About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: North Gauteng High Court, Pretoria
SAFLII
>>
Databases
>>
South Africa: North Gauteng High Court, Pretoria
>>
2021
>>
[2021] ZAGPPHC 199
|
|
Mhlwana and Another v Denel SOC Ltd (40858/19) [2021] ZAGPPHC 199 (19 March 2021)
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, PRETORIA
CASE
NUMBER: 40858/19
DATE:
19 March 2021
REPORTABLE:YES/NO
OF
INTEREST TO OTHER JUDGES:YES/NO
REVISED
ZIPHIWO
MADODODWA
MHLWANA
First Applicant
ZWELAKHE
NTSHEPE
Second Applicant
V
DENEL
SOC LTD
Respondent
JUDGMENT
MABUSE
J
[1] In this
application the two Applicants, Mr Ziphiwo Madododwa Mhlwana, the
First Applicant, and Mr Zwelakhe
Ntshepe, the Second Applicant, seek
the following order:
“
1.
That the resolution taken on 30 November 2017 regarding payments
buying out the Applicants from their
permanent employment constituted
a binding agreement on the Respondent;
2.
That the Respondent is compelled to pay the First and Second
Applicants an amount of R7m and R8.4m
respectively in accordance with
this resolution;
3.
That the abovementioned amounts be paid within 7 days of this order;
4.
That interest shall accrue on this amount at a legal rate from 30
November 2017 to date of payment.”
[2] The First
Applicant was employed by the Respondent at its head office in
Pretoria as a Group Chief Financial
Officer (GCFO) while at the same
time the Second Applicant was employed as a Group Chief Executive
Officer (GCEO) of the Respondent.
The Respondent, Denel Soc
Ltd, is a state-owned company. For purposes of brevity, I shall
refer to the Respondent herein
as “Denel”.
[3] The
Purpose of this application is to seek an order in terms of which
Denel is compelled to pay certain
amounts specified in a notice of
motion to wit R7m to the First Applicant and R8.4m to the Second
Applicant in accordance with
the resolution of the Board of Directors
taken on 30 November 2017.
[4] On grounds
set out in the answering affidavit and repeated in the counsels’
heads of argument,
Denel refuses to pay the said amounts to the
Applicants. I will revert to the said grounds when I deal with
Denel’s
answering affidavit.
THE
BACKGROUND
[5] On 10
October 2006, the First Applicant was appointed as Chief Financial
Officer (CFO) by BAE Land Systems
(“BAE”) which was, at
that material time, owned by a British company called by that name.
[6] In 2015,
BAE sold its South African subsidiary, BAE Land Systems South Africa,
to Denel as a going concern.
Following such sale, Denel became
the Applicants’ employer, according to the Applicants, in terms
of the provisions of s
197 of the Labour Relations Act 66 of 1995
(“the LRA”).
[7] BAE Land
Systems South Africa then changed its name to Denel Vehicle Systems
and became Denel’s
operating division.
[8] Between
April 2015 and September 2015 the First Applicant became a Divisional
CFO for Denel. This
meant that the First Applicant’s
permanent employment status was transferred to Denel.
[9] During
September 2015 Denel’s GCFO was placed on suspension. In
his absence or during his
suspension, the First Applicant took up his
position and became, albeit on an interim basis, Denel’s Acting
GCFO. The
said suspended GCFO had, before his suspension, been
approved on a permanent basis as GCFO. Prior to his suspension,
Denel
had entered into, and concluded, negotiations with him in terms
of which his permanent employment was converted into a fixed 5 years’
period appointment. The said suspended GCFO never resumed his
duties because Denel and he decided mutually to terminate his
employment.
[10] At a meeting of Denel
held on 7 June 2017, Denel’s board adopted a resolution that
permanent employment of
certain employees be converted to fixed term
employment to maintain a single contracting regime. The advantage of
such a contracting
regime was that the conversion would allow a
negotiated and mutually agreed basis for the termination of permanent
contracts. Their
negotiations would, moreover, be conducted on a
case-by-case basis. As on 7 June 2017, the First Applicant’s
earnings
were R3,285,612.60.
[11] Around March 2017 the
process of filling up the post of GCFO permanently started. The
First Applicant was
one of those who was shortlisted to be
interviewed. He was successful at the interview. He came out as a
preferred candidate to
be appointed Denel’s full time GCFO. The
First Applicant states that when Denel offered him the position of
the GCFO, he
begged the board of Denel to enter into negotiations
with him about how to deal with his permanent employment with Denel
in the
light of the fact that he did not want to give up his
employment for the purpose of taking up a fixed term contract of
employment
with Denel failing such an agreement. He then informed
Denel to offer the employment on a fixed term employment to another
deserving
candidate. Instead, Denel chose to offer him the position
of the GCFO and to deal with the aspect that he was a permanent
employee.
[12] On 1 June 2017 Denel
offered the First Applicant the employment at Denel Corporate Office
on a fixed basis commencing
on 1 June 2017 and ending on 31 May 2022
with a basic salary remuneration of R5,000,000.00 excluding the
permanent bonus.
[13] Following the said
offer of the role of the GCFO, Denel and the First Applicant reached
an agreement in terms of
which his permanent employment as a
Divisional CFO was converted to enable him to take up the role of the
GCFO for a fixed period
of 5 years. The First Applicant
contends that by agreeing to converting his Divisional CFO position
to enable him to become
GCFO for a fixed period of 5 years, Denel was
buying him out of his permanent employment as a Divisional CFO of its
subsidiary.
[14] Subject to the
approval of the Board, the First Applicant and a certain Lungisane
Daniel Mantsha (“Mr Mantsha”)
concluded an agreement in
terms of which Denel would buy him out of his permanent employment
contract and pay him 12 months’
remuneration at a rate of his
earnings of R3,285,612.00. The conversion from permanent to
fixed term contract was to take
place on 1 June 2017 when the First
Applicant took up the position of the GCFO.
[15] On 7 June 2017 a
5-year fixed employment contract was entered into by and between
Denel, represented by Mr Mantsha,
and the First Applicant.
Clause 3.1 fixed remuneration of the Applicant for a total
remuneration of R5,000,000.00 and 50%
representing performance-based
pay as set out in clause 3.2.
[16] On 7 June 2017 the
board took a resolution adopting the conversion of the First
Applicant’s employment contract
from permanent to fixed term
and to pay him a 12 months’ separation payment, among others,
as permanent contract termination.
THE
TERMS
A
copy of the minutes is annexed to the founding affidavit as Annexure
‘004’.
[17] The agreement to
agree to a 12 months’ payment for the conversion was because of
the salary offer made in
accordance with the employment contract
entered into between Denel and the First Applicant, on 7 June 2017
which set the First
Applicant’s salary as at R5,000,000.00.
[18] On 8 June 2017 Vuyo
Kazi Xaxa, the Company Secretary, of the board and Group Legal
Executive of Denel, wrote an
email to Natasha Davis, the Humans
Relations Director at Denel and informed her of the resolution of the
board of Denel taken on
7 June 2017. This is the resolution
that confirmed the conversion of the permanent contract to a fixed
term contract and
signed offer for fixed term copy of the email is
attached as Annexure ‘005’.
[19] At the end of June
2017 Denel paid the First Applicant an amount equivalent to the 12
months’ remuneration
in accordance with the resolution of 7
June 2017.
[20]
MEMORANDUM OF
INCORPORATION
20.1 Clause 13.3 of the
Memorandum of Incorporation deals with the process of the appointment
of the CEO and CFO of Denel.
20.2 Clause 13.3.1 states that
the board shall identify, nominate, and evaluate potential candidates
for appointment at the
CEO in accordance with the guidelines.
20.3 Clause 13.3.2 provides that
the shareholder shall appoint the CEO from a shortlist of candidates
provided by the board
in accordance with the Guidelines.
20.4 Clause 13.3.3 states that
the board shall identify, nominate, evaluate, and appoint a candidate
for appointment of CFO
providing that the shareholder shall approve
such appointment in writing.
[21] After the appointment
of the Applicants, it was mandatory for the chairperson to inform the
Minister in writing
of the appointment and seek her to endorse their
appointment in terms of clause 13.3.3 of the MOI.
[22] Although the
Applicants had no proof that the chairman had done so, they are
adamant that he did so following the
response from the Minister
attached to the founding affidavit in which the Minister approved the
appointment of both applicants,
the First Applicant as GCFO and the
Second Applicant as GCEO, both for a fixed term of 5 years.
[23] The Minister approved
the Applicants’ appointments but not their salaries.
Instead, she suggested the
salaries of R3,500,000.00 for the First
Applicant and R4,500,000.00 for the Second Applicant. The First
Applicant was aware of
the contents of the said letter.
[24] The First Applicant
was unhappy about the remuneration approved or suggested by the
Minister for him and the Second
Applicant. He then approached
Mr Mantsha again to open negotiations about his pay out in relation
to the conversion of his
permanent appointment. He raised his
complaints with Mr Mantsha who undertook to escalate them to the
board.
[25] The board convened a
meeting on 30 November 2017. The purpose of the meeting was
twofold:
25.1 the
first purpose was to consider and approve the conversion of the
permanent appointment of the
Second
Applicant as he was taking up his appointment as the GCEO;
25.2 the second purpose was to
formally consider and approve the remuneration of the new GCEO and
GCFO and as well as their
conversion proposition of permanent
contracts to fixed term contracts for the two executive directors in
line with the resolution
of 7 June 2017.
[26] At the said meeting
of 30 November 2017, the board approved the proposals that the First
Applicant be paid an additional
24 months’ separation pay out
which totaled R7m and the Second Applicant’s R8.4m for the full
36 months. The board
further resolved that that resolution be
implemented immediately. The minutes of the 30 November 2017 meeting
showed the following
entry:
“
Important
to note is that Mr Mhlwana’s guaranteed package at DVS as a
Divisional CFO was R3.5m. The board deliberated on this
matter and
highlighted that, it is unfair and an injustice to expect Mr Mhlwana
to accept the R3.5m now approved by the shareholders
without any
other compensation to the incumbent. As GCFO he is taking more
responsibility than he was as a divisional CFO, and
the board is thus
inclined to approve R7m referred to in the aforegoing paragraph.”
The
aforegoing paragraph of the minutes reads as follows:
“
The
GCS did further confirm that the GCEO and the GCFO did receive acting
allowances during their acting tenures in line with Denel
policy.”
[27] The First Applicant
states that at the time the board took its resolution of 30 November
2017, he was going through
difficult financial times.
Notwithstanding that, he, and the Second Applicant, based on the
ordeals with financial position,
resolved not to request immediate
payment of their monies. They wanted Denel to recover first
financially before they could
ask for or demand the payments from
Denel in accordance with the resolution of 30 November 2017.
[28] Any payment to them
of any money in keeping with the resolution of 30 November 2017 was
overtaken by events.
They approached the board in February with
what they had planned, and the board rubberstamped it in February
2018. Unfortunately,
in March 2018 a new board was purported,
and it refused to proceed with the recovery plan.
[29] The Second Applicant
resigned from Denel on 15 May 2018 before he could be paid. On
9 November 2018 Denel
terminated the First Applicant’s
employment contract following a disciplinary process. Upon
termination of the First
Applicant’s contract of employment,
Denel did not pay him the R7m that the board had resolved to pay on
30 November 2017.
[30] It is the Applicants’
case that Denel has an obligation to pay them for their conversion of
their permanent
employment. According to them, the resolution
adopted on 30 November 2017 by the board of Denel amounted to an
undertaking
and an agreement between Denel and them to pay out these
remarks.
[31] A fundamental
complaint raised by Denel against the application is that the
Applicants have approached this Court
without any cause of action. It
is unclear to Denel whether the Applicants alleged a breach of
contract between them and Denel.
It would appear, from the arguments
of Adv Z Feni, that the basis of the Applicants’ claims is
contractual because he told
the Court when this issue came up for
discussion that the Applicants have set out the terms of the contract
in the application.
So, it behoved this Court to scan the
applications to establish the terms of the contract.
[32] It is also not clear
whether the Applicants’ case is that Denel has breached a
statutory duty. A question
that Denel asks is on what grounds in law
do the Applicants allege that they are entitled to the relief that
they seek in the notice
of motion? In my view, the resolutions
in question do not constitute an agreement with the Applicants.
The application,
in my view, constitutes an attempt by the Applicants
to enforce compliance by Denel. If it was an agreement it was for
that reason,
as I set out below, unlawful and with no effect. For the
same reasons there was no valid reasons in law to conclude such an
agreement.
The foundation on which such an agreement was based were
flawed.
DETERMINATION
OF THE REMUNERATION OF DIRECTORS
[33] S 66(8) of the
Companies Act 71 of 2008 (“the
Companies Act&rdquo
;) deals with
the determination of the directors’ remuneration. It
provides that:
“
Except
to the extent that the memorandum of incorporation of a company
provides otherwise, the company may pay remuneration to its
directors
for their service as directors, subject to subsection (9).”
According
to
s 66(8)
, any amount that the board of directors determines as any
directors’ remuneration is subject to the provisions of
s
66(9).
Subsection (9) states as follows:
“
Remuneration
contemplated in subsection (8) may be paid only in accordance with a
special resolution approved by the shareholders
within the previous
two years.”
[34] In the application
under consideration, the shareholder was the Minister of Public
Enterprises. The determination
by the board of Denel of
Directors’ remuneration required the blessing or permission or
consent or sanction of the shareholder.
Any amount determined
by the board and not sanctioned by the shareholder was ultra vires,
invalid and unlawful.
[35] The First Applicant
states that on 7 June 2017 a five-year fixed employment was entered
into between the Respondent,
represented by Mr Mantsha, and him.
The said employment contract provided for the total base remuneration
of R5,000,000.00
and 5% representing performance-based pay. On
7 June 2017, the board took a resolution adopting the conversion of
his employment
contract to a fixed term and to pay him a 12 months’
separation agreement:
35.1 the remuneration of
R5,000,000.00 agreed by and between the First Applicant on one side
and Denel on the other side,
as set out in clause 3.1 of the
agreement signed by Mr Mantsha on behalf of Denel and the First
Applicant was not sanctioned by
any shareholder as required by the
provisions of
s 66(9)
of the
Companies Act. Therefore
, the said
agreement is invalid and unlawful.
35.2 the resolution of the board
taken on 7 June 2017 to:
confirm
the conversion of permanent contracts to fixed term contracts and to
pay the First Applicant a 12 months’ separation
payment is
invalid and unlawful. The board had not obtained the sanction
of the shareholder. The board acted ultra
vires its powers.
The resolution of 7 June 2017 contravenes the provisions of
s 66(9)
of the
Companies Act. In
the absence of ministerial sanction,
Denel cannot and could not then pay out any separation payment.
It has no power to approve
such payments.
[36] For the same reasons
set out in the preceding paragraph in respect of the resolution taken
by the board on 7 June
2017, the resolution of 30 November 2017 is
unlawful. It is invalid for want of compliance with
s 66(9)
of
the
Companies Act. It
cannot be lawfully acted upon as it is
null and void. It is for this reason that in his heads of
argument, counsel for Denel
states that it is quite an extraordinary
occurrence for a party to come to Court and ask for unlawful
decisions to be sanitized
through a court order. This
resolution of 30 November 2017 must suffer the same fate as the
resolution of 7 June 2017.
It must be set aside.
[37]
37.1 Attached to Denel’s
answering affidavit, was State Owned Enterprise’s Remuneration
Guidelines, which explicitly
set out the position of the directors’
remuneration. Before dealing with it I need to point out, at
this stage, that
during his argument, Mr Feni concluded that the
Guidelines do not apply to the current matter. He also argued
that the Minister’s
sanction is not required for the purposes
of the determination of a director’s remuneration. In my
view he was wrong.
37.2 These guidelines are
binding on all state-owned enterprises such as Denel. They
provide that any remuneration of
Executive Director of a state-owned
enterprise must comply with the framework set out therein.
37.3 The purpose of the
guidelines is set out to be:
“…
to assist boards
and remuneration committees in the determination and negotiations of
the Chief Executive Officers (CEO) of SOE
to establish a related
coherent remuneration policy and system for executive directors.”
The
GCFO will fall into this category of Chief Executive Officers.
37.4 “
Boards and
remuneration committees are expected to apply these guidelines in
determining remuneration and incentives of CEO’s
and ED’s
and in formulating remuneration policies.”
The
guideline is comprehensive. It sets out the remuneration
policies that the board must observe in the determination of
the
remuneration and incentives of the CEO’s and ED’s.
Failure to observe the guideline renders any conduct inconsistent
with it fatal.
[38] These Guidelines
define three categories of payments that could be made to an
Executive Director. These three
categories are remuneration,
long term incentives and short-term incentives. Whether or not
the board considers any form
of payment to the Executive Director,
whether it be remuneration, long term or short-term incentives or ex
gratia payment, the
provisions of
s 66(9)
of the
Companies Act and
of
the Guidelines must always be observed. Any resolution of the
board which is inconsistent with the said section and Guidelines
will
not have any legal effect and is liable to be impugned.
[39] Counsel for the
Applicants argued that the two Applicants were not directors at the
time the resolutions were taken.
According to him, at that
relevant time, the First Applicant was a permanent employee as
Divisional CFO of BAE Lands Systems in
subsidiary of Denel and the
Second Applicant was a business development manager. The two
Applicants were therefore not directors.
He was arguing against
the statement by counsel for Denel that the resolution taken by the
erstwhile board was not a resolution
that the board could have
competently and lawfully taken. The argument went further and
stated that that remuneration for
any director, including any
separation payment, would only be taken by the Minister by way of a
special resolution taken at a shareholders’
meeting and no such
resolution was adopted by the Minister.
[40] The argument by Adv
Feni that at the time the resolutions were taken the First Applicant
was not a director carries
no weight. The following
circumstances show that the two Applicants were in fact directors.
[41] On 1 June 2017, in
his own words, the First Applicant took up the position of the GCFO.
So, he became the
GCFO on 1 June 2017. On 7 June 2017 the First
Applicant entered into a five-year fixed employment contract with
Denel.
The said agreement was signed by him, the First
Applicant, and Mr Mantsha on behalf of Denel. In terms of
Clause 1 of the
said contract his job title was described as Group
Chief Financial Officer. On 7 June 2017, the board took a
resolution
in which it adopted the conversion of the First
Applicant’s employment contract from permanent to fixed term
and to pay the
First Applicant five months’ separation payment,
as permanent contract termination terms. We have now
established that
when the board took its resolution on 7 June 2017,
the First Applicant was already a GCFO and in terms of the agreement
that was
signed by him and Mr Mantsha.
[42] When the resolution
of 30 November 2017 was taken, the First Applicant was already a GCFO
and the Second Applicant
a GCEO. The principal item that was
discussed at that meeting was remuneration. It was an already
foregone conclusion
on 30 November 2017 that the First Applicant was
the GCFO, and the Second Applicant was the GCEO.
[43] The First and Second
Applicants were directors. The First and Second Applicants sat in the
board meetings as ex
officio directors that approved these payments.
The minutes of the board meeting of 30 November 2017 showed that,
among others,
Mr Z Ntshepe – Group CEO (GCEO) and Mr Z Mhlwana
– Group CFO (GCFO) were present. They even made submission to
the
board about why they felt entitled to those payments. The letter
of the Minister dated 7 November 2017 made it plain that the First
Applicant and the Second Applicant were appointed Group Chief
Financial Officer and Group Chief Executive Officer respectively
of
Denel and ex officio directors of the Denel body of directors. The
Minister’s letter confirms their appointment as GCFO
and GCEO.
Therefore, the argument by Mr Feni that at the time of the
resolutions of 7 June 2017 and 30 November 2017 the First
Applicant
and Second Applicant were not directors is flawed. Moreover, it must
be recalled that at the stage they were offered
those positions they
were already acting in those roles and had discharged the powers of
the executive directors during their acting
tenures.
[44] The conversion
payment offers were not made to the Applicants independently of their
promotions to GCFO and GCEO,
respectively. These offers were made to
the Applicants as incentives to give them to accept the director
positions of GCFO and
GCEO. It is common cause that the remuneration
of the Applicants as GCFO and GCEO were, in terms of
s 66(9)
of the
Companies Act, subject
to the shareholder approval and that their
determination was subject to the Guidelines. According to counsel for
Denel it is an
absurd proposition that the remuneration of the
Applicants as employees/executive directors is subject to the
shareholder’s
approval, yet any gratuities or “conversion”
payments are not.
[45] The
Companies Act and
the guidelines make it expressly clear that any payments to the
Applicants is subject to the sanction of the shareholder. No such
sanction was obtained in respect of the remuneration and ex-gratia
payments determined for the Applicants. Any resolution of the
board
that was passed without the approval of the shareholder is void.
Consequently, the Applicants cannot rely on such resolutions
for
their claim. Their claim can therefore not be sustained.
[46] Denel has lodged a
counterapplication against the First Applicant in which it seeks the
following relief:
1. It is
declared that resolutions 5.2.a and b of the Respondent (Denel Soc
Ltd) on 7 June 2017 and
30 November 2017 are unlawful.
2.
Alternatively, resolutions 5.2.a and b of the Respondent (Denel Soc
Ltd) on 7 June 2017 and 30
November 2017 are reviewed and set aside.
3.
The First Applicant,
Ziphiwo
Madododwa Mhlwana is ordered to repay the Respondent (Denel Soc Ltd)
R1,652,718.60 within 30 days of this order.
This is a review application by Denel
against its own decision to approve the “conversion”
payments to the Applicants.
An organ of state is permitted to a bring
a self-review application where its own decision is tainted with an
illegality. In this
regard, counsel for Denel found support in
State
Information Technology Agency Soc Ltd v Gijima Holdings (Pty) Ltd
2018 (2) SA 23
CC at paras 18 to 42
which itself referred to
Khumalo v MEC for Education
2014 (5) SA 579
(CC) at 590
. At
para [35] the Court had the following to say:
“
Section
195
provides for a number of important values to guide decision
makers in the context of public sector employment. When, as in this
case, a responsible functionary is enlightened of a potential
irregularity,
s 195
lays a compelling basis for the founding of a
duty on the functionary to investigate and, if need be, to correct
any unlawfulness
through the appropriate avenues. This duty is
founded, inter alia, in the emphasis on accountability and
transparency in
s 195(1)(f)
and (g) and the requirement of a high
standard of professional ethics in
s 195(1)(a).
Read in the light of
the founding value of the rule of law in
s 1(c)
of the Constitution,
these provisions found not only standing in a public functionary who
seeks to review through a court process
a decision of its own
department, but indeed they found an obligation to act to correct the
unlawfulness, within the boundaries
of the law at the interests of
justice.”
[47] The purpose of the
counter application by Denel is to seek an order that reviews and
sets aside the resolutions
of the board in terms of which the
“conversion” payments that were clear contraventions of
the
Companies Act and
the Guidelines. The resolutions of the board
about the “conversions” payments fail to comply with
s
66(9)
of the
Companies Act and
the Guidelines. The board was not
empowered to pass these resolutions. In passing those resolutions,
the board exceeded its powers
in terms of both the
Companies Act and
the Guidelines. This was unlawful and a violation of the law.
[48] In
Fedsure Life
Assurance Ltd v Greater Johannesburg Transitional Metropolitan
Council
[1998] ZACC 17
;
1999 (1) SA 374
CC at paragraph [58]
the Constitutional
Court stated that:
“
It
seems central to the conception of our constitutional order that the
Legislature and Executive in every sphere are constrained
by the
principle that they may exercise no power and perform no function
beyond that conferred by the law.”
Counsel
for Denel referred the Court furthermore to the judgment of
Affordable
Medicines Trust v Minister of Health
[2005] ZACC 3
;
2006 (3) SA 247
CC at para
[49]
.
There the Court had the following to say:
“
The
exercise of public power must therefore comply with the Constitution,
which is the supreme law, and the doctrine of legality,
which is part
of the law. The doctrine of legality, which is an incident of
the rule of law, is one of the controls through
which the exercise of
the public power is regulated by the Constitution.”
[49] Clearly the exercise
of public power that is not congruent with the principle of legality
is inconsistent with
the Constitution itself. Section 172(1) of
the Constitution requires the Court to declare any conduct which
violates the
Constitution invalid or unlawful and to review and set
it aside.
[50] In
their replying affidavit and answering affidavit to the counter
application, the Applicants raised a point
in
limine
that
Denel has not complied with Rule 6 of the Uniform Rules of Court.
They contend that Denel failed to file an answering affidavit
in
which it sought to oppose the Applicants’ application on an
attached notice of motion in which it seeks to review the
resolution
of Denel.
[51]
This point
in
limine
,
besides having been framed without any purity, lacks merit. There is
a notice of motion clearly marked “counter application”
which complies in all material respects with what is expected of a
notice of motion. This counter application precedes the answering
affidavit. Attached to the counter application is the affidavit of
David du Toit. In my view, there is compliance by Denel with
the
Rules of Court.
[52] The Applicants raised
a point that Denel has launched this application and failed to cite
the individual board
members who took the resolutions. This statement
lacks merit. In the first place this application was not “launched”
by Denel. It was “launched” by the Applicants. Secondly,
for inexplicable reasons, the Applicants did not cite the
members of
the board who took the impugned resolutions. They certainly did not
regard them as necessary parties. They did not think
that they had
any interest in the application. They certainly did not seek any
relief against them. Citing them would not have
added any value to
their case. Denel could not cite the board members if the Applicants
did not do so.
[53] The First Applicant
admitted that at the end of June 2017 Denel paid him the equivalent
of the twelve months’
remuneration in accordance with the
resolution that was taken on 7 June 2017. The First Applicant did not
state the amount that
was paid to him. It took a diligent search by
Mr du Toit to obtain the payment confirmation that reflects that the
First Applicant
received a sum of R1,652,718.60 on 28 June 2017. A
copy of proof of payment of the amount of R1,652,718.60 is attached
to the answering
affidavit as Annexure ‘AA4’.
[54] This payment should
have been sanctioned by the shareholder in terms of
s 66(9)
of the
Companies Act. As
it was not approved by the shareholder, it was
unlawful. Denel, as a state-owned enterprise, is under an obligation
in terms of
the
Public Finance Management Act 1 of 1999
and Public
Service Act 103 of 1994 to recover the said payment from the First
Applicant.
APPLICATION
FOR CONDONATION
[55]
There is before me
an application by Denel for condonation for the late filing of its
answering affidavit.
T
he
reasons proffered by Denel for the delay are that much of the facts
set out in the answering affidavit were not within the personal
knowledge of the deponent to the answering affidavit. The board that
sat during the impugned resolutions had been removed and,
in its
place, a new board was installed.
In
order t
o get
the correct fact, a thorough search for the information had to be
undertaken. It took extensive time to search through
the archives and
records of Denel to find the information. The board had to be
consulted. The Applicants have not attached the necessary
documents
to their application. This necessitated a delivery by Denel of the
Rule 5(12) notice. When it realized that it would
not be able to
deliver its answering affidavit timeously, Denel sought an indulgence
of two weeks from the Applicants, who granted
it gladly.
[56] In the light of the
reason for the delay, the fact that the Applicants were aware of the
difficult situation in
which Denel found itself, because the delay
involve no prejudice to the Applicants, I see no reason why the
application should
not be granted. Moreover, counsel for the
Applicant did not put up any fight on this aspect of the delay.
[57] The following order
is hereby made:
1.
The application is hereby dismissed, with costs.
2.
The resolutions adopted by the Respondent’s board of directors
on 7 June 2017 and 30 November
2017 are hereby reviewed and set
aside.
3.
The counter
-
application
is hereby granted.
4.
The First Applicant,
Ziphiwo
Madododwa Mhlwana, is hereby ordered to repay, within 30 days of this
order, the Respondent (Denel Soc Ltd), the sum of
R1,652,718.60.
5.
The application for condonation by the Respondent for the late filing
of its answering affidavit
is hereby granted.
PM MABUSE
JUDGE OF THE HIGH
COURT
Appearances
:
Counsel
for the Applicant:
Adv Z Feni
Instructed
by:
Qhali Attorneys
Counsel
for the Respondent: Adv
T Ramogale
Instructed
by
Edward Nathan Sonnenbergs
Date
on the opposed roll before Mabuse J:
8 March 2021
Date
of Judgment:
19 March
2021