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[2020] ZAWCHC 85
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#Unitebehind v Minister of Transport and Others (2058/2020) [2020] ZAWCHC 85; [2020] 4 All SA 593 (WCC) (25 August 2020)
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
CASE
NO: 2058/2020
In
the matter between:
#UNITEBEHIND
Applicant
And
THE
MINISTER OF
TRANSPORT
First
Respondent
NATIONAL
TREASURY
Second
Respondent
BONGISIZWE
MPONDO
Third
Respondent
PASSENGER
RAIL ASSOCIATION OF SOUTH AFRICA
Fourth
Respondent
MINISTER
OF
FINANCE
Fifth
Respondent
Coram:
Erasmus J
Dates
of Hearing: 26 May 2020
Date
of Judgment: 25 August 2020
JUDGMENT
ERASMUS,
J
INTRODUCTION
[1]
In this application the applicant seeks a review of decisions taken
by the first respondent (The Minister of Transport) arid
for same to
be set aside. It further seeks final interdictory relief against the
first respondent and interim relief, in that,
the second respondent
(National Treasury) should take certain steps. Lastly, declaratory
relief is sought in relation to actions
taken by the first
respondent.
The
relief it seeks was amended after a reply to the founding papers was
filed and is styled as follows:
"2. The First Respondent's
failure to appoint a Board of Control for the Fourth Respondent
(PRASA) and the decision to appoint
the Third Respondent as "the
Administrator of PRASA" in lieu of a Board of Control for PRASA,
is declared to be unlawful,
and is reviewed and set aside.
2A. The First Respondent's secondment
and/or appointment of the Third Respondent as the Acting Group Chief
Executive Officer and
accounting authority of PRASA is declared
unlawful, and is reviewed and set aside.
2B. The Second Respondent's decision
of 28 January 2020 to approve that the Group Chief Executive Officer
of PRASA, or person' acting
in that position, be the accounting
authority of PRASA is the declared unlawful, and is reviewed and set
aside.
3. The First Respondent is directed to
appoint a Board of Control for PRASA, in accordance with section 24
of the Legal Succession
to the South African Transport Services Act 9
of 1989, within three months of the date of this order, or such other
period as the
court deems appropriate.
4. Pending the appointment of the
Board of Control under paragraph 3:
4.1 The Second Respondent is directed
to instruct or approve, within seven (7) calendar days of the date of
this order, another
functionary of a public entity to be the
accounting authority of PRASA, in accordance with section 49(3) of
the Public Finance
and Management Act 1 of 1999; and
4.2 The orders in paragraph 2, 2A and
28 are suspended until another functionary is appointed on the
instruction or approval of
the Second Respondent, in terms of
paragraph 4.1 of the order.
5. It is declared that the First
Respondent has breached his duty in section 63(2) of the Public
Finance and Management Act (PFMA),
by failing to exercise the
Executive's Ownership Control Powers to ensure that PRASA complies
with
i
(sic) the requirements of
section 49 of the Public Finance and Management Act, 1 of 1999.
6. Such parties as may oppose this
application shall be jointly and severally liable for costs,
including the cost of two counsel
where so employed.
7. Further and/or alternative relief."
[2]
Although this matter was brought, styled as an urgent application,
intervening developments no longer require me to deal with
the
question of urgency. All the issues were fully ventilated, after
postponements and the filing of further affidavits. It is
unfortunate, however, that this matter evolved rather than being
pleaded once. The record consists of more than 600 pages. I was
allocated this matter one day before a virtual hearing and was
overloaded with additional documentation. At the end of the hearing
I
was requested not to proceed with a judgment as the parties were to
attempt to reach agreement on the matter. This, however,
did not
succeed and hence this judgment.
[3]
Subsequent to the hearing, further documents were uploaded into the
Dropbox used for this matter, which included the following:
(i)
A PowerPoint presentation by
the third respondent (Mr Mpondo)
[1]
and others to the Portfolio Committee on Transport dated 11 May 2020.
It curiously included a slide named "the Administrator's
Turnaround Update". Throughout the presentation the third
respondent is referred to as the Administrator;
(ii) Various news clippings;
(iii) A judgment from the Labour Court
delivered on 9 June 2020;
(iv) An order by La Grange J in case
number 19976/2019 dated 30 of June 2020.
I
had no regard to the various newspaper clippings, the judgment of the
Labour Court or the order of Le Grange J in reaching the
conclusions
I do hereinbelow.
BACKGROUND
[4]
The fourth respondent (PRASA) was established as a legal persona
under section 22(1) of the Legal Succession Act, No 9 of 1989.
Section 22(1) reads:
"On the date referred to in
section 3(1) a legal person, which shall be called the Passenger Rail
Agency of South Africa, shall
be established."
[5]
PRASA is also a public entity and "a National Government
Business Enterprise" listed under Part B of Schedule 3 of
the
Public Finance Management Act, 1 of 1999 (PFMA), and is wholly owned
by the State. Its main objective and business is set out
in section
23 of the Legal Succession Act, which reads as follows:
"(a) ensure that, at the request
of the Department of Transport, rail commuter services are provided
within, to and from the
Republic in the public interest; and
(b) provide, in consultation with the
Department of Transport, for long haul passenger rail and bus
services within, to and from
the Republic ...
(2) The second objective and the
secondary business of the corporation is to generate income from the
exploitation of the assets
acquired by it.
(3) In carrying out its objectives and
business, the corporation shall have due regard to key government
social, economic and transport
policy objectives."
[6]
PRASA is, in the words of the first respondent "... An important
institution that plays a major role in South Africa's
public
transport value chain and its impact on the economy cannot be
emphasised enough." On a daily basis millions of South
Africans
rely on the proper functioning of PRASA to go about their daily
business and to enhance their livelihood. It is therefore
imperative
that this institution functions optimally to ensure a better life for
all.
[7]
The scale and importance of PRASA is reflected in its 2018/2019
Annual Report. It comprises of several divisions and subsidiaries
which include:
(i) PRASA-Rail which operates commuter
rail services including suburban rail services (Metrorail) and
regional\intercity rail services;
(ii) Autopax, operating regional and
intercity coach services, including Translux and City to City bus
services;
(iii) lntersite Property Management
Services, a wholly owned subsidiary responsible for growing its
property portfolio, investments
and pursuing ad hoc developments;
(iv) PRASA-Cres (Corporate Real Estate
Solutions), manages its real estate assets and facilities; and
(v) PRASA-Technical which is tasked to
improve and modernise the current rolling stock, modernise depots and
strategic infrastructure.
[8]
PRASA's expenditure, for the last reported financial year, was R15.5
billion that exceeded its income by nearly R2 billion of
which the
vast majority is derived from the annual capital subsidy and
operational subsidy from government. It is responsible for
huge
public expenditure and capital intensive projects. It currently has
563 approved capital projects with a budgeted amount of
R12.6
billion. It has also embarked on a 10- year modernisation and
"rolling stock fleet renewal" program, at an estimated
cost
of R173 billion.
[9]
In the 2018/2019 financial year, only 26% of its performance targets
were met. Passenger patronage of its services continues
to decline
with an overall decline in paying passengers of 21%. The number of
Metrorail coaches in service declined from 2511 to
2143. Bus
availability climbed to 41% whereas an overall customer satisfaction
was measured at 48.74%. A downward spiral of activity
and efficiency
is constantly met with incidents that negatively affect the general
public. The applicant has set forth a number
of outstanding incidents
between the months of February and March 2020 that included safety
issues to the rolling stock as well
as general safety of the users.
Staff salaries and utility bills went unpaid and services were
suspended. The National Treasury
had once again provided it with
"relief funding", as they were carrying an operating
deficit of R1.8 billion as at 25
February 2020.
[10]
The affairs of PRASA shall be managed in terms of the Legal
Succession Act of which Section 24 thereof reads as follows:
"(1) the affairs of the
corporation shall be managed by a Board of Control of not more than
11 members including the Chairman,
who shall be appointed and
dismissed by the Minister,
(2) at least-
(a)
one of the members of the Board of Control shall be an officer in the
Department of Transport;
(b)
one of the members of the Board of Control shall be an officer in the
Department of Finance;
(bA) one of the members of the Board
of Control shall be an officer in the Department of State
Expenditure;
(c)
one of the members of the Board of Control shall be nominated by the
South African Local Government Association recognised in
terms of
section 2(1)(a) of the Organised Local Government Act, 1997;
(d)
three of the members of the Board of Control shall have expertise in
the management of a private sector enterprise."
[11]
The Act thus recognises the importance of the input from key
departments and layers of government that have a particular interest.
It is further apparent that the legislator recognised the expertise
and experience needed for the management of PRASA.
[12]
It is common cause that at least for the past five years, PRASA has
been beset by chronic governance and management failures.
There was a
decline in public services and various financial and procurement
irregularities came to the fore. At least four different
boards and
eight different group CEOs were employed. From 1 August 2014 when a
Board was appointed for a three-year term until
April 2019 it seems
there was constant instability. The applicant, already during April
2018, submitted nominations to the then
Minister for members of a new
permanent Board. The Minister appointed an Interim Board whose term
of office was either extended
and additional members appointed and
that did not necessarily solve problems that included quorum
problems. In the last financial
year the Auditor-General reported
irregular expenditure that have escalated to R27.3 billion.
[13]
I now turn to the role played by the first respondent since his
appointment. Mr Fikile Mbalula was appointed the Minister of
Transport on 30 May 2019. Shortly thereafter (May I just interpose in
saying that he inherited a mess), he extended the existing
Board's
appointment for a period of six months, "pending the
finalisation of a new Board for PRASA". The Director-General
of
the Department of Transport, who deposed to the opposing affidavit,
states that at the time of the Minister's appointment the
process of
the appointment of a permanent Board was still pending. According to
the erstwhile Chairperson of the Board in a letter
to the first
respondent, nominations for the appointment of permanent Board
members were called for with an end date of 28 June
2019. The
applicant responded to that invitation and submitted a list of
nominees willing to accept appointment. No Board of Control
was
however appointed.
[14]
On 9 July 2019 the Minister announced an intervention called the
Ministerial War Room. It was launched on 8 August 2019 and
began its
operations on 12 August 2019.
[15]
At the announcement of the establishment of the so-called War Room
the Minister issued a lengthy public statement wherein he
said, inter
alia:
"The continued decline of the
quality of service PRASA provides to the commuting public requires
urgency in the interventions
we put in place... The urgency of the
addressing PRASA's turn-around cannot be over emphasised and tangible
results that people
can see must be realized in the shortest possible
time... Government has a constitutional obligation to ensure that
citizens' rights
as enshrined in the Bill of Rights, are not eroded
when they use public transport. These include a right to a safe,
reliable and
secure public transport ... We are therefore under no
illusion about our obligations to transport our people safely, in a
manner
that enable sustainable livelihoods."
[16]
The War Room was to focus on three areas that included service
recovery, safety management and an accelerated implementation
of the
modernisation programme. The set targets were to be met by 31
December 2019. Gleaning from the letter dated 3 December 2019
from
the former Chairperson of the Board to the first respondent, it is
instructive to note that the Board played an integral role
in the War
Room.
[17]
On 25 September 2019 the Auditor-General issued a report on the audit
of the consolidated and separate financial statements
of the entity
(being PRASA). The Auditor-General issued a disclaimer that it could
not express an opinion because it was unable
to obtain sufficient and
appropriate audit evidence to provide an audit opinion.
[18]
On 31 October 2019 the Government Technical Advisory Centre in
National Treasury (GTAC) issued its report on the organisation
of the
system and of PRASA. The Report dealt extensively where there are
shortcomings within the organisation and made certain
recommendations,
inter alia,
it observed:
"Governance and leadership
instability is widely regarded as the most important reason for the
failure of PRASA's turnaround
strategy, ie, the rapid turnover of
minister, boards and senior managers (many of whom are currently in
acting positions), has
made it impossible to implement long-term
strategies with the consistency and discipline that is required for
success."
[19]
The report noted claimed areas of improvement as encouraging but "the
reality is that in most areas the improvements targeted
by the War
Room have not yet been achieved though action plans are in place...
This is not unexpected given that most of PRASA's
performance and
service delivery problems are the result of deep systemic root
causes, and even these are not addressed, any improvements
will
merely be temporary."
[20]
The GTAC advised that "taking cognizance of the ongoing work of
the War Room, including the successes and challenges,
and the
progress made in recent months to appoint key executives at PRASA are
the most important action
that the Minister can take to ensure
better outcomes is to ensure leadership stability in the
organisation, including the Board.
The CEO and top executives.
Stabilising the organisation means that new appointees should not
seek to develop yet another turnaround program but should focus
on
the initiatives identified in the latest turnaround program... "
(my underlining)
To
be reminded, that report was in October 2019.
[21]
Under the heading "Blueprint for Improved Organisational
Performance" it sets out seven key themes all of which needed
to
be addressed either in the short, medium or long term. Short-term
being within three months; medium-term within one year; long
term more than one year. The first of these key themes identified by
the GTAC was to create leadership stability and recommended,
as the
first short-term step to be taken, is for the Minister to appoint
permanent members of the Board and a Group CEO for a tenure
of five
years. It further advised that vacant executive positions be filled.
This is identified as a short-term action therefore
the Minister
should act within three months according to the report.
[22]
On 4 November 2019 the first
respondent called a news conference to address the media on the
progress of the War Room. The news
conference was televised live
[2]
.
In this conference the Minister said that the Board will soon appoint
a permanent CEO "that will seal the pack", the
Board having
already started a process of filling vacant senior executive
positions, "the Interim Board in terms of its task
is busy with
employment of people... ".
On
a question from the Daily Maverick he went further to state:
"Daily Maverick, the Board will
be appointed, once approved by Cabinet. I am busy with that process
now, to place before Cabinet
the new Board of PRASA and that will be
finalised probably before end of year, in terms of the Cabinet cycle
and I intend to announce
that Board once Cabinet has approved."
[23]
On 10 November 2019 the Minister published an open letter in the
Daily Maverick wherein he describes the dire state of PRASA.
He wrote
"The problem rather, is failure to implement this strategy and
absence of able and capable leadership." He repeated
his
undertaking referred to above in relation to the appointment of a
permanent Board by saying:
"While we applaud the progress
made through the War Room interventions, we are under no illusion
about the fact that in the
broader scheme of things PRASA remains in
a critical state.
We have prioritised the appointment of a
permanent board at PRASA and this process is nearing completion
.
This will be immediately followed by the appointment of a permanent
Group Chief Executive and Chief Executive of its various divisions
and subsidiaries.
Meanwhile, the process of filling
critical vacancies is proceeding with the appointment of a Group CFO,
Group Chief Procurement
Officer and a Group Human Capital Management
Executive in the last month.
Stabilising operations without full
time leadership both at Board and Management levels is no different
from attempting to fill
a leaking bucket. "(my underlining)
[24]
On 15 November 2019 the Minister offered Mr Mpondo (third
respondent), a contract appointment as a special advisor in the
office of the Minister for a period linked to the term of office of
the Minister. This was done pursuant to the provisions of section
12A(3)(a) of the Public Service Act, 1994. The appointment offer,
subject to four conditions that included the signing of a Performance
Agreement with the Minister within three months from the date of
assumption of duty and the signing of employment contract within
five
working days from the date of assumption of duty, was accepted on the
same day.
[25]
On 20 November 2019 the Minister attended a meeting of Parliament's
Standing Committee on Public Accounts (SCOPA). He was accompanied
by
his Deputy, the Director-General, officials as well as members of the
Board. The minutes of the meeting record that the Minister
assured
the Committee that the processes to finalise the appointment of a
permanent group CEO would be finalised by the end of
the financial
year. He went on to say:
"The department was also
finalising the process appointing a permanent Board as first order of
business would be to take extraordinary
measures to stabilise PRASA's
operations and ensure that it delivers its mandate."
During
the course of this meeting, according to the Minutes, the
Director-General indicated that by creating the War Room "the
Minister had fallen short of
placing the entity under
administration
because of its organisational collapse".
In his closing remarks to the meeting the Minister repeated that "the
Board was operating on an interim basis and
the process of
finalising its vacancies was underway
... One of the crucial
mistakes was that incoming Board Members for the Department's
entities were not taken through an interview
process; they would
usually be appointed on consideration of the portfolios and
recommendations.
The ministry introduced interviewing processes
as a way of evaluating whether the candidate had the requisite
skills." He further reflected that the Chairperson hoped that
the ministry would finalise the appointments of board members so that
the Committee would have more meaningful engagement with
the entity.
(My underlining)
[26]
On 22 November 2019 the Minister wrote to his Cabinet colleague, the
Minister of Finance, as well as the President of the Republic,
briefing them on the performance of the Passenger Rail Agency of
South Africa (PRASA) Board and "My Intention to Dissolve
the
Board" is the heading. After summarising the shortcomings of the
Interim Board and the intention to dissolve same he states:
"I intend to write to the
individual Board Members to afford them an opportunity to make
written representations as to why
their membership to the Board
should not be terminated and as to why the board should not be
resolved.....
There are two options that I am
currently considering in the post Board dissolution phase. Option one
involved work to fast track
the appointment of a full-time Board that
is fully fledged in line with the provisions of the Legal Succession
to the South African
Transport Services Act, No 9 of 1989, and option
two
involves placing PRASA under Administration in line with the
provisions of
section 49(3)
of the
Public Finance Management Act, No
1 of 1999
. I'm leaning more on option two considering the
situation of the entity and wish to consult with yourself on invoking
the provisions
of
section 49(3)
of the PFMA in me appointing an
Administrator,
which should be a turnaround expert to assist
in addressing the operational deficiencies of the entity... I
therefore seek your
concurrence in invoking the provisions of
section
49(3)
of the PFMA. I fervently and eagerly await your response in
this matter, which I shall highly appreciate."
The
Minister, through the Director-General, indicated that he received
guidance from the President and Cabinet before proceeding
to serve
the members of the Interim Board of Control with notices of his
intention to dissolve the Board.
[27]
On 26 November 2019 the Minister served on the individual members of
the Board notices of his intention to terminate their
membership as
members of the Interim Board. They were given five days within which
to make written representations as to why the
membership should not
be terminated.
[28]
Or,, 3 December 2019, members of the Board collectively submitted a
representation on why they should not be dismissed. This
response was
43 pages long.
[29]
Applicant relies on media reports of what the Minister told
Parliament in a question and answer session on 4 December 2019
in
relation to the Board. It is reported that the Minister told members
of Parliament that he had written to the Interim Board
asking why
they had failed to comply with their fiduciary obligations with
regard to the Public Finance Management Act. He said
he would
evaluate the Board's response before determining the "correct"
course of action. This must be in reference to
the letter of 26
November 2019 that was responded to the previous day, but the
Minister had not seen yet. He further stated that
the Department was
in the process of finalising a permanent Board "to restore
stability", and that the process was "at
an advanced
stage".
[30]
The next day, on 5 December 2019 the Minister dissolved the Board of
Control by writing to the chairperson. He indicated that
he
considered the submissions contained in the letter of 3 December
2019. He stated "Please take note further that your appointment
or extension was subject to the appointment of the new full-time
Board or accounting authority and I have now decided to do so
after
consulting my colleagues in Cabinet. I have therefore concluded and
inform you that I am herewith dissolving the board of
PRASA from date
of this letter (5 December2019)."
[31]
On the same day, 5 December 2019, the Minister terminated Mr Mpondo's
employment contract as special advisor and simultaneously
offered him
a contract appointment as project manager and secondment to the
Passenger Rail Agency of South Africa (PRASA). In the
document his
rank is described as "Project Manager" (Acting Group: CEO:
PRASA). The offer was subject to similar conditions
as to his
appointment as Special Advisor described above. He accepted the offer
on the same day.
[32]
The following day,
6 December 2019,
the Minister and Mr Mpondo
entered into a "Permanent Employment Contract for a fixed term
or a specific project in accordance
with chapter 5 of the Public
Service Regulations, 2016, for members of the Senior Management
Service" (SMS). (My underlining)
[33]
Clause 1.1 of the contract states that the contract is concluded in
terms of section 9 of the Public Service Act, 1994, as
amended, and
that it is for a period of 12 months from 6 December 2019. It is
further envisaged in terms of the contract that a
Performance
Agreement will be entered into that will set out the responsibility
and key performance areas.
[34]
On 9 December 2019 the Minister
wrote to the acting company secretary of PRASA informing her of the
appointment of the third respondent
as the Acting Group Chief
Executive Officer of PRASA with effect from 9 December 2019
[3]
.
On the same day the letter is addressed to the third respondent in
which the Minister purports to vest him with the powers of
the
Accounting Authority under
section 49(2)(b)
of the
Public Finance
Management Act.
[35
]
On the same day the Minister released a media statement in which he
stated:
"Merely replacing an Interim
Board with a permanent Board will not address the deep rooted
fault lines at PRASA... ......
I arrived at a conclusion that a more
incisive intervention that enables quick turnaround times in
decision-making, with a view
to stabilise operational performance, is
more urgent than an appointment of a permanent Board. This view was
supported and
agreed to by Cabinet."
(my underlining)
[36]
I pause here to note that a statement on the Cabinet meeting of 13
December 2019 was attached to the papers which indicated
that the
meeting was held on Friday, 13 December 2019 where Cabinet approved
the dissolution of the Interim Board of PRASA and
placing of the
entity under administration. It also approved the appointment of an
Administrator.
[37]
The Minister continued in his media statement: "I have therefore
decided to dissolve the Interim Board and place PRASA
under
administration
with immediate effect. The
Administrator
will run the affairs of PRASA as a
de facto
Board of
Control as envisaged in the PRASA founding law
and as an
accounting authority terms of the PFMA... The role of the group CEO
will be integrated into the role of the Administrator
as an integral
part of the intervention... This intervention will continue for 12
months, whereafter a permanent Board will be
appointed to run the
affairs of PRASA. We will ensure that
the process to recruit a
permanent Board is initiated at least six months
into the tenure
of the Administrator to ensure a seamless transition at the end of
the intervention. I am pleased to announce the
appointment of Mr
Bongisizwe Mpondo as the newly appointed Administrator of PRASA with
immediate effect."
The
six months into the tenure would henceforth have passed already.
[38]
The following day, on 10 December 2019, the applicant addressed a
lengthy letter to the Minister. They pointed out that whilst
they
trust the decision to resolve the Interim Board and place PRASA under
administration, was done in good faith and with the
right intentions,
they had concerns that the actions taken by the Minister was not
lawful. They requested the Minister to clarify
the legal basis for
appointing an Administrator and whether the Minister intended to
involve National Treasury or Parliament as
contemplated in law. It
seems, to date, they received no response.
[39]
On 14 January 2020 the Group Executive: Legal, Risk and Compliance
and the General Manager: Group Legal Services provided an
internal
memorandum to the Administrator on two issues, namely:
a) Whether PRASA requires a Memorandum
of Incorporation?
b) What is the legal standing of the
Administrator in relation to PRASA?
In
respect of the second question, they came to the conclusion that the
appointment of the Administrator is unlawful, having regard
to both
the Legal Succession Act and section 49 of the PFMA. They also point
out the risks of continuing with the situation as
is.
[40]
The following day, 15 January 2020, yet another media event was held.
The transcript of this media briefing seems to be prepared
by
internal persons at PRASA, as it appears in the annexure under a
heading and logo of PRASA Media. It seems the Minister, the
Deputy
Minister and the Director-General were present at this meeting. It is
headed "Administrator's Brief to the Media".
The third
respondent elaborated on his mandate as the Administrator and his
turnaround strategy which would include, inter alia,
issues such as
serious restructuring and, on the face of it before me, all the
functions of the Board, placing functions under
what is called, the
Office of the Administrator. It seems that the Minister's Media
Statement dated the same day was released prior
to this media
briefing as reference is made to the Minister's Media Statement of
earlier that day wherein the Minister indicated
the winding down of
the War Room and without any confusion referring to the third
respondent as an Administrator. In both the Administrator's
Media
Address as well as the Minister's Media Statement mention is made of
the "Shareholders Compact" with the Administrator
that was
agreed to on 13 December 2019. Although the details are scant in
these documents, a better understanding is gleaned from
the
presentation made to the Portfolio Committee on Transport dated 11
May 2020 styled as "Administrator's Turnaround Update".
[41]
I revert to the timeline. On 28 January 2020, a few days before the
launch of this application, the Director-General of the
National
Treasury issued a letter to the Director-General of the Department of
Transport for the appointment of the accounting
authority for PRASA.
The authority was granted in terms of section 49(3) of the PFMA, to
approve that the Group Chief Executive
Officer of PRASA, or a person
acting in that position, be the accounting authority for a period of
twelve (12) months.
[42]
The application was launched on 4 February 2020., After the exchange
of affidavits it was eventually set down for hearing before
me,
albeit it seems there were aborted attempts for a hearing before
that, on 26 May 2020.
[43]
I turn briefly to the conduct of the parties that led to a delay in
the finalisation of the papers herein. The Director-General,
on
behalf of the Minister, in his opposing affidavit made it clear that
it was obvious that the applicant's application was made
without the
full knowledge of the events that led to the appointment of the third
respondent and the applicant was clearly wrong
in the construction of
the provisions of the Legal Succession Act and the PFMA. He makes no
mention of the letter dated 10 December
2019. It is instructive to
note that he failed to deal with the perception created by the
Minister and the Department as to the
true state of affairs before
the application was launched. The applicant, as far back as 10
December 2019, requested the Minister
to clarify the situation and
they simply failed to do that. It is disingenuous, in my view, for
the Director-General, and for the
Minister to have confirmed under
oath, that:
"I conclude this part of the
affidavit by pointing out that the Minister has colloquially referred
to Mr Mpondo as "the
Administrator" of PRASA. That, of
course, is not legally the case. Mr Mpondo is the new accounting
authority whose appointment
was lawfully made from and with the
approval of National Treasury, in terms of the relevant provisions of
the PFMA. "
[44]
The first respondent's answering affidavit, deposed to by the
Director-General is dated 6 March 2020. Not only did the
Director-General
and the Minister, at various instances as pointed
out above, publicly declare that the third respondent is "the
Administrator"
and
"de facto
Board of Control"
of the entity, but also as indicated above, it was the third
respondent himself that made a presentation
on the 11 May 2020 to a
Portfolio Committee in Parliament still calling himself something
else. The two YouTube videos hyperlinked
hereinabove clearly shows
the Director-General and the Minister jointly together on more than
one occasion using the terminology
and explaining same. It is clear
that the first respondent had no answer to the legality issue of the
appointment of an Administrator
instead of a Board of Control as I
shall point out hereunder.
[45]
Nowhere in the papers is there any indication but for the approval
dated 28 January 2020 that National Treasury had pre-approved
the
appointment of the third respondent as the accounting authority. In
fact, in the document filed does not refer to an individual
by name.
[46]
The Minister's answer in the opposing affidavit, through the
Director-General, as to the status of the third respondent and
his
appointment, led to the applicant requesting further documents from
the Minister. The shareholders contract/compact for 2018/2019
and
2019/2020 as well as the employment contract of the third respondent
were provided. Absent to these documents was the performance
contract/shareholders compact or any service level agreement that was
according to them signed on 13 December 2019 was attached
nor any of
the items upon which the employment was conditional. This condition
was applicable to both agreements, being the first
as a special
advisor and the second of 5 or 6 December 2019.
[47]
The disclosure of these additional documents to the employment
contracts led to an amendment being sought by the applicant.
They,
inter alia, criticised the Director General and/or the Minister
in not disclosing the requisite Performance Agreement.
The first
respondent then filed a supplementary answering affidavit, through
the Director General, attaching further documents.
What is
obvious is that no further Performance Agreements or Service Level
Agreements were attached. I repeat that it needs to
be noted that at
the announcement on 9 December 2019 the Minister publicly declared
that within the coming week he would enter
into a Service Level
Agreement with the third respondent. In the papers and other
instances, it is noted that an agreement was
allegedly entered into
on 13 December 2019. No such agreement was however attached to the
papers.
[48]
In answering the concern of the applicant that the performance
contract was not disclosed, the Director-General answered that
the
third respondent did not stay in his position for the three-month
period after the assumption of duty. This response is unhelpful
as on
the date of the affidavit being 6 March 2020, and the second
affidavit dated 7 April 2020, the three-month period would either
have expired on 6 March 2020 insofar as it relates to the second
employment contract and could have been attached to the second
affidavit which it was not.
[49]
In the supplementary answer referred to above, the offer of
employment as project manager and acting GCEO of PRASA attached.
The
duties to be performed by the third respondent was left blank and, as
indicated, by 7 April 2020 there was still no agreement
attached.
[50]
The applicant then filed a further supplementary affidavit wherein it
is clearly stated that the first respondent's affidavit
was out of
time in non-compliance with the court order, despite various
enquiries from the applicant's attorneys to the first respondent's
attorneys. As noted above the further affidavits on behalf of the
first respondent was filed on 7 April 2020 with no further
supplementary
affidavit filed by the Minister. It is noted that the
Minister's counsel advised the applicant's counsel on 31 March 2020,
four
days after it was due to be filed in terms of the court order,
that the Minister intended filing a supplementary affidavit. Although
the affidavits purport to be signed on 7 April 2020, until 16 April
2020 the attorney acting on behalf of the first respondent
still
indicated that he only had an unsigned version.
[51]
One of the purposes of the supplementary affidavit filed on behalf of
the first respondent was to oppose the amendment sought.
This
opposition flies in the face of the fact that an agreement was
reached by the parties to postpone the matter on a previous
occasion
and that the pragmatic approach should be followed that the
applicant's file an amended notice of motion and the Minister
be
given an opportunity to respond. They took an order by agreement with
a timetable for the filing of further pleadings. The opposition
to
the amendment sought is unfortunate and opportunistic and cannot be
upheld. Not only was no prejudice suffered by the first
respondent
but it was of their own making.
DISCUSSION
[52]
The parties are at, odds as to the interpretation of certain sections
of various pieces of legislation that impacts on this
matter. I am
thus guided by the principles as set out by the Constitutional Court
in
Cool Ideas 1186
CC
v Hubbard
2014 (4) SA 474
(CC)
where, at paragraph 28 it is stated:
"A fundamental tenet of statutory
interpretation is that the words in a statute must be given their
ordinary grammatical meaning,
unless to do so will result in an
absurdity. There are three important inter-related riders to this
general principle, namely:
(a) that statutory provisions should
always be interpreted purposively;
(b) The relevant statutory provision
must be properly contextualised; and
(c)
All statutes must be construed consistently with the Constitution,
that is, where reasonably possible legislative provisions
or to be
interpreted to preserve their constitutional validity. "
LEGAL
SUCCESSION TO THE SOUTH AFRICAN TRANSPORT SERVICES ACT, 9 OF 1989
(THE SUCCESSION ACT)
[53]
The applicant relies on the provisions of this Act, inter alia, to
support their argument that the Minister acted unlawfully
in
effectively to bestow on the third respondent all the powers and
responsibilities of the Board of Control as well as that of
a Group
Chief Executive Officer.
[54]
The respondents in turn argue, that because the Minister has the
right to dismiss the members of the Board, it envisages a
period that
they refer to as an interim period, where there is no Board of
Control. I have referred to sections 22 (1), 23 and
24 in paragraphs
[4], [5] and [10) above. Sections 22 and 23 primarily deals with the
establishment and the main objective and
business of PRASA. Section
24(1) of the Succession Act vests the management and control of PRASA
in the "Board of Control"
whose members are appointed and
dismissed by the Minister. The Succession Act recognises that a
multiplicity of skills and experience
is required in the management
of the affairs of PRASA. The effect of the provisions referred to
above, read together is that, as
a matter of law, the legal entity
has a composite Board of Control, whose composition is prescribed in
the Act. It is instructive
to note that the word "shall "is
used. This Act also does not grant any person other than the Board of
Control, which
is responsible for the management, to appoint or
dismiss the executive management, as the Minister purports to have
done. The period,
absent a Board of Control, that the respondents
referred to as an Interim period might be remedied by the provisions
of the PFMA.
[55]
Before I, however, turn to the PFMA, insofar as it is still relevant,
given the stance of the respondents that they disavow
their previous
claims of appointing the third respondent as an Administrator, the
provisions of section 29 of the Act is applicable.
In the
announcement on 9 December 2019 the Director-General indicated that
the appointment of an Administrator is akin to Business
Rescue. The
Act does not make provision for placing the entity under any form of
administration and the closest that it can be
related to is to be
found in section 29 of the Act which reads:
"29. Liquidation
For as long as the state is a
shareholder of the corporation, the corporation shall be liquidated
or placed under judicial management
only on the authority of an Act
of Parliament. "
Counsel
for the first respondent were constrained in arguing this point at
all. It is clear that the Minister had no power to place
the entity
under "administration" and appoint an "Administrator".
It is therefore not unsurprising that the
use of the term is now
blamed on colloquial speak.
THE
PRASA SHAREHOLDER'S CONTRACT/COMPACT
[56]
The shareholders contract for 2019/2020 was signed on 29 March 2019
between the Government of the Republic of South Africa,
represented
by the Minister of Transport, and PRASA. It delineates the roles and
responsibilities of the Minister and the Board
of Control as the
accounting authority. The contract reinforces the position that the
Board of Control is responsible for the governance
of PRASA. It
remains the accounting authority and is responsible for the
appointment of the executive. The Minister therefore had
no authority
to appoint Executive Officers that would include an acting GCEO.
THE
PROMOTION OF ADMINISTRATIVE JUSTICE ACT, 3 OF 2000 (PAJA)
[57]
There appears to be no dispute that the decision to appoint the third
respondent to PRASA and his corresponding failure to
appoint a
properly constituted Board of Control under section 24(1) of the
Legal Succession Act, is administrative action reviewable
under PAJA
and is also the exercise of public power to be reviewed under the
constitutional principle of legality.
PUBLIC
SERVICE ACT, 1994 AND REGULATIONS, 2016
[58]
The relevance and context of the Public Service Act and its
regulations is clearly illustrated by the appointment of an
accounting
authority in the letter dated 28 January 2020 from the
Director-General of the National Treasury. In this letter he approved
the
Group Chief Executive Officer of PRASA or a person acting in that
position, to be the accounting authority. It is therefore imperative
to determine the position of the third respondent as the acting GCEO.
The first question that arises is whether the third respondent
was an
"employee" capable of secondment.
[59]
Section 1 of the Public Service Act defines an employee as a person
contemplated in section 8 of the Act, but it excludes a
person
appointed under section 12A.
[60]
Section 15 (3) reads as follows:
"(3)(a) The executive authority
of a department may second an employee of the department to another
department, any other organ
of state, another government or any other
body-
(i) for a particular service or period
not exceeding the prescribed period (if any); and
(ii) on the prescribed conditions (if
any) and such other conditions as agreed upon between the executive
authority and the relevant
functionary of the body concerned.
(b) The secondment of an employee of a
department may occur only if
(i)
the employee requests, or consents to, the secondment;
or
(ii)
in the absence of such request or consent, after due
consideration of any representations by the employee, the secondment
is in
the public interest."
[61]
As indicated above the third respondent was appointed on 15 November
2019 under section 12A of the Public Service Act as a
special
advisor. This employment was terminated on 5 December 2019 when the
third respondent was offered an appointment as project
manager and
secondment to PRASA as an acting Group Chief Executive. The
termination of the first agreement and appointment was
clearly a
strategy to place the third respondent in a position to be seconded
in terms of section 15 of the Act. However, he was
not an existing
employee capable of secondment.
[62]
In the event that he was capable of secondment, the parties still had
to comply with the conditions set in section 15(3) as
there was
clearly no agreement between the Minister and any other functionary
within PRASA. The Board of Control was not capable
of agreeing to the
secondment as it was dissolved on 5 December 2019. The acting company
secretary was simply advised on 9 December
2019 of the secondment. No
Performance Agreement had been concluded in terms of regulation 88 of
the Public Service regulations
which reads: "The Minister shall
develop and improve a system for performance management for members
of the SMS or categories
of the SMS." Furthermore, the Minister
of Public Service and Administration issued directives which came
into effect on 1
April 2018 which also have not been complied with.
No deviation was sought nor approved by the Minister of Public
Service and Administration.
As indicated above, even at the time of
filing their affidavits no Performance Agreement had been entered
into. Furthermore, clause
6 of the employment contract was simply
left blank.
[63]
Regulation 82 read with regulations 25(2), 26, 57(2) and 57(3)
describes certain requirements to be met. Whilst the Minister
was
called upon to show that the requirements were met for the third
respondent as a Project Manager, no answers were given.
[64]
Consequently I am of the view that not only was the third
respondent's appointment as the acting GCEO unlawful but also his
appointment as Project Manager in the Minister's office and this is
reviewable under section 6(2) of PAJA and should be set aside.
PUBLIC
FINANCE MANAGEMENT ACT 1 OF 1999 (PFMA)
[65]
PRASA is a form of public entity listed in Part B of Schedule 3 of
the PFMA and is therefore obliged to have "an Authority
which
must be accountable in terms of this Act". Section 49 reads:
"49. Accounting authorities.-
(1)
Every public entity must have an authority which must
be accountable for the purposes of this Act.
(2)
If the public entity-
(a)
has a board or other controlling body, that board or controlling body
is the accounting authority for that entity; or
(b)
does not have a controlling body, the chief executive officer or the
other person in charge of the public entity is the accounting
authority for that public entity unless specific legislation
applicable to that public entity designates another person as the
accounting authority.
(3)
The relevant treasury, in exceptional circumstances,
may approve or instruct that another functionary of a public entity
must be
the accounting authority for that public entity"
[66]
The first respondent argues that he was entitled to apply section 49
in order to appoint the third respondent as the accounting
authority.
The first respondent is of the view that the existence of a board or
a controlling body must be interpreted as a matter
of fact rather
than a matter of law. He is further of the view that section 49(2)(b)
is an empowering provision that empowers him
to vest the powers of
the accounting authority in a designated person. Having dissolved the
Board of Control he was thus empowered
to vest powers in the third
respondent.
[67]
In my view in order to determine whether the Minister was thus
empowered one has to have regard to the language and structure
of
section 49, in its proper context, with regard to the object thereof.
Section 49(2)(b) in my view, applies by operation of law
only to
public entities that does not have as a matter of law a board or a
controlling body and it does not vest the responsible
minister with
the power to designate a functionary in a public entity as the
accounting authority. Section 49(3) on the other hand
is an
empowering provision that vests such power exclusively in the
relevant Treasury with a discretion and have no automatic legal
effect. As it caters for "exceptional circumstances" , in
the instant matter such exists, National Treasury would have
been
empowered to act in terms of section 49(3) lo appoint an accounting
authority. The unfortunate situation was that absent a
Board of
Control, a new GCEO or an acting GCEO lawfully appointed could have
been assisted by the letter of 28 January 2020. However,
under the
circumstances where the appointment is ruled to be unlawful, and the
Minister implementing section 49(2)(b) it seems
to be reviewed and
set aside.
[68]
Having regard to the seriousness of this matter I am of the view that
an order should be granted that allow National Treasury,
in a short
period of time, to appoint an accounting authority pending the
appointment of a permanent Board of Control.
THE
BOARD OF CONTROL
[69]
As indicated above the Minister has a duty to appoint a Board of
Control. The vacancies on the Board has been advertised more
than
once. The process of appointing a permanent Board of Control has been
delayed for more than two years. The current Minister
extended the
term of office of the last Interim Board and indicated on more than
one occasion publicly that he was to appoint a
permanent Board before
the end of 2019. In the report of the GTAC referred to above, it was
highlighted as a short-term need to
be fulfilled within three months
of the report. Nominations were called for and received and
particularly on 4 November 2019, as
I have indicated, the Minister
publicly declared that he was busy with the process of appointing a
permanent Board that would probably
be finalised before the end of
that year and that members were being interviewed.
[70]
At the announcement of the appointment of the third respondent as the
Administrator the Minister sure the public that within
six months of
the Administrator's appointment the process to appoint a new Board
should be started on. We are now eight months
hence.
[71]
Mr Maleka
was specifically asked to ascertain during the
hearing as to the timelines for the appointment of a permanent Board
of Control.
The Minister argues that he needs 12 months. In my view
this process has been ongoing for longer than 12 months and whilst I
am
mindful of the enormity of the task and that one should not set up
a Board of Control for failure, more than enough time was wasted.
[72]
Consequently, I am of the view that a period of sixty (60) days from
the date of this order should be sufficient for the Minister
to
complete the process, as he was ready in November 2019 to present his
candidates that was interviewed to cabinet.
[73]
The relief sought in paragraph 5 of the amended notice of motion was
not strenuously pursued with and no order will be made
in this
regard.
CONCLUSION
[74]
I am therefore satisfied that the applicant has made out a case for
the relief sought in the notice of motion, as amended,
and
consequently they would be entitled to the cost that should follow
the result.
ORDER
[75]
I therefore make the following order:
1. The First Respondent's failure to
appoint a Board of Control for PRASA (PRASA) and decision to appoint
the third respondent as
"the Administrator of PRASA" in
lieu of a Board of Control for PRASA, is declared to be unlawful, and
is reviewed and
set aside.
2. The First Respondent's secondment
and/or appointment of the Third Respondent as the Acting Group Chief
Executive Officer and
accounting authority of PRASA is declared
unlawful, and is reviewed and set aside.
3. The Second Respondent's decision of
28 January 2020 to approve that the group chief executive officer of
PRASA, or person acting
in that position, be the accounting authority
of PRASA is the declared unlawful, and is reviewed and set aside.
4. The First Respondent is directed to
appoint a Board of Control for PRASA, in accordance with section 24
of the Legal Succession
to the South African Transport Services Act 9
of 1989, within sixty (60) days of the date of this order, or such
other period as
extended by the court on good cause shown.
5. Pending the appointment of the
Board of Control under paragraph 4 above:
5.1
The Second Respondent (National Treasury) is directed to instruct or
approve, within seven (7) calendar days of the date of
this order,
another functionary of a public entity to be the accounting authority
for PRASA, in accordance with section 49(3) of
the Public Finance and
Management Act 1 of 1999, and
5.2
The orders in paragraph 1, 2 and 3 are suspended until another
functionary is appointed on the instruction or approval of the
Second
Respondent, in terms of paragraph 5.1 of the order.
6. The first respondent to pay the
costs of this application, including the costs of 2 counsel where
employed.
__________________
N
C Erasmus
Judge
of the High Court
Counsel
for Applicant: Adv Janice Bleazard
Attorneys
for Applicant: Bradley Conradie Halton Cheadle Attorneys
Counsel
for First Respondent: Adv V Maleka SC
Adv
N Mashava
Attorneys
for First Respondent: The State Attorney
i
My insertion.
[1]
Mr Mpondo will be used interchangeably with Third Respondent.
[2]
https://youtu.be/exDC6SGziV 4;https://youtu.be/9tUD4kSKC2o
[3]
The Board ceased to exist on 5 December 2019.