Denel vindicated as high court dismisses with punitive costs LMT minority shareholders’ business rescue application

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The application for business rescue that was brought to the North Gauteng High Court as an urgent matter by some shareholders of LMT Holdings on 13 July was dismissed with costs by the same court yesterday, due to the applicants’ failure to make a case supporting their application.

The matter was heard at the North Gauteng High Court, in Pretoria, on 26 July.

Not only did the applicants fail to make a case supporting what they purported to be an urgent case for business rescue, the court found they also failed to abide by their own timelines, and instead pleaded to be given more time to comply with the basic court processes applicable.

Denel had opposed the application and, from the onset, rejected the allegations that it was the cause of the alleged challenges LMT was faced with, as LMT’s challenges arose as a result of the conduct of the management applicants while they were running the business. This was before Denel decisively intervened earlier this year by seconding the current chief executive from its head office.

Denel had further put before the court that the conduct of the applicants included:

* Poor quality products that were rejected by clients; and
* Failure to adhere to set delivery schedules.

In court yesterday, the applicants did not even have a response to claims by Denel that their application was designed to create media hype and that they had leaked their highly inflammatory application to the media, even before serving it to the court and Denel.

“We feel vindicated by the court in its dismissal of the application with costs including those of the two counsels. We are now focusing on operational matters aimed at ensuring that LMT delivers to its valued customers as promised,” Denel Acting Group CEO, Zwelakhe Ntshepe, says.

The applicants failed to put before the court and the respondents (Denel SOC) a replying affidavit that is compliant with court rules, and instead filed unsigned and uncommissioned affidavits.

“They further had no response to our contention that the application was designed to create media hype and to exploit the media generated hype of alleged ‘state capture’ of the company by the Guptas, which up to now has not been supported by even a shred of evidence,” Ntshepe says.

With regards to Denel’s counter-application to compel the fourth applicant (Pamodzi), the applicants again failed to convince the court as to why Denel’s application compelling the fourth respondent to comply with the provisions of the memorandum of incorporation (appointment of directors) should not be granted.

This again was granted in Denel’s favour with costs at a punitive scale as between attorney and own client, including costs of the two counsels.

Notwithstanding the above, LMT Holdings remains a valued strategic asset to the Denel Group, which Denel has supported both with business and resources throughout the five-year business relationship period.

LMT is a 51% Denel-owned company that receives support from the company similar to all the other Denel-owned businesses, which include:

* Shareholder loans;
* Business origination, where Denel has been instrumental in getting LMT work from other clients;
* Deployment of experienced human resources to support and strengthen the business; 
* Intervention in cases of poor workmanship;
* Procurement of preferable contract terms where this was necessary; and
* Assistance in managing commitments to creditors.



Denel has historically, and is further, committed to continue supporting the company, as demonstrated in the past. LMT Holdings is a profitable company with at least three contracts that will keep the company going for the next few years, and a potential major defence contract that the company is currently positioning itself for.