Property magnate Nic Georgiou will soon face a class action suit of more than R3 billion from the Highveld Syndication Action Group (HSAG) on behalf of thousands of investors in the former Highveld Syndication (HS) schemes.
The Pretoria High Court finally granted the HSAG certification for a class action this week after filing the first application more than five years ago.
The HSAG can now institute a class action to reclaim more than R3 billion from several respondents, including Georgiou, his trust and Zephan. (See the note below the article)
The peculiar case of the Picvest billions (Part 1) (Background)
The peculiar case of the Picvest billions (Part 2) (Background)
The peculiar case of the Picvest billions (Part 3) (Overvaluation of properties)
The peculiar case of the Picvest billions (Part 4) (Property transactions prior to HS companies being put into business rescue)
The peculiar case of the Picvest billions (Part 5) (Disposal of properties contradicts the intent of the business rescue plan)
The peculiar case of the Picvest billions (Part 6) (The sale of 31 ‘Orthotouch Properties’ to Accelerate)
Class action limited to HS 21 and HS 22 investors
The certification only relates to investors in the HS 21 and HS 22 schemes as their original investment agreements included specific buyback agreements. In terms of these agreements, Georgiou committed to repurchase the investors’ shares in the respective HS companies in 2014.
The certification judgment cited a recent ruling by the Supreme Court of Appeal (SCA) which confirmed that the buyback agreements were not affected by the decision to put the HS companies into business rescue or the adoption of the Section 155 Scheme of Arrangement in 2014. This ruling came after an individual investor sued Georgiou. The investor was represented by Advocate Louis Bolt.
All fully paid-up HSAG members who invested in HS 21 or HS 22 automatically form part of the class action and will not have to pay any additional fees.
Investors who are not HSAG members will have to register with the HSAG and pay a once-off registration fee. Investors who invested less than R100 000 need to pay R4 500, while the those who invested more than R100 000 need to pay R6 500.
The judgment sanctioned these registration amounts.
The investors have until early March to register.
The HSAG is already in the process of building a website to facilitate electronic registration. It should go live at the end of January.
Johan Stander, an executive of the HSAG, said the HSAG is pleased with the certification. “We have a good case. We can now put our case to the court and prove thousands of investors who were fleeced. We are also pleased that the court acknowledged the good work the HSAG’s legal team has done and that their fees were fair. Hopefully, this judgment will also bring an end to the unfounded allegations and lies regarding the HSAG and our legal representative Jacques Theron of Theron & Partners.”
Georgiou did not respond to request for comment on the judgment.
HS 15 to HS 20
While the class action is only aimed at investors in the HS 21 and HS 22 schemes, Stander said the notices of claims are being served on the respondents for HS 15 to HS 22. Notices of claims related to HS 21 and HS 22 were also included in these notices.
Criticism of Theron & Partners
The certification process was delayed by five years as the HSAG and Georgiou, or entities related to him were involved in 23 legal brawls which caused significant delays.
A common theme during the brawls, as well as through other means, was aggressive personal attacks on various individuals related to the HSAG, and especially the HSAG legal representative Jacques Theron of Theron & Partners.
The judgment addressed these attacks in detail and confirmed that the firm acted in the best interest of investors. “It stands uncontested that they [Theron & Partners] have worked whilst only having been paid their full fees until the third term of 2016. Certainly, this must be an indication of their commitment to their clients.”
Stander did not seem too concerned with Georgiou’s recent decision to put Orthotouch and Zephan, the rescue vehicle of the HS companies and the underwriter of the scheme, into business rescue.
“The HSAG will continue full steam ahead. This business rescue process is another attempt by the respondents to put distance between themselves and justice. Our case is not limited to these entities. These companies were looted as all properties were sold, but the big advantage of properties is that it leaves a paper trail. We will follow the trail and recover the assets.”
Stander added that Georgiou probably does not have the funds to repay investors, but that there are ways to recover the assets. “Georgiou probably moved the funds to entities related to his children and we will institute processes to recover these funds. We feel that we have sufficient remedies to recover the assets.”
Independent Accelerate offer
In another development, the Highveld Syndication Investment Forum (HSIF) of Helgard Hancke extended an offer to investors to settle their claims through the issuing of Accelerate shares. The offer, which is open until December 20, proposes returning 25% of investors’ initial investments in Accelerate shares.
However, the Accelerate shares would be issued at R7.50 each, and not at the prevailing share price of around R1.70. It effectively means investors will receive less than 6% of their original investments according to Accelerate’s current share price.
Hancke refused to answer a question as to which party is making the offer to investors. He also did not respond to a question regarding complaints from investors that despite signing such agreements, they did not receive the reciprocal Accelerate shares or promised dividends.
An earlier version of this article stated that R3bn could be claimed from Nic Georgiou and his son Michael Georgiou, the CEO and majority shareholder in the Accelerate Fund. The article also stated that business rescue practitioner Hans Klopper was a respondent. This is not accurate. Only Nic Georgiou, his trust and Zephan are respondents in the certified class action.