An investigation of matters relating to the emphyteutical agreement between the Goverment and the GWU

On 16 March 2015, the National Audit Office was requested to investigate whether: the provisions of the emphyteutical contract between Government and the General Workers Union were breached as a result of the lease of part of the Union’s premises to ARMS; the Government Property Department was aware and had approved this lease; other Government officials were involved; other lease agreements were in place and determine whether these were in accordance with the Government-GWU contract.

In 1957, the Government granted the GWU the perpetual emphyteusis of a site on which to build its headquarters for trade union activities and its Union Press. In 1997, the contract with Government was modified permitting the Union to transfer, assign or let part of its building to any company in which it had more than 51 per cent shareholding. In May 2015, the GWU redeemed the yearly ground rent of €801 against payment of €16,026, rendering the property freehold. Prior to the redemption, in April 2014, the GWU leased part of its premises to ARMS against the annual payment of €61,950.

The NAO established that between April 2014 and May 2015, the lease between the GWU and ARMS was in breach of the Union’s contract with Government, as the GWU did not have any shareholding in ARMS. The redemption of ground rent rendered the breach less straightforward due to the opposing views expressed by the GWU and the GPD. The Union maintained that the redemption rendered obsolete all conditions stemming from the contract with Government, while GPD argued otherwise. The NAO aligns with GPD’s views and recommends that the Department actively considers instituting legal action against the GWU for the breaches prior to redemption. The NAO also urges the GPD to establish, through legal action, whether the conditions of the contract survive ground rent redemption, and in the affirmative, institute judicial action against the Union or any other type of action deemed suitable.

In the NAO’s opinion, while the GPD never approved the lease, it took limited action to avert and/or remedy the situation. The GPD maintained that it was unaware of the GWU’s arrangement with ARMS until the press exposed this matter even though correspondence on file indicated that the Union had previously approached the GPD with regard to the possible lease of parts of its premises to Government entities. According to a former GPD senior official, the Union claimed that the ‘pertinent authorities’ were aware of this, yet the NAO was unable to establish a complete understanding of this matter as the GPD provided limited details while the Union failed to cooperate. Regardless, the GPD prepared a memorandum, intended for Parliamentary Secretary OPM, outlining that the matter could be resolved through a parliamentary resolution, yet failed to take the necessary action for its endorsement. Nevertheless, the Union entered into a lease contract with ARMS without the required authorisation. The only action taken by the GPD, following press coverage on the matter, entailed enquiries addressed to the Union about the ARMS lease. This was deemed insufficient by the NAO.

The NAO established that portions of the GWU premises were, aside from ARMS, being utilised as a tourist attraction, a restaurant, a travel agency and an insurance agency. The use of parts of the GWU premises by Malta 5D and Untours Insurance Agents was regular in view of the Union’s shareholding. However, the occupation by Sciacca Grill and Vjaggi Untours was not as the Union was not the majority shareholder. While the NAO is certain of the irregularity of Sciacca Grill and Vjaggi Untours prior to the redemption of ground rent in May 2015, the situation is less clear following this development. This Office is of the opinion that the establishment of regularity or otherwise should be determined by the appropriate judicial forum.