First published in the Daily Maverick 168 weekly newspaper.

A common adversary, in the form of Regiments Capital, has driven the South African Revenue Service (SARS) and retail banker Capitec to the Supreme Court of Appeal (SCA).

It has also sent the National Prosecuting Authority (NPA) off to a full bench of the High Court with an appeal of its own.

SARS, Capitec and the NPA are each trying to overturn initial court victories against them by Regiments – the company accused of having ushered the Gupta network into state-owned enterprises.

Once regarded as a beacon of black success in the financial sector, these days Regiments exists primarily to manage and mitigate the fallout from the State Capture scandals in which it has been implicated.

Much of that involves payback deals and a set of dense and intertwined civil litigation matters that stem from its Gupta-era bonanza. In a nutshell, the company – under the ownership of Litha Nyhonhya and Niven Pillay – has been navigating at least 20 court cases since 2016.

Those include several High Court applications initiated by Regiments or challenges to legal action brought by other parties, interdicts, contempt of court proceedings, anti-dissipation orders, an Anton Piller application and a bid by the NPA to restrain R1.6-billion in assets as the alleged proceeds of crime.

The plethora of legal battles Regiments has been involved in includes:

A marathon volley of legal ping-pongs involving the Transnet Second Defined Benefit Fund (TSDBF), with whom Regiments reached a settlement agreement with in 2019. (See sidebar.) Although Regiments came out of it somewhat pummelled and bruised, in the end it walked off with a R600-million settlement that put paid to a nearly R1-billion lawsuit. But, although it cited litigation fatigue among its reasons for this deal, the company’s fighting spirit shows no sign of dissipating just yet.

The deal with the TSDBF led to ongoing legal clashes with Capitec, which had tried to block it in court on the basis that it eroded the company’s BEE credentials because the TSDBF is regarded as a predominantly white retirement fund. The settlement involved the transfer of more than 800,000 Capitec shares to the fund, thereby wiping out Regiments’ liability in terms of the 2017 civil claim. Having lost, Capitec is off to the SCA. This is one of several cases between the bank and Regiments – the company also filed a lawsuit for R1.3-billion in damages from Capitec over restrictions imposed on the sale of shares on a previous occasion.

Regiments’ settlement with the TSDBF will have lifted anti-dissipation orders that were previously obtained by the fund. But the ink on the deal had barely dried when, in November 2019, the Investigating Directorate (ID) of the NPA snuck up on the company when it obtained an ex parte draft order to restrain more than R1-billion in assets as the alleged proceeds of crime. Regiments had to step into the ring for yet another round of litigation. When the case returned to court in May 2020, team Regiments – the company, Pillay and Nyhonhya and their respective family trusts – boasted an impressively heavyweight team comprising Danie Dorfling SC, Jeremy Gauntlett SC and Jaap Cilliers SC, with highly regarded junior advocates Angus McKenzie and Gcobani Ncgangisa each dishing out targeted blows during a trial by Zoom.By October 2020 Regiments scored a win when the court faulted the NPA team over issues of non-disclosure and set aside the draft preservation order. The court did not consider the merits of the state’s case and the NPA’s appeal is pending.

In September 2020, weeks before Regiments scored the court victory off the NPA, creditor Vantage Capital successfully applied to have the company liquidated. On the back of its win over the NPA, Regiments rushed back to court to undo the liquidation damage. The company managed to buy some time and the case returned to court in early 2021. In February this year, the High Court set aside the liquidation. But things didn’t go all that smoothly, because Regiments, in its rush to cash in on its victory over the NPA, neglected to cite SARS as a party in this round of litigation. The revenue service, once it caught a whiff of this, successfully applied to intervene. But, on February 22 2021, Regiments once again walked out of court having gained the upper hand when the liquidation was set aside. This looks like  a temporary win, though: SARS hit back with an SCA appeal that effectively suspended Regiments’ February 22 win.

The next round will play out at the SCA.

More than just putting out fires

Neither Regiments nor owners Litha Nyhonhya and Niven Pillay have been charged with wrongdoing, although the NPA has stated an intention to charge them.

The head of the ID, Hermione Cronje, in an affidavit submitted for the ID’s November 2019 application to restrain Regiments assets, boldly declared that the businessmen – along with their former partner, Eric Wood – will face charges of fraud, corruption and money laundering relating to deals with Transnet and the TSDBF.

Yet, 18 months later, there is still no indictment and Regiments’ owners have had the luxury of time to work through a long list of to-dos.

For now, all the energy – and no doubt much cash – is seemingly being spent on civil litigation, some of which has been quietly commended for its strategic nature.

In the case of the deal with the TSDBF, the company faced a nearly R1-billion lawsuit. In the end, Nyhonyha and Pillay walked off with a settlement of just over R639-million. The fund is pursuing its former partner, Wood, among others, for the rest.

Regiments also entered into a deal with Transnet for R180-million as a “full and final settlement” relating to an advisory contract it had in respect of the acquisition of 1,064 locomotives and a $1.5-billion loan deal with China Development Bank – payment remains outstanding because the money is tied up as a result of further litigation involving Capitec and SARS.

But this settlement came at an R65-million discount when viewed against the total claimed in Transnet’s initial lawsuits.

Some may argue that Regiments are winning in court because they have the best game plan, legal strategy or case.

Others are inclined to flag the company’s financial might as a key factor in it having enjoyed what could easily be mistaken for a winning streak in court.

In fairness, it is not possible to conduct a balanced assessment of Regiments’ gains and losses because all the information is not in the public domain, said a lawyer who closely monitors State Capture cases.

For example, it’s important to understand how settlement deals come about: who caved and proposed a deal?

That may be more indicative of the power dynamics at play.

Another vital issue is whether the merits of the cases against Regiments are being thrashed out or whether these court cases are merely legal skirmishes – sideshows to the real issues of alleged illegality yet to be properly considered in court.

Whether the Regiments litigation wave is part of a highly organised legal strategy with a clear endgame is anyone’s guess.

But electing to defend and oppose everything so vigorously may well prove to be Regiments’ Achilles heel down the line, said the State Capture legal observer.

The Regiments defendants are putting out affidavits left, right and centre – all of which set in legal stone their versions, across the multitude of civil cases.

This paper trail could well become a treasure trove of averments for a willing prosecution plotting its own strategy.

For now, what is clear is that nothing says fight quite like the name Regiments Capital. DM168

Who is Regiments Capital?

Regiments Capital is no ordinary character in the State Capture saga and its appetite for courtroom battles shows it leaves nothing to chance. Its legal antics thus far serve as an indicator of how it may respond to any attempt by the state to level criminal charges at the company or its owners.

It featured centrally in some of the most controversial deals that have come before the Zondo Commission – it was transaction advisor in Transnet’s acquisition of 1,064 locomotives, a deal that ended up costing the country R16-billion more than initially planned.

More important is how some of the company’s big-money deals at state-owned companies were allegedly clinched with the aid of the Gupta network in exchange for kickbacks of up to 55%.

Such payments were allegedly made to a string of Gupta-linked letterbox companies and documented by Regiments in its books as tax-deductible “professional fees”.

The National Prosecuting Authority wants to restrain more than R1-billion in assets belonging to the company ahead of an intended criminal prosecution. At the same time SARS is going back over records to determine the extent to which those “professional fees” may have short-changed the fiscus. DM168

A court roll like no other*

Regiments vs the Transnet Second Defined Benefit Fund (TSDBF)

In 2017 the TSDBF sued Regiments Fund Managers and others for nearly R1-billion to recover funds misappropriated during the company’s tenure as one of its portfolio managers.

In February 2018 the fund launched an application for an interdict to prevent Regiments from dissipating assets. Regiments agreed to put up security pending finalisation of the case.

In March 2018 the TSDBF returned to court with a successful application for Regiments to put up interim security.

Finally, the anti-dissipation application was heard in April 2018 and judgment went in favour of the TSDBF three months later. Regiments Capital applied for and was granted leave to appeal this order.

In August 2018 the TSDBF rushed to court with an urgent ex parte application for Anton Piller relief. The order is varied several times but is ultimately abandoned because of a settlement reached between the TSDBF and Regiments in November 2019.

Regiments vs Capitec

Regiments (via Coral Lagoon and Ashbrook Investments as the holders of its Capitec shares) first launched legal action against Capitec over alleged unconstitutional restrictions that only allowed it to sell its Capitec BEE shares to other black buyers in 2016.  This case is stagnant.

In 2019 Regiments, through Coral Lagoon and Ashbrook, took the bank to court to compel it to permit the settlement transaction with the TSDBF. Regiments won.

Capitec’s challenge of this order comes before the Supreme Court of Appeal in late May 2021.

Regiments launched a R1.3-billion lawsuit against Capitec in 2020. This is for damages it says the company suffered as a result of restrictions imposed during a previous sale of Capitec shares involving a former partner.

Approval for this transaction was seemingly conditional upon Regiments not relying on it for future litigation – and, for this reason, Capitec has returned to court, this time suing Regiments for breach of contract. (Regiments owns 60% of a company called Ashbrook Investments 15, which in turn owns 100% of a company called Coral Lagoon Investments 194, which in turn owns the Capitec BEE shares. For ease of reference, these are referred to above under the name of Regiments.)

NPA vs Regiments

In November 2019 the NPA obtained an ex parte order to restrain more than R1-billion in Regiments assets as the alleged proceeds of crime.

Regiments opposed the application and in May 2020 the case was heard via Zoom.

In October 2020 the case went in favour of Regiments, not based on the merits of the case, which were not argued, but rather because of alleged non-disclosures by the NPA during the ex parte application.

The NPA has been granted leave to appeal before a full bench of the High Court and Regiments is expected to file papers setting out its case over the next few weeks.

Regiments vs Vantage Capital/SARS

In 2020 creditor Vantage Capital applied to have Regiments Capital liquidated.

Regiments defended the application and filed a counter-application for the company to be placed in business rescue instead.

In September 2020 Vantage Capital obtained an order to liquidate Regiments.

On 26 October 2020 the NPA’s provisional restraint of Regiments assets was lifted and, five days later, Regiments brought an application to set aside the liquidation of the company, arguing that it was only unable to pay creditors because of the interim restraint that had now fallen away.

The company failed to cite SARS in this application and the revenue service launched an application to intervene in the proceedings.

The case returned to court in January 2021. In February, the company managed to get an order setting aside the liquidation.

The victory was short-lived. SARS successfully petitioned the Supreme Court of Appeal, thereby suspending the order that plucked the company out of liquidation. The appeal is now pending. DM168

*This is not an exhaustive list of litigation involving Regiments.

This story first appeared in our weekly Daily Maverick 168 newspaper which is available for free to Pick n Pay Smart Shoppers at these Pick n Pay stores.