It was September 2011, and Black Rock Mining had yet to be nominated by Chris Schoeman as the company to fund Please Call Me inventor Nkosana Makate’s battle against Vodacom. Yet Black Rock representative, Errol Elsdon, was already discussing a £250 000 funding deal for the case in London.
Elsdon’s international funders later sued him, seeking their money back as Makate hadn’t won the battle by 2014, while also separately suing the lawyer who introduced them to Elsdon on the basis that Black Rock didn’t have valid contract with Makate.
That’s according to court papers filed in England on the sidelines of the inventor’s bid to secure, from South Africa’s largest cellular network, a share of the profits from his 2000 invention. The dispute, which began in Pretoria in 2008 and stretched through to the Constitutional Court, was confidentially settled last year.
It’s 40% of this settlement that Elsdon is currently arguing that he is entitled to because, as he says, Black Rock put forward R4.39 million for Makate’s fight. The claim is disputed by Makate and his legal team, who say that only R7 853 was ever put towards the case. While not publicly disclosed, the Vodacom settlement seems to be worth somewhere between R600 million and R1 billion.
Elsdon, who says he’s authorised to represent British Virgin Islands-registered Black Rock, tells ITWeb that he first became aware of Makate’s litigation against Vodacom “at a meeting with Makate arranged by Chris Schoeman at the Midrand Protea Hotel in October 2011”.
(Biographies of the key players are detailed here. Those in supporting roles have not been included.)
Naming the ship
Around the same time, Schoeman – a disbarred advocate who died at some point during the 18-year court drama – signed an agreement with Makate, acting “on behalf of a company to be nominated”. In July two years later, this turned out to be Black Rock.
“From the outset, it was proposed that Black Rock would be the entity contracting with Makate,” says Elsdon. He explains to ITWeb that Black Rock was only nominated later because Schoeman wanted to secure the agreement of other early investors, who collectively raised an initial R500 000.
Once this funding was exhausted by July 2013, in the midst of Makate’s first, albeit unsuccessful court case against Vodacom, Elsdon says “it became clear that the funding would primarily be sourced from funders in the United Kingdom through various offshore entities” to be housed in Black Rock.
(ITWeb covered that case and part of the funding dispute in The Please Call Me millions: Makate’s first case was ‘FUBR’.)
Through Black Rock, Elsdon claims to have raised £250 000 – some R3.75 million in 2013 – from London investor Global Distressed Alpha Fund III (GDAF), represented by its agent, Simba Capital VIII. Simba invested on the basis of Black Rock saying it would receive 50% of any settlement with Vodacom.
This amount was split into two payments, with £100 000 to be paid to London lawyers Hamilton Downing Quinn LLP, where it would be held on behalf of Stemela & Lubbe and dealt with only on Lubbe’s instructions. The remaining £150 000 was to be paid directly to Black Rock into an account nominated by Elsdon.
(Recently, Makate accused Elsdon of siphoning £75 000 – or R2.25 million based on the South African Reserve Bank’s historical exchange rate of R15 to UK Sterling – into related Cyprus-based entities. Elsdon has indicated he will sue over such defamation claims.)
Lost at sea
GDAF itself is complicated as it’s linked to Global Distressed Alpha Capital (GDAC) and Global Distressed Alpha Fund Management (GDAFM) and all three were Bermuda entities. GDAF applied to liquidate GDAFM in 2015, a Bermuda publication shows.
All three entities are listed in the ICIJ Offshore Leaks Database, a project of the International Consortium of Investigative Journalists. This ICIJ database contains information on more than 810 000 offshore entities that are part of the Pandora Papers, Paradise Papers, Bahamas Leaks, Panama Papers and Offshore Leaks investigations.
The records cover more than 80 years up to 2020, and link to people and companies in more than 200 countries and territories – though the ICIJ says inclusion in these records doesn’t imply wrongdoing.
Little is known publicly about Simba Capital, which was intended to hold the rights to the claim for GDAF. The 2013 financing agreement states it is registered in Luxembourg, with a “care of” address in Singapore. However, desktop research has uncovered that the private investment holding company was registered in Singapore in May 2023, but has since been struck off.
A further complication is that the Global Distressed Alpha entities were housed under Switzerland-based Commercial Intelligence Funds Group (CIFG). CIFG is a litigation finance firm that offers litigation funding, distressed debt solutions, settlement negotiation and arbitration enforcement services. It focuses principally on litigation finance and distressed debt recovery in Africa, Asia, the Middle East and Latin America.
Sunk costs
The funding for the Vodacom case was structured as a loan to Black Rock, with Elsdon and Schoeman signing as sureties and co-principal debtors. When Makate lost his first battle in the Johannesburg High Court in 2014, GDAC argued the loan was due and started proceedings to sue the pair in 2018 to recover the £250 000.
GDAC’s 2018 bid to recover the £250 000 went no further. A search of judgement databases by ITWeb found no further reported decisions.
Another 2018 set of court papers, a claim filed in the Business and Property Court unit of the High Court of Justice of England and Wales, shows Elsdon had started courting GDAF as far back as September 2011, when Hamilton Downing Quinn lawyer Walton Eddlestone contacted key representatives of the fund to alert them to the Vodacom case.
“Eddlestone was aware of the Vodacom litigation by 29 September 2011,” the papers read, when he sent an e-mail to GDAC representatives, saying “he had received information about the Vodacom litigation from Elsdon and Schoeman,” both of whom had previously introduced other investment opportunities to CIFG.
Compass points
On 20 June 2013, Elsdon apparently asked Eddlestone whether a CIFG fund would be interested in investing in the Vodacom litigation. “Elsdon proposed an investment of $300 000 on the basis of a funding agreement entered into between a fund nominated by Commercial Intelligence and Black Rock Mining.”
The claimants in that matter, who wanted to sue the London legal firm for more than £18 million – or around R313 million at the historical exchange rate – plus interest and costs, were listed as GDAF, GDAC and GDAFM, the latter of which was the entity put into liquidation in 2015.
In that claim, the Bermuda companies base their case on three central allegations: that Hamilton Downing Quinn failed to carry out proper due diligence and would have discovered that Black Rock had no binding agreement with Makate; that it failed to structure the investment correctly, meaning the Bermuda companies could instead have invested directly with Makate; and that it failed to put the legal protections in place around the funding arrangement.
“The claimants have subsequently been informed that… Black Rock never had any agreement with Makate to finance the Vodacom litigation,” paragraph 35 says. Paragraph 36 adds that they instead discovered that the deal Schoeman signed on behalf of a company yet to be named was not on behalf of Black Rock.
“Accordingly, Black Rock had no contractual entitlement to receive 50% of any proceeds of the Vodacom litigation, or any other proportion,” the 2018 claim states.
That claim does not seem to have progressed further, as the paper trail runs dry at that point. Makate, in his latest missive against Black Rock, argues among other things that the deal with Black Rock is in any event no longer valid because Elsdon’s company didn’t provide the agreed funding for the litigation.
The question of which company, or who, had what agreement with whom is the subject of next week’s instalment in this series.
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