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HomeMedico-LegalPPE supplier challenges Tribunal’s power in R38m forfeiture dispute

PPE supplier challenges Tribunal’s power in R38m forfeiture dispute

Judgment was reserved last week in a case that carries major implications for the Special Investigating Unit’s (SIU) probe into COVID-19 procurement corruption. The SIU has identified corruption totalling R7.8bn, has set aside contracts worth R170m, and is seeking to recover hundreds of millions more that were irregularly spent.

In the Constitutional Court last Tuesday, it was argued that a R38m forfeiture order granted against Ledla Structural Development after the Gauteng personal protective equipment (PPE) contract was found unlawful should fall away because the Special Tribunal lacked the standing of a court of law.

This meant the court should also set aside the Tribunal’s ruling overturning the contract that saw the provincial health department procure PPE equipment at vastly inflated prices in the early days of the COVID-19 pandemic, argued Advocate Tembeka Ngcukaitobi for Ledla Structural Development.

The court heard counter-argument from counsel for the SIU that this was a constitutional challenge to the rules governing the Tribunal dissimulated as an appeal application, for the sake of clawing back the proceeds of profiteering from the health crisis, reports the Mail & Guardian.

In 2020, the SIU filed an urgent application for review of the contract awarded to Ledla, which served as a proxy for Thandisiswe Diko’s Royal Bhaca Projects, and for a preservation order against various bank accounts into which R38.7m had flowed.

The Tribunal found that the contract flouted public finance rules and declared the money be forfeited to the state.

Ledla and two of its directors, Rhulani and Kgadisho Lehong, were denied leave to appeal by the High Court and the Supreme Court of Appeal before turning to the Constitutional Court.

But Ncqukaitobi argued that no legislation – neither the Constitution, nor the Promotion of Administrative Justice Act (PAJA), nor the Special Investigations Unit Act – empowered the Tribunal to exercise a judicial review function.

The SIU has countered that the powers of the Tribunal are not dependent on its status as a court but derived from a proper reading of the regulations accompanying its founding Act. Ngcukaitobi said this was flawed, because these failed to mention review and because the PAJA required such powers to be conferred by national legislation.

“The Tribunal is not established to judicially review any decisions under any legislation, including the SIU Act itself. When the Tribunal purported to grant a judicial review, it acted outside its powers. The decision is a nullity.” It then followed, he said, that the forfeiture order could not stand.

“If we are correct that the Tribunal is neither a court nor a Tribunal with review powers, its entire ruling must be vacated, including the consequential orders of asset forfeiture.”

He said the Tribunal was not a court because it was not established under section 166 of the Constitution, but through the exercise of executive power by the president.

Inferior tribunals could not be confused with courts even if they were headed by judges or enjoyed some of the powers granted to courts, including those to subpoena witnesses and to hold witnesses in contempt, he added.

On the merits of the case, the applicants argued that contrary to what the SIU found, the reasons the contract was awarded were explained and sanctioned by Gauteng Premier David Makhura, MEC for Health Bandile Masuku, the head of the department and the chair of the COVID-19 procurement programme given local and global shortages.

“The whole of the provincial executive knew. All of them sanctioned this.”

Ngcukaitobi conceded that the pricing undeniably meant there was profiteering, “… (but) that profiteering does not translate to unlawfulness”.

“What we have here is a sledgehammer approach cutting through the whole without a proper analysis. Everybody is talking about this inflated amount but what is being ignored is what is the Treasury recommending and was the Treasury correct or not in making those recommendations. That is the only argument I make. I cannot justify the profiteering. It is unconscionable.”

Matthew Chaskalson, for the SIU, said the court had to consider whether it wanted to allow the applicants to walk away with profits made in the feeding frenzy that marked emergency pandemic procurement.

“The question only has to be posed to answer itself,” Chaskalson said. “The applicants have no answer to the clear evidence that they were part of that feeding frenzy and that they stepped forward to be used in an attempt to conceal the abuse of COVID procurement processes to benefit the politically-connected Diko family.”

He said their version of events was false but they tried to obscure this by omitting from the record filed to court affidavits from the manufacturers of the material procured. Even so, on the facts they admitted, it was plain that they were paid R7m by the department for a million plastic bags that they sourced for R750,000.

“That is a markup of R6.25m … 833%. And they now approach this court seeking to deflect attention away from the merits by raising this series of jurisdictional points,” Chaskalson said.

The present arguments conflicted with those raised before the Tribunal and in their earlier attempts to appeal its ruling, he said. They were recently raised for the first time in their heads of argument – and in the wrong guise.

“The jurisdictional arguments may be interesting but this is not the case in which to decide them, this court should not entertain what is an abusive process brought by a litigant who in any version has been party to a disgraceful attempt to profit unlawfully out of a public health emergency.”

As matters stood, Chaskalson said, the arguments about the powers of the Tribunal were irrelevant because what the applicants were really challenging was a forfeiture order. “They don’t want the money in their FNB account forfeited.”

He said the only question the court had to answer was whether the forfeiture powers could legitimately have been exercised in this case. It could not entertain a review challenge in the guise of a restrictive reading of the rules under which the powers could not be exercised because the Tribunal is not a court.

“You can never interpret a statute not to confer a power that it expressly confers. It may be unconstitutional to confer that power but then the statute would be unconstitutional and you have to challenge it,” Chaskalson said.

“What is the point of considering the review power when the primary interest of the applicants is in getting their money back and if they can’t challenge the forfeiture power they can’t get their money back?”


Mail & Guardian article – PPE supplier challenges Special Tribunal’s power to impose R38M sanction (Restricted access)


See more from MedicalBrief archives:


Funding-starved SIU still trying to recover missing Ledla PPE millions


SIU report reveals massive scale of looting from COVID-relief funds


SCA dismisses appeal against invalidation of R139m Gauteng Health PPE tender




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