Constitutional Court decision paves the way for Beneficio to sell two of Nova’s premier shopping centres.
Nova Property Group has suffered another significant setback, which will result in the loss of two of its premier shopping centres in Nelspruit, collectively valued at around R110 million.
The Constitutional Court has dismissed Nova’s application for leave to appeal a high court ruling ordering it to repay short-term loans taken out in 2017 and 2018 at an interest rate of 1% per week.
The decision brings an end to a five-year legal battle with bridging finance provider Beneficio Developments.
Further, it undermines Nova’s already fragile financial position, leaving it with only a handful of income-generating properties and heightening concerns about its solvency and ability to repay former Sharemax investors.
The case dates back to 2017 and 2018, when Nova borrowed money from Beneficio at an interest rate of 1% a week after commercial lenders refused to extend loans to the company. Beneficio registered bonds over the Courtside Centre and The Village shopping centres in Nelspruit as security.
Despite making some repayments, Nova defaulted, and Beneficio approached the Pretoria High Court to recover R31.4 million.
The court ruled in Beneficio’s favour. Still, the sale of the properties was delayed as Nova pursued a series of unsuccessful appeals – first to the Supreme Court of Appeal, then to the Constitutional Court.
Over this period, accumulated interest pushed the total amount owed to Beneficio to R62.7 million.
Nova’s defence was that the interest rate was usurious and unlawful.
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‘Stalingrad tactics’
Nova also instituted a counterclaim against Beneficio of R19.7 million – an amount the company included as income in its annual financial statements, describing it as a “virtual certainty” that it would recover the amount.
However, the Constitutional Court’s dismissal now clears the way for Beneficio to sell the two shopping centres to recover the debt.
Dr André Laäs of Beneficio stated in response to questions that he is relieved the case has finally concluded after years of delay and accused Nova of employing “Stalingrad tactics” to obstruct justice.
“We will sell the two shopping centres in Nelspruit, Courtside Centre and The Village Mall, by sheriff auction. The legal process has taken time, but all the judges came to the right conclusion,” he said.
The ruling represents another severe blow for Nova, which is already facing a liquidation application from another creditor.
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Implications
The outcome is significant because if Nova is placed in business rescue, or provisional or final liquidation, all debentures become immediately repayable.
Liquidation would also open the way for a comprehensive investigation into the events that led to the group’s financial collapse and the conduct of its directors and other key stakeholders.
Jean-Pierre Tromp, the trustee of the Nova Debenture Trust who represents the interests of the former Sharemax investors, has accused Nova’s board of reckless trading for taking out the 1%-per-week loans in the first place. He said, in response to the Constitutional Court judgment, that it would have a severe financial impact on the group.
“The harsh reality now lies in the gross misrepresentation within Nova’s 2024 audited Annual Financial Statements [AFS].
“What was incorrectly recorded as a ‘receivable’ of R19.7 million has now been revealed to be a payable of at least R67 million, an understatement of liabilities by R86 million.
“With no available cash to settle this immediate obligation, Nova will lose the two assets tied to this judgment.
“In my view, this constitutes blatant, reckless trading by the entire board of directors,” Tromp stated.
“I have written extensively on this issue, and it forms part of the concerns I formally reported to the CIPC [Companies and Intellectual Property Commission] under reckless trading.”
Nova’s 2024 AFS already revealed a company in severe financial distress, with mounting debt, unpaid taxes, and acute cash flow constraints. It is also currently facing liquidation applications from service providers, including Bright Light Solar (BLS), which installed solar systems at several of Nova’s shopping centres.
Tromp has published several documents on his website over recent months regarding developments at Nova and has accused the board of reckless trading and trading while insolvent – both serious contraventions of the Companies Act. One of the examples Tromp highlighted was the board’s borrowing of money from Beneficio at an interest rate of 1% a week.
Nova chair Connie Myburgh has strongly rejected these claims, stating they are “defamatory and baseless and devoid of any truth and are rejected.” His complete response is available on Tromp’s website.
Moneyweb has sent questions to Myburgh and Dominique Haese, Nova’s CEO, regarding the Constitutional Court judgment, but had not received a response at the time of publication. It will be added to the article once received.
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Remaining properties
Losing the two Nelspruit properties will reduce Nova’s property portfolio to just eight investment properties, of which only five generate income.
The group originally inherited 28 unencumbered shopping centres from Sharemax.
Nova’s 2024 AFS reflects that the group values its investment properties – including the Nelspruit centres – at R2.165 billion. However, the two largest assets, the non-income-generating Villa and Zambezi centres in Pretoria, collectively account for R1.29 billion, or roughly 60% of the total portfolio value.
The 2024 statements also reflect debentures payable of R2.2 billion, and that Nova suffered a loss of nearly R50 million during the period.
Nova’s liabilities also exceeded its assets by R90 million.
Nova has not released its 2025 AFS, despite it being due at the end of August. This is another contravention of the Companies Act, which requires public companies to release AFS within six months of their year-end.
It is the ninth consecutive year that Nova has failed to publish its AFS within the prescribed period.
Myburgh has previously denied that Nova is in breach of the act.
This article was republished from Moneyweb. Read the original here.
