Khulubuse Zuma 'unaware' of Aurora mismanagement

2015-09-17 22:00

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Pretoria - Aurora Empowerment Systems director Khulubuse Zuma could not be held liable for the destruction of Aurora's Grootvlei and Orkney mines because he was unaware that Aurora was being mismanaged, the High Court in Pretoria has heard.

Zuma and his fellow Aurora directors - Zondwa Mandela and Thulani Ngubane - on Thursday applied for leave to appeal against a damning judgment holding them personally liable for the destruction of the mines that cost 5 300 workers their jobs.

Judge Eberhard Bertelsmann is due to deliver judgment in the application on Friday.

In June, the judge ruled in favour of the liquidators of Pamodzi Gold in terms of section 424 of the Companies Act, holding the directors, including financial directors Solly and Fazel Bhana, personally liable for all damage caused to the mine.

The liquidators estimated that the amount involved could be as high as R1.7bn.

He found that the directors, except Zuma, had been involved in willful deception in the 2009 bid letters that Aurora submitted to the liquidators, which claimed that Aurora had access to funds and enough experience to take over the mines.

He described Aurora as an "empty shell", that was insolvent when it made a R600m bid for the mines, and the entire
project as a "pipe dream". The claims in the bid documents were also "the figment of an overactive imagination".

He ruled that Zuma's failure to act once he knew the dire state of affairs was clearly a reckless disregarding of his duties as a director, but held that Zuma should only be held liable for losses that were incurred after December 1 2009 as it was not clear that he was involved in the mines before then.

Mike Helens SC, for Zuma, said the fact that Zuma had contributed R35 million to Aurora to pay the salaries of workers showed his concern for the company.

No one who was a willing party to the reckless abandonment of a company would have contributed that amount and Zuma would not have done it if he had any suspicion, he argued.

Judge Bertelsmann remarked that Zuma must surely have known "the wheels were coming off" when he realised the workers could not be paid and he had to pay them out of his own pocket.

Helens replied that it was "a leap too far in logic". He said it simply meant there was no money for the workers, not
that the company was being run recklessly.

He stressed that a director of a company was entitled to rely on management and that Zuma had distanced himself from the management and detailed running of the company.

Zuma was not involved in the bid documents and another court might draw a different conclusion about his involvement and whether "red lights" should have flickered for him given his distance from management, Helens argued.

Advocate Louis Hollander, for the other directors, argued that the quantum of the claim had been in dispute from the start.

He said there was a reasonable prospect that another court might find that the Pamodzi liquidators had not established any legal standing to bring the claim.

"The respondents told the court they genuinely believed funding was coming through. There's no reason to reject that they had such a genuine belief.

"...At worst they were negligent, not reckless," he said.

Hollander pointed out that there were further negotiations after the initial funding did not come through and said another court might take a different view on the actions of the directors.

Gerhard Cilliers SC, for the liquidators, argued that since Zuma borrowed money and used some of his own money to pay the workers, he must at least have known there were more fundamental problems to the extent that workers could not be paid.

He said much of the legal argument by the directors was directed to events subsequent to the acceptance of Aurora's bid. But those arguments were irrelevant and mere attempts "to resuscitate the patient".

He argued that no other reasonable court would come to a different conclusion about the misrepresentations in the bid documents and the liability of the directors.

He said the directors knew that none of the conditions to require Pamodzi's mines were fulfilled and that there was no funding, but they nevertheless took possession of the mines, placing the workers and the entire operation in jeopardy.

Read more on:    aurora empowerment systems  |  khulubuse zuma  |  pretoria  |  mining

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