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[2014] ZALCJHB 72
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Grup v Renaissance BJM Securities (Pty) Ltd (J1720/12) [2014] ZALCJHB 72; (2014) 35 ILJ 3400 (LC) (25 February 2014)
REPUBLIC OF SOUTH
AFRICA
LABOUR COURT OF SOUTH
AFRICA, JOHANNESBURG
JUDGMENT
Reportable
Case
no: J
1720
/
12
In the matter between -
STEVEN
GRUP Applicant
and
RENAISSANCE BJM
SECURITIES
(PROPRIETARY)
LIMITED Respondent
Heard:
16 August 2013
Delivered:
25 February 2014
Summary:
Interpretation of the clause in the employment contract dealing with
deferred equity compensation. Cancellation and rescission
of contract
of employment not take away the right to deferred equity
compensation. Deferred equity compensation survived the termination
of the contract. The right to deferred equity compensation vested
upon signature of the contract of employment and determination
of the
value of the shares the employee would have received but for the
recruitment from previous employer by the respondent. Defence
of
respondent- right to claim deferred equity compensation did not
survive cancellation of the contract- employee not entitled
to
deferred equity compensation in terms of industry practice. Applicant
failing to proof existence of practice that deferred equity
compensation does not survive cancellation of contract.
JUDGMENT
MOLAHLEHI J
Introduction
[1]
This is
an application in terms of
section 77(3)
of the
Basic Conditions of
Employment Act 75 of 1997
, in terms of which the applicant seeks the
following order.
‘
1.1
Declaring that, in June 2012, I became entitled to an unconditional
payment of USD 250 000.00 (two hundred
and fifty thousand dollars) in
terms of my contract of employment with the Respondent, constituting
the second instalment of my
deferred equity compensation.’
[2]
The
application is opposed by the respondent on the following grounds:
‘
3.1
that the employment contract was terminated by the respondent through
resignation prior to the payment date;
and
3. 2
industry norms and practices regarding the payment of deferred equity
compensation of which the applicant
was aware and in terms of which
employment was conditional upon continued employment.’
Background facts
[3]
The
applicant was recruited by the respondent to join its employ during
November 2010, whilst he was in the employ of Investec Bank
Limited
(Investec). The applicant was offered and accepted employment as
director in investment banking of the respondent.
[4]
It is
common cause that during the negotiation of the employment contract,
the applicant indicated that he had differed equity compensation
from
Investec in the form of share options. Those equity shares were part
of the retention strategy of Investec. The applicant
indicated that
he stood to lose his shares if he was to resign. According to him the
value of the shares was USD 1000 000.00 (one
million US Dollars)
[5]
The
parties concluded an employment contract after addressing the
applicant’s concern about the equity shares. The concern
is
addressed through clause 4.5 of the employment contract which reads
as follows:
‘
4.5
Deferred Equity Compensation
You have told us that you
would forfeit deferred equity compensation from your current employer
(the “Old Award”) as
a result of leaving them to join the
Group. The current value of the Old Award is currently estimated by
you to be USD 750 000,
but the precise valuation will be determined
by RENCAP BJM in its absolute discretion as at the last day of your
employment with
your previous employer (and in making that
determination RENCAP BJM shall be entitled to take into account the
risk of subsequent
forfeiture had you not left your current employer
(the “Forfeited Value”). Provided that you provide
evidence to the
reasonable satisfaction of RENCAP BJM of the
existence and value of the Old Award and its forfeiture (including
any documentation
requested by RENCAP BJM) within 30 days of the date
on which your employment with RENCAP BJM actually begins, we will
procure that
you paid cash of the equal value to the Forfeited Value,
payable in June 2011, June 2012, and June 2013.’
[6]
The
applicant says that offer would commence from the date of his
employment. Soon after the commencement of his employment, he
heard
rumours that the respondent had a deferred plan relating to payment
of bonuses known as Long Term Incentive Policy (the LTIP).
The
applicant objected to the application of the policy to him as
according to him, the policy was never mentioned during discussions
that led to the employment contract. It was for this reason that he
addressed and email to the respondent on 27 February 2011 which
reads
as follows:
‘
The
offer, read together with the 17 December e-mail accordingly
constituted the Applicant’s contract of employment.
Accordingly,
while the contract of employment is dated 29 November
2010, it was only signed and submitted to the Respondent (together
with the
e-mail attached as an annexure) on 21 December 2010 after
accepting the compensation terms as set out in the attached 17
December
e-mail. The Applicant accordingly commenced employment with
the Respondent from 1 February 2011.’
[7]
In
response to the e-mail, Mr Cornthwaite of the respondent indicated to
the applicant that he shared the same understanding as
his but he
should speak to HR about the matter. The applicant engaged in further
communication exchange with the respondent to
no avail regarding the
applicants’ LTIP policy. This issue then received attention in
an action which the applicant instituted
against the respondent in
this Court under case number J1582/11. The applicant was unsuccessful
in that claim as the Court found
that the LTIP entitled the
respondent to defer payment of the guarantee bonus.
[8]
On 25
June 2011, the applicant received payment in respect of the
guaranteed advance payment and first instalment of the deferred
equity compensation payment in the sum of USD 525 000, 00. This
according to the applicant was a short payment in the amount of
USD
75 000, 00.
[9]
The parties could not resolve their differences as to the application
of LTIP policy. It was for this reason that the applicant
tendered
his resignation on 26 September 2011.
The issue/s
[10]
The key
question to answer in this matter is whether the applicant is
entitled to the payment of the deferred equity compensation
after he
cancelled the contract that made provision for such payment. Put in
another way the question is whether the obligation
to pay the
deferred equity compensation survived the cancellation of the
contract. The answer in my view lies in the interpretation
of the
employment contract.
[11]
The
applicant contends that the amount USD 750 000,00 vested when he took
employment with the respondent. Furthermore the amount
of USD 250
000,00 which he claims in these proceedings is part payment of that
amount which has become due and owing. He further
contends that the
fact that he resigned before the payment of the amount was made is
irrelevant because the payment was not conditional
on him remaining
in employment in order to receive the payment in future. The
termination of the contract according to him did
not take away his
right to receive payment which vested upon acceptance of the
employment.
[12]
In
essence, the applicant’s case is that the right to receive the
payment of the USD 750 000, 00 or part thereof on the due
date
accrued and vested before the termination of the contract and
therefore his dismissal or resignation or cancellation and rescission
of the contract is irrelevant.
[13]
The
essence of the respondent’s case on the other hand is that the
right of the applicant to claim the amount in question
was guaranteed
as an incentive for him to leave Investec and thereafter to remain in
the employ of the respondent.
[14]
The respondent further contends that it was never the intention of
the parties that clause 4.5 dealing with the deferred equity
compensation was intended to survive termination of the contract. It
was contended on behalf of the respondent that had the parties
intended clause 4.5 to survive the contract they would in that
respect made provision similar to the to the arbitration clause.
[15]
As
concerning the interpretation of the contract, the respondent
contends that it is not necessary to imply anything in the contract
as its terms are clear. There is however no dispute that the
respondent had in terms of the agreement undertaken to pay the
applicant
differed equity compensation in the amount of USD 750 000
in three annual instalment. Having paid the first instalment towards
the payment of the said amount the respondent contends that the
remainder of the instalments were linked directly to the continued
employment of the applicant and also on the contract of employment
remaining in place. The defence of the respondent is in other
words
that the applicant was not entitled to receive any payment in terms
of the employment contract once the contract was terminated
by the
resignation.
[16]
Furthermore,
the respondent contends that the applicant had no right or
entitlement to have the right to claim the deferred equity
compensation kept alive after the contract was cancelled by the
applicant.
Evaluation
[17]
It is
common cause that the parties concluded an employment contract which
was subsequently terminated by the applicant in terms
of clause 8
thereof and on the ground that the respondent repudiated the contract
by deducting an amount USD 75 000,00 in
terms of the LTIP. It is
also common cause that the respondent had undertaken to compensate
the applicant for the loss of shares
which he would have acquired
from his previous employer, Investec but for the resignation to join
the respondent.
[18]
As
indicated earlier, the respondent contends that the applicant is not
entitled to the deferred equity compensation because of
the
rescission of the contract by him and in this respect relies on the
decision in
Nash
v Golden Dumps (Pty) Ltd,
[1]
whose facts are very similar to that in the present instance. In that
case, the Court dealt with a claim concerning the delivery
of shares
to the employee after repudiation his employment contract by the
employer.
[19]
The
general legal principle dealing with the repudiation of contract is
dealt with by Cobbett JA in
Nash
v Golden Dumps
as
follows: --
‘
Where
one party to a contract, without lawful grounds, indicates to the
other party in words or by conduct a deliberate and unequivocal
intention to no longer to be bounds by the contract, he is said to
“repudiate” the contract (see
Van
Rooyen v Minister van Openbare Werke en Gemeenskapsbou
1978
(2) SA 835
at 845A-B). Where that happens, the other party to the
contract may elect to accept the repudiation and rescind the
contract. If
he does so, the contract comes to an end upon
communication of his acceptance of repudiation and rescission to the
other party
who has repudiated (see Joubert
Law
of South Africa
vol
5 para 226). The consequence of this is that the rights and
obligations of the parties in regard to the further performance
of
the contract come to an end and the only forms of relief available to
the party aggrieved are, in appropriate cases, claims
for restitution
and for damages. Where, however, a right to performance under the
contract has accrued to one party prior to rescission,
this right is
not affected by the rescission and may be enforced despite
rescission...’
[2]
[20]
The
answer to the key question referred to earlier of whether the
applicant is entitled to the differed equity compensation turns
on
interpretation of clause 4.5 of the contract of employment. In
support of his claim, the applicant relies also on the contents
of
the email he received from the respondent on 17 December. The
relevant part of that email reads as follows:
‘
Stock
Buyout- $750. 000 – you will need to provide valid proof of
forfeiture, usually a letter dated and on Investec company
headed
paper confirming details of forfeiture.’
[21]
In
interpreting the provisions of clause 4.5, I find no basis for having
regard to the contents of the email of 17 December. The
basic rule of
interpretation is set out in
Natal
Joint Municipal Pension Fund v Endumeni Municipality
,
[3]
in the following terms:
‘
...Interpretation
is the process of attributing meaning to the words used in a
document, be it legislation, some other statutory
instrument, or
contract, having regard to the context provided by reading the
particular provision or provisions in the light of
the document as a
whole and the circumstances attendant upon its coming into existence.
Whatever the nature of the document, consideration
must be given to
the language used in the light of the ordinary rules of grammar and
syntax; the context in which the provision
appears; the apparent
purpose to which it is directed and the material known to those
responsible for its production. Where more
than one meaning is
possible each possibility must be weighed in the light of all these
factors. The process is objective, not
subjective...’
[4]
[22]
The
purpose of clause 4.5 of the employment contract was to attract the
applicant to join the employ of the respondent and this
was done by
the incentive of offering the applicant the value of the shares he
would have acquired had he remained with Investec.
[23]
At the
time of signing the contract whilst the respondent made an
undertaking to address the risk of the applicant losing his shares
as
a result of resigning from Investec, that undertaking was conditional
on the applicant producing written proof that the value
of the shares
was USD 750 000,00. It seems common cause that the applicant was
entitled to the equity compensation on condition
he resigned from
Investec and joined the respondent.
[24]
There
is no dispute as to the value of the shares being USD 750 000,00,
which was to be paid in equal instalment over a period
of three
years. The first instalment towards payment of the value of the
shares/ or deferred equity compensation was made by the
respondent in
June 2011. The key issue is thus whether the amount in question
vested soon after the respondent was satisfied and
accepted that the
value of the shares were as stated by the applicant. This question
has to be answered by giving effect to the
meaning of the provisions
of the contract and in particular clause 4.5 thereof.
[25]
In my
view, the simple grammatical reading of clause 4.5 is firstly that it
acknowledges the risk faced by the applicant if he was
to resign from
Investec and join the respondent. And secondly it provides an
undertaking by the respondent to make good the loss
that the
applicant would suffer as a result of resigning from Investec. This
undertaking as indicated above is conditional on the
applicant
producing written proof of the value of the shares he would have
received but for resigning his employ with Investec.
It seems common
cause that that condition was fulfilled as the first instalment
towards the payment of the equity compensation
was made in June 2011.
[26]
It is
further my view that except for the condition referred to above there
was no other condition attached to the payment of the
amount referred
to in clause 4.5 of the contract. I agree with the submission made on
behalf of the applicant that there is no
condition that the amount
would only be paid if he remained in the employ of the respondent.
What is apparent from the reading
of clause 4.5 is that the parties
addressed the risk consequent to the applicant resigning from
Investec but nothing in the contract
seeks to address the possible
risk on the part of the respondent in the event the applicant was to
resign. There is no necessity
to imply anything in the contract as
the provision regarding the issue in dispute is very clear. Thus the
obligation on the part
of the respondent to pay the applicant in
three instalments the equity compensation vested on the signing of
the employment contract
and the exercise of the discretion by the
respondent accepting the value of the shares as stated by the
applicant.
[27]
The
other defence raised by the respondent to the applicant’s claim
is that it could never have been the intention that the
applicant
would be entitled to the equity compensation after resignation as
that does accord with industry norms and practices
regarding the
payment of deferred equity compensation of which the applicant was
aware of. Except for the general averment regarding
the practice
there is no evidence to substantiate period of its existence, the
consistency of its application and its recognition
in the industry.
In
Golden
Cape Fruits (Pty) Ltd v Fotoplate (Pty) Ltd
,
[5]
in dealing with the evidentiary requirements to prove the existence
of custom, it was held that:
‘
It
(the evidence) must ...amount something more than mere opinion:
instances of the usage having been acted upon should be provided
in
order to establish the fact of the existence of the usage. No rule
can be laid down as to the number of witnesses required.
This depends
very much upon the nature of the usage in question, the character and
quality of the witnesses and the extent to which
to which their
evidence is placed in issue by the other evidence.’
[6]
Conclusion
[28]
In
summary, I find that the provisions of clause 4.5 of the employment
contract gave rise to an enforceable obligation on the part
of the
respondent to pay the applicant the amount claimed. In other words,
the obligation on the part of the respondent arises
from the proper
interpretation of clause 4.5 of the employment contract which created
an unconditional and enforceable obligation
which survived the
cancellation and rescission of the contract by the applicant. There
is nothing in the applicant’s employment
contract that says
that the equity compensation was never intended to survive
termination of the contract by resignation. There
is no dispute that
the cancellation of the contract by the applicant was done in terms
and in accordance with the provisions of
the employment contract.
Order
[29]
In the
premises, the following order is made:
1.
The Applicant became entitled in June 2011, to an unconditional
payment of USD 250 000.00 (two hundred and fifty thousand dollars)
in
terms of the contract of employment with the Respondent, constituting
the second instalment of the deferred equity compensation.
2.
The Respondent is ordered to pay the Applicant USD 250 000.00 (two
hundred and fifty thousand dollars), with interest thereon
at 15.5%
per annum a
tempore
morae,
from
30 June 2012 being the second instalment of the deferred equity
compensation.
3.
The Respondent is to pay the Applicant’s costs.
____________
Molahlehi J
Judge of the Labour
Court of South Africa
APPEARANCES:
FOR THE
APPLICANT: Fritz
Malan
Instructed
by: Edward Nathan Sonnenbergs
FOR THE RESPONDENT:
G
Fourie
Instructed
by: Haffegee Roskam Savage
[1]
1985
(3) SA 1
(SCA).
[2]
At
22D-G.
[3]
2012
(4) SA 593
(SCA).
[4]
At
para 18.
[5]
1973
(2) SA 642
(C).
[6]
At
646H.