GWU guilty of breach in leasing out parts of HQ

The General Workers’ Union breached a contract with the government when it leased parts of its Valletta headquarters to third parties, the National Audit Office has found.

The Sciacca Grill.

An investigation concluded that the GWU broke lease conditions when it sublet office space to State billing company ARMS Ltd, the travel agency Vjaġġi Untours and the restaurant Sciacca Grill.

The GWU does not have a 51 per cent shareholding in any of the three companies, which was a condition in its lease agreement with the government if parts of the Workers’ Memorial Building were to be used for commercial purposes.

The iconic building in South Street, Valletta, was granted to the GWU in 1957 to be used for trade union functions. The lease agreement was changed in 1997 to allow some areas to be used for commercial purposes as long as the GWU held the majority of shares in the companies making use of such leased areas.

The NAO investigation started earlier this year after shadow justice minister Jason Azzopardi claimed the GWU had breached contractual obligations when it rented out space to ARMS in 2014. The investigation was widened to look into other commercial activities carried out from the building.

The report was tabled in Parliament yesterday.

In a statement last night, the government said there was conflicting legal advice on the issue, as the GWU had redeemed the ground rent so its legal position may have been regularised.

It said it would pass the report on to the Attorney General for advice in protection of its rights.

The lease agreement between ARMS and the GWU was signed on April 24, 2014, after the union had submitted the most advantageous bid. The union was to receive an annual sum of €61,950 payable every six months.

Audit Office says GWU broke lease conditions

However, the NAO found that the union failed to highlight the contractual limitations imposed on it when submitting the bid. This was deemed particularly relevant by the NAO since the call made by ARMS had specified that any servitudes or legal constraints possibly bearing an unfavourable impact on the functionality of the building had to be indicated.

The NAO said that, on March 28, 2014, almost a month before the agreement with ARMS was signed, the GWU had asked the Government Property Division whether it would find any objection if it leased part of the building to “a government entity”.

A parliamentary resolution was necessary for the union’s request to be acceded to

The Audit Office found no written reply, which it indicated as a shortcoming on the part of the Government Property Division. However, the former commissioner of land told the NAO he had phoned former GWU general secretary Tony Zarb to inform him that a parliamentary resolution was necessary for the union’s request to be acceded to.

During the phone call he got the impression that Mr Zarb had discussed the issue at another level.

“The commissioner added that he was told not to cause problems as the pertinent authorities were aware of the matter,” the NAO said. The former commissioner of land said he understood the pertinent authorities as a reference to the “political establishment”.

However, when queried about the reference to ‘pertinent authorities’, the former GWU general secretary could not recall the words, and the parliamentary secretary responsible for land, Michael Falzon, insisted it could not have been a reference to him.

Dr Falzon told the NAO investigators he got to know of the matter from the press – in February 2015 – and immediately told the commissioner to write to the GWU.

“He also maintained that, since the grant was made through a legislative assembly resolution, any changes to the contract had to be carried out through a similar parliamentary resolution,” the NAO said.

Dr Falzon stopped his involvement when NAO started its probe.

The commissioner of land did initiate action by writing to the union’s general secretary and president on March 23 this year. The letter enquiring whether the GWU or any of its affiliate companies had entered into any agreements with ARMS was ignored by the union and the commissioner stopped pursuing the matter after the NAO got involved.

On May 15 this year, the GWU redeemed the ground rent, paying €16,026 to render the property freehold. The union argued that this relieved it of the conditions imposed by the agreements with the government in 1957 and 1997.

However, the NAO said this was subject to legal interpretation and best left to the judicial authorities to decide. The Attorney General had advised the Government Property Division that the original conditions still stood despite the redemption of the lease.

The NAO said that should it be established that the conditions of the grant did not remain applicable after the redemption, the ARMS agreement would be in breach of the original conditions between April 2014 and May 2015.

When media attention on breach of the contract first appeared, the GWU deputy general secretary said that the ground rent redemption process had already been initiated. But the NAO did not believe this.

“Given that a number of articles relating to the matter appeared in the press early on in February 2015, the NAO considers the justification put forward by the deputy general secretary as unlikely,” the Audit Office said.

The union started the redemption process after February.

kurt.sansone@timesofmalta.com