The Special Investigating Unit argued that the concourt should not entertain a cynical attempt to claw back the millions made in the scandal. (Oupa Nkosi/M&G)
The constitutional court on Tuesday heard argument that a R38-million 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, said advocate Tembeka Ngcukaitobi.
The court heard counter-argument from counsel for the Special Investigating Unit (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.
In 2020, the SIU filed an urgent application for review of the contract awarded to Ledla, a company that served as a proxy for Thandisiswe DIko’s Royal Bhaca Projects, and for a preservation order against a raft of bank accounts into which R38.7-million had flowed.
The tribunal found that the contract flouted public finance rules and declared the money forfeit 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. But Ngcukaitobi said this was flawed, because these failed to mention review and because the PAJA required such powers to be conferred by national legislation.
“In fact, 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 of 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.”
Ngcukaitobi stressed that the SIU regulations do not authorise civil forfeiture unless there is a preservation order that is legally competent. In this case there cannot be, he said, because there is no requisite legislation creating that competency.
Instead, it appears that the rules and regulations, read together, envisioned only narrow scope for the role of forfeiture orders, namely to preserve evidence relevant to an investigation.
“It was not meant to be a legal instrument for the general disgorgement of stolen funds without recourse to court.”
Ngcukaitobi argued that the tribunal was not a court because it was not established in terms of section 166 of the Constitution, but through the exercise of executive power by the president.
He said 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.
“It is so that the president of the tribunal is a judge, in terms of section 7(1). But that, on its own, does not tell us much. After all, a judicial commission of inquiry is also chaired by a judge, but that does not convert it into a court.
“Whether it is a court or not must be answered by reference to the architecture of the constitution,” he said.
Equating the tribunal to a high court because its decisions were appealable to full benches of the high court was a classic case of bootstrapping, without regard for the implications for the separation of powers, Ngcukaitobi said.
The tribunal was established by the president, with the power to adjudicate cases investigated by the SIU following a presidential proclamation, and the terms of office of its members were likewise set by the president. This was not the case with judges, whose security of tenure counted as one of the cornerstones of judicial independence.
“The president is exercising a purely political discretion,” he argued.
On the merits of the case, the applicants argued that contrary to what the SIU found, the reasons the contract was awarded was 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. “It also unsettled me … [but] that profiteering does not translate to unlawfulness.”
He suggested that part of the problem was the wide parameters accepted by the treasury.
“But that problem has not been properly identified, unearthed and dealt with in terms of how do you disgorge those elements of improper profiteering.
“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 R7-million by the department for a million plastic bags that they sourced for R750 000.
“That is a markup of R6.25 million … 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 were at odds 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 on any version has been party to a disgraceful attempt to profit unlawfully out of a public health emergency.”
Ngcukaitobi’s pleadings in that he had argued that the tribunal is not a court but an administrative agency and because of that it acted ultra vires in granting the review and forfeiture relief.
“If my learned friend is right on those submissions then his remedy should have been to take the decision of the special tribunal on review to the high court because his complaint is a review complaint. It is not an appeal complaint,” Chaskalson said.
Had they duly filed for review, the minister of justice would have been cited as a respondent, and there would have been debate as to whether, if the rules and regulations were to be struck down, that should be done with retrospective or only prospective effect and whether there should be a suspension of invalidity to allow parliament to remedy the defect.
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 regulation 5(c) and rule 26 expressly vested the power of forfeiture in the tribunal and if this could not be so, because it was not a court, the correct remedy was to launch a constitutional challenge to the rules and regulation.
“All of those debates are not here because there is no constitutional challenge,” said Chaskalson.
“So we have to accept the validity of the regulation and the rules when they grant that forfeiture power in these proceedings, even if we have strong misgivings as to the validity of the regulation and the rules in that regard, they are not challenged.”
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.
“Then why are we here? 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?”
It meant that pertinent questions that might engage the constitutional court are ones that went nowhere in this particular case.
Judgment was reserved.
The case carries profound implications for the SIU’s investigations into Covid-19 procurement corruption. It has identified corruption totalling R7.8-billion and has set aside contracts worth R170-million. The special tribunal is seeking to recover hundreds of millions more irregularly spent.
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