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[2012] ZALCJHB 41
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Ndaba v Department of Communications (JS 925/2010) [2012] ZALCJHB 41 (11 May 2012)
15
REPUBLIC
OF SOUTH AFRICA
THE
LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG
JUDGMENT
Reportable/ of interest
to Judges
Case No: JS 925/2010
In
the matter between:
MAKHUBALO
NDABA
…......................................................................................
Applicant
and
DEPARTMENT OF
COMMUNICATIONS
…...........................................................
Respondent
Heard: 20 February 2012
Delivered:11 May 2012
Summary: Whether employment
contract purportedly in terms of section 15 of the Public Service Act
of 1994 valid and enforceable;
Khanyile v Minister of Education
and Culture, Kwazulu-Natal and Another
(2006) 27 ILJ 769 (N)
and
Dwane-Alpman v Premier, Eastern Cape
(2008) 29 ILJ 541 (E)
distinguished.
JUDGMENT
______________________________________________________________________
[1]
This matter was
referred to court in terms of section 77 (3) of the Basic Conditions
of Employment Act 75 of 1997 (BCEA). The applicant,
Mr Makhubalo
Ndaba (Ndaba),
asks that the respondent be
ordered to pay him an amount of R1 708 404.75 in respect of the 21
months remaining of a fixed term
contract of employment. The trial
took place on the 20 February 2012. It has only been necessary to
refer briefly to the oral evidence
on that day.
[2] There are two written
contracts at issue,
both signed by Ndaba and the
then director-general of the respondent, Ms Mamodupi Mohlala
(Mohlala). The first was signed on May
17 2010 (the first contract),
and the second on the 29 June 2010,
(the second
contract). Ndaba bases his claim on the second contract.
[3]
Certain
facts were common cause in terms of the pre-trial minute. Ndaba was
informed that his contract of employment with the respondent
was to
terminate on or about 5 August 2010. His annual salary at date of
termination was R976 317.00 and such salary was paid until
the end of
August 2010.
Since 17 May 2010, Ndaba worked as
the Acting Deputy Director: Governance and Administration of the
respondent, having resigned
from his former position at the office of
the Pension Fund Adjudicator on that very day. It was undisputed that
Ndaba had once
reported to Mohlala in her previous position as
Pension Fund Adjudicator.
Ndaba was remunerated
at Senior Management Service (SMS) level during his employment with
respondent.
[4] It was common cause
during the trial of the matter that Ndaba took over the duties of the
department’s Chief Operating
Officer, who was under suspension.
It was furthermore undisputed at the trial that Ndaba was informed
that his contract was terminated
for operational reasons on the day
that he advised that the Special Investigating Unit should
investigate fraud and corruption
in the department, and he opened a
fraud case with the police on the instructions of Mohlala.
[5] The respondent
contended, in its written submissions filed after the trial, that the
second contract of employment (which purported
to extend the duration
of appointment reflected in the first contract from six months to two
years) was void and of no force and
effect. This was because the
contracts which purported to be “secondment” agreements
were not valid in that they did
not comply with the applicable
legislation, being section 15 of the Public Service Act of 1994 as
amended (the PSA). Respondent
had initially pleaded that the second
contract was fraudulent but after confirmation by Mohlala at trial
that she had signed it,
did not proceed with this allegation.
[6] Regard must first be
had to the content of the contracts at issue and the provisions of
the PSA. It is of assistance to note
that the definition of
“department” in the PSA is as follows: 'department' means
a national department, a national
government component, the Office of
a Premier, a provincial department or a provincial government
component.’
[7] The provisions of the
PSA dealing with secondment read as follows:
‘
15 Transfer and secondment of
officials
(1) A person holding a pensionable
appointment in a department under any law other than this Act or in
any institution or body established
by or under any law and which
obtains its funds directly in whole or in part from revenue, may be
transferred to, and appointed
in, a post in the A or B division.
(2) A person in the service of a
department under any law other than this Act, or in the service of
another government, or of any
council, institution or body
established by or under any law, or of any other body or person, may
be employed by another department
or a department, as the case may
be, for a particular service or for a stated period and on such terms
and conditions, other than
conditions laid down by or under any
pensions law, as may be agreed upon by the employer of the person
concerned and the relevant
executive authority and approved by the
Treasury.
(3) (a) An employee may with his or
her consent and on such conditions, in addition to those prescribed
by or under any law, as
may be determined by the relevant executive
authority after consultation with the Treasury, be placed at the
disposal of another
government, or of any council, institution or
body established by or under any law, or of any other body or person,
for a particular
service or for a stated period.
(b) Such an employee remains subject
to the laws applicable to employees in the public service while so
placed at such disposal.
(4) (a) A person (in this paragraph
referred to as the official) in the service of a department under any
law other than this Act,
or in the service of another government, or
of any council, institution or body established by or under any law,
or of any other
body or person, may be employed by another department
or a department, as the case may be, for a stated period and on such
terms
and conditions, other than conditions laid down by or under any
pensions law, as may be agreed upon by the employer of the official
and the relevant executive authority and approved by the Treasury,
and in such a case, on such conditions, in addition to those
prescribed by or under any law, as may be determined by the said
authority after consultation with the Treasury, an employee may
with
his or her consent and in terms of such an agreement be placed at the
disposal of the employer of the official for the same
period on an
exchange basis.
(b)
Such
an employee remains subject to the laws applicable to employees in
the public service while so placed at such disposal.’
1
[8] In terms of the
Regulations promulgated under the PSA, secondment is dealt with as
follows:
‘
B.4.1 An executing authority
may, with the consent of the employee concerned, second the employee
to another department in the public
service for a particular service
or for a period of time.
B.4.2 The recipient department shall
bear the inclusive costs of secondment, unless both departments agree
otherwise.
B.4.3 If an employee is seconded in
terms of section 15(3) or (4) of the Act, the recipient government,
council, institution or
body or person shall bear the inclusive costs
of the secondment, unless the relevant department, after consultation
with the Treasury,
and the recipient entity agree otherwise.
B.4.4 If an employee is seconded in
terms of section 15(3) or (4) of the Act, the relevant executing
authority may, subject to the
written consent of the employee, bind
her or him to continued employment in the relevant department or
another department in the
public service immediately after the
secondment, for a period not exceeding the period of the secondment.’
The contracts
[9] The first contract is
headed: ‘Consent of employee to be seconded and agreement to
return to the South African Public
Service on expiry of the
secondment.’ In terms of clause 1 of the first contract, the
employee (Ndaba):
‘
herewith consents to her/his
secondment to the Department of Communications herein referred to as
the Recipient Organisation on
the conditions and terms in terms of
the undertakings below.’
It is notable that the
Respondent is referred to as both “the Department” and as
“the recipient organisation”
in this contract.
[10]
In
their written submissions, the legal representatives of the parties
had differing interpretations of section 15 of the PSA,
and of which of its
sub-sections applied in this matter. On a close reading of the
applicable provisions and the terms of the first
contract, I am of
the view that pro forma contract used for the purposes of first
contract was drafted to cater for the secondment
of an employee out
of the public service in terms of section 15(3) of the PSA,
to a recipient
organisation.
2
In other words,
it is in fact a contract
that the respondent’s Director General (as delegee of an
executing authority) may enter into,
in
order to second (i.e. temporarily transfer) an employee of respondent
to a body such as the Pension Fund Adjudicator. The first
contract
provides in Clause 10 for the following:
‘
10 obligation to continue
services after expiry of the secondment
10.1 the employee undertakes to
continue, after expiry of the secondment, his/her employment in the
Department for a period equal
to/not exceeding the period of the
secondment.
10.2 should the employee fail to
comply with this requirement, she/he undertakes to repay the
Department or the department in which
she/he is employed at the time,
an amount equal to the additional conditions of service (i.e. those
conditions of service that
relate directly to the secondment) that
she/he rendered after expiry of her/his secondment.
10.3 the employee understands and
accepts that clause 10.2 supra will apply only if she/he resigns or
if she/he is dismissed from
service due to misconduct or incapacity,
but excluding incapacity due to ill-health or injury on duty.’
[11] The second contract,
an amended version of the first, on which Ndaba’s claim is
based, was signed on the 29 of June 2010,
and extends the
“secondment” to the 16 May 2012. It refers to Ndaba as an
“employee of the office of the pension
fund adjudicator”
and is dated a month and a half after he resigned from that Office. A
material amendment to the first contract
is found in clause 9 which
is headed
:
‘obligation to continue services after expiry
of the secondment’ and includes the following sub-clause:
‘
9.1 the employee undertakes to
continue, after expiry of secondment, her/his employment in the
Department or the public service
for a period equal to/not exceeding
the period of secondment and if the employee has resigned from his
original position, it will
be at the discretion of any government
department to receive the employee into full-time employment.
However, the employee is obliged
to serve the entire contract period
unless circumstances as mentioned in paragraph 8 above are
applicable.
3
Conversely, the employer undertakes to
allow the employee to perform his or her duties until the expiry of
the contract, if the
employee has resigned from the original
employer, and if the employer decides to terminate the contract
prematurely other than
on the grounds mentioned in paragraph 8 above,
the employer will negotiate an exit of the employee and meet all the
contractual
obligations for the remains of the contract period.’
[12]
The
second contract thus purports to allow for Ndaba to be received into
any government department after the expiry of his contract,
and to protect him from
premature cancellation of the two year contract by the respondent.
Ndaba was not a member of the Public
Service before he joined the
respondent. The remuneration and terms and conditions of employment
of an employee of the Office of
the Pension Fund Adjudicator are
determined by the Adjudicator with the concurrence of the Financial
Services Board,
in
terms of the Pensions Funds Act 24 of 1956. The Office is funded by
the Financial Services Board.
4
The Office is a public
entity and is accountable under the Public Service Management Act.
[13]
Clause
9.1 of the second contract contains rights and obligations absent
from secondment arrangements prescribed by the PSA. These
rights and
obligations are more in line with appointments to the SMS of the
Public Service,
in
the normal course.
Evaluation
[14] The crisp issue for
the Court to decide is whether Ndaba can enforce the second contract
to obtain the relief claimed from
the respondent in terms of clause
9.1 of the contract.
[15] Section 8A of the
PSA sets out how the services of persons may be obtained in the
Public Service:
‘
8A Mechanisms for obtaining
services of persons Services of persons may be obtained in terms of
this Act by means of-
(a) appointments in terms of section
9, including appointments of heads of department in terms of section
12;
(b) appointments in terms of section
12A on grounds of policy considerations; or
(c) deployments in the form of-
(i) transfers in terms of section 14,
including transfers of heads of department in terms of section 12
(3);
(ii) secondments in terms of section
15; and
(iii) assignments in terms of section
32.
[S. 8A inserted by s. 13 of Act 30 of
2007.]”
[16] It is relevant to
look at certain of the applicable Public Service Regulations
prescribed for members of the SMS. In regard
to appointments the
following prescripts apply:
‘
A
Principles
The recruitment, selection and
appointment of persons to the SMS, shall take place in accordance
with section 11 of the Act. Posts
shall as far as possible be filled
through open competition. Selection shall increasingly be
competency-based so as to enhance
the quality of appointment
decisions.
B Employment capacities
B.1 Persons newly appointed to the SMS
shall be employed in a permanent or temporary capacity in posts on
the fixed establishment.
B.2 Where persons are appointed to the
SMS in a temporary capacity, it shall be for a fixed term or for a
specific project.
C Advertising of posts and employment
equity
The Minister may issue directives on
how SMS posts are to be advertised and the application forms to be
utilised; and targets to
be achieved in promoting a SMS that is
broadly representative of the South African people, including
representation according to
race, gender and disability.
D Competency-based selection
The Minister may issue directives on
the desired managerial and leadership competencies of members of the
SMS and the selection
processes for the filling of SMS posts.
E Nurturing of talent to sustain SMS
The Minister may introduce programmes
to identify and nurture talented individuals for possible appointment
to SMS posts.
F Employment contracts
F.1 A person newly appointed to the
SMS, other than a head of department, shall conclude a contract of
employment, which shall be
based on the provisions of the contract
set out in Part 2 or 3 of Annexure 2, as the case may be.’
[17]
The regulations
governing the SMS also deal with exit management as set out below:
‘
Exit Management
A Principles
Executing authorities shall give
consideration to the termination of service of members of the SMS in
a manner that is fair to the
individuals concerned and takes into
account the public interests. The Minister may assist executing
authorities to act accordingly.
B Procedures and benefits
The Minister may issue directives and
provide guidelines to executing authorities on the procedures to be
followed and benefits
to be paid when terminating the services of
members of the SMS.’
[18]
Section 11 of the PSA which also governs appointments to the SMS
provides:
‘
11 Appointments and filling of
posts
(1) In the making of appointments and
the filling of posts in the public service due regard shall be had to
equality and the other
democratic values and principles enshrined in
the Constitution.
(2) In the making of any appointment
in terms of section 9 in the public service-
(a) all persons who applied and
qualify for the appointment concerned shall be considered; and
(b) the evaluation of persons shall be
based on training, skills, competence, knowledge and the need to
redress, in accordance with
the Employment Equity Act, 1998 (Act 55
of 1998), the imbalances of the past to achieve a public service
broadly representative
of the South African people, including
representation according to race, gender and disability.’
[19]
In
Khanyile v Minister of Education and Culture, Kwazulu-Natal and
Another
,
5
the court decided that an
appointment into the Public Service was null and void,
as it had not been in
compliance with the PSA or its regulations, and was thus ultra vires
the statute.
Khanyile
’
s
case was that he had been appointed in the ordinary course to full
time employment in the Public Service. The court found that
the
appointment into the SMS had been flawed in at least three major
aspects – first,
the
post was not advertised; secondly,
the
proper selection procedures were not followed and thirdly,
no contract of service,
nor a performance
agreement were concluded.
[20]
In
Dwane-Alpman
v Premier, Eastern Cape
,
6
the court considered an
urgent application for reinstatement by the applicant into the
position to which she had been appointed
in terms of section 12A of
the PSA. The parties had signed a “Special Advisors Contract”
in terms of which the applicant
was obliged to enter into a
performance agreement with the Premier. Her failure to do so was
considered a material breach of her
obligations and a repudiation of
the contract. It was submitted before that court that before the
performance agreement had been
signed,
the
contract was inchoate and had no enforceability. The court found on
the facts,
that
it was an implied term of the agreement that until the performance
agreement was finalised, the applicant would perform such
duties as
were assigned to her by the Premier, either personally or on her
behalf via other officials in her office, and would
in respect of
such performance receive the remuneration stipulated for in the
agreement, provided that such duties fell within
the ambit of one or
more of the subparagraphs of the contract. On that basis,
a valid and binding
agreement was in existence as at the date when the premier addressed
the letter of termination to the applicant.
[21]
The
court in
Dwane-Alpen
distinguished the
decision in
Khanyile
v Minister of Education and Culture, KwaZulu-Natal and Another
7
stating that:
‘
[I]n that case the applicant
was appointed in terms of the Act, and the applicable regulations
thereunder (as opposed to s 12A)
provided inter alia that an
executing authority-
“
(a) may appoint employees on a
permanent basis, either full time or part- time;
....
(g) shall ensure that each employee
upon employment, is provided with a written contract of employment,
including the terms and
conditions of her or his service.”
It was held that on the grounds, inter
alia, that no contract of service had been concluded, the purported
appointment of the applicant
to a post in the public service was
flawed in a major respect and was therefore of no force and effect.
The ratio of the decision
finds no application in the present case.’
[22]
In
my judgment, this matter is distinguishable from both those
decisions. This case concerns a purported secondment in terms of
section 15 of the PSA
8
as is evident from the
face of the second contract.
More
significantly,
and
in distinction to both those cases, the said contract appears to be
in the nature of a simulated or disguised agreement. The
Appellate
Division (as it then was) was concerned with the distinction between
motive and purpose, on the one hand, and intention
on the other, in
trying to determine the genuineness of a contract, and of the
underlying intention to transfer a right, where
the transfer was not
an end in itself. Nienaber JA had this to say in
Hippo
Quarries (Tvl) (Pty) Ltd v Eardley
:
9
‘
Motive and purpose differ from
intention. If the purpose of the parties is unlawful, immoral or
against public policy, the transaction
will be ineffectual even if
the intention to cede is genuine. That is a principle of law.
Conversely, if their intention to cede
is not genuine because the
real purpose of the parties is something other than cession, their
ostensible transaction will likewise
be ineffectual. That is because
the law disregards simulation. But where, as here, the purpose is
legitimate and the intention
is genuine, such intention, all other
things being equal, will be implemented.’
10
[23]
The
test to be applied to decide whether a contract is simulated i.e. not
genuine,
has
recently been considered by the Supreme Court of Appeal
11
in a tax matter. The
court held that the test to determine simulation cannot simply be
whether there is an intention to give effect
to a contract in
accordance with its terms. The court stated that invariably where
parties structure a transaction to achieve an
objective other than
the one ostensibly achieved, they will intend to give effect to the
transaction on the terms agreed. The test
should thus go further, and
require an examination of the commercial sense of the transaction: of
its real substance and purpose.
If the purpose of the transaction is
only to achieve an object that allows the evasion of tax, or of a
peremptory law, then it
will be regarded as simulated. And the mere
fact that parties do perform in terms of the contract does not show
that it is not
simulated: the charade of performance is generally
meant to give credence to their simulation. A court should not look
only to
the outward trappings of a contract: it must consider, when
simulation is in issue, what the parties really sought to achieve.
12
[24]
What
Ndaba intended to achieve was was clearly expressed in his evidence
before court. This evidence is also contained in a letter
he wrote to
the Acting Director General of the department, parts of which he read
out in court,
and
which includes the following statement: ‘Again, having been in
permanent employment for about 15 years, only a madman
would not
negotiate a better and longer contract period. I left a permanent
job, when I resigned, the employer had informed me
that I will be
able to negotiate a longer contract period.’ I must also note
that the content of this letter reflects that
Ndaba is highly trained
in law, as was the other signatory to the contract, Mohlala.
[25]
The
pleadings on Ndaba’s behalf are drafted to claim monies owing
in respect of a two year binding fixed term contract. The
pleadings
do not raise the principle of estoppel. On Ndaba’s own version,
the intention of the
agreement was not to enter into a contract of secondment. Indeed, the
common cause fact that he resigned from
his previous employment on
the day he entered into the first contract, as well as the undisputed
fact that his previous employer
did not second him to the respondent
leaves the question beyond doubt.
[26]
The
matter appears to fall squarely into the category mentioned in the
Hippo
Quarries
matter
in which the court stated in respect of the parties that ‘if
their intention to cede is not genuine because the real
purpose of
the parties is something other than cession, their ostensible
transaction will likewise be ineffectual. That is because
the law
disregards simulation.’
13
In this matter,
the real purpose of the
parties,
on
Ndaba’s own version,
was
to enter into a fixed term contract and he would have been “a
madman” to have left his former permanent employment
on a
temporary secondment contract basis. Most importantly,
the second agreement
purported to give Ndaba rights which normally would only accrue to a
person who had been duly appointed to
the SMS on a fixed term
contract in accordance with the relevant prescripts,
relating to
qualifications, competence and due appointment process in both the
PSA and its regulations as set out above.
[27] I therefore find
that the second contract is not enforceable because it was simulated.
The fact that two people with advanced
legal skills entered into the
contract only serves to fortify this conclusion. I do not consider
this an appropriate case for costs
to follow the result – the
agreement had two signatories.
[28] In the premises I
order as follows:
28.1 The application is
dismissed
28.2 There is no order as
to costs
_________________
Rabkin-Naicker J
Judge of the Labour Court
Appearances:
Applicant: Mr Moshoana
,
Mohlaba & Moshoana Inc
Respondent: Advocate PC
Pio instructed by the State Attorney
1
This
section has not yet been substituted in terms of
section 22
of the
Public Service Amendment Act 30 of 2007
by proclamation.
2
Section
15(3)
(a) provides ‘An employee may with his or her consent
and on such conditions, in addition to those prescribed by or under
any law, as may be determined by the relevant executive authority
after consultation with the Treasury, be placed at the disposal
of
another government, or of any council, institution or body
established by or under any law, or of any other body or person,
for
a particular service or for a stated period.
(b) Such an employee
remains subject to the laws applicable to employees in the public
service while so placed at such disposal.’
3
This
clause deals with the “premature termination of secondment”
due to misconduct or personal circumstances of the
employee.
4
Section
30S
Of the
Pension Funds Act 24 of 1956
.
5
(2006)
27 ILJ 769 (N).
6
(2008)
29 ILJ 541 (E).
7
(2006)
27 ILJ 769 (N) at para 24.
8
I
note that there is a distinction between a ‘deployment’
such as secondment in terms of
section 8A
of the PSA and an
‘appointment’
9
[1991] ZASCA 174
;
1992
(1) SA 867
(A).
10
Id
at 877D-F.
11
Commissioner
for the South African Revenue Service v NWK Ltd
2011 (2) SA 67
(SCA) at para 55.
12
Id
at paras 55 and 80
13
Hippo
Quarries supra.