LEWIS GROUP LIMITED - Favourable judgment for Lewis and its directors

Favourable judgment for Lewis and its directors

Lewis Group Limited
Incorporated in the Republic of South Africa
Registration number 2004/009817/06
JSE share code: LEW
ISIN: ZAE00058236
JSE share code: LEW 01
ISIN: ZAG000110222

(“Lewis” or “the group” or “the company”)

FAVOURABLE JUDGMENT FOR LEWIS AND ITS DIRECTORS

Shareholders are advised that the Western Cape High Court (“Court”) today handed
down judgment in Lewis’ favour in the matter between Lewis and David Woollam and
Others. The Court set aside, in terms of section 165(3) of the Companies Act,
Woollam’s demand, dated 20 May 2016, to have certain of Lewis’ directors namely
Messrs Enslin, Davies, Nurek and Saven declared delinquent (“Directors”). The
findings of the Court are listed below:

   -   Woollam’s resort to the provisions of section 165 of the Companies Act in
       wanting the Company to pursue claims against the Directors, which he was
       able to do personally, was vexatious in the circumstances, but in any
       event the court held that there was no merit in Woollam’s demand to have
       the directors declared as delinquent persons at the instance of Lewis;

   -   Woollam could not controvert the evidence of Lewis that the sale of loss
       of employment insurance occurred because of erroneous data capture, but
       moreover, there was nothing in the body of Woollam’s demand or the
       evidence before court to connect any of the Directors with the incidents
       of the sale of loss of employment insurance. The Court found that
       Woollam’s demand does not make out a prima facie case of dishonest or
       grossly negligent conduct by the Directors, or that any of them was
       guilty of wilful misconduct. On the contrary, the Court found that the
       evidence shows, upon being alerted to the issue, Lewis’ Board acted
       quickly and responsibly to address the problem. The Court found Woollam’s
       complaint to be without merit. The Court also found that this complaint,
       on its face, was indicative of vexatiousness but did not find it
       necessary to make a determination in that regard;

   -   In regard to Woollam’s claims related to extended warranties sold to
       Lewis customers, the Court found that such complaint did not implicate
       any of the Directors and his allegations do not merit an investigation by
       Lewis on this issue;

   -   In regard to Woollam’s claims related to delivery fees, the Court found
       that his complaint would not make out a case of fraud against Lewis’
       operating subsidiary. Moreover, the Court found that it was even less
       likely that it could be said that the Directors were guilty of the sort
       of conduct referred to in section 162;

   -   In regard to Woollam’s allegations regarding Lewis’ accounts and the
       changes to its accounting policies, the Court found that no case had been
       made out for delinquency of the Directors. The Board’s adoption of a
       special investigation into the Company’s accounting policies, following
       its   2015  annual  general   meeting  (“AGM”),   and  the   adoption  of
       recommendations relating thereto, which led to adjusted financial
       results, were irreconcilable with fraudulent or grossly negligent
       behaviour on the part of the Directors;

   -   In regard to Woollam’s claims of inappropriate revenue recognition in
       relation to extended warranties, and an incorrect response given to his
       question on this issue at Lewis’ AGM, the Court found that this fell far
       short of serious misconduct or dereliction of duty, which is what was
       required in order to qualify Woollam’s complaint in terms of section 162
       of the Companies Act;

   -   The Court concluded that Woollam’s demand failed to demonstrate that
       Lewis had the makings of a case for the relief that he insisted the
       company should pursue against the Directors;

   -   In regard to Woollam’s admitted shorting of Lewis’ shares, the Court
       found that it was noteworthy that Woollam failed to disclose his short-
       trading activities when involved in publicising his adverse opinions on
       Lewis business activities. The Court observed that this raised an ethical
       question but declined to determine the question in the present
       proceedings as Woollam’s alleged conduct had been referred by Lewis to
       the Financial Services Board for investigation;

   -   The Court awarded Lewis costs against Woollam in regard to an
       interlocutory application brought by him to strike out Lewis’s replying
       affidavit, including wasted costs. The Court also awarded costs against
       Woollam in regard to the setting aside of his demand. These costs orders
       include the costs of two counsel.

Cape Town

11 October 2016

Sponsor: UBS South Africa Proprietary Limited
Debt Sponsor: Absa Bank Limited (acting through its Corporate and Investment
Bank division)
Legal Advisors: ENSafrica

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