Another blow for Georgiou
SCA dismisses an appeal against a high court decision ordering him to honour an HS buyback agreement.
by Ryk van NiekerkProperty magnate Nic Georgiou may face claims of more than R3 billion of investors of two failed Highveld Syndication schemes, after another defeat in the Supreme Court of Appeal (SCA).
On Friday the SCA dismissed Georgiou’s appeal against a previous High Court Judgement which found he must honour the buyback agreement he signed with an HS 22 investor. Acting Judge Moroa Tsoka also confirmed that the buyback agreements were not affected when the HS companies were put into business rescue.
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Georgiou puts Orthotouch and Zephan into business rescue
This paves the way for thousands of HS 21 and HS 22 investors who signed similar agreements to institute claims against Georgiou. He may, therefore, be liable to repay the R1.3 billion to HS 21 and R1.8 billion to HS 22 investors. He will also be liable for interest payments.
Background
The case involves Suraiya Noormahomed, who invested R3 million in HS 22 in 2009 and received shares in the company. The agreement she signed with Georgiou contained a clause through which Georgiou agreed to buy back the shares in 2014 for double the amount she initially invested.
When Georgiou failed to pay the R6 million in 2014, Noormahomed approached the court to force him to do so. The court granted a default judgement against Georgiou and ordered him to pay the R6 million as well as 15.5% interest per annum from August 2014.
Bizarrely, Georgiou was not aware of Noormahomed’s initial application and did not oppose it. He then brought an application to have the default judgement rescinded. He argued in this application that the business rescue process and Section 155 Scheme of Arrangement replaced the original HS investment agreements, including the buyback agreement he signed with Noormahomed.
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The High Court disagreed and dismissed his rescission application with costs.
However, Georgiou approached the SCA and was granted leave to appeal. It was this appeal that was dismissed by the SCA with costs.
In response, Adv Louis Bolt who represented Noormahomed said the SCA “correctly found that the terms of the scheme of arrangement did not affect the validity or the enforceability of the buyback agreements pertaining to investment in HS22 (and HS21) and reconfirmed the earlier decision in the De Lange matter.
Georgiou, therefore, has no defence against claims of investors based on the buyback agreements and is consequently exposed to claims in excess of R1.4 billion in respect of HS21 and R1.7 billion in respect of HS22 (excluding interest from 2014).
Bolt also represents other investors with a collective claim of more than R1 billion against Georgiou.
The judgment stated that the litigation was not affected by Georgiou’s decision to put Orthotouch and Zephan into business rescue. This means Noormahomed will be able to seek payment from the N Georgiou Trust, Zephan and Georgiou personally.
Nic Georgiou was asked to comment on the judgement, but he failed to respond by the time of publication. If he responds, his response will be included in the article.
The SCA also approved a warrant of execution against Georgiou for R448 000 of unpaid legal bills this week. The case relates to Georgiou’s efforts to scuttle the class action application by the Highveld Syndication Action Group (HSAG). He appealed against two scathing judgments in the Pretoria and Johannesburg high courts that found he acted unethically and abused the legal system in an effort to thwart the class action application.
He was granted leave to appeal against these judgments, but withdrew his appeal and tendered punitive costs to the HSAG after several of the full bench of judges severely criticised his conduct.
It appears that he did not pay the punitive costs he tendered to the HSAG.
- An article about the first creditors meeting of the business rescue process will be published on Monday.