SA’S TANGLED LEGAL WEB

Barnabas Xulu, Zuma/Hlophe lawyer, ordered to repay state R20 million in legal fees

By Marianne Thamm 31 January 2020
Caption
Attorney Barnabas Xulu. (Photo by Gallo Images / Foto24 / Nelius Rademan)

Attorney Barnabas Xulu, a friend of Jacob Zuma and lawyer to Western Cape Judge President, John Hlophe, has been ordered to pay back around R20 million in legal fees funnelled to his firm by the Department of Agriculture, Forestry and Fisheries, which was entitled to free legal advice from the Office of the State attorney.

Attorney Barnabas Xulu, a friend of Jacob Zuma and lawyer to Western Cape Judge President John Hlophe, has been ordered to pay back about R20-million in legal fees funnelled to his firm by the Department of Agriculture, Forestry and Fisheries, which was entitled to free legal advice from the Office of the State attorney.

The significant judgment was handed down in the Western Cape High Court by Judge Owen Rogers on Thursday 30 January 2020.

The ruling serves as a warning to ministers, departments and other officials partial to giving work to legal friends. It is also a warning to those who ignore the State Liability Act. It was former Minister of Agriculture, Forestry and Fisheries (DAFF), Senzeni Zokwana, who had funnelled the work to Xulu’s firm.

Judge Rogers ordered Barnabas Xulu Incorporated (BXI) to repay DAFF by Thursday 30 April 202o, “the amount of R20,242,472, which it received pursuant to the invalid writs of execution and notices of attachment”.

Judge Elize Steyn issued the order for the writs on 16 June 2019 and by August the same year the sheriff had paid R17,657,098 – in accordance with the second writ – into the BXI trust account which Xulu then shifted to his business account “from which it was disbursed”.

By 5 August 2019, only R203,515.97 remained in the trust account and by 6 August only R117,200.25 remained in the business account (though R3.4-million is available in the frozen forex account),” noted Rogers.

An interesting detail popped up in Thursday’s judgment, considering the storm brewing in the Western Cape division after Deputy Judge President Patricia Goliath accused Hlophe of gross misconduct.

Xulu has represented Hlophe in various matters including a pending JCC disciplinary hearing. He was also the legal representative in a case involving businessman Matthews Mulaudzi, who appeared before Hlophe as judge in a R48-million theft matter.

In 2017, SCA Judge Visvanathan Ponnan handed down a scathing judgment with regard to Hlophe’s conduct in the Mulaudzi matter. Ponnan not only pointed out the fact that Xulu was Hlophe’s personal attorney, but also that Hlophe had allocated the case to himself while he was not one of the duty judges.

Rogers’ judgment reveals that it was Goliath who had deliberated, in 2019, the application for a R20-million settlement entered into by Deputy Director-General (DDG) of Fisheries Management, Siphokazi Ndudane, and Xulu’s firm to be made an order of the court.

Xulu had been unhappy that Goliath, as the hearing judge, had correctly sought further information from National Treasury, the State Attorney, the NDPP, then Minister of Agriculture, Forestries and Fisheries, Senzeni Zokwana, as well as DAFF Director-General (DG), Mike Mlengana, about the deal.

In the meanwhile, BXI had complained to the Judge-President that Goliath’s requirements went beyond what was reasonable. Goliath notified BXI on 20 May [2019] that in view of this complaint she would no longer be dealing with the case, which BXI could enroll in Third Division in the normal course,” Rogers noted in his judgment.

And that is how Judge Steyn came to hear the application and later grant the order in favour of BXI. It was this order by Steyn that Rogers had now rescinded.

Rogers ordered that the service level agreement “purportedly concluded between the applicant [DAFF] and the First Respondent [BXI] on 23 May 2017 is declared invalid and is reviewed and set aside.”

Another settlement agreement on 12 April 2019 was also declared invalid, reviewed and set aside.

Xulu was joined by Rogers as a Fifth Respondent in the matter and DAFF was ordered to verify BXI invoices by 9 April 2020. Xulu has until 12 March 2020 to “show just cause why he should not be ordered to pay the amount. BXI was also ordered to pay DAFF’s costs.

Rogers pointed out that Deputy Director-General: Fisheries Management, Siphokazi Ndudane had acted as Minister Zokwana ’s proxy in the department, bypassing DG, Mike Mlengana’s authority as the accounting officer. Ndudane had not been authorised to broker the settlement with BXI.

Remarking on Ndudane overstepping her duties, Rogers noted: “Officials who exercise public power are constrained by the principle, fundamental to our constitutional order and the rule of law, that they may exercise only those powers and perform only those functions which are conferred upon them by law.”

Apart from rescinding Steyn’s order, Rogers pointed out several breaches of the State Liability Act including that Xulu’s firm had only notified the new Minister, Barbara Creecy, after the first writ (a command from the court) had been issued and executed.

Rogers noted, the 30-day limit on the “satisfaction” of a final order had expired on 5 July 2019 without payment being made, an obligation of Treasury had not been triggered, and BXI had not been entitled to request the registrar to issue the writs of execution. The sheriff had also not been entitled to execute and attach money in DAFF’s bank accounts to pay BXI.

All of this was in violation of the State Liability Act, said Rogers.

A consideration “which weighs with me” said Rogers, was that BXI “was very much the author of its own misfortune. The greater part of the amount the firm would be obliged to refund – R17,657,098 – is money which the BXI parted with after it had been notified that the execution was non-compliant with the State Liability Act.

With this knowledge, BXI disbursed the proceeds… with almost indecent haste,” said Rogers.

As a firm of attorneys working for the state, BXI, said Rogers, could reasonably have been expected “to be familiar with the provisions of the State Liability Act and thus the defect in the execution it had levied.”

It was difficult not to conclude that Xulu “caused BXI to part with the money” despite knowing that the writ had been invalid.

If he did not bother to look at the State Liability Act, he would seem to have acted in reckless disregard of the legality of BXI’s actions, ie at least with dolus eventualis.

Rogers said “none of the requirements of the act were heeded.”

Rogers tore into the court’s registrars, saying it was a matter of concern that “writs were issued in this case without an inquiry into compliance of the State Liability Act.”

Rogers said he had consulted with the court’s chief registrar and it appeared as if the registrars in this division “may not be alert to the provisions of the Act”.

There is no standard form for the written request contemplated in section 3 (6) of the Act. Attorneys who seek writs against national or provincial government departments must not make such requests unless there has been compliance with the Act, and registrars should not issue writs unless so satisfied.”

Rogers added that it appeared that the sheriff in this case also “did not pay proper heed to the provisions of ss 3 (7) and (8). Had the sheriff observed the 30-day holding period specified in 3 (8) the loss of the DAFF’s money might have been avoided.”

Some background to the inside job — it’s complicated, but here goes:

Before President Cyril Ramaphosa reshuffled Cabinet in May 2019, Zokwana was Zuma’s Minister of Agriculture, Forestry and Fisheries. The Department’s DG was Mzamo Mlengana.

While Mlengana had a “fraught” relationship with Zokwana, Deputy DG Ndudane had Zokwana’s support.

The Marine Living Resources Act provides for “the continued existence” of a fund called the Marine Living Resources fund which enabled the administration of the provision of the Marine Act. Mlengana was the MLRF’s accounting officer.

In October 2016, a memorandum of understanding was concluded between DAFF and Emang Basadi Legal (EBL) for the provision of legal services. DAFF, in its court papers, said this was “part of a move by the Zokwana faction to get rid of the State Attorney in Cape Town so as to enable private law firms to extract excessive fees from the dept.”

On 6 January 2017 EBL wrote to BXI stating that EBL had been instructed by DAFF to appoint BXI attorneys to assist pending litigation in which Viking Inshore Fishing was suing DAFF.

According to BXI, the DAFF had recommended that BXI apply to be added to the MLRF’s supplier database so that EBL could be dispensed with as an intermediary.

DAFF’s chief director of legal services, Kanthi Nagiah, “who had no complaint with the quality of service rendered by the State Attorney”, did not approve the sidelining of the office.

Although Mlengana had signed the MOU with EBL, he wrote to the firm on 2 February 2017 informing it that “proper supply chain management processes had not been followed in EBL’s appointment” thus rendering the contract invalid.

BXI said it continued working on the Viking case “because it was unaware of the termination of EBLs services”.

Rogers said that the DG had complained that Ndudane had continued to use EBL after the contract had been terminated. She had also continued to approve payments to the firm.

Zokwana had “promoted BXI’s engagement to assist in the DAFF litigation against Arnold Bengis and others”.

Bengis was the managing director of Hout Bay Fishing and in 2002 was ordered to pay R12-million and forfeit two fishing vessels to the South African Authorities for catching and illegally smuggling lobsters out of South Africa to the US.

In 2011 the US Court of Appeals handed down a landmark ruling ordering the company directors of the exporter in South Africa and the importer in the US to pay the South African government $54.9-million in restitution for the illegally harvested south and west coast lobsters.

In 2017 Zokwana had written to DIRCO to inform it that DAFF had mandated BXI, working with advocate Nomazotsho Memani, to initiate the restitution of the money to South Africa. Memani was Zokwana’s legal adviser.

In April 2017 BXI registered on the MLRF supplier database even while this “may have been irregular for lack of current tax clearance certificate” noted Rogers.

In May, the Service Level Agreement was concluded with Ndudane appointed as the “delegated authority” for DAFF. She would be the “first point of interface” and only she issued instructions to BXI. The drafters of the SLA were careful, noted Rogers, to bypass Mlengana.

All service providers were also requested to bill the DAFF in US dollars and this “remarkably applied to BXI itself” noted Rogers.

This is where it gets dense.

Mlengana claimed that he did not sign the SLA and that Zokwana had asked him, during a meeting in Cape Town, to sign only the last page of another document. The DG accused Zokwana of using this signature for a document “of a different character”.

Mlengana had earlier contested the validity of the appointment of EBL by DAFF on the basis that SCM processes had not been followed. This was also true of the BXI appointment, said Rogers.

It was Minister Zokwana who was promoting the BXI appointment and had given it a mandate.”

The DG said in late July 2018 he had reported to the Hawks that his signature on the SLA was a fraud. He later terminated BXI’s services.

Suffice to say Mlengana was later suspended in June 2017 by Zokwana on charges of “gross misconduct”, a decision he challenged and won. Mlengana was “only freed” from Zokwana’s oversight “when there was a changing of the guard in May 2019” and Creecy was appointed minister.

While Mlengana was on suspension, noted Rogers, Ndudane, assisted by Nazima Parker, Director Supply Chain Management and Acting Chief Director of Financial Management, approved the paying of millions to BXI in legal fees.

From March 2017 to June 2018 these totalled R24.4-million.

Enter Shaun Abrahams.

Around June, Abrahams, then still National Director of Public Prosecutions, asked Zokwana to compile a report with regard to alleged “acts of undue influence, criminality and maladministration in DAFF”.

This minister engaged BXI to produce the report,” noted Rogers.

While Mlengana had written to Zokwana to suggest using the State Attorney as the AG had made negative findings about the DAFF’s use of private law firms, Zokwana ignored this and issued a directive that DAFF settle with BXI.

Rogers’ judgment has exposed the illegal conduct of various senior officials in DAFF as well as Zokwana for his irregular appointment of Xulu. The consequences of Rogers judgment should be far-reaching not only for the future, but for those who have been implicated in the irregular appointment and payment of Xulu. DM

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