A Steinhoff shareholder who lost R6.4 million when the group's share price collapsed says he wants to hold the group's former auditor Deloitte accountable for its alleged "negligent performance" in auditing the retailer's books.
Stellenbosch attorney Jan Lamprecht has asked the Western Cape High Court to let him join the former owners of shoe retailer Tekkie Town as a co-applicant in their upcoming liquidation bid against Steinhoff.
He also wants the court to declare that Steinhoff failed to investigate the role of Deloitte in its accounting scandal. The winding-up application, which Steinhoff is opposing, is set to be heard in early September.
But while the former owners of the popular shoe franchise say their goal is to have their business "returned" to them, Lamprecht's application is primarily focussed on Deloitte's relationship with Steinhoff.
Lamprecht is arguing that he relied on Deloitte's statements in Steinhoff's financial results when he decided to purchase around R7-million worth of shares in November 2015.
"Had the reportable irregularities been reported by Deloitte, I would not have invested in Steinhoff shares," he states in his intervention application, which was filed on Friday afternoon.
According to Lamprecht, he wouldn't have bought the shares if he knew the true financial state of the retailer. He said he lost millions when he sold his Steinhoff shares in early January 2018 after their value had plunged.
Negligent performance'
"Deloitte misrepresented Steinhoff's worth by reflecting new profits before tax, whereas, in fact, Steinhoff had suffered net losses over the relevant periods," states Lamprecht.
In his view, Deloitte should be held liable for his financial losses due to its "negligent performance".
Deloitte audited the books of Steinhoff's ultimate holding company until November 2019, when Mazars replaced it. In February, Deloitte in the Netherlands and SA agreed to pay ?70.3 million (circa R1.2 billion) in compensation to claimants suing Steinhoff as part of a global settlement proposal.
At the time, the auditor said the global settlement was in the "best interest of all stakeholders". It noted that the settlement was not in any way an admission of any liability.
In late 2020, the group's South African branch said that while events at Steinhoff, African Bank* and Tongaat Hulett had put a "spotlight on our audit quality", internal investigations had found no evidence of any unethical behaviour, corruption or state capture on the part of the firm.
Deloitte has not been cited as a respondent in Lamprecht's application. It did not immediately reply to a request for comment for its views on the merits of Lamprecht's application.
Indeterminate liability'
The auditing firm did previously respond to substantially similar arguments made by Lamprecht and a colleague in their initial case brought against it in a Gauteng court. There, it argued that it does not and cannot owe a general duty to third parties to guide their investment decisions.
"The existence of such a general duty would create indeterminate liability for auditors against third parties," it noted in a court filing in February.
Investors, it said, know that they assume many risks when investing. "The plaintiffs, like any investor, based their investment decision on processes reflected in the market which are a function of market forces that fluctuate from time to time".
Deloitte also argued that the ultimate responsibility to "sign off" on Steinhoff's annual financial statement lay with its board and not with it as an independent auditor.
Deloitte has also denied Lamprecht's assertion that it should have spotted the fraud in 2014 and 2015. And it has denied that any other reasonable auditor, in its position, would have been able to do so.
The group has said it only became aware of possible accounting irregularities in the course of its 2017 audit on Steinhoff. In response, it said it pushed Steinhoff to conduct an independent forensic probe.
Why now?
Lamprecht told Fin24 that the case that he and a college instituted against Deloitte in Gauteng last year would probably only be heard in two years.
By that time, according to Lamprecht, Steinhoff may have concluded its global settlement with creditors without informing them of the "true facts" and the parties potentially implicated in a forensic report compiled by PwC.
The report, the result of a 16-month probe, has not been publicly released. Lamprecht, meanwhile, has questioned whether it focussed on Deloitte's role at all.
The settlement proposal includes wide-ranging indemnification against further lawsuits. Lamprecht fears that if it were concluded before his case came to court, then his legal bid would be thrown out before it was heard.
Lamprecht said that, for this reason, he has applied to intervene in the winding-up application of the former owners of Tekkie Town.
Steinhoff is opposing the upcoming liquidation application.
The retailer has argued that it is not commercially insolvent and that the rights of the "overwhelming majority" of claimants and creditors would be hurt were it wound up.
Steinhoff has urged claimants to support its settlement proposal - which was recently revised upwards - saying it is the "best opportunity to recover amounts in respect of any claims in the near term and with certainty."
*Two months after Deloitte made this statement, the Independent Regulatory Board for Auditors' (IRBA) disciplinary committee gave the Deloitte partner in charge of African Bank's audit before it nearly collapsed in 2014 a "suspended suspension".
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