A software developer has missed out on a substantial payday after the High Court reversed a Sh1.1 billion compensation for his ideas, which Safaricom partly used to develop two M-Pesa apps.
The High Court on Tuesday overturned the award to Samuel Wanjohi, through Popote Innovations, ruling that the techie lacked a signed contract with Safaricom to deserve the Sh1.1 billion payout.
He received a huge compensation in November last year through an arbitration, which agreed with Mr Wanjohi that Safaricom had dropped Popote from a partnership and used part of its ideas to develop the M-Pesa Super App and M-Pesa Business App.
This prompted Safaricom to petition the High Court to nullify the award, arguing it was fictitious and an attempt to benefit from an activity which the company had not invested in.
Safaricom said it never signed a 2018 partnership agreement with Popote for the development of a mobile payment solution dubbed “Popote Pay.”
Popote claimed Safaricom had agreed to share revenues from the venture, but later abandoned the project and launched its own products—the “M-Pesa Super App” and “M-Pesa Business App” —without compensation.
Popote, where Mr Wanjohi is the sole director, alleged that the innovation resembled the jointly conceptualised solution.
The arbitrator agreed that M-Pesa Super App and M-Pesa Business App were “similar” to the envisaged Popote Pay project, triggering the Sh1.1 billion payout.
The High Court agreed with Safaricom’s advocate that the arbitrator erred because the partnership was not signed by the telecoms giant and Popote.
The judge said the arbitrator’s finding that the M-Pesa apps resembled the Popote Pay project was unsupported by expert or factual evidence.
He added that the financial award was based on speculative financial assumptions and an unsigned agreement, which offends public policy.
“The court finds that the arbitrator’s award, predicated on an unsigned and inoperative contract, and containing speculative damages unrelated to the evidence, offends the principles of contractual certainty, legality, and fairness, thereby conflicting with the public policy of Kenya,” said the court.
“The evidence before this court shows that the alleged partnership agreement was never executed by Safaricom. Nor is there any exchange of correspondence or other written instrument evidencing an intention by Safaricom to submit disputes to arbitration,” the ruling said.
Popote produced an email addressed to Safaricom that has attached a draft of the agreement.
The court reckoned the email “merely acknowledged receipt of the draft agreement but did not signify execution or assent”.
“Execution by both parties was an express precondition to its effectiveness,” the court ruled.
“An award predicated on an unsigned contract and speculative damages offends principles of fairness and contractual certainty.”
Safaricom, however, argued that the partnership agreement was never finalised because it never signed the contract.
The telecoms operator maintained that it had only reimbursed Popote for development costs under a separate settlement agreement in 2020, which extinguished any further obligations.
The arbitrator had awarded Mr Wanjohi Sh39.2 million, a further Sh902.7 million as shared revenue for the M-Pesa applications and costs of the case amounting to Sh2.5 million.
Safaricom said Popote pushed for a payout of Sh46 million per month for 24 months—totalling Sh1.1 billion—based on projected revenue shares.
The court heard that following a change of business strategy, Safaricom decided not to proceed with the project but compensated Popote for its development costs in full as per the settlement agreement executed on September 11, 2020.
That payment, made on October 15, 2020, allegedly extinguished all further obligations.
Safaricom said that it launched its own M-Pesa Consumer and Business Super Applications independently, “which Popote wrongly alleged to resemble the jointly conceptualised solution”.
The dispute started after Safaricom launched its M-Pesa Super App and M-Pesa Business App in June 2021, which Popote alleged incorporated features from the jointly developed solution.
“The respondent (Popote) delivered the customised ‘Popote Pay Solution” on May 8, 2018, thereby fulfilling its contractual obligations.
The applicant [Safaricom], however, breached the agreement by unilaterally abandoning the launch,” stated Mr Wanjohi.
He started Popote in 2013 and State records show him as the sole director, with full ownership of the firm placed under a US-registered investment vehicle—Popote Inc.
The Sh1.1 billion payout is equivalent to 2.59 percent of the Sh42.7 billion profit that Safaricom posted in the six months to September. Its net profit grew from Sh28.11 billion the previous year, and it expects to declare an interim dividend in February.
The Kenya business continued to be the main profit driver on the back of M-Pesa, the firm’s largest unit that is on course to generate half of the telecoms operator’s revenues.
Revenue from the mobile financial service, M-Pesa, rose to Sh88.1 billion from Sh77.2 billion previously, reflecting a growth of 14 percent.
