THE GUPTA YEARS
SCA’s extraordinary directive to Regiments Capital lawyers and Vincent Maleka SC
The Supreme Court of Appeal has asked law firm Smit Sewgoolam Inc and senior advocate Vincent Maleka to explain why their conduct in litigation involving the Regiments group in its battle against SARS shouldn’t be referred to the Legal Practice Council. Maleka led evidence at the Zondo inquiry involving payments to Gupta-linked letterbox companies.
Liquidators of Regiments Capital have highlighted information in a Supreme Court of Appeal case that suggests a potential conflict of interest on the part of the company’s attorneys, Smit Sewgoolam, and senior advocate Vincent Maleka.
Maleka – one of the darlings of the South African legal fraternity – is briefed on behalf of several companies seeking to remove the company from liquidation.
He was second in charge of the State Capture Commission’s legal team under colleague Paul Pretorius and led the evidence of a number of senior witnesses at the inquiry.
Those included former Standard Bank legal counsel Ian Sinton, who testified about the bank’s closure of Regiments’ bank account and payments to various Gupta-linked letterbox companies.
On Wednesday, the Supreme Court of Appeal is set to hear an application by the South African Revenue Service (SARS) in its attempt to keep Regiments in liquidation.
Read in Daily Maverick, our accompanying article: Five must-reads for a recap of Regiments Capital’s journey in the courts
Sars is appealing a February 2021 ruling that discharged Regiments from liquidation and paved the way for the company to strike a R600-million settlement with the Transnet Second Defined Benefit Fund (TSDBF).
The court will also hear applications from SARS and liquidators Willem Jacobus Venter and Kagiso Dinaka to submit a substantial bundle of further evidence flowing from other litigation across the Regiments sphere.
That evidence includes court papers relating to the National Prosecuting Authority’s R1-billion restraint order, the company’s 2014-to-2016 income tax assessments and the State Capture Report.
But ahead of Wednesday’s hearing, Elizabeth Vermeulen, Chief Registrar of the SCA , sent a short electronic directive to the parties.
Dated 7 February 2023, it is crisp and, at first glance, contains a standard request relating to the indexing of documents for case nr: SCA 1150/2021.
But then Vermeulen writes: “Given the nature of some of the allegations raised in the applications for leave to adduce further evidence and irrespective of the outcome of those applications, it will be necessary at the hearing of the appeal to hear submissions from or on behalf of Smit Sewgoolam Inc and Mr Maleka as to whether their conduct in representing the First to the Ninth Respondents in this matter, warrants a referral to the LPC. (Legal Practice Council)”
The first to the ninth respondents in the case include Regiments’ owners, Litha Nyhonyha and Niven Pillay, Regiments Fund Managers, Coral Lagoon Investments 194 and Ash Brook Investments 15.
The SCA note directs the law firm and Maleka to 22 paragraphs contained in an affidavit filed by Regiments liquidators in their application to adduce further evidence in the case.
Venter and Dinaka, not initially party to the appeal, want to submit additional evidence that did not feature during the initial high court hearing that led to an order discharging Regiments from liquidation.
Their application, notably, comes after the SCA formally asked parties about the relevance of various other court judgments relating to Regiments and whether such ought to be placed before the court.
The sections referred to in the SCA directive deal with, among other things, Sinton’s testimony at the State Capture inquiry about why the bank terminated Regiments Capital’s account. Also, payments of alleged kickbacks to Gupta-linked letterbox companies, Homix, Chivita and Albatime by Regiments.
The SCA’s precise concerns with these sections in relation to the conduct of either Smit Sewgoolam or Maleka are likely to only be discerned in full during the hearing.
Maleka was contracted to the State Capture Commission and left well ahead of the conclusion of the public hearings that ran from August 2018 until August 2021. No reasons were given for his departure then.
He led the testimony of a range of heavyweight witnesses including Sinton’s in March 2019.
Read in Daily Maverick: “Standard Bank presents records of alleged money laundering operation involving Gupta-linked entities”
Court papers in the appeal do not contain a response from Maleka on the issues raised by the SCA.
But, an affidavit submitted by attorney Tiaan Jonker of Smit Sewgoolam, in response to the SCA’s 7 February directive, suggests that the law firm’s take on the court’s request is that it centres on two key issues.
One, that Smit Sewgoolam had failed to declare, in the earlier court proceedings, that it stood to score more than R5-million in fees from an unbundling transaction involving the sale of Capitec shares, and second, a potential conflict of interest on the part of Maleka.
Jonker says there is no justification to report either the firm or Maleka to the LPC and that the allegation in respect of Smit Sewgoolam is without merit.
In a section titled “Briefing of Advocate Maleka SC”, Jonker suggests that the “conflict of interest” concern relates to Maleka’s involvement in previous litigation around the unbundling transaction (that transaction dates back to 2016 and the last leg concluded helped Regiments owners Pillay and Nyhonyha to pay back R600-million to the Transnet Second Defined Benefit Fund (TSDBF).
Read in Daily Maverick: “Exclusive: Regiments Capital puts up R500m in Capitec shares in lieu of ‘State Capture’ claims”
“When Maleka was briefed by SSI (Smit Sewgoolam) in this (the current) matter, SSI did not anticipate any conflict of interest. The instruction relates to the litigation about the implementation of the unbundling transaction which has no connection with the allegations of State Capture levelled against RC (Regiments Capital),” Jonker says.
He says Maleka was briefed to assist when Coral Lagoon and eight other applicants instructed the law firm to bring an urgent application to set aside the winding-up of Regiments Capital and to implement the final stages of the unbundling transaction aimed at settling with the TSDBF.
This was because Maleka already had the “institutional knowledge” of Coral Lagoon’s structure, the Capitec shares it owned and the transaction.
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“There was no conflict of interest. The urgent application was unrelated to the Zondo Commission inquiries and more specifically to Mr Sinton’s testimony regarding Standard Bank’s engagement and decision to close RC’s bank account,” says Jonker.
Regiments Capital, now in liquidation, was essentially the mothership of a group of companies that are caught up in myriad litigation flowing from the State Capture scandal.
Since it is in liquidation and under the control of liquidators, much of the litigation has been driven by various other entities in the group – some of which Maleka has appeared for, including Regiments Fund Managers, Coral Lagoon and Ash Brook Investments and Regiments Securities.
He is also briefed in the group’s quest for a declaratory order that Eugene Nel, curator of the Regiments estate currently under a restraint in terms of the Prevention of Organised Crime Act (Poca), does not require a court order to release cash for legal fees payable by the companies in question.
Read in Daily Maverick: “Gupta Universe: Cash-starved Regiments Capital owners head to court in bid to pay legal bills”
In that case Smit Sewgoolam provided the court with details of outstanding legal bills and projected fees for some of the high-stakes court cases.
It includes the cost of Maleka’s fees for various matters including the SARS SCA appeal currently under way.
SARS, in its appeal and its own application to adduce further evidence, argues that it not in the interest of justice to take Regiments out of liquidation, thereby handing the keys to the company back to Nyhonyha and Pillay, its “criminally implicated directors”.
The two businessmen are among a group of 18 parties facing criminal charges relating to Transnet’s acquisition of 1,064 locomotives.
It would also be futile to do so as the NPA would have to return to court for a fresh restraint order. The information it wishes to introduce into the appeal record is “weighty, material and credible”, SARS argues.
The Regiments group is opposing both applications to adduce further evidence. It says SARS and the liquidators are trying to place a substantial amount of new material before the court and they are trying to do so selectively. DM
The SARS appeal in a nutshell
Regiments Capital was liquidated by Vantage Mezzanine Fund, with a final winding-up order granted in September 2020. The company rushed to court, saying there is more than enough money in the kitty to settle its overall debt, and in February 2021 the High Court in Johannesburg set aside the liquidation. SARS failed in an initial bid for leave to appeal that order but later successfully petitioned the Supreme Court. This case is being heard on Wednesday, 8 March 2023.
In addition to its appeal, SARS is also applying to submit an extensive list of additional documents into the appeal record.
It includes Regiments Capital tax assessments covering the period 2014 to 2016, and the NPA’s application for a restraint order.
The outcome of this appeal has important implications and, significantly, it has a bearing on a R1-billion restraint order that the NPA currently has in place over various Regiments companies, its owners and their family trusts. DM