Gupta Universe: Cash-starved Regiments Capital owners head to court in bid to pay legal bills

Businessman Niven Pillay and his partner Litha Nyhonhya have filed a high court bid to access millions of rands tied up in a restraint order under the Prevention of Organised Crime Act (Poca).

The owners of the embattled Regiments Capital say this is so they can pay outstanding and future legal bills for seven big-money matters, one of which is imminently going before the Supreme Court of Appeal.

Although extremely wealthy, Pillay and Nyhonhya currently have no control over their money after the National Prosecuting Authority (NPA) secured a final restraint order against them and their various companies in May.

That stems from Regiments’ involvement in an alleged conspiracy to milk state-owned companies through a partnership with the global consulting firm McKinsey & Company and the Gupta enterprise. Their Supreme Court of Appeal bid against the NPA’s restraint is pending, but for now, Pillay and Nyhonyha are urgently seeking a declaratory order that curator bonis Eugene Nel is authorised to release money for ongoing legal fees without a court order compelling him to do so.

Pillay, in an affidavit filed at the Johannesburg High Court, says they need about R20-million to cover expenses relating to matters involving the South African Revenue Service (SARS), Capitec Bank Holdings, the City of Johannesburg and Lebashe Investment Group.

Although mostly tied up in other litigation, he says there is more than enough money in the kitty to wipe out the NPA’s R1.6-billion restraint — they just don’t have access to it. (R600-million of this amount has been deducted in lieu of a settlement paid to the Transnet Second Defined Benefit Fund (TSDBF).

The two businessmen also want financial provision for the semi-urgent application filed on 25 July.

Regiments Capital, in liquidation, is not a party to the application brought by Regiments Fund Managers, Regiments Securities, Coral Lagoon Investments 194 and Ash Brook Investments 15.

The NPA intends to oppose the application — one that comes mere weeks after five companies in the Regiments stable obtained an order to compel the NPA and the curator to release money for “reasonable legal expenses” and any criminal proceedings that may flow from the restraint proceedings.

Pillay, in an affidavit submitted in his capacity as one of two directors of the various applicant companies, says the legal challenges must proceed in order to preserve value for the companies. Those cases include three major tax disputes with SARS, including that of Regiments Capital, another matter between Regiments Fund Managers and the City of Johannesburg involving some R60-million in unpaid fees and counter-claims by the city of up to R6-billion as well as R1.5-billion in quantified pleaded claims involving Capitec shares that two of the companies are battling Lebashe for.

All these cases were under way before the NPA secured the May final order, and the various companies stand to suffer significant losses if not pursued, especially should the NPA later elect not to charge them, fail to convict them or fail to obtain a confiscation order. Pillay says it’s in the interest of justice that they be permitted to pursue the litigation because it’s been nearly three years since the NPA brought the restraint proceedings and still there are no criminal charges against them.

While he faces an unrelated criminal case relating to a decade-old case involving the Gauteng Department of Health, the NPA has not initiated a prosecution with fraud, corruption and/or money laundering charges that informed the basis for its restraint application that was first filed in November 2019.

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Bills, bills, bills

Pillay says just two of the cases for which funding is required involve claims that, if successful, would easily cover the value of the NPA’s R1-billion restraint. Daily Maverick previously reported on a number of highly complex legal battles that the Regiments group of companies are embroiled in.

Court papers set out their case for outstanding and future legal bills and provide extraordinary insight into the complexity and associated costs thereof. Engagement letters and fee breakdowns for the law firm Smit Sewgoolam Inc (which has represented Regiments through much of the company’s State Capture woes), Andersen, Mkhabela Huntley Attorneys and CMS RM Partners, who represented them until June, are included as annexures to Pillay’s affidavit.

 



The total costs put forward comprise just over R3-million in outstanding legal fees and invoices plus another R15.8-million budgeted for legal expenses provided by the various law firms — for a period of no more than two years. They include fees for attorneys up to director level, tax experts and counsel at rates of up to R8,500 an hour.

The Supreme Court battle to set aside the liquidation of Regiments Capital scheduled for early 2023 has outstanding and yet-to-be invoiced bills of R566,000, with another R2.5-million budgeted by lawyers Smit Sewgoolam. Pillay says this case is of major significance as Regiments Capital has roughly R500-million in Capitec shares and another 74% stake in the Kgoro Consortium, which is the sole owner of the company that owns a Sandton property valued at roughly R1.4-billion.

In contrast, Regiments Capital has relatively minor creditors and with that, a debt of R180-million due to Transnet and another debt of R75-million, the amount for which Vantage Mezzanine Fund secured the company’s liquidation.

In addition, court papers set out amounts required across the other matters that include:

• A tax dispute with SARS, with R292,000 in outstanding legal bills, and expenses budgeted by the law firm Andersen of R2.5-million over two years.


• An arbitration matter against Lebashe Investment Group with R599,000 in outstanding bills. Andersen has set a total budgeted fee estimate of R4.5-million or R900,000 a month until December 2022.


• Another tax fight with SARS has R567,000 in unpaid and yet-to-be invoiced bills plus another R2.5-million in expenses budgeted for by Smit Sewgoolam for the next 12 months.


• A third tax dispute involving Regiments Fund Managers and Regiments Capital currently sits with more than R1-million in outstanding amounts and invoices to come and just over R2.2-million to cover expenses for the next six months as budgeted for by Smit Sewgoolam.


• The group’s fight against the City of Joburg has just over R70,000 in outstanding legal bills and it faces another R1.3-million in related legal expenses, according to figures provided by Mkhabela Huntley Attorneys.


• A bid to remove the liquidators of Regiments Capital has no outstanding fees, but is likely to cost R1.6-million, according to Smit Sewgoolam.


• The group’s fight with Capitec Bank Holdings has just over R715,000 in outstanding fees, and Mkhabela Huntley Attorneys has provided a fee including VAT of R906,000 for the upcoming Supreme Court of Appeal hearing, a figure that includes counsel and court attendance.

Read more in Daily Maverick: “NPA claims legal victory with R1.6bn restraint order against Gupta-linked Regiments Capital”

The NPA snatched control from the Regiments owners with a successful ex parte restraint application in November 2019, but the interim order obtained was discharged in October 2020. The NPA appealed and in May 2022 it succeeded and the Regiments group was again divested of access and control of the estate.

Pillay says they had access to money for a period of roughly 18 months during which the curator provided for legal expenses.

Nel’s position, however, changed upon the final order being granted in May and he now refuses to cough up without a court order directing him to do so.

The Regiments companies do not believe this to be a proper reading of the restraint order. Pillay says there would be no rational basis to differentiate between litigious costs related to restrained assets — which would ordinarily be covered by the estate out of the restrained assets — and expenses like accounting, tax and other professional services.

“There can be no suggestion that the costs that are the subject of this application are a means by which they are unlawfully dissipating assets or defeating the objectives of Poca.”

The various Regiments companies must be “imminently” represented in an arbitration hearing set down for 12 September, as well as two Supreme Court appeals, one of those scheduled for next month.

“It would prejudice the applications should they not be allowed to pay legal expenses to continue with these matters,” Pillay says.

He flagged a suggestion by the NPA in the earlier application that they approach Legal Aid South Africa for help with legal expenses.

This, Pillay says, is not an option because the various applicants are not natural persons that may qualify for Legal Aid.

Furthermore, they would not qualify under a means test requirement.

And, they have the money, it is just not available to them as control of it vests with Nel, the court-appointed curator, Pillay says.

While the restraint order provides for legal fees in non-litigious matters, it is limited to R500 an hour unless a higher rate is approved by the National Director of Public Prosecutions. Pillay describes the rate as unreasonable, saying it cannot be considered as an appropriate benchmark having regard to factors used to determine a reasonable fee in accordance with the Legal Practice Guidelines.

The legal battles in question are in the midst of proceedings; they are complex and voluminous in nature, Pillay says. Attorneys and counsel have been involved since inception, have institutional knowledge of the matters, and to brief new teams now would result in more costs, Pillay argues.

The NPA is expected to file its response later this month. DM