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[2018] ZAGPPHC 1
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Democratic Alliance v Minister of Public Enterprise and Others; Economic Freedom Fighters v Eskom Holdings Limited and Others; Solidarity Trade Union v Molefe and Others (33051/2017; 34568/2017; 34042/2017) [2018] ZAGPPHC 1 (25 January 2018)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, PRETORIA
Not reportable
Of interest to
other judges
Revised.
25/1/2018
CASE
NO: 33051/2017
In
the matter between:
DEMOCRATIC
ALLIANCE
Applicant
and
THE
MINISTER OF PUBLIC
ENTERPRISE
First
Respondent
ESKOM
HOLDINGS
LIMITED
Second
Respondent
BRIAN
MOLEFE
Third
Respondent
Case
No: 34568/2017
AND
In
the matter between:
ECONOMIC
FREEDOM
FIGHTERS
Applicant
and
ESKOM
HOLDINGS
LIMITED
First
Respondent
MINISTER
OF PUBLIC
ENTERPRISE
Second
Respondent
BRIAN
MOLEFE
Third
Respondent
NATIONAL
UNION OF
MINEWORKERS
Fourth
Respondent
Case
No: 34042/2017
In
the matter between:
SOLIDARITY
TRADE
UNION
Applicant
and
BRIAN
MOLEFE
First
Respondent
MINISTER
OF PUBLIC
ENTERPRISES
Second
Respondent
ESKOM
HOLDINGS SOC
LIMITED
Third
Respondent
JUDGMENT
MATOJANE
J
Introduction
[1]
Before us are three separate but consolidated applications brought by
the Democratic Alliance ("DA"), Solidarity Trade
Union
("Solidarity") and the Economic Freedom Fighters ("EFF")
. The applications have a common feature, namely
to review and set
aside the decision of the Minister of Public Enterprises to appoint
and/or reinstate, the third respondent, Mr.
Molefe to the position of
Group Chief Executive at Eskom after he had departed from Eskom on a
purported early retirement agreement.
[2]
On 2 November 2016, the Public Protector released a report entitled
"the State of Capture" which was the culmination
of the
investigation by the Office of the Public Protector into alleged
improper and unethical conduct by the President and other
state
functionaries. The report contains damaging allegations against Mr.
Molefe of abusing his position at Eskorn to benefit the
Gupta family
in the improper and possibly corrupt awarding of state contracts and
benefits to the Gupta family's businesses.
[3]
On 11 November 2016, stung by the contents of the Report and its
possible implications to Eskom, Mr. Molefe, announced in a
televised
press conference that he was leaving his employ at Eskom from 1
January 2017. He stated that he was doing so voluntarily
as that
would be in the interests of good governance at Eskom to do so. He
expressed his confidence in being able to demonstrate,
at an
appropriate time, that he had done nothing wrong.
[4]
It transpired later that on the same day, Mr. Molefe submitted a
request for early retirement. The request was granted in the
letter
dated 24 November 2016, and under it, an early retirement agreement
was concluded with Eskom effective on 1 December 2016.
The agreement
permitted Mr. Molefe to proceed on retirement from age 50, with
Eskorn making up the shortfall regarding the ten-year
service
requirement in terms of the rules of the Pension Fund.
[5]
The Minister was never informed that Mr. Molefe had applied for early
retirement and that such an agreement had been concluded.
[6]
On 23 February 2017, Mr. Molefe joined the National Assembly as a
member of Parliament representing the African National Congress
("ANC"). Eskom duly advertised the position of Group Chief
Executive Officer.
[7]
In consequence of his purported early retirement, Mr. Molefe elected
to receive one-third of his retirement benefits as a lump
sum payout.
The Fund has paid a total amount of R10 327 074.53 in pension
benefits to Mr. Molefe.
[8]
On 16 April 2017, the Sunday Times reported that Mr. Molefe had
received an R30.1 million pension pay-outs. Following the media
outcry and the intervention of the Minister, the Eskom Board resolved
to "rescind" the early retirement agreement and
entered
into the Reinstatement Agreement with Mr. Molefe. The reinstatement
agreement purports to revive Mr. Molefe's terminated
contract for him
to resume his duties at Eskom. The period he was a parliamentarian
was to be regarded as unpaid leave, and Mr.
Molefe was to repay to
the Eskom Provident Fund ("EPPF") all amounts paid to him.
[9]
Mr. Molefe returned to his employment duties on 15 May 2016. The
Minister addressed a letter to the Eskom Board directing the
Board to
rescind its decision to reinstate Mr. Molefe on the basis that "the
appropriate process was not followed in the appointment
of Mr.
Molefe." Eskom subsequently informed Mr. Molefe on 2 June 2017
that the Reinstatement Agreement was rescinded.
[10]
On 4 June 2017, Mr. Molefe launched a parallel application in the
Labour Court contending that he was summarily and unlawfully
dismissed by Eskom on 2 June 2017. Mr. Molefe did not cite the DA in
its application in the Labour Court. The DA was granted leave
to
intervene in the matter with costs, and the application has been
stayed pending the outcome of this application.
[11]
The Eskom Pension and Provident Fund ("EPPF") has launched
a counter application to reverse its acceptance of Mr.
Molefe's
retirement should Mr. Molefe's early retirement agreement be set
aside.
The
relief sought
[12]
The DA seeks an order in the following terms;
11.1.
Reviewing and setting aside the decision made by the Minister
to appoint and reinstate Mr. Molefe to the position of Group Chief
Executive at Eskom;
11.2.
Declaring that any payment or sum of money received by Mr.
Molefe under any purported pension agreement between him and Eskom to
be invalid and ordering Mr. Molefe to repay such amounts within ten
days of this order.
[13]
Solidarity asks for an order declaring as unconstitutional and
invalid and setting aside the following decisions which it says
were
made by the board and the Minister
"3.1
the decision taken "around" 9 February 2016 to
approve a "pension carve out" for Mr. Molefe in terms of
which
he was "granted significantly greater early retirement
benefits than he would otherwise have been entitled to under the
Eskom
Pension and Provident Fund Rules, and which would come at a
significant cost to Eskom
3.2. the
decision taken in November 2016 to accept Mr. Molefe's "early
retirement" proposal, and any and all steps were
taken under it.
3.3. the
decision was taken "in or about May 2017 to "reinstate"
Mr. Molefe to his position as Group Chief Executive
of Eskom."
[14]
Solidarity also seeks an order directing the Director of Prosecutions
to investigate Mr. Molefe's and the Eskom Board's actions
in respect
of the above impugned decisions. The OPP has opposed this relief
and Solidarity has abandoned it.
[15]
The EFF seeks, amongst others the order:
13.1.
declaring that the decision of the Board to re-appoint Mr.
Molefe "as Chief Executive Officer" is irrational,
unlawful,
unconstitutional and invalid.
13.2.
Declaring that members of the Eskom Board have acted in breach
of their fiduciary duties owed to Eskom
13.3.
Directing the Minister to "forthwith" take
appropriate steps to remove members of the Board
[16]
The Minister and Eskom do not oppose the relief sought by the DA or
Solidarity as she avers that she took none of the decisions
referred
to above, she, however, opposes the relief by EFF that this court
should direct her to remove members of the Board. Eskom
abides by the
Court's decision and the EFF has now abandoned the relief it sought.
[17]
Mr. Molefe's case is that he never resigned but instead applied for
early retirement. The early retirement agreement was the
only reason
for his departure from Eskom. He states that there was a common
misunderstanding between him and Eskom about his early
retirement and
pension payments which rendered that retirement agreement void , with
the result that the
status quo
being, his employment as Group
Chief Executive Officer- was restored by operation of the law.
Consequently, he argues, the Minister
neither made nor was she
required to make any decision as to his appointment and reinstatement
and no question of a review arises.
The
factual background
[18]
On 11 November 2015, Mr. Molefe signed an open-ended contract of
employment with Eskom accepting his appointment as Group Chief
Executive Officer with effect from 1 October 2015. He subsequently
received notification from the Minister through Dr. Ngubane
that his
conditions of employment would be altered from an open-ended contract
to a fixed term contract.
[19]
Mr. Molefe says that one of the concerns he had when he left Transnet
(his previous employer) was that he would have to start
afresh with a
new pension scheme. He was 48 years old at the time. He says that he
did not remain in any position for a lengthy
period and was not in a
position to accumulate pension benefits over time. He was concerned
that at the age of 54 when his employment
contract at Eskom was set
to terminate, he would be a considerably less attractive candidate
for employment.
[20]
Mr. Molefe raised his concerns with Dr. Ngubane, the chairman of the
Board of Eskom and the chair of People and Governance
Committee of
the Board. Eskom with the involvement of Mr. Molefe formed a plan to
afford him early retirement benefits at age 50.
[21]
On 15 November 2016 Mr. Minnaar, the Executive Support Manager for
Eskom, wrote to the EPPF requesting calculations as to the
cost to
Eskom to make up for the minimum of 10 years required in terms of the
rules of the Pension Fund if Mr. Molefe retires at
54 (i.e., at the
end of five-year term) with Eskom waiving penalties. The EPPF advised
that Eskom will have to buy service to make
up the minimum ten years.
[22]
On 25 November 2015, two weeks after Mr. Molefe had signed his
appointment letter, Dr. Ngubane addressed a letter to the Minister.
He proposed that Mr. Molefe's pension benefits be calculated to age
63 with penalties waived, to compensate for the fact that Mr.
Molefe
had been
"previously employed on some short contracts and
have not been in the position to accumulate pension benefits over
time,"
the letter stated:
"due to
the nature of this engagement in the short term contractual
obligations in Mr. Molefe
's
case, he has not been able to
benefit from the growth opportunity in
a
single pension fund.
to bridge
this gap
, the following contractual stipulations are proposed:
regardless of
Mr. Molefe 's age after the five-year termination date, he will be
allowed to retire from Eskom 's service on the
basis that he is aged
63.
That the
penalties prescribed by the Eskom Pension and Provident fund ("EPPF”)
for retirement before age 63, be waived
That Eskom
carries the cost of such penalties (to be paid over to the EPPF)
if Mr.
Molefe's contract is not extended beyond the five-year termination
date, he will not be allowed to subscribe to any other
SOC
or
government pension fund.
[23]
Although the Minister's assistant, Ms. K Davids and Mr. K Mhlongo
from the Registry of the Ministry of Public Enterprises acknowledged
receipt of Dr. Ngubane's letter and undertook to bring the letter to
the Minister's attention, the Minister is adamant that the
letter
never came to her attention, and she was accordingly not aware of the
proposal that Mr. Molefe should be permitted to retire
on the basis
of an age of 63.
[24]
Dr. Ngubane's letter of the 25 November 2015 is significant for what
it does not mention. Mr. Molefe was previously employed
in senior
positions at National Treasury for approximately seven years. He was
then employed as the CEO of the Public Investment
Corporation (SOC)
Ltd for approximately seven years. He worked for Transnet for
approximately four years before he joined Eskom.
Mr. Molefe received
significant pension benefits at his previous positions.
[25]
In his last year at Transnet in the financial year ended 31 March
2015, Mr. Molefe received a salary of R6 115 000.00, together
with
"Post-retirement benefit fund contributions" of R561 000.
In the same year, Mr. Molefe received a long-term incentive
payment
of R6 835 000.00 and short-term incentive payments of R1 551 000.00 .
[26]
In terms of his Executive Employment Contract with Eskom, Mr Molefe
received a total annual guaranteed remuneration package
of R7 656
000.00. It is thus untrue that Mr. Molefe has not been in a position
to accumulate pension benefits over time.
[27]
On 9 February 2016, some four months after his appointment as Group
Chief Executive Officer, Mr. Molefe attended a meeting
of the
committee of the Board of Eskom, ("the People and Governance
Committee."). Mr. Molefe was not a member of this
committee and
did not recuse himself from its deliberations. He says that he
attended the meeting as an invitee, he, however, failed
to disclose
his interest in the subject matter of the resolution.
[28]
The Committee passed a resolution that in cases were Executive
Directors decided to take early retirement and there was a shortfall
regarding the EPPF ten years of service rule, Eskom would bridge the
gap to make up for the ten years, waive the penalties applicable
to
early retirement and Eskom would refund the pension fund the actual
costs for additional service added plus penalties applicable
to early
retirement.
[29]
In terms of the resolution Mr. Molefe and other executives who were
to be appointed on five-year fixed-term contracts would
be able to
qualify for the early retirement benefits contrary to the rules of
the Pension Fund. The resolution is consistent with
Dr. Ngubane's
proposal in the letter to the Minister of the 25 November 2015. The
Minister was not a party to that resolution and
was not aware of its
adoption. The resolution was never made public. The Minister only
came to know of the resolution a year later
when Eskom filed its
answering affidavit on 22 May 2017.
[30]
On 7 March 2016 Mr. Molefe concluded a five-year fixed-term contract
with Eskom which replaced his original contract of employment.
The
contract was to run from 1 October 2015 until its termination on 30
September 2020 .
[31]
Clause 3.1 of the second contract deals with the period of employment
and provides that:
The
Executive's employment with the Company is based on a fixed term
contract that expires on 30 September 2020 ("the Termination
Date"). The employment shall continue until this date subject to
either Party being entitled to terminate the employment relationship
by giving the other not less than 6 (six) months wrote the notice.
The Company may elect to pay the executive instead of notice.
[32]
Clause 10 is headed PENSION AND PROVIDENT FUND and provides
The
Executive shall continue as a member of the Eskom Pension and
Provident Fund or any other fund established or participated in
by
the Company from time to time,
subject to the
rules thereof.
(own underlining)
[33]
Clause 1.2.15 defines "Termination Date" as "the date
upon which the Executive's employment by the Company ceases
or is
terminated for any reason whatsoever."
[34]
Clause 21 deals with resignation. It states:
"On
the termination date, the Executive will
ipso facto
be deemed
to have resigned as a director of the Company and any other Group
Company of which he is a director at that date."
[35]
Clause 19.4 is the whole agreement clause and reads:
"This
agreement constitutes the whole agreement between the Parties and no
warranties or representations whether express or
implied have been
given or made by the Company to the Executive."
[36]
Mr. Molefe argues that his new contract of employment for a fixed,
five-year period did not alter his entitlement to membership
of the
EPPF. He relies upon his original contract of employment which
permitted his membership of the Fund which membership he
submits was
not altered by the new contract of employment.
[37]
A whole agreement clause, like any other clause in the agreement must
be interpreted by the intentions of the parties as reflected
in words
used in their ordinary and grammatical meaning having regard to
surrounding circumstances known to the parties at the
time of
formation of the contract in order to determine what the parties
intended . The purpose of the whole agreement clause is
that the
obligations of the parties will be determined by the written terms of
the contract and not by terms of a prior contract
that have not been
acknowledged in the new contract which may be contradictory and
irreconcilable. A "whole agreement clause"
and a "no
representation clause" mean what they say. Mr. Molefe cannot
rely on his original contract of employment because
it is not legally
relevant to the subsequent contract he concluded. See De Villiers v
McKay NO.
[1]
[38]
The alteration of Mr. Molefe's term of employment to five years meant
that he was now a
Temporary
Employee
[2]
and
not an
Eligible
Employee
[3]
as
defined. Although he was under pensionable age, he was a temporary
employee as defined and was disqualified from being a member
of the
Eskom Pension Fund.
[39]
The decision by Eskom to waive penalties and buy Mr. Molefe an extra
13 years of service totaling R30.1-million after only
15 months
service at the age of 50 stretches incredulity and is unlawful for
want of compliance with the rule of the EPPF. What
is most disturbing
is the total lack of dignity and shame by people in leadership
positions who abuse public funds with naked greed
for their own
benefit without a moments consideration of the circumtances of fellow
citizens who live in absolute squalor throughout
the country with no
basic services.
The
early retirement agreement
[40]
In terms of section 3(1) of the Eskom Conversion Act
[4]
,
Eskom is deemed to be a public company incorporated in terms of the
Companies Act, 1973. Section 6 of the Act provides that the
Registrar
of Companies must, on the date of conversion register the Memorandum
and articles of association of Eskom in terms of
section 63(1) of the
Companies Act, and provides that the Memorandum and Articles must be
"as determined by the Minister."
[41]
The second Memqrandum of Incorporation that was passed and adopted by
Eskom on 1 July 2016 ("The 2016 MOI). applies in
respect of the
decision by Eskom to approve Mr. Molefe's early retirement on 24
November 2016 and to conclude the "early retirement
agreement."
The MOI locate the power to appoint and remove the Group Chief
Executive Officer on the government (represented
by the Minister) to
the exclusion of the Board.
[42]
Section 63(2) of the PFMA provides that:
"The
executive authority responsible for a public entity under the
ownership control of the national or a provincial executive
must
exercise that executive's ownership control powers to ensure that
that public entity complies with this Act and the financial
policies
of that executive."
[43]
Clause 3.6 of the 2016 MOI provides that:
"3.6.
The Company [Eskom] shall not:
3.6.1.
appoint to or remove a
Director from the Board; or
3.6.2.
appoint or remove the
Chairperson of the Board, Group Chief Executive or Group Chief
Financial Officer other than as provided for
in terms of this MOI."
[44]
Clause 14.3 deals with the process of appointment and removal of the
Group Chief Executive and states:
14.3.1.
The Shareholder shall, on
behalf of the Company, have the exclusive power, in exercising its
Ownership Control under the provisions
of sec 63 (2) of the PFMA,
to
appoint and remove the CE
as an employee of the Company by the Guidelines (own underling)
14.3.2.
The Shareholder's act of
appointment of the Group Chief Executive binds the Company to the
exclusion of the Board.
14.3.3.
The Minister shall be
noted as a party to any contract of employment between the Company
and the Group Chief Executive.
14.3.4.
The Group Chief Executive
shall report to the Board and shall only become an Executive Director
of the Company is appointed to the
Board by the Shareholder in terms
of clause 14. 1. 1 of this MOI.
14.3.5.
The Shareholder shall, on
behalf of the Company have the exclusive power to remove the Group
Chief Executive as an employee of the
Company which removal would
constitute a dismissal as envisaged in terms of Section 186(1)(a) of
the Labour Relations Act 66 of
1995 ("LRA'). Consequently, the
provisions of the LRA apply to any such removal."
[45]
The decision by Eskom to approve Mr. Molefe's early retirement and to
conclude the early retirement contract is
ultra vires
and void
for non-compliance with the 2016 MOI.
[46]
Despite the knowledge that Mr. Molefe was a temporary employee on a
five year fixed term executive employment contract,
thus not
eligible to be a member of the Pension Fund and that he was not being
retrenched, Eskom provided the Fund with information
that Mr. Molefe
was appointed as permanent employee and requested the Fund to grant
Mr. Molefe extra service in accordance with
the provisions of Rule
21.4
[5]
of the EPPF rules. The associated costs amounted to R30,1 million.
Eskom paid this amount to the Fund.
[47]
Among the documents submitted by Eskom to the Fund included a letter
from Dr. Ngubane dated 24 November 2016 addressed to Mr.
Molefe
stating that Mr. Molefe's early retirement had been approved "in
terms of Rule 28 and Rule 21.4 and that penalties
will be waived and
potential service to age 63 has been granted to Mr. Molefe".
Attached to the affidavit was also a certain
annexure "SA 1"
reflecting code "PPX" which it is common cause indicates
permanent executive employment in
the F-band.
[48]
The Eskom Pension and Provident Fund is a defined benefit pension
fund that is registered as a self-administered pension fund
in terms
of the Pension Funds Act
[6]
24 and approved as a pension fund in terms of the Income Tax Act 58
of 1962. Section 13 of the Pension Fund Act is headed "Binding
force of rules" and states:
"Subject
to the provisions of this Act, the rules of a registered fund shall
be binding on the fund and the members, shareholders,
and officers
thereof, and on any person who claims under the rules or whose claim
is derived from a person so claiming."
[49]
Rule 28
[7]
deals with
retrenchment,
not early retirement
.
It applies in circumstances where the member is below the age of 65
years and is retired from service of the employer for operational
reasons, namely a reduction in or reorganization of staff, the
abolition of his office or post, to facilitate improvements in
efficiency or organization or retrenchment generally.
[50]
Rule 28(3)
[8]
which applies only if a member has satisfied the requirements of Rule
28(1) require consultation between an employer and the Board
of EPPF
before the EPPF can be satisfied that the employee in question is
entitled to retirement as contemplated in Rule 28(1).
The EFFP never
consulted with Eskom before it exercised its discretion as
contemplated in Rule 28(3).
[51]
Rule 24
[9]
deals with
early
retirement
and
sets out the circumstances under which employees are entitled to
early retirement benefits. To qualify for such benefits an
employee
had to, amongst others, have been in the employ of Eskom for at least
ten years and must have reached an age of 55 years.
[52]
Mr. Molefe does not fall within the category of section 28(1) as he
was not "retrenched," nor had he completed not
less than
ten years' pensionable service. Rules 23 and 24 could not be applied
as Mr. Molefe had not reached the age of 55 years.
He was 50 and not
a permanent employee.
[53]
The Fund avers that it relied on the relationship of trust it had
with Eskom and was satisfied on the basis of formal information
provided by Eskom that Mr. Molefe had retired from service for
reasons listed in Rule 28 and that the entry conditions contained
in
Rule 28(1) had been met and effected payment accordingly. This
explanation extends incredulity.
[54]
The Fund failed to-independently assess whether Mr. Molefe's
application for early retirement fell within Rule 28. Clause 1(2)(b)
of the Constitution of the Fund stipulates that its operations shall
have as its main objectives, among others, sound governance
and
faultless administration. The Fund has failed to comply with the
Pension Fund Act or with the Rules of the EPPF.
[55]
It has subsequently become common cause between the parties that the
early retirement agreement which purported to permit Mr.
Molefe to
retire from Eskom on full pension benefits after only 15 months
service at the age of 50 was unlawful in that it breached
the Rules
of the Eskom Pension Fund.
[56]
There is a strong inference to be drawn from the above factors that
the early retirement agreement was deliberate scheme devised
by Eskom
with the involvement of Mr. Molefe to afford him pension benefits he
was not entitled to. The scheme permitted Mr. Molefe
to proceed to
early retirement at age 50 by buying him extra pensionable service.
The scheme was started soon after Mr. Molefe's
permanent employment
and was deployed after he had publicly stated that he was voluntarily
leaving Eskom's employ.
Whether
Mr. Molefe resigned
[57]
Mr. Molefe states that he was under a mistaken impression, common to
him and Eskom regarding the age at which he could take
early
retirement in terms of Rule 24 of the EPPF. He says that he relied on
the EPPF Guide to Benefits which refers to early retirement
(not
retrenchment or retirement from service) being possible from the age
of 50. He submits that his original contract of employment
did not
come to an end because when it was discovered that the Retirement
Agreement was unlawful, the
status quo,
being his employment
as Group Chief Executive - was restored by operation of the law.
[58]
On his version, the mistake relates to his entitlement to early
retirement, not his resignation which became effective on 31
December
2016. An application for early retirement is a resignation. An
employee cannot retire and resign. Mr. Molefe's decision
to leave was
not conditional in any way and had nothing to do with the early
retirement agreement; the agreement had not yet been
concluded when
he announced that he would leave Eskom and he had no reason to
believe that the Board would accept his application
for early
retirement. If the application was refused, he would not have been
entitled to return to Eskom as the employment relationship
had
terminated.
[59]
In tenns of clause 21 of the employment contract, Mr. Molefe is
deemed to have resigned as a director of Eskom on the termination
date.
[60]
Mr. Molefe could not lawfully be appointed a member of Parliament if
he was in the service of the state in terms of section
47(1)(a)
[10]
of the
Constitution,
accordingly,
the alleged common mistake, if any, could not have impacted on his
decision to resign. His reasons for leaving Eskom
is indicated in his
statement of 11 November 2016, namely
"I
have, in the interest of good corporate governance, decided to leave
my employ Eskom from 1January 2017. I do so voluntarily.
…
I
will take time off to reflect before I decide on my next career move.
…
I
go now because it is in the interest of Eskom and the public it
serves that Ido so (emphasis added)
[61]
He, correctly in our view, wanted to avert the harm that will be done
to Eskom if he remained in office while these allegations
remain
unresolved. He stated that he left Eskom for purposes of clearing his
name on the assumption that he would be able to do
so within a
reasonable time. Mr. Molefe noted that the process of establishing a
Commission of Inquiry might take time and that:
"In
the meantime, harm is done - to the institution; it has been my honor
to lead the most difficult times, to its reputation
and my own. I say
nothing of the harm, too, to others close to me."
[62]
Mr. Molefe's resignation was accepted by the Minister, who is the
only representative shareholder of Eskom, she indicated in
her
statement on the same day that she respected Mr. Molefe's decision to
resign. Mr. Molefe never corrected the Minister on her
understanding
that he had resigned. He never informed her that he was leaving his
employ as a result of an early retirement agreement
he concluded with
Eskom. The alleged common mistake was in any event between Mr. Molefe
and Eskom and not with the Minister who
is the representative of the
employer.
[63]
On the same day, Eskom issued a Media Statement headed "Eskom
GCE Brian Molefe voluntarily steps down." Eskom announced
its
"great sense of loss and regret" that Mr. Molefe had
decided to "step down in the interest of good corporate
governance... To clear his name following the release of former
Public Protector Thuli Madonsela's report on her 'observations'
about
the so-called state capture."
[64]
Eskom also accepted that Mr. Molefe had resigned. It submitted to the
Companies and Intellectual Property Commission ("CIPC")
the
minutes of the Board meeting dated 29 November 2016 recording that
the Board had resolved to accept Mr. Molefe's resignation.
[65]
In our view, Mr. Molefe terminated his employment relationship with
Eskom either by retirement or reignation. The contention
that Mr.
Molefe's original contract of employment did not come to an end is a
contrived and is manifestly false.
Whether
the purported Reinstatement Agreement was lawful.
[66]
Mr. Molefe contends that his return to Eskom did not involve the
decision by the Minister, but a restoration of the
status quo
as
a matter of law as a consequence of a common mistake. This he argues
did not constitute an appointment as contemplated in clause
14.3.1 of
the Memorandum of Incorporation.
[67]
The early Retirement Agreement and the Reinstatement Agreement are
employment contracts subject to the provisions of the 2016
MOI. It is
the government represented by the Minister that has the power to
appoint the Group Chief Executive Officer to the exclusion
of the
Board. The Minister was not noted as a party to the Agreements as
required in terms of clause 14.3 .4 of the 2016 MOI. Eskom
did not
obtain the Minister's consent or approval before concluding the
Reinstatement Agreement. The Reinstatement Agreement is
accordingly
ultra vires
and unlawful.
[68]
It is trite that the exercise of public power is only legitimate
where it is lawful and where a rational relationship exists
between
the exercise of the power and the purpose for which the power was
given. In
Pharmaceutical
Manufacturers Association of SA & another: In Re Ex Parte
President of the Republic of South
Africa
& others
[11]
Chaskalson CJ said the following:
"It
is a requirement of the law that the exercise of public power by the
executive and other functionaries should not be arbitrary.
Decisions
must be rationally related to the purpose for which power was given,
otherwise they are in effect arbitrary and inconsistent
with this
requirement. It follows that in order to pass constitutional scrutiny
the exercise of public power by the executive and
other functionaries
must. at least, comply with this requirement. If it does not, it
falls short of the standards demanded by our
Constitution for such
action."
[69]
In
Affordable
Medicines Trust v Minister of Health
[12]
Ngcobo J held:
"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 that law. The doctrine of legality, which is an incident of the
rule of law, is one of the constitutional controls
through which the
exercise of public power is regulated by the Constitution."
[70]
The Minister stated that the R30.1 million pension payment proposal
had no legal rationale and was unlawful. She requested
Eskom to
renegotiate a package with Mr. Molefe which would be less expensive
and which would also ameliorate Mr. Molefe's financial
prejudice.
Eskom subsequently presented the Minister with four options.
[71]
The Board indicated that its preferred option was consensual
rescission which would, according to the Board, mean that there
would
be a restoration of the
status quo ante.
Eskom ignored the
allegations against Mr. Molefe contained in the Public Protector's
report because it regarded them as irrelevant
to whether or not he
should be reinstated as Group Chief Executive officer because they
were "not findings" and the Public
Protector did not take
any remedial action against Mr. Molefe.
[72]
The Minister accepted rescission of the early retirement agreement
and the restoration of the
status quo ante,
as it was a better
"value proposition for the South African
fiscus."
She
stated that Mr. Molefe was reinstated "in exchange" for
repayment of the monies that he had received under the early
retirement agreement. There is no rational reason to reinstate Mr.
Molefe in exchange for the return of an unlawfully received
benefit.
[73]
Having concluded that there was no legal rationale for the pension
arrangement and that it was unjustifiable, it was irrational
for the
Minister to approve the reinstatement of Mr. Molefe as a better value
proposition to an unlawful pension proposal. The
correct approach
would have been to refuse the pension payout proposal out of hand.
There was no obligation on the Minister to
incur the burden of an
unlawful obligation on behalf of Eskom.
[74]
One of the four options provided to the Minister by the Board was to
review the Reinstatement Agreement in court proceedings.
As an organ
of state Eskom is obliged by the Constitution to approach a court to
have its unconstitutional act or decision declared
invalid and set
aside. The Constitutional Court in
State
Information Technology Agency SOC Limited v Gijima Holdings (Pty)
Limited
[13]
held
that PAJA does not apply to an organ of state seeking to review its
own decision. An organ of state must instead do so under
the
principle of legality as [Section 33 of the Constitution creates the
right to just administrative action to be enjoyed by private
persons
only as the State is the bearer of obligations under that section and
cannot be a beneficiary of the rights under Section
33 (being rights
to administrative action that is lawful, reasonable and procedurally
fair.
[75]
The Reinstatement Agreement is irrational because the Minister was
deceived about the nature of the decision that was being
taken and
its legal and factual background. The Minister says
"I was
under the impression that this was
a
case of unilateral
resignation and nothing more."
The Minister was not aware
that the early retirement agreement had been concluded, she knew
nothing about Mr. Molefe's R30 million
pension payout and Dr. Ngubane
had already signed the Reinstatement Agreement when he sent it to the
Minister.
[76]
Mr. Molefe accepted that the allegations against him were so serious
that they warranted his resignation in the interest of
Eskom and good
corporate governance. The allegations are directly relevant to the
rationality and legality of his reinstatement
as Group Chief
Executive officer. Eskom acted irrationally in failing to consider
how his reinstatement could now be in the interest
of Eskom and good
governance after Mr. Molefe acknowledged that the serious allegations
were a reason for his resignation.
[77]
Eskom says that it would have been inappropriate to have acted
against Mr. Molefe on the basis of the untested allegations
contained
in the Public Protectors report. At the time of announcing his
resignation, Mr Molefe, Eskom and the Minister correctly
in our view,
conveyed an acceptance that the allegations against Mr. Molefe were
so serious as to warrant his immediate resignation
so that he could
have an opportunity to clear his name, and that his immediate
resignation was in the interest of Eskom and good
corporate
governance.
[78]
It was not possible for Eskom to take a rational decision about
whether to reinstate Mr. Molefe without at least investigating
the
veracity of the allegations as it has control over all the relevant
evidence and the allegations are plainly material to Mr.
Molefe's
suitability for the position of Group Chief Executive Officer of
Eskom.
[79]
Mr. Molefe contends that the Public Protector's report contains
observations, not binding findings. He argues that the observations,
framed by the Public Protector as interrogatories, were intended to
be determined by the Judicial Commission of Enquiry and he
was not
given an opportunity to respond to the Public Protector's
observations before the report was published.
[80]
The allegations against Mr. Molefe contained in the Public Protectors
are so serious that they were the reason for his resignation.
The
allegations are highly relevant to Mr. Molefe's suitability to be
reinstatement as GCEO. They are a dead weight that he must
carry
until he is cleared. In the absence of new facts that arose in the
interim to lift the dead weight that motivated the need
for Mr.
Molefe to resign in the first place, the allegations in the Public
Protector's report cannot just be ignored by the Minister
or Eskom.
The Minister and Eskom acted irrationally in ignoring the damning
allegations in the Public Protector's report.
[81]
We find that the reinstatement of Mr. Molefe as Group Chief Executive
Officer at Eskom is at variance with the principle of
legality and is
invalid and falls to be set aside.
[82]
We also find that Mr.Molefe was never entitled to receive any pension
benefits from from Eskom Pension Fund and any payments
made in lieu
of such benefits were patently unlawful.
[82]
In the result, the following order is made
a. the decision
taken by the Board of Eskom in November 2016 to accept Mr. Molefe's
"early retirement" proposal is reviewed
and set aside.
b. The decision
made by the Minister to appoint and reinstate Mr. Molefe to the
position of Group Chief Executive at Eskom is reviewed
and set aside.
c. It is
declared that any payment or sum of money received by Mr. Molefe
under any purported pension agreement between him and
Eskom is
invalid and Mr. Molefe is ordered to repay such amounts within ten
days of this order.
d. Mr. Molefe is
ordered to pay the costs including the ·costs of two counsel
where employed.
_________________
K
E MATOJANE
JUDGE
OF THE HIGH COURT
GAUTENG
DIVISION, PRETORIA
I
agree:
___________________
H
J FABRICIUS
JUDGE
OF THE HIGH COURT
GAUTENG
DIVISION, PRETORIA
I
agree:
___________________
S
S MPHAHLELE
JUDGE
OF THE HIGH COURT
GAUTENG
DIVISION, PRETORIA
HEARD
ON: 29 AND 30 NOVEMBER 2017
JUDGMENT
DATE
FOR
THE DEMOCRATIC ALLIANCE: P KENNEDY SC
with
N FERREIRA, K HARDING
AND
L ZIKALALA
INSTRUCTED
BY
FOR
THE SOLIDARITY TRADE UNION
INSTRUCTED
BY
[1]
[2008] ZASCA 16
;
2008 (4) SA 161
SCA
[2]
"Temporary Employee" is a person who is appointed for a
specific purpose and whose employment will end when that purpose
has
been accomplished, or who is appointed for a specific period and
whose employment will end at the end of that period.
"Eligible
employee" means an employee who: •
(i)
At the date of becoming a member,is under a pensionable age
(ii)
Is not a Temporary Employee or an employee on the London Office of
Staff of an Employer.
[3]
[4]
Act 13 of 2001
[5]
"An EMPLOYER may make special payment to the FUND in order to
add to the PENSIONABLE SEVICE of a MEMBER in his employ such
period
of past SERVICE as the BOARD, after consulting the ACTUARY,
determine."
[6]
24 of 1956
[7]
"(1) Subject to the provisions of subsections (2), (3) and (4)
If a Member who has not attained the pensionable age Is retired
from
the service owing to a reduction In or reorganization of staff, or
to the abolition of his office or post, or in order to
facilitate
Improvements in efficiency or organization or to retrenchment
generally, he shall be paid a benefit equal to three
times his
contributions plus ten per cent of his final average emoluments for
each year of pensionable service before January
1950..
[8]
"if a member who had attained the age of 50 years...and has not
less than ten years' pensionable service, he may instead
be granted
at the discretion of the Board after consulting the employer, as
from the date of his leaving the service of his employer,
a pension
in respect of his pensionable service calculated in terms of rule
22,without reduction in terms of rule 24'."
[9]
"24 Notwithstanding the provisions of rule 23, a MEMBER may
retire from the service after attaining the age of SS years
in which
case he shall be entitled, as from the date of his retirement, to a
PENSION in respect of his PENSIONABLE SERVICE to
the date of
retirement calculated in terms of rule 22 reduced by a factor equal
to thirteen-fortieths of one per cent for each
month by which the
period from the date of his retirement to the date on which he would
have-attained the PENSIONABLE AGE exceeds
twenty-four months".
[10]
47. Every citizen who is qualifed to vote for the National Assembly
is eligible to be a member of the
Assembly,
except-
1.
(a) anyone who is appointed by, or is in the service of, the state
and receives remuneration for that appointment or service,
other
than ...
[11]
(2000) ZACC 1
;
2000 (2) SA 674
(CC) para 85
[12]
[2005] ZACC 3
;
2006 (3) SA 247
(CC);
2005 (6) BCLR 529
(CC) at para 49
[13]
(CCT254/16) (2017] ZACC 40 (14 November 2017)