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[2017] ZAGPPHC 120
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Molefe and Others v Minister of Transport and Others (17748/17) [2017] ZAGPPHC 120 (10 April 2017)
IN THE HIGH COURT OF
SOUTH AFRICA
GAUTENG DIVISION,
PRETORIA
CASE NUMBER: 17748/17
DATE: 10 April 2017
Reportable:
No
Of
interest to other judges: No
Revised.
POPO
SIMON
MOLEFE First
Applicant
ZODWA
PENELOPE
MANASE Second
Applicant
MASHILA
JEMINA
MATLALA Third
Applicant
WILLIAM
SOLOMON
STEENKAMP Fourth
Applicant
XOLILE
GEORGE Fifth
Applicant
CLEMENT
MANYUNGWANA Sixth
Applicant
and
THE
MINISTER OF
TRANSPORT
First Respondent
PASSANGER
RAIL AGENCY OF SOUTH AFRICA
Second Respondent
CAROL
ROSKRUGE-CELE Third
Respondent
NONDUDUZO
SAMUKELISWE KHESWA Fourth
Respondent
NAZIR
ALI Fifth
Respondent
RONNY
MKHWANAZI Sixth
Respondent
TIYANI
RIKHOTSO Seventh
Respondent
NATALIE
SKEEPERS Eighth
Respondent
THE
MINISTER OF
TRANSPORT Ninth
Respondent
CONSTANCE
MALEHO Tenth
Respondent
JUDGMENT
MABUSE
J:
[1]
To set the scene this matter concerns the decision taken on 8 March
2017 by the Minister of Transport ("the Minister")
to
dissolve the Board of Control (''the Board") of Passenger Rail
Agency of South Africa ("PRASA") by removing the
applicants
from the said Board. It is submitted by the applicants that while the
Minister has the power to remove the directors
from the Board, such
power is a public power which must be exercised at the very least, in
a lawful and rational manner and in
accordance with the prescripts of
administrative justice. The applicants contend that this obligation
arises automatically
ex lege
and that the Minister is not
entitled to remove the directors of the Board of PRASA in an
unlawful, irrational, unreasonable or
procedurally unfair manner with
far reaching consequences for the individuals involved, PRASA and the
public.
[2]
On the other hand while the Minister admits that in removing a
director of the Board she is obliged to act in a lawful and rational
manner, she contends, however, that the decision to remove the
applicants is of an executive nature and, furthermore, denies that
the decision to remove the applicants constitutes an administrative
decision.
[3]
Accordingly, it is required of this Court to decide whether the
decision to remove the applicants from the Board constitutes
an
administrative or executive action. Secondly, it is required of .this
Court to decide whether in dissolving the PRASA Board
or in removing
the applicants from the Board of PRASA, the Minister acted lawfully
and rationally. It is of supreme importance
to point out that the
issue to be decided in this matter is not so much whether the
Minister had valid grounds to dissolve the
Board of PRASA as it is
whether she acted rationally and lawfully when she did so.
[4]
The applicants are all former directors of the Board of PRASA. The
directors who were removed by the decision of the Minister
are the
first, second, third, fourth, sixth and seventh applicants. For
purposes of brevity these applicants may be referred to
as "the
removed directors". Although there are ten respondents in
this matter the battle raging on in this application
involves the
applicants on the one side and the first respondent on the other
side. The second to tenth respondents have not filed
any papers in
this matter. In the circumstances I will assume that they are all
prepared to accept the outcome of this application.
Although the
target of this application is the decision of the Minister taken on 8
March 2017 the ultimate decision of this Court
may have implications
for the second to the tenth respondents.
[5]
In this application the applicants seek the following order:
"1. that this
application be treated as an urgent application and in so far as may
be
necessary where the forms prescribed by
the Rules of this Court be dispensed with;
2. reviewing;
alternatively declaring unlawful, and setting aside the novices of
removal of director issued by the first respondent
in respect of each
of the applicants on or about 8 March 2017;
3. removing;
alternatively, declaring unlawful, and setting aside the decision(s)
by the first
respondent to remove each of
the applicants from the Board of Control of the second
respondent on or about 8 March 2017;
4. to the extent
necessary, ordering the reinstatement of the first to seventh
applicants as
directors of the second
respondent, with effect from 8 March 2017 alternatively the date
of this order;
5. to the extent
necessary, reviewing; alternatively: declaring unlawful, and setting
aside
the appointment of any directors
appointed, in substitution of the applicants, to the
Board on or after 8 March 2017;
6. in the alternative
to 2-5 above, ordering that, pending the determination of the review
referred to in Part B below:
6.1.
the notice of removal and the decisions to
remove are suspended with effect from
8
March 2017and have no practical or legal effect,
6.2.
to the extent necessary, the first to seventh
applicants are reinstated as directors
of
the second respondent with effect from 8 March 2017, alternatively,
the date of
this
order;
6.3.
to the extent necessary, the appointment of
any directors, in substitution of the
applicants,
to the Board on or after 8 March 2017 is reviewed,·alternatively
declared unlawful, and set aside,
alternatively, suspended;
6.4.
interdicting and preventing the first
respondent from appointing any directors to
the
Board in substitution of the applicants;
7. ordering any
respondent who opposes Part A relief to pay the costs of Part A of
this application on a scale as between attorney
and own client,
including the costs of two counsel jointly and severally with any
other respondent who does opposes, the one
paying
the other to be absolved;
8. ordering further
and alternative relief.”
THE
BACKGROUND
[6]
On 8 March 2017 the Minister decided to remove the relevant directors
as well as the third and fourth respondents from the Board.
She sent
notices to each of the relevant directors as well as the third and
fourth respondents, unilaterally terminating their
directorship of
PRASA with immediate effect. The notice to the first applicant reads
as follows:
"Dr. Popo Molefe
Chairperson
Passenger Rail Agency
of South Africa
Private Bag X101
Braamfontein
2017
Dear Dr. Molefe
NOTICE OF REMOVAL
AS DIRECTOR
In accordance with s
24(1) of the Legal Succession to the South African Transport Services
Act, Act 9 of 1989, the Minister of Transport as the
Minister designated as the shareholding
Minister, hereby gives you notice that you are
hereby removed as a director of the Company
with effect from date of this notice.
Yours faithfully
Ms. Dipuo Peters, MP
Minister of Transport
Date 08/03/2017.
”
[7]
The contents of the notices to the other directors are similar to the
one that was sent to the first applicant. The Minister's
decision to
dismiss these directors and former directors was also intimated in a
letter sent by the Minister on 8 March 2017 to
the Acting Company
Secretary of PRASA. The said letter reads as follows:
"Mr. Tumi Mohube
Acting Company
Secretary
Private Bag_ X101
Braamfontein
2017
Members of the Board
of Directors Passenger Rail Agency of South Africa (PRASA)
NOTICE OF REMOVAL
OF DIRECTORS
In accordance with
section 24(1) of the Legal Succession to the South African Transport
Services Act, Act 9 of 1989, the Minister of
Transport as the Minister designated as the
Shareholding Minister, hereby gives the
Company and the board of directors of the Company
notice that P Molefe, WS Steenkamp, TB
Phitsane, ZP Manase, CR Cele, MJ Matlala, N
Kheswa and C Manyungwana are hereby removed by
the Minister as directors of the
Company
with effect from the date of this notice.
Please note that the
written notice has been sent to each of the abovementioned directors
regarding their removal
Yours Faithfully
Ms. Dipuo Peters, MP
Minister of Transport
Date: 08/03/2017.
”
[8]
By the said decision the Minister thus dissolved the entire Board and
purported to "remove" two former directors of
PRASA, the
third and fourth respondents, who had, many months before her
decision, resigned from the Board. No similar notice was
sent to the
fifth applicant, the reason being that the fifth applicant had been
seconded to PRASA by the South African Local Government
Association
("SALGA") and for that reason the Minister had no powers to
remove him. Consequently the Board became a one
member board
constituted only by the fifth applicant. The applicants contend that
there is no basis in law or fact for the Minister's
actions.
[9]
Each of the relevant directors has a right to remain in that
position, so it is contended by the applicants, in the absence
of any
circumstances on the basis of which the Minister could lawfully
terminate their membership of the Board. The Minister has,
however,
terminated each of the applicants' mandates, except the fifth
applicant, to act as director without reason or warning
thereby
severely affecting the relevant directors' rights and interests. This
application is therefore brought by each of the relevant
directors in
his or her personal capacity. It is also brought by the fifth
respondent in his capacity as a director of PRASA for
the time being
in the exercise of his fiduciary duties to PRASA.
[10]
PRASA was established in terms of s 22(1) of the Legal Succession Act
To The South African Transport Service Act No. 9 of 1989
("the
Legal Succession Act'). Under that Act, PRASA was tasked with
providing commuter rail services within, to and from South
Africa as
well as Long Haul Passenger Rail and Bus Services. In carrying out
its business and projects, PRASA is obliged to
"have due
regard to key governmental social, economic and transport
policy
objective s''.
PRASA's powers are set out under s 23(4) of the
Legal Succession Act and include the power
"generally, to do
anything or to perform any other acts ... that may
assist the
co-operation in achieving its objects'..
[11]
PRASA is a State owned entity. It receives substantial amount of
public funding. It is listed as a National Government Business
Enterprise under Schedule 3 of the Public Finance Manual Act, 1999
("PFMA"). Moreover s 23(1)(a) of the Legal Succession
Act
states that the main objects of PRASA is
"to ensure that, at
the request of the Department of Transport, rail
commuter
services are provided within and to and from public in the public
interest"
PRASA is thus obliged and does in fact provide
rail commuter services to millions of people in South Africa.
[12]
The public interest in PRASA and the constitution of the Board and
the need for proper corporate governance are underscored
by the
investigations carried out by the office of the Public Protector and
the report of the Auditor General in 2015 who each
uncovered
irregular expenditure at PRASA. Following these findings and in terms
of its obligations and the
Public Finance Management Act No. 1 of
1999
as amended by Act No. 29 of 1999 ("the PFMA"), the
relevant directors conducted an internal investigation in PRASA.
[13]
The directors were appointed in August 2014. Each of them was
appointed for a fixed period by the Minister until 31 July 2017
in
the case of every director. The seventh applicant, though, was
appointed until 12 April 2018. Shortly after the appointment
of the
relevant directors in August 2014 previous irregularities and
misconduct within PRASA were uncovered. On 31 July 2015 the
Auditor
General made certain discoveries of irregular and unauthorised
expenditure against PRASA. He later reported approximately
of R550
million in irregular expenditure for the 2014/2015 financial year and
approximately R14 billion for the period 201!\/2016
year. On 24
August 2015 the Public Protector issued a report containing a series
of damning indictments against PRASA for conduct
between 2008 and
2015. In this report the Public Protector pointed out numerous
instances of cooperate governance failures and
suspected corruption.
On the basis of her discoveries the Public Protector then instructed
the National Treasury to investigate
every PRASA contract above R10
million. Each relevant director therefore joined PRASA at the time
when there already was maladministration
and financial mismanagement
at PRASA and which affairs were in serious disarray and required
investigations and oversight.
[14]
Following the aforementioned findings by both the Public Protector
and the Auditor General and in accordance with the terms
of their
obligations under PFMA the relevant directors conducted an internal
investigation in PRASA. So far the said investigation
uncovered the
true extent .of fruitless and wasteful and irregular expenditure at
PRASA totalling at least approximately R14 billion.
The removed
directors contend that the Minister's action in removing them from
the Board of PRASA interferes with the ongoing investigations
at
PRASA and may be an effort to frustrate the successful outcome of
these investigations. They contend furthermore that their
removal
clearly threatened the constitutional principle of legality, the
operations in PRASA, the values of transparency and openness
and the
continued viability and finalisation of the PRASA investigation. The
removal of the directors also erodes the institutional
memory and
intimate knowledge of these investigations and cases against
individuals and companies involved. The Board has taken
several steps
pursuant to these findings in the discharge of its duties to act in
PRASA's best interest and its assets. The Minister
denies, though,
that the relevant directors conducted the required internal
investigations of PRASA. She contends that their investigations
were
selective. She contends furthermore that the directors were in fact
content in concealing some of the irregular expenditure
that they
themselves committed until exposed by the Auditor General. She denies
that her actions interfere with the ongoing activities
at PRASA. She
states that it is the applicants who have over a period overseen the
corruption in PRASA and frustrated the efforts
of one Mr. Collins
Letsoalo ("Letsoalo") to turn around the fortunes of PRASA.
According to her Letsoalo has uncovered
more corruption in the short
space of time that he was at PRASA than the applicants who have been
sitting on the rot for more than
two years without any meaningful
intervention. She accused the Board of having appointed Werksmans
Attorneys to conduct crime investigations
into the irregular
expenditure of R127 million which had not been budgeted for.
According to her there is a clear contravention
of the PFMA.
THE
APPOINTMENT OF MR. COLLINS LETSOALO AS ACTING GROUP CHIEF EXECUTIVE
OFFICER
[15]
Up until March 2015 when he resigned from his position, one Mr. Lucky
Montana was the Group Chief Executive Officer ("GCEO")
of
PRASA. He only left PRASA in July 2015. During that same month the
Board appointed a certain Nkosina Khena to act in that portfolio.
Thereafter the Board embarked on a robust recruitment drive to hire a
permanent GCEO. In February 2016 it submitted a list of preferred
candidates to the Minister for that position. Despite repeated
requests the Minister refused for many months and for inexplicable
reasons to engage with the Board on this burning issue of the
appointment of the GCEO. The Board believed that the appointment
of a
GCEO would go a long way towards stabilising the organisation and
improving its performance. The Board needed someone who
would
introduce strategy that would give direction to PRASA and someone who
would allow lower level managers to perform their roles
and who would
make decision that were capable of moving, or designed to move, PRASA
towards its objectives.
[16]
On or about 29 June 2016 the first applicant was informed that the
Minister wished to meet with him. At their meeting the Minister
indicated to him that she did not believe that PRASA was sufficiently
stable to allow for the appointment of a permanent GCEO.
She
told him furthermore that she would be seconding her nominee to PRASA
to be the acting GCEO. Although initially reluctant
to reveal the
identity of that person she had in mind, which is denied by the
Minister, it was to be Letsoalo, the Chief Financial
and Deputy
Director General ("DOG") in the Department of Transport
("DoT'). The Minister had indicated that, as
part of Letsoalo's
mandate, he was to assist in stabilising PRASA and drafting a general
plan. The Minister denies that she was
reluctant initially. She
contends that she disclosed the identity of Letsoalo to the first
applicant. She trusted the ability of
Letsoalo as a proven corruption
buster and his knowledge of the PFMA and corporate governance,
including the duties and responsibilities
of non-executive directors
with regard to daily management of an organisation. The applicants
did not, in this regard, have the
same level of knowledge as
Letsoalo. The Board was of opinion that PRASA needed the appointment
of a permanent GCEO to lead PRASA's
executive team. They were baffled
as to how a temporary deployee from the DoT could create any
stability within PRASA. They contend
that the Minister does not have
any statutory authority unilaterally to dictate the appointment of
the GCEO to the Board. Under
s 24(1) the Board is vested with the
power to manage the affairs of PRASA including the appointment of the
GCEO. Section 24(1)
of the Legal Succession Act states as follows:
"The affairs of
the corporation shall be managed by a Board of Control and of not
more than
eleven members, including the
Chairman who shall be appointed and dismissed by the
Minister."
[17]
The Legal Succession Act, however, does not expressly regulate the
appointment and makeup or removal of the Board. As part
of its
shareholders' agreement the Board appoints a GCEO in consultation
with the Minister.
[18]
On 30 June 2016 the Board agreed reluctantly to appoint Letsoalo. It,
however, requested a meeting with the Minister to obtain
clarity on
the terms and conditions of his secondment especially as the Board
did not know how long he was going to be seconded
to PRASA. A meeting
was set up with the Minister on 5 July 2016 but unfortunately the
Minister cancelled the meeting at the last
moment and never
rescheduled another one. The Minister does not deny these
allegations. On 7 July 2016 the Minister approved the
Acting Director
General of the DoT's request to second Letsoalo to PRASA as an Acting
GCEO ("AGCEO"). Although the applicants
state that it was
expressly stated that this request was subject to approval by
National Treasury and that the Minister did not
obtain such approval,
the Minister states that the Department contend that it was no longer
necessary for National Treasury to
give its approval. In a letter
dated 7 July 2016 the Minister addressed a letter of secondment to
Letsoalo in which she advised
him that such secondment was from 1
July 2016 until further notice. It was further stated that Letsoalo's
rank, salary, seniority,
date and service benefits would remain
unchanged. On the same date the Minister had sent a letter to the
first applicant in which
she indicated that the all-inclusive human
resource costs of Letsoalo would be borne by the DoT but would in tum
be claimed from
PRASA on a monthly basis. At that particular time
Letsoalo's salary was a gross sum of R1,358,868.00 per annum. The
first applicant,
in his capacity as Chairman of the Board and acting
in terms of s 24(1) of the Legal Succesion Act, then concluded an
appointment
agreement with Letsoalo. The said agreement provided
expressly, inter alia, that PRASA would terminate his employment at
any time
with or without cause and with or without advance notice.
With regard to the contention by the applicants that under section
24(1)
the Board is vested with the powers to administer the affairs
of PRASA, including appointing the GCEO, the Minister states that
the
letter that she wrote on 7 July 2016 was in line with section 15(3)
of the Public Services Act 1994 which provides, inter alia,
that the
executive authority of a department may second an employee of a
department to another department, any other Organ of State
or any
Government or any other body on the prescribed conditions and such
other conditions as agreed upon by the Executive Authority
and the
relevant functionary of the body concerned. Such appointment,
according to the Minister, did not deprive Letsoalo of any
applicable
benefits in the position in which he was to act at PRASA. According
to her PRASA offered Letsoalo benefits fitting of
his position
because it would have been anomalous for Letsoalo to continue earning
an amount of R1,358,868.00 per annum when his
immediate subordinates
at PRASA were earning salaries of more than R4 million. The Minister
contends that the Board has deliberately
misinterpreted her letter
and have created a frenzy around this issue and alleged that Letsoalo
had increased his salary by 350%.
[19]
According to the first applicant Letsoalo appeared to accept that, as
acting GCEO, he was accountable to the Board. He-indicated
that he
wanted to assist the Board in its investigations into corruption and
irregular expenditure with PRASA and the Minister
purportedly
identified him as a suitable candidate to do so.
[20]
The applicants complain that far from pursuing the mission for which
he had been seconded to PRASA, which was to improve PRASA's
core
service and to deliver a turnaround strategy, Letsoalo seemingly
embarked on his personal crusade to restructure PRASA and
to enrich
himself. His secondment to PRASA was, as will be demonstrated
hereunder, not without teething problems. It is contended
by the
applicants that in the period during which he was seconded to PRASA
he ignored instructions and requests from the Board
of Control.
20.1.
he refused meetings and, for some inexplicable
reasons, believed that the Board was indebted to him. He defied
delegated authority;
20.2.
from August 2016 he engaged with Mr. Khumalo,
PRASA's previous Acting Executive Human Capital Management and
PRASA's Mr. Nkomo and
sought to secure payment to himself or what the
previous GCEO, Mr. Montana, had been earning. Mr. Montana was earning
R5.9 million
per annum. When Mr. Khumalo refused Letsoalo
unilaterally terminated Mr. Khumalo's appointment. Letsoalo's
termination of
the appointment of Mr. Khumalo was never raised for
discussion with the Board nor was it approved by the Board as would
be required
under statutes and the shareholders' agreement;
20.3.
having terminated Mr. Khumalo's appointment, he
then unilaterally appointed a certain Ms Pearl Munthali ("Munthali")
to
the position of the Acting Group Executive Human Capital
Management. This same Munthali, it is so testified by the applicants,
had previously been removed from this very position by the Board on
30 September 2015. The reason for removing her was that she
did not
have the appreciation of the Human Capital policies she was supposed
to implement or a sufficient grasp of corporate governance
principles. The Board was not informed of and never approved this
appointment contrary to the requirements of statutes and shareholders
conduct;
20.4.
On 26 October 2016 Munthali addressed a letter to
the Acting Director General of the DoT and Mr. Mokonyama in which she
stated that
the Board had
"agreed to
compensate letsoalo at a rate applicable to
the position being R5.986, 140.07”,
that
PRASA would bear the difference between this new salary and the
salary paid by the DoT and that PRASA would backdate the salary
to
the date of appointment of GCEO;
20.5.
the Board had never approved that this salary be
paid to Letsoalo; that PRASA would be paying any secondment allowance
or bear any
additional salary costs itself or that there would be any
backdating. According to the Board, at most Letsoalo would be
entitled
to an additional secondment allowance of 12% on top of his
DoT package in terms. of PRASA policies. His unilateral and meteoric
increase of remuneration, however, far exceeded this amount to an
over 350% increase in his salary so the Board contended.
As a
result of the unlawful increase Letsoalo was paid R1.3 million by
PRASA before the Board became aware of this machinations
of February
2017;
20.6.
Letsoalo further unilaterally seconded two
additional individuals to PRASA, Ms. Prudience Manyasha and Ms.
Sikelelwa Maqaqa and
afforded them significant pay packages to be
borne by PRASA. The Board was not informed of and did not approve of
any aspect of
the secondment.
[21]
The Minister has not responded to the full text of paragraph 57 of
the founding affidavit. Of paramount importance though is
that she
has pointed out that in their complaint that Letsoalo's unilateral
and meteoric increase in his remuneration amounted
to 350%, the
applicants have failed, for no apparent reason, to deal specifically
with paragraph 3 of 'PM7'. 'PM7' is a document
in which Letsoalo was
appointed as the AGCEO by the Board of PRASA. It was signed by Dr. P
S Molefe, the first applicant herein.
It sets out the terms and
conditions under which PRASA employed Letsoalo as AGCEO of PRASA. The
said paragraph 3 states that:
"During the term
of service as Acting Group CEO, PRASA will pay you at the annualised
salary rate applicable to this position and in
accordance with applicable remuneration policy, payable at such time
at the company's
normal payroll during the 27
th
day of every month.
You
will be eligible to receive all the benefits applicable to the
position and to PRASA 's Senior Officers. The details related
to your
compensation and benefits will be discussed and shared with you by
the Group Executive responsible for the Human Capital
Portfolio.”
Accordingly,
it is as clear as crystal from the correspondence that the total
costs to the company package for the GCEO at the time
was standing at
RS,986,140.07 per annum. And this package, read with paragraph 3 of
Annexure 'PM7' signed by the first applicant
himself leaves no doubt
as to what package was Letsoalo entitled to. Paragraph 5 of
this letter makes it clear that it constituted
an agreement between
the parties and it was nowhere stated that it was subject to further
approvals.
[22]
Letsoalo, so the Court was told, was earning or was supposed to earn
a salary of R1,358,868.00 per annum, while he occupied,
though in an
acting capacity, the position of the GCEO of PRASA. While he occupied
that position in a permanent capacity, Mr. Montana
earned
R5,986,140.07 per annum. It boggles one's mind that the Board seemed
to have some difficulty with Letsoalo earning the same
salary or the
salary of the GCEO, the same amount that Mr. Montana earned per annum
or put otherwise, the salary that a GCEO was
entitled to. If 350%
that the applicants complained about was the percentage that would
have brought the level of Letsoalo's salary
to that of its GCEO and
if it was agreed, there is no merit therefore, in the allegations
that it was unilateral. It would appear
that it was justified. It is
not correct, in my view, that the increase was unlawful or that it
had not been agreed by the parties
in the appointment document. In my
view the perpetuation of the myth that Letsoalo wanted to increase
his salary by 350% per annum
is unfounded and unfair to him. The
truth is that, based on the information before the Court, Letsoalo
was entiUed to the same
package that was agreed upon in his
appointment package or the same package that was enjoyed by Lucky
Montana.
[23]
Following such teething problems that it perceived were caused by
Letsoalo, the Board enlisted the services of a top law firm
to
provide it with legal opinion. For three reasons, firstly, the
teething problems accompanying Letsoalo's secondment to
PRASA,
secondly, the legal opinion and advice from the relevant top law firm
and, thirdly and lastly, the contents of a letter
dated 3 March 2017
that the Board had written to the Minister, the Board took a
unanimous decision on 24 February 2017 to terminate
Letsoalo's
appointment at PRASA.
[24]
On Sunday 26 February 2017, the Sunday Times carried a report in the
front page article which stated that "MR. FIX-IT
UPS HIS OWN PAY
BY 350%." Letsoalo had planned to hold a press conference at the
offices of PRASA the following day in the
afternoon. The first
applicant issued instructions to him that such a press conference
should not proceed. He instructed Letsoalo
to tell him of any press
conference. Instead Letsoalo refused to hearken these instructions
and indicated to the first applicant
that he, the first applicant,
should, on the contrary, call him. Letsoalo proceeded to hold a press
conference albeit at a different
venue.
[25]
The Minister was concerned about the aforementioned Sunday Times
article and the public spat between the Board and Letsoalo.
So on 27
February 2017 she wrote the following letter to the first applicant:
"
MEDIA
REPORTS ON ALLEGED PASSENGER RAIL AGENCY OF SOUTH AFRICA
(PRASA) ACTING GROUP CEO SALARY INCREASE
I am hereby writing to
the Chairperson with reference to the media reports of the past
weekend OIJ the abovementioned, and in particular
the Sunday Times
article of 26 Februaty titled "MR. FIX-IT UPS HIS OWN PAY BY
350%.”
Mr. Letsoalo's
secondment to PRASA with effect from 1 July 2016 was done in
accordance
with the Public Services Act of
1994, read in conjunction with the Public Service Regulations
of 2001, which provides for a secondment of an
employee. Mr. Letsoalo's rank, salary and
seniority at the Department, including service
benefits remain unchanged during his acting
period, but the acting allowance is however a
matter to be decided by PRASA and Mr.
Letsoalo.
The allegations as
contained in these reports are of great concern to the Department and
it
remains of critical importance that
they are responded to in a conscious and rational manner.
I therefore instruct the Board to duly
investigate the matter and report back to my office by
Friday 3 March 2016 to ensure that timeous and
appropriate action is taken.
Yours faithfully
Ms. Dipuo Peters, MP
Minister of Transport
Date: 27/02/2017.
”
[26]
On 27 February 2017 Mr. Letsoalo was formally notified in writing by
the Board that:
"2. The Board of
PRASA has, however, resolved to terminate your secondment.
Accordingly please report for duty at the Department
of Transport as from Monday 27
February
2017."
As
a consequence of the said termination of the secondment Mr. Letsoalo
was advised to
"Kindly return the property of PRASA including
but not in total·vehicles, computer, cell phone
and any
strategic documents that is in your possession, as well as
intellectual property of
PRASA."
[27]
On 1 March 2017 two important incidents took place. Firstly, the
Minister wrote the following letter to Letsoalo:
“
Dear Mr.
Letsoalo
WITHDRAWAL OF
SECONDMENT AS ACTING GROUP CHIEF EXECUTIVE OFFICER:
PASSENGER RAIL AGENCY OF SOUTH AFRICA (PRASA)
The evenly numbered
letter dated 7 July 2016 regarding your secondment to PRASA with
effect from 1July 2016, refers.
Please be informed
that your secondment as Acting Group Chief Executive Officer (GCEO)
of
PRASA is hereby withdrawn with
immediate effect.
I wish to take this
opportunity to thank you for making yourself available for the
secondment.
Kind regards
Ms. Dipuo Peters, NP
Minister of Transport
Date: 01/03/2017.”
The
second incident was that the Minister wrote another letter to the
first applicant. The said letter stated as follows:
"Dear Mr. Molefe
THE TERM/NATION OF
THE SECONDMENT OF THE ACTING GROUP CEO, MR
LETSOALO
RELATING TO HIS REMUNERATION AND THE SUBSEQUENT NEGATIVE
MEDIA ATTENTION
The above matter
refers.
I have witnessed with
great concern the continuous negative publicity in the media and
other
related platforms about PRASA, which
undermines good corporate governance and the
image of the organisation. This current
impasse and undesirable actions by both the Board
and the Acting Group CEO is bringing the name
of the Company into disrepute, and warrants
my urgent and decisive intervention.
To that extent, I am
obliged to request as I hereby do, to furnish me with reasons why I
should
not intervene and/or take
appropriate actions to restore good governance and stability of the
organisation. It is also of critical
importance that to furnish me
with the root cause for the public spat, and equally to provide
reasons for disregarding the instruction
in my letter of 27
February 2017.
I therefore call upon
you to within 5 working days of this letter, provide me with a report
justifying your actions, as it is evident that these
issues are playing themselves in the public
discourse and require urgent attention.
I believe during the
period we will all rise above our personal issues and place the
interest of
the organisation and the
country at heart.
Yours faithfully
Ms. Dipuo Peters, MP
Minister of Transport
Date: 01/03/2017."
[28]
The Minister, on her side, contends that the purpose of this letter
dated 1 March 2017 was an attempt to grant the Board an
opportunity
to make representations before she could take any action. She states
furthermore that the letter complies, or substantially
does so, with
the
audi
alterim partem
principle.
[29]
On 8 March 2017 the Minister removed the directors as well as the
third and fourth respondents from the Board of Control of
PRASA by
way of Notices of Removal referred to in paragraph 8 supra.
[30]
On the evening of 12 March 2017 the applicants' legal representatives
became aware that the Minister had planned to hold a
press conference
at 10h30 on 13 March 2017 on the developments at PRASA. At 21h24 on
the same date the applicants sent an email
to the Minister and the
DoT in which they warned the Minister that in the light of the
current proceeding any action by her to
appoint any interim Board
would be
ma/a fide,
would unlawfully pre-empt the judgment of
the court order and would under such circumstances constitute
constructive contempt of
court. The Minister and the Department were
furthermore warned to desist from appointing an interim Board. No
response was received
from either the Minister or the DoT. On
13 March 2017 the Minister proceeded with a press conference during
which she announced
the immediate appointment of the members of the
new Board. At 16h43 the applicants sent a letter of objection to the
appointment
of the new Board to the Minister.
[31]
As a consequence of the dichotomous views with regard to the
characterisation of the Minister's action, it is only apposite
at
this stage to pause and determine whether the Minister's decision to
remove the directors from the board constituted an executive
or
administrative action. Considering that the application is brought
under PAJA, the classification is crucial as it will enable
this
Court to establish whether the principles of PAJA apply to the
Minister's decision, if it is an administrative action or the
principles of legality apply to it, if it is an executive action.
[32]
The Minister derives the power to appoint and dismiss the Board from
s 24 of the Legal Succession Act. The said section states
that:
"Board of Control
-
(1)
The affairs of the cotp0ration shall be
managed by a Board of Control ... who
shall
be appointed and dismissed by the Minister.”
Accordingly
the Minister's appointment and dismissal of the members of the Board
constitutes administrative action as it involves
the implementation
of national legislation. The Minister derives the power to act,
neither from the Constitution nor from any provision
of the
Constitution but from a statute of Parliament. Accordingly the power
of the Minister to remove the directors of the Board
is located in
the abovementioned s 24. In The Minister of Defence v Modau 2014(5}
SA 69 CC at p. 82 paragraph 31 C-D ("Modau")
the Court
stated that:
“
This Court has
held that the implementation of legislation by a senior member of
executive
ordinarily constitutes
administrative action.”
In
making the said statement the Court confirmed what it stated in
Permanent Secretary, Department of Education and Welfare, Eastern
Cape and Another vs Ed-LI-College (PE)(Section 21) Inc.
2001 (2) SA 1
CC at paragraph 18 p.12 where it had the following to say:
"In President of
the Republic of South Africa and Others v South African Rugby
Football
Union and Others
2000 (1) SA 1
CC
this Court held that, in order to determine whether a
particular act constitutes administrative
action, the focus of the enquiry should be the
nature
of the power exercised, not the
identity of the actor
(my
own underlining). The Court noted that senior elected members of the
executive (such as the President), Cabinet Ministers in
the National
sphere and members of the executive councils in the provincial
sphere, exercise
different
functions according to the Constitution. For example, they implement
legislation,
they
develop and implement policy and they prepare and initiate
legislation. At times the
exercise
of their functions will involve administrative action and at other
times it will not In
particular,
the Court held that when such a senior member of the Executive is
engaged upon
implementation
of legislation, that will ordinarily constitute administrative
action. However,
senior
members of the Executive also have constitutional responsibilities to
develop a policy
and
initial legislation and the performance of this task will generally
not constitute
administrative
action."
The
Court continued as follows at p. 143:
"Determining
whether an action should be characterised as the implementation of
legislation or the formulation of policy may
be difficult It will, as
we have said above, depend primarily upon the nature of the power. A
series of considerations may be relevant
to deciding on which side of
the line a particular action falls. The source of the power, though
not necessarily decisive, is a
relevant factor. So, too, is the
nature of the power, its subject-matter, whether it
involves the exercise of a public duty and how
closely it is related on the one hand to policy
matters, which are not administrative, and on
the other to the implementation of legislation,
which is. While the subject-matter of
the power is not relevant to determine whether
constitutional review is appropriate, it is
relevant to determine whether the exercise of the
power constitutes administrative action for
the purpose of section 33. Difficult boundaries may have to be drawn
in deciding what
should and what should not be characterised as
administrative action for the purposes of
section 33. These will need to be drawn carefully in
the light of the provisions of the
Constitution and the overall constitutional purpose of an
efficient, equitable and ethical public
administration. This can best be done on a case by case
basis."
[33]
Mr. Labuschagne argued that the power to dismiss the Board is more of
an executive than an administrative action in that it
was incidental
to the power to make transport policy; that it is a high level power
and the Minister is afforded broad discretion
in exercising it. What,
according to him, constitutes good cause for removing Board members
under s 24(1) is a matter for the Minister
to form a view on,
depending on the government policy. It would therefore, according to
him, constitute the performance of an executive
function in terms of
s 85(2)(e) of the Constitution. It provides that:
"The President
exercises executive authority, together with the other Members of the
Cabinet,
by -
(e) performing any
other executive function provided for in the Constitution or in
National Legislation."
[34]
Other than administrative implementation of national legislation
which is referred to in s 85(2)(a) of the Constitution, on
this
aspect Mr Labuschagne relies on the case of Modau, paragraphs [41) to
[57) where the Court in paragraph 47 stated as follows:
"[47] In the
light of the aforegoing and for the reasons that follow, I am of the
view that the
Minister's decision is
executive rather than administrative in nature. First, the minister's
s B(c) power is adjunct to her power to
formulate defence policy. In terms of this power,
the Minister formulates policy on, among
others, the acquisition and maintenance of 'a
navigation system' and 'arms, ammunition,
vehicles, aircraft, vessels, uniforms, stores
and other equipment ' Of course this is policy
in the broad sense: overarching and
direction-giving, with the minutiae of
individual procurement decisions left to Armscor.
[48] As is apparent
from the scheme of the Armscor Act, the minister does not provide
direction through interventions in individual
projects or by prescribing particular
procurement policies. Rather, she discharges a
political responsibility to ensure that the department's procurement
agency meets
statutory obligations by appointing and
dismissing leaders who have the 'knowledge and
experience which
...
should
enable
them .to obtain
the objectives of the Corporation.
The
minister must have in mind the
department's
policy aims when selecting board members, including the chairperson
and
the deputy
chairperson. She must select people who are capable of carrying out
those
aims and who
share the department's policy vision. Similarly the Minister arrests
the
failure to follow
proper policy by terminating the directorships of people who have not
assisted Armscor to discharge the statutory
functions. The formulation of defence
procurement policy and the appointment and
dismissal of people who would supervise
the
implementation of that policy are thus closely linked. While
the appointment and
dismissal
of board members are not the formulation of policy as such it is the
means by
which the
minister gives direction in the vital area of military procurement,
and is
therefore an
adjunct to her executive policy-formulation function.
(51) For these
reasons, I am persuaded that the impugned decisions are not subject
to
review under PAJA. Because s B(c) of
the Armscor Act is an adjunct to the minister's
power to make defence policy. and thus more
closely related to the formulation of policy
than its application, the decision to
terminate the services of the board members
amounts to the performance of an executive
function in terms of section 85(2)(e) of the
Constitution rather than the implementation of
national legislation in terms of section 85(2)(a).”
[35]
In his heads of argument, Mr Labuschagne had stated that in deciding
whether a decision was executive rather than administrative,
the
Court should have regard to the following guidelines:
35.1.
a power most closely related to a formulating
policy is likely to be executive, while a power most closely related
to applying policy
is likely to be administrative;
35.2.
pointers in making a determination were:
35.2.1.
the source of the power;
35.2.2.
constraints imposed to its exercise; and
35.2.3.
whether it was appropriate to subject its
exercise to the more vigorous standard of administrative law review.
[36]
According to him, the Minister of Transport is an organ of state
subject to Constitutional imperatives in s 195 of the Constitution,
to ensure the promotion of constitutional values and principles as
set out in s 195(1), which include the efficient and economic
effective use of resources. . The Minister's exercise of her powers
to dismiss Board members must, as a matter of law, be rational.
He
developed his argument and stated that, however, it would not be
appropriate to subject the Minister's powers of dismissal to
the more
vigorous standards of administrative law review.
[37]
The fundamental difference between the Modau case and the current
case is that in the Modau case the Constitutional Court found
that
the Minister's powers were predicated on the provisions of the
Constitution whereas in the current case the Minister's powers
are
anchored in statutory enactment. Her power to appoint and
dismiss the Board of PRASA is sourced from the legislation
and not
from the Constitution. In removing the directors of the Board the
Minister was wielding her statutory power which was conferred
on her
by the provisions of s 24 of the Legal Succession Act. She was not
involved in the development of a new policy. I have accordingly
reached a conclusion that the Minister's decisions are liable to be
reviewed under the broad grounds provided for in PAJA. It will
be
recalled that in his argument Mr Labuschagne submitted that in
deciding whether a decision was executive rather than administrative,
the court should have regard to, inter alia, the source of the power,
in other words, was it the Constitution or, if not so, was
it
statute?
[38]
Mr Unterhalter, the applicants' counsel, argued that even if PAJA was
not applicable to the Minister's decision, then such
a decision
constitutes the exercise of public power and is therefore amenable to
the principle of legality. This principle requires
that the decisions
be rationally connected to the purpose for which they were taken.
Such decisions should not be arbitrary or
capricious or ultra vires
the Minister's powers. They should not unjustifiably limit the
Constitutional rights. The Minister answered
that in such
circumstances as the instant matter where she has to take all
decisions, she merely has to act in a lawful and rational
manner.
[39]
The principle of legality also requires fairness to be observed
before the decision was taken. The process by which an executive
decision is taken and the resultant decision must be rational. The
case of Albutt v Centre for the Study of Violence and Reconciliation
and Others
2010 (15) SA 391
CC serves as good guidance in this
respect. It concerns the powers of the President of this country to
grant pardons under s 84(2)0)
of the Constitution to people who
claimed that they had been convicted of offences which they had
committed with a political motive.
The question for consideration by
the Constitutional Court was whether the President was required,
prior to the exercise of the
power to grant pardon to this group of
convicted persons, ta afford the victims of these offences a hearing.
In paragraphs [49]
and [50] respectively the Court expressed itself
as follows:
"(49) It is by no
means axiomatic that the exercise of all public power must comply
with the
Constitution, which is the
supreme law, and the doctrine of legality, which is part of the
rule of law. More recently, and in the context
of section 82(2)(j), we held that although there is no right to be
pardoned, an applicant
seeking pardon has a right to have this
application "considered and decided upon
rationality. in good faith, (and} in accordance
with the principle of legality.
It follows therefore that the exercise of the
power to grant
pattern
must be rationally related to the purpose sought to be achieved by
the exercise of it
(50) All this now from
the supremacy of the Constitution. The President derives the power to
grant pardon from the Constitution and that
instrument proclaims its own supremacy
and
defines the limits of the powers it grants. To pass the
constitutional muster,
therefore,
the President's decision to undertake the special dispensation
process,
without
affording victims the opportunity to be heard, must be rationally
related to the
achievement
of objectives of the process. If it is not, it falls short of the
standard that is
demanded
by the Constitution.”
See
also in this regard
The Democratic Alliance v President of the
Republic of South Africa and Others 2013(1) SA 248 CC paragraph [34]
where the Court stated:
"(34) It follows
that both the process by which the decision is made and the decision
itself
must be rational A/butt is
authority for the same proposition. The means there were
found not to be rationally related to the
purpose because the procedure by which the decision was taken did not
provide an opportunity
for victims or their family members to
be heard.”
[40]
Accordingly·, the Minister's process of removing the concerned
directors could only have been rational if the Minister
had, before
taking that decision, afforded the concerned directors an opportunity
to be heard before their removal. Both our common
law and the rule of
law require a hearing to precede the undertaking of any drastic steps
against the individual.
[41]
It is an unalienable principle of our law that preceded even both the
Constitution and PAJA that everyone is entitled to present
his or her
case. This is called the
audi alterim partem
rule. It extends
even to the powers that the Minister exercises in terms of the
Constitution. In their book South African Legal
System And Its
Background the authors, HR Hahlo and Ellison Kahn, stated the
following at p.62 about this principle of
audi alterim partem
rule:
"In an old
English case Biblical authority to this effect is given: Even God
himself did not pass
a sentence on Adam,
before he was called upon to make his defence. Adam ("says God")
where art thou? Hast thou not eaten of the
tree, whereof I commanded thee thou shouldst not eat.”
[42]
The Minister denied the concerned directors a fair hearing. By thus
denying them a fair hearing and deciding to remove them
from their
positions as directors without first having given them any hearing,
the Minister exercised her powers arbitrarily or
in a greatly
unreasonable manner. A denial of a fair hearing was clearly designed
to cause these concerned directors substantial
prejudice. The general
rule is that where the Minister, entrusted with such powers as
envisaged in s 24(1) of the Legal Succession
Act, is seized with
information that seeks her to make a decision, the person whose
rights or claims may be adversely affected
by such a decision, is
entitled to a hearing. It is one of the fundamental requisites of a
fair hearing that she should give such
a person an opportunity of
meeting such point. The Minister was obliged, in my view, to disclose
to the concerned directors the
substance of any prejudicial
information in her possession and, having done so, afford these
concerned directors a fair opportunity
to controvert it. I am
fortified in this regard by paragraph [101] at p. 104 of the case of
Modau where Jafta J confirmed the principle
of
audi alterim partem
in the following manner:
"Although the
main judgment agrees that the respondents were entitled to a
pre-decision hearing ...”
and
also paragraph [83) of the same case of Modau where the Court had the
following to say:
"[83] However,
whether the principle of legality, or some other principle in this
case, required
the Minister to act in a
procedurally fair manner does not, in the light of the applicability
of the Companies Act, need to be decided here.
It suffices to know that our law has a
long
tradition
-
which was
endorsed by this Court in Mohammed
-
of
strongly
entrenching
audi alterim partem ("hear the other party/ which contains
particular force
when
prejudicial allegations are levelled against an individual. And it is
for this reason
that
dismissal from service has been recognised as a decision that attacks
the requirements of procedural fairness.”
[43]
Interestingly enough, the Minister was aware of the
audi alterim
partem,
and that it would be for her procedurally remiss in the
manner in which she took a decision to remove the directors from
their positions.
She contends that she complied with the principles
of national justice. She answers that:
"I specifically
requested both the Board and Mr. Letsoalo to furnish me with
submissions why I
should intervene. After
carefully considering their submissions, I arrived at my decision to
remove the Board.”
I
will revert to this statement later in the judgment in order to
establish the contents of the letter in which the Minister requested
submissions. I will contrast that letter with what Mr. Labuschagne
informed the Court about the basic complaints that the Minister
had
against the Board.
[44]
Suffice to mention that the Minister's decisions, even if they were
of an executive nature as she claims, and that they may
not be
procedurally reviewed under PAJA,, they were subject to review under
the principle of legality, for lawfulness, rationality,
bad faith and
lack of procedural fairness.
[45]
Referring the Court to the evidence, Mr. Labuschagne submitted that
there was good cause for the removal of the concerned directors.
He
argued that even before the appointment of Letsoalo PRASA had
virtually collapsed under the erstwhile Board. As early as 9
September 2015 the erstwhile Board was implored by the Minister to
move with speed in the implementation of the Public Protector's
findings. Notwithstanding such a request from the Minister by June
2016 the performance of PRASA had in fact deteriorated alarmingly
under the watch of the erstwhile Board. In her letter dated 17 March
2016, the Minister expressed her concern as
"the Board has
failed to tum tide as the pace of irregular, fruitless and wasteful
expenditure are increasingly relentless.”
In the letter
dated 14 June 2016 the Minister wrote as follows:
''lt is evident from
PRASA s declining performance that the BOC has not been able to tum
around the performance of PR4SA. In fact
it is declining. I have
persistently directed the
BOC as the
accounting officer to take responsibility for the affairs of PR4SA,
conduct detail
analysis
of his performance and to make vital interventions."
The continuous
performance and executions cannot be tolerated any longer, there
needs to
be consequences for poor
performance. Government is expecting improved performance
from all Entities, especially those that are
providing services directly to the public and
receiving the majority of its funds from the
national fiscus.
"
[46]
Mr. Labuschagne also pointed out that what the Minister did was not
only the Minister that had persistently raised her concerns.
Parliament through its Portfolio Committee on Transport had equally
been concerned about the poor performance of the ex-board and
its
failure to address the irregularities in the Auditor General's
report. In addition a vote of no confidence in the Board and
a
suggestion of the dissolution of the Board were also raised in that
Committee. In support of this contention he argued that in
fact when
the decision of the Minister was read to the Portfolio Committee on 8
March 2017 it gave its full support to the Minister's
decision. On
this basis he contends that this Court should be slow to disturb the
decision that was carefully made and has the
support of Parliament.
[47]
According to him, on 31 August 2016 the Portfolio Committee continued
to question PRASA on the repeated findings by the Auditor
General.
The ex-Board was also questioned about the irregular expenditure in
the amount of R93 million, now standing at R127 million
at the time
paid to Werksmans Attorneys, a matter persistently raised by
Letsoalo.
[48]
The purpose of the secondment of Letsoalo to PRASA was to help turn
around the infirmity at PRASA. This was done because he
was known to
have had a track record of clearing up corruption and irregular
expenditure. He is reported to have devised a turn-around
strategy
for PRASA in an attempt to set up systems and controls that were
lacking at PRASA.
[49]
When Letsoalo was removed by the Board after the media frenzy, the
Minister called for submissions from both the Board and
Letsoalo why
she should not intervene. It is contended that the submissions that
the Minister obtained demonstrate that the allegations
that Letsoalo
had increased his salary by 350% could not be true. This is because,
in the first place, his letter of appointment
signed by the first
applicant himself expressly stated in paragraph 3 that he was to be
paid at the annualised salary applicable
to the position of the Group
CEO. This amount was therefore an objectively determinable one and
was not subject to further Board
approval. Paragraph 3 concludes by
stating that:
"the details
related to your compensation and benefits will be discussed and
shared with you
by Group Executive
responsible for Human Capital Portfolio."
It
was argued by Mr. Labuschagne that nowhere did the said paragraph
state that it was subject to the Board's approval. The
12%
allowance relied upon by the ex-Board did not apply to Letsoalo. I
have stated somewhere above that this matter is not about
whether the
Minister had valid reasons to dissolve the Board but whether or not
in dissolving the board she acted rationally or
lawfully or in a
procedurally fair manner.
[50]
The Minister did not initially provide reasons for her decision to
remove the relevant directors from office either at the
time of their
removal or in response to the applicants' request for reasons on 9
March 2017. This is the argument by Mr. Unterhalter.
The fact that
initially no reasons were provided and that still no reasons were
provided when they were requested for on 9 March
2017 created the
presumption that the decision by the Minister was irrational. In this
respect he relied on National Lottering
Board v South African
Education and Environment Project
2012 (4) SA 504
(SCA) where it was
stated by the Court at par. (27] that:
"The duty to give
reasons for an administrative decision is a central element of the
constitutional duty to act fairly. And the
failure to give reasons, which includes proper or
adequate reasons, should ordinarily render the
disputed decision reviewable. In England the Courts have said that
such a decision
would ordinarily be void and cannot be validated by
different reasons afterwards
-
even
if they show that original decision may have been justified. For in
truth the later reasons are not the true reasons for the
decision,
but they are
rather an
expose facto realisation of a bad decision.·
[51]
For the first time the Minister purported, at a press conference that
she held on 13 March 2017, to justify her decision to
remove the
relevant directors. She did that to the media instead of to the
concerned directors. She stated that the Board
"was found
wanting relating to amongst others the declining performance, lack of
good governance, lack of financial prudence
and ever deteriorating
public confidence due to spats of infighting.”
In her
answering affidavit she set out two fundamental reasons for her
decision. Firstly, she claims that the trigger for the relevant
directors' removal was their decision to terminate Letsoalo's
secondment to PRASA. She states that the Board was removed because
"the Board acted in
unison in frustrating the actions
of Mr. Letsoalo and ultimately removing him.”
Furthermore
she claimed that
"she substantially complied"
with
the procedural fairness obligations in respect of this complaint
because she wrote to the Board on 1 March 2017 and asked it
to
explain its public spat with Letsoalo and to furnish reasons why she
should not intervene in order to restore good governance
within
PRASA. Secondly, the Minister claimed that she had wide-ranging
concerns about the board's management of PRASA. She considered
it to
have been involved in corruption and in irregular expenditure since
its appointment. Quite clearly nowhere does she state
that she
afforded the relevant directors an opportunity to be heard on these
issues before she took the decision to remove them
from office.
[52]
A submission advanced by Mr. Unterhalter is that the Minister was not
entitled to formulate reasons after the fact in an attempt
to justify
her decision. He relied, in this respect, on the case of National
Lottery Board and South African Education Environment
Project
2012
(4) SA 504
SCA where the SCA upheld the High Court's finding that it
was impermissible for an administrator to rely on reasons put up for
the first time in its answering affidavit.
[53]
Her decision to remove the relevant directors from their position in
the board must be assessed against reasons that motivated
her at the
relevant time she took the decision. Counsel for the applicants
submitted that the clear trigger for the decision was
the board's
dismissal of Letsoalo. That dismissal did not provide independently
any sufficient basis for the removal of the relevant
directors. That
must be so because the Minister herself decided to remove Letsoalo a
few days after the Board had taken that decision,
and by doing so she
validated the decision of the Board to remove Letsoalo.
[54]
The argument advanced by Mr. Unterhalter was that even if the
Minister had been motivated by both sets of reasons, her decision
remained liable to be reviewed on the following grounds:
54.1.
firstly, that it was procedurally unfair.
According to the Minister she removed the relevant directors because
she considered them
to have engaged in long-standing irregular
payments and, potentially, misconduct. But surprisingly she did not
raise the alleged
irregular spending on the part of the board with
them or afford them an opportunity to respond and address her
concerns. Procedural
fairness requires that they be provided with
such information and a chance to respond to it. See in this regard Du
Preez and Another
v Truth and Reconciliation Commission
1997 (3} SA
304
A at 234 H-1 which was recently endorsed by this Court in The
Minister of Agriculture Fisheries and Forestry v Public Protector,
case number 21830/2014 the unreported judgment which was handed down
on 13 March 2017;
54.2.
the Minister also failed to afford the relevant
directors an opportunity to be heard in order to explain their
decision to remove
Letsoalo. In her letter dated 27 February 2017 she
alerted the board to her concerns around the public spat with
Letsoalo but failed
to warn it that she was considering their removal
pursuant thereto. For that reason alone her letter did not constitute
sufficient
notice of the steps that she was contemplating.
Furthermore, the board addressed the Minister on its reasons for
terminating Letsoalo's
secondment and so did Letsoalo. The Minister
appears to have preferred Letsoalo's versions of events but did not
revert to the
board or notify it of Letsoalo's allegations against it
before she did so. This is a further breach of the requirements of
procedural
fairness.
[55]
Secondly, the Minister's decision can be challenged on the basis of
irrationality. The Minister's explanation of her conduct
quite
clearly is internally inconsistent and irrational. She terminated on
the one hand Letsoalo's secondment to PRASA thereby
tacitly
confirming that there were sound grounds for such termination. I
already have pointed out in paragraph 54 that by doi.ng
so the
Minister validated the action of the board to terminate Letsoalo's
secondment appointment at PRASA. She accepted Letsoalo's
version, on
the other hand, of the dispute that unfolded between him and the
Board. She then used the dispute as the springboard
to remove
the relevant directors from office. Those two decisions cannot be
married with each other. They demonstrate that the
decision to remove
the Board was irrational. She claims she was forced to remove the
board once Letsoalo was no longer in office
because the board would
otherwise be able to operate unchecked. This is a suggestion that the
Minister was happy to allow the board
that was potentially guilty of
misconduct or mismanagement to remain in the office for as long as it
was supervised by Letsoalo
or consider their removal to be imperative
once he was gone. It was submitted that that claim is irrational and
unsustainable.
It is to be remembered that at all times the board,
and not Letsoalo, managed the affairs of PRASA. It is of crucial
importance
to point out that the Board was never answerable to
Letsoalo and that Letsoalo could not have prevented misconduct. if
the Board
was indeed engaged in such. If the Minister, honestly and
genuinely believed that there were grounds to remove the concerned
directors
before 27 February 2017 then she was obliged to act on that
belief at that particular time. The Minister could not simply bury
her head in the sand and turn a blind eye to potential evil doing on
the part of the board. The fact that the Minister took no steps
to
discipline the board before 8 March 2017 is indicative of the fact
that there were in fact no grounds to do so and that the
alleged
misconduct was raised simply after the fact in an attempt to justify
her unlawful conduct. Accordingly, her decision was
irrational.
[56]
Thirdly, and lastly, the Minister's decision to remove the concerned
directors was so unreasonable and disproportionate as
to be arbitrary
and irrational. The board took a decision to terminate Letsoalo after
it had sought and obtained legal advice.
The decision to terminate
Letsoalo's appointment was thus plainly reasonable given the fact
that it had a discretion to terminate
his appointment at will. The
Minister should therefore have accepted that the Board's decision to
terminate his secondment rather
than disciplining it for it. Her
decision was accordingly unreasonable on that basis alone. The
decision, however, is rendered
wholly disproportionate by the fact
that the Minister appears to have given no consideration to the
serious and prejudicial impact
of the wholesale removal of the Board
on PRASA's interest. Mr. Unterhalter submitted that it was
arbitrarily and irrational for
the Minister to take the extreme step
of removing the board for its good faith's removal of Letsoalo when
the effect of the decision
was so deleterious to PRASA's interest and
those of the public. Finally, he submitted that the decision was
subject to be reviewed
and set aside on each of the grounds set out
above whether the review is brought under PAJA or on the basis of
legality.
THE
DECISION TO APPOINT THE NEW BOARD MEMBERS
[57]
At the time the Minister appointed the new members of the Board of
Control of PRASA, she was aware of this application. The
Minister had
been warned in an email of 12 March 2017 from the removed director's
legal representatives that the relevant directors
had instituted the
urgent proceedings on 11 March 2017. It is contended that in
appointing the new members of the Board, the Minister
clearly and
deliberately ignored the urgent proceedings and the relief sought by
the applicants. Furthermore she ignored the fact
that such urgent
proceedings were subject to considerations by the Court. The Minister
ignored the letters dated 9 and 10 March
2017 respectively sent to
her by the removed directors' legal representatives and, finally,
ignored the email sent on behalf of
the removed directors dated 12
March 2017.
[58]
It was submitted by counsel for the applicants on the basis of the
aforegoing allegations that the Minister's conduct was clearly
unlawful and amounted to pre-emption of the urgent proceedings and
constructive contempt of court.
[59]
Finally, it was submitted, furthermore, that if the removal of the
concerned directors was invalid then the decision to appoint
the new
members in their place was equally invalid. In this respect counsel
for the applicants relied on the case of Seale v Van
Rooyen N.O. and
Others Provincial Government, North West Province v Van Rooyen N.O.
and others
2008 (4) SA 43
at page 50 C-D where the Court had the
following to say"
"I think it is
clear from Oudekraal, and it must in my view; follow that if the
first act is set
aside, a second act that
depends for its validity on the first act must be invalid at the
legal
foundation for
its performance was non-existent.”
Cora
Hoexter on page 509 of her book "Administrative Law of South
Africa, 2nd Edition" commented on the Oudekraal judgment
and had
the following to say:
“
ln
other
words, as Oudekraal itself makes clear, the factual existence of an
act is capable of supporting subsequent acts only as long
as the
first act is not set aside. In this instance a decision to grant a
servitude had indeed been set aside and the subsequent
registration
of
the servitude was
therefore of no force and effect.
"
I
have therefore come to the conclusion that the decision of the
Minister to appoint new members of the Board of directors before
the
conclusion of the current prosecution was invalid.
[60]
I have reached a conclusion that the applicants, or should I say the
removed directors, have proved that they have a clear
right to
challenge the decision taken by the Minister and furthermore to have
the decision reviewed and set aside or to obtain
an order suspending
the operation of the notices of removal. The removed directors have a
right to the proper exercise of statutory
powers by the Minister, who
exercises public power and whose decision in this regard is subject
to administrative justice. Secondly,
it is in the public interest
that the affairs of PRASA be properly regulated by an independent
Board of Control independently of
any interference from the
government. Thirdly, and finally, it is of paramount importance that
corruption in PRASA be exposed and
prevented. The public has an
interest to fight the deep rooted corruption in the country because
it compromises the democratic
ethos, the institutions of democracy
and gnaws at the rule of law. Accordingly, the applicants therefore
have a clear right.
[61]
A tug-of-war relating to whether or not this matter was urgent
developed between the parties. The parties ·agreed that
the
said issue should not be made a separate subject of argument but that
it should be argued with the merits of the matter. This
was in order
to prevent the Court from being bogged down on a side issue before it
could deal with the merits of the application.
The move was intended
to save time and to expedite the proceedings. In this tug-of-war the
removed directors had, much to the chagrin
of the Minister, contended
that the application was urgent and also asked for an order
accordingly. The Minister though disputed
urgency of the matter.
[62]
What were then the reasons for the removed directors to contend that
their matter was urgent? In this regard the removed directors
cited
continuity in the governance of PRASA. They contended that continuity
employment of PRASA was critical not only in the light
of the
projects that PRASA was pursuing but furthermore in the light of the
investigations of corruption and maladministration
which was
continuing. Consequently, the summary removal of the directors of
PRASA would denude it of any intimate knowledge about
such
investigation. Civil proceedings which had been set down for hearing
in the coming months would also be weakened. The
second reason
that they gave was that they were suffering substantially and
potentially irreparable personal harm, both in terms
of their public
and commercial reputation. In the eyes of the undiscerning public,
their removal was ignominious. They were perceived
to have
misconducted themselves in running the affairs of PRASA. If the
decision was left unchallenged, they would be regarded
as having
mismanaged the affairs of PRASA and ran it into the ground.
[63]
Fourthly, they could not let the decision of the Minister go on
unchallenged unless they be regarded as having acquiesced in
it. They
had to act with lightning speed to bring the application and to set
the record straight. Fifthly, time was not on their
side. It is
common course between the parties that ordinarily they were left with
three months or less to the end of the tenure
of their office.
Sixthly, the Minister herself has conceded that the matter was
urgent.
[64]
The Minister contended that judging from the time frame set by the
appellants the matter was not urgent. They pointed out that
already
on 10 March 2017 the appellants' attorneys had indicated in a letter
that they were aware that the Minister was actively
engaged in trying
to install a new PRASA Board. Accordingly, they were aware that the
Minister was on the point of appointing a
new Board. Then they
contend that a new Board had already been instituted.
[65]
The fact that the Minister had already appointed a new Board, as they
contend, made the matter, in my view, extremely urgent.
The Minister
was not prepared to wait for her decision to be challenged so that
there could be certainty. This shows that she herself
thought that
the matter was urgent and that a new Board had to be installed in
order to attend to the governance of PRASA. The
applicants had to
take steps to challenge the appointment of the new Board, firstly,
because the Minister proceeded with the appointment
of the new Board
despite the fact that it had been indicated to her that her decision
would be challenged and, secondly, before
the new Board could take
root. In conclusion I agree, and I find, that the matter was urgent.
[66]
Finally, I now tum to whether or not the Court should grant an
interim or final relief. This point was not so much vigorously
pursued by the parties during the argument. In the circumstances and
also due to the fact that this matter was argued as if it
was an
application for a final relief, the Court will accept that the
parties envisaged that on the facts before the Court the
final order
could be granted. Moreover it will be financially cumbersome and
costly to expect the parties to come back to Court
to reargue the
points that they fully ventilated during their argument in this
urgent application. Then interim relief will be
otiose considering
the fact that a period of three months which represent the last of
the three months of the tenure of office
of the removed directors
would have expired by the time the matter comes back to Court for
argument on Part B of the application.
I am satisfied that all the
relevant issues were property and extensively ventilated and that, in
the circumstances, there is nothing
that prevents the Court from
granting a final relief in this matter. The application, in my view,
satisfies the requirements for
a final relief.
[67]
Accordingly, the application is granted and the following order is
made:
1.
This application is hereby treated as an urgent
application and the forms prescribed by the Rules of this Court are
hereby dispensed
with.
2.
The Notices of Removal issued by the First
Respondent on 8 March 2017 in respect of each of the Applicants,
except the Fifth Applicant,
are hereby reviewed and set aside:
3.
The decision of the First Respondent made on 8
March 2017 in terms of which the First Respondent removed each of the
Applicants,
except the Fifth Applicant, from the Board of Control of
the Second Respondent is hereby reviewed and accordingly set aside.
4.
It
is hereby ordered that the First, Second, Third, Fourth, Sixth and
the Seventh Applicants be and are hereby reinstated as the
directors
of the Second Respondent with effect from 8 March 2017.
5.
The appointment of any directors to the Board of
Control of the Second Respondent on or after 8 March 2017 in
substitution of the
Applicants is hereby reviewed and set aside, with
effect from 13 March 2017.
6.
The First Respondent is hereby ordered to pay the
costs of this application.
__________________
P.M.
MABUSE
JUDGE
OF THE HIGH COURT
Appearances:
Counsel
for the applicants:
Adv. D Unterhalter
(SC)
Adv I A Goodman
Instructed
by:
Webber Wentzel Attomeys
Counsel
for the respondents:
Adv. EC Labuschagne (SC)
Adv. J Motepe (SC)
Instructed
by:
The State Attorney
Date
Heard:
17 March 2017
Date
of Judgment
10 April 2017