CASE LAW UPDATE

Facts: The first appellant is the Member of the Executive Council for Economic Development, Gauteng, (MEC). The second appellant is the Gauteng Growth and Development Agency (the Agency), a company established in terms of the Gauteng Growth and Development Agency Act 5 of 2003. Its objects are to promote economic growth, enable private sector investment and to create sustainable employment opportunities in the province. The respondents were members of the Agency’s board of directors until 24 March 2023, when the MEC, being of the view that the relationship between her and board members had irretrievably broken down, terminated their directorships and dissolved the board. Aggrieved by the MEC’s decision, the respondents brought an application for an order reviewing and setting aside the decision.

Appeal: The High Court found for the respondents and ordered that the MEC’s decision to terminate the directorships of the respondents was suspended with effect from 24 March 2023; the respondents were reinstated as board members with effect from the same date; and the MEC was interdicted from appointing any board members in substitution of the respondents. The High Court also ordered the appellants, jointly and severally, to pay the respondents’ costs on the attorney and client scale. The punitive costs order was based on a finding that, in dissolving the board, the MEC was motivated by ulterior purposes. The appellants appeal against the judgment of the High Court granting the respondents interim relief pending the finalisation of a review application.

Discussion: The appellants contend that the High Court failed to consider properly whether the respondents had established the legal requirements for interim relief and has impermissibly purported to pronounce finally on issues which fell for decision in the review application. The scales had been tipped comprehensively in favour of the appellants in respect of the requisites for interim relief. Four directors had resigned and four did not bother to make representations. The directorships of the latter group were also terminated, and they did not challenge the MEC’s decision. Since the Act provides that the board must have at least nine members at any time, the interim re-instatement of the respondents was legally inconsequential and had no practical effect. The High Court also failed to consider that the respondents had made serious allegations of misconduct against the MEC accusing her of corruption. Apart from the fact they had failed to provide any factual basis for these serious allegations, it undoubtedly had the effect of further souring the relationship between the parties and removing any possibility of the level of cooperation which good corporate governance would demand. The balance of convenience was therefore manifestly in favour of the appellants.

Findings: The respondents failed to establish that they would suffer irreparable harm if the interim were not granted. Their claims that they would suffer reputational harm and that their prospects of future appointments would be prejudiced if they were not vindicated through reinstatement were exaggerated, if not farfetched. Their directorships were terminated because of the breakdown of the relationship between them and the MEC and not because of any alleged misconduct on their part. The only harm that they could possibly have suffered would have been financial in nature. There was therefore no reason why they could not obtain substantial redress in respect of any financial losses that they may be able to prove in due course. The respondents also failed to show that there are reasonable prospects that they would succeed in the review application. This is not one of those cases where judicial limitation of executive powers can be justified. The High Court should thus have refused the interim relief for this reason also. The respondents failed to establish the requisites for interim relief and the appeal must therefore succeed.

Order: The appeal is upheld with costs. The order of the High Court is set aside and replaced with one dismissing the application.

SMITH JA (DAMBUZA JA, MOCUMIE JA, KGOELE JA and DOLAMO AJA concurring)

Facts: In 2015, Ms Mogale was appointed as the CEO of the National Health Laboratory Services (NHLS) on a fixed-term contract of five years. Mr Zulu was appointed as the CFO. Ms Mogale testified that she was headhunted to turn the NHLS around as it was technically bankrupt. She confirmed that the curbing of costs was part of her mandate and that she presented that she had the necessary skills to do the job. She also confirmed that the NHLS renders services to the poor and if it was not frugal with its expenses, it could not render these services. If there was a waste of money, services could not be delivered and it was ultimately the poor that suffered the most. In 2017, Ms Mogale and Mr Zulu faced charges arising out of procurement, including fruitless and wasteful expenditure, and irregular or unauthorised payments.

Application: Ms Mogale and Mr Zulu (applicants) were found guilty and summarily dismissed. They referred an unfair dismissal dispute to the CCMA which later issued a ruling consolidating the cases and referring the dispute to the Labour Court. They contested the fairness of their dismissals and the NHLS has launched a counterclaim for damages, premised on the alleged breach of the applicants’ employment contracts. Mr Zulu passed away before the commencement of trial proceedings and was substituted by the executrix.

Discussion: By taking up the senior position of CEO, Ms Mogale was aware or at least ought to be aware of her responsibilities and contractual obligations. The express duties of the applicants correlate with their common law duties, and as senior employees, they were required to act in good faith, to serve the NHLS honestly, faithfully and diligently, and not to work against the NHLS’ interests and not to do anything incompatible with the due or faithful discharge of their duties. In exercising their duties, the applicants were required to do so in terms of the express terms of their contracts and in a manner which was not in conflict with the provisions of section 217 of the Constitution and the Public Finance Management Act 1 of 1999.

The charges: The charges included exceeding delegations of authority and irregular payments made to, and appointment of, service providers. Ms Mogale entered a service level agreement (SLA) for computer equipment at almost R84 million when the delegation of authority was for just under R26 million. She concluded an SLA for over R79 million for the leasing of motor vehicles when her delegation was limited to R20 million. She concluded an addendum to an SLA with with DV8 for the support of end-user MPLS VPN for an additional 63,5 million which exceeded her delegation of authority.

Findings: This case shows how important it is to have skilled, competent and qualified people employed in key positions and how devastating the consequences are if a CEO or CFO is not up for the task. During their conduct relating to three contractors, Mr Zulu and Ms Mogale failed to perform their duties effectively, efficiently and professionally, and instead displayed severe negligence and incompetence, resulting in damage to the NHLS. The applicants displayed an ineptitude in performing functions which require the implementation of tender law, and the application of financial control, reducing costs and increasing value. Ms Mogale, as the CEO, should have been looking out for the interests of the NHLS when she signed the contract with Afrirent for the vehicle leasing and she should have avoided prejudicial clauses, such as the penalty clause, which she knew could cause the NHLS to pay millions in penalties, but she failed to do that. She conceded that as a person with an MBA degree, she knew that she was committing the NHLS to pay penalties and that those penalties could run into millions.

Order: The applicants’ claim for unfair dismissal is dismissed. In respect of DV8, Ms Mogale and Mr Zulu’s estate are jointly liable to pay R342,545 to the NHLS. In respect of Afrirent, Ms Mogale has to pay the NHLS the total amount of R22,135 346.70. There is no order as to costs.

PRINSLOO J

Facts: The applicant was employed by the respondent’s predecessor in law, Ladysmith Autohaus in terms of an oral agreement as a sales consultant. There was no agreed retirement age between the applicant and Autohaus. The applicant was promoted to the position of sales manager at the time he was 65 years of age. His role was then refined as that of new car sales manager. At that stage, he was almost 70 years of age. The respondent purchased Autohaus. A schedule to the sale agreement identified the applicant as being of retirement age. After purchasing the business, the respondent took transfer of Autohaus as a going concern. Consequently, the applicant’s terms and conditions of employment in place immediately preceding the transfer of the business were transferred to the respondent in terms of section 197 of the Labour Relations Act 66 of 1995. Mr Mngadi advised the applicant that he had reached retirement age, based on what he argued is the normal retirement age of 65 in the motor industry. Mnagadi proposed an option for the applicant to continue earning an income from the respondent post-retirement on a sales commission basis, basically 50% of the profits from all vehicles sold. The applicant rejected the offer. Immediately following the meeting with Mr Mngadi, the applicant was served with a notice of retirement.

Application: In terms of the pre-trial minute concluded by the parties, the court is required to decide whether the reason for the applicant’s dismissal by the respondent was a transfer, or a reason related to a transfer, contemplated in section 197 of the LRA, alternatively whether the applicant’s dismissal based on age was automatically unfair. The applicant seeks monetary relief.

Discussion: On the evidence, the schedule to the sale agreement, the applicant’s discussion with Mngadi and the termination notice, viewed together, the most proximate cause of the dismissal was based on age as claimed by the respondent. The fact that the respondent gave the applicant “notice of his retirement” immediately after the transfer of the business took place is not a sufficient basis to conclude that the reason for the dismissal was the transfer, or a reason related to the transfer. More was needed from the applicant for the court to have drawn that inference. That was not provided. The collective agreements relied on by the respondent establish that the retirement age of 65 years is a term and condition of employment of only certain categories of employees employed within the registered scope of MIBCO. Given that the applicant was not a member of the Motor Industry Provident Fund and given the absence of any averment, let alone proof, that he fell into the category of employees who are obliged to join the Fund, it follows that the retirement age of 65 years was not a term and condition of the applicant’s employment.

Findings: No evidence was adduced that in the motor industry employees who fall outside the prescripts of the Rules of the Fund also retire at the age of 65 years. The respondent was not entitled to use the retirement age of 65 years as a guideline to impose retirement on the applicant because of the wording of section 187(2)(b), namely “normal . . . for persons in that capacity”. The provision enjoined the respondent to show that the retirement age of 65 years was normal to employees employed in the capacity as the applicant in Autohaus, which it did not. In all the circumstances, the dismissal of the applicant could not be justified based on section 187(2)(b) of the Act, but was contrary to the provisions of section 187(1)(f) and was automatically unfair. Given the applicant’s age at the time of dismissal, it is just and equitable to award the applicant compensation equivalent to 12 months remuneration (made up of his gross salary plus average commission), plus costs of suit.

Order: The dismissal of the applicant was automatically unfair. The respondent is ordered to pay the applicant the amount of R953,496 within 30 days of receipt of the judgment, plus costs of suit.

WHITCHER J

Facts: In 2021, the plaintiff (Ms Ngwenya) attended at premises managed by the defendant, Accelerate Property Fund. She was employed by Electronic Toll Collection on behalf of SANRAL, a tenant, which was situated in one of the stores on the defendant’s premises. She went to the bathroom, and upon her return at a corner of the passage through the readily-used and accepted service entrance, she tripped “over something” and fell over a metal skirting that was on the wall on the open passage. In her words, “it felt like at the time, something pulled me back”. She testified that she was wearing wool-like boots. She was pregnant at the time and tried to protect her unborn child by placing her right hand to minimize the impact on her stomach, causing a fractured wrist.

Claim: The plaintiff claims damages arising from her injuries and contends that the defendant should have ensured that the metal skirtings and walkway on the premises were safe to the general public and properly affixed to the wall. The defendant denies that any breach of duty of care took place. Five disclaimer notices were in place on various pillars on main entrances or walkways inside the centre, including a disclaimer in the vicinity of the plaintiff’s place of employment.

Discussion: The video footage shows how the plaintiff barely passed the corner when she tripped, causing her to fall forward. The plaintiff can be seen cutting the corner and moving closer to the edge of the skirting, as if distracted. There was no foreseeable risk present at the defendant's premises, despite the occurrence of the incident established by the plaintiff. It cannot be concluded that there was a foreseeable risk of which the defendant ought to have been aware and that the defendant failed to take such steps as the diligence paterfamilias ought to have taken. The plaintiff did not prove foreseeability or negligence on the side of the defendant and accordingly failed to prove her case as she carried the burden to do.

Disclaimers: The disclaimer notices were prominently displayed and are 60cm by 42cm (A3 paper size) displayed at eye height, in clear and unambiguous terms, including on a pillar next to the scene of incident. The signs are not hidden or displayed amongst other more glamorous signs, but are displayed on their own. The signs were printed in black and red on a white background. At A3 in size, they are reasonable sized and pertinently displayed in a way that would draw the attention of a reasonable passerby. On her version, the plaintiff understood the consequences of the disclaimer signs. The plaintiff does not deny having noticed the signs, nor that she had read them. The allegation that the plaintiff says she did not pay attention to them for the two years she worked at the centre does not assist her. The court is satisfied that actual, or at the best for her, quasi-mutual assent was proven in respect of the said disclaimer.

* See the wording of the disclaimer at para [4].

Order: Plaintiff's claim is dismissed with cost on scale A.

MUDAU J