A court on Friday nullifed the government’s €60 million deal to privatise three hospitals.

In a court judgment today, Mr Justice Francesco Depasquale ordered that all property be returned to the government.

Former Opposition leader Adrian Delia had filed the court case in 2018 in a bid to cancel the 99-year emphyteutical concession agreement awarded to Vitals Global Healthcare.

Delia argued that the Vitals Global Healthcare, and their heirs in title Steward Healthcare, had not fulfilled the contractual obligations tied to the deal.

The €100 million buy-out clause: “Possibly criminal”

The judge says Steward had forced the government to change the agreement to make the government in default if the contract failed. The judge questioned how the government allowed itself to get into this position, suggesting that Steward's actions were "possibly criminal".

This was the result of fraud by Steward to change an agreement entered into through fraud by its predecessor, to end up enriching itself on the back of the Maltese taxpayer. The judge describes Steward's machinations as "solely blackmail and unjustified enrichment".

Vitals and the MoU: “Evidence of its fraudulent intent”

Between the memorandum and the granting of the concession, Vitals should have disclosed this conflict, which would have rendered it ineligible. "The fact that Vitals kept the MoU hidden was evidence of its fraudulent intent," said the judge.

He stated: Vitals had abused its position and took advantage of the government, which was already politically bound to deliver the hospitals it promised before the elections.

The concession milestones: “A complete farce”

As Depasquale reads out the concession milestones that had to be fulfilled, he remarked: “It emerges that none of these completion milestones were observed or achieved by Vitals, today Steward.”

"They were rendered ineffective, if not a complete farce," says the judge on the milestones, as the secret side-agreements showed. “The government of Malta, instead of defending the interests of the Maltese people,... incredibly accepted a change to the agreement," said the judge.

From Vitals to Steward: “Serious doubt on Steward’s good faith”

Depasquale expressed "serious doubts as to Steward’s good faith when it acquired the shares of Vitals", and when it obliged the government to pay a penalty of €100 million if the contract is nullified in court.

Depasquale goes on to slam government’s “amateurish” checks before signing the contract.

In the RFP there is absolutely no request for due diligence on the proposers, which the court says indicates that there was no intention to actually evaluate the proposals.

The judge is convinced that this was part of a complex and concerted effort to deceive and strong-arm the authorities into accepting the proposal.

 

 

13:25 This is a big win for Delia, who is being hugged and kissed as he leaves the courtroom. 

13:25 It’s official. The court has nullified all contracts awarded to Vitals and Steward, and ordered all property to be returned to government. 

13:24 The judge orders the government notary to publish this within three months. All costs are to be borne by Steward Malta Ltd.

13:23 The court therefore, upholds the plaintiff's request. The court rescinds and annuls all three agreements and all their amendments and orders the return of all the properties in question.

13:22 This was the result of fraud by Steward to change an agreement entered into through fraud by its predecessor, to end up enriching itself on the back of the Maltese taxpayer. The judge describes Steward's machinations as "solely blackmail and unjustified enrichment". 

"Machinations which were solely intended to corrupt the selection... at the expense of the Government of Malta."

13:20 The judge says Steward had forced the government to change the agreement to make the government in default if the contract failed. The judge questioned how the government allowed itself to get into this position, suggesting that Steward's actions were "possibly criminal".

13:15 Now we move on to Steward Healthcare. The court said it had no doubt that, at the time, Steward was "well aware" of the obligations of VGH, which were not honoured. Stewards embarked on an interminable series of negotiations with the government, ending up with four loans from BOV. 

13:14 The judge states: Vitals, with Bluestone as shareholder, had failed in all its obligations and fulfilled none of their obligations. Medical tourism was a mise-en-scene used to convince the government to grant the emphyteutical concession over the lands. There had been no attempt by Vitals to implement the agreement.

13:12 He continues that, between the memorandum and the granting of the concession, Vitals should have disclosed this conflict, which would have rendered it ineligible. "The fact that Vitals kept the MoU hidden was evidence of its fraudulent intent," said the judge.

13:10 The judge is convinced that this was part of a complex and concerted effort to deceive and strong-arm the authorities into accepting the proposal. 

13:10 In the RFP there is absolutely no request for due diligence on the proposers, which the court says indicates that there was no intention to actually evaluate the proposals.

13:08 Depasquale goes on to slam government’s “amateurish” checks before signing the contract.

13:08 He states: Vitals had abused its position and took advantage of the government, which was already politically bound to deliver the hospitals it promised before the elections.

13:07 He notes how $600,000 were to be provided as “pre-project costs”, meaning the bidders had already made a substantial investment. Mizzi had rejected this claim. The judge continues that the in-depth studies must have been made before the RFP was issued. He adds that he had no doubt that VGH had bound the government to give them the full details of their requirements for the construction of the hospitals.

13:05 Adrian Said, Executive Chair of Projects Malta had insisted in his testimony that when he started in 2014 he had found the request for proposals (RFP) "ready and prepared", reads the judge. Everyone involved in the process has three weeks to understand the portata of their bids.

13:03 The judge is making lots of references to agreements and timelines, and has made some heavy remarks against the concession and Steward.

13:00 Mizzi had said that the government had rejected the proposal, said the judge, adding however that it emerged that Mizzi had indirectly advised that Malta Enterprise had identified a place in Gozo "coincidentally the same size as that of the hospital".

12:58 Pivot Holdings was set up just the day before this memorandum had been entered into, notes the judge. The agreement was that no other bids would be accepted. At the time that the government had promised to carry out all due diligence on the parties, the memorandum of understanding had already been entered into says the judge. No public announcement was made at the time.

12:57 Regarding the fraud before the contract: the court had a detailed timeline of the facts leading to the contract. "It emerges that well before the government published its intention to privatise the three state hospitals, the investors who subsequently became Vitals entered into a memorandum of understanding with the government."

12:57 The court observes that the element of fraud and bad faith on the part of Vitals and Steward could have arisen at 3 stages - before the contract was signed, during the contract and when Steward stepped in Vital's shoes.

12:52 The court's doubts and concerns lead it to consider the argument of 'fraus omnia corrumpit’, says the judge. While the phrase ‘fraus omnia corrumpit’ had only been used in the latter stage of the argumentation, it is clear that it is the backbone of the plaintiff's entire argument.

12:51 Depasquale expressed "serious doubts as to Steward’s good faith when they acquired the shares of Vitals", and when it obliged the government to pay a penalty of €100 million if the contract is nullified in court.

12:49 He notes how the project for ‘tourism beds’ at St Luke’s Hospital was supposed to have been completed by December 2018. However, the judge says it had “never been considered, much less started”.

12:48 There was no evidence provided to show that any of the new bedspaces promised under the agreement had actually been provided. "While it appears that some works did take place in Gozo hospital, this court has no evidence to show that they have been completed."

12:46 There are giggles in the courtroom as the judge notes that the only documented works were those of a single bathroom. The judge said he was perplexed by the dearth of evidence submitted by the defendants. 

12:45 In view of all this, the court said it expected Steward to submit unquestionable evidence that it had fulfilled its obligations. Yet the only evidence Steward exhibited was a one page affidavit from an engineer, together with 56 pages of photographs.

12:44 He notes that Mizzi had opted not to testify after his resignation. The date of the resignation was on the same date that Chris Fearne was supposed to debate this with him in parliament. Fearne said that the completion milestones in the original contract were not reached, not under Vitals and not under Steward, according to the judge.

12:43 He says there was no logical explanation for Mizzi’s four-and-a-half-year concession to Vitals allowing them to finish their milestones by 2022 instead of 2018.

12:42 The judge notes how government granted a further 18 months from the lapse of 36 months. This means they were given until the end of 2022 to do what they were supposed to do, says the court. But even then, they did not reach their milestones. Indeed, he notes how some of the projects have not been completed to date.

12:41 "They were rendered ineffective, if not a complete farce," says the judge on the milestones, as the secret side-agreements showed. “The government of Malta, instead of defending the interests of the Maltese people... incredibly accepted a change to the agreement," said the judge.

12:37 As Judge Depasquale reads out the concession milestones that had to be fulfilled, he remarks: “It emerges that none of these completion milestones were observed or achieved by Vitals, today Steward.”

12:36 The contract states that the grantee was to develop the sites in accordance with the terms thereof. Therefore, if a breach of these agreements is found, it is also a breach of the concession, says the judge.

12:35 The government's intention was solely that Vitals and Steward could implement their obligations under those contracts. This also emerges from the concession, points out the judge, quoting the deliverables laid out on the agreement, such as the refurbishment of St Luke’s Hospital and Karin Grech Hospital. 

12:34 The concession is part of several granted to VGH, and later Steward Healthcare. The concession could only have been viable thanks to the three contracts entered into before the concession was granted. The result of this is that Vitals and later Steward were granted almost full ownership of the hospitals, says the court. 

12:33 We come to the final defence: that there was no breach of the concession. 

12:32 Delia had argued that the Attorney General had been obliged to request the rescission of the contract and had failed to do so. Therefore, the Attorney General was also a legitimate defendant. 

12:32 With regards to INDIS and the Lands Authority, the judge said there is no doubt that they should be parties to the case. With regards to the Prime Minister, says the court, Konrad Mizzi was not appearing in his capacity as minister but on behalf of the Government of Malta, as he had testified several times. Therefore, the Prime Minister has correctly been made a defendant.

12:31 The judge noted how the top brass in some of the parties to this case had tried to distance themselves from the contract, despite their representatives appearing as signatories on the contract.

12:28 Moving on to the fourth defence, that of lack of juridical interest, the court observes that the law provides for the possibility of a person who is not a party to the contract to challenge the contract. The law allows an MP to request rescission of a contract involving government, and therefore public, property.

12:26 The duty of the Leader of the Opposition is to stick up for the rights of the electorate. The breach of contract can give rise to request of rescission of contract at any time, not just when contract is signed. Delia had a right and a duty to file this action, concludes the court, dismissing this defence.

 12:24 Nowhere is there evidence of the government's express consent to this transfer, says the judge. More so, nowhere in the Laws of Malta is this action subject to being time-barred, meaning that it could be challenged at any time. The judge says that the Leader of the Opposition has the right to request the rescission of the contract, “something which the other parties are all saying he doesn’t have”.

12:22 It was argued that, as the completion date had never been reached due to shortcomings by Vitals, the transfer of the concession to Stewards is null. The court is going through the transfer from Vitals to Steward, noting that this had happened less than three years from the initial contract. 

12:20 The principle that Fraus Omnia Corrumpit (fraud corrupts everything) means that he had the right to demand the rescission of the contract on behalf of the public, says the judge.

12:19 The third defence was that Delia lacked the juridical interest to file the case. They insisted that he had based his case on a breach of contract which happened after the transfer, implying that it had already been concluded and therefore he had no right to challenge it as an MP.

12:17 The second defence is rejected as the contracts are a vital part of the concession.

12:16 The emphyteutical concession was a crucial element to all of the agreements, says the judge. It was vital to the whole project as intended by the government. Therefore, the related instruments must be taken as part of the emphyteutical concession, as it was given with those agreements as prerequisites. The court disagrees with the way the Prime Minister and State Advocate had interpreted the issue.

12:14 The second defence is that the contract is distinct from an emphytheutical concession. The judge says that it is clear that the applicant is contending that there were breaches in the related instruments which are to be taken as breaches of the emphyteutical concession, meaning that both were to be taken together. The court notes that there appears to have been three related instruments. "It emerges that all three of these agreements were changed after they were signed."

12:12 The first defence is that the application was lacking in some required formality. The court however, ruled that "formalism should not be used in an ‘asphyxiatory’ manner". This defence has been rejected.

12:11 A summary of the defence’s arguments: Delia had no juridical interest in the case, and he wasn't a party to the contract. Moreover, the contracts of service were distinct from the concession contract and that there had been no breach of the conditions. The court will tackle these defences one by one.

12:11 At the time Delia was Leader of the Opposition and is currently still an MP. Although not expressly said in the application, but emerging from the submissions, Delia filed the case in his capacity as an MP to have the contract rescinded, says the judge.

12:08 He notes that 55 witnesses were heard over 44 sittings, leading to a 3,000-page case file. The summary of the evidence alone is 50 pages long.

12.08 "It emerges that the contract of temporary emphyteusis between Parks Ltd and Commissioner of Lands on one side and VGH on the other, were granted a number of sites in Malta," he reads.

12:05 The judgment is 140 pages long, announces the judge. He added that he will read out some of the passages.

12:04 The judge has entered the courtroom.

12:00 Lawyer and Nationalist MP Mario Demarco is also in the courtroom, which is now packed with people – all seating space has been taken up.

11:58 Lawyer John Bonello is next to enter. He is representing INDIS. He is seen having a quiet word with the State Advocate.

11:57 State Advocate Christopher Soler has entered the courtroom. The State Advocate represents the government in court. Adria Delia has also just walked into the courtroom. 

11:42 But what’s this case about? This court case was filed in 2018 by Adrian Delia, then leader of the Opposition, in a bid to force the cancellation of the 99-year emphyteutical concession agreement on the basis that the concessionaires, both Vitals Global Healthcare and Steward Healthcare, had not fulfilled their contractual obligations. 

11:40 The public hospitals’ concession had been negotiated by Konrad Mizzi, who was health minister at the time. The deal raised eyebrows as VGH was a relatively known consortium at the time. Later on, the concession was sold to Steward Healthcare together with €55 million in debts accrued by VGH, for a nominal price of €1. It was sold less than two years after the concession was granted to VGH. 

11:35 The Steward deal, widely known as the ‘Vitals case’, has been a long ride. The deal was struck in 2015, when government handed a concession for the running of three hospitals to Vitals Global Healthcare (VGH). It was handed St Luke’s Hospital, Karin Grech Hospital, and Gozo General Hospital. 

11:29 Good morning! We’re going to be reporting live this afternoon as the court decides on the validity of the €60 million privatisation deal that saw three hospitals sold off to foreign investors.