The famous words of Lord Denning: "fraud unravels everything" may be applicable to the situation which has arisen as a consequence of the investigation of the South African Police Services (SAPS) headquarters leases in Pretoria and Durban by the Office of the Public Protector.
According to press reports, the Minister of Public Works has received a letter of demand from the putative landlord, Roux Shabangu, who in turn is facing demands from Nedbank, the financier of the two invalid and unlawful deals in terms of which the SAPS headquarters were to be moved to buildings acquired by Shabangu's company Roux Property Fund (RPF).
As both deals were for procurement on behalf of the state, it was incumbent upon the parties involved to ensure that the procurement was effected in accordance with a system that is fair, equitable, transparent, competitive and cost effective. This is a constitutional requirement that is reinforced by the provisions of the Public Finance Management Act.
Nedbank and Shabangu should be aware of the legal and constitutional environment in which they do business. The consequence of conduct inconsistent with the Constitution is that such conduct (the conclusion of the two leases in this case) is invalid. The invalidity of the leases leaves both Shabangu and Nedbank without any legal recourse against the Minister or any other organ of state.
This is as it should be: the flouting of the requirements for proper tendering can not be rewarded with claims for damages, irrespective of the greed for profit of those involved. It is impossible to found a good cause of action in a moral swamp, or as AP Herbert put it: "a dirty dog gets no dinner from the courts". The mere invalidity of the leases, as determined by the OPP, excuses the taxpayer from having to compensate either the bank or the property developer involved in the negotiations outside the framework of the law and the criteria of the Constitution.
The "elephant in the room" in the SAPS HQ case is the astronomical rentals agreed in the putative leases. The willingness of the state to pay more than three times the going rate in rental for the two buildings in question has not been explained by any of the parties involved. The Public Protector herself, rather charitably, speculates that this could be due to incompetence, negligence, or even recklessness. It could also be due to fraud and corruption. No one knows because, in an ongoing display of lack of accountability, none of the players involved in the deals has explained their conduct or justified the decision to pay rental out of all proportion to the market value of the premises chosen. In the case of the Durban lease there is also the question of the dilapidated state of the building in question, and the obligation of the state to pay for its renovation to render it fit for habitation by SAPS personnel deployed at head office level.
It is reported that Nedbank is demanding to be repaid its loans to RPF. Shabangu's response has been to start legal proceedings to recoup R 1 billion from the Minister. She is blamed for reinstating the leases upon taking office, despite two opinions from senior counsel to the effect that they were unlawfully concluded. This purported act of reinstatement is legally ineffective. If the leases could not pass constitutional muster because they were not fair, equitable, transparently negotiated, competitively priced and cost effectively concluded; their alleged reinstatement can not magically render them valid. They are and remain invalid for want of compliance with the requirements of section 217 of the Constitution, as the OPP has found, thereby confirming the opinions of the two senior counsel whose advice was sought.
The officials in Nedbank who agreed to lend the necessary finance to Shabangu owe their management, and Nedbank's shareholders, an explanation for getting involved in the deal. It is the equivalent of paying R1250 for a tank of petrol at a particular pump when all other pumps are supplying petrol at R400 per tank. It reeks of impropriety.
Taxpayers can feel lucky that Shabangu rejected a settlement offer of R50 million which he says was made last year by the Department of Public Works. That offer was worth R50 million more than he is entitled to, and should not be repeated.
The Minister may have many problems around the conclusion of the leases and her own role in purporting to re-instate them, but a successful claim for damages is not one of them.
Paul Hoffman SC
27th July, 2011
No comments:
Post a Comment