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[2019] ZASCA 44
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Vela v Efora Energy Limited (385/2018) [2019] ZASCA 44 (29 March 2019)
THE SUPREME
COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 385/2018
In the matter between:
ROBIN
TENDAI
VELA APPELLANT
and
EFORA ENERGY
LIMITED RESPONDENT
Neutral
citation:
Vela
v Efora Energy Limited
(385/2018)
[2019] ZASCA 44
(29 March 2019)
Coram:
Navsa
AP, Dambuza and Makgoka JJA and Davis and Eksteen AJJA
Heard:
12
March 2019
Delivered:
29 March 2019
Summary
:
Resignation of Chief Executive Officer – claim by company for
repayment of outstanding PAYE - counter-claim by Chief Executive
Officer for leave pay, bonus payment – damages consequent on
loss of share options –
ORDER
On
appeal from:
Gauteng
Local Division, Johannesburg (Matojane J) sitting as court of first
instance):
1.
The
appeal, save in respect of the leave pay claim, is dismissed with
costs.
2.
The
cross appeal succeeds with costs.
3.
The
order of the court
a
quo
is altered as follows:
3.1 The defendant is ordered to pay an
amount of R3 324 524.36 together with interest at the mora rate from
26 March 2014 to date
of payment.
3.2 The plaintiff is ordered to pay
the defendant the amount of R103 661.28 as leave pay.
3.3 Defendant’s claim for R2 784
948.23 in respect of an unpaid bonus is dismissed.
3.4 It is declared that defendant’s
share options in terms of plaintiff’s share option scheme
lapsed with effect from
his date of resignation from his employment
with the plaintiff, being 31 May 2013.
3.5 The defendant is ordered to pay
plaintiff’s costs.
JUDGMENT
DAVIS AJA (Navsa AP, Dambuza and
Makgoka JJA and Eksteen AJA concurring)
Introduction
[1]
This
case primarily concerns a series of claims made by the appellant, the
Chief Executive Officer of the respondent, who faced
with a demand
for his resignation, resigned with immediate effect on 31 May 2013.
[2]
The
appellant’s
[1]
case was based on three claims, namely payment of outstanding leave
pay, which he alleged was due to him upon his resignation,
in the
amount of R 280 749.15, payment of an unpaid portion of his
annual bonus in the amount of R 2 784,948.23 and a claim
for damages
as a result of an alleged breach by the respondent of its share
incentive agreement with the appellant in the amount
of R16 881,
459.30. The claim for leave pay was later reduced to R172, 786.80 and
the claim for damages to R6 795,711.12.
The respondent
[2]
had claimed reimbursement of arrear PAYE
[3]
which it alleged should have been deducted from the appellant’s
remuneration in the sum of R3 324,524.36. The appellant’s
claim
was in response to respondent’s claim.
[3]
The
court
a
quo
upheld the respondent’s claim for PAYE, dismissed the
appellant’s claim for leave pay together with his claim for
damages but upheld his claim for the unpaid portion of his bonus.
[4]
With
the leave of the court
a
quo
,
the appellant appealed against the upholding of the respondent’s
claim for PAYE and the dismissal of his claims for unpaid
leave and
damages. The respondent cross appealed against the upholding of the
appellant’s claim for the bonus payment.
The factual background
[5]
The
appellant was originally appointed through a company, Lonsa (Pty)
Ltd, as a corporate advisor to the respondent’s predecessor,
SA
Mineral Resources Corporation Limited (Samroc). To all intents and
purposes, by 2009 he had been the de facto Chief Executive
Officer of
Samroc. On 17 November 2010, an agreement was entered into between
the respondent and the appellant, whereby the latter
was formally
employed as the Chief Executive Officer. A similar arrangement was
concluded with the financial director of SAMROC,
Ms Carina de Beer,
who had also been employed as an independent contractor through a
corporation, Johannes de Beer Inc. This change
of both the appellant
and Ms de Beer’s legal relationship with Samroc, had taken
place when it was decided to list the respondent
in the United
Kingdom, on the Alternative Investment Market of the London Stock
Exchange (AIM). One of the listing requirements
was that both the
Chief Executive Officer and the Financial Director had to be
employees of the listed company. It was that decision
which triggered
the conclusion of contracts of employment between the appellant and
Ms de Beer and the respondent, respectively.
The cases brought in substantiation
of the claim and counter-claims
The PAYE claim
[6]
Owing
to the change of status of both the appellant and Ms de Beer from
independent contractors to employees, the respondent ought
to have
deducted PAYE from the remuneration of both parties and paid it over
to the South African Revenue Service (SARS). This
did not happen. The
failure to deduct PAYE created a problem for both the appellant and
Ms de Beer as is evident from a lengthy
exchange of emails between
the two. From a compliance point of view, this also created a problem
for respondent.
[7]
On 24
April 2012 Ms de Beer wrote to the appellant and said the following:
‘
I
just had a very disturbing meeting with EY [Ernest Young, the
respondent’s auditors]. They indicated to me that the fact
that
SacOil is not withholding tax from our (yours and mine) remuneration
is an unlawful act and a breach of fiduciary duty. .
. . Their
argument is around the contracts we entered into in October 2010 for
the purpose of our listing on AIM. I explained
my side and
confirmed that I draw a salary from the practise and the practise is
also a registered tax payer.
They
say that these contracts create an employer/employee relationship and
hence SacOil should have deducted PAYE from the remuneration.
After
going through a consulting practice internally, EY wants to report
this matter to IRBA as a reportable irregularity (RI)
and we shall
then have 30 days to respond and rectify.
It
would seem that unless the auditors are willing to back off we don’t
have any choice but to approach SARS for a solution.
The advice I
received this morning was that one option is for SacOil to pay over
the PAYE (3.6 m!), issue an IRP5 to both of us
and we will then
reopen our personal tax returns and claim the PAYE back after which
we would then pay it back to SacOil.’
To this the appellant responded on the
same day:
‘
This
is a serious issue, we must resolve without delay.’
[8]
On 17
May 2012 Ms de Beer wrote again to the appellant, by way of an
e mail, in which she said:
‘
The
auditors are considering raising a liability in SacOil’s
accounts for the PAYE not deducted and paid. I am arguing this
as I
am not sure what the debit would be. It cannot be loans to the
directors as we would be dead in terms of AIM and it
would need to be
disclosed as related party loans.
’
[9]
On 17
May 2012 Ms de Beer again wrote an e-mail to the appellant, saying:
‘
From
the attached it is clear that we are not contractors but employees.
This is a huge problem for me as it would just not
be worth it for me
to work for a net salary of R75k per month.
’
[10]
On
the same day Ms de Beer wrote a further e-mail setting out certain
proposals. This included the following:
‘
1.
That
SacOil pay the PAYE for past 14 months to SARS; I don’t think
it is fair that the taxes we have paid in the corporate
vehicles be
discarded and ignored. This will reflect a net effect that
agrees with the contractual amounts we agreed to net
of tax;
2.
If the above is too thick to swallow we can maybe offer to forfeit
50% of or annual bonuses this year to meet the Company halfway;
3.
That our packages be adjusted by 35% and we would become employees of
SacOil; we can certainly motivate this as your package
was not
adjusted last year and your remuneration is moderate for the position
that you fill at the moment; my package is currently
30% below the
median for AIM companies so we can motivate an increase to align with
AIM companies.’
[11]
On 19
May 2012 the appellant wrote to Ms de Beer saying, inter alia;
‘
I
must say we may be able to get PAYE paid by co if we then forfeit any
bonus but may struggle just asking for increase.’
[12]
On 21
May 2012 Ms de Beer again wrote to the appellant in which she
referred to a conversation she had with Mr Richard Linell, then
a
director of the respondent:
‘
I
met with Richard.
We
need to do the following:
1.
Pay
the PAYE and issue IRP5’s to both of us; EY would need to call
it something other than loans;
2.
We
then claim back from SARS and pay over to SacOil;
3.
We
need to work out what costs we did not claim from SacOil during the
time we used our own offices; a list of monthly expenses
paid and not
claimed as needed;
4.
The
amount in 3 should then justify significant increase to our gross;
5.
Move
the review of our contracts forward.
’
[13]
The
next day, 22 May 2012, Ms de Beer clarified the position in a further
e mail to the appellant, saying:
‘
Please
note that it is not SacOil paying the PAYE but you and me
ultimately.’
[14]
On 31
August 2012 a termination agreement was entered into between the
respondent and Ms de Beer. Pursuant thereto, on 31 October
2012, a
minute of a board meeting of the respondent reflected the following:
‘
Carina
de Beer – The settlement agreement for Carina de Beer was
ratified. It was further noted that the taxes paid
on behalf
Executive Management as a result of the company’s error could
no longer be claimed by the company
.’
[15]
On 13
December 2013 respondent paid over an amount of unpaid tax to SARS in
the sum of R3 324 524.36. This was the amount of PAYE
due to SARS on
behalf of appellant.
[16]
The
appellant’s counsel contended that this minute with references
to tax paid on behalf of ‘executive management’
included
both the appellant and Ms de Beer. Counsel submitted that the minute
amounted to a waiver by the respondent of its right
of recovery of
the tax paid and accordingly the court
a
quo
erred in not finding that the respondent had waived its claim to
PAYE. In further support thereof, the appellant’s counsel
referred to an extract from an integrated annual report of the
respondent for the year 2013 that reflected a provision for
impairment
in the amount of R 4 695 905, which amount
reflected that the respondent was unable to recover PAYE from either
Ms de
Beer or the appellant.
The leave pay claim
[17]
The
appellant claimed leave pay, which he considered to be due to him as
at the date of his resignation on 31 May 2013. The claim
was based on
his payslip, which recorded that he was entitled to 32.5 days leave.
By the time the matter was argued before the
court
a
quo,
the appellant only claimed 20 days of leave pay because he accepted
that he could not prove that the respondent’s Board had
permitted him to accumulate leave pay from prior leave periods. In
his claim, he relied on
s 20
of the
Basic Conditions of Employment
Act 75 of 1997
, which reads thus:
(1)
In
this Chapter, ‘annual leave cycle’ means the period of 12
months’ employment with the same employer immediately
following-
(a)
an
employee’s commencement of employment; or
(b)
the
completion of that employee’s prior leave cycle.’
[18]
On
the basis of this provision, the appellant claimed that he was
entitled to 20 days leave. At an average daily remuneration of
R 8
638.44 he claimed an amount of R 172,786.80.
Share option and damages claim
[19]
The
appellant made two further related claims, namely a share option
claim, and a damages claim. The share options claim was based
on a
share option scheme of the respondent of 29 August 2008. The
following clauses of the share option scheme were referred to
by the
appellant’s counsel as relevant to these claims. Clause 5.1.4
reads:
‘
5.1.4
If any Participant ceases to be an employee / non-executive director
of the Company (as the case may be):
5.1.4.1
for
any reason approved by the Directors from time to time, then any of
the Options that may become exercisable on or after the
date of
termination or subsequently become exercisable by the affected
Participant, as the case may be, will continue to be exercisable
as
follows after date of termination of his/her employment or
appointment; or
5.1.4.2
for
any reason not approved by the Directors from time to time (including
without being limited to summary dismissal, proven dishonestly,
fraudulent or grossly negligent conduct), then all of the Options
that may become exercisable on or after the date of termination
will lapse immediately on the date of termination and may not be
exercised by the Participant thereafter.
’
Clause 5.5 reads as follows:
‘
Termination
of Employment
The
provisions of 5.1.4 shall apply, unless any Participant ceases to
remain in the employ of the Company for any reason not approved
by
the Directors from time to time, in which event, all Options then
held by such Participant, as the case may be, will lapse to
the
extent that they have not been exercised.
’
[20]
The
appellant’s counsel submitted that, as the appellant had
resigned from the respondent after all his share options had
vested
and furthermore that the Board had not made a decision approving his
resignation. There had therefore been no forfeiture
or lapse of his
share options. By contrast, the respondent contended that the options
that were exercisable as at 31 May 2013,
lapsed when the appellant
terminated his employment, not for any reason approved by the Board.
[21]
In
the alternative, the appellant argued that he was entitled to share
options when the respondent issued a rights offer. Thus,
it was
submitted that the respondent had failed to comply with clause 5.3 of
the rules, which provided as follows:
‘
[
T]he
Directors
shall
include in the Options held by each Participant
,
a further option to acquire such additional number of shares as would
have been offered to each participant in terms of such rights
offer,
if he/she had been the registered holder of the Shares forming the
subject matter of the options previously granted to such
Participant,
at a price equal to the rights offer price thereof
’
.
(Emphasis added.)
[22]
According
to the appellant’s counsel, had the respondent recognised that
the appellant’s share options had not lapsed,
which options
included the additional rights offer options, the appellant would
have exercised his options and consequently sold
the shares in the
period following an increase in the share price on 24 February 2014,
when the price was at an all-time high of
80c per share. The
appellant contended that, even if a price of an average of 65c a
share was employed, he would have been entitled
to damages of R6
795,711.12.
The Bonus payment claim
[23]
The
court
a
quo
upheld the appellant’s claim for a bonus. The appellant
calculated that his bonus entitlement was the sum of R5 134 949,
23. He had already been paid immediately in the amount of R2.35m,
with the balance to be paid when the respondent had sufficient
funds.
This latter amount had never been paid; hence the appellant’s
claim was justified.
[24]
The
appellant’s case in this connection is best illustrated by the
manner in which he pleaded his case by way of a reference
to a
meeting of the respondent’s remuneration committee:
‘
On
or about 01 November 2011, the [respondent’s] remuneration
committee and/or board of directors resolved that the [appellant]
was
entitled to an annual bonus for the period ending 30 September 2011
in the sum of R5 134 948, R2 500 000
of which was
to be paid to the [appellant] with his November 2011 salary on or
about 25 November 2011 and the balance when the
[respondent] had the
ability to do so.
The
[respondent] had the ability to pay the balance of R2 784 948.23
by no later than January 2012.
The
[respondent] has paid R2 350 000.00 to the [appellant], but
the balance of R2 784 948.23, despite demand,
remains
unpaid.’
Evaluation
[25]
I
turn to evaluate the merits of the appellant’s appeal and the
respondent’s cross appeal respectively.
The PAYE claim
[26]
In
the appellant’s plea he ‘denies that the deduction or
withholding from remuneration of employees income tax fell
within the
ambit of the [appellant’s] duties as Chief Executive Officer.’
[27]
There
is no substantiation for this assertion. Manifestly, the appellant
was a Chief Executive Officer in the employ of the respondent.
PAYE
has to be deducted from a salary of an employee.
[4]
There is nothing more to be said of this. The main defence raised by
the appellant in respect of the unpaid PAYE was based on a
waiver.
The appellant pleaded that on or about October 2012 ‘the
[respondent] represented by its board of directors elected
to waive
any right of recovery which it may have had against executive
employees including the [appellant]. The averments that
the
respondent waived its right to receive the amount of tax which it
paid on behalf of the appellant are the essence of the appellant’s
case in respect of this claim.
[28]
Waiver
is a question of fact. The onus rests on the party relying on a
waiver to allege and prove it.
Road
Accident Fund v Mothupi
2000 (4) SA 38
(SCA) at paras 16-17. The decision to waive a right
may be express or implied. A waiver by implication is proved by
conduct that
is plainly inconsistent with an intention to enforce a
right on which the party relies. The conduct from which it can be
inferred,
that a party has waived its right cannot be consistent with
any other hypothesis.
Mothupi
para 19. In assessing the probabilities of the alleged act of waiver,
the presumption that a party is not lightly deemed to have
waived its
rights must be taken carefully into account.
[5]
Clear evidence of waiver is thus required.
Feinstein
v Niggli
1981 (2) SA 684
(A) at 698-699.
[29]
The
essence of the appellant’s case based on waiver turns on the
minutes of the Board meeting of 30 October 2012. It is common
cause
that the initial minute said ‘
Carina
de Beer – the settlement for Carina de Beer was ratified.
’
Then on 26 November
2012 the appellant wrote to Melinda Gouws of Fusion Corporate
Secretarial Services (Pty) Limited saying ‘
Melinda
please find attached my comments to the minutes.
’
What was inserted
is ‘it was further noted that taxes paid on behalf of the
executive management as a result of the company’s
error could
no longer be claimed by the company.’
[30]
The
contents of this change to the minutes, which were inserted by the
appellant, were never substantiated. Tellingly, the evidence
of Mr
Linell, which was relied upon by the appellant’s counsel, to
contend that the amended minute accurately reflected the
decisions
taken at the meeting, extended no further than that there was an
understanding that ‘[the appellant] and Carina
were in the same
situation.’ When Mr Linell was asked about the fact that
the appellant had not resigned nor had there
been a settlement
agreement as was the case with Ms de Beer, he said ‘[t]here was
a perception of understanding, yes that
they (were) in the same
boat.’
[31]
The
appellant was confronted with a recording of the Board meeting of 30
October 2011 in respect of which it was common cause that
no mention
could be found of a decision that ‘executive management’
be dealt with in the same fashion as was Ms de
Beer. Save for this
amended minute, altered solely by the appellant, it was not shown, on
the probabilities, to reflect a resolution
adopted at the meeting,
which represented a settlement agreement between the appellant and
the respondent. In short, there was
no evidence to justify the
conclusion that there was a clear intention on the part of the
respondent to waive its rights to the
liability for PAYE, which was
owing in respect of the appellant.
[32]
It is
not without significance that when the appellant was invited to
listen to the recording of the Board meeting of 30 October
2012,
prior to the commencement of proceedings in the court a quo, he
declined the invitation. Under cross examination, he initially
disputed the quality of the recording, notwithstanding that he had
not listened thereto. Finally, when pressed to listen, he conceded
that there was no reference to the settlement agreement entered into
between himself and the respondent. The only plausible inference
to
be drawn from the appellant’s conduct is that he had
unilaterally amended the minute to favour himself by incorrectly
claiming that there was a resolution that both he and Ms de Beer did
not have to pay the outstanding PAYE.
[33]
The
accounting entries of the respondent for the years 2013 and 2014, as
well as the extensive e-mail exchanges between Ms de Beer
and the
appellant, referred to earlier in this judgment, are also consistent
with this conclusion. In the notes to the consolidated
financial
statements of the respondent for the financial year ending 28
February 2014, the following entry appears:
‘
At
28 February 2013, other receivables included an amount of R4.4
million (2012: R4.4 million) relating to employee taxes recoverable
from employees of the Company by virtue of their service agreements.
An administrative oversight was reported and rectified in
the prior
year in respect of the non-payment of these taxes to SARS. A
provision for impairment has been recognised against
this
receivable.
’
[34]
In
the respondent’s ledger for the financial year ending 28
February 2014, Ms de Beer’s PAYE liability is written off.
Although this correction represents a delayed response by the
respondent’s auditors, it is significant that the appellant’s
liability for PAYE remained as an impairment; that is a doubtful debt
rather than a write off, itself an important difference,
when
compared to the accounting treatment of the amount of tax which the
respondent paid on behalf of Ms de Beer. It has to be
borne in mind
that Ms de Beer had elected to leave the respondent’s
employment, while the appellant, with a lucrative overall
remuneration package, chose to continue in the respondent’s
service.
[35]
In
summary, the appellant failed to prove that the respondent’s
conduct in dealing with the outstanding PAYE claim was consistent
with an intention to waive its right of recovery as pleaded by the
appellant.
Leave pay
[36]
Turning
to the claim for leave pay, the difficulty for the appellant is that
initially he claimed for 32.5 days of leave pay on
the basis of his
salary slip. Not only was there no evidence to justify a claim for
32.5 days of leave pay, but also clause 14.4
of the appellant’s
service contract prevented him from carrying forward unused leave,
save with the permission of the Board.
This clause has to be read
with clause 14.1 which provided for an entitlement of 30 days leave
between 1 January to 31 December.
As a consequence, by the time this
matter was heard before this Court, the appellant’s counsel had
reduced the claim and
argued that the appellant was entitled to 20
days of leave, calculated from October 2012 until May 2013.
[37]
There
was an entry in the leave register to the effect that on 25 February
2013 the appellant, as at 25 February 2013, had taken
15 days leave.
This entry however was reversed. The appellant denied that he had
taken 15 days leave and further contended that
during the closure of
the respondent’s offices, between 17 December 2012 to January
2013 when annual leave had to be taken,
he had worked throughout this
period:
‘
I
was actually working. Simply because I was not in the office, it did
not actually mean that I was not working. Specifically on
the 19
th
of December 2012 there was a board meeting that took place in
relation the Gairloch conversion and the Rangkap Novation Facility.
I
worked throughout that period culminating in the signature of
agreements with Rangkap for the novation of their loans on the
31
st
of December which was the deadline. So yes, the office might have
closed but certainly I was working and not on holiday.’
[38]
The
onus was on the appellant to prove this claim. It did not rest on the
respondent to prove the contrary. This court in
Topaz
Kitchens (Pty) Ltd v Naboom Spa (Edms) Bpk
1976 (3) SA 470
(A) at 473A, in respect of proving a negative
assertion, stated that:
‘
There
is, in my opinion, no justification for the proposition that in cases
such as the present case, where the plaintiff seeks
to enforce a
contract and the
onus
is on him to prove the terms thereof, which would involve his proving
a negative, that burden is alleviated by a duty imposed on
the
defendant to begin and to adduce some evidence in support of his
averment that the additional term relied on by him was agreed
upon.’
[39]
Given
the evidence, the appellant only proved that he was at work on 19 and
31 December 2012. There is no evidence in terms of which
the
appellant proved that he had not taken leave for the 8 days until 7
January 2013 (excluding the public holidays in this period).
The
appellant’s own evidence with regard to working over the
Christmas period and into January 2013 was not supported by
any
correspondence generated by him during this period, even though he
was invited to show proof thereof. His assertions in regard
thereto
were both vague and implausible. The only evidence to which he was
able to refer was a set of minutes of a Board meeting
that had been
held on 23 January 2013, which did not show the extend to this leave
during relevant period. In summary, excluding
the public holidays
between 17 December 2012 to 7 January 2013, the appellant failed to
show that he had not taken 8 days of leave.
Thus he was entitled to
12 days of leave pay. The appellant was paid a basic salary of R195
833,93 per month. His daily remuneration
was R8 638,44. This figure
multiplied by 12 equals R103 661,28 which represents the amount of
leave pay owing to him.
The share option agreement
[40]
The
entire share option scheme needs to be interpreted holistically so as
to put it in the best possible light, congruent with the
purpose for
which it was intended. In short, it has to be interpreted
purposively.
[41]
The
purpose of the scheme is set out in Clause 2. It provides that the
scheme ‘is intended as an incentive to Participants
to identify
themselves more closely with the activities of the Company and to
promote its continued growth by giving them the opportunity
of
acquiring Shares through the Options and is not intended to be
utilised for trading purposes.’ Clause 2 further states
that
the scheme is ‘an incentive to each of the Participants to
render ongoing services to the Company, the terms and conditions
attaching to Options, provided for in this Scheme have been agreed to
and are recorded in this document.’ In addition, clauses
5.1.4
and 5.5, which are reproduced earlier in this judgment are critical
to the adjudication of this dispute.
[42]
It is
necessary however to commence the analysis with reference to clause
5.1.3. It provides:
‘
[E]ach
of the participants shall have the irrevocable right and option to
purchase Shares at a strike price consisting of the 15
day volume
weighted average price per Share on the JSE as at the Date of
Approval, exercisable, cumulatively, on or after the Date
of Grant
(as to 50%) and, subject to each of the relevant Participants, as the
case may be, still remaining as employees/non-executive
directors of
the Company respectively, at the following exercise dates:
5.1.3.1
on or after the first anniversary of the Date of Grant (as to 25%);
and
5.1.3.2
on or after the second anniversary of the Date of Grant (as to 25%).
’
[43]
In
this case, it is common cause that all of the appellant’s
shares had become exercisable pursuant to clause 5.1.3 prior
to his
resignation; that is the last of his options were allocated to him on
08 July 2010. The following extract from the Integrated
Annual Report
of respondent for the year 2013 reflects the position regarding the
options held by the appellant.
Date
Share price Exercise
As at
Vesting
Expiry
granted
grant date price
29 February
date
date
R
R
2012
21
Nov 08 0.57
0.82
4 198 614
21 Nov 08
20 Nov 08
21
Nov 08 0.56
0.82
2 099 307 21 Nov
09 20 Nov 19
21 Nov 08
0.55
0.82
2 099 307 21
Nov
10 19 Nov 20
08
Jul 10 0.40
0.29 2
099 307
08 Jul
10 06 Jul 20
08
Jul 10 0.40
0.29
1 049 654 08
Jul 11 06 Jul
21
08
Jul 10 0.40
0.29
1 049 654 08
Jul 12 07 Jul
22
Thus,
as the respondent set out in its plea to the appellant’s
counter claim, ‘as at 31 May 2013 (the time of his resignation)
the defendant held 12 595 843 share options which had not been
exercised’. Clause 5.1.4 does not assist appellant’s
case. Clause 5.1.4 applies to any options ‘that may become
exercisable on or after the date of termination of his or her
employment. In the case of the appellant as is evident from the
table, read together with clause 5.1.3, the options had all been
exercisable prior to his resignation date.
[44]
In
addition, in the case of the appellant’s resignation, the
directors of the respondent made no decision on whether to approve
the appellant’s resignation. This failure to approve his
resignation meant that the options exercisable as at 31 May 2013
lapsed. The appellant’s employment had terminated for a reason
that had not been approved by the directors. This is the precise
situation which is catered for in clause 5.5, namely that the
appellant had ceased being an employee of the respondent for a reason
not approved by the Directors, and therefore all options lapsed which
had not been exercised by that time. The appellant’s
options
were capable of immediate exercise prior to his resignation.
Therefore, turning to clause 5.5, appellant ceased ‘to
remain
in the employ of the Company for (a) reason not approved by the
directors’. The appellant’s options had not
been
exercised at the moment of resignation and therefore they lapsed.
[45]
This
conclusion obviates any necessity to examine the alternative argument
which is directed at damages that the appellant alleged
he had
suffered. This argument was predicated on the basis that the options
have not lapsed.
The Bonus claim
[46]
This
was the one claim which the court
a
quo
upheld in favour of the appellant. It accepted that the full
contractual bonus was in the amount of R5 134 978 and that
he had only received R2 350 000 thereof. In short, the court
a
quo
accepted the appellant’s argument that he had never waived his
claim to the balance of his entitlement. The respondent has
appealed
against this order.
[47]
The
appellant’s case was pleaded as follows:
‘
On
or about 1 November 2011, the plaintiff’s remuneration
committee and/or board of directors resolved that the defendant
was
entitled to an annual bonus for the period ending 30 September 2011
in the sum of R5 134 948.00, R2 500 000.00 of which was
to be paid to
the defendant with his November 2011 salary on or about 25 November
2011 and the balance when the plaintiff had the
ability to do so.
’
[48]
The
court a quo dealt with this matter on the basis of determining
whether the appellant had waived his entitlement to the balance
of
the bonus which he now claimed. The respondent had pleaded as follows
to the appellant’s counter claim:
‘
.
. .the defendant agreed to abandon his entitlement to a performance
bonus calculated as stipulated in the employment contract,
as
supplemented, and in its stead accept a performance bonus equal to
one year’s basis salary being R2.35 million.’
[49]
This
plea was in response to based on the averment that an agreement had
been reached between the appellant and respondent by which
the former
would accept a bonus of R2.35 million instead of the amount which he
claimed. It is on the basis of this averment, that
this claim must be
determined.
[50]
The
appellant’s and respondent’s plea necessitates an
examination of the respondent’s conduct prior to this date.
By
January 2012 the appellant claimed that the respondent was
financially capable of paying the balance owing to him. On 1 November
2011, the remuneration committee of the respondent met. Of relevance
is the following extract from the minutes of this meeting:
‘
It
was agreed that the committee would request a revised proposal from
RV regarding his own bonus as well as the rest of the management
team
as included in the pack
.’
[51]
On 3
November 2011 a further meeting of the remuneration committee took
place at which the appellant was present. The issue of the
appellant’s bonus was discussed as is reflected in the minutes
of this meeting:
‘
RV
would not be receiving an increase in this basic salary. In
terms of his proposed bonus; he agreed to stand down from his
contractually entitled bonus as calculated in terms of the increase
in market capitalisation of the company and to accept a bonus
equal
to one year’s basic salary being R2.35m. It was agreed
that RV would give a proposal to the Remuneration Committee
on how
the shortfall may be made up and RV compensated in future for the
reduction in entitlement either by way of options or issue
of shares.
RV
agreed to his bonus being approved as a bonus equal to one years’
basic salary RV’s bonus is to be paid in cash at
the end of
November 2011.
’
[52]
The
minutes of this meeting were formally recorded at a subsequent
meeting of the remuneration committee of 16 February 2012 where
the
appellant was again present.
[53]
Counsel
for the appellant contended that both the appellant and Mr Linell had
testified that the contents of this minute were not
reflective of
that which had been decided at this meeting. Unfortunately this
submission does not accurately reflect the evidence
contained in the
record. All that the appellant said in this regard was that it was
not a formal meeting and a discussion took
place as to whether he
could accept a deferment of payment and
‘
look
into a makeup in future time for my bonus’
.
Mr Linell claimed he had no independent recollection of the contents
of this meeting. At best for the appellant’s
case was a passage
from Mr Linell’s testimony that as the respondent had been
‘cash strapped’, it had to defer
payment of the balance
of the bonus. But on its own this is insufficient to justify the
claim.
[54]
In
further support of the respondent’s version that the appellant
had accepted payment of R2.35 million, with an envisaged
discussion
of a structuring of a total remuneration to arrive at a mutually
beneficial conclusion, is an invoice dated 25 November
2011 which
Lomsa (Pty) Ltd, the company which had employed the appellant prior
to the conclusion of his employment contract with
the respondent had
generated in respect of the appellant’s bonus. The entry is
‘Robin Vela – Annual Bonus 2011’
in the amount of
R2.35 million plus VAT. I should add that in order for this envisaged
restructuring of future remuneration to
materialise as an enforceable
obligation, there would have to be a continued relationship.
[55]
There
was no indication in this invoice that the amount of R2.35 million
was but a part-payment for the amount claimed by the appellant.
This invoice is consistent with the respondent’s contention
that the appellant had agreed to his bonus payment being equal
to one
year’s salary which was paid in November 2011. It is also
consistent with the minutes of 3 November 2011.
[56]
The
respondent was overwhelmingly successful in this litigation. The
appellant is ordered to pay R3 324 524,36 in respect of PAYE.
His
claims for a bonus payment of R2 784 948,23 together with claim for
damages of R6 795 711,12 were unsuccessful. His only success
was for
leave pay in the amount of R103 661,28. For these reasons the
appellant should pay the respondent’s costs both in
respect of
this appeal and before the court a quo.
[57]
In
the result, the following order is made:
1
The
appeal, save in respect of the leave pay claim, is dismissed with
costs.
2
The
cross appeal succeeds with costs.
3
The
order of the court
a
quo
is altered as follows:
3.1 The defendant is ordered to pay an
amount of R3 324 524.36 together with interest at the mora rate from
26 March 2014 to date
of payment.
3.2 The plaintiff is ordered to pay
the defendant the amount of R103 661.28 as leave pay.
3.3 Defendant’s claim for R2 784
948.23 in respect of an unpaid bonus is dismissed.
3.4 It is declared that the
defendant’s share options in terms of plaintiff’s share
option scheme lapsed with effect
from his date of resignation from
his employment with the plaintiff, being 31 May 2013.
3.5 The defendant is ordered to pay
plaintiff’s costs.
_______________________
D
DAVIS
ACTING
JUDGE OF APPEAL
APPEARANCES:
For the Appellant: CE Watt-Pringle SC
Instructed
by:
Webber
Wentzel, Johannesburg
Lovius
Block Attorneys, Bloemfontein
For the Respondent: IP Green SC
Instructed
by:
Norton
Rose Fulbright SA Inc., Sandton
Webbers
Attorneys, Bloemfontein
[1]
Respondent in the cross appeal and
defendant in the court
a
quo
.
[2]
Appellant in the cross appeal and the
plaintiff in the court
a
quo
to whom I shall refer
to as respondent in this judgment.
[3]
PAYE
stands for pay as you earn. It is a withholding tax on income
payments made by an employer to an employee. Amounts withheld
are
treated as advance payments of income tax due. In other words, an
employer is obliged to deduct tax from the monthly remuneration
of
an employee and to pay it over to SARS
[4]
Section 89
bis
read together with
Part II
of the Fourth Schedule of the Income Tax
Act 58 of 1962 as amended.
[5]
See LTC Harms
Amler’s
Precedent of Pleadings
9ed at 384.