MCCARTHY 's lawyers have turned to the courts to prevent Absa employees from being forced to answer a question about loans to McCarthy after the question was declared valid at an inquiry into Retail Apparel Group (RAG).
Lawyers for McCarthy said the question "at May 2002, what was the loan by Absa to McCarthy?" "vastly" extended the ambit of the inquiry and prejudiced their client.
They said McCarthy's loans had nothing to do with the financial situation of RAG, or its now liquidated subsidiary Retail Apparel Pty Ltd, and were privileged.
Stephan du Toit, who was appointed by the master of the court, argued that as McCarthy had a 96% shareholding in RAG and eight banks owned about 80% of McCarthy, the questions went to the state of mind of those involved in lending money to RAG.
The banks have come under fire at the inquiry, facing allegations that they may have delayed RAG's liquidation until they had reduced their risk on their exposure to RAG, and then unreasonably pulled the plug on the ailing retailer. The R50m lent by Absa to RAG, appears to have been facilitated via McCarthy.
Du Toit objected to requests for the matter to be reviewed as the inquiry intended to call First National Bank employees to testify on December 1 and they would be asked the same questions.
He said it was "simply a blatant attempt at delay".
Commissioner Hendrik Strydom granted McCarthy's request to apply for interim relief in the Durban Coast Local Division pending a review of his ruling after a lengthy discussion on the matter.
McCarthy CEO Brandt Pretorius had told the inquiry that all eight banks lent McCarthy money, and that the combined funding facilities tended to vary between R300m and R400m.
The hearing on Friday was characterised by a series of objections and adjournments, to allow for consultation between the bank's lawyers and Absa employees.
They were ordered to return in December after First National Bank's testimony, to allow for further questions.
Efforts to get to the bottom of a security document signed by the banks to extend cover to all companies in the RAG group were unsuccessful, after Trevor Murgatroyd, head of Absa's workout and recovery unit, said that he had doubts that notes he submitted to his legal advisors for advice had survived.
A fellow employee from the unit, Chris Barnard, was unable to assist the inquiry because he had not been involved in negotiations concerning the security documents, despite having cosigned the document with Murgatroyd.
Documents presented at the inquiry show that Barnard told the banks that he had been advised that the security documents were "too narrow".
He was unable to explain to Du Toit exactly what this meant because Barnard allegedly never received the detailed report he had been promised from the lawyers.
Pretorius has testified that the banks knew that any suspension of the credit facility to RAG would have forced the company into liquidation.
Credit lines were slashed on May 24 2002 and four days later RAG was placed under liquidation.
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