COMPANY — Mauritius — Personal liability of “principal officer” for unpaid tax — Identification of principal officer — Whether evidence of director's dominant shareholding relevant — Income Tax Act 1995, ss 79, 8(2)

Chiniah v Director General of the Mauritius Revenue Authority

PC (Lord Hoffmann, Lord Scott of Foscote, Lord Rodger of Earlsferry, Lord Walker of Gestingthorpe and Lord Mance): 17 April 2007

A court could take into account a director's dominant shareholding of a company in determining whether, under the law of Mauritius, he was a “principal officer” of that company so as to be personally liable for income tax owed by the company.The Privy Council so held in dismissing an appeal by Jayram Chiniah from the order of the Court of Civil Appeal of Mauritius (YKJ Yeung Sik Yuen ACJ and P Lam Shang Leen J) affirming the decision of the Supreme Court of Mauritius to dismiss his notice of motion for erasure of an inscription of privilege in the sum of Rs 6.9m over his property, taken under the authority of the Income Tax Act 1995, in respect of income tax for the years 1991–92 to 1994–95 due by a company, Chiniah & Sons Ltd of which he was, until 17 April 1996, a director.

By s 81(2) of the 1995 Act a “principal officer” of a company was deemed to be its agent and, by s 79, was required to retain sufficient of the money received by the company to pay its income tax or be personally liable for such amount.

LORD RODGER OF EARLSFERRY said that the appellant, a director of the company, had argued that the Commissioner of Income Tax had not established that he was its principal officer. However, someone must have been managing the business, which had been sufficiently active to earn profits on which tax of Rs 6.9m was due, and, though no one could have been in better position than the appellant to know who was actually managing the company, at no stage in the proceedings had he named anyone as having carried out that role. Further, the appellant had been not only a director of the company but owned 99 out of the 100 issued shares. His counsel had criticised the courts below for taking his shareholding into account in deciding that he had been the principal officer, but the Board rejected that criticism. While his shareholding did not demonstrate that he was controlling the company's affairs, it was nevertheless a factor to be taken into account, since his dominant shareholding meant that he was in a position to control its affairs. Those factors, taken together, justified a provisional conclusion that the appellant was the principal agent conducting the affairs of the company. In the absence of any evidence pointing to someone else having had that role, the concurrent findings of the courts below would not be disturbed.

Appearances: Gavin Glover, of the Mauritius Bar, (Saunders) for the appellant. Philip Baker QC, Rajesh Ramloll, of the Mauritius Bar, and Marika Lemos (Carrington & Associates) for the Commissioner.

Reported by: C T Beresford, barrister