Durban - A wealthy Zimbabwean businessman has been awarded more than R8 million – in Australian dollars – which he claimed he was swindled out of by two former business partners who persuaded him to invest in a financially ailing KwaZulu-Natal North Coast property development.
Richard Peall could not come to Durban to testify in his civil trial against Marcus William Marchant because he suffers from motor neuron disease and, at the time of the trial before Judge Peter Olsen in August this year, was reportedly no longer able to speak and could only communicate using a chalk board.
However, he sent a representative, Glynn Hawkes, another director of Kensal Rise Investments, the company which sued Marchant.
The essence of the allegation was that Marchant owed Kensal Rise a fiduciary duty, but he misrepresented the financial worth of Morgan Creek Properties – a company in which he was also a director – enticing investment.
Peall has also laid criminal charges and is suing – in Mauritius – Charles Salem, who was tasked with handling his investments outside Zimbabwe and who cut the deal with Marchant.
In his recent judgment, Judge Olsen said Marchant was a director of Morgan Creek along with brothers Mark and James Johnson and Richard Mohring.
At the time in question in November 2009, Morgan Creek’s main project was the development of Shortens Country Estate and “things were not going well”.
E-mails between the directors revealed that they were “not sleeping at night” and without a substantial investment of money – R4m in just days and another R8m by the end of January 2010 – the company was at risk.
One of the reasons for the financial crisis was the “scary company overheads” because of the four directors’ salaries and perks and that the project was running behind schedule.
Marchant, the judge said, knew Salem and that he acted for a “trust or overseas vehicle”. Kensal Rise Investments was formed to buy, at a discount, 12 relatively near-completed units.
The next event was the purported sale of Marchant’s “luxury home” for R4m to Kensal Rise, also orchestrated through Marchant and Salem.
While the deal never went through, the money was paid in advance “to show good faith” into Marchant’s bank account.
Marchant, in his evidence, said he was contacted by Salem who said his “principals” had changed their minds and did not want the house. Salem then suggested buying Marchant’s shares in his various companies.
Centre stage in the trial was “annexure C” – a document Peall claims was presented showing the net asset value of the companies to be R14.9m, “a gross overstatement” of the true position of about R600 000.
Morgan Creek – the schedule alleged – was valued at R12.6m whereas it had an accumulated loss of R3m.
Also not disclosed was that in September 2010, only R1.3m had been declared in dividends to shareholders of Morgan Creek while directors’ salaries over the same period had been R12.4m, making it “hardly a sensible investment”.
Although his fellow shareholders in Morgan Creek expressed concern at the values Marchant was placing on his shares, an auditor signed a certificate for the Reserve Bank and the deal went ahead.
The judge said the evidence showed that Marchant had advanced his own interests by making a profit off the back of Peall, who was entitled to the return of the money paid into Marchant’s Australian account.
The Mercury