Unapproved face masks – sold for R5m by two Gauteng men during the Covid-19 pandemic – had to be destroyed because they were sold without regulatory approval, with the Gauteng High Court ruling that the pair had acted recklessly and ordering them to pay back the money.
Boksburg’s Michiel and Morne Stassen were held personally liable for selling the KN95 masks that their company, KMSG Outsourced Services, sold for R5m to Lluvia Trade Division in Gauteng without approval from the National Regulator for Compulsory Specifications (NRCS).
News24 reports that the judge also found the pair couldn’t keep their story straight about why they did not have a permit to sell the products.
South Africa was in lockdown at the time, and there was high demand for medical face masks. While those for use by the general public could be freely sold, masks that made claims about protection against viruses or that are used by medical personnel need a sales permit.
Acting Judge Solly van Nieuwenhuizen found the Stassens personally liable for the losses incurred by Lluvia.
They were told to pay back the R5m they charged for the masks, plus interest, as well as Lluvia’s legal costs – and will probably have to fork out at least R6.8m.
In his ruling, Van Nieuwenhuizen criticised the Stassens for getting the case bogged down in “protracted litigation” to allow them to dispose of KMSG’s assets when it became clear the money needed to be paid back.
“They strategically delayed the hearing of every facet of the matter (…) to avoid liability and to minimise the assets available for distribution upon liquidation,” he said.
Cleaning up
Lluvia first took KMSG to court in July 2021 to claw back the R5 079 619 it paid for the masks.
Two months later, KMSG’s attorney sent an email admitting the company did not possess the relevant permits to sell the masks – yet despite this admission, it continued to oppose Lluvia’s attempt to recoup the funds.
In August 2022, KMSG changed tack, denying that it did not have the permits to sell the masks.
Lluvia then applied for summary judgment, granted in November 2022, after KMSG failed to file an opposing affidavit. The company was ordered to pay back the R5m plus interest and costs.
But when it failed to do so, Lluvia succeeded in having it placed into liquidation on 8 February 2023.
It later discovered that KMSG had applied for its own voluntary winding up by resolution on 6 February, just two days before its own liquidation bid.
In their winding-up statement, the Stassens said their company had no assets other than stock valued at R10 000. This meant Lluvia had to look elsewhere for the funds.
Lluvia then decided to institute a new application to hold the Stassens personally liable under a provision in South African company law where directors can be held accountable for reckless trading.
After repeated delays, the case was finally heard in May. In his ruling last week, the judge criticised the Stassens and their legal representative for “delaying tactics time after time”.
Van Nieuwenhuizen also noted it was common cause that the Stassens did not have the required permits to sell the masks, but kept changing their stories, at various times arguing they had regulatory approval to sell them, admitting they did not have the approval, or claiming they didn’t know they needed it.
Meanwhile, added the judge, their attorney had already admitted back in 2021 that they did not have approval.
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Dis-Chem appeals excessive pricing conviction and R1.2m fine