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[2022] ZALAC 113
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HOD Sports, Arts, Culture and Recreation- Free State v NEHAWU obo Masekoa and Others (DA 9/21) [2022] ZALAC 113; (2023) 44 ILJ 147 (LAC) (18 October 2022)

FLYNOTES:
CONFLICT OF INTEREST AND DISMISSAL
Labour
– Conflict of interest – Duty of good faith to
employer – Government employee securing business from

department for her guesthouse – Requirements of SMS Handbook
– Transgression serious enough to justify dismissal.
IN THE LABOUR APPEAL
COURT OF SOUTH AFRICA, DURBAN
Reportable
Case no: DA 9/21
In the
matter between:
HOD OF SPORTS, ARTS,
CULTURE AND
RECREATION
– FREE
STATE

Appellant
And
NEHAWU
obo MC MASEKOA

First Respondent
GENERAL PUBLIC SERVICE
SECTORAL
BARGAINING
COUNCIL

Second Respondent
MARTIN
SAMBO
N.O.

Third Respondent
Heard:
22 September 2022
Delivered:
18 October 2022
Coram:
Coppin JA,
Kathree-Setiloane et Tokota AJJA
JUDGMENT
COPPIN
JA
[1]
This
is an appeal, with the necessary leave, against the part of the order
of Whitcher J dismissing the application of the appellant

(Department) to review and set aside an arbitration award of the
third respondent (arbitrator), acting under the auspices of the

second respondent (bargaining council) in favour of the first
respondent, in respect of the substantive fairness aspect of the

Department’s dismissal of Ms MC Masekoa.
[2]
At
the time of her dismissal on 15 December 2015, Ms Masekoa was
employed by the Department as Chief Director: Arts, Culture and

Heritage. Her dismissal followed after she had been found in a
disciplinary hearing to have committed two counts of misconduct
in
respect of a business deal she concluded on behalf of her guesthouse,
Maisy’s Guesthouse, and relating to accommodation
for artists
participating in the annual arts and culture event (Macufe) initiated
and financed by the Department through the Free
State Arts and
Culture Council (FSACC) and its contracted agent, a consortium, PSS.
[3]
The
counts of misconduct were the following: in charge 1, it was alleged
that during the period September 2014 to October 2014,
while on duty,
Ms Masekoa contravened clause 6.1 of the SMS Handbook in that she
allegedly failed to exhibit the highest ethical
standards in
executing her duties as an employee of the Department by doing
business with the Department and receiving payment
for the Macufe
accommodation in the amount of R 288 000,00, paid to
Maisy’s Guesthouse, and that it constituted
a conflict of
interests.
[4]
In
terms of charge 2 it was alleged that during that same period, while
on duty, Ms Masekoa contravened paragraph C 4.5 of the Code
of
Conduct for the Public Service which states that an employee should
not “
engage
in any transaction or action that is in conflict with or infringes on
the execution of his or her official duties
”
– in that her business, Maisy’s Guesthouse, was paid the
amount of R288 000,00 for services rendered.
[5]
As
an alternative to charge 2, it was alleged that during the said
period, while on duty, Ms Masekoa conducted herself in an improper,

unbecoming and unacceptable manner by doing business that was in
direct conflict with her interests and duties as a programme manager

for programme 2 under which the Macufe project resided, and in terms
of which her guesthouse was paid the aforesaid amount for

accommodation services rendered.
[6]
Paragraph
6 of the SMS Handbook provides that senior managers “
must
exhibit the highest ethical standards in carrying out their duties
”,
and paragraphs 10.2. C4.5 and C4.6 of the Code of Conduct saddle
senior managers with an onus to alert their employer of
any actual or
potential conflict of interest, be it financial or otherwise.
Paragraph C4.5 also provides that no employee is to
engage in any
action or transaction that is in conflict with or infringes upon the
execution of his or her official duties.
[7]
Following
Ms Masekoa’s dismissal, the trade union NEHAWU caused an unfair
dismissal dispute to be referred on her behalf to
the bargaining
council. After an unsuccessful conciliation, it proceeded to
arbitration before the arbitrator.
[8]
The
Department, that bore the onus of proving that the dismissal was
procedurally and substantively fair, essentially made a case
along
the following lines at the arbitration through,
inter
alios
,
its investigator: (1) the Department had a mandate to support and
develop the arts in general and in order to give effect to this,
it
established the FSACC, a body which resorts in the office of the MEC:
Sports, Arts and Culture; (2) Macufe is a project of the
FSACC; (3)
Mr Ernest Moikangoa, an employee of the Department, who reported to
the Director: Arts and Culture, was seconded in
2013 to the FSACC as
a coordinator; (4) the funds for Macufe were in a programme managed
by the Chief Directorate for Arts, Culture
and Heritage and Ms
Masekoa was the Chief Director intended to manage the Macufe arts
event on behalf of the FSACC, which was awarded
to a consortium, PSS;
(5) during this annual event, accommodation in Bloemfontein is
expensive and not readily available; (6) consequently,
the Department
would make an advance payment to PSS for it to secure the required
accommodation and to attend to the necessary
logistics; (7) during
September 2014, a quotation from Maisy’s Guesthouse was
approved by the FSACC’s subcommittee
for accommodation; and (8)
Maisy’s Guesthouse, which was owned by Ms Masekoa, was paid an
amount of R288 000,00 for
the accommodation.
[9]
Ms
Masekoa’s defence was essentially the following: (1) she had
disclosed her ownership of the guesthouse to the Department
in her
annual declaration of interest; (2) during September 2014, she had
been approached at the workplace by Mr Danny Moleko and
someone, who
according to her, merely identified himself as “Ernest”,
who said that they were from a private company
and were looking for
accommodation for the Macufe festival; (3) in response to their
request and in her private time, she collated
quotes from other
guesthouses, including her own, into one, under the name of Maisy’s
Guesthouse, which Mr Moleko and Ernest
collected from her home, the
quote was addressed to “Ernest/Danny Moleko”); (4) while
admitting that the funds for
the Macufe project “resided in”
a programme of funds managed by the Chief Directorate for Arts,
Culture and Heritage
and that she was the Chief Director, she
maintained that it was a transfer fund that comes into and leaves the
directorate, that
the funds were already ring-fenced and that there
is a once off transfer out of the directorate to the FSACC; that its
use is outsourced
and does not fall within the mandate; (5) she
denied having any knowledge of the tender awarded to PSS and denied
that she had
a working relationship with the FSACC or PSS; and (6)
she alleged that she had no knowledge of Ernest’s links with
the Department
at the time and maintained that she only became aware
subsequently that he was an employee of the Department.
[10]
The
arbitrator seemingly accepted Ms Masekoa’s version and found
that the charges against her had not been proved. The arbitrator
also
found that her dismissal had been procedurally unfair, allegedly
because the chairperson of the disciplinary enquiry had not
given her
an opportunity to adduce evidence in mitigation of the sanction. The
arbitrator accordingly ordered Ms Masekoa’s
retrospective
reinstatement with back pay.
[11]
In
response, the Department brought an application to review and set
aside the arbitrator’s award. It contended essentially
that the
arbitrator’s findings of procedural and substantive unfairness
were not reasonable.
[12]
In
respect of the procedural fairness point, Whitcher J held that the
arbitrator had “
grossly
misdirected itself when he found that the dismissal was procedurally
unfair
”,
because, as the arbitrator himself found, there was nothing wrong
with the way the Department had conducted the disciplinary
hearing.
[13]
In
respect of the substantive fairness issue, Whitcher J essentially
found that the arbitrator’s award in that regard fell
within
the bounds of reasonableness and that “
ultimately,
it was not unreasonable for the arbitrator to find that there was no
conflict between Masekoa’s official position
and her guesthouse
concluding business with PSS
.”
[14]
In
arriving at a conclusion on the substantive fairness issue, Whitcher
J reasoned as follow:
‘…
Another
arbitrator may perhaps come to a different conclusion but I cannot
conclude that the decision reached by the appointed arbitrator
is one
that a reasonable decision-maker could not reach. In my view, the
result is capable of justification given the following
facts: 16.1
There is no suggestion in the evidence that Masekoa use the position
or knowledge of the Macufe funds to hawk her business
to PSS. It is
an undisputed fact that Ernest Moikangoa and Danny Moleko approached,
and invited. 16.2 She was not involved in and
had no influence in the
decision-making of [the] FSACC or PSS or how the funds for Macufe
were used. 16.3 Masekoa’s claim,
that, at all times, in her
mind, she had been doing business with a private company (PSS) not
[the] applicant is not highly implausible.
In fact, there is no
evidence that she knew PSS was the so-called implementing agent of
FSACC. 16.4 Even so, at the time, there
was no law prohibiting SMS
members from doing business with the State. The public service
regulations banning civil servants from
doing business with the State
came into effect at the end of August 2016 was a transitional
arrangement enabling public servants
who were doing business with the
State to either resign from the public service or relinquish their
business interests by a certain
date, failing which disciplinary
action would follow. 16.5 The evidence does not demonstrate that
Masekoa looked no further than
their own guesthouse. It was
undisputed that the quotation provided was in fact
(behind-the-scenes) a correlated quotation from
various other
guesthouses, and that these guesthouses were paid from the payment
received by Masekoa’s guesthouse. 16.5 the
situation in
Bloemfontein was unique. On applicant’s own version,
accommodation during Macufe was scarce and expensive. Logistically

and financially, Masekoa’s guesthouse would in all probability
have been approached in the ordinary course. Finally, and
connected
to this, is [the] applicant’s own suggestion that no unethical
conduct would have arisen if Ernest Moikangoa and
Danny Moleko had
directly approached the guesthouse. I do not see how this
fundamentally differed to them approaching the owner
of the
guesthouse. The same result would in all probability have arisen.’
[15]
The
appeal is directed only against Whitcher J’s order in respect
of the substantive fairness aspect. There is no cross-appeal
in
respect of the finding regarding procedural fairness.
[16]
An
aspect of the appellant’s mandate as the provincial Department
is to support and develop the arts and artists, in general,
in the
Free State province. In order to give effect to this mandate, it
established the FSACC, a juristic person, which in terms
of section 3
of the Free State Arts and Culture Council Act
[1]
(Arts and Culture Act) has as its object the provision of
opportunities for persons to practice, develop and promote the arts
and to encourage excellence in the expression and performance of all
art forms.
[17]
In
terms of section 5 of the Arts and Culture Act, the powers of the
FSACC includes the provision of financial support, advice and

information to such persons in order to attain its objects. The FSACC
also has the power to establish committees, including an

accommodation committee, which it may perform its function and it
resides in the office of the MEC for Sports, Arts and Culture
in the
Free State. The same MEC is the political head of the Department.
[18]
The
PSS consortium was appointed through a tender to assist with the
promotion of the Macufe project, which is part of the Department’s

and the FSACC’s initiatives relating to the development of
artists in the province. The PSS was essentially responsible for

commission-orientated transactions, such as ticket sales, revenue and
booking of artists for the annual event.
[19]
In
order to financially assist the FSACC with this operation, public
funds were budgeted for in the Department and allocated for
the arts,
culture and heritage projects under the so-called, ‘programme
2’, which was managed by the Chief Directorate
for Arts,
Culture and Heritage in the Department. Ms Masekoa was the Chief
Director and accordingly had control over programme
2.
[20]
One
of the responsibilities of the accommodation subcommittee of the
FSACC was to find and secure accommodation for the artists
that were
to perform at the annual Macufe event. Mr Ernest Moikangoa, who was
employed in the Department, had been seconded to
the steering
committee of the FSACC to render administrative support and to secure
accommodation for the artists.
[21]
It
is established on the evidence that Mr Moikangoa had approached Ms
Masekoa to secure accommodation for artists and that she was
willing
to assist in that regard. She owned her own guesthouse, Maisy’s
Guesthouse, and was a member of an association of
guesthouses in the
area. In her annual declaration of interests to the Department, Ms
Masekoa declared her interest in a guesthouse
with the registered
name ROWCO.
[22]
It
is further established on the evidence that, following her discussion
with Mr Moikangoa, Ms Masekoa caused the quotation for
the
accommodation of 80 artists to be presented to the FSACC’s
subcommittee on accommodation for acceptance and it was accepted.
[23]
On
or about 15 September 2014, Ms Masekoa’s guesthouse presented
invoices for payment, but in October 2014 a payment dispute
had
arisen between Ms Masekoa and her daughter Ms Ntakazo, who also owned
a guesthouse, Little Venice, which was a participant
in Ms Masekoa’s
venture, and this triggered an investigation by the Department.
[24]
As
part of her
modus
operandi,
Ms Masekoa collected quotations from all the guesthouses in the area
that wanted to participate in the venture, including Little
Venice,
and compiled one quotation which was presented as if it emanated from
Maisy’s Guesthouse only. The quotation also
creates the
impression that this was the guesthouse that was to be appointed to
provide accommodation and to whom payment was to
be made in an amount
of R 288 000,00, whereas, in truth, other guesthouses had
also participated in this venture. The
investigation led to the
charges of misconduct being brought against Ms Masekoa.
[25]
The
charges essentially allege that Ms Masekoa’s conduct in
securing the accommodation contract for her business was in breach
of
the rules in the SMS Handbook and the Code of Conduct for the Public
Service which were essentially directed at regulating situations

where employees of the Department, such as she, encounter conflicts
between their personal interests and the interests of the Department,

and were aimed at avoiding such conflicts.
[26]
The
question that arose crisply for determination was whether there was a
conflict or potential conflict between Ms Masekoa’s
interest as
an employee of the Department, specifically as Chief Director that
was responsible for the proper management of the
Macufe funds, and
her personal interests as owner of Maisy’s Guesthouse. Further,
if there was such a conflict, whether Ms
Masekoa complied with her
ethical duties as required by the Handbook.
[27]
Employees
have a duty of good faith towards their employers. They are required
to advance the employer’s interest and not
their own in
situations where their interests and that of the employer may
clash
[2]
. A typical example of
such a conflict would be where an employee who conducts a business,
or who in his personal capacity and for
his own benefit, enters into
a deal relating to the employer’s business. In
Robinson
v Randfontein Estates Gold Mining Co Ltd
[3]
Innes
CJ expressed the position as follows:
‘
Where
one man stands to another in a position of confidence involving a
duty to protect the interests of that other, he is not allowed
to
make a secret profit at the other’s expense or place himself in
a position where his interests conflict with his duty.
The principle
underlies an extensive field of legal relationship... the doctrine is
to be found in the civil law (Digest 18.1.34.7),
and must of
necessity form part of every civilised system of jurisprudence.’
[4]
[28]
Given
Ms Masekoa’s position as Chief Director in charge of programme
2, where the funds for the Macufe event originally came
from, it is,
unlikely in the extreme, if not improbable, that she did not know
that annually during that event in Bloemfontein
accommodation for
participants in the event was in high demand and therefore scarce and
expensive. It is also equally unlikely,
if not improbable, that she
did not know that the amounts that were eventually to be paid to
service providers for the accommodation
originally emanated from the
programme administered by her and were to be applied diligently by
the FSACC and its implementing
agent, if any, in this case PSS, or
that PSS was the implementing agent of the FSACC, or at least that Mr
Moikangoa was an employee
of the Department and coordinator of the
FSACC specifically for the Macufe event.
[29]
Ms
Masekoa’s defence in terms of which she tried to distance
herself from the Department, her employer, was that she thought
that
she was dealing with a private entity, PSS, and did not know that it
was linked to the FSACC, was contrived in order to deal
with what Ms
Masekoa must have known was a conflict of interest situation. Given
her very senior position, it is unlikely that
she did not have
intimate knowledge of how the Macufe event was arranged, funded and
paid for and what the source of that payment
was.
[30]
There
was indeed a potential conflict, if not an actual conflict, between
the interests of the Department in relation to the utilisation
and
preservation of the Macufe funds, in particular and in respect of the
accommodation of artists, and Ms Masekoa’s interests
as
business owner of Maisy’s Guesthouse. In the latter capacity,
Ms Masekoa had a duty to the guesthouse to realise a good
profit out
of that business deal. While the Department’s interest, albeit
through the FSACC and PSS, which Ms Masekoa was
to advance, was to
keep the expenditure as low as possible.
[31]
Even
though there is no rule which expressly and specifically prohibited
Ms Masekoa from doing business with the Department, in
terms of the
SMS Handbook she was required to disclose to the Department such
actual or potential conflict of interests, and to
take steps to avoid
such conflict.
[5]
[32]
That
Ms Masekoa declared her financial interest in a guesthouse in her
annual declaration of interest to the employer was not sufficient
to
constitute compliance with the duty imposed upon her by chapter 6
paragraph 10 of the SMS handbook. The accommodation deal was
a
specific incident of potential conflict, or actual conflict, of
interests that Ms Masekoa was obliged to bring to the attention
of
her employer, disclosing all details, and she had to take steps to
avoid the conflict. That she did not do.
[33]
The
situation was aggravated by her attempts to justify the deal as one
that she thought she was concluding with a private company,
and by
effectively eliminating competing quotations by other guesthouses in
the area and submitting one quotation purporting to
emanate from her
guesthouse only. A reasonable arbitrator would have found
accordingly.
[34]
While
it is correct that courts of appeal and of review will not easily
interfere with factual findings of an arbitrator, those
findings are
not cast in stone and may be interfered with if they are irregularly
or unreasonably arrived at
[6]
.
In this instance, the arbitrator and the court
a
quo
appears
to have made the same errors in respect of crucial factual issues and
not to have taken into account, all of the evidence,
including Ms
Masekoa’s unique position in relation to the Macufe event.
[35]
The
transgression was serious enough to justify Ms Masekoa’s
dismissal. She was in a position of trust and breached that trust.
[7]
[36]
It
follows that the appeal must succeed. Taking the facts, the law and
fairness into account, a costs order is not appropriate.
There shall
therefore be no costs order.
[37]
In
the result, the following is ordered:
Order
1.
The
appeal is upheld;
2.
The
order of the Labour Court is set aside and substituted with the
following order:
“
1.
The award of the third respondent, acting under the auspices of the
second respondent,
dated 30 April 2018 in case GPBC88-2017 is
reviewed and set aside and substituted with the following order: ‘The
applicant’s
claim is dismissed’.”
2.
There is no costs order.”
P Coppin
Judge
of the Labour Appeal Court
Kathree-Setiloane
and Tokota AJJA concur in the judgment of Coppin JA.
APPEARANCES:
FOR THE
APPELLANT:

P Masihleho
Of the
State Atttorney, Bloemfontein
FOR THE FIRST
RESPONDENT:
WS Kuboni
Instructed
by Adriaan Moodley Attorneys
[1]
Act
7 of 2007.
[2]
See,
inter
alia
,
J Grogan ‘
Workplace
Law’
13th ed. at p 193 and the cases cited there.
[3]
1921
AD 168
at 177-178.
[4]
See
also
Volvo
(Southern Africa) (Pty) Ltd v Yssel
[2010] 2 BLLR 128
(SCA) at paras 13 and 16 where it was held that
“
while
certain relationships have come to be clearly recognised as
encompassing fiduciary duties there is no closed list of such

relationships
.”
In that particular case it was held to apply to an employment
relationship.
[5]
See
Chapter 6, paragraph 10 of the SMS Handbook.
[6]
See,
inter
alia
,
Minister
of Safety and Security & Another v Madikane & Others
(2015) 36 ILJ 1224 (LAC) at para 48.
[7]
See
‘
Workplace
Law’ supra
fn 3 at p 193 and the cases cited there.