JOHANNESBURG – Attorneys acting for investors in Pickvest-promoted property syndication companies Highveld Syndications (HS), say an average of R250 000 was invested per investor and there could be as many as eight or nine separate class actions collectively brought against various individuals and the HS companies.
Seven thousand investors have now joined a class action group, the Highveld Syndication Action Group (HSAG) administered by attorneys Theron & Partners, on behalf of the 18 000-odd investors, mainly pensioners, who invested in the HS Companies.
The total amount invested was approximately R4.6 billion.
Two High Court applications seek to have class actions certified for HS 15 to 18 and HS 19 to 22. An application for HS 19 to 22 was issued in October 2014. Once the respondents and applicants have had sufficient chance to submit relevant arguments, a judge will consider the merits of the case and decide whether to certify a class of investors.
In respect of HS 15 to 18, Theron & Partners expects an application to be issued in the first half of this year. The High Court will then have to decide, based on the commonality of the investors’ claims, whether to certify this second class of investors so that the class action can proceed.
The number of individual class actions certified will depend on the High Court’s directive, according to Marina Verdoes of Theron & Partners.
“If the respective certificates to continue with the class actions are granted, eight to nine actions will commence and the normal rules relevant to High Court cases will be applicable,” Verdoes explains.
Among the respondents against which relief in the order of billions of rands is sought, is Nic Georgiou, MD of Orthotouch. Orthotouch is a public company that bought properties in the HS companies, but has failed to uphold its interest payment obligations under the terms of a scheme of arrangement settled in 2011.
New scheme of arrangement challenged
As a result, a new scheme of arrangement was sanctioned in the South Gauteng High Court late last year, as a means of reorganising the company’s affairs and ensuring the business was sustainable and could “equitably” address the claims and interests of creditors, according to Orthotouch.
In terms of the new scheme, HS investors were given three alternatives to restructure the repayments of their historical investments.
Theron & Partners, however, says it is currently investigating the validity of the court order and will issue an application in “the next week or two” to have the order revised or rescinded.
Verdoes says no notice of the sanctioning of a new scheme of arrangement was given to the HSAG and the arrangement was granted in the incorrect court.
“We are of the opinion that the claims of investors under the class action cannot be compromised in the Section 155 Scheme of Arrangement [in terms of the Companies Act],” Verdoes says.
Interest payments dry up
According to Helgard Hancke, an investor and Pretoria-based coordinator of the HSAG, investors are now receiving less than 2% interest on their invested capital each month. “They [the 22 respondents] must come and explain in court what they’ve done with our money,” he says.
Hancke tells Moneyweb that one 84-year old pensioner told him she gradually invested R7 million, left to her by her late husband, into various HS companies. She has since had to sell her house and is living with her children. Other investors, Hancke says, have committed suicide.
Investors must pay R1 000 per claim (or HS syndication in which they are invested) in order to participate in the class action. This can be paid upfront or in instalments and is “only a fraction of the total costs of the ensuing High Court matters,” Verdoes says.
“This [R1 000] cost per claim has been instituted in order to be reasonable to all investors and also to cover the costs of more than one court case. For example, an investor in HS 15, 17 and 19 will be a claimant in three High Court Cases,” Verdoes explains.
Investors can choose to register only one claim or can opt out of the class action altogether. “Due to the overwhelming support for the class action, it seems possible to cover a large portion of the legal fees involved,” Verdoes says. “All surplus funds will be returned to investors at the end of the matter.”
Launched last month, the official class action website can be found at www.hsaction.co.za.