More questions for AfroCentric
UNCLEAR: QUESTIONS AROUND MEDSCHEME LEGAL ISSUES The stock exchange is, however, satisfied with the company’s response to questions.
Last month Moneyweb revealed that according to Medscheme’s own court papers, the AfroCentric subsidiary faces a potential R1 billion legal liability. The company has, however, only made provision for R8.25 million on its balance sheet.
The amounts relate to a claim by Neil Harvey & Associates (NHA) in 2007 in which it alleges Medscheme copied source code from its software and misappropriated its intellectual property.
In response to Moneyweb’s enquiries about whether the provision on its balance sheet was sufficient, AfroCentric argued that it has “raised appropriate provision” and it does not expect the NHA claim to materialise. It reiterated this stance in a Sens announcement.
Medscheme’s papers filed in a recent high court application reveals that NHA has provided it with a written denial that it is an empty corporate shell. The papers relate to an application to compel NHA to provide security for costs in relation to the arbitration, which the company lost.
Its heads of argument record that in a letter received from NHA’s attorneys in July 2015: “NHA advised that it ‘is still trading and currently has 717 276 members on Medware in South Africa, Uganda and Nigeria’.”
When Moneyweb raised this with AfroCentric, it acknowledged the contents of this letter. However, its head of legal, Billy Mokale, argued that: “There are ample allegations supported by documentation in the Medscheme founding affidavit which demonstrate that NHA is not trading.
“NHA has not refuted this evidence under oath nor proffered any document to indicate that … it remained the owner of the relevant software ...”
It is questionable whether that explanation aligns with the original Sens announcement, which does not qualify that there has been no denial under oath, or that NHA has not proferred any evidence. It simply states that there has been no denial.
Moneyweb pointed this out to the JSE, which, in turn, sought an explanation from AfroCentric. The exchange was, however, satisfied with the company’s response, noting that: “it is not immediately clear to the JSE that the company made a false statement in relation to material facts”.