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[2014] ZALAC 21
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Blue IQ Investment Holdings (Pty) Ltd v Southgate (JA28/13) [2014] ZALAC 21; (2014) 35 ILJ 3326 (LAC) (30 May 2014)
REPUBLIC
OF SOUTH AFRICA
IN
THE LABOUR APPEAL COURT OF SOUTH AFRICA, JOHANNESBURG
Case
no: JA 28/13
In the matter between:
BLUE
IQ INVESTMENT HOLDINGS (PTY)
LIMITED
Appellant
and
DOUGLAS
SOUTHGATE
Respondent
Heard:
11 March 2014
Delivered:
30 May 2014
Summary: Contract-
existing contract of employment has ‘no variation/ no
cancellation clause’ restricting variations
and cancellations
thereof to writing signed by or on behalf of the parties- Held: new
alleged oral contract was to cancel and /or
vary the existing
contract- new contract not completely negotiated- and in any event
not valid in light of the no variation clause
in the existing
contract. Authority to contract- Held: CEO had no authority to
conclude new contract of employment with person
on a management level
without consulting the Board- intended position was at management
level-
Turquand
rule of no assistance to alleged appointee.
Coram
:
WAGLAY JP, NDLOVU JA, COPPIN AJA
JUDGMENT
COPPIN AJA
[1] This is an appeal
against the judgment of the Labour Court (A C Basson J) ordering the
appellant to pay the respondent “
contractual damages in the
amount of R5 576 500
” as well as party and party costs.
Leave to appeal was granted on petition by this Court. The case is
about whether a three
year employment contract was concluded between
the parties and whether the appellant had repudiated that contract,
resulting in
the respondent suffering damages.
[2] In the Labour Court,
the respondent’s claim against the appellant, in terms of his
statement of claim, was for reinstatement,
an order directing the
appellant to pay him the remuneration he would have earned between 15
February 2009 and the date the contractual
relationship between them
is restored, as well as costs of suit on the scale as between
attorney and own client. The respondent
claimed, alternatively, an
order directing the appellant to pay him the remuneration he would
have earned between 15 February 2009
and 15 October 2011, as well as
costs on an attorney-client scale.
[3] The basis of the
respondent’s claims is as follows. The respondent alleged that
while he was employed by the appellant
as a Special Projects
Programme Manager in terms of a fixed contract for one year (“
the
second contract
”), which was to terminate on 15 February
2009, he, personally, negotiated and entered into a contract (“
the
third contract
”) with the appellant, who was represented by
its Chief Executive Officer (CEO) at the time, Ms Nomhle Canca
(“
Canca
”) during or about October 2008, on the
following terms:
3.1
The
second contract would terminate with effect from 15 October 2008 and
would be replaced by the third contract;
3.2
The
third contract would commence on 16 October 2008 and would endure for
a period of three years;
3.3
The
respondent would be Group Programme Co-ordinator;
3.4
The
respondent would receive the same remuneration package as he had
received in terms of the second contract;
3.5
The
respondent’s monthly salary would be subject to the appellant’s
normal salary review process.
[4] The respondent
alleged, in essence, that even though the third contract had not been
reduced to writing it had effectively and
validly been concluded;
that Canca ceased to act as the appellant’s CEO after the
conclusion of the third contract and that
Mr Jameel Chand (“
Chand
”)
had replaced her; that even though Chand was at all material times
aware of the respondent’s employment as Group
Programme
Co-ordinator he directed the letter to the respondent, through the
appellant’s legal officer, Mr Mulaudzi (“Mulaudzi”),
which the respondent received on or about 10 February 2009, informing
him that his employment with the appellant would terminate
on 15
February 2009, which was the date upon which the second contract was
to terminate; that despite protestations of the respondent
and
contentions that the appellant was bound to the third contract, the
appellant maintained its stance and the respondent’s
employment
was terminated accordingly.
[5] Respondent also
alleged, in essence, that the termination of his employment amounted
to a repudiation of the third contract
by the appellant. Respondent
seemingly refused to accept such repudiation and tendered his
services to the appellant who, according
to the respondent, refused
to accept it. The respondent consequently instituted the claim in
which he sought the relief which I
have mentioned earlier.
[6]
In the original response to the respondent’s claim,
[1]
the appellant, in essence, admitted that the respondent was employed
by it in terms of the second contract and admitted that prior
to the
termination of that contract, negotiations had commenced regarding a
new contract of employment, but denied that the negotiations
were
concluded and that the third contract came into being. Furthermore,
the appellant alleged that the parties had contemplated
reducing
their verbal negotiations to writing and to have the written
documents signed by the parties; but that no such contract
was
concluded. It was further alleged that Canca instructed Mulaudzi on
some of the aspects for the new contract, but she gave
no
instructions in respect of two essential or material aspects, namely,
the remuneration package and the duration of the new agreement.
It
was further denied that the respondent rendered services to the
appellant as Group Programme Co-ordinator and that the respondent
was
appointed as such and that Mr Chand had knowledge of his appointment
to that position. The appellant denied unlawfully terminating
the
respondent’s employment and alleged that the termination
happened as a result of the expiry of the second contract on
15
February 2009. In its original response, the appellant also raised
other technical issues which are not relevant for the purposes
of
deciding this appeal.
[7] During or about
November 2009, the appellant delivered a notice to amend its response
to the respondent’s statement of
claim. The proposed amendment
was not opposed and on or about 8 March 2010, the appellant’s
attorneys delivered an amended
response to the respondent’s
statement of claim. Of significance (beside other issues raised) the
appellant alleged that
negotiations in respect of the third contract
had not been concluded and that the parties had contemplated that the
third contract,
if concluded, would be in writing; denied that the
respondent was appointed as, or rendered services to the appellant as
Group
Programme Co-ordinator; denied that Chand had knowledge of the
respondent’s appointment as Group Programme Co-ordinator;
denied that Canca had authority to unilaterally create a position of
Group Programme Co-ordinator and to employ a person in such
a
position without first obtaining the approval of the appellant’s
board of directors for the creation of the position and
for the
employment of a person to the position; alleged that Canca had failed
to comply with the Public Finance Management Act
(“
the
PFMA
”) and the appellant’s delegation of authority
policy; and accordingly, denied that Canca had the authority to enter
into and/or bind the appellant on the terms alleged in respect of the
third contract. Of further significance for this appeal,
the
appellant alleged in the amended response that the respondent was
bound to the second contract, including the terms contained
in
clauses 13.2 and 13.4 thereof. Clause 13.2 is a no variation/no
cancellation-except- in writing clause, requiring the
parties to
reduce to writing and to sign any variation or consensual termination
of the second contract. Clause 13.4 is a no waiver
clause. The
appellant contended, accordingly, in essence, that since the no
variation/no cancellation clause was not complied with
and there was
no waiver by the appellant of its rights in terms of the second
contract, the third contract could not have come
into existence. I
shall deal in more detail with the precise wording of the clauses,
referred to, later in the judgment. The appellant
accordingly sought
a dismissal of the respondent’s claim with costs.
[8]
At the hearing before the Labour Court, several issues remained for
determination, but the two main issues were, firstly, whether
the
third contract came into existence even though it was not in writing
and particularly in light of clauses 13.2 and 13.4 of
the second
contract. Secondly, whether Canca had the necessary authority to
create the position of Group Programme Co-ordinator
and employ a
person to that position and whether the appellant was nevertheless
bound by the agreement between the respondent and
Canca (i.e. the
third contract). In respect of the latter question it was in issue
whether the respondent could rely on the so-called
“
Turquand
rule
”.
[2]
This rule was adopted into our law in the earlier part of the
twentieth century. For the application of the rule in our courts
see
for example
National
and Overseas Distributors Corporation (Pty) Ltd v Potato Board
[3]
and
Potchefstroomse
Stadsraad v Kotze
[4]
.
[9] The appellant called
Mulaudzi as a witness. He was acting company secretary of the
appellant and at the time of the alleged
negotiation of the third
contract he was also its Group Legal Adviser. The appellant also
called Chand, who was acting CEO of the
appellant after Canca was
suspended, and Mr Waja, a non-executive director of the appellant, as
witnesses. The respondent gave
evidence in person and called Canca as
a witness.
[10] The court
a quo
concluded as follows regarding the first issue:
‘
[54]
… I am, however, not persuaded that the
non-variation clause contained in the second contract has
the effect
of rendering the third contract invalid simply on the basis that it
(the third contract) was not reduced to writing.
The purpose of
a non-variation clause (except in writing) is to protect the parties
to the agreement by preventing one of the contracting
parties (for
example the employer) from, for example, vary
[ing]
the salary that was agreed upon in the
employment contract.
[55]
Clause 13.2 of the second contract is, in my
view, valid only in respect of the second contract.
This clause
cannot be used to prevent the parties (in this case the applicant and
Canca contracting in her capacity as the CEO
on behalf of the
respondent) from concluding a third or further contract. In the
present case, the applicant and Canca did not
negotiate the amendment
of the second contract. They had negotiated the terms of another
(third) contract in terms of which the
applicant who was appointed to
a different position and for a longer period. Clause 13.2 of the
second contract is therefore in
my view irrelevant vis-à-vis
the third contract. Moreover, nothing in the second contract prevents
the parties from entering
into a new contract. Lastly, the two
parties to the contract were ad idem that it was a requirement that
the new contract
had to be reduced to writing. Canca contracted
on behalf of the respondent. She was the CEO at the time and she
concluded
the contract on behalf of the respondent and she concluded
the third contract on the basis that it was not a material
requirement
that the contract had to be in writing.
’
[11] The court went on to
apply something in the nature of an estoppel, in that it held that
even if it was wrong in finding that
the third contract did not have
to be in writing to be binding, the appellant was, nevertheless,
bound by it because Mulaudzi,
the appellant’s legal adviser,
had not drafted the third contract in time and the respondent had “
in
fact commenced
” working in his new position since October
2008. Furthermore, the court
a quo
stated that it took into
account that if Canca had not been suspended, the third contract
would have been reduced to writing and
held that “
in light
of these factors … the third contract came into being despite
the fact that it was not in writing
”.
[12] Regarding whether
the appellant was bound by the third contract, i.e. allegedly entered
into between Canca (its CEO at the
time) and the respondent, the
court
a quo
concluded that Canca was empowered to appoint the
respondent to the new position in terms of her delegated powers. The
court
a quo
was not persuaded that the respondent was in fact
a senior manager as defined in the regulations. It was seemingly
accepted that
Canca was not obliged to consult the Board in respect
of the creation of the post of group programme co-ordinator and in
respect
of the appointment of the respondent, in terms of the
appellant’s delegation policies. The court
a quo
also
held that Canca’s evidence was not challenged that the
respondent was not a manager and further that it was never put
to her
that the respondent was a senior manager and that she therefore had
to consult with the board. Regarding the application
of the Turquand
rule, the court
a quo
held that if it was wrong in its
conclusion that Canca had the necessary authority to appoint the
respondent to the new position,
then the Turquand rule was applicable
and the respondent was entitled to assume in good faith that Canca
had the necessary authority
to appoint him and to conclude the
employment contract on behalf of the appellant.
[13] At the hearing
before us counsel for both the appellant and the respondent were in
agreement that there were only two issues
that had to be addressed,
namely, the issue regarding the validity of the alleged third
contract in light of the no variation/no
cancellation and no waiver
provisions in the second contract and, secondly, whether the alleged
third contract, if it was validly
concluded, was binding on the
appellant. With regard to the latter issue it had to be determined,
in particular, whether Canca
was empowered to bind the appellant
without having consulted the board regarding the appointment of the
respondent and, in the
alternative, whether the respondent could
invoke the Turquand rule. I shall now deal with those issues in turn.
Conclusion of the third
contract
[14] The argument of the
appellant was, briefly, that in light of the no variation/no
cancellation and no waiver provisions in the
second contract, the
third contract could not be validly concluded and in fact was not
validly concluded. Related to this point
it was submitted on behalf
of the appellant that with the third contract the respondent and
Canca purported to terminate and/or
vary the second contract orally;
the prescription of the no variation/no cancellation clause, i.e.
that any consensual termination
be in writing and signed by the
parties and that any variation, similarly, be in writing and signed
by the parties, was not complied
with. Accordingly, that in those
circumstances the third contract was not validly concluded.
[15] On behalf of the
respondent, it was submitted that the third contract was not a
variation of the second contract but was a
new contract; that it was
a novation of the second contract that did not require compliance
with the prescriptions in the second
contract relating to consensual
terminations and variations. An alternative argument raised on behalf
of the respondent was that
even though the third contract was
concluded during the currency of the second contract it did not come
into effect during the
currency of the second contract, but only came
into effect upon termination of the second contract by the effluxion
of time as
was agreed in terms of the second contract. This latter
argument was not the case made out by the respondent in the court
a
quo
and was raised for the first time on appeal before us in
response to a point that it could never have been the intention of
the
respondent and Canca that the parties would be bound by two
contracts of employment simultaneously, or concurrently (i.e. both
the second and the third contracts).
[16] The appellant’s
counsel argued that for the third contract to constitute a novation,
it had to substitute the contractual
obligation in the second
contract. The contractual obligation, according to this argument, was
the employment relationship. The
third contract, so it was submitted,
did not substitute the contractual obligation in the second contract,
but purported to vary
certain terms of the second contract, more
particularly, by extending the period and by slightly changing the
respondent’s
job description and extending his duties. It was
submitted that the third contract did not purport to change the
respondent’s
salary and the other terms of the second contract.
[17] In my view, the
issue whether the non-variation clause in the second contract had the
effect of rendering the third, oral,
contract invalid should not have
been considered in an abstract sense. The actual wording and meaning
of that clause was important
in determining its purpose, range and
impact.
[18]
The no variation clause provides:
‘
No
amendment of this agreement or any consensual cancellation thereof or
any part thereof shall be binding on the parties unless
reduced to a
written document and signed by them.
’
In
my view, the meaning of this clause is clear and unambiguous. A
variation or consensual termination of the second contract, in
order
to be valid, had to be reduced to writing and signed by the parties
(or on their behalf). The case made by the respondent
in the Labour
Court was that in terms of the third oral contract, the second
contract was consensually terminated. In my view,
that cannot be a
valid termination in light of the no variation/no cancellation clause
in the second contract.
[5]
There
was no contention either in the court
a
quo
or before us that the no variation/no cancellation clause was not
sufficiently entrenched in the second contract.
[19] It is furthermore
apparent from an examination of the second contract and the alleged
terms of the third contract that the
latter was not a novation, but
an attempt to vary the second contract by, firstly, extending the
period of the respondent’s
employment contract for three years
from the date of the alleged conclusion of the third contract, i.e.
during or about October
2008 and, secondly, by altering the job
description of the respondent, although not materially. Whereas the
respondent was employed
by the appellant under the second contract as
a special project programme manager in respect of, principally, the
Blue Umbrella
Project, in the third contract, his responsibilities
were to be extended to other projects and he was to be employed, on
his suggestion,
as “
Group Programme Co-ordinator
”.
Other than these variations, the employment relationship was to
persist. The respondent was to continue earning the same
salary that
he earned in terms of the second contract and the other standard
terms, which were part of the second contract, were
to continue to
apply.
[20]
A contract is novated when an existing contractual obligation is
replaced by a new obligation.
[6]
The main obligation in the second contract was not replaced by a new
obligation in the third contract, but the effect of the latter
agreement was to extend and vary certain obligations in the second
contract. Even if it was to be assumed that the third contract
did
not vary the second contract, the respondent and Canca clearly never
envisaged that the two contracts would bind the parties
simultaneously or concurrently. One cannot ignore the fact that
according to the respondent, one of the terms of the third contract
involved the termination of the second contract. The respondent’s
evidence was also to the effect that he had already begun
performing
in terms of the third contract by about October 2008. Prior to the
hearing of the appeal, it had never been the respondent’s
version that he and Canca had intended the third contract to apply
only after the second contract had expired by the effluxion
of time
on 15 February 2009.
[21] The formalities for
the consensual termination or variation of the second contract were
laid down in the no variation clause
in that contract. It is
therefore not correct to conclude that the no variation clause was
only valid in respect of the second
contract. The parties intended to
lay down formalities for any further contracts in terms of which the
second contract was either
terminated or varied. If such further
contracts were not in writing and signed by the parties as ordained
by the no variation/no
cancellation clause in the second contract,
they were not valid. The alleged third contract was accordingly not
valid and the court
a quo
erred insofar as it held the
contrary. In any event, I am not persuaded on the evidence that was
led that the third contract was
negotiated to finality. Over and
above the fatal lack of compliance with the formalities of writing
and signature by the parties,
it was at best nothing more than a
“
limping
” contract that was in the process of
being negotiated and finalised.
[22] Even though the
point relating to the validity of the third contract is decisive of
this case I shall now briefly turn to deal
with the issue of
authority of Canca and the applicability of the Turquand rule. I
would also have to proceed on the assumption
that the third contract
was complete (i.e. not a “
limping
” contract).
[23] The appellant’s
argument on the authority point was briefly the following. One had to
look at the written delegation
of authority document of the appellant
which was applicable at the time of the alleged conclusion of the
third contract. The board
has to be consulted when the Chief
Executive Officer deals with staff at a management level. The
respondent was at such a level
and therefore Canca, as the CEO was
obliged to consult with the board regarding the respondent’s
employment in terms of the
alleged third contract. Since it was
common cause that she did not consult with the board, the appellant
was not bound by her unilateral
decision, as it were, to enter into
the third contract with the respondent. Furthermore the respondent
could not rely on the Turquand
rule because the respondent was not an
“
outsider
”. At the time of the alleged third
contract, the respondent was employed by the appellant in terms of
the second contract.
In terms of, at least, that contract, he was
obliged to know about the policies and procedures that were
applicable in the employment
relationship and could not merely assume
that internal procedures or policies, that were applicable to his
appointment in terms
of the third contract, had been complied with by
Canca. He, being at a senior management level, had the responsibility
to see to
it that they were indeed complied with. According to this
argument, it was eminently clear from his contract of employment and
the alleged third contract that the respondent was functioning and
was to continue functioning at an executive management level.
At
least one person, a Mr Cook had to report to the respondent. The
respondent in turn had to co-ordinate projects and aspects
of
projects and reported directly to the Chief Executive Officer. The
respondent’s job description (including the key performance
indicators that were applicable to him), anticipated that in the
course of his work, the respondent would also manage people. The
respondent’s salary was also in excess of R5 million and the
board therefore had to be consulted. Even if it was anticipated
(or
agreed in terms of the third contract) that the respondent was to
continue earning the same salary as he earned under the second
contract the third contract had an unanticipated financial impact
since it was going to endure for a period of three years, in
other
words, for more than two years after the second contract would have
expired.
[24] The appellant’s
counsel was dismissive of the contention by the respondent’s
counsel that two members of the remuneration
committee of the
appellant’s board knew of the respondent’s appointment in
terms of the third contract and had approved
of it, on the basis that
there was no evidence whatsoever that the remuneration committee had
authority to appoint people, let
alone people at the level at which
the respondent was appointed or supposedly appointed. On behalf of
the appellant, it was further
submitted that Canca had exceeded her
authority in appointing or purporting to appoint the respondent in
terms of the third contract.
In conclusion, it was submitted that all
the relevant material was before the court
a quo
and that if
it had examined the material, it could not reasonably have come to
the conclusion it came to on the issue of Canca’s
authority and
the binding nature of the third contract.
[25] On behalf of the
respondent, it was submitted that the appellant could not argue that
the respondent was a manager because
it was never put to him in
evidence that he was a manager, nor was it suggested to Canca that
the respondent was a manager, nor
was Canca’s evidence, that he
was not a manager, ever challenged and Mr Waja did not even know what
the respondent’s
duties were. It was furthermore submitted that
the respondent could not be a manager unless there was a key human
resources component.
Furthermore, that there was no merit in the
appellant’s budget point and that the court could not be
‘locked into’
an organogram that was never produced. It
was further submitted on behalf of the respondent that, in any event,
the Turquand rule
applied. The respondent did not know of the
delegations and was like an outsider. He was therefore entitled to
assume that the
internal procedures and policies relating to his
appointment in terms of the third contract had been complied with.
[26] The primary purpose
of the delegation of authority document of the appellant, according
to the document itself, was to provide
a policy with regard to the
delegation of powers, duties and functions to management. The
document describes the powers and duties
of certain functionaries
including the Chief Executive Officer (“
CEO
”). The
CEO,
inter alia
, has the power “
to appoint, determine
the conditions of employment of and dismiss the staff of Blue IQ,
including members of staff on management
level; where the management
members are reporting to the CEO the board must be consulted
”.
The document does not define “
management level
”,
or the term “
management members
”, but does define
the term “
Executive Manager
” as meaning “
a
manager who is responsible for the management of
[a]
Blue IQ
Department
”. A “
Department
” is
defined as “
a functional unit within Blue IQ tasked with
specific functions which are related to the achievement of that
unit’s objectives,
i.e. finance, marketing and communications
etc
”. The term “
Senior Manager
” is
defined as “
a manager who exercises direct managerial
control over specific human resources utilised in a department or
section in the achievement
of that department or section’s
objectives.”
[27] It is instructive
that the powers of the CEO relating to the employment of staff on
management level does not only refer to
an executive manager or a
senior manager, but refers generally to “
members of staff on
management level
”. It furthermore provides where
“
management members
” are reporting to the CEO the
board must be consulted. There is no reference to executive managers
or senior manager, the
reference is generally to “
management
members
” who are reporting to the CEO.
[28] It is noteworthy
that in the second contract, the respondent is referred to as “
the
executive
” and his job description is “
Special
Projects – Programme Manager
”. He was to report
directly to the CEO or the board of the appellant for the duration of
the second agreement. His job was
to oversee and manage the
implementation of business plans and particular aspects thereof. He
is described elsewhere in that contract
in particular in a portion
dealing with working hours that he occupies a “
senior
position
” or is a “
senior employee
”.
[29] On 23 October 2008,
Canca sent to the respondent a pro forma job profile of a Programme
Co-ordination Officer. In terms of
that document, the skills and
qualification required for the position included having five years
project management experience
and having held an executive position
for at least three years. The tasks and outputs envisaged were to
assist the management of
the Blue Umbrella Programme to plan with
milestones, scope, budget, deadlines and programme deliverables, to
compile management
reports; relate and provide all information and
documentation requests submitted to the programme officer; oversee
the participation
and delivery of all stakeholders including public
and private sectors participants; develop and implement key PMO
deliverables;
and be responsible for billing management.
[30]
On 24 October 2008, the respondent responds to Canca in connection
with the job description document and informs her that he
has changed
the document significantly to “
more
mirror the role
”
that he has been playing with the Blue Umbrella Programme to include
the fact that his responsibility would be for more
than one
programme. It states further “
the
role, as defined, is essentially that of Group Programme ‘Manager’,
but I have stayed with ‘co-ordinator’
as I am comfortable
with the same
”.
A document as reviewed by the respondent, sets out the
responsibilities of the Group Programme Co-ordinator. It
inter
alia
mentions that the Group Programme Co-ordinator is responsible, on
behalf of the senior responsible owner, for successful delivery
of
the portfolio of programmes and projects. It further sets out the
role of the Programme Co-ordinator which includes managing
the
overall budgets on behalf of the senior responsible owner and
monitoring the expenditures and costs against benefits that are
realised as the programme progresses. He would also be
responsible for facilitating the appointment of individuals to the
programmes and projects delivery teams. He was furthermore to be
responsible for ensuring that the delivery of new products or
services from programmes and projects meet requirements and was of
appropriate quality, on time and within budget, in accordance
with
the plans and governance requirements. He was also to ensure maximum
efficiency in the allocation of resources and skills
within the
portfolio and then he was also responsible for managing third party
contributions to the programmes and projects; managing
the
communication with stakeholders; managing the dependencies and
interfaces between programmes and projects; managing risks to
the
programme and projects’ successful outcome. He was also
responsible for initiating extra activities and other management
interventions wherever gaps in the programmes and projects were
identified or issues arose. He was also to report progress of the
programmes and projects at regular intervals to the senior
responsible owner. In the ultimate paragraph the following is stated:
‘
Throughout
the programmes and projects, the Group Programme Co-ordinator
provides the ongoing ‘health check’ of the
programmes and
projects by re-assessing whether the programmes and projects continue
to meet their objectives and continue to use
available funds and
resources efficiently. This requires the timely management of
exceptions, slippage and conflicting priorities.
’
[31] It appears from his
responsibilities that although he was not responsible for the day to
day management and delivery of the
programmes and projects, which was
the responsibility of designated teams, he was playing a management
and oversight role over
those teams. The respondent continued to be
an executive or to be employed at an executive level and was to
report directly to
the CEO in terms of the alleged third contract. In
my view, he was part of management, or at least at management level.
Once he
was at management level and reported directly to the CEO, the
CEO had to consult the Board concerning his appointment and the
conditions
of his employment. The fact that Canca’s evidence,
that he was not in management, was not contradicted, does not assist
the
respondent. His job profile and the nature of his
responsibilities clearly placed him on the management level and the
fact that
he reported and was required, in terms of the third
contract, to report directly to the CEO was never a point of
contestation.
[32] The issue that now
arises is whether the respondent could invoke the Turquand rule and,
nevertheless, hold the appellant to
the third contract. I am of the
view that the Turquand rule cannot be of any assistance to the
respondent in the circumstances
of this case. Consultation with the
Board was not a mere formality. It was not a simple internal
formality which had to be complied
with. One cannot anticipate what
the outcome of the consultation with the Board could have been
concerning the creation of the
position and the employment of the
respondent to that position. The Turquand rule can only apply where a
person purporting to transact
for the company would have had the
actual authority if the necessary internal formalities had been
complied with. When the rule
applies, it entitles the third party to
assume that the company has in fact contracted. There is nothing to
show that the appellant
purported to authorise Canca, the CEO, to
create the position and to appoint the respondent to the position in
terms of the third
contract. The fact that the remuneration committee
might have known, does also not assist the respondent. The committee
is not
the Board. There has been no evidence that the functions of
the Board regarding consultation with the CEO in respect of the
appointment
of staff on management level who are to report to the CEO
directly, had been delegated to the remuneration committee.
[33] Accordingly, I am of
the view that the court
a quo
erred in finding in favour of
the respondent in the abovementioned issue and in awarding damages
for the alleged repudiation of
the third contract. Accordingly, the
appeal must succeed. However, taking into account the law and
fairness, I am of the view that
there should be no costs order on
appeal, which, effectively, means that each party should bear its own
costs.
[34] In the result the
following order is made:
1.
The
appeal is upheld.
2.
The
order of the court
a
quo
is set aside and is substituted with the following order:
“
The
applicant’s claim is dismissed with costs.
”
________________
Coppin
AJ
I agree
_______________
Waglay
JP
I agree
_______________
Ndlovu
JA
APPEARANCES:
FOR THE APPELLANT:
Adv J G Rautenbach
SC
Instructed
by Mkabela Huntley Adekeye INC
FOR THE
RESPONDENT:
Adv MYBURGH SC
Instructed
by Webber Wentzel
[1]
The
original response is dated 1 September 2009.
[2]
This
is a rule that was developed in
Royal
British Bank v Turquand
(1856)
6 E & B 327;
1843-60 All ER 435
, which provides that “
persons
contracting with a company and dealing in good faith may assume that
acts within its Constitution and powers have been
properly and duly
performed and are not bound to enquire whether acts of internal
management had been regular
”
– see per Lord Simons in
Morris
v
Kanssen
1946
AC 459
at 474
(1946) 1 All ER 586
(HL) at 592 approving the
formulation of the Rule in Halsbury’s
Laws
of England
2
nd
Ed Vol 5 p 432 par 698.
[3]
1958
(2) SA 473
(A) at 480.
[4]
1960
(3) SA 616
(A) at 621-624. Also see
section 20(7)
of the
Companies Act No 71 of 2008
which appears to contain the gist of the
Turquand rule.
[5]
See
Impala
Distributors v Taurus Chemical Manufacturing Co (Pty) Ltd
1975
(3) SA 273
(T) following the Appellate Division decision in
S
A Sentrale Ko-op Graanmaatskappy Bpk v Shifren
1964 (4) SA 760
(A) where it was held that the parties could
effectively stipulate in a written agreement that no variation of
that contract
would be valid unless it was in writing. In
Impala
Distributors
the
court held that where the parties stipulate in a written contract
that the contract can only be terminated in writing and
that
restriction is retrenched by a clause in the contract, prohibiting
variation of the contract other than in writing, an oral
termination
will be of no effect. The decision in
Shifren
was confirmed by the Supreme Court of Appeal in
Brisley
v Drotsky
2002
(4) SA 1 (SCA).
[6]
See
for example,
Tauber
v Von Abo
1984
(4) SA 482
(E);
Havenga
v Havenga
1988 (2) SA 438
(T) at 439.