Makate v Vodacom Ltd

• Jurisdiction: South Africa
• 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
• Judgment Date: 26 April 2016
• Docket Number: CCT 52/15 [2016] ZACC 13
• Hearing Date: 01 September 2015
• 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.
• Court: Constitutional Court

Jafta J (Mogoeng CJ, Moseneke DCJ, Khampepe J, Matojane AJ, Nkabinde J and Zondo J concurring):

D [1] This application for leave to appeal is about the enforcement of a contract concluded by the applicant and the respondent's agent. The case concerns payment of compensation for the use of the applicant's idea in developing a lucrative product which has generated billions of rands for the respondent. In resisting the claim, the respondent has raised a number of defences, two of which were upheld by the E Gauteng Local Division of the High Court, Johannesburg (trial court). These were that the agent had no authority to enter into the agreement and that the applicant's claim had prescribed. Both the trial court and the Supreme Court of Appeal refused to grant the applicant leave to appeal, hence this application.

Factual background F

[2] The applicant is Mr Kenneth Nkosana Makate, a former employee of the respondent, Vodacom (Pty) Ltd (Vodacom). During 2000 the applicant was employed by Vodacom as a trainee accountant. In November 2000 he was involved in a long-distance relationship with a student G who later became his wife. They experienced communication difficulties, owing mainly to the fact that his girlfriend could not afford to buy airtime for purposes of making telephone calls to him. As a result the applicant was the one who initiated their telephone calls.

[3] Both of them were familiar with the practice in terms of which a H cellphone user with low airtime would dial the number of another cellphone user and allow the cellphone to ring twice before cancelling the call. But for the message to be conveyed, the one who initiated the call had to have some airtime and therefore the practice did not resolve the couple's communication difficulty.

I [4] Meanwhile the applicant came up with an idea in terms of which the cellphone user who has no airtime would be able to send the request to the other cellphone user who has airtime to call the former. The idea was reduced to writing and the applicant consulted his superior and mentor at Vodacom for advice on how he could sell it to any of the cellphone J service providers, including Vodacom. His mentor, Mr Lazarus

Jafta J (Mogoeng CJ, Moseneke DCJ, Khampepe J, Matojane AJ, Nkabinde J and Zondo J concurring)

Muchenje, advised him to speak to the director of product development A and management, Mr Philip Geissler.

[5] The applicant and Mr Geissler negotiated and agreed that Vodacom would use the applicant's idea to develop a new product which would be put on trial for commercial viability. If the product was successful then the applicant would be paid a share in the revenue generated by it. B Although the applicant had indicated that he wanted 15 % of the revenue, the parties deferred their negotiations on the amount to be paid to the applicant to a later date. However, they agreed that in the event of them failing to agree on the amount, Vodacom's chief executive officer (CEO) would determine the amount. C

[6] Based on the applicant's idea Vodacom developed a new product called Please Call Me. This product enabled a cellphone user with no airtime to send a message to the other cellphone user, asking her to call him. The new product elicited excitement at Vodacom and the inventor of the idea on which it was built was praised for his innovative thinking. Vodacom's internal newsletter described the applicant's idea in these D terms:

'Vodacom has launched a new product called Call Me, thanks to Kenneth Makate from our finance department. Kenneth suggested the service to the product development team, which immediately took up the idea. Call Me is a world first and allows Vodago prepaid users to E send a free text message to other Vodacom customers requesting that they call them back. The main aim of this product is to allow Vodacom users who do not have balances on their accounts to keep in touch with their families and loved ones.'

[7] The newsletter did not only exude excitement about the new product which was regarded by Vodacom to be the first of its kind in the whole F world, but also declared its success. In this regard the newsletter stated:

'Call Me has been a big success. On the first day of operation about 140 000 customers made use of the service. It will be free until December 31 this year and thereafter cost users 15 cents per transaction.'

[8] In the same newsletter the managing director of Vodacom, G Mr Mthembu, heaped praises on the applicant for his idea. He said:

'Most impressive to me was the fact that the idea of the product came from one of our staff members whose job is not in any way related to product development. This led me to ask myself one question: what would happen in this company if we were all to come up with workable H solutions to our company's problems like Kenneth did?'

[9] As stated in the newsletter the service was offered for free for a limited period from the date of its launch. Later Vodacom charged for it. Despite the fee charged, Please Call Me was an instant hit with customers and raked in a lot of money for Vodacom. It is common cause I that this product has generated revenue amounting to billions of rands.

[10] As it was customary within Vodacom to make and implement business decisions before they received the approval of the board, the Please Call Me product was also launched before Vodacom's board approved it on 15 March 2001. J

Jafta J (Mogoeng CJ, Moseneke DCJ, Khampepe J, Matojane AJ, Nkabinde J and Zondo J concurring)

A [11] Despite the product being a success, Vodacom did not negotiate compensation for the use of the applicant's idea. Instead, as the High Court later held, Messrs Knott-Craig, Vodacom's CEO, and Geissler created a false narrative pertaining to the origin of the idea on which the Please Call Me product was based. They dishonestly credited Mr Knott-Craig B with the idea and this lie was perpetuated in the latter's autobiography. When the media queried the correctness of the story, Mr Knott-Craig solicited confirmation from Mr Geissler who was on holiday in Mauritius. Mr Geissler responded by email on 25 December 2009 in which he said:

C 'As discussed, I read your latest book and agree, in principle, with the way Please Call Me was created on the fourth floor outside your office with two of Vodacom's security guards playing a role of the two prepaid users without any credit on their phones — communicating with each other.

D The concept of Call Me refined inside your office minutes later and launched officially in late January 2001.

I hope this helps with the media queries.'

[12] Mr Geissler's email contradicted his earlier email of 9 February 2001 which was addressed to staff at Vodacom, informing them about E the launch of the Please Call Me product. That email reads:

'Dear All Vodacom Staff, Vodacom is launching a new product this weekend (Sunday Times) which will hopefully stimulate all traffic on the network as well as assist some of our subscribers who do not have F balances on their Vodago accounts to be able to communicate with friends and family. This service is free until the end of the year and then will go to 15c per transaction. Kenneth Makate from our Finance Department came up with this idea a few months ago and brought it to the Product Development Division. We wish to thank Kenneth for bringing his idea to our attention.'

G [13] The fact that the applicant was the inventor of the idea was further acknowledged in Vodacom's newsletter that was published in March 2001. Its contents were quoted earlier, in which even the managing director of Vodacom praised the applicant for his idea. Despite these facts, Messrs Knott-Craig and Geissler later claimed that it was the CEO's idea. This untrue story appears to have been part of a stratagem to deny the applicant compensation for the H idea. Vodacom first accused him of having stolen the idea from MTN, its competitor.

Litigation history I

[14] Approximately two and a half years after the launch of the product, the applicant left Vodacom's employ. He instituted action to enforce his agreement with Vodacom in the High Court in 2008, some four years after the launch of the Please Call Me product. He sought an order J directing Vodacom to comply with its obligations under the parties' oral

Jafta J (Mogoeng CJ, Moseneke DCJ, Khampepe J, Matojane AJ, Nkabinde J and Zondo J concurring)

agreement. [1] In the alternative the applicant sought the development of A the common law in terms of s 39(2) of the Constitution and to infuse it with constitutional values of ubuntu and good faith. Flowing from the alternative claim, the applicant sought an order directing Vodacom to enter into good-faith negotiations with him, to determine a reasonable remuneration payable to the applicant for the use of his idea in developing the Please Call Me service. B

[15] Vodacom responded by filing two special pleas and raising a number of defences. The first asserted that the applicant's claim had prescribed in terms of s 11(d) of the Prescription Act. [2] The second contended that in terms of the applicant's employment contract, the idea C in question was Vodacom's property for which the applicant was not entitled to compensation.

[16] In the main plea Vodacom disputed the existence of the agreement on which the applicant relied. Furthermore, the authority of Messrs Muchenje and Geissler to conclude the agreement on behalf of Vodacom D was placed in issue. Vodacom asserted that neither of them had actual or ostensible authority to enter into the agreement on its behalf. [3]

[17] At the trial the applicant testified in support of his claim and also called Mr Muchenje and an American computer-science and...