South Africa: Law Reform Being Driven By Litigation Funders?

Last Updated: 29 June 2015
Article by Max Ebrahim and Thomas Henstra

Having been a part of the litigation landscape for less than a decade, the full impact of litigation funding companies is yet to be determined. However, the now notorious 'Please call me' case has provided a hint of what may be hiding in the shadows including the potential for wide-scale reform of South African law.

As has been widely reported, Mr Makate has been locked in a dispute with Vodacom (a monolithic mobile phone operator) since 2008. In short, he argues that he developed the novel 'please call me service' (in terms of which pre-paid users, reluctant or unable to initiate a call, send a text to somebody calling on that person to ring them). He further alleges that he entered into an agreement with Vodacom in terms of which he undertook to hand over the concept, which if proved technically and financially viable, in exchange for remuneration on terms to be negotiated. Backed by litigation funders, and after Vodacom apparently reneged on the "agreement", he instituted an action for damages against Vodacom, claiming 15% of the estimated ZAR 70 billion revenue generated by Vodacom since 2001.  

The legal process has, unsurprisingly, taken many years to wend its way through the South African courts. In an uncontroversial judgment, the High Court dismissed Mr Makate's claim on two grounds:

  1. it noted that the agreement relied on was void because the person who represented Vodacom in concluding the agreement lacked authority to do so1; and
  2. it ruled that the claim had been time-barred (or prescribed).

Given that it considered the appeal without merit, the Supreme Court of Appeal ("SCA") dismissed Mr Makate's application for leave to appeal (in other words, the merits of the matter was not argued before this court).

Undeterred, Mr Makate filed an application for leave to appeal to the apex appeal court ie the Constitutional Court ("CC"). In his application for leave to appeal to the CC, he raises the following arguments:

  1. that the law on prescription (time barring) is unconstitutional; and
  2. that the CC should use its expanded jurisdiction to decide the issue of authority.

To put the latter argument into context, until two years ago the CC was the final court of appeal only in relation to constitutional matters. An amendment to the South African constitution which came into effect in August 2013 extended the court's jurisdiction to include deciding appeals that raise matters of public interest. Until the CC's decision in Paulsen and Another v Slip Knot Investments 2015 (3) SA 479 CC the question of what constitutes the public interest had yet to be determined. In broad terms the CC held that where the impact and consequences of a decision would be "substantial, broad-based, transcending the litigation interests of the parties, and bearing upon the public interest" it will entertain the merits of an appeal.

Notwithstanding the tenuous merits of Mr Makate's appeal, in a surprise move the CC has recently granted him the right to argue his appeal before the full court in October this year. He will be free to raise both grounds of appeal.

The result is surprising for the following reasons: the constitutionality of the application of a time bar has already been the subject of a decision by the CC - and validated. Accepting that the case of Napier vs Barkhuizen (2007 (5) SA 323 CC)  dealt with a challenge to the validity of a time bar clause contained in an agreement of insurance and that Mr Makate is challenging the validity of a statute of general application, it would surprise us to see the statute being declared unconstitutional. Similarly, the issue of authority had been cogently dealt with by the High Court and confirmed by the SCA.

The case is significant for two reasons:

  1. It highlights a nascent trend of a developing tension between the SCA and the CC. Given the expanded jurisdiction of the CC, and the divergence in opinion, the outcome of litigation may become much more unpredictable in the future.
  2. As we have seen in the silicosis litigation (See Mankayi v AngloGold Ashanti article), litigation funders have the potential to fundamentally change the legal landscape. Even if Mr Makate fails in his bid to challenge the statutory regime that has been in place since 1969, he has already put Vodacom to significant legal costs.


1. For purposes of this newsletter, we have not dealt with Mr Makate's attempts to amend his pleadings to cater for the issue of estoppel prior to judgment being granted but after evidence had been led

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Max Ebrahim
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