Ledla Structural Development (Pty) Limited and others v Special Investigating Unit
| Jurisdiction | http://justis.com/jurisdiction/166,South Africa |
| Judge | Kollapen J, Madlanga J, Majiedt J, Mathopo J, Mhlantla J, Mlambo AJ, Theron J and Tshiqi J |
| Judgment Date | 10 March 2023 |
| Citation | 2023 JDR 0684 (CC) |
| Hearing Date | 24 May 2022 |
| Docket Number | CCT 319/21 |
| Court | Constitutional Court |
Mhlantla J (Kollapen J, Madlanga J, Majiedt J, Mathopo J, Mlambo AJ, Theron J and Tshiqi J concurring):
Introduction
This is an application for leave to appeal against a judgment and order of the Special Tribunal held at the High Court of South Africa, Gauteng Division, Pretoria. The Special Tribunal is established in terms of section 2 of the Special Investigating Units and Special Tribunals Act [1] (SIU Act). The Special Tribunal reviewed and set aside an unlawful contract. It issued an interdict and a forfeiture order in respect of monies held in terms of a preservation order. The central question in this matter is whether the Special Tribunal is a court and has review powers as well as the powers to grant preservation and forfeiture orders.
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Mhlantla J (Kollapen J, Madlanga J, Majiedt J, Mathopo J, Mlambo AJ, Theron J and Tshiqi J concurring)
Parties
The first applicant is Ledla Structural Development (Pty) Ltd (Ledla). The second and third applicants are Ms Rhulani Lehong and Mr Kgodisho Norman Lehong, respectively. They are the directors and co-chief operations officers of Ledla. The respondent is the Special Investigating Unit (SIU), an organ of state established in terms of section 2(1)(a)(i) of the SIU Act.
Background
The following background is largely taken from the judgment of the Special Tribunal. In December 2019, the world was introduced to COVID-19. [2] The first confirmed case of COVID-19 in South Africa was reported on 5 March 2020. [3] The unanticipated emergence of COVID-19 prompted the South African government to take active measures to prevent the further spread of the coronavirus and, as far as possible, mitigate its effects. [4] One such measure was the procurement of personal protective equipment (PPE), a task that was to be performed by the various provincial departments of health.
On 27 March 2020, the Chief Operations Officer of the Gauteng Department of Health (Department) presented a report that revealed a PPE shortage of R1.7 billion for the entire Department. The report was informed by a decision of the Department that was taken to assess and project the impending PPE shortage, as well as the quantities required to ensure that frontline health workers would be protected. As a result of this
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Mhlantla J (Kollapen J, Madlanga J, Majiedt J, Mathopo J, Mlambo AJ, Theron J and Tshiqi J concurring)
report, a decision was taken to procure PPE stock. Ms Mantsu Kabelo Lehloenya, the Chief Financial Officer of the Department, was appointed as the chairperson of the Bid Adjudication Committee and was placed in charge of the procurement process for the Department.
For reasons of exigency, the Department authorised a deviation from compliance with the normal tender processes. It is worth noting that this deviation was adopted by the Department, notwithstanding Note No 8 of 2019/2020 that was issued in terms of section 76 of the Public Finance Management Act [5] (PFMA) on 19 March 2020 by the National Department of Treasury. Note 8 was issued to, among other things, support effective and efficient service delivery, as well as to curb possible abuses of supply chain management systems during the period of managing COVID-19. Clause 2.3 of Note 8 emphasises that in procuring COVID-19 items, state institutions were required to comply with the PFMA and the applicable emergency provisions of the Treasury Regulations. [6] Regulation 16A6.4 of the Treasury Regulations provided that if it was impractical to invite competitive bids, the accounting officer may procure the required goods and services by other means, provided that the reasons for deviation from inviting competitive bids were recorded and approved by the accounting officer. Although the Department did not advertise the tender or call for bids, as it would in the ordinary course, it received bids from various individuals and businesses.
The Department received two bids to supply masks, disposable bags and sanitisers from Royal Bhaca (Pty) Ltd (Royal Bhaca), whose sole director was Mr Thandisizwe Diko – a close family friend to Dr Bandile Masuku, the then Member of the Executive Council for Health in Gauteng. Mr Diko secured two contracts (PPE contracts) with the Department to the value of R125 million. When the relationship between Mr Diko and Dr Masuku became public knowledge, Royal Bhaca was substituted with Ledla.
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Mhlantla J (Kollapen J, Madlanga J, Majiedt J, Mathopo J, Mlambo AJ, Theron J and Tshiqi J concurring)
On 25 March 2020, Ms Thandy Pino was appointed as Chief Director of Supply Chain and Asset Management in the Department. Five days after her appointment, Ms Pino signed commitment letters for PPE contracts valued at R125 million. It is common cause that Ms Pino did not have the necessary authority to sign off on procurement contracts that exceeded the value of R30 000. Ms Pino advised the SIU that Ms Lehloenya had instructed her to sign the letters of commitment.
On 13 April 2020, Ms Lehloenya received a quotation from Ledla for several PPE items amounting to R139 million. According to the SlU's investigation, the quotation was created by Mr Diko and modified by Ms Lehloenya. On 20 April 2020, the quotation was accepted by Ms Lehloenya and the amended commitment letter was sent directly to Mr Diko. On 30 April 2020, Ms Lehloenya sent two emails to Mr Diko. One of them cancelled the two contracts with Royal Bhaca and the other was an acceptance of the quotation on behalf of the Department. The second email also contained the amended letter of commitment attached to an email dated 20 April 2020. Thereafter, Ms Lehloenya resigned from the Department on 1 May 2020.
On 3 August 2020, the Department deposited an amount of R38 758 155 into Ledla's bank account. Between 3 and 5 August 2020, Ledla transferred a large portion of this amount into various bank accounts. K Manufacturing and Supply (Pty) Ltd (K Manufacturing) received an amount of R16.5 million. Mr Sangoni, who was neither a director nor an employee of Ledla, but a relative of Mr Diko's wife, instructed K Manufacturing to transfer R8.5 million to his company, Zakheni Strategic Solutions (Pty) Ltd. From the remaining money, K Manufacturing distributed various amounts to five companies and three individuals. [7] Mediwaste Packaging (Pty) Ltd (Mediwaste), received R3 470 000 from Ledla. On the next day, Mediwaste transferred various
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Mhlantla J (Kollapen J, Madlanga J, Majiedt J, Mathopo J, Mlambo AJ, Theron J and Tshiqi J concurring)
amounts into the bank accounts of nine other business entities and three individuals. [8] Another company, Atturo Tyres (Pty) Ltd, received R1 426 000 from Ledla and it also distributed it to various business entities and individuals. [9]
Mr Jonathan Maake, the managing director of Mediwaste, filed an affidavit before the Special Tribunal in which he alleged that, on 3 April 2020, he was approached by Mr Lehong and Ms Lehong, as representatives of Royal Bhaca, seeking to place orders for the supply of disposable bags and health care boxes. Mediwaste charged 75 cents for each disposable bag. The total for a million disposable bags came to R750 000. Royal Bhaca charged the Department R7 per bag, totalling R7 million for the million disposable bags. Royal Bhaca, therefore, made a profit of R6 250 000 on the disposable bag transaction.
According to Mr Maake, while Mr Diko was attending at Mediwaste to facilitate a certain payment, Mr Diko proposed that Mediwaste and Royal Bhaca enter into a partnership. This partnership, in terms of the proposal, was to be capitalised by securing a loan for the amount of R30 million from the Industrial Development Corporation. Upon securing the loan, this amount would be shared between the two entities, whereafter Mediwaste would file for bankruptcy.
Several complaints were made regarding allegations of corruption in the procurement of PPE. The Head of Department referred the allegations to the Office of the Premier. A preliminary investigation was conducted by the Office of the Premier. The investigation revealed violations of procurement prescripts and impropriety in the processing of payments. The media widely reported on the award of two contracts to Royal Bhaca and suggested that the awards may have been as a result of Mr Diko's proximity to political power. As a result, the President of the Republic of South Africa
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Mhlantla J (Kollapen J, Madlanga J, Majiedt J, Mathopo J, Mlambo AJ, Theron J and Tshiqi J concurring)
issued a proclamation in terms of the SIU Act, authorising the SIU to investigate acts of maladministration, corruption and breaches of procurement procedures relating to COVID-19 and for remedial steps to be taken.
The SIU conducted investigations and concluded that Ms Lehloenya was central to the conclusion of the unlawful contract and authorisation of the payment of R38 758 155 to Ledla. This was based on email correspondence between Ms Lehloenya and Mr Diko, as well as evidence from other parties. The SIU's findings prompted it to approach the Special Tribunal for urgent relief relating to the contract awarded to Ledla.
Litigation history
Special Tribunal
Urgent application
In August 2020, the SIU launched an ex parte urgent application against Ledla and various other business entities and individuals for relief in three parts: (a) cancellation of the contract between the Department and Ledla; (b) a preservation order against various banks which held the amount of R38 758 155 paid to Ledla; and (c) an interdict prohibiting the Government Employees Pension Fund and the Government Pensions Administration Agency from releasing monies held in pension and retirement benefits due to Ms Lehloenya. The interim order was granted and a rule nisi was...
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