Billionaire Patrice Motsepe’s investment firm African Rainbow Capital (ARC) has turned to the Johannesburg high court to lay down the law in a R3.4bn lawsuit initiated in Tanzania by a US-based company, Pula Group, against the businessperson and three companies affiliated to him.
Pula Group, headed by former US ambassador to Tanzania Charles Stith’s daughter Mary, initiated the legal showdown against Motsepe, ARC, African Rainbow Minerals (ARM) and ARCH Sustainable Resources in 2023, accusing Motsepe and the companies of breaching a 2019 confidential agreement in a mining project investment proposal in Tanzania for Pula Graphite.
The litigation was initiated after ARCH invested in Australia’s Evolution Energy Minerals Ltd in 2021, which was involved in a graphite mine project, Chilalo, in the same area as Pula Graphite.
Pula Group, which is a 50% shareholder of Pula Graphite, defines Chilalo as its opposition in the Ruangwa District.
Motsepe, ARM and ARCH have had an unlucky run in the $195m legal battle in Tanzania. They did not defend the case arguing they were not served correctly. Pula Group applied for a default judgment against the three.
ARC was the only entity that opposed the application in Tanzania. The undefended parties tried to lodge applications to have the default judgment application scrapped but failed in 2024 and have taken the matter on appeal.
ARC lodged an application with the Johannesburg high court in June, marking the first time the case served in SA courts.
ARC’s representative advocate Kristie Magagula last week argued for edictal citation (serving court papers to parties outside the country) and the High Court granted the request. The foreign companies have about a month to oppose the application.
ARC wants the court to make declaratory orders (clarifying issues of law), according to SA laws, that the company was not affected by the confidential agreement between ARM and Pula Group and cannot be held liable for damages.
It also wants the court to declare that Pula Group’s mining company, Pula Graphite, in Tanzania was not part of the agreement therefore cannot claim to suffer contractual damages flowing from the alleged breach of the agreement.
In court papers, ARC director Johan van der Merwe argued ARC was stuck in a legal conundrum as ARM, Motsepe and ARCH were not defended in the main lawsuit in Tanzania and could not produce evidence in the case.
“Notwithstanding the fact that Pula Graphite, ARC, Dr Motsepe and ARCH are not parties to the confidentiality agreement, Pula Group and Pula Graphite are seeking to hold them jointly and severally liable with ARM in respect of both the declaratory orders and damages,” he argued.
Van der Merwe contended the confidentiality contract was signed on the agreement that its interpretation was based on SA laws.
“The High Court in Tanzania is thus enjoined to apply the law of the Republic of SA to determine, among other issues, whether the confidentiality agreement was breached as alleged; whether Pula Group and Pula Graphite suffered damages and those damages are quantified; and whether the declaratory relief sought by Pula Group and Pula Graphite are competent orders as remedies for purported breach of agreement.”
In engaging the Johannesburg high court jurisdiction, he argued the court’s ruling on the matter would be key in resolving the legal dispute.
“It is our case that a finding on SA law will be dispositive of all the relief sought, first and foremost against ARC, but by necessary implication against Dr Motsepe and ARCH too.
“A determination of this court, in the form declaratory orders dealing with the legal issues arising from the confidentiality agreement, will ensure that those disputes are properly resolved by application of the applicable SA legal principles.”
Van der Merwe argued Pula Group misled the court and it’s application had numerous defects in its evidence according to SA law relating to damages claim.
Pula Graphite no longer owned the exploration right of the project by August 2023. This meant the company did not have the mining right when the litigation was launched, Van der Merwe contended.
“The plaintiffs intend to exploit ARM, Dr Motsepe and ARCH’s position to secure a default judgment against them where they have no case, and the case presented is based on false evidence.”
ARC also disputes the amount sought by the applicants and contend the value of the graphite project was $105m.
Van der Merwe argued that though Pula Group had not sought a default judgment against ARC, the court’s finding on the matter would be binding to ARC.
ARC has applied for a stay of the default judgment application pending the finalisation of the main proceedings. That application has been launched in Tanzania.
“ARC has been dragged into the proceedings in Tanzania without any basis in law for doing so. ARC requires the protection of SA courts to ensure that it is fairly treated in a foreign jurisdiction based on the correct application of the SA law,” Van der Merwe argued.
The Johannesburg high court is yet to make findings on the merits of the case.
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