By Gershwin Wanneburg
Former CNA director John Newton has been cleared by the Cape High Court of any wrongdoing in the management of the stationery chain.
Newton was sued in 2007 by CNA's joint liquidators, who claimed that in 2000 to 2002 CNA's business was run recklessly, in the light of the Competition Act.
John Fourie, Johannes Klopper, Juanito Damons and Karen Keevy asked that Newton be held personally liable for all CNA's debts and liabilities.
Their case against Newton included that:
- He had signed a retailer agreement and deed of surety in favour of Wooltru, CNA's former owners, without the proper authority.
- The agreement held no commercial benefit for CNA.
- Newton had allowed two withdrawals of R30 million from CNA through Gordon Kay and Associates (GKA) to pay as part of the purchase price to Wooltru.
- He failed to have CNA placed under liquidation as soon as it became insolvent.
Judge Siraj Desai dismissed these arguments when he delivered his judgment on Friday.
He found that testimony from one of the plaintiffs' key witnesses, forensic accountant Harvey Wainer, was "fundamentally flawed in significant aspects".
Newton's evidence that he had the authority to sign the retail agreement to secure guarantees went unchallenged.
Also unchallenged was testimony that failure to sign the agreement would have led to a withdrawal of certain payments by M-Tel, which supplied CNA with MTN products.
That disputed the claim that the agreement was not beneficial to CNA.
The payments to Wooltru were made with the consent of Absa and, when done, CNA had cash in the bank.
Wainer had suggested that CNA should have been liquidated in March 2001.
Judge Desai supported the argument by Newton's senior counsel, S F Burger, that Wainer's views were based on his experience as an accountant.
The law required that recklessness by a director be determined in the light of what a "reasonable businessman" might have done.
"(Wainer) used past losses to predict CNA's financial future," Desai said.
"This did not make much commercial sense in that it ignored the turnaround proposals introduced by management at the end of 2000 and the new initiatives introduced by GKA in the era post-1 March 2001."
GKA bought CNA in 2001.
Judge Desai agreed with Burger that Wainer had been selective in the facts and documents he presented.
Wainer had ignored that CNA had been in business until July 2002 and until then had paid its debts on time, the judge said. Also, the plaintiffs had failed to call any of the directors and other professionals who had advised Wooltru and CNA.
Retail group Edcon bought CNA in 2002.