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Man v UFF Agri Asset Management (Pty) Ltd and Others (C233/2020) [2026] ZALCCT 74 (4 May 2026)
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THE
LABOUR COURT OF SOUTH AFRICA
HELD AT CAPE TOWN
Case
No: C233/2020
(1)
Reportable: NO
(2)
Of interest to other Judges: YES
04
May 2026
In
the matter between:
HUNG-WA
MAN
Plaintiff
And
UFF
AGRI-ASSET MANAGEMENT (PTY) LTD
First
Defendant
ME
VAN WYK
Second
Defendant
DUNCAN
KELVIN VINK
Third
Defendant
ERWIN
BOULAND
Fourth
Defendant
CRYSTAL
TREE (PTY) LTD
Fifth
Defendant
Heard
:
25-26
July and 16-18 October and 4 December 2024
Delivered:
04 May 2026
Summary:
(Contract of employment –
purported cancellation of contractual provision by employee following
alleged breach of provision
- claim under s 77(3) for
restitution in the form of reimbursement of salary forfeited for the
purchase of shares in a different
company from the employer –
Oral contract relied on - Shares in other company not issued –
Plaintiff unable to
prove existence of a contractual obligation on
employer to procure shares in other company – Employer not
liable for procuring
issue of shares – claim dismissed –
costs follow the result)
JUDGMENT
LAGRANGE, J
Nature
of the case
[1]
The plaintiff in this matter, Mr H Man (‘Man’) is suing
the defendants for restitution of 25 % of his salary forfeited
by him
following the cancellation of a contract in the amount of R 1,32
million, plus interest and costs. He claims the reimbursement
of his
forfeited salary in lieu of receiving shares for the salary he
forfeited. The plaintiff’s claim is based on a breach
of an
oral contract and is brought under section 77(3) of the Basic
Conditions of Employment Act, 75 of 1997 (‘the BCEA’).
Man, who at all relevant times was employed at the time by the first
defendant, UFF Agri-Asset Management (Pty) Ltd (‘UFF’)
asserts that the partial forfeiture of his salary was in exchange for
UFF issuing shares to him in the fourth defendant, Crystal
Tree (Pty)
Ltd (‘Crystal Tree’)’. Man contends that all
the defendants are jointly and severally liable
for the breach of
contract, but he only seeks relief against one of them, namely UFF,
his erstwhile employer.
[2]
UFF disputed that Man was an employee of UFF after his fixed term
contract expired on 31 July 2016. In any event, they contend
that the
agreement that Man would forfeit his remuneration in exchange for
shares in Crystal Tree, was an agreement between himself
and second,
third and fourth defendants (who are also the founder members of UFF)
in their personal capacities as intended co-shareholders
in Crystal
Tree and that UFF merely assisted by facilitating the salary
forfeiture. They argue that UFF had no power to issue shares
in
Crystal Tree to Man. UFF disputes that Man’s claim can be
brought under section 77(3) of the BCEA because the
salary-sacrifice-for-shares
agreement on which it is based was not
part of an employment contract.
[3]
In the original pleadings, which pre-date the amendment of the Labour
Court Rules in 2024, the parties were designated
as applicant and
respondents. To bring the citation in conformity with the current
nomenclature, they are now designated as plaintiff
and defendants.
Chronology of Events
[4]
UFF provides investment and asset management services to clients.
This entails it performing various activities such as:
Identifying
and structure agricultural investment opportunities; conducting due
diligence on farms and agribusiness assets; advising
investment
committees of client funds; managing and monitoring agricultural
assets post investment; structuring acquisitions
and disposals
of equity participations and providing financing and structuring
solutions for agricultural investments. Bouland
testified that the
main investors in UFF were Old Mutual, the Public Investment
Corporation and Future Growth. The investments
were subject to
a mandate that the funds would only be used for land and biological
assets.
[5]
M Van Wyk (‘van Wyk’), Mr D Vink (‘Vink’) and
Mr E Bouland (‘Bouland’) were founder
members of UFF
holding 51 % of its shares. Van Wyk was the Chief Executive Officer
(CEO) and a director. Vink was also a
director and Bouland was
a director from time to time.
[6]
Man was first employed on 1 August 2014 under a two-year fixed term
contract ending on 31 July 2016, Man’s
central
function was to act as an investment adviser within UFF’s
agricultural asset management business. His core functions
were:
advising UFF on investment strategies and opportunities in the
agricultural sector; providing specialist input into equity
participations and agricultural investment structures, and assisting
with investment decision making at a senior, strategic
level. He
also had the responsibility of fundraising, especially focussing on
Asia and China. This required him to engage with
international
investors and institutions, assisting UFF to obtain foreign capital
for agricultural investment funds and acting
as a bridge between
Asian investors and African agricultural opportunities.
[7]
These functions fell under ‘financial advice” and
‘intermediary services’ as defined in the Financial
Advisory and Intermediary Services Act 37 of 2002 (‘FAISA’),
in terms of which he was required to register as a financial
advisor.
[8]
Different stages in the relationship between the parties are
summarised below.
Fixed term
employment and core advisory work
[9]
From August 2014, Man was employed by UFF Agri Asset Management
(Pty) Ltd under a written fixed term contract
expiring on 31
July 2016.
[10]
UFF’s investment and asset management business at that time was
in the agricultural field. It advised and managed
investment funds
holding agricultural assets, earning management fees and performance
linked returns tied to asset productivity.
UFF depended materially on
the operational performance of farms under its management and, as
part of its value creation strategy,
it engaged in research,
innovation and productivity enhancing initiatives alongside orthodox
fund management.
[11]
During this period, he performed senior advisory functions: mentoring
and supervising investment analysts, structuring
and analysing
investments, drafting investment proposals, engaging in fundraising
(particularly in Asia), and liaising with external
investors and
technology providers relevant to agricultural productivity. Man’s
written employment contract demonstrated
he had a wide mandate
extending beyond narrow fund administration tasks. Man was
wholly engaged in UFF’s business and
his sole remuneration was
his salary.
July to August 2016:
Expiry of the fixed term and uninterrupted continuation
[12]
On 31 July 2016 the fixed term contract expired by effluxion of
time. However, Man continued working without interruption,
performing
his usual functions, and being paid his full monthly salary by UFF.
No new written contract was concluded, and no communication
suggested
his employment had ended. The parties dispute the legal
characterisation of the continuation of the relationship,
but
not the facts. Man maintains this gave rise to a tacit continuation
of his employment on the same terms (save for later changes),
while
the defendants say this period formed part of an interim holding
arrangement pending a new venture. There is no document
recording an
“interim” arrangement and Man’s payslips and
payroll records show he received his normal payment
in August 2016.
During August 2016 Man remained engaged in UFF’s ordinary
advisory work and preparatory discussions.
Late August to September
2016:“Special projects” and an oral agreement, with or
without tacit terms
[13]
In late August or early September 2016, discussions took place
between Man, van Wyk, Vink and Bouland. It was common
cause that they
agreed on a shift in Man’s work focus from day-to-day fund
management duties to work mainly on “special
projects”,
on which he would spend about 80% of his time. Special projects
referred to technology, innovation and productivity enhancing
initiatives, fundraising and advisory opportunities, especially those
connected to Asia, which were considered ancillary to, but
supportive
of, UFF’s agricultural asset management business. Because
of UFF’s client mandates and risk sensitivities,
it was not
desirable for UFF to pursue these more speculative projects as part
of its own activities. To that end, Crystal Tree,
a shelf company
registered on 23 July 2015 and owned by van Wyk, was identified as
the intended special purpose vehicle under
which such projects
would be housed. Man’s engagement during this transition
shifted from routine analyst supervision to
the conceptual and
developmental work required to identify, scope and plan these
projects, and engage potential investment partners.
Man contends it
was part of this agreement that he would remain an employee of UFF
and he would forfeit one month’s salary
every four months which
entitled him to 25% of issued Crystal Tree shares, which UFF would
procure for him. It was also part of
the agreement that UFF would
provide office space in the building it leased for Crystal Tree
related activities.
[14]
The existence of a so-called ‘
special projects agreement
’
concluded in September 2016 is common cause, but which obligations
were undertaken by the various parties to the agreement
is a matter
of contention. Man contends that UFF was a party to this agreement
and that the agreement
inter alia
restructured his
remuneration while he remained a UFF employee and, in exchange for
forfeiting his salary every four months UFF
undertook to procure that
a quarter of Crystal Tree’s issued share capital would be
issued to him (the ‘
salary sacrifice for shares agreement’
).
The defendants contend the salary sacrifice was part of a personal
joint venture arrangement between Man and the three founder
members of UFF in their personal capacities, with UFF playing only an
administrative role.
September 2016 onwards:
Implementation of salary for shares arrangement
[15]
From September 2016 UFF continued to pay Man’s salary and,
every fourth month, withheld one month’s salary,
amounting to a
forfeiture of 25% of his income per annum. Man, for his part, was to
devote 80 to 90 percent of his working time
to develop special
projects, which were to be housed under another company, Crystal Tree
(Pty) Ltd (‘Crystal Tree’),
a dormant shelf company
wholly owned by van Wyk.
[16]
It is unclear from the evidence exactly when Crystal Tree was
registered, but it did exist by the time discussions took
place
between Man and Bourland in August or September that year.
[17]
Owing to Man being dedicated to spending most of his time on special
projects, he was expected to spend a correspondingly
reduced portion
of his time mentoring analysts and assisting UFF directly. Man’s
work during this period consisted of identifying
opportunities,
developing feasibility analyses, preparing budgets and projections,
and engaging with potential technology partners,
funders and
counterparties.
[18]
The character of the legal obligations between the parties regarding
the 25% salary withheld is a matter of dispute.
Man claims it was a
substitution of a portion of his salary in exchange for receiving
shares in Crystal Tree. The defendants contend
it was ‘sweat
equity’ or capital in the form of work contributed at risk. The
only documentary record relating to the
transaction are the payslips
and payroll deductions, showing that UFF paid his salary and made the
deductions.
[19]
Van Wyk’s evidence was that UFF did invoice herself, Vink and
Borland for Man’s salary costs insofar as it
related to the
work he performed for Crystal Tree. Accordingly, to the exent that no
salary was paid to him every fourth month,
yet he still performed
work for Crystal Tree, he provided his labour that month at no cost
to Crystal Tree and consequently they
were relieved of funding his
salary that month, thereby reducing Crystal Tree’s operating
costs.
November 2016: Regulatory
confirmation of role
[20]
On 7 November 2016, Vink, writing as a director of UFF, issued a
letter to the registration department of the Financial
Sector Conduct
Authority describing Man as having been appointed as an investment
manager since August 2014 and stating, amongst
other
responsibilities, that he ‘
recently … took up the
role to enhance the investment research field enabling UFF Agri Asset
Management’s involvement
in relevant agri related
innovative projects.’
This letter post dates the
expiry of Man’s fixed term contract and records Man’s
role in special projects
as part of UFF’s activities. Man
relies on this as proof that he remained a UFF employee engaged in
UFF aligned work.
The defendants maintain it was merely
supportive correspondence to assist him with regulatory requirements
and did not describe
his contractual arrangement with UFF.
2016 to 2017: Development
work and the Pargo opportunity
[21]
During late 2016 and early 2017 Man continued intensive development
work: exploring agri tech and energy projects,
logistics and
advisory opportunities, and preparing detailed budgets for Crystal
Tree. One such opportunity concerned Pargo Logistics
(‘Pargo’).
It seems to have been the most concrete initiative embarked on by
Man. Pargo was a South African parcel delivery
company. It was
seen as offering a commercial opportunity capable of generating fee
income, which would potentially develop an
early revenue stream to
support the contemplated Crystal Tree venture while other projects
matured. Because the nature of the business
fell outside UFF’s
investment mandate and funding would have to come from the Crystal
Tree sponsors.
[22]
In pursuing this prospect, Man prepared memoranda, financial
projections and budgets, and sought capital commitment from
the
intended shareholders by January 2017. However, by 18 January 2017,
the deadline set by Pargo for funds to be raised to acquire
it,
nothing was forthcoming so the opportunity fell through.
June 2017: Written
confirmation of the agreement
[23]
On 5 June 2017 Man sent an email to van Wyk, which he copied to
Bouland, summarising the September 2016 agreement. He
confirmed that
he would remain an employee of UFF, that he would give up one month’s
salary every four months, and that ‘
in return for the
sacrificing of one month’s salary every four months I would
receive 25% shareholding in Crystal Tree’
, with the other
shareholders being the current shareholders in Crystal Tree, namely
Bouland, Vink and van Wyk. He noted the commencement
date as
September 2016, and he recorded discrepancies in past deductions. He
also recorded that office space was to be provided
for Crystal Tree
on the fourth floor of the Hudson building and that Crystal Tree
would assume the operational costs funded by
the current founding
shareholders of UFF.
[24]
After noting that he agreed with a contention made previously by van
Wyk that he started sacrificing one month’s
salary every four
months, beginning in September 2016, he recorded his view that the
obligation to issue him with shares in Crystal
Tree had not been met:
‘
Nonetheless, I
maintain my point that, although I have accepted a de facto decrease
in my salary, UFF (or founding shareholders’
of UFF) did not
discharge their share of the arrangement; until date I have not
received shareholding in Crystal Tree nor are certain
expenses
incurred and paid by me in the course of my employment reimbursed.’
(
sic
)
[25]
This contemporaneous document delineated Man’s understanding of
the parties’ obligations. Man said he sent
it to record the
agreement reached in August or September 2016 and when the salary
sacrifice arrangement had started. No written
response corrected or
repudiated this letter at the time. Man continued thereafter with the
same mix of special project development
and limited UFF
mentoring.
[26]
Van Wyk testified that no response was made to this letter because it
was understood as an informal recap of ongoing
discussions about the
Crystal Tree shareholder arrangement and payroll accommodation, not a
contractual statement about Man’s
employment terms with UFF. It
appears there was no dispute about the content of the letter, but
merely about the interpretation
of who bore the obligations
concerning the issuing of shares to Man.
2017 to early 2020:
Attempts to formalise shareholding
[27]
Between 2017 and early 2020 various drafts of a shareholders’
agreement for Crystal Tree circulated. On 12 February
2020, Man and
Bouland eventually signed a version drafted by Man, but van Wyk and
Vink did not. Man conceded that because it had
not been signed by all
the shareholders in Crystal Tree, it was neither valid nor operative.
However, he interpreted it as a written
confirmation of his orally
agreed upon rights. It was the oral agreement which was the original
source of those rights.
[28]
The parties to the intended written shareholders’ agreement
were Bouland, Vink, van Wyk, Man and Crystal Tree.
Bouland, Vink and
van Wyk were describes as ‘Sponsors’ in the agreement.
Provisions of the Introductory section set
out in paragraphs 3 and 4
of the agreement, which are pertinent to the matter, read:
‘
INTRODUCrystal
TreeION
…
3.2
The Sponsors and
Man wish to conduct the Business in the Company with a view to
collaborate with Chinese technology and venture
capital firms who
wish to enter the African market
.
3.3
The Sponsors will
contribute Operational Costs while Shareholders and until such time
as the Company can secure its own funding
from third parties, finance
itself out of its own business activities or by the completion date
(whichever is the soonest).
3.4 Man will affect from
the signature date be employed or be seconded with the objective of
ultimately being employed by the Company
on a full-time basis, as the
Chief Executive Officer of the Company.
Man will continue for so
long as the Sponsors contribute operational costs to the Company.
3.5 the shareholders wish
to regulate the relationship amongst each other and the Company.
3.6 the agreement will
regulate:-
3.6.1 the issue of shares
in the Company to man, Bouland and Vink;
3.6.2 the operation and
management of the Company; and
3.6.3 the relationship
between the Shareholders and between the Shareholders and the
Company.
…
4. SHAREHOLDING:-
4.1 The Company was
incorporated on 23 July 2015 and has an authorized share capital of
1000 ordinary shares of no par value.
4.2 On the Signature
Date, Van Wyk is the sole Shareholder and holds 100 issued shares.
4.3
The intention is
that the Parties shall be equal Shareholders and accordingly Bouland,
Vink and Man will each subscribe for 100
shares in the share capital
of the Company at a nominal subscription price of R1 per share
.
4.4
Van Wyk shall
procure that the Company shall allot and issue to each of the other
three shareholders or their nominees the number
of shares subscribed
for within 30 calendar days of the Signature Date
.’
(emphasis added)
[29]
The reason that van Wyk and Vink did not sign the draft agreement was
that they were unhappy the last sentence in 3.4
of the draft which
they were concerned could be interpreted to mean that they would
potentially be liable to fund Man’s income
in perpetuity during
in the course of Crystal Tree conducting business, which was a
commitment they were not prepared to make.
Bouland testified he had
signed the agreement in good faith without reading it carefully.
[30]
Crystal Tree never became a distinct operational entity, had no
employees, and generated no income. Bouland stated that
himself, van
Wyk and Vink had collectively invested about R 5.2 million in cash in
Crystal Tree, but the business came to nothing,
and it reached a
stage when they felt it would not generate any income for the
shareholders. At that point they were no longer
prepared to invest
any more cash in the business. In the end, it was a failed investment
which resulted in them suffering a loss.
[31]
Neither Man, Vink nor Bourland ever received their 25% share
allocation in Crystal Tree. The parties dispute the legal
significance of the shareholder agreement drafts. The defendants
argue that the conclusion of a signed shareholders’ agreement
was a precondition of any share entitlement. Man contends the
shareholders’ agreement was intended merely to give formal
effect to an existing and binding remuneration arrangement.
March–April 2020:
Demand for share transfer and cancellation of the contract
[32]
In March 2020, after repeated informal requests, Man formally
demanded delivery of his 25% shareholding, giving notice
that failure
to issue the shares to him so would result in cancellation.
[33]
When the shares had still not been delivered by late March or early
April 2020, he cancelled the arrangement insofar
as it required him
to sacrifice salary in exchange for shares, which he interpreted as a
provision of his employment contract.
He did not resign or purport to
terminate his employment with UFF. In an email of 24 March 2020, Man
gave notice to van Wyk of
his intention to cancel the agreement of 12
February 2020 and copied his email to Vink and Bouland. The email
headed ‘
Crystal Tree/UFF Employment
’ read:
‘
Dear Miné
With reference to our
understanding, which has been documented in the agreement dated 12
Febuary 2020, which in essence entails:
•
That I surrender 25% of
my gross salary at UFF effective already from September 2016 to date,
•
That in exchange for my
benefit sacrifice, I receive 25% unencumbered shares in Crystal Tree
(Pty) Ltd, and
•
That you, Erwin and
Duncan further undertook to fund the operational costs of Crystal
Tree (Pty) Ltd.
To date, albeit that I
have performed my functions diligently as we had agreed and have
sacrifices a huge portion of my salary for
an extended period of
time,
you
have for some unknown reason not issued me with the
shares/share certificates in Crystal Tree (Pty) Ltd.
I have taken this up with
you numerous occasions since September 2016, the most recent
discussion last week Wednesday the 18 of
March in which you promise
to revert. Until date
I have been unable to get you (and or the
other shareholders) to fulfil their side of the agreement.
I have have no option
but to place you and the other shareholders, who are copied into this
communication
,
on terms
as I hereby do; to specifically
perform as per our written agreement
and hereby giving you 5
working days’ notice to issues the said shares in Crystal Tree
(Pty) Ltd, and arrange the funding
as per budget, without delay
.
In the hopefully unlikely
event you do not intend honouring our agreement, or we don’t
come to a mutually agreed position,
I have no option but to cancel
the agreement, and I am giving you such notice now by close of
business Monday 30 March 2020.
I will then have the expectation
and I believe legitimately so to be reimbursed my benefits that I had
sacrificed at UFF plus interest
and related losses
. Hopefully we
don’t get to this position.
I await your urgent
response.
Respectfully, …’
(emphasis added).
Notably, this demand was
not addressed to UFF. In the absence of a response to this email, Man
followed up with an email on 3 April
2020, in which he cancelled the
February agreement and demanded reimbursement of his salary sacrifice
with interest, in the following
terms:
Dear Miné,
I refer to my email dated
24 March 2020 to
in which I demanded from you, and the other
shareholders, to perform your obligations
in terms of the signed
agreement dated 12 February 2020, failing I would cancel the
agreement per 30th March 2020.
Notwithstanding my demand
of the 24 March 2020, until date
you failed, ignored or refused
to, among others, issue the shares in Crystal Tree (Pty) Ltd to me
and, arrange the funding as per budget. You, Duncan Vink and Erwin
Bouland have thus breached and remain in breach of the agreement.
As per my email of the
24th of March 2020,
the agreement is now cancelled
, which I
reconfirm in this correspondence.
In the light of your
breach of the now cancelled agreement, I suffered damages and/or
losses.
Therefore, I demand from UFF Agri Asset Management, you,
Duncan Vink and Erwin Bouland, jointly and severally, to reimburse me
for
my salary sacrifice to date including interest and benefits and
all my other losses and damages which I have to suffered
According to my
calculations (to be amended as time goes on) I have sacrificed a
portion of my salary since September 2016 to the
amount of R1 320
000, interests thereon of R 265 925 and sacrificed annual adjustments
to my salary to the amount of R 854 225.
I thus demand from
UFF
Agri Asset Management, you, Duncan Vink and Erwin Bouland to arrange
payment of the total amount of R 2 440 150 forthwith but
no later
than 10 April 2020.
Failing such payment, I
will have no option but to approach the applicable forum for relieve.
Respectfully,
Hang-Wah MAN’
(
Sic-emphasis
added
)
[34]
This was the first communication directed at UFF as well as the other
intended shareholders in Crystal Tree. Even so,
at that stage, it is
apparent that he still did not hold UFF directly responsible for the
failure to deliver the shares, but only
for reimbursing his forfeited
income.
Post cancellation
2020: Abandonment of special projects and retrenchment
[35]
Following this correspondence, the other partners in the Crystal Tree
venture realised that relations with Man had taken
on a litigious
character added to which they had not even concluded the shareholder
agreement. They concluded there was no longer
any trust in their
relationship with Man. Added to which the project had failed to
generate income over a number of years and they
were no longer
prepared to fund it. With its collapse, the main
raison d’etre
for Man’s continued employment by UFF, namely to get
special projects off the ground to be housed in Crystal Tree, fell
away,
making him redundant and UFF proceeded to retrench him under
section 189 of the Labour Relations Act.
[36]
The retrenchment documentation and correspondence between Man and
defendant’s attorneys link the cessation of special
projects to
the termination of Man’s employment. There is no evidence that
Crystal Tree pursued any business or generated
income after that
point.
[37]
Man referred an unfair dismissal claim to the CCMA and the
arbitration award was pending review in the Labour Court when
this
trial was underway. The retrenchment proceedings were not addressed
in any detail during the testimony, but both parties sought
to draw
inferences from it. Man argued that the fact that UFF retrenched him,
rather than Crystal Tree demonstrated that UFF regarded
him as its
employee right up to 2020 and undermined UFF’s argument that he
had effectively ceased being a UFF employee after
2016. In 2016 his
remuneration structure was simply modified. Moreover, the money he
had forfeited under the new remuneration structure
in return for
shares, meant that if the reciprocal obligation to issue the shares
was not met, he had to be fully reimbursed. As
the Crystal Tree
venture effectively ended with his cancellation of the agreement,
there was no justifiable basis for retaining
his forfeited
remuneration.
Evaluation
[38]
A number of issues have to be resolved, namely: Man’s
employment status with UFF after 31 July 2016; the effect
of
non variation clause in Man’s expired fixed term
contract; the nature of the agreement concluded in September
2016 and
the parties to that agreement; the respective obligations of UFF and
founder members of UFF relating to the salary-sacrifice-for-shares
agreement.
[39]
Ultimately, the onus rests on Man to establish the existence of a
contractual obligation on UFF to arrange for the delivery
of shares
in Crystal Tree to him and, if it failed to do so on demand, he was
entitled to cancel salary fofeiture arrangement the
agreement and, in
lieu of the promised shares, claim a refund of the salary he had
sacrificed for the shares,.
Man’s legal
relationship with UFF after his fixed term contract ended on 31 July
2016.
[40]
Following the expiry of Man’s fixed term contract on 31
July 2016, the employment relationship between Man
and UFF continued,
albeit that his fixed term contract expired. From August 2016 until
his retrenchment in 2020, Man continued
to render services while
remaining on the payroll of UFF. He was paid remuneration through
UFF’s payroll system, received
payslips, and statutory
deductions were effected on his behalf. During this period, Man’s
role evolved: he continued to perform
certain functions directly for
UFF, including the mentoring and oversight of junior analysts, but
devoted the majority of his time
to the development of so called
“special projects”. These projects were operationally
housed within Crystal Tree
(Pty) Ltd, but Man’s duties to
develop these projects for the benefit of Crystal Tree would be done
whilst remaining an employee
of UFF, which retained control over his
remuneration, the allocation of his working time, and the
administrative framework of his
employment.
[41]
From September 2016, Man’s remuneration by UFF was restructured
so that he forfeited one month’s salary every
four months. This
forfeiture was to fund his entitlement to shares in Crystal Tree. The
employment relationship persisted on that
footing until early 2020,
when Man was retrenched by UFF following the breakdown of the
parties’ relationship.
[42]
The
defendants argued that in accordance with the principles in
SA
Sentrale Ko-op Graanmaatskappy Bpk v Shifren
[1]
and
Brisley
v Drotsky
[2]
non-variation clauses are
binding. Consequently, the non-variation provision in Man’s
fixed term contract meant that his
conditions of employment could not
be altered to reflect changes such as the salary forfeiture
arrangement. If so, his terms of
employment could not have been
varied to include the salary sacrifice scheme.
[43]
The difficulty with this argument is that the non-variation clause in
the fixed term contract could not have outlived
the fixed term of the
contract. Clause 2 of that contract fixed the term of the contract.
As the fixed term contract could only
have been extended if that
change was reduced to writing and signed by both parties, which the
non-variation clause required, the
contract and all its terms,
including the non-variation provision, came to an end on 31 July
2016. Any employment of Man by UFF
after that date was undertaken
under a new employment contract, whether tacit or express. The fact
that his remuneration remained
the same simply reflects that the
parties accepted this arrangement, and he continued to perform the
same services he had rendered
before. By their conduct both parties
accepted that he continued to work and perform duties for the same
remuneration as before
but no longer subject to a fixed term
contract. There was a shift in the emphasis of his responsibilities.
He was expected to devote
less time to service the direct needs of
UFF and more time on the development of special projects which had to
be housed under
another entity, Crystal Tree.
[44]
Aside from this modification of his responsibilities, there is no
dispute about the continuity in the respective performance
of
obligations by both parties from 1 August 2016, all of which is
demonstrative of an ongoing employment relationship. Thus, UFF
continued to pay Man through its payroll, issued payslips in its own
name, deducted PAYE and statutory contributions as employer,
controlled his work allocation and reporting lines, used its own
infrastructure to support his work; and ultimately retrenched
him via a section 189 type process. The defendants argued that
it maintained his employment status because it was necessary
for him
to have a recognised employer for tax and visa purposes and Crystal
Tree did not yet have its own independent operational
structure.
[45]
However, even if I accept that the intention of the parties
after 31 July 2016 that his work would increasingly
be devoted to
Crystal Tree activity, and that it was for reasons of practical
convenience that his formal employment status with
UFF was
maintained, he remained employed by it. The fact an employee of one
entity is engaged in the work of another does not mean
the formal
employment relationship is a sham. Secondment of an employee to work
for a third party does not end the employment relationship
with the
seconding party.
[46]
When the shift in his duties became more pronounced in September 2016
and he agreed to the salary forfeiture scheme,
it is true that 80 to
90 percent of his time was allocated to trying to develop special
projects which were to be housed under
Crystal Tree. However, even
though he devoted a correspondingly smaller part of time only to UFF
work, his employment relationship
with it continued.
[47]
In conclusion, I am satisfied that Man continued to be employed by
UFF after 31 July 2016 until he was ultimately retrenched
in 2020.
The agreement altering
Man’s remuneration in September 2016
[48]
Notwithstanding the sharp legal dispute between the parties, there
was a high degree of consensus regarding the events
of September
2016. All parties accepted that, following discussions during August
2016, an arrangement was reached in or about
September 2016, under
which Man’s working conditions were changed. The negotiations
were conducted between Man and
van Wyk, Vink and Bourland
[49]
It was common cause that, from that point, Man’s work focus at
UFF shifted predominantly to what were described
as “special
projects”, and that these projects were conducted as part of
Crystal Tree’s business. It was further
common cause that, from
September 2016 onwards, Man did not receive his full salary every
fourth month, that this altered payment
pattern was implemented
through UFF’s payroll systems, and that the arrangement was
sustained in practice over a period of
several years. Where the
parties diverge is on the legal characterisation and consequences of
the salary sacrifice arrangement.
[50]
Man founds his entitlement on ‘
an uncontradicted email
’
to Bouland and Van Wyk on 5 June 2017, which confirmed that during
September 2016 Mr Man concluded an oral agreement (‘the
Special
Projects Agreement’) with UFF, Bouland, Vink and Van Wyk.
[51]
He argues that UFF was a party to the agreement for the following
reasons: it benefitted from the agreement; it had to
agree to the
amendment of Mr Man’s employment arrangement; it had to agree
to the allocation of his services; it continued
paying his salary as
before, save for the 25% forfeiture; it was instrumental in providing
the office space and other infrastructure
for the venture. He submits
that this made UFF’s consent and performance essential to the
agreement.
[52]
Further, Man argues that when UFF’s attorneys stated in
correspondence that “
Mr Man has now terminated the
shareholders agreement and the agreement between the parties to
pursue the special projects”
this was confirmation that UFF
too was of the view that there was a single agreement which it had
been a party to. He contended
that the agreement to pursue ‘
special
projects’
could only be a reference to the September 2016
agreement and because UFF’s attorneys used the term in the
context of retrenchment,
‘
the parties’
must have
included UFF.
[53]
Under cross-examination it was put to Man that the letter was written
to explain why UFF no longer had work for him as
the Crystal Tree
venture had ended, not a statement of acknowledgement of a joint and
several obligation to delivery Crystal Tree
shares to him. It was a
letter dealing with causation of his retrenchment, not a statement of
legal liability. The fact that the
letter referred to the
shareholders’ agreement ending and the commercial agreement to
pursue special projects via Crystal
Tree, did not transform UFF into
a contractual party to that agreement.
[54]
However, Man insisted that the September 2016 arrangement constituted
an employment related agreement with UFF which
restructured his
duties and remuneration, substituting a portion of his cash salary
with an entitlement to shares as part of his
remuneration package.
The defendants, by contrast, claimed that the agreement of acquiring
Crystal Tree shares in exchange for
sacrificing part of his salary
was an agreement between Man and the founder members of UFF
(Van Wyk, Bouland and Vink) in
their personal capacities, relating to
a private entrepreneurial venture, namely the establishment and
operation of Crystal Tree
(Pty) Ltd. UFF’s undertaking was
limited to effecting the salary sacrifice.
[55]
On the defendants’ version, by effecting the salary forfeiture,
as his employer, UFF simply provided a convenient
mechanism for Man
to make his financial contribution to the Crystal Tree business.
However, UFF did this without assuming any contractual
obligation
concerning the issuing of shares. As Crystal Tree was not yet an
operational entity in its own right, UFF was being
used as a facility
for the founders to conduct activities related to Crystal Tree.
Evidence was provided by van Wyk of payments
made by UFF relating to
the business of Crystal Tree. She also testified that the
founders were liable to refund UFF for
Crystal Tree related expenses,
including that portion of Man’s remuneration attributable to
his Crystal Tree related work.
Man did not dispute this, but argued
that it was irrelevant to his claim against UFF to issue him with his
Crystal Tree shares
which was part of his employment contract.
Did UFF assume the
obligation to procure shares in Crystal Tree due to Man on the basis
of him sacrificing one quarter of his annual
salary?
[56]
Man did claim that van Wyk, Bourland and Vink were also parties to
the agreement that he would forfeit 25 % of his earnings
in exchange
for a 25 % shareholding in Crystal Tree. When Man recorded his
understanding of the oral September agreement in his
email of 5 June
2017, he recorded that neither UFF nor the founding shareholders had
discharged ‘their share’ of the
arrangement, namely by
issuing him with Crystal Tree shares and reimbursing him certain
expenses. Although he never used the term
‘
joint and
severally liable
’, in effect he is asserting that all the
individual defendants as a group were jointly and severally liable
with UFF to deliver
the shares, or the individual defendants as a
group were jointly and severally liable with UFF to do so. It is not
necessary to
resolve this nuance for the purposes of the judgment.
[57]
The important question is whether UFF assumed joint and several
liability with them. In this court, Man only pursues
his claim
against UFF on the basis that the agreement formed part of his
conditions of employment. As he had no employment
relationship
with van Wyk, Bourland or Vink, he cannot not sue them under s 77(3)
of the BCEA for restitution in the form of reimbursement
of his
salary forfeiture, which is the only statutory provision giving the
Labour Court jurisdiction to entertain his claim.
[58]
However, in
his email of 24 March 2020
[3]
.
He complained to van Wyk that he had been ‘
unable
to get you (and or the other shareholders) to fulfil their side of
the agreement’
and
his demand for delivery of his share allocation was expressly
directed only at her ‘
and
the other shareholders
’
to ‘
perform
as per our written agreement
’.
UFF is not mentioned. Furthermore, he identified his claim as
originating in the agreement of 12 February 2020, which was
the draft
shareholder’s agreement signed by himself and Bourland, albeit
that it was never even agreed to by all shareholders,
least of all
with van Wyk who still held all the issued shares in Crystal Tree.
[59]
UFF did not appear as a party to the agreement in that draft, which
is hardly surprising because it was never intended
it would be a
shareholder in Crystal Tree. Thus, to the extent that Man relied on
that document to enforce his right to be issued
with shares, even if
it is debatable it was enforceable against the individual
respondents. it could never have provided the basis
for deriving an
obligation enforceable against UFF. Accordingly, the only possible
source of such an obligation on the part of
UFF, if it came into
being, must have originated in the oral agreement of September 2016.
In his follow up email of 3 April 2020,
he again clearly identifies
van Wyk and ‘
the other shareholders’
as having
failed to perform their obligations to deliver the shares. It was
only when it came to demanding substituted restitution
in the form of
a reimbursement of his salary sacrifice that he identified UFF as
being jointly and severally liable with the founder
members, even
though he never directly demanded delivery of the shares from UFF
itself, thereby failing to place it in
mora
.
[60]
UFF never held any shares in Crystal Tree and neither did the
September agreement provide for UFF to be issued with any
shares at
any stage. The sole shareholder of Crystal Tree at all times right up
until the Man’s cancellation of the agreement
was van Wyk.
While UFF’s members in their personal capacities were able to
reach an agreement on the disposition of shares
in Crystal Tree with
Man, even though they were majority shareholders in UFF, UFF simply
had no capacity to issue shares to Man
itself. Its role in relation
to Crystal Tree was confined to performing activities on its behalf
subject to reimbursement of the
corresponding expenses incurred by
Vink, van Wyk and Bourland, one of which was at least 80% of Man’s
salary. Part of facilitating
that arrangement was effecting the
forfeiture of Man’s salary as his contribution for his shares.
By undertaking that obligation
UFF was agreeing to perform one more
function which was consonant with the other services it provided to
facilitate Crystal Tree’s
operational activities. It does not
necessarily follow that because UFF agreed to implement
the four monthly salary
forfeiture it necessarily incurred a
reciprocal obligation to deliver Man’s portion of Crystal Tree
shares.
[61]
The practical effect of Man’s forfeiture of salary every four
months meant that Vink, van Wyk and Bourland were
relieved of
reimbursing UFF for his salary that month. His sacrifice thereby
correspondingly reduced their contribution to the
running costs of
the Crystal Tree project. They were the real beneficiaries of
this arrangement, not UFF. This was eventually
conceded by Man
himself. In the absence of any necessary reciprocity between Man and
UFF regarding his shareholding in Crystal
Tree and his salary
forfeiture, Man’s attribution of an additional obligation
to UFF that it also would deliver the
shares to him appears as a
somewhat superfluous addition, when that obligation was already owed
to him by the individual defendants.
Man provided no explanation why
the parties would have agreed that UFF should also have assumed this
obligation.
[62]
The
agreement between Man and the individual defendants was that they
would issue him with shares provided he regularly sacrificed
his
salary and thereby reduced their financial contribution to funding
the nascent business of Crystal Tree. The fact that the
salary
forfeiture mechanism was the most convenient one for the individual
defendants and that UFF was amenable to it, did not
as a matter of
necessity require UFF to assume the same obligation as the individual
defendants to issue MAN with the shares in
exchange for his
contribution. In so far as Man did not provide any direct evidence of
how this term came to be agreed on in the
discussions, the only
alternative basis its existence could established is if
it was a tacit term of the oral agreement.
However, because a tacit
term must be necessary to give business efficacy to an agreement
[4]
,
the purported obligation on UFF to issue the Crystal Tree shares,
could not even be explained as a tacit term of the agreement
that UFF
did not have to pay him every fourth month. To issue shares to Man,
the co-operation of the individual defendants was
essential. It was
not essential that UFF also be saddled with the obligation to
procure the shares for him.
[63]
In the absence of written proof of such an obligation or proof an
oral agreement to that effect, Man has not successfully
established
the existence of an obligation on UFF to procure the Crystal Tree
shares for him.
[64]
The operative obligation which UFF agreed to give effect to as part
of it facilitating the assisting Crystal Tree to
get off the ground,
was to effect the salary sacrifice, but the sacrifice was to enable
him to earn his entitlement to a quarter
of the issued share capital
of Crystal Tree, just as his three intended partners were entitled to
their share allocation by virtue
of reimbursing UFF for expenditure
it incurred on Crystal Tree’s behalf.
[65]
As Bourland testified, himself, Vink and van Wyk had sunk R 5,2
million between them in funding the Crystal Tree enterprise,
which
represented a loss of venture capital. On Man’s version,
however, his contribution was treated fundamentally differently
from
that of the other participants: if shares were not issued, he would
be restored in full, while the other participants would
bear their
losses without recourse. That construction is difficult to reconcile
with the commercial logic of the arrangement. As
far as the
obligations of the individual defendants are concerned, it is
inherently improbable that the individual defendants would
have
agreed to expose themselves to the full downside risk of a failed
venture while ensuring that Man was insulated from comparable
risk
through a right of full restitution of his financial contribution.
It is even more improbable that UFF, a company with
no
shareholding in Crystal Tree and no entitlement to its profits, would
have put itself at risk by guaranteeing to procure the
issuing of
Crystal Tree shares, as reciprocal obligation of Man’s
forfeiture of his income every four months for Crystal
Tree’s
benefit, not its own, and thereby lay itself open to the claim
Man has now brought when the shares were not
delivered.
[66]
In his evidence, Man advanced no plausible explanation why UFF would
have assumed the same obligation which the individual
defendants owed
him to issue him shares in Crystal Tree, nor did he give evidence of
what transpired in the August-September oral
discussions with the
individual defendants, which led to it also taking on that
obligation, which was primarily that of the individual
defendants.
The evidence of any details of those discussions was absent from his
account.
[67]
His ‘explanations’ for UFF undertaking the obligation are
based on his own assertions and inferences he drew.
For
example, he inferred that because UFF was the party giving effect to
the salary sacrifice it followed it was also responsible
for ensuring
the delivery of the shares. He also assumed that whenever he spoke
with the individual defendants he was speaking
to them in their dual
capacity as future co-shareholders in Crystal Tree and as directors
of UFF. Thus, if there was an agreement
that he was entitled to
shares in Crystal Tree provided he sacrificed a portion of his
earnings, UFF was bound not only to effect
the salary deduction,
which only it could have agreed to, but it also would provide the
shares if asked to. He also believed it
agreed to procure the shares
for him because the special projects enhanced the performance of UFF
investments. However, he conceded
under cross-examination that the
projects were for Crystal Tree and the financial benefit would inure
to Crystal Tree and its shareholders.
He also never testified
to the effect that, without UFF warrantying that it could also be
called upon to procure delivery
of the Crystal Tree shares, he would
not have entered the salary sacrifice agreement. In the absence
of Man laying down an
evidentiary basis for the assumption of a joint
and several obligation on the part of UFF and the founder members to
deliver his
shares in Crystal Tree, the assumption of this obligation
by UFF is improbable.
[68]
The only alternative construction which would permit him to proceed
against UFF alone in this court, is that that UFF
separately agreed
as part of his employment contract that it would procure the shares
for him. However, he failed to provide details
of any discussion with
the individual defendants in which they represented to him that UFF
as his employer also undertook to ensure
the delivery of his shares
in Crystal Tree. When confronted with the draft shareholders’
agreement which stated that ‘
Van Wyk shall procure that the
company [Crystal Tree] shall allot and issue shares
’ he
agreed it did not impose that obligation on UFF, but nevertheless
‘
believed that UFF should ensure it happened’
.
[69]
In conclusion, I am satisfied that Man has failed to establish that
there was an agreement whether express, oral or tacit
between
himself, the individual defendants and UFF itself that he agreed to
forfeit one quarter of his remuneration on the understanding
that the
individual defendants (either individually or jointly as a group) and
UFF were jointly and severally liable to
ensure he was
issued with one quarter of the issued shares in Crystal Tree.
Likewise, he has failed to establish that it was a
binding term of
this employment with UFF, that it would procure the Crystal Tree
shares provided he had sacrificed one month’s
salary every four
months.
Conclusion
[70]
In light of the discussion, Man’s claim against UFF must fail.
[71]
On the
question of costs, the claim is contractual in nature and there is no
reason why costs should not follow the result
[5]
.
Order
1.
The Plaintiff’s referral is dismissed.
2.
The Plaintiff must pay the First Defendant’s costs on Scale C,
which costs include the cost of senior counsel for the duration
of
the trial, and any costs which might have stood over for later
determination.
R
Lagrange
Judge
of the Labour Court of South Africa
.
Appearances:
For The
Applicant:
Adv. F Rautenbach
Instructed
by:
Carelse Khan Attorneys
For the
Respondent:
Adv. R Stelzner SC
Instructed
by:
STBB Attorneys
[1]
1964 (4) SA 760 (A)
[2]
2002 (4) SA 1 (SCA)
[3]
See paragraph 32 above.
[4]
Transnet
Ltd v Rubenstein
[2005] 3 All SA 425
(SCA) at paragraph [17].
[5]
Baise v
Mianzo Asset Management (Pty) Ltd
(2019) 40 ILJ 1987 (LAC) at paragraph 48.