SCA judgment a major setback for property magnate
Property magnate Nic Georgiou may face claims of more than R3bn of investors in two failed Highveld Syndication (HS) schemes, after another defeat in the SCA, says a Moneyweb report.
On Friday the SCA dismissed Georgiou’s appeal against a previous High Court judgment 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. This, notes the report, 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 R1.3bn to HS 21 and R1.8bn to HS 22 investors.
He will also be liable for interest payments. The case involves Suraiya Noormahomed, who invested R3m 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, notes Moneyweb.
When Georgiou failed to pay the R6m in 2014, Noormahomed approached the court to force him to do so. The court granted a default judgment and ordered Georgiou to pay the R6m as well as 15.5% interest per annum from August 2014. Georgiou was not aware of Noormahomed’s initial application and did not oppose it. He then brought an application to have the default judgment rescinded.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. The High Court disagreed and dismissed his rescission application with costs.
Georgiou suffered the same fate after being granted leave to appeal to the SCA.
Former investors in the failed HS schemes will in March next year be presented with a final settlement offer that will offer them shares in the Accelerate Property Fund as full and final settlement of their claims.
This, notes Moneyweb, was revealed at the creditors’ meetings of Orthotouch – the rescue vehicle of the former HS companies – and Zephan, the underwriter of the Orthotouch scheme, last week after Georgiou put both companies into business rescue on 7 November.
Jacques du Toit, of Du Toit Business Rescue Practice, the business rescue practitioner of Orthotouch and Zephan, said at the meeting that if investors and other creditors reject the offer, he will put the two companies into liquidation.
However, based on the information Du Toit disclosed at the meeting, investors may only receive a fraction of their original investments. According to Moneyweb’s calculations, it could be as little as 3.3%.
Accelerate is a listed company run by Georgiou’s son Michael, who is also the largest shareholder in the company.
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