Makate v Vodacom (Pty) Ltd

Estoppel principles considered in context of ostensible authority of agents and 4 judges who penned the concurring minority judgment disagreed on the juristic nature of ostensible authority where there is no actual authority and maintained that it is settled law that this is a form or instance of estoppel, which is why it is commonly referred to in judgments and textbooks as agency by estoppel. 

Essence

Estoppel principles considered but there was disagreement concerning the true nature and effect of ostensible authority 

Decision

(CCT52/15) [2016] ZACC 13; 2016 (6) BCLR 709 (CC); 2016 (4) SA 121 (CC) (26 April 2016)

Order:

Allowed the appeal and certain orders made.

Judges

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

Judgments: Jafta J (majority): [1] to [107]
Wallis AJ (concurring): [108] to [200] – see below

Heard:       1 September 2015
Delivered: 26 April 2016

Related books

Darcy du Toit et al Labour Relations Law: A Comprehensive Guide 6ed 925 pages (LexisNexis 2015) at

Darcy du Toit et al Labour Law Through The Cases – loose-leaf service updated 6 monthly (LexisNexis 2021)

Van Niekerk & Smit et al [email protected] 5ed (LexisNexis 2019) at 

Reasons

“Conclusion on ostensible authority

[154] The argument before us accepted the analysis of the present state of our law set out above. That analysis shows that in English law ostensible authority is an estoppel by representation and that the earlier decisions of our courts that say that ostensible or apparent authority is a form of estoppel are correct. That is also the view of the academic commentators both here and overseas. This characterisation was not and is not challenged on the basis that it is inconsistent with the spirit, purport and objects of the Bill of Rights. It should in my opinion be applied in this case. Therefore, once Mr Makate accepted that Mr Geissler did not have actual authority, whether express or implied, to conclude a contract with him on behalf of Vodacom, he had to show that Vodacom made a representation to him that Mr Geissler had the requisite authority and that he reasonably acted upon it.”

Quotations from judgment

Note: Footnotes omitted and emphasis added

WALLIS AJ (Cameron J, Madlanga J and Van der Westhuizen J concurring):

[108] I have had the pleasure of reading the main judgment by Jafta J. We arrive at the same destination in this case, namely that Mr Makate is entitled to the relief set out in the main judgment. But on one aspect, the issue of ostensible authority, we differ. Even there the difference is small, one of jurisprudential nomenclature or categorisation. We agree that the key issue is whether Vodacom represented that Mr Geissler had authority to conclude the agreement with Mr Makate. We agree that it made that representation, although I rely on a wider range of facts than Jafta J in reaching that conclusion. We agree also that the representation justifies us in holding that Mr Geissler had ostensible authority to conclude that contract.

[109] We disagree on the juristic nature of ostensible authority where there is no actual authority. In my view it is settled law that this is a form or instance of estoppel, which is why it is commonly referred to in judgments and textbooks as agency by estoppel. He disagrees. Our disagreement is not relevant to the outcome of this case, but it has the potential to cause unnecessary confusion in a settled area of the law, which is undesirable. I am compelled to write by the following considerations. First, the issue was not debated before us and we were not asked to alter the settled legal position. Second, my Colleague’s approach is based on his understanding of the English law. That understanding, based as it is on a single sentence in a judgment of Lord Denning in the Court of Appeal, is inconsistent with the authoritative judgments of English courts. Third, his approach is inconsistent with the judgments of our courts since the early twentieth century as well as the views of our textbook writers. Fourth, he advances no reason of principle for adopting this approach and does not locate it in any constitutional imperative. Fifth, the enquiry arose only because of the erroneous approach of the trial Court to the proper pleading of apparent or ostensible authority.

[110] In the light of that disagreement it is perhaps best that I set out my own approach at the outset. I accept that estoppel is a wide-ranging equitable concept that finds application in a number of different settings, not only where issues of authority or agency arise. Cases that spring to mind are the well-known motor dealer cases, share dealing transactions and other vindicatory actions. It has been said that the Turquand Rule of company law is merely an application of estoppel. Estoppel has also been held to apply where a property owner failed to have an erroneous entry corrected in the Deeds Registry. Countless other examples of estoppel are to be found in the reported cases. On both principle and authority I am convinced that ostensible authority is merely one more instance of estoppel. It is not by any means the only one, but it is one that crops up frequently in practice, where there is no authority, express or implied. There are cases in which ostensible authority coincides with actual authority arising by implication and in that event, to adopt my Colleague’s metaphor, actual authority and ostensible authority will be two sides of the same coin, but this is a case where it is accepted that there was no authority at all, express or implied. That in my view takes it into the realm of estoppel.

The facts

[111] My Colleague has outlined the relevant facts in paragraphs [2] to [13] of the main judgment. I have little to add to that exposition and what I add focuses on the events surrounding the conclusion of the contract on which Mr Makate relied for his claim. Mr Makate had an idea for a new product that became “Please Call Me”. From the outset he realised its commercial potential. He prepared a memorandum incorporating the idea addressed to his immediate line manager Mr Muchenje, but copied to the Group Chief Executive of the Vodacom Group, Mr Knott-Craig (CEO), and other senior executives. He discussed it with Mr Muchenje explaining that he wished to be remunerated for the idea and, if Vodacom was not interested, he would take it to a competitor. Mr Muchenje thought the idea worthwhile, but said it would have to be approved by the Product Development Department before it could be taken to the executive. He undertook to discuss it with Mr Geissler, the Director of Product Development and Management. Mr Geissler responded favourably to an initial approach by Mr Muchenje and on that basis Mr Makate amended the addressees of the memorandum and sent it to Mr Geissler on 22 November 2000.

[112] It does not appear that Mr Makate spoke to Mr Geissler until after the Product Development Department had discovered how to make his idea technically feasible. This appears to have taken about a month because on 19 December 2000 Mr Muchenje informed Mr Makate that the company was going to introduce a product similar to his concept. On 26 December 2000 Mr Geissler sent him an email saying that he would be “kept in the loop” concerning the product. On 18 January 2001 Mr Makate sent an email to Mr Geissler asking about developments and recording that they had not yet met. Two days later Mr Geissler responded by email and asked him whether he had used the new function. He added: “Let me know if you are OK with it.” Between 23 and 28 January 2001 the Product Development Department approved the launch of the product. On 30 January 2001 Mr Geissler told Mr Makate that Vodacom was launching the product for all phones and asked him for his suggestions in regard to a name for the new product.

[113] Mr Makate’s response to this enquiry is significant because, in addition to suggesting a possible name, he added:

“Lastly as per our verbal conversation, I think we should start talking about ‘REWARDS’, can you please notify me when can this be feasible.”

This shows that between 18 and 30 January 2001 a meeting had taken place between Mr Geissler and Mr Makate and among the topics discussed had been remuneration for his idea. This is consistent with Mr Makate’s evidence that he and Mr Geissler met and discussed the fact that if Vodacom launched a product in accordance with his idea he would be remunerated for it. It is also consistent with Mr Geissler’s response on 6 February 2001 that, once the product was launched and was successful, he would discuss the issue of a reward with Mr Knott-Craig. The launch occurred on about 10 February 2001 and was an immediate success.

[114] Mr Geissler did not give evidence so we do not have his version of his meeting with Mr Makate. The latter’s version that there was a specific agreement that he would be remunerated for his idea stands unchallenged and was accepted by the trial Court. However, no agreement was reached on the precise form or amount of such remuneration. Mr Makate said that he wanted a profit share and had suggested 15%. Mr Muchenje confirmed that this figure was mentioned in his discussions with Mr Makate. But the evidence is clear that Mr Geissler did not agree to this figure or any basis for determining the remuneration. Everything was to depend on the successful launch of the product after which the matter would be discussed. If those discussions did not lead to agreement the question of remuneration would be referred to Mr Knott-Craig for determination. As Mr Knott-Craig has now left the company Mr Makate says that the incumbent CEO should perform this tie-breaking function.

[115] On the basis of the facts and events summarised above Mr Makate sued Vodacom, basing his claim on a contract concluded between him and Vodacom represented by Mr Geissler. As often happens, his pleadings were more ambitious than the evidence led in support of this case. Over time they were amended. At the close of the trial he claimed only that the contract between him and Vodacom was that in return for his providing the idea to Vodacom it would enter into bona fide negotiations with him in order to agree on a reasonable remuneration for his idea. Should they be unable to agree on a reasonable remuneration the matter would be referred to Mr Knott-Craig for his adjudication. The trial Court held this to have been proved on a balance of probabilities.

[116] We were asked to revisit this conclusion and were furnished with detailed submissions attacking the trial Judge’s conclusion. I agree with Jafta J where he says that it is inappropriate for this Court to be asked to interfere with the factual findings by the trial Court. That should not be the function of this Court. Whilst there may be a few cases where it is appropriate and necessary for it to make factual findings on the basis of material in the record, where on a particular issue necessary for the proper determination of the case the trial Court has not made a factual finding, in general this Court should proceed on the basis that the factual findings by the court from which the matter emanates are correct.

[117] But in this instance that should not be taken as casting doubt on the correctness of those findings. The criticism addressed to them, largely on the basis of the terms in which the claim was couched in letters of demand sent some considerable time after the relevant events, ignores that in all those letters it was consistently Mr Makate’s case that he was to receive reasonable compensation if his idea proved commercially successful. It also ignores Vodacom’s failure to call the one witness who could have rebutted Mr Makate, namely, Mr Geissler. Lastly, it ignores one of the more disgraceful aspects of this case namely that, after the institution of this action, Mr Knott-Craig published his autobiography and falsely claimed credit for the “Please Call Me” idea. To make matters worse, when challenged, he procured an email from Mr Geissler to bolster his untruthful version.

Issues

[118] Accepting that Mr Makate and Mr Geissler concluded an agreement in the terms set out above, I agree with Jafta J that a contract on those terms is enforceable. That renders it unnecessary for us to consider the issues raised in this Court in Everfresh. The primary issue is whether that agreement was binding upon Vodacom. In the particulars of claim it was alleged that Mr Geissler had authority to conclude the agreement, alternatively had ostensible authority to do so. By the close of Mr Makate’s case his case was expressly confined to one based on ostensible authority. The trial Court held that he failed to establish such authority and on that ground non suited him. It went on to hold that in any event his claim had prescribed. These are the issues that must be decided by this Court.

Pleading ostensible authority

[119] At the outset it is necessary to deal with two technical issues raised by Vodacom. First, there was a complaint that ostensible authority may only be raised by way of a replication delivered in response to the defendant pleading a defence of lack of authority. But that was pedantry, and its acceptance by the trial Court was incorrect. Where the issue of authority has been pertinently raised before the commencement of the action it is usual for ostensible authority to be pleaded in the particulars of claim. Where the plaintiff alleges authority and this is denied in the plea ostensible authority is raised by way of a replication. It is necessary for me to expand on this because, as is apparent from the main judgment, the Judge’s finding that ostensible authority could only be raised by way of a replication lies at the root of my colleague’s endeavour to distinguish ostensible authority from estoppel.

[120] The only authority relied on by the Judge was Amler. In the section dealing with estoppel the following statement appears:

“A plaintiff wishing to rely on estoppel must plead it in the replication in reply to the defendant’s plea where reliance is placed on the true facts.”

But the case relied on in support of that proposition contains no such statement. The judgment in the High Court also overlooked the fact that in the section of the same work dealing with agency and ostensible authority a less definitive stance is taken. First it is said that—

“if reliance is placed on ostensible authority, the elements of estoppel must be alleged.”

Then the passage goes on:

“Because estoppel can only be raised as a defence, a plaintiff intending to rely upon estoppel is well advised to allege actual authority and rely on estoppel as an alternative in the replication.”

This is less dogmatic because “well advised” is not the same as “must”. The author quotes neither reason nor authority for that proposition and it is inconsistent with what occurs in practice. It is pointless to say that, where there is no actual authority, either express or implied, the plaintiff must nonetheless allege authority and wait for the inevitable denial in order to raise what was all along the real issue, namely, ostensible authority. In a different capacity the learned author of Amler has pointed out that litigation is not a game. The suggested approach to pleading ostensible authority is at odds with that notion. It also finds no support in Beck, the other leading textbook on pleading, or the leading textbook on estoppel. But the latter says:

“[I]t is submitted that the terms ‘agency by estoppel’, ‘apparent authority’ and ‘ostensible authority’ in principle refer to the same circumstances.”

[121] Where a plaintiff is aware that the defendant will, or will probably, raise a defence of lack of authority, there can be no criticism of them for pleading ostensible authority from the outset, either as an alternative to actual authority, or on its own. There is no merit in the suggestion that this is impermissible because, in the colourful phrase of an English judge, estoppel is a shield and not a sword. Where a party sues on a contract concluded with an agent whose authority is denied, proof that they had ostensible authority is as much part of their cause of action as would be proof of actual authority, and that would undoubtedly need to be pleaded from the outset. Estoppel serves two purposes. It either places an obstacle in the path of a case that might otherwise succeed, or it removes an impediment in the path of a case that might fail without its removal. In the latter case I can see no reason why the impediment should not be removed at the outset.

[122] The proposition that estoppel may only be used as a shield and not a sword does not relate to the manner in which it is pleaded, but to the use to which it is put. One of its proper uses is to remove an impediment to the successful prosecution of an action. Invoking it in relation to a plea that the representative of a contracting party lacked authority to conclude the contract is an obvious example. In that case it overcomes the hurdle of absence of authority and binds the other party to the contract concluded without authority. An example of an attempt to use it to create a cause of action is furnished by Union Government v National Bank of South Africa Ltd. There, a number of postal orders had been stolen, fraudulently made out to various individuals and cashed with the bank. The Government sued to recover the amount that the Post Office had paid the bank when postal orders were presented for payment. The bank legitimately, albeit unsuccessfully, relied on an estoppel to resist a claim for repayment under the condictio indebiti. But it also tried to rely on the same facts to justify a claim for payment on further postal orders that it had cashed, but which it had not had an opportunity to present to the Post Office for payment. As the postal orders were fraudulent it had no legal right to demand that the Post Office cash them. It was in that context that Innes CJ said:

“A plaintiff cannot invoke estoppel to create a cause of action where none existed before.”

[123] For all those reasons the finding by the trial Court that ostensible authority was not pleaded, because it had to be pleaded by way of replication was wrong. There is therefore no reason to say that ostensible authority is not a form of estoppel in order to hold that ostensible authority was properly raised in the particulars of claim. It clearly was raised and the argument advanced on behalf of Vodacom was pettifogging in the extreme.

[124] A more serious objection might have been that the issue of ostensible authority was not at any stage properly pleaded. I agree that the pleading was seriously deficient in detail and that the obligation to plead all the elements of estoppel was ignored. But Vodacom initially sought particularity by way of a request for particulars for trial and, when the answer failed to disclose the requested particulars, no attempt was made to compel a proper reply. When the case came to trial in 2013 Vodacom delivered a further very detailed request for further particulars for trial, but did not ask for any further information in regard to the question of ostensible authority.

[125] Against that background, the objections to Mr Makate’s reliance on ostensible authority raised in the course of the trial, and in this Court, ring rather hollow. During the trial counsel went so far as to say that a case based on ostensible authority would be a wholly new case and that it would require full particularity of the nature of the representation founding the ostensible authority. This overlooked the fact that the allegation appeared in the particulars of claim; that the particularity he said he required had been sought and refused; that its production was not compelled by Vodacom; that during the application for absolution from the instance at the close of the plaintiff’s case it was made clear that reliance was being placed on ostensible authority; and that both endeavours by the plaintiff to address these complaints by way of amendment were resisted by Vodacom. It has not been shown that the course of the trial would have been any different had the pleading of ostensible authority been more detailed, or that Vodacom has in any way been prejudiced by the lack of particularity in regard to this aspect of the case. The objection must be rejected.

Is ostensible authority based on estoppel?

[126] The trial Court held that ostensible authority is a form of estoppel and that Mr Makate failed to prove the requisites of estoppel. My Colleague holds that this approach is incorrect and that “although ostensible authority and estoppel have at times been treated synonymously by our courts, they are not one and the same thing”. His view is that: “[a]ctual authority and ostensible or apparent authority are the opposite sides of the same coin”. This is explained on the basis that a misrepresentation that a person has authority may lead to the appearance that the agent has the power to act on behalf of the principal and that—

“[t]his is known as ostensible or apparent authority in our law. While this kind of authority may not have been conferred by the principal, it is still taken to be the authority of the agent as it appears to others. It is distinguishable from estoppel which is no authority at all.”

So ostensible authority is treated as a form of actual authority, in contrast to estoppel, which is no authority at all. As pointed out in [110] above that is correct if one is dealing with actual authority arising by necessary implication. But I understand this case to be dealing with a situation where it is accepted that there was no authority at all, either express or implied. That was the necessary inference from counsel’s abandonment of reliance on actual authority during the argument on Vodacom’s application for absolution from the instance at the close of Mr Makate’s case.

[127] The foundation for the view expressed in the main judgment is a sentence in the judgment of Lord Denning in Hely Hutchinson CA that “[o]stensible or apparent authority is the authority of an agent as it appears to others”. The main judgment says that this was incorporated into our law when Schutz JA cited it with approval in NBS Bank, but that in doing so Schutz JA mistakenly conflated apparent authority and estoppel, an error that has been repeated in subsequent decisions. It is said that he did this without any substantiation and in doing so overlooked that “apparent authority is the agent’s authority as it appears to others” while “estoppel is not a form of authority”.

[128] There are two errors in this.

The first arises because in English law apparent or ostensible authority falls under the broader rubric of estoppel and is treated as an instance of estoppel by representation. Lord Denning in Hely- Hutchinson CA did not differentiate apparent authority and estoppel. The English law emerges from the two leading cases in England, namely, Freeman & Lockyer and Armagas. The latter is the definitive statement of English law on the point and because it is a judgment of the House of Lords is binding on all other courts. The main judgment mentions the Court of Appeal judgment in this case but does not refer to the decision in the House of Lords. Nor does it refer to the key passage where Lord Keith states unequivocally as a matter of English common law that ostensible authority is nothing more than estoppel.

[129] The second error lies in the suggestion that treating apparent or ostensible authority as a form or instance of estoppel was a novel departure by Schutz JA from the principles applied in our law before his judgment in NBS Bank. That is not so. The consistent view in our law has always been that apparent or ostensible authority is an instance of estoppel. That is reflected in the cases both prior to and after NBS Bank and in the academic writing. The main judgment states that there is not a single case referred to in our law that holds that apparent authority is estoppel before NBS Bank and subsequent decisions that followed it. My researches have, however, uncovered a number that did. Like the main judgment I will start with the English law but will need to explore that in greater detail than does the main judgment.

English common law

[130] The proper approach to the determination of the law of a foreign country is to examine the authoritative decisions of its courts. In England that is the Supreme Court and was formerly the House of Lords. It pronounced on the relationship between ostensible authority and estoppel in Armagas, where Lord Keith of Kinkel, giving the opinion of the House, said:

“Ostensible authority comes about where the principal, by words or conduct, has represented that the agent has the requisite actual authority, and the party dealing with the agent has entered into a contract with him in reliance on that representation. The principal in these circumstances is estopped from denying that actual authority existed. In the commonly encountered case, the ostensible authority is general in character, arising when the principal has placed the agent in a position which in the outside world is generally regarded as carrying authority to enter into transactions of the kind in question. Ostensible general authority may also arise where the agent has had a course of dealing with a particular contractor and the principal has acquiesced in this course of dealing and honoured transactions arising out of it.” (Emphasis added.)

[131] It should be unnecessary to delve any further into the English law in the light of that decision. If a foreign court were investigating whether the operation of the in duplum rule is suspended in South Africa once the plaintiff has instituted action, that question would be answered in the negative by reference to this Court’s decision in Paulsen. One would not expect the foreign court to disregard Paulsen in favour of the judgment in Oneanate. That would be inconsistent with the comity that the courts of one country have for those of another. But in view of the fact that the main judgment does not deal with what was said in Armagas and relies upon an understanding of English law that is inconsistent with it, I think it is necessary to examine the leading English cases in more depth to demonstrate why this leads to error.

[132] Hely-Hutchinson CA was decided in 1967 and is a decision by the Court of Appeal consisting of three judges, all of whom delivered judgments. The ratio decidendi of the decision can only be determined by examining all three. But first it is necessary to examine a judgment of the Court of Appeal handed down four years before. That necessity arises because the passage from Lord Denning’s judgment in Hely-Hutchinson CA relied on in the main judgment starts as follows:

“I need not consider at length the law on the authority of an agent, actual, apparent or ostensible. That has been done in the judgments of this court in the case of Freeman & Lockyer (a firm) v Buckhurst Park Properties (Mangal) Ltd.”

It is therefore apparent that Lord Denning accepted the law as laid down in the earlier decision.

[133] In Freeman & Lockyer the leading judgment was given by Diplock LJ (as he then was). In what has subsequently been described by English courts as a comprehensive and lucid exposition of the law, which has also been accepted as correct in Australia, he said:

“We are concerned in the present case with the authority of an agent to create contractual rights and liabilities between his principal and a third party whom I will call ‘the contractor’. This branch of the law has developed pragmatically . . . [b]ut it is possible (and for the determination of this appeal I think it is desirable) to restate it on a rational basis. It is necessary at the outset to distinguish between an ‘actual’ authority of an agent on the one hand, and an ‘apparent’ or ‘ostensible’ authority on the other. Actual authority and apparent authority are quite independent of one another. Generally they co-exist and coincide, but either may exist without the other and their respective scopes may be different. As I shall endeavour to show, it is on the apparent authority of the agent that the contractor normally relies in the ordinary course of business when entering into contracts.

An ‘actual’ authority is a legal relationship between principal and agent created by a consensual agreement to which they alone are parties . . . . To this agreement the contractor is a stranger; he may be totally ignorant of the existence of any authority on the part of the agent. Nevertheless, if the agent does enter into a contract pursuant to the ‘actual’ authority, it does create contractual rights and liabilities between the principal and the contractor.
. . .
An ‘apparent’ or ‘ostensible’ authority, on the other hand, is a legal relationship between the principal and the contractor created by a representation, made by the principal to the contractor, intended to be and in fact acted on by the contractor, that the agent has authority to enter on behalf of the principal into a contract of a kind within the scope of the ‘apparent’ authority, so as to render the principal liable to perform any obligations imposed on him by such contract. To the relationship so created the agent is a stranger. He need not be (although he generally is) aware of the existence of the representation. The representation, when acted on by the contractor by entering into a contract with the agent, operates as an estoppel, preventing the principal from asserting that he is not bound by the contract. It is irrelevant whether the agent had actual authority to enter into the contract.” (Emphasis added.)

[134] Diplock LJ thus clearly founded ostensible authority on estoppel. So did Pearson LJ in his judgment in that case where he said:

“The expressions ‘ostensible authority’ and ‘holding out’ are somewhat vague. The basis of them, when the situation is analysed, is an estoppel by representation.”

There can be no doubt that the ratio decidendi of this case is that ostensible authority is an estoppel by representation. That is after all what the judges said. The main judgment suggests that the first part of the passage from the judgment of Diplock LJ accurately describes apparent authority, while the emphasised portion creates confusion because it “introduces the issue of estoppel, as if it is an integral part of apparent authority”. But that involves reading the passage through the filter of the view that apparent authority and estoppel are different concepts. Absent that filter it states quite clearly that ostensible authority is a matter of estoppel arising by virtue of a representation of authority.

[135] Diplock LJ summarised his conclusions in the following terms:

“If the foregoing analysis of the relevant law is correct, it can be summarised by stating four conditions which must be fulfilled to entitle a contractor to enforce against a company a contract entered into on behalf of the company by an agent who had no actual authority to do so. It must be shown: (a) that a representation that the agent had authority to enter on behalf of the company into a contract of the kind sought to be enforced was made to the contractor; (b) that such representation was made by a person or persons who had ‘actual’ authority to manage the business of the company either generally or in respect of those matters to which the contract relates; (c) that he (the contractor) was induced by such representation to enter into the contract, ie, that he in fact relied on it; and (d) that under its memorandum or articles of association the company was not deprived of the capacity either to enter into a contract of the kind sought to be enforced or to delegate authority to enter into a contract of that kind to the agent. The confusion which, I venture to think, has sometimes crept into the cases is, in my view, due to a failure to distinguish between these four separate conditions, and in particular to keep steadfastly in mind . . . that the only ‘actual’ authority which is relevant is that of the persons making the representation relied on.”

[136] That judgment has been repeatedly endorsed in subsequent cases. I need mention only two. In the Court of Appeal in Armagas Robert Goff LJ (as he then was) described it as “the locus classicus on the subject of ostensible authority” and proceeded to re-affirm that—

“ostensible authority is created by a representation by the principal to the third party that the agent has the relevant authority, and that the representation, when acted on by the third party, operates as an estoppel, precluding the principal from asserting that he is not bound.” (Emphasis added.)

On appeal the House of Lords took the same view as is apparent from the passage quoted in [130] from Lord Keith’s speech.

[137] I have already pointed out that Lord Denning MR himself, in Hely-Hutchinson CA, endorsed the decision in Freeman & Lockyer. So did Lords Wilberforce and Pearson in their concurring judgments. That is hardly surprising because Lord Pearson, as a Lord Justice of Appeal, had concurred in Diplock LJ’s judgment in Freeman & Lockyer. And at the risk of being accused of heaping Pelion upon Ossa, immediately after the passage relied on in the main judgment, Lord Denning said that on the facts of the case there was actual implied authority and added:

“This finding makes it unnecessary for me to go into the question of ostensible authority . . . . I do not say that the judge was in error in what he said on these subjects. All I say is that I do not find it necessary to express any opinion on it.”

The trial Judge had followed Diplock LJ’s statement of the legal position and the other two members of the Court of Appeal agreed that there was actual implied authority in the case. So the case did not turn on ostensible or apparent authority at all, nor did it depart from the accepted view in England that this falls within the field of estoppel.

[138] I will briefly examine the passage from Lord Denning MR’s judgment quoting it without the preamble set out in [132] above. It reads:

“[A]ctual authority may be express or implied. It is express when it is given by express words, such as when a board of directors pass a resolution which authorises two of their number to sign cheques. It is implied when it is inferred from the conduct of the parties and the circumstances of the case, such as when the board of directors appoint one of their number to be managing director. They thereby impliedly authorise him to do all such things as fall within the usual scope of that office. Actual authority, express or implied, is binding as between the company and the agent, and also as between the company and others, whether they are within the company or outside it. Ostensible or apparent authority is the authority of an agent as it appears to others.” (As it lies at the heart of the reasoning in the main judgment, I have like my Colleague italicised the key passage.)

[139] This cannot be taken as an indication that ostensible authority is a form of authority or that it is the other side of the coin from actual authority. It exists where the principal represents, either by words or conduct, that someone has authority to enter into a transaction on behalf of the principal. Where the representation of authority coincides with actual authority then it is actual authority and nothing more need be said. It is only relevant where the representation of authority diverges from and is greater than the actual authority. That much is clear from the example that follows, of a managing director, which is particularly pertinent to the present case, given Mr Knott-Craig’s role in events.

A person appointed to that office may have either the ordinary powers of a managing director, or some more restricted powers. But as a result of their appointment the company represents them as having the usual powers of a managing director. That is the appearance given, or representation made (the two expressions are synonymous), to people dealing with the managing director. And when people deal with the company relying on that appearance or representation the company is bound. That may be because actual and ostensible authority coincides, or because the principal is precluded, that is, estopped, from asserting the managing director’s lack of authority. But they will only be bound in that case if the other party reasonably acted upon the representation to their prejudice. Were that not so a party could rely on ostensible authority arising from the appearance of matters even though they were aware of the limitation on the managing director’s authority, for example, because they had been told that the contract would have to be referred to the board of directors for approval.

South African law

[140] In our case law ostensible authority has always been treated as a form of estoppel, and in my view that is the correct approach as a matter of principle. I need to deal with the suggestion that this was not so until matters went astray in NBS Bank, which has been followed in all the recent leading cases in the Supreme Court of Appeal. But no case and no authority is cited prior to NBS Bank that supports the notion that the latter case involved a deviation from established principle. It is not suggested that treating ostensible authority as a form of authority and not estoppel is a constitutionally mandated development of the common law.

This necessitates an examination of the South African authorities. The earliest judgments I have discovered describing apparent authority as estoppel are two decisions by Lord de Villiers CJ in 1904 and 1906 respectively.

In the earlier of these Lord de Villiers CJ said in regard to a plea of estoppel relating to the authority of a person to dispose of shares that:

“I am satisfied also that by our law, as by the law of England, a person who by his conduct has clothed his agent with the apparent ownership and right of disposition of a document, whether negotiable or not, is estopped from asserting his title as against a person to whom such agent has sold it, and who received it in good faith, and for value.”

[141] The next case of importance is Strachan v Blackbeard and Son. It dealt with loans made by Blackbeard and Sons to one McLeod. Strachan was McLeod’s employer, but had not given him authority to borrow money on his behalf. The claim failed because Strachan had not represented that McLeod had authority to borrow on his behalf. But all three judges made it clear that where there was no authority to borrow, whether express or implied, the case necessarily had to rest on estoppel. Innes J said that the plaintiff could—

“make their case either by proving, expressly or impliedly, that McLeod had authority to bind the defendant’s credit, or by establishing facts which operated to estop the latter from denying the existence of such authority – even though, in truth, it did not exist.”

[142] That decision was followed in Monzali v Smith, where Stratford JA said:

“To establish agency by estoppel there are two requisites:

first, the principal sought to be bound must represent by his words or conduct that the person professing to bind him has authority to do so, and

secondly, that the person to whom the profession is made acts on the faith of the representation to his prejudice.

The rule is stated in Bowstead on Agency (4 edition, art 88) thus: ‘Where any person by words or conduct, represents or permits it to be represented that another person has authority to act on his behalf, he is bound by the acts of such other person with respect to any one dealing with him as an agent on the faith of any such representation, to the same extent as if such other person had the authority which he was so represented to have.’ But the representation whether by words or conduct must be of such a nature that it could reasonably have been expected to mislead. In dealing with estoppel by course of dealing De Villiers CJ laid down the following in the case of Strachan v Blackbeard & Son (1910 AD at p 288), (I quote the headnote which, with the omission of the names of the parties, is substantially what the learned Judge held): ‘To prove a course of dealing which would estop a principal from denying an authority which, in fact, he never conferred on his agent and which could not be legally implied from the nature of the agency, it is not sufficient to show that the plaintiff may possibly have been mislead, but the plaintiff must show that the course of dealings was of such a nature that it could reasonably have been expected to mislead, and that it did in fact mislead him.’”

[143] This situation is frequently described as agency by estoppel, although in truth it is no agency at all. The point is that the agent does not have authority to represent the purported principal, but the latter is precluded by estoppel from disputing the agent’s authority.

This is, to borrow my colleague’s metaphor, the opposite side of the coin to actual authority, whether that authority is actual or implied. Is there any basis for thinking that ostensible or apparent authority is any different from agency by estoppel? In my view there is not.

[144] There are a number of references to ostensible authority in the early judgments of our courts, where it is used as the equivalent of implied authority. Most of these involved persons in a similar position to the managing director in Hely-Hutchinson and implied authority was inferred from the position they held in the affairs of the company or entity concerned. In these cases references to ostensible authority are no more than a misleading way of describing actual authority and they can accordingly be disregarded. In others the discussion of the concept is only compatible with it being treated as a species of estoppel by representation.

[145] The terms ostensible authority and estoppel were linked by Greenberg J in West. The plaintiff had given certain shares in pledge to a broker together with share transfer forms signed in blank. The broker dishonestly, and in breach of the pledge, sold and transferred the shares to innocent third parties. The plaintiff sought their recovery in a vindicatory action. The action failed on the basis that the broker had ostensible authority to sell the shares, such authority being based on estoppel.

Greenberg J explained his decision as follows:

“Estoppel operates by preventing a person from denying the truth of a representation he has made. In the present case the representation which is relied upon is the representation created through the documents, namely, that by giving the scrip and the blank transfer forms to Hunt, appellant represented that Hunt was authorised to deal with the shares. It appears to me that the effect of estoppel is that the appellant is not entitled to deny that he gave this authority which ostensibly he gave, with the result that in proceedings to which estoppel applies he is deemed to have given the authority. The transaction is looked upon as if he has actually given the authority, and as a result of this authority, combined with the delivery, ownership to the shares passes.” (Emphasis added.)

In a further passage on the same page Greenberg J spoke of a situation where “the purchaser from the agent with ostensible authority, has established the estoppel”. He was specifically referring to the fact that proof of the ostensible authority, and that it had been acted upon, “established the estoppel”. That would have been wholly unnecessary if the ostensible authority, as a form of actual authority involving something less than estoppel, sufficed to render the principal liable.

[146] In another case arising out of the same fraud, Centlivres J said in regard to the plea of estoppel:

“I cannot do better perhaps than to refer to the authority . . . of Fuller v Glynn, Mills, Currie & Co. [1914 2 KB 168 at 177], where Pickford J, said: ‘I must therefore consider the principle on which this estoppel rests. In my view it does not rest on the mere manual act of signature. That act is not an essential element in the estoppel. Its importance, where it exists, is as one step towards placing in the power and disposition of another an instrument which carries with it a representation of authority to that other person to deal with it, and which when produced to a third person will convey to that third person that such an authority exists’.”

[147] That ostensible authority is a manifestation of estoppel by representation is clear from the judgments in Insurance Trust.

Broome J said that the legal position is that—

“[t]he plaintiff can only succeed if there were real authority . . . express or implied, to bind the company, or if there was such ostensible authority as to create estoppel.”

Hathorn JP said:

“My view is that the law relating to the branch of agency, here under discussion, is perfectly clear, whether it be applied to companies or natural persons. The principal is liable in two cases only. First, where there is actual authority, express or implied. Second, where the principal is estopped from denying the authority of the agent.”

In the main judgment it is said that these statements “cannot reasonably be construed to be authority for the proposition that apparent authority is estoppel”. I am unable to read them as saying anything else.

Broome J said that “there was such ostensible authority as to create an estoppel”. Hathorn JP said, in the passage more fully quoted at n 147 that those two expressions apparent authority and ostensible authority “are apt to describe a conception which is confined to cases of estoppel”. Both clearly made the point that ostensible authority falls within the general concept of estoppel.

[148] A similar statement of the position is to be found in the judgment of Quenèt J in Clifford Harris.

The relevant passage reads:

“It is clear that in contract the principal’s liability to third parties for the acts of his agent depends either upon the agent’s actual authority, express or implied, or upon the agent’s ostensible authority, that is, in consequence of a holding-out and, in such a case, there is said to be an agency by estoppel.”

In Inter-Continental Finance Botha J said in relation to ostensible or apparent authority that they are terms used to describe a situation:

“Where there is no authority in fact but the principal is estopped from denying the existence of authority, according to the ordinary principles of estoppel. This situation is frequently referred to as one of agency by estoppel, which is in itself, notionally, a misnomer.”

He went on to point out that the terms ostensible and apparent authority are also sometimes used to describe situations where express authority cannot be shown but it can be implied from the conduct of the principal, and summarised the relevant principles as follows:

“A is bound by an agreement purportedly entered into on his behalf by B with C if B had authority from A to enter into that agreement on A’s behalf, or if A is precluded from denying such authority by virtue of the principles of estoppel. Between actual authority and estoppel I can perceive no intermediate situation in which A is bound by B’s agreement with C.”

[149] There is a comprehensive discussion of ostensible authority on the basis of estoppel in Connock. But it did not cast doubt on the law as stated in these earlier cases. In Service Motor Supplies and Southern Life the then Appellate Division dealt with the issue on the basis of estoppel. And in two cases leading up to NBS Bank, one of which dealt with the same fraud and the same bank manager as that case, ostensible authority was expressly dealt with on the basis of estoppel. This was also the stance of the textbook writers.

[150] NBS Bank was the first of a number of relatively recent cases in the Supreme Court of Appeal to deal with these issues. It concerned a fraudulent scheme of taking investments orchestrated by the branch manager of one branch of the bank. When the investment was stolen and the investor sued the bank it resisted the claim on the grounds of the manager’s lack of authority. Giving the judgment of the court, Schutz JA cited the passage from the judgment of Lord Denning MR in Hely Hutchinson CA. I have dealt with that fully in the analysis of the English law and need say no more.

[151] In accordance with the lengthy and unbroken line of authorities dealt with above, Schutz JA placed the question of ostensible authority squarely within the framework of estoppel.

He said:

“As Denning MR points out, ostensible authority flows from the appearances of authority created by the principal. Actual authority may be important, as it is in this case, in sketching the framework of the image presented, but the overall impression received by the viewer from the principal may be much more detailed. Our law has borrowed an expression, estoppel, to describe a situation where a representor may be held accountable when he has created an impression in another’s mind, even though he may not have intended to do so and even though the impression is in fact wrong.

Where a principal is held liable because of the ostensible authority of an agent, agency by estoppel is said to arise. But the law stresses that the appearance, the representation, must have been created by the principal himself. The fact that another holds himself out as his agent cannot, of itself, impose liability on him.” (Emphasis in original.)

[152] Since NBS Bank the Supreme Court of Appeal has several times reaffirmed this approach. For present purposes I need quote only two passages. I do not do so because it is necessary to add further authority to show that ostensible authority (under that name, or when described as apparent authority, or agency by estoppel) is a form of estoppel by representation precluding reliance on a denial of authority.

My purpose is to stress the point that the representation founding that estoppel must be a representation by the principal, either by words or conduct. Absent a representation that draws its authority from the words or conduct of the principal there can be no estoppel.

This is in harmony with the main judgment’s acceptance that the only requirement for a finding that there is ostensible authority is that “a principal by words or conduct has created an appearance that the agent has the power to act on its behalf”.

I stress the point because we received argument based on the proposition that a representation by Mr Geissler alone, unsupported by any representation by Vodacom, should suffice. These cases refute that proposition and inform my approach to the facts.

[153] In Glofinco SCA, Nienaber JA said:

“A representation, it was emphasised in both the NBS cases, supra, must be rooted in the words or conduct of the principal himself and not merely in that of his agent. Assurances by an agent as to the existence or extent of his authority are therefore of no consequence when it comes to the representation of the principal inducing a third party to act to his detriment.” (Footnotes omitted).

And in MEC for Economic Affairs, Cachalia JA said:

“It is well established that to hold a principal liable on the basis of the agent’s apparent authority, the representation must be rooted in the words or conduct of the principal, and not merely that of his agent. Conduct may be express or inferred from the ‘particular capacity in which the agent has been employed by the principal and from the usual and customary powers that are found to pertain to such an agent as belonging to a particular category of agents’. It may also be inferred from the ‘aura of authority’ associated with a position which a person occupies, at the principal’s instance, within an institution.” (Footnotes omitted).

Conclusion on ostensible authority

[154] The argument before us accepted the analysis of the present state of our law set out above. That analysis shows that in English law ostensible authority is an estoppel by representation and that the earlier decisions of our courts that say that ostensible or apparent authority is a form of estoppel are correct.

That is also the view of the academic commentators both here and overseas. This characterisation was not and is not challenged on the basis that it is inconsistent with the spirit, purport and objects of the Bill of Rights. It should in my opinion be applied in this case.

Therefore, once Mr Makate accepted that Mr Geissler did not have actual authority, whether express or implied, to conclude a contract with him on behalf of Vodacom, he had to show that Vodacom made a representation to him that Mr Geissler had the requisite authority and that he reasonably acted upon it.

[155] Before leaving the question whether ostensible authority is a matter of estoppel there are two further points to be made.

The first is that no difficulty of principle or practicality arises in characterising ostensible authority as estoppel. That is illustrated by the facts of this case. The main judgment accepts that there must be a representation by Vodacom as the party Mr Makate seeks to bind. Presumably, as the basis is misrepresentation, it is a requirement that Mr Makate should have relied on that representation.

[156] It can hardly be suggested that, had Mr Makate known that Mr Geissler lacked authority, Vodacom would nonetheless have been bound on the basis of a representation that did not influence his conduct, or that it should be held bound by a contract that he knowingly concluded with someone lacking authority to represent Vodacom.

Then there is the twofold requirement of reasonableness, namely that

  • the representation must have been one that Vodacom should reasonably have thought would be relied on and
  • that Mr Makate reasonably relied on it.

These do not seem to pose any difficulty. If Mr Makate behaved unreasonably it would be wrong to hold Vodacom liable for it. Lastly there is the issue of prejudice. That is obvious. For Mr Makate to permit Vodacom to develop his idea in a false belief that he would be compensated for it plainly redounds to his prejudice.

[157] The second point relates to the suggestion that my approach is contrary to principle and the approach our law takes to the doctrine of quasi-mutual assent.

The example is given of a person who is held liable on a contract because they reasonably caused the other party to believe that they were agreeing to conclude a contract with them. That has on several occasions been treated as estoppel, but in Saambou Jansen JA said that it would lead to greater clarity to distinguish quasi-mutual assent and the reliance theory of contract from estoppel.

The problem he was addressing was whether our law of contract is wholly subjective and based on the existence of consensus ad idem (subjective agreement, which he referred to as the “wilsteorie” of contract), or whether it includes objective elements, which he described as the reliance theory.

This bears no resemblance to the issue that arises in relation to the authority to conclude a contract. In the former case the issue is a single one of whether there is any contract at all. In the latter there is a contract, but one of the parties claims that the person purporting to represent it lacked authority to contract. This involves two separate enquiries, namely, whether there was express or implied authority and, if not, whether there was ostensible authority. Whatever reasons there may be for distinguishing between quasi-mutual assent and the objective approach to whether a contract was concluded, they have no bearing on the issue of ostensible authority. The two situations are not in my view comparable.

Source of the representation

[158] The focus of the enquiry must turn to the issue of representation. There can be no doubt that Mr Makate acted upon the belief that Mr Geissler had authority to conclude a contract with him. In view of his position in the company – and despite some suggestions in argument that as an employee he ought to have known that this was not the case – it was reasonable for him to rely upon any such representation.

So the crucial issue is whether Vodacom made such a representation to Mr Makate.

[159] The primary submission by Mr Makate’s legal advisers is that the requirement that the representation must be that of Vodacom and not Mr Geissler stated the requirements too stringently, for reasons I will discuss shortly. Only in the alternative was it contended on constitutional grounds that it should be relaxed in the case of a person in Mr Makate’s position. The scope of such relaxation was not clearly defined in their submissions and amounted to little more than a contention that on the facts of this case Mr Makate should be held to have discharged the onus of proving ostensible authority and, to the extent that in strict law he had not done so, the strict law should be relaxed.

[160] That is not a satisfactory basis upon which to ask this Court to discharge its constitutional function of developing the common law so as to ensure that it accords with the spirit, purport and objects of the Bill of Rights.

Such a process requires in the first place a clear understanding and exposition of the current state of the common law as it applies to the problem at hand and a precise identification of the manner in which it is suggested that it should be developed.

We cannot simply overthrow the existing law – which the Constitution explicitly preserved, subject to its being consistent with the Constitution – because a particular case evokes sympathy or because of the disgraceful conduct of a party.

Notoriously, hard cases make bad law. Constitutional development of the law, as our jurisprudence demonstrates, requires that changes to existing law be articulated with the same clarity as the rules and principles that they replace. When urging this Court to develop the common law it is appropriate for legal practitioners to bear this in mind and seek to formulate the development they propose with the greatest possible clarity.

[161] I do not see the need for any development of the common law along the lines suggested by counsel. I agree with counsel that in some of the cases it has been stated too stringently and without necessary qualification. I also agree that in this case the trial judge erred by following that overly stringent approach.

The statements that say or indicate that the representations of the agent cannot be taken into account at all, fail to take account of the fact that companies can only make representations through natural persons who themselves have authority to represent them.

That requires in any particular case that the court examine closely how authority was exercised in the company sought to be held liable in order to ascertain whose conduct was authorised and whose representations would bind the company. It goes without saying that this exercise may be complex and that the actions of various different people will need to be taken into account in the analysis.

[162] A helpful starting point is the judgment of Lord Pearson in Hely Hutchinson CA, where this very problem was explored. Lord Pearson said:

“There is, however, an awkward question arising in such cases how the representation which creates the ostensible authority is made by the principal to the outside contractor. There is this difficulty. I agree entirely with what Diplock LJ said . . . that such representation has to be made by a person or persons having actual authority to manage the business. Be it supposed for convenience that such persons are the board of directors. Now there is not usually any direct communication in such cases between the board of directors and the outside contractor. The actual communication is made immediately and directly, whether it be express or implied, by the agent to the outside contractor.

It is, therefore, necessary in order to make a case of ostensible authority to show in some way that such communication which is made directly by the agent is made ultimately by the responsible parties, the board of directors. That may be shown by inference from the conduct of the board of directors in the particular case by, for instance, placing the agent in a position where he can hold himself out as their agent and acquiescing in his activities, so that it can be said that they have in effect caused the representation to be made. They are responsible for it and, in the contemplation of law, they are to be taken to have made the representation to the outside contractor.” (Footnote omitted.)

[163] Frequently, as in that case, the conduct constituting the representation will be the conduct (not the claims to authority) of the purported agent. The reason is that, when one is concerned with the ostensible authority of a managing director, the conduct conveying to the outside world that the incumbent has the authority in issue is almost inevitably that of the managing director. In that sense at least some of the representation is to be found in the conduct of the agent.

This is a point that Robert Goff LJ made in Armagas CA:

“Diplock LJ confined his analysis to ostensible authority of an agent to bind his principal to a contract. I, for my part, can see no reason why the same principles should not be applicable to other acts by an agent, for example the making of representations by the agent, provided that it is clearly understood that, to give rise to ostensible authority, the representation by the principal must be to the effect that the agent is authorised to make the representation on his, the principal’s, behalf, so that the third party is entitled to rely on it as such. On this basis, a representation by an agent within his ostensible authority may give rise to an estoppel against his principal.” (Emphasis added.)

[164] I agree with that analysis. It follows that the strict approach postulated by Nienaber JA in Glofinco SCA must be qualified.

Insofar as the agent has actual authority to make representations on behalf of the principal those representations, even as to the agent’s own authority will bind the principal. Equally, if the agent has ostensible authority to make those representations and a third party acts on them to their prejudice, they will bind the principal on the basis of estoppel. The aura of authority created by the principal, both by its actions, but also by its acceptance of the acts of its employees, is the central consideration.

[165] In summary the position in regard to representations of authority founding a claim of ostensible authority is the following.

  • The statements or conduct constituting the representation must be those of persons, individually or collectively, who have actual authority to bind the principal to the transaction in dispute.
  • The conduct may include the appointment of an individual to a position ordinarily carrying with it a particular level of authority.
  • If the appointment is made, but some of that authority is withheld or subjected to limitations, it is essential that this is made clear to persons dealing with that individual.
  • Otherwise they will be entitled to hold the company to the representation of authority created by the appointment.
  • A representation may also be made by permitting the putative agent to engage in a course of dealing on behalf of the principal.
  • Representations by the agent alone without more are insufficient, whatever form they may take.
  • But the conduct and statements relied upon may be those of the agent, provided the conduct or statements are themselves within the actual or ostensible authority of the agent.
  • The statements and conduct must, when taken as a whole, be such as reasonably to convey to a person dealing with the agent the impression that they have authority to conclude the transaction in question, and thereby to induce the belief in that person that they have that authority.

[166] The issue of Mr Geissler’s ostensible authority must therefore be viewed not only in terms of his positive conduct and that of others, but also in the light of the overall picture of the sources of authority created by Vodacom in relation to the conduct of its business and the identity of those to whom it delegated authority to act on its behalf and represent it in the conclusion of a contract of the type in issue. Against that background I turn to deal with the facts.

Was ostensible authority proved?

[167] The source of authority in a company such as Vodacom is principally the board of directors. While there are some matters, such as the disposal of the business of the company, which can only be undertaken with the approval of the shareholders, in general it is the board of directors that is responsible for the conduct of the business of the company.

But in a modern company, as was the case with Vodacom, the board of directors consists of both executive and non-executive directors. The executive directors are usually those who are critically involved in the day to day operations of the company. The most important of these will be the CEO and the chief financial officer (CFO).

The non-executives are usually in the majority and play more of an oversight role, ensuring that the executives perform to shareholders’ expectations and overseeing their actions and the strategic direction of the company.

And it is for the board to fix the parameters of the authority of the executives and especially the authority of the CEO.

[168] In this case the CEO was Mr Alan Knott-Craig. He is an unusual individual. There can be few CEO’s of public companies in South Africa whose lives and performance in that role have warranted the production of an autobiography. But Mr Knott-Craig had achieved what few others had done, at an exciting time in this country’s history in a period of extraordinary technological development in the world.

Mobile telephony is a relatively recent development. Most people, not only in South Africa, but elsewhere, have probably not owned a mobile phone for much more than twenty years. Yet, as we see everyday, they have become not just ubiquitous but an essential item in modern life. Vodacom is one of two or three major suppliers of mobile telephony services in South Africa and elsewhere on the African continent. It is a giant company. And in large measure it was created and has achieved its current eminence as a result of the vision, drive and energy of Mr Knott-Craig.

[169] So what was the extent of Mr Knott-Craig’s authority?

He was the Group CEO of the holding company of Vodacom and the Executive Chairman of the operating company. He was in many ways the founder and guiding spirit of Vodacom through its early years. In the eyes of the public he was Vodacom. And someone who regarded his contribution as worthy of an autobiography was not someone who stood quietly in the background waiting for things to happen.

The clear impression is that he was the driving force behind the company. Of course he had to account for his running of the company to its board of directors and ultimately its shareholders, but so long as it was a success, as it undoubtedly was, it is improbable that the board would have stood in the way of any project that he had approved.

In the trial Court in Hely-Hutchinson QBD Roskill J described the role of the managing director in that case in the following terms:

“Sometimes, I daresay, the directors persuaded him to take or to refrain from taking a particular step; no doubt, like any wise chief executive, he sought and obtained advice before he made up his mind; but in all these cases the final decision . . . rested with him and with nobody else”.

That description seems apt in relation to Mr Knott-Craig.

[170] This point is well illustrated by the launch of “Please Call Me”.

Mr Knott Craig approved the launch of the product without waiting for board approval. The launch was reported to the meeting of the Vodacom Group Directing Committee on 15 March 2001, by which stage the product had been launched and was generating thousands of calls a day.

Mr Knott-Craig, the CFO (Mr Crouse) and the managing director of the network company, Mr Mthembu, were at that meeting by invitation. The report they tabled suggested that the planned implementation date would be 31 March 2001. But by then the product had been rolled out and was enjoying success. Not only had all employees been told of the roll-out in a general email from Mr Geissler sent on 9 February 2001, but in the company’s in-house magazine for March 2001 Mr Mthembu congratulated Mr Makate on his initiative and his idea.

[171] The inescapable conclusion is that if Mr Knott-Craig approved a project that project would be undertaken. And if he approved of a new product that product would be launched in the marketplace. This would occur without any need to obtain board approval for the product. No doubt if it involved substantial capital expenditure that would have had to be put to the board for its approval, but that was not the case with “Please Call Me”, at least in its initial stages.

[172] In that light it seems to me that Mr Knott-Craig had, if not actual authority, at least ostensible authority to agree to remunerate Mr Makate for his idea.

He testified that there was a delegation of authority document that was the company’s “bible” on authority to which strict adherence had to be paid. All contracts had to be scrutinised by the Group Board. But this evidence appears to have been led in the context of Mr Makate’s claim to a revenue share, which Mr Knott-Craig said could never be approved. That may well have been so, but it is no answer to the more general claim to reasonable remuneration. Nor is it a full answer to the validity of the agreement to compensate Mr Makate for his idea. While the amount of any compensation might well, if large, have had to be approved by the Board that does not necessarily mean that no agreement for compensation could be concluded. All it meant was that the scope for negotiating such compensation was possibly restricted and subject to further approval.

[173] But Vodacom objects that there is no evidence that Mr Knott-Craig or other executives and board members were even aware of the possibility of Mr Makate wanting to be remunerated for his idea. On the probabilities, at least in respect of Mr Knott-Craig, I do not accept that this was the case and nor did the trial Court. Mr Knott-Craig was the chief executive. Mr Mthembu, the managing director of the operating company reported to him, as did Mr Geissler. Given the nature of the “Please Call Me” idea and its potential importance for the company in the future, it is inconceivable that he was unaware of it before the launch of the product. And the evidence shows that he was fully aware of it.

[174] Mr Muchenje testified that the reason he directed Mr Makate to Mr Geissler was because a project would not be put before the executive before it had received product approval. In other words it required product approval before being put to Mr Knott-Craig for his imprimatur. On 24 January 2001 Mr Geissler approved the product development plan. That document revealed potential revenues in round figures of between R239 000 and R322 500 per day. Even for Vodacom that was a significant amount. Five days later Mr van der Watt, the finance director of the network company, reported to Mr Crouse, the CFO Director, on the financial implications of “Please Call Me”. In the memorandum he noted that he understood that “Alan”, that is, Mr Knott-Craig, had given instruction for urgent consideration of the service and to launch it after Board approval. That was not refuted by Mr Knott Craig, save that the product was launched, at least on a limited basis, without board approval. The probabilities are overwhelming that Mr Knott-Craig was intimately involved in the roll-out of “Please Call Me”.

[175] But would he have known of Mr Makate’s desire, over and above any public congratulations, to be remunerated for his idea? Again resort must be had to the probabilities. The evidence of Mr Muchenje was that Mr Geissler was close to Mr Knott-Craig and was one of the executives who had access to him if required. Mr Geissler knew from the outset that Mr Makate was seeking remuneration and had indicated that he wanted a revenue share. In those circumstances it is improbable that Mr Geissler, in introducing this exciting new product to Mr Knott-Craig, would not have told him of its provenance and of Mr Makate’s desire to be remunerated therefor. Mr Knott-Craig’s evidence was restricted to saying that he could not remember whether he was told of this. That was a weak response in the circumstances. Why would Mr Geissler not tell him this important fact? After all, the only basis upon which Vodacom was entitled to use Mr Makate’s idea was that he would be remunerated for it. A flat rejection of any payment of remuneration would have led Mr Makate to look elsewhere to exploit his idea. As Mr Geissler knew that, there is every reason to believe that Mr Knott-Craig also knew.

[176] This is not speculation. At least two people know the true story and they are Mr Geissler and Mr Knott-Craig. (There are possibly others within Vodacom but like Mr Geissler they have said nothing.)

Of these two, Mr Geissler did not give evidence and Mr Knott-Craig was a poor, and in some respects plainly dishonest, witness. A court does not in those circumstances draw the inference most favourable to the party that called or could have called these witnesses. It examines the overall probabilities, which include the absence of credible evidence from the one party. That is how the then Appellate Division approached a similar case in Pirie and that, in my view, is how this Court must approach this case.

In addition the information known to the executives of Vodacom concerning their authority and how it was exercised in the company was not a matter within Mr Makate’s knowledge. It was within the exclusive knowledge of Mr Knott-Craig, Mr Geissler and possibly other executives.

In those circumstances it is a long-established principle of our law of evidence that less evidence will be required from the plaintiff to discharge the onus of proof.

[177] The implications of Mr Knott-Craig being aware of Mr Makate’s demands are considerable. If he wished to reject them several things had to occur. Most importantly Vodacom could not develop and launch the product without agreeing to them. Its only basis for adopting the idea and using it to create the “Please Call Me” product was that it would remunerate Mr Makate. So, if Mr Knott-Craig was aware, as I hold him to have been, of Mr Makate wanting to be remunerated, his failure to reject that notion and instruct Mr Geissler to do so is only consistent with his representing to Mr Makate that he accepted it. Crucial to a rejection of Mr Makate’s demand was that Mr Knott-Craig, or Mr Geissler on his behalf, had to tell Mr Makate that he would not be paid for his idea. Neither did so. In fact the opposite occurred. Mr Geissler told Mr Makate that everything depended upon the technical and commercial viability of the idea, but once this had been established he would discuss the matter of his reward with Mr Knott-Craig.

[178] I find it impossible to accept that throughout this period Mr Geissler was deliberately stringing Mr Makate along with promises of payment and a promise that he would discuss the basis for it with Mr Knott-Craig, while concealing that from Mr Knott-Craig. That would be inconsistent with the evidence as to the relationship between the two men. The only proper conclusion is that Mr Knott-Craig knew what was demanded and knew what promises Mr Geissler was making to Mr Makate to ensure that he co-operated with the development and roll-out of “Please Call Me”. To have done otherwise would have put the entire project at risk. Various scenarios come to mind, all of them adverse to Vodacom’s interests. If Mr Makate had been told that Vodacom intended to go ahead with “Please Call Me” without paying him anything, he might have consulted lawyers and sought an interdict. He might have found ways of going over Mr Knott-Craig’s head to the board of directors. He might have gone to the press. The risk of reputational damage to the company was considerable. So steps needed to be taken to ensure his co-operation. That was the effect of Mr Geissler’s agreement and his promises once the product was a success to discuss rewards with Mr Knott-Craig.

[179] I do not accept that the company would not have concluded a contract with an employee in order to procure the advantage of a profitable idea. While I accept that it would not have concluded an agreement on a revenue share basis, I do not accept that it would not have agreed to pay an employee, who generated, in his spare time and outside the scope of his ordinary duties, a highly profitable idea for a new product, a reasonable remuneration commensurate with the financial benefit enjoyed by the company. In fact the article in the company newsletter urged employees to come up with good ideas in the way that Mr Makate had done. The suggestion that this was precluded because it was “against the policy and practice” of Vodacom is improbable and unbusinesslike.

Vodacom’s business involves the exploitation of profitable concepts in the telecommunications industry. To say that it would not contract with an employee, who offered on a contractual basis to make such a concept available to it, because it was against its policy and it would not deal with an employee as it would deal with an outsider, flies in the face of common sense. In the words of the old saw, it is cutting off one’s nose to spite one’s face.

[180] Starting from the premise that Mr Knott-Craig had either actual or ostensible authority to agree to remunerate Mr Makate for his idea, there is no reason why he could not use Mr Geissler as his agent, in turn, to engage with Mr Makate. That was entirely compatible with the corporate hierarchy. Mr Makate was no longer dealing with his seniors via the agency of Mr Muchenje. Instead he was in direct communication with a member of the board of the network company who in turn had the ear of the CEO. Mr Makate would not expect Mr Knott-Craig to deal directly with him. He would expect that his dealings with the upper echelon of the company would come through others, and in this case it was through a very senior individual. The internal hierarchy of the company reinforced the representation in regard to Mr Geissler’s ostensible authority.

[181] Mr Makate did not say that he questioned Mr Geissler’s authority or that Mr Geissler made any express representations to him about the scope of that authority. Nor did he tell him that his authority to agree to Mr Makate’s demands was limited. Any such statement would inevitably have caused alarm bells to ring. This is not therefore a situation of reliance on assurances of authority by an unauthorised agent.

It is a case of reliance on the conduct of those senior in the company’s hierarchy that cloaked Mr Geissler with the appearance of authority to conclude the agreement that he did with Mr Makate. Once I reject, as I do, the contention that Mr Knott-Craig was unaware of what was being discussed between Mr Geissler and Mr Makate the chain of ostensible authority from the board to Mr Geissler is complete and the estoppel is established.

[182] To summarise. Mr Makate had to prove that Vodacom represented to him that Mr Geissler had the necessary authority to conclude the agreement for remuneration with him.

The necessary source of authority had to be the main board. For the reasons given above I hold that the board represented to the world, including Mr Makate – one is almost inclined to say that the representation to employees would have been even stronger than the representation to the world outside the company – that Mr Knott-Craig had authority to conclude such an agreement on behalf of the company.

He may have had actual authority, but for present purposes it is sufficient to say that it was represented that he had authority, in other words, ostensible authority. And that authority extended to authorising others to act on his behalf.

[183] The next link in the chain lies in the relationship between Mr Knott-Craig and Mr Geissler. Their closeness was well-known within the company and it is improbable that Mr Geissler would have concealed from Mr Knott-Craig what he was doing with and saying to Mr Makate. That is reinforced by the very public knowledge that Mr Knott-Craig wanted to speed up the launch of this product as shown in Mr van der Watt’s memorandum to Mr Crouse. Combined with this was the fact that Mr Geissler was a director of the network company and the head of product development. He was therefore more than a mere subordinate in relation to Mr Knott Craig. He was both a confidant and a person likely to be entrusted to act on his behalf.

[184] So Mr Knott-Craig had ostensible authority in his own right to conclude the contract and also had ostensible authority to invest Mr Geissler with the same authority. Once it is accepted that he knew in substance what was happening between Mr Geissler and Mr Makate and did nothing to make it clear to Mr Makate that no agreement could be concluded without reference to higher authority in Vodacom, that created the classic situation of knowingly permitting someone to exercise an authority they did not have. That is what occurred.

The consequence is that Mr Geissler had ostensible authority to conclude a contract with Mr Makate and Vodacom is estopped from denying that authority.

It is bound by the contract Mr Geissler concluded on its behalf.

Prescription

[185] The onus of proving prescription rests on the party asserting it. Vodacom pleaded that Mr Makate’s claims were based on “an oral commercial contract” and that his “claims and debt according to his allegations” became due prior to 13 July 2005. No attempt was made to spell out the nature of the debt that was said to have prescribed.

In Vodacom’s heads of argument reference is made generally to “a contractual debt” and to Mr Makate pursuing his claim at any time after “Please Call Me” was shown to be successful. Vodacom noted that the only relief being sought at the trial was an order that Vodacom negotiate with Mr Makate to determine a reasonable remuneration for the right to use his idea. It said, without elaboration, that the alleged obligation to negotiate was a debt in terms of sections 10, 11 and 12 of the Prescription Act 68 of 1969.

The plea of prescription must be viewed against this background.

[186] The main judgment holds that the obligation that Mr Makate seeks to enforce in this case is not a debt within the meaning of that term in the Prescription Act. I agree.

In my view the plea of prescription is not established in this case for the simple reason that on the established meaning of “debt” the obligation in issue – an obligation to negotiate a reasonable remuneration – is not a debt at all.

Until those negotiations reach a conclusion there will be nothing that is due by Vodacom to Mr Makate and nothing in respect of which he is able to make any claim.

The Prescription Act provides for debts to be extinguished by prescription, as they would be by payment or performance. But as yet nothing exists that can be extinguished and participation in negotiations will not extinguish any obligation. One can test that by asking at what point in time the obligation would be extinguished as a result of negotiating. There was accordingly no debt that was due prior to the commencement of the present litigation and there could accordingly be no question of prescription.

I will briefly deal with my reasons for reaching that conclusion.

[187] Section 10 of the Prescription Act provides for a “debt” to be extinguished by prescription. In terms of section 12(1) prescription begins to run when the debt is due. The meaning that has been given to the word “debt” since the Prescription Act came into force has been in accordance with the definition in the New Shorter Oxford Dictionary, namely:

“1. Something owed or due: something (as money, goods or service) which one person is under an obligation to pay or render to another.
2. A liability or obligation to pay or render something; the condition of being so obligated.”

I agree with the main judgment that if the statement in Desai that debt “has a wide and general meaning, and includes an obligation to do something or refrain from doing something” was intended to extend this meaning, that was an error.

[188] The correlative of a debt in this sense is a right of action vested in the creditor in which the payment of money, or the delivery of goods, or the rendering of services is claimed. And, when payment, delivery or the rendering of services extinguishes the debt, the right of action is likewise extinguished.

That is why section 12(1) of the Prescription Act provides that prescription will commence to run once the debt is due. If the debt is not due then prescription cannot run. Debts become due when they are immediately claimable or recoverable.

[189] Not all rights of action give rise to debts. That is well illustrated by the recent decision in Keet.

Based on an ambiguous and obiter statement in the first instance Court in Evins it had been said in a series of cases in the Supreme Court of Appeal that a vindicatory claim, that is, a claim to assert a right of ownership in an asset, gave rise to a debt capable of being extinguished by extinctive prescription under section 10 of the Prescription Act. This occasioned confusion because the owner would remain the owner of the asset, but would not be entitled to exercise its rights of ownership against the possessor thereof. In effect it would be deprived of its rights of ownership by way of extinctive prescription, whereas the loss of the right of ownership by way of prescription is a matter of acquisitive prescription, which is dealt with in Chapter I and sections 1 to 5 of the Prescription Act, not Chapter III and sections 10 to 12 of that Act.

[190] The Court in Keet overruled these earlier cases and held that acquisitive prescription dealt with the acquisition (and corresponding loss) of real rights such as ownership, while extinctive prescription dealt with the extinguishment of debts and their correlative rights of action, in other words, with personal rights. The relevance of the case to the present one is that it illustrates that not every right to approach a court for relief will amount to a debt for the purposes of extinctive prescription. So the right to claim delivery of the motor vehicle in that case did not give rise to a “debt” for the purposes of extinctive prescription in terms of section 10 of the Prescription Act.

[191] It will be apparent from this that, depending on their source, rights of action directed at the same purpose and seeking identical relief may in one case give rise to a debt for the purposes of prescription and in another not. For example a right to claim occupation under a lease is a personal right and the obligation to satisfy that right by delivering possession of the property leased will be a debt capable of prescribing. But a claim to possession of the same property arising from a registered right of usus or habitatio will not.

[192] In the case of a continuing wrong there can be no question of prescription even though the wrong arises from a single act long in the past.

The reason, which may appear somewhat artificial, but which is well established, is said to be that while the original wrongful act may have occurred at a past time the wrong itself continues for so long as it is not abated. But the running of prescription in respect of any financial claim arising from the same wrong will not be postponed. Accordingly, if financial loss was occasioned by the original wrongful act, the debt in relation to that loss would become due and prescription would commence to run when the original wrongful act occurred and loss was suffered. The result is that the impact of prescription on claims having their source in the same right may differ depending on the nature of the claim.

[193] The issue in the present case is whether any debt in this sense arose until after the parties had negotiated in regard to Mr Makate’s remuneration and either reached an agreement or referred the issue for determination by Mr Knott-Craig or his replacement as CEO. This may have a parallel with the provision sometimes encountered in construction contracts, and apparently a consistent feature of standard form commodity contracts, that requires, as a pre-requisite to any claim arising, that the claimant must obtain an arbitration award, with the result that the very existence of a claim depends on the outcome of the arbitration.

This is not the same as the more commonly encountered situation where the parties simply agree that any disputes they may have about the validity of existing claims will be determined by arbitration. Where the contract contains a Scott v Avery clause, as these are known, no cause of action justiciable in the ordinary courts can arise until after arbitration has taken place. In other words, the parties by their agreement ensure that a claim will only arise after a particular event has occurred.

[194] In this case, once agreement had been reached on the remuneration due to Mr Makate, he would have had a right of action to recover that remuneration from Vodacom. That would have been a debt in respect of which prescription would have run. But no such agreement has been reached. The parties have not yet arrived at the point where there is anything that is, “owed or due: something (as money, goods or service) which one person is under an obligation to pay or render to another”. If they had, then Vodacom ought by its own actions to be able to discharge what is owed. But it cannot. Vodacom could not extinguish its liability by paying Mr Makate for the simple reason that the amount it will be liable to pay has not been determined. If it were to tender payment of an amount and Mr Makate accepted it that would resolve the dispute, but as a result of a compromise concluded by the parties, not as a result of payment of the debt.

[195] This led Vodacom to submit that the obligation on Vodacom to negotiate remuneration is itself a debt for the purposes of prescription. But, if so, it is a debt of a very unusual kind.

As Corbett JA said in Evins and Van Heerden JA said in Oertel, a debt is the correlative of a right of action and when one is extinguished so is the other. That is why debt has been defined by reference to the means by which the debtor can discharge it, namely payment, or the delivery of goods, or the provision of services. The obligation that underlies the existence of the debt must be one that is capable of being discharged by one or other of these means. But doing so is not possible here because there is nothing determinate in existence that can be discharged by payment, the delivery of goods or the rendering of services.

[196] I do not think that Duet and Magnum on which Vodacom relied is of any assistance here. The case concerned liquidators seeking to set aside, under section 32 of the Insolvency Act , dispositions made prior to the liquidation of the close corporation. The question was whether their right to do so and recover the amount of the payments was a debt for the purposes of prescription. The argument on behalf of the liquidators was that a debt would only come into existence once the court set aside the dispositions and ordered that the amounts in issue be repaid.

But, as the Court correctly held, that was to confuse the process whereby the liquidators would be enabled to recover the debt with the debt itself. The right being enforced was the right to obtain a declaration that the beneficiary of the dispositions should repay them. Once obtained that would give rise to a further right to obtain payment of a money debt. But the first right was a debt in that it could be extinguished by payment. The recipient of the dispositions was under no obligation to wait for a court order in order to repay what he had received and had he done so the liquidators’ right would have been extinguished. While there are some remarks in the judgment that might be construed as suggesting that any right that can found a cause of action is necessarily encompassed by the word “debt” they were not addressed to the present situation and should not be regarded as affecting it.

[197] Likewise, I do not find anything in Cape Town Municipality that bears upon the present problem. The question that arose in that case was whether the commencement of an action, seeking a declaratory order that an insurer was liable to indemnify the insured, had the effect of judicially interrupting prescription in terms of section 15 of the Prescription Act in respect of a claim for payment of the amount of the indemnity.

Having drawn attention to the different senses in which “debt” is used in different sections of the Prescription Act, the Court held that the claim for a declaration that the insurer was obliged to indemnify the insured had interrupted the running of prescription, even though such an order is not susceptible of execution in terms of section 15(4) of the Prescription Act.

[198] The obligation of Vodacom to negotiate with Mr Makate concerning the remuneration to which he is entitled for coming up with the idea underlying “Please Call Me” can only be fulfilled by undertaking such negotiations. That will not involve the payment of money, the delivery of goods or the rendering of services. All those presuppose that the debtor can discharge the debt by what are in essence unilateral actions on its part. The obligation cannot therefore be extinguished by conduct by Vodacom on its own. The negotiations will involve the active participation of Mr Makate. On both sides they will require conduct that is bona fide and reasonable. None of that is consistent with the simple concept of a debt and its discharge.

[199] The present situation is unusual but that is what renders the issues worthy of the attention of this Court. It is unlikely to be one that is much encountered in practice. But in my view the right that Mr Makate has is one of that probably small category of rights that do not constitute a debt for the purposes of prescription. It is far more akin to the right to claim rectification of a contract that was held not to be a debt for the purposes of prescription in Boundary Financing Ltd, than it is to a debt in the sense in which that expression has hitherto been understood.

In any event Vodacom, on whom the onus lay, has not persuaded me that it is a debt.

Accordingly I would dismiss the plea of prescription.

Conclusion

[200] For those reasons I concur in the order proposed in the main judgment.

Court summary

Summary

Contract — breach — oral agreement to negotiate in good faith

Pleadings — Ostensible authority — Distinct from estoppel — Not necessary to plead ostensible authority in replication

Prescription Act 68 of 1969 — Sections 10(1), 11(d), 129(d) — interpretation of “debt”

Constitution — Section 39(2) — Narrow interpretation of “debt” — claim not prescribed

Media Summary

The following explanatory note is provided to assist the media in reporting this case and is not binding on the Constitutional Court or any member of the Court.

Today the Constitutional Court handed down judgment in a matter concerning the payment of compensation for an idea that was disclosed pursuant to an oral agreement.

The applicant, Mr Kenneth Nkosana Makate, was employed by the respondent, Vodacom (Pty) Limited (Vodacom), as a trainee accountant. In November 2000 he conceived the Please Call Me idea which he intended to sell to a willing buyer. After seeking advice from within Vodacom, he approached Mr Geissler, who at the time was Vodacom’s Director and Head of Product Development. They reached an oral agreement that Vodacom would experiment with the idea and, if it proved commercially viable, Mr Makate would be paid a share of proceeds from the product subject to terms to be negotiated between him and Mr Geissler. Vodacom implemented the idea in March 2001. After Mr Makate’s demands on Vodacom to honour the oral agreement were unsuccessful, he instituted a claim against Vodacom in July 2008 in the then South Gauteng High Court (High Court).

The High Court found that Mr Makate had proved that he had entered into an agreement with Mr Geissler. However, it dismissed the claim on the basis that Mr Makate did not plead the ostensible authority (the seeming or apparent authority) of Mr Geissler to contract on behalf of Vodacom, and further had failed to demonstrate that Mr Geissler had such authority. Additionally, it found that Mr Makate’s claim against Vodacom had prescribed.

The Supreme Court of Appeal dismissed Mr Makate’s application for leave to appeal for lack of reasonable prospects of success.

Before this Court, Mr Makate argued that the High Court erred in finding that ostensible authority had not been pleaded and that any claim or debt owed by Vodacom had prescribed in 2004. He also argued that the High Court’s failure to determine his case on ostensible authority violated his right of access to courts. Vodacom claimed that no facts were pleaded in the High Court to support a case for ostensible authority and in any case, ostensible authority was not proved. Vodacom also argued that Mr Makate’s claim had prescribed.

In the majority judgment, written by Jafta J (Mogoeng CJ, Moseneke DCJ, Khampepe J, Matojane AJ, Nkabinde J and Zondo J concurring), this Court upheld the High Court’s finding that Mr Makate had entered into an agreement with Mr Geissler. The Court identified two main issues for determination: whether ostensible authority had been properly pleaded and established by Mr Makate; and whether his claim had prescribed.

This majority judgment held that the High Court adopted an incorrect approach to the pleadings. By holding that ostensible authority had not been pleaded, the High Court had conflated ostensible authority with estoppel. On application of the elements of ostensible authority to the facts, the majority judgment found that ostensible authority had been established. Given Mr Geissler’s position at Vodacom; the organisational structure within which he exercised his power; and his role in the process which had to be followed before a new product could be introduced at Vodacom, the judgment held that Mr Geissler had ostensible authority to bind Vodacom.

On the issue of prescription, the majority judgment held that because Mr Makate’s claim was not a debt as contemplated by the Prescription Act, the claim had not prescribed. The Court held that the meaning of “debt” had to be construed in light of section 39(2) of the Constitution, which imposes an obligation on the courts to interpret statutes in a manner consistent with the Bill of Rights. Thus, a provision that limits a right in the Bill or Rights (in this case, the right to access the courts) is to be interpreted narrowly. The majority judgment concluded that the High Court had incorrectly interpreted “debt” which did not extend to the present claim.

In a concurring judgment, Wallis AJ (Cameron J, Madlanga J and van der Westhuizen J concurring) agreed that Mr Makate was entitled to the relief in the majority judgment. The concurring judgment agreed that the key issue was whether Vodacom represented that Mr Geissler had authority to conclude the agreement with Mr Makate. However, it reached a different conclusion on the issue of ostensible authority.

Wallis AJ disagreed on the juristic nature of ostensible authority where there is no actual authority. He argued that it was settled law that ostensible authority was a form or instance of estoppel, which was why it was commonly referred to as agency by estoppel.

Wallis AJ held that there are cases in which ostensible authority coincides with actual authority arising by implication, and where actual authority and ostensible authority would be two sides of the same coin. But this was a case where it was accepted that there was no authority at all, express or implied. That took it into the realm of estoppel.

The concurring judgment then concluded that Mr Makate had to prove that Vodacom represented to him that Mr Geissler had the necessary authority to conclude the agreement for remuneration with him. It held that that the board represented to the world, including Mr Makate that Mr Geissler had authority to conclude such an agreement on behalf of the company. He may have had actual authority, but it was sufficient to say that it was represented that he had authority, in other words, ostensible authority. The consequence was that Mr Geissler had ostensible authority to conclude a contract with Mr Makate and Vodacom was estopped from denying that authority. It was bound by the contract Mr Geissler concluded on its behalf.

In the result, leave to appeal was granted and the application was upheld with costs.