Amazwi Power Products (Pty) Ltd v Turnbull (JA 14/07) [2008] ZALAC 8; (2008) 29 ILJ 2554 (LAC); [2008] 9 BLLR 817 (LAC) (20 June 2008)

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Amazwi Power Products (Pty) Ltd v Turnbull (JA 14/07) [2008] ZALAC 8; (2008) 29 ILJ 2554 (LAC); [2008] 9 BLLR 817 (LAC) (20 June 2008)

IN
THE LABOUR APPEAL COURT OF SOUTH AFRICA
(HELD AT
JOHANNESBURG)
Case No.: JA 14/07
AMAZWI
POWER PRODUCTS (PTY) LTD Appellant
and
SHELLY
TURNBULL Respondent
JUDGMENT:
DAVIS
JA:
Introduction
[1] Respondent was employed by appellant in June 1979 as an internal
accountant. In 1994 she was promoted to the position of accountant.
On 1 November 2003 appellant was bought by a new owner as a going
concern. During the early part of 2004 (the exact date is not
apparent from the record) respondent was appointed to the board of
directors of appellant as its financial director.
[2] On 10 January 2005 respondent wrote to the managing director of
appellant tendering her resignation as a director of the appellant,
stating: “I will continue to give 100% on behalf of the company as
an employee”. On 31 January 2005 respondent received a letter
from appellant’s managing director, acknowledging receipt of the
letter of resignation as the financial director and confirming
“your
offer to continue as an employee (of appellant)”. He also
informed respondent that the matter would be discussed by the
board
and thereafter they would consult with her.
[3] She continued performing her duties until 18 February 2005 when
she received a
letter from appellant’s managing director, accepting her
resignation of 10 January 2005 from the employ of appellant and
tendering
to pay her until 31 March 2005. Respondent objected,
claiming that she had only resigned as the director and not
as an employee.
[4] The dispute was
then heard by an arbitrator, Mr DG Levy, who found that
respondent had been unfairly dismissed and awarded an amount of
compensation equivalent to six months of respondent’s salary, prior
to her appointment to the board.
[5] This decision was
then taken on review before Sangoni AJ. The learned judge
dismissed the application to set aside the award but upheld a cross
review and ordered the appellant to pay the sum of R 247 800,00,
being the equivalent of six months salary, based on respondents
salary as at the date of dismissal 18 February 2005. This award
was larger than that of the arbitrator’s award calculation had been
made on the basis of respondent’s monthly salary, prior to
her
appointment as a director.
[6] It is against these findings that appellant, with leave of the
court
a quo,
has approached this court on appeal.
Appellants Case
[7] Mr Mahon, who appeared on behalf of appellant, raised two
arguments, the first
being a principle set of submissions and another, an alternative
argument on the award of compensation. The principle set of
submissions
was predicated on the contention that respondent held one
position; that is, she was employed as financial director of
appellant
and when she tendered her resignation as the financial
director, she resigned her employment from appellant
in toto
.
In the alternative, Mr Mahon submitted that, were this court to
find that the resignation letter constituted her resignation as
a
director of appellant only, then the correct amount of compensation
due to respondent would be based on her salary prior to the
increases
that had been granted to her, pursuant to her elevation to the board
of appellant.
[8] Mr Mahon submitted that respondent was employed in a single
post; that is the financial director of appellant, and that this
employment had replaced her previous post as an accountant. In
support thereof, Mr Mahon referred to a letter of Mr Martin, the
managing director of appellant, dated 19 March 2004:
“Dear Shelley
We are pleased to advise that you have been granted an increase in
salary as from 1
st
March 2004
The increase amounts to
R7 000. 00 per month and your adjusted salary will amount to R32
000.00 per month. In addition the Company
will pay your portion of
the pension fund.
Your employment contract will be ready within the next two weeks”.
[9] Mr Mahon submitted that this letter clearly envisaged that a new
employment contract would be drafted which would encapsulate
the new
employment relationship created between the parties, pursuant to
respondent’s appointment as the financial director.
Although it
is common cause that no contract was produced in writing, Mr Mahon
submitted that the intention of the parties was clearly
to regulate
the directorship of respondent in a contract. Respondent had
received no directors’ fees. The salary which she received
as an
accountant was increased significantly to be commensurate with her
new, more onerous set of obligations as the financial director.
As
she was employed as a director, her resignation meant that there was
no other legal basis to justify the continuation of her
employment in
appellant’s organization.
[10] Respondent’s ‘resignation’ letter to appellant, in so far
as it has a bearing upon the submissions of Mr Mahon reads:
‘After much soul searching and careful consideration, I hereby
tender my resignation as Director of Amazwi… I assure you that
I
shall continue to give 100% on behalf of the company, as an employee,
however, require express instruction about what and who is
to be
paid, bearing in mind that there are certain items that must be paid
i.e. Medical Aids, PAYE and Pension (the outstanding Pension
needs to
be paid as soon as possible). (sic)
I am also not prepared to misrepresent the true financial position of
the company to creditors (especially given regard to the fact
that I
have worked closely with many of them for many years) and require
express instructions about what to tell them regarding the
non-payment of their accounts and the payment thereof.
Over the past 20 years
I have been a loyal member of the company and shall continue to act
in the best interests of the company with
your support and guidance.’
[11] Mr Mahon conceded that the wording of this letter was indicative
that respondent had intended to resign from the board of appellant
but to continue as an employee. However he argued that given the
legal position that respondent occupied one position, appellant
was
entitled to accept her resignation from its organization.
The applicable
law
[12] In general it, can be stated that a director stands in a
fiduciary relationship to a company and is subject, essentially, to
the same fiduciary duties and responsibilities as do other
fiduciaries who are in a similar relationship of confidence and trust
to one another. When a person accepts the office of a director and
no contract had been expressly concluded, the contract between
the
director and the company will be implied, the effect being that the
position is regulated by the company’s articles of association.
A
director is thus not an employee of a company, although he or she can
be an employee in addition to holding the independent office
as a
director. See
The Law of South Africa
(First Reissue (1996))
Volume 4 Part 2 at para52;
Anderson v James Sutherland (Peterhead)
Ltd
1941 SC 203
at 217.
[13] Applying these
principles to the office of a managing director, Prof Blackman
writes that the managing director constitutes a composite office.
Not all of his actions in relation to company business are to
be
attributed to the powers as a director. As a manager, the managing
director is a party to a contract of employment with the
company.
Accordingly, his or her position as a director must be distinguished
from that of a manager.
The Law of South Africa
, Volume 4.
Part 2 at para102. See also the instructive article by Professor
Larkin “Distinctions and Differences: A Company Lawyers
Look at
Executive Dismissal” 1986 (7) ILJ 248.
[14] Notwithstanding the clear position of the managing director or,
for that matter a financial director in terms of company law,
Mr
Mahon contended that labour law viewed the position differently.
He referred to the decision of Friedman J in
Oak Industries (SA)
(Pty) Ltd v John NO and another
1987 (4)SA 702 (N) in which the
court held that it did not follow that, because a managing director
is a holder of an office, he
cannot be nor was he capable of being an
employee of a company. The determination of whether a managing
director fell within a
definition of employee had to be ascertained
by reference to the definition of an employee in the Labour Relations
Act (in that case
the Labour Relations of 28 of 1956 and by analogy
the current legislation, The Labour Relations Act 66 of 1995 (‘The
Act’).
[15] I can find no fault in the approach adopted by Friedman J as to
whether the Act affords protection to a managing director or
a
financial director dismissed by a company. But this case is not
concerned with such a dismissal; it is concerned with whether
the
respondent terminated the employment relationship that existed
between appellant and respondent, pursuant to her letter of
resignation.
Hence, this case must be determined on a different
basis, that is whether a financial director is truly a composite of
two posts
or whether there are two separate posts.
[16] However, this case can be decided on a different, albeit
related, basis. When the departure from an organization is at the
initiative of the employee by way of a voluntary resignation which is
accepted, by the employer the termination of the contract it
then
takes place by mutual and voluntary agreement between the parties.
As Mr van der Merwe, who appeared on behalf of the respondent,
correctly submitted, a termination of a contract, particularly a
contract of employment has important consequences for the reciprocal
rights and duties of the parties. To be legally effective, a notice
of intention to resign from employment and therefore to terminate
the
contract must be clear and unequivocal. See
Kragga Kamma Estates
CC and another v Flanagan
[1994] ZASCA 137
;
1995 (2) SA 367
(A) at 375 C.
[17] It was clear from the testimony of respondent that she never
intended to resign from her employment relationship with appellant.
To the extent that she laboured under any legal misapprehension
(regarding the conflation of the duties the financial director and
employee) there was, as I have set out, an understandable basis for
her adopting this approach. Her testimony is instructive:
“I
honestly did not expect them to say take your things and go I …..
maybe they will come back and say ok you are still a valuable
person
to the company you can decide so you have the solidarity duty so
whatever. I honestly did not expect them to say cheers.”
[18] To the question as
to whether she approached the managing director regarding her letter
she said: “On the Monday I just went
to Mike and I said to him is
there no other solution. And he said to me it is a board decision.”
[19] Respondent was
clear in her testimony that, upon her appointment to the board, very
little had changed in so far as her employment
obligations were
concerned. To return to her evidence: “Can you explain to us what
was different in these duties for when after
you were director to
prior to being a director? I think the only difference was that I
went to board meetings but other than that
all the functions that I
had done before.”
[20] In my view, it is clear that respondent tendered her resignation
from the board without any intention of resigning from the
employ of
the company. The very least she expected was that appellant would
honour its obligations as set out in its letter of
31 January 2005
and consult with her regarding her ongoing employment relationship
with appellant. This was not done.
[21] Mr van der Merwe
correctly classified the actions of the appellant as “opportunistic”
in seeking to invoke the respondent’s
letter of 10 January 2005 as
a resignation of her employment when it was clear, on a fair and
reasonable reading of that letter,
that she never held to that
intention. Indeed, as already noted, Mr Mahon conceded that
respondent’s letter indicated that her
intention was to resign only
from the board. Had there been any doubt in the mind of the
appellant as to the intention of the respondent,
it could have
availed itself of the consultation process which it promised would
take place. In my view, there is no basis to interfere
with the
finding of either the arbitrator or the court
a quo,
namely
that the dismissal of the respondent from the employ of appellant was
substantively unfair.
Compensation
[22] It is common cause that, at the date of the termination of
respondent’s employment, her remuneration amounted to R 41 300.00
per month. Section 194 of the Act provides that the relevant
remuneration must be calculated at the employee’s rate of
remuneration
on the date of dismissal. Furthermore, there was no
evidence that the respondent received any director’s fees. There
was no
evidence provided to the arbitrator to reveal what portion of
the respondent’s remuneration was allocated to her appointment as
a
director of appellant.
[23] The absence of any
evidence to gainsay respondent’s contentions, as well as the
finding of the court
a quo,
was illustrated in the submission
of Mr Mahon that the salary which formed the basis of the relevant
calculation was R 25 000.00
per month. Mr Mahon located this figure
in a letter of 13 December 2002 when respondent was informed by the
then managing director
of appellant that her salary would be
increased to R25 000.00 per month. That was a salary which applied
more than two years prior
to dismissal. On 19 March 2004 her salary
was increased to R32 000.00 per month, together with an obligation
that appellant would
pay respondent’s portion of the Pension fund.
Whether it was this latter contribution, which added to the R32
000.00 amounted
to the figure of R41 300.00 per month is not clear.
By contrast, appellant produced no evidence to contradict
respondent’s evidence
that her remuneration as at the date of
termination of employment was R41 300.00 per month. On this basis
therefore, the court
a quo
adopted the correct computation, as
it was obliged to do in terms of section 194 of the Act.
[24] For these reasons,
the appeal is dismissed with costs.
____________
DAVIS
JA
I agree
____________
LEEUW
JA
I agree
____________
TLALETSI
AJA
Date
of Judgment: 20 June 2008
Date
of Hearing: 27 May 2008
Appearances
For
the appellant Advocate Mahon
Instructed
by Fairbridges Attorneys
For the
respondent Advocate van der Merwe
Instructed
by Senekal Simmonds Inc