Irba surprisingly withdraws SCA application to appeal former Sharemax auditors’ judgment

The Independent Regulatory Board for Auditors (Irba) has surprisingly withdrawn its petition to the Supreme Court of Appeal (SCA) for leave to appeal a judgment ordering two members of the disciplinary committee hearing a case against the former auditors of the failed Sharemax investment scheme to recuse themselves because of bias.

Irba lodged its petition to the SCA for leave to appeal this judgment after Judge Jabulani Nyathi in the High Court in Pretoria dismissed the auditing regulator’s application for leave to appeal his judgment in July this year.

That judgment followed the three former auditors of Sharemax applying in February 2021 for the recusal of Suren Sooklal and Horton Griffiths, two members of the disciplinary hearing committee, on the grounds of actual bias or perceived bias and for the hearing to be declared a nullity.

Irba CEO Imre Nagy confirmed to Moneyweb last week that it filed the application at the SCA on 16 August 2024 seeking leave to appeal the judgment and filed the notice of withdrawal for leave to appeal at the SCA on 21 August 2024.

“We withdrew our application having considered advice received from our legal team on the prospects of success of the application,” he said.

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What’s the way forward?

Nagy was guarded in his comments on how Irba now plans to proceed in regard to the partially heard and adjourned disciplinary hearing of the three auditors.

“We have sought legal advice in this regard and will make a decision upon receipt and consideration of the legal opinion on the options available to the Irba,” he said.

It appears Irba now only has three options in regard to this adjourned disciplinary hearing.

They are to:

• Continue with the disciplinary hearing, with Sooklal and Griffiths excluded from the disciplinary committee;
• Abandon the disciplinary hearing against the former Sharemax auditors; or
• Start the disciplinary hearing against the auditors afresh with a new disciplinary committee.

Nagy declined to comment on whether these are the only options available to Irba and what other possible options, if any, are available to it.

He referred Moneyweb to his earlier statement that Irba would make a decision once it has received and considered the legal opinion it has requested.

The legal representatives of the three auditors declined to comment.

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Appeals

The former Sharemax auditors – Danie Dreyer, Jacques Andre van der Merwe and Petrus Johannes Jacobus Bekker – who were all directors of ACT Audit Solutions Incorporated, are collectively facing a total of 413 improper conduct charges against them related to Sharemax in the Irba disciplinary hearing.

They pleaded not guilty to all the charges against them.

In Irba’s application to the high court for leave to appeal Judge Nyathi’s judgment, the three auditors applied for leave to cross-appeal to the SCA, or alternatively a full bench of the high court, against the non-granting of their main relief and the fact that they only succeeded with the alternative relief in the December 2023 judgment.

However, the auditors’ cross-appeal application was conditional on Irba’s leave for appeal application being successful.

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More court action anticipated

In the apparently unlikely event that Irba attempts to continue with the adjourned disciplinary hearing, it appears likely the three auditors will lodge a further high court application to stop these proceedings on the basis that they are a nullity.

This is based on the fact that in terms of their main application, the former auditors applied to review and set aside the Irba disciplinary hearing against them on the grounds that there had been a material infringement of their right under Section 34 of the Constitution to a fair hearing from an independent and impartial committee.

The auditors were only granted an order reviewing and setting aside Irba’s disciplinary committee’s decision to refuse their application for the recusal of Sooklal and Griffiths as members of the disciplinary committee hearing the case and substituting it with an order that these two members be recused.

In the auditors’ cross-appeal, they said the court should have found the evidence conclusively demonstrated that:

• Irba, in Part A of the charge sheet, published serious, sensationalist, wild, speculative and unfounded allegations previously made in the media against the auditors;
• Irba presented Part A of the charge sheet to the disciplinary committee as relevant, true and the correct factual background to the charges against the auditors, although it, at the time, had absolutely no evidence in support of this narrative;
• The narrative presented in Part A of the charge sheet was that the syndication schemes were fraudulent, pyramid or Ponzi schemes in which the auditors did not perform an independent professional role but in which they were an important cog in the Sharemax machinery;
• The opening address on behalf of Irba in the disciplinary proceedings constituted a continuation of the same false narrative as that presented in Part A of the charge sheet, resulting in further adverse media articles that prejudicially affected the auditors and the continuation of the same previously mentioned narrative; and
• The disciplinary committee was not immune from or insulated against this ongoing false narrative.

The auditors claimed the court should have found that:

• None of the explanations provided by Irba in respect of Part A of the charge sheet and/or the opening address by the complainant constituted a cogent, credible or rational explanation;
• The only inference that could be drawn from the presentation of the false narrative both in Part A of the charge sheet and in the opening address is that it was calculated to improperly influence the disciplinary committee; and
• The previously mentioned objective to improperly influence the disciplinary committee was manifestly achieved.

Sharemax Investments collapsed in 2010 after the finding by a Registrar of Banks investigation that Sharemax’s funding model had contravened the Bank Act became public knowledge.

About 18 700 investors invested an estimated R4.6 billion in Sharemax’s various investment schemes.

Nova Property Group was tasked in terms of the original scheme of arrangement to repay investors.

This article was republished from Moneyweb. Read the original here.