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The Supreme Court of Appeal has dismissed Shoprite Holdings' appeal in respect of its efforts to have a court order declaring an accounting expert's determinations as being incapable of being implemented so as to finalise the acquisition of OK Bazaars for a nominal R1.
SAB finance director Garth Saunders confirmed that the court has awarded in SAB's favour in all issues under litigation. "We are pleased that judgement went in SAB's favour in respect of all the matters that were before the court and the net effect of the judgement is that the expert's determination has been accepted," he said.
A spokesperson from Shoprite Group said the group respects the judgement delivered by the court. "Shoprite applied to the Cape High Court for a decision regarding specific directions made by an accounting expert relating to a dispute between the company and SAB arising from the purchase of OK Bazaars, about which Shoprite and SAB are in disagreement."
The spokesperson added that the group intends giving effect to its understanding of the directions of the accounting expert in anticipation that the long outstanding dispute between it and SAB can finally be resolved.
Cost to Shoprite
Fin24 wonders how much money Shoprite is likely to part with as a result of this unfavourable judgement from the court? But for now there is no doubt that law firms representing both Shoprite Holdings and SAB are smiling all the way to the bank.
The legal case, which has been in front of our courts for 10 years, was triggered by Shoprite Holdings' written agreement on 31 October 1997 with SABMiller (then old SA Breweries) to buy the issued share capital in, and certain loan claims against, OK Bazaars and its associated companies in Botswana, known as Retail Holdings.
The agreement made provision for the preparation of closing date accounts as at 31 October 1997 to verify that the shareholders' funds of the OK Bazaars Group would amount to no less than R540m. Furthermore (in terms of the agreement) in the event of such funds being less than this amount SAB was compelled to fund the shortfall by way of a cash loan to OK Bazaars.
The dispute has centred on technical accounting issues related to the purchase of OK Bazaars, such as valuation of assets at the time of the sale and provision of trade creditors and unpaid VAT.
In dealing with accounting issues related to the transaction, the two companies were to be guided by a determination prepared by an accounting expert, Edwin Oblowits - who was a partner at then Arthur Andersen (now Accenture).
Unfortunately Oblowits' determinations were a disappointment for Shoprite Holdings, which had claimed adjustments and provisions to the value of R280m but those accepted were limited to R57m together with a contingent liability of R13m.
On 17 April 2000 and disappointed with some of Oblowits findings, Shoprite initiated a case in the Cape High Court. Arbitration proceedings failed to resolve contentious issues. On 23 August 2002, Shoprite Holdings launched an application which has resulted in the appeal that was dismissed on 14 September 2007.
However, SAB has all along been in agreement with Oblowits' determinations and argued that full reconciliation was required under the sale agreement to buy OK Bazaar.
Dismissed with costs
Despite its argument, the court dismissed Shoprite Holdings application with costs, including the costs occasioned by the employment of two counsels.
In arriving at the judgement the Supreme Court argued that the issue in this case was not whether one or other interpretation of the determination was the correct one, but whether the determination is one which is valid in law.
It further said: "What is required is that all issues submitted must be resolved in a manner that achieves finality and certainty."
As a result the Supreme Court of Appeal did not endeavour to pick holes, inconsistencies and faults in determining this case.
The court further argued in its judgement: "The fact that the determination made it necessary to identify specific assets rather than rely on the fixed assets register (which contained a register of details about OK Bazaar"s fixed assets) made the task undoubtedly more onerous. The exercise required by the determination involved the laborious task of tracing the documents evidencing the acquisition and scrapping of specific assets subsequent to 1995. Shoprite's accountants hardly needed the expert to tell them what they had to do. Shoprite's real complaint was the onerous nature of the exercise required by the determination rather than its uncertainty."
- Fin24
