Gihwala ordered to pay former business associate

No fear No Favour No Corrupt officials please..........


BY FRANNY RABKIN, 27 JUNE 2014, 18:43

Dines Gihwala. Picture: ROBERT BOTHA

FORMER Fidentia curator Dines Gihwala has been declared a "delinquent director" by the high court and ordered to pay about R6m to a former business associate.

The once highly respected attorney and former chairman of big Johannesburg law firm Cliffe Dekker Hofmeyr is now disqualified from being a company director for the next seven years.

He resigned as Fidentia curator on Thursday — the day of the court judgment — and reportedly also as nonexecutive director of Redefine Properties, the second-biggest property company listed on the JSE.

The judgment, from the Western Cape High Court, related to a protracted legal dispute over a 2005 Black Economic Empowerment joint venture to buy linked units in JSE-listed Spearhead Property Holdings.

The court found that Mr Gihwala and an associate — both shareholders and directors of Seena Marena Investments — had "recklessly" breached their fiduciary duties to Seena Marena’s third shareholder, an offshore company called Grancy Property.

Seena Marena was the majority shareholder in Ngatana Property Investments, the BEE investment company that acquired the units in Spearhead.

Judge Burton Fourie said Grancy was "wholly reliant" on the two to keep control of the investment and protect Grancy’s interests.

The contract between the three was "underpinned by confidence, trust and utmost good faith", with the two owing a fiduciary duty to Grancy, the judge said.

But instead, their behaviour towards Grancy was not only in breach of their 2005 agreement, but "clearly wrongful".

"It constituted a reckless breach of their fiduciary obligations," said Judge Fourie.

The judge went through a number of Grancy’s claims of legal breaches in the conduct of Mr Gihwala and his associate towards Grancy and ultimately ordered them to pay, jointly and severally, about R6m.

He said the two "grossly abused their positions as directors" and that their conduct "constituted repeated unlawful misappropriation of funds, involving substantial amounts".

"The inescapable conclusion is that they were, at all material times, consciously aware of their wrongdoings, but persisted regardless of the consequences thereof, repeatedly perpetuating instances of unlawful conduct with the aim of benefiting only themselves."

Repeated attempts by Business Day to reach Mr Gihwala were unsuccessful.

The Financial Services Board’s (FSB’s) Caroline da Silva said the FSB would need to approach the court for the appointment of a new curator for Fidentia.

BusinessDayLive

COMMENTS BY SONNY

LIKE SHAREMAX WHERE ALL OFFICIALS WERE CORRUPT?

NO WONDER SOUTH AFRICA'S ECONOMY HAS GONE TO THE DOGS!

Sharemax attorneys deny ombud’s claims of irregular conduct

2013
inlsa

Legal issues sorrounding Bonatla's proposed acquisition of Sharemax.photo by Simphiwe Mbokazi 099

Roy Cokayne

Sharemax Investments’ attorneys, Weavind & Weavind, have labelled allegations by the financial advisory and intermediary services (Fais) ombud that the firm contravened the Attorneys Act and a government prohibition as “gratuitous and unfounded”.

Raiford Johnson, Weavind & Weavind’s managing director, said on Friday that the firm rejected the contention it had contravened a government notice issued in 2006 prohibiting the release of investor funds held in trust for investment in property syndications before the properties being syndicated had been transferred into the syndication vehicle.

In a determination released last week, Fais ombud Noluntu Bam concluded that Zambezi Retail Park, which was promoted and marketed by Sharemax, was “nothing more than a Ponzi scheme” in which investors were paid interest out of their own funds.

The determination followed a complaint by Gerbrecht Siegrist, a 67-year-old pensioner from Tigerpoort in Pretoria, who invested R580 000 in Zambezi but is now destitute.

Bam ordered Siegrist’s financial advisor Cornelius Johannes Botha, trading as CJ Botha Finansiele Dienste, Sharemax Investments, FSP Network, Sharemax and USSA director Gert Goosen and Sharemax directors Willem Botha, Dominique Haese and Andre Brand to jointly and severally pay Siegrist R580 000.

Johnson stressed that the complaint related to the role of all the respondents to the complaint, which did not include Weavind & Weavind.

The issues of the determination did not concern his firm “in any way, shape or form”.

Johnson said it was unclear why Bam had found it necessary to accuse Weavind & Weavind of irregular or inappropriate conduct because these were “completely irrelevant to the issues she was required to determine”.

Bam recommended the Law Society investigate the trust account of Weavind & Weavind to establish how and under what circumstances investors’ funds were paid out of the firm’s trust account.

“It is clear the attorneys did not comply with the Attorneys Act and the Law Society guidelines. Nor did the attorneys comply with the investor protection provisions of the Government Gazette,” she said.

Bam said that in the prospectus and the marketing of the Sharemax product, two significant representations were made to the investing public: that their funds would be deposited into the trust account of the attorneys where they would enjoy protection; and that the attorneys, acting independently, had “satisfied themselves that the whole scheme was compliant with the prevailing laws”.

She said the attorneys claimed that the government notice was not applicable to the Sharemax schemes but the firm did not provide any legal or factual basis indicating why the government notice did not apply to the firm.

Bam said Weavind & Weavind’s view on this was also contrary to what was stated in the prospectus and there was a duty on Sharemax and the firm to disclose in the prospectus that the government notice did not apply to this transaction.

Johnson said the government prohibition was only applicable to “public property syndication schemes”, which referred to schemes in which investors were invited to participate by investing in entities “whose sole assets are commercial, retail, industrial or residential properties”.

“The investors who participated in the Villa and Zambezi Retail property syndication were not invited to invest, nor did they actually invest, in the property investment companies themselves. Their investments were in the investment companies’ holding companies, which did not own commercial, retail, industrial or residential properties at all, but only a share in and a claim against the subsidiaries who did own properties of that nature.”

Johnson said the properties were also not the subsidiaries’ sole assets, which also included rental businesses and other property, “such as furniture, equipment and so forth”.

The Law Society had already investigated several complaints against Weavind & Weavind and all allegations made against the firm had been rejected as “being without merit”, Johnson added.