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[2012] ZALCJHB 21
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Hlubi and Others v Universal Services and Access Agency of South Africa (USAASA) and Others (J 2951/2011) [2012] ZALCJHB 21 (24 February 2012)
REPUBLIC OF SOUTH AFRICA
THE LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG
JUDGMENT
Reportable
case no: J 2951/2011
In the matter between:
ANDREW
NKABI HLUBI
…..............................................................................
First
Applicant
MOLEFI
JACOB MOLLO
…........................................................................
Second
Applicant
ARCHIE
NHLANHLA MBATHA
…..................................................................
Third
Applicant
and
UNIVERSAL
SERVICE AND ACCESS
AGENCY
OF SOUTH AFRICA (USAASA)
…..............................................
First
Respondent
MINISTER
OF COMMUNICATION
…....................................................
Second
Respondent
THEMBA
PHIRI N.O
…..............................................................................
Third
Respondent
SAM
VILAKAZI N.O
….............................................................................
Fourth
Respondent
Heard :
17 January 2012
Delivered : 24 February 2012
Summary : Leave to appeal. Powers of the Minister of Communication
to appoint Executive Caretakers in respect of a Public Entity
in
terms of
section 80
of the
Electronic Communications Act 36 of 2005
.
REASONS FOR ORDER
AC BASSON J
Introduction
This matter came before this Court on an urgent basis on 17 January
2012. The following order was made:
The application is dismissed with costs including the costs of two
senior counsel employed by the Second Respondent and the costs
of
senior counsel employed by the First, Third and Fourth Respondents.
Parties
The first applicant, Mr Hlubi, was employed as the Chief Financial
Officer by the first respondent. The second applicant, Mr
Mollo, was
employed as the Executive Manager Business Development and the third
applicant, Mr Mbatha, as the Senior Manager Supply
Chain Management.
(I will, for purposes of this judgment, refer to the first, second
and third applicants jointly as “the
applicants”).
The first respondent is the Universal Service and Access Agency of
South Africa (“USAASA”). USAASA is an organ of
state
whose functions include the promotion of universal access to
electronic communications network and broadcasting services
as
provided for in
section 82
of the
Electronic Communications Act
1
(hereinafter
referred to as “ECA”). USAASA is further a
public entity listed in Schedule 3 of the Public Financial
Management
Act
2
(hereinafter referred to as the “PFMA”). The second
respondent is the Minister of Communication. The third respondent
is
Mr Phiri who was appointed by the second respondent as the Executive
Caretaker of the first respondent. The fourth respondent
is Mr
Vilakazi who was also appointed by the second respondent as the
Executive Caretaker of the first respondent.
In essence, the applicants are seeking the following orders:
Declaring the appointment of the third and fourth respondents by the
second respondent as Executive Caretakers of the first respondent
unlawful and null and void for failure to comply with the provisions
of the ECA;
An order declaring their suspension from work by the Board of the
first respondent unlawful and invalid; and
An order lifting and/or setting aside their suspension and ordering
the respondents to allow them to return to work and an order
interdicting and restraining the third respondent from proceeding
with the disciplinary proceedings against them scheduled for
26
January 2012.
Brief exposition of the facts
The applicants were placed on special leave on 12 September 2011.
Shortly thereafter their special leave was withdrawn by the
Acting
CEO and they were advised that management was considering their
suspension pending a forensic investigation into allegations
which
arose pursuant to an internal audit report. According to the first
respondent, management suspended the applicants because
it believed
that their continued presence at the workplace might jeopardise the
investigation. On 6 December 2011 each of the
applicants was served
with a notice of a disciplinary enquiry. All three applicants were
also served with a detailed charge sheet.
These charges range from
numerous contraventions in the process of awarding tenders to
misconduct in respect of irregular and/or
unauthorised payments
running into millions of rands that were paid to numerous service
providers. It is clear from these charges
that they are all of an
extremely serious nature.
The disciplinary hearing was scheduled for 15 December 2011.
Advocate Anton Myburg SC was appointed as chairperson for purposes
of the hearing. When the disciplinary hearing was about to commence,
the applicants launched this present application on an urgent
basis.
Summary of the issues before the court
In essence, the applicants are contending, firstly that their
suspension is not justified and secondly, that they were not
afforded an opportunity to be heard prior to their suspension.
In respect of the decision to subject them to a disciplinary
enquiry, the applicants contend that this was
ultra vires
in
that the decision was taken and communicated by the third
respondent, whose appointment as Executive Caretaker by the second
respondent they contend is unlawful and invalid.
It appears from the answering affidavit that the decision to take
disciplinary action against the three applicants was taken
by the
Executive Caretakers (third and fourth respondents) after their
appointment by the second respondent on 15 November 2011.
Before turning to the merits, it must be pointed out that, although
the founding affidavit states that the relief sought is of
an
interim nature, this is clearly wrong: All the substantive prayers
either seek a declaratory order or an interdict of a permanent
nature. In the event, the test for final relief applies, which
requires the applicants to show (i) a clear right, (ii) an injury
actually committed or reasonably apprehended; and (iii) the absence
of similar protection by any other ordinary remedy.
Urgency
In addition to the aforegoing, the applicants must make out a case
for urgency. I am not persuaded that the matter is urgent
despite
the fact that the parties have reached an understanding in December
2011 that the first respondent would not challenge
urgency in
relation to the attack on the validity of the appointment of the
third and fourth respondents as Executive Caretakers.
According to
the respondents, this agreement only related to one aspect of this
application and that is the issue of authority
of the first
respondent to charge the applicants. The agreement did not relate to
the question of the suspension.
The suspensions
In respect of the suspension of the applicants, I am in agreement
that this issue is not urgent. I have nonetheless decided to
deal
with the issue of suspension as it is part and parcel of the entire
dispute before the Court. The applicants were placed
on special
leave on 1 September 2011. According to the applicants, this was the
date of their suspension. This issue is therefore,
on their own
version, not urgent. Apart from the fact that the issue of
suspension is not urgent, I am, in any event, not persuaded
that
there are special circumstances justifying urgent relief in respect
of their suspension. The applicants remain on full pay
during the
course of their suspension pending the disciplinary hearing. The
justification put forward by the first respondent
for suspending the
applicants namely, that their continued presence in the workplace
could potentially jeopardise the investigation
is reasonable in
light of the serious nature of the charges brought against them. I
am also not persuaded that the applicants
will be materially
prejudiced by the suspension and I am particularly not persuaded
that they will suffer any irreparable harm
as a result of the
suspension. In any event, the applicants have an alternative remedy
at their disposal. It appears from the
papers that the applicants
had threatened to approach the Bargaining Council but have
apparently decided against same. I am lastly
also not persuaded that
the applicants were not afforded a fair opportunity to be heard
prior to their suspension. They were
placed on special leave on 12
September 2011 by the CEO. Their special leave was subsequently
cancelled and the applicants were
notified that the Acting CEO is
considering placing them on suspension. The applicants were then
afforded an opportunity to submit
representations in writing. They
in fact requested an extension until 11 October 2011 to submit their
written representations.
Having considered the papers, I am
satisfied that these representations were considered before taking
the decision to suspend
them. After these submissions, the
applicants were asked to present themselves as a party to the
forensic investigation. They,
however, left after having waited for
about 45 minutes. A further meeting was scheduled for 23 November
2011 but they refused
to attend. If the applicants wanted to make
further representations, they could have done so during these
meetings, but they
refused to avail themselves of the opportunity.
The complaint that there was no reasonable justification for the
suspensions is likewise groundless. The fact that the applicants
allege that they have not committed any misconduct, does not render
the suspension unreasonable. This is precisely the purpose
of a
suspension namely to afford an employer an opportunity to
investigate whether a disciplinary process is indeed warranted.
In
the present case, an initial internal audit report indicated that
the applicants may be implicated in misconduct. Thereafter
a
forensic investigation was conducted which culminated in the
applicants each having been issued with lengthy charge sheets
containing multiple and very serious charges involving tens of
millions of rands. I am persuaded that, in these circumstances,
the
first respondent was justified in suspending the applicants pending
the outcome of the disciplinary hearings. In the event,
the
application in respect of the applicants’ suspension is
dismissed.
The decision to institute disciplinary proceedings
In brief, it is submitted on behalf of the applicants that, because
the second respondent is a creature of statute, the lawfulness
of
the exercise of power by the second respondent must be assessed
against the provisions of the ECA. It is submitted that the
appointment of the third and fourth respondents by the second
respondent is unlawful in that the only power conferred upon the
second respondent in terms of section 80 of the ECA is to appoint
the Board of the first respondent. According to the applicants,
the
ECA does not confer any power on the second respondent to appoint or
second employees to the first respondent in the capacity
of
Executive Caretakers. The appointment of the second and third
applicants is unlawful and invalid because of the unlawful conduct
of the second respondent. Consequently, the decision to institute
disciplinary proceedings against the applicants is
ultra vires
and of no legal effect.
The Minister explains in her answering affidavit the circumstances
that led to the appointment of the two Executive Caretakers.
The
Chairperson of the Board had resigned and the rest of the Board
members have had their terms of office terminated by the
Minister
after the Parliamentary Committee had passed a vote of no confidence
in the Board. The three applicants have been placed
on suspension
and are facing serious charges of misconduct. Faced with this
situation, the Minister appointed the two Executive
Caretakers with
full executive powers to take whatever executive decisions necessary
to ensure that USASSA (the first respondent)
executes its mandate.
According to the Minister, this is an interim measure to address the
serious problems experienced by the
first respondent. Furthermore,
because the appointment of a new Board and the appointment of new
management will take time, the
Minister therefore decided to
appoint, as an interim measure, the two Executive Caretakers.
I will now proceed to briefly evaluate what seems to be the main
issue in dispute and that is the power of the Minister to appoint
the two Executive Caretakers. The applicants argue that the Minister
does not have this power in terms of the ECA. Consequently
the
Executive Caretakers do not have the authority to institute
disciplinary proceedings against the Applicants. The applicants
further seem to argue that this power to institute disciplinary
proceedings in any event only vests in the CEO.
Section 80 of the ECA provides for the appointment of the board by
the Minister:
‘
80
Continued existence of Universal Service Agency
(1) Despite the repeal of the
Telecommunications Act by this Act, the Universal Service Agency
established in terms of section 58
(1) of the Telecommunications Act
continues to exist as a juristic person in terms of this Act and will
henceforth be called the
Universal Service and Access Agency of South
Africa.
(2) T
he
Minister may, by notice in the Gazette, appoint a board of up to
seven members to provide oversight of and guidance to the Agency
3
.
(3) A board appointed by the
Minister in terms of section 58 (2) of the Telecommunications Act is
considered to have been appointed
in terms of this Act.’
It is clear from section 80(2)
4
of the ECA that the Minister may appoint a Board of up to seven
members to provide oversight and guidance to the first respondent.
The Board’s functions are set out in section 81
5
of the ECA. Once the Board has been appointed, USAASA will in terms
of section 83(1)
6
of the ECA, be under the direction and control of the CEO appointed
by the Board. Section 83(2)(b), however, makes it clear that
the CEO
is subject to the direction and oversight of the board in the
performance of all financial and administrative functions
as well as
other work as may arise from the performance of USAASA’s
functions under the ECA. The CEO employs staff including
senior
management. In terms of section 83(7) the CEO must manage and direct
the activities of USAASA.
As already pointed out, because there is currently no CEO to perform
the duties in terms of the ECA (as he has been suspended),
the
executive management of the first respondent has been taken over by
the Executive Caretakers. I am in agreement with the
submission
that, although there is no specific reference in the ECA to the term
“Executive Caretakers”, there is
nothing in law to
preclude the Minister from replacing the Board on an interim basis
with Executive Caretakers pending the appointment
of a new Board. I
can also not see why this power of the Minister to appoint a new
Board cannot also imply the power to appoint
an Executive Caretaker
on a temporary basis. In essence these Executive Caretakers function
as a replacement Board on a temporary
basis pending the appointment
of a new Board. I can also find no basis, nor is it alleged in the
founding papers, that the appointment
of the third and fourth
respondent was done for an ulterior motive or purpose or that it was
made in bad faith or as a result
of bias. It is also not alleged,
nor can I find any indication thereof, that the decision of the
second respondent constitutes
an irrational decision and therefore
constitutes an abuse of the discretionary power of the Minister.
In the event, it is concluded that the appointment of the third and
the fourth respondent is implicitly authorised by section
80(2) of
the ECA. In the premise, the applicants have failed to make out a
case for the order they seek.
Public Finance Management Act
There is one further compelling reason why this application should
be dismissed. Section 49 of the Public Finance Management
Act, No 1
of 1999 (hereinafter referred to as “the PFMA”) states
that an accounting authority
must
be appointed in the event
where a public entity does not have a controlling body. This section
reads as follows:
‘
Accounting
authorities for public entities (ss 49-55)
[doja1y1999s49]
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
.
7
(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
.’
[21] I am in agreement with Mr. Kennedy that the Executive Caretakers
constitute the accounting authority for USAASA as contemplated
by
section 51 of the PFMA until a more permanent form of a Board is
appointed by the Minister to replace the previous Board. The
accounting authority referred to in this section will (and has in
this case) assume the financial accountability of the public
entity
and will ensure that it complies with the specific fiduciary duties
under section 50 of the PFMA and the general responsibilities
under
section 51
8
of the PFMA. These duties include taking effective and appropriate
disciplinary steps against any employee of the public entity
who
contravenes or fails to comply with a provision of this Act; commits
an act which undermines the financial management and internal
control
system of the public entity; or makes or permits an irregular
expenditure or a fruitless and wasteful expenditure’.
9
Lastly, it could never have been the intention of the legislature to
allow for a situation where a public entity functions without
an
accounting authority. After all, state organs are funded by the
taxpayer and are the custodians of valuable assets hence the
need for
an accounting authority to act with honesty integrity and in the best
interest of the public entity. The accounting authority
must further
take steps to prevent any prejudice to the financial interest of the
state. Furthermore, Treasure Regulation 2.1.2
(promulgated under the
PFMA by the Minister of Finance) provides that the Chief Financial
Officer is directly accountable to the
accounting authority.
Regulations 4.1.1 and 33.1 oblige an accounting officer to pursue
disciplinary proceedings where an official
is alleged to have
committed financial misconduct (as in this case). Because the third
and fourth respondents constitute the accounting
authority of USAASA,
they not only have the power but indeed have the duty to take
disciplinary action against any person alleged
to have been involved
in financial irregularities or similar irregularities relating to
procurement and governance. I am in agreement
with Mr. Kennedy that
this is precisely what the third and fourth respondents have done
upon receipt of the allegations that emerged
from the forensic
investigations. In fact, had they not done so, they would have been
in contravention of their duties in terms
of the PFMA.
[22] In conclusion, I can find no reason why costs should not follow
the result. The application is therefore dismissed with costs
including those consequent upon the employment of two counsels
(including the costs of senior counsel) in respect of the second
respondent and the costs of senior counsel in respect of the first,
third and fourth respondent.
_______________________
AC BASSON J
Judge of the Labour Court
APPEARANCES:
FOR APPLICANT: Advocate A A Mphahlele
Instructed by Tracy Sischy Attorneys
FOR FIRST, THIRD AND
FOURTH RESPONDENTS: Advocate P Kennedy SC
FOR SECOND RESPONDENT: Advocate AT Ncongwane SC
Advocate Matlejoane
Instructed by Cheadle Thompson & Haysom Attorneys
1
No.
36 of 2005
2
No.
1 of 1999
3
Court’s
own emphasis
4
82
Functions of Agency
(1) The Agency must-
(a) strive to promote the goal of universal access and
universal service;
(b) encourage, facilitate and offer guidance in respect
of any scheme to provide-
(i) universal access or universal service; or
(ii)
telecommunication services as part of reconstruction and development
projects and programmes contemplated in section 3 (a)
of the
Reconstruction and Development Programme Fund Act, 1994 (Act 7 of
1994), where such provision will contribute to the attainment
of the
object of the project or programme in question;
5
‘’
81
Functions of Board
(1) The Agency's board must exercise the powers
conferred, and perform the duties imposed, upon it in accordance
with any policy
direction issued by the Minister.
(2) The board must-
(a) represent the Agency before the Minister and the
Authority;
(b) oversee the functions of the Agency;
(c) prepare and update a strategic plan for the Agency
at least once every three years to be used by the Agency in
exercising
its powers and carrying out its functions;
(d) approve the annual report referred to in section 86
prior to submission to the Minister;
(e) approve the statement of estimated income and
expenditures and any adjusted statements referred to in section 84
prior to
submission to the Minister;
(f) approve the Chief Executive Officer's (CEO's)
recommendations referred to in section 83 (3) (b);
(g) oversee the accounts of the Agency referred to in
sections 84, 85 and 91; and
(h) take such other decisions as may be requested by
the CEO of the Agency in terms of this Chapter.’
6
’
83
CEO and staff of Agency
(1) The Agency is under the direction and control of
the CEO appointed by the Board.
(2) The CEO-
(a) must be a suitably qualified and experienced
person;
(b) is subject to the direction and oversight of the
board in the performance of all financial and administrative
functions as
well as other work as may arise from the performance of
the Agency's functions under this Act; and
(c) must exercise any powers delegated to him or her by
the board.
(3) Without derogating from his or her general powers,
duties and functions as set forth in this section, the CEO must-
(a) approve of expenditures from the universal service
and access fund;
(b) conduct competitive tenders in terms of section 90
and make recommendations to the board.
(4) The CEO must enter into a performance agreement
with the Board. The perfomance agreement must, amongst other things-
(a) set appropriate key performance indicators; and
(b) set measurable perfomance targets.
(5) The CEO must employ a staff, including senior
management and such other persons as may be necessary to assist him
or her with
the performance of the functions of the Agency.
(6) The staff of the Agency is accountable to and must
enter into a performance agreement with the CEO.
(7)
The CEO must manage and direct the activities of the Agency.’
7
Court’s
emphasis.
8
51
General responsibilities of accounting authorities
(1) An accounting authority for a public entity-
(a)
must ensure that the public entity has and
maintains-
(i) effective, efficient and transparent system of
financial and risk management and internal control;
(ii) a system of internal audit under the control and
direction of an audit committee complying with and operating in
accordance
with regulations and instructions prescribed in terms of
sections 76 and 77; and
(iii) an appropriate procurement and provisioning
system which is fair, equitable, transparent, competitive and
cost-effective;
(iv) a system for properly evaluating all major capital
projects prior to a final decision on the project;
(b)
must take effective and appropriate steps
to-
(i) collect all revenue due to the public entity
concerned; and
(ii) prevent irregular expenditure, fruitless and
wasteful expenditure, losses resulting from criminal conduct, and
expenditure
not complying with the operational policies of the
public entity; and
(iii) manage available working capital efficiently and
economically;
(c)
is responsible for the management, including
the safeguarding, of the assets and for the management of the
revenue, expenditure
and liabilities of the public entity;
(d)
must comply with any tax, levy, duty,
pension and audit commitments as required by legislation;
(e)
must take effective and appropriate
disciplinary steps against any employee of the public entity who
-
(i)
contravenes or fails to comply with a
provision of this Act;
(ii) commits an act which undermines the financial
management and internal control system of the public entity; or
(iii) makes or permits an irregular expenditure or a
fruitless and wasteful expenditure
;
(f)
is responsible for the submission by the
public entity of all reports, returns, notices and other information
to Parliament or
the relevant provincial legislature and to the
relevant executive authority or treasury, as may be required by this
Act;
(g)
must promptly inform the National Treasury
on any new entity which that public entity intends to establish or
in the establishment
of which it takes the initiative, and allow the
National Treasury a reasonable time to submit its decision prior to
formal establishment;
and
(h)
must comply, and ensure compliance by the
public entity, with the provisions of this Act and any other
legislation applicable
to the public entity.’
9
Section
51(1)(e) of the PFMA.