Leo Boonzaier | Constitutional Court preview: Makate v Vodacom

28 August 2015 – On Tuesday next week, the Constitutional Court of South Africa hears the most high-profile case of 2015’s third termMakate v Vodacom (Pty) Ltd CCT 52/15 (court papers), which we preview here.

Date of hearing:  Tuesday, 1 September 2015

Issue:  Whether the plaintiff concluded a valid contract with Vodacom entitling him to a share of the profits from the invention of the “please call me” messaging service

Background:  In 2000, the plaintiff, Nkosana Makate, was working at Vodacom as a trainee accountant.  While enduring a long-distance relationship with his cash-strapped girlfriend (now wife), he realised cellular networks should provide a means by which someone who has no airtime can request a call from someone who does.  Mr Makate raised the idea with his boss, who told him to speak to the company’s Director of Product Development, Mr Geissler.  Mr Geissler told Mr Makate he liked the idea and would implement it if it proved commercially viable — and the two agreed, Mr Makate says, that he would get a share in its profits.  Vodacom launched their “please call me” service the following year, thanking Mr Makate for the idea in its newsletter.  Vodacom’s then CEO, Mr Knott-Craig, later wrote that the “please call me” had, through the additional calls it triggered, earned the company billions of rands.

But when Mr Makate approached Vodacom for his profit-share, things quickly turned sour, and he had to turn to the South Gauteng High Court.  After a lengthy trial, Coppin J held that Mr Makate had proved he concluded an oral agreement with Mr Geissler entitling him to a profit share.  It also made adverse credibility findings against Mr Geissler and Mr Knott-Craig, who had disingenuously tried to “write [Mr Makate] out of the ‘please call me’ script”.  Nevertheless, the Court dismissed Mr Makate’s claim.  It held that Mr Geissler had not had ostensible authority to conclude an agreement on behalf of Vodacom, which was not, therefore, bound.  First, Mr Makate’s attempt to establish ostensible authority was procedurally improper.  His pleadings did not identify any specific statements by which Vodacom implied that Mr Geissler had authority.  His legal team sought to identify them only in a belated amendment, once the trail was over.  Second, and in any event, although Mr Makate’s boss told him to take his idea to Mr Geissler, that fell far short of suggesting Mr Geissler could contract on Vodacom’s behalf.  Finally, Coppin J held that the law of prescription bars Mr Makate’s claim, since he brought it seven years after his invention was implemented.

Things to watch:  Commercial disputes rarely find their way to the Constitutional Court, so it was surprising when it set down Mr Makate’s appeal.  There will be something slightly incongruous when this court of human rights entertains six high-flying commercial silks.

That does not mean this high-stakes set-down is unwarranted.  As Mr Makate’s stellar legal team (consisting of Cedric Puckrin SC, Gilbert Marcus SC, Reinard Michau SC and Steven Budlender) ably contend, there is something bizarre about finding, as the High Court did, that Mr Makate invented the “please call me”; that he shared the idea, on the advice of a senior Vodacom employee, with its Director of Product Development; that, in return, the Director promised him a significant share in the invention’s profits; that the invention went on to make Vodacom billions of rands; that its officials openly attributed the invention to Mr Makate, but then dishonestly tried, once a legal dispute arose, to conceal his role — and yet conclude that Mr Makate has failed to establish any right to share in Vodacom’s profits.  Is the law such an ass?  If it is, then (say Mr Makate’s legal team, mounting one of the Court’s favourite hobby horses) the law of contract must be developed in line with the values of ubuntu and good faith.

Not so, says Fanie Cilliers SC, who appears for Vodacom along with Richard Solomon SC, Matthew Chaskalson SC and Alet MacManus.  In truth, he says, Mr Geissler’s inability to bind Vodacom was patent and just.  Corporations act through their board of directors, not through the unilateral conduct of one of them.  It would be catastrophic and unfair if corporations could be bound to contracts by imposters, simply because those imposters claimed they had legal authority.  If Mr Makate really was duped by Mr Geissler, he can sue him — but not the blameless Vodacom.  Second, and most crucially, the High Court was right about ostensible authority: Mr Makate’s lawyers never pleaded the facts to establish this in their High Court papers, deliberately chose not to alter this during the trial, and only sought an amendment two months after the trial — once Vodacom’s opportunity to rebut the allegations had ended.  It would flout basic rules of procedural fairness, Mr Cilliers says, to find against Vodacom on this basis.  And, in any case, Mr Makate could not reasonably have thought that Mr Geissler, in defiance of all commercial practice and common sense, had had the authority to bind a sophisticated corporation like Vodacom without any involvement from its senior executives.  That, says Mr Cilliers, is why the High Court was compelled to dismiss Mr Makate’s action, and why the SCA would not countenance an appeal.

And if this all seems unfair to Mr Makate, Mr Cilliers continues, remember that his legal team freely chose to bring this action in contract law, for tactical reasons: to try and evade the law of prescription, to side-line Vodacom’s enormous role in making Mr Makate’s crude idea into something technologically and commercially viable, and to get the highest possible award for Mr Makate.  They did this even though that path was beset by significant hurdles.  (In fact, Mr Cilliers says, the High Court was only getting started on its myriad deficiencies.)  The failure of the high-risk strategy that Mr Makate’s legal team freely and self-servingly chose is no reason to cue the violins.

Finding for Mr Makate against the big, nasty corporation has intuitive appeal.  Mr Cilliers sounds a lawyerly note of caution to the Court not to be seduced.  But his involved, technical argument, which tries in part to prevent the adjudication of the case’s substance, is not the kind the Court usually relishes.  If Mr Makate and his legal team — whose application the Court was moved to hear in the first place — manage to stay on the Court’s good side, Mr Cilliers (who, despite 50 years’ experience, failed to charm the Court in the recent AllPay litigation) is in for a torrid time.  Still, unpicking the arguments’ relative merits is tricky.  And the Court’s judges are not experts, it is fair to say, on the law of agency, on which the appeal turns.  We hope that the eye-popping number of commercial silks on display will generate more light than heat — and that we do not come to lament the continued failure to appoint bona fide private-law experts to the Court.

Leo Boonzaier

About Leo Boonzaier

Leo is an Editor for the African Legal Centre, and he reports on the Constitutional Court of South Africa. He has BSocSci and LLB degrees from the University of Cape Town and a BCL from the University of Oxford. He has worked as a visiting researcher at the Max Planck Institute for Private Law in Hamburg, Germany, and more recently as a law clerk at the Constitutional Court of South Africa. He is currently a doctoral student at the University of Oxford.