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[2011] ZAGPJHC 32
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Nyoka v Cricket South Africa (2011/8727) [2011] ZAGPJHC 32 (15 April 2011)
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SOUTH GAUTENG HIGH COURT, JOHANNESBURG
REPORTABLE
Case No.: 2011/8727
Date:15/04/2011
In
the matter between:
DR
MTUTUZELI
NYOKA
.....................................................................
Applicant
and
CRICKET
SOUTH
AFRICA
.............................................................
Respondent
______________________________________________________________
J U D G M E N T
______________________________________________________________
MOJAPELO, DJP
The Indian
Professional League (“IPL”) held its tournament in South
Afr
ica
in the first half of 2009. The tournament was hosted by Cricket
South Africa (“CSA”). The event was by all accounts
a
great success. Mr Gerald Majola (“Mr Majola”), as the
CEO of CSA, handled negotiations and concluded the agreement
with the
Indian authorities for the staging of the tournament in this country.
Dr Mtutuzeli Nyoka (“Dr Nyoka”), as
the president of CSA
praised Mr Majola for the role he played in negotiating and staging
the tournament.
If it all ended
there it would have been a happy ending of a good story. However
,
the payment of bonuses by the IPL to the staff of CSA and the way in
which the payments were handled by CSA unleashed a wave of
events
that wrecked and strained relationships within management of CSA and
culminated in a special general meeting of CSA on 12
February 2011.
At that meeting CSA took a decision to remove Dr Nyoka from his
office as the president of CSA, the position to
which he had been
re-elected unopposed in August 2010. Dr Nyoka and Mr Majola, and
the roles they played, are central to the
strained relationship in
the management of CSA, and in order to understand fully the cause
thereof, it is important to contextualise
them.
This is how the
major events in that chain flowed
:
Sequence
of
Events
:
During
the period March – August 2009, a dispute raged in relation to
the IPL in South Africa. Rumours emerged (and were taken
up by the
Gauteng Cricket Board (“GCB”), which is one of the eleven
associate members of CSA) that Mr Majola had personally
received (or
was to receive) a significant payment from the IPL.
Dr
Nyoka confronted Mr Majola with these rumours. Mr Majola
categorically denied receiving any personal benefit from the IPL.
Flowing from this interaction, Dr Nyoka supported Mr Majola in
resisting the accusation from the GCB. Dr Nyoka believed Mr Majola
and accepted that he had not received any personal benefit from the
IPL.
On
10 July 2009, a special general meeting was held to deal with the
GCB’s allegations of mismanagement in respect of the
IPL
tournament. According to the minutes of that meeting Mr Majola
“
informed the meeting that, in his negotiations with IPL he
had included an amount for bonuses for the CSA staff and this news
was
applauded by the members.”
No particularity was sought
and none was given about the IPL bonuses. In particular, Mr Majola
did not mention that he was to benefit
or had benefitted from the
bonuses he had negotiated and no amounts were mentioned.
Despite
Mr Majola’s report, the GCB persisted in its allegation that Mr
Majola had received personal benefits from the IPL.
To meet this
allegation, Mr Majola is said to have shown Dr Nyoka and Mr
Skjoldhammer, the chairman of GCB, a copy of the Heads
of Agreement
concluded with IPL, which made no mention of any bonus. Based on
this evidence Dr Nyoka insisted that the GCB apologise
for its
accusations of impropriety against Mr Majola. Unbeknown to Dr Nyoka
or the GCB, Mr Majola had not disclosed the full IPL
agreement to
them and had withheld the “Schedule of Payments” which
reflected a bonus payable to him in the sum of
R1 131 062.00.
In
his President’s annual report for 2008/9 prepared in mid 2009,
Dr Nyoka praised Mr Majola for his work as CEO. Dr Nyoka
also praised
Mr Majola in 2009 for his work as CEO on other occasions. This was
all prior to 13 July 2010 when the bonuses received
by Mr Majola from
the IPL and the International Cricket Council (“ICC”)
were revealed. Throughout and until after
13 July 2010 Mr Majola
remained silent on the bonus he had received.
In
September 2009, the ICC Champions’ League Trophy was held in
South Africa. Without the knowledge of Dr Nyoka or the remuneration
committee, Mr Majola received a further bonus in an amount of
R644 081. This too was not disclosed.
In
April 2010, at the end of the CSA financial year, Dr Nyoka considered
the work done by Mr Majola during the year, specifically
his
contribution to the success of the IPL and ICC tournaments, and
motivated to the Remuneration Committee of CSA (“Remco”)
payment of an extraordinary bonus to Mr Majola equal to eight months’
salary, rather than the usual three months. This recommendation
was
approved by Remco and the special bonus was paid to Mr Majola by CSA.
However, Mr Majola made no disclosure that he had already
received
R1, 795,143.00 in bonuses which had been paid without reference to or
approval of the board or Remco. Had Remco known
of these bonuses it
would not have agreed to the special payment, apart from the fact it
would have taken up the non-disclosure
issue. This is specifically
confirmed by Mr Paul Harris, who was the chairman of Remco at the
time when the extraordinary CSA
bonus was approved and paid.
On
09 July 2010 the Audit Committee of CSA met with Deloitte, the
external auditors, to sign off the 2010 financial statements.
At this
meeting Deloitte were not aware of the payment of the IPL and ICC
bonuses, because of the way in which the bonuses were
reflected in
the financial statements (in the loan accounts and not in the revenue
accounts). The financials were thus approved.
On
10 July 2010 Deloitte were notified of the bonus payments and the
signing off of the financials was postponed. Instead steps
were taken
and an independent auditor was appointed to conduct an internal
audit.
On
13 July 2010, before CSA’s auditors, Deloitte, had signed off
on the financial statements for the year ended April 2010,
Mr D O
Thomas (an independent auditor), delivered a report following his
review of CSA’s accounting records. Mr Thomas reported
that: a
pool bonus of R2,732,172.00 had been received for the IPL tournament
and of that amount, R1,131,062.00 had been paid to
Mr Majola and
R797,999.00 to D McIntosh. He reported further that a bonus pool of
R2,024,951.00 had been received for the ICC Trophy,
and of that,
R644,081.00 had been paid to Mr Majola and R649,986.00 to D McIntosh.
In total, 67 per cent of the bonuses received
by CSA had been paid to
these two individuals. In addition, Mr Thomas identified travel and
expenses claims which appeared to be
abnormal. He sent his report to
Mr Colin Beggs (then head of CSA’s audit committee), who in
turn reported to Dr Nyoka.
Dr
Nyoka was dismayed at this news since it was directly at odds with
the consistent denial by Mr Majola that he had received any
personal
benefit from the IPL tournament. This was the turning point in the
relationship between Dr Nyoka as president and Mr
Majola as CEO of
CSA. Dr Nyoka immediately consulted a list of experienced individuals
on the corporate governance ramifications
and the correct steps
forward.
On
4 August 2010, following a confrontation between Dr Nyoka and Mr
Majola, Mr Majola finally revealed the Schedule of Payments
which
formed part of the agreement with the IPL. The schedule reflected the
personal benefit that Mr Majola had negotiated for
himself.
Previously Mr Majola had only shown Dr Nyoka the IPL Heads of
Agreement without the schedule.
Dr
Nyoka sought advice from Prof Mervyn King SC, who was then chair of
CSA’s Legal and Governance Review Committee of CSA,
and on his
advice, immediately took steps to appoint an external Commission to
investigate the bonus issue.
At
a board meeting held by way of teleconference on 4 August 2010, it
was unanimously decided that CSA’s management committee
(“MANCO”) should appoint an independent, external
committee to review the circumstances surrounding the payment of
the
bonuses in the two tournaments.
On
5 August 2010, MANCO met and decided to appoint a Commission headed
by former Chief Justice Langa, assisted by the auditing firm
KPMG. On
the same day, Mr Majola proposed to pay back the bonuses he had
received. It was by this stage essential to ensure that
the CSA
financial statements for the year ending April 2010 be approved
without delay.
On
6 August 2010, CSA’s audit and risk committee met and decided
to recommend the approval of the financials by the board
subject to
the repayment of the bonus monies by Mr Majola and McIntosh and an
external review of the bonus issue. This decision
was conveyed to
Deloitte who insisted on an independent inquiry as a condition for
them signing off the financial statements.
Thereafter,
a briefing meeting was held with former Chief Justice Langa and KPMG,
to brief them on their mandate and terms of reference.
At
a further teleconference held later in August, the board again
unanimously endorsed the external review.
On
1 September 2010, Mr Majola, accompanied by his lawyer, met with Dr
Nyoka and complained about the process which had been followed.
He
wanted an opportunity to make representations directly to the board
and to persuade it to reverse its earlier resolutions.
At that
meeting, Mr Majola stated to Dr Nyoka that in the past “he has
never declared his bonus to any CSA President”.
Clearly, Mr
Majola had operated with the express intention of keeping the bonus a
secret and that secret would have remained so
in the absence of the
Thomas audit report.
On
16 September 2010, Mr Ray Mali, a CSA board member, arranged a
meeting with Dr Nyoka and Mr Majola. An attempt was made at
reconciling
Mr Majola and Dr Nyoka. Some reconciliation was achieved
but this did not detract from or dilute Dr Nyoka’s resolve to
pursue
the necessary inquiry, nor did it vindicate Mr Majola.
A
board meeting was held on 17 September 2010. Deloitte were in
attendance, and were questioned about why the bonuses had been paid
from a CSA account without being detected by them. After further
discussion the following decision was recorded:
“The general
consensus of the board was to proceed with the appointment of a
Commission (with the exclusion of Deloitte and
KPMG). Mr Matheson was
asked to expedite the matter as quickly as possible.”
This
was the third occasion on which a unanimous decision for the
appointment of an external Commission was taken by the board.
On
28 September 2010, Mr John Bester (the new chairperson of CSA’s
finance and commercial committee (“Fincom”)
prepared a
memorandum. Although he confirmed the board’s decision of 17
September 2010 to appoint an external Commission
comprising of Chief
Justice Langa and himself, he recorded that he had held informal
discussions with Mr Majola and had met with
Dr Nyoka and the vice
president, Mr A Khan, and in the light thereof suggested an internal
review of the bonus issue rather than
an external one. This was the
first time that an internal investigation was suggested in the place
of the external one that had
been agreed to and confirmed by the
board of CSA at least three times. The memorandum does not provide
reasons for this change.
In a supplementary affidavit filed the day
before the hearing of this application, Mr Bester explains for the
first time, as far
as I can establish, that the internal
investigation was suggested as a preliminary process, and that the
external investigation
would have been resorted to if the internal
process found good reasons for that.
On
29 September 2010, a board teleconference was held to discuss this
proposal. CSA has attached a minute of that teleconference.
Dr
Nyoka denies that this is an accurate recordal of the teleconference.
The inaccuracy of the minute has been confirmed by CSA
in the
supplementary answer. Contrary to CSA’s earlier contention it
appears that there were only 9 board members present
when the
teleconference started.
Despite
three (3) prior resolutions to hold an independent external review,
the board decided, in a hastily arranged teleconference,
instead, to
constitute an internal committee under the chairmanship of Khan (“the
Khan Committee”)
with Mr Bester, also serving as a
member. Mr Bester had made the proposal for the formation of the
internal committee after discussions
with Mr Majola. The content of
those discussions have not been disclosed before this court.
The
decision to proceed with an internal inquiry in the place of an
independent external one, was taken in the face of the concerns
of
the external auditors, Deloitte, who in a letter of the same day (29
September 2010) expressed themselves as follows:
“
Prior
to signing the annual financial statements for the year ended 30
April 2010, we were informed that an independent enquiry
would take
place on the matters relating to the unauthorised bonuses, travel and
related expenditure and fringe benefits. At that
stage we were of the
view that that an investigation was necessary in order to allow us to
fulfil our statutory reporting requirements.
Based on this
understanding, we were satisfied with management’s actions, and
the financial statements were signed off accordingly.
Should
an independent enquiry not be held in this regard, we may be obliged,
in terms of our statutory obligations, to conduct a
review ourselves.
In the event that an enquiry or our review indicates that there has
been a Reportable Irregularity, we will have
to report details to the
Independent Regulatory Board for Auditors (IRBA) in terms of the
Auditing Professions Act 2005 (Act 26
of 2005) (APA). …
In
relation to this matter, we strongly recommend to the Board to
continue and conclude the independent enquiry. Failure to do so
may
have serious adverse consequences for CSA. …
I
understand that there is a Board meeting this afternoon. Please
distribute this letter to all your board members.”
It
is not clear whether this letter was distributed to the board members
as specifically requested by the auditors. What is clear
is that
contrary to the express view and advice of the auditors, the internal
Khan Committee was tasked to proceed with the investigations
in the
place of the independent external investigations which would have
been chaired by the former Chief Justice Langa.
Dr
Nyoka and others presented evidence to the Khan Committee. Dr
Nyoka’s statement is “MN9”. He confirms its
correctness under oath.
The
Khan Committee handed down its report shortly before 19 November
2010. It made a number of findings which Dr Nyoka, as well
as the
former chairmen of CSA’s key governance committees, regarded as
being in direct conflict with the evidence they had
presented. This
caused them to publicly criticise its findings.
The
Khan report was presented to the board on 19 November 2010. Dr Nyoka
recommended that the report be sent to the affiliate members
of CSA
for consideration and discussion at that level before a decision was
taken by the board of CSA whether to endorse it or
not. This proposal
was rejected by Mr Majola who stated that he wanted to bring the
matter to an end. It is questionable whether
it was appropriate for
Mr Majola to have been involved in any way in the discussion of this
proposal. Although there is a dispute
about the accuracy of the
minutes of the meeting, it is common cause that the Khan report was
accepted by the board. Dr Nyoka was
not happy and submitted a
statement of dissent explaining his position.
On
22 November 2010, a statement was released by the former chairmen of
the CSA audit, finance and remuneration committees who had
been in
office during the period when the irregularities had occurred. The
three individual chairmen (each an independent, senior,
and respected
individual) voiced their disapproval at the manner in which the
undisclosed bonus payments had been dealt with. They
also raised the
specific concern that the funds of the CSA were to be preserved to
develop the game at grassroots level rather
than to enrich the
executives who had already been adequately compensated.
On
13 December 2010, Dr Nyoka approached CSA’s Vice President, Mr
Khan (chairman of Khan Committee and now Acting-President)
and
requested Khan’s comments on the statement so that an
appropriate response could be submitted to the former chairmen.
Khan
declined because he regarded the matter as closed.
Dr
Nyoka remained intent on obtaining answers to questions that had not
been answered in the Khan Report. It concerned him that
Mr Majola had
misled him during 2009; that ‘secret profits’ had been
made (contrary to CSA’s Code of Best Practice)
and not
detected; and that he had been party to an undertaking to the
auditors that an external inquiry would take place and (on
that
basis) the auditors had signed-off on the 2010 financial statements.
He was concerned that the internal (Khan Committee) process
followed
by CSA, despite the undertakings to the auditors, would be viewed as
a cover-up and tarnish the image of cricket generally.
Dr Nyoka was
intent on following these up.
Dr
Nyoka met with resistance in advancing this line. His detractors, who
believed the bonus issue should be laid to rest, rallied
support for
his removal as president. The affiliate member presidents met
independently of Dr Nyoka on 08 January 2011 and then
with Dr Nyoka
on 09 January 2011. They sought to resolve the conflict between Mr
Majola and Dr Nyoka. Dr Nyoka suggested independent
meetings with
each of the Presidents to understand their concerns and complaints.
The process suggested by Dr Nyoka appears not
to have found favour
with affiliate presidents and was not followed. Instead, Dr Nyoka
received notification that the affiliate
presidents wished him to
step down from his office as president of CSA.
This
was the first intimation that the removal of Dr Nyoka from his
position as president of CSA would be sought. It is important
to set
out in some detail the flow of events from this point onwards as this
will be vital to determine whether Dr Nyoka received
proper notice of
the meeting or not.
Events
leading up to Notice of and the Meeting:
On
19 January 2011, Mr Majola notified Dr Nyoka by letter of a
requisition by the affiliate presidents for a special general meeting
at which a resolution would be tabled to remove him from office as
president of CSA. This was not the
notice
of the meeting but a
requisition for one to be convened; it contained no date for a
meeting.
On
the same day, that is, on 19 January 2011, Dr Nyoka’s use of
his official e-mail address at CSA was suddenly terminated
by the CSA
– despite the fact that he remained president. From that date
Dr Nyoka could not receive or send emails using
that address. CSA
did not deny this in its initial answering affidavit.
In
its supplementary papers the CSA states that on 19 January 2011, its
computer server crashed. This is given as a reason why
CSA cannot
access the records of the 20 January 2011 emails. However, the
so-called crash of the server apparently had the effect
of
terminating or cutting off the use of only Dr Nyoka’s email
address at CSA. There is no suggestion that the email address
of any
other director, official or employee of CSA was similarly affected.
CSA
alleges that notice of a special general meeting to be held on 12
February 2011 at the Inter-Continental Hotel at OR Tambo
International Airport was distributed to all concerned on 20 February
2011 and specifically to Dr Nyoka by email.
On
26 January 2011 Dr Nyoka addressed and sent a letter by email to CSA
in which he stated, inter alia, that he had not received
formal
notice of the meeting of 12 February 2011 although he read about it
in press reports. He also asked for reasons from each
of the
affiliate members of CSA for his proposed removal as president of
CSA. He specifically requested, in the covering email,
that his
letter be sent to all members of the board and to members of a body
called the members forum. He did not receive a response.
On
01 February 2011 Dr Nyoka addressed a further letter to CSA, which he
copied to individual board members and to members forum.
He sent this
by email together with copy of his earlier letter of 26 January 2011
to CSA. He pointed out that he had not received
a response to the
letter and email of 26 January 2011. In reply, Dr Nyoka received a
letter purportedly written and signed “for
and on behalf of the
Affiliate presidents of Cricket South Africa” to the effect
that they had received his correspondence
and “the contents
thereof are noted”. CSA thus ‘noted’ that Dr Nyoka
had not received notice of the meeting.
It also, presumably, ‘noted’
his request for reasons.
Dr Nyoka still did not receive
notice of the meeting of 12 February 2011 nor any response to his
request for reasons. CSA appears
to have done nothing about what it
had noted.
Dr
Nyoka’s e-mail of 1 February 2011 further elicited a response
from two board members that they had not previously seen
Dr Nyoka’s
correspondence. Clearly, Mr Majola had not distributed it as he was
requested and required to do.
By
10 February 2011, Dr Nyoka had still not received notice of the
general meeting although he was aware from press reports that
it was
to take place. He addressed a further e-mail to CSA (annexure ‘MN26’
at record p 155) in which he repeated
that he had not received notice
of the meeting. He pointed out that he had not been invited to the
meeting despite being the person
who was at the centre of the
proposed vote and the only person able to respond in his defence. He
said that if the decision was
to be made by each of the affiliate
members, he expected their respective boards to have consulted him or
made enquiries from him
so that he could address any of their
concerns. None of this was done. He pointed out that the unfortunate
result of the approach
adopted by CSA was to prejudice cricket and
credible cricket administration.
Dr
Nyoka finally received the notice of the meeting which was
hand-delivered to him on 10 February, only two (2) days before the
meeting. On 11 February 2011, Dr Nyoka sent a further note to Mr
Majola as the CEO of CSA (annexure ‘MN28’ at record
p157)
calling for various documents that would properly sustain an inquiry
into the financial records of CSA. This was ignored
by the CEO.
The
general meeting was indeed held on 12 February 2011. Dr Nyoka did not
attend. At that meeting a motion of no confidence was
adopted and
the decision was taken to remove Dr Nyoka from his position as
president of CSA. This also had the effect of removing
him as
director and chairperson of the board of CSA. It is this decision
that Dr Nyoka now seeks to set aside on the basis that
it is invalid.
Court
proceedings
:
On
28 February 2011
Dr Nyoka filed an urgent
application in this court to challenge the decision of 12 February
2011 taken by CSA at the special general
meeting of that day. He is
henceforth referred to as the applicant. CSA is cited as the only
respondent and it is thus also henceforth
referred to as the
respondent.
The
applicant
seeks an order to review and set
aside the decision and to reinstate him to his position as president
and chairperson of the respondent
with immediate effect. The
respondent opposes the challenge.
At
first the applicant sought an order in terms of Part A of the Notice
of Motion on an urgent basis pending the decision in Part
B. The
relief sought in Part A is the same as the relief sought in Part B.
The only difference is that the relief in Part A was
sought as an
interim urgent measure pending the final decision for the same relief
in Part B. Part A was initially to be heard
on 15 March 2011 while
Part B was to be heard on 10 May 2011.
The
parties however agreed by arrangement with this court that the matter
would be heard and disposed of in one hearing on 25 March
2011. The
matter was accordingly heard before me on the latter date.
The
proceedings before this court are thus in terms of Part B.
Consequently, the determination of urgency is no longer an issue as
a
prerequisite for this court determining the main relief sought by the
applicant. The arrangement for one hearing was reached
without the
applicant conceding that the relief he seeks is not urgent. The
respondent has also not conceded that it is.
Internal
Arbitration:
in limine
:
The
respondent raised a point
in limine
in the original papers and
persisted with the point in the hearing before me. The point is to
the effect that the dispute should
be referred to arbitration in
terms of clause 25.1 of the respondent’s Articles of
Association (“the Articles”)
and that this court
accordingly has no jurisdiction. Although the point was not strongly
argued, it remains an open issue between
the parties. A ruling is
thus necessary.
Clause
25.1 of the Articles provides that:
“
Subject
to the Constitution of the RSA, and save in circumstances where there
is a need for urgent relief of a sort which cannot
be obtained
through the dispute prevention or resolution procedure contemplated
in these Articles, no club, club member, official,
Office Bearer or
affiliate shall approach a Court of Law to decide a dispute it has
with a body or individual falling under the
jurisdiction of the
company.”
The
word company in the clause refers to CSA (the respondent).
There
are two grounds, on which the point
in limine
falls to be
dismissed based on a proper reading of the clause, i.e., (a) urgency
of relief; and (b) the nature of the dispute.
The
applicant sought urgent relief in the proceedings. The matter was set
down on 15 March 2011 as to the first part while the second
part was
to be heard on 10 May 2011. The first part could not be accommodated
in the ordinary urgent court on 15 March 2011 due
to its anticipated
duration. It was referred to me on 17 March 2011 to be accommodated
as special motion on urgent basis. It also
appeared that the
proceedings of 10 May 2011 would, because of the duration also
require accommodation as a special motion that
would require a day to
be disposed of. The parties agreed through the intervention of this
court to a single hearing on 25 March
2011 instead of two separate
hearings. Although by agreement urgency would not be argued as an
issue, it remained on the papers,
as it was neither abandoned nor
conceded. Urgency thus persists in the current hearing on expedited
times for final relief. This
is relief of a sort which cannot be
obtained through the dispute resolution procedures contemplated in
the Articles.
The
respondent has contended in its answering affidavit, through Abdool
Karim Khan, that there is no urgency as the next elections
are due in
August 2011 and “There will be nothing to preclude the
Applicant from standing for election as president at an
annual
general meeting in August 2011.” The contention is devoid of
sincerity in the approach to this application. If there
is illegality
and invalidity of the nature complained of, it cannot be a proper
response to say the applicant has the next elections
available for
him to change the course of events. It is patently in the interest
of justice and all involved that illegality of
that nature be
adjudicated and decided upon at the earliest and without undue delay.
This is what the applicant seeks from this
court.
Secondly,
the dispute is not one between an office bearer and a “body or
individual falling under the jurisdiction of the
company” as
contemplated in clause 25.1 of the Articles. It is one between the
applicant as an office bearer and respondent,
the “company”
itself.
I
am satisfied that the jurisdiction of this court is, in the
circumstances, not ousted by the arbitration clause in the Articles
and that it is in the interest of justice that this court should
exercise such jurisdiction. The point
in limine
is without
merit and is dismissed.
The
Merits:
I
now proceed to consider the application on its merits.
The
applicant seeks an order to set aside the decision of 12 February
2011 on the basis that the decision is invalid. He complains
that he
was not given proper notice of the meeting though he is the person
most affected by the decision. He was also not given
the reasons and
information that he required. He relies on a number of alleged
irregularities including the contention that he
was not afforded an
opportunity to be heard at the meeting. I now proceed to deal fully
with each of the grounds on which the applicant
attacks the decision
of 12 February 2011.
Notice
:
The
requirements for the removal of the president are dealt with in
cla
use 4.6 of the Articles which provide
that ‘office bearers’ may be removed during their term by
the affiliate members
at a general meeting held in accordance with
the Articles, subject to the approval of two-third (2/3) of the vote
of the affiliate
members. The president of the respondent is an
office bearer in terms of the Articles.
The
procedural requirements for notices of meetings are contained in
clause 7.5 which reads as follows:
“
An
Annual General Meeting and any General Meeting, which requires the
passing of a special resolution as contemplated in Companies
Act
shall be called by 21 (twenty one) clear days notice in writing at
the least … provided that the CEO has taken reasonable
steps
to give notice of a meeting, the accidental omission to give and/or
the accidental giving of a defective notice (provided
that by reason
of such defect it is not misleading) of a meeting to, or the
non-receipt of notice of notice of a meeting by, any
person entitled
to receive notice shall not invalidate the proceedings of that
meeting. The notices of meetings shall contain the
business to be
considered at such meeting.”
It
is common cause that the applicant was entitled to notice. The first
question is therefore whether he received the requisite
notice.
On
the papers the respondent alleges that notice of the meeting of 12
February 2011 was sent to the applicant and other members
by email on
20 January 2011. The email referred to does not identify the email
address used for the applicant. In the respondent’s
supplementary papers, Lesley Anne O’Donoghue (“O’Donoghue”)
records that she sent the relevant notices
on behalf of the
respondent and that she used the applicant’s official email
address and his private email address. What
the respondent is not
able to say, and does not say, is that the applicant received the
notice allegedly sent to him on 20 January
2011.
The
applicant on the other hand states that he did not receive the
official notice which was issued on 20 January 2011. He says
he
informed the respondent of that fact in writing by email on 26
January 2011, 01 February 2011 and on 10 February 2011 and has
the
necessary documentary proof of that communication which he placed
before court. The respondent does not deny receipt of any
of that
correspondence from the applicant. It is also common cause that the
respondent did not respond to applicant’s emails
of 26 January
and 01 February, other than by acknowledging receipt of the email of
01 February 2011 and noting the contents thereof.
There was
absolutely no response to the email of 26 January 2011.
Notwithstanding that the respondent noted the fact that the applicant
had not received the notice, the respondent did not take any step to
deliver the notice after receipt of the emails of 26 January
and 01
February. It was only after the email of 10 February 2011 that the
respondent caused the notice to be hand-delivered to
the applicant on
the same day, that is, two (2) days before the meeting, instead of 21
clear days as contemplated by clause 7.5
of the Articles.
According
to Danny Myburgh, an expert and director of a Computer Forensic Lab,
who conducted an investigation of the Blackberry
device and laptop of
the applicant, including an interrogation of the “iafrica”
central record for the applicant’s
private email address:
there
is no record of any emails being received at the applicant’s
official email address after 19 January 2011; and
there
is no record of any emails being received by the applicant’s
private email from any address “@cricket.co.za”
after
19 January 2011;
specifically
there is no record of the email from Lesley Donoghue sent
purportedly on Thursday January 20, 2011 at 1:pm (Annexure
‘AK8’at
record 232) being received at the applicant’s private email
address at all. This is the email that
had the official notice of
the relevant meeting of 12 February 2011 as an attachment.
The
evidence of Danny Myburgh is uncontroverted. I am satisfied on the
papers that the contention that the applicant did not receive
the
notice purportedly sent to him on 20 January 2011 is we
ll
established. There is no real dispute as far as that is concerned.
As I said earlier, while the respondent may allege that it
sent the
notice in question to the applicant, it cannot (and does not) deny
that he did not receive it. I find accordingly that
the applicant did
not receive the notice allegedly sent to him on 20 January 2011. The
very first time that he received notice
of the meeting of 12 February
2011 was when the notice was hand-delivered to him on 10 February
2011, two days before the meeting.
The notice delivered on 10
February 2011 was not proper notice of the meeting in terms of clause
7.5 of the Articles. I find accordingly
that the applicant did not
receive notice of the meeting in question while he was clearly
entitled to receive it.
I
am fortified in th
is factual finding by the
statement made on behalf of the respondent in the supplementary heads
of argument (para 19) which reads:
“
It
is not disputed that Dr Nyoka was entitled to receive a notice. It
also appears that he did not formally receive a notice
of
the meeting until 10 February 2010 – although he was aware of
the meeting before that time.”
I
make the finding above not because of but despite this apparent
concession.
The
next question then is whether the proviso
to clause 7.5 saves the proceedings and decision of 12 February 2011
from invalidity.
In other words, in the language of the proviso, the
question is whether “the CEO has taken reasonable steps to give
notice
of (the) meeting” to the applicant. If he did, then the
non-receipt of notice by the applicant does not invalidate the
proceedings.
The
conduct of the respondent in relation to the giving of notice to the
applicant stands to be assessed for reasonableness. Reasonableness
is
examined objectively and in the light of all the circumstances. The
following factors are in my view relevant to the question
whether the
respondent took reasonable steps: (a) the respondent alleges that it
sent the notice by email using the applicant’s
official and
private email addresses; (b) the use of email address was permissible
under the Articles; (c) the respondent was informed
not once but
three times of the fact that the applicant had not received notice of
the meeting; (d) the respondent totally ignored
the first written
notification of non-receipt of the notice; (e) despite the fact that
the respondent ‘noted’ the fact
that the applicant had
not received notice of the meeting by 01 February 2011, the
respondent took no steps to deliver notice
to him; (f) the sole
purpose of the meeting was to move the motion of no confidence in the
applicant – he was thus central
to the holding of the meeting
and the only one who could respond to the motion; (g) there was a
crash of the computer server at
the respondent’s offices on 19
January 2011 which affected the emails of 20 January 2011 because
emails of that day cannot
be retrieved – the respondent must
have been aware of this at the time; (h) a “delivery status
report” (annexure
‘AK12’ at record 237), relied
upon by the respondent as proof that an email of 01 February 2011 was
sent to the applicant,
is a confirmation of a delivery to a wrong
address ( - with an extra ‘m’ - instead of
)
which the respondent and its counsel have confirmed does not exist;
(i) the fact that ‘AK12’ was sent to a incorrect
address
for the applicant by the respondent relying on, possibly, the same
distribution list used on 20 January 2011 raises questions
of the
reliability of the list; and the standard of care taken by the
respondent to ensure notice is addressed correctly to the
applicant
is questionable; (j) if the respondent wanted to rectify the
non-receipt of the notice by the applicant, it had ample
opportunity
do so: it could and should have done so by hand-delivery of the
notice once the respondent was made aware on the two
earlier
occasions; (k) it was totally unreasonable for the respondent to wait
until two days before the meeting to take effective
steps to ensure
delivery of notice to the applicant.
In
the total circumstances neither the respondent nor its CEO (Mr
Majola) took reasonable steps to give notice of the critical meeting
to the applicant. In fact the applicant’s non-receipt of the
notice was simply ignored by the CEO and the respondent. It
was due
to deliberate failure on the part of the respondent that no steps
were taken to deliver the notice between 26 January 2011
and 10 Feb
2011. The proviso to clause 7.5 does not help the applicant to save
the decision of 12 Feb 2011 from invalidity.
The
respondent failed to give proper notice of the meeting to the
applicant who was entitled to same. This failure is an irregularity
which invalidates the proceedings. Resolutions taken at a meeting
where persons who were entitled to receive notice or required
to
receive notice thereof did not receive such, are ordinarily invalid.
(See
Mtshali v Mtambo
1962 (3) SA 469
(GWLD)
at 472 D-E; Wessels and Smith v Vanugo Construction
1964 (1) SA 635
(O) at 636G-637H; African Organic Fertilizers and Associated
Industries v Premier Fertilizers Ltd
1948 (3) SA 233
(N) at 239-241;
Visser v Minister of Labour
1954 (3) SA 975
(W) at 983C-984E
)
The
application of the above rule need not be applied absolutely where
the issues decided are non-contentious, trivial or of a formal
nature. (See
Visser v Minister of Labour (supra)
,
African Organic Fertilizers and Assoc Industries v Premier
Fertilizers Ltd (supra)
). However, the Courts have applied a
common sense approach (
African Organic Fertilizers and
Associated Industries v Premier Fertilizers Ltd (supra)
at
241 and
Visser v Minister of Labour (supra) at
983C
) taking all relevant factors into account, including the nature
of the business to be transacted.
The
provisions of Article 7.5 (regarding reasonable attempts to give
notice) do not detract from this approach but rather confirm
it. The
concept of reasonableness applies in assessing the steps taken by the
respondent to give notice to the applicant –
the reasonableness
of the steps being determined by the relevant circumstances.
The
relevant considerations in the current case include the fact that the
applicant was to be the central figure in the anticipated
proceedings; the applicant had complained in his letter of 26
January that he had not received notice; the significance of the
decision on his reputation and the reputation of the respondent; and
very importantly, the fact that most of the affiliate representatives
at the meeting had been given open mandates to consider all
submissions and views before making a decision in the public
interest.
I return later to the significance of the open mandates.
These
are not minor issues. It was not sufficient for the respondent to
proceed with the meeting without ensuring that the applicant
received
proper notice. The resolutions taken at that meeting are invalid and
ineffectual.
Affiliate
Members, Affiliate Presidents and Mandates to vote:
Furthermore,
a proper appreciation of the role of affiliate members, the
presidents of affiliates and how these impacted on the
voting is
important in deciding whether the resolution which was purportedly
taken at the meeting of 12 February 2011 should stand
or not.
Affiliate
Members of the respondent are defined in clause 1.3 of the Articles
as follows:
‘
Affiliate
Members’ means the bodies that represent and serve as the
respective custodians of amateur cricket in each of the
regions in
South Africa as determined by the member body from time to time and
which currently comprises eleven bodies representing
eleven regions
[the eleven bodies are identified]”
The
affiliate members are thus “the bodies” that represent
and serve as custodians of amateur cricket in the regions.
They are
currently eleven and are specified in the Articles.
Each
of these eleven affiliate members is, in turn, headed by a president
(to be distinguished from president of respondent itself
who is
simply referred to as the president). With reference to these heads
of affiliate members, clause 10.3 of the Articles, describing
composition of the Board, states that it consists of three (3) office
bearers, the CEO, “the eleven (11) presidents of the
affiliate
members”, the 2 independent representatives, etc. The
presidents of affiliate members are thus members of the board
together with others. They represent their respective affiliate
bodies and serve on the board as directors for as long as they
remain
presidents of such affiliates. They cease to be directors or board
members when they cease to be presidents of their respective
affiliate members (see clause 11.1). To distinguish them from the
president of respondent they are referred to formally as “presidents
of the affiliate members” or simply as “affiliate
presidents” for short.
Thus
while the Articles deal specifically with affiliate members and the
role which they play, they differentiate the “affiliate
members” from the eleven presidents of the affiliate members
who are referred to in clauses 10.3 and 11.1 and who hold office
as
members of the board of the respondent. The presidents are
individuals who are appointed to the respondent’s board and
must be distinguished from the member bodies themselves. While the
various presidents may act as individuals in conducting the
work of
the board of the respondent (as direct appointees to that board),
they do not enjoy the same entitlement with regard to
meetings, where
the meeting is of the “affiliate members”. Where business
concerning the affiliate members is conducted,
the Articles
necessarily require that each of the member bodies themselves has
considered the business to be discussed at the respondent’s
general meeting and has mandated an individual to represent their
interests and carry out their mandate. This is one of the reasons
why
proper notice must be given to the members of such a meeting.
Of
the affiliate bodies that have been referred to in the supporting
affidavits, it appears that nine of the eleven voted for the
applicant’s removal. Two voted against his removal. However,
of those nine individuals who attended the meeting, six had
been sent
to the meeting without indicating which way that representative
should vote.
At
least two of those six affiliate bodies do not appear to have had the
information in order to take a view themselves. These are
Free State
and Eastern Province. The open mandate was clearly given by unions
(located in different parts of the country who were
not close to the
personalities involved) to permit the representative attending the
meeting to hear all representations and to
make a decision in the
best interests of the affiliate and cricket in South Africa. The
meeting, at which representations were
to be heard and considered,
was the very forum at which the public interest was to be served. By
effectively excluding the applicant
from that meeting, the affiliate
members were deprived of an opportunity to hear the applicant and
from considering his submissions.
Eight
votes were required to remove the applicant from office (two thirds
of eleven) If those six presidents with an “open
mandate”
had received the appropriate information and/or had had an
opportunity to hear representations from the applicant
at the
meeting, only two of them needed to have been convinced in order for
the motion to be defeated. By excluding the applicant
from the
meeting through its irregular process, the respondent caused only one
side of the story to be conveyed to the members.
At
a properly constituted meeting convened on proper notice, and once
the affiliate members had been sufficiently informed to make
a
decision, the voting might have been different from what actually
transpired on 12 February 2011. There is a high probability,
in that
event, that the two-thirds majority required to remove the applicant
from office would not be achieved.
Consequently,
the resolutions purportedly taken on 12 February 2011 are invalid and
fall to be set aside for these reasons too.
The
right to be heard (
audi alteram partem
):
The
applicant further and finally relies on violation of his right to be
heard to attack the validity of the decision against him.
It
is a fundamental principle of justice that a person affected by a
decision should be given an opportunity to be heard or to defend
himself or herself before such decision is taken. The corollary of
the right to be heard is the right of the affected person to
be given
reasons, that is, to be informed of the substance of allegations
relied upon so that he or she can have an opportunity
to controvert
such allegations. Without reasons being given the right to be heard
may be illusory. See
Kloppenburg N O v Minister of Justice
1964
(1) SA 813
(D&CLD) at 818B; Arepee Industries Ltd v CIR
1993 (2)
SA 216
(N) at 220F-I
. Put otherwise, the right to be heard
entails an opportunity to present a case as well as obtaining all the
relevant information
to do so.
See Barkhuizen N O v Independent
Communications Authority of South Africa & Another
[2002] 1 All
SA 469
(E).
The
applicant asserts that according to principles of natural justice he
had a right to be heard at the meeting of 12 February 2011.
This has
been conceded by the respondent.
The
only question thus is whether the right has been violated. In my
view, it has; and with detrimental or prejudicial effects.
Proper
invitation to the applicant was required not only to comply with
clause 7.5 of the Articles, but also to afford him an opportunity
to
be heard. He did not receive timeous notice of the meeting.
Furthermore, his express written repeated request to be furnished
with reasons in advance was simply ignored. While the notice was
delivered late, the reasons were never furnished at all. The
applicant had also addressed certain correspondence to the respondent
in which he set out views in regard to the meeting. Such
views were
evidently not considered nor distributed at the meeting. This is the
very least the respondent could have done. The
failure, in the
absence of the applicant to distribute and consider the views which
he had communicated in writing, is suggestive
of a deliberate intent
not to allow any of his views to be known to the members before
voting on the motion.
The
applicant’s right to be heard was violated. The violation was
significant, particularly when one has regard to the fact
that six
(6) of the eleven (11) affiliate representatives (affiliate
presidents) who voted on the motion had received open mandates
from
the bodies they represented to vote on the resolution. The open
mandates clearly permitted and required them to hear all
representations at the meeting and to make a decision (based thereon)
in the best interest of their affiliate bodies and of cricket
in
South Africa. If the applicant had been heard, the outcome might
have been different, particularly having regard to the fact
that (a)
the motion required two-third majority; and (b) two affiliate
representatives in fact already (without hearing him) voted
against
the motion.
The
importance of the right to be heard in the context of this case, for
the applicant and for cricket in South Africa, is aptly
captured by
the applicant in the letter he addressed to his colleagues at CSA on
10 February 2011 when he stated: “After
all, an opportunity to
at least state your case and hear any adverse evidence is fundamental
to our legal system. This was unfortunately
not done to the best of
my knowledge and I fear ultimately cricket and credible and open
cricket administration will suffer.”
Finally
the respondent argued on the basis of, inter alia,
Jockey Club
of South Africa v Feldman
1942 AD 340
at 355
and
Rajah
& Rajah (Pty) Ltd & Others v Ventersdorp Municipality &
Others
1961 (4) SA 402
(A) at 407H – 408A
that even if
the irregularity may have been established, the court will not grant
relief ‘if the irregularity caused the
party no prejudice’
(
Jockey Club
case) because ‘the Court is
disinterested in academic situations’ (
Rajah & Rajah
case).
The
respondent argued on the basis hereof that the applicant suffered no
prejudice, and that this court should accordingly not grant
him the
relief he seeks. The principle that there has to be prejudice for
relief to be granted, as set out in the cases referred
to (and
followed in others), is indeed correct and is fairly established. See
more recently in
South African Post Office Ltd v Chairperson,
Western Cape Provincial Tender Board & Others
2001 (2) SA 675
(C)
at para 22
. What this court does not accept, however, is that
the applicant in this case suffered no prejudice. In my view, the
applicant
clearly suffered prejudice. He had a right to be heard
which is admitted. He was directly affected by the outcome of the
resolution.
If it was passed, he stood to lose (and did lose) his
position both as president and as a director of the respondent. The
decision
would be made public (as it indeed was); and the public has
effectively been told that the respondent had lost confidence in him.
These all happened without explaining reasons behind the loss of
confidence. It affects his long uninterrupted career as a cricket
administrator of approximately thirteen years at provincial, national
and international level and in varied fields ranging from
medical,
human resources, audit and leadership at national level. The
reputation and stature he has earned in that career cannot
be
insignificant. The respondent has admitted such career as stated in
paragraph 9 of the founding affidavit. It should not and
ought not to
be terminated through unlawful action. The respondent could not
legitimately proceed without hearing the applicant
in these
circumstances. Its actions were unlawful and prejudicial to the
applicant and stand to be set aside.
The
applicant has argued further that of even greater significance than
the applicant’s right to be heard according to the
ordinary
principles of natural justice, is the fact the applicant’s
right operates for a wider purpose than his own. He refers
in that
regard to other provisions of the Articles, the provisions of the
Companies Act and of the Constitution. The respondent
contest the
further basis advanced. There is sufficient basis in the legal and
factual matrix examined above for the remedy that
the applicant
seeks. I therefore do not find it necessary to examine the further
argument advanced.
It
suffices for present purposes to record that this court accepts that
there is a public purpose to be served in the protection
of the
applicant’s rights in this matter. This is primarily because of
the nature of power that Cricket South Africa exercises,
the function
it performs and its “
role as custodian of cricket in the
Republic and as the national controlling authority for cricket, as
well as its new focus on
transformation and development of amateur
and professional cricket in South Africa
.” (See clause 24
of the Articles). The wider purpose is self-evident.
Having
regard to the background to the matter and the events that lead to
the removal of the applicant from office, it appears to
me that the
purported removal of the applicant from his position as president and
director of the respondent occurred as a consequence
of respondent’s
reluctance to allow a further investigation into the financial
management of the affairs of respondent and
its failure to pursue
breaches of basic principles of corporate governance and
transparency. The applicant seeks to ensure that
inter alia
the
IPL bonus irregularities are fully investigated and dealt with by the
respondent.
In
addition to the main prayers, the applicant seeks an order directing
the respondent to furnish him within 10 days with certain
information
which he requested in annexures “MN26” and “MN28”
to the founding affidavit. No reasons were
advanced as to why he
should not receive such information. He is entitled to receive it.
I
accordingly and for reasons already given grant the following order:
(a) The
resolution taken at a special general meeting of the respondent held
on 12 February 2011 in terms whereof the applicant
was removed from
his position as president of the respondent is reviewed and set
aside.
(b) The
respondent is to reinstate the applicant to the aforesaid position
with immediate effect.
(c) The
respondent is to reinstate the applicant to the position of the
Chairman of the Board of Directors of the respondent with
immediate
effect.
(d) The
respondent is to comply with the applicant’s request for
information contained in annexures “MN26” and
“MN28”
to the founding affidavit, within ten (10) days of the date hereof.
(e) The
respondent shall pay the costs of this application, which shall
include the cost for two counsel.
…………………………………
P M
MOJAPELO
JUDGE
OF HIGH COURT
Counsel
for the Applicant: A E Franklin SC and D A Turner
Counsel
for the Respondent: P B Hodes SC, M W Collins and D P Borgström
Attorneys
for Applicant: McLaren Attorneys, Johannesburg
Attorneys
for the Respondent: Dev Maharaj & Associates, Bedfordview