Pamodzi / Aurora liquidation: Master of High Court briefing

Meeting report

Chairperson’s opening remarks
The Chairperson indicated that the Chief Master of the High Court has been invited to brief the Committee on an outstanding matter from the Fourth Parliament. He said Members had taken full responsibility of the work covered by the previous Committee. One matter which arose during an oversight visit to the Eastern Cape was that of the liquidation at Aurora. He said the matter has been described as a complex scandal. It was therefore hoped that the update would be able to shed light on the matter so that the Committee could resolve to act based on a clearly informed decision. The Committee needed to learn from this experience to ensure that such matters do not repeat themselves in the future. This matter is very important to the Committee because it affects thousands of former employees who lost their jobs without benefits.  Many people have fallen victim to pyramid schemes, and Parliament had a responsibility to ensure that such experiences do not repeat themselves.

Presentation: Master of the High Court, Pamodzi Briefing
Mr Lothian Basson, Chief Master, Department of Justice, thanked the Committee for the opportunity to share information on this matter with the Committee. Ms Rossouw, the Deputy Chief Master, would proceed with the presentation.

Ms Christene Rossouw, Deputy Master, Department of Justice, said the presentation would simply provide a timeline of the events which have taken place. A Commissioner's Report has been provided to the Committee, therefore Members were more than welcome to ask for clarity on any matters which might have arisen from the report. She explained that the Pamodzi Gold companies consisted of three mines; Orkney, Welkom and Grootvlei. The Pamdodzi Gold Orkney and Pamdodzi Gold Free State were placed under judicial management in January 2009. In June 2009, the Grootvlei mine, with its five companies, was placed under provisional liquidation. The holding company, Pamodzi Gold was ultimately liquidated in October 2009. The Master proceeded to appoint provisional liquidators in each company at the time they were provisionally liquidated, based on support by creditors and the practice to include a previously disadvantaged individual as a liquidator.

During October 2010, there were a series of bad press articles regarding the management of the mines by the management of Aurora Empowerment Systems, who were, at the time, managing the mines in terms of an Interim Trading and Contract Mining Agreement (ITCMA) entered into between the JPL (Joint Provisional Liquidators) and Aurora Empowerment Systems. Complaints were also received by the Department of Justice from organised labour Solidariteit and NUM. The Chief Master’s Office called for a meeting with the JPL on 19 November 2009 to address the complaints lodged by organised labour and the JPL were requested to provide written responses in this regard. The JPL provided the Master with the required information and were also requested to provide fortnightly reports to the Master regarding the status of the  mines, which were provided.

During April 2011, the Master was approached by Mr Calie Smit, the in-house legal representative of Aurora Empowerment Systems with information that he regarded as important to the Master. Mr Smit provided information, together with documentary proof, which prompted the Master to initiate a section 381 (of the Companies Act) enquiry. Several relevant witnesses testified in this enquiry. The Joint Provisional Liquidators (JPL) were subpoenaed to testify on 16 and 17 May 2011. Four of the JPL cooperated with the Master, whilst two (Messrs Motala and Gainsford) declined to cooperate. Due to Mr Motala and Mr Gainsford’s unwillingness to cooperate with the Master in the section 381 enquiry, the Master removed them as liquidators from all Pamodzi matters on 23 May 2011. The Master no longer deemed them suitable to act as liquidators on these matters..

The remaining JPL approached the Master on 29 June 2011 to commence an inquiry under Section 417/418 of the Companies Act to determine the whereabouts of the assets of the companies. The enquiry commenced in July 2011 and was finalised in April 2013, with over 40 witnesses testifying. The Commissioner finalised his report in October 2013, the report was handed to the Master on 19 October 2013. Based on the conclusions reached by the Commissioner and the facts presented in the report, the matter was referred to the National Director of Public Prosecutions (NDPP) on 18 November 2013. After receiving the determination by the NDPP, the report was referred to the Special Investigating Unit (SIU) in February 2014. The SIU required a proclamation to enable them to proceed with the investigation.

The Master was currently in the process of calling on the security bonds of the JPL concerning the above matters.

Discussion
The Chairperson said the presentation was the shortest presentation which has ever been brought before this Committee. He asked for guidance from Members about whether the provisional liquidator present should not be given an opportunity to make a presentation to the Committee before the Members proceed with questions.

Mr H Schmidt (DA) said Members had come to the meeting without having any sight of the report under discussion. He was not going to be able to ask a single question on the report because he has not seen it. He agreed that the presentation was the shortest in the history of the Committee, and this was unfair to Members of the Committee. When was this document forwarded to the Committee? He said the presentation was clearly made on the assumption that Members had read the Commissioner's Report and that was not the case.

Mr Basson responded and said the Committee would be more interested in the current state of affairs within the companies, and this was something the liquidators would need to respond to. With the Pamodzi Group, the High Court only had provisional liquidators because the moment the provisional order was made, the licences to the mine lapsed. Companies were therefore kept under provisional liquidation. In final liquidation, the value of the mine disappeared. The unusual situation was therefore that the High Court had a provisional stance until the matter had been finalised. The assets of the company and what happened to them were therefore something the liquidators would have to answer to. There was however challenging conduct and the Master has reached a point whether the conduct of the liquidators was such that they prejudiced the creditors. Every liquidator before appointment provides security to the Master; the Master then goes afterwards to the security company to indicate whether the provisional liquidators acted appropriately. The Master had the intention of claiming hundreds of millions from the security company, due to  irregular conduct.

The other issue of the 74-page report was the result of a Section 417 inquiry. The Section 381 inquiry was for the Master to test the conduct of the liquidators and deal with it. The Section 417 inquiry was inherently a confidential inquiry where the affairs of the company, broader than the conduct of the liquidators, were investigated. This included a whole range of other issues. He said further actions had since emanated from both these inquiries. In the Section 381 inquiry, the Master decided to remove the liquidators from their position. This matter has not yet been taken to court. However it was maintained that there was irregular conduct on the part of the liquidators and they would be liable. However the Master would not single out any individual, they would be dealt with as a group, and the insurance company would pay out the amount. If needs be, the liquidators would defend their position. In terms of the Section 417 inquiry, the Master could not easily release the report to the Portfolio Committee because of the private nature of the contents of the report. Nonetheless, the Master has taken the Committee into its confidence and made the report available to the Committee. He apologised if the report was not made available in the correct format or in time. The Master however would provide proof that indeed the report was provided. However it was important that Members understand that the report was of a confidential nature.

From the Section 417 investigation, a number of issues emanated such as transactions which were impeachable, conduct which could be unlawful, among other matters. There was even a SIU proclamation in the situation. The Section 417 report outcome would therefore have far-reaching consequences, further than the Section 381 report. However if the Committee wanted to know more about assets, questions should be posed to the liquidators. If it wanted to know more about criminal prosecutions, questions should be posed to the NDPP and its various branches. Questions about the recovery of the security bond for bad conduct and how much progress on litigation has been made, were also matters for the liquidators to answer. The matter of the workers was still an ongoing issue; the Master has yet to get the liquidators to explain. Workers were only entitled to claim from the companies in which they were employed. As a way of providing assistance, the Master could provide the Committee with some direction as to whom the sources of these responses would be.

The Chairperson said the report was an urgent matter which needed to be addressed. Members were in agreement that there was insufficient information at hand. He requested that the Master try and delegate. He asked that the Committee set aside what was going to be on next week’s agenda, so that the current discussion could continue, with the Master of the High Court present, together with whoever he would trust to provide Members with all the information they would need. As the nature of the report was private, Members should sign a confidentiality agreement about the nature of the contents of the report. Members would therefore be subjected to whatever the consequences of the report becoming available in the public realm. Each Member would receive a copy of the report upon signing of a confidentiality agreement. He asked that the provisional liquidator also prepare a short presentation to the Committee. The Committee would then be in a position to decide whether to proceed to the NDPP or not with regard to the matter. A proper and concise background needed to be provided to the Members.

Mr John Walker, Attorney, said he was not a provisional liquidator but rather an attorney acting for the four liquidators. He said he has had sight of the report during the Section 417 inquiry. He said, of the recommendations made in the report, certain actions have been taken by both Pamodzi and Aurora on the benefactors of the money generated from the two companies. He would be able to take the Committee through the steps which these companies have taken and where the process was currently because this was public knowledge. However his costs of travel needed to be taken into consideration if the Committee required him to return and brief the Committee at a later stage. However if the Committee requested a written report, this could also be made available to Members.

Mr Schmidt suggested that the attorney return to brief the Committee together with the Chief Master, such a briefing would be better than a written briefing. Members would be able to interact with the briefing. The meeting could be accommodated within the parliamentary rules.

Mr Basson said he fully agreed with Mr Schmidt that their attorney needed to come back and brief the Committee. In terms of the confidentiality of the report and the signing of it by all Members, the provisional liquidators provide direction. The report should deal specifically with the assets; what there was and how they have been alienated, the workers and their claims, and what legal issues had been encountered. On the Section 417 Report, copies of the report would be circulated to Members. He proposed that Mr Walker, on behalf of the liquidators, brief the Committee. On Wednesday the Committee would receive a briefing by the Chief Master. He asked if Members could give an indication of what areas they would like the Master to speak on during the briefing.

The Chairperson responded to Mr Schmidt and said the Committee would try its level best to get the Attorney back to brief the Committee in person. However there were various processes which needed to be followed. The Committee would make an application, and wait the response, so that by Thursday the Committee could extend a formal invitation to Mr Walker. Approval also needed to be sourced from Parliament with regard to the travel expenses. He said the Committee could not continue without the Section 417 Report; the Committee needed to full report in order to make an informed decision. If the Committee did not receive full information, the Committee would not be informed about what happened with the assets and other relevant matters.

Mr Walker thanked the Chairperson for his intervention. He said the only point he was trying to emphasize was that of his travel costs back to Cape Town. At the end of the day, the costs needed to be justified. He explained that he represented the estate which indirectly meant that he was representing the workers. He did not represent the liquidators in their personal capacity. If the issue of the bonds needed to be dealt with by anyone, all the liquidators and their respective attorneys would need to be present.

The Chairperson said the reality was that Members needed to deal with the Commissioner's report, so that the matter could be finalised completely. The Committee needed to do justice on the matter. After receiving the report it would therefore be up to the Committee to decide whether there was a need to call in other people. The provisional liquidators' briefing report would be received in the following week. The Department of Mineral Resources was scheduled to make a presentation to the Committee; however that meeting would be rescheduled.

Mr Basson proposed that the Master put a covering note on the report, which would indicate that the report was still confidential in nature, the contents therefore were for the use of the Committee exclusively and in confidence. The contents of report should therefore not be published or made public. Some of the contents of the report were not yet proven.

The Chairperson said he had much confidence in the Members and that having pledged under oath, they would not undermine the confidentiality agreement. However, Members would be able to make the final determination on the confidentiality of the report when they have had an opportunity to have a look at the document.

Mr J Lorimer (DA) said he was a bit confused on the process because Members would be seeing a confidential report while discussing it in an open Committee meeting. How would this work?

Mr Basson said his only obligation was that the report should be confidential. He did not know how the discussions would flow. He did not want to hinder the free flow of information. The nature of the challenge was that the Commissioner may have expressed an opinion which would still be subject to further investigation before a final decision could be taken.

The Chairperson said he also feared to have a report which Members would talk to without any representative from the High Court present. Would there be someone from the High Court who would be presenting the report next week? The point which Mr Lorimer raised also needed to be taken into consideration.

Ms M Mafolo (ANC) made reference to a meeting she attended where the Committee was considering a SIU Report and the Chairperson declared the meeting a “closed” meeting. She suggested that the Committee also do the same when dealing with the Section 417 report to ensure that not any confidential information leaves the meeting.

Mr Basson proposed that a copy of the Section 417 report be printed during a short break and circulated to Members, with the covering letter. Mr Walker could then take the Committee through the highlights of the report, should the Committee require more input, this could be provided in the meeting on Monday.

The Chairperson agreed that Members of the Committee would be the only people to have copies of the report. A determination would be made during the meeting about whether the copies handed to Members would be returned back to the Chief Master or whether they could be retained. He said the provisional liquidators report would be received by the Committee in the following week. The Commissioner’s Report, with the cover letter, would be made available to Members before the end of the meeting.

Mr Basson said if any Member had a specific issue for the Master to add, this should be communicated to the Chief Master in advance so that it could be included in the report.

The Chairperson said when the Chief Master prepares the report, the Master's Office should be able to answer any questions which might arise.

Nkosi Z Mandela (ANC) asked that the Committee take a five minute break so that Members could further caucus on the matter.

Mr Schmidt said the Committee needed to be careful as to how they deal with the legal concerns regarding the report.

Mr Basson indicated that the report has been circulated to Members who would need to sign the cover letter.

The Chairperson said the issue which was raised by Ms Mofolo on the nature of the meeting also needed to be taken into consideration. He indicated that there was a proposal that the meeting itself should be a closed meeting, on the basis of the nature of the report.

Ms Mofolo said the Chief Master should lead the discussion about whether the meeting should be an open or closed meeting; and how the discussion on the document should be handled.

Mr Schmidt said in principle there would a problem with having a closed meeting. There was already a fair amount of information available to the public on the matter. A closed meeting was not the answer. He said the Chief Master should release the document under the covering letter, which would cover the Chief Master legally. He said closing the meeting would be undemocratic.

The Chairperson said the Master of the High Court would make a determination if there were areas of discomfort. If he preferred a closed meeting, reasons for this should be provided, upon which the Committee would make a consideration. He indicated however that the Committee could only make a determination once Members have interacted with the report.

The Commissioner’s Report together with the legal cover letter was circulated to Members to sign.

Committee Report on Gauteng oversight visit 25-26 September 2014: adoption
The Chairperson said the activities of the day might not be correctly indicated in the report; however these were not matters of significance.

Mr Lorimer noted that Members were told by SAPS that illegal mining was difficult to prosecute because the law only allowed police to charge a person with trespassing. He suggested that the Committee recommend to the DMR that the department suggest how the law can be changed to make it easier to prosecute illegal miners. Was there something which the Committee could do to make the police’s job easier with regard to legislation? Members were informed by the police that when they arrested someone with gold, the police needed to send the gold to a laboratory. However there was currently a nine month backlog, and under such circumstances it became impossible to prosecute. At the same time the Council for Geoscience had the facilities to analyse this gold in a matter of a day or two. Was there not a way that the Committee could suggest that the police use the facilities at the Council for Geoscience to assist with prosecutions?

The Chairperson agreed with Mr Lorimer that there needed to be considerations in place which dealt with illegal mining, based on the Supreme Court’s ruling in Bloemfontein. He said police indicated that an illegal miner could only be held for 48 hours if sufficient evidence could not be provided. Unfortunately there were no facilities in place at the police station to test the material in an attempt to find out whether it was real gold. He agreed with Mr Lorimer that legislation needed to be in place to deal with such matters, and perhaps even consider a partnership between SAPS and the Council for Geoscience.

On the matter of the illegal water connections, he said the Portfolio Committee on Water and Sanitation would need to be engaged. A better legislative framework needed to be developed for the closure of mines because these resulted in more illegal mining activities.

Mr Schmidt he said there was an entity in place which dealt with the closure of illegal mining. He asked that the Committee conduct more research on the matter of sustainable mine closure. Land use was the function of local government.

Nkosi Mandela moved for the adoption of the Committee Report with amendments. Mr Lorimer seconded the adoption of the report with the amendments.

The report was adopted.

The Chairperson said the DMR had a responsibility to do proper assessments and evaluation of the mines before closing them because the responsibility lay with the department and not with local government. He thanked Members for their interactions and the Chief Master for his report.

The meeting was adjourned.