HSF legal counsellor, Anton van Dalen, in a brief issued by the Helen Suzman Foundation, set out how, in light of current controversies surrounding Public Protector Busisiwe Mkhwebane’s reports on the SARS “rogue unit” and the pension payout of former SARS Deputy Commissioner Ivan Pillay, a judgment by the court would clarify matters relating to the alleged competency and/or bias of the PP.

“There has as yet been no indication by the Constitutional Court as to when judgment will be delivered and we have no information on why it is taking so long,” said Van Dalen.

Apart from the outstanding legal issues in the Absa/Bankorp matter the ConCourt also had yet to rule on the question of whether the High Court was correct in ordering Mkhwebane to personally pay 15% of costs.

Van Dalen referred to a document entitled “Norms and Standards for the Performance of Judicial Functions”, issued by Chief Justice Mogoeng Mogoeng on 28 February 2014, in which the Chief Justice stated, “Save in exceptional cases where it is not possible to do so, every effort shall be made to hand down judgments no later than three months after the last hearing.”

The HSF said that there were several aspects of the Absa/Bankorp case that were particularly relevant at present relating to the Public Protector’s “perceived bias, apparent lack of understanding of her constitutional duties and whether she abused her office in the investigation. It is assumed that a judgment by the Constitutional Court will clarify some of these matters and would give lower courts the necessary guidance in dealing with them.”

In this light, said the foundation, a judgment by the Constitutional Court on the personal liability for costs “is also becoming increasingly important, since guidance is required by the Courts when they are confronted with similar situations”.

The High Court’s recent finding that the Public Protector’s report on the Vrede Dairy Project by the Free State’s Department of Agriculture was unlawful, unconstitutional and invalid was also relevant.

“The Court found that the Public Protector’s failure to investigate the complaints properly was plainly irrational, with the information before her providing at least prima facie evidence of corrupt activity. In addition, the Court found that her belief that she was not empowered to take remedial action by referring the matter to another organ of state for further investigation constituted a profound mistake of law,” said Van Dalen.

The factual background to the Absa/Bankorp case is that between 1985 and 1991, the South African Reserve Bank (SARB) had granted a R1.5-billion loan to Bankorp, which had experienced financial difficulties.

The SARB had acted within the framework of its general duty to ensure confidence in the banking system, to protect depositors and to avoid contagion. The proceeds of the loan were to be invested with the SARB or in Government Bonds and would earn 16% interest, but only 1% interest was to be paid to the SARB.

The arrangement resulted in Bankorp benefitting from an interest rate differential of 15% while the investment was ceded to the South African Reserve Bank as security.

The annual interest amount of R225-million earned by Bankorp was to be available for five years, resulting in a total of R1.125-billion. The intention was that these funds would be applied to the writing off of bad loans.

After five years, the R1.5-billion principal would, therefore, be repayable, but not the interest differential of R1.125-billion.

In 1992, Absa Bank took over the assets and liabilities of Bankorp and replaced Bankorp in the agreements with the SARB. The agreement terminated in 1995, with the principal of R1.5-billion being repaid.

The South African Government subsequently entered in October 1997 into an agreement with a UK-based asset recovery agency (CIEX) to investigate and assist in recovering assets that had allegedly been misappropriated prior to 1994.

In her June 2017 report, the Public Protector found that the South African Government had failed to implement the CIEX report and recover the R1.125-billion from Bankorp/ABSA Bank.

Mkhwebane’s report also found that the conduct of government and the SARB had constituted “improper conduct and maladministration” and referred the matter to the Special Investigating Unit (SIU) for the recovery of the funds from ABSA. Mkhwebane also issued instructions for a change to the Constitution.

Prior to Mkhwebane’s investigation, a panel of experts had been appointed in 2000 by the Governor of the Reserve Bank, with Judge Dennis Davis as chair. The panel found that the financial assistance given by the SARB had been “seriously flawed” and that, by using a simulated transaction, the Reserve Bank had acted outside its statutory powers.

Van Dalen said that there was “therefore no dispute between the Panel’s report and that of the Public Protector that the nature of the assistance provided was unlawful”.

However, he said, “it should be noted that it was just the particular kind of assistance rendered to Bankorp that was found to be unlawful by the panel, and not other methods that may be used by the Reserve Bank to assist banks in distress”.

The panel found that the price that Absa had paid in its acquisition of Bankorp included the value of the Reserve Bank’s assistance and that it was therefore not unjustly enriched.

In her report, the PP confirmed being presented with Absa’s argument that it had paid fair value when it had acquired Bankorp (including the assistance by the South African Reserve Bank), but stated that this argument could not be sustained since the SIU and the panel had established that the R1.125-billion had been an unlawful gift.

“That was the end of the matter as far as the Public Protector was concerned,” said Van Dalen.

“The issue here is who benefited and whether it is realistic to attempt to retrieve the funds from those recipients. The panel dealt with this in some detail, but the Public Protector has simply avoided the issue, except to say that as the assistance was unlawful, therefore Absa, having acquired Bankorp, has to pay. The legal issue at play here, i.e. that Absa was not unlawfully enriched, has not been understood by her at all,” said Van Dalen.

While the Public Protector examined the mandate of the Reserve Bank in her report she also, as one of her remedial actions, proposed the amendment of the Constitution.

“The report states, in peremptory fashion, that the Chairperson of the Portfolio Committee on Justice and Correctional Services ‘must initiate a process that will result in the amendment of Section 224 of the Constitution’,” said Van Dalen.

After the release of the PP’s report, the SARB approached the High Court on an urgent basis for an order to set aside the remedial action relating to the Public Protector’s direction to Parliament to amend this section of the Constitution.

Mkhwebane initially opposed this application, but later conceded the merits and consented to all the relief sought.

In that matter the judgment stated that Mkhwebane “has agreed that her remedial action is unlawful in that only Parliament has the power to amend the Constitution and that she has no power to dictate to Parliament” and “the Public Protector’s explanation and begrudging concession of unconstitutionality offer no defence to the charges of illegality, irrationality and procedural unfairness. It is disconcerting that she seems impervious to the criticism, or otherwise disinclined to address it.”

Further remedial action in the PP’s report related to an instruction to the SIU to “recover misappropriated public funds unlawfully given to Absa Bank in the amount of R1.125-billion” and that the SARB should assist the SIU to recover these funds.

Legal review proceedings were instituted by the SARB, the Minister of Finance, the National Treasury and Absa in order to set aside this remedial action.

In the Court’s judgment, it was pointed out that the Public Protector had predetermined any investigation by the SIU in her report’s findings, and that these could not, therefore, be regarded as recommendations.

“The Court found that she was also wrong in her answering affidavit before the Court, in claiming that the remedial action only advises the State of available remedies in law,” said the HSF.

The court also referred to the fact that Mkhwebane had held two meetings with the Presidency after the release of the preliminary report, but had failed to mention the second meeting in her final report and disclose what had been discussed.

She had also met with the State Security Agency (SSA) and the former Minister of State Security, in discussions relating to the Reserve Bank. Mkhwebane had also failed to record these meetings and could not supply transcripts or minutes. She did not engage with either ABSA or the Reserve Bank after these meetings.

The High Court judgment concluded: “The Public Protector did not conduct herself in a manner which should be expected from a person occupying the office of the Public Protector ….. She did not have regard thereto that her office requires her to be objective, honest and to deal with matters according to the law and that a higher standard is expected from her. She failed to explain her actions adequately.”

Furthermore, the High Court found that “… we have found that the Public Protector was biased and the remedial action should be set aside”.

With regard to the discussion on the costs order to be made, the Court stated: “In the matter before us it transpired that the Public Protector does not fully understand her constitutional duty to be impartial and to perform her functions without fear, favour or prejudice. ….. Section 5(3) of the Public Protector Act provides for an indemnification with regard to conduct performed ‘in good faith’. The Public Protector had demonstrated that she exceeded the bounds of this indemnification.”

All the remedial action prescribed by the Public Protector was declared unlawful by the Court in two judgments. The court also ordered her to pay 15% of the costs of the SARB in her personal capacity.

After the High Court dismissed an application for leave to appeal, the Public Protector approached the Constitutional Court directly, for an order setting aside the personal costs order and that portion of the judgment on which that costs order was based, in particular, “that there was a reasonable apprehension that the Public Protector was biased and that she does not fully understand her constitutional duty to be impartial and to perform her functions without fear, favour or prejudice.”

The SARB lodged a cross-appeal against that part of the High Court’s judgment that refused to declare that the Public Protector had abused her office during the investigation that led to the report.

Van Dalen said that there were several aspects of the Absa/Bankorp case which were “particularly relevant to what is going on at the moment, especially relating to the Public Protector’s perceived bias, apparent lack of understanding of her constitutional duties and whether she abused her office in the investigation. It is assumed that a judgment by the Constitutional Court will clarify some of these matters and would give lower courts the necessary guidance in dealing with them.”

He added that a judgment by the Constitutional Court on the personal liability for costs “is also becoming increasingly important since guidance is required by the courts when they are confronted with similar situations.” DM