Inside Safaricom's Sh1b Mpesa app dispute with software firm

Safaricom has won a Sh1 billion case against a software development company.

High Court judge, Peter Mulwa, said Popote Innovations Ltd could not prove that it had an agreement with the telco company for sharing revenue generated from M-Pesa apps.

Justice Mulwa set aside Sh944.5 million which had been awarded to Popote by the arbitrator, Paul Ngothi, saying that the arbitration was based on an unsigned agreement.

He noted that Popote’s claim that the apps launched by Safaricom were similar to the one they had allegedly jointly conceptualised was not backed by expert witness or facts.

Justice Mulwa agreed with Safaricom’s lawyer Fred Ngatia that the case was based on speculation.

“The tribunal’s conclusion that the applicant’s subsequent mobile applications, M-Pesa Super App and M-Pesa Business App, were 'similar' to the envisaged Popote Pay project was unsupported by expert or factual evidence. It was a speculative assumption forming the basis of a hypothetical damages computation, which fails the reasonableness test under public policy principles."

He said the arbitrator had no powers to entertain the case as there was no contract in place and contained speculative damages.

Safaricom moved to the High Court after the arbitrator found that it ought to have shared revenue with Popote based on the partnership agreement proposal.

The company argued that the agreement was never sealed and that Popote was paid for the developmental cost in 2020.

He argued that the payment was clear that there would be no further relationship or obligation between the parties.

The company told the court that Popote sought Sh46.7 million, claiming that the amount would cover 15 months revenue share.

Safaricom Senior Legal Manager Daniel Ndaba told the court that it was unfair to award Popote, and that there was no evidence to show Popote was involved in the apps development.

“The arbitrator disregarded the fact that the applications contemplated in the proposed partnership agreement were never launched. It is from the launch that revenue would be received and be shared in the manner envisaged in the proposed partnership agreement.”

“The arbitrator received the evidence by the applicant as well as the respondent’s witnesses. Unanimity was that there was no launch of the applications. Faced with that situation, the Arbitrator held that “there was no launch" as envisaged under the proposed Partnership Agreement. With that determination, the Respondent's claim was liable for rejection,” said Ndaba.

In its response, Popote argues that Ngothi was right to find that the apps launched bore similar features to the one they had contemplated. It asserted that once Safaricom launched the apps, it was liable even without the agreement being in force.