The Court of Appeal (Co) has used the Bakang Seretse matter to deliver a strong judicial statements on fiduciary duties in government-linked contracts. The Court warned that public funds cannot be managed by officials or advisers who stand to benefit from the very transactions they oversee.
It establishes a principle that private consultants entrusted with public assets can owe the state duties of loyalty, honesty and full disclosure similar to those imposed on trustees and company directors.
In a unanimous judgment this week, Justice of Appeal Edwin Cameron described the relationship between government and entities managing the National Petroleum Fund (NPF) as one founded on trust, concluding that Seretse occupied a fiduciary position because of his role in companies entrusted with the management of the fund.
Instead, the judges found that government’s allegations that Seretse failed to disclose his interests in both Khulaco and Kgori Capital while participating in transactions involving the fund, were never meaningfully answered. The court distinguished between disclosure and mere visibility.
The court found that the consultancy agreement governing the National Petroleum Fund required those involved to act as government’s “faithful advisor” and avoid activities that conflicted with their responsibilities. The judges said these obligations extended beyond the contracting company itself to its representatives and key actors.
“The key feature of the fiduciary obligations Mr Seretse pledged to fulfil was that he would be Government’s faithful advisor in all professional matters,” the judgment states.
The court said that when funds were directed from the National Petroleum Fund to Khulaco, a company in which Seretse had an interest, he was under a duty to make a full and explicit disclosure of that interest.
Instead, the judges found that government’s allegations that Seretse failed to disclose his interests in both Khulaco and Kgori Capital while participating in transactions involving the fund, were never meaningfully answered. The court distinguished between disclosure and mere visibility. “It may be observed that anyone reading Mr Seretse’s … letter would have been in a position to infer that he had a sticky finger in the deal,” Cameron wrote. That fiduciary law required more than hints or inferences. Full disclosure, the court said, meant an “unequivocal, candid” statement of the conflict of interest.
The Court of Appeal also rejected the High Court’s earlier refusal to grant summary judgment, finding that Seretse and Khulaco failed to provide a substantive defence to government’s allegations. Instead of answering claims relating to conflicts of interest, disclosure and the flow of funds, the court said the respondents merely argued that the issues should proceed to trial.
The judges were particularly critical of unanswered questions surrounding the transaction. These included the absence of a written contract governing a P250 million arrangement and the apparent shift in documentation from a petroleum storage project to the acquisition of security and surveillance equipment.
The court said the summary judgment proceedings provided a “golden opportunity” for explanations that never came. “In their absence, a warrantable surmise is that a monstrous heist was in the making, one at the expense of the Government, and the taxpayers and citizens it represents,” the judgment said. Although the court stopped short of making findings of fraud and declined to award punitive costs, it said a “whiff of fraud” lingered over the matter.
