Updated 11.30am

Steward Health Care's contract to run three state hospitals in Malta and Gozo is officially null and void after a court of appeal threw out the company's arguments.

"Senior government officials" were complicit in the privatisation fraud and the Maltese government had failed in its duty to protect the national interest, defending Steward throughout the process, the court said. 

The decision confirms a landmark judgment earlier in the year to cancel contracts related to the deal, on the basis that Steward had not fulfilled its contractual obligations. The court had concluded that the hospitals deal appeared to be fraudulent. 

In a 99-page decision, a civil court presided by Chief Justice Mark Chetcuti partially upheld Steward Health Care’s appeal in terms of expenses, but rejected other arguments made by the healthcare giant. 

While the original court decision had pinned the blame for the "fraudulent" deal on Steward, the court of appeal said it also believed there was "collusion between Steward and senior government officials or its agencies". 

The intent, it said, was "to draft contracts intended not to deliver quality medical service, but other things." 

In dismissing the appeal, the court also ruled that government representatives named in the case - including Joseph Muscat in his capacity as prime minister, the Attorney General and heads of INDIS and the Lands Authority - must jointly pay for court expenses, along with Steward.  

PN MP and former Opposition leader Adrian Delia, who filed the case, welcomed the decision and said he now expected political repercussions. 

"I don’t know of any democratic country in which a sentence like this does not trigger the highest echelons of government to take political responsibility," he said, standing outside the courthouse in Valletta.

The government made no mention of damning criticism within the court judgment. Instead, its official reaction to the verdict emphasised that it had taken back control of the hospitals in April. Finance Minister Clyde Caruana later said the government was assessing the court decision.

What did the original decision say?

Vitals Global Healthcare, a new company with no track record in business or healthcare and with an opaque ownership structure, was selected as the winning bidder to run St Luke's, Karin Grech and Gozo General Hospital in 2015. 

Steward took over the deal in November 2018, buying out Vitals and its contracts. 

As questions swirled about the deal and pledges to revamp the hospitals got nowhere, Delia filed a court action to have the contracts annulled. 

He argued that not only had Vitals and Steward, as its successor on the concession, failed to fulfil its contractual obligations but the deal was also tainted by fraud. 

In February, a court vindicated Delia's arguments.  It condemned Steward for having intended to “unjustly enrich itself at the expense of the government and Maltese and Gozitan citizens” when taking over the running of the three state-owned hospitals.

Steward appealed that verdict, arguing that it was itself defrauded by the Maltese government, which made promises that it then did not fulfil.

The government has since taken over the running of the three hospitals, following a bitter fallout with Steward. It did not appeal Mr Justice Depasquale’s judgment and had also requested a shortening of the time limit for filing an appeal. 

Steward argued in its appeal that the government had capitalised on the February judgment and used it as an excuse to take back the hospitals.

It is also battling the government within an arbitration court, the International Chamber of Commerce, as it believes it is owed a €100 million cancellation fee it obtained through a side letter engineered by then-minister Konrad Mizzi.

Fraud on both ends

On Monday, the court of appeal noted that while the original decision had concluded there were signs of fraud in the deal, the decision to nullify the contracts was made because Steward had failed to live up to its contractual obligations.  

It also took a broader view of the questionable deal. 

The deception at play was not between a fraudster on one side [Steward] and a naive party on the other [government], but rather a “collusion between the two parties."

That collusion began right at the start, when Steward's predecessor Vitals got access to privileged information ahead of being awarded the mega contract. 

The collusion continued when Vitals got a deal that was acknowledged to not be a workable one, and it stretched on as milestones were missed.

Government 'failed its duty to country' 

The court of appeal said that "those who had a duty to look out for the country's interest issued one extension after another to prevent a deal that was just a front for 'the real deal' from being made public, and continued to pay millions of euros to the appealing parties [Steward] even though these were not fulfilling their obligations". 

Karin Grech Hospital. File photoKarin Grech Hospital. File photo

In a particularly damning line, the court also noted that the government had sought to defend Steward all throughout, right until the company had filed its appeal to the original decision to nullify the deal. 

"The facts show that they failed their duty to the country, they did not seek the remedies they should have sought and it had to be the plaintiff [Delia] to take the initiative to seek those remedies in the national interest," the court said. 

In a damning conclusion, the court said the government had failed in its duty to protect the national interest.In a damning conclusion, the court said the government had failed in its duty to protect the national interest.

It said that since collusion existed between Steward and Government representatives or agencies, then each was to shoulder his share of the expenses of the case.

In the original decision, Steward had been ordered to pay all court expenses. 

Vitals and Steward are the same

The court dismissed Steward's various arguments made against the first ruling, including its claim that it was distinct from its predecessor, Vitals Global Healthcare.

Steward argued that the concession was originally given to Bluestone Investments Malta Limited, part of the VGH group.

But that court said that the appellants, whether Vitals or Steward were always the same.

“They were the same and the baggage they carried was and still is the same," it said. "Failings that occurred before the change in shareholders are and remain their own failings." 

No crime by Steward shareholders

There was a note of consolation in the judgement for Steward shareholders: the court of appeal said it was not right for them to have been accused of criminal behaviour by the first court. 

St Luke's Hospital. File photoSt Luke's Hospital. File photo

While it was "suspicious" that Steward had agreed to take over Vitals without doing any due diligence, despite being aware of the company's problems, the court said that it believed the company had entered into the deal in good faith.

But that made little difference to the case concerning the hospitals contracts, it added.  

Thus while confirming the judgment on its merits, the court partly upheld Steward’s appeal and ordered expenses to be shared between Steward and the other defendants, including the government. 

Lawyer Edward DeBono assisted Delia. 

Aside from Chief Justice Mark Chetcuti, the court of appeal was composed of Mr Justices Giannino Caruana Demajo and Anthony Ellul. 

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