Connie Myburgh, Nova Property Group vs. Moneyweb
SUMMARY
The headline to the story in dispute read, Nova: Insolvent, or in a sound financial position? – It’s becoming increasingly unlikely that Nova will be able to repay the 18 000 former Sharemax investors (published on 26 March 2020).
This ruling by Acting Assistant Press Ombud Johan Retief was based on the Press Code that was in effect before 30 September 2022.
Connie Myburgh and Nova Property Group simultaneously lodged six complaints with the office of the Press Ombud. Retief said that, as all the articles complained of were about the same subject and issue, all six of the complaints and adjudications should be read in conjunction with the others.
The Ombud initially declined to entertain this complaint due to Myburgh’s inappropriate personal remarks about the editor. Chair of Appeals Judge Bernard Ngoepe granted the complainant his appeal against this decision, on condition that he toned down his language.
The article said Nova’s board declared the company to be in a “sound financial position”, despite receiving a lengthy qualified audit report, and the auditor expressing significant concern about its ability to continue as a growing concern.
The gist of the article was whether Nova was in a sound financial position or not.
Myburgh complained that the article created the false and unfair impression that Nova had:
- experienced financial difficulties, and that he was to be blamed for that;
- blamed Moneyweb for its alleged financial difficulties;
- not been in a financial position to repay debenture holders according to the Scheme of Arrangement; and
- its properties not officially valued by an independent valuer.
The issue was whether the article falsely and unfairly created the impression that Nova had experienced financial difficulties. Retief said he was satisfied that not only did the editor quote the report of Nova’s external auditors (Nexia SAB&T) accurately, but he also did so in context
Did the article blame Myburgh for the financial difficulties Nova allegedly found itself in? The Ombud was not convinced. There simply was no reference in the article as to who was to blame for the dire situation. The article did not put any blame on Myburgh – it left it to readers to decide for themselves.
Did Nova blame Moneyweb for its alleged financial difficulties? The Ombud said the relevant statement in the article was justified.
The complaint was dismissed in its entirety.
THE RULING ITSELF
Complaint Number: 7830
Lodged by: Mr Connie Myburgh, Chairman: Nova Property Group
Date of article: 26 March 2020
Headline: Nova: Insolvent, or in a sound financial position? – It’s becoming increasingly unlikely that Nova will be able to repay the 18 000 former Sharemax investors
Author of article and respondent: Ryk van Niekerk, editor
Index
Introduction: Six complaints 2
Unacceptable language 2
- Complaint 3
- The article 3
- Relevant sections of the Press Code 3
- The text 3
- The arguments 3
- Introduction 3
- Financial difficulties 4
- Myburgh to be blamed 7
- Van Niekerk to be blamed 8
- Not able to repay debenture holders 9
- Properties not officially valued 10
- Finding 11
- Appeal 11
Introduction
At the outset, I need to flag two issues:
| Six complaints
Mr Connie Myburgh and Nova Property Group (“Nova”) have simultaneously lodged six complaints with the office of the Press Ombud. The complaint numbers, headlines and dates of publication of the five other complaints are:
As all the articles complained of are about the same subject and issue, all six of the complaints and adjudications should be read in conjunction with the others. At the end of the last adjudication, I shall make some general comments in a separate addendum.
Johan Retief – Acting Assistant Press Ombud |
- Complaint
1.1 The Article
1.1.1 Myburgh complains the article created the false and unfair impression that Nova Property Group (“Nova”) had:
- experienced financial difficulties, and that he was to be blamed for that;
- blamed Moneyweb for its alleged financial difficulties;
- not been in a financial position to repay debenture holders according to the Scheme of Arrangement; and
- its properties not officially valued by an independent valuer.
1.1.2 He says if Moneyweb is unable to provide proper proof to the complaints, he requires the publication of rectifications, retractions and unequivocal public apologies to him in his personal capacity and as Nova’s chairman, as well as to the Nova itself.
1.2 Relevant sections of the Press Code
Sections of the Press Code complained about are:
- 1.1: “The media shall take care to report news truthfully, accurately and fairly”;
- 1.2: “The media shall present news in context and in a balanced manner, without any intentional or negligent departure from the facts whether by distortion, exaggeration or misrepresentation, material omissions, or summarization”; and
- 1.3: “The media shall present only what may reasonably be true as fact; opinions, allegations, rumours or suppositions shall be presented clearly as such.”
- The text
2.1 The article said Nova’s board declared the company to be in a “sound financial position”, despite receiving a lengthy qualified audit report and the auditor expressing significant concern about its ability to continue as a growing concern.
2.2 The gist of the article was whether Nova was in a sound financial position or not. Van Niekerk did not make any bones about it. He wrote, “Apart from the qualification by auditor Nexia SAB&T in respect of the valuations of several properties, the statements reveal that Nova’s assets barely exceeded liabilities, a desperate cash flow crunch and that the board sold properties to fund operational expenses – including lavish executive salaries. The statements also show that Nova was unable to secure funding from commercial banks or credible financial institutions, and was forced to borrow nearly R40 million from a bridging finance provide at the astronomical interest rate of 1% per week.”
- The arguments
- Introduction
3.1.1 Before I delve into this complaint, allow me to say that I am going to ignore statements that are irrelevant to the complaint – of which there are quite a few. If follows that I am also going to ignore responses to such statements.
3.1.2 Myburgh leaves no stone unturned in accusing the editor of bias and “utmost malice”, alleging that he was out to create “maximum damage” to him and to Nova. I shall refer to this allegation again in my addendum, after I have adjudicated all six complaints.
3.1.3 To keep the issues as simple as possible, I am:
- not going to repeat myself, as often happens in the relevant correspondence that has landed on my desk; and
- grouping together several issues that are addressed separately in the communication with this office.
3.1.4 I am cognisant of the fact that simplifying matters can be dangerous. Over-simplifications will inevitably lead to wrong interpretations and decisions. However, the intricate nature of the complaint at hand has forced me to simplify. Hopefully, I have not missed any nuances in this process. If I have, it was not intentional. The exercise was indeed all but easy.
3.1.5 Myburgh’s (and Nova’s) refusal to respond to Moneyweb’s questions is a recurring theme. He says Nova has long ago come to understand that, “to respond to Mr van Niekerk, merely provides him with another platform and opportunity, to further report his incorrect, and in the view of the Nova Group, damaging and defamatory narrative, regarding the Nova Group and its functionaries”. He adds, “To respond to every article written about the Nova Group by Mr van Niekerk in order to satiate his obsession with the Nova Group, will be a waste of time, money and resources, as the reportage is no more than sensationalist writings.”
3.1.6 On the other hand, I note (with appreciation) that the editor nevertheless persisted in giving Nova a right of reply.
3.1.7 Still, this is an extremely unhealthy situation. Given the tension between the parties (let’s be honest!), I have little hope that this adjudication will do anything to improve this situation. I am nevertheless going to try to do the seemingly impossible – to bring the parties closer to each other. But, in the end, the choice is theirs.
- Financial difficulties
3.2.1 Myburgh complains the editor created the false and unfair impression that Nova had experienced financial difficulties and asks the editor to prove this impression.
3.2.6 Regarding the complaint, the editor says that, from his analysis, it was clear that Nova was in a dire financial position. 3.2.7 He highlights the following facts “which reveal the extent of Nova’s financial problems”:
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3.2.8 Myburgh denies that Nova was experiencing financial difficulties and argues that the matters put forward by the editor do not indicate such.
Analysis
3.2.9 The issue is whether the article falsely and unfairly created the impression that Nova had experienced financial difficulties.
3.2.10 I am satisfied that not only does the editor quote the report of Nova’s external auditors (Nexia SAB&T) accurately, but that he also did this in context – the statement quoted by him is by no means an isolated one, as other assertions in the same report point to the same conclusions.
3.2.11 Consider the following statements in Nexia SAB&T’s report:
- “Having assessed the various key assumptions applied by the board of directors in their valuation process for these properties, we were unable to satisfy ourselves that, based on information at our disposal, the assumptions applied appropriately reflect the existing conditions of these investment properties as it was not in line with the valuation performed by the management expert for these properties”;
- “The value of these investment properties in the consolidated financial statements is currently carried at R583 million as disclosed in the statement of financial position… Consequently, had management accounted for these investment properties at the value indicated by management’s expert, the investment properties would have been carried in the consolidated financial statements at R309 million”;
- “The effects on the consolidated financial statements are that had the investment property been accounted for at the above value of the management expert, the valuation of these investment properties would have decreased by R274 million, the related deferred taxation liabilities would have decreased by R61 million as disclosed in the statement of financial position…and the other non-operating losses would have increased by R274 million…”; and
- “Due to possible misstatements in the investment property values…the investment in subsidiaries balance in the company separate financial statements may also be further impacted.”
3.2.12 But there is more evidence (which is what Myburgh is asking for). In her special Communique to debenture holders, CEO of Nova Dominique Haese wrote, “Nova was compelled to make this loan at a high interest rate, because Nova could not obtain ordinary commercial funding from the banking industry, as a result of the continuous negative, incorrect and damaging reporting by Ryk van Niekerk of Moneyweb, in regard to Nova and its directors, for many years, creating so called ‘Reputational Risk’, which impacts negatively on Nova’s ability to obtain funding, all of which impact negatively on Debenture Holders’ interests”.
3.2.13 This is what Haese said:
- Nova was “compelled” to make a loan at a “high interest rate”;
- Nova “could not obtain ordinary commercial funding”; and
- Nova’s ability to obtain funding was impacted “negatively”.
3.2.14 If anything, these statements smell of financial difficulties. Here is the proof that Myburgh is asking for, coming from Nova’s CEO herself. It would be hard to believe otherwise.
3.2.15 The editor is also correct in:
- stating that Nova’s AFS for the financial period 1 March 2018 to 28 February 2019 were published more than a year after the company’s year-end – which was in contravention of the Companies Act; and
- his references to the amounts of money involved.
3.2.16 Van Niekerk has bombarded me with evidence – while nothing of the sort was forthcoming from Myburgh.
3.3 Myburg to be blamed
3.3.1 Myburgh complains that the article (falsely) blamed him for the financial difficulties Nova allegedly found itself in.
| 3.3.2 Seemingly curiously, and out of character, the editor does not reply to this part of the complaint. |
Analysis
3.3.3 With no real arguments from either side, I am only left with an analysis of the text of the article itself.
3.3.4 A careful reading of the quite lengthy article reveals that Myburgh was only mentioned once. This sentence read, “Interestingly, Connie Myburgh, Nova’s chairman, was a director of Colf Cree from 2004, long before Nova acquired it.”
3.3.5 His picture also accompanied the report.
3.3.6 Given the above, it is difficult to uphold a complaint that Moneyweb held Myburgh responsible for Nova’s alleged financial troubles. There simply was no reference in the article as to who was to blame for the dire situation. Van Niekerk did not put any blame on Myburgh – he left it to readers to decide for themselves.
3.3.7 As Myburgh was Nova’s chairperson, it was reasonable to at least mention his name in the article.
3.4 Van Niekerk to be blamed
3.4.1 The sentence in dispute read, “… Dominique Haese, CEO of Nova … issued a lengthy response as a Communique to debenture holders, which once again partly blames the author for the financial difficulties the group finds itself in”.
3.4.2 Myburgh denies that Nova has held the editor responsible for Nova’s alleged financial difficulties.
| 3.4.3 Van Niekerk quotes from Haese’s Communique, as well as from a media release by Nova regarding the poor outcome of an auction – both of which, he says, proves his point (namely, that Nova did blame him for its financial problems). He also refers to a statement subsequently issued by the auctioneers, denying that Moneyweb, or he was to blame for the poor auction outcome.
3.4.4 He presents me with a statement released by Mr Ari Ben, CEO of AuctionInc, dated 11 June 2019, which exonerated Moneyweb from having had any negative impact on the auction. |
3.4.5 Myburgh presents me with counter-evidence, which puts Ben’s statement in a different perspective.
Analysis
3.4.6 The auctioneer’s opinion about Moneyweb’s alleged negative influence on the outcome of the auction may be important to the parties, but it is not relevant to this complaint – the article did not say the auctioneers said that Moneyweb had a negative influence on the outcome of the auction (or no influence at all, for that matter) – Van Niekerk merely reported that Nova (not the auctioneers) partly blamed him for the poor outcome
3.4.7 The issue is whether this particular statement was justified or not. To be more exact: Is it true that Nova partly blamed Moneyweb “for the financial difficulties the group finds itself in”?
3.4.8 Let’s take a look at Nova’s media release in this regard. It inter alia stated, “Based on feedback from auctioneers at the auction of 30 May 2019, Moneyweb’s presence and the taking of photographs of the bidders created an uncomfortable environment for the bidders with the result that bidders were reluctant to become involved in the process. Due to the direct interference by Moneyweb, optimal pricing was not obtained, to the detriment of the Debenture Holders, as a normal, free auction process could not take place as a direct result of said interference. If optimal pricing had been achieved on the properties, it may well have been possible for the Board to consider repayment to Debenture Holders.”
3.4.9 From this, it should be clear that Nova indeed directly blamed the editor for the poor outcome of the auction – which justified his statement that the Group had “partly blamed” him for its financial problems.
- Not able to repay debenture holders
3.5.1 The article stated, “…it is clear from the balance sheet that Nova is not in a financial position to repay debenture holders according to the scheme of arrangement.”
3.5.2 Myburgh denies this statement, calling it untrue, inaccurate, unfair, and misrepresentative of the “true factual situation”. He asks the editor to prove his reportage on this issue.
| 3.5.3 Van Niekerk replies that Moneyweb’s analysis of the balance sheet revealed Nova found itself in no position to repay debenture holders.
3.5.4 He submits:
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3.5.5 Myburgh rejects the editors “flawed ability” to analyse Nova’s financial situation. He submits that Nova’s balance sheet showed something different than what the editor alleges it did. “In fact, the balance sheet does not talk to the ability or not, to make payment to Debenture Holders at all,” he argues.
3.5.6 He continues, “According to the Schemes of Arrangement, amounts equal to fair market value of relevant properties, to the maximum of amounts equating to historical capital invested with reference to relevant properties, are payable to Debenture Holders, with the effect that there can never be a situation of the Nova Group not being able to pay Debenture Holders. The Nova Group is therefore always able to pay Debenture Holders according to the Schemes of Arrangement.”
Analysis
3.5.7 The introductory paragraph in the article that the editor refers to read, “The Nova Property Group has suspended interest payments to debenture holders due to the group’s inability to obtain bank funding to fund its property management operations at the various property developments. The interest payments were suspended from November 1.”
3.5.8 I am satisfied that the figures the editor refers to (sub-section 3.5.4) are correct – and that his conclusions were therefore justified.
3.6 Properties not officially valued
3.6.1 The article read, “However, the statements indicate that an independent valuer did not officially value the properties in the 2019 financial year. The last independent valuation was fond on February 28, 2018, the final day of the preceding financial year.”
3.6.2 Myburgh denies this statement, calling it untrue, inaccurate, unfair, and misrepresentative of the “true factual situation” – Nova Properties were indeed valued by independent valuers in the 2019 financial year, he submits. He asks the editor to prove his reportage on this issue.
| 3.6.3 Van Niekerk refers to the relevant AFS, which disclosed that Ms A de Wet valued the properties on 28 February 2018, the last day of the preceding financial year. “Her valuation was, therefore, not performed during the accounting period as claimed,” he argues. |
Analysis
3.6.4 Note 3 on page 30 of the relevant AFS stated that Ms A de Wet valued the properties – and that she was an independent valuer who was not connected to Nova. This evidence seemed to prove that the statement in dispute was not accurate. The valuation was dated 28 February 2019.
3.6.5 Concerned that I might have misunderstood the relevant document, I asked the editor for clarification.
3.6.6 Van Niekerk responded inter alia as follows: “The particular sentence only pertains to three properties in the Nova portfolio, and not the whole portfolio as Mr Myburgh alleges in his complaint. If the sentence is read in the context of the preceding and subsequent paragraphs, it is clear it only refers to the Del Judor Mall, Flora Centre and the Waterglen Shopping Centre.”
3.6.7 The sentences immediately preceding the statement in question (as cited under sub-heading 3.6.1) said: “The auditors’ qualification of the valuations of several properties is … critical, as any valuation changes may influence the company’s solvency position. The auditors were especially concerned with the assumptions made in the valuation processes of Del Judor Mall, Flora Centre and the Waterglen Shopping Centre properties. These properties were valued by the Nova board. Nexia said the three properties were collectively valued at R583 million in the statements, despite the valuation of an independent valuer putting them at only R309 million, or R274 million less. Nexia said that had the properties been accounted for at R309 million, the total portfolio value would have been reduced by R274 million and the deferred tax liability by R61 million. It would also have increased the non-operating losses by R274 million. This would have resulted in a reduced valuation of the property portfolio and a significantly higher net loss, and most likely would have resulted in Nova’s liabilities exceeding its assets, thus rendering the company technically insolvent. Even if the company remains solvent, it is clear from the balance sheet that Nova is not in a financial position to repay debenture holders according to the scheme of arrangement. Nova’s board rejected the auditors’ qualification. In the directors’ report, Nova said the properties were valued by independent valuers. However, the statements indicate that an independent valuer did not officially value the properties in the 2019 financial year.”
3.6.8 The sentence immediately following the statement in dispute read: “In the Communique, Nova acknowledged that the board had valued the properties. ‘The upward valuation by the Nova board of Waterglen and Flora is supported by an external independent valuator and by an independent calculation by architects, which include an appropriate value given to remaining bulk. The upward valuation of Del Judor Mall is supported by upgrades, an expected increase in demand for space and a renewal of the lease agreement by an anchor tenant with an expressed intention to take up additional space’.”
3.6.9 From this context, the editor is clearly correct in that the reference in the article about any official evaluation was about these three specific properties.
3.6.10 The next question is how justified the editor was in making this statement (read: with reference to the Del Judor Mall, Flora Centre and the Waterglen Shopping Centre).
3.6.11 At the bottom of page 30 of the relevant AFS, the “valuation dates” for these three properties are documented. They were all dated “28 February 2018 – which was for the previous financial year. I have no proof that these properties were valued by an independent valuer during the next financial year.
3.6.12 This substantiates the reportage on this particular issue.
3.6.13 Van Niekerk concluded, “This is critical to the story as it reveals that the board valued the properties for the 2019 financial period. Nexia strongly suggests in its qualification that the Nova board overvalued the three properties by R274 million. This is of crucial importance because if the board used De Wet’s independent valuation, Nova’s liabilities would have exceeded the value of the assets, rendering the company insolvent. It is also clear that the paragraphs only refer to the three properties through the inclusion of the Nova board’s responses to Nexia’s audit opinion.
3.6.14 I am satisfied that the editor has quoted the Nexia SAB&T audit report correctly.
- Finding
The complaint is dismissed in its entirety.
- Appeal
The Complaints Procedures lay down that within seven working days of receipt of this decision, either party may apply for leave to appeal to the Chairperson of the SA Press Appeals Panel, Judge Bernard Ngoepe, fully setting out the grounds of appeal. He can be contacted at [email protected].
Johan Retief
Acting Assistant Press Ombud