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[2015] ZALAC 28
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Hudson and Another v South African Airways Soc Limited (JA84/2014) [2015] ZALAC 28; [2015] 9 BLLR 879 (LAC); (2015) 36 ILJ 2574 (LAC) (24 June 2015)
IN THE LABOUR
APPEAL COURT OF SOUTH AFRICA, JOHANNESBURG
Reportable
Case no: JA 84/2014
In the matter
between:
PETER
HUDSON
First Appellant
DIRK ROBERT
BULDER
Second Appellant
and
SOUTH AFRICAN AIRWAYS SOC
LIMITED
Respondent
Heard:
27 May 2015
Delivered:
24 June 2015
Summary:
Authority
to contract - Acting CEO having no authority to conclude fixed terms
contract with employees without approval of the Board
–
appointment not in accordance with rules and procedures -
Turquand
rule
of no assistance to alleged appointees
.
Plascon-Evans
rule
–
principles
that in motion proceedings contested issues referred for oral
evidence for determination restated - conflicting versions
raised in
parties’ papers – issues could not be determined on
papers - employees failing to request for oral evidence
- failure
detrimental to their application – Labour Court’s
judgment upheld albeit for different reasons – appeal
dismissed
with costs.
Coram: Davis, Ndlovu JJA
et
Mngqibisa-Thusi AJA
JUDGMENT
DAVIS JA
Introduction
[1]
This
is an appeal against the judgment of Walele AJ which was delivered on
24 April 2014. At first blush, it requires this Court
to decide
important legal points, namely whether respondent proved that the
appointments of the appellants were
ultra
vires
as they were in breach of an applicable moratorium placed on
appointments within respondent’s organisation, whether the
appointments contravened the relevant legislative framework, whether
appellants were entitled to assume that the Acting Chief Executive
Officer of respondent, Mr Vuyisile Kona, possessed the necessary
authority to make these appointments and further whether the
respondent is estopped from denying that he had no such authority.
However, as I shall explain presently, this appeal turns exclusively
on the proper approach to the determination of a dispute within the
context of application proceedings.
[2]
Briefly,
the facts are as follows. On 19 November 2012, first appellant
entered into a fixed term employment contract with respondent
for a
period of three years. On 13 November 2012, second appellant entered
into a fixed term of employment contract with the respondent
for a
period of one year. Both fixed term contracts were signed by Mr Kona
on behalf of the respondent. In terms of the contract
of first
respondent, the latter was appointed as the Marketing Manager of Air
Chefs and received an annual remuneration of R 1.1m
together with
certain benefits. Second appellant was appointed as a level 2 Manager
with the title Financial Manager with specific
responsibility to
assist South African Airways Technical Services (Pty) Limited, Air
Chefs and the South African Travel Centre.
He received an annual
remuneration of R 1.5 m together with benefits.
[3]
On 17
January 2013, both appellants were summoned to meetings. They were
informed by the Human Resources General Manager of respondent,
Ms
Mathulwane Mpshe, that the board of respondent had resolved to annul
their contracts because:
‘
Your
appointment and the conclusion of the above mentioned contracts were
in violation of due process with a standing moratorium
on
appointments and against good governance practices’
.
In short, respondent contends that the
contracts were
ultra vires
and were concluded in violation of
due process and a moratorium placed on appointments. The
justification is set out comprehensively
in the answering affidavit:
‘
During
October 2012 it came to the attention of the Board that certain
persons, including the Applicant , had been appointed to
render
services to the Respondent, but that the appointments were made
contrary to the policies and procedures of the respondent.
The
Board conducted investigations into the matter. Due to the public
nature of the Respondent its activities and actions are in
the public
eye and subject to constant public reporting and scrutiny.
The
investigations revealed that during or about November 2012 Kona, in
his capacity as acting CEO, concluded what was termed “a
fixed
term service contract” with the Applicant as Financial Manager
(SAAT, Air Chefs and SATC) for a period of twelve months
commencing
13 November 2012 and terminating 12 November 2013 at a remuneration
of R 1 500 000.00 per annum.
The
investigations also revealed that Kona had concluded other agreements
including an agreement with Mr Peter Hudson (Hudson),
who like the
applicant in this matter has issued proceedings similar to those of
the applicant (case number J545/13). Kona appointed
two other persons
irregularly.
Subsequent
to the conclusion of the above service contracts the Board took a
resolution reading, in part, as follows:
“
Appointment
of four consultants.
The
Board proceeded to report that it had been informed by the
Shareholder that consultants who were occupying high positions in
SAA
had been appointed. They were allegedly appointed to positions
at executive level.
According
to the repost from the Shareholder, no advertisements were issued and
no proper process was followed in appointing those
consultants.
The
shareholder wanted to know what those consultants were doing, what
process was followed in appointing them, what informed the
appointment and whether the Board was aware of the appointment.
The
shareholder wanted to know what those consultants were doing, what
process was followed in appointing them, what informed the
appointment and whether the Board was aware of the appointment.
The
Acting Chairperson further reported that she was advised to instruct
the acting CEO to cease appointing employees until a permanent
CEO
was appointed. The Shareholder wanted to know the risk associated
with these appointments.
Having
considered the concerns, the Board deliberated on the matter and
decided that:
·
the
contracts with the four consultants be reviewed to ascertain their
validity;
·
it
be established whether or not due process was followed;
·
if
due process was not followed, the contracts be terminated;
·
if
the contracts are found to be valid, the Board considers how SAA
could have them terminated.”’
[4]
In
her judgment, Walele AJ found that the appellants ought to have known
that the recruitment process fell within a particular legislative
framework, that these legislative requirements were peremptory and
that appellants were parties to appointments that they ought
to have
been aware were unlawful, impermissible and
void
ab initio
because they were concluded in violation of due process and the
standing moratorium on appointments within the respondent’s
business.
Appellant’s case
[5]
The
case made out by both appellants as set out in their respective
founding affidavits can be summarised as follows: the contention
that
the contracts were concluded on the basis that the underlying
decisions were
ultra
vires
were “baffling” and were based on “nebulous
allegations”. An opinion of Ms Fikile Thabethe, respondent’s
Head of Legal Services, was invoked to show that the fixed term
contracts could not be nullified and that there were no breaches
of
the
Public Finance Management Act 1 of 1999
. Further, appellants
contended that Ms Thabethe’s opinion was changed to support
respondent’s case. Thus, according
to first appellant:
‘
Given
what is set out in the correspondence addressed by Thabethe, the
respondent’s Head of Legal, it is evident that in addition
to
the respondent’s conduct being unlawful, it was malicious and
amounted to a gross violation of corporate governance and
indeed the
PFMA on which the respondent had purported to base its decision to
terminate my contract. The decision to terminate
my contract was
premeditated and intended to have been implemented irrespective of
the advice furnished by the respondent’s
own Head of Legal;
hence the need to unlawfully alter the opinion of the Head of the
Legal Department.
’
Respondent’s answer
[6]
On
the basis of Ms Thabethe's answering affidavit, respondent contends
that the rules and procedures which applied to the appointment
of
employees were contained in its Human Resources Policy. The policy
stipulates that before vacant positions could be filled,
they must
first be advertised internally and externally which was not done in
this case. Accordingly, the appointments were made
without adherence
to any standard recruitment procedures. Significantly, in the form
headed “request for non-permanent staff”
which form was
signed by Mr Kona and Ms Mpshe, it was made clear that the positions
had not been budgeted for and there was no
budget available. Ms
Thabethe avers further:
‘
I
wish to highlight the fact that due to the unhealthy financial state
of the respondent the management had put in place a moratorium
on
recruitment and appointment of new employees unless it was strictly
necessary for the critical business operations. The Acting
CEO was
aware of the moratorium and was specifically advised thereof by
Mpshe.’
Serious allegations are then made
regarding Mr Kona:
‘
The
Acting CEO summoned Mpshe to his office in on about November 2012 and
instructed her to process the ostensible employment of
the applicant
and Bulder. Mpshe refused to appoint the applicant because he had
been dismissed by the respondent and was involved
in a Labour Court
dispute with the respondent challenging his dismissal (which dispute
is currently pending before the Honourable
Court). In order not to
burden the papers unnecessarily, I do not deem it necessary to annex
a copy of the court process, however,
I shall make same available at
the hearing of the matter or upon request.
Mpshe
refused to appoint the applicant because there was also no position
for him to fill, there was a moratorium on appointments
and there was
no budget available to sustain his non-existent and vague position.
In addition, his position had not been advertised.
Mpshe confronted
the Acting CEO with the information that the applicant had been
dismissed and he said that she should not worry
because the applicant
had been dismissed due to the Acting CEO.
The
Acting CEO instructed Mpshe that he did not care how the appointments
of the applicant and the Bulder were to be made and they
must just be
effected.
Mpshe
asked the Acting CEO to put his instructions in writing because any
new positions created needed the approval of the Board
and Chairman.
Any new positions also needed to be signed off by the GM HR and GM
Finance. No such approval or sign off happened
in the case of the
applicant and Bulder.
When
Mpshe refused to make the appointments the Acting CEO instructed her
subordinate, Joubert, to make the appointments.’
Ms Mpshe deposed to a confirmatory
affidavit in which she states the following:
‘
I
confirm, as alleged in the aforementioned affidavits, that the
appointment of both Messrs Bulder and Hudson were irregular. There
were no existing positions for them to fill. The Acting CEO, Mr
Vuyisile Kona, acted on a frolic of his own and did not follow
the
prescribed Human Resources procedures of
inter
alia
obtaining the approval for the creation of the positions prior to
appointing Messrs Hudson and Bulder. For instance the positions
were never advertised and the gentlemen involved were never
interviewed.
The
Acting CEO also did not follow the prescribed process of appointing
them as consultants either, which should have been in accordance
with
the provisions of the respondent’s Supply Chain Management
Policy.
I
warned the Acting CEO against appointing the gentlemen and refused to
cooperate with him in this regard. As a result he threatened
to
dismiss me.’
Evaluation
[7]
As I
indicated in the introduction, this case potentially raised an
important question: that is the application of the
Turquand
rule which was canvassed in
Blue
IQ
Investments Holdings (Pty) Ltd v Douglas Southgate:
[1]
“[The
Turquand
rule can only apply] where a person purporting to transact with a
company had the actual authority with 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.’
[2]
[8]
In
short, the effect of the
Turquand
rule is to prevent the company from lawfully resiling from a contract
with a
bona
fide
third party on the ground that some “internal”
requirement was not observed. The rule does not prevent the company
from lawfully resiling from a contract on any other ground, apart
from such non observance. For appellants to hold the respondent
to a
contract
intra
vires
the company and its directors, necessitates the requisite proof.
Thus, appellants must show that Mr Kona, who purported to represent
the company when concluding the relevant contracts, was duly
authorised. If express authority was lacking, because it was never
conferred by the Board or their delegates or the conferral thereof
was conditional on the compliance with an internal requirement
which
compliance was lacking, unless appellants can prove that Mr Kona had
implied or ostensible authority, they cannot rely on
the contracts.
Appellants cannot merely, because of their presumed knowledge
thereof, rely on the contents of the company’s
public documents
to establish the existence of either form of authority. If the
existence of neither can be established, respondent
was not bound to
the contract. This represents the approach adopted by respondent in
its answering affidavit. What was then required
of the court
a
quo
was an engagement, based upon the applicable rules, with the
competing versions of the parties.
Deciding a case on application
[9]
I
have set out in some detail the averments contained in both the
founding and the answering affidavits. It must be remembered that
the
appellants came to court by way of an application. This should have
immediately caused the evidence as contained in the affidavits
to be
interrogated through the prism of the well-established rule in
Plascon-Evans
Paints Ltd v Van Riebeeck Paints (Pty) Ltd
(
Plascon-Evans
).
[3]
Most certainly, even before
Plascon-Evans,
in
Stellenbosch
Farmers Winery Ltd v Stellenvale Winery (Pty) Ltd
[4]
,
the principle existed that where material facts are in dispute and
there is no request for the hearing of oral evidence, a final
order
of the kind sought by appellants in this case can only be granted, if
the facts as stated by the respondent together with
the facts as
alleged by the applicant, that are admitted by the respondent, could
justify such an order.
[10]
In
the case of a bare denial of an applicant’s allegations in an
affidavit, a court is entitled to contend that there is no
genuine or
real dispute of facts. See
Wightman
t/a JA Construction v Headfour (Pty) Ltd
(
Wightman
).
[5]
Similarly, a court is entitled to reject a denial where there is no
real genuine dispute on the facts in question or the respondent’s
allegations are so farfetched, so clearly untenable or so palpably
implausible as to warrant their rejection merely on the papers.
See
National
Scrap Metal (Cape Town) v Murray and Roberts
2012 (5) SA 300
(SCA) at para 21 relying on
Plascon-Evans,
supra
at 635 C.
[11]
As
was noted in
Wightman
:
‘
A
real, genuine and
bona
fide
disputed fact can exist only where the court is satisfied that the
party who purports to raise a dispute has in his affidavit seriously
and unambiguously addressed the fact set to be disputed.’
[6]
[12]
In
this case, as I have outlined, respondent put up a series of
averments which, unquestionably raised real, genuine and
bona
fide
disputes. Respondent’s contention was that the evidence showed
that there was a moratorium on appointments, there was no
budget
available for the positions, the positions had not been advertised
and accordingly, Mr Kona had no authority to make these
appointments.
To the extent that documentation was signed not only by Mr Kona but
also by Ms Mpshe, respondent contends that she
did so under duress
for fear that she would lose her job.
[13]
In
Buffalo
Freight Systems (Pty) Ltd v Castleigh Trading (Pty) Ltd and
Another,
[7]
Shongwe JA noted that courts must be cautious about deciding
probabilities in the face of conflict of facts as set out in
affidavits.
In this case, the conflicts were profound, the
justification offered by respondent was substantiated and thus
constituted a weighty
defence to any relief sought by the appellants.
[14]
Manifestly,
the appellants are faced in this case with answering affidavits that
set out a detailed case. They must have known that
this was a case
which could not be resolved on the papers. By pursuing the route of
an application, they ran the risk that there
would be an insufficient
evidential basis to justify the relief that they sought.
[15]
On
these papers, the application of the well-known principles of
Plascon-Evans
dictated that the application stood to be dismissed for insufficient
evidence. There was no need therefore to go any further in
dealing
with the relevant disputes. The appellants chose an ill-considered
form of motion proceedings in this case. They bore the
risk and were
unable to surmount the problem.
[16]
For
these reasons, the ultimate result reached by Walele AJ was correct
although for different reasons. The dispute of facts cannot
be
resolved on these papers. There was no recourse to oral evidence and
thus, on these papers, the dispute cannot be resolved in
favour of
appellants.
[17]
In
the result, the order that the application was dismissed with costs
must stand.
[18]
In
the result: “
The
appeal is dismissed with costs”
.
_______________
Davis JA
Ndlovu JA and Mngqibisa-Thusi concur
in the Judgment of Davis JA
APPEARANCES:
FOR THE APPELLANTS:
Mr Donald Carls of D C Carls
Inc
FOR THE RESPONDENT:
Adv A Mosam
Instructed by
Norton Rose Fulbright SA Inc
[1]
(2014)
35 ILJ 3326 (LAC).
[2]
At para 32.
[3]
[1984] ZASCA 51
;
1984 (3) SA 623
(A) at 634.
[4]
1957 (4) SA 234
(C) at 235.
[5]
[2008] ZASCA 6
;
2008 (3) SA 371
(SCA) at 375.
[6]
At para 13.
[7]
2011
(1) SA 8 (SCA) at para 14.