The valuable SportPesa gaming trademark faces a legal challenge after a fresh suit was filed in court alleging fraudulent transfer of the brand ownership, tax evasion and forgery.
Businessman Paul Ndung’u has asked the High Court to issue orders stopping Milestone Games, which is associated with his former partners-turned rivals, from using the SportPesa trademark pending the determination of the matter.
The Registrar of Trademarks has been dragged into the case for facilitating the alleged fraudulent transfer of two trademarks from Pevans East Africa to UK-based SportPesa Global Holdings Limited (SPGHL) for £100,000 (Sh17.3 million) each.
Mr Ndung’u, one of the shareholders of Pevans East Africa, had filed a suit at the Registrar of Trademarks, which has quasi-judicial powers, seeking to reverse the sale, citing fraud and forgery.
He sought to have the brand reinstated to Pevans East Africa, terming the transfer to SPGHL and eventually to Milestone Games irregular, illegal and subject of a tax evasion investigation and accounting fraud.
“It is obvious that the constitutional rights of the petitioner [Mr Ndung’u] that are already violated are fundamental and it would be necessary for the court to intervene and prevent further violations,” Mr Ndung’u said in the application.
He said in court documents they appeared before an assistant Registrar of Trademarks on October 9, but the registrar declined to hear the matter and referred it to the High Court.
When the matter came up for directions on Thursday, the judge referred the petition to the presiding judge of the Constitutional and Human Rights Division of the High Court for directions.
The fresh suit will intensify the battle for the brand and firm between former partners and now turned rivals —Mr Ndung’u and Asenath Wachera with a combined ownership of 38 percent of Pevans and the chief executive of the firm, Ronald Karauri, who backed the transfer.
Other parties named in the case have not filed their responses save for the office of the Registrar of Trademarks, which has stated that the office cannot be sued as per Section 14 of the Trade Marks Act.
Mr Ndung’u asked the court to give orders restraining Milestone Games, its directors or agents from representing to the public, the Betting Control and Licensing Board or any other State agency that it is the licensed operator or authorised user of the SportPesa trademark.
“A conservatory order be and is hereby issued restraining Milestone Games Limited, its directors, agents, or servants from withdrawing, transferring, disposing, or in any manner dealing with any monies held in its bank accounts or mobile money paybill numbers operated under the SportPesa brand, being proceeds of an allegedly unlawful and deceptive operation, until further orders of this Honourable Court,” he said.
Mr Ndung’u said the decision by the registrar of trademarks to refer the matter back to the High Court was a “back door appeal” and a reversal of the decision of the High Court in an earlier case, where a judge said the matter should be handled by the office. The businessman said his rights continue to be infringed as Milestone Gaming continues to trade on the basis of an illegal assignment.
He further said his capital investment in Pevans East Africa continues to dissipate or be exposed to continuing losses as his firm had been crippled, rendering it urgent for the court to intervene in the interests of justice.
Filings at the registrar indicate that the application for transfer of the SportPesa trademark from Pevans East Africa, the original owner, to UK-based SGHL was based on a deed of assignment of September 1.
The deed of assignment is a legal document that formally transfers ownership or rights in an asset, including trademarks from one party to another. But the filings show that the deed of assignment of September 1 is not available and one for June 2 is attached to the transfer documents.
This suggests that the trademark was owned by Pevans East Africa and SPGHL between June 2 and September 15. Mr Ndung’u says a dated deed of assignment must be attached to the transfer approval papers, arguing that the September 1 deed was never filed with the registrar and it remains a mystery how the transfer was executed.
Buyers of trademarks are required to pay a stamp duty equivalent to 2.0 percent of the deal value.
The tax is used to validate the assignment document, which is crucial for the legal recognition and enforceability of the trademark transfer.
Mr Ndung’u says SPGHL did not pay stamp duty for the deal, putting the validity of the transfer into question. “A non-registered foreign company cannot be issued with a KRA PIN and therefore during the material time it could not have been able to pay stamp duty in the iTax System,” he said.
He added that SPGHL was not registered in Kenya and therefore was not allowed to conduct business in line with the Companies Act.
Before approving transfer and registration of trademarks, the registrar is expected to ensure stamp duty for the deal has been paid.
Mr Ndung’u reckons that the transfer of the brand was also not unanimous and lacked shareholder approval from the UK firm where he served as the chair.
He adds that SPGHL's financial statements for the year ended December 2020 December 2023 does not show the payment of £200,000 (Sh34.6 million) for the two trademarks as an expense or intangible asset.
Mr Karauri and another Pevans East Africa minority owner, Robert Macharia, would later emerge with a controlling 84 percent stake in Milestone Games, the company that was subsequently assigned the right to use the SportPesa trademark in Kenya by SPGHL in the roundabout deals.
In the latest application before the High Court, Mr Ndung’u wants the court to direct the Kenya Revenue Authority to file a statement disclosing all corporate income tax and value-added tax paid or remitted by SGHL as a non-resident taxpayer in relation to any income, royalties, or other proceeds earned from the Sportpesa trademark from September 15, 2020 to date.
