Wrap Text
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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