A former employee of a construction company has successfully sued his former boss who attempted to avoid paying him over $1 million in compensation for being injured on the job by closing the company and transfering its business to one that was incorporated recently.
Delivering judgment in the Port-of-Spain High Court on Tuesday, Justice Frank Seepersad “pierced the corporate veil” to hold businessman, Ashram Persad, personally liable for the debt his company—A & R General Contractors—owed to former employee Yunus Meighoo.
Meighoo initiated a lawsuit against the company after he was seriously injured in 2006 and could not return to work. In 2013, judgment was entered against the company, which was ordered to pay Meighoo compensation, including fees for medical treatment and loss of earnings.
After making an initial payment, the company claimed it was insolvent and could not honour the remaining debt.
In his case before Seepersad, Meighoo’s lawyers presented evidence that after their client’s legal victory, Persad formed another company—Aspher Contracting Limited—which effectively replaced A & R’s operations.
Seepersad ruled it was possible that Persad formed Aspher as a “sham company” to “carry out or take over” A & R’s business interests. As he criticised Persad’s actions, Seepersad said the legal protection provided by incorporation was not designed to be used as a shield to escape liability.
Seepersad said: “The intention of incorporation was never to shield “smart men” or to enable shareholders to manipulate the corporate structure to ensure that profits generated from commercial activity could be put out of the reach of creditors by ensuring that same is withdrawn from the company and placed in the hands of the shareholders, thereby leaving the company without any tangible assets.
“The protection of incorporation should be afforded only when the company complies with the provisions of the Company’s Act and its actions are undertaken in the best interest of the company and the shareholders or owners act as agents for the company and not vice versa.
“There seemingly is a regrettable tendency in this jurisdiction for persons to believe that they can form companies for their unilateral benefit, solely enjoy the profits generated by the company and leave the said company cash stripped so that judgments cannot be enforced.
Such a circumstance has to be condemned and will not be condoned by this court,” he added. Meighoo was represented by Yasin Ahmed and Tara Lutchman, while Michael Rooplal and Saira Lakhan represented Persad and the companies.