"I have learnt, with disappointment, that it is tough to defend the truth, as the truth is neither sexy nor sensational, unlike lies. Sadly, it is sexy and sensational news that certain sections of our media like."

- Robert Matana Gumede

THE PARTIES

1. GUMA (then GIJIMA):
   Guma is a 100% black owned company. Guma bought 26% in ACT for R30.160 million. Guma did not appoint an Executive Director.
   
   
2. JOHN STERENBORG AND HIS WIFE:
   Dr John Sterenborg, a British businessman who came to South Africa and set up a smart card company that was funded by a South African investment bank, Brait.
   
   
3. APPLIED CARD TECHNOLOGIES (ACT):
   Founded by Sterenborg, financed by Brait. Owned 100%
   
   
4. BRAIT MERCHANT BANK:
   Financed Sterenborg to the tune of + R17 million. Successfully applied for the liquidation of ACT. According to an agreement signed with Sterenborg, Brait owned 10% of ACT.
   
   
5. JOHANNESBURG SUPREME COURT:
   The matter was heard by various judges
   
   
6. ROBERT GUMEDE:
   A Non Executive Director of ACT

THE STERENBORG LITIGATION

1. On 4 August 2000, Guma Smart Technologies (Pty) Ltd ("Guma") (previously known as Gijima Afrika Smart Technologies (Pty) Ltd), purchased a 26% share in the entire share capital of Applied Card Technologies (Pty) Ltd ("ACT") from Dr. John Sterenborg ("Sterenborg") and his wife, Elizabeth Jane Sterenborg ("the Sterenborgs") for a purchase price of R30 million ("the 26% Purchase"). At all relevant times, the Sterenborgs misrepresented to Guma that ACT was a South African based fully functional and operational smart card manufacturer of GSM SIM cards and banking cards. Approximately R22 million of the purchase price was paid from Guma's own cash without third party funding, something unique for black companies especially in 2000 after the global financial pressures.
   
   
2. During mid 2001, it became abundantly clear that the Sterenborgs as CEO and major shareholders had materially mismanaged the business of ACT to the detriment of Guma's shareholding interest therein, although the full extent of Sterenborgs' mismanagement was not known to Guma at that time. In an attempt to protect its investment in ACT, Guma entered into negotiations with the Sterenborgs to purchase their 74% remaining shareholding in ACT after Sterenborg failed to buy out Guma's 26% and pay back the R22 million already paid.
3. On 4 August 2001, Guma acquired the balance of the shares in ACT (i.e. the remaining 74% of the issued share capital of ACT) for a purchase consideration of R 5 million ("the 74% Sale Agreement"). In terms of the 74% Sale Agreement:
   1. R 3 million was payable on the effective date;
   2. The balance payable against delivery of certain key documentation in respect of ACT, being amongst others the audited financial statements for the years 1998 to 2001, creditors lists, debtors lists, management accounts and the like ("the Trigger Documents").
      
      
4. Guma duly paid the sum of R 3 million timeously and withheld the balance pending delivery of the Trigger Documents (as it was entitled to do in terms of the 74% Sale Agreement) which, still today, remain outstanding and have never been provided by the Sterenborgs to Guma. Guma lawfully withheld payment of the balance of the R2 million purchase price in terms of the said agreement.
   
   
5. The Sterenborgs however instituted a claim in November 2001 for payment of the outstanding R2 million ("the R2 million action"). Guma defended this action which was subsequently withdrawn by the Sterenborgs who tendered Guma's legal costs. See paragraph 13 hereunder.
   
   
6. Subsequently, Guma then ascertained that no audited financials ever existed for ACT since its inception in 1998. It transpired that the ACT auditors (Levetton Bonner) appointed by Sterenborg had never conducted an audit since ACT's inception.
   
   
7. Unbeknown to Guma and Robert Gumede ("Gumede"), the chairman of Guma and now the Executive Chairman of GijimaAst Ltd (a JSE listed major ICT group), two days prior to the 74% Sale Agreement , on 4 August 2001, the Sterenborgs had received at their private home fax number on 2 August 2003, a letter from Brait Merchant Bank Ltd ("Brait") cancelling the various instalment sale agreements concluded between Brait and ACT (at all relevant times represented by the Sterenborgs, at a time long before Guma became involved with ACT) and calling for immediate payment of all outstanding amounts of approximately R17 million from ACT in respect of its financing of the ACT ostensible smart card manufacturing plant ("the cancellation letter").
   
   
8. The basis of the cancellation was that ACT, under the sole management and control of the Sterenborgs, had failed for a considerable period of time beforehand and since at least May 2001 (when an earlier demand was made by Brait against ACT, being unbeknown to Guma at all relevant times), to:
   1. Service its agreements for asset finance with Brait;
   2. Meet certain turnover targets;
   3. Furnish management accounts and financial documentation under the agreements;
   4. Pay ACT's rental obligations.
      
      
9. The Sterenborgs concealed from Guma and its attorney, Brian Kahn, the existence of the cancellation letter at the time of and leading up to the signature of the 74% Sale Agreement in respect of ACT.
   
   
10. It was only at the time of receipt of the draft liquidation papers for the liquidation of ACT launched by Brait in August 2001 (a few days after Guma bought out Sterenborg) that this letter came to light for the first time. As a result of this, Gumede entered into intensive negotiations with Brait in order to settle Brait's claims against ACT. Gumede also made concerted attempts to raise third party finance in order to discharge ACT's liabilities to Brait and others. The fact that ACT had no audited financial statements since inception, made all of Gumede's attempts futile.
    
    
11. On 12 October 2001 Brait applied to court for the winding up of ACT primarily on the basis set out in the cancellation letter. At this point in time Guma had purchased the 100% shareholding from the Sterenborgs without knowledge of the cancellation letter and threat of liquidation.
    
    
12. In order to protect the interests of the creditors of ACT, its employees and the substantial investment made by Guma, it vigorously opposed the liquidation application at a great expense to it and strived to avert a final liquidation order.
    
    
13. Despite its opposition a provisional liquidation order was granted on 27 November 2001. Gumede and other Guma directors ceased to manage or be involved in ACT as the joint liquidators led by Anttrust took over control and management of ACT. During ACT's provisional liquidation i.e. from 27 November 2001 to 28 February 2002, Guma and Gumede financed the operations of ACT whilst trying to save the company from final liquidation in the interest of all stakeholders.
    
    
14. Not only did Guma expend very large sums in legal costs in attempting to oppose the liquidation of ACT but:
    1. Gumede personally attempted to raise finance to discharge ACT's debts to Brait; and
    2. Guma also made various offers to Brait for payment of ACT's outstanding debts, and presented written undertakings accordingly to the tune of R10 million, so as to avoid the liquidation, but the offer was rejected by Brait (R17 million), who became a large creditor in the estate together with Guma and Gumede (R24 million).
    3. In 2002 the Sterenborgs applied to the Master of the Supreme Court to convene a private 417 insolvency inquiry ("the inquiry"). Senior Advocate Subel was appointed to be the Commissioner.
    4. Pursuant to Guma's policy of transparency, it believed that it was important to have the insolvency inquiry to be heard in a public forum as neither Gumede nor Guma had anything to hide and wanted the Sterenborgs' alleged wrongful actions in relation to ACT publicly exposed. Guma successfully petitioned the Master of the High Court to have the inquiry made public. Click here to view legal documents.
    5. During this time the Sterenborgs approached certain journalists in the media and started a negative and bias media campaign against Guma and Gumede. These articles were not only defamatory also inherently false. For further information on the media campaign against Guma and Gumede please click here.
       
       
15. The R2 million action instituted by the Sterenborgs was enrolled for trial on 5 February 2003 but the day before the trial they sought a postponement to amend their alleged claim. The trial was re-enrolled for 19 September 2003 but on 4 September 2003 the Sterenborgs again sought a further postponement to amend their alleged claim. The Sterenborgs tried to settle the matter by proposing that Guma pay R10 million to settle their claim of R2 million, which was obviously rejected. It appeared that the Sterenborgs believed that they could extort money from various parties including Telkom which is dealt with more fully hereunder. Shortly thereafter the Sterenborgs voluntarily withdrew their claim and paid Guma and Gumede's legal costs.
    
    1 - A COURT VICTORY FOR GUMA & GUMEDE
    
    
16. In 2002, the Sterenborgs instituted another claim for R10 million ("the R10 million action") in respect of the balance of the purchase price ostensibly pursuant to the 26% Sale Agreement relating to ACT of R30 160 000.00 which Guma purchased in August 2000 and paid R22 million long before the second and last tranche of R10 million respectively, was due and payable as per request by Sterenborg.
    
    
17. Guma defended the R10 Million Action on the basis that the purchase price payable by Guma pursuant to the 26% Sale Agreement and was to be paid to ACT as a credit to the loan account of the Sterenborgs to be utilised solely for working and expansion capital of ACT, which claim formed part and parcel of the 74% Sale Agreement
    
    
18. In terms of the 74% Sale Agreement Guma purchased the ostensible balance of the issued share capital of ACT, being the remaining 74% of the shares from the Sterenborgs including their (Sterenborg's) claims both then and in the future. Accordingly, Guma and Gumede were not obliged in terms of the agreement to pay the outstanding payment of R8 million (not R10 million).
    
    
19. The R10 million action was enrolled for trial on 16 August 2003. The following day an order was granted by Mr. Justice Boruchowitz dismissing the Sterenborgs' claim with an order to pay Guma's and Gumede's legal costs. The Sterenborgs initially indicated an intention to seek leave to appeal but, as a result of the fact that they did not have an automatic right to appeal, their right to apply for leave to appeal had lapsed as they never pursued their application.
    
    2 - A COURT VICTORY FOR GUMA & GUMEDE
    
    
20. In 2003 Guma instituted an action for R52 million ("the R52 million action") against the Sterenborgs in respect of the profit warranties given by them in the August 2000 in terms of the provisions of the 26% Sale Agreement for the years ended 2000, 2001 and 2002 for a total net profit after tax of R201 369 000.00.
    
    
21. ACT made no profit whatsoever during that period and as a result Guma claimed from the Sterenborgs the sum of R52 355 940.00. The action was initially enrolled for trial on 7 June 2004 but shortly before the trial, the Sterenborgs brought a major amendment to their defence alleging a contravention of Section 38 of the Companies Act.
    
    
22. The High Court, in 2005, gave a ruling against the Sterenborgs that the contravention of the Companies Act did not allow the Sterenborgs to avoid their obligations and the court dismissed this defence. The Sterenborgs brought an appeal which was also dismissed with costs by a full bench i.e. 3 Judges in the High Court. The Sterenborgs did not petition or appeal the decision to the Supreme Court of Appeal based in Bloemfontein.
    
    
23. Thereafter, the matter was finally enrolled for trial on 16 August 2006 as it was consolidated with the R10 million action and on 17 August 2006 Mr Justice Boruchowitz granted an order in favour of Guma for R26.1 million plus interest and costs totalling approximately R45 million (as at the end of 2007, and counting). The Sterenborgs had indicated that they intended to apply for leave to appeal but did not take active steps to do so. They brought an application but were ordered by Mr Justice Willis on 31 October 2006 at Guma's request, to lodge security for legal costs of R30 000.00. The Sterenborgs failed to lodge such security and their application for leave to appeal has lapsed. To view a copy of the court order in respect of the consolidated action for the R10 million trial and the R52 million trial. Click here to view legal documents.
    
    3 - A COURT VICTORY FOR GUMA & GUMEDE
    
    
24. In July 2004, the Sterenborgs, in retaliation to Guma's action for damages in respect of its R52 million profit warranties, instituted an action for an absurd amount of R288 million ("the R288 million trial) in respect of alleged unfounded misrepresentations made to them.
    
    
25. The Sterenborgs did not actively pursue the matter and Guma expedited the trial and applied to court for the allocation of a trial date.
    
    
26. As a result of the Sterenborgs having failed to pay Guma's claim of R26 million plus interest and costs (R45 m), Guma and Gumede issued a warrant of execution and attached the Sterenborgs' frivolous claim of R288 million. The claim was sold at an auction during October 2007 . If the Sterenborgs believed that their claim was good they would have paid Guma's claim (R45 million order together with interest and costs) in order to pursue their R288 million claim. Notwithsanding various invitations to do so, they failed to pursue the same.
    
    4 - A COURT VICTORY FOR GUMA & GUMEDE
    
    
27. On 5 November 2007, the Sterenborgs' claim of R288 million was dismissed with costs in favour of Guma and Gumede by Mr Justice Gildenhuys. Guma is in the process of taxing its costs which it will also pursue against the Sterenborgs for payment thereof. A copy of the order can be viewed. Click here to view legal documents.
    
    
28. The insolvency inquiry convened at the request of the Sterenborgs in 2002 finally came to an end on 4 September 2006 as the Sterenborgs had unilaterally abandoned the enquiry. When evidence was led against Dr. John Sterenborg in regard to his attempt to extort approximately R27 million from Telkom and in regard to certain transfer pricing frauds committed by him, he failed to appear at the last hearing of the inquiry. Advocate Subel SC has written a letter to the Master and advised him that Sterenborg, as the initiator complainant and funder of the insolvency enquiry has abandoned the enquiry and his attorneys have pulled out. It is clear that Sterenborg abandoned the enquiry as soon as he failed to extort money from Gumede and Telkom as well as fearing that the Commissioner Adv Subel SC was going to write a negative report against Sterenborg's fraud actions and mismanagement of ACT which led to it being liquidated. Guma and Gumede feel strongly that had the Commissioner written the report, they would have been exonerated and found to have been the VICTIMS of Sterenborg's fraudulent actions.
    
    
29. Guma and Gumede, after having succeeded in all the litigation between themselves and the Sterenborgs have now been left high and dry as they are unable to recover the millions of rands in legal costs that have been expended in defending frivolous and unsubstantiated allegations and claims against them and are out of pocket by approximately R35 million, made up of the ACT shares purchase price plus legal costs. More upsetting are the opportunity costs suffered by Guma and Gumede as they have spent precious executive time on baseless defamatory allegations and claims.
    
    
30. The Sterenborgs have fled from South Africa and returned to their native United Kingdom. They have left no attachable assets in South Africa and Guma and Gumede now have to pursue recovery of its claims in the UK which will inevitably result in further legal costs. The Sterenborgs having lost or abandoned their various actions and claims have left a trail of legal actions against them in South Africa. They have instructed various firms of attorneys and advocates who subsequently withdrew from representing them as a result of the Sterenborgs failure to pay their legal costs. These attorneys have now instituted High Court legal proceedings against the Sterenborgs for payment of their fees. To read more on these legal actions please click here.
    
    Guma and Gumede have made a resounding success of Guma Smart Card which operates from the old premises of the liquidated ACT. Guma Smart employs over 200 black staff who have already manufactured over 100 million smart cards for Telkom.
    
    Today Guma Smart has clients in Algeria, Egypt, Mauritius, Angola, Tanzania and Zimbabwe, proof that Guma's entrepreneurial and management skills have effectively salvaged the jobs of many ex-ACT staff members and created a thriving business.