Controversial businessperson Paul De Robillard— who the Revenue Service (Sars) alleged had links to a tobacco-smuggling ring — and his family, have been criticised by the Supreme Court of Appeal (SCA) for abusing the business rescue process to salvage their property company.
According to Sars, they tried to sell yachts and houses to avoid paying the company’s creditors and misled Sars about how the company would manage its affairs to avoid paying about R60m in tax.
The SCA dealt with two matters brought by Sars involving the businessperson: a personal sequestration of his estate and a winding-up of his property company.
The personal sequestration order
Sars has been litigating against Paul De Robillard, who is involved in multiple business dealings from property to tobacco since 2012. Sars holds De Robillard personally liable for debts totalling R89m, incurred by one of his companies, Doltek. Business Day reported in 2013 that Sars alleged De Robillard had links to a “tobacco-smuggling ring” in 2010. He is also a business associate of Edward Zuma, the eldest son of the former president.
De Robillard did not pay the Doltek debts and, in 2020, Sars applied to sequestrate him. The sequestration was granted in 2021 and trustees were appointed to manage the affairs of his insolvent estate.
The winding-up order
Sars finalised its audit findings in 2019 for various payments of one of De Robillard’s other companies, PFC Properties.
PFC objected to the audit findings and sought to resolve this with Sars. Until there was a solution, PFC said it would not dispose of its properties. Sars granted the suspension of tax payments until the dispute was resolved.
Sars said De Robillard, despite promises not to sell properties, did exactly that. PFC, via De Robillard, sold two luxury yachts for a fraction of their value: a R45m yacht was sold for only R12m, while a R13m yacht was sold for just under R600,000.
In 2021, because of this conduct, Sars removed the suspension it had allowed PFC. It sought R16m in payment but PFC could not pay, since it now had no assets. Sars then launched winding-up proceedings against the company in the Pretoria high court.
The court case
PFC, during the winding-up litigation in Pretoria, changed its registered address from Gauteng to KwaZulu-Natal. The sole shareholder of PFC, the De Robillard Family Trust, then instituted business rescue proceedings in Pietermaritzburg.
Afterwards, back in Pretoria, PFC’s lawyers argued that Sars could not wind up PFC because business rescue proceedings had been brought in Pietermaritzburg.
In terms of the Companies Act, winding-up procedures are suspended until business rescue proceedings are finalised. The Pretoria high court nevertheless granted the final winding-up order.
PFC appealed to the SCA.
The SCA findings
Writing for a unanimous court, appeal judge Sharise Weiner outlined the purpose of business rescue proceedings. “Business rescue proceedings are aimed at restoring a company to solvency,” she wrote last week, “and are not to be abused by a company with no prospects of being rescued but mainly to avoid a winding-up.”
She examined the conduct of the Family Trust who brought the business rescue proceedings in Pietermaritzburg. She concluded “the conduct of [Family Trust] in launching the business rescue application amounts to an abuse of process.” She labelled it a “stratagem”, because the Family Trust “had no intention” of seeing the business rescue finalised.
She also said “deliberately” changing the company’s registered office was done so the Family Trust could bring business rescue proceedings in another court, to stop the winding-up proceedings happening in Pretoria.
Sars alleged that PFC had submitted fraudulent VAT claims and tried to dissipate its assets, with the yachts and properties. Wiener noted that PFC never responded to the allegations. She also held that Family Trust must have known the business rescue “had no prospect of success”.
“PFC’s very existence — if it was ever a genuine asset holding company — was destroyed by the dissipation of all of its assets,” Wiener wrote. The conduct of the Family Trust and PFC “is ... tainted with impropriety”, dubbing it “a scheme of abuse”.
She dismissed the appeals against Sars and ordered PFC to pay costs for both appeals.
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