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[2021] ZALAC 39
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Minister of Higher Education, Science and Technology v Construction Education and Training Authority and Others (JA27/2020) [2021] ZALAC 39; [2022] 1 BLLR 72 (LAC); (2022) 43 ILJ 374 (LAC) (20 October 2021)
IN
THE LABOUR APPEAL COURT OF SOUTH AFRICA, JOHANNESBURG
Reportable
Case no: JA27/2020
MINISTER OF HIGHER EDUCATION,
SCIENCE
AND
TECHNOLOGY Appellant
and
CONSTRUCTION EDUCATION AND
TRAINING
AUTHORITY First
Respondent
WEBSTER MFEBE
N.O Second
Respondent
DIRECTOR GENERAL, HIGHER EDUCATION
AND
TRAINING Third
Respondent
NATIONAL SKILLS
AUTHORITY Fourth
Respondent
Heard:
14
September 2021
Delivered:
20
October 2021
Coram:
Waglay
JP, Davis JA and Coppin JA
JUDGMENT
DAVIS JA
Introduction
[1]
In
January 2020, the appellant placed the first respondent under
administration pursuant to
s 15
(4) of the
Skills Development Act 97
of 1998
(‘SDA’).
[2]
Prior
to taking these decisions on 14 December 2019 the appellant addressed
correspondence to the chairperson of the first respondent,
Mr Raymond
Cele indicating his intention to act in terms of
s 15
(4) of the SDA.
In his letter, the appellant raised some 10 allegations which he
considered illustrated a profound lack of governance
in the
operations of the first respondent, including gross financial
management, irregular payment of pension benefits and salary
increments and serious lapses of governance in procurement processes.
He expressed the view that the first respondent was on the
brink of
collapse and it was incumbent upon him to restore good governance to
the operations of the first respondent. He requested
that
representations be made to him by no later than 10 January 2020; in
particular, as to why he should not act in terms of
s 15
(4) of SDA.
[3]
A
response was generated by the first respondent on 10 January 2020
which the Minister did not consider to be particularly helpful.
Under
the circumstances, he decided to act in terms of
s 15(4)
of SDA, and
ordered an independent investigation to be conducted into the
operations of the first respondent.
[4]
On
30 January 2020, a notice placing the first respondent under
administration and appointing Mr Sabelo Wasa as administrator as
well
as a suspension of board members was published in the Government
Gazette. This action elicited a response from the first respondent,
who, through its attorneys Werkmans Attorneys, sought an undertaking
from the appellant that he would not implement a decision
to place
the first respondent under administration, pending the outcome of an
urgent application to review and set aside this decision
which was
launched on 3 February 2021.
[5]
The
application was heard as a matter of urgency by Moshoana J, sitting
in the court
a
quo,
on 20 February 2020. The learned judge determined that there was one
issue to be decided, namely whether the appellant had acted
within
the scope of the SDA to place the first respondent under
administration. The learned judge found that this decision had
been
taken without the appellant consulting with the first respondent or
the National Skills Authority as required in terms of
s 15
(1) of
SDA. Accordingly, Moshoana J upheld the review application and
declared the decision to place the first respondent under
administration to be invalid and ineffective in law. He also set
aside the appointment of the administrator Mr Wasa, and lifted
the
suspension of the board members of the first respondent.
[6]
With
the leave of this Court, the appellant has appealed against this
judgment of the court
a
quo
. The critical
issue on appeal which requires determination, prior to evaluating the
legality of the appellant’s decision,
is whether the appellant
was correct to contend that a valid resolution had not been passed on
29 January 2020 to appoint Werkmans
as attorneys to act on behalf of
the Accounting Authority, being the Board of the first respondent.
The
appellant’s case with regard to
locus standi
[7]
In
a supplementary answering affidavit, Ms Phumudzo Nethengwe, the Board
secretary of the first respondent, set out in detail the
reasons why
a valid resolution had not been passed on 29 January 2020 to appoint
Werkmans as attorneys to act on behalf of the
Accounting Authority.
[8]
She
referred to paragraph 2 of the founding affidavit deposed to by the
second respondent in support of the notice of motion seeking
to
interdict the appellant from placing the first respondent under
administration. In this affidavit, the second respondent said
the
following:
‘
[He
was] duly authorised to depose to [the founding affidavit] on behalf
of the applicant on the basis of being the initiator of
the
resolution passed by the majority of the board through a round robin
resolution passed on 29 January 2020 pursuant to the Minister’s
decision in terms of s 15 (4) of the Skills Act. The
members of the board resolved to institute this application and
to
appoint Werkmans Attorneys to act on its behalf.
’
[9]
In
her supplementary answering affidavit, Ms Nethengwe contested this
averment in the following manner: She referred to the appellant’s
denial that a valid round robin resolution had been passed on 29
January 2020. She then referred to the second respondent’s
email which had been addressed to the Board proposing a round robin
resolution in which the following was said:
‘
The
[Accounting Authority] hereby resolves to instruct Werkmans Attorneys
to urgently interdict and review Minister Dr Blade Nzimande’s
decision of placing the CETA under administration and to write a
letter to the Minister asking him not to go ahead publishing in
the
government gazette his decision of invoking s 15(4) by placing CETA
under administration.
The
AA further resolves to urgently review and set aside the Minister’s
letter 24 January 2020, instructing the AA not to
make any decision
with financial implication as this effectively renders the AA
redundant
.’
[10]
It
was common cause that, at that time, the Board was comprised of
eleven members, including the second respondent. However, according
to Ms Nethengwe, the second respondent, as proposer of the
resolution, did not cast a vote. She concluded that only five valid
votes had been cast in favour of the proposed resolution. Initially,
she had thought that seven members had supported the resolution
but:
‘
With
the benefit of hindsight, I have come to the realization that the two
proxies were incorrectly counted as valid votes in support
of the
resolution, when they ought not to have been counted. I draw the
court’s attention to clause 15 (4) (e)(ii) which
states that
“votes by proxy are not allowed”. Decisions are taken by
50% plus one of members
.’
[11]
She
also pointed out that on 30 January 2020 four of the members who had
cast their vote in favour of the resolution, Sunday Mlangeni,
Romeshni Govender, Vangile Manzini and Thembi Ndlovu, had revoked
their earlier support for the litigation, a development of which,
according to her, the second respondent was aware.
[12]
Pursuant
to this affidavit, the appellant filed a notice in terms of the
Uniform Rule 7 (1) disputing the authority of Werkmans
Attorneys to
act on behalf of the first respondent and requesting Werkmans to
produce proof of its authority in terms of Rule 7(1).
At the hearing
on 20 February 2020, Moshoana J issued a ruling regarding the dispute
as to
locus
standi
of the first respondent. He noted that there was ‘a
notice of motion signed by the attorneys suggesting that they are
acting on behalf of a party which is the applicant CETA I have no
doubt in my mind that I have the right parties before me and
that
will be the order of the court.’
[13]
The
issue of
locus
standi
and thus correctness of this ruling becomes critical to the
disposition of this dispute. Hence before entering the terrain of the
merits of the dispute between the parties, it is necessary to deal
fully with the appellant’s objection as set out in Uniform
Rule
7 (1).
Evaluation
[14]
It
is clear from the founding affidavit deposed to by the second
respondent that he had deposed to this affidavit not in his personal
capacity but on behalf of the first respondent. So much is clear from
the passage of his affidavit to which I have made earlier
reference
when I dealt with the supplementary answering affidavit of Ms
Nethengwe.
[15]
However,
the first respondent contended that the approach taken to the voting
by Ms Nethengwe was incorrect as is apparent from
the contents of a
further affidavit to which the second respondent deposed on 11
February 2020 stating thus:
‘
When
Part A was argued on 6 February 2020, the respondents took issue with
those board members who had authorised me to bring this
application.
I submit that the majority of the board members, namely eight board
members, had in fact authorised the bringing of
this application.
This excluded myself as the proposer. The point was taken that two
votes were case as proxies and this was impermissible
in terms of the
Constitution of CETA. This then left six members of the remaining
eleven board members, and a majority.
The
purported withdrawal of a further four board members after the
resolution was adopted is incompetent in law because this was
not
done in terms of any resolution. Section 65(6) of Companies Act
provides that once a resolution has been approved, it may not
be
challenged or impugned by any person in any forum on the grounds that
it did not satisfy subsection (4).
’
[16]
There
does not appear to be any evidence that the second respondent voted
in support of the resolution. It follows that the averment
regarding
his non-participation in the voting, as set out in the affidavit of
Ms Nethengwe, cannot be gainsaid. In the second respondent’s
own supplementary founding affidavit, he states that the majority of
the Board members, namely, eight ‘had in fact authorised
me to
bring this application. This excluded
myself
as the proposer.’
[17]
Absent
a vote from the second respondent, it appears that only five members
of the board cast votes in favour of the proposed resolution.
Unsurprisingly therefore, respondents’ counsel submitted that
the claim that the inclusion of the two votes by proxy was
an error
and had to be ignored had no legal foundation. In his view, the two
board members, who voted by proxy, were entitled to
vote in this way
and their votes could not be discounted. If their votes are included
then, notwithstanding that no vote was cast
by the second respondent,
the majority of the Board members (six out of eleven) would have
authorised Werkmans Attorneys to act
on the first respondent’s
behalf in launching the review application.
The
Constitution of the First Respondent
[18]
As
the status of proxy votes became central to whether they were a
majority in favour of the Resolution of 29 January 2020 much
of the
debate before the Court concerned clause 15.4 of the Constitution of
the first respondent which provides for the procedure
to be adopted
at meetings. It reads thus:
‘
Meeting
Procedure for All Committees
In respect of
the Executive Committee or any other committee established by the
Accounting Authority listed in Annexure 5, whether
in the form of a
physical meeting or by using electronic medium, the relevant
Chairperson must –
(i) give
at least 10 working days’ written notice of the proposed
meeting to members’
and
(ii)
include
an agenda with such notice.
(e) The voting
procedures and decision-making procedures at meetings are as follows:
(i) Each
member present has a single vote on any matter serving before a
meeting for its decision.
(ii) Votes
by proxy are not allowed.
(iii)
Any
decision at a meeting requires the support of at least 50 per cent
plus one of the members present.
(iv)
Decisions
must be taken by way of a show of hands or, if at least 50 per cent
of the members present so require, by way of a closed
ballot.
(v)
In
the event of an equality of votes, the chairperson has a casting
vote.’
[19]
The
appellant’s counsel relied on Clause 15.4 (e) (ii) to contend
that the voting procedures and decision making procedures
of all
committees of the first respondent precluded voting by proxy. On this
view, clause 15.4 (e) (ii), which related to the exclusion
of votes
by proxy, was equally applicable to meetings of the Accounting
Authority in addition to committees of the Authority. Clause
15.4
refers to meetings of all Committees. The question arises to whether
this clause covers meetings of the Accounting Authority.
[20]
The
only other reference to meetings is to be found in clause 15.3.
Clause 15.3 of the Constitution provides thus:
‘
(3) Special
Meetings of Accounting Authority, Executive Committee and Other
Committees
(a)
The
Chairperson may, on grounds of urgency, call a special meeting of the
Accounting Authority or Executive Committee on at least
48 hours’
notice, whether in the form of a physical meeting or by using any
electronic medium.
(b)
If
the Chairperson receives a request for a meeting, signed by at least
50 per cent of the members of the Accounting Authority or
the
Executive Committee, the Chairperson must, as soon as is practicable,
give notice of a special meeting of the Accounting Authority
or the
Executive Committee, as the case may be, and that special meeting
must be held within 15 working days of receiving such
request.
(c)
The
Chairpersons of any committee of the Accounting Authority may, on
grounds of urgency, call a special meeting on at least 48
hours’
notice, whether in the form of a physical meeting or by using any
electronic medium.’
[21]
This
clause is silent on the legal status of proxy votes. However, it is
headed ‘Special meetings of Accounting Authority,
Executive
Committee and other Committees’ and thus needs to be read
within the context of Clause 15.
[22]
There
is no other provision in the Constitution which deals with voting
procedures. Thus, read together, clauses 15 (3) and (4)
provide no
authority for the argument that a proxy vote could lawfully be taken
into account in determining whether the majority
of the Accounting
Authority had passed a valid resolution to appoint Werksmans
Attorneys to act on behalf of the first respondent.
There is no
reason to infer that a different system of voting would apply to
Committees as opposed to the Board, particularly since
clause 15.3
deals with meetings of both the Board and Committees and is followed
by an express provision dealing with voting procedures
[23]
As
a further alternative submission, the respondents’ counsel
contended that the second respondent had a substantial and direct
interest in the matters of the Board as a member thereof and was
cited before the court. The basis upon which the second respondent
expressly approached the court was not in his individual capacity but
rather as a party acting on behalf of the first respondent.
But there
is nothing in the founding affidavit to support this submission. The
second respondent expressly stated that he had brought
this
application on behalf of the first respondent. Nowhere does he claim
that he acted in his personal capacity.
Conclusion
[24]
The
critical question was whether the first respondent had lawfully
authorised the legal proceedings to take place by way of a majority
vote. I accept readily that once a resolution is passed by a
director, it is binding on him or her, save in circumstances where
the resolution is rescinded by a later resolution. So much, in my
view is clear from
s 65
(6) of the
Companies Act 2008
. Once a
resolution has been approved, it may not be challenged or impugned by
any person in any forum on the ground that it does
not express with
sufficient or clarity and specificity or was not accompanied by
sufficient information or explanatory material
to enable a
shareholder who is entitled to vote on the resolution to determine
whether to participate in the meeting and seek to
influence the
outcome of the vote and resolution. It appears to follow from this
wording that, where shareholders have changed
their mind, subsequent
to having voted in favour of the resolution, they would have had to
rescind it by way of a fresh resolution.
See
Lipschitz
v Estate Olivier
1917 CPD 582.
[25]
But,
even if the votes of these directors, who did not wish to proceed
with the application are included in the calculation, the
two proxy
votes could not be taken into account. Once it is accepted that the
second respondent did not cast a vote, there were
insufficient votes
to pass the resolution and thus to have authorised the launching of
the relevant application. Six votes were
required in favour of the
resolution and only five were so cast.
[26]
A
further argument was advanced by the first respondent’s
counsel, based on
Giants
Concert v Rinaldo investments (Pty) Ltd
2013 (3) BCLR 251(CC)
that the interests of justice require a court
to be hesitant to dispose of cases on standing alone, where broader
concerns of accountability
and responsiveness may require
investigation and determination of the merits. See also
Smit
v Minister of Justice and Correctional Services and others
2021 (1) SACR at 582 (CC). Following upon this approach, the
respondents counsel sought to invoke the just and equitable remedy
as
provided for in terms of s 172 (1)(b) of the Constitution of the
Republic of South Africa, 1996, namely, when deciding a
constitutional
matter a court may make any order that is just and
equitable.
[27]
It
is here that the decision of four directors who withdrew their
approval subsequent to the resolution and who clearly articulated
that the second respondent was on a frolic of his own does become
important. In short, on the basis of such skeletal support for
this
litigation, there would appear to be little justification upon which
to exercise a discretionary just and equitable remedy
in order to
come to the aid of the first respondent, where authority from the
Board was clearly lacking to support these review
proceedings.
[28]
In
the circumstances, a resolution appointing Werkmans Attorneys to act
on behalf of the first respondent and in furtherance of
its interests
which purported to be passed on 29 January 2020 was not a valid
resolution. There is thus no need to examine any
other aspect of this
dispute. Without a valid resolution, the appeal must be upheld.
[29]
Accordingly,
the following order is made:
1.
The
order of the Labour Court of 25 February 2020 is set aside and
replaced with the following order:
‘
The
application is dismissed.’
2.
There
is no order as to costs.
Davis
JA
Waglay
JP and Coppin JA concur.
APPEARANCES:
FOR
THE APPELLANT: T
Motau SC and R Tshelto
Instructed
by Norton Rose Fulbright SA Inc.
FOR
THE RESPONDENTS: Mr M
Morgan
Instructed
by Werksmans