Nyandeni Local Municipality v Hlazo

• Jurisdiction: South Africa
• Judge: Alkema J, Pillay J and Ndengezi J
• Judgment Date: 12 November 2009
• Citation: 2010 (4) SA 261 (ECM)
• Docket Number: CA 68/09
• Hearing Date: 21 August 2009
• Counsel: DC Botma for the appellant. S Dzingwa (attorney) for the respondent.
• Court: Eastern Cape Division

Alkema J: A

[1] The Shifren principle, which binds contracting parties to the entrenchment clause under their written agreement to the effect that no variation thereof shall be binding unless agreed to in writing and signed by both parties, remains controversial. Depending on the facts of the case, its application may sometimes result in harsh and inequitable B consequences. For this reason, and over the period of 45 years of its existence, and particularly since 1994 with the coming into operation of the new constitutional order, the principle has from time to time reared its head in unsuccessful attempts by our courts to develop the common law in order to escape, in appropriate circumstances, such consequences; C only to be knocked back into place by definitive judgments from the Supreme Court of Appeal reaffirming its status and its scope and ambit of operation, and coupled with reminders to the lower courts to observe the stare decisis rule.

[2] The court a quo was once again requested to relax the principle. It D refused the invitation. On appeal, this court is yet again invited by the appellant to embark on the perilous journey of developing the common law by escaping the Shifren shackle. Our only beacons are judgments from the Supreme Court of Appeal pointing the direction where not to go. As the law stands at present, there are no exceptions to the application of the Shifren principle, and there are no decided cases not E overturned on appeal where the Shifren principle was relaxed. This then is the issue in this appeal.

[3] The facts of the case, which are either common cause or not seriously disputed, are the following. F

[4] The appellant is a local authority. The second respondent was at all material times employed by it as its municipal manager in terms of a written employment agreement. The first respondent is the relevant provincial department of local government which abides the decision and has not entered the dispute, and has no further interest in the matter. Since the inception of the legal proceedings the appellant, at different G times, was either the applicant or the respondent; and likewise the second respondent. For the sake of clarity I shall in this judgment continue to refer to the appellant as the municipality; and to the second respondent as the municipal manager.

[5] The employment contract between the municipality and the municipal H manager was signed on 11 September 2007, but operated retrospectively from 1 July 2006. Two months after it was signed, and during November 2007, the accounting firm Deloitte & Touche prepared an interim forensic accounting report highlighting certain financial irregularities concerning, inter alia, the municipal manager. The allegation by I the municipality that the municipal manager 'concealed' the report from the council and the mayor, and only revealed it when threatened with criminal action, is not disputed by him.

[6] On the strength of the forensic report, the council resolved on 28 March 2008 that the municipal manager be given a three-month J

Alkema J

A 'precautionary suspension'. For reasons which do not appear from the papers, the municipal council thereafter, on 4 April 2008, advised the municipal manager that the 'precautionary suspension' was withdrawn, and that he should report to his offices on Monday 7 April 2008 at 8h00. When he reported at 8h00 on the date as instructed, he was given a letter of the same date advising him, inter alia, as follows (I quote verbatim B from the letter):Alkema J

'1.

It is has emerged therefrom (the report) that the management of the municipality at one stage increased its salary without the approval of the Council of the Municipality.

2.

C It has emerged therefrom further that the pay roll has been interfered with such that there are people who are not employed by the Municipality but are paid salary by the municipality Management on monthly basis.

3.

It has emerged therefrom further that the Management is directly involved on all above irregularities including mismanagement of D funds of the Municipality.'

[7] The letter concluded by calling on him to show cause, at 11h00 on the same date, why he should not be suspended 'as the Accounting Officer of the Municipality'.

[8] The municipal manager thereupon, in writing, requested the municipality E to give him more time to respond to the threat of suspension. It is unclear from the papers whether further discussions ensued between the parties or whether or not they reached any agreement in regard to time limits and/or the making of further representations; or whether the municipality even considered the request for more time, or even if it was agreed that he be temporarily suspended. What is clear, however, is that F at 11h30 on 7 April 2008 the municipality handed the municipal manager a letter advising him as follows (I again quote verbatim):

'Further to our letter for you to show cause, kindly be advised that it has been considered prudent and wise to suspend you from your duties as the Accounting Officer for the purpose of conducting an investigation G of the contents of the Deloittes & Touche report which sights irregularities in relation to the payroll system, against you for a period of three months or on completion of the foresaid investigation with full pay from the time of the receipt thereof.'

[9] The letter concludes that the municipal manager would in due H course be advised in writing of the date of a disciplinary hearing, 'should such a route be found to be a necessary one'.

[10] The municipal manager does not attack in any way the circumstances under which he was suspended pending the outcome of the disciplinary hearing, and this was never, and is not, an issue in this appeal I or in any of the preceding hearings. Nothing further need be said about this.

[11] On 24 June 2008 the municipal manager was served with a 'Notice of misconduct', calling on him to attend a disciplinary hearing on a stated day, time and place to answer four charges and alternative charges J of misconduct. The charges may be summarised as follows:

Alkema J

Charge 1 A

A contravention of s 171 of the Municipal Finance Management Act 56 of 2003 in that, inter alia, the municipal manager wrongfully authorised irregular salary overpayments to certain senior managers, including himself. B

Charge 2

A contravention of the same section, in that he 'improperly' engaged the services of a service provider by the name of Apexq Consulting, and in a dishonest manner caused unauthorised payments to be made to it. C

Charge 3

He wrongfully:

(1)

Caused overexpenditures in respect of payments to five service providers named in the charge.

(2)

Failed to ensure that there were valid contracts in place with the D said service providers.

(3)

Failed to recover penalty fines from the named service providers.

(4)

Caused payments to be made to Apexq Consulting in respect of services which were never rendered.

Charge 4 E

He wrongfully, in contravention of the said Act and without authorisation, disposed of a certain immovable municipal asset (the town clerk's house) in circumstances where he knew he was not entitled to do so.

[12] The stated commencement date of the proposed disciplinary hearing F was 3 July 2008, but the hearing was postponed to a later date which does not appear from the papers. It is common cause that at all material times, including at the hearing of the disciplinary enquiry, the municipal manager was represented by an attorney from East London, Ms N Pakade. At the conclusion of the disciplinary hearing, and having considered the evidence and the arguments, the chairperson returned a G verdict of 'guilty'. It is not clear from the papers in respect of which charges the municipal manager was found guilty, or when the finding was handed down. However, it seems probable that the verdict was reached sometime during September 2008.

[13] The municipal manager was advised of the verdict of guilty, and he H was again invited to submit written representations on why a recommendation should not be made to the council for his dismissal. Such representations were made, and, at a special meeting of the council on 3 October 2008, the report of the chairman of the disciplinary enquiry and her recommendation that the municipal manager should be I dismissed, together with the submissions and representations of both parties, were considered.

[14] On the same day, namely 3 October 2008, the municipal manager handed a letter to the mayor, predated 1 October 2008, in which he tendered his resignation as municipal manager with immediate effect. It J

Alkema J

A seems that the municipality did not accept the resignation, and on 8 October 2008 it served a letter dated 7 October 2008 on the municipal manager, advising him that the council had resolved to confirm the finding and recommendation of the disciplinary enquiry, and that he was therefore dismissed with immediate effect. He was advised that he had B the right to appeal against the findings and/or sanction.

[15] On 10 October 2008 the municipal manager's attorney addressed a letter to the municipality, complaining that the dismissal procedure which was followed was defective in three respects, namely:

(1)

The municipal manager should have been given the opportunity to C make representations to the council before the decision was taken to dismiss him.

(2)

The decision to dismiss him should have been taken 'in consultation' with the municipal manager.

(3)

The decision had an adverse effect on the municipal manager.

D [16] It is necessary to make a few observations concerning the letter of 10 October. Firstly, it does not refer to or even faintly attack the lawfulness, validity and/or outcome of the disciplinary hearing. The...