The man behind Black Rock Mining, which claims in court papers to have funded Nkosana Makate’s legal battle against Vodacom in the ‘Please Call Me’ case to the tune of R4 million, allegedly diverted some of those funds.
In court papers Makate recently filed, he alleges Errol Elsdon, who is the public face of Black Rock Mining, used R2.5 million of the money he raised ostensibly to fund Makate’s case for his personal benefit.
This allegation is part of a court bid to prove that British Virgin Islands company Black Rock Mining never existed. Makate argues it had no assets, never traded and lacked the means to honour the funding agreement it signed.
In his Particulars of Claim document, he states Elsdon and his business partner Chris Schoeman secured funding on the basis of a funding agreement with Makate to bankroll his fight with Vodacom to secure a percentage of profits from his ‘Please Call Me’ invention.
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This agreement is at the nexus of Makate’s latest legal battle with Black Rock following his successful confidential settlement with Vodacom last year, after the litigation funders sought to claim a 40% stake.
While the value of the settlement is confidential, Elsdon claimed in a press release last week that it was worth R1 billion. Peter Takaendesa, chief investment officer at Mergence Investment Managers, has estimated the settlement at around R660 million.
However, Makate says Black Rock Mining is not entitled to any percentage because the agreement is “impugned” and has no legal standing. Among his reasons for disputing the deal is that Black Rock never provided any funding, although other court papers state that the company put R8 000 towards the legal battle.
Elsdon has previously stated that about R500 000 was initially raised and paid through Makate’s attorneys to fund the litigation, with total funding later reaching about R4.39 million.
Cyprus calling
Various court papers and decisions filed during Makate’s almost two decades-long battle with Vodacom – which went through several courts including the Constitutional Court – show that Elsdon secured part of the required money from a company called Global Distressed Alpha Capital (GDAC) via its Global Distressed Alpha Fund (GDAF).
In 2013, GDAC agreed to provide Black Rock with £250 000 – split into £100 000 held in trust and £150 000 paid to Black Rock. Elsdon and the since deceased Schoeman signed surety obligations for the loan, at the time worth R3.75 million.
This fund-raising was on the back of an agreement Schoeman signed with Makate in 2011, with Schoeman – an advocate who was struck off the roll in 1999 – inking the paperwork “in his capacity as authorised representative of a company to be nominated”.
It is some of this money that Makate alleges Elsdon used for his personal enrichment by directing attorneys representing the fund to, in July 2013, transfer £75 000 each to Cyprus-based Delcay Holdings Limited and his own Cyprus bank account. At the time, £75 000 was worth R2.25 million based on the South African Reserve Bank’s historical exchange rate of R15 to UK Sterling.
Cyprus company registry records show Delcay Holdings Limited was a dissolved shell company whose directors were themselves holding companies: Atlas Alpha Services Limited and Totalserve Management Limited, both of which share overlapping directors. Delcay was dissolved in January 2016, a decade after its registration in 2005.
In April 2018, the Pretoria High Court, in a preliminary hearing, ruled that GDAF had a case against Elsdon and Schoeman to recover its £250 000 loan, based on allegations that they induced it to enter into the Black Rock funding agreement through misrepresentations. ITWeb could not find any resultant cases.
Elsdon in his press release denied perpetrating any fraud. “The litigation funder behind Nkosana Makate’s ‘Please Call Me’ claim rejects accusations of fraud as false, malicious and defamatory, confirms that he has instructed his attorneys to sue Makate, and says that, with the dispute now before the High Court, the public will learn for the first time who promoted the case and carried the risk that made the settlement possible,” he says.
Elsdon’s lawyers, SN Mnguni Inc, were specifically asked to comment on the allegations that he diverted litigation funding for his personal use and have not done so. They have previously said: “Our client’s representatives have instructed us to defend the matter vigorously as they remain steadfast in the assertion that they have a valid claim against Mr Makate emanating from the funding agreement concluded between the parties.”
How the funding unravelled
The arbitration ruling handed down in 2020 as to which entity held the nomination to fund Makate states that Elsdon raised R750 000 “from friends and family members”. When more funding was needed, Elsdon approached two men in the UK, Misters Eddlestone and Shone, for whom no first names are given.
However, Elsdon realised he had “to formalise the nomination of a company in terms of the funding agreement,” the arbitration ruling says in point 6.1.4. In April, Elsdon phoned an unknown person and stated that “I have got a company that we are going to use as the company in my place, and this is the company, Raining Men Trade (Pty) Ltd,” the ruling by arbitrator Advocate Mathabathe says.
Eddlestone, in his capacity as a partner of London law firm Hamilton Downing Quinn LLP, was sued by GDAF for more than £18 million in 2018 for “negligence and/or breach of contract by the defendant in conducting due diligence and advising GDAF in relation to an investment made in 2013” – that investment being the Black Rock funding. The lawyer recommended the £250 000 investment as it was “probably worth a shout” in July 2013.
GDAF alleges Eddlestone caused it to lose both its £250 000 investment and the opportunity to secure a far more valuable stake in the ‘Please Call Me’ litigation, as the law firm failed to conduct adequate due diligence. This would have revealed that “no such agreement existed”. In its claim, it also argued that, based on estimated proceeds of R6.7 billion, the lost opportunity was worth £18 million.
Shone was a director and the majority shareholder of GDAC.
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