Mpofu II

Problem started in beginning of 2008

4 April after the first meeting with GCEO the chair started preparing a memo
7-9 April meeting started where the memorandum was first discussed but not given. GCEO and others
were informed of it and others were asked to be on standby but they were no included
23 April letter of invitation to respondent to attend meeting but asked not to attend
24 April was asked to attend and other board members were surprised to hear that he had not yet
seen the memo
29 April parliament discussed the fact that the memo was not yet given to GCEO
6 May advised that there would be meeting on 7 May
6 May in the evening had a meeting where GCEO was dismissed

Facts

[7] During the early part of 2008 an induction meeting of the Board was held. An expert in corporate
governance and author of the King Code, Mr Mervyn King SC gave a presentation to the Board on its
oversight role and there was particular emphasis on the delineation of the role between management
and the Board. During this induction meeting the respondent requested that a meeting be held to
clarify the separate roles of management and the Board. The respondent understood that as General
CEO he was responsible for the day to day operational matters of the SABC and not the Board.

[9] On 7 April 2008 the chairperson gave the respondent notice of a meeting to be held on 9 April
2008 of the non-executive board where the respondent, Ms Mampane and Mr Nicholson were ordered
to be “on stand by”. The meeting was not held at the premises of SABC but at the Hyatt Hotel in
Rosebank. The respondent and the other two members attended the meeting but waited outside
throughout and were not called in. A few days thereafter a Board memorandum was leaked to the
Sunday Times newspaper: “NEW BOARD GUNS FOR SABC BOSS” meaning the respondent. He
requested a copy of the memorandum to no avail. This step commenced the tormenting but extremely
damaging approach by the Chairperson to let the respondent know the various meetings concerned
him but his participation was controlled and curtailed by her. This conduct must be weighed against the
principle that the Board in its entirety is the principal focal point of good corporate governance2 and
that the fiduciary duty the directors owed to each other is paramount.

[11] On 23 April 2008 the chairperson sent a letter inviting the respondent to a meeting of the non-executive Board
which was to take place on the same day. The letter stated that it would not be appropriate or desirable for him to
be present. He did not attend.

[12] On 24 April 2008 he was invited to attend another non-executive directors’ meeting. He presented himself and
was told to wait outside whilst the meeting commenced. He was duly called in. The question of the memorandum
was raised. Members of the Board especially Mr Peter Mavundla and Ms Allison Gillwald were surprised that he had
not seen it. Mr Andile Mbeki a director and member of the Board announced that a decision had been taken to
investigate the respondent around the issues contained in the memorandum.

16] From the Saturday, a few days prior to the fateful Board meeting of Tuesday 6 May 2009, the respondent had
been trying to reach the chairperson to meet with her about certain urgent matters. She advised she did not take
calls over the weekend. When he managed to reach her on the Sunday she promised to come back to him. On
Tuesday 6 May 2008 the respondent after what he considered proper legal process decided to suspend a senior
employee Dr Zikalala who admitted to leaking confidential material to third parties. The respondent suspended Dr
Zikalala in accordance with the SABC Disciplinary Code. He wished to address the staff about the suspension at
16h00 that day and then the Press. Prior to making this decision public, the respondent tried to convey his decision
to the Chairperson and requested a meeting with her. He attempted to contact her through the company secretary
and left voice messages on her cell phone. He eventually sent her a letter urging her to make time to meet him about
a senior employee who leaked information to third parties. By the said Tuesday they had still not met. By 16h00 he
had still not made contact with the Chairperson. At 16h00 he made the announcement as planned.

[17] The Chairperson contacted him at 17h00 and said her cell phone battery had been flat. She advised that she did
not recognize the suspension of Dr Zikalala. She advised that there would be a meeting with him on 7 May 2008
about the matter.
[18] Rather precipitously and during the evening of 6 May 2008 at about 19h59 and whilst the respondent was
meeting with the executive members he was informed that there would be a non-executive Board meeting to
commence at 20h00 and that the executive members were required “to remain on standby.” When he together with
Ms Mampane and Mr Nicholson were finally called in, there were four Board members present and some of the
other Board members were on teleconference. The status of Ms Mampane and Mr Nicholson as directors was not
questioned at all for the purposes of this meeting. The respondent was called upon to explain the suspension of Dr
Zikalala. He explained inter alia that such suspension was within his powers as Group CEO. Since Dr Zikalala had
admitted to leaking the confidential material to third parties the respondent was of the view that he had acted
within the powers as Group CEO of the SABC and the delegation authority framework to suspend him. In terms of
the disciplinary code duly adopted by the Board, discipline was a management function. Dr Zikalala was on
precautionary suspension.

[19] She then requested them to leave the meeting. At 01h40 he received a telephone call from the Chairperson
advising that he had been suspended. When he asked the reason she said it was serious. He later read the resolution
passed. The respondent contends that the reference in the resolution to suspend him referred to his “divisive and
disruptive conduct”. He felt this was included as an afterthought so as to conceal the real reasons for suspending him
viz Dr Zikalala.

Relevant statutory framework

[21] The SABC was established pursuant to the Broadcasting Act 4 o f 19 9 9 (“the Broadcasting Act”) having been
converted from the former SABC to a company now deemed to be a public company incorporated in terms of
the Companies Act 6 1 of 19 7 3, (“the Companies Act”). Since the date of the conversion the State is the sole
shareholder and thus its only member. The memorandum and the Articles of Association of the SABC were
registered in terms the Companies Act. Sect i o n 8 A of the Broadcasting Act excludes section 65 of the
Companies Act in particular Section 65(2) which provides that the Memorandum and Articles of Association are
binding on the company.

[22] Notwithstanding the SABC did register the Memorandum and its own Articles of Association. It was registered
as a company having a share capital not adopting S c h ed ul e 1. Words and expressions in the Articles had to
bear the meaning as assigned in certain Statutes referred to in the Articles, inter alia, the Broadcasting Act,
the Companies Act, the Public Finance Management Act 1 o f 19 9 9, Telecommunications Act 1 0 3 o f 1 9 9 6,
Treasury Regulations for Departments 2002 and other statutes.

[23] The Articles3 provide that general meetings of Directors are to be called whenever the Board thinks it fit.
Notices 4provide that the notice of the general meeting shall comply with the provisions of the Statutes, which of
course includes the Companies Act. The Articles 5provide that notice of a general meeting shall be given on not less
than 14 clear days and notice must be given to such persons who are in accordance with the provisions of the
Articles entitled to receive notice of all meetings. The notice shall specify the venue, date and time of the meeting
and if it is special business the nature of such business. Special business is not defined. The Articles6 provide that
the Board may regulate its meetings as it thinks fit provided that the Board shall meet regularly. A quorum must
consist of nine members.

[24]Executive directors conclude contracts of employment for 5 years. The Articles7 deal with the duties of the
Board. The Board controls the affairs of the Corporation in accordance with the Statutes. The directors have to
exercise the utmost good faith, honesty and integrity in all their dealings with or on behalf of the SABC and always
act in its best interests. Article 12.2.9 ensures that matters of confidential nature should be treated as such and not
be divulged to anyone without the authority of the SABC. Provision is made 8 that each director must be in a position
to make informed decisions.

[25]The powers of the Board are defined9. The management of the business and control of the Corporation is vested
in the directors. The directors must ensure that any decision taken is not inconsistent with the Statutes or the
Articles and complies with the statutes or any resolution passed by a general meeting. The Articles define the
proceedings of the Board. The chairperson may and the secretary at the request of a director shall at any time
convene a meeting. The Articles 10 define the notice required for such a meeting. The Board shall determine the
number of days notice to be given for the Board meetings and the form and the medium for giving that notice.

[26]The Articles 11provides for directors’ written resolutions. Article 18.1 provides that “Subject to the statutes, a
duly minuted resolution in writing signed by all the directors shall be as valid and effectual as a resolution passed at a
meeting of the Board duly called and constituted”. Article 18.3 provides that the written resolution shall be deemed
to have been passed on the day it was signed by the last director unless a statement to the contrary is made in the
written resolution. Article 18.4 provides that a written resolution which is not signed by all the directors shall be
inoperative until confirmed by a meeting of the Board.

[27]It is the appellants’ approach that the resolution is reflected as an extract of the minute book and therefore the
minute does not have to be signed by all the directors to be valid. The respondent relies in his founding affidavit
upon the fact that the resolution was not signed by all the directors as is required in terms of the Articles. Upon a
proper analysis of this submission it is clear that the actual resolution was not signed by all directors.

[28] A further feature of importance is whether the Board in making the decision to suspend the
respondent was mindful of and indeed applied proper corporate governance principles in coming to
their decision. The central issue of corporate governance is the accountability of senior management
and the Board of a company because of the extensive powers vested in them.

[29] The King Report on Corporate Governance for South Africa 2002 deals with public sector
enterprises. The first appellant is a public company and is a public sector enterprise as defined in
terms of the Public Finance Management Act No 1 of 1999. Companies and their Boards are required
to measure up to the principles set out in the Code. King recommends that public enterprise should try
and apply the appropriate principles set out in the Code. The Code sets out principles and does not
determine detailed conduct. The conduct of public enterprises must be measured against the relevant
principles of the Code and must adhere to best practices. The Code regulates directors and their
conduct not only with a view to complying with the minimum statutory standard but also to seek to
adhere to the best available practice that may be relevant to the company in its particular
circumstances.

[30] The Board and its directors are ultimately accountable and responsible for the performance and
affairs of the company. King noted that given the synergy which takes place between individuals of
different skills, experience and background, the unitary board structure with executive and non-
executive directors interacting remains appropriate for a South African company. In terms of the King
Code, Board meetings should include mechanisms that are efficient and timely. Board members
should be briefed prior to meetings and Board members should take the responsibility of being
objectively satisfied that they have been furnished with all the relevant information and facts before
making a decision. Although non-executive directors may meet separately the attendance of executive
directors at Board meetings is of value. The diversity of views is important. The Board has a collective
responsibility to provide effective corporate governance and should exercise leadership, enterprise,
integrity and judgment in directing the company.

[31] In this case the absence of meaningful notice, the exclusion of not only the respondent from a
substantial portion of the Board meeting juxtaposed to the manner in which two executive members of
the Board were intentionally excluded, then included and thereafter excluded from a debate among
Board members is an issue of crucial concern. The importance of the deliberation by all members of
the Board could not have escaped the chairperson. The issues which had surrounded the
memorandum had smouldered throughout April 2008 had certainly after the parliamentary Portfolio
Committee meeting become an inflammable issue. The potential suspension of the respondent was an
issue which required the attention of the entire Board as defined in the Broadcasting Act and the
Articles. In addition the Board had to be in a position to make informed decisions as required by the
Articles.14 The events surrounding the convening of the meeting and the execution thereof correctly led
the court a quo to the inescapable conclusion that it had to be set aside.

The absence of the respondent, Ms Mampane and Mr Nicholson at the moment critique when the
decision to suspend him was taken

[32] The appellants contend that the court a quo erred in fact by finding that the decision was taken in
the absence of the respondent at the meeting. They contend that he was at the meeting and he did
participate. The respondent’s limited participation at the meeting is common cause. He was called in
and only allowed to deal with the matter of Dr Zikalala. Such participation was neither meaningful nor
in accordance with the best practice as described in the King Report particularly when regard is had to
the fact that the SABC is a public enterprise. The limitation on the participation of the other two
executive members is also not in accordance with best practice. The court a quo was correct in finding
that a Board meeting must consist of all Board members. The suggested justification by the appellants
for their exclusion was based on the fact that they report to the respondent and presumably are his
subordinates. This approach is inconsistent with the Articles which gives the executive directors full
status. There is no suggestion in the appellants’ papers that the conflict of interests issue was debated
that evening, and if it was, it would have had to be dealt with in accordance with section 17 (2) of the
Broadcasting Act. It was not.

In any event it does not appear that the type of conflict of interest in question here falls into this
category. The chairperson appears to have unilaterally and without proper deliberation with all the
members of the Board made a decision to exclude the respondent based on a perceived conflict of
interest. The entire deliberation on this aspect should have been debated by the directors and minuted.

Sufficiency of Notice

[37] It was common cause that on 6 May 2008 the respondent and the other two executive directors
were notified of the meeting on 1 minutes notice. The respondent and the two executive directors were
called into the meeting for a short period. The respondent addressed the meeting where after he and
the two executives were asked to leave. Therefore the respondent was not present inside the meeting
of 6 May 2008 when the decision was taken. The submission that the respondent was part of the
meeting (albeit a portion thereof) is to overlook the ambit and purport of what a properly constituted
Board meeting should be. In my view the Board was not properly assembled.

[40] The Articles of Association deal with meetings and do allow for the Board to define the conduct of
its own meeting. Upon a proper interpretation of the Articles the Board must mean the Board and not
the deliberate exclusion of a portion of the Board to determine how meetings must be conducted, again
a corporate governance issue. Although teleconference is permissible in terms of the Articles, the
question to be determined is whether in these circumstances it was necessary to conduct the meeting
in this way and in addition whether the decision had to be made in the early hours of the morning when
a meeting had already been scheduled for 7 May 2008.

[41] The respondent and his two executive directors were given one minutes notice of the meeting and thereafter
kept out of the meeting except for a short period. These issues go to the crux of whether the meeting was properly
convened. Furthermore it is not in accordance with proper corporate governance to keep directors out of a Board
meeting then allow them in for a selected period and when the vote is taken to remove them from the meeting. The
question is whether this procedure was permissible. The above circumstances in my view do not make it possible to
hold that there was a properly convened meeting of the first appellant’s directors and that the business transacted
was valid.

The proper conduct of the meeting

[42] Seligson JA in Transcash Swd (Pty) Ltd v Smith 23 referred to a number of cases involving the proper conduct of
Board meetings. In De Villiers and another NNO v Boe Bank Ltd 24Navsa JA stated “Of course, principles of good
governance of companies dictate that resolutions should be properly taken at general meetings or meetings of
directors after due and proper deliberation. This does not mean, however, that in instances where this course is not
strictly followed the directors cannot otherwise bind a company”. In other words the particular circumstances are of
importance when assessing the validity or otherwise of the resolution. The suspension of a high profile General CEO
in a public sector enterprise which is particularly directed to observe principles of good corporate governance and
best practice must ensure that it adheres to the principles referred to above. There could not have “due and proper”
deliberation” in the absence of the three Board members.

[44] In Silver Garbus and Co (Pty) Ltd v Teichert27, formalities can be dispensed with provided that a board meeting
of all the directors agree to what is done. This is not such a case. At least three directors have not agreed to the
resolution taken at the meeting.

Jajbay J

[64] Integrity is a key principle underpinning good corporate governance. Put clearly, good corporate
governance is based on a clear code of ethical behaviour and personal integrity exercised by the
board, where communications are shared openly. There are no opportunities in this environment for
cloaks and daggers. Such important decisions are not made in haste or in anger. There must be
ethical behaviour in the exercise of dealings with fellow board members. These dealings must be dealt
with in such a manner so as to ensure due process and sensitivity
[66] Ubuntu-botho is deeply rooted in our society. These values should assist in informing corporate
decisions made by directors in state owned enterprises. Proper and constructive dialogue would
enable better outcomes in the decision making process. Heated and impetuous decision making is the
stuff of irrational outcomes. This must be avoided. This form of governance is underpinned by the
philosophy of ubuntu-botho. The time is right to incorporate the views of umuntu ngumuntu ngabantu in
the King code of good governance.
$$$$$$$$$$$$$$$$$$$
MthimunyeBakoro v Petroleum Oil and Gas Corporation of South Africa (SOC) Limited and another
[2015] JOL 33744 (WCC)

This case concerns corporate governance, the animating idea of which is to ensure net gains in wealth for
shareholders, protect the legitimate concerns of other stakeholders and improve efficiency, organisational
performance and resource allocation. To this end, through a process of development, the common law has imposed
a series of duties and responsibilities upon directors, in essence these being:
(1) A set of fiduciary duties, that is the duty to avoid conflicts of interests, to act honestly, to promote the best
interests of the company, not to usurp corporate opportunity, not to take secret profits, not to fetter votes and to
exercise powers for the purpose for which they were granted and not for any collateral purpose.
(2) The duty of care, skill and diligence, which essentially amounts to the duty to manage the affairs of the company
in the same manner as would be done by a reasonably prudent person of business.

This application raises a number of questions concerning the application of these principles, their purpose and the
relationship of the common law to the Companies Act 71 of 2008 ("the Act"). It was launched as a matter of urgency
in which the applicants seeks to challenge the lawfulness of certain meetings of the first respondent's board of
directors and a decision and resolutions made and passed at such meetings.

The applicant is an executive director of first respondent and its chief financial officer. The first respondent is a
subsidiary of the Central Energy Fund (SOC) Limited, which is a Stateowned entity reporting to the Department of
Energy. It is therefore a public entity as contemplated by the Public Finance Management Act 1 of 1999 (see
schedule 2) and has been described as the national oil company of South Africa. The second respondent is the
interim chairperson of first respondent, who chaired the meetings which are the subject matter of this dispute.

First respondent's board of directors comprises of eight nonexecutive directors and two executive directors namely,
applicant and Ms Nosizwe NokweMacamo who is the group chief executive officer ("GCEO") of first respondent. It is
further common cause that the executive directors of first respondent, the applicant and the GCEO were not notified
nor invited to the meeting on 18 June 2015.

The background to this meeting is set out comprehensively in the answering affidavit, upon which averments I am
entitled to rely. The relevant facts can be summarised thus:
- During December 2014 it came to the attention of the board that first respondent was expected to declare a
substantial loss of several billion Rand for the financial year ending March 2015.
- Consequently the first respondent performed far below the target performances which had been expected.
According to the answering affidavit, which was deposed to by Mr Sebothoma, an attorney acting as the company
secretary of first respondent, the loss at the time of the deposition of the affidavit was projected to be in the order of
R4.58 billion, which incorporated an impairment charge of approximately R5,4 billion.
This loss was later revised in May 2015 in the amount of R14,89 billion of which approximately R14 billion relates to
an impairment charge. These losses have received much publicity in the press during and subsequent to the
launching of this application.
The board then commenced a process of seeking to establish the cause of these losses and the poor performance of
first respondent.

Following this letter, a meeting of the nonexecutive directors of the first respondent was called for on 18 June 2015.
It appears that the primary purpose of this meeting was to consider the precautionary suspension of the applicant
and the GCEO. All of the first respondent's directors, save for applicant and the GCEO, were given notice of the
meeting.

The meeting was then attended by all of the nine nonexecutive directors who were invited, apart from Mr
Hlatshwayo, who tendered an apology. It appears that he has subsequently resigned as a director. The first
respondent's attorneys of record were also invited to speak at the meeting and advise the members of the board. At
that meeting the board decided to place the GCEO and applicant on precautionary suspension. All but one of the
nonexecutive directors who attended voted in favour of this decision.

Mr Bembridge, who appeared on behalf of the applicant, submitted that respondent's conduct, as I have outlined it,
contravened not only the law but also fundamental principles of proper corporate governance. The meeting of 18
June 2015 was in violation of these principles. Thus, it stood to be declared unlawful and the decisions and
resolutions taken and passed at the meeting had to be declared invalid and of no force and effect. In this connection
he cited the judgment in South African Broadcasting Corporation Limited v Mpofu and another [2009] 4 ALL SA 169
(GSJ) [also reported at [2009] JOL 23729 (GSJ) Ed] in which a full bench approved certain basic principles of corporate
governance relying, inter alia, on the King Report on Corporate Governance for South Africa (which is referred to as
the King Code).

Applying these principles Mr Bembridge submitted that the suspension of a high profile chief executive officer in a
public sector enterprise, which is directed to observe principles of good corporate governance and practice, was a
matter which required the strictest adherence to these principles. He noted that in Mpofu's case, the court had
found, on the basis of these principles that, notwithstanding the perceived conflict of interest regarding a possible
suspension, the chief executive officer and director in question was entitled to participate fully throughout the
meeting. A decision to exclude him and two executive members from a meeting at which a decision to suspend the
director as the CEO was taken upon the reliance of a conflict of interest, prevented the director from discharging his
duties and precipitated a fatal flaw in the process conducted by the board.

In the circumstances the court in Mpofu had held that due to the absence of meaningful notice of the meeting,
exclusion of respondent and the other executive directors from substantial portions of the board meeting and a
failure to ensure proper deliberation amongst members of the board, there had not Page 15 been a properly
convened meeting, no business was validly transacted and the resolution of the meeting had to be set aside. Mr
Bembridge submitted that the fundamental principle that could be gleaned therefrom was that a meeting of a board
would be invalid and unlawful where a director has been excluded from full participation therein, save where the
exclusion could be shown to be justified.

With this finding in mind I can return to the substance of the dispute. Central to respondents' answer to applicant's case
was that a further meeting of the board was held on 13 July 2015. The primary purpose of this meeting appeared to be
for the board to consider, indeed to reconsider, the decisions which were taken at the meeting of 18 June 2015 to
suspend the applicant and the GCEO. The applicant and the GCEO were both given notice and attended this meeting.

As appears from the agenda circulated with the notice of 9 July 2015, the main purpose of this meeting was to consider
this application and to reconsider the resolution to suspend the two officers. It was attended by all the directors. The
applicant Page 19 and the GCEO participated in the meeting via a video conference link from respondents' offices in
Sandton. At the meeting the second respondent noted that the applicant was conflicted regarding the issues and the
agenda that related to her. The applicant differed and indicated that she did not agree as the issues did not involve her
financial inferences.

The chair pointed to the provisions of section 75(4) and (5) of the Companies Act and invited the applicant to address the
board in this regard, which she so did. After receiving the applicant's representations and further complaints concerning
the provision of insufficient information, the board requested the applicant to excuse herself from the meeting in order
that it could commence deliberations on the issues affected. The applicant then left the meeting. After both the applicant
and the GCEO had been excused, the board debated the proposed resolutions and resolved, inter alia, to confirm (and to
reconfirm) the decision which it had initially taken on 18 June and to the extent necessary resolved afresh to suspend the
applicant.

Given the change of focus of the meeting of 13 July, it appears possible to summarise the dispute between the parties
and the issues which now fall to be determined as follows:
(1) Whether, in the light of the meeting of 13 July and the decision taken at that meeting, the relief sought by the
applicant in respect of the 18 June meeting has become moot?
(2) If this relief is not moot, or if it is otherwise necessary for the court to consider the issue, whether the meeting of 18
June and the decision taken thereat to suspend the applicant was valid?
(3) The validity of the 13 July meeting and the decision taken at that meeting to suspend the applicant.

Mr Bremridge submitted that applicant, having been excluded from the prior meeting of 18 June, could not be
expected to contribute to a process designed to consider or reconsider Page 23 decisions taken thereat without
access to this set of documentation. Mr Bremridge noted further that the second respondent chaired the meeting
held on 13 July 2015. She noted that the applicant was conflicted in regard to the matters for consideration of this
meeting before the applicant had an opportunity to address the board on it and before the board had an
opportunity to debate this.

In short, she had clearly predetermined the issue. Applicant was, in Mr Bremridge's view, permitted to make
representations of the meeting as to the perceived conflict of interest as referred to by the chairperson. There was
no further consideration or debate between the directors on the issue of any conflict, at this stage. Applicant's
representations in this regard together with the objections of the short notice, the failure to provide the requested
information were dismissed out of hand and she was then obliged to leave the meeting. Mr Bembridge noted that
the GCEO was then permitted to make representations in relation to the alleged conflict of interest. Again there does
not appear to have been any further consideration or debate on this issue between the directors and she was
excluded from further deliberation or discussion. Accordingly the GCEO was also obliged to leave or be recused from
the meeting. Page 24 With these facts as his basis Mr Bremridge again invoked dicta from the Mpofu decision to
which I have already made reference:
"The chairperson appears to have unilaterally and without proper deliberation with all the members of the Board,
made a decision to exclude the respondent based on a perceived conflict of interest. The entire deliberation of this
aspect should have been debated by the directors and minuted."

[court then distinguishes Mpofu on the basis that there were many flaws]
[It also distinguishes other cases quoted in Mpofu especially Transcash on the basis that it did not determine that a
person was not in a conflict of interest in these situations and even if he was that would no longer apply in terms of s
75 which now deals with conflict of interests

NBNB final conclusion: With these principles in mind, I return to the meeting of 13 July.
Whatever the legality of the meeting of 18 June and, in my view, without deciding, the
resolution of suspension may have been valid, given the law as I have outlined it, the latter
Page 37 meeting holds the key to the resolution of this dispute.

What was different about the meeting of 13 July was that the applicant was given timeous notice, she attended the
meeting, addressed the meeting before being excused from it prior to the resolution been taken.
Applicant's complaint appears then to fall within four categories:
(1) She was given insufficient notice of the meeting.
(2) She was not provided with sufficient information in order to participate.
(3) A view was formed that she was conflicted when she was not and she was compelled to leave the
meeting.
(4) The meeting was called for an improper motive.
I need to deal briefly with each of these contentions.

Court answers the first question as follows:

Notice
The applicant was given reasonable notice of the meeting. Notice was given on Thursday, 9 July, which was four days
prior thereto. This is entirely different to the situation of Mpofu's case. Sufficient time was given to all the directors
to attend as is evidenced by the attendance of all the directors at the meeting, including the applicant and the
suspended GCEO.
Mpofu III

[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.’

[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.’

[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.

[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.

[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.
- 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’.

[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:

[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.
[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:
SOS Support Public Broadcasting Coalition v South African Broadcasting Corporation (81056/14) [2017] ZAGPJHC
289 (17 October 2017)

[1] The two applications are instituted in the background of systematic and repeated failures in the governance and
management of the SABC. This has presented itself in the continuous turn-over of Directors of the Board with
resultant financial mismanagement. The critical systemic causes of governance failures and mismanagement were
found to have been caused by Ministerial interference in the governance and operations of the SABC.

[2] The improper Ministerial interference in the affairs of the SABC was demonstrated in the report of the ad
hoc Committee on the SABC Board Inquiry into the fitness of the SABC Board which found that the previous Minister
of Communications, Ms Muthambi unlawfully interfered in the affairs of the Board. At paragraph 39 of the report
dealing with the role of the shareholder representative the report states:
“The Committee found that the Minister displayed incompetence in carrying out her responsibilities as Shareholder
Representative. Evidence suggested major shortcomings in the current Shareholder Representative’s conduct
particularly in relation to her apparent failure to lodge the October 2014 amendments to the MOI, and her role in Mr
Motsoeneng’s permanent appointment as COO. The Committee is of the view that the Minister interfered in some of
the Board’s decision-making and processes and had irregularly amended the MOI to further centralise power in the
ministry”.

[3] The ad hoc committee report was preceded by the Public Protector’s report on allegations of
maladministration, systemic corporate governance deficiencies, abuse of power and irregular appointment of Mr
Motsoeneng by the SABC, “When Governance and Ethics Fail” (17 February 2014) . The Public Protector’s report
demonstrates the history of Ministerial interference in the affairs of the SABC. She found that the previous Minister
of Communications Ms Pule unlawfully interfered with the recruitment and appointment of a Chief Financial officer
of the SABC in 2012.

4.1 SABC 1 concerns the lawfulness of the powers vested in the Minister under SABC’s Memorandum of
Incorporation (MOI) and SABC Charter in respect of the appointment, discipline and suspension of the three
Executive Directors of the SABC, being the GCEO, COO and CFO. The central issue in dispute is whether the powers
vested in the Minister undermine the independence of the SABC, which the applicants and amicus contend is
required by the right to freedom of expression (including the freedom of the media) under S16 of the Constitution.
An ancillary issue is whether the Minister’s powers contravene S13(11) of the Broadcasting Act, which provides that
the SABC Board must “control the affairs” of the SABC.

[5] SABC 2 concerns the power of the minister to remove all of the Directors of the SABC Board, including the
non-Executive Directors. The issue for determination is whether S71 of the Companies Act may be applied in the
removal of Directors of the SABC, or whether the procedures under sections 15 and 15A of the Broadcasting Act
must be followed. The applicants seek declaratory relief and the review of the removal decisions taken in respect of
the tenth and eleventh respondents on 26 March 2015, on the basis that they were unlawfully removed in terms of
section 71 of the Companies Act, and not in accordance with the procedure set out under section 15(1) of the
Broadcasting Act.

6.1 In SABC 1, the applicants seek orders declaring that certain clauses of the SABC’s Memorandum of
Incorporation (“MOI”) (Clauses 13.5.1, 13.5.2, 13.5.3, 13.5.6, 13.5.7 and 13.6.3 of the Amended MOI) and
SABC Board Charter (Clauses 8.2 and 11) are inconsistent with the Broadcasting Act 4 of 1999 and/or the
Constitution and constitutionally invalid. The applicants seek the suspension of the declarations of invalidity
for one year to allow the defects to be remedied, and a reading-in order is pending the remedying of the
defects or the expiry of the one year period, whichever occurs first.

6.2 In SABC 2, the applicants seek a declaratory order that members of the SABC Board may not be
removed save in compliance with sections 15(1) and (2) and 15A of the Broadcasting Act, and an order
setting aside the Minister’s removal of the 10th and 11th respondents from their positions as non-Executive
Directors of the SABC. The applicants have also proposed alternative declaratory orders, to the extent they
may be deemed appropriate. In particular;
6.2.1 A declaratory order that section 5(4)(b)(i) of the Companies Act is unconstitutional to the extent that it omits
any reference to sections 15(1), 15(2) and 15A of the Broadcasting Act, with consequential relief; or

6.2.2 Orders declaring that the failure by the Minister of Communications, the Companies and Intellectual Property
Commission and the Minister of Trade and Industry to totally exempt the SABC from section 71 of the Companies
Act, in accordance with section 9(2)(a) and 9(3) of the companies Act, is unconstitutional and unlawful; and declaring
that the SABC is totally exempt from section 71 of the Companies Act.

[25] Section 192 of the Constitution requires Parliament to establish “an independent authority to regulate
broadcasting in the public interest, and to ensure fairness and a diversity of views broadly representing South African
society”. The Independent Communications Authority of South Africa (“ICASA”) was enacted to give effect to
section 192.

[26] The state fulfils its positive obligation in terms of the Constitution by mandating ICASA to regulate electronic
communications and postal services in the public interest.

Broadcasting Act

[28] Section 1(2) of the Act provides that “Any interpretation of the provisions of this Act must be construed and
applied in a manner which is consistent with freedom of expression and the journalistic, creative and programming
independence of the broadcasters guaranteed by the Constitution.”

[29] Section 6(2) provides that the SABC “in pursuit of its objectives and exercise of its powers, shall enjoy the
freedom of expression and journalistic, creative and programming independence.”

[30] The right to freedom of expression is the most important principle underlying the regulation of broadcasting.
This right finds its most explicit expression in section 16 of the Constitution, which provides that:

“Everyone has a right to freedom of expression, which includes –

(a) freedom of the press and other media;
(b) freedom to receive or impart information or ideas;
(c) freedom of artistic creativity; and
(d) Academic freedom and freedom of scientific research.

[31] Section 16 of the Constitution enshrines the right of the public, the SABC’s audience, to be able to access
information and ideas so that they can enjoy their rights. The freedom to receive or impart information or ideas
relates to the right of the SABC to communicate without interference, but also the right of the broader public to have
access to the broadcast media.

[35] Section 3(5) of the Act enjoins the SABC to ensure that members of the public have access to accurate,
neutral and pluralistic information. It provides that the programming provided by the South African broadcasting
system must-

“(a) be varied and comprehensive, providing a balance of information, education and entertainment meeting the
broadcasting needs of the entire South African population in terms of age, race, gender, interests, and backgrounds;
(b) be varied and offer a range of South African content and analysis from a South African perspective;
(c) must be drawn from local, regional, national and international sources;
(d) provide a reasonable, balanced opportunity for the public to receive a variety of points of view on matters
of public concern;”

[36] Section 10(1)(d) obliges the SABC to provide coverage of “significant news and public affairs programming
which meets the highest standards of journalism, as well as fair and unbiased coverage, impartiality, balance and
independence from government, commercial and other interests”;

[37] The SABC Shareholder Compact (concluded between the Government of the Republic as the sole
shareholder of the SABC and the SABC) recognizes that “an appropriate balance must be struck between “the
independence to manage the SABC, transparency in the management of the SABC and accountability to the Minister.
[38] Clause 8.1 of the SABC Board Charter provides that “the Board constitutes the fundamental base of
corporate governance in the SABC. Accordingly, the SABC must be headed and controlled by an effective and
efficient Board comprising Executive and Non-Executive Directors of whom the majority must be Non-Executive to
ensure independence and objectivity in decision-making”.

[39] The ability of the SABC to reach a vast number of people renders it a powerful tool that potentially could
impact on the quality of democracy if it is not independent and pluralistic because the majority of South Africans
receive their news and information primarily through the SABC’s radio and television broadcasts. According to its
annual report, the SABC has an average of 38.29 million adult listeners weekly, across its 18 radio stations. It has
19.925 million adult weekly viewers across its three free-to-air television stations and subscription news channel.

[43] The Act gives effect to this purpose of the public service broadcaster by requiring the SABC in section 6(4) to:

“encourage the development of South African expression by providing, in South African languages, a wide range of
programming that-
(a) reflect South African attitudes, opinions, ideas, values and artistic creativity;
(b) displays South African talent in education and entertainment programmes
(c) offers a plurality of views and a variety of news, information and analysis from a South African point of view;

[46] The SABC is required to perform a watchdog function by investigating and reporting on the
maladministration, abuses of power and corruption as these are matters of public interest.

[47] As with the investigative agencies tasked with probing corruption and abuses of power, such as the
Directorate of Priority Crimes investigation (DPCI or the Hawks) and the Independent Police Investigative Directorate
(IPID), the SABC must be free from Executive control and influence to be able to perform its function.

[48] Unlike the Haws and IPID which do not have independent Boards and hence the Executive makes
appointments, the SABC has an independent Board to govern it. The Board does not report to the Minister but to
the National Assembly. The Board is meant to be strictly independent and does not have to work with other
government agencies.

[52] Similarly, for the SABC, the requirement of an independent SABC is implied in the duty of the state under
section 7(2) of the Constitution to protect and promote the rights in the Bill of Rights, including the right to freedom
of expression and a free press. Because the SABC is the medium that should allow the free flow of ideas that is
necessary for our democracy to function, the state must ensure that it has the necessary structural and operational
independence. The SABC will only have such independence if there are entrenched mechanisms to ensure that it
provides accurate, neutral and pluralistic content.

[60] The independent and pluralistic broadcaster is not only crucial for the right of freedom of expression and
access to information. It is also vital to the citizen’s right to vote and the right to free and fair elections in terms of
section 19.

[63] Without access to information about the conduct, opinions and relationships of political parties and the
representatives, it is impossible for citizens to decide how to exercise their right to vote. If political or private
interests govern the media, it cannot provide South Africans with the accurate, neutral and pluralistic information
they require to make the right to vote meaningful.

[73] Part V of Chapter IV of the Broadcasting Act deals with the "Governance of the Corporation."

[74] Section 12 of the Act provides that the Board of the SABC is to consist of twelve non-Executive members and
three Executive members, the latter three being the Group Chief Executive Officer ("the GCEO"), the Chief
Operations Officer ("COO") and the Chief Financial Officer ("CFO") or their "equivalents" who will be members of the
Board.

[75] Section 13 of the Act deals with the appointment of the twelve Non-Executive Directors of the SABC Board. It
provides that the Non-Executive members of the Board must be appointed by the President on the advice of the
National Assembly, after a public nomination process .
[76] The President’s power to appoint the non-Executive members of the SABC is a purely formal power as the
National Assembly is the appointing authority who interviews and selects candidates before forwarding their names
to the President for their formal appointment. The President has no discretion but to appoint the candidates
recommended by the National Assembly as it is the only authority that is empowered to interview and select
candidates. The same principle applies to the appointment of judges of the High Court

[77] This approach is understandable and sensible because the National Assembly is made up of multiple political
parties who appoint members who are acceptable to all parties. Section 13(4)(C) requires that there be a specific
representation for minority parties by requiring that the non-Executive Directors must when viewed collectively”
represent the broad cross-section of the population of the public”.

[78] The Act is silent, however, on the appointment process to be followed in respect of the three Executive
Directors. The roles and responsibilities of the Executive Directors are essential to the SABC's fulfilment of its
mandate as a public service broadcaster. The roles of the Executive Directors of the SABC as set out in clause 11.1 of
the Charter are set out as follows:

11.1.1 ensuring the Shareholder Compact and Corporate Plan of the SABC fully addresses the mandate and
strategic objectives set by the Executive Authority;
11.1.2 timeously providing the Board with relevant and appropriate information to achieve the necessary strategic
objectives and to comply with its legislative, regulatory and other obligations;
11.1.3 manage the business of the SABC, in accordance with the directives from the Board, and the Executive
Authority”

[80] The roles and responsibilities of the Executive Directors at essential to the SABC’s fulfilment of its mandate
as the public service broadcaster. They manage the finances and budget of the SABC, implement strategic priorities
and performance targets and manage the day to day operations of the public broadcaster.

[81] The editorial powers of the GCEO trump that of the editors of the SABC editors and the GCEO is accountable
for the performance for the performance of all news and other programmes broadcast on SABC radio, television,
internet and any other platform. Significantly, controversial or impactful news items or programmes should be
reported to senior management through an upward referral process

[82] The influence wielded by the Executive leadership over the content broadcast by the SABC can be easily
abused as evidenced in the SABC's unfortunate history of internal censorship. Mr Motsoeneng who was appointed
acting COO at the instance of Minister Muthambi directly intervened in SABC news, current affairs and programming
and issues related to it.

[87] In terms of the Amended SABC's Memorandum of Incorporation (“MOI”) and Board Charter, the Minister has
extensive powers over the three Executive Directors of the SABC. Including over their appointments, terms, and
conditions of appointment, discipline and suspension. The amendments to MOI in September 2014 by Minister
Muthambi entrenched the Minister's power over the GCE CFO and COO, as well as over the SABC Board more
generally. The relevant part of the MOI is quoted below

“Appointment of the GCEO, the CFO and the CEO

13.5.1 the GCEO, CFO and COO (as the case may be) shall be confirmed by the Minister before being appointed by
the Board, pursuant to the board having embarked on the following process:
13.5.1.1 The Board shall present the terms and conditions of appointment ((“the employment contract”) the
Minister for approval prior to embarking on the process of recruiting suitable candidates;
13.5.1.2 the Board shall advertise or employ any other executive search mechanism to source potential
candidates; and
13.5.1.3 the board shall conduct interviews and compile a shortlist of at least 3 (three) preferred candidates
who are suitable to hold the contemplated position including any motivation that the board considers necessary to
make.
13.5.2 the Minister is entitled to approve the division of 13.5.1.2 and 13.5.1.3 upon considering relevant factors.
13.5.3 the board may recommend less than 3 (three) candidates in the event of the Minister agreeing to a shorter
list, and motivating reasons for an inability to provide at least 3 (three) candidates and the Minister shall be entitled
to reject any of the candidates proposed in terms of paragraph 13.5.1.3 or the shorter list contemplated in this
13.5.2 of this MoI, with reason, save that the board or any person having an interest therein shall not be entitled to
challenge the Minister on the reasons given, and in the event that a candidate is rejected then the process shall be
repeated in order to find a suitable candidate for the Minister’s approval”

[88] The Minister has veto power over the appointment of the GCEO, COO and CFO. There is no limit on the
number of candidates the Minister can veto. The Minister could prolong the selection process indefinitely. Under
section 174 of the Constitution, the President is afforded only one opportunity to veto the nominations on the
shortlist prepared by the Judicial Services Commission. ( Clause 13.5.1).

[89] The Minister is permitted to manipulate the Board’s interview and shortlisting process altogether and to
accept recommendations of a single candidate. The Minister could effectively waive the requirement for the Board
to advertise and shortlist candidates who apply for the positions of GCEO, COO and CFO. (Clause 13.5.2)

[90] The Minister’s unfettered discretion in the appointment process is indeterminate, as no criteria are
prescribed for the appointment of candidates to the Executive Director position. The Constitutional Court in Dawood
has held that the legislature should provide guidance as to when limitation of rights will be justifiable-

[91] This unfettered discretion was used in the appointment of Mr Motsweneng and Ms Duda who were both
appointed at the instance of former Ministers Muthambi and Pule.

[92]] Clause 13.5.3 of the MOI renders any decision taken by the Minister to reject the Board’s recommended
candidate immune from challenge by the “Board or any interested person”.

[93] The Minister's veto power in the appointment of the Executive Directors is also sourced in the Board Charter

Clause 8.2 provides:

"The Board of the SABC has absolute responsibility for the performance of the entity and is accountable for such
performance. As a result, the Board should give strategic direction to the SABC and, in concurrence with the
Executive Authority [ the Minister] and the President, appoint the Group Chief Executive Officer, the Chief Operating
Officer and the Chief Financial Officer and ensure that an effective succession plan is in place and adhered to for all
Directors and key Executives."

[94] Under Clause 13.1.1 and 13.4.4 the terms and conditions of the employment contracts of the GCEO CFO and
COO are made subject to the Minister's approval.

[95] The Minister determines the duration of the employment contract subject to a maximum of five years
(Clause 13.5.5)

[96] The reappointment of the GCEO, CFO, and COO, and terms and conditions of any re-appointment is subject
to the Minister's approval (Clause 13.5.6 and 13.5.7)

[97] The institution of any disciplinary proceedings against, and the suspension of, the GCEO the CFO and COO is
subject to the Minister's approval (Clause 13.6.3) and the appointment of an Acting GCEO, CFO or COO, and the
extension of such appointments is subject to the Minister's approval (Clauses 13.7.1 and 13.7.2 and 13.7.4.

[98] Power is diverted away from the Board to the Minister and the Executive Directors. The Minister is now
vested under clause 13.9.2 with the power to extend the term of office of a non-Executive Director beyond three
terms (of not more than five years each), and the Executive Committee is now appointed by the GCEO and " the
Board may give input to the GCEO on the composition of the Executive Committee.( Clause 11.3 )

[99] Whereas previously the Board was explicitly required to approve the appointment of senior Executives at the
level of General Manager, the Amended MOI now provides that "the powers to appoint and to discipline staff and
members of the SABC management team is delegated to the GCEO CFO and COO and can only be revoked by the
Minister.
[100] The Amended MoI extends new powers to the Minister over the administration and operations of the SABC
Board. Specifically, the Board is required to seek the approval of the Minister should it wish to make any rules
relating to the governance of the SABC (Clause 5)

[111] Whereas previously the number of meetings of the Board was determined solely by the Board." provided
that the Board shall meet regularly and at least once a quarter" (Clause 16.1 of the previous Articles of Association,
the Amended MoI requires the Board to develop an " annual meeting plan" and request the Minister's consent to
any Board meetings in excess of the planned meetings (Clause 15.1.1 to 15.1.4)

[112] Whereas previously it was the sole prerogative of the Chairperson of the Board and the secretary at the
request of a Director to convene a meeting (Clause 16.3) of the previous articles of Association, the Amended MOI
entitles the Minister " at any time." to convene a meeting of the Board.

[113] Whereas previously the Board alone had the power to recommend the removal of a Board member (Clause
14.3.1.3 ) of the Amended MoI gives the Board or the Minister the power to do so.

[114] In terms of clauses 13.5.6 and 13.5.7 the Minister is vested with the power to determine whether an
Executive Director should be reappointed, and the terms and conditions of such reappointment.

[115] Clause 13.6.3 of the Amended MOI provides:

“The Board shall have all the rights and powers to institute any disciplinary proceedings against the GCEO, CFO or
COO (as the case may be) upon the approval of the Minister and also have the right and power to suspend the
employment of the GCEO, CFO or COO up and approval of the Minister ( as the case may be)” emphasis added.

[116] In terms of these provisions, disciplinary proceedings may be brought against an Executive Director only on
approval of the Minister and an Executive Director may be suspended from office on the approval of the Minister.

[117] The powers granted to the Minister to appoint, re-appoint and discipline Executive Directors undermine the
independence of the SABC which is required by the right to freedom of expression (including the freedom of the
media) under S16 of the Constitution. These powers are inconsistent with the specific independence and pluralism
required of public service broadcaster.

[120] The SABC and the Minister contended that the effect of the Act's silence on the appointment of the
Executive Directors is that the Broadcasting Act either permits or does not preclude the appointment process
prescribed in the Amended MOI and the Board Charter.

[121] Section 13(11) stipulates: “The Board controls the affairs of the Corporation and must protect the matters
referred to in section 6 of this Act”. Section 13(11) must be read with section 6(2) which reads " The Authority must
monitor and enforce compliance with the Charter by the Corporation" - the two sections requires the Board to
control the affairs of the SABC and to ensure SABC's compliance with the Charter.

[122] The Minister, as the representative of the sole shareholder and not a member of the Board, does not have
the right to act on behalf of SABC or to manage its business or affairs. Section 66(1) of the Companies Act states that
the business and affairs of a company must be managed by or under the direction of its Directors and that the
Directors have the authority to exercise all of the powers and perform any of the functions of the company, except
to the extent that the Act or the Memorandum of Incorporation (MOI) of the company provides otherwise.

[124] Section 13(11) provides that the SABC Board is to control "the affairs" of the Corporation not only "the
business" of the SABC. Didcot J in Ex Parte Russlyn Construction (Pty) Ltd drew the distinction between the power to
control the business of a company and the broader power to control its affairs: He stated that the power to manage
all the ‘affairs’ of the company’s business is a concept wider than the power to manage the company’s business
alone.

[125] The ultimate decision-making power is that of the Board and not the Minister as a sole shareholder save
where the MOI provides otherwise. The Minister contends that her role in the appointment process is legitimate
because she “represents the public interest and must vet candidates on behalf of South Africans”.
[126] In her engagement with the Board, the Minister represents the sole shareholder of the SABC - the
Government of the Republic of South Africa. It is Parliament, not the Minister that represents the public interest and
performs an oversight role on behalf of the public. The Constitutional Court in Glenister II explained the difference
between parliamentary oversight and that which the Executive exercises as follows:

“Under our constitutional scheme, Parliament operates as a counter-weight to the Executive, and its committee
system, in which diverse voices and views are represented across the spectrum of political views, assists in ensuring
that questions are asked, that conduct is scrutinised and that motives are questioned.”

“parliamentary committees comprise members of a diversity of political parties and views. No consolidated or
hegemonic view, or interest, is likely to preponderate to the exclusion of other views. As importantly, parliamentary
committees function in public.The questions they ask of those reporting to them aim at achieving public
accountability. The Ministerial Committee, by contrast, comprises political Executives who function out of the public
gaze. The accountability they seek to exact is political accountability. It is inimical to an adequately independent
functioning of the DPCI.”

[127] The effect of section 13(11) therefore is to confer on the Board the exclusive power to control the affairs of
the SABC. The Minister is accordingly precluded from exercising any powers by which she may control the Directors
in how they control the affairs of the SABC.

[128] In March 2015 three non-Executive Directors of the SABC were removed without due regard to the
provisions of section 15 of the Broadcasting Act. The SABC and the Minister submit that the removal of the three
non-Executive Directors was lawful because the removal process under section 71 of the Companies Act was
followed.

[129] The applicants, on the other hand, argued that the removals were unlawful for non-compliance with the
special provisions governing the removal of SABC Directors under sections 15 and 15A of the Broadcasting Act.

[130] Section 15 of the Broadcasting Act is headed removal from office and provides:

“(1) The appointing body may –

(a) remove a member from the office on account of misconduct or inability to perform his or her duties
efficiently after due inquiry and upon recommendation by the Board.
(b) must remove the number from office after finding to the effect by a committee of the National Assembly
and the Adoption by the National Assembly of a resolution calling for that member’s removal from office in terms of
Section 15A.”

[131] The Appointing body is defined in section 1 of the Act as “….. the body charged with the appointment of
members of the Board in terms of section 13 of his Act.”

[132] Section 13, in turn, defines the appointment procedure and provides:

13. Members of Board—

(1) The twelve non-Executive members of the Board must be appointed by the President on the advice of the
National Assembly.
(2) The non-Executive members of the Board must be appointed in a manner ensuring--
(a) participation by the public in a nomination process;
(b) transparency and openness; and
(c) that a shortlist of candidates for appointment is published, taking into account the objects and principles of this
Act.

[133] Section 15A deals with a resolution for the removal of a member in two ways, firstly, the appointing body
conducts an inquiry and determines that member is guilty of misconduct and is unable to perform his or her duties
efficiently and makes a recommendation to that effect to the President for that member's removal. (Section 15(1)(a)

[This paragraph is wrongly worded see:

 15.   Removal from office and resignation of member.—(1)  The appointing body—

(a)
may remove a member from office on account of misconduct or inability to perform his or her
duties efficiently after due inquiry and upon recommendation by the Board; or

(b)
must remove a member from office after a finding to that effect by a committee of the National
Assembly and the adoption by the National Assembly of a resolution calling for that member’s
removal from office in terms of section 15A.

15A. Resolution for removal of member, dissolution of Board and appointment of interim Board.—(1) (a)
The National Assembly may, after due inquiry and by the adoption of a resolution, recommend the removal
of a member from office on account of any or all of the following—
(i) Misconduct;
(ii) inability to perform the duties of his or her office efficiently;
(iii) absence from three consecutive meetings of the Board without the permission of the Board, except on
good cause shown;
(iv) failure to disclose an interest in terms of section 17 or voting or attendance at, or participation in,
proceedings of the Board while having an interest contemplated in section 17; and
(v) his or her becoming disqualified as contemplated in section 16.
(b) The National Assembly may, after due inquiry and by the adoption of a resolution, recommend the
dissolution of the Board if it fails in any or all of the following:
(i) Discharging its fiduciary duties;
(ii) adhering to the Charter; and
(iii) carrying out its duties as contemplated in section 13 (11).

(2) The appointing body—

(a) may suspend a member from office at any time after the start of the proceedings of the National
Assembly for the removal of that member;
(b) must act in accordance with a recommendation contemplated in subsection (1) within 30 days;
(c) must dissolve the Board if the resolution recommends the removal of all the members of the Board]
[134] A committee of the National Assembly conduct an inquiry and makes a finding that a member is guilty of
misconduct or is unable to perform his or her duties efficiently. The National Assembly adopted a resolution calling
for that member's removal. The president removes the member from office. Section 15(1)(b) and 15A

[135] Section 71 of the Companies Act prescribes two removal processes for Directors. Firstly, under s71(1)-(2) the
removal by ordinary resolution is adopted at a shareholder’s meeting (i.e. removal by the Minister as the sole
shareholder representative, on any ground, other than those specified in s71(3) subject to notice and comment
procedure in s71(2).

[136] Secondly, under s71(3)-(4): Removal by the Board on grounds specified in s71(3) (negligence, dereliction of
duty, disqualification, incapacity); Removal is by simple majority vote subject to the notice and comment procedure
under s71(4).

[137] Section 39(2) of the Constitution require the court to interpret the Broadcasting Act in the manner that
“promotes the spirit, purport an object of the Bill of Rights” and must give effect to section 192 of the Constitution
which requires broadcasting to be regulated “in the public interest, and to ensure fairness and a diversity of views
broadly representing South African society”. As indicated earlier, the Broadcasting Act specifically requires that its
interpretation must be construed and applied in a manner which is consistent with freedom of expression and the
journalistic, creative and programming independence of the broadcasters guaranteed by the Constitution.

[138] The Constitutional Court, in Goedgelegen , per Moseneke DCJ, remarked:

“We must seek to promote the spirit, purport, and objects of the Bill of Rights. We must prefer a generous
construction over a merely textual or legalistic one in order to afford claimants the fullest protection of their
constitutional guarantees. In searching for the purpose, it is legitimate to seek to identify the mischief to be
remedied. In part, that is why it is helpful, where appropriate, to pay due attention to the social and historical
background of the legislation. We must understand the provision within the context of the grid, if any, of related
provisions and the statute as a whole, including its underlying values.”
[139] Sections 15 and 15A of the Broadcasting Act ensure that the is a level of oversight in the removal of a SABC
Director, neither the Minister or the Board can remove the Director unilaterally. Removal requires an inquiry and
must be based on specified, objective grounds for removal and where the National Assembly recommends removal,
the President has no discretion and must remove the Director from office.

[140] Section 71 of the Companies Act, on the other hand, empower the Minister to remove any member of the
Board, for any reason, subject only to the requirement of notice under section 71(2). The Board is empowered to
remove any member of the Board, among other things, for negligence or dereliction of duty by a simple majority,
subject only to the requirement of notice and comment under section 71(4).

[141] The removal provisions of the Companies Act cannot be construed as applying to the SABC because the
Broadcasting Act prevails over the Companies Act as it was specifically enacted to govern the operations of the SABC.
The removal processes prescribed under the Companies Act denies members of the SABC Board security of tenure
and thus undermine the independence of this SABC Board in a manner that is inconsistent with the Constitution.

[142] The Broadcasting Act is the specific legislation enacted by Parliament in respect of the national public service
broadcaster, with the broadcasting services to be “owned and controlled by South Africans”. It was also enacted to
encourage the development of the right to freedom of expression through a plurality of views. It has detailed
provisions governing the appointment of members of the SABC Board which are enacted to ensure that the objects
of the Broadcasting Act in section 16 of the Constitution are met.

[143] By permitting the removal of a board member unilaterally at the instance of the Minister as sole shareholder
and removal by simple majority vote of the Board, section 71 undermines their independence. The threat of removal
without any oversight, on any ground, and without due enquiry, would render Board members not likely to express
views not aligned with that of the government or the majority Board members.

[144] Section 5(4)(b)(i) of the Companies Act provides for specific statutes and provisions in other statutes to
prevail in the event of inconsistency with the provisions of the Companies Act. Section 9(2)(a) and (3) of the
Companies Act provide for the total, partial or conditional exemption of state-owned companies from the
Companies Act. Such exemptions may be granted by the Minister of Trade and Industry, by notice in the Government
Gazette, upon the request of the Minister responsible for state-owned companies and on the advice of the CIPC.

[145] The Broadcasting Act is not listed under section 5(4)(b)(i) of the Companies Act, according, none of the
provisions of the Broadcasting Act, is made applicable in the event of inconsistency with the Companies Act. This
bridges section 7(2) and 16 of the Constitution and the relevant provisions of the Companies Act are invalid to this
extent.

SABC 1

1. Clauses 13.5.1, 13.5.2, 13.5.3, 13.5.6, 13.5.7, and 15.6.3 of the Amended Memorandum of Incorporation of
SABC and SABC Board Charter are declared inconsistent with the Broadcasting Act 4 of 1999 and are invalid.

2. the declaration of invalidity is suspended for a year to allow for the defects to be remedied.

3. the executive members of the Board are to be appointed solely by the non-executive members of the board and
without any requirement of approval by the Minister.

4. Before appointing any person to the position of executive director on a permanent basis, the non-executive
members of the board shall follow a process which ensures transparency and openness, including publicly
advertising the position in, among other things, the Government Gazette, and conducting interviews of suitable
candidates, taking into account objects and principles of the Broadcasting Act.

5. Where it is necessary for the non-executive members to appoint a person to the position of Executive director
on an interim basis, such person may not serve in such temporary position for more than four months.

6. in respect of the Minister's disciplinary powers under clause 13.6.3 of the amended memorandum of
Incorporation, the words " upon the approval of the Minister" are struck out pending the remedying of the defects,
or the expiry of the one-year period ever occurs first. The provision read thus " the board shall have all the rights
and powers to institute any disciplinary proceedings against the GCEO, CFO or COO ( as the case may be) and also
have the right and power to suspend the employment of the GCEO, CFO, or COO ( as the case may be)

In respect of SABC 2

1. It is the declared that members of the SABC Board may not be removed safe in compliance with sections 15(1)
and 2 and 15A of the Broadcasting Act.

2. The removal of 10th and 11th respondents from their positions as non executive directors of the SABC are
reviewed and set aside as they were unlawfully taken under section 71 of the Companies Act and not in accordance
with the mandatory procedure set out in s 15(1) of the Broadcasting Act.

3. The 10th and 11th respondents are not to be re-instated to their previous positions in the Board.

3. The first and second respondents are ordered to pay the costs of both applications.

$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$
The minister says she hopes to get feedback from the legal team by Thursday.
Newly appointed Communications Minister Nomvula Mokonyane says she is receiving legal counsel on whether to
go ahead with a high court appeal initiated by her processor, Mmamoloko Kubayi-Ngubane, on the appointment of
executives at the SABC.
In October last year, the Pretoria High Court ruled that the appointment of the group chief executive officer (CEO),
chief operating officer (COO) and chief financial officer (CFO) of the public broadcaster must be solely done by non-
executive members of the SABC board in consultation with the communications minister.
In an interview on SABC’s Frankly Speaking on Sunday night, Mokonyane said she hoped that she would get a report
back from the legal team by Thursday on how to move forward on the matter.
“I am already consulting with a legal team outside the team that has been on board… What’s of importance is that
these are role players in this particular space. I have also spoken to two other very important people who are
involved in policy within the ANC,” Mokonyane said.
“I am sure by Thursday we will be able to share the information because we intend to ensure that by Saturday we
will be sharing with the South Africans on how we will reposition and reconnect the communications sector,” she
added.
At the end of January, the SABC board appointed Chris Maroleng as the national broadcaster’s new COO. He took
over the post from Hlaudi Motsoeneng, who was fired last year in June for bringing the SABC into disrepute. The
SABC is yet to appoint a CEO and CFO on a permanent basis.
Mokonyane, who was previously the minister of water and sanitation in former president Jacob Zuma’s Cabinet, said
her three key priorities in her new department would be the long delayed implementation of digital migration in the
country, access to information for communities and repositioning the SABC.
“We need to reposition the SABC back to its glory. It must be a body that is respected not only in South Africa but
also in Africa and the world given its capacity and its abilities. We need to also make sure that we modify the ability
and means within the SABC,” she said.
The minister said government needed to utilize existing platforms of communication, such as community radio
stations and Government Communication Information System (GCIS), to improve its communication with the public
as well as work on partnerships with the media.
“We need each other for the sanity of this country,” Mokonyane said.
Mokonyane said the sense of “self-correction and renewal” within the ANC had to be applied across the board. She
said since her appointment last week by President Cyril Ramaphosa she had already had six meetings with media
houses and various stakeholders in the communications sector.
“Everyone including those that are functioning within our own institutions such as the SABC must also appreciate the
mandate that is bestowed upon them and stay away from getting involved too much in party politics particularly of
the ANC.”

$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$
13. Members of Board.—(1) The twelve non-executive members of the Board must be appointed by the President
on the advice of the National Assembly.
(2) The non-executive members of the Board must be appointed in a manner ensuring—
(a) participation by the public in a nomination process;
(b) transparency and openness; and
(c) that a short-list of candidates for appointment is published, taking into account the objects and principles of this
Act.

(3) The President must designate one of the members of the Board referred to in subsection (2) as the chairperson
and another member as a deputy chairperson, both of whom must be non-executive members of the Board.

(4) The members of the Board must, when viewed collectively—

(a) be persons who are suited to serve on the Board by virtue of their qualifications, expertise and experience in the
fields of broadcasting policy and technology, broadcasting regulation, media law, business practice and finance,
marketing, journalism, entertainment and education, social and labour issues;
[Para. (a) substituted by s. 1 of Act No. 4 of 2009.]
(b) e persons who are committed to fairness, freedom of expression, the right of the public to be informed, and
openness and accountability on the part of those holding public office;
(c) represent a broad cross-section of the population of the Republic;
(d) be persons who are committed to the objects and principles as enunciated in the Charter of the Corporation.

(5) The members of the Board must hold office for such period as the President may determine which period must
not exceed five years.

(6) The deputy chairperson referred to in subsection (3) must, when the chairperson is absent or unable to perform
his or her duties, act in his or her stead and when so acting, exercise or perform any function of the chairperson.

(7) Every appointment of a member of the Board must be published in the Gazette.

(8) A member of the Board appointed to fill a casual vacancy must hold office for the unexpired portion of the period
for which the vacating member was appointed.

(9) The Board of the old Corporation as constituted on the date of conversion constitutes the first Board of the
Corporation.

[Sub-s. (9) substituted by s. 14 (a) of Act No. 64 of 2002.]

(10) Nine members of the Board, which must include the chairperson or the deputy chairperson, will constitute a
quorum at any meeting of the Board.

(11) The Board controls the affairs of the Corporation and must protect matters referred to in section 6 (2) of this
Act.

(12) The Board—

(a) must establish a public service subcommittee and a commercial service subcommittee—
(i) to report to the Board on the extent to which the public service division and the commercial service division have
achieved their objectives during the relevant period; and
(ii) to perform such other functions regarding the organisation of the Corporation into the public service division and
the commercial service division, respectively, as may be delegated to them by the Board; and
(b) may establish such other subcommittees as it deems appropriate from time to time.
[Sub-s. (12) added by s. 14 (b) of Act No. 64 of 2002.]

(13) The Board is the accounting authority of the Corporation.

[Sub-s. (13) added by s. 14 (b) of Act No. 64 of 2002.]

14. Executive committee.—(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.
(2) The executive committee is accountable to the Board.
(3) The executive committee must perform such functions as may be determined by the Board.
[S. 14 substituted by s. 15 of Act No. 64 of 2002.]

15. Removal from office and resignation of member.—(1) The appointing body—
(a) may remove a member from office on account of misconduct or inability to perform his or her duties efficiently
after due inquiry and upon recommendation by the Board; or
(b) must remove a member from office after a finding to that effect by a committee of the National Assembly and the
adoption by the National Assembly of a resolution calling for that member’s removal from office in terms of section
15A.
[S. 15 substituted by s. 2 of Act No. 4 of 2009.]

15A. Resolution for removal of member, dissolution of Board and appointment of interim Board.—(1) (a) The
National Assembly may, after due inquiry and by the adoption of a resolution, recommend the removal of a member
from office on account of any or all of the following—
(i) Misconduct;
(ii) inability to perform the duties of his or her office efficiently;
(iii) absence from three consecutive meetings of the Board without the permission of the Board, except on good
cause shown;
(iv) failure to disclose an interest in terms of section 17 or voting or attendance at, or participation in, proceedings of
the Board while having an interest contemplated in section 17; and
(v) his or her becoming disqualified as contemplated in section 16.
(b) The National Assembly may, after due inquiry and by the adoption of a resolution, recommend the dissolution of
the Board if it fails in any or all of the following:
(i) Discharging its fiduciary duties;
(ii) adhering to the Charter; and
(iii) carrying out its duties as contemplated in section 13 (11).
(2) The appointing body—
(a) may suspend a member from office at any time after the start of the proceedings of the National Assembly for the
removal of that member;
(b) must act in accordance with a recommendation contemplated in subsection (1) within 30 days;
(c) must dissolve the Board if the resolution recommends the removal of all the members of the Board.
(3) (a) Upon the dissolution of the Board contemplated in subsection (2) (c), the appointing body must appoint an
interim Board consisting of the persons referred to in section 12 (b) and five other persons recommended by the
National Assembly.
(b) The interim Board must be appointed within 10 days of receiving such recommendations and is appointed for a
period not exceeding six months.
(4) The appointing body, on the recommendation of the National Assembly, must designate one of the members of
the interim Board as the chairperson and another member as the deputy chairperson, both of whom must be non-
executive members of the interim Board.
(5) A quorum for any meeting of the interim Board is six members.
[S. 15A inserted by s. 3 of Act No. 4 of 2009.]

Comparison of Mpofu and Maroga

Mpofu
About suspension
President appoints non-execs on advice of
Parliament (s 13)
Appointment of execs as directors
recommended to Minister (art is 11.1.2)
Actual appointment as employees (art 19)
Article 13.1.5 provides that a director ‘shall cease
to hold office as such’ if ‘the Board recommends
Maroga
About agreement to terminate
Minister as shareholder appoints non-execs (art
10 although this is not quite clear the issue is
probably regulated in the usual way)
Appointment of CEO and Chair as directors is
done by Minister after consultation with board
art 10.4 but only as non-execs
Actual conclusion of the employment contract
with the board (Article 16.1 thereof, by the
conclusion of a contract of employment between
Eskom and its CEO, by the distinction between
the CEO’s capacity as a director and his or her
capacity as an employee)
General principles apply
 that the appointing authority [Parliament] 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’
Section 15 provides that ‘[t]he appointing body General principles apply
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.’

Minister of Defence and Military Veterans v Motau and others 2014 (8) BCLR 930 (CC)

[3] Armscor is a wholly State-owned entity regulated by the Armscor Act.3 The State exercises ownership control
of Armscor through the Minister.4 Armscor was incorporated primarily to provide South Africa's armed services
with military material, equipment, facilities and services,5 as well as to meet the "defence technology,
research, deve lopment, analy sis, te st and evaluati on requirements" of the Departm ent of Defence
("Department").6 In essence, Armscor is the Department's armaments and technology procurement agency.7

3 Armaments Corporation of South Africa Limited Act 5 1 o f 2 00 3 ("Armscor Act"). Armscor was established in terms of s
2(1) of the Armaments Development and Production Act 5 7 of 1 9 68. In terms of s 3 (1 ) of that Act, the corporation's
object was "to meet as effectively and economically as may be feasible the armaments requirements of the Republic,
including armaments required for export". S 2 3 of the Armscor Act, read with t h e S c h e d u l e of the Act, repealed the
Armaments Development and Production Act. However, s 2 of the Armscor Act provides for the "Continued existence of
 Corporation", and reads in relevant part:
"(1) [Armscor] established by section 2 of the Armaments Development and Production Act
continues to exist under that name despite the repeal of that Act.
...
(3) The Corporation is a juristic person capable of suing and being sued
in its own name. (4) Subject to this Act, the Corporation may -
(a) purchase or otherwise acquire, hold or alienate property, movable or immovable; and
(b) perform such acts as are necessary for or incidental to the carrying out of its
objectives and the performance of its functions."
4 S 2(2) of the Armscor Act reads as follows:
"(a) The State remains the sole shareholder of the Corporation.
(b) The Minister exercises ownership control over the Corporation on
behalf of the State." 5 Defined in s 1(g) of the Armscor Act as "defence matériel".
6 These objectives are set out in s 3(1) of
the Armscor Act.
7 See s 4(2) of the Armscor Act.

[4] Armscor's affairs are managed and controlled by its Board, comprising nine non-executive
members and two executive members (a chief executive officer ("CEO") and a chief financial
officer ("CFO")).8 General Motau and Ms Mokoena were appointed to the Board (as non-
executive members) by the Minister's predecessor in terms of sectio n 7(1) and (2) of the
Armscor Act. Those provisions read as follows:
"(1) The non- executive members of the Board must be appointed by the Minister on the
grounds of their knowledge and experience which, when considered collectively, should
enable them to attain the objectives of [Armscor].

(2) The Minister must designate one of the non-executive members of the Board as
chairperson of the Board and another one as deputy chairperson of the Board."

In terms of section 7(5)(a) of the Armscor Act, non-executive Board members are appointed
for a period of three years. On 1 May 2011, General Motau was designated as Chairperson
and Ms Mokoena was designated as Deputy Chairperson. The terms of General Motau and Ms
Mokoena expired on 30 April 2014.

8 S 6(1 ) of the Armscor Act. The High Court judgment erroneously states that the Armscor Act requires
two further Board members: the Secretary of Defence and the Chief of the South African National
Defence Force. The provision stipulating this requirement - s 6(1)( c) of the Armscor Act - was repealed
with effect from May 2006.

[8] On 8 August 2013, by letter, the Minister terminated General Motau and Ms Mokoena's
membership of the Board in terms of sectio n 8(c) of the Armscor Act. Section 8(c) provides
that "[a] member of the Board must vacate office if his or her services are terminated by
the Minister on good cause shown." The letter to General Motau explained that:
"the manner in which you exercised your powers, through your managerial style and the
decisions you took . . . has resulted in a situation where [Armscor] has not been able to meet
the defence matériel requirements of the Department effectively, efficiently and economically."

[18] Legodi J granted judgment in favour of General Motau and Ms Mokoena. He concluded
that the Minister's decision was administrative rather than executive action. This was
because the decision met the positive requirements of the administrative-action definition
and because it was not expressly excluded from the ambit of the Promotion of Administrative
Justice Act13 ("PAJA"), as are some other forms of conduct by members of the National
Executive.
[19] Flowing from that conclusion, the High Court held that the decision fell to be set aside on
several grounds. First, the Minister committed an error of law14 in terminating the services
of General Motau and Ms Mokoena insofar as she acted under the misapprehension that her
conduct was executive rather than administrative in nature. Second, the Minister acted
unfairly15 in failing to give General Motau and Ms Mokoena an opportunity, with appropriate
notice, to explain why their appointments should not be terminated. Third, the Minister acted
on the basis of an ulterior motive16 in that she expressly acknowledged that the removal of
General Motau and Ms Mokoena was a "political" rather than a legal matter. 17 Fourth, in
relation to Ms Mokoena, the Minister's decision to dismiss her

Page 937 - 2014 (8) BCLR 930 (CC)

 was not rational18 to the extent that her membership of the Board was "terminated simply
on the basis that the Minister [did] not know what to do with her."19
[20] Non-compliance with PAJA was not the only source of unlawfulness identified by the High
Court. It also found that it was inappropriate for the Minister to have singled out General
Motau and Ms Mokoena for termination of their membership on the Board. This was
because of the Board' s collecti ve respon sibilit y for the management of Armscor, and
the fact that there are two executive directors (the CEO and the CFO) who are responsible
for the management and control of Armscor's daily affairs. It reasoned that the Minister
failed to identify particular occurrences for which General Motau and Ms Mokoena were
directly responsible, and thus failed to show the good cause required by section 8(c) of the
Armscor Act.
[51] For these reasons, I am persuaded that the impugned decisions are not subject to
review under PAJA. Because section 8(c) of the Armscor Act is an adjunct of the Minister's
power to make defence policy, and thus more closely related to the formulation of policy than
its application, the decision to terminate the services of Board members a mo u nt s to t he
per fo r manc e of a n ex ec uti v e f unct i on i n ter ms of sec t io n 8 5(2)(e ) o f t h e Constitution,
rather than the implementation of national legislation in terms of section 85(2)(a).

[68] In conclusion, the Minister was not prompted to act by one or two poor managerial
decisions, but by the continued failings of the Armscor Board under the leadership of
General Motau and Ms Mokoena. Given this, the facts do not admit of any other
conclusion but that the Minister had good cause to terminate their services.

[71] A rational link therefore exists between the need to address the failures of Armscor and the
termination of the services of General Motau and Ms Mokoena: with them at the helm, the
Corporation was not operating in an efficient or effective manner and was not properly
fulfilling its statutorily prescribed mandate. Section 8(c) was properly used by the Minister, in
the exercise of her executive oversight, to abate the problems that had set in at Armscor.
Given this, I believe that the Minister's decision was rational.

[72] General Motau and Ms Mokoena contend that, should this Court find against them on the
question whether the Minister's decision constituted administrative action, we should
nevertheless conclude that the Minister had to comply with section 71(1) and (2) of the
Companies Act102 when she exercised her power in terms of section 8(c) of the Armscor
Act. It is not disputed by any of the parties that the Minister did not comply with those
provisions. The Minister's answer is that she was not required to comply with them.

[73] Section 71 reads, in relevant part:

"(1) Despite anything to the contrary in a company's Memorandum of Incorporation or rules,
or any agreement between a company and a director, or between any shareholders
and a director, a director may be removed by an ordinary resolution adopted at a
shareholders meeting by the persons entitled to exercise voting rights in an election of
that director, subject to subsection (2).

(2) Before the shareholders of a company may consider a resolution contemplated in

subsection (1) -

(a) the director concerned must be given notice of the meeting and the resolution, at
least equivalent to that which a shareholder is entitled to receive, irrespective
of whether or not the director is a shareholder of the company; and

(b) the director must be afforded a reasonable opportunity to make a presentation, in

person or through a representative, to the meeting, before the resolution is put to a
vote."

Section 71(1) and (2) is the mechanism under the Companies Act through which
shareholders may dismiss a director whom they have elected. Importantly, section 71(2)
requires that a shareholder must give a director notice and a chance to make representations
before a resolution is adopted to dismiss him or her.
[74] In my view section 8(c) of the Armscor Act must be read together with section 71(1) and (2)
of the Companies Act.103 First, it is not disputed that Armscor falls within the definition of a
"state-owned company" in terms of the Companies Act:104 as required, it is listed in
Schedule 2 of the Public Finance Management Act105 as a "Major Public Entity" and it is
registered under the Companies Act. Furthermore, section 9 of the Companies Act deals
specifically with the statute's application to the affairs of State-owned companies.106 The
effect of that provision is that State-owned companies are, for all intents and purposes, to
 be treated as public companies, unless a Cabinet member has procured an exemption
(inwhole or in part) from the obligation to comply with the Companies Act. It was conceded
by Counsel for the Minister during the hearing that there is nothing before us to indicate that
she has applied for an exemption. All indications point to Armscor's affairs being subject to
that statute.

103 This is reiterated by s 5(4) of the Companies Act, which deals with the situation where there is
"inconsistency between any provision of this Act and a provision of any other national legislation". In
the event of such inconsistency, s 5(4)(a) provides that "the provisions of both Acts apply
concurrently, to the extent that it is possible to apply and comply with one of the inconsistent
provisions without contravening the second".
104 That definition reads as follows:
"[A]n enterprise that is registered in terms of this Act as a company, and either -
(a) is listed as a public entity in Schedule 2 or 3 of the [Public Finance Management Act]; or
(b) is owned by a municipality, as contemplated in the [Local Government: Municipal Systems Act],
and is otherwise similar to an enterprise referred to in paragraph (a)."
105 1 of 1999.
106 The section, entitled "Modified application with respect to state-owned companies", reads as follows:
"(1) Subject to section 5(4) and (5), any provision of this Act that applies to a public company
applies also to a state-owned company, except to the extent that the Minister has granted an
exemption in terms of subsection (3).
(2) The member of the Cabinet responsible for -
(a) state-owned companies may request the Minister to grant a total, partial or
conditional exemption from one or more provisions of this Act, applicable to all
state-owned companies, any class of state-owned companies, or to one or more
particular state-owned company; or
(b) local government matters may request the Minister to grant a total, partial or
conditional exemption from one or more provision s of this Act, applicable to all
state-owned companies owned by a municipality, any class of such enterprises, or
to one or more particular such enterprises,
on th e gr oun ds that tho se provisio ns over lap o r du plicate an applicable
r egulat or y scheme established in terms of any other national legislation.
(3) The Minister, by notice in the Gazette after receiving the advice of the Commission, may
grant an exemption contemplated in subsection (2) -
(a) only to the extent that the relevant alternative regulatory scheme ensures the
achievement of the purposes of this Act at least as well as the provisions of this Act;
and
(b) subject to any limits or conditions necessary to ensure the achievement of the
purposes of this Act."

[75] Second, the Minister is, for the purpose of section 71(1) and (2), the shareholder of
Armscor. 107 The Minister appoints the Chairperson and the Deputy Chairperson of the
Board and is thus empowered through those provisions to terminate their services. She is
thus required to comply with the prescripts of the section in dismissing them.
107 S 57(1) defines "shareholder" for the purposes of s 71 as including "a person who is entitled to exercise
any voting rights in relation to a company, irrespective of the form, title or nature of the securities
to which those voting rights are attached." The Minister is thus the shareholder of Armscor as she
"exercises ownership control over the Corporation on behalf of the State" (s 2(2)(b) of the Armscor
Act).

[76] Third, on my reading, section 8(c) of the Armscor Act and section 71(1) and (2) of the
Companies Act are perfectly compatible: the former provides the substantive criterion, and
the latter the process, by which Board members may be dismissed. Section 71(1) and (2)
does not put any substantive constraint on the exercise of the Minister's dismissal power. Of
course, it would be a different matter if the section obliged the Minister to dismiss a director
for some other substantive reason (for example, ineligibility, incapacitation or negligence),
notwithstanding the fact that she had good cause under the Armscor Act.108 But it makes no
such provision. Put simply, section 71 is the procedure by which the Minister exercises her
section 8(c) power. I see nothing undesirable or unduly constraining in that.
[77] The Armscor Act is not designed, and does not purport, to regulate each aspect of Armscor's
governance and corporate affairs. It seems clear, at least generally, that both the Armscor
Act and the Companies Act apply -and must have been intended to apply - concurrently.
Were that not the case, the Corporation would be operating without any statutory guidance
over a wide range of areas.
[78] Fourth, the Minister's reliance on Sasol v Lambert109 at the hearing as authority for the
proposition that section 8(c) operates to the exclusion of section 71(1) and (2) is misplaced.
In that case the Supreme Court of Appeal restated the generalia specialibus non derogant
maxim: general words and rules do not derogate from special ones.110 However, this maxim
 is only of application where a reading of the general statute could alter the meaning of the
specific statute.111 As explained above, that possibility does not arise here, for section
8(c) of the Armscor Act regulates the substantive basis upon which the Minister may
terminate the services of a director and section 71(1) and (2) regulates the process the
Minister must follow. And it must be noted that Sasol v Lambert emphasised that statutes,
where possible, "must be read together".112
Sasol Synthetic Fuels (Pty) Ltd and others v Lambert and others [2001] ZASCA 133; 200 2 ( 2 ) S A 2 1
(S CA ) (Sasol v Lambert)

[79] It would not lead to an absurdity to hold that the Minister, as sole shareholder for these
purposes, was obliged to comply with section 71(1) and (2) in the circumstances of this
case. For the purpose of those provisions is not only to ensure that a majority of
shareholders assent to a decision to dismiss a director, but also to ensure that those whose
interests may materially be affected by the decisions taken are given an opportunity to
put forward relevant information, and to ensure that the decision-makers are appropriately
informed before taking a serious decision.
[80] The Minister took no steps required by the Companies Act when she exercised her section
8(c) power. She therefore failed to observe the prescribed procedure, and acted
unlawfully, when she sought to terminate General Motau and Ms Mokoena's membership
of the Board without first affording them a reasonable opportunity to make
representations.
[81] Were it not for the operation of the Companies Act, would there be an obligation on the
Minister to dismiss directors in a procedurally fair manner? This Court's decision in Masetlha,
which was extensively relied on by the Minister in her submissions, has been interpreted to
exclude the requirement of procedural fairness in the review of executive action as a stand-
alone requirement under the principle of legality. 113 Masetlha does not stand for this
unequivocal proposition, however. The decision was limited to the specific context of
that case and the power under consideration: the distinguishing feature which rendered the
observance of procedural fairness inapposite in that case was "the special legal
relationship that obtains between the President as head of the National Executive, on
the one hand, and the Director-General of an intelligence agency, on the other". 114
T h e sensitive nature of this special relationship, lying as it did in the heartland of "the
effective pursuit of national security",115 meant that Mr Masetlha, the spymaster-in-chief,
could continue to occupy his position only as long as he enjoyed the trust of the President,
his principal.116 Moreover, the power to appoint and dismiss in Masetlha was "conferred
specially upon the President for the effective business of government and . . . for the effective
pursuit of national security."117
[82] This Court has also subsequently acknowledged in Albutt118 that procedural fairness
obligations may attach independently of a statutory obligation in virtue of the principle of
legality. In that case, the President was required, as a matter of rationality, to allow some
form of participation by interested persons when issuing pardons to prisoners under a
special dispensation.119
[83] However, whether the principle of legality or some other principle in this case required the
Minister to act in a procedurally fair manner, does not, in the light of the applicability of the
Companies Act, need to be decided here. It suffices to note that our law has a long tradition
- which was endorsed by this Court in Mohamed - of strongly entrenching audi alteram partem
("hear the other side"),120 which attains particular force when prejudicial allegations are
levelled against an individual. And it is for this reason that dismissal from service has been
recognised as a decision that attracts the requirements of procedural fairness.121

In the circumstances the majority found that the Minister had acted unlawfully but that in the
circumstances this was not a basis for setting her decisions aside