Investec Bank Ltd and Another v Lefkowitz

• Jurisdiction: South Africa
• Judge: Nienaber JA, Van Heerden JA, Eksteen JA, Marais JA
• Judgment Date: 27 November 1996
• Citation: 1997 (3) SA 1 (A)
• Docket Number: 384/95
• Hearing Date: 08 November 1996
• Counsel: C Z Cohen SC (with him A C Thompson) for the appellants S L Joseph for the respondent
• Court: Appellate Division

Nienaber JA:

Mrs Lefkowitz, the successful applicant in the Court below, now the respondent, was an employee of the second appellant, Reichmans Ltd ('Reichmans'). Reichmans was a subsidiary of the first appellant, Investec Bank Ltd ('Investec Bank'). D The cardinal question is whether she disqualified herself from taking up shares in Investec Bank, offered to her as an employee of Reichmans, when she relinquished her employment in 1994.

Mrs Lefkowitz commenced her employment with Reichmans in April 1987. During 1988 Investec Bank established 'The Investec Bank Share Trust' to enable its E employees and the employees of its subsidiary companies to purchase shares in Investec Bank. The trust deed is annexure F to the founding affidavit. Clause 2 thereof stated that

'the scheme is intended as an incentive to employees to promote the continued growth of the company by giving them an opportunity to acquire shares therein'. F

The trust was to be administered by two independent trustees. The trustees would offer scheme shares allocated to the trust by Investec Bank to employees qualifying for the purchase thereof. In November 1991 Investec Bank resolved to substitute a new scheme for annexure F, termed 'The Investec Bank Share Purchase Trust Deed'. This was annexure PRJ3 to the answering affidavit. Clause 2.2 thereof provided as follows: G

'The scheme is intended as an incentive to employees of the company and its subsidiaries and to employees of any other company in the group to encourage them to acquire an interest in the company by offering to employees the right to acquire scheme instruments in order to promote a proprietary interest in the success of the company and the group.' H

The new scheme resembled the old one in concept but differed from it in wording and detail.

It was this latter trust deed which was the operative one when, on 1 April 1992, Reichmans addressed a letter in the following terms to Mrs Lefkowitz: I

'We are pleased to confirm that we (are) able to offer you an option to take up an allocation of 500 Investec Bank Ltd shares.

The share option scheme has been so designed, that only on the effective date of you having to receive ownership and control of the shares, need you decide whether or not you wish to take up the option.

The risk element, therefore, is totally eliminated in this scheme. J

Nienaber JA

These shares will be sold subject to the terms and conditions of the Investec A Bank Staff Share Option Scheme.

Your divisional manager has a copy of the Staff Share Trust which includes the rules of the scheme.

The sale price will be R20,50 per share and no deposit is payable.

Should you wish to consider this offer at the appropriate time, would you B please notify Mrs Carol Sawkins on the 5th floor, of the Investec Bank building.'

Without asking for a copy of the relevant trust deed, Mrs Lefkowitz responded by intimating her 'intention, in principle, to accept the shares in due course', as she put it in her founding affidavit. C

A year or so later, on 4 May 1993, Investec Bank addressed a similar letter to Mrs Lefkowitz offering her the option of taking up 700 Investec Bank shares at R28 per share, the last paragraph of which letter reads as follows:

'Should you accept this offer in principle, would you please sign and immediately return the attached letter of acceptance to Mrs Carol Sawkins on the 8th floor, of the Investec Bank building.' D

It is not disputed that Mrs Lefkowitz did so, again without first calling for a copy of the trust deed.

On 24 January 1994 Mrs Lefkowitz gave written notice of her resignation as an employee of Reichmans with effect from 28 February 1994. Shortly thereafter she had E occasion to discuss the question of her share options with Mr Jacobson, Reichmans' managing director. There was a problem. As at the time when her resignation would take effect she would not have been employed for a period of two years reckoned from the dates on which each of the two offers had been made to her. On Jacobson's F understanding of the terms of the trust deed she was accordingly precluded from exercising her options unless the trustees, acting on the instructions of the directors of Investec Bank, agreed thereto. He made such a recommendation in respect of the Reichmans offer of 500 shares but it was not accepted because the directors were fearful, so it was later explained, of creating 'a dangerous precedent'. That decision G when conveyed to Mrs Lefkowitz caused such a strain on her relationship with her employer that Jacobson agreed that she could depart immediately albeit on full pay and without prejudice to such rights as she may have had to take up her share options.

In the mean time Mrs Lefkowitz had consulted her attorney. On 9 February 1994 he wrote to Reichmans, inter alia: H

'As it is the intention of our client to exercise her rights she requires a copy of the Staff Share Trust including the rules of the scheme. Our client wishes to acquaint herself with the procedure which she is presumably obliged to follow in the exercising of her rights.'

For a reason never adequately explained in the papers a copy of the obsolete scheme, I annexure F, was handed to Mrs Lefkowitz to forward to her attorney, instead of the substituted scheme, annexure PRJ3. On 17 February 1994, when Mrs Lefkowitz was deemed still to be in Reichmans' employ, her attorney wrote to Jacobson, acting on behalf of both companies, as follows:

'6.

In summary: J

Nienaber JA

6.1

my client has exercised, alternatively hereby exercises the A options granted to her in the letters referred to in para 2 above;

6.2

Reichmans is called upon to deliver the certificate evidencing that such shares are registered in my client's name against which payment will be made, either to Reichmans or Investec, as you prefer.'

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