Minister of Environment Affairs, Forestry and Fisheries, Barbara Creecy has approached the Western Cape Hight court to rescind an order issued by Western Cape Judge President John Hlophe, appointing Xulu’s firm, B Xulu and Partners INC (BXI), as one of two “implementing agents” in a more than R100-million US repatriation settlement order.
Hlophe appears to have issued the order in September 2018 “in chambers”.
Creecy’s Notice of Motion in the matter sets out an extraordinary series of events which led to former Minister of Agriculture, Forestry and Fisheries (DAFF), Senzeni Zokwana, appointing Xulu to represent DAFF in a legal matter involving “Lobster King” Arnold Bengis.
In March 2004, Bengis, and others, entered into plea agreements in a US court after being convicted of “conspiracy to violate” US legislation with regards to smuggling of fish.
Bengis single-handedly helped to destroy the West Coast rock lobster population during his fishing operations in South Africa over the years. In 2013, Bengis and his co-accused were ordered by the US court to jointly and severally pay “the sum of US$22,466,720 in restitution for the benefit of South Africa”.
Zokwana served as the Minister for Agriculture, Forestry and Fisheries from 2014 to 2019.
In July 2017, the US Southern District Court of New York ordered the forfeiting of US$37,200,838.36 and Bengis was further sentenced to 57 months in prison for failing to comply with the first US$22,466,720 restitution order.
In September 2017, the amount was replaced with an order imposing restitution of US$30,055,787.50, being “the amount Bengis was required to pay the South African government in restitution for unlawfully pillaging our rock lobster resources from our coastline”, said Creecy.
Creecy points out that neither DAFF nor the NPA “was a party to the proceedings in the United States and Jersey”.
In her affidavit, Creecy sets out how in September 2018 – when Xulu, representing DAFF [with the NPA second applicants] in the matter involving Bengis – had approached the High Court on behalf of DAFF and the NPA.
While the NPA had been cited as the “Second Respondent” in that matter, said Creecy, “there is no affidavit, or any indication in the court file that the NPA had authorised the application brought on its behalf”.
The head of the Asset Forfeiture Unit at the time was advocate Nomvula Pinky Mokhatla and there was “nothing in the court file which reflects that the NPA had given any instructions in relation to the application”.
The only indication was that the Notice of Motion was signed by B Xulu and Partners INC of behalf of BOTH the DAFF and the NPA.
“I have been advised,” said Creecy in her founding affidavit, “based on the court roll, that it was in all probability given in chambers.”
This is not the first occasion that Hlophe has run into legal trouble with regards to his personal legal representative and the conflict of interest this presents in particularly high-profile matters heard in the division over which he presides.
The Creecy application presents a further problem now as to who will decide which judge in the division will hear this matter, involving its Judge President, who along with his Deputy Judge President are facing inquiries by the Judicial Services Commission.
In 2017, SCA Judge Visvanathan Ponnan handed down a scathing judgment with regard to Hlophe’s conduct in relation to businessman, Matthews Mulaudzi, in a R48-million fraud matter and whom Xulu represented. Hlophe was the judge who ruled on that matter.
In his judgment, Ponnan not only pointed out that Xulu was Hlophe’s personal attorney, but also that Hlophe had allocated the case to himself while he had not been one of the duty judges.
That Xulu represented Hlophe, said Ponnan, gave rise “to the reasonable apprehension that in the light of the particular nature of that relationship, the Judge President would not bring an impartial mind to bear on the adjudication of a matter brought before him by his attorney”.
Creecy in her founding affidavit sets out how she had been informed during the first BXI review, and before Bengis (the respondents in the matter) had filed answering papers, that Xulu had informed Hlophe that her predecessor, Minister Senzani Zokwana, had appointed Xulu to represent the DAFF.
This too was done “in chambers”.
Xulu had, on that occasion, told Hlophe that “his mandate from the Minister had not been terminated and that he continued to work accordingly”.
This in stark contradiction to information that the DG of DAFF “in his capacity as an accounting officer had expressly terminated any mandate to BXI in August 2018”, said Creecy.
She said that Zokwana, in his capacity as the political head of DAFF, had “lacked the requisite statutory authority to appoint service providers like BXI to represent the DAFF in legal proceedings or even to provide services”.
Creecy said that it was only on 30 January 2020, when Judge Owen Rogers handed down a landmark judgment that Xulu is to repay R20-million in legal fees payed out by DAFF for legal work, that she and Minister of Agriculture, Thoko Didiza, “were informed about the details of the order granted by his Lordship Justice Hlophe on 20 September 2018, the illegality thereof and its implications”.
The department had been entitled to free legal advice from the Office of the State Attorney and there had been no need for the appointment of external legal advisers, Rogers had found.
Rogers’ ruling, as it stands, serves as a grave 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.
In her affidavit, Creecy stated that BXI had issued the application to the court on 17 September 2017 and it appeared that it was served, on the same day, on Abrahams and Goss – the legal firm representing Bengis and his companies.
“Three days later, on 20 September 2018, it appears a draft order was provided to the court and it was made an order of the court… As I have already indicated, I have been advised based on the court file that it was in all probability given in chambers,” said Creecy.
From the court record of the day, it appears the matter was not placed on the roll.
For this reason, said Creecy, she was advised “that it was improperly sought and improperly granted and should be rescinded”.
“This is particularly so, given that the proceeds received would, as a matter of law, have had to be paid into the Criminal Assets Recovery Account. CSRA is a separate account within the National Revenue Fund, into which monies and property are deposited following judicial forfeiture or confiscation order.”
DAFF had no power to commit such funds to “meet the expenditure incurred or to commit who shall be tasked to manage these funds or dictate how such funds are to be spent”.
Yet the order, said Creecy, recorded not only that the costs of implementation of the settlement agreement “would be paid from the proceeds of the settlement but that the costs of ‘any associated present and future agreement’ would be paid to BXI in accordance with the agreement between the firm and DAFF”.
As these funds were paid into the Criminal Assets Recovery Account (CARA), “DAFF had no legal status to determine how such would be spent. I am advised that such funds were as a matter of fact paid into CARA.”
“Moreover it appears that the settlement agreements were self-executing and did not require implementing agents,” noted Creecy.
What is also revealing in Creecy’s affidavit is how the original amount of US$30,055,787.50, which the US courts had determined was owing to South Africa, was whittled down to a settlement of only US$7.5-million.
“It appears from the settlement agreements … that an amount of approximately US$7.5-million had been accepted on behalf of South Africa in settlement of the amount of US$30,055m787.50 which the US courts had determined was owing.”
Approximately US$23.3-million, said Creecy, had been held “in safekeeping” by the Jersey Royal Court.
“Mr Zokwana explained that the reason why settlement negotiations were pursued was as a result of ‘difficulties in pursuing the litigation’, and which appears to have culminated in less than 23% of the total amount ordered by the US Courts, being the subject of the settlement agreements.”
These were the three settlement agreements “in respect of which Mr Zokwana indicates that he seeks to make an order of the court”.
The three agreements were signed by Pearl Investment Trading Limited and First Trust Management and Arnold Bengis, as well as Advocate Mokhatla, on behalf of the NPA, and Mr Zokwana, on behalf of the DAFF.
“At this juncture we have not as yet been fully briefed as to the full implications of these agreements vis-a-vis South Africa’s obligations, whether the signatories at the time had the requisite authority to conclude such agreements on behalf of South Africa and to bind South Africa to such an agreement; and whether, in fact, there is any basis and/or obligation and/or reason to seek the setting aside of these agreements.”
A clearer picture of exactly what went down will no doubt emerge when the respondents in the Creecy application supply their answering affidavits. DM
An accountant named Kushim was the first recorded name in history.
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