There has been much in the press lately regarding the boardroom battles between Simmer and Jack Mines (HYPERLINK "/mw/view/mw/en/page296058?oid=2265&sn=2009 Detail&pid=296058"JSE:SIM) and its BEE shareholder, Vulisango Holdings. However, another dispute involving Simmers and Vulisango has been playing out in the Port Elizabeth High Court, this one related to JCI (HYPERLINK "/mw/view/mw/en/page296058?oid=2106&sn=2009 Detail&pid=296058"JSE:JCD) Limited and the preference shares JCI (HYPERLINK "/mw/view/mw/en/page296058?oid=2106&sn=2009 Detail&pid=296058"JSE:JCD) has in a company called Xelexwa Investment Holdings, formerly known as Jaganda.

In terms of the preference share agreement, a loan claim against Simmers by a subsidiary of JCI (HYPERLINK "/mw/view/mw/en/page296058?oid=2106&sn=2009 Detail&pid=296058"JSE:JCD) in the region of R89 million was acquired by Xelexwa in return for the issue to JCI (HYPERLINK "/mw/view/mw/en/page296058?oid=2106&sn=2009 Detail&pid=296058"JSE:JCD) of 357 million Xelexwa redeemable preference shares. The loan claim against Simmers was in turn capitalised into 357 million ordinary Simmers shares held by Xelexwa and owned by Vulisango, its holding company. It is in terms of this structure that Vulisango currently owns 22% of Simmers.

In April last year in the Port Elizabeth High Court, Vulisango sought and was granted a final order of liquidation against Xelexwa. Claire Morgan of Edward Nathan Sonnenbergs (ENS), whose client is JCI, says, "this was contrary to the usual practice in that court whereby a provisional, rather than a final, order of liquidation is granted at the first hearing of the liquidation application".

Until last Monday, Xelexwa has been languishing in final liquidation, although in October last year JCI (HYPERLINK "/mw/view/mw/en/page296058?oid=2106&sn=2009 Detail&pid=296058"JSE:JCD) launched court proceedings to overturn the liquidation of Xelexwa.

At the time of applying for Xelexwa's liquidation in April 2008, Vulisango did not give notice of the liquidation application to JCI (HYPERLINK "/mw/view/mw/en/page296058?oid=2106&sn=2009 Detail&pid=296058"JSE:JCD) despite JCI's substantial interest, through its preference shareholding, in Xelexwa and its possible liquidation. Vulisango disputes the validity of JCI's preference shares and this dispute will be decided in another court action in the Johannesburg High Court.

After JCI (HYPERLINK "/mw/view/mw/en/page296058?oid=2106&sn=2009 Detail&pid=296058"JSE:JCD) got wind of the final liquidation of Xelexwa, it launched an application to set aside the final order. JCI (HYPERLINK "/mw/view/mw/en/page296058?oid=2106&sn=2009 Detail&pid=296058"JSE:JCD) argues that it is severely prejudiced by the liquidation of Xelexwa for, where Xelexwa is in liquidation, JCI (HYPERLINK "/mw/view/mw/en/page296058?oid=2106&sn=2009 Detail&pid=296058"JSE:JCD) is not entitled to a premium on the redemption of its preference shares. In terms of the preference share agreement, JCI (HYPERLINK "/mw/view/mw/en/page296058?oid=2106&sn=2009 Detail&pid=296058"JSE:JCD) would ordinarily be entitled to a premium in the region of R140 million when the preference shares fall due for redemption at the end of 2010.

JCI (HYPERLINK "/mw/view/mw/en/page296058?oid=2106&sn=2009 Detail&pid=296058"JSE:JCD) has therefore argued in papers before the Court that the effect of the liquidation was the de facto stripping of JCI's right to its R140 million premium. According to JCI, notice of the liquidation was deliberately withheld from it and had the usual practice of first granting a provisional liquidation order been followed, JCI (HYPERLINK "/mw/view/mw/en/page296058?oid=2106&sn=2009 Detail&pid=296058"JSE:JCD) would have opposed the granting of a final liquidation order on the return day of the provisional order. JCI (HYPERLINK "/mw/view/mw/en/page296058?oid=2106&sn=2009 Detail&pid=296058"JSE:JCD) has argued that Vulisango's failure to give JCI (HYPERLINK "/mw/view/mw/en/page296058?oid=2106&sn=2009 Detail&pid=296058"JSE:JCD) notice of the pending liquidation of Xelexwa amounted to an abuse of the process of court.

Valence Watson, the CEO of Vulisango, has admitted in papers before the court that one of the objects of the liquidation of Xelexwa by Vulisango, was to deprive JCI (HYPERLINK "/mw/view/mw/en/page296058?oid=2106&sn=2009 Detail&pid=296058"JSE:JCD) of its right to receive its premium on the preference shares.

According to Morgan, by agreement between JCI (HYPERLINK "/mw/view/mw/en/page296058?oid=2106&sn=2009 Detail&pid=296058"JSE:JCD) and Vulisango, reached at the Port Elizabeth High Court last Monday, and in terms of an order handed down by Judge Alkema, Xelexwa has been taken out of final liquidation and placed in provisional liquidation. The court will hear argument for and against the final liquidation of Xelexwa on 23 March 2010