More ques­tions for AfroCen­tric

UN­CLEAR: QUES­TIONS AROUND MED­SCHEME LE­GAL IS­SUES The stock ex­change is, how­ever, sat­is­fied with the com­pany’s re­sponse to ques­tions.

The Citizen (KZN) - - BUSINESS - Pa­trick Cairns

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”.

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