THE Privy Council yesterday ruled against Edward Seaga, holding that his firm, Town & Country Resorts, was responsible for nearly $150 million in unpaid GCT and penalties owed by Enchanted Gardens, the hillside hotel it operated in Ocho Rios.

Seaga, the Opposition leader, had insisted that the liability was not his company’s, but properly belonged to an American firm, DHC Ocho Rios Hospitality Corporation, which had a contract to manage the hotel and was in effect its operator in the context of the law.

“…Assuming (without deciding) that DHC was the operator, their Lordships are of the clear opinion that that does not exclude the liability of Town & Country as registered taxpayer in respect of the taxable activity carried on at the Enchanted Garden,” the judges said in their ruling, delivered by Lord Walker of Gestingthorpe. “Concurrent liability of an agent under Section 23A (of the General Consumption Tax Act) cannot exclude the principal’s liability any more than it does under Section 58 of the Act or Section 52 of the Tax Collection Act.”

Costs were awarded against Seaga.

The ruling by the Privy Council, Jamaica’s court of last resort, was likely to re-open the way for negotiations between Town & Country and its parent, Premium Investments and tax czar Clive Nicholas, for a settlement. According to Observer sources, Seaga’s lawyers had weeks ago placed a settlement offer on the table, but that was turned down as being too late. The issue was broached again immediately after the hearing in London last week.

But yesterday, the solicitor-general, Michael Hylton, who argued the case for the Government, indicated that the next move was up to Seaga and his lawyers.

“It (the liability) is over $100 million,” he said. “What’s next is up to them.

“They should come in and make arrangements to pay. If they don’t, the commissioner (of GCT) may have to take steps to collect,” said Hylton.

Neither Nicholas, Seaga nor his lawyers was available for comment yesterday and the finance minister, Omar Davies, who would, ultimately, have to sign-off on any compromise, made it clear that he was not involved in the matter.

“It has been a legal issue and is a matter for the tax people,” Davies told the Observer. “I am not involved in it.”

Political sources have, however, suggested that Davies would not be averse to a settlement of a portion of the liability — given the fact that neither Premium nor Town & Country would likely be able to cover the debt — and have pointed to similar agreements endorsed by Davies. Among the recent ones was the wiping out of millions of dollars of GCT owed by HOT 102 radio station ahead of the sale of its majority stake to Neville Blythe. Under that agreement, the proceeds went towards the clearing of arrears in statutory payments.

Yesterday’s ruling by the Privy Council was particularly swift, coming only a week after lawyers for Seaga and the Government had argued the case before the law lords in London.

The issue arose out of a 1999 move by the tax authorities in the St Ann Magistrates Court to have Town & Country pay about $12.3 million in GCT collected by the hotel, but not remitted, plus another $27.3 million in penalties and interest.

Before the case could be completed Town & Country and its parent, Premium, Seaga’s main investment vehicle, went to the Supreme Court seeking a ruling that DHC — within the construct of Section 23A of the GCT Act — was the operator and manager of Enchanted Gardens and that it was therefore responsible to the Commissioner of Taxes for the GCT.

That section of the Act, dealing with tourism accommodations and services, says that it is the “responsibility of the operator” of this category of business to collect GCT and transmit it to the tax authorities.

It defines operator to mean “the person who owns the business concerned with the operation of the tourism accommodation or services… and includes the manager of the other principal officer of that business”.

The High Court ruled against the Seaga companies, holding, among other things, that they were asserting something contrary to what they had previously done, having in the past accepted that the GCT liability was Town & Country’s. The Jamaica Appeal Court upheld that decision, but also asserted that the lower court did not have to go as far as invoking the principle of estoppel.

The Privy Council, in agreeing with the Jamaican courts, noted that despite the management agreement with DHC in 1993, there was no indication of DHC not assuming the tax obligations.

“In 1997 payment of GCT in respect of the resort was falling into arrears,” the judges held. “There were discussions between officers (the tax system and) advisers of Town & Country. For about two yeas these discussions proceeded and some payments of GCT were made by Town & Country, on the basis that it acknowledged its obligations and was trying to solve its cash-flow problems. There was no suggestion that Town & Country was not liable for the tax.”

But beyond that, the law lords argued that the responsibility of an operator to collect and remit GCT in Section 23A of the Act was not “to oust the liability of any other person who is (or ought to be) the registered taxpayer in respect of the taxable activity”.

Moreover, during the relevant period, between December 1993, when the management agreement was signed with DHC and August 1998 when it ended, Town & Country “was the registered taxpayer”, the Privy Council judges noted.

Even if DHC was the operator of the hotel — the issue was not ruled on because the company was not made a party to the case — that, based on their interpretation of the law, would not affect Town & Country’s liability. Against that backdrop the UK-based judges did not find it necessary to consider the issue of estoppel: the claim of an assertion of a contrary position to Town & Country’s actions.