The Supreme Court of Appeal (SCA) has upheld Old Mutual Unit Trust Managers’ appeal against the High Court ruling that found it liable for more than R1.7 billion in damages for losses suffered by the Living Hands Umbrella Trust, which was controlled by Fidentia.
The plaintiffs, who included the trustees of the Living Hands Umbrella Trust, alleged that OMUT, which invested the trust money, failed to comply with its duties and this allowed the Fidentia wrongdoers to misappropriate the trust’s funds.
Living Hands accuses OMUT of handing over R1.1bn to the Fidentia-controlled Mantadia Asset Trust Company (Matco) when OMUT had reason to believe the trust had come under the control of individuals who might not act in the best interests of the beneficiaries.
Matco, which later became Living Hands Umbrella Trust, managed the trust funds of about 50 000 beneficiaries, the vast majority of whom were minors.
Matco was sold to Fidentia for R93 million in 2004.
Old Mutual said it could not be held responsible for the financial losses caused by Fidentia’s mismanagement and looting. It also argued that prescription prohibited the trust from pursuing its case.
In July 2022, the High Court found that OMUT owed a direct duty of care to the trust under section 71 of the Collective Investment Schemes Control Act (CISCA) that ranked higher than its contractual obligations towards the trust administration company.
In a judgment handed down today, the SCA held that section 71 of CISCA does not extend beyond OMUT’s contractual relationship with Living Hands, the trust administration company, and does not include the trust itself.
It said the plaintiffs failed to prove that OMUT’s actions were the factual and legal cause of the loss. The misappropriation of the funds was due to the fraudulent conduct of the Fidentia wrongdoers.
The SCA set aside the High Court’s order and replaced it with an order dismissing the plaintiffs’ claim against OMUT with costs.
The High Court’s judgment was regarded as having far-reaching implications for the financial services industry. Every financial institution administering or managing a fund would not only have duties to its principal but also to those to whom the principal owed duties. It also had implication for anyone who is obliged to report a “suspicious” transaction to a regulator.
Read: Old Mutual/Living Hands judgment: consider your verdict
So living hands won’t be able to pay us our money back we didn’t go school because ot that money the trust eat our money our fathers work hard for that money now we get nothing at all??