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Steinhoff loses in court bid to consolidate cases

And is left facing a legal bill of R60m.
Many of the claimants believe this was a delaying tactic. Image: Dwayne Senior, Bloomberg

Steinhoff has lost its ambitious bid to consolidate 12 South African-based claims that have been lodged against it, following the collapse of its share price in the wake of news of accounting irregularities reported in December 2017.

The loss comes with a hefty legal bill estimated to be as much as R60 million; the judge ruled that the international retail group must pay the costs of all of the parties and that such costs would include the costs of three counsel.

“I am satisfied that [given] the volume of the papers in the record and the importance of the matter to the parties, the employment of [three] counsel is justified,” said Judge Dolamo, announcing the dismissal of Steinhoff’s application last week.

Bernard Mostert, former CEO of Tekkie Town and one of the parties battling the consolidation attempt, told Moneyweb he was very pleased with the dismissal decision as well as the cost order, which he described as “quite punitive”. Mostert and other co-founders of Tekkie Town, which was bought by Steinhoff in late 2016, have launched a new retail chain called Mr Tekkie. They have instituted legal action in a bid to restore ownership of the Tekkie Town business to them. Mostert said he believes that action is close to being “trial-ready”.

The parties involved in the cases that Steinhoff attempted to consolidate have lodged claims of over R80 billion.

Much of that is down to former chairman and controlling shareholder Christo Wiese’s R59 billion claim. PIC-banked Lancaster is claiming R11 billion, former banker GT Ferreira is claiming R1.2 billion and Tekkie Town-related entities are claiming R1.8 billion.

In the court papers Ferreira argued the cases could not be consolidated because of the extensive disparities among the claims: “A bumper trial will inevitably entail the incurring of unnecessary delay and legal costs in relation [to] litigation in which the claimants have no interest and where the issues are neither common nor capable of convenient disposal.”

Delaying tactic?

Many of the claimants believe the attempt at consolidation was a delaying tactic aimed at securing the interests of Steinhoff’s creditors who signed up to the company voluntary arrangement last August. A court-backed order to pay out any successful claimant could trigger Steinhoff’s liquidation to the disadvantage of the creditors.

The creditors, who owned claims of around €9 billion (R188 billion) of debt, agreed to roll over the debt until at least December 2021. In exchange they will receive annualised interest of 10%, which will be capitalised. Unlike the SA claimants, the creditors are represented on the Steinhoff board.

Read: Stay for the Steinhoff ride?

In his judgment Dolamo said the purpose of consolidation actions “is to have issues, which are substantially similar tried at a single hearing so as to avoid the disadvantage attendant on a multiplicity of trials”. But he said a court would not order a consolidation: “Unless satisfied that such a cause is favoured by the balance of convenience and that there is no possibility of prejudice being suffered by any party.”

Claims ‘similar but diverse’

The judge contends that the claims are similar in that they deal with misrepresentations made in the financial statements, but says they are diverse in nature and involve different claims of relief. And they are at different stages of progress. “At this stage it would not be convenient for all these matters to be consolidated,” said Dolamo, adding that any costs savings from consolidation would only accrue to Steinhoff, “while the respondents would be substantially prejudiced”. He said that only when all the cases were ready for trial could consolidation be considered.

Steinhoff CEO Louis du Preez said the company respects Dolamo’s ruling and accepts that the judgment may require each action to progress individually. “However we note that paragraph 27 of the [judgment] indicates that the suitability of a consolidation may be reconsidered by the court at a later date once matters have been set down and dates for trial applied for, providing an opportunity for us to re-assess this option at that point.”

Du Preez said that Steinhoff is engaged in a host of legal proceedings in South Africa and that while there are individual differences: “Steinhoff considers that there are sufficient overlapping issues and witnesses that renders it more efficient for these proceedings to be consolidated.”

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In my opinion, the parties that are part of the R80b claim against Steinhoff should have known better in the first place and don’t deserve a refund of their monies…. they were betting on a crooked race from the start and, if they are worth their salt as astute investors would have known this but took the bet anyway because the spoils were too easy to ignore. Greed is a terrible thing….it can kill you.
You live by the sword…you die by the sword. Accept this and suck it up like all the other smaller investors are having to.

Agreed. So many stories after the fact of big businessman in stellenbosch knowing about markus’ tricks and were well aware.

How bad must you be to move in those circles and still invest millions/ billions. Bankers, analysts should all be ashamed.

Seems to me that investors (including me) want a riskless investment environment. I’ll gladly take the loss. I made the decision to invest. I can live with that.

Fire Du Preez. He just cost shareholders R60m in unnecessary litigation and the cost order is evidence that the consolidation order idea had no merit from the start.

I don’t understand the claims either.

There is always an inherent risk in investing in shares.

The info was out there and if you did your homework , then you would never have invested in Steinhoff.

The short sellers made money , maybe they should refund the people ? That would be crazy ?? It’s the same thing, the fact that people were going short , means that if anyone could see through the numbers , then anyone worth their salt should have been able to do the same.

Also , why doesn’t everyone that made money and sold the share before it collapsed , also not pay back the shareholders that lost ? Again , it’s free market and that would be insane!

If anything, I would like to see more liability fall on auditors . They “give assurance” of material misstatement. I would say the books were materially misstated.

Jooste and co, must face jail time , no doubt. But a civil claim because of a bad investment , I don’t agree with the principal.

Indeed – but remember, Oom Christo and all his merry men in different companies dont like losing money (who does) but they are making shareholders pay for their mistakes.
Would be interesting when the truth comes out about Oom Christo’s role in all of this – he better hide his remaining few bob’s overseas – massive actions could come against him –

I also had a couple of shares.

The main reason I bought was on the back of the faith Christo Wiese had in the company . Surely the richest man in SA (at the time) gets these type of things right more often than not, surely he did the most in depth due diligence known to man. He publicly stated that he was on the board for a couple of years before making the significant investment in 2015.

Maybe I have a better case against him than against steinhoff

Why are Jooste & Co. not yet in jail? There are sufficient evidence to lock these buggers up for life! Or they should spend time in jail until they are convicted – the time spent in jail can then be deducted from their jail sentence.

Obviously because there no skills left in the NPA to investigate white-collar crime or they are getting paid to look the other way.

When last did anyone with money or connected to the ANC go to jail in SA?

If it wasn’t for these “petty” claims against Steinhoff, I think they could have been well away with rescuing the company. The reason why I call it “petty”, is that, like being said above, investors decide to invest in a particular company and you take the risks that goes with it.

I also agree with the notion that the likes of the Auditors are first at fault here and that those who participated in dishing off the cream, back then, should be brought to book.

Strangely Steinhoff negotiated with creditors for a standstill with 10% interested paid annually but brings claimants to court who were allegedly defrauded by Steinhoff.

There could be a case to answer by the claimants for due diligence neglect prior to agreeing to share swops, and assume that will be Steinhoff’s main argument in court.

Whittey Basson did his due diligence.

Most claimants have to answer as to what they were offered by Jooste and Weise in court so the FULL story comes out and person are put in jail.

No doubt Steinhoff will appeal the ruling.

Moneyweb – why invite comment and then censor me?

previously disadvantaged comments only

All I did was to state a fact that the current CE is ex a firm of lawyers doing the bulk of the legal work – – – – – – Is that a Sate Secret???

I wonder what triggers the AI to hold a message. Perhaps a history of your comments, the article author, key words..

Mine gets stopped every time for hrs

So the biggest claim against the company is from the person who was chairman of the board while all of this was happening.

The company committed massive fraud and flopped with him as chairman. So he resigns as chairman and claims against it?

How is that fair to any independent shareholder?

Something stinks here.

a Fish rots from it’s head …

Mr Lawyer – “If we manage this matter carefully, it can go on forever”

The Virus came at the best possible time for Jooste and Wiese and Zuma – nothing like a distraction.

Look over THERE!

it astounds me that absolutely nothing has happened to any of those three but 120,000 people have been charged for contravening covid regulations. Where is the army when you need them? In the township instead of Hermanus and Clifton and Nkandla?

Identify and then follow the “vested interests and interested parties.” Then you will clearly know. It becomes so clear.

If any of these claims are successful, they should put all current and ex shareholders who had any profit/loses back in the same position that they were before they bought in. Impossible task.

Although I feel their pain, they surely cant just be in for the reward and expect no risk.

End of comments.

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