Investor Errol Elsdon last contributed to Nkosana Makate’s litigation against Vodacom in 2014 and should not be allowed to claim 40% of Makate’s multimillion-rand payout, Makate’s counsel, Reinard Michau, argued on Thursday.
Michau, appearing in the South Gauteng high court, opposed Elsdon’s urgent bid for an order compelling Makate’s attorneys, Stemela & Lubbe, to ring-fence 40% of the payout pending the outcome of separate litigation over whether foreign company Black Rock Mining is entitled to a substantial share of the money.
Elsdon, a former director of Black Rock Mining, which is registered in the British Virgin Islands, in 2011 agreed to pay for all legal costs for Makate in his battle to be compensated for the incorporation of his “Please Call Me” idea into Vodacom services.
According to Elsdon, he and his associates, the late Christian Schoeman and Tracey Roscher, paid an initial R500,000 and a further R2.4m towards Makate’s fees before there were cashflow issues and a dispute over the legality of the contract ensued.
The last payment made for Makate was R7,853 from Schoeman on December 4 2014.
Arguing on Thursday, Michau used Elsdon’s 2021 affidavit filed in the high court to invalidate the existence of the contract.
“The refunding received and applied by Makate towards the cost of litigation ceased during October 2014 when a dispute arose between parties,” Elsdon’s affidavit reads.
Michau contended Elsdon in his own affidavit supported the argument that the contract ceased to be in effect a decade ago.
“The last payment was R7,830 in 2014. When days were dark and friends were few, we needed money to go to the Supreme Court of Appeal, and Mr Elsdon was nowhere to be seen.
“There were days and days of litigation. There was no one to offer and say, ‘You must be needing money; can we help.’ Not one,” he said.
He told acting judge Don Mahon that Elsdon is effectively preying on Makate’s payout, having done “nothing” for more than a decade.
“Sitting in the shadow lurking somewhere waiting for this matter to be finalised, and when it was, out popped Mr Elsdon and Black Rock seeking that which they have done absolutely nothing to assist.”
Litigating against Vodacom’s legal team, led by advocate Richard Solomon (present in court yesterday), for about 17 years cost millions, and Black Rock failed to fulfil its obligation, Michau said.
When Makate litigated against Vodacom in the Constitutional Court in 2014, he said it cost R12m.
“The lordship should have seen how embarrassing Mr Solomon’s bill of costs from Vodacom was. Elsdon knew Black Rock should have been funding us; there is no evidence they ever did.”
He maintained the contract in 2011 was signed fraudulently because Black Rock was in provisional deregistration in 2011 in the British Virgin Islands. From 2014 until 2020, the company was deregistered “due to failure to pay annual fees”, Elsdon conceded.
“I do not know which person would give 40% of his funds or enter into an agreement with a company in provisional deregistration that is part of the fraud, which I will argue,” Michau said.
Furthermore, the funds given to Makate’s legal team did not all come from the company but through Elsdon’s associates, Schoeman and Roscher, which Michau argues showed the company did not have the cash flow to fulfil the contractual obligation to Makate.
The company was challenged to show a bank statement to depict it fulfilled its legal obligations to Makate.
“For six years the company was deregistered. You cannot just say, ‘I have an agreement.’ It means nothing; at least you make an allegation that you performed your obligation in terms of that agreement. Elsdon’s own affidavit says no money was paid after 2014,” Michau said.
The application is not urgent he argued, because Elsdon knew Makate disputed the contract from 2015 and could have litigated, but he had withdrawn previous challenges before.
When Black Rock was deregistered in April 2014, 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.
Elsdon argued Makate cancelled the contract with the wrong company, Raining Men. Makate said he cancelled the contract with Black Rock when it was registered again.
“They should have sought a declaration of validity of their contract with Makate 10 years ago when it was disputed; it is not an urgent matter,” Michau said.
Advocate Nazeer Cassim, representing Black Rock Mining, argued for the court to grant the freezing of the 40% for the parties to go through the arbitration process. Makate’s team has rejected arbitration.
Cassim argued the case is urgent because Makate’s attorneys refused to commit to withholding the 40% pending the litigation and are concerned the money will “decapitate”.
The acting judge asked whether Elsdon was worried Makate could squander the “big money” and that the company would be unable to litigate in a normal application of breach of contract. Mahon said Makate is likely to spend the money on assets that the company could attach if they win litigation in court.
Cassim said it is difficult to know what would happen with the money without a commitment from the attorneys and a court order restraining the 40%, and case laws support retention of funds in their circumstances.
Mahon reserved judgment.
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