Judge’s reasons for urgent interdict support Tekkie Town case

The law moves in its own slow, inexorable way. Quite why the honourable Justice Nathan Erasmus has only just handed down reasons explaining an order that was granted in April is a mystery.

In April the good judge granted an urgent interdict that prevented Steinhoff from selling, committing, promising, or doing anything else with its shares in Tekkie Town or those of Pepkor, in which Tekkie Town is controversially housed, and in which Steinhoff has a 71% shareholding. 

At the time the order came as a relief to the former owners of Tekkie Town, founder Braam van Huyssteen and former CEO Bernard Mostert. Van Huyssteen had sold the business to Steinhoff for R3.26-billion in 2016 and accepted restricted Steinhoff shares in exchange. But when Steinhoff collapsed and its share price imploded, the scrip the Tekkie Town vendors received became commercially worthless.

They have maintained ever since that they concluded the transaction based on misleading and fraudulent information, and have been on a single-minded mission to get the courts to nullify the agreement and return the company to them. 

In March, Steinhoff released an 11-page summary of audit firm PwC's 3 000-page report on its probe into the alleged fraud and corruption that led to the collapse of the Steinhoff share price in December 2017. Aside from confirming the validity of the fraud allegations, the report also spelt out the extent of the company’s debt, which chilled the former Tekkie Town executives. “All we want is our business back,” Mostert told Business Maverick.

“The main case to have the deal set aside will only be heard in 2020, and we needed to ensure that Tekkie Town was not sold in the interim to satisfy Steinhoff creditor demands.”

The reasons for the granting of the urgent order, set out by Judge Erasmus yesterday (August 20th), lend support to their cause. 

In outlining his reasons underpinning his order Judge Erasmus noted; “As it is apparent from the agreement itself that insofar as it relates to the applicants that it was the exchange of the entire shareholding together with the business operated by it for shares in the first respondent (Steinhoff) that turned out to be Fools Gold as a result of misrepresentations made by [former Steinhoff CEO Markus] Jooste on the behalf of Steinhoff. In my view the applicants made a proper case for both urgency and the harm they seek to prevent.”

 In what has turned into an ugly tug-of-war, Pepkor executives have countered all along that Pepkor is an independent entity, that it was not part of the original transaction between Steinhoff and the Tekkie Town vendors, and thus its ownership of Tekkie Town is legitimate. 

(In 2017 Steinhoff transferred ownership of Tekkie Town to Steinhoff Africa Retail, which has since been renamed Pepkor).

However Judge Erasmus put short shrift to that notion: While the Pepkor executives may not have been party to the main action… “these assertions lose sight of the nature of the relationships inter se in the Steinhoff Group. That it seems, [these] might also not always be what it portrayed at first sight.”

 He added, “The transfer path of the Tekkie Town business and its shares were clearly plotted before the first transfer took place.” 

 “Some of the decisions were made the day before the transaction would take place, and on the same day the flow would go from one subsidiary to another.”

Van Huyssteen, who attended the handing down of the reasons on Tuesday, said; “We have always been focused on restoring our interest in the business and growing it in the way we always had – without debt and one store at a time. 

“Over time it became evident to me that one of the reasons why Tekkie Town exists is to give a career platform to South Africans. It does not exist to shelter a select group of Pepkor executives from their losses in Steinhoff or to assist Steinhoff in servicing foreign debt with South African effort. We want to ensure that we and our colleagues retain our right to grow this business and leave a positive legacy. In that regard we remain open to any solution offered by Steinhoff that will result in this outcome.”DM