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[2015] ZALAC 96
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Hudson and Another v SAA SOC Ltd (JA 84/2014) [2015] ZALAC 96 (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.