BRC DiamondCore contests document seizure

Allan Seccombe | Fri, 09 Oct 2009 14:54
[miningmx.com] -- RECORDS and documents were seized from the home of Brian Scallan, the vice president finance of BRC DiamondCore, and from the office of Banro Corporation in South Africa on Thursday, in a move that is contested by his lawyers as “unlawful",blocking the liquidators' immediate access to them.

According to legal documents from Scallan’s lawyers, Thomson Wilks Inc, there were a number of legal violations of the warrant granted under Section 69 of the Insolvency Act.

The seized items have been sealed and placed under the control of a lawyer acting exclusively for the liquidators. These items remain in the offices of Banro pending a court decision on the validity of the warrant.

JSE- and TSX-listed BRC DiamondCore’s wholly owned subsidiary in South Africa, Diamond Core, was placed into liquidation on 3 July for failing to pay R5m owed to River Corporate Finance.

As part of that process, the provisional liquidators approached the court to issue the warrant to seize certain documents. The warrant was granted in August 2009 and two policemen brought the warrant to Scallan’s home on 8 October.

“There was a warrant which was defective and it wasn’t fully executed,” Scallan told Miningmx. "Consequently, no documents could be taken, only electronic copies of emails and documents from my lap top." The liquidators will have no access to these records until the court decides on the matter, he said.

“It’s related to the liquidation. There was a warrant to search for the company’s records, which were all down in Kimberley essentially Kimberley but some were in the Banro offices.”

Thomson Wilks said a number of people sub-contracted to a private detective, who was retained by one of the liquidators, were in attendance during the visit to Scallan’s home and it was they who wanted to take electronic records from his computer.

These records in the form of e-mails are held under lock and key by the liquidator's lawyer and will remain so until the court makes a ruling on the warrant.

“The warrant clearly stipulates that only the parties entitled to carry out the warrant were members of the South African Police Service. Consequently, the search and seizure process was unlawful insofar as it was in fact carried out by private investigators and not by the police who merely stood by in attendance,” the lawyers said.

One of BRC’s directors, Stephen Thomson, is a director at the law firm.

The private detective participated in the search and seizure of documents at the Banro office in Johannesburg, again contravening the terms of the warrant, the lawyers said, adding that the detective took documents not stipulated in the warrant. Again, these sealed documents are held by the liquidator's lawyer until a court rules on the warrant.

“Having regard to all of the aforesaid facts, we have instructions to advise that an application will immediately be launched to set aside the Section 69 warrant and for an order directing that all the documents and records seized in the unlawful manner aforementioned be retained by our clients,” Thomson Wilks said.

The lawyers also argued, without giving details, that the representations made to get the warrant “were false”. They also argued that, according to another section in the Insolvency Act, a sheriff of the court should have drawn up an inventory before the warrant could be enacted, something which was not done in this case.

BRC's proposed sale of alluvial diamond assets to KIG Mining, a Frankfurt-listed diamond group, for $10.7m in cash and shares appears to have stalled now that the assets are in a liquidation process.