African Bank’s BEE shareholders apply for leave to appeal dismissal of legal action
The case could set a precedent by enabling shareholders to sue directors and auditors
African Bank’s BEE shareholders have applied for leave to appeal against the Pretoria High Court’s recent dismissal of its legal action against the bank’s former CEO Leon Kirkinis, his fellow board members and Deloitte.
The case could set legal history by enabling shareholders to sue directors and auditors.
On Wednesday Desmond Lockey, chair of Hlumisa Investment Holdings, confirmed that on Friday the high court will hear an application for authority to appeal its earlier dismissal of its bid to hold the directors and auditors of African Bank, which provided loans to low-income earners, liable for R2bn of damages.
The legal action, which was launched in 2015 following the headline-grabbing collapse of the African Bank share price in August 2014, has implications for Steinhoff shareholders who believe the directors of the global retail group should be held liable for the collapse of the share price in December 2017.
Hlumisa claims the directors contravened several sections of the Companies Act and that this resulted in the business being carried out recklessly “or with gross negligence”. This in turn resulted in significant losses to African Bank, which caused the share price to lose more than 90% of its value in August 2014 before the JSE stepped in to suspend the share. Within days the Reserve Bank put African Bank under curatorship.
Lockey told the media then that Hlumisa had invested R264m of its own funds and reinvested R700m in dividends over an eight-year period. Expected returns bumped the claim up to just over R2bn.
At present if shareholders want to sue the directors they have to persuade the company to launch the action. Or the shareholders can try to launch what is called a derivative action against the directors on behalf of the company.
In a status report, business rescue practitioner Connie Myburgh warned the Hlumisa shareholders that the legal action against the directors and auditors “may still take a few years to be finalised”.
Myburgh said he could not give any view on the success or otherwise of the court case but said the legal team “would do its best to achieve the best possible result and the best possible recovery of monies”.
A spokesperson for Deloitte said they were not opposing Hlumisa’s leave to appeal but have filed a conditional counter-appeal.