Judge annuls hospitals deal, slams Vitals, Steward and government in damning ruling

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Mr. Justice Francesco Depasquale did not mince his words in his scathing judgement on the Government’s privatisation deal with Vitals Global Healthcare and subsequently Steward Healthcare.

The deal was originally struck in 2015, when government granted a concession for the running of three hospitals to Vitals Global Healthcare (VGH).  The hospitals’ concession had been negotiated by Konrad Mizzi, who was health minister at the time.

Under that agreement, Vitals was handed St Luke’s Hospital, Karin Grech Hospital and the Gozo General Hospital. The deal with VGH, a relatively known consortium at the time, had caused many a raised eyebrow. Less than two years after being granted the concession, Vitals sold it to Steward Healthcare together with €55 million in debts accrued by VGH, for the nominal price of €1.

READ ALSO: From Vitals, to where... timeline of a privatisation gone wrong

In 2018 Adrian Delia, then leader of the Opposition, had filed the case against the Prime Minister, Vitals Global Healthcare, the Attorney General, the CEO of Malta Industrial Parks Limited and the chairman of the Board of Governors of the Lands Authority in a bid to force the cancellation of the 99-year emphyteutical concession agreement. The cancellation was requested on the basis that the concessionaires, both Vitals Global Healthcare and Steward Healthcare, had not fulfilled their contractual obligations.

And this basis was upheld - with great vehemence it must be said - by the judge in his 138-page judgement.

The judge methodically shot down every one of the defence’s arguments: that Delia had no juridical interest in the case, that he wasn't a party to the contract, that the secret side contracts of service were distinct from the concession contract, and that there had been no breach of the conditions.

“The glaring failure of the Steward companies to try to justify the their position and defend their insistence that there was no breach of the contractual obligations on their part, leads the Court to seriously doubt Steward’s good faith [and intention] to honour the agreement and the obligations imposed on it and freely assumed by it at the moment that it acquired the shares of Vitals on 16 February 2018, as well as raising serious doubts about the honesty and good faith of the same Steward when they entered into the 27 August 2019 the agreement where the Government bound itself to to pay it a penalty of one hundred million Euros in the event that the Court, as composed, declared the contracts that had been awarded to Vitals, and which it had failed than to honour, as void.”

“Such a doubt, this Court observes, should also have been raised by everyone who was involved in order to protect the rights of the Government of Malta and which was originally included in the agreement, and this also includes Dr. Konrad Mizzi, both when he was Minister of Energy, Health and Projects at the time that the original agreement was signed, and even more so when, even though he was no longer Minister of Health, he signed various other agreements that amended the original contract, and knowingly revoked and reduced rights which the Government had -changes which were made only for the benefit of Vitals as well as Steward, and certainly not to the benefit of the Government and the citizen, who was supposed to ultimately reap the benefits from the projects entrusted to Steward and which they had failed to see to completion.”

Vitals, and Bluestone as shareholder, had failed in all its obligations and fulfilled none of their obligations, said the judge, describing the promise of medical tourism as a ruse they had used to convince the government to grant them the emphyteutical concession over the hospitals. There had been no attempt by Vitals to implement the agreement, he noted.

With regards Steward Healthcare, the court said it had no doubt that, at the time, Steward was "well aware" of the obligations undertaken by VGH, and which were not honoured. Instead, noted the court, Steward had embarked on an interminable series of negotiations with the government, ending up with four loans from BOV.

Steward had strong-armed the government into changing the agreement in such a way as to make the government in default if the contract was rescinded, said the judge, expressing great concern at how individuals responsible for governmental authorities “could ever knowingly accept to undertake such onerous obligations on behalf of the Government.” The court said it “wanted to believe that they had assumed this obligation as a result of schemes, if not pressure, to keep the original project viable.”

“But certainly [the court] fully believes that this took place, in view of the fraudulent and, possibly, criminal, behaviour by Steward…as well as Vitals…and its investors.”

The principle fraus omnia corrumpit (fraud corrupts everything it touches) meant that Delia did indeed have the right to demand the rescission of the contract on behalf of the public, ruled the judge.

Rescinding the contract and agreements, the judge said he had no doubt that Steward had fraudulently tried to “turn in its favour, a situation resulting from the fraudulent actions of its predecessors with the aim of unjustifiably enriching itself on the backs of the Government of Malta and the citizens of Malta and Gozo.”

18:31 We're officially closing this liveblog for today. Thank you for following today's events with us. We will continue following this story in the coming days. Meanwhile, take a look at the rest of the stories we have up on our home page, including reactions to the sentence and a look at the judge's choice of words in describing the deal. Have a great evening. Nicole Meilak

18:15 We now also have a reaction from Steward Health Care Malta. The company strongly objected to the judgement, even saying that they believe there are significant flaws in the reasoning and award of the judgement. "We believe that the judgement, which goes far beyond the court's remit, presents major concerns for the rule of law in Malta and has serious implications for the future of foreign investment in the country." Nicole Meilak

16:58 During the press conference, PN leader Bernard Grech pointed out that Abela was the lawyer and legal consultant of Joseph Muscat when the contracts were signed. He also pointed to Health Minister Chris Fearne, who had described Steward as the “real deal”.

Adrian Delia slammed the Attorney General for saying he had no right to start this case, and noted how various entities tried to brush off any responsibility for this deal. Nicole Meilak

16:01 Meanwhile, the Nationalist Party is giving a press conference at Dar Centrali. Opposition leader Bernard Grech is giving the conference with Adrian Delia. Nicole Meilak

15:19 The reactions haven’t stopped coming in. The Daphne Caruana Galizia Foundation said that Friday’s ruling vindicates the slain journalist’s 2015 reporting on the deal. “It is hoped that the decision will lead to further action against those responsible for the fraudulent deal and for the murder of the journalist who exposed it.” Nicole Meilak

14:35 ADPD – The Green Party has also reacted to the court sentence, calling for an urgent public inquiry on all contracts awarded by the Maltese government as led by Joseph Muscat. “We also request the Commissioner of Police to investigate Joseph Muscat, Konrad Mizzi and Chris Cardona for fraud and corruption. Nicole Meilak

14:16 Former prime minister Joseph Muscat has commented on the sentence. He insists on two points: that the concession was subject to legal scrutiny and continuous discussions in Cabinet, and that he is open to any other investigations on this concession. “I want all the facts to be made public. I have always acted in the interest of the people, and those of good will know this.” Nicole Meilak

14:10 Nationalist MEP David Casa has also commented on the sentence. He said the court confirmed that the privatisation deal was riddled in fraud and corruption. “This isn’t an opinion. These are crimes. And yet Joseph Muscat and his accomplices run scot-free”. Nicole Meilak

14:05 Former Nationalist MP Jason Azzopardi congratulated Delia and said that the court sentence confirms what the Opposition had always said on the deal – that there was criminal conspiracy and criminal association committed by Konrad Mizzi, Joseph Muscat and Chris Cardona. Nicole Meilak

14:04 Social media is flooded with congratulations for Adrian Delia. European Parliament President Roberta Metsola dubbed the sentence a win for the Maltese and Gozitan people. “The decision shows that the contracts were not in the interest of health workers and neither patients.” Nicole Meilak

14:01 Nationalist Party leader Bernard Grech thanked Adrian Delia for opening the case “If it wasn’t for the Opposition, the public would still be robbed of hundreds of millions of moneys.”

He added that the Opposition will make sure that government follows the court’s ruling and ensure that those who abused of their position face justice.

”Whoever does not fight corruption, is himself corrupt.” Nicole Meilak

13:52 Independent candidate Arnold Cassola has meanwhile called for the immediate arraignment of former prime minister Joseph Muscat and former minister Konrad Mizzi. He added that an international arrest warrant should be issued against Ram Tumuluri and Armin Ernst. Nicole Meilak

13:46 Meanwhile, the Government of Malta has issued a statement on the ruling.

“The Government is analyzing this sentence, and in any eventuality it will ensure that it protects the national interest, the jobs of all workers, and all the services that patients receive from hospitals, which are the fruits of the concession about which the deferred judgment was given.” Nicole Meilak

13:43 Delia is joined by a couple of other PN MPs, including Alex Borg, Mario de Marco, Eve Borg Bonello. The current Opposition leader, Bernard Grech, is nowhere to be seen in the area. Nicole Meilak

13:38 “Malta won. Justice won. The truth came out. The fight against corruption never stops and you must never give up,” Delia says as he thanks everyone who supported him throughout the court saga. Nicole Meilak

13:37 Meanwhile, Delia is about to deliver a statement outside the courthouse. We will be recording this live on our Facebook page. Nicole Meilak

13:36 Anti-corruption NGO Repubblika insists that Prime Minister Robert Abela must ensure that whoever was responsible for this abuse is charged in court and brought to answer for their actions. Nicole Meilak

13:33 Reactions are already coming in on the sentence, and a crowd is ready outside the courthouse to congratulate Adrian Delia. Nicole Meilak

13:25 This is a big win for Delia, who is being hugged and kissed as he leaves the courtroom. Nicole Meilak

13:25 It’s official. The court has nullified all contracts awarded to Vitals and Steward, and ordered all property to be returned to government. Nicole Meilak

13:24 The judge orders the government notary to publish this within three months. All costs are to be borne by Steward Malta Ltd. Nicole Meilak

13:23 The court therefore, upholds the plaintiff's request. The court rescinds and annuls all three agreements and all their amendments and orders the return of all the properties in question. Nicole Meilak

13:22 Judge says the government and the authorities "had an obligation to rescind the contract in view of the machinations by the other party". Nicole Meilak

13:22 This was the result of fraud by Steward to change an agreement entered into through fraud by its predecessor, to end up enriching itself on the back of the Maltese taxpayer. The judge describes Steward's machinations as "solely blackmail and unjustified enrichment".

"Machinations which were solely intended to corrupt the selection... at the expense of the Government of Malta." Nicole Meilak

13:20 The judge says Steward had forced the government to change the agreement to make the government in default if the contract failed. The judge questioned how the government allowed itself to get into this position, suggesting that Steward's actions were "possibly criminal". Nicole Meilak

13:15 Now we move on to Steward Healthcare. The court said it had no doubt that, at the time, Steward was "well aware" of the obligations of VGH, which were not honoured. Stewards embarked on an interminable series of negotiations with the government, ending up with four loans from BOV. Nicole Meilak

13:14 The judge states: Vitals, with Bluestone as shareholder, had failed in all its obligations and fulfilled none of their obligations. Medical tourism was a mise-en-scene used to convince the government to grant the emphyteutical concession over the lands. There had been no attempt by Vitals to implement the agreement. Nicole Meilak

13:12 He continues that, between the memorandum and the granting of the concession, Vitals should have disclosed this conflict, which would have rendered it ineligible. "The fact that Vitals kept the MoU hidden was evidence of its fraudulent intent," said the judge. Nicole Meilak

13:10 The judge is convinced that this was part of a complex and concerted effort to deceive and strong-arm the authorities into accepting the proposal. Nicole Meilak

13:10 In the RFP there is absolutely no request for due diligence on the proposers, which the court says indicates that there was no intention to actually evaluate the proposals. Nicole Meilak

13:08 Depasquale goes on to slam government’s “amateurish” checks before signing the contract. Nicole Meilak

13:08 He states: Vitals had abused its position and took advantage of the government, which was already politically bound to deliver the hospitals it promised before the elections. Nicole Meilak

13:07 He notes how $600,000 were to be provided as “pre-project costs”, meaning the bidders had already made a substantial investment. Mizzi had rejected this claim. The judge continues that the in-depth studies must have been made before the RFP was issued. He adds that he had no doubt that VGH had bound the government to give them the full details of their requirements for the construction of the hospitals. Nicole Meilak

13:05 Adrian Said, Executive Chair of Projects Malta had insisted in his testimony that when he started in 2014, he had found the request for proposals (RFP) "ready and prepared", reads the judge. Everyone involved in the process has three weeks to understand the import of their bids. Nicole Meilak

13:03 The judge is making lots of references to agreements and timelines, and has made some heavy remarks against the concession and Steward. Nicole Meilak

13:00 Mizzi had said that the government had rejected the proposal, said the judge, adding however that it emerged that Mizzi had indirectly advised that Malta Enterprise had identified a place in Gozo "coincidentally the same size as that of the hospital". Nicole Meilak

12:58 Pivot Holdings was set up just the day before this memorandum had been entered into, notes the judge. The agreement was that no other bids would be accepted. At the time that the government had promised to carry out all due diligence on the parties, the memorandum of understanding had already been entered into says the judge. No public announcement was made at the time. Nicole Meilak

12:57 Regarding the fraud before the contract: the court had a detailed timeline of the facts leading to the contract. "It emerges that well before the government published its intention to privatise the three state hospitals, the investors who subsequently became Vitals entered into a memorandum of understanding with the government." Nicole Meilak

12:57 The court observes that the element of fraud and bad faith on the part of Vitals and Steward could have arisen at 3 stages - before the contract was signed, during the contract and when Steward stepped in Vital's shoes. Nicole Meilak

12:52 The court's doubts and concerns lead it to consider the argument of 'fraus omnia corrumpit’, says the judge. While the phrase ‘fraus omnia corrumpit’ had only been used in the latter stage of the argumentation, it is clear that it is the backbone of the plaintiff's entire argument. Nicole Meilak

12:51 Depasquale expressed "serious doubts as to Steward’s good faith when they acquired the shares of Vitals", and when it obliged the government to pay a penalty of €100 million if the contract is nullified in court. Nicole Meilak

12:49 He notes how the project for ‘tourism beds’ at St Luke’s Hospital was supposed to have been completed by December 2018. However, the judge says it had “never been considered, much less started”. As Steward had not provided evidence of works, the court understands that this milestone will never be completed. Nicole Meilak

12:48 There was no evidence provided to show that any of the new bedspaces promised under the agreement had actually been provided. "While it appears that some works did take place in Gozo hospital, this court has no evidence to show that they have been completed." Nicole Meilak

12:46 There are giggles in the courtroom as the judge notes that the only documented works were those of a single bathroom. The judge said he was perplexed by the dearth of evidence submitted by the defendants. Nicole Meilak

12:45 In view of all this, the court said it expected Steward to submit unquestionable evidence that it had fulfilled its obligations. Yet the only evidence Steward exhibited was a one page affidavit from an engineer, together with 56 pages of photographs. Nicole Meilak

12:44 He notes that Mizzi had opted not to testify after his resignation. The date of the resignation was on the same date that Chris Fearne was supposed to debate this with him in parliament. Fearne said that the completion milestones in the original contract were not reached, not under Vitals and not under Steward, according to the judge. Nicole Meilak

12:43 He says there was no logical explanation for Mizzi’s four-and-a-half-year concession to Vitals allowing them to finish their milestones by 2022 instead of 2018. Nicole Meilak

12:42 The judge notes how government granted a further 18 months from the lapse of 36 months. This means they were given until the end of 2022 to do what they were supposed to do, says the court. But even then, they did not reach their milestones. Indeed, he notes how some of the projects have not been completed to date. Nicole Meilak

12:41 "They were rendered ineffective, if not a complete farce," says the judge on the milestones, as the secret side-agreements showed. “The government of Malta, instead of defending the interests of the Maltese people,... incredibly accepted a change to the agreement," said the judge. Nicole Meilak

12:37 As Depasquale reads out the concession milestones that had to be fulfilled, he remarks: “It emerges that none of these completion milestones were observed or achieved by Vitals, today Steward.” Nicole Meilak

12:36 The contract states that the grantee was to develop the sites in accordance with the terms thereof. Therefore, if a breach of these agreements is found, it is also a breach of the concession, says the judge. Nicole Meilak

12:35 The government's intention was solely that Vitals and Steward could implement their obligations under those contracts. This also emerges from the concession, points out the judge, quoting the deliverables laid out on the agreement, such as the refurbishment of St Luke’s Hospital and Karin Grech Hospital. Nicole Meilak

12:34 The concession is part of several granted to VGH, and later Steward Healthcare. The concession could only have been viable thanks to the three contracts entered into before the concession was granted. The result of this is that Vitals and later Steward were granted almost full ownership of the hospitals, says the court. Nicole Meilak

12:33 We come to the final defence: that there was no breach of the concession. Nicole Meilak

12:32 Delia had argued that the Attorney General had been obliged to request the rescission of the contract and had failed to do so. Therefore, the Attorney General was also a legitimate defendant. Nicole Meilak

12:32 With regards to INDIS and the Lands Authority, the judge said there is no doubt that they should be parties to the case. With regards to the Prime Minister, says the court, Konrad Mizzi was not appearing in his capacity as minister but on behalf of the Government of Malta, as he had testified several times. Therefore, the Prime Minister has correctly been made a defendant. Nicole Meilak

12:31 The judge noted how the top brass in some of the parties to this case had tried to distance themselves from the contract, despite their representatives appearing as signatories on the contract. Nicole Meilak

12:28 Moving on to the fourth defence, that of lack of juridical interest, the court observes that the law provides for the possibility of a person who is not a party to the contract to challenge the contract. The law allows an MP to request rescission of a contract involving government, and therefore public, property. Nicole Meilak

12:26 The duty of the Leader of the Opposition is to stick up for the rights of the electorate. The breach of contract can give rise to request of rescission of contract at any time, not just when contract is signed. Delia had a right and a duty to file this action, concludes the court, dismissing this defence. Nicole Meilak

12:24 Nowhere is there evidence of the government's express consent to this transfer, says the judge. More so, nowhere in the Laws of Malta is this action subject to being time-barred, meaning that it could be challenged at any time. The judge says that the Leader of the Opposition has the right to request the rescission of the contract, “something which the other parties are all saying he doesn’t have”. Nicole Meilak

12:22 It was argued that, as the completion date had never been reached due to shortcomings by Vitals, the transfer of the concession to Stewards is null. The court is going through the transfer from Vitals to Steward, noting that this had happened less than three years from the initial contract. Nicole Meilak

12:20 The principle that Fraus Omnia Corrumpit (fraud corrupts everything) means that he had the right to demand the rescission of the contract on behalf of the public, says the judge. Nicole Meilak

12:19 The third defence was that Delia lacked the juridical interest to file the case. They insisted that he had based his case on a breach of contract which happened after the transfer, implying that it had already been concluded and therefore he had no right to challenge it as an MP. Nicole Meilak

12:17 The second defence is rejected as the contracts are a vital part of the concession. Nicole Meilak

12:16 The emphyteutical concession was a crucial element to all of the agreements, says the judge. It was vital to the whole project as intended by the government. Therefore, the related instruments must be taken as part of the emphyteutical concession, as it was given with those agreements as a prerequisites. The court disagrees with the way the Prime Minister and State Advocate had interpreted the issue. Nicole Meilak

12:14 The second defence is that the contract is distinct from an emphytheutical concession. The judge says that it is clear that the applicant is contending that there were breaches in the related instruments which are to be taken as breaches of the emphyteutical concession, meaning that both were to be taken together. The court notes that there appears to have been three related instruments. "It emerges that all three of these agreements were changed after they were signed." Nicole Meilak

12:12 The first defence is that the application was lacking in some required formality. The court however, ruled that "formalism should not be used in an ‘asphyxiatory’ manner". This defence has been rejected. Nicole Meilak

12:11 A summary of the defence’s arguments: Delia had no juridical interest in the case, and he wasn't a party to the contract. Moreover, the contracts of service were distinct from the concession contract and that there had been no breach of the conditions. The court will tackle these defences one by one. Nicole Meilak

12:11 At the time Delia was Leader of the Opposition and is currently still an MP. Although not expressly said in the application, but emerging from the submissions, Delia filed the case in his capacity as an MP to have the contract rescinded, says the judge. Nicole Meilak

12:08 He notes that 55 witnesses were heard over 44 sittings, leading to a 3,000-page case file. The summary of the evidence alone is 50 pages long. Nicole Meilak

12:08 "It emerges that the contract of temporary emphyteusis between Parks Ltd and Commissioner of Lands on one side and VGH on the other, who were granted a number of sites in Malta," he reads. Nicole Meilak

12:05 The judgment is 140 pages long, announces the judge. He added that he will read out some of the passages. Nicole Meilak

12:04 The judge has entered the courtroom. Nicole Meilak

12:00 Lawyer and Nationalist MP Mario Demarco is also in the courtroom, which is now packed with people – all seating space has been taken up. Nicole Meilak

11:58 Lawyer John Bonello is next to enter. He is representing INDIS. He is seen having a quiet word with the State Advocate. Nicole Meilak

11:57 Inside, State Advocate Christopher Soler has entered the courtroom. The State Advocate represents the government in court. Delia has also just walked into the courtroom. Nicole Meilak

11:53 Our court report Matthew Agius tells us that journalists have just been allowed into the courtroom. The sitting is scheduled for noon. Meanwhile, our journalist Marianna Calleja has just informed us that Adrian Delia has walked into the courthouse. There was a small crowd of supporters outside applauding Delia’s entrance. He was joined by fellow Nationalist MP Alex Borg. Nicole Meilak

11:53 So what could we expect today?

Mr Justice Francesco Depasquale is going to decide on Delia’s request to have the €60 million deal rescinded and nullified. A ruling that rescinds the deal could cause political shockwaves with serious ramifications for the Abela administration, as it comes to terms with one of the most controversial projects of the Muscat era. Nicole Meilak

11:42 But what’s this case about?

This court case was filed in 2018 by Adrian Delia, then leader of the Opposition, in a bid to force the cancellation of the 99-year emphyteutical concession agreement on the basis that the concessionaires, both Vitals Global Healthcare and Steward Healthcare, had not fulfilled their contractual obligations. Nicole Meilak

11:40 The public hospitals’ concession had been negotiated by Konrad Mizzi, who was health minister at the time. The deal raised eyebrows as VGH was a relatively known consortium at the time. Later on, the concession was sold to Steward Healthcare together with €55 million in debts accrued by VGH, for a nominal price of €1. It was sold less than two years after the concession was granted to VGH. Nicole Meilak

11:35 The Steward deal, widely known as the ‘Vitals case’, has been a long ride. The deal was struck in 2015, when government handed a concession for the running of three hospitals to Vitals Global Healthcare (VGH). It was handed St Luke’s Hospital, Karin Grech Hospital, and Gozo General Hospital. Nicole Meilak

11:29 Good morning! We’re going to be reporting live this afternoon as the court decides on the validity of the €60 million privatisation deal that saw three hospitals sold off to foreign investors. Nicole Meilak