Business rescue practitioner and corporate lawyer Hans Klopper has vehemently denied any wrongdoing during the events leading up to the liquidation of a company called Harrison & White (H&W).
He harshly criticised the Section 417 inquiry and subsequent report as being inaccurate in many material aspects and unfair, which found him “guilt[y] without [a] trial “.
Klopper has also condemned Moneyweb for publishing an article based on the confidential report. (A Section 417 inquiry looks at possible stripping of assets before a company is put into liquidation.)
Klopper last week sent Moneyweb a memorandum addressed to the Master of the High Court in Johannesburg. It was written in response to the Section 417 report, which found he was “gravely remiss in the exercise of his functions” as a business rescue practitioner. The report states that he should have been aware from the onset that H&W was insolvent, yet he allowed the business rescue process to continue for more than three years.
This, according to the report, allowed for the looting of H&W’s assets to the detriment of creditors.
Respected and retired Judge Eberhard Bertelsmann was the commissioner of the inquiry and penned the report. Bertelsmann also recommended that the liquidators hold Klopper personally liable for the damage the delay caused and that the Legal Practice Council (LPC) should investigate his conduct.
The report also cites possible wrongdoing by Connie Myburgh, a corporate lawyer and current chair of the Nova Property Group.
In his case, the report recommended that Myburgh’s conduct be referred to the Hawks and the LPC for investigation.
In response to Moneyweb’s questions, the LPC said its Gauteng office would investigate the allegations contained in the report. Charity Nzuza, acting CEO of the LPC, said it would first ask Klopper and Myburgh to comment on the report. “After receipt of their comments, we will present the matter to an investigating committee of the Legal Practice Council to consider the explanations given and the way forward.”
The Companies and Intellectual Property Commission (CIPC), the regulator of the business rescue industry, confirmed that it referred the matter to the South African Restructuring and Insolvency Practitioners Association NPC (Saripa, non-profit company). Saripa is the representative body of the business rescue industry, of which Klopper is a member.
Lucinda Steenkamp, a senior legal advisor at the CIPC, said the matter was “directed” to Saripa for investigation based on its internal code of conduct and disciplinary procedures. She added that the CIPC might suspend or revoke a business rescue practitioner’s licence should they be found guilty of misconduct.
René Bekker, CEO of Saripa, said in response to Moneyweb’s questions that “the allegations of improper conduct on the part of Mr Klopper are viewed in a very serious light and the board has made the decision to approach the Master of the High Court, Johannesburg, for permission to have regards to the report [sic] authored by retired judge Bertelsmann.
“We respectfully take note that the report is, in your view, in the public domain but we have been advised to obtain the permission of the Master of the High Court ex-abundante cautela [by way of extreme caution] considering the provisions of Section 417(7). Embarking on a process with a document which may not be in the public domain would derail the process and result in wasteful expenditure.”
Bertelsmann declined to comment on Klopper’s memorandum.
Klopper does not mince his words in the three-page memorandum. He severely criticises the inquiry and report, as well as Moneyweb’s decision to publish the findings and recommendations.
Klopper claims the report and the article are factually incorrect in many material respects and that the recommendations are neither fair nor justified. “I was not present, and was not permitted to be present, during the enquiry other than when I testified. I testified willingly and cooperatively and in an effort to assist the liquidators and the Commissioner in the winding-up process. I left the enquiry believing that I had done so and did not contemplate for a moment that I would be one of the targets of the report.”
Klopper says he was “appalled” when he saw the report. “The Commissioner had grouped everybody involved in the company’s management together, myself included, even though my involvement was completely different in time and purpose to that of the erstwhile managers and directors. Then, with the same brush, he tarred us all.”
Klopper adds that Bertelsmann did not fully take his evidence into account. “I saw, for the first time, that the evidence of other witnesses that was never put to me during my testimony, had informed the Commissioner’s findings and recommendations. The recommendations themselves (or even the fact that the Commissioner was considering them) were never put to me. I was not given an opportunity to respond to any of the adverse contents of the report.”
Klopper says he was found guilty after testifying for only an hour. “It is guilt without trial. Unlike any other defendant or accused in civil or criminal proceedings, I had none of the basic rights and protections afforded to a person before their fate is decided, including the right to cross-examine their accusers and appeal the decision.”
He added that he was a cooperative witness and now has to deal with “the fallout of a factually incorrect report by a respected member of the legal fraternity and an unlawfully published article by Moneyweb in flagrant disregard of the Act and the Commissioner”.
Klopper says he wanted to take the report on review to have it set aside, but was advised that he could not do so as the commissioner did not make “findings” against him and that there is no prejudice towards him.
“Although this may be the position adopted by courts of law, the courts of public opinion do not operate in the same way. In that space, where I conduct my day to day business activities and deal with colleagues and clients, far from the sanctity of a court room, I have suffered a great deal of damage to my personal and professional reputation.
“As I am left without a legal remedy, I will deal with the content of the report and its inaccuracies in a court of law should proceedings ever be instituted against me.”
Criticism of Moneyweb
Klopper said in his memorandum that the inquiry and the report were confidential in terms of the Companies Act. “Moneyweb did this [publish an article based on the report] despite the Commissioner personally informing him [Moneyweb editor Ryk van Niekerk] that the report was confidential and that the information contained therein could not be published.”
Moneyweb sought extensive legal counsel after acquiring a copy of the report and published the report as a matter of public interest. Klopper and Myburgh play critical roles in the management of the rescue vehicles of the failed Highveld Syndication and Sharemax investment schemes in which nearly 30 000 investors invested close to R10 billion.
Both rescue vehicles have seen the significant sell-off of assets over the past few years, with little of the proceeds flowing through to investors. Both companies are also in dire financial positions.
Read: The peculiar case of the Picvest billions (Part 1) (Background)
Read: The peculiar case of the Picvest billions (Part 2) (Background)
Read: The peculiar case of the Picvest billions (Part 3) (Overvaluation of properties)
Read: The peculiar case of the Picvest billions (Part 4) (Property transactions prior to HS companies being put into business rescue)
Read: The peculiar case of the Picvest billions (Part 5) (Disposal of properties contradicts the intent of the business rescue plan)
Read: The peculiar case of the Picvest billions: Part 6 (The sale of 31 ‘Orthotouch Properties’ to Accelerate)
In response to Moneyweb’s questions, Myburgh refused to comment on the findings of the report and reiterated that the report was confidential in terms of the Companies Act.
“The disclosure and use of the document was and remains unlawful, and you were made aware of this.
“I have previously asked you if you have approval [from the Master of the High Court to publish the report]. You did not answer me and continued to use and make the report public.
“I have been informed that Mrs (Cornelia) van der Merwe was formally informed that the Master did not authorise the use of the report [in her court papers]. Your use of Mrs Van der Merwe’s actions does not excuse you and does not give you the right to use and make the report public.
“I reserve my rights against your unlawful conduct, insofar it has and will affect me in the future.
“I am not prepared to discuss the report with you and reserve my rights to deal with the report when and if necessary.”
(Myburgh’s full response in Afrikaans appears below this article).
Myburgh’s reference to Van der Merwe has bearing, as she included the Section 417 report in court papers forming part of her defence against a defamation suit involving Klopper. This inclusion makes the document a public document. In response to questions, Van der Merwe denied that she received any communication from the Master of the High Court, Myburgh or Klopper regarding the use of the report in her court papers.
Original response from Connie Myburgh to Moneyweb’s questions:
Mnr. Van Niekerk.
Die verslag is nie en het nie ‘n openbare dokument geword nie.
Die openbaarmaking en gebruik daarvan deur u, was en bly onregmatig, en ek maan u teen u voortgesette onregmatige openbaarmaking en gebruik van die vertroulike dokument, van welke vertroulikheid en u onregmatige optrede, u bewus is en van bewus gemaak is.
Nieteenstaande die bovermelde, verwys ek u na paragraaf 97 van die verslag, wat dit duidelik maak dat die verslag slegs met die toestemming van die Meester van die Hooggeregshof openbaar gemaak en gebruik mag word.
U is duidelik bewus van hierdie bepaling in die verslag.
Ek het u voorheen gevra of u goedkeuring het. U het my nie geantwoord nie en voortgegaan om die verslag, willens en wetens, openbaar te maak en te gebruik.
Ek het verneem dat Mev Van der Merwe formeel in kennis gestel is dat haar gebruik van die verslag sonder die Meester se toestemming plaasgevind het.
U gebruikmaking van Mev Van der Merwe se optrede, verontskuldig u nie en gee nie aan u die reg om die verslag openbaar te maak en te gebruik nie.
U het duidelik geen gewetenswroeging om onregmatig op te tree en om voort gaan met sulke onregmatige optrede nie, selfs nadat u gewys is op en gemaan is teen u onregmatige optrede.
Ek behou my regte voor teen u onregmatige optrede, insoverre dit my reeds geraak het en in die toekoms, mag raak.
Ek is nie bereid om die verslag met u te bepreek nie, en behou my regte voor om met die verslag te handel, soos en wanneer dit vir my nodig is.
Indien u enigiets publiseer, wat my betrek, moet u hierdie antwoord op u onderstaande versoek aan my, woordeliks publiseer.