Two companies majority-owned by troubled Gupta-linked firm Regiments Capital have 10 days to withdraw their more than R1.2 billion lawsuit against Capitec Bank for fronting, unfair racial discrimination and grossly negligent and fraudulent material misrepresentation.
The Western Cape High Court on Friday ordered both Coral Lagoon Investments 194 and Ash Brook Investments 15 to withdraw their R1.2bn lawsuit against the bank within 10 days as their agreement states that disputes should be referred to arbitration and not be settled in court. Regiments Capital holds an interest of about 60% in Ash Brook, which owns 100% of Coral Lagoon, which bought 10 million shares in Capitec Bank in 2006.
Judge Derek Wille found that neither the agreement not to sue nor its enforcement violated public policy.
The lawsuit Capitec wanted withdrawn was lodged in the Western Cape High Court in June last year.
Coral Lagoon and Ash Brook approached the high court to force Capitec Bank to pay almost R1.23bn plus interest and costs.
According to the Regiments companies, the terms of the subscription agreement breached the duty of reasonableness and good faith, alternatively a common law duty of good faith.
The December 2006 subscription agreement has restrictions relating to the disposal of shares by Coral Lagoon to ensure that Capitec Bank maintains its direct transformation shareholding.
It also states that any dispute should be resolved through private arbitration.
Coral Lagoon and Ash Brook told the high court that Capitec Bank breached the duty of reasonableness and good faith imposing a condition of consent, which means the bank would waive various rights in connection with the selling restrictions that later caused Coral Lagoon to dispose of its shares at a discounted rate.
In 2012, the Public Investment Corporation (PIC) bought nearly 5.3 million of Coral Lagoon’s 10 million in Capitec Bank.
Coral Lagoon and Ash Brook accused Capitec Bank of committing a wrongful act through its grossly negligent and fraudulent material misrepresentation when it (Coral Lagoon) sold almost 3.4 million of its remaining shares to black economic empowerment entity Petratouch and retained 1.35 million shares without the bank’s consent.
According to the Regiments’ companies, they suffered pure economic loss claim due to Capitec Bank’s breach of a duty to not engage in conduct that diminished or reduced the value of their proprietary interest in its shareholding in the bank.
They also accused Capitec Bank of fronting and conducting its business in a manner that is oppressive or unfairly prejudicial to them and unfair discrimination on the basis of race in terms of the Promotion of Equality and the Prevention of Unfair Discrimination Act.
Coral Lagoon insisted that Capitec Bank unfairly disregarded its interests as laid out in the Companies Act, which states that a shareholder or a director of a company may seek relief from the courts if any act or omission is oppressive or unfairly prejudicial or unfairly disregards its interests or has been carried out or conducted in such a manner.
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