Magongwa v East London Industrial Development Zone (Soc) Ltd
| Jurisdiction | South Africa |
| Judge | BR Tokota J |
| Judgment Date | 28 May 2020 |
| Docket Number | EL466/15; ECD: 866/15 |
| Court | East London Circuit Local Division |
Tokota J:
Introduction:
This was one of those trials where the evidence was, for the better part thereof, based largely on reading documents rather than reliance on human memory. This of course is not to say human memory would have served a better purpose. On the contrary, contemporaneous documentary evidence is always more reliable than human memory which is fallible. Furthermore, regard being had to the manner in which the plaintiff planned to present her case, and in particular considering the time lapse, reference to documentation was inevitable. However, too much reading of documents tends to obfuscate rather than clarify the true issues for determination. This trial was largely prolonged by this reading of documents and quotations from statutes. Yet, brevity will always lubricate the wheels of justice.
Issues for determination:
The claim by the plaintiff is for damages she allegedly sustained through the defendant's repudiation of her contract of employment between them. The basis of the cause of action is accordingly set out in the pleadings. The defendant, East London Industrial Development Zone (hereinafter referred to as the entity or IDZ), resisted the claim. The issue for determination is whether the defendant repudiated the plaintiff's
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contract of employment. The main contention is that the defendant withdrew the delegated powers of the plaintiff and thereby deprived her of her capacity to perform her duties in terms of the contract. In the alternatively, it is contended that the defendant repudiated the implied term of the contract by subjecting the plaintiff to occupational detriment and subsequently dismissing her.
The pleadings:
In the particulars of claim the plaintiff alleged that she was employed by the entity as a Chief Financial Officer (CFO) with effect from 1 November 2014 for a contractual period of five years. Soon after her employment and upon her having conducted some investigations she reported to the Chief Executive Officer and the Board of IDZ that the IDZ was de facto insolvent. She alleged that in March 2015 and consequent upon her report the defendant withdrew her delegations and authority to discharge her duties as a CFO and invested a task team, alternatively, a 'cash lab' with the powers and duties of the CFO. Furthermore the defendant appointed her subordinate to perform her duties without reference to her.
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She was subsequently charged with misconduct. On 14 April 2015 she was suspended from duty pending the finalisation of her misconduct enquiry. After the misconduct enquiry was finalised she was dismissed on 28 July 2015. She claimed that both the suspension and disciplinary action constituted occupational detriment as defined in the Protected Disclosures Act 26 of 2000 (the PDA or the Act). She pleaded that the conduct of the defendant amounted to a repudiation of her contract. She accepted the repudiation. Consequently she claimed that she suffered damages in the sum equal to her salary and benefits for the period spanning from 1 May 2015 to 31 October 2019.
The defendant admitted employment of the plaintiff. It admitted her suspension on 14 April 2015 and pleaded that such was necessary regard being had to the nature of the charges that were preferred against the plaintiff. The defendant further admitted that the plaintiff was dismissed. It pleaded, however, that she was dismissed on 31 July 2015, pursuant to a disciplinary process which had been set in motion against her.
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The defendant denied that it repudiated the contract and that the plaintiff accepted such repudiation. It pleaded that the plaintiff initially participated in the disciplinary process but later elected to opt out. The defendant denied that the suspension and dismissal were unlawful and prayed that the plaintiff's claim be dismissed.
The defendant also denied that the suspension or the dismissal of the plaintiff was unlawful or invalid in terms of section 3 of the PDA or at all. It further denied that the disclosures which were made by the plaintiff were protected by the PDA or that they were made by the plaintiff in good faith. It denied that such disclosures were reasonable in that the plaintiff did not have a reasonable belief that they were substantially true.
In response to questions in terms of Rule 37(4) of the Uniform Rules the defendant contended that the withdrawal of delegations of authority related only to authorization of payment of creditors effective from 6 March 2015 to 31 March 2015. The withdrawal of the delegation was therefore limited both in time and scope.
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The Evidence:
The plaintiff was the only witness who gave evidence in support of her claim.
She testified that after she was head hunted she was employed by the defendant as a CFO and assumed duties on 2 November 2014. She was employed on a fixed term contract of five years commencing on 1 November 2014. Soon after assuming duties it was brought to her attention that there was a risk that, due to a financial crisis, the entity might not be able to pay salaries of employees at the end of the month. This was brought to the attention of the Chief Executive Officer (CEO). In her opinion this risk was due to financial mismanagement. She stated that she had discovered that in the financial statement of the financial year 2013/14 an amount of R119 million was reflected as available whereas on a proper analysis there was a deficit of R23million.
In order to survive that year the entity utilised the maintenance funds which were earmarked for operational functions. These were 'ring fenced' funds. The entity paid performance bonuses when it was not performing. She recommended that the funds be replenished, but the Board did not
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approve the recommendation. According to her the use of those funds constituted an irregular expenditure.
There were a series of properties that were bought by the entity notwithstanding that they were outside its operational zone. The first batch was the social housing project. She testified that the defendant went outside its mandate and acquired a piece of land in 2007 and embarked on a social housing project for building low cost houses. The entity spent R67million on the infrastructure on this development project but the development never took off the ground. There was never any development of that land. It applied for accreditation after spending R67 million. The application was unsuccessful. It then abandoned the project. According to her this programme is regulated by section 54(2)(d) of the Public Finance Management Act No. 1 of 1999 (PFMA) and therefore the entity needed approval of the Treasury and that of the Executive Authority.
She went on to state that there were three properties that were acquired in Berlin. One property was donated by the Buffalo City Metropolitan Municipality (BCM). Berlin is 30 km away from the IDZ zone. Kemba station was donated by BCM. The plan was to lease it to investor Langa Energy to undertake a solar energy. Transformers were installed.
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There was a premature expenditure which was a fruitless and wasteful expenditure. The entity has been trying to sell the transformers all but in vain.
Fort Jackson land was acquired on the basis of an exception to the tender processes. The property was also outside the 5 km zone allowed to the defendant. Bridger farm properties were also outside the designated zone. The land was valued at R4 million. There was no economic sense in buying the land. The land was bought even though it failed geotechnical tests and the transaction was without the approval of the Treasury.
She further testified that rental penalties were not collected. One of the entity's tenants Mr Khaya Ngqula, the director of African Sports Holdings, had leased a golf course belonging to the defendant. This was also outside the operational zone of the defendant. The rent was R3900 per month. On top of that 10% of the royalties of the annual turnover was never collected. No steps were taken to collect arrear rentals until November 2015 which was after the Price Water Cooper (PWC) report was released.
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On 11 November 2014 she reported some of the irregularities resulting in short fall to the CEO and suggested a forensic audit.
The CEO responded on the same day and said, inter alia, that finance division historically had always kept information close to their chests thus creating an impression that all was well. That had been his major concern to the extent that it resulted in action being taken against some keepers after they were exposed by the Auditor General (AG). The CEO went on to say "we need to get to the bottom of this and put processes in place to control our expenditure properly." [1]
The plaintiff felt that the process of attending to the so-called irregularities was moving at a snail's pace. She was of the view that even bonuses and performance bonuses were unwarranted. She was particularly concerned about the payment of performance bonuses when the entity was not performing well at all. She testified that the entity was paying R5 million in salaries but it was paying R7 million in performance bonuses. She had some ideas to alleviate the financial plight of the entity but those fell on deaf ears as she did not get joy from the CEO.
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At some stage she realised that there were some movements of funds without her knowledge as CFO. She then gave instructions to the finance officials that all movements of money from one account to another had to be made with her approval.
On 1 December 2014 in an Executive Management meeting she reported that the...
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