Yellow Button claims pour in

Posted On Monday, 20 October 2003 02:00 Published by eProp Commercial Property News
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The Estate Agency Affairs Board was receiving "a flood" of claims against its fidelity fund from ex-clients of Yellow Button Property Management (Johannesburg), a former subsidiary of listed property company Jigsaw, it has confirmed.

Property-Housing-ResidentialPretoria - The Estate Agency Affairs Board was receiving "a flood" of claims against its fidelity fund from ex-clients of Yellow Button Property Management (Johannesburg), a former subsidiary of listed property company Jigsaw, it has confirmed.

Solly Makenna, the board's claims manager, said on Wednesday that the claims resulted from a shortfall of more than R4 million on the trust account of Yellow Button, which was placed in final liquidation in the Johannesburg high court in April.

Makenna was unable to quantify the value or number of claims received to date by the board, which is the statutory body regulating estate agencies.

He added that criminal charges related to the trust fund shortfall had not been laid by the board against anyone, but the body was "getting an opinion from counsel to see our way through this quagmire".

However, Makenna said specific individuals or bodies corporate that had submitted claims against the board's fidelity fund had been told to lay criminal charges if they believed trust money had been stolen.

Strategic Alliance Property Services acquired Yellow Button (Johannesburg) in February, but applied for the company's liquidation soon after.

BDO Spencer Steward, the auditors of the board, prepared a report which was referred to in court papers in support of Yellow Button's liquidation. It said:

"The trust liability owed by the estate agent [Yellow Button] to its trust creditors exceeded its cash held in trust by R4 348 059.49."

"This amount was provided as a liability in the books of the estate agent's holding company [Jigsaw], but has not been paid into the trust account as there is not sufficient cash available to fund this shortfall."  


Alex Frenkel, the managing director of Strategic Alliance, said in an affidavit that there had been a R1.5 million shortfall in the trust account transfer to Strategic Alliance; staff severance packages totalling R387 216, which should have been paid by February 28, had not been paid; and R1.19 million which had been paid into Yellow Button's trust account since the effective date of the acquisition had not been transferred to Strategic Alliance on a daily basis as agreed.

David Singer, an attorney for Strategic Alliance, said this week that neither the board, Jigsaw, the liquidators nor Absa, which has a major shareholding in Jigsaw, had seen fit to do anything about the trust shortfall.

"The consequences of that will shortly be debated in court between Jigsaw and Strategic Alliance," he said.

Neville McIntyre, the chief executive of Jigsaw, said this week that he believed the shortfall had been rectified, but added that "the quantum [of the shortfall] was never proved".

In addition, McIntyre said all money received after the effective date of the sale had been paid over.

He acknowledged that money paid into Yellow Button's account wasn't paid over immediately, not because of a shortfall, but because the banks had a seven-day clearance period on all deposits.

The severance packages were only payable on fulfilment of the sale agreement, McIntyre added, and Strategic Alliance had not fulfilled its obligations in terms of payment before bringing the liquidation application.

Jigsaw's shares were untraded at 28c yesterday.



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