Tapley Seaton QC
1. That at no stage of the negotiations leading up to the signing of the Credit Agreement of 30 May 1986 did you order a proper investigation of Nautical Trading (St. Kitts Ltd.) for the purpose of advising the Prime Minister and Minister of Finance on the propriety of Government becoming a primary guarantor. (Upheld)
2. That you improperly gave in paragraph (i) of your legal opinion of 3 June 1986 (pursuant to clause 8(a)(vi) of the Credit Agreement) that Nautical Trading (St. Kitts) Ltd. was a company in “good standing” under the laws of St. Kitts and Nevis. (Not Upheld)
3. That you failed, at the Cabinet Meeting of the 4 April 1986 (or at a Cabinet Meeting in the months preceding that meeting) to explain to Cabinet members the full impact and meaning of the Government’s contingent liability under the forthcoming Credit Agreement of 30 May 1986. (Upheld)
4. That you failed to obtain independent leading counsel’s opinion as to the legal implications for the Government being primary guarantor under the Credit Agreement, on the grounds that the obligations on the Government were sufficiently serious to warrant outside legal advice. (Upheld)
5. That at no time, following the request from the Italian authorities on 17 January 1996, have you indicated either to the office of the Attorney-General of St. Kitts or to the Italian authorities that you would be willing to assist the prosecutor in Rome by agreeing to give evidence, irrespective of the validity of the Letters Rogatory. (Not Upheld)
6. That you improperly gave instructions to your solicitors which had the effect of frustrating the Italian criminal proceedings when you were not in jeopardy in the Italian criminal proceedings. (Upheld)
7. That you failed contemporaneously to ensure that the necessary documentation evidencing the Government’s participation in the Credit Agreement was kept in the files of the Attorney-General’s office. (Upheld)
8. That, having regard to the legal consequences to the Government in becoming the primary guarantor to the Credit Agreement, you should have advised against the Prime Minister and Minister of Finance signing the guarantee. (Not Upheld)
NOTICE OF PROVISIONAL CRITICISMS
Dr Kennedy Simmonds
. That in you capacity as Prime Minister and Minister of Finance you acted negligently in signing on 29 April 1986 the Credit Agreement of 30 May 1986. (Upheld)
2. That in seeking on 4 April 1986 the approval of Cabinet to you signing the Credit Agreement, you acted improperly in both not including the item on the Cabinet agenda on 2 April and failing to insure that the mention of the matter by you was accompanied by departmental submission (see item 2(c) on the Minutes of Cabinet meetings for 4 April 1986). (Upheld)
3. That in your capacity as Minister of Finance you failed to give instructions to officials in the Ministry to prepare submissions on the Credit Agreement. (Upheld)
4. That in your capacity as Minister of Finance throughout 1985 and up to 29 April 1986 you failed to ascertain sufficiently the viability and profitability of the hydrofoil project envisaged by the Credit Agreement of 30 May 1986. (Upheld)
5. That you improperly acted upon the information supplied to you (via your Deputy Prime Minister, Michael Powell) from Walter Simmonds in his letter of 7th June 1985 and from Ernest Pistana in his letter of 22nd June 1985, together with appended note from Ingle Rawlins (acting on the instructions of the High Commissioner in London). (Dismissed)
6. That in promoting the financial arrangements for the project of the hydrofoils you improperly kept the whole matter under the secrecy of government by not bringing the matter to Cabinet (other than on the 4 April 1986), not taking the matter to the National Assembly, and not in any way making the Government’s involvement in the Credit Agreement as the primary guarantor known to the public of St. Kitts and Nevis. (Upheld)
7. That in agreeing on behalf of the Government of St. Kitts and Nevis to become the primary guarantor to the Credit Agreement of 30 May 1986 you were acting irresponsibly towards Sezzione Speciale Per L’Assicurazione Del Credito All’Esportazione (SACE) - the Italian export credit agency - and therefore towards the government of Italy. (Upheld)
8. That in authorising the telex of 30 April 1993 (see supplemental bundle, pp.36-40) you improperly suggested to the government of Italy that its export credit agency SACE “should look to others [than the government of St. Kitts and Nevis] to satisfy their request for payment”, you being aware that the government of St. Kitts-Nevis was a primary guarantor under the Credit Agreement of 30 May 1986. (Upheld)
9. That at no time, following the request from the Italian authorities on 17 January 1996, have you indicated either to the office of the Attorney-General of St. Kitts-Nevis or to the Italian authorities that you would be willing to assist the prosecutor in Rome by agreeing to give evidence, irrespective of the validity of the Letters Rogatory. (Upheld)
10. That you improperly gave instructions to your solicitors which had the effect of frustrating the Italian criminal proceedings when you were not in jeopardy in the Italian criminal proceedings. (Upheld)
11. That on the disappearance from St. Kitts in or about March 1986, you failed to order an investigation by the police and other authorities to search for the whereabouts of the Hydrofoils. (Upheld)
12. That on the issue about the disclosure to the public of the default in the servicing of the loan by Nautical Trading (St. Kitts) Ltd. on the Credit Agreement 30 May 1986 and the contingent liability of the government of St. Kitts-Nevis in the early, you ought to have ordered a Commission of Inquiry under the Commission of Inquiry Act. (Upheld)
Part II B(1)
The National Caribbean Insurance Company
[A list of participants in the events in Part II B(1)-(3) appear at p.xx and p.xxiii]
The National Caribbean Insurance Company Ltd (NCIC) was incorporated in St Kitts and Nevis under the Companies Act on 30 June 1973 with a share capital of EC $1 million, divided into one million shares of EC $1 each, to undertake and carry on business of insurance in all departments and branches. At some time - at least before 1982 - it became a wholly-owned subsidiary of the National Bank Trust Ltd (NBT) which had been incorporated on 15 February 1971 (NBT is the wholly-owned subsidiary of St Kitts-Nevis-Anguilla National Bank (SKNA)). Government owns sixty per cent of the shareholding in the National Bank; the other 40% is consolidated in the accounts of SKNA National Bank and its subsidiaries.
Both Ms Mitcham and Mr Eugene Hamilton, in the course of their final submissions on the insurance claims issues, insisted that NCIC could not be described as a public corporation, but was quintessentially a private company incorporated under the Companies Act. They went on to submit that it was improper for the Governor-General (on advice of the Prime Minister) to order a Commission of Inquiry which trespassed into the private sector of business. To my mind, the submission is redolent of the phrase made famous by Sir Robert Armstrong that he was being “economical with the truth”. What is the true position?
Mr Edmund Lawrence, the managing director of the National Bank was asked by counsel for the Commission: “It [the National Bank] is essentially a private company within the structure of Government?”, to which Mr Lawrence replied, in my view correctly: “It is a public company in the private sector with government majority shareholding”. (It is worth noting that, on re-incorporation of the National Bank in 1998 under the Companies Act 1996, its Memorandum and Articles of Association disclose on their face that the National Bank is a public company limited by shares. Public companies under the Companies Act are required to disclose certain information in their annual reports and returns from which private companies are exempt).
I would describe the National Bank and its subsidiaries as a group of public companies operating in the commercial field, infused with a dominant public ingredient by virtue of the Government’s majority shareholding, such as to render the Bank and its two subsidiaries governmental agents. True enough, NCIC is not a public corporation, but it is not correct simply to treat NCIC as a private company devoid of any public ingredient.
In March 1982 the Government sought to legislate for direct governmental control of the Board of Directors of the National Bank. In that aborted legislation, the National Assembly was recognising the public interest in the interlocked group of companies, of which NCIC was a member. (I refer to the 1982 episode hereafter).
Even if (which is not the case) I acceded to the bold proposition that NCIC was, simpliciter, a private company, and hence outside public accountability, there would still be no reason to conclude that Government should, in effect, stay off the private sector’s lawns and refrain from ordering a public inquiry. The Commissions of Inquiry Act provides that, over and above inquiries into the conduct or management of any department of the public service, any matter in which an inquiry would “be for the public welfare” may properly be the subject of investigation under the Act. Assume, for the purposes of argument, an individual or private company, engaged in providing financial services, was thought to be engaged in fraudulent conduct towards private investors on a large scale. Such a matter would fall within the scope of the Act. There is in fact a precedent in the UK. In 1964 Parliament ordered an inquiry under the Tribunals of Inquiry (Evidence) Act 1921 into the affairs of Vehicle and General Insurance Co Ltd.
Mr Fitzroy Jones was the chairman of NCIC on the occasion of the ex gratia payments to the three Ministers, on 16 October 1989, and to the Democrat Printing Company on 29 September 1993. At both times he was a member of the National Assembly and a Minister in Dr Simmonds’ Cabinet. He was uniquely qualified to hold a prominent position, since he had acquired an expertise in the insurance field. The fact that he was recalled from the UK in 1973 to become the first General Manager of NCIC is evidence enough of his unrivalled experience. Later he was elected by the shareholders to be the Chairman of the Board of Directors. Had the 1982 law he would have become automatically disqualified from the chairmanship of NCIC.
The Eighth of March 1982 and its 1999 Repercussions
Mr Edmund Lawrence, the managing director of the St Kitts-Nevis-Anguilla National Bank (the National bank), gave evidence before the Inquiry on 19 August 1999, primarily for the purpose of identifying two cheques which were received on 18 October 1989 from the National Caribbean Insurance Co. The cheques represented the settlement of a claim by the National Bank’s customer, Dr Kennedy Simmonds, the former Prime Minister, whose private residence had been seriously damaged in September 1989 by Hurricane Hugo (see Part II: B(2) below). In the course of questioning by Ms Constance Mitcham, counsel on behalf of Dr Simmonds, certain events of 8 March 1982 became relevant. (I deal with Mr Fitzroy Jones’ role in both the insurance issues below.)
Mr Lawrence became managing director of St Kitts Industrial Bank Ltd on 16 March 1970, having been appointed by resolution of the Board of Directors of the company. (He had been in the company’s employ continuously since 1958). He was appointed to hold office until he resigned, or if he ceased to be a Director of the Bank. On 15 February 1971 the company came to be known as St Kitts-Nevis-Anguilla National Bank Ltd with Mr Lawrence as its managing director and chairman of the Board of Directors. Mr Lawrence remained in office until 8 March 1982, when he was summarily extruded from his directorship in circumstances that I will describe. He was subsequently re-instated in 1995 after the retirement of his successor, Mr Ernest Pistana.
On 8 March 1982 the House of Assembly enacted the St Kitts-Nevis Anguilla National Bank (Special Provisions) Act 1982 (“the Act”). The Bill for the Act was taken through all three legislative stages, received the Governor’s assent and became law on the same day. On that day, too, Mr Lawrence received a letter, signed by the Minister of Finance, informing him that a new Board of Directors had been appointed in pursuance of the Act and that the former directors had ceased to hold office.
In the course of Mr Lawrence’s evidence before me on 19 August 1999 reference was made to the Act which, on the face of its provisions had some relevance to questions relative to the appointment of directors to the National Bank and the Bank’s subsidiaries, which included the National Caribbean Insurance Company Ltd. It transpired, during the questioning of Mr Lawrence, that the whole of the 1982 Act was declared unconstitutional by the courts in judicial review proceedings brought by Mr Lawrence against the Attorney-General of St Kitts and Nevis.
The Act
The Act was stated to make special provisions for the operation of the Bank “for the protection of the shareholders and for the benefit of the State”. As at March 1982 the Government owned 60% of the shares in the Bank. The Government was the largest depositor of money in the Bank; it was also the largest borrower from the Bank and, as such, contributed most by way of interest. All the Government’s normal business was channelled through the Bank. Thus, the Government was able to effect a significant, but in the event inadequate amount of control on the National Bank’s policy and practices.
In the weeks before the emergency meeting of the House of Assembly on 8 March 1982 the management of the Bank requested that the Government should issue to the Bank Treasury Bills to the value of EC $4.5 million so as to allow the Bank to raise that additional sum of money. Government approved this proposal. But, without any prior indication, the Bank’s management hastily convened a meeting of its Board of Directors and took a decision to raise the EC $4.5 million by issuing shares to that value. The Board further decided that no person should be permitted to buy less than one hundred, or more than fifty thousand shares. If, by that change in the structure of the shareholding, the Government was restricted to purchasing only the maximum fifty thousand shares out of $4.5 million, its 60% proportion of the shareholding in the Bank would shrink, to the point where Government would cease to be the majority shareholder. Government control would be seriously diluted.
The emergency legislation was considered to be necessary because the Bank had proposed to issue the shares for sale to the value of $4.5 million two days later, on 10 March 1982. Delay was perceived by Dr Kennedy Simmonds, then the Premier, to inflict potentially disastrous consequences on the financial stability of St Kitts and Nevis. All this was explained on the evening of 8 March 1982 in simultaneous radio and TV broadcasts by Dr Simmonds. While he justified speedy action in legislating, nothing was said about the manner in which Government was, at that moment of the broadcast, implementing the new Act. Any listener/viewer would reasonably assume that the law would take its normal course. The new Board of Directors, six of whom were in fact immediately appointed by the Minister of Finance, however, stepped instantly into the shoes of the previous six members (elected by the shareholders at an annual general meeting). It was that change that prompted the challenge to the constitutionality of the Act. (As it transpired, the court’s reversal of the emergency legislation did not produce the dire consequences predicted by the Premier). The constitutional challenge is neatly summarised by Sir Fred Phillips CVO, QC in his book, West Indian Constitutions: Post-Independence Reform.
There was little doubt that the letter from the Minister of Finance purported to remove Mr Lawrence from his position as director, to which he had previously been elected by the shareholders of the company in general meeting. At five o’clock Mr Lawrence received another letter, this time emanating from the National Bank, dated 8 March 1982. It was from Mr William Liburd, the chairman; purporting to have been appointed that day by the Minister of Finance. Contemporaneously, Mr Lawrence received yet another letter, this time from Mr William Liburd in the following terms:
At 5:20pm Mr Lawrence received yet another letter from Mr William Liburd, which stated peremptorily that the Board of Directors “has taken a decision to terminate your services with immediate effect; you are therefore required to vacate the premises immediately”.
Drama was at hand. The six “new” directors, accompanied by six police officers of the St Kitts and Nevis police force, as well as the Commissioner of Police, entered the Bank’s head office and proceeded to take certain action: they held a meeting of the Board of Directors, at which Mr Lawrence’s appointment as director was terminated; they ejected him from the bank’s premises; they demanded and received from him the keys and property held by him in right of his office. This he did, without the slightest hint of resistance. As the Court of Appeal was to state a year later, Mr Lawrence “complied with all the requests made of him…”
Quite apart from the political justification for such precipitate legislation, what took place, from the moment the Act became law, was, by any standards of good governance, performed with an overt and an overly show of force and a disregard for the ordinary process of the civil law. If there had been a hint of non-compliance by Mr Lawrence with the new law - and there was nothing to suggest resistance - Government could have sought an immediate mandatory injunction. Whether the court would have acted must be a matter of conjecture. The use of the coercive power of a bevy of police officers accompanied by their commander, to enforce a limited piece of legislation without any judicial sanction, betokened a military-style operation. To deploy such force to remove from private office a prominent and respected citizen - Mr Lawrence has since become Deputy Governor-General of St Kitts and Nevis - was little short of disgraceful conduct. It manifested an arrogance of power which appears not to have dissipated over the ensuing years. To the ordinary member of the public, Mr Lawrence was being made to look like a common criminal.
During Dr Simmonds’ evidence to the Inquiry on 23 August 1999 on the issue of his insurance claim (see Part II B(2)) I asked him about his premiership role in the events of 8 March 1982. He expressed himself defiantly in justification of the legislative action and the instant implementation of it by the use of the coercive power of police officers; there was not a hint of retrospective self-criticism in his answers or his demeanour. In its report of July 1998 the Commission appointed to review the Constitution of St Christopher and Nevis under the chairmanship of Sir Fred Phillips CVO QC referred to the regimes for both St Kitts and Nevis up to 1967. At paragraph 16 of Chapter 3 (Constitutional History of St Kitts and Nevis) the Commission noted that by the middle of December 1870 the Governor, Sir Benjamin Pine “was able, with airy dismissal of the truth, but with bombast intact, to report to the Secretary of State for the Colonies that all obstacles of ‘political ignorance’, ‘class feeling’, local prejudice and ‘local self interest’ had been overcome.” Much the same could aptly be said of Dr Kennedy Simmonds in respect of the obstacles of observing standards in public life in St Kitts and Nevis. Dr Simmonds’ explanation, if not excuse, for his stubborn defence of his political actions might be that he was playing to the gallery of political supporters. If so, Dr Simmonds was impermissibly using the forum of the tribunal to score a political point. My description of Dr Simmonds was fortified when, at a later stage of the Inquiry in relation to a procedural aspect of taking evidence of a witness form Europe, Dr Simmonds made a broadcast complaining about the unreasonableness of the Chairman’s decision and added, gratuitously, that it demonstrated the “evil” of the Commission of Inquiry (I refer to this instance elsewhere). When he gave evidence for the second time, on 10 January 2000, the bombast, politically pumped-up was again in full flow.
Mr Lawrence’s riposte to the unseemly treatment of 8 March 1982 was, by contrast, commendable. He challenged the constitutionality of the Act in the courts. At first instance Mr Justice Bishop, in a lengthy judgment which the Court of Appeal later considered to be “a fair and accurate interpretation of the impugned Act of 1982”, cited the provisions of the 1982 Act in extenso, significantly omitting, among other subsections, section 3(e) as being incidental to the main purpose of the constitutional challenge.
Under the St Kitts-Nevis-Anguilla National Bank Ltd (Special Provisions) Act No. 8 of 1982 certain provisions were made for the carrying on of the affairs of the National Bank, which, by section 2 of the Act, encompassed all the National Bank’s subsidiaries, including specifically NCIC. By section 3(e) “Member of the House of Assembly shall not be qualified to be a Director” of NCIC. Mr Fitzroy Jones would be disqualified as from 8 March 1982. The whole Act was nullified within a short time, it being declared unconstitutional by the courts, on the ground that the power of the Minister of Finance to appoint six out of ten Directors (reflecting the 60% proportion of the government shareholding) violated the constitutional protection against the confiscation of property without compensation.
The principle that lay behind Section 3(e) appeared to the government of Dr Simmonds to be valid for the good governance of St Kitts and Nevis. Why was the principle not fully implemented, even though the statutory provision had been lost in the process of the Act being unconstitutional? The rationale for the provision in Section 3(e) was as good before 8 March 1982 as it has been at all times since then. Dr Simmonds’ initial answer, to the question of ensuring the disqualification, was that “once the law was not there and he [Mr Jones] was functioning very well, then we saw no reason to remove him.” To appreciate the full flavour of Dr Simmonds’ justification for his stance over Mr Jones’ position, I set out the relevant parts of the transcript:
Finally, I asked Dr Simmonds: Is the principle as expressed in Section 3(e), in your view a flexible principle - that is to say, is it not an absolute prohibition on a member of the National Assembly (a fortiori, a Minister) holding a directorship (never mind, the chairmanship of the Board of Directors) in any of the Boards of the group of companies of the National Bank, which could be circumvented in circumstances of the individual having special expertise, such as insurance? Dr Simmonds concluded that the absolute prohibition did not prevail after the Act had been declared unconstitutional. In short, he was not accepting the principle unqualifiedly. Mr Fitzroy Jones, in his written responses, accuses me of not understanding the effect of the 1982 Act being unconstitutional. I hope that what I have now said convinces him that it is the principle that lay behind section 3(e) that I am fastening onto for my criticism of both him and Dr Simmonds.
I regard the principle, as enunciated in section 3(e), to be imperative in any administration devoted to good governance. I am surprised that, whatever Dr Simmonds might reasonably have thought was right in the years after 1982, that he would act the same way at the end of the millennium. Accordingly, I recommend that an early opportunity be taken to re-legislate the principle of Section 3(e) of the 1982 Act. While that legislation is forthcoming, another aspect of conflicting interest should be addressed.
Section 5 of the 1982 Act provided that “a member of the Board who has a direct or indirect pecuniary interest in any business transacted or proposed to be transacted by the Board shall disclose the nature of such interest at the meeting of the Board, where such business is discussed. The disclosure shall be recorded in the Minutes of the Board and such member shall not take part in any deliberation or decision of the Board with regard to that business and shall withdraw while such deliberation is in progress or that decision is being made”.
I have heard no evidence that the principle in section 5 is not being adhered to. But, as with section 3(e), I recommend that the principle in section 5 should be similarly re-enacted. At the same time consideration should be given to extending the principle to non-pecuniary interests. It may be that non-pecuniary interests should at least be disclosed, without necessarily requiring the disclosant to withdraw from participation in the discussion of the relevant matter.
Clearly, the Board members (with the notable exception of Mr Robert Manning) all had a non-pecuniary interest in deciding to make ex gratia payments to the three ministers, and to the Democrat Printing Company, since they appeared to be members of the People’s Action Movement. They hardly needed to make a disclosure, since their political affiliations would have been well known to their fellow members. If their non-pecuniary interest were to disqualify them from deliberating on the claims, the Board would almost certainly have been inquorate. Such a conclusion is the result of filling such posts in small jurisdictions, to which I allude in Part IV A.
It cannot escape any reader of this aspect of the handling by the National Caribbean Insurance Company of the insurance claims by three Ministers whose property was damaged by Hurricane Hugo that double standards have been applied by Dr Kennedy Simmonds. On the one hand, he was all too ready to challenge, by way of judicial review, the propriety of the appointment of the predecessor Commissioner of Inquiry, Professor Randolph Williams, on the ground that real bias on the part of the counsel to the Commission fatally infected the Commissioner, against whom there was no question of even an apparent bias; on the other hand, Dr Simmonds was all too ready to assert there could be no application of the rule about real bias on the part of Mr Fitzroy Jones in his capacity of chairman of the NCIC while adjudicating on an insurance claim by his Prime Minister, in whose cabinet Mr Jones served. Dr Simmons is too eager to have his cake and eat it.
Mr Fitzroy Jones
At the centre of the issues relating to the payments to the two insurance issues stood the chairman of NCIC, Mr Fitzroy Jones. On both matters the Inquiry wanted to hear his evidence. Unfortunately, that has not been possible.
Mr Fitzroy Jones had been a prominent figure in the public life of St Kitts and Nevis throughout the 1980’s and early 1990’s he was chairman of NCIC from March 1982 to July 1995. But he left the twin islands in or about July 1995, and has been permanently resident in Florida, USA ever since. From the moment that the Inquiry began, in July 1999, the Commission’s Secretariat sought to make contact with Mr Jones and was able to do so at the beginning of September. In response to a letter from the Secretary of 22 September, Mr Jones duly provided a written statement comprising 19 paragraphs.
Written statements submitted to the Inquiry do not automatically become part of the material upon which the Commission makes its findings; written statements are intended to pre-date the giving of oral testimony and are designed to assist all participants in the Inquiry, in advance of the oral testimony, to deal with the matters covered by the statement. If (as in the case of Mr Jones) it is not possible to call the author of the written statement, the Inquiry must decide whether, and to what extent the contents of the written statement should be treated as evidence. It is commonplace for public inquiries to decide that, to the extent that it treats the whole (or part) of the written statement as evidence, that it will not give such evidence the same weight as if it had been given orally and been tested by questioning from all the participants in the Inquiry. That was clearly explained to Mr Jones in correspondence.
Following the receipt of Mr Jones’ written statement, the secretariat wrote to Mr Jones on 13 October 1999 enclosing a questionnaire. Mr Jones’ answers to some 15 questions was sent to the Inquiry on 11 November 1999. Mr Jones prefaced his answers with some remarks about the authorship of “confused and contradictory expressions” in the questionnaire. He was told that the Commission would deal with the answers to the questionnaire in the same manner as his written statement.
On examination of the contents of the written statement, I came to the conclusion that I should take account (and have done so in writing my report) of all that he said, with the exception of paragraphs 10 to 17 inclusive. Those paragraphs were excised by me on the grounds, first that the matters contained a personal attack on a named individual who would have had no opportunity to cross-examine Mr Jones as to their veracity, and second, that the matters referred to were, in my view, irrelevant to the matters under inquiry and outside my terms of reference. They have, accordingly not been included in the totality of material upon which I make this report. That explanation should have sufficed to satisfy Mr Jones and others of the proper treatment of the material submitted by an absentee witness to the Inquiry. But, unhappily, the matter did not rest there.
The Democrat newspaper of 13 November 1999 (two days before the Commission was due to begin a further week’s oral hearings in Basseterre) published verbatim Mr Jones’ written statement (including the excised paragraphs) and his answers to the questionnaire. (I assume - I can’t be sure - that Jones supplied the material to the newspaper.) The secretariat was at no time approached to say whether the material could be published as being evidence before the Inquiry. The editor would have been told that, so far as the Inquiry was concerned, he was entitled to publish, subject to the exclusion of paragraphs 10 to 17 inclusive of the written statement, and without editorial comment.
The Democrat publication in full of Mr Jones’ written statement carried a banner headline -“Blom-Cooper Commission tampers with Roy Jones’ statement. Deletes important sections”. An editorial note under the headline added: “ We hereby publish part one of the true statement submitted by Roy Jones.” Across two pages of the newspaper, which contained the full answers of Mr Jones to the questionnaire, the banner headline (twice placed at the top of the page) stated: “Roy Jones once again slams unethical practices of Blom-Cooper Commission of Inquiry.”
It is not, ordinarily, the function of a Commission of Inquiry to comment on the media coverage of the Inquiry. But I cannot forbear to make some observations on the standards of press conduct, without in anyway passing judgment on the contents of the Democrat of 13 November 1999. It is for others who care for the freedom of expression, with its concomitant duty on newspaper proprietor, editors and journalists to act responsibly according to a code of conduct, to make their own judgment and to decide what, if anything, needs to be done. My own recommendation to the Government of St Kitts and Nevis is that, jointly with the other members within the Organisation of Eastern Caribbean States, it should set up a committee to review the state of journalism in the region. One of the Four Seasons Accord of 22 November 1994 was the elimination of the use of the political party newspapers and platforms to ‘demonise’ political opponents. The Constitutional Task Force observed that the Accord’s decision had “…vanished without trace. It should be resurrected”. That recommendation should form a vital part of the review of the press in the Eastern Caribbean. A prime consideration should be whether it is sufficient to promote and maintain self-regulation, or whether some from of statutory regulation should be introduced, both to safeguard press freedom and to protect the public form unwarranted invasions of privacy and promote the accurate reporting of matters of public interest. The committee should be composed of two persons - one from outside the Caribbean with experience in media publications, the other from the Caribbean with editorial or journalistic expertise. This review should form part of the re-formulation of Section 12 of Constitution of St Christopher and Nevis, as recommended by the Phillips’ Commission (Volume III Chapter 7).
NOTICE OF PROVISIONAL CRITICISMS
Mr Fitzroy Jones
1. That you improperly occupied the office of Chairman of the National Caribbean Insurance Company while you were an elected member of the National Assembly from 1984-1995. (Not Upheld)
2. That, on 16 October 1989, you improperly took the Chair of the Board of Directors of the National Caribbean Insurance Co. to determine the claims of three Ministers of the Government of St. Kitts-Nevis, in conflict with your position as a fellow Minister of the three. (Upheld)
3. That, on 16 October 1989, you improperly led the determination of the claims of the three Ministers by indicating to your fellow members on the Board of Directors that the three Ministers should be accorded preferential treatment in respect of their insurance claims. (Upheld)
4. That, on 16 October 1989, you improperly recommended to the Board of Directors of the National Caribbean Insurance Co. that the three Ministers should be granted ex gratia payments on that part of their claims which had been disallowed by the loss adjusters. (Upheld)
5. That on 29 September 1993 you, in your capacity as Chairman of the National Caribbean Insurance Co. decided that an ex gratia payment should be made to the Democrat Printing Co. in respect of fire damage at the premises of The Democrat on 23 September 1993, knowing that at the relevant time the Democrat Printing Co. had no Policy of Insurance with the National Caribbean Insurance Co. (Upheld)
6. That on 25 February, 1994, you improperly signed a claim form on behalf of the Democrat Printing Co. in respect of an insurance claim for fire damage at the premises of the Democrat, knowing that you, as Chairman and Member of the Board of Directors of the National Caribbean Insurance Co., would be disqualified from deciding on the Insurance Claim. (Upheld)
7. That on 28 February 1994, you, in your capacity as Chairman of the Board of Directors of the National Caribbean Insurance Co., decided improperly that the Democrat Printing Co. should be paid EC $100,000 in respect of fire damage at the premises of the Democrat. (Upheld)
PART II B(2)
The Hurricane Hugo Insurance Claims
Hurricane Hugo hit the Eastern Caribbean islands on 17 September 1989 with a ferocity that brought havoc in its trail throughout the area. The National Caribbean Insurance Company Ltd in St Kitts, to which reference has been made in Part II B(1) above, recorded claims by its policy-holders to the tune of EC $14 million. Three of the many residents in the island of St Kitts who suffered loss and claimed under their “householder’s/house-owners comprehensive policy” were the-then Prime Minister, Dr Kennedy Simmonds and the Minister for Agriculture, Lands and Housing, Mr Hugh Heyliger. On the face of their claims, nothing untoward appeared. Their private residences had been damaged and they were making their respective claims in their capacities as private citizens to a private insurer. It is the plain, undisputed fact that their claims, as submitted to the insurers, were paid, in full, in circumstances which I shall describe. The claims were, however, not dealt with in an ordinary manner; as such, the matter has given rise to adverse comment, and accordingly formed a part of the Commission of Inquiry, established originally in July 1997, and has now formed part of this Commission of Inquiry. The terms of reference talked of “over-payments”. As Mr Hamilton rightly pointed out, that was prejudging the payments. Accordingly, I have approached the two stated amounts as “payments” to the individuals concerned.
There were two outstanding features of the handling of both claims that aroused suspicion of impropriety. First, both claims were paid, totally overriding the recommendation by the loss adjuster. This was recognised by way of the method of payment in settlement of the claims - namely, the adjusted portion was paid expressly by way of an “ex gratia payment” under separate cheques made out to the respective banks of the two claimants, with the noted difference that they were to be paid “at the National Insurance Company’s expense”. Second, when the claims were determined upon by the Board of Directors, the minutes of the Board’s meeting disclosed, unambiguously, that the three Ministers were being accorded special treatment, on the grounds of their public offices: the minute-taker (Mrs Judith Attong, Secretary to the Board) used the words “in deference to who the claimants were”.
Dr Simmonds’ Claim
At the time of the hurricane, Dr Kennedy Simmonds held a householder’s policy covering fire and other perils. His house at Earl Morne Housing Development, Basseterre which had been in course of construction only since 1988, was severely damaged; twelve days after the hurricane, on 29 September 1989, he made a claim on his insurance. The claim was for $159,317.45, and it was supported by estimates provided on that date by Warner Construction Company Ltd. The largest item on the claim related to the fencing and windbreaks around the tennis court. The claim under this heading was for EC $60.7K. Some EC $37.2K was claimed for removing, relaying and finishing the parquet floors. And the estimate for both the temporary and the permanent replacement of the roof was for some EC $22.2K approximately. The other items claimed - including the cost of replacing the basketball board and hoop and the repositioning of the turf on the tennis court - were much smaller.
Consistent with the practice of insurers, the claim was submitted to a loss adjuster for assessment. The adjuster was Mr Bertrand Doyle of Bertrands Doyle Ltd., of Port of Spain, Trinidad. In a report, dated 14 October 1989, Mr Doyle (who is Dean of the Insurance Academy in Trinidad) commented on the urgency with which the report was requested and observed first, that Dr Simmonds’ householders’ policy did not cover damage to basketball fixture and tennis court; secondly, that the original estimate provided for replacing the entire fence around the tennis court in circumstances in which the damaged areas of the fence could not exceed 60%; thirdly, that the carpets in two bedrooms were removed, though the carpet in the third bedroom was in place: fourthly, that the basis of the estimate for removing and replacing the entire parquet floor had not been established. In so far as there was damage to a part of the parquet floor, the adjuster recommended that the damage be repaired and a six-month guarantee period be given, to see if any further damage would manifest itself within that period. In general, the loss adjuster found that the estimate from Warner Construction did not make any distinction between material and labour, and there was no detailed costing informing the assessment of damage work. In the result, Mr Doyle amended the claim downward from EC $159,317.45 to $100,000.
The loss adjuster’s report and the claim were next submitted to the Board of the insurance company. Mr Fitzroy Jones chaired the Board. He was then also a Minister of Government and a Cabinet colleague of Dr Simmonds and Mr Heyliger. Other members of the Board were Messrs Robert Manning, William Liburd, Ivan Buchanan, Kenneth Kelly, John Reynolds(now deceased), Austin Joseph, Romig Phipps (now deceased) and Winston Warner.
Mrs Judith Attong was the Secretary to the Board and the principal officer of the insurance company. She told the Inquiry that the Board met on 16 October 1989 (this is supported by the Minutes of the Board) and that the Chairman informed the members of the Board that he was “seeking their assistance in dealing with a fairly difficult situation.” He alluded to three claims assessed and adjusted by Mr Doyle that included the claim of the Prime Minister.
| CHAIRMAN’S REPORT |
Mr Jones began his report by explaining that he sought the board’s assistance in dealing with a fairly difficult situation. He alluded to three claims assessed and adjusted by Mr Doyle for the PM, the Deputy PM and Mr Hugh Heyliger. The Chairman requested that the board treat these claims in a special way in deference to who the claimants were. He then suggested that the company incur any costs claimed above the adjusted figures presented by Mr Doyle. He tabulated the claims and presented an analysis to each member. The decision was made to pay the claims as indicated by the adjuster and pay the differences at the National Insurance Company’s expense less:
Mr Jones was then commended for his approach to the situation in crystallising the matter so effectively.” |
There was no voice of dissent, although some members who gave evidence before the Inquiry talked of considerable discussion of the claims before the figures were agreed. No such discussion, if it took place, was minuted.
The claim by Dr Simmonds was paid in its entirety - in two separate cheques - one for EC $100,000 and the other for EC $59,317.45, the latter representing the part of the claim disallowed by the adjuster. It was identified as an ex gratia payment. The cheques were paid to National Bank, almost certainly on the prior instructions of Dr Simmonds. In his written statement to the Commission, Dr Simmonds does not recall having given the bank any instructions at that time. In his oral evidence Dr Simmonds added that he became aware, only after the claim was settled by way of two cheques, that Mr Doyle had amended the original claim. Dr Simmonds added that he believed he was telephoned to let him know that the claim was settled and that the [two] cheques had been sent to the Bank: “…the bank statement would have so indicated.”
But Dr Simmonds, in the course of his oral testimony, emphatically stated that he was unaware that the method of payment in two cheques indicated that part of the settlement of his claim was an ex-gratia payment. And he was likewise emphatic in not having known about any preferential treatment that he might have received, until the matter was made public in 1997 on the setting up of the Williams Commission of Inquiry.
Dr Kennedy Simmonds as at October 1989 had no mortgage with the National Bank; neither had he a loan from the Bank, nor had he been granted any overdraft facility, but his account with the bank was debited to the extent of EC $550,000. Hence the two payments of 18 October totalling $159,217.45 were being used to offset the indebtedness on his account.
Mr Heyliger’s claim
At the time of Hurricane Hugo, Mr & Mrs Hugh Heyliger owned their split-level concrete dwelling house at Bird Rock, Basseterre. That property was insured with the National Caribbean Insurance Company Ltd, and the Royal Bank of Canada was the mortgagee. Hugh Heyliger was, at the time of the hurricane, Minister of Agriculture, Lands Housing and Development in the Kennedy Simmonds administration.
The Heyligers made a claim on the insurance company. It was supported by an estimate provided by Anthony Skeete Associates. The claim was for EC $48,053.83. Unlike the estimate given in relation to Dr Simmond’s claim, the estimate provided by Anthony Skeete was broken down into material cost and labour cost. The rain damage done to the Heyligers’ property related to the roof. The floor and walls were water damaged.
Bertrand Doyle was also the adjuster in the Heyligers case. He found that the cost in preparing the estimate, which was set at EC $2,000 and submitted as part of the claim, was not covered by the policy. He found, too, that the provision made for repainting was not directly related to hurricane damage; and that the cost of labour estimated to be EC $20.4K was not specifically indicated. The claim was adjusted downwards from EC $48K to EC $36.9K.
The Heyligers’ claim went before the Board, along with the adjuster’s report, and was considered on 16 October 1989, coupled with the Simmonds claim. Other than the different amounts of loss, the claims were treated in identical manner. The Heyligers’ claim was one of the claims that the chairman, Mr Fitzroy Jones, requested “be treated in a special way in deference to who the claimants were”. The part of the Heyligers’ claim that was approved by the adjuster was paid. An additional sum of EC $10,088.79 was also paid, ex-gratia. These monies were paid also by separate cheques, and were directed to The Royal Bank of Canada. Mr Heyliger told the Inquiry that he had no knowledge whatsoever of the ex-gratia payment. He was merely aware that he was the recipient of his claim in full.
Meeting of the Board of Directors on 16 October 1989
The Chairman of the Board who led the discussion at the meeting was Mr Fitzroy Jones. He began his report to the Board by “explaining that he sought the Board’s assistance in dealing with a fairly difficult situation”. The delicacy of the Board’s deliberations was not lost on its members. The minutes of the meeting went on to record, that “the chairman requested that the Board treat these claims in a special way in deference to who the claimants were”. He then suggested that the company incur any costs claimed above the adjusted figures presented by the loss adjuster. The decision was made to pay the claims as indicated by the adjuster and to pay the differences at the insurer’s expense. According to Mrs Attong, deputy manager of National Caribbean Insurance, and in 1989 the secretary who took the minutes at the meeting of 16 October, no other claims arising out of the Hurricane Hugo damage were similarly treated. On the face of it, there can hardly have been a more blatant example of monetary preference to political leaders by Mr Jones and his colleagues on the Board, although they are recorded as having congratulated the chairman for his approach to the situation. Mr Jones has stayed away from the Inquiry, but answered a lengthy questionnaire. Some of his colleagues who did come and give evidence - Ivan Buchanan, Robert Manning, Kenneth Kelly, and William Liburd - sought to justify the Board’s decision. Mr Kenneth Kelly stated that, to his way of thinking, it was fair “and I still say it was fair.”
My conclusions are that Mr Fitzroy Jones dragooned his fellow members on the Board of Directors, by virtue of his prestige in the world of insurance; they were quite plainly overawed by his renowned expertise in insurance matters. Mr Jones had been invited by Government, as long ago, as 1973, to return from the UK to set up a national insurance company. He became the NCIC’s first general manager, principal officer and director form the company’s inception. He served as chairman of the Board from 1982-1995. Thus he was rightly regarded as the pioneer of local insurance development, as well as having contributed to the development of insurance generally and locally. Given that background of dominant knowledge, insurance expertise and experience, it would be too censorious to criticise the individual members of the board other than for their supine attitude to the blandishments of their chairman.
When their chairman told them that the claims of Dr Simmonds and Mr Heyliger presented a “fairly difficult situation” and that the claims should be treated in a “special way in deference to who the claimants were”, there appeared to have been no demur to that suggestion, whatever discussions may or may not have taken place. Some of the members who gave evidence either did not fully comprehend what was being said by their chairman or gave some interpretation of what was being said which did not accord with the plain and ordinary meaning of the recorded decision. I do not doubt for a moment that Mrs Attong, then the secretary to the Board and the minute taker, faithfully recorded the pith and substance of what the chairman was telling the members of the Board, although she did not recall whether the chairman was in fact using the precise language which she reproduced in the minute. She was quite certain that he was indicating that their claims should be treated in a “special way”, but was less certain whether he had used the precise words “in deference to who they were”. I do not doubt for a moment that the chairman was inviting his colleagues to treat the claims of Dr Simmonds and Mr Heyliger discriminatorily in their favour, and however his entreaty was regarded by the individual Board members, it cannot be doubted that their leader was clear in his attitude and approach to the claims of his Cabinet colleagues. The reason that I am so convinced arises from the fact that the claims of Dr Simmonds and Mr Heyliger were dealt with at the meeting in a quite exceptional way from any other claimant that the Board was dealing with. The claims of the two of the three ministers, by reference to their ministerial offices, were, moreover, lumped together collectively, and not separately in their individual or personal capacity. The claims of Dr Simmonds and Mr Heyliger did not appear, as I find, in any list of claimants whose claims were being decided upon, but were adjudicated upon under the rubric of “the Chairman’s Report” which appears as a side heading to the minutes of the meeting of the 16 October 1989. That demonstrably indicates that their claims were being treated in special way. It could not be said - as was urged upon me at the Inquiry - that the payments were made ex gratia so as to reflect the value of individual customers. If that had been so, the claims would not have been dealt with collectively.
I found Mrs Attong an impressive and honest witness who was faced before the Inquiry with her own phrase, “a fairly difficult situation” which she said was a faithful recording of what the chairman had said at the meeting of the 16 October 1989.
An added reason for coming to the conclusion that I have is provided by a further entry on the minutes of the meeting. After the Board had decided to pay the claims as indicated by the adjuster, and to pay the differences between the original estimate and the amended estimate at the expense of the National Insurance Company (less certain items of cost) the minutes recorded that the chairman was “then commended for his approach to the situation in crystallising the matter so effectively”. If, as some Board members claimed in their evidence to the Inquiry, they had treated the claims of Dr Simmonds and Mr Heyliger in no different way from any other claimant, why on earth should they wish to record in their minutes a specific commendation to their chairman? A vote of thanks to the chairman at the end of a Board meeting for his successful handling of the meeting might, no doubt, have been appropriate. But a specific recording of congratulations, immediately following the conclusion of the claims by the Ministers is altogether bizarre, unless of course the Board members had an ulterior, and possibly political motive. My conclusion is that the members were commending their chairman precisely because he had dealt with a difficult situation in a way which accorded wholly with their inclination and motivation to favour those in high office, particularly since the members, with the notable exception of Mr Robert Manning who has never had any political affiliation, were either recognisable supporters of the ruling political party or were unswerving supporters of their chairman. In this regard I have paid particular attention to the evidence given by Mr Ivan Buchanan who had a distinguished record as Speaker of the National Assembly from 1985-1995. He was at pains to deliver, at some length in his evidence, an encomium on Mr Fitzroy Jones. It seemed to me that Mr Buchanan was so enchanted with the attributes of his chairman, to the point where he was incapable of appreciating that other, more objective members might have taken the view that Mr Jones, as a minister in the Cabinet of Dr Simmonds and a colleague of Mr Heyliger would be biased in favour of their claims. At least Mr Robert Manning (the vice-chairman) explained to me that Mr Buchanan was given to hyperbole and flights of florid language.
Actual bias there may not have been on Mr Jones’ part - and most members whom I have heard disavowed any such suggestion - but that there was a real risk - a very substantial risk - suggestive of bias. Indeed, one member of the board, Mr Kenneth Kelly, commendably, told me that, in retrospect, he thought it had been improper for Mr Jones to have been a party to the decision-making process on 16 October 1989 in relation to the claims of ministerial colleagues: As indeed it undoubtedly was.
The responsibility of the insured politicians
The question for me remains: did the former Prime Minister and Mr Heyliger each know of the preferential treatment he was receiving? If not, ought they to have been aware that in receiving their claims in full they were allowing themselves to be party to a questionable bargain? And if so, should they have disclosed their private interests? To answer these questions, it is necessary to recount the events that followed the claims flowing from the devastation wreaked by Hurricane Hugo.
The Prime Minister’s claim form of 29 September 1989 was signed by him and had attached to it the estimate by Warner Construction Company of repairs to his insured property, amounting to EC $159,317.45. The report of the loss adjuster, Mr Bertrand Doyle, dated 14 October 1989, scaled down the original estimate of EC $159,317.45 to EC $100,000. His reasons for so doing were prefaced with the comment: “the urgency with which this report is requested precludes the aforementioned considerations, and the following observations and recommendations are made with this understanding”. Why was Mr Doyle asked to report with “urgency”? I can only conclude, having heard Mr Doyle and having heard nothing from the insurers to explain the request for an urgent report, that the desire to expedite these particular claims was the product of political favouritism shown by the insurance company to the Prime Minister and Mr Heyliger. The two cheques in each instance were drawn on 17 October 1989, less than three weeks from the presentation of the claims and the day immediately following the Boards decision. If this does not disclose indecent haste to reward the Prime Minister and Mr Heyliger, it has, at the very least, the hallmark of suspicious priority. Did the two recipients not realise that prompt dealing and payment of their claims in full was the product of a preference? Did any other claimant receive such expeditious treatment on their claims?
Dr Simmonds’ policyholder’s record sheet, disclosed to the Inquiry, exhibits some interesting entries. The entry for 18 October 1989 states “Paid ($159,217.45) to SKNA Nat. Bank 2 + D in full settlement of P/H’s claim” On 14 November 1989 the sum insured was increased from EC $600,000 to EC $800,000 “to include tennis court of $50,000.” (The policy had not included the tennis court, and was one of the reasons for the deductions made by the loss adjuster.) Against an entry, dated 28 February 1991, there is recorded: “Fence damaged by ‘Hugo’ was donated to a Playing Field Committee”. What did the “donation” amount to, and why was it made? No “donation” appears to have been made out of the claim of $159,217.45 in October 1989. The last entry, of 28 November 1995 (five months after the election that removed Dr Simmonds from power) records “Info. as per Mr Jeffers instructions - P/H said he will not be renewing his policy. Therefore policy has been CANCELLED”. While these facts might lead a suspicious mind to conclude that Dr Simmonds and Mr Heyliger could reasonably have assumed that they were getting preferential treatment while they were in power, it would be wrong for me to uphold the notice of provisional criticism. Indeed, I would go further and, having now considered all the evidence, dismiss the criticism as unfounded.
Had I heard any evidence that either or both of the two Ministers could reasonably be found to have, or ought to have known that he had received preferential treatment, by way of an ex gratia payment in settlement of their insurance claims, there would have been a clear breach of the rule that members of the National Assembly must not be in receipt of any material benefit which might reasonably be thought by others to influence his or her actions, speeches or votes in the Naitonal Assembly, or actions taken in his or her capacity as a Member of the National Assembly. The rule means that any gift, or other benefit, which in any way relates to membership of the National Assembly and which is given gratis, or at a cost below that generally available to members of the public, is a breach of the standards of conduct by members of the National Assembly. I have made these observations only for the reason that I am unsure whether the rule that I have stated was and is generally understood or appreciated in St Kitts. If not, it should be impressed on all members of the National Assembly that they must disclose any interest that might influence them in performance of their parliamentary duties.
Ex-gratia Payments
An argument was advanced before me that ex gratia payments are not infrequently made by insurance companies. The argument needs to be addressed. Mr Doyle, in answer to questions from Ms Mitcham, explained the circumstances in which an insurance company might make an ex gratia settlement of a claim by a policyholder. He said that for his part (and by that he meant all insurers) he would never pay the full amount of a client’s claim because the message had to be that the ex gratia payment was a matter of favour: there was no entitlement to it. For emphasis he said: “If I am going to make an ex gratia payment I will make sure the client does not get the full amount; the client must recognise he is getting something for nothing. That is what I would say, paying above what the adjuster recommended is good, but paying the full amount of the claim on an ex gratia basis is a no-go”. On that basis, no doubt the status of a person is a proper consideration for the purpose of calculating an ex gratia payment. But even assuming some preferential treatment to a Prime Minister, such preference would not accommodate the whole of the claim. To the extent that some at least of the disallowed claim by the adjuster could properly be paid as a matter of grace or favour, there is a basis for supporting the decision of the Board on 16 October 1989. What is insupportable is a clear preference to the Prime Minister and his ministerial colleagues beyond what would be ordinarily permissible; that seems to me to be wrong. For the Board to have rejected in toto the loss adjuster’s estimate of the insurer’s liability was to indulge in an exercise of political overbearing of all principles of sound administration.
Conclusions
If (as I have concluded) NCIC acted improperly in its decision of 16 October 1989, what (if any) are the consequences to Dr Simmonds and Mr Heyliger in taking advantage of the ex gratia payments? There is no direct evidence that either of the two men knew that he was receiving payments over and above the amount of the adjusted estimate as a matter of grace and favour. Mr Heyliger told me that he was at the time wholly unaware of the receipt of his insurance claim; the payment was made to the Royal Bank of Canada in reduction of his mortgage liability. I have no reason to doubt his word in that regard. Dr Simmonds told me that he was aware of the payment of his claim in full, but he felt that nothing less than a settlement in full was only right and proper. He was oblivious to the fact that the payment was ex gratia. Like Mr Heyliger I have no reason to disbelieve Dr Simmonds.
But that is not the end of the matter. If I had thought that Dr Simmonds ought reasonably to have known that the payment of his claim in full was quite exceptional and thereby reflected a preference, he would be acting totally irrationally other than for naked political reasons, I would have to criticise him, to this extent. Such a finding would mean that Dr Simmonds was obtaining a private benefit by reason of his status as Prime Minister. At the very least, to my mind, he would be bound to make a public disclosure of that benefit. Whether he would be bound, morally at least, to have declined to accept the amount of the ex gratia payment is a matter not readily answerable. In the event, I do not need to deal with that, since I have come to the conclusion that Dr Simmonds could not reasonably have known that he was getting quite exceptional, preferential treatment. While Mr Doyle was adamant that no client should ever think that he was, even as a matter of grace, going to be paid every penny of his claim by an insurance company, I am unsure that any insured would be so certain that payment in full was entirely out of the question. Indeed, Dr Simmonds was adamant in thinking that he was entitled to the totality of his claim, quite irrespective of any ex gratia element. If he had been aware that part of his claim did in fact reflect other than a strict liability payment, there might be a different conclusion. But I accept that he was unaware of the payment being, in part, ex gratia. Accordingly, there is nothing in his conduct in October 1989 to criticise.
NOTICE OF PROVISIONAL CRITICISMS
Dr Kennedy Simmonds
1. You failed to take any steps to ensure that your Ministerial colleague, Mr. Fitzroy Jones, who was also Chairman of the Board of Directors of the National Caribbean Insurance Co. Ltd., take no part in the decision making process on your insurance claim. (Dismissed)
2. You should have declined to accept the ex gratia payment by way of a second cheque of $59,217.45 paid into your account with the St. Kitts Nevis Anguilla National Bank on the 17 October, 1989 as being either a corrupt bargain or at least an improper transaction on the part of a Minister of the Crown. (Dismissed)
NOTICE OF PROVISIONAL CRITICISMS
Mr Hugh Heyliger
1. You failed either acting alone or together with the Prime Minister, to take any step(s) to ensure that your Ministerial colleague Mr. Fitzroy Jones, who was also Chairman of the Board of Directors of the National Caribbean Insurance Co. Ltd., take no part in the decision making process on your insurance claim. (Dismissed)
2. You should have declined to accept the ex-gratia payment of $10,088.79 paid by way of a second cheque to your account with the Royal Bank of Canada as being either a corrupt bargain or, at least, an improper transaction on the part of a Minister of the Crown. (Dismissed)
NOTICE OF PROVISIONAL CRITICISMS
Mr William Liburd
1. You failed to take any step(s) to ensure that the Chairman of your Board, Mr. Fitzroy Jones, as a Government Minister and as a colleague in Cabinet of both Messers. Simmonds and Heyliger did not participate in the decision-making process. (Upheld)
2. By making ex gratia payments to Dr. Simmonds and the Heyligers respectively, you participated in striking a corrupt bargain or at least involving yourself in an improper transaction with a Minister of the Crown. (Upheld as to involvement in an improper transaction)
NOTICE OF PROVISIONAL CRITICISMS
Mr Robert Manning
1. You failed to take any step(s) to ensure that the Chairman of your Board, Mr. Fitzroy Jones, as a Government Minister and as a colleague in Cabinet of both Messers. Simmonds and Heyliger did not participate in the decision making process. (Upheld)
2. By making ex gratia payments to Dr. Simmonds and the Heyligers respectively you participated in striking a corrupt bargain or at least involving yourself in an improper transaction with a Minister of the Crown. (Upheld as to involvement in an improper transaction)
NOTICE OF PROVISIONAL CRITICISMS
Mr Austin Joseph
1. You failed to take any step(s) to ensure that the Chairman of your Board, Mr. Fitzroy Jones, as a Government Minister and as a colleague in Cabinet of both Messers. Simmonds and Heyliger did not participate in the decision making process. (Upheld)
2. By making ex gratia payments to Dr. Simmonds and the Heyligers respectively you participated in striking a corrupt bargain or at least involving yourself in an improper transaction with a Minister of the Crown. (Upheld as to involvement in an improper transaction)
NOTICE OF PROVISIONAL CRITICISMS
Mr Ivan Buchanan CBE
1. You failed to take any step(s) to ensure that the Chairman of your Board, Mr. Fitzroy Jones, as a Government Minister and as a colleague in Cabinet of both Messers. Simmonds and Heyliger did not participate in the decision making process. (Upheld)
2. By making ex gratia payments to Dr. Simmonds and the Heyligers respectively you participated in striking a corrupt bargain or at least involving yourself in an improper transaction with a Minister of the Crown. (Upheld as to involvement in improper transaction)
NOTICE OF PROVISIONAL CRITICISMS
Mr Kenneth Kelly
1. You failed to take any step(s) to ensure that the Chairman of your Board, Mr. Fitzroy Jones, as a Government Minister and as a colleague in Cabinet of both Messers. Simmonds and Heyliger did not participate in the decision making process. (Upheld)
2. By making ex gratia payments to Dr. Simmonds and the Heyligers respectively you participated in striking a corrupt bargain or at least involving yourself in an improper transaction with a Minister of the Crown. (Upheld as to involvement in improper tranaction)
PART II B(3)
The Fire at the Democrat
The Facts of the Fire
The Democrat is, and was in 1993, a biweekly newspaper in St Kitts and Nevis. It is unmistakably, even ostentatiously the unofficial mouthpiece of the People’s Action Movement (PAM), the political party of government during the period from 1983 (when the Federation of St Kitts and Nevis achieved independence from the British Crown) until June 1995, since when PAM has been in opposition. The People’s Action Movement Publishing Company Ltd (PAMPUBCO) in fact owns the newspaper although apparently it is not the official organ of PAM. The premises in which The Democrat is housed on two floors of the building are occupied by the Democrat Printing Company Ltd (DPC). DPC was registered under the Companies Act on 11 June 1974. (Unwittingly, counsel for the Commission in his opening statement said that there was some uncertainty in DPC’s legal status. This caused some consternation, an example of how careful counsel for the Commission needs to be.) For thirty years DPC was insured with Delisle Walwyn. In 1992, DPC’s bank (the St Kitts-Nevis-Anguilla National Bank) which is the parent company of National Caribbean Insurance Company (NCIC) advised DPC that it should switch its custom to NCIC. The director of NCIC, Mr Eugene Hamilton instructed his underwriting department to process an application for insurance coverage. The Democrat’s premises at 30 Cayon Street, Basseterre were inspected. By autumn 1993 the matter was in abeyance, the underwriting department not having completed the process of issuing a policy of insurance. No written policy had been issued at any relevant time.
On 24 September 1993 a section of the building, occupied by the newspaper’s editorial staff and housing the records and old copies of the newspaper, was damaged by fire. The Fire Brigade was speedily on the scene and managed to extinguish the flames after approximately forty minutes. Water from the hoses, trained on the site of the fire, percolated to the first floor where two printing presses were situated. Mr Uriel Hensley, in 1993 a Superintendent of Police and the officer in charge of the Fire Department, told the Inquiry that the property on the first floor was most likely to have been damaged by the water either seeping through the ceiling or coming down the stairway.
The first policeman on the scene of the fire was Mr Delvin Hodge, at the time a detective officer in the Criminal Investigation Department and now, after 16 years in the police force, a labour construction worker. At the scene of the fire he met Mr Fitzroy Jones, the “managing director” [and key-holder to the premises] of DPC who told Mr Hodge that the property was insured. Mr Hodge told the Inquiry that he was called to the scene of the fire “to respond to a report of arson”. (One might note that arson is commonly a feature of political demonstrations in the Caribbean). He added that there was some evidence of a break-in at the building that suggested that the arsonist was an outsider. Mr Hodge’s further inquiries did not identify the perpetrator; there was no evidence to suggest an inside job. But Mr Hodge thought that the case had not been, either at the time or since, thoroughly investigated. He added that the insurers should have requested the police report on the circumstances of the fire and the damaged property. Such request was made, but only nine months after the fire, when Mr Austin Julius, a claims assistant of NCIC, wrote on 21 June 1994 asking to be provided with a police report. The response from Mr Richards, a Superintendent of Police of 7 July 1994, ended by stating that “initial and subsequent enquiries suggests that the fire was set deliberately by person or persons unknown as several glass louvres which were intact prior to closing down were found to be broken out facilitating an entry.” That belated report, be it noted, was received at NCIC’s offices the following day, simultaneously with the receipt by the National Bank of EC $96,000 from NCIC in settlement of a claim by DPC in respect of “incident which occurred on or about the 24th of September 1994 [sic].” NCIC’s cheque of $96,000 was sent to the National Bank on 4 July 1994. The amount paid was $100,000 less $4,000 deducted as the first premium. The payment was from the outset - which is from 29 September 1993 onwards - declared to be ex gratia. The actual claim, made only in February 1994, was for $167,000, unadjusted by any loss adjuster.
Insurance Coverage
At the time of the fire there was no written policy of insurance issued by NCIC to DPC, and much was made initially at the Inquiry of the fact that, without such a policy in force it was odd, if not highly exceptional for an insurer to meet a claim. Exceptions could arise, where for some explicable reason an established customer of an insurance company had forgotten to renew an annual policy. But scarcely otherwise. There appeared, therefore, to be no basis for settling the claim in the absence of a policy. I was persuaded, however by both Ms Mitcham and Mr Hamilton (supported by the expert evidence from Mr Doyle, a leading loss adjuster from Trinidad) that, as a matter of insurance law, there can indeed be a contract of insurance by word of mouth. Halsbury’s Laws of England, 4th Edition, Volume 22, paragraphs 388 and 389 state as follows:
The important question for me is: was there, prior to the fire on 23 September 1993, any positive act indicative of an intention to create a contract of insurance?
On balance, I came to the provisional view that all the essential ingredients for concluding a policy of insurance appear to have existed so as to qualify as a legally binding agreement. The subject matter of the insurance was clear: it was the property of DPC at its offices at Cayon Street. Mr Julius had inspected the premises in 1992. The amount of the insurance had not been fixed, but the sum to be insured was EC $200,000 on the property, the contents for EC$170,000 and stock for EC$30,000. The nature of the risk - against fire - was known. The period of the coverage was presumably for one year initially, and the rate of the premium, although not calculated, had been assessed and a recommendation was made by the underwriting assistant of NCIC at 11%. Moreover, when NCIC came to settle the claim, it deducted an amount of EC $4,000 as reflecting the annual premium on the policy. The only difficulty I see in my making a positive finding that there was an unwritten contract of insurance is the attitude of NCIC at the relevant time. Why did NCIC proceed to meet the claim by way of an ex gratia payment? If there was indeed a contractual liability to meet any claim for loss, on the basis of an unwritten contract, an ex gratia payment by an insurer would definitively be as a matter of favour “without merit; it does not stand up” according to Mr Doyle. By that he meant, no legal liability to pay. An insurer might make an ex gratia payment as a matter of charity. Payment might be made as a marketing decision, but always outwith any legal liability. Nothing that I have heard or read in the course of the Inquiry leads me to conclude that any of the “marketing” considerations prompted the ex gratia payment to the Democrat. In my judgment, NCIC was solely motivated by the absence of a written contract and hence where it thought it had no strict legal liability. The argument now (in 1999) that there had been in 1992/3 an intention to create a contractual liability is an ex post facto rationalisation of the state of affairs. As I have said, had that been the true appreciation of the legal situation, the General Manager - Mr Eugene Hamilton - would have advised payment. He would not have resorted to the alternative, non-legal liability of an ex gratia payment; on the contrary, he was insisting from the word go on an ex gratia payment, if and when a claim was formally made.
Within a week of the fire at the Democrat’s premises, Mr Eugene Hamilton, the General Manager , under the heading of “General Manager’s Report” (and, therefore, presumably an extra-item to the agenda) advised the Board of the fire at the Democrat Building (since Mr Fitzroy Jones the chairman of the Board, had been at the scene of the fire, he would have had direct knowledge of the incident). The minute of the meeting records:
Nowhere in this minute is there any hint of an unwritten contractual liability. Indeed, on the contrary the “application” for insurance, the “risk not yet valued” and “information” lacking on the valuation of the rate suggests, at most, an inchoate agreement, an incomplete state of affairs to constitute an intention to create a legal relationship. The indecision towards an unwritten contract or negotiations towards the acceptance of a contract, is bolstered by Mr Hamilton’s memorandum of 16 May 1994 to Mrs Althea Byron, manager of the claims department. Explaining the circumstances that led the Board “to consider a claim in this case”, Mr Hamilton states:
If the move was only “attempted”, not all the ingredients of an unwritten contract of insurance with NCIC were in place. There was, moreover, no hint or suggestion that the ex gratia payment was being made for marketing reasons or as an act of charity. Could it be that the political sympathies of the Chairman and the General-Manager of NCIC swayed their action to favour a gift to the Democrat? I cannot vouchsafe that conclusion. But it must be an unarticulated premise that favouritism operated to pay $100,000 to DPC.
Post-September 1993
By stark contrast to the insurance claims made by Dr Kennedy Simmonds and Mr Hugh Heyliger, the claim by the Democrat proceeded at a snail’s pace. Five months elapsed after the Board of Directors accepted, in principle, that DPC’s claim should be settled by an ex gratia payment. And when it came, on 25 February 1994, the form was signed by Mr Fitzroy Jones “pp. Democrat”. The handwriting on NCIC’s Premises/Property claim form appears throughout the document to correspond with the signature. Without an admission from Mr Jones or some evidence of a handwriting expert, I cannot tell. Suffice it to say, it was quite improper for Mr Fitzroy Jones to be both insurance claimant and chairman of the insurance company deciding on the claim. His board members should have been alert to this impropriety and suggested that their chairman should at least vacate the chair or leave the meeting, whenever the DPC claim was being discussed. Likewise, a vigilant chief executive should have indicated the impropriety to his chairman and, in the absence of an appropriate response from the chairman, to the Board members. Mr Hamilton did not take any such step. Indeed, he appeared not to acknowledge any impropriety.
No allusion was made to the problem of DPC’s claim without a written policy of insurance in place when the Board of Directors met on 28 February 1994. The Minutes of that meeting record.
Matters still did not proceed apace. Mrs Althea Byron, who had been instructed to process the settlement of the claim for $100,000, became concerned because she was aware that no written policy was in force. She was not satisfied with verbal instructions from Mr Hamilton and proceeded to request from him something in writing. Although the Board had decided to settle a claim for $167,000 by ex gratia payment of $100,000, at no time was the claim submitted to a loss adjuster, which was the normal procedure in all but straightforward claims. In response to Mrs Byron, Mr Hamilton provided a memorandum on 16 May 1994. The gave no indication that the absence of a written policy was material, on the ground that there was an unwritten contract. Mrs Byron then carried out the necessary documentation. On 27 June 1994 she approved the issue of a cheque and disbursement voucher for “ex gratia payment: $100,000.00 less premium payment $4000.00: ex gratia payment: $96,000.”; and on 4 July 1994 a cheque was sent to the National Bank. Meanwhile Mr Julius wrote to the Commissioner of Police requesting a police report on the fire. The response only came on 7 July 1994 , too late to have any bearing on the settlement of the claim.
Mr Eugene Hamilton, in the course of a persuasive (if somewhat excitable and politically overloaded) submission said that criticism was not properly forthcoming because whatever his (or others’) actions might be, they were inevitably couched within an “organisational culture inherent in a structure from inception”. Historically I do not doubt that Mr Hamilton is right. Traditional cultures tend to be trapped in a time warp, but must ultimately yield to fresh ways of behaviour. Cultures do change, with changing attitudes and publicly acknowledged standards in public life. No better example came to light than in the course of this Inquiry.
I dealt earlier (in Part II B(1)) with the events of 8 March 1982 when the National Assembly passed through all three legislative stages the St Kitts-Nevis-Anguilla National Bank Limited (Special Provisions) Act 1982. By a single section in that piece of banking legislation Dr Kennedy Simmonds and his colleagues in government decided that a member of the National Assembly was disqualified from being a director of the National Bank, which included by definition the National Caribbean Insurance Co. The principle, thus enunciated legislatively, had a sound rationale then: it is just as sound nearly two decades later, even if accidentally and incidentally it never became law due to the judicial declaration of the Act’s unconstitutionality on grounds of interference with property rights. There are occasions, Ms Mitcham submitted, “where even in the English common law system, which our system is derived, a person is allowed to wear several hats” and she proceeds to give the example of cases of contempt of court where the judiciary can wear a prosecutorial hat against an alleged contemnor and then sit in judgment. Ms Mitcham goes on to submit that it is not the number of hats being worn but whether the wearer of multiple hats is acting fairly and reasonably in all the circumstances. Just so . It is now widely accepted that the criminal judge in front of whom a contempt is committed cannot try the alleged contemnor. To do so would violate the norm of fundamental freedom of a fair trial before an independent and impartial tribunal. If any authority is used for this proposition one need point only to the ECHR’s decisions about the procedure in courts-martial.
The whole episode of the claim by the Democrat Printing Co has to be understood in the context of public life in St Kitts and Nevis. The report of the Constitution Task Force under the chairmanship of Sir Fred Phillips CVO QC describes the problem graphically. It said: “The country is incredibly polarised politically. Virtually everything - a word spoken, to whom it was spoken, a phrase, a proposal - is scrutinised through a political magnifying glass…for political…agendas.” The Democrat is pronouncedly the voice of the political party then in power, of which Mr Fitzroy Jones was a prominent member. He was, moreover, the managing director of the claimant. On a number of scores he was automatically disqualified from acting on the insurance claim to the insurers. He paid no attention whatsoever to the impropriety of the duality of his position. He also entirely dominated the processing of the claim. At every important stage he not only took the chair but also led the discussion and decision-making. Whether or not there was a legal liability to accept the claim - and I am inclined finally to the view that at no time was there any strict legal liability - the insistent qualification that the payment was ex gratia merely underlines Mr Fitzroy Jones’ approach of political motivation. Mr Jones and his Board members collectively and individually must accept the responsibility for the ex gratia payment of $100,000. My conclusion is that the gift (which is what it was) to DPC was politically motivated and could not properly be treated as an aspect of sound marketing practices of an insurance company that has some public responsibility.
Mr Eugene Hamilton
For the reasons mentioned, the chief of which is the plain fact that Mr Hamilton was not a public official, I do not uphold the provisional criticisms of which he was given notice. In fact, one of the criticisms was not supported by the evidence; although Mr Hamilton admitted he was a member of PAM, he was only an occasional contributor to the Democrat.
Notwithstanding the foregoing, I cannot leave the matter of Mr Hamilton’s role just like that. His failure to seek a police report, in view of the suspicious circumstances of the fire, seems both inexplicable and reprehensible. Any insurance company, faced with a claim where arson was suspected, must, as a matter of course or simple expediency, ask immediately for a report from the police and the fire brigade. Whether Mr Hamilton’s failure in this respect was politically motivated or not must remain a matter of conjecture.
That apart, Mr Hamilton should have been on record as having drawn to the attention of the Board that Mr Jones could not be both a claimant on behalf of the Democrat and at the same time be Chairman of the Board. On the assumption that Mr Jones was conducting himself improperly, Mr Hamilton should have had a quiet word with his Chairman. If thereafter he failed to produce a sensible response from his Chairman, Mr Hamilton should have alerted the Board to the situation; after all he was also secretary to the Board.
Finally, without doubt, the omission by the NCIC to have this claim, above all other claims of its nature, referred to the loss adjuster was a failure of management, for which Mr Hamilton must take responsibility. But, as I have already indicated, I allude to Mr Hamilton’s mismanagement as a matter which in a well-functioning organisation ought to be dealt with by his employer. Had Mr Hamilton been in public office my findings in relation to the provisional criticisms might well have been different.
NOTICE OF PROVISIONAL CRITICISMS
Mr Eugene Hamilton
1. You failed to inform the Board that there was no policy of insurance in existence in relation to the Democrat Printing Company Ltd. at the time of the fire, and as a consequence that there was no basis for the ex gratia payment. (Not Upheld)
2. You failed to inform the Board that the claim was signed by Fitzroy Jones, the Chairman of the Board of Directors. (Not Upheld)
3. You failed to inform the Chairman that it was unjust for him to sit in judgement, as it were, in the determination of a matter in which he was a party (Not Upheld)
4. In your capacity as Secretary to the Board, making a full and careful record of the issues in relation to the Democrat Printing Company Ltd, for the purpose of the Minutes. (Not Upheld)
5. You failed to insist that the matter first be evaluated and commented upon by the relevant department of the Insurance Company. (Not Upheld)
6. You failed to disclose to the Board your close relationship to the Democrat Printing Company (Dismissed)
NOTICE OF PROVISIONAL CRITICISMS
Mr Robert Manning
1. You participated in a decision to meet a claim made by the Democrat Printing Co. Ltd. knowing that there was no Policy of Insurance in force. (Upheld)
2. You knew or ought to have known that the payment of an ex gratia award of $96,000.00 was, in the circumstances, improper and constituted a corrupt bargain given that the claimant was an organ of the Peoples Action Movement of which you were a member (Not Upheld)
3. You failed to insist that the Chairman of the Board, Mr. Fitzroy Jones, either declare an interest and or withdraw from the meeting since the claim form submitted to the Insurance Co. on behalf of the Democrat Printing Co. was signed by the said Fitzroy Jones. (Upheld)
NOTICE OF PROVISIONAL CRITICISMS
Mr. William Liburd
1. You participated in a decision to meet a claim made by the Democrat Printing Co. Ltd. knowing that there was no Policy of Insurance in force. (Upheld)
2. You knew or ought to have known that the payment of an ex gratia award of $96,000.00 was, in the circumstances, improper and constituted a corrupt bargain given that the claimant was an organ of the Peoples Action Movement of which you were a member. (Not Upheld)
3. You failed to insist that the Chairman of the Board, Mr. Fitzroy Jones, either declare an interest and or withdraw from the meeting since the claim form submitted to the Insurance Co. on behalf of the Democrat Printing Co. was signed by the said Fitzroy Jones. (Upheld)
NOTICE OF PROVISIONAL CRITICISMS
Mr Kenneth Kelly
1. You participated in a decision to meet a claim made by the Democrat Printing Co. Ltd. knowing that there was no Policy of Insurance in force. (Upheld)
2. you knew or ought to have known that the payment of an ex gratia award of $96,000.00 was, in the circumstances, improper and constituted a corrupt bargain given that the claimant was an organ of the Peoples Action Movement of which you were a member. (Not Upheld)
3. you failed to insist that the Chairman of the Board, Mr. Fitzroy Jones, either declare an interest and or withdraw from the meeting since the claim form submitted to the Insurance Co. on behalf of the Democrat Printing Co. was signed by the said Fitzroy Jones. (Upheld)
NOTICE OF PROVISIONAL CRITICISMS
Mr Ernest Pistana
1. You participated in a decision to meet a claim made by the Democrat Printing Co. Ltd. knowing that there was no Policy of Insurance in force. (Upheld)
2. you knew or ought to have known that the payment of an ex gratia award of $96,000.00 was, in the circumstances, improper and constituted a corrupt bargain given that the claimant was an organ of the Peoples Action Movement of which you were a member. (Not Upheld)
3. you failed to insist that the Chairman of the Board, Mr. Fitzroy Jones, either declare an interest and or withdraw from the meeting since the claim form submitted to the Insurance Co. on behalf of the Democrat Printing Co. was signed by the said Fitzroy Jones. (Upheld)
PART III
Financial Administration
Transparency and accountability are the twin pillars of good governance, whatever may be their variable application in large or small states (see Part IV A below). Yet neither concept, to put it moderately, was conspicuously observed in the financial administration of the Government of St Kitts and Nevis, either in the mid-1980’s in the handling of the hydrofoil affair (see Part II A) or again in 1989 or 1993/4 in the insurance issues (see Part II B). These examples suffice, in my view, to indicate at least a significant degree of non-compliance with the standards in public life expected of a democratic country.
Since the mid-1990’s countries in the Eastern Caribbean have been undertaking, or intending to undertake programmes of legislation for strengthening the control of public finances; such legislation would provide for financial management and accountability at all levels of government administration. But, while the laws in St Kitts and Nevis and elsewhere in the Eastern Caribbean have not kept pace with public acceptance of the notion of good governance, there is no reason why, absent the required legislation, Ministers, politicians and administrators shall not have observed the standards. The period under scrutiny by the Commission of Inquiry further indicates the emergence in the immediate post-colonial era of an indigenous political culture in which Ministers impermissibly have paid little or no attention to the twin concepts underpinning good governance. Ministers also declined to adopt the need interdependently to co-ordinate (and regionalise) their financial controls of public funds.
In June 1995 OECS produced a proposal for a uniform Finance Administration Act and Regulations, which is currently under active consideration by the member-states. In a preliminary note on the draft model legislation for financial administration in the OECS, the consultant-author referred to the pre-independence consideration:
“The East Caribbean Federation Conference of 1962, in considering proposals for the establishment of a Federation of Barbados and the Leeward and Windward Islands agreed ‘that it was of great importance that there should be adequate provisions in the Federal and Unit constitutions to ensure proper control and supervision of the expenditure of public funds…and …that in the preparation of the Federal Constitution and in the revision of Unit Constitutions, special attention should be paid to the possibility of establishing uniform and effective provisions in this regard.’
The failure of the Federation of the West Indies in 1962 was eventually aborted and most of the Unit governments sought, and attained constitutional independence individually. Most of the Leeward and Windward Islands went through a transitional stage of Associate Statehood with the United Kingdom in 1967 and finally to full constitutional independence.
The expressed intent of the 1962 Conference to establish uniformity in financial matters was later achieved in the 1967 constitutions for Associate Statehood and in the later independence constitutions. The 1967 constitutions transferred considerable responsibility for financial management to the local legislatures and introduced new concepts of legislative authority, including the establishment of a Contingencies Fund, so that by the time of independence there had been almost total devolution of authority in financial matters.
Notwithstanding these advances in constitutional independence, which transferred full authority to the domestic legislatures, there was introduced “…the concept of ministerial responsibility and the partial decentralisation of authority and accountability to Permanent Secretaries/Accounting Officers, the laws governing financial management remained largely unchanged.”
Non-Application of Concepts
The approach of Dr Simmonds and his ministerial colleagues to the applicability of the twin concepts to the Credit Agreement of 30 May 1986 is instructive. Whatever was the proper legal view of the Government’s primary guarantee of the loan of US $25,330,000, there arose the question of the law relating to governmental entry into a guarantee. Under the Finance and Audit Act 1965 there was no express provision dealing with guarantees by Government to private person or organisations. Clearly, that would be a legislative oversight for an independent sovereign state. But in 1967, when St Kitts was granted associated statehood there was in place significant restrictions in terms of what a colonial administration could do in respect of raising finances. As Mr Wendell Lawrence stated, “the need to provide for guarantees and things of that nature did not exist….there was a significant devolution of authority in 1967 but the laws did not change until 1990 when the matter was clarified, although not conclusively, by section 10 of the Finance Act 1990. Strictly speaking there was no statutory requirement on Government to seek approval from the National Assembly for the guarantee under the Credit Agreement. But did not the advent of independence, with the assumption of full sovereignty status, call for demonstrably enhanced ministerial responsibility in respect of public funds? Even if there was no legal compulsion to seek parliamentary sanction to guarantee a loan of substantial amount, both openness and public accountability for the potential loss of public funds constituted an imperative in terms of good governance. Mr Wendell Lawrence told the Commission that “if there is a liability for 20 or 30 something million US dollars, it would be prudent to raise it - the issue, not the millions of dollars - before Parliament.” Not merely did Dr Simmonds and his colleagues clothe the Government’s involvement in the hydrofoil affair in a cloak of Cabinet secrecy (and extremely limited disclosure in that forum) but significantly did not issue any statement for publication in the media. By contrast the Government, through its radio and television station on 5 August 1985, had hailed the arrival in St Kitts the hydrofoil service as a “luxurious inter-island ferry service to the Caribbean”. The public in St Kitts and Nevis was entitled to know what public funds their Government was potentially committing to the hydrofoil project. The failure to provide any information - indeed, there appeared to have been a deliberate aim to keep governmental involvement under wraps - was an emphatic denial, at least in principle, of both transparency and accountability about financial administration of Government.
Apart from strengthening the law pertaining to guarantees, there is the issue of loans themselves. What happens at present is that most loans are approved through specific legislation - which is through a Loans Act - in which the specific purpose of the loan is stated, together with the terms of the loan and the limit in terms of quantity. If there are at any one time loan, each of which has a limit - for the sake of argument, a hundred million dollars - when viewed in relation to the total revenue, difficulties could arise. The solution is to have a simple Loans Act which would set broad limits - for example, that total loans outstanding at anyone time should be no more than 60% of gross notional product; to be debt servicing should not constitute more than 20% of revenue. It is worth exploring, in my view, a system of micro-limits so that if there was to be contemplated a violation of a limit in one contract of loan, no loan could be contracted except that some adjustment could be made to other loans. It is the aggregate of loan that makes the greater impact on government finances. I recommend that the question of Government loans be fully explored.
Insurance Issues
The examination of the insurance issues raised the question of the disclosure of assets by members of the National Assembly. The Constitution Task Force, under the chairmanship of Sir Fred Phillips, in July 1999 distilled from the evidence submitted to it that “there is a need for a form of political discipline within the legal and regulatory framework to create incentives for full and accurate disclosure of assets of all Parliamentarians, senior members of statutory bodies, permanent secretaries and heads of department.” To satisfy public accountability “an Integrity Commission may be essential….to entrance good governance in small societies such as St Kitts and Nevis.”
The Task Force omitted to note that the present Government in 1996 introduced a draft Integrity in Public Life Act. This proposed legislation would provide for the establishment of an Integrity Commission for the purposes of receiving declarations as to the financial affairs of persons in public life. (The draft legislation is at present subject to a consultation process). Clause 4(4) provides that a person may not be appointed a member of the Commission - the composition is to be a chairman, deputy chairman and three other members - “unless he is a citizen of Saint Christopher and Nevis”. This runs counter to what Mr Wendell Lawrence told the Commission, you cannot “select five persons in St Kitts whom everybody in public life would be satisfied could look upon their personal affairs”: in short, the imposition of independence and impartiality in the context of decision-making in relation to individual rights or interests is unattainable.
There is nothing to be said against the idea of an Integrity Commission, except for two considerations. First, and Integrity Commission needs to be framed within a much wider context of the establishment and maintenance of a Code of Ethics for all those involved in public life. Mr recommendation to the St Lucia Government in July 1999 for the establishment of a standing Commission for Standards in Public Life, encompassing all aspects of transparency and accountability of ministers, politicians and senior civil servants, is my preferred opinion for St Kitts as well. Second, my recommendation to St Lucia was that any such standing commission should not be set up on an island basis but should be a body established by OECS to cover all member-states.
Clause 4(4) of the draft model law on financial administration should not, in my view, stand. It would be almost impossible of implementation, given the limited pool of persons who could provide the necessary guarantee of independent and impartial decision-making about the personal affairs of persons in public life. Nationals of other Eastern Caribbean countries should be eligible to sit on the Integrity Commission.
The Public Accounts Committee, which is a vital instrument of parliamentary control over public funds, for reasons that are not clear, has not been functioning for many years. Mr Wendell Lawrence surmised that its failure to function, as in some of the other OECS countries, reflects “a weakness in its conceptualisation, especially in the context of a small island state”. Mr Lawrence said in his view the time was ripe for a rethink of the structure and functions of the Public Accounts Committee, with a view to increasing it relevance and effectiveness. I agree. This palpable failure of any effective exercise of control of public financing can be remedied only within the framework of island interdependence.
PART IV A
Good Governance in Small States
Writing his inspector’s report of 28 November 1992 into the SACE guarantee for the purchase of three hydrofoils by Nautical Trading (St Kitts) Ltd (see Part II A(6) above) Ambassador Egone Ratzenberger described, for the benefit of his colleagues in the Government of the Republic of Italy, “the constitutional status of St Christopher and Nevis”. The English version of the Italian text - which Mr Ratzenberger in his oral evidence to the Inquiry on 20 November 1999 regarded as “ a very good translation” - stated as follows:
In his oral evidence to the Inquiry, Mr Ratzenberger explained that his report was intended exclusively for the eyes and ears of his Italian diplomatic colleagues. While Mr Ratzenberger was evidently discombobulated by the subsequent international dissemination of his report, he was uncomplaining that his description of St Kitts was interpreted by some as condescending. Allowing for an understandable immoderacy of language, tinged with Roman irritation that his Government had been landed, by the primary guarantor to the Credit Agreement of 30 May 1986, with an unpaid loan of US $40 million (capital plus interest), the Italian diplomat was nevertheless pointing unerringly to the very real problems of small states in an international community which is increasingly interdependent. How can an island (to be precise, two islands in a federated nation state) with a current population of only 48,000 inhabitants (app. 38,000 + 10,000) sustain the necessary attributes of a sovereign state as a full-blown member of the United Nations?
Most of the literature on the subject - sparse as it is - has focused on the economic viability, not to say prosperity of these small island countries. Given that tropical islands, understandably, present great attraction to increasing numbers of tourists, their economic prospects are comparatively bright. They are, however, always vulnerable to the devastation nowadays of the perennial hurricane(s) inflicting damage, not easily reparable on the brittle infrastructures of organised society. (The Inquiry itself lost no fewer than 2 days in October, due to hurricane José and 3 valuable days of oral hearings, thanks to hurricane Lenny in mid-November.) The problem is, however, not just one of economic viability. It is quintessentially a problem of democratic government in modern societies. It is the capacity and ability of minnow states (I prefer that ichthyological allusion, to “micro-states” which is favoured in academic writings) to instil and maintain standards among politicians and public administrators in the commonly proclaimed aim of “good governance”. “Good governance” within the Commonwealth was affirmed in the Harare Commonwealth Declaration of 20 October 1991. Paragraph 9 of the Declaration contained a pledge by the Heads of Government of the countries in the Commonwealth to “work with renewed vigour, concentrating especially”, among other things “the protection and promotion of the fundamental political values of the Commonwealth: democracy, democratic processes and institutions which reflect national circumstances, the rule of law and independence of the judiciary, just and honest government.”
In a recent pamphlet, Reinventing the Commonwealth (prepared for the Durban Heads of Government Conference in November 1999 and authored by Kate Ford and Sunder Katawala), the Foreign Policy Centre argued forcefully for matching the economic growth of the members of the Commonwealth with good governance. They wrote that, as members seek to create the conditions for increased investment and trade, greater attention needs to be paid to “basic political and legal frameworks and anti-corruption programmes”. One of their five points for developing criteria for delivering values is “tackling corruption and promoting honest and efficient administration”. The pamphlet is directed alike to large and small states within the Commonwealth. It is to the latter that the rest of this chapter is directed.
A European Example
The problem of compliance by small states with international norms of civil liberties has emerged in a constitutional setting recently in relation to the Channel Islands - Jersey (100,000 population) and Guernsey (65,000 population) - both dependencies of the Crown but with a high degree of self-government. The case concerns the proceedings before the Royal Court of Guernsey in which the applicant, Mr Richard McGonnell, applied for, and was refused planning permission for change of use of land owned by him. He complained to the European Commission of Human Rights that his right, under Article 6 of the European Convention on Human Rights, to a fair trial before an independent and impartial tribunal had been violated. In its ruling of 20 October 1998 the Commission found by 25 votes to 5 that the Royal Court of Guernsey did not satisfy the requirements of independence and impartiality, because the Bailiff of Guernsey (a) was a senior member of the island judiciary; (b) a senior member of the legislature (as President of the States of Deliberation); and (c) was a senior member of the island’s executive as titular head of the administration, presiding over a number of important committees. The apparent breach of the strict separation of powers of government was fatal to a claim of independence and impartiality. The UK Government’s appeal to the European Court of Human Rights was heard on 28 September 1999; judgment was reserved.
The constitutional structure of a nation state must generally comply with the separation of the court system from executive government and the legislature. Maintaining the rule of law is a prerequisite of a sovereign state. How necessary, even desirable, is it to insist that the peculiarities of small state societies should be inflexibly observed generally in public administration? In a concurring opinion Sir Nicholas Bratza (in 1998 the British member on the Commission and since November 1998 the British member on the Court in Strasbourg) noted that the imposition on a small island community, while it must conform to, and not modify, elaborate constitutional structures similar to those existing in large states, there may be some relaxation of the rule. He added that his agreement with the majority of the Commission that there was a violation of Article 6 was confined to cases where the legal proceedings in which the Bailiff sat in a judicial capacity related to the acts or decisions of the Executive:
Should such considerations apply where issues arise involving standards of conduct in public life? Events under scrutiny in this Inquiry underline the point.
Insurance Claims
The conduct of the chairman and members of the Board of Directors of the National Caribbean Insurance Company (see Part II B) attracted justifiable criticism, on the grounds of both the conflict of interests and improper preferential treatment to those holding public office.
But the criticism, justified as it is, must at least be tempered by a sense of reality. In a jurisdiction of a size no larger than a parish council (indeed a good deal smaller) the pool of talent to fill the posts referable to institutions of a nation state is so limited that inevitably the holder of the posts will be wearing, at any one time, two or more hats in the public sector. Appearance of partiality, not to say actual bias, is a concomitant of dual (or triple) office-holding. How could Mr Fitzroy Jones, chairman of the National Caribbean Insurance Company and a Minister in the Cabinet of the Prime Minister, properly determine an insurance claim by the latter - and then go on to treat him preferentially in paying the disallowed portion of his claim as an ex gratia payment? Yet, Mr Jones was undeniably the only person in St Kitts with knowledge and expertise in the field of insurance. Anyone else, unconnected with ministers, would lack the requisite experience, let alone expertise. And if publicly unrelated, there will almost certainly be some familial relationship that would tend to disqualify the parties.
Export Credit Agencies
Another aspect of the capacity of small states to match the attributes of larger states came in the case of the three hydrofoils. The financing of the sale and purchase of the hydrofoils was possible only through the financial support of the export credit agencies of the developed world which is reliant upon sound administration in the countries in receipt of aid. The insurance guarantee by SACE of US $25 million to Nautical Trading (St Kitts) Ltd facilitated the Credit Agreement of 30 May 1986, as well as allowing a fraud to be perpetrated. It may be that greater flexibility in the grant of insurance guarantees was displayed by the Italian Export Credit agency than would have been, and is still customary, in the Export Credit Guarantee Department (ECGD) in the UK. Stricter rules by the Italians might have avoided the fiasco of the hydrofoil project. But then development in the developing world will be stunted.
The inherent problem is exemplified by the foreword by the Chief Executive of ECGD, Mr Vivian Brown, to the annual report for 1998/9:
The Inquiry has learned recently of an application by an English engineering company, which was contracting to export and build airport facilities in the island of Dominica, being turned down by ECGD, because that small state was unable to satisfy the demands by ECGD of risk assessment. On the one hand, the developed world is keen to promote export trade in states of the developing world, but is restrained by the realities of inadequate financial control and standards of public administration in the recipient countries. The UK Secretary of State for Trade and Industry has ordered a fundamental review of ECGD’s mission and status. In particular, the review will examine what ECGD “could do to help as many of these [poorer] nations as possible resume their places as Britain’s trading partners.” How can the smaller states help to promote the work of export credit agencies?
From the perspective of the smaller states one answer towards ensuring financial assistance from the export credit agencies (ECAs) in the financing of exports from Europe is to act through such bodies as CARICOM and OECS, in providing reassurance to ECAs that collectively they are able to face the obligations imposed on the member-states. Could the Government of St Kitts and Nevis in 1986 ever have been in a position, on its own account, to provide the primary guarantee to the Credit Agreement of 30 May 1986? Under the umbrella of regional government that might have been possible.
Both the operation of the ECA in the case of the three hydrofoils and the mischief in the issue over the insurance claims points up one obvious solution, if there is to be no relaxation of the rules pertaining to good governance. Good governance, to which the governments in the former British West Indian territories subscribe, is in isolation often unattainable. Conflicts of interest inevitably abound in small communities. These small states must collaborate by establishing interdependent institutions which justly proclaim the requisite standards of public life. Only then can the appointments of office holders from the various territories be made so as to avoid conflicts of interest. In my report to the St Lucia Government in July 1999, I recommended the establishment of a Standing Commission for Standards in Public Life, and that such a Commission should be constructed inter-island. The Government of St Lucia accepted this recommendation.
The Inquiry is aware that Dr Paul Sutton of the University of Hull has recently received a grant from the Economic and Social Research Council to study the problems of small states in relation to public administration. It is to be hoped that the results of his research will be studied carefully, with a view to joint action. I recommend that the Government of St Kitts and Nevis awaits the outcome of the research before embarking on any programme of legislation. I am aware that a Bill on the Integrity in Public Life is before the National Assembly; it should await Dr Sutton’s study before getting on to the statute book.
Conclusion
The urge and impetus now to strengthen governmental administration in small states is redolent of the claim by Alexander Hamilton (Nevis-born), over two centuries ago, that only the larger societies are competent to resist any attempts by Government to indulge in maladministration, if not worse impositions on their citizenry. Largeness in the context of nation states calls for a sharing by smaller states of their sovereign power. Federation of the twin islands of St Kitts and Nevis is demonstrably desirable, as the Phillips’ Commission has demonstrated. But even that federation has not avoided breaches of good governance. Federal or regional structures need to be more readily framed to render good governance in the federated states or regions meaningful. Mr Wendell Lawrence when giving evidence, said it all:
In an address to the annual conference of the Royal Commonwealth Society in June 1984 Small may be beautiful, but can they with help be viable, Professor Michael Faber posed the indelicate question to his audience: what disadvantages does a small island suffer from, and what advantages does it enjoy, when it is not an independent state but a small integrated part of the periphery of a larger country? No one can want a return to colonialism, even though there are remnants of that outmoded system of government to-day in the region of the Eastern Caribbean. But the independence from colonial rule should not automatically lead to sovereign status as “a person of international law”. A sharing of political power with other small states in the region can alone ensure the principles and practices of good governance. In isolation small states cannot attain that desired condition. Professor Faber’s solution is the “absorption of the small island community into the nationhood of a larger, modern industrialised economy”. That is the economist’s prescription. The student of public administrator should echo that solution.
I am conscious that federalism - perhaps less so, regional government - does not instantly excite popular or political support. Politics, it is said, is the art of the possible, but the possibility of diminishing existing sovereign status must be remote. The limits of the possible, however, constantly shift. Those who ignore these limits are apt to win in the end. Barbara Wootton wrote in the epilogue to her autobiography:
Part IV B
Recommendations
Commissions of Inquiry
1. In future Commissions of Inquiry, evidence from witnesses abroad (if unavailable in person) should be conducted by video-link.
2. Where the Commission of Inquiry requires, exceptionally, expert evidence, it should appoint an assessor, whose opinion should be subject to questioning by the participants in the Inquiry.
3. Counsel for the Commission of Inquiry should be chosen by the Commissioner, after consultation with the Attorney-General. The Government should not nominate counsel to the Commission.
4. A review of Commissions of Inquiry, initiated by the member-states of OECS should be pursued; in particular, the question of the funding of participants in an Inquiry needs urgent attention.
5. A Commission of Inquiry should be resorted to only when no other, less expensive means of inquiry is available. Given financial constraints, Government should resort to a Commission of Inquiry sparingly and only when public disquiet about a disaster or scandal can be allayed only by such a method of investigation.
6. Commissions of Inquiry are not courts of law; they must not usurp the functions of the courts. In so far as legal issues arise in the course of the Inquiry, the Commission must deal with them only from the point of view of public administration and good governance.
Part I A
7. The activities of the Ministry of Finance in pursuance of the Taipei memorandum should be subjected to forensic accountancy. Mr Doug Kalesnikoff should be asked to carry out that task.
8. Proper record-keeping in government departments should be urgently reviewed.
Part II A(2)
9. Whenever the Government is intending to become a party to an international commercial agreement of any complexity, the Attorney-General should consider asking for a legal opinion from counsel practising at either the Bars of the Caribbean or of England.
Part II A(6)
10. Diplomatic exchanges, such as meetings to discuss differences between friendly sovereign states, a record of meetings should be kept in the files of the Ministry of Foreign Affairs.
Part II A(7)
11. Dr Kennedy Simmonds and Mr S W Tapley Seaton QC should forthwith undertake to provide evidence as witnesses in the Italian criminal proceedings and on doing so the Government of St Kitts and Nevis should discontinue its appeal against the judgment of Mr Justice Neville Smith.
12. The Government of St Kitts and Nevis, whenever convenient, should introduce legislation to provide a modern method of implementing Letters Rogatory.
Part II A(8)
13. Given the recommendation of Sir Fred Phillips’ Constitutional Commission in Chapter 13 of Volume IV, consideration should be given to the role of Attorney-General as the Government’s legal adviser, and in particular whether Sections 53(2) and 64(1) of the Constitution of St Christopher and Nevis ought to be reviewed.
Part II B(1)
14. The Commission of Inquiry Act should be amended, apart from the general review of the Act, to make plain that inquiries into matters “for the public welfare” include private bodies as well as public bodies.
15. The rationale of Section 3(e) of the aborted St Kitts-Nevis-Anguilla Bank Ltd (Special Provisions) Act 1982 should immediately be re-enacted.
16. The principle that there should be disclosure of any direct or indirect pecuniary interest by any member of the Board of the National Bank or of the Board’s of the Bank’s subsidiary companies should be extended to non-pecuniary interests. Section 5 of the 1982 Act should likewise be re-enacted with the suggested amendment.
17. Given the recommendation of the Phillips Commission in Volume III, Chapter 7 that section 12 of the Constitution of St Christopher and Nevis should be re-formulated so as expressly to provide that the exercise of the right carries special duties and responsibilities, a two person committee should be established by OECS to review the state of journalism in the Eastern Caribbean.
Part III
18. There is a need to clarify the law pertaining to guarantees by Government to persons or organisations in the private sector.
19. Clause 4(4) of the draft Integrity in Public Life Act 1996 should be amended so that nationals of other Eastern Caribbean countries are eligible to sit on the Integrity Commission.
20. The Public Accounts Committee should forthwith become active; its structure and function should be reviewed.
Part IV
22. To set up, in conjunction with other member-states of OECS, a standing Commission for Standards in Public Life.
23. The Government of St Kitts and Nevis (in collaboration with its fellow member-states of OECS) should embark on a programme designed to ensure that good governance is observed throughout the machinery of government in accordance with the Harare Commonwealth Declaration of 20 October 1991.
24. The Government of St Kitts and Nevis should in the course of its review of its Constitution of 1983, investigate the possibility (even the impossibility) of sharing power with its fellow member-states of the OECS.