• Tue. Nov 29th, 2022

PAJA: State Capture Commission findings and recommendations cannot be reviewed or reversed – Arbitration and Dispute Resolution

ByChad J. Johnson

Oct 4, 2022

In a landmark judgment of the High Court in the case Duncan Ernest Korabie v Judicial Commission of Inquiry into Allegations of State Capture, Corruption and Fraud in the Public Sector, Including the Organs of State, the court held that the findings and recommendations of the State Capture Commission could not be reviewed and reversed under PAJA.

Relevant facts

Under a settlement agreement between the Richtersveld community, the South African government and Alexkor (a state-owned company), land and its mineral rights were returned to the community.

A company called Richtersveld Mining Company (“CMR“) was formed. RMC, in turn, partnered with Alexkor in a pooling and sharing joint venture (“PSJV“) to explore land and mineral rights.

Independent contractors appointed after a competitive bidding process rendered services to PSJV. The bidding process was supposed to be fair, equitable, transparent, competitive and cost effective, as required by Section 217 of the South African Constitution.

Mr. Korabie claims that he was invited on 9 December 2014 to attend a meeting of the tender committee and that he met Rafique Bagus, the chairman of the tender committee, who was also an Alexkor representative on the PSJV board with Dr. Roger Paul, Mervyn Carstens, Zarina Kellerman (Alexkor’s chief legal counsel) and Raygen Phillips (PSJV secretary).

Prior to the start of the meeting, Mr Bagus allegedly called Mr Korabie and Dr Paul aside and informed them that only one bidder, Scarlett Sky Investments 60 (Pty) Limited (“ISS“) provided for local development of diamonds and concomitant significant community investment.

During the meeting, the members of the tender committee received the documentation relating to the tenderers. None of these bidders impressed Mr. Korabie. Only SSI has provided appropriate social investment and direct community benefits. Mr. Korabie was not entirely convinced that SSI should be nominated and raised a number of questions regarding SSI’s bid. The meeting was adjourned with the understanding that due diligence would be conducted on the bidders.

On December 17, 2014, Mr. Korabie received a call from Dr. Paul informing him that Mr. Bagus had recommended the appointment of SSI. Later that same day, Mr. Korabie also received a call from Mr. Bagus, who again recommended that SSI be appointed. Mr. Korabie suggested to Mr. Bagus the possibility of a conditional appointment of SSI, subject to the performance of due diligence.

Mr. Korabie received an invitation to attend a meeting of the tender committee, which was scheduled for January 23, 2015. Mr. Bagus attempted to put the appointment of SSI on the agenda of this meeting , in order to persuade the committee to approve the appointment of SSI as the successful bidder. Mr Korabie claimed he objected to such an appointment before a due diligence process had been completed and a final recommendation had been made to the tender committee. Mr. Korabie’s opinion prevailed and Mr. Bagus was forced to withdraw his proposal to appoint SSI immediately.

During March 2015, Mr. Korabie learned that PSJV had appointed SSI through a round robin resolution passed in February 2015. Mr Korabie disputed accepting this and argued that he had only accepted a conditional appointment from SSI, pending a due diligence investigation.

Mr. Korabie then conducted his own investigation and discovered that SSI was an inactive company until shortly before its bid was submitted. Shortly after SSI’s bid was submitted, Kuben Moodley and Daniel Nathan were appointed directors of SSI.

SSI had no background in the diamond industry and did not hold a diamond license, which was one of the prerequisites for bidding for the services required by PSJV.

According to Mr. Korabie, no money was paid to the Communal Property Association as agreed, nor was there an investigation by Alexkor’s audit and risk committee (as had been promised at the meeting).

On January 18, 2021, Mr. Korabie received a letter from the Commission containing a notice under Rule 3.3. The Commission noted that it had come to its attention that information and evidence relevant to the Commission’s investigation was in the possession and/or under its control of Mr. Korabie. The Commission has urgently requested access to this information.

On March 2, 2021, Mr. Korabie received a call from a Commission investigator. The investigator indicated that he was aware that Mr. Korabie wished to testify before the Commission and the investigator asked if Korabie had received a request for information from the Commission.

This was the last time Mr. Korabie heard from the Commission and he claimed he was later alerted by an acquaintance that his name was mentioned in the Commission’s findings and that a directive had been given that further investigation be opened against him and others in relation to the tender that has been awarded to the SSI.

This led Mr. Korabie to file an urgent request with the WCHC in which he requested:

  • the review and rescission of adverse findings and recommendations made in respect thereof;

  • an order directing the State Capture Commission to issue a correction within ten days of the date of the order.

WCHC findings

The court noted that the State Capture Commission recommendations described earlier also applied to Paul and Bagus, as members of the tender committee. Accordingly, the court concluded that Dr. Paul and Mr. Bagus had a direct and substantial interest in the relief sought by Mr. Korabie and that they could be harmed by the relief sought by Mr. Korabie. The court found that the joining of Mr. Bagus and Dr. Paul to the motion was a matter of necessity and that the failure to join them as parties to the motion constituted non-joining. The court reiterated the legal position that where a party may have a direct and substantial interest in the litigation and has not been joined, the court would not proceed with the case.

The court had to determine whether the recommendations of the State Capture Commission constituted an administrative measure. She recalled that for a decision to constitute an administrative action, which can be challenged under the PAJA, it must have direct legal effect. “Direct” refers to decisions that are final. “External” refers to decisions that do not affect only the decision maker. “Legal” is a reference to the rights affected

The court cited with approval the judgment of the Supreme Court of Appeals in Corpclo 2290 CC t/a U-Care v Registrar of Banks. In this case, the SCA said that a decision to investigate and the investigative process, which precludes a determination of fault, would not affect the appellants’ rights in a way that has a direct and external effect. Therefore, the decision of the Registrar of Banks was not an administrative action. This approach has also been adopted by the Constitutional Court in Viking Pony Africa Pumps (Pty) Limited t/a Tricom Africa v Hydro-Tech Systems (Pty) Limited and another.

The WCHC concluded that the findings of the State Capture Commission did not constitute an administrative act as defined in the PAJA. First, the State Capture Commission recommended an investigation to determine if there had been a breach of fiduciary duty. This decision is not final and cannot be considered as constituting a decision affecting the rights of Mr. Korabie. The State Capture Commission, second, has recommended that law enforcement conduct further investigations, if necessary, to assess whether prosecution for fraud or violations of Section 214 (b) of the Companies Act had taken place. The WCHC considered that this decision was also not final and had no direct external legal effect.

Third, the State Capture Commission has recommended that law enforcement conduct the additional investigations necessary to determine whether there should be a possible prosecution of Mr. Korabie and others for contempt of court. The court held that it was also not a final decision with direct external effect and, therefore, a request to review and set aside the recommendations of the State Capture Commission regarding M Korabie under the PAJA was unsuccessful.

WCHC emphasized that the Commission’s recommendations mentioned above do not amount to decisions to investigate. They were simply a recommendation to investigate. These recommendations may not be accepted and they may not be acted upon. They are therefore neither final nor liable to infringe Mr. Korabie’s rights.

The court also emphasized the doctrine of maturity: a plaintiff should not appear in court until the action or decision complained of is final or ripe for trial. Under this doctrine, there is no point in wasting a court’s time with half-formed decisions whose form may change or for which no decision has actually been made. The maturity doctrine ensures that courts deal with matters that have crystallized and do not have to deal with prospective or hypothetical matters.

Ultimately, due to the doctrine of maturity, the absence of harm suffered by Mr. Korabie, and the checks and balances in place in the form of further investigations and/or legal proceedings, Mr. Korabie was rejected.

This ruling may make it difficult for Minister Mantashe, Mike Mabuyakhulu and other ruling party members who were implicated in the Zondo report to successfully review and reverse the Commission’s findings and recommendations. This may also impact the request of Dr. Surve and the Sekunjalo entities to review and reverse some of the findings and recommendations of the Mpati Commission.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.