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2024
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[2024] ZAFSHC 284
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Dichabe v Free State Gambling, Liquor and Tourism Authority and Others (2752/2024) [2024] ZAFSHC 284; [2024] 4 All SA 466 (FB) (12 September 2024)
IN
THE HIGH COURT OF SOUTH AFRICA
FREE
STATE DIVISION, BLOEMFONTEIN
Reportable
/ Not reportable
CASE
NO: 2752/2024
In
the matter between:
KENNILWORTH
ITUMELENG DICHABE
APPLICANT
And
FREE
STATE GAMBLING, LIQUOR
AND
TOURISM AUTHORITY
FIRST
RESPONDENT
FREE
STATE GAMBLING, LIQUOR
AND
TOURISM AUTHORITY
SECOND
RESPONDENT
THE
CHAIRPERSON OF FREE STATE
GAMBLING,
LIQUOR AND TOURISM
AUTHORITY
THIRD
RESPONDENT
MEMBER
OF THE EXECUTIVE COMMITTEE
ECONOMIC
AND SMALL BUSINESS
DEVELOPMENT,
TOURISM AND ENVIRONMENTAL
AFFAIRS,
FREE STATE
FOURTH
RESPONDENT
Coram:
Ramdeyal AJ
Heard:
5 September 2024
Delivered:
This judgment was delivered on 12 September 2024
ORDER
1.
It is declared that the fourth respondent, the MEC for Economic and
Small Business Development, Tourism and Environmental Affairs,
Free
State Province, is the relevant executive authority who must initiate
an investigation into the matter of alleged financial
misconduct by
the CEO, the applicant; and if the allegations are confirmed, must
ensure that appropriate disciplinary proceedings
are initiated
immediately. The MEC is given 20 days from the date of the order of
this court to comply.
2.
It is declared that the interdict in respect of the disciplinary
proceedings instituted against the applicant on 16 May 2024
and the
precautionary suspension remain in force pending the investigations
and decision of the MEC.
3.
The first, second and third respondents are granted leave to
supplement their papers (if necessary) and to approach this court
on
the same papers duly amplified for the relief that they may require
or seek in the event of the MEC failing to comply with para
1 of this
order.
4.
The first respondent is ordered to pay the costs of this application
on an attorney and client scale.
JUDGMENT
Ramdeyal
AJ
Introduction
[1]
The applicant in this matter is the CEO of the Free State Gambling,
Liquor and Tourism Authority, cited as the first and second
respondents. The first respondent is the Free State Gambling, Liquor
and Tourism Authority, a juristic person and public entity
in terms
of Schedule 3C of the Public Finance Management Act 1 of 1999 (PFMA).
The second respondent is the Free State Gambling
and Liquor Board, a
board appointed in terms of s 4(3) of the Free State Gambling and
Liquor Act 6 of 2010 (the Act) to manage
and control the powers and
functions of the first respondent. The third respondent is the
chairperson of the second respondent
while the fourth respondent is
the Minister of the Executive Council for the Department of Economic
and Small Business Development,
Tourism and Environmental Affairs of
the Free State Province (the MEC). The fourth respondent does not
oppose the application and
has filed a notice to abide.
[1]
[2]
The applicant was called upon by the respondents to attend a
disciplinary enquiry in respect of allegations of misconduct against
him to be heard on 5 June 2024.
[2]
The applicant brought an urgent application in Part A of this notice
of motion to interdict the respondents from proceeding with
the
disciplinary enquiry against him, scheduled for 5 June 2024 pending
the relief sought in Part B of the notice of motion. The
application
was granted.
Part
B of the Notice of Motion
[3]
Part B of the notice of motion is an application to declare that the
second respondent does not have the necessary authority
to suspend
and discipline the applicant; that the disciplinary proceedings
instituted against the applicant on 16 May 2024 be declared
unlawful
and set aside; that the applicant, having been placed on
precautionary suspension is unlawful and be set aside; and that
the
first respondent be ordered to pay the costs of this application on
an attorney and client scale.
[4]
The granted order of court as is relevant to this part of the
proceedings is as follows:
‘
The
first, second and third respondents are interdicted from proceeding
with the disciplinary hearing against the applicant scheduled
for 5
June 2024, pending the finalization of the relief sought in Part B of
this application; and the costs associated with Part
A are reserved
for determination in Part B.’
[5]
The applicant contends that the second respondent does not have the
authority to discipline him as he is the Chief Executive
Officer
(CEO) of the first respondent and a member of the second respondent
(the Board). He contends that he was appointed
as CEO of the
Board by the MEC in terms of s 12(1) of the Act.
Applicant’s
Contentions
[6]
The applicant was placed on precautionary suspension on 17 April 2024
pending the investigations of allegations of misconduct
against him
and subsequent disciplinary proceedings. He contends that the board
does not have the power to suspend him because
the CEO is appointed
by the MEC, the fourth respondent, and he is an
ex officio
member of the board. Therefore, only the MEC has the power to
suspend, discipline and dismiss him or any of the board members as
the MEC is the appointing authority. The power to dismiss is the
essential corollary of the power to appoint. Hence, the Board
unlawfully usurped the power and function of the MEC.
[7]
Likewise, even though the Board is the accounting authority, it only
has the duty and power assigned to it in terms of s 51
(e)
of
the PFMA to take disciplinary steps against the employees of the
board, who commit financial misconduct and not the CEO.
Furthermore, s 12(1) of the Act states that ‘the responsible
member must appoint a suitably qualified and experienced person
as
chief executive officer, after consultation with the board.’
His case is therefore that only the CEO has the power assigned
to
discipline him and not the first and second respondents.
[8]
S141 of the Act reads as follows:
‘
The
responsible member may delegate and assign all or part of a power or
function of the responsible member in terms of the Act,
other than
the power to make regulations to the Head of Department or an officer
of the department designed by the Head of Department.’
So,
according to the applicant, he has been appointed by the MEC.
Therefore, only the MEC – not the Board – has the
power
to discipline and suspend him.
Respondents
Contentions
[9]
The applicant entered into a written employment agreement with the
first respondent (KID1 to the founding affidavit) whilst
the fourth
respondent represented him in terms of the said employment agreement.
The first respondent is a legal persona in terms
of the Labour
Relations Act and can discipline its employees.
[10]
The respondent submits that the applicant is described as an
‘employee’ in terms of his contract. In terms of s
51 of
the PFMA, an accounting authority can take effective and appropriate
disciplinary steps against any employee of the public
entity who
‘
(i)
contravened or fails to comply with the provision of this Act;
(ii)
commits an act which undermines the financial management and internal
control system of public entity; or
(iii)
makes or permits an irregular expenditure or a fruitless and wasteful
expenditure.’
[11]
As such, the respondent submits that the Board has the powers to
discipline its employees including the applicant in terms
of his
employment agreement and s 12(4) (C) of the Act. Therefore, the MEC
is not the only person who has authority to discipline
him. The
respondent relies on the authority as set out in
Dyasi
v Onderstepoort Biological Products LTD and Others
[3]
(
Dyasi
)
where it was held that the Board can initiate and pursue disciplinary
enquiries against the managing director of Onderstepoort
Biological
Products as the charges were serious and deserved to be the subject
matter of disciplinary proceedings and wherein the
Board had
managerial obligations, accounting authority and employed the
applicant, Mr Dyasi.
[12]
The respondent submits that the principle of
stare decisis
applies. It is a Labour Court decision but is binding on this court.
The position of a managing director and a CEO is of
equivalent
standing and the managing director in the Labour Court case was
accountable to the Board. Therefore, the CEO in this
matter should
also be accountable to the Board. The respondent contends that
Dyasi
settles the matter of accountability and the CEO in this case is
accountable to the Board.
Dyasi
has not been overturned and,
therefore, this court is bound by same.
Accountability
of a Chief Executive Officer
[13]
Accountability is said to be a cornerstone that upholds the integrity
and effectiveness of an organization. Indeed accountability
is
crucial. But an essential question arises:
Who
holds the CEO accountable?
In large corporations the
board holds the CEO accountable. The board has the authority to hire,
review, and, if necessary, terminate
the employment of a CEO.
The
role of managing director in my view differs from a CEO. Both are
high-ranking executives; however, they have a number of key
differences in their roles. Dyasi’s case dealt with a manging
director and not a CEO.
Section 12(4) of the Act sets out the
responsibilities of the chief executive officer of the Free State
Liquor and Gambling Board
which include:
(a) execution of
functions and exercise of powers of the chief executive officer
specifically contemplated in this Act or any other
law; (b) execution
of functions and exercise of any power assigned or delegated to him
or her by the board; (c) the day to day
operations of the Authority,
which include reporting on the performance of the Authority,
accounting to the board on operational
and financial matters and any
matter referred to the chief executive officer by the board; (d)
appointment of such staff, as may
be necessary, to enable the board
to exercise and perform its powers and functions under this Act
effectively. It accordingly appears
that the functions of the CEO in
itself calls for a superior person to him to suspend and discipline
him.
Relevant
Sections of the Act for Consideration
[14]
At this stage it is important to analyse the relevant sections of the
Free State Gambling and Liquor Act 6 of 2010
.
Section 4(1) of the Act defines the Free State Gambling and Liquor
Authority as a juristic person and an established entity. The
board,
chief executive officer and administration consists of ‘The
Authority’ as stated in s 4(2). Section 20(1) confers
on the
Authority the power to conduct any enquiry falling within its scopes
and powers and even to give evidence and produce necessary
documentation.
[4]
With these
sections in mind, it is appropriate to examine the relevant
legislation.
Legislation
[15]
In terms of regulation 33.1.1 of the PFMA, ‘if an employee is
alleged to have committed financial misconduct, the accounting
authority of the public entity must ensure that investigation is
conducted into the matter and if confirmed, must ensure that a
disciplinary hearing is held in accordance with the relevant
prescripts.’
Regulation
33.1.3 reads as follows:
‘
If
an accounting authority or any of its members, is alleged to have
committed financial misconduct, the relevant executive authority
must
initiate an investigation into the matter and if the
allegations are confirmed, must ensure that appropriate disciplinary
proceedings are initiated immediately.’
Accordingly,
the executive authority is the MEC and not the Board. The Board’s
power is only limited to employees who are
not members of the Board.
[16]
In terms of s 10 of the Act which deals with termination of office,
‘
(1)
The responsible Member may, after he or she has afforded a member of
the board the opportunity to state his or her case, at
any time
terminate the terms of office of such member if-
(a)
there are good reasons for doing so, it is in the best interest of
the board and the proper control and regulation of gambling
or liquor
industries,
(b)
he or she is disqualified to remain a member of the board in terms of
section 7; or
(c)
he or she has been absent from more than 2 consecutive meetings of
the board without the prior leave of the chairperson.’
[17]
Section 12(1) states that ‘the responsible Member must appoint
a suitably qualified and experienced person as chief executive
officer, after consultation with the board, subject to subsections
7(1)
(a)
(i), (iii) and 7(1)
(b)
, [it is consultation as
in discussion not approval, my emphasis]. The Act furthermore,
defines ‘responsible Member’
as the Member of the
Executive Council of the Province and the executive Council means the
Executive Council of the Province contemplated
in section 125 of the
Constitution.
[18]
Hence, from the interpretation of these sections, it is apparent that
the responsible Member, namely the MEC, has the power
to appoint the
CEO. The CEO is a member of the Board and s 10(1) makes it clear that
the MEC can terminate the term of office of
a member.
Case
Law
[19]
In
Apleni
v The President of the RSA and Another
[5]
(
Apleni
)
it was alleged that in placing the Applicant on precautionary
suspension, the Minister exercised a power reserved for the President
which had not been delegated to her. According to s 12 of the Public
Service Act 103 of 1994 (PSA), the appointment and
other career
incidents of the Heads of Department shall be dealt with, in the case
of a Head of a National Department, by the President.
His contract of
service between him and the Government of the Republic also makes it
clear that his appointment as Head of the
Department of Home Affairs
is in terms of s 12 of the
Public
Service Act of 1994.
The
Minister is not the Applicant's employer, it was said, and therefore
the particular provisions of the Public Service Handbook,
which
relate to the powers of the ‘employer’, do not apply to
him. The extension of his employment contract was signed
by the
Minister of Public Service and Administration and the Minister of
Home Affairs. In both letters the Ministers state that
Cabinet
approved the extension of the employment contract. In terms of the
Constitution, the President is the Head of Cabinet.
Even in respect
of the extension of his term of office, the Minister as the Executive
Authority only acted after he obtained Cabinet
approval for such
extension. The only way in which the Minister would have been
empowered to suspend him and exercise the power
she purported to
exercise, was if she had a proper and lawful delegation from the
President, which has not occurred. The precautionary
suspension was
therefore unlawful and the Minister acted
ultra
vires.
[20]
At para 22 it was said that in terms of s 84(2)(e) of the
Constitution of the Republic, the powers and functions of the
President
include the making of appointments required by the
Constitution and legislation. The Court continued at para 27 and held
that,
‘in [its] opinion, the purported legislation was in any
event rendered ineffective by the repeal of the provisions of s. 38
of the
Public Service Act
for the reasons stated. No
delegation in terms of the amended Public Service Act exists. The
result is that the Second Respondent,
the Minister, had no lawful
authority to suspend the Applicant.’
[21]
In application of the decision in
Apleni
, it is essential to
revert to the Act in this matter, more especially s 141 of the Act
which deals with delegation of power; it
is apparent that there was
no delegation of power by the responsible Member, namely the MEC, to
suspend the applicant or to charge
him for misconduct or call him to
appear before the board to answer to any allegations against him.
[22]
In
Masetlha
v President of the RSA and Another
,
[6]
the
High Court considered the crucial inquiry to be whether the dismissal
of
the
applicant is an exercise of executive power, particularly because the
Constitution
and
applicable legislative provisions are silent on the dismissal of a
head of an
intelligence
service. The Court found that the power to appoint includes the power
to
dismiss.
The power to dismiss is implicit in
s 209(2) of the Constitution
and is
an
executive power in terms of s 85(2)
(e)
of the Constitution.
[7]
At
para 68 the Constitutional Court held that the power to dismiss is
necessary in order to exercise the power to appoint. The High
Court
is right that the power to dismiss a head of the Agency is a
necessary power without which the pursuit of national security
through intelligence services would fail. Without the competence to
dismiss, the President would not be able to remove the head
of the
Agency without his or her consent before the end of the term of
office, whatever the circumstances might be. That would
indeed lead
to an absurdity and severely undermine the constitutional pursuit of
the security of this country and its people. That
is why the power to
dismiss is an essential corollary of the power to appoint and the
power to dismiss must be read into s 209(2)
of the Constitution.
There is no doubt that the power to appoint under s 209(2) of the
Constitution and the power under ISA implies
a power to dismiss.
Clearly
this decision too supports the issue in dispute in the matter of
concern, suggesting that the MEC has the power to dismiss
the
applicant and in my view the binding decision on this court.
The
Public Finance Management Act
[23
]
Section 1
of the PFMA defines an accounting authority as a body or
person mentioned in
s 49:
‘Accounting authorities. — (1)
Every public entity must have an authority which must be accountable
for the purposes
of this Act. (2) If the public entity— (a) has
a board or other controlling body, that board or controlling body is
the accounting
authority for that entity; or (b) does not have a
controlling body, the chief executive officer or the other person in
charge of
the public entity is the accounting authority for that
public entity unless specific legislation applicable to that public
entity
designates another person as the accounting authority. (3) The
relevant treasury, in exceptional circumstances, may approve or
instruct that another functionary of a public entity must be the
accounting authority for that public entity.’
[24]
It is common cause that the CEO is a member of the board. Section 84
of the PFMA sets out the procedure to be followed when
a charge of
financial misconduct is alleged. It must be investigated, heard and
disposed of in terms of the regulations set out
in s 85.
Section 85(1) (c) sets out that the Minister must make regulations
prescribing the circumstances in which the national
treasury or
provincial treasury may direct that disciplinary steps be taken or
criminal charges be laid against a person for financial
misconduct.
Treasury Regulation 33.1.3 of the PFMA reads as follows:
‘
If
an accounting authority or any of its members is alleged to have
committed financial misconduct, the relevant executive authority
must
initiate an investigation into the matter and if the allegations are
confirmed, must ensure that appropriate disciplinary
proceedings are
initiated immediately.’
[25]
In conclusion, every public entity must have a board or controlling
body. In this case, a Board exists. The Board is the accounting
authority for the Free State Gambling and Liquor Authority.
[8]
The relevant executive authority can only be the MEC. Even if
contended by the respondent that the Free State Gambling Liquor and
Tourism authority is the employer in terms of the employment
contract, it does not negate the fact that the relevant executive
authority is responsible for initiating and investigating
disciplinary proceedings against the board or its members. The
relevant
executive authority is the MEC and therefore is solely
responsible for suspending and disciplining the applicant.
Declaratory
Relief
[26]
The applicant approaches this court in terms of
s 21(1)
of the
Superior Courts Act 10 of 2013
for a declaratory order. An applicant
must, firstly, satisfy the court that he has a direct interest in an
existing future or contingent
right or obligation and secondly that a
court should exercise its discretion in his favour having regard to
all the circumstances
of the matter.
[9]
What is required is that there should be interested parties upon whom
the declaratory order would be binding. In considering
whether
to grant a declaratory order, a court exercises a discretion with due
regard to the circumstances. The absence of an existing
dispute is
not an absolute bar – a court may decline to grant such an
order if it regards the question raised as hypothetical,
abstract or
academic.
[10]
I am satisfied
that the requirements for a declaratory order in this case are met.
[27]
The fourth respondent, the MEC, has not opposed the application but
chose to abide by the decision of the court. There are
serious
allegations against the applicant in respect of gross negligence and
misconduct which, ultimately, forms part of a separate
enquiry. It is
not for this court to determine the veracity of it. The dispute that
arose is whether the board had powers to discipline
and suspend the
applicant; this Court found that the MEC is the correct person
responsible for suspension and discipline.
[28]
The MEC now has a duty to initiate an investigation into the matter
and if the allegations are confirmed, must ensure that
appropriate
disciplinary proceedings are initiated immediately in terms of
s
33.1.3
of the PFMA. Whilst it is incumbent on the MEC to attend to
this task, the serious allegations against the applicant cannot go
unfounded if the MEC does not comply as the interests of justice
warrants that the allegations be investigated.
[29]
I see no reason to penalise the respondents with a punitive cost
order as requested by counsel for the applicant. The award
of costs
is in any event in the discretion of the Court.
[30]
In the circumstances, I make the following order:
1.
It is declared that the fourth respondent, the MEC for Economic and
Small Business Development, Tourism and Environmental Affairs,
Free
State Province, is the relevant executive authority who must initiate
an investigation into the matter of alleged financial
misconduct by
the CEO, the applicant; and if the allegations are confirmed, must
ensure that appropriate disciplinary proceedings
are initiated
immediately. The MEC is given 20 days from the date of the order of
this court to comply.
2.
It is declared that the interdict in respect of the disciplinary
proceedings instituted against the applicant on 16 May 2024
and the
precautionary suspension remain in force pending the investigations
and decision of the MEC.
3.
The first, second and third respondents are granted leave to
supplement their papers (if necessary) and to approach this court
on
the same papers duly amplified for the relief that they may require
or seek in the event of the MEC failing to comply with para
1 of this
order.
4.
The first respondent is ordered to pay the costs of this application
on an attorney and client scale.
T
RAMDEYAL, AJ
APPEARANCES:
On
behalf of the Applicant
Adv.
Mphela
Instructed
by:
Rampai
Attorneys
BLOEMFONTEIN
On
behalf of the Respondent
Adv.
Jonase
Instructed
by:
State
Attorneys
BLOEMFONTEIN
[1]
See
Amended Index: Notices at 3-4.
[2]
KID10,
at 58 of the pleadings.
[3]
Dyasi
v Onderstepoort Biological Products LTD and Others
[2010]
ZALC 205
;
[2011] 7 BLLR 671(LC)
; (2011) 32 ILJ 1085 (LC).
[4]
See
also
s 20(2)
(a)
and
(b)
.
[5]
Apelleni
v President of the Republic of South Africa and Another
[2017] ZAGPPHC 656; [2018]1 All SA 728 (GP) para 11.
[6]
Masetlha
v President of the RSA and Another
[2007] ZACC 20; 2008 (1) SA 566 (CC).
[7]
Ibid para 22.
[8]
See
s 49(2)
of the PFMA.
[9]
Reinecke
v Incorporated General Insurances Limited
1974 (2) SA 84
A at 95C;
Cordiant
Trading CC v Daimler Chrysler Financial Services
(Pty) Ltd
2005 (6) SA 205
SCA at 213 paras 17-18.
[10]
Association
for Voluntary Sterilization of South Africa v Standard Trust Limited
and Others
[2023] ZASCA 87.