Nic Georgiou – the man whose property syndication companies amassed R4.6 billion from 18 000 investors – has been granted leave to appeal an earlier Pretoria High Court ruling, which ordered him to honour the claims of 46 investors amounting to nearly R30 million.
The investors had invested in Highveld Syndications (HS) 21 and 22, which were later placed into business rescue along with HS 15 to 18.
They argued that buy-back agreements in the prospectuses of HS 21 and 22 expressly stated that their money was safe and assured of guaranteed yields.
According to the prospectus of HS 21, the head lease agreement secured the investors’ income, at a yield of 12.5% a year, from the date of investment until the “guaranteed buy-back” of the investors’ shares five years from the investment date.
Investors entered into these buy-back agreements with a company called Zelpy, now Zephan Pty (Ltd), which belongs to Georgiou. When the property syndication companies were placed into business rescue in December 2011, another Georgiou-related company, Orthotouch, took over the obligations to repurchase the shares of the investors in the HS Companies five years from the date of the adoption of the plan.
The ruling, a summary judgement (i.e. based on certain facts without trial) delivered in June, ordered Georgiou, the N. Georgiou Trust and Zephan to cover the legal costs and pay the claims of the 46 investors with interest at 9% per annum, from December 9 2014 to date of payment.
In a written judgement, acting Judge J. Hiemstra said that the investors purchased shares in the HS companies because of the security offered by the buy-back agreements. To argue, as Georgiou’s Senior Counsel did, that these agreements were of no force or effect because they had in fact not been signed when shares were purchased was “opportunistic”.
“The investors were made to believe that contracts in that form had in fact been signed… If that was not the case, the HS Companies had attempted to commit fraud involving millions of rands. In the event, the buy-back agreements were ultimately signed and the undertakings contained therein stand. It matters not that the buy-back agreements had been signed after the plaintiffs had accepted the benefit,” Judge Hiemstra writes in his judgement.
Judge Hiemstra also dismissed the argument that the business rescue plan restructured the rights of investors so that the buy-back agreements were no longer valid, relying on a clause in the agreements that would’ve prevented such an outcome.
Georgiou’s leave to appeal this judgement to the Supreme Court of Appeal in Bloemfontein was granted on October 30. A date for the appeal to be heard must still be set.
HS 15 to 22 remain under business rescue, as a Stellenbosch-based law firm seeks to bring a class action on behalf of investors against 22 respondents – including Georgiou, Orthotouch and others – under the Highveld Syndication Action Group (HSAG).
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