Vodacom’s Please Call Me idea man, Nkosana Makate, has initiated a legal challenge in the high court in Pretoria to scrap a contract entitling UK investor Errol Elsdon to 40% of his multimillion-rand payout.
Elsdon, a former director of Black Rock Mining, registered in the British Virgin Islands, has a decade-long dispute with Makate, claiming his company had a contract to fund Makate’s litigation with Vodacom and in return would be entitled to 40% of the money share from the Vodacom dispute payout.
Makate entered into an agreement with the late Christian Schoeman to nominate a company, Black Rock, to pay for all his legal costs in 2011 in his 17-year battle with Vodacom to pay him for the incorporation of the “Please Call Me” service.
The litigation puts into the spotlight the legal rights of companies in high-stakes litigation funding contracts and seeks to answer whether a company’s legal rights stand in cases it runs into money flow troubles.
Makate’s legal team, in court papers, argues the company breached the contract from the start because it never had the money to fund the litigation.
“Black Rock never had, and would not have, the financial means or legal standing, and they never employed nor would they employ adequate financial and administrative management to enable it to perform as envisaged by the purpose of, and the obligations under, the impugned funding agreement,” Makate’s papers read.
The relationship between the parties soured in 2015 when Black Rock was deregistered and had cash-flow troubles.
The contract stated the company shall fund all legal costs and expenses reasonably necessary to prosecute the claim instituted by Makate against Vodacom.
Makate accuses Elsdon and his associates, Schoeman and Tracey Roscher, of fraud in failing to disclose crucial information about Black Rock and its financial standing before the contract was signed.
“As a result of Schoeman’s, Elsdon’s, Roscher’s and/or Black Rock’s fraudulent, alternatively negligent, further alternatively innocent misrepresentation and nondisclosure, Makate was entitled to cancel the impugned funding agreement,” the papers read.
“Makate acted on these false and fraudulent misrepresentations and nondisclosures and entered into the impugned funding agreement and the impugned nomination agreement, to his detriment, in that he has had to bear the costs of the entire PCM [Please Call Me] litigation since at least January 2015 and the concomitant risk of adverse legal cost orders.”
In a failed urgent application before the high court in Johannesburg, Elsdon argued his company paid an initial R500,000 and a further R2.4m towards Makate’s fees before there were cash-flow issues and a dispute over the legality of the contract ensued.
Elsdon disclosed to court he took out a loan to fund some of Makate’s litigation when his company had problems with cash. The company was deregistered in April 2014 after failing to file financial statements.
When Black Rock was deregistered, the agreement was transferred to another company, Raining Men Trade, also owned by Elsdon. That process was found to have been fraudulent, with an arbitrator finding that the only valid agreement was with Black Rock.
Makate cancelled the contract with Raining Men, giving rise to a dispute that legal rights of Black Rock still existed when it was registered again.
Makate contends: “Throughout the duration of the impugned funding agreement, read with the impugned nomination agreement, Black Rock has not performed any of its alleged obligations thereunder. Consequently, Makate has no obligation to tender any restitution of performance.”
Makate seeks an order declaring that the funding agreement was cancelled by agreement on or about January 12 2015, with retroactive effect from November 7 2011.
“On these premises, Makate is entitled to an order declaring that the impugned funding agreement, read with the impugned nomination agreement, has been cancelled or, alternatively, terminated.”
The case has not yet been heard by the court.
Business Day
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