The Western Cape High Court has reserved judgement in the matter in which the Independent Media Consortium (IMC), formerly the Sekunjalo Independent Media Consortium (SIM), is defending itself against the South African Clothing and Textile Workers’ Union (Sactwu) investment arm.
On Tuesday, the two parties delivered closing arguments before Acting Judge Michelle O’Sullivan, who will determine whether Sactwu’s general-secretary, Andre Kriel, had the authority to sign a subordination agreement, among other things.
In his closing argument, IMC counsel advocate Eduard Fagan, SC, said Sactwu was suing because it was trying to avoid the consequence that eventuated in the non-listing of Sagarmatha.
“It is based on hindsight. It is based on regret,” he said.
Fagan said it was not an issue that Sactwu’s loan claim against SIM would have passed to Sagarmatha pursuant to the conclusion on November 2, 2017 of a sale of shares and claims agreement in the event that the suspensive conditions of the sale agreement were fulfilled.
Fagan also said it was not contentious that everyone was firmly of the view that Sagarmatha would be listing in the near future.
He dismissed allegations by Sactwu Investment Group (SIG) that Independent Media chief executive Takudzwa Hove had told Kriel that the subordination agreement would lapse one week after the date on which Sagarmatha was scheduled to be listed on the JSE.
“Mr Hove had explained to Mr Kriel that the agreement was requested by the auditors.
“The reason for this was that the liabilities of SIM exceeded its assets, which meant that SIM was insolvent, and given that SIM was a target investment of Sagarmatha, the financials were needed so that SIM could be signed off on a going-concern basis,” Fagan said.
SIG counsel Leon Kuschke, SC, said Sactwu disputed that the subordination agreement was validly concluded and that it was of any force or effect.
Kuschke said Kriel did not have any authority to conclude the subordination agreement on behalf of the union’s investment arm.
“At all material times the defendants knew that the plaintiff wanted to recover payment of its loan (in cash) and that its participation in the proposed listing of Sagarmatha Technologies Ltd (“Sagarmatha”) was for the sole purpose of achieving that purpose.”
According to Kuschke, the written resolution of the directors of the board of the SIG passed on November 22, 2017, concerned the approval of a sale of shares and claims agreement to sell its shares in, and loan claims against SIM in exchange for shares in Sagarmatha.
“Mr Kriel did not have any authority to conclude the open-ended subordination agreement contended for by the defendants. This means that, insofar as the question of actual authority is concerned, the subordination agreement was not validly concluded.”
He also said that neither the written resolution nor the sale agreement had made any reference to a subordination agreement.
The matter dates back to 2013 when Sekunjalo Investment Holdings (SIH) bought the Independent Media publishing group from its then Irish owners.
SIH brought on board partners, among them Sactwu, which was looking to increase its footprint in the media space.
Sactwu, through SIG, invested about R150m into Independent News Media South Africa and became part of the consortium.
However, Sactwu requested to change the equity into a loan of R150m when the final agreement was signed.
At the centre of the court case is whether, among other things, Kriel had the authority to sign a subordination agreement, which is a legal document that establishes one debt as ranking behind another in priority for collecting repayment from a debtor.
The agreement provided that the union’s R150m investment would be paid back only when the media group’s assets exceeded its liabilities.
The investment was later swapped for shares in Sagarmatha Technologies, in 2017.
Cape Times