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2023
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[2023] ZAECMKHC 25
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Nelana v Interim Chairperson of the Board: Buffalo City Metropolitan Development Agency Board and Others (4027/2022) [2023] ZAECMKHC 25 (7 February 2023)
FLYNOTES:
CONTRACT AND UNDERMINING COURT ORDER
CONTRACT
– Employment contract – Public policy – Pacta
sunt servanda – Terminate on a “no fault
basis”
with two weeks’ notice and without providing any reasons –
Mala fide enforcement of a contractual
term to undermine the
efficacy of a court order is against public policy.
IN THE HIGH COURT OF
SOUTH AFRICA
(EASTERN CAPE DIVISION
– MAKHANDA)
CASE NO.: 4027/2022
Matter heard on:
31 January 2023
Judgement delivered
on: 07 February 2023
(1) REPORTABLE: YES
(2) OF INTERST TO
OTHER JUDGES: YES
(3)REVISED
In the matter between: -
BULUMKO
NELANA Applicant
and
INTERIM CHAIRPERSON OF
THE BOARD: 1
st
Respondent
BUFFALO CITY
METROPOLITAN
DEVELOPMENT AGENCY
BOARD
BUFFALO CITY
METROPOLITAN 2
nd
Respondent
DEVELOPMENT AGENCY SOC
LIMITED
SPEAKER OF THE
COUNCIL: 3
rd
Respondent
BUFFALO CITY
METROPOLITAN MUNICIPALITY
EXECUTIVE MAYOR:
BUFFALO CITY 4
th
Respondent
METROPOLITAN
MUNICIPALITY
BUFFALO
CITY 5
th
Respondent
METROPOLITAN
MUNICIPALITY
NOEL VAN
WYK 6
th
Respondent
NOLITHA
PIETERSEN 7
th
Respondent
MANDILAKHE
DILIMA 8
th
Respondent
MXOLISI
SIBAM 9
th
Respondent
NOBANTU
SAKUBE-NDEVU
10
th
Respondent
SILINDILE
TONI
11
th
Respondent
ANDISIWE
KUMBACA
12
th
Respondent
Summary:
Law of
Contract – courts may refuse to enforce a term of a contract on
the basis that is mala fide, unfair or unreasonable
and therefore
contrary to public policy – held that the mala fide enforcement
of a contractual term to undermine the efficacy
of a court order is
against public policy.
JUDGMENT
SMITH
J:
[1]
The applicant brought urgent proceedings on 31 January 2023 for an
order suspending
the decision of the second respondent, namely the
Buffalo City Metropolitan Development Agency (the Agency), taken on
25 January
2023, to terminate his employment and remove him from his
position as Chief Executive Officer (CEO) of the Agency. The relief
is
sought pending a final review of the impugned decision in terms of
Part B of the notice of motion.
[2]
The chairperson of the Agency’s Interim Board was cited as the
first respondent,
the Buffalo City Metropolitan Municipality, as well
as its Speaker and Executive Mayor were cited as third, fourth and
fifth respondents
respectively, and the sixth to eleventh respondents
were cited in their capacities as members of the Agency’s
Interim Board.
Only the first and second respondents opposed the
interim relief.
[3]
The material facts are relatively straightforward, uncomplicated and
largely undisputed.
Although the application was brought on
drastically truncated time periods, it was opposed and the parties
filed relatively comprehensive
heads of argument, given the time
available.
[4]
The relevant facts are as follows. On 24 January 2023, Bloem J
granted an order, inter
alia, suspending the decision of the Agency
to suspend the applicant, pending the finalization of the review
application. That
order entitled the applicant to return to work
forthwith.
[5]
The applicant’s feeling of elation at his reinstatement was,
however, short-lived.
Having been warned by a friend that the Agency
did not intend to allow him to resume his duties as CEO and was
planning a scheme
to get rid of him, he instructed his attorneys to
write to the Agency to inform it that he would be reporting for work
by 9h00
on 26 January 2023. His attorneys duly dispatched the letter
to the Agency’s attorneys during the morning of 25 January
2023.
In addition to declaring his intention to return to work, his
attorneys also, amongst others, sought an undertaking that the Agency
will comply with the letter and spirit of Bloem J’s order.
[6]
To his surprise the Agency’s attorneys replied almost
immediately, and berated
him for not having reported for work earlier
that day, i.e. 25 January. They stated that he ‘should have
been at work as
of early today’, and that he did not require
any ‘undertaking for him to execute or enforce his order’.
[7]
They moreover lamented that: ’His bosses, our client, do not
know where he is.
He has signed no leave form and indeed, no leave
has been granted to him. At this stage, our client views his absence
from work
as being absent without leave.’
[8]
The letter furthermore stated that he was expected back at work and
required him to
confirm that he would indeed be reporting for work on
that day. In conclusion, they said that his request for an
undertaking ‘is
nothing but a failed (sic) attempt’ at
justifying his absence from work.
[9]
Armed with this unambiguous assertion that he was required urgently
to return to work,
he confidently arrived at the office at 12h00 on
the 25
th
of January. Upon enquiring about the whereabouts
of the relevant functionaries who would have enabled access to his
office and
other tools of trade, he was informed that they were all
at a strategic planning meeting at the Blue Lagoon Hotel. He
immediately
drove to the hotel and arrived there at about 13h00.
[10]
There he was told that Ms Pietersen, the chairperson of the Agency’s
Interim Board, wanted
to meet with him virtually. He was then showed
into an empty boardroom and told that the meeting would start at
14h00. He was later
joined by the Acting Company Secretary of the
Agency and one Mr van Wyk, who had been appointed as Acting CEO after
his suspension.
Ms Pietersen eventually only joined the Microsoft
Teams meeting at about 15h00. She told him that the Agency’s
Board had
met at 07h00 that morning and decided to terminate his
contract of employment summarily. She also told him that Mr van Wyk
would
give him the letter of termination. Mr van Wyk then produced
the document from his bag and handed it to him.
[11]
The relevant portions of that letter read as follows:
‘
1. The Board of
Directors of the Buffalo City Metropolitan Development Agency
(“Agency”) has resolved to terminate your
appointment as
Chief Executive Officer on 2 weeks’ notice. You are not
required to work out your notice period and will be
paid two weeks’
remuneration in lieu of notice.
2. Your last working day
is today, 25 January 2023, when you will be required to collect all
your belongings and return the Agency’s
belongings, including
your access keys.’
[12]
It is common cause that in terminating the applicant’s
employment, the Agency relied on
the following clause in his
employment contract:
‘
An employment
contract of an employee may be terminated only on notice of:
(a)
two weeks,
if the employee has been employed for six months or less;’
[13]
Before I consider the central issue which falls for decision in this
matter – namely whether
I am entitled to interfere with the
Agency’s contractual right to terminate on notice without
providing any reasons –
I need first to deal with the
preliminary issues relating to urgency, the balance of convenience, a
prima facie right, and availability
of adequate alternative remedies.
When Bloem J granted the order I referred to earlier, he gave an
ex
tempore
judgment in which he dealt comprehensively with those
issues. I have had the opportunity of perusing the transcribed
version of
his judgment and I am satisfied that his findings in
respect of those issues are still germane to this case. In that
application
the applicant has relied on substantially the same
factual matrix which he has advanced in his founding papers in this
matter.
The judgment was delivered the day before the impugned
decision was taken and Bloem J’s findings in respect of the
above
mentioned issues therefore remain very much apposite to this
case. I respectfully associate myself fully with the reasons provided
by the learned judge for his finding that the facts put up by the
applicant establish that the matter is urgent, that the balance
of
convenience is with the applicant, that he has established a prima
facie right and that there is no other satisfactory remedy
available
to him.
[14]
Mr
Tsele
, who together with Mr
Cohen
, appeared for the
applicant, argued that the impugned decision to terminate his
employment in terms of the contract is reviewable
since it was
maliciously taken by a public body and with the sole purpose of
undermining the efficacy of Bloem J’s order.
He also pointed to
the fact that the Agency has brought a counter-application in the
proceedings before Bloem J for an order declaring
his employment
contract unlawful. In addition, the validity of the appointment of
the Agency’s Interim Board is also still
sub judice
in
that application and the fifth respondent (the municipality) has
conceded that the applicant’s challenge in this regard
is
well-founded. It is therefore inevitable such an order will issue in
due course, or so the argument went.
[15]
To my mind, the undisputed facts compel the inference that the
decision to terminate the applicant’s
employment contract was
taken in calculated haste and with the sole purpose of undermining
the efficacy of Bloem J’s order.
The respondents have made no
attempt to place any facts before me to refute the compelling
inference that the decision was not
bona fide. Instead they relied
only on their contractual right to terminate on two weeks’
notice
. They thus seek sanctuary in the principle of
pacta
sunt servanda
, asserting that they were entitled to
terminate on a ‘no fault basis’ by giving him two weeks’
notice having
to provide any reasons. Their counsel, Mr
Bodlani
SC, (appearing with Mr
Salukazana
and Ms
Nxazonke-Mashiya
)
argued that the court is accordingly not entitled to question the
motive behind the Agency’s decision to enforce a term
of the
contract. He submitted that in terms of the aforementioned principle,
contracting parties are bound to honour obligations
that have been
freely and voluntarily undertaken. The Court should therefore be
loath to interfere with the Agency’s contractual
right to
enforce a term of the agreement, no matter of how severe the
consequences might be for the applicant.
[16]
In order to obtain interim relief the applicant must also show that
there are reasonable prospects
that he will succeed with the final
relief. The central issue which therefore falls for decision is
whether the court may refuse
to enforce a term of the contract on the
basis that it is mala fide, unfair or unreasonable and therefore
contrary to public policy.
[17]
The Constitutional Court has authoritatively pronounced on this issue
in
Beadicia 231 CC and Others v Trustees of the time being of the
Oregon Trust and Others
2020 (5) SA 247
(CC). The Court held that
abstract values such as good faith, fairness or reasonableness do not
provide a free-standing basis on
which courts may interfere with
contractual relationships. They do, however, have relevance in the
application of contract law
when the question arises as to whether a
contractual provision or the enforcement thereof would be against
public policy.
[18]
The Court also emphasized that ‘in our new constitutional era,
the principle of
pacta sunt servanda
is not the only, nor the
most important principle, informing the judicial control of contacts’
and that there is no basis
for elevating the principle above other
constitutional rights. If the enforcement of a contractual term will
implicate a number
of constitutional rights, ‘a careful
balancing act’ is required to determine whether it will offend
public policy.
(at para 87)
[19]
In
AB v Pridwin Preparatory School
2019 (1) SA 327
(SCA), the
Supreme Court of Appeal enunciated the following important principles
that govern judicial control of contracts:
(i)
Public
policy demands that contracts freely and voluntarily entered into
must be honoured.
(ii)
A court
will declare invalid a contract that is prima facie inimical to a
constitutional value or principle, or otherwise contrary
to public
policy.
(iii)
Where a
contract is not prima facie invalid but its enforcement in particular
circumstances is, a court will not enforce it.
(iv)
The party
who attacks the contract or its enforcement bears the onus of
establishing the facts.
(v)
A court
will use the power to invalidate a contract or not to enforce it,
sparingly, and only in the clearest of cases in which
harm to the
public is substantially incontestable and does not depend on the
idiosyncratic inferences of a few judicial minds.
(vi)
A court
will decline to use this power where a party relies directly on
abstract values of fairness and reasonableness to escape
the
consequences of a contract because they are not substantive rules
that may be used for this purpose.
[20]
The facts of this case are indeed unique in the sense that it is
seldom that one is faced with
such a brazen abuse of a contractual
provision designed to undermine a court order. As mentioned earlier,
the Agency was unable
to proffer any reasonable explanation to rebut
the compelling inference that the impugned decision was primarily
aimed at undoing
the consequences of Bloem J’s order. The
letter from the Agency’s attorneys the morning after the order
was granted
was clearly aimed at luring the applicant to the Agency’s
office under false pretences. By that time the decision to terminate
the contract had already been taken, yet no mention was made of it.
Instead the applicant was misled into believing that the Agency
was
intent on complying with the order, only to be summarily dismissed a
few hours later. And all of this happened in circumstances
where the
appointment of the Agency’s Interim Board had been challenged
and the municipality had conceded that the board
members may have
been improperly appointed. The undue hasty and sneaky manner in which
the decision was taken compels only one
inference, namely that the
main and mala fide objective was to emasculate Bloem J’s order.
There can be little doubt that
the public mores will be offended by
such a brazenly malicious enforcement of a contractual provision
aimed at undermining the
efficacy of a court order.
[21]
Although the Constitutional Court in
Beadicia
(supra) has
cited the abovementioned excerpt from
Pridwin
with approval,
Theron J has cautioned that the caveat that the power to invalidate
or not enforce contractual provisions should
be used sparingly,
should not deter courts from exercising their duty to infuse public
policy with constitutional values. The learned
judge also said that
the notion that there must be substantial and incontrovertible harm
to the public before the power can be
exercised, is alien to our law.
[22]
I am therefore satisfied that the applicant has established that the
enforcement of the contractual
term which allows for termination of
the applicant’s employment contract without notice, will be
against public policy. He
is accordingly entitled to the interim
relief sought in the notice of motion.
[23]
In the result the following order issues:
1)
Dispensing
with the normal time limits and services provided for in the Uniform
Rules of Court, and directing that the application
may be brought on
an urgent basis in terms of Rule 6 (12).
2)
Declaring
that the decision of 25 January 2023 by the second respondent’s
Interim Board to terminate the applicant’s
contract of
employment and to remove him from his position as Chief Executive
Officer, is suspended pending the final determination
of Part B of
the notice of motion.
3)
Declaring
that the Interim Board may not suspend or dismiss the applicant from
his position as Chief Executive Officer pursuant
to the contract of
employment dated 1 October 2022, pending the final determination of
the relief sought in Part B of the notice
of motion and the
applications brought under case number 4023/2023, on any basis other
than pursuant to bona fide disciplinary
proceedings in which due
process, including, but not limited to the principles of natural
justice, is complied with.
4)
Directing
that Part B of the notice of motion shall be heard together with the
applications brought under case number 4027/2022.
JE
SMITH
JUDGE
OF THE HIGH COURT
Appearances:
Counsel
for the Applicants
: Adv.
M. Tsele
:
Adv.
E. Cohen
: Nandi
Bulubula Inc.
C/o Cloete & Company
112A High Street
MAKHANDA
Counsel
for the Respondents :
Adv. A.
Bodlani SC
Adv.
M. Salukazana &
Adv.
Z. Nxazonke- Mashiya
: Sakhela
Inc.
C/o Yokwana Attorneys
10 New Street
MAKHANDA