A court on Friday condemned Steward Health Care, which took over the hospitals' concession from Vitals, as having intended to “unjustly enrich itself at the expense of citizens” and engaging in “possibly criminal behaviour”.
The court annulled the controversial hospitals' privatisation deal originally signed with Vitals, declaring it to be “fraudulent”, and ordered that St Luke’s, Karin Grech and Gozo hospitals be returned to the government within three months.
Steward wanted to unjustly enrich itself at the expense of the government and Maltese and Gozitan citizens- Judge Francesco Depasquale
Mr Justice Francesco Depasquale delivered a dramatic and strongly worded judgment after 44 hearings in the case filed by former opposition leader Adrian Delia.
Delia has waged a five-year legal battle challenging the deal and calling for the hospitals to be “given back to the people”.
The court said Vitals Global Healthcare Limited, the original concessionaire, had “abused of the information” previously obtained by its investors by means of a memorandum of understanding signed with the government in October 2014, to present a proposal that “could not but be accepted”.
Reading out chunks of the 136-page judgment, the judge threw out all the pleas raised by the defendants and upheld Delia’s argument that not only had Vitals, and its successor on the concession Steward Health care, failed to fulfil its contractual obligations but, moreover, the deal was vitiated by fraud.
Vitals 'took advantage of government's ambitions'
Knowing full well that the newly elected Labour administration had pledged in its electoral manifesto to improve the state of hospitals and could not backtrack on that political promise, Vitals “took advantage of government’s political ambitions leading government to choose their project”.
But they did so by means of “well-pre-conceived tricks and manoeuvres,” said the judge, adopting a timeline of events drawn up by the auditor general in his report on the hospitals deal.
After VGH investors signed the memorandum of understanding in respect of the Gozo hospital and bound the government not to negotiate with any other third party, they subsequently used the information obtained to submit a proposal.
This proposal was subsequently described by the evaluation committee as “a true and detailed picture of healthcare in Malta and Gozo”.
The government had insisted that all investors were to be subject to due diligence checks.
A month later, the same investors signed an agreement with Medical Associates of Northern Virginia (MANV), including reference to how profits from the hospitals' concession were to be shared.
That agreement also made reference to the “potential acquisition of St Philips and/or St Luke’s Hospital in Malta”.
In January 2015, then-minister Konrad Mizzi, who was responsible for the health portfolio, declared that the government was no longer interested in Vitals’ proposal.
At the time, there had been no public announcement about the privatisation deal, observed the court. Moreover, “documentation to support [Mizzi’s] allegation was nowhere to be found”.
Also, at no point did VGH inform Projects Malta about any possible conflict of interest.
In May 2015, three bidders submitted a request for proposals for the hospitals' concession but out of those three, VGH was the only one that included a bid bond, thus making it eligible to clinch the deal.
Vitals 'took all for a ride, made authorities believe their lies'
The court could not help but observe that the methodology adopted by persons entrusted by the government to evaluate and adjudicate the project was “slack and totally unprofessional, almost amateurish.”
The evaluation committee clearly “did not at all evaluate the financial due diligence of VGH but relied solely on ‘letters of comfort’ from international banks”.
It later transpired that Vitals’ sole financial source was a local bank, namely Bank of Valletta, whose primary shareholder was the government.
The court was convinced that the request for proposals was “simply part of the plan conceived and concerted solely by the investors”.
Vitals made use of tricks and claimed to have financial leverage running into billions of euros, “thus taking all for a ride and making the authorities believe their lies, thereby getting the final project”.
Those tricks eventually fizzled out into nothing and their many promises went unfulfilled.
As for Steward, the court had no doubt that it was well aware of this ongoing litigation when it took over the deal, seeking to take advantage of the situation arising through the fraud committed by its predecessor so as to “unjustly enrich itself at the expense of the government and Maltese and Gozitan citizens”.
The court questioned how persons responsible for government authorities could ever knowingly undertake such onerous obligations.
The court “wanted to believe that such obligations were taken on possibly as a result of naivety if not pressure for the original project to remain viable”.
However, this was certainly a result of “the fraudulent and possibly criminal behaviour” both by Steward as well as its predecessor, Vitals and their investors, went on the judge.
Steward's 'lack of respect' towards judicial process
Steward’s stance was “condemnable and clearly manifested a lack of respect” not only towards its contractual obligations but also to the “entire judicial process”.
The concessionaire sought to influence the court’s final decision, with the sole aim of making a financial gain without honouring its obligations on the hospitals deal.
The court ripped up all pleas raised by the defendants.
The first was that the applicant had not cited the article of law in terms of which he framed his case. Article 33 of the Government Lands Act stated that transfers of public property not held in accordance with that law could be annulled and that annulment could be demanded: “by any of the parties involved in the disposal and also by the attorney general or by any person who is a member of the House of Representatives at the time of the demand before the First Hall, Civil Court”.
Delia had utilised that right as an MP to seek that annulment.
Formalism was an essential part of judicial proceedings but not to the extent of being applied in an “asphyxiating manner to obstruct or block proceedings that were instituted in a legitimate manner”.
The court also rejected the plea that the three agreements signed before the emphyteusis concession were “distinct and separate”.
Those three “related instruments”, concerning the services concession agreement, the health services delivery agreement and the labour supply agreement, were an intrinsic part of the concession whereby the government granted the sites under a temporary ground rent.
The defendants had also argued that Delia lacked juridical interest.
But the court again shot down that argument, making some strong statements about the duty of every member of parliament to safeguard the interests of the citizens who elected him and to ensure that government properties are transferred to third parties in accordance with the law and in the best interest of the citizen.
Attorney General duty bound to scrutinise concession
Moreover, the contracting parties representing the government, as well as the attorney general, were duty-bound to ensure that those undertaking obligations on the deal put words into action.
And those obligations did not “stop on the day of the transfer but continued to apply so long as the concession remained in force, subject to the constant scrutiny of the contracting parties”.
In this case, the concession concerned property used to provide an essential service to the country, namely health, and therefore every MP was to ensure that parties on such a profit-making deal respected their obligations.
Dearth of evidence likely reflected Steward’s “poverty of investment, projects and future plans- Court
All defendants, except for Steward, argued that they were non-suited, all seeking to “escape responsibilities and to disassociate themselves with every possible means” from the dispute.
That plea was also rejected.
The court scrutinised all of Vitals’ and Steward’s failures in attaining the pre-established “milestones.” It had expected the concessionaire to produce evidence, including witnesses, proving that it had fulfilled those obligations.
But surprisingly, all that Steward produced was a one-page affidavit and 76 pages of photographs which showed a new helicopter and refurbishment of the telephone operator’s toilet.
Such dearth of evidence likely reflected Steward’s “poverty of investment, projects and future plans”.
When all was considered, the applicant’s claims were to be upheld.
The concession, including the three preliminary agreements, amendments and additions thereto, were to be annulled and given back to the government, concluded the judge, appointing the Principal Notary to Government to publish the deed of rescission within three months.
All expenses are to be borne by Steward Malta Limited. Lawyers Edward and Nicholas De Bono assisted Delia.
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