AFRICAN Rainbow Capital (ARC) has won a declaratory judgment in the Johannesburg High Court which ruled it had no liability under a confidentiality agreement at the centre of a $195m damages claim brought against it in Tanzania.
Judgment was handed down on Tuesday by Judge L Adams who also ordered the applicants — Pula Group, a US-registered entity, and Pula Graphite, registered in Tanzania — to pay ARC’s costs.
The case turns on a confidentiality agreement concluded in Sandton in October 2019 between Pula Group and African Rainbow Minerals (ARM), a separate company from ARC but both founded by Patrice Motsepe, the mining entrepreneur and former lawyer.
Pula Group and Pula Graphite instituted proceedings in the Tanzanian High Court in October 2023, claiming ARM had breached the agreement by investing in the Chilalo graphite project in Tanzania, which allegedly competes directly with Pula Graphite. Pula Group and Pula Graphite were operating through an Australian company called Evolution Holdings.
The Tanzanian action named ARC, ARM, Motsepe and another entity, Guernsey-based ARCH, as joint and several defendants.
ARC’s case was that it was never a party to or signatory of the confidentiality agreement and could therefore incur no contractual liability arising from any breach of it.
Judge Adams declared that ARC had no obligations under the agreement; could not be in breach of it; and could not be held liable for damages flowing from it. The judge further declared that Pula Graphite, which also did not sign the agreement, has no contractual rights under it and cannot claim contractual damages.
The position of ARM, which concluded the agreement with Pula Group, remains unresolved. ARM is not defending the Tanzanian proceedings, and an application by Pula Group for default judgment against ARM, Motsepe and ARCH is pending in Dar-es-Salaam.
The declaratory judgment removes Pula Graphite as a plaintiff in any contractual claim, narrowing the action to Pula Group versus ARM alone.
The only problem for ARC and Motsepe now is persuading the Tanzanian court to accept the authority of the South African High Court. It’s not clear what, if any, authority a South African declaratory order has internationally. It’s likely an order from an South African court will only be applicable if the Tanzanian court accepts it.
