- Choppies largest shareholders Ottapathu and Ismail are suing PwC and Binedell for a combined P451 500 185 (R621 795 014) for losses on the BSE and another R416 680 (P340 160) for losses on the JSE
Shareholders in BSE and JSE-listed supermarket giant Choppies have won a major court victory in their battle to recover damages of more than P451m (R621m) from auditors Price Waterhouse Coopers and its Managing Partner Rudi Binedell.
Binedell has been harshly criticised by Justice Boipuso Tshweneyagae of the High Court who found he had delayed the Choppies Enterprises Ltd’s audit report because a job he had been offered at Choppies had not materialised.
His judgement said of Binedell: “…(his) alleged conduct is also an issue. The allegation is that he was not (at) arm’s length in his auditing of the Choppies books as he had been offered a job with significant shareholding as incentive.
“When this did not materialise, he used his position as the key lead auditor to compromise the publication of the audit report beyond the publication deadline of 30th September 2018.
“Prima facie…(his) independence as a dispassionate and professional auditor was impaired once he engaged in potential employment discussions with Choppies. He should have recused himself from leading the audit.”
The judge found in favour of an application by Choppies’ two largest shareholders, Ram Ottapathu and Farouk Ismail, to compel PwC and Binedell to provide details of the defence they would raise in answer to allegations that they had caused damage to Choppies by delaying the audit report.
Ottapathu and Ismail are suing PwC and Binedell for a combined P451 500 185 (R621 795 014) for losses on the Botswana Exchange as a result of the delayed publication of Choppies financial results on the Botswana Stock Exchange, as well as another R416 680 (P340 160) for the similar delay on the Johannesburg bourse. They allege that PwC’s actions caused the loss of over 75 percent of Choppies market value.
The judge ruled, with costs, that PwC and Binedell provide the two shareholders with further particulars of their defence. “The information sought from the defendants is necessary to enable the plaintiffs to plead and for the court to equally appreciate the issues in dispute,” he said.
“It is important and must be provided to avoid the parties and the court being caught by surprise. The disputes must be recorded in the pleadings with sufficient precision to enable someone other than the combatants to ascertain what is in dispute between them.”
Justice Tshwenyagae noted that in their heads of argument, PwC and Binedell had summarised their defence by saying that the audit contract with Choppies never stipulated an absolute deadline for the audit report. Secondly, the deadline was expressly subject to Choppies furnishing the defendants with draft audited financial statements (AFS) as well as the necessary information to audit the draft AFS, well ahead of the deadline.
PwC was ordered to pay the costs, including the cost of the senior counsel. The judge ruled that the matter will go to trial from 9 to 20 May 2022 and said there would be no relaxation of the timelines he specified for the information to be supplied.