After a Herculean victory over telecommunications giant Vodacom for being the rightful inventor of “please call me”, Nkosana Makate has yet again been dragged back to court.
A fresh legal battle has emerged between Makate’s lawyers, Stemela & Lubbe Inc, and a company called Raining Men Trade, purporting to be the early litigation funders of Makate’s nearly decade-long case against Vodacom.
An urgent interdict was filed at the high court in Pretoria last week by Raining Men Trade (the first applicant) to delay Vodacom from negotiating with Makate and his lawyers on compensation for “please call me”. The urgent interdict is supported by Chris Schoeman (the second applicant), who was also involved in raising funds for Makate’s litigation costs against Vodacom.
But Moneyweb learnt on Wednesday that Schoeman and Raining Men Trade are looking to withdraw from the legal action and revert back to an arbitration process launched last year. It is unclear if both applicants will have to pay the costs of the interim interdict application.
In a responding affidavit filed on Tuesday, Makate said the looming court threatens to “paralyse these negotiations [with Vodacom] and to deprive me of my hard-fought right to negotiate with Vodacom.”
“…I have battled for more than 14 years, at great personal cost, for my right to negotiate with Vodacom for a reasonable compensation.”
Makate had already begun negotiations with Vodacom to discuss the question of a reasonable share of revenues “please call me” has generated since it went to market with the innovation in 2001.
Makate also warned that if the relief is granted by the court, he would be “severely prejudiced” by having to deal with a new legal team that “I have no prior relationship with and no trust in their abilities”.
The matter is set to be heard on 14 June at the high court in Pretoria to determine if Raining Men Trade and Schoeman have any legal right to interfere in compensation negotiations.
Applicant’s orders
Raining Men Trade and Schoeman are concerned that Makate and his lawyers might agree on a settlement from Vodacom that excludes them. Schoeman, in his detailed affidavit, is seeking to prevent Makate from appointing any representative in his compensation negotiations with Vodacom without the consent of him and Raining Men Trade. Furthermore, he is looking to prevent Vodacom from making payments to any of Makate’s legal representatives, only with the consent of Schoeman and Raining Men Trade.
Alternatively, Schoeman and Raining Men Trade want Vodacom to not pay Makate more than 50% or R650m of the settlement to legal representatives until they are included in settlement discussions.
Schoeman’s orders rest on his claim that a funding agreement was entered into between Makate and the nominated company Raining Men Trade in November 2011 to bankroll litigation costs. And it is on this basis that Schoeman wants to be part of negotiations with Vodacom.
Makate responds
Makate has hit back, labelling Schoeman’s claims as baseless. Makate said he cancelled the funding agreement in January 2015 and that Schoeman was yet to nominate a company, not Raining Men Trade, to cover legal expenses and to indemnify Makate on further costs.
“…There were multiple breaches of this [funding] agreement, as the funders failed to provide sufficient funding to cover my legal expenses and, on the applicants’ own version, there was no capital to indemnify me against the risk of adverse cost orders,” Makate’s affidavit reads.
As a result of the “breaches” in Schoeman’s alleged inability to raise sufficient capital for the”please call me” case, Makate cancelled the funding agreement, and Schoeman “fully accepted this cancellation.”
He cancelled the agreement after the “please call me” case was dismissed by the high court in Johannesburg and the supreme court of appeal rejected Makate’s application for leave to appeal.
“In January 2015, my case appeared to have no prospects of success, the costs of proceeding further were prohibitive, and there was a real risk of an adverse costs order running into the millions of rand… My decision to cancel the funding agreement suited the applicants’ interests,” he said.
Schoeman maintains that enough money was raised by several funders — more than R2,4m for the litigation since 2011. According to Schoeman, the funds were paid to Stemela & Lubbe Inc, the law firm co-founded by Wilna Lubbe, who handled Makate’s case.
Divvying up Vodacom’s settlement
Funders who pitched in litigation funds were each allocated a share of 4% to 5% of the settlement that Makate would get from Vodacom. Some of the funders include Schoeman and his ex-wife, businessman Kevin Jenkins, Luxembourg-based company Simba Investments and Errol Elsdon, who is the chairman of litigation funder Sterling Rand.
Collectively, Raining Men Trade and several investors would get 40% of the payout and Makate would get 60%. At the time, Schoeman believed that Makate’s claim against Vodacom was worth between R650m and R1bn.
But the payout to Makate and various investors was reduced to accommodate more investors given that the case was prolonged over many years and the legal bills piled up. “I now watered him down [Makate’s claim] to 53% [from the initial 60%]. Makate had agreed to 53%.”
Schoeman also said that the funding agreement was not cancelled because of funding issues but that Lubbe allegedly coerced Makate into cancelling his funding agreement with the funders in 2014.
“The next step in the grand scheme was for Lubbe to contact Makate and tell him that the funders were not paying Lubbe’s bills [related to the case] and that the indemnity Makate held from me for adverse costs orders were worthless. Quite obviously this had a very negative impact on Makate and he agreed with Lubbe that in the circumstances he would support the cancellation of the funding agreement.”
The funding agreement was cancelled and several funders were “left out of the picture”.
Lubbe, in her affidavit, has dismissed Schoeman’s allegation as “a blatant lie” and added that he is trying to blame her for “his own scheme to get rid of his co-founders”.
“It is clear that Schoeman actively supported the cancellation of the agreement for his own purposes. I did not conceive or orchestrate the cancellation, and I believe that Makate eventually validly cancelled the agreement,” said Lubbe.
Raining Men trade ‘nomination’
Schoeman said Makate in 2014 signed an agreement with him detailing the split of the settlement from Vodacom and to nominate Raining Men Trade as a party to the funding. Makate maintains that his initials on the agreement were forged.
The fresh court action comes nearly two months after the constitutional court ordered Vodacom to compensate Makate for “please call me”, the free service which enables a user without airtime to send a text to be called back.
In a scathing constitutional court judgment delivered by justice Chris Jafta in April, the court ordered Vodacom to negotiate “in good faith” with Makate to determine a “reasonable compensation” for his innovation. Jafta also ordered Vodacom to commence negotiations within 30 days.
The court also found that former Vodacom CEO Alan Knott-Craig was wrongly credited for “please call me”. He claimed in his autobiography, Second is Nothing, to have come up with the innovation.
- This article was originally published on Moneyweb and is used here with permission