Makate v Vodacom Ltd

• Jurisdiction: South Africa

Makate v Vodacom Ltd
2016 (4) SA 121 (CC)

2016 (4) SA p121

Citation	2016 (4) SA 121 (CC)
Case No	CCT 52/15; [2016] ZACC 13
Court	Constitutional Court
Judge	Mogoeng CJ, Moseneke DCJ, Cameron J, Jafta J, Khampepe J, Madlanga J, Matojane AJ, Nkabinde J, Van Der Westhuizen J, Wallis AJ and Zondo J
Heard	September 1, 2015
Judgment	April 26, 2016
Counsel	C Puckrin SC (with G Marcus SC, R Michau SC and S Budlender) for the applicant.; SA Cilliers SC (with M Chaskalson SC, RA Solomon SC and A Mac Manus) for the respondent.

Flynote : Sleutelwoorde B

Agency and representation — Agent — Authority — Ostensible authority — Distinct from estoppel — Ostensible authority defined as power to act as agent indicated by circumstances; estoppel as rule precluding principal from denying that it gave authority to agent — Fact that representation giving rise C to ostensible authority may also form basis of estoppel not collapsing concepts into one.

Company — Director — Authority — Ostensible authority — To bind company to agreement to compensate employee for work-related invention — Ostensible authority indicated by director's membership of board; his position as D director of product development; his wide powers over new products; and process that had to be followed before introduction of new products.

Contract — Consensus — Oral agreement to negotiate in good faith (pactum de contrahendo) — Enforceable if it provides deadlock-breaking mechanism in event of parties not reaching consensus. E

Estoppel — Distinct from ostensible authority — Estoppel defined as rule precluding principal from denying that it gave authority to agent; ostensible authority defined as power to act as agent indicated by circumstances; estoppel as rule precluding principal from denying that it gave authority to agent — Fact that representation giving rise to ostensible authority may also form basis of estoppel not collapsing concepts into one. F

Practice — Pleading — Ostensible authority — Distinct from estoppel — Need not be pleaded in replication — May be raised in particulars.

Headnote : Kopnota

Former Vodacom employee Mr Nkosana Makate sued Vodacom for compensation for having conceived — while employed as a trainee accountant at G Vodacom during November 2000 — Vodacom's lucrative Please Call Me service. Vodacom launched the service in February 2001, and it proved to be a major success, netting the company several billion rand. Mr Geissler, Vodacom's then director of product development, verbally agreed to remunerate Mr Makate for his idea. The parties deferred negotiations on the amount of compensation to a later date but concurred that if no H agreement were reached, compensation would be determined by Vodacom's CEO. No agreement on compensation was, however, reached, and later the then CEO of Vodacom, Mr Knott-Craig, falsely claimed that Please Call Me was his idea. [*] Having received nothing, Mr Makate left Vodacom late in 2003. In 2008 he instituted a High Court action to enforce his I agreement with Mr Geissler, which, according to the undisputed evidence of Mr Makate, was that the parties would enter into bona fide negotiations over compensation. Vodacom disputed the existence of any such agreement

2016 (4) SA p122

A and contended in the alternative that Mr Geissler lacked actual or ostensible (apparent) authority to bind the company.

The High Court, while accepting that Mr Makate had proved the compensation agreement between him and Vodacom and that Mr Knott-Craig did not invent Please Call Me, dismissed Mr Makate's claim on the ground that Mr Geissler had lacked ostensible authority and because the claim had B prescribed under s 11(d) of the Prescription Act 68 of 1969. The word 'debt' had to be widely interpreted, said the court, to include a claim that the defendant comply with its obligations under a contract. Invoking the estoppel-as-shield analogy, the court found, moreover, that Mr Makate should have pleaded ostensible authority in replication instead of raising it in his particulars. In an application for leave to appeal to the Constitutional Court —

C Held, by the majority (Jafta J; Mogoeng CJ, Moseneke DCJ, Khampepe J, Matojane AJ, Nkabinde J and Zondo J concurring)

Interference with the factual findings of the High Court was not warranted, and the matter would be approached on the basis that an agreement between Mr Makate and Mr Geissler was established (see [41]). But the High D Court's view that Mr Makate had mistakenly raised estoppel in his particulars was based on a faulty conflation of estoppel and ostensible authority, which were distinct concepts (see [44]). This conflation, which had limited legal precedent [*1] (see [47]), had resulted in the attribution of elements of estoppel to ostensible authority (see [50], [54]). Yet estoppel was not a form of authority but a rule that if the principal had conducted E himself in a manner that misled a third party into believing that the agent had authority, he was precluded from denying it (see [45]). While the same misrepresentation could lead to ostensible authority by creating the appearance that the agent had authority to act on the principal's behalf, ostensible authority had this sole requirement — the representation — and lacked the other elements of estoppel (see [47], [49]). Ostensible authority was the F authority of an agent as it appeared to others while estoppel was no authority at all (see [46]), and it was contrary to principle to collapse the two concepts into one (see [78], [80]). Since Mr Makate alleged in his particulars that Mr Geissler had ostensible authority and Vodacom denied this in its plea, ostensible authority became one of the issues to be determined at trial (see [59]).

G As director of product development Mr Geissler was not only Vodacom's front man in dealings with third parties in relation to new products, but could make or break any new product (see [62]). His membership of Vodacom's board, his power over new products, the organisational structure within which he operated, and the process that had to be followed before a new product could be introduced, gave the appearance that Mr Geissler had H authority to negotiate all issues relating to the introduction of new products at Vodacom (see [66]). Hence Mr Geissler had ostensible authority to bind Vodacom (see [68]).

'Debt' as used in the Prescription Act had to be narrowly interpreted so that it least impaired the right of access to courts (see [91]). But since Mr Makate's claim for an order forcing Vodacom fell beyond the scope of I a 'debt' as defined by ruling precedent, namely an obligation to either pay money, deliver goods or render services, it was not necessary to precisely

2016 (4) SA p123

determine its meaning (see [92]). It followed that the trial court had A attached an incorrect meaning to the word (see [93]). Since a 'debt' contemplated in s 10 of the Prescription Act did not cover the present claim, it did not prescribe (see [93]).

Mr Makate sought the enforcement of a pactum de contrahendo — an agreement to agree — on fair compensation for his idea. Such pacta were enforceable if B they provided a deadlock-breaking mechanism, should the parties fail to reach consensus (see [97]). In the present case a deadlock-breaking mechanism was in place: if the parties disagreed on compensation, it would be determined by Vodacom's CEO. So ordered, with the proviso that the CEO could not represent Vodacom at the negotiations, but could only be approached to break deadlock (see [94] – [103].)

Held, by the minority (Wallis AJ; Cameron J, Madlanga J and C Van der Westhuizen J concurring)

Mr Makate was entitled to the relief set out in the main judgment on the ground that Mr Geissler had ostensible authority to conclude the agreement with Mr Makate. But, contrary to the view expressed in the main judgment, it was settled law that, where there was no actual authority, ostensible authority was a form of estoppel (see [109]). While ostensible authority D could coincide with actual authority arising by implication, in the present case there was no authority at all, which took it into the realm of estoppel (see [110]). The view that ostensible authority could be raised only by way of a replication was incorrect (see [119], [129]); it could be pleaded from the outset (see [121]). Hence the trial court's finding that ostensible authority was not pleaded because it had to be done by way of replication, E was wrong (see [123]). As Vodacom had represented to the world — including Mr Makate — that Mr Geissler had authority to conclude the agreement with Mr Makate, he had ostensible authority to do so, with the consequence that Vodacom was estopped from denying it (see [182]).

Since Vodacom's obligation to negotiate with Mr Makate did not involve the payment of money, the delivery of goods or the rendering of services, but F required bona fide conduct on both sides, Mr Makate's right was one of the rare kind that did not constitute a debt for the purposes of prescription (see [195], [198] – [199]).

Cases Considered

Annotations

Case law G

Southern Africa

Absa Bank Ltd v Keet 2015 (4) SA 474 (SCA) ([2015] ZASCA 81): referred to

Acutt v Seta Prospecting and Developing Co Ltd 1907 TS 799: referred to

Adams v Mocke (1906) 23 SC 782: referred to H

African Life Assurance Co Ltd v NBS Bank Ltd 2001 (1) SA 432 (W) ([2000] 1 All SA 545): referred to

Aris Enterprises (Finance) (Pty) Ltd v Protea Assurance Co Ltd 1981 (3) SA 274 (A): referred to

Baldachin's Trustees v Sloman & Sloman 1944 SR 55: referred to

Barnett and Others v Minister of Land Affairs and Others I 2007 (6) SA 313 (SCA) (2007 (11) BCLR 1214; [2007] ZASCA 95): referred to

Baumann v Thomas 1920 AD 428: referred to

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