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[2013] ZASCA 156
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Public Investment Corporation Ltd v Bodigelo (128/2013) [2013] ZASCA 156 (22 November 2013)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case No: 128/2013
Reportable
In the matter between:
PUBLIC INVESTMENT
CORPORATION LTD
.......................................
APPELLANT
and
KAGISO
GERALD BODIGELO
...........................................................
RESPONDENT
Neutral
citation
:
Public
Investment Corporation v Bodigelo
(128/2013)
[2013] ZASCA 156
(22 November 2013)
Coram
: Lewis,
Tshiqi, Majiedt and Pillay JJA and Swain AJA
Heard
: 11 November
2013
Delivered:
22
November 2013
Summary
:
Respondent,
as part of his employment with appellant, nominated as non-executive
director to boards of companies in which appellant
held an interest –
claimed payment of directors’ fees – trial court held
that respondent failed to discharge
onus of establishing his
entitlement to fees and bonuses – on appeal full court held
onus on appellant to establish entitlement
to payments which it
failed to discharge – in a further appeal held that fact that
respondent was obliged to exercise an
unfettered discretion
qua
director did not affect his obligations
qua
employee in terms of his employment contract with appellant –
onus on respondent to establish entitlement to the payments
which he
had failed to do – appeal upheld – order of trial court
dismissing respondent’s claim reinstated.
Order
On appeal from:
North
Gauteng High Court, Pretoria (Mavundla J, Makgoba J and Mabuse J
sitting as a court of appeal from the decision of Msimeki
J as court
of first instance):
1 The appeal is upheld
with costs, such costs to include those occasioned by the employment
of two counsel as well as the reserved
costs.
2 The order of the court
of first instance that ‘the plaintiff’s claim is
dismissed with costs’ is reinstated.
JUDGMENT
_______________________________________________________________
SWAIN AJA
(
LEWIS,
TSHIQI, MAJIEDT AND PILLAY JJA
concurring):
The
respondent, Mr Kagiso Bodigelo (Bodigelo) was formerly employed by
the appellant, the Public Investment Corporation Ltd (PIC)
as a
junior (and later senior) manager: private equity and corporate
finance, in terms of a written fixed-term employment contract,
until
his resignation on 3 August 2007.
The
PIC invested moneys on behalf of public sector entities including
the Government Employees Pension Fund and appointed certain
employees, including Bodigelo, as non-executive directors to the
boards of companies in which it had invested. This was to ensure
that the funds it invested were spent for the agreed purpose and to
participate in the management of these companies to ensure
the
security of the investment.
Bodigelo
was appointed by PIC as its nominee and on its behalf to represent
PIC on the boards of four companies, namely DCD-Dorbyl
(Pty) Ltd,
Blue Label Investments (Pty) Ltd, Kulungile Metals Group (Pty) Ltd
and Global Roofing Solutions (Pty) Ltd (the companies).
The
companies paid directors’ fees and bonuses for the services
rendered by non-executive directors such as Bodigelo. These
fees and
bonuses were paid by the companies directly to PIC on the
instructions of PIC.
Bodigelo
contended that he was entitled to payment of these directors’
fees and bonuses and unsuccessfully sought to recover
the sum of
R2 345 534 from PIC before the court of first instance. On
appeal to the North Gauteng High Court, however,
he was successful.
The order of the court of first instance was set aside and
substituted by an order directing PIC to make payment
of the sum of
R2 345 534 to Bodigelo together with
mora
interest
and costs, which were to include the costs of two counsel. The
appeal is with the leave of this court.
A
consideration of Bodigelo’s particulars of claim and the
defence of PIC, as raised in the pleadings, is central to the
resolution of the present appeal. This is so because in the court of
first instance Msimeki J appeared to find on the evidence
that
Bodigelo had failed to discharge the onus of proving that he was
entitled to payment of the disputed directors’ fees
and
bonuses. The full court, however, after initially finding that
Bodigelo ‘had to establish the cause of action’
then
found that because it was not disputed that Bodigelo was a
non-executive director to the companies, with the approval of
PIC,
who knew that there were directors’ fees and bonuses to be
paid to Bodigelo, had the consequence that Bodigelo ‘had
prima
facie established the cause of action’. The full court then
concluded ‘in the circumstances, the respondent
[PIC] bore the
onus to prove on a balance of probabilities its defence to the
plaintiff’s claim’ adding that PIC
‘had to prove
that it was entitled to appropriate for itself the aforesaid
amount’. The full court then went on to
hold that PIC was
accordingly obliged to lead evidence showing it was entitled ‘to
appropriate to itself’ these payments
and that ‘there
was no evidence at all placed before the Court a quo’ in this
regard.
The only cause of action
as pleaded by Bodigelo was that he became entitled, as a director of
the companies to remuneration, including
bonuses payable by the
companies to their non-executive directors in the amount claimed.
Bodigelo alleged further that on the
instructions of PIC, these
amounts were paid by the companies to PIC and not to Bodigelo. It
was then alleged that:
‘
In
receiving the aforesaid amounts the defendant accordingly received
such amounts for and/or on behalf of and for the benefit of
the
plaintiff.’
It
was alleged that PIC was accordingly obliged to make payment to
Bodigelo of these amounts.
PIC
in its plea admitted that it had instructed the companies to make
payment of these amounts to it, averring that it was entitled
to do
so. The entitlement to issue such an instruction was alleged to
arise from the fact that Bodigelo was not entitled to receive
these
payments for his personal benefit because he performed his functions
as a director of the companies as a nominee and employee
of PIC and
as part of his functions and duties as manager of private equity and
corporate finance of PIC.
It
is therefore quite clear that Bodigelo bore the onus of proving on a
balance of probabilities that PIC received the payments
‘for
and/or on behalf of for the benefit of’ himself and that as a
consequence PIC was obliged to make payment of
these amounts to
himself. The fact that PIC alleged that Bodigelo was not entitled to
receive these payments because, in performing
his functions as a
director, he did so as the nominee and employer of PIC, did not
alter the incidence of the onus of proof resting
upon Bodigelo to
establish his entitlement to the payments. Nowhere in his pleadings,
or in evidence, did Bodigelo set out the
basis of his entitlement.
He did not allege a right to directors’ fees pursuant to any
contract with any of the companies
on whose boards he sat (there was
no contract between Bodigelo and any of the companies). And he did
not allege a right arising
from his employment contract with PIC to
receive such payment.
Bodigelo’s
cause of action was thus one based solely upon the receipt of the
payments in terms of a relationship of agency
between PIC and
himself. The allegation that the funds were received by PIC ‘for
and/or on behalf of and for the benefit
of the plaintiff’ can
be interpreted in no other manner. As submitted by counsel for PIC,
however, no allegation is made
of any agreement concluded between
PIC and Bodigelo creating a relationship of agency. In addition, the
allegation by Bodigelo
that the payments were made by the companies
to PIC ‘on the instructions of’ PIC is admitted by PIC.
It is accordingly
common cause on the pleadings that the companies
acceded to ‘the instruction’ and accordingly agreed to
make payment
of the amounts to PIC.
Payment
is a bilateral juristic act, which requires the meeting of two
minds. See
Burg Trailers SA (Pty) Ltd v Absa Bank Ltd
2004
(1) SA 284
(SCA) para 7. Bodigelo accordingly bore the onus of
proving that the companies in making the payments to PIC did so in
its capacity
as Bodigelo’s agent, to honour an obligation owed
to Bodigelo by the companies. Bodigelo would also bear the onus of
proving
that PIC accepted the payment as agent for Bodigelo, in
discharge of an obligation by the companies to make payment to
Bodigelo.
No evidence was given by Bodigelo that the payments were
made to PIC and received by PIC as agent for Bodigelo. The cause of
action of Bodigelo is based simply on the premise that because he
was entitled to the payments and PIC was not, PIC accepted the
payments as agent for Bodigelo without any regard being had to the
nature of the agreement concluded between the companies and
PIC for
payment to be made directly to PIC. The evidence led on behalf of
PIC was that it was entitled to payment of these amounts
and
consequently it was for this reason that it instructed the companies
to make payment directly to it, to which request the
companies
acceded. It is therefore clear on the evidence that payment was made
by the companies to PIC as principal and not as
agent for Bodigelo.
Bodigelo accordingly failed to discharge the onus of proving the
pleaded cause of action based upon agency.
The
argument advanced by Bodigelo’s counsel was, however, that the
onus was on PIC to justify its retention of the payments
due to
Bodigelo, in accordance with the pleaded defence of PIC, namely that
Bodigelo performed his function as a non-executive
director in the
companies, as a manager: private equity and corporate finance of
PIC. This argument assumes that Bodigelo was
entitled to receive the
payments as against PIC simply because he was a non-executive
director on the boards of the companies.
It also assumes the
existence of a pleaded cause of action by Bodigelo, valid in law,
which asserts the entitlement to receipt
of these payments by
himself as against PIC. As I have said, no such cause of action
exists in Bodigelo’s particulars of
claim.
However,
if, for the purposes of examining this argument, it is assumed that
the cause of action advanced by Bodigelo in his particulars
of claim
is not simply one based upon agency, but as one in which reliance is
placed upon an alleged entitlement to payment from
the companies by
Bodigelo as against PIC, then the onus in this regard rested upon
Bodigelo. This is because PIC placed in issue
Bodigelo’s
entitlement to receive these payments as against PIC. The allegation
by PIC in its plea that Bodigelo at all
times acted as an employee
vis-a-vis
PIC and the admission that the companies paid
directors’ fees and bonuses to persons who acted as directors
on their boards
did not result in PIC attracting the onus of proving
its entitlement to receive the payments as against Bodigelo.
An
examination of the evidence reveals that Bodigelo failed to
discharge such an onus. Bodigelo conceded in evidence that there
was
no agreement between PIC and himself that he would be entitled to
board fees and directors’ bonuses payable to him,
in respect
of services rendered by him as a non-executive director on boards on
which he sat at the behest of PIC. In addition,
although the
employment contract between Bodigelo and PIC does not expressly deal
with the entitlement to directors’ fees
earned by Bodigelo,
there are a number of provisions in the agreement which do not
support an entitlement on the part of Bodigelo
to receive these
payments. Bodigelo was required to work without additional
remuneration outside of normal working hours and
PIC would refund to
Bodigelo his out of pocket expenses incurred in respect of his
employment. In addition, Bodigelo was obliged
to devote his whole
time and attention to his assigned duties and functions, during
normal business hours and at any additional
time that may be
required of him. He would not be employed or engaged in any other
business or other remunerative work without
PIC’s prior
written consent. No allegation was made by Bodigelo, or evidence led
that such written consent was sought or
given. The evidence
established that it was a normal incident of Bodigelo’s
employment with PIC that he would be required
to serve as a
non-executive director on the boards of companies in which PIC had
invested.
Counsel
for Bodigelo, in attempting to show that PIC was not entitled to the
payments, submitted that in contrast to PIC’s
pleaded defence
that in performing his functions as a non-executive director,
Bodigelo acted as an employee of PIC, the witnesses
of PIC in the
form of Dr Matilja and Mr Molefe conceded that in performing such
functions Bodigelo was not doing the work of
PIC. However, when the
evidence in question is examined the statements relied upon were
clearly made in relation to individuals
who were not employees of
PIC being nominated by PIC as non-executive directors to boards of
companies in which PIC held an interest.
In
addition, by reference to the decision in
Fisheries Development
Corporation of SA Ltd v Jorgensen
1980 (4) SA 156
(W) at 163F,
counsel for Bodigelo submitted that the defence pleaded by PIC that
Bodigelo at all times acted as an employee of
PIC was bad in law.
Although it is clear, as decided in
Jorgensen
, that a
director appointed as a nominee to represent certain shareholders or
interests within a company, is obliged to exercise
his or her
discretion unfettered by such interests, this does not mean that
Bodigelo could not perform his functions as a director
in the
context of his employment with PIC. A distinction has to be drawn
between the unfettered exercise of a nominated director’s
discretion
qua
director and his adherence to the terms of an
employment contract with the entity that nominated him or her as a
director, which
has no bearing upon the exercise of that discretion.
In this regard, Bodigelo stated that the reason he was placed on the
boards
of these companies was to ensure that the money advanced by
PIC was used for the purpose for which it was intended. In addition,
he was to ensure that the companies sustained themselves in the
future to protect PIC’s investment. The full court accordingly
erred in concluding that Bodigelo ‘could not have been acting
in such directorship as an employee of the respondent’
in
reliance upon this authority.
Simply
put, in performing his functions as a non-executive director on the
boards of the companies, Bodigelo did so as an employee
of PIC. In
terms of the assumed cause of action Bodigelo bore the onus of
proving that he was entitled, as against PIC, to the
fees and
bonuses payable by these companies to directors. Bodigelo failed to
discharge this onus. The full court accordingly
erred in holding
that an onus rested upon PIC to prove its entitlement to the
payments in question and that it had failed to
discharge this onus.
At
the hearing of the appeal counsel for Bodigelo advanced two
additional causes of action in support of the appeal. These were
the
rei vindicatio
and the
actio ad exhibendum
. Not only
were these causes of action not pleaded, but they were bereft of any
relevance in the circumstances of this case.
As
regards the costs, counsel for PIC asked that the costs of two
counsel be awarded. This was not on the basis of the complexity
of
the matter, but because of its importance to PIC as a result of the
number of employees of PIC presently nominated as non-executive
directors on the boards of companies. In addition, he asked that all
of the reserved costs be included in the order. Counsel
for Bodigelo
did not oppose the grant of such an order.
In the result the
following order is granted
1 The appeal is upheld
with costs, such costs to include those occasioned by the employment
of two counsel as well as the reserved
costs.
2 The order of the court
of first instance that ‘the plaintiff’s claim is
dismissed with costs’ is reinstated.
K G B SWAIN
ACTING JUDGE OF APPEAL
appearances:
FOR APPELLANT: S A
CILLIERS
(WITH HIM K G MONYANDU)
EDWARD NATHAN SONNENBERGS
, SANDTON
WEBBERS, BLOEMFONTEIN
FOR respondeNT: i A M
SEMENYA
(WITH HIM A L PLATT)
FLUXMANS INC,
JOHANNESBURG
LOVIUS BLOCK,
BLOEMFONTEIN