On 26 April 2016, the Constitutional Court gave judgment in Makate v Vodacom (Pty) Ltd. This judgment provided the end to a protracted ‘David and Goliath’ legal battle that began in 2008.
Kenneth Nkosana Makate, a former employee of Vodacom, claimed he came up with the idea behind the “Please Call Me” service, however the cellular giant had refused to compensate him for it. Kenneth, who was a trainee accountant at Vodacom, had difficulty communicating with his long-distance girlfriend due to the fact that she could not afford to buy airtime. Kenneth discussed his idea with Philip Geissler, the Director of Product Development and Management at Vodacom. Based on Kenneth’s idea, Vodacom developed a new product called “Please Call Me”. Kenneth and Geissler agreed that if the product was a success, they would negotiate fair compensation for Kenneth and, if they were unable to agree, they would ask Vodacom's CEO to determine the amount of compensation due. “Please Call Me” was an instant hit with customers and generated billions in revenue for Vodacom.
Despite the product being a success, Vodacom did not negotiate compensation for the use of Kenneth’s idea. Instead, the then CEO and Geissler created another narrative in which they credited the CEO with the idea. In 2008, some four years after the launch of the “Please Call Me” service, Kenneth sued Vodacom for an order directing them to comply with their obligations under the oral agreement reached between him and Geissler or, alternatively, he sought the development of the common law of contract in terms of section 39(2) of the Constitution and asked for it to infused with constitutional values of ubuntu and good faith.
The trial court found that the agreement between Kenneth and Vodacom had been established and that Geissler had authority to conclude the agreement on Vodacom’s behalf. The trial court also found, however, that Kenneth’s claim constituted a “debt” in terms of the Prescription Act, and that the claim had thus prescribed because the legal action was instituted over three years from the date on which the debt arose.
The Constitutional Court was called on to decide two main issues, namely:
- Whether or not the agent (Geissler) had authority to enter into the agreement on Vodacom's behalf with Kenneth; and
- Whether or not Kenneth’s claim had prescribed. email@example.com
Ostensible authority, also referred to as apparent authority, means that a company cannot escape its obligations under a contract simply by saying that its agent was not authorised to enter into the contract. If the company acts in a way that gives the impression that it has sanctioned the contract, then it is bound by it. The concept of ostensible authority was introduced into law for the purpose of achieving justice in circumstances where a principal has created an impression that its agent had authority to act on its behalf.
The rationale for prescription is that, if a person does nothing to claim a debt for years, he / she cannot turn around later and demand payment of the debt; it is about fairness. The High Court’s conclusion on prescription had hinged on its interpretation of the word “debt". There is a plethora of judgments dealing with the meaning of “debt”. Some courts have given it a wide meaning; others restrict its meaning. The Constitutional Court said that in Kenneth’s case it was not necessary to determine the exact meaning of the word “debt” as envisaged in the Prescription Act, because Kenneth’s claim fell beyond the scope of the word as determined by the courts. The Constitutional Court found that Kenneth did not ask to enforce a claim for payment of money, delivery of goods, or rendering of services. Instead, he requested an order forcing Vodacom to commence negotiations with him for determining compensation for the profitable use of his idea.
The Constitutional Court was scathing it is remarks on Vodacom’s conduct during the litigation, stating that it is not the kind of conduct expected from an ethical corporate entity. Constitutional Court Justice, Chris Jafta, said that the decision taken by the mobile network service provider not to compensate Makate for his concept is “unfortunate and unethical”. The judgment of the trial court was also unsettling because the court found that the “Please Call Me” concept was indeed Kenneth’s brainchild and that Vodacom’s Geissler had agreed that, if the idea turned out to a be a money spinner, Kenneth would be paid for it, but that the claim had become time barred.