CAPE EMPOWERMENT LIMITED - Cape Empowerment Trust : Litigation Summary

Cape Empowerment Trust : Litigation Summary

CAPE EMPOWERMENT LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1987/001807/06)
JSE code: CAP ISIN: ZAE000145066
(“CEL” or “the company”)

CAPE EMPOWERMENT TRUST: LITIGATION SUMMARY

Shareholders attention is drawn to a summons issued by the Trustees for the time being of the Grapsy Trust
(Master’s Reference no. IT1751/95) (“Grapsy Trust”) against Command Holdings Limited (as first
defendant) (“Command”) and Cape Empowerment Trust Limited (“CET”) (as second defendant) in the
Western Cape High Court, Cape Town, which summons was served on CET on 20 February 2013 (“the
Summons”). CET is a wholly-owned subsidiary of Cape Empowerment Limited.

The claim against CET, as set out in the Summons, (“the Claim”) relates to an alleged breach and repudiation
by CET of an alleged oral agreement entered into between CET, the Grapsy Trust and Mr Mohammed Shaffie
Mowzer (“Mowzer”).

The claim is for payment of the sum of R42 500 000 together with interest thereon, being in respect of alleged
damages suffered by the Grapsy Trust and Mowzer as a result of the alleged breach and repudiation.

The allegations made by the Plaintiff against CET and specifically the existence of the alleged oral agreement
are denied by CET and the action in terms of the Summons is and will therefore be defended by CET.

The Summons must be seen in context with other ongoing legal proceedings instituted by CET against
Command, Comwezi Security Services (Pty) Ltd (“Comwezi”), the Grapsy Trust and Mowzer.

In the first such matter, an application was instituted in the Western Cape High Court, Cape Town against
Comwezi and the Grapsy Trust as respondents in 2012. This is an application in terms whereof CET applies
for a declaratory order to be made that the settlement agreement concluded between the Parties to the
application on 8 June 2010 (“Settlement Agreement”) remains valid and binding and directing the
respondents to comply with the order made by the Court on 11 October 2011 by allowing and assisting CET
to conduct a due diligence investigation in respect of the business of Comwezi in accordance with the
provisions of the Settlement Agreement.

CET has been seeking to enforce its rights in terms of the Settlement Agreement since 2011 when an
application was instituted by CET against Comwezi and the Grapsy Trust after they argued that the Settlement
Agreement had lapsed, because CET was not entitled to extend the date for fulfilment of the suspensive
condition in the Settlement Agreement. This argument failed in the Western Cape High Court, Cape Town
with an order being made on 11 October 2011. The order was then upheld in the Supreme Court of Appeal
when it was ordered that the Settlement Agreement had not lapsed on the basis argued by Comwezi and the
Grapsy Trust.

Subsequent to the Supreme Court of Appeal’s ruling, Comwezi, however, again refused to allow CET to
proceed with the due diligence investigation and Comwezi now argued that the settlement agreement had
lapsed for another reason, i.e. due to CET’s failure to extend the date for fulfilment of the suspensive
condition in writing beyond November 2011.

CET accordingly applied for the declaratory order as set out above, which order was granted in the Cape High
Court on 5 December 2012.

Comwezi and the Grapsy Trust have now applied for leave to appeal based on this technical argument and
leave to appeal to the Supreme Court of Appeal was granted by the Cape High Court in February 2013.

The second matter which must be taken cognisance of is an application instituted by CET in terms of section
162 of the Companies Act 71 of 2008 in the Western Cape High Court, Cape Town against Command and all
the directors of Command, including Mowzer. This is an application for the directors of Command to be
declared delinquent in relation to the directorship each of them holds in Command or in the alternative for the
directors to be placed under probation in relation to their directorships in Command.



The application is premised on the conduct and omissions of the directors of Command, with particular
reference to the fact that the last approved Annual Report for Command is the 2008 Annual Report for the
year ending 30 June 2008 (the 2009 Annual Report was withdrawn), no Annual General Meeting of the
Command shareholders has been held since 22 January 2009 and the fact that Command has been suspended
from trading on the JSE.

This matter has been set down for hearing on 24 April 2013.

CET’s attorneys and the Senior Counsel who has been briefed in respect of the action instituted by the Grapsy
Trust and the aforesaid additional ongoing legal proceedings have advised CET that there is no merit in the
claim and that accordingly the chances of CET failing to successfully defend the Summons is negligible. The
Board is accordingly of the opinion that it is neither necessary nor appropriate for CET to make any provision
for any exposure in respect of the Summons.

Given the lack of any merit in the claim set out in the Summons, the Board would ordinarily have considered
it unnecessary to bring the Summons to the attention of shareholders. However, seeing as the shareholders are
to consider and vote on a delisting proposal at the 4 April 2013 meeting scheduled for this purpose, the Board
considered it appropriate to inform the shareholders on the matter (which had the Summons been received by
CET prior to the issue of the delisting circular issued on 1 March 2013 may have been disclosed in such
delisting circular).

CET’s legal advisors are furthermore also optimistic about CET’s chances of success in the other two legal
proceedings mentioned above.

Cape Town
26 March 2013

Corporate advisor and transaction sponsor
Java Capital

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