A former director of Price Club Operators was found by a court today to be personally responsible to pay the VAT Department almost €760,000 in VAT, interest and penalties incurred by the company.
Mr Justice Raymond C Pace delivered this judgment in the First Hall of the Civil Court following a writ of summons filed by Victor Zammit against the Commissioner of Value Added Tax and the Attorney General.
Mr Zammit told the court that in March 2005 the VAT Department had called upon him to pay Lm326,154 (equivalent to €759,734.50) due by Price Club Operators Ltd (PCOL) by way of tax, penalties and interest.
This demand notice constituted an executive title in terms of law and the VAT Department could proceed to enforce payment following service of a judicial letter.
Mr Zammit told the court that he only became aware of the VAT Department's claim against PCOL when he received this demand notice. He claimed that any proceedings on the part of the VAT Department ought to have been filed against PCOL and not against him personally. As PCOL was now in the process of being liquidated, the VAT Department ought to have filed legal action against the company's liquidator.
He requested the court to find that the demand notice issued against him personally was null and void.
The court heard that the VAT Department had issued an estimate of tax agaisnt PCOL in January 2002 for the period between August 2000 and July 2001. PCOL had appealed against this assessment to the VAT Appeals Board which appeal was dismissed in June 2004.
Dr Andrew Borg Cardona had been appointed liquidator of PCOL in June 2002 and his appointment took effect from November 2001.
The VAT Department had issued a judicial letter against the liquidator but the latter had told the department that he did not have sufficient funds to settle this claim. The department had then taken action against PCOL's directors, namely Christopher Gauci, Wallace Fino and Mr Zammit.
In his testimony before the court, Dr Borg Cardona said that PCOL's directors had not given him a statement of affairs when he was appointed liquidator. He had carried out the necessary investigations and had deposited the sum of Lm236,000 to be used to pay judicial fees. The balance of this sum would be distributed among the company's creditors.
Mr Justice Pace noted that following judicial action filed by Dr Borg Cardona, the three directors of PCOL had been found guilty of wrongful and fraudulent trading, for they had intended to defraud the company's creditors. In two separate judgments delivered in October 2007, the First Hall of the Civil Court had found the three directors personally liable for PCOL's obligations towards third parties.
In today's judgment the court pointed out that the demand notice had been issued in terms of law and had been addressed to Mr Zammit personally because he had been a director of PCOL at the time the VAT assessment was raised. The fact that PCOL had been put into liquidation did not change Mr Zammit's personal responsibility. Neither could Mr Zammit plead that he had acted in good faith when he was company director.
The court therefore dismissed Mr Zammit's action.