Findings against Nova chair referred to NPA

The National Prosecuting Authority (NPA) may investigate Connie Myburgh, chair of the Nova Property Group, for his apparent role in delaying the liquidation and the subsequent looting of the assets of a company, Harrison & White (H&W).

Such an investigation may follow after the Master of the South Gauteng High Court referred a Section 417 report to the NPA for investigation in February.

The report found that the conduct of Myburgh and H&W directors Gavin Zietsman and Michael Ralston resulted in creditors suffering significant losses, and recommended its referral to the NPA.

The referral is of significant public interest as Myburgh is the current chair of Nova, the rescue vehicle of the failed Sharemax investment scheme, and a former director of Orthotouch, the rescue scheme of the failed Highveld Syndication schemes.

Both companies are currently in financial difficulty, and both sold off many assets in recent years.

More than 30 000 people invested nearly R10 billion in these schemes, and it seems unlikely they will be refunded their original investments, if anything.

Read:
Highveld Syndication BRP and Nova chair sued for R110m
The dark underbelly of the business rescue industry
‘Guilt without trial’ – Klopper

Referral of the report

The case stems from 2017, when the Master of the South Gauteng High Court ordered a Section 417 investigation into several individuals’ conduct during the three-and-a-half years from when the directors put the company into business rescue to its eventual liquidation.

Retired justice Eberhard Bertelsmann was the commissioner of the inquiry, and he found the business rescue process was abused and allowed for the widescale illegal sell-off of assets. Creditors, which include Rand Merchant Bank, were left with virtually no dividend.

Bertelsmann submitted the report to the master in 2019 and recommended its referral to the NPA.

The Department of Justice and Constitutional Development confirmed to Moneyweb that the Master of the South Gauteng High Court referred the report to Advocate Andrew Chauke, the Director of Public Prosecutions in Gauteng.

Interestingly, it seems the master initially decided not to refer the report.

In response to Moneyweb questions, a spokesperson said the master did not refer it as the report did not make such a recommendation, citing an incorrect paragraph in the report.

However, Moneyweb drew the official’s attention to the correct paragraphs in the report, which recommend the referral to the NPA, after which the master seemingly changed the decision.

Myburgh’s response

In response to Moneyweb’s questions, Myburgh said he was unaware of the referral and denied any wrongdoing. “You cannot, with respect, expect me to respond to this assertion, which you have elevated to a ‘fact’, without this ‘fact’ being confirmed. I certainly am not aware of any such ‘decision’.

“I have not committed any wrongs which could substantiate investigations or proceedings against me and whilst I disagree with and reject the views of the Commissioner regarding me in the confidential Section 417 Report, as being baseless, the media is not the forum to debate any issues regarding the Report and the Report will be dealt with in the fullness of time in the appropriate forum, should the need therefor arise.”

Myburgh also stated that he would not resign as chair of Nova as a consequence of the referral. “The board of the Nova Group has dealt with the Report and has already confirmed that my resignation from the board is not necessary.” (Read Myburgh’s full statement at the end of this article.)

Neither Zietsman nor Ralston responded to Moneyweb questions.

Civil action

The master’s referral of the report to the NPA follows earlier civil proceedings the H&W liquidators instituted against the directors and former management of the company for the losses the company and creditors allegedly suffered.

The liquidators claim R110 million from the directors, Myburgh, H&W business rescue practitioner Hans Klopper and Diaan Ellis of Pretoria-based law firm Faber Goërtz Ellis Austen. They all indicated that the action would be opposed.

In the summons, the liquidators claim H&W owned assets valued at R116 million when it entered business rescue in July 2013, but only R6.1 million remained at liquidation in February 2017. According to the summons, H&W’s total debt at liquidation was R66 million.

This delay, they claim, resulted in over R110 million in losses, which the liquidators are now claiming from the individuals.

Read: Highveld Syndication BRP and Nova chair sued for R110m

Findings and recommendations of the Section 417 report

Bertelsmann found in the 79-page Section 417 report that H&W was “the victim of directors and management bent upon personal enrichment in this regard of the rights of creditors”.

Regarding Myburgh, Bertelsmann states that he breached his fiduciary duties as H&W’s legal advisor and found himself in a triple conflict of interest.

The report states that Myburgh should have been aware of the company’s dire financial position and recommended the company’s immediate liquidation rather than put it into business rescue.

“As a legal advisor he was obliged to engage the company directors and management as soon as the red lights of inability to meet financial commitments as and when they occurred began to flicker. He did nothing of the sort.

“He continued collecting retainers while the sham of business rescue proceedings played itself out over a period of about three years,” the report reads.

Bertelsmann also found that Myburgh colluded with the directors and management.

“He colluded with the company directors and management in obstructing the flow of justice by delaying the finalisation of the liquidation application through the stratagem of the intervention of the trusts, who were to his knowledge by no stretch of the imagination bona fide creditors.

“In his role as legal advisor, he indubitably participated in the management of every one of the companies in the group, including the insolvent company. The actions stipulated above were clearly reckless, if not worse.”

The Section 417 report made damning findings and recommendations related to Zietsman and Ralston, finding their conduct to be reckless, fraudulent and dishonest.

Legal Practice Council

Bertelsmann also recommended that Myburgh and Klopper be referred to the Legal Practice Council (LPC) for investigation and possible disciplinary action.

After Moneyweb alerted the LPC in 2019 of the existence of the Section 417 report, the LPC approached the master to release the report.

Jaco Fourie, senior legal officer at the LPC’s disciplinary department, said the master only referred the report to the LPC in February this year. “We will now first have to give the respondents an opportunity to make their submissions in respect of the report by Justice Bertelsmann, before we proceed to refer the matter back to the investigating committee. In terms of Rule 39.3.1 we are required to grant a respondent 30 days to answer.”

Full response from Connie Myburgh, chair of the Nova Property Group and former legal advisor of H&W:

Mr van Niekerk.

 You suggest, without revealing your source, that the Master of the High Court has decided to refer the confidential Section 417 Report to the NDPP [National Director of Public Prosecutions]. You cannot, with respect, expect me to respond to this assertion, which you have elevated to a “fact”, without this “fact” being confirmed. I certainly am not aware of any such “decision”.

 I have not committed any wrongs which could substantiate investigations or proceedings against me and whilst I disagree with and reject the views of the Commissioner regarding me in the confidential Section 417 Report, as being baseless, the media is not the forum to debate any issues regarding the Report and the Report will be dealt with in the fullness of time in the appropriate forum, should the need therefor arise.

 The board of the Nova Group has dealt with the Report and has already confirmed that my resignation from the board is not necessary.

 Should you decide to print anything regarding this matter, you are requested to quote my response verbatim.

 Connie Myburgh.