Claims of liquidation scams emerge in Cape Town defamation case

Leonard Katz of law firm Edward Nathan Sonnenberg is suing Noseweek editor Martin Welz for defamation. Photo: Steve Kretzmann

• Edward Nathan Sonnenberg director Leonard Katz is suing Noseweek editor Martin Welz for defamation in the Western Cape High Court.
• This follows Welz’s articles claiming top banks Investec and Nedbank benefited from liquidating their own clients, with the help of Katz.
• The case spans years and testimony stretches from Zimbabwe and South Africa to the Channel Islands and the British Virgin Islands.
• At the centre of the case is a loan to buy a Cape Winelands farm and the way it was repaid.
• Witnesses called by Welz have claimed phone-tapping and destruction of court records.

Startling claims of fraudulent and criminal activity by top banks and top lawyers have emerged in a defamation case playing out in the Western Cape High Court.

Leonard Katz, director of Edward Nathan Sonnenbergs (ENS) is suing Noseweek editor Martin Welz and his publishing company Chaucer Publications for defamation. This follows articles in which Welz claimed that top banks Investec and Nedbank had benefited from liquidating their own clients, with the help of Katz, who was dubbed “Lennie the Liquidator”. According to Welz, Katz oversaw the liquidation of more than 30 entities for Investec in the space of weeks in the late 1990s.

Testimony in the case tracks money across the globe, from Zimbabwe and South Africa to the Channel Islands to the British Virgin Islands and back again, with allegations of fraudulent litigation, illegal phone-tapping, and the removal and alteration of court records as the banks appeared to benefit from liquidating their own clients.

Katz is represented before Acting High Court Judge Ncumisa Mayosi by ENS Senior Counsel Brendan Manca, with junior counsel Johan Engelbrecht. Welz is representing himself, with second defendant Chaucer Publications represented by junior counsel Cei Fehr.

Katz is seeking R1 million plus legal costs which are likely to be considerable.

After a break in initial proceedings in February, the case resumed from 29 June to 10 July in virtual hearings due to Covid-19 restrictions.

Katz took exception to the cover of Noseweek’s July 2014 edition, which features a photograph of himself with the heading ‘The Man who stole justice’, and two stories in the edition, including ‘Lenny the Liquidator makes a mockery of the law’. In the pleadings Katz singles out paragraphs such as: “You want what can’t legally be done? Agree to pay Lennie an extra million-or-three and he will pull it off, by hook or by crook”.

The promise of a Cape wine farm

At the centre of the case is testimony by Durban businessman Ian Brakspear linking Nedbank and Katz to a chain of events in the sale of a farm in the heart of the Cape Winelands.

Brakspear claimed that the liquidation at the hands of Katz of his company West Dunes, which owned the farm, was manufactured on the spurious grounds that he owed Nedbank’s international arm, Nedgroup Investments’ Fairburn Private Bank in Jersey, about R7 million.

Brakspear, with his mother and sister, were beneficiaries of the Brakspear Trust which Brakspear claims his father had set up in the Isle of Man to protect the funds from being claimed by the Zimbabwean government. In 2004 the family and the Brakspear Trust trustees agreed to pay him £500,000 (approximately R7 million at the time) to guarantee finance from Rand Merchant Bank (RMB) to buy Klein Normandie, a farm in the Cape Winelands. This would also enable his mother and sister to leave Zimbabwe and live in South Africa.

Under advice from consultants working for Nedbank Private Bank in Jersey, and auditing firm Price Waterhouse Coopers, he then set up a complicated ownership structure for the farm. He paid for the creation of a company called Westley Holdings in the British Virgin Islands. Westley Holdings was to be owned by the Westley Trust set up in Jersey, which was controlled by Brakspear, who nominated a Nedbank official as titular shareholder. These were vehicles to allow funds to flow from Jersey to the British Virgin Islands to buy shares in Moneybox, a South African company owned by Brakspear. Moneybox was the owner of West Dunes, which Brakspear and two partners established as the local company which purchased the Winelands farm. The transfer of the farm to West Dunes took place in July 2004. But plans to rezone and subdivide the land came to nothing, the farm was sold on auction in 2008 for R18 million, and RMB was repaid its money.

As the sale was being finalised, on 19 December 2008, an urgent application to liquidate West Dunes was brought to the High Court in Durban by ENS, acting on behalf of Nedbank. Nedbank argued that the RMB loan had been repaid by Fairburn Private Bank in Jersey (the Nedgroup subsidiary) through the Westley Trust, and should be paid back to Fairburn Bank. But Brakspear claimed that the money was paid to RMB by the Brakspear Trust in the Isle of Man.

Cutting short his holiday on the South Coast, Brakspear instructed lawyers to oppose the provisional liquidation headed by Katz. But when he returned to the South Coast on 23 December, he found that the provisional liquidation order had been granted in court that day. Matters progressed to the final liquidation order and the appointment of liquidators, also headed by Katz.

Brakspear complained that this was a conflict of interest as Katz was acting for Nedbank against West Dunes, and at the same time as a liquidator who could influence which creditor had a legitimate claim against West Dunes. One of those claimants was Brakspear himself, for the millions it had cost to run the farm for four years, but his claim was denied.

The Durban High Court ruled against Brakspear, and a Supreme Court appeal was also not successful.

Court records allegedly disappear

When Brakspear approached the Master of the Durban High Court for clarity on how the liquidation order came to be granted against West Dunes, he found that the lawyers he had appointed had not represented him. Instead, according to the Durban High Court records, he had been represented by advocate Manca - the senior ENS counsel now representing Katz - with Nedbank also represented by ENS.

When he returned to look for the record of the hearing, he found that Manca’s name had been crossed out and replaced with the names of the lawyers he had appointed. Some time later, he approached the registrar to obtain the court recordings. When she tried to call up the file, it had gone missing.

She called for the book in which all court cases are registered, and found the page to be torn out. She observed it was the only page missing among 20 years of entries, Brakspear said.

The registrar then gave Brakspear permission to listen to the recordings on the central database. He said they listened to the entire day’s proceedings and his case did not appear. The registrar then suggested it could have been heard in the judge’s chambers, in which case it would be recorded in the judge’s bench diary, but there was nothing noted there either.

After West Dunes was liquidated, Brakspear was sequestrated, as he had stood surety of R3 million for West Dunes. He told the court his wife left him when their belongings were “thrown in the street” and his mother lost her “lovely home” and now lives in “a make-do garage” at his sister’s house in London.

Manca, in cross-examining Brakspear, produced correspondence stating Westley Trust had received the R7 million from Fairburn Private Bank in Jersey. He called Brakspear a liar.

He also argued that Brakspear had agreed to the liquidation of West Dunes.

Manca also focused on whether Welz had been in possession of documents providing alternative views on some of the matters he wrote about (such as Katz’s explanation of why the liquidation hearing was not in the court records). He inferred Welz had ignored these as they did not favour his view of Katz. Manca went into the details of various liquidation judgements in a bid to show that contrary to Welz’s assertions, Katz was acting within the law.

The matter is expected to resume in the Western Cape High Court on 31 August.

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