THE Supreme Court has ordered the Namibia Financial Institutions Supervisory Authority (Namfisa) to pay N$35.1 million to the liquidator of the insolvent company Prowealth Asset Management, to be paid to investors who lost money entrusted to the company about two decades ago.
The order for the payment of N$35.1 million was made in a judgement delivered in the Supreme Court on Thursday.
It follows on a judgement in which the court in November last year found Namfisa liable for losses that Prowealth Asset Management (PAM) investors suffered because of insufficient regulatory oversight by Namfisa over the company.
In the court’s judgement in November last year, it was found that Namfisa failed to carry out its duty to supervise the business of PAM from the end of August 2005 until the company collapsed following the suicide of its founder, Riaan Potgieter, in December 2008.
Some 87 people who invested money with PAM, the company’s liquidator, Alwyn van Straten, and PAM itself launched a lawsuit against Namfisa, the auditing firm SGA, and the executor of Potgieter’s estate in March 2012.
Some of the plaintiffs – many of whom were pensioners or approaching or planning for retirement when they invested money with PAM – died before their claim was heard in the High Court.
During the hearing of the claim in 2020, Van Straten told the court that Potgieter operated a fraudulent scheme in which he used investors’ money to pay the operating costs of the Prowealth group and enrich himself, instead of investing the funds on behalf of his clients.
The Prowealth group collapsed when its bankruptcy was exposed after the suicide of Potgieter in December 2008.
After Potgieter’s death, an investigation ordered by Namfisa revealed that Potgieter misappropriated some N$75 million of investors’ funds invested with PAM, the court was informed.
The plaintiffs lost their case in the High Court in March 2022, but succeeded with an appeal to the Supreme Court in November last year.
The issue of the amount which Namfisa would have to pay the PAM investors who lost money was left to be decided in the follow-up judgement that was delivered last week.
Acting judge of appeal Dave Smuts recounted that Namfisa was found to have been negligent in its oversight of PAM by not requiring the company to produce its annual financial statements for the year ending 28 February 2005 by the end of May 2005, and thereafter by failing to withdraw PAM’s registration as an asset manager, which would have occurred by the end of August 2005.
“This court found that this wrongful conduct was the probable cause of the loss for those investors placing funds with PAM after 31 August 2005,” Smuts said in the court’s follow-up judgement.
He noted that the court also found that “glaring and serious irregularities” would have been apparent if Namfisa had scrutinised PAM’s annual financial statements timeously, and that would have resulted in urgent enquiries, an inspection and the withdrawal of PAM’s registration, with the further result that Potgieter would not have been able to continue to solicit investors’ funds.
Smuts noted that an expert witness calculated investors’ losses at a total amount of about N$48.4 million from the end of August 2005.
Taking into account amounts recovered from Potgieter’s estate and from SGA, Smuts concluded that Namfisa is liable to pay N$35.1 million to Van Straten as liquidator of PAM, in respect of claims investors have lodged against the company.
The N$35.1 million should be paid within 30 days after the delivery of the Supreme Court’s judgement, and interest at an annual rate of 20% should be paid on that amount, calculated from March 2022, the court also ordered.
Appeal judge Hosea Angula agreed with Smuts’ judgement.
Senior counsel Jean Marais, assisted by Jesse Schickerling and Japie Jacobs, represented the plaintiffs on instructions from the law firm Van der Merwe-Greeff Andima Inc.
Namfisa was represented by Sisa Namandje and Thabang Phatela.
