Updated | Former FMS chairman requested meeting with Gonzi 'which never took place'

A controversial waiver exempting Skanska from any claims that might arise had already been included in a draft agreement dating back to December 2008 • Lawrence Gonzi says meeting never took place

Construction on the hospital began in October 1995
Construction on the hospital began in October 1995

Former chairman of the Foundation for Medical Services, Paul Camilleri, has revealed a thread of emails confirming his intentions of keeping the Finance Ministry and the Office of the Prime Minister in the loop over the Project Closure Agreement.

More specifically, Camilleri had requested a meeting in January 2009 with former prime minister Lawrence Gonzi to discuss the contract closure negotiations with Swedish contractors Skanska, responsible of designing and constructing the €600 million hospital.

Camilleri, who is currently recovering from a serious injury, communicated with the board of inquiry after Gonzi told MaltaToday that he would have “never authorised or countenanced such a blanket waiver”. Although the inquiry had already concluded its report, Camilleri felt the need to forward the correspondence to the board.

In the email to Gonzi Camilleri wrote: “Presently I am drafting a memorandum outlining the salient points; the idea being to first obtain FMS board approval, subsequently Decision Group approval (essentially Minister Dalli’s approval) and then Cabinet’s approval (and possibly in parallel), Director of Contract’s approval.”

On the same day, Gonzi replied that he would be asking his secretary to set up the meeting. The meeting however never took place.

In a press statement, Gonzi confirmed receiving an email from Camilleri but said that the meeting was not held “due to other commitments during that month, including an official visit to Germany”.

He reiterated that the Project Closure Agreement was never brought to the attention of the Cabinet and went on to add that it was “untrue” that the waiver clauses hindered the government in any way to seek redress for any bad workmanship or fraudulent activity.

Gonzi, who had been asked by Camilleri to meet over the settlement agreement, added that it was strange that the government declared that its rights had been hindered when the legal advice given to FMS stated otherwise.

Camilleri, through his lawyer George Hyzler, sent the thread of emails to judge Philip Sciberras, chair of an inquiry into the use of weak concrete at Mater Dei. The correspondence – dating between December 2008 and April 2009 – was sent after the board of inquiry had already concluded its report. It was nonetheless presented to Health Minister Konrad Mizzi.

The infamous Project Closure Agreement was drafted to waive all contestations and claims which were raised by the Foundation for Medical Services and Skanska Malta Joint Venture (SMJV).

The PCA was found in a safe at the Foundation for Medical Services with a number of other sensitive documents, isolated from the rest of the documents pertaining to the Mater Dei Hospital.

What raises questions about clause 9 – the blanket waiver – is that the second clause, titled the Reciprocal Waiver of Claims, clearly stipulated that both sides were waiving the contestations and claims that were being raised.

Correspondence over the Project Closure Agreement

Extracts from 25 emails show how clause 9 already existed in a draft settlement agreement, though it was elaborated upon in the final settlement agreement, which became the PCA.

A noticeable difference between the original and final version of clause 9 is that what started off as “[…]the parties will not be liable whatsoever for all and any further and future concerns, claims or disputes […]” became “[…]the parties will not be liable whatsoever for all and any further, past, present or future concerns, claims or disputes […]”.

Despite being nominated as the “senior executive” for FMS, Camilleri was not legally empowered to commit FMS to any agreement without the requisite authorisation and the approval of the FMS board was necessary.

On 26 December 2008, Camilleri forwarded the terms of settlement to Alan Caruana, then head of secretariat at the Finance Ministry.

Communication continues in the following days between Camilleri and Camilleri Preziosi who had been engaged by FMS to legally assist them.

On 29 January 2009, FMS were presented with yet another updated version of the agreement. On 4 February 2009, Camilleri received an email from Skanska rep Erik-Lars Alm with SMJV’s own amendments.

During the same day, SMJV raised questions over reference to the Maltese law in clauses 2 and 5. The FMS lawyers explained that they were “trying to achieve closure without waiving any rights that FMS may have at law (the 15-year contractor liability and liability for hidden or latent defects) – this on the basis of your discussions with SMJV.”

Discussions on the PCA clauses continued in the following days up until 19 February, the day of the signing. In one particular email, Alm explains that Skanska didn’t want to get into a situation where its obligation where in excess of the contractual, unless it is mandatory obligations according to Maltese Law.

The lawyers advised Camilleri that they wanted FMS to retain all its rights in terms of Maltese law, whereas SMJV wanted to avoid this. In a later email, the legal advisors inform Camilleri that they had opted to remove the contentious wording from clauses 2.1 and 2.2 but expressed their opinion that FMS’s concerns were still protected by the wording in clause 51.1 “which seems to have been accepted (perhaps inadvertently!) by Lars”.

On 19 February 2009, the agreement was signed. A day later, Camilleri wrote to then FMS CEO Brian St John suggesting a “preparation of the justification document for this Project Closure Agreement to  be submitted to Minister Dalli for possible onward transmittal to the Cabinet”.

On 5 April 2009, Camilleri wrote to Dalli briefing him over the Project Closure Agreement that had been signed six weeks before, “despite the fact that Brain advised me that he had briefly informed you about it”.

The Sciberras inquiry

In its conclusions, the Sciberras inquiry found that the responsibility and contractual liability for the failures identified in the present day technical reports ultimately lies with Skanska. “The documentation seen by board indicates that FMS in the Project Closure Agreement and actions of the client may have hindered its right to vaunt any further claims against the contractor which could limit FMS and government in pursuing the necessary redress,” the board of inquiry concluded. In 2011, Skanska invoked the waiver after FMS tries to withhold a €200,000 payment to cover costs to repair a faulty reservoir at Mater Dei.

Appearing before the inquiry, Paul Camilleri said that failure to reach an agreement with Skanska over the claims would have led to lengthy arbitration proceedings involving millions. Camilleri said that he was constantly under advisement and also sought re-assurances that all works were done in accordance with the standards and specifications established in the contract of works.

Pressed by the board, Camilleri “made the startling declaration that negotiations with Skanska JV were being held in bad faith from their end, and that there could also have been fraudulent or malicious intent.”

“There could have been naivety from our end,” Camilleri told the board, adding that no one had ever drawn the attention as to the consequences of such a blanket waiver.

Camilleri added that St John had been requested to make a full presentation to the board and did not raise any concerns regarding the clause in question.