African Bank Investments Directors Rebuff $142 Million Claimby
Black shareholders said directors, auditors failed duties
Deloitte & Touche call claims `vague and embarrassing'
The former directors of African Bank Investments Ltd., which failed in August 2014, said in court documents that they aren’t liable for a 2.03 billion rand ($142 million) damages claim lodged by black shareholders who held stock in the collapsed lender.
The 10 directors, including former Chief Executive Officer Leon Kirkinis, owed fiduciary duties to the company and not to shareholders, so “a breach of those duties cannot found a claim for damages,” they said in court papers lodged last week in the North Gauteng High Court in Pretoria. Only Abil, as the bank was known, could have suffered a loss, the directors said, denying that a violation of their duties led to the bank’s demise.
Daniel le Roux, an attorney representing the former Abil directors, confirmed that papers were filed on April 15 and declined to comment on his clients’ behalf.
Abil set up two ownership plans with black investors, starting Eyomhlaba in 2005 and Hlumisa in 2008. When the lender collapsed 20 months ago amid soaring bad debts and a lack of funding, shareholders were left with nothing. Having held a combined 4.9 percent of the bank, the two shareholder groupings first filed court papers in December, claiming that Abil’s directors acted recklessly and misled investors. No court date for a hearing has been set yet.
Following the demise of Abil, the South African Reserve Bank stepped in to save the remaining viable assets. These assets started business again as African Bank Ltd. on April 4. The central bank also asked advocate John Myburgh to investigate Abil’s collapse, and his report was delivered to the Reserve Bank in the first quarter of last year. The report, which was to probe whether there had been any wrongdoing on the part of directors, has not yet been made public. The central bank didn’t respond to questions about the delayed report.
The court papers filed by the former directors of Abil last week requested that some of the black shareholders’s claims be struck from the original summons, including that fiduciary duties were owed to individual shareholders. It was not a full response to all of the allegations made against the former directors of the failed bank.
“We are pursuing a court case against the Abil directors and Deloitte & Touche,” Desmond Lockey, chairman of Hlumisa, said by phone. “Deloitte gave unqualified audit reports on Abil. There are 13,000 black shareholders and we’re meeting on Tuesday in Pretoria to brief creditors.”
Hlumisa and Eyomhlaba’s claims are “vague and embarrassing,” Deloitte & Touche LLP said in court papers dated March 11. According to auditing laws, Deloitte wouldn’t incur any liability unless it’s proven that opinions were expressed maliciously, fraudulently or there was negligence in the performance of its duties, said the firm, which also sought to have a number of the black shareholders’s claims amended in the original summons.
Kathryn Gawith, the Norton Rose Fulbright LLP attorney who signed the legal documents on behalf of Deloitte & Touche, confirmed papers were filed on March 11 and said the matter is being defended, declining to comment further on her client’s behalf.