Dali Mpofu v SABC Ltd

In considering the questioning of the lawful or unlawful suspension the high court confirmed that “there are significant differences between executive directors and non-executive directors. The applicant occupies a dual status as a director and as an employee. The managing director of a company occupies a similar position. It has been held that the employment of a managing director has ‘a double aspect’ since he or she is ‘both manager and director’. In other words, a managing director ‘may hold two distinct positions, namely, on the one hand, that of the holder of the office of director and, on the other hand, that of manager, and as manager the managing director may be employed by the company’. It is common cause that the applicant has been suspended qua employee and an enquiry has been instituted into his conduct qua employee. The applicant continues to act as a director. His suspension and the decision to institute disciplinary proceedings only concern his status as an employee. This application seeks to preserve his status as an employee.”

Essence

Questioning lawful suspension and high court decided applicant had failed to prove any infringement of legality principle.

Decision

(2008/18386) [2008] ZAGPHC 413 (16 September 2008)

Order:

Refused application with costs. [Note: Mpofu v SABC dated 19 May 2008 and full bench decision in SABC v Mpofu dated 166 June 2009]

Judges

Frans Malan J,

Heard: 28 August 2008
Delivered: 16 September 2008

Related books

Darcy du Toit et al Labour Relations Law: A Comprehensive Guide 6ed 925 pages (LexisNexis 2015) at

Darcy du Toit et al Labour Law Through The Cases – loose-leaf service updated 6 monthly (LexisNexis 2021)

Van Niekerk and Smit (Managing editors) et al [email protected] 5ed (LexisNexis 2019) at 

Reasons

“[27] The Board manages and controls the affairs of the first respondent. It may delegate its powers and this it has done in terms of the Delegation of Authority Framework. Section G deal inter alia with the Termination of Employment Relationships and clause G 9 provides that the Board bears the responsibility to initiate disciplinary proceedings against ‘top and senior management’, that is employees at levels SC 110 and 115 who are members of Exco and who are accountable to the Board. The applicant is employed at level SC 110 and disciplinary proceedings may be taken against him by the Board.

The Board is required in terms of clause G 9 to notify the Minister of the proceedings. In paragraph 38.2 of the answering affidavit it is stated that the Minister has ‘been notified and kept informed at all material stages of the steps being taken in relation to the Applicant, has been provided of copies of the letter of 12 June 2008 initiating the enquiry and attaching the charge sheet, and will continue to be kept so informed.’”

Quotations from judgment

Note: Footnotes omitted and emphasis added

[1] This application has a history. On 21 May 2008 Tsoka J set aside a decision by the first respondent’s Board to suspend the applicant from his position as Group Chief Executive Officer of the first respondent, the SABC. This application concerns decisions taken by the Board at two meetings held on 2 and 11 June 2008 and affecting the applicant’s employment as GCEO.

[2] The Board on 2 June 2008 resolved:

‘7.22.1 To proceed with a formal inquiry process in relation to the allegations against the applicant;
7.22.2 To consider making a fresh decision to suspend the applicant for reasons that were subsequently recorded in a letter dated 2 June 2008;
7.22.3 To give the applicant an opportunity to make representations in relation to the contemplated suspension before making a decision on that issue.’

[3] The applicant was informed that the Board had resolved to institute a formal process into his conduct and capacity and that details of the allegations would be sent to him in the course of the following week. He was also notified that the Board was contemplating making a fresh decision to suspend him on full pay. He was invited to make representations as to why he should not be suspended pending the enquiry.

[4] The Board resolved on 11 June 2008:

‘2 to establish an ad hoc committee to deal with the enquiry into the GCEO’s conduct and capacity, any further issues relating to his suspension and all ancillary matters. …
3 that the enquiry to determine allegations of misconduct, incapacity and incompatibility in relation to the GCEO be instituted as soon as possible, and that the ad hoc committee referred to in 2 above be authorised to deal with all matters incidental to that process …
4 after considering all relevant factors including the seriousness of the allegations which are the subject of the enquiry into the conduct and capacity of the GCEO, the interests of the SABC and the interests of the GCEO, that the GCEO be suspended with immediate effect pending the outcome of that enquiry.
5 to appoint Mr Gabriel Mampone to act in the position of the GCEO during Mr Mpofu’s suspension.’

[5] On 19 June 2008 the applicant launched an urgent application in which he sought final relief in Part A of his notice of motion as follows:

‘2 The special meeting of the Board of Directors of the SABC held on 11 June 2008 is declared unlawful.
3 The special meeting of the Board of Directors of the SABC held on 02 June 2008 is declared unlawful.
4 The resolution of the Board of Directors of the SABC dated 11 June 2008 is null and void and therefore of no force and effect.
5 That any resolution taken at the special meeting dated 02 June 2008 is/are null and void and therefore of no force and effect.
6 The applicant’s suspension is set aside forthwith.
7 The decision by the Board of the SABC to institute disciplinary enquiry [sic] against the applicant is unlawful and therefore of no force and effect.
8 Setting aside the appointment of Mampone (third respondent) as Acting Group CEO as unlawful.
9 That the non-executive Members of the first respondent are held personally liable to pay the costs of this and previous related applications in terms of section 424(1) of the Companies Act and such costs be on attorney and own client scale.’

[6] In the alternative, the applicant applied for interim relief in the following terms:

‘10 Pending the finalisation of the review application(s) referred to in Part B, the following orders are made:
10.1 The applicant’s suspension is set aside as unlawful.
10.2 The meeting of the Board of Directors of the SABC on 11 June 2008 is declared unlawful.
10.3 The decision by the Board of the SABC to institute disciplinary enquiry against the applicant is unlawful and therefore of no force and effect.’

[7] In Part B, the applicant indicated that he intended to apply for the following orders:

‘(a) reviewing and setting aside the decision/resolution of the Board of Directors of the SABC dated 11 June 2008 and other meetings dealing with the suspension of the applicant and related issues (‘the special meetings’); and
(b) reviewing the failure and/or refusal of the fourth and fifth respondents to take the necessary steps towards the removal of the non-executive Directors of the first respondent;
(c) compelling the fourth and fifth respondents to take the necessary steps towards the removal of the non-executive Directors of the first respondent.’

[8] Part A was argued before Gildenhuys J from 8 to 10 July 2008. In the course of argument, the applicant’s counsel indicated that the applicant applied for urgent and final relief in terms of prayers 2, 3, 4 and 5 only. It was agreed that prayers 6, 7 and 8 would be postponed to 5 August 2008 and Part B. The applicant indicated that he did not persist in seeking the relief in prayers 9 and 10. On 15 July 2008, Gildenhuys J dismissed prayers 2, 3, 4 and 5 reserving costs. The applicant applied for leave to appeal and on 18 August 2008 Gildenhuys J dismissed the application.

[9] On 5 August 2008, Gildenhuys J postponed this application matter to the week commencing 26 August 2008 in order to allow the applicant time to file an affidavit in response to the answering affidavit of the fifth respondent (‘the Minister’).

[10] The contract of employment entered into between the SABC and the applicant was signed by the applicant and Mr Funde, the then chairman of the Board, on 1 August 2005. It states that the applicant is a ‘full-time employee of the SABC and nothing in this agreement shall be interpreted to indicate otherwise.’ Clause 5 of the contract of employment provides:

‘5. Disciplinary Procedure
Advocate Daluxolo Mpofu shall be subject, in particular to the disciplinary procedure at the SABC. Should Advocate Daluxolo Mpofu be found guilty in terms of the provisions of the SABC Code of Disciplinary Procedure, then the SABC may impose any punishment in terms of such findings on Advocate Daluxolo Mpofu including, where appropriate, summary dismissal. In the latter instance, this agreement shall forthwith be terminated without any penalty on the SABC.’

[11] The SABC’s personnel rules and regulations (including its disciplinary code) are incorporated into the contract of employment by express reference. Clause 1.2.2 of the contract of employment provides:

‘The SABC’s Personnel Rules and Regulations shall form an integral part of this Agreement and shall apply to Advocate Daluxolo Mpofu who acknowledges that he knows the said rules and regulations, that he has access thereto and that it applies to him and his relationship as employee of the SABC.’

[12] The clause 12 of the personnel regulations deals with suspension of an employee and provides:

‘Where, prima facie, an employee has inter alia committed an act of serious misconduct such as assault or theft or fraud, the employee may be suspended pending an investigation and/or the holding of a disciplinary hearing. The employee shall be advised that the Corporation is considering suspending the employee pending an investigation or the holding of a disciplinary hearing and the employee shall be given an opportunity to respond to the proposed suspension before a decision is made to suspend such employee. If the employee is suspended, the employee shall be advised of the suspension in writing. Any such suspension shall be on full pay.’

[13] I have to deal with the relief sought in prayers 6, 7, 8, 11 and 12. The substantive prayers read:

‘6. The applicant’s suspension is set aside forthwith.
7. The decision by the Board of the SABC to institute disciplinary inquiry against the applicant is unlawful and therefore of no force and effect.
8. Setting aside the appointment of Mampone (Third Respondent) as acting Group CEO as unlawful.’

[14] The applicant contends that the Board did not have the power in law to institute a disciplinary enquiry against him, to suspend him, and to appoint the third respondent as acting GCEO. In his founding affidavit, the applicant formulated his case in relation to prayers 6 and 7:

‘86 The content of the Resolution [of 11 June 2008] is also invalid for the reason that in so far as the Board purports to institute disciplinary proceedings for serious misconduct against me, the Board is acting ultra vires its powers. The administrative body which is responsible for my appointment is not the Board but the Minister. This is in terms of the Articles of Association.’
87. Whilst the Board may ordinarily have been entitled to impose a precautionary suspension pending an investigation into the allegations against me, which is defined in the applicable Disciplinary Code as ‘a precautionary, administrative measure that does not constitute a disciplinary measure’, the situation is different when taking a disciplinary measure such as the one contained in the resolution.
88. In this case it is the Minister, as the appointing authority who is entitled to have a final say. Neither the resolution itself nor the covering suspension letter makes the allegation that a recommendation was ever referred to the Minister who made such a decision. On the contrary, the decision to charge is unlawfully presented as having been taken by the Board.
89. The decision to institute a disciplinary enquiry against me stands to be struck down on this additional ground, quite apart from the separate invalidity of the resolution giving rise to it.’

[15] The nature of the applicant’s attack is thus that the ‘applicable legislative instruments’ which regulate the powers of the Board do not expressly or impliedly confer on the Board the power to suspend the applicant or to dismiss him or remove him from office as GCEO. The applicant contends that the power to do so vests in the fifth respondent by virtue of her capacity as shareholder of the first respondent. The first respondent thus acted beyond its powers in suspending the applicant and instituting disciplinary proceedings against him.

The applicant in advancing these contentions relied on articles 11.1.2, 14.4.1(e) and 19.1.1(a) of the first respondent’s articles of association. The applicant contends that these provisions in the articles make it clear that the appointment of the GCEO is subject to the process described in article 11.1.2, namely that the non-executive directors of the Board make a recommendation to the fifth respondent who then has the power to approve or reject a recommended candidate.

The applicant also contends that the ‘relevant legislative instruments’ do not expressly deal with the power to suspend or dismiss the GCEO and that in the absence of an express power to this effect, the general principle applies that the power to appoint also include the power to dismiss and that this power would also include the limited powers to suspend or institute disciplinary proceedings as a normal incidence of the power to appoint or dismiss.

The first, second and third respondents allege that they have informed the fifth respondent of their decision to suspend the applicant. The fifth respondent, however, alleges that she became aware of his suspension only when she received the application this matter. The fifth respondent accepts that she did not take part in or authorise the decision bringing about the applicant’s suspension. The applicant’s case is thus based on the principle of legality, viz that,

‘the exercise of public power is only legitimate where it is lawful. It is central to our constitutional order that the legislature and the executive are in every sphere constrained by the principle that they may exercise no power and perform no function beyond those conferred on them by law.’

[16] As far as the position of the third respondent is concerned, the applicant contends that the third respondent did not qualify for appointment at all as acting GCEO. The applicant relies on clause 19.2 of the articles which makes it clear that the person to be appointed as acting GCEO must be ‘an executive director’ of the first respondent. It is common cause that that the third respondent is not an executive director of the first respondent.

[17] The respondents accept that the appointment of the GCEO is subject to the process envisaged by clause 11.1.2 of the articles of association and the non-executive directors are required to make a recommendation to the fifth respondent on a suitable candidate to be appointed. They do not accept, however, that as a corollary the Minister, the fifth respondent has the power to dismiss or suspend. The respondents rely on the provisions of the Board Charter, the Protocol on Corporate Governance and the Delegation of Authority and also the provisions of the applicant’s contract of employment, to which I have referred, and contend that their power to suspend and discipline is subject only to the obligation to inform the fifth respondent.

[18] It is thus necessary to refer to the regulatory framework governing the first respondent’s powers. The Broadcasting Act 4 of 1999 (the ‘Act’) provides for the conversion of the ‘old’ South African Broadcasting Corporation established in terms of the Broadcasting Act 73 of 1976 into a public company deemed to be incorporated in terms of the Companies Act 61 of 1973 with the State its sole shareholder.

According to s 13(11) the Board ‘controls the affairs’ of the first respondent. Section 12 of the Act deals with the composition of the Board of the first respondent so incorporated: it consists of twelve non-executive members as well as the Group Chief Executive Officer, the Chief Operations Officer and the Chief Financial Officer ‘or their equivalents’ who are the executive members of the Board. Section 13(1) provides that the twelve non-executive members are appointed by the President on the advice of the National Assembly.

There is no provision in the Act dealing with the appointment of the executive directors. The non-executive members are appointed on the basis of personal selection in a manner ensuring the participation of the public in a nomination process; transparency and openness and the publication of a shortlist (s 13(2)). The executive directors, on the other hand, hold office only by virtue of their employment. They are also members of the executive committee (s 14(1)). The applicant did not become a director of the first respondent in terms of s 13 but solely because of his appointment as GCEO.

[19] The articles of association of the first respondent deal with the employment of the three executive members of the Board. The relevant provisions are the following:

‘1.5.1 If the provisions of these Articles are in any way inconsistent with the provisions of the Act, the provisions of the [Companies] Act shall prevail, and these Articles shall be read in all respects subject to the Act.
1.5.2 Notwithstanding the omission from these Articles of any provision to that effect, the Corporation may do anything which the Statutes empower the Corporation to do.’

3 The directors may, in their discretion but subject to the provisions of the Broadcasting Act, the IBA Act, the ICASA Act and the provisions of the Memorandum of Association, undertake, whether wholly or in part and whether temporary or permanently, any business or branch of any business which the Corporation is expressly or implicitly empowered to undertake.’

Article 12.1 provides that ‘the Board controls the affairs of the Corporation in accordance with the provisions of the Statutes.’ Article 14.1.1 states:

‘The management of the business and control of the Corporation shall be vested in the Directors, who, in addition to, and without limitation of the powers expressly conferred upon them by the Broadcasting Act or these Articles, may exercise or delegate to any one or more persons all such powers.’
Article 14.4.1(e) imposes the duty on the Board to ‘appoint Group Executive members subject to article 11.1.2’.
Article 15.3 provides:
‘15.3.1 The affairs of the Corporation are administered by an Executive Committee consisting of the Group Chief Executive Officer, Chief Operating Officer, Chief Financial Officer and no more than 11 other members;
15.3.2 The Executive Committee is accountable to the Board;
15.3.3 The Executive Committee must perform such functions as determined by the Board.’

[20] The following articles are relevant to the appointment of the GCEO: Article 1.1.15 defines the ‘Group Chief Executive Officer’ as the officer ‘appointed by the board in terms of article 14 hereof.’ Article 14.4.1(e) provides that the Board shall ‘appoint Group Executive Members subject to article 11.1.2’.
Article 11.1 provides:

‘11.1.1 The Corporation will have a Board which shall consist of 15 (fifteen) Directors, of whom, 12 (twelve) shall be non-executive Directors appointed by the President and 3 (three) shall be Executive Directors, namely, the Group Chief Executive Officer, the Chief Financial Officer and the Chief Operating Officer or their equivalents.
11.1.2 The non-executive Directors shall, after they have conducted interviews and compiled a short-list for preferred candidates, recommend to the Member the appointment of the preferred candidate to fill any position as the executive Directors of the Corporation.
11.1.4 The contract of employment of each executive Director shall be for a term not exceeding 5 (five) years and is renewable’ (my emphasis).

Article 19.1.1 provides:

‘Any Group Chief Executive Officer appointed in terms of the Broadcasting Act and of these Articles shall:
(a) be appointed by the Board after the due process described in article 11.1.2 above and shall have her or his contract of employment approved by the Minister …’ (my emphasis).

[21] Article 13.1.5 provides that a director ‘shall cease to hold office as such’ if ‘the Board recommends that the appointing authority [sc ’body’] as defined in the Broadcasting Act, 1999, after due enquiry, terminate the services of a director on account of misconduct or inability to perform his or her duties’. The ‘office’ referred to in this article is the office of director and the ‘appointing authority’ the ‘appointing body’ as defined in the Act.

This article does not apply in this matter since it does not relate to the termination of the contract of employment concluded between the SABC and the executive directors but to the removal of a director from his office as director. It is, in any event, apparent from section 15 of the Broadcasting Act that the ‘enquiry’ referred to in article 13.1.5 must be conducted by the Board and not by the ‘appointing body’.

The ‘appointing body defined in s 1(1) of the Act is the ‘body charged with the appointment of members of the Board …’, ie the President on the advice of the National Assembly (s 13(1)). Section 15 provides that ‘[t]he appointing body may remove a member from the office on account of misconduct or inability to perform his or her duties efficiently after due enquiry and upon recommendation by the Board.’

[22] The process for the appointment of the GCEO is thus that the Board initiates the selection process. Its preferred candidate is then recommended to the State for approval and the Minister, the fifth respondent, is empowered to approve the employment contract. This is followed by the Board making the appointment followed by the conclusion of a contract of employment between the first respondent and the GCEO.

Neither in the Act nor in the articles of association is it contemplated that the Minister or the State becomes the employer. The same conclusion follows from the Board’s Charter: paragraph 1.13 of Appendix A refers to the powers reserved for the shareholder (the State) and includes among them ‘[a]pproval of the appointment of executive directors of the Corporation, by the Board or extension of executive directors’ terms of office’.

[23] Non-executive directors occupy the office of director but do not have contracts of employment with the SABC. On the other hand, executive directors are required to have contracts of employment with the SABC. For example, the GCEO is required have a contract of employment for a period not exceeding five years. The contract of employment creates a range of rights and obligations that do not exist in the case of non-executive directors. It means that, in effect, executive directors enjoy a dual status as directors and as employees.

There are significant differences between executive directors and non-executive directors. The applicant occupies a dual status as a director and as an employee. The managing director of a company occupies a similar position. It has been held that the employment of a managing director has ‘a double aspect’ since he or she is ‘both manager and director’.

In other words, a managing director ‘may hold two distinct positions, namely, on the one hand, that of the holder of the office of director and, on the other hand, that of manager, and as manager the managing director may be employed by the company’. It is common cause that the applicant has been suspended qua employee and an enquiry has been instituted into his conduct qua employee. The applicant continues to act as a director. His suspension and the decision to institute disciplinary proceedings only concern his status as an employee. This application seeks to preserve his status as an employee.

[24] I do not agree with the applicant’s contention that the role of the Board is only to compile a short list of candidates and to make a recommendation to the Minister, and that the non-executive directors have no power to appoint a fellow director. Nor do I think that the use of the word ‘after’ in article 11.1.2 gives any indication where the power of appointment resides.

The articles of association must be construed as a whole. This argument ignores the provisions of article 19.1.1(a) which provides expressly that the GCEO shall ‘be appointed by the Board after the due process described in article 11.1.2 above and shall have her or his contract of employment approved by the Minister.’

This is what happened when the applicant was appointed; the Board recommended his appointment which was noted with approval by the cabinet. The fifth respondent attended to certain issues requiring clarification and, when that was done, confirmed that the appointment should be made. It was at all times understood that the appointment itself was made by the Board.

The fifth respondent’s letter of 22 June 2005 reads:

‘I am happy to inform that Cabinet today, 22 June 2005, noted the appointment by the SABC Board of Mr Dali Mpofu as the Chief Executive Officer (CEO) of the South African Broadcasting Corporation, on a fixed term of contract of five (5) years, with effect from 1 July 2005.
Cabinet was also informed that the SABC Board would take the responsibility of ensuring that this appointment is communicated to all relevant stakeholders.
However, a number of issues were raised by Cabinet, which I need to discuss with yourself and the Deputy Chairperson.
Kindly submit to me the contract, draft performance agreement, conditionalities for non-performance and salary package you will offer, before you enter into an offer/agreement with Mr Mpofu, as these are some of the matters to be discussed.’

[24] The word ‘approve’ as used in article 19.1.1(a) must be given its ordinary meaning of ‘sanction, ratify or confirm’. In the circumstances of this case it bears no other meaning. The fifth respondent is required to ‘approve’ the applicant’s appointment, not make it.

[25] The applicant’s case is that the decision to institute disciplinary proceedings is an inevitable concomitant of the power to appoint and dismiss. I have found that that the fifth respondent has no such power to appoint or dismiss. The fifth respondent, consequently, has no power to institute a disciplinary enquiry.

[26] The Act does not deal with disciplinary proceedings against employees of the first respondent. Section 15 of the Act is concerned with proceedings against directors. Read with the definition of ‘appointing body’ it is clear that the section is concerned only with the removal of the non-executive directors appointed pursuant to s 13. The Act is concerned with proceedings against directors qua directors and not with proceedings against employees whether the chief executive officer or any other. Part 5 of the Act is concerned with the Board and its members and s 15, where it refers to the removal from office of a member, deals with a member of the Board as such. It does not purport to and does not concern employees. It enables the President as the ‘appointing body’ to remove a member from the office after due enquiry and recommendation by the Board. This relates only to the office of director or a member of the Board: the Act is not concerned with employee relations.

[27] The Board manages and controls the affairs of the first respondent. It may delegate its powers and this it has done in terms of the Delegation of Authority Framework. Section G deal inter alia with the Termination of Employment Relationships and clause G 9 provides that the Board bears the responsibility to initiate disciplinary proceedings against ‘top and senior management’, that is employees at levels SC 110 and 115 who are members of Exco and who are accountable to the Board. The applicant is employed at level SC 110 and disciplinary proceedings may be taken against him by the Board. The Board is required in terms of clause G 9 to notify the Minister of the proceedings.

In paragraph 38.2 of the answering affidavit it is stated that the Minister has ‘been notified and kept informed at all material stages of the steps being taken in relation to the Applicant, has been provided of copies of the letter of 12 June 2008 initiating the enquiry and attaching the charge sheet, and will continue to be kept so informed.’ The Minister in paragraph 18 of her affidavit states that to her recollection the letter of 12 June 2008 came to her attention as part of the applicant’s papers (which were served on the Ministry on 19 June 2008).

She, however, adds that ‘I was by then aware of the Board’s decision to institute disciplinary proceedings against the Applicant. I was informed thereof telephonically by Ms Mkonza, the Board’s Chairperson, during the evening of 6 May 2008 and the Board’s resolution was confirmed in the letter to me of that date …’.

In his answering affidavit the applicant finds the apparent contradiction between these two statements ‘astounding’.

I do not find it necessary to resolve this issue:

  • First, the statements are not necessarily contradictory and I have no reason to reject the statement in the answering affidavit.
  • Secondly, even if the letter of 12 June 2008 was not sent to the Minister, she was aware of disciplinary proceedings being taken against the applicant from 6 May 2008 and is certainly aware of them now.
  • Thirdly, the requirement that the Minister be notified does not affect the validity of any disciplinary action taken by the Board: as I have shown, it is the Board and not the Minister that is empowered to take disciplinary proceedings.

Should the Minister be dissatisfied, she representing the only shareholder in the first respondent can take whatever action she deems appropriate in terms of the articles of association and the Act. She has in fact stated that at no time did she have the intention to take part in the merits of the dispute the applicant and the other respondents.

[28] In his answering affidavit the applicant also relies on the recommended appointment of Mr Mvuso Mbebe as the chief operations officer to show that the Minister appoints the executive directors. He referred to the resolution of the Board in 2007 recommending the latter’s appointment to the Minister. The recommendation was forwarded to the Minister in June 2007 but the Minister in September 2007 indicated that she did not support the appointment and was reluctant to refer the matter to the Cabinet.

Thereafter, and after further discussions with the Minister when she again rejected Mr Mbebe as the Board’s preferred candidate the Board resolved on 6 March 2008 to rescind its resolution to appoint him and to recommence the process of recruitment. In this series of events the applicant seeks to find support for his contention that it is the Minister who appoints the executive directors but that the administration of the contract of employment is left to the chairperson of the Board.

I fail to see the relevance to these proceedings of the Board’s not appointing Mr Mbebe nor do I find any support therein for the applicant’s contentions. Indeed, the process followed supports the respondents’ case. As the Minister stated in her replying affidavit: ‘In respect of both the applicant and Mr Mbebe recommendations were made to the Board for approval, in contemplation of an appointment being made by the Board. The fact that the outcomes were different, in that the former was approved and the latter was not, does not establish an inconsistent approach to the process or a variant interpretation of the Articles and other legal instruments.’

[29] The applicant’s case as formulated in the founding papers is based the first respondent’s alleged unlawful action in breach of the provisions of the articles of association. The first respondent is deemed to be a public company incorporated in terms of the Act with a single shareholder, the State. The Minister must determine the memorandum and articles of association of the first respondent which the Registrar must register them. These have been registered and are annexed to the founding papers. Section 8A(6) states that the provisions of ss 32, 44, 54(2), 60, 63(2), 64, 65, 66, 172, 190 and 344(b) and (d) of the Companies Act do not apply to the first respondent. Of importance is s 65(2) which provides that ‘[t]he memorandum and articles shall bind the company and the members thereof to the same extent as if they respectively had been signed by each member, to observe all the provisions of the memorandum and of the articles, subject to the provisions of this Act.’

Although the operation of this subsection is excluded this, it seems to me, is due to the fact that the first respondent has one shareholder only. However, nothing in the papers before me suggests that the articles of association are not binding on both the company and its member and that they govern their rights inter se. The effect of the articles of association of the first respondent is therefore no different from that in any other case where there are more than one shareholders: they are taken to create a contractual relationship between the company and its members. From this certain consequences follow.

Cilliers and Benade summarise them:

‘The memorandum and articles do not constitute a contract between the company and a director in his capacity as such. A director cannot therefore rely on the terms of the articles in order to retain his office, or to determine the amount of the remuneration due to him or for any other reason unless an implied or tacit agreement can be construed by the circumstances. If a special contract had been entered into between the company and a director, their rights and duties are determined by reference thereto. The parties may incorporate the provisions of the memorandum and articles in a contract in express terms, or incorporation of such provisions may be inferred from the surrounding circumstances. In either event, the contingency provided for in the memorandum or articles will then be governed by such provisions by virtue of its incorporation in the contract.’

[30] In prayer 8 the applicant seeks to aside the appointment of the third respondent as acting GCEO on the basis that Mr Mampone is not one of the executive directors of the SABC and may consequently not be appointed as acting chief executive officer by virtue of the provisions of article 19.2. Article 19.2 empowers the Board to appoint an executive director as acting GCEO. Mr Mampone is not an executive director. On behalf of the applicant it was contended that the Board in making this appointment acted beyond its powers; the powers vested in the Board must be exercised in terms of the articles of association which create the power. Moreover, it was argued that, because the power is in the nature of a discretion it had to be exercised in compliance with the preconditions set for its exercise. The respondents answer is that the appointment is not a ‘formal’ appointment as envisaged by article 19.2 but a delegation of powers as contemplated by the first respondent’s Delegation of Authority structure without the appointment of Mr Mampone as an executive director.

I would be surprised, given its wide powers, if the Board did not have the power to delegate these functions to Mr Mampone, but I need not decide this issue. For the reasons referred to the applicant lacks the required standing to challenge the appointment of the third respondent. The applicant, albeit a director of the first respondent, does not have a sufficient, direct, interest in the subject matter entitling him to challenge the appointment.

Moreover, the applicant’s complaint rests squarely on article 19.2 of the articles of association. The applicant has no entitlement to found a cause of action on the articles of association. It is for the Minister, the shareholder, to raise this issue, not for an individual director.

[31] The conclusion I have reached is that the applicant has not shown any infringement of the principle of legality on which he relies. This makes it unnecessary for me decide whether this court or the Labour Court has jurisdiction to hear the matter.

The application is dismissed with costs including the costs reserved by Gildenhuys J in relation to the hearing of 8 to10 July 2008 (such costs to include the costs of two counsel).

Court summary