Case Summary: Special Investigating Unit and Another v Ndlovu and Others

Special Investigating Unit and Another v Ndlovu and Others

URL

https://lawlibrary.org.za/za/judgment/special-tribunal-south-africa/2022/6

Citations

(GP 19 of 2021) [2022] ZAST 6

Date of judgment

7 June 2022

Keyword(s):1

Emergency procurement procedures, Covid-19 pandemic, PPE supplies, delay in instituting review application, organs of state, approved deviation, fair, equitable, transparent and cost-effective procurement process, fraud, condictio ob turpem vel inustam causam, enrichment claim, turpitude, tender fronting, asset forfeiture, prohibition from trading with the State

Case type2

Application

Result

Unlawful contracts were set aside and amounts derived from the unlawful contracts were ordered to be repaid to the NHLS. Assets were also declared forfeited to the State for the purpose of repaying the NHLS.

Flynote3

Procurement law – emergency procurement procedures – failure to meet emergency procurement requirements and remedy for non-compliance includes forfeiture of preserved assets

Legislation and International Instruments4

• Section 217(1) of the Constitution

• Section 76 of the Public Finance Management Act

• Treasury Regulation 16A6.4

• Section 15 of the Preferential Procurement Policy Framework Act

• Section 8(2) of the Special Investigations Unit and Special Tribunals Act

Cases cited as authority5

• Swifambo Rail Leasing (Pty) Ltd v PRASA 2020 (1) SA 76 (SCA)

• AllPay Consolidated Investment Holdings (Pty) Ltd and Others v CEO of the South African Social Security Agency and Others 2014 (1) SA 604 (CC), AllPay Consolidated Investment Holdings (Pty) Ltd and Others v CEO of the South African Social Security Agency and Others 2014 (4) SA 179 (CC)

• First National Bank v Perry N.O. [2001] 3 All SA 33 (A)

Facts6

The first respondent and the companies he represented, as well as the rest of the fronting companies, were involved in procurement transactions for the supply of personal protective equipment (“PPE”) to the NHLS. The procurement process deviated from normal processes and requirements of the Public Finance Management Act due to the urgent need to procure PPEs to combat the Covid-19 emergency, and the NHLS adopted emergency procurement procedures instead. The fronting companies allowed the first respondent to use their companies as a front to do business with the NHLS, and the funds received from the PPE contracts were ultimately for the benefit of the first respondent. The fronting companies were unqualified and did not have any experience in the supply of PPEs, and also supplied goods to the NHLS at non-competitive prices.

Summary7

The tribunal reviewed the procurement transactions for the supply of PPE to the NHLS to determine whether the procurement process and transactions, as well as the payments, were irregular and unlawful in terms of the Public Finance Management Act and relevant regulations.

The tribunal was also tasked with determining the consequential relief for the recovery of monies the respondents received in relation to the unlawful payments.

Decision/ Judgment8

The PPE contracts were found to be unlawful and set aside. The first, fourth, ninth, tenth and thirteenth respondents were ordered to repay the NHLS the amounts they received in respect of the unlawful contracts. The eleventh, twelfth, fifteenth and sixteenth respondents were also ordered to repay the NHLS for the amounts by which they were enriched through payments derived from the NHLS. The assets belonging to the first, second, fourth, eighth and ninth respondents were declared forfeited to the State to enable the applicants to realise the forfeited assets for the NHLS’s benefit.

Basis of the decision9

The tribunal found that the first respondent and the fronting companies fraudulently exploited the NHLS’s emergency procurement procedure, were inexperienced companies, and ultimately supplied the NHLS with goods at excessive prices despite the same goods being available from other suppliers at substantially lower prices. The majority of the funds acquired through the payments made by the NHLS made their way to accounts held or controlled by the first respondent or members of his family. The first respondent, the companies he represents as well as relevant fronting companies were therefore liable on the basis of an enrichment claim, and the tribunal ordered the liable respondents to repay the NHLS, and for the preserved assets of certain respondents to be forfeited to the State in terms of section 8(2) of the Special Investigations Unit and Special Tribunals Act.

Reported by

Date

African Legal Information Institute (AfricanLII)

7 June 2022