Case set to cost Vodacom billions

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Vodacom may have to fork out more than R10 billion plus interest to a former employee who has accused the country’s largest mobile network operator of hijacking his idea to create what has become known as a Please Call Me service. On September 1 Vodacom will face off with Nkosana Makate in another critical phase of a high-stakes case poised to lay the foundation and legal parameters for contracts to incorporate an “ubuntu or good faith” principle in future. The Constitutional Court handed Makate a significant victory this month when it overturned rulings by two lower courts and granted him leave to appeal. The court has set down a hearing on the matter for September 1 and has directed both parties to file relevant papers between June and July in preparation. If Makate wins in September, Vodacom may have to pay him R10.5bn in a backdated liability, according to his legal team. The amount represents Makate’s 15 percent share of revenue claim. On top of that Vodacom would also have to pay interest. An actuarial estimate by Makate’s legal team says the Please Call Me service has netted Vodacom as much as R70bn in revenue since the service was introduced back in 2000.

Inventor

If he is successful, Makate also plans to halt the use of Please Call Me in South Africa and abroad through an interdict that will bar Vodafone, Vodacom’s parent company, from using the service until the dispute is resolved through an equitable payment or settlement.

Makate contends that he is the inventor of the service, a claim that has been confirmed by the South Gauteng High Court.

In 2000 he was employed by Vodacom as a trainee accountant. Finding it difficult to communicate with his then cash-strapped girlfriend – now his wife – he conceived of an idea that would allow his girlfriend to send him a text message asking him to call her – hence the moniker Please Call Me.

The service delivered via SMS not only facilitates cellphone calls between parties, it now also carries advertising, making it a lucrative platform.

The High Court, which also found that Makate had had a valid contract with Vodacom, was scathing about evidence supplied by former Vodacom chief executive Alan Knott-Craig, who was found to have manipulated the truth about who had invented the service.

Knott-Craig claimed in his autobiography, Second is Nothing, that he came up with the idea while chatting to a colleague in a Vodacom building.

Yesterday, Makate told Business Report that he was ready to take the matter back to Vodacom. He said he felt vindicated by the Constitutional Court as he knew that his claim against Vodacom was based on reality.

“I am happy. I am looking forward to the Constitutional Court ruling on the matter,” Makate said. “It is unfortunate that the two other courts saw things differently despite the fact that they could see that the company was not truthful… Now that the Constitutional Court has given me the go-ahead, I think the matter is nearing a settlement.”

But Vodacom spokesman Richard Boorman said the Constitutional Court had not agreed to hear the appeal. “They have simply agreed to hear the application for leave to appeal. That would then determine whether a court would hear the appeal itself or not.”

Last year Judge Phillip Coppin, who gave the original judgment that found in favour of Vodacom, found there was an agreement between Makate, a junior accountant at Vodacom at the time, and Philip Geissler, an executive for product development at the mobile network operator.

The agreement was that Makate would hand over to Vodacom the Please Call Me concept, which Vodacom would not disclose to any other party, and if the concept proved to be technically and financially viable, the parties would negotiate in good faith to establish a reasonable remuneration to Makate, who suggested a figure of 15 percent.

Collusion

Knott-Craig denied he was aware of or sanctioned the agreement. However, the court found on probabilities, that he had knowledge of the agreement but was dismissive of remuneration to Makate because he was “greedy”.

Coppin also stated that there was collusion between Geissler and Knott-Craig to thwart the invention from Makate for commercial gain.

Cedric Puckrin, the senior counsel for Makate, argued that Makate had proven the existence of the agreement.

Makate’s business manager, Mandla Mdluli, said the case was bound to set precedence on the law of contract, which would incorporate the Ubuntu principle. “Makate plans to set a precedence on the law of prescription whereby the courts will disregard prescription when there is continuous violation.

“For example, Vodacom claims prescription on a stolen product from the inventor and yet they continue to make billions and export the product to all Vodafone entities around the world.”

With additional reporting by Ellis Mnyandu (Follow him on Twitter @Ellis_Mnyandu)