Subsequent to the publication of this article on 16 November, Mr. Georgiou responded on 23 November. His response appears in the last paragraph.
The Supreme Court of Appeal (SCA) has granted property magnate Nic Georgiou leave to appeal against an earlier High Court decision that he must honour the buyback agreement he signed with an investor in the Highveld Syndication (HS) schemes.
Moneyweb has also learned that two people have resigned from the Orthotouch board – Hans Klopper, the business rescue practitioner (BRP) of the HS companies, and Connie Myburgh, a corporate lawyer and chairman of the Sharemax rescue vehicle Nova.
The SCA’s granting of leave to appeal followed the Pretoria High Court’s dismissal of Georgiou’s application for leave to appeal against an earlier judgment that found him liable to honour the investment agreement he signed with an HS investor.
However, Georgiou petitioned the SCA directly and was granted leave to appeal against this judgment.
The original judgment was decisive as it confirmed that the Section 155 Scheme of Arrangement did not affect the validity of the buyback agreements. This opened the door for thousands of other investors in these HS syndications to institute similar claims against Georgiou and entities related to him. According to Advocate Louis Bolt, who argued the case on behalf of the applicant, the collective claims could exceed R2 billion.
The case will now move to Bloemfontein where the appeal will be heard. A court date has not been announced, although it will most probably only be heard next year.
The SCA has not been a happy hunting ground for Georgiou in recent times. Earlier this year, his legal team withdrew his appeal while they were still arguing against two High Court judgments and he proceeded to tender punitive costs.
The appeals were against two scathing judgments, which found that Georgiou had acted unethically and abused the legal system when he secretly settled the claims of the six applicants who represented around 7 000 Highveld Syndication Action Group (HSAG) members in the applications to have the Section 155 Scheme of Arrangement set aside and for the certification of the class action. After Georgiou settled their claims, the six applicants withdrew their applications and changed lawyers without informing the HSAG’s lawyers. If allowed, these actions would have put an end to the HSAG applications.
In a statement released afterwards, Orthotouch claimed that its legal counsel wasn’t given an opportunity to argue its case in full and that the appeals were withdrawn to avoid references of impropriety that may have been made in a judgment.
Non-payment of interest
Earlier this year Zephan and Orthotouch, both companies owned by Georgiou, suspended interest payments to investors who support any of the legal challenges of Bolt and the HSAG.
This court case, as well as others instituted by Bolt and the HSAG, led to a unilateral decision by Zephan and Orthotouch to suspend the payment of interest to investors who support the legal challenges. They deem it unfair to the investors who support the Scheme of Arrangement that those who back the legal challenges continue to benefit from it
Investors were sent a form to complete to indicate their support for these legal challenges. Interest payments to supporters and investors who haven’t completed the form have been suspended since August.
This seems to be in contravention of the Section 155 Scheme of Arrangement as it does not allow for any discretion in the payment of interest.
This contributed to the resignation of the receiver of the scheme, Derek Cohen.
Georgiou has recently sent another letter to investors to inform investors that if the legal challenges continue, it may scuttle the scheme of arrangement.
Says Georgiou, “if the small minority continues to fight me, they may be responsible for causing the financial failure of the agreed scheme and that will have a negative impact on the majority of investors with potential further legal implications.
“If we do not have the full support of all the investors, this could ultimately result in the setting aside of the scheme of arrangement and the business rescue practitioner having no option but to liquidate the Highveld Syndication 15-22 Companies.”
The resignations of Hans Klopper and Connie Myburgh
Moneyweb can confirm the resignations of Klopper and Myburgh from the Orthotouch board. A WinDeed company report shows they resigned on October 30.
Klopper was originally appointed as the BRP of the HS companies and was appointed to the Orthotouch board on January 9, 2012, less than a month after the approval of the BRP in December 2011.
He confirmed his resignation in a letter penned by his attorney, Natalie Lubbe. She added that his resignation was for personal reasons that he does not want to discuss publicly.
Myburgh, who was appointed to the Orthotouch board on the same day as Klopper, did not respond to questions asking for reasons for his resignation.
Annual Return Deregistration Process
The WinDeed company search also shows that Orthotouch is in arrears with the submission of annual returns to the Companies and Intellectual Property Commission (CIPC), as prescribed by the Companies Act. The deed shows the company status as ‘Annual Return Deregistration Process’ and not ‘In Business’, as would be the case if the company had submitted the prescribed documentation.
According to the CIPC website, failure to submit returns “will result in the commission assuming that the company … is not doing business or is not intending on doing business in the near future. Non-compliance with annual returns may lead to deregistration, which has the effect that the juristic personality is withdrawn, and the company or close corporation ceases to exist”.
On 23 November Georgiou emailed a copy of a CIPC company report of Orthotouch showing that the company status has been changed to “In Business”.
Georgiou said, “the issue, did not relate to a failure to file the required documentation, as you (the reporter) claim, but rather a failure on the part of CIPC to allocate payment of the annual fee due.”
He added: “I do not believe that addressing the e-mail and publishing an article shortly thereafter, without affording a party sufficient time to deal therewith or, at least being warned about when an article will be published is fair or unbiased.
“I guess something negative needed to be said by you, to detract from the news of the successful petition.
“I trust you will correct the misstated facts and inform the public accordingly.”