Thousands of people who were persuaded by hard-sell salesmen outside supermarkets to spend large sums on "points" for dream holidays stand to lose their money.
This emerged after it was claimed in court on Friday that directors of the Cape Town holiday timeshare group Holland Moorehouse led the high life, which included a visit by five directors to Las Vegas when the company's finances were "chaotic".
An urgent application for the liquidation of the Holland Moorehouse was dismissed by Mr Justice Deon van Zyl in the Cape High Court on Friday. Judge Van Zyl ruled that there was no reason for the application to be regarded as urgent.
However, lawyer Schalk Marais, who represented applicant Brett Jolly, said he had instructions to bring a further application for Holland Moorehouse's liquidation
Unibank, which is owed R5,2-million by Holland Moorehouse, opposed the application. The 8 800 subscribers to the holiday scheme could lose a packet if the application succeeds. The average cost of buying into the scheme was about R17 600, according to court papers.
The company directors did not appear to stint themselves, according to statements in the documents.
They paid themselves R30 000 a month plus R20 000 on a loan account, a share of the profits, cellphone, internet and telephone expenses, a R10 000 annual travel allowance and car, petrol, and insurance allowances.
Holland Moorehouse representatives adopted a hard-sell approach, often approaching potential clients outside supermarkets with promises of prizes, usually cars, if they attended presentations. But only one car was ever won.
Five directors visited Las Vegas last year, it was said in court papers, although "the company was in extreme debt".
And a director wrote, in a letter filed with the papers, that trust funds were "earmarked" by another director "in terms of Holland Moorehouse debt. It places him in a precarious position, but please don't blame me."
Trouble between the directors also arose about "the surreptitious transfer" of funds away from the company, described in another letter filed.
The liquidation application was brought by Brett Jolly, a director of the company, who holds 30 percent of the issued share capital in Holland Moorehouse, but who later started his own business selling the group's products.
Jolly said in an affidavit that Holland Moorehouse and its subsidiaries were commercially insolvent.
Jolly told the court that "for a considerable time" he had been demanding payment of R5,2-million owing to him.
He said that Holland Moorehouse had not released him from suretyships, which exposed him to enormous financial risk.
This was because he and other executives were bound for the indebtedness of the group to Unibank for R6-million, from which Unibank would not release him.
"I was responsible for sales and marketing. I left all other matters to Davout Wolhuter, the company's attorney," he said .
Later Wolhuter became group chair while his father, Charles Wolhuter, and his secretary, Kathleen Martufi, were made directors.
"They currently own 70 percent of (the group's) shares."
Jolly said "monies received in the group's business were being used for the personal benefit of Wolhuter, his family and other business - I have been stripped of all authority and have been overridden, even by Kathy who has little or no experience in the group's business."
Jolly said the group's affairs were "chaotic". The last official audit was in 1999 and in June that year the auditors sent the directors a cautionary note that the company and its subsidiaries "appeared to be trading in insolvent circumstances".
Jolly said the Receiver of Revenue had told him that VAT and PAYE returns were missing and that the group had never paid company tax.
The group's offices had closed because there was no money to pay its debts. Sales and marketing staff had not been paid.
Telephone accounts for R40 000 and rent amounting to R400 000 were outstanding and legal action had been started by creditors for debts amounting to R2-million, said Jolly.
In a responding affidavit, Martufi said the group was owed almost R115-million. This was more than enough to cover all its liabilities, she said.
She denied that Holland Moorehouse was conducting its affairs recklessly or that conditions were chaotic. Holland Moorehouse had been placed under the efficient administration of an associated group 10 months ago.
She said Jolly had his own ulterior motive in bringing the application and it had nothing to do with the bona fide winding up of the group companies.