Moyo v Old Mutual

• Jurisdiction: South Africa
• Judge: The Court (Joseph Raulinga J, Mpostoli Twala J and Ingrid Opperman J)
• Judgment Date: 16 May 2022
• Court: Gauteng Local Division, Johannesburg
• Docket Number: 22791/2019
• Citation: 2022 JDR 1248 (GJ)

The Court (Raulinga J, Twala J and Opperman J):

INTRODUCTION:

[1]

The first and second respondents shall be referred to as 'Old Mutual' and the third to sixteenth respondents as 'the Directors'. Where Old Mutual and the Directors are referred to collectively, they will be referred to as the respondents.

[2]

The termination of the applicant's ('Mr Moyo's') contract of employment as the Chief Executive Officer ('the CEO') of Old Mutual, gave rise to his urgent application for reinstatement. An interim order was granted by Judge Mashile whereafter a dispute arose as to the interpretation of such order. Mr Moyo contended that he was entitled to be physically re-instated and Old Mutual contended that the order reinstated the contract only but that Old Mutual's filing of an application for leave to appeal had in any event suspended the order because, although interim in nature, was final in effect and interim orders which are final in effect are suspended by applications for leave to appeal in terms of section 18 of the Superior Courts Act 10 of 2013 ('the Superior Courts Act'). Old Mutual brought an urgent application for a declarator that their interpretation of the order was correct and if not, that the interim order reinstating Mr Moyo be suspended pending the appeal. Judge Mashile who had granted the interim order dismissed this latter application and that development entitled Old Mutual to an automatic urgent appeal in terms of section 18 of the Superior Courts Act. In that appeal the Court found that Old Mutual's interpretation on most fronts was correct, confirming too that the filing of the application for leave to appeal had indeed suspended the operation of the interim order. After the granting

2022 JDR 1248 p3

The Court (Raulinga J, Twala J and Opperman J)

of the interim order by Judge Mashile and in the run up to the appeal hearing, Old Mutual had refused to permit Mr Moyo back onto the Old Mutual premises to resume his position as CEO and these 'lockouts' formed the cornerstones of a contempt application for non-compliance with the interim reinstatement order. Certain public utterances by Old Mutual's chairman, Mr Trevor Manuel, a former Minister of Finance, contributed to Mr Moyo's allegations of contempt by scandalising the Court, which was brought as a counter application to Old Mutual's urgent application for declaratory relief as to the status of the interim order (with the alternative relief being the suspension of the interim order). Mr Moye subsequently also brought an application to declare the Directors to be delinquent and he sought their removal from the board of Old Mutual in terms of the Companies Act 71 of 2008 ('the Companies Act'). The application for an order declaring the Directors of Old Mutual to be delinquent directors and the application to have them declared to be in contempt of court came before this Full Court by the means described below.

[3]

On 23 August 2021, Malindi J granted an order in terms of which the application in which Mr Moye sought to have the Directors declared delinquent in terms of section 162(5)(c) of the Companies Act under case number 22791/2019 ('the delinquency application') was consolidated with the contempt application which Mr Moye had instituted as a counter application when Old Mutual brought the urgent application in terms of section 18 of the Superior Courts Act, application ('the contempt application') to proceed as one application which we understand to mean that the two applications would be heard simultaneously. This accords with the manner in which the applications were argued before us. The applications against the fifth respondent were withdrawn and this consolidated application thus proceeds against 15 respondents only.

2022 JDR 1248 p4

The Court (Raulinga J, Twala J and Opperman J)

COMMON CAUSE FACTS OR FACTS TO BE ACCEPTED BY VIRTUE OF THE PLASCON-EVANS RULE

[4]

Old Mutual and Mr Moyo were both shareholders in NMT Capital before it appointed him as its CEO. Mr Moyo, Mr Sango Ntsaluba and Mr Thabiso Tlelai each directly and indirectly held 26,6% of the shares in NMT Capital. Mr Moyo was at all times a director of that company. Old Mutual invested in NMT Capital as a BEE investment in January 2005. It took up 20% of the shares in NMT Capital and provided funding to it by subscribing for preference shares at a price of R5,5m.

[5]

On 25 January 2005, Old Mutual entered into a Preference Share Subscription Agreement with NMT Capital (then known as Amabubesi Investments Pty Ltd) and its ordinary shareholders including Mr Moyo. It included the following provisions: In terms of clause 4.3.3 read with Schedule 1, NMT Capital undertook to pay prescribed preference dividends to Old Mutual every six months; Clause 1.2 of the Schedule 1 provided that "[n]o dividends may be paid on ordinary shares before all arrear preference dividends have been paid' and in terms of clause 5, NMT Capital undertook to redeem the preference shares after five years, that is, in January 2010.

[6]

Old Mutual and the NMT Capital shareholders, including Mr Moyo, also entered into a Shareholders' Agreement on 25 January 2005. It too stipulated in clause 19.2, that "dividends may only be declared on the ordinary shares once all arrear dividends have been paid".

[7]

Old Mutual thereafter provided further preference share funding to NMT Capital. The total value of its investment in NMT Capital's preference shares ultimately came to R46m.

2022 JDR 1248 p5

The Court (Raulinga J, Twala J and Opperman J)

[8]

Old Mutual and Mr Moyo executed his contract of employment in March 2017 ('the contract of employment'). The contract of employment made it clear that Mr Moyo's employment was based on the parties' relationship of confidence and trust. Clause 3.6 emphasised the importance of interpersonal compatibility recording that it formed an inherent requirement of his appointment; in clause 3.7, Mr Moyo agreed that Old Mutual's confidence in his performance formed an inherent and essential requirement of his appointment and continued employment; in clause 12.1, Mr Moyo acknowledged that his employment relationship with Old Mutual was based on trust and mutual respect; clause 12.2 elaborated on Mr Moyo's fiduciary duties to Old Mutual. It identified a number of specific duties and added that a breach of any of them would warrant termination of his employment.

[9]

The contract of employment made elaborate provision for the disclosure and resolution of any conflicts of interest. Clause 5.2 identified Mr Moyo's existing business interests set out in addenda A and B. They included his interests in NMT Capital. He undertook "that such business interests shall not detract from his duties as Chief Executive Officer". Clause 14.1 obliged Mr Moyo to disclose any actual or potential conflict of interest to Old Mutual as soon as he became aware of it. In addendum A, Mr Moyo undertook to manage his interest in NMT Capital in accordance with certain requirements. He agreed in the penultimate bullet point that any conflict resulting from his directorship of NMT Capital "will be dealt with by the Chairperson of (Old Mutual)". Addendum B was a protocol for the regulation of potential conflicts between Mr Moyo's duties as CEO of Old Mutual and his interests in NMT Capital.

2022 JDR 1248 p6

The Court (Raulinga J, Twala J and Opperman J)

[10]

Clause 24 provided for the termination of Mr Moyo's employment. In terms of clause 24.1.1, either party had the right to terminate their contract on six months' notice in writing ('the termination clause').

[11]

Under the Preference Share Subscription Agreement, NMT Capital was meant to pay preference dividends to Old Mutual every six months and redeem the preference shares after five years. It, however, requested and obtained Old Mutual's agreement to delay those payments from time to time.

[12]

At the end of January 2018, the parties to the Preference Share Subscription Agreement concluded an agreement to extend the redemption date of Old Mutual's preference shares in NMT Capital, until 30 June 2018. Mr Moyo signed this agreement on 29 January 2018. At that time, NMT Capital was also in arrears with its payment of preference dividends to Old Mutual. The amount outstanding was R63,5m. NMT Capital made further requests for the extension of the date for redemption of the preference shares beyond 30 June 2018. Old Mutual, however, declined those requests.

[13]

On or about 1 March 2018, the board of directors of NMT Capital approved the declaration of an ordinary dividend in an amount of R10m. Mr Moyo participated in the decision to declare this dividend. NMT Capital declared this ordinary dividend at a time when its preference share dividends due to Old Mutual were in arrears. The total amount outstanding as at 31 December 2017 was R63.5m.

[14]

Mr Moyo's share of the R10m ordinary dividend was R1.6m paid to him on 8 March 2018.

[15]

On 30 June 2018 the full amount of Old Mutual's preference share funding to NMT Capital became due and payable to Old Mutual in accordance with the

2022 JDR 1248 p7

The Court (Raulinga J, Twala J and Opperman J)

agreement concluded in January 2018. Mr Moyo knew that this amount was payable to Old Mutual because he had signed the agreement.

[16]

On 4 July 2018 the NMT Capital board decided, in a meeting chaired by Mr Moyo, by a resolution proposed and supported by Mr Moyo, to distribute an amount of R105m to ordinary shareholders. Of this, an amount of R21m was paid to Mr Moyo in his personal capacity (being his 20% portion of the R105m dividend) on 5 July 2018 and a further R7m was paid to the company owned by his family trust. He thus personally (directly and indirectly) benefitted to the extent of R28m. In the circumstances, the declaration of the ordinary dividend of R 105m was made in breach of clause 19 of the NMT...