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IN THE HIGH COURT OF SOUTH AFRICA

KWAZULU-NATAL LOCAL DIVISION,

DURBAN

CASE NO: 14185/2011

DATE: 03 NOVEMBER 2014

In the matter between:

ANDRE VENTER...........................................................................................PLAINTIFF

And

AYESHA KHAN...................................................................................1^ST DEFENDANT

BUBALUBA PROPERTIES CC..........................................................2^ND DEFENDANT

COMPANIES AND INTELLECTUAL................................................3^RD DEFENDANT

PROPERTIES COMMISSION

JUDGMENT

Date of hearing: 17-18 September 2014

Date judgment delivered: 3 November 2014

D. PILLAY J

Introduction

[1] The plaintiff is Andre Venter. The first defendant is Ayesha Khan (the defendant). The plaintiff employed the defendant as a transport broker at Cee Vee Transport Consultants under various contracts of employment. As a performance incentive, the plaintiff agreed to transfer annually portions of his member’s interest in Bubaluba Properties CC, the second defendant, to the defendant if she met certain conditions (the 2002 agreement). On 27 February 2008 the parties extended the 2002 agreement to 31 December 2015 (the extension agreement).  The only asset in Bubaluba is a house purchased for the defendant. The defendant occupies the house. She resigned in October 2011. She alleges that the plaintiff constructively dismissed her thus terminating her fixed term employment contract prematurely.

[2] The plaintiff instituted action for transfer of the defendant’s member’s interest in Bubaluba back to him. The defendant resisted with a counter-claim for the transfer of the balance of his interest in Bubaluba, underpayment of remuneration and other relief.

The Issues

[3] The issues for the court to determine were narrowed down to the following:

a.   Is the plaintiff entitled to rectification of clause 7 of the extension agreement so as to read that the employee, not the employer, forfeits the benefits of the agreement?

b.   Do the benefits referred to in clause 7 relate to the benefits in the extension agreement exclusively or do they also relate to the benefits in the 2002 agreement?

c.   Is the plaintiff entitled to the transfer of the defendant’s membership interest in Bubaluba, or is the defendant entitled to 55% or any portion thereof of the plaintiff’s membership interest in Bubaluba?

d.   Did the defendant resign voluntarily or did the plaintiff dismiss her constructively?

e.   Is clause 7 a penalty stipulation in terms of the Conventional Penalties Act 15 of 1962? If ‘yes’, what would be an appropriate penalty?

[4] With the claims framed thus the question of the jurisdiction of the court which both parties accepted did not arise. After setting out the facts I deal with the issues in the order listed above.

The 2002 Agreement

 

[5] The defendant commenced working for the plaintiff about 1999. For personal reasons she left his employment twice. She returned in August 2001 and remained employed until October 2011.

 

[6] During July 2002 the parties negotiated the terms of the defendant’s remuneration and benefits. On 14 August 2002 they recorded the terms in the 2002 agreement. The plaintiff agreed to buy a property for R230 000 for the defendant via Bubaluba and thereafter to transfer annually 15.38% of his membership in Bubaluba to the defendant if she met her targets. To that end the plaintiff undertook to sign the membership transfer forms and lodge them periodically with the Registrar of Close Corporations for registration in favour of the defendant. In exchange for the member’s interest in Bubaluba the defendant undertook to remain employed at Cee Vee for 78 months from 14 August 2002, the date of the 2002 agreement.

 

[7] Regarding the property, they agreed that the plaintiff would pay 60% of the rates and the defendant would pay 40%, the percentages to switch when they reached the midpoint in their ownership. They agreed to share the transfer costs of the property equally. The defendant undertook to pay R1 000 per month in lieu of rental to the plaintiff.

 

[8] The only penalty stipulation in the 2002 agreement was the forfeiture by the defendant of 1.28% per month membership interest if she failed to achieve the minimum target of 75 loads per month for three consecutive months. Confident of reaching high net income targets the defendant set them for herself.

 

[9] The defendant’s remuneration was to increase or decrease by the percentage by which she exceeded or missed the targets she had predicted for herself. In 2002 her net salary was R7 000 per month. By September 2003 the defendant had exceeded her annual target by 141%. Accordingly her basic salary of R7 000 should have increased by 141%. She should have been paid R16 870 per month. Instead, the plaintiff paid her R14 000 per month. She queried the short payment of her salary. It remained unchanged until 2004. Clearly the plaintiff had underestimated the defendant’s potential.

 

[10] If the plaintiff had implemented the 2002 agreement correctly for 78 months he would have had to pay the defendant the amounts in the third column of the schedule below based on the percentage increase of her target. What he actually paid her ranged between the amounts in the fourth column. Except for July 2004 when the plaintiff paid the defendant R17 318.56 which, together with commission, barely exceeded her basic salary of R16 870, he would have underpaid her from September 2003 to August 2008 when the underpayment soared as high as 325%.

Year	% Increase in target	Salary 2002 agreement	Salary + commission range paid
September 2003 - August 2004	141%	R16 870.00	R12 334,48 -17 318.56
September 2004 - August 2005	68%	R28 341.60	R16 091.37- 20 539.16
September 2005 – August 2006	50%	R42 512.40	R21 016.05-24 709.58
September 2006 – August 2007	62%	R68 870.09	R26 010.41-32 302.52
September 2007 – August 2008	83%	R126 032.26	R26 380.19 -38 754.75

 

 

The 2004 agreement

 

[11] On 19 March 2004 the plaintiff substituted the remuneration in the 2002 agreement with the 2004 agreement. The terms of the 2004 agreement were as follows: The defendant’s basic salary would increase by R3 000 per annum[1] provided she attained the targets in the 2002 agreement. If she did not attain her targets her salary would be reduced by R3 000 per annum. She would earn commission at 5% and 10% depending on the amount of the profit. The 2004 agreement was rendered retrospective to 1^st September 2003.

 

[12] The obvious effect of the 2004 agreement was to reduce the defendant’s remuneration substantially and retrospectively, which the plaintiff persistently denied under cross-examination.  The plaintiff dropped her basic salary from R14 000 to R10 000. Taking into account that her basic salary should have been upwards of R16 870 for 78 months in terms of the 2002 agreement, the defendant’s loss of income was considerable under the 2004 agreement, as tabulated above.

 

[13] The plaintiff denied that he presented the 2004 agreement as a prerequisite for payment of her March salary. The defendant contended that she signed the 2004 agreement under duress. She alleged that she submitted to the reduction of her remuneration because she thought that she had no choice. As the sole breadwinner she could not risk being unemployed.

 

[14] No employee will voluntarily agree to a reduction in remuneration. Usually, the risk of losing their jobs in the face of retrenchment would be an example when agreement would be voluntary. I find that the plaintiff having underestimated the defendant’s potential forced her to agree to a reduction in her remuneration.

 

The extension agreement 

 

[15] The plaintiff’s decision to relocate to Cape Town so that his son could complete his schooling there precipitated the extension agreement. He needed the defendant’s assurance that she would remain with the business.  After he relocated to Cape Town his attendance on the business at Pennington was to diminish to about once a month.

 

[16] The parties concluded the extension agreement on 28 February 2008. In exchange for the defendant agreeing to extend her employment to 31 December 2015 the plaintiff paid her R300 000 up front. Generous as this amount seems it was considerably less than what  she would have earned by then if the 2004 agreement had not replaced the 2002 agreement. Although the extension agreement records that the defendant was entitled by that stage to 70% of the membership interest in Bubaluba, it is now common cause that the figure should have been 76.9%. This now settles the defendant’s claim in this action for rectification of clause 3 of the extension agreement. The plaintiff undertook to transfer annually over the next 8 years 4% of his remaining member’s interest commencing from February 2009. The defendant took full responsibility for all the rates and taxes on the property registered in Bubaluba. Unlike all previous agreements, the extension agreement introduced a forfeiture of benefits in clause 7.

[17] Under the extension agreement the defendant’s basic salary was agreed as follows:

Year	Salary per month	Annual Figures
February 2010	R29 500	R1 165 782
February 2011	R31 000	R1 206 000
February 2012	R32 500	R1 246 000
February 2013	R34 000	R1 286 000
February 2014	R35 500	R1 326 000
February 2015	R37 000	R1 366 000
February 2016	R38 500	R1 406 000

 

[18] In addition, commission was agreed as follows:

5% for loads with profit of R500,

10% for loads with profit of R1 000,

12½ % for loads with profit of R1 500 and

15 % for loads with profit of R2 000.

The 2011 agreement

[19] Even though the extension agreement was to endure until December 2015, in January 2011 the parties began renegotiating the terms of the defendant’s remuneration again. Having offered his properties in Selborne Estate to other employees the plaintiff considered it would be unfair not to extend the offer to the defendant.

[20] This round of negotiations had to have commenced at the instance of the plaintiff. If he merely wanted to give the defendant the Selborne property he could have done so without further negotiations. He wanted a quid pro quo for the property. As the defendant testified, he wanted her to extend her employment for the next five years and to increase her target. The five-year extension is apparent from his email of 28 January 2011 in which he recorded the discussions that introduced the new round of negotiations.

[21] The negotiations continued until 21 June 2011 when the defendant offered to reach a monthly target of R230 000 profit for July 2011 – June 2012 with an increase of 5% every year thereafter until the end of the extension agreement in February 2016. Furthermore, her salary was to be based on the old structure of R31 000 basic per month, plus commission for the first R100 500 as per the extension agreement, to increase accordingly as set out above. On the balance of the profit she wanted 24% commission. If she did not reach her target of R230 000 then that percentage should be reduced by 5%. She refused to extend the contract for the member’s interest in Bubaluba further. She wanted six months to resolve the problem of bad debts.

 

[22] The plaintiff unequivocally accepted her terms by email on 21 July 2011. He instructed the salaries clerk to implement the new salary from July. The clerk calculated the commission on the first R100 500 to be R11 927.61. The plaintiff refused to pay the defendant any commission on the R100 500. Rejecting the clerk’s calculation the plaintiff paid the defendant 24% on the balance of the profit after deducting R100 500 from the total profit she generated.

[23] By email dated 20 September 2011, the defendant asked him to look into the short payment of her commission. By email, four minutes later, the plaintiff explained that he had paid her basic wage of R31 000 for attaining R100 500 and then calculated commission on the balance at 24%. The plaintiff persisted in paying the defendant according to this formula. Consequently, he underpaid her commission for July (R11 927.61), August (R11 366.96) and September (R10 409.24). The parties met on 29 September 2011 to resolve the underpayment of her commission. The plaintiff refused to budge. He told the defendant to accept his offer or do as she saw fit.  The 2011 agreement was their last agreement.

 

[24] Manifestly, the plaintiff reneged on their 2011 agreement recorded in writing by their exchange of emails. After some pressure under cross-examination the plaintiff finally conceded that he did not pay the defendant according to their 2011 agreement. Resignedly he sighed that there were so many negotiations that he was confused.

Build-up to resignation

[25] Sometime in May 2011 the defendant’s husband injured himself in a household accident. He was hospitalised for a possible amputation of his leg. She visited him during working hours. After he was discharged she accompanied him to the wound clinic. She attended to him during working hours after arranging with the general manager to make up her time away from work by starting early and finishing late. Notwithstanding the stresses imposed upon her by her husband’s condition, she met and even exceeded her targets.

[26] The plaintiff testified that he received a complaint that the defendant refused to inform the general manager of her comings and goings. In chief the plaintiff testified that he did not think it was a problem for as long as the work was done. Under cross-examination he conceded that she met her targets. Even though her productivity remained unaffected, he dispatched an email dated 4 August 2011 enquiring from the defendant what her understanding of her working hours were and how much leave she was entitled to. He also remarked that other staff saw how much of time she took off from work and enquired how he should respond to them if they took off as much time as she did.

[27] His email differed starkly from his evidence in chief. Even though he wrote that he did not know how to approach the matter with her, there was nothing cautious, sensitive, empathetic or justified about his email.  His was not a frank enquiry but an insidious criticism that she was taking too much time off.  If he were as sincere and fair-minded as he would have the court find, he would not have raised the issue at all. That would have been consistent with his evidence-in-chief. This inconsistency between what the plaintiff said or wrote and what he did is proving to be a pattern of behaviour that conduced to the defendant’s resignation.

[28] He hurt the defendant deeply. Hence followed a highly charged exchange of emails between the parties resulting in her resigning.  In summarising their contents I try as far as possible to allow their ‘voices’ to be heard. For it is what they thought, said and felt at that time that is an authentic explanation for the termination of their relationship.

 

[29] After the meeting on 29 September 2011 when the plaintiff refused to abide by their 2011 agreement the defendant retaliated emotionally by email the same day. She referred to the ‘hours of work’ email as an ‘eye opener’. She accused the plaintiff of not empathising with her family, of treating her as ‘just a means of making money’, that the time that she spent and the income that she brought to his business did not count. If the plaintiff did not pay her as she requested in her email of 12 July 2011 then she wanted to revert to her extension agreement (even though this would have meant lower targets, less income but more time with her family). She vented on that new employees got more benefits than she did. She enquired whether this was because of her ‘skin colour’ or whether she was just too gullible. She declared that there was no point in her increasing her turnover by 125% if she was going to earn less than 24%. She complained that if he had paid her as he paid everyone else from the outset it would not have been necessary for her to extend her contract. She accused him of doing her in from the first year. She hated coming to work and suggested that it might be better if he made her an offer to buy out the percentage that she had in the member’s interest in Bubaluba. She complained that he kept using the house as ‘an excuse’ when the house had been paid for over and over again. She thought that the time and loyalty she had given to the company would have meant something. She concluded ‘DAMN HOW COULD I BE SO BLIND!’

[30] Absolutely amazed and astounded the plaintiff replied by email on 5 October 2011. He denied ever treating the defendant unfairly. She was always paid more than any other staff member. He pointed out that she had refused his offer of a share in the business. She had always received preferential treatment. Her working hours had never been monitored or checked (which was untrue in view of his 4 August email). She also received bonuses. Then he accused her of trading recklessly, resulting in bad debts which had never been taken off her account. He noticed that she had been unhappy for some time from her attitude towards other staff and clients. He then criticised her performance in relation to the CHEP contract.

[31] Regarding the house he informed her that she could not terminate her services until the end of 2015. If she did she would lose the entire house regardless of her membership interest in Bubaluba. He advised her to consult a lawyer if she disputed this. He denied changing his attitude or feelings towards her and said that it was she who was aggrieved. Nevertheless he threatened to enforce their agreements if she decided to leave. He invited her to take a month or even three months off to consider his proposal. He attempted to assure her that he admired her and that she was the best broker. He was disappointed that she accused him of taking advantage of her colour when he had looked after her as a friend and employee. He concluded by offering to fly her to Cape Town to resolve the issue.

[32] Ignoring the rest of the plaintiff’s email the defendant honed in on the criticism about bad debts. She requested a list of the bad debts that she allegedly incurred for the business. Seven minutes later the plaintiff declined to give her a list but mentioned only Crossmoor in respect of which the business allegedly sustained a loss of R16 000. The defendant insisted on receiving a list of the bad debts. The plaintiff resisted, directing her instead to resolve their relationship problems.

[33] In chief he explained that the defendant had found a way of bypassing the limits on their software system to give more credit to customers than the system allowed. If this was a serious breach of the rules all he did to remedy her alleged misconduct was to tell her that she was ‘naughty’. Although the defendant exposed the business to higher risk, she seems to have exercised good judgment because the plaintiff proved no loss to the business arising from her giving more credit than the system authorised.

 

[34] At 5:59 that afternoon the defendant sent a lengthy email in which she raised the following issues: The plaintiff questioning her about her working hours when she had to go to hospital for her husband and for herself; the plaintiff humiliating and demoting her by removing her from the privacy of a separate office and returning her to the general office with all its noise and distractions; the plaintiff being rude in his letters and conversations with her. She reflected that ‘(s)ometimes MONEY does not fix matters. Human kindness and respect is sometimes a more worthy reward than money’. She criticised him for seeming to be ‘generous and kind’ when in fact he had ‘such an ego’ that he thought it was a ‘big deal’ to buy someone a bunch of flowers or a box of chocolates.  She repeated that respect and kindness could not be bought. 

[35] Again she invited the plaintiff to ‘pin point’ complaints against her. If he was unable to substantiate the complaints she said she would assume that he was making up stories to make her ‘feel inferior (as usual)’. Under cross-examination he conceded that he did not pin point the complaints against her. In re-examination he acknowledged that he emailed her about some bad debts. However he proved no losses to the business resulting from them.

 

[36] One of her main complaints against him was that he had a ‘bombastic manner in which he tried to rule’.  If she had an attitude towards the plaintiff it was because she found him to be ‘so arrogant and so demanding’. She criticised him for being rude to her and to a customer who had settled an account early in exchange for a discount. She resented all the ‘hammerings’ that she got. She acknowledged that there were many issues that needed resolving. She contemplated taking his advice to consult an attorney.

 

[37] Shortly thereafter she sent a further email referring to the distasteful conversations they had exchanged in the past months when the plaintiff expressed dissatisfaction with her performance. She complained that in the past she was praised and appreciated for her hard work; now she was put under extreme pressure to bring in more money for the business. Work was no longer a pleasure for her and her health had suffered. She was miserable as a result of the circumstances created by the plaintiff. She tendered her resignation at the end of October but offered, if compelled, to work until the end of November 2011.

 

[38] The following morning (6 October 2011) she requested the plaintiff to give her a date when she had to move out of the house. At that stage the plaintiff had convinced her that she had no claim to the house when he said that a court of law would rule in his favour when it heard what she had been paid to sign the extension agreement. He informed her that he had no intention of asking her to leave her house. He could not understand why she was reacting in the way she did. Again he offered to fly her to Cape Town to chat with her. He did not want to fight or be hurtful, he said. In saying that he admired her and that she had a heart of gold he attempted to assure her that he was not trying to ‘smooth over issues’ between them.

 

[39] The defendant reiterated that she had made up her mind to leave the business. Furthermore, he had said that if she left work he would take the house back. She declared that it was all his fault. Again she requested a date to leave the house. She did not think there was any use in him coming to talk to her. She was not angry, just hurt.

 

[40] Later that day she persisted in resolving the issue of the house. She requested him to give her an amount to pay so that she could have the house. He repeated that she would lose the house if she left the business. He refused to discuss the house further. He also intimated that he might reclaim the R300 000 paid to secure her services until 2015. But he wanted her to sit around a table in order to find an amicable resolution.

 

[41] Eleven minutes later she repeated her request to him to give her a date to move out. The defendant also instructed her insurer to remove the plaintiff as a beneficiary under her insurance policy taken in terms of clause 5 of the extension agreement to secure the payment to her of the sum of R300 000.

 

[42] On 12 October 2011 the plaintiff met the defendant in his office in Pennington. He handed her a letter thanking her for her hard work, dedication and loyalty, remarking that she was a shining example to others in the business. On a personal note he expressed his admiration for her kindness, generosity and concern for others. He declared that he would miss her friendship. In stark contrast to these warm and conciliatory sentiments the plaintiff terminated her services with immediate effect. With the letter he gave her a Lunch Bar. He testified that he could not recall but did not dispute that he might have given her the chocolate. However, he denied any intention to slight her.

[43] In the context of terminating summarily her employment and their friendship of almost twelve years, giving her a cheap chocolate bar was another insensitive and demeaning act. It humiliated her. The height of his insincerity was manifest from his unilateral decision to withhold her salary for October pending deductions he intended to make against it. That was unlawful under s 34 of the Basic Conditions of Employment Act 75 of 1997 firstly because she did not consent to the deductions. Secondly, he did not give her a fair opportunity to say why he should not make deductions from her salary before he withheld it for October 2011.  In the course of this litigation he agreed to pay her for October.  I include an order to that effect.

[44] On 24 October 2011 the plaintiff invited the defendant for a discussion at his home the following morning. His intention was ‘to get to the bottom of her problem’. He had asked the staff but they could not help him understand what troubled her. He decided to meet her to ascertain from her personally what her problem was. Clearly, the import of her lengthy emails venting her anger, hurt and disappointment with him before she tendered her resignation was lost on him.

[45] They met at his home early the following day. He testified that she demanded that he should get rid of the general manager. He refused to accede to this request, claiming that the general manager was probably a better manager than he was. He proposed that he open a satellite office for her in Pennington. She informed him that her sister had invited her to establish a transport brokerage. The plaintiff offered to increase her package if she were to return to work for him. The defendant undertook to consider his offer and revert. Shortly she declined his offer and informed him that she would be taking up her sister’s offer to start their own company from 1 November 2011.

[46] On 28 October 2011 the plaintiff emailed the defendant to enquire when she would be vacating the house, and if she wanted to stay there, for how long she would like to rent it. He asked her to sign the forms to transfer back her membership interest in Bubaluba to him. He enquired what her attitude was regarding his payment of the R300 000 to her. Then he complained about having to pass credits to various customers as a result of her errors and her exceeding the credit limit for a customer, My Transport, despite his instruction. He waxed on that any normal company would have dismissed her without hesitation; a court of law would have found her actions unacceptable and dismissed her. He hoped that My Transport would settle their account otherwise she would be personally liable as she had agreed to be. He then discussed deductions to her October salary. He wished her well.

[47] Under cross-examination he conceded that the defendant’s dealing with My Transport did not result in any loss for his business. This concludes the factual background and my analysis of it.

Rectification of the extension agreement

[48] Clause 7 of the extension agreement reads:

‘The parties record that it is a specific term of this agreement that should the Employee leave the employment of the Employer prior to the agreed period of employment (last day of December 2015) the Employer shall forfeit the benefits of this agreement and the member’s interest transferred to the Employee shall revert to the Employer and the Employee hereby undertakes to sign all necessary documentation to transfer the member’s interest back to the Employer upon presentation thereof.’

 

[49] The defendant did not read the extension agreement carefully. She merely browsed through it. She noticed the 70% in clause 3 because it was a figure. It ‘jumped out at her’ she said. In 2011 when the plaintiff drew her attention to clause 7, she could not understand it. He convinced her at the time that any court of law would rule in his favour.

[50] Clearly the word ‘Employer’ in the third line is a typographical error. It makes no sense as it stands. It should be rectified to read ‘Employee’. Irrespective of whether the rectification is granted, the second part of the clause literally entitles the employer to the member’s interest already transferred to the employee. Even if the reference to ‘employer’ instead of ‘employee’ was nonsensical, it was clear that her interests would revert to the plaintiff.

 

[51] The defendant denied agreeing to the contents of clause 7. She testified that she became aware of its contents only after the plaintiff brought it to her attention in October 2011. The plaintiff testified that the forfeiture was discussed during the negotiations for the 2002 agreement. That the 2002 agreement does not include forfeiture was an oversight by the drafters, he persisted.

 

[52] That cannot be true. Nowhere in the exchange of communications preceding the 2002 agreement was there any mention of forfeiture of the interest in Bubaluba. It is a clause potentially so prejudicial to the defendant that it had to feature expressly in their pre-agreement communications and eventually in the agreement. He accepted under cross-examination the defendant’s contention that there was no discussion about forfeiture saying ‘I don’t think she would lie.’ He also conceded that the only query she raised about the extension agreement was the 70% membership interest reflected in clause 3.

 

[53] However, even though she was unaware of the forfeiture clause the defendant had an opportunity to read the extension agreement. She chose to browse through it. The plaintiff was entitled to invoke the principle caveat subscriptor[2]. She is bound by virtue of her signature to the extension agreement.

 

[54] Although she cannot avoid clause 7, the fact that she simply browsed the extension agreement and signed it without reading it carefully tells of the high level of trust the defendant had in the plaintiff to prepare a document consistent with their negotiations and agreement. Her trust was clearly misplaced. The plaintiff slipped clause 7 into the extension agreement without alerting her to it. Not only the novelty of the clause but also its manifest prejudice were compelling reasons for alerting her because by 2008 the defendant owned more than 50% of the membership interest in Bubaluba. More on this issue in the discussion below on contra bonos mores.

[55] The only interpretative question that remains is whether ‘this agreement’ refers to the extension agreement exclusively or to both the extension agreement and the 2002 agreement.

 

Interpretation of the extension agreement

 

[56] The extension agreement refers to the 2002 agreement as ‘the said agreement’ in the preamble and as the ‘original agreement’ in clauses 1, 4 and 8. Clause 7 mentions ‘this agreement’ twice. In the context ‘this agreement’ could only refer to the extension agreement exclusively. The clearest evidence of the intention of the drafter to distinguish between both agreements appears in clause 8 which records that the terms and conditions contained in ‘the original agreement’ not affected by ‘this agreement’ shall remain binding.

[57] Even if clause 7 was ambiguous, which it is not, the plaintiff was responsible for having the contract drafted by his attorney. The Latin maxims verba fortius accipiuntur contra proferentem[3] and verba contra stipulatorem interpretanda sunt[4] apply.[5] The plaintiff suffers the consequence of the agreement being interpreted against him. As the party who claims forfeiture in his favour he should have ensured that the terms were clear; otherwise the defendant must have the benefit of the doubt. ^[6] Additionally, as the claimant he bears the onus of proving the forfeiture.

 

[58] On this construction therefore I find that if the defendant were to forfeit any benefits at all it will be only in terms of the extension agreement. This would be the 12% membership interest she had earned by October 2011.  Although no benefits had been transferred to the defendant under the extension agreement it was common cause that an additional 12% of the member’s interest in Bubaluba had accrued to her by virtue of her employment for three years since 2008.

 

Who is entitled to the members’ interests in Bubaluba?

[59] In support of his claim to the membership interest the plaintiff relied on the defendant’s resignation coupled with the forfeiture in clause 7. For the defendant, counsel submitted that clause 7 was contra bonos mores. Counsel referred to the plaintiff’s two stratagems in the extension agreement to secure the defendant’s employment. First, he paid her R300 000 upfront on the condition that she remained in his employment until December 2015. Second, he transferred portions of the member’s interest in Bubaluba annually to the defendant. This was both to incentivise the defendant to strive for and maintain high profits and to remain employed with the plaintiff until February 2016.

 

[60] As counsel pointed out her acquisition of her membership interest was not exclusively time based as it would have been if it accrued to her only on termination of her employment in December 2015. If she did not achieve the target she would not have been entitled to a transfer of the member’s interest for that year; but tenure would be unaffected. There was a direct correlation between the defendant’s productivity and performance, the transfer of the member’s interest and her remuneration package. During the various negotiations and both parties’ testimony the house featured pertinently in the computation of her remuneration. Furthermore, the defendant paid initially 40%, then 60% and finally 100% of the rates and outgoings on the property, which she continues to occupy rent-free. The plaintiff has not claimed rental since February 2009. Nor has he reclaimed the R300 000. This signals that the house was part of her remuneration. To deny her the member’s interest she earned would mean denying her remuneration. In these circumstances, is clause 7 contra bonos mores or against public policy as counsel for the defendant submitted?

[61] What is meant by public policy is best answered in Sasfin (Pty) Ltd v Beukes 1989 (1) SA 1 (A) at 71 – 9G, summarised in Retha Meiring Attorney v Walley 2008 (2) SA 513 (D) at paras 45-46. Paragraphs material to this case are the following three:

  

‘[45.3]   Agreements which are clearly inimical to the interests of the community, whether they are contrary to law or morality, or run counter to social or economic expedience, will, on the grounds of public policy, not be enforced (at 8D). 

[45.8] One must be careful not to conclude that a contract is contrary to public policy merely because its terms (or some of them) offend one's individual sense of propriety and fairness (at 9C).

[45.10] A relevant and not unimportant consideration is that public policy should properly take into account the doing of simple justice between man and man (at 9G).’

The learned judge adds at para 46 that:

‘(W)hen considering whether an agreement is against public policy, one has to look at 'the tendency of the proposed transaction, not its actually proved result' (per Innes CJ in Eastwood v Shepstone 1902 TS 294 at 302, quoted with obvious approval  in Sasfin (supra) at 8I - 9A).’

 

Williston on Contracts 3rd ed para 1630 cited in Sasfin (supra) at 14D) cautions:

‘“Although the power of courts to invalidate bargains of parties on grounds of public policy is unquestioned and is clearly necessary, the impropriety of the transaction should be convincingly established in order to justify the exercise of the power.”’

Sasfin (supra) at 13I-14D concludes:

‘An agreement … [that constitutes exploitation and leaves one party at the mercy of another] is clearly unconscionable and incompatible with the public interest, and therefore contrary to public policy.’[7]

 

[62] In discussing the right of recovery of something delivered under an illegal contract the Appellate Division emphasised in Jajbhay v Cassim 1939 AD 537 at 544:

‘I respectfully suggest that he should have approached the matter from the more fundamental point of view as to whether public policy was best served by granting or refusing the plaintiff's claim. If the learned Judge had so approached the case and had considered that as an equitable Judge he was free (as I think he was) to order the restoration of the cow, I cannot doubt that he would have granted the relief prayed. Indeed the facts of that case afford a typical example which called for a decision on which side public policy is best served. It may be said that contracts of that nature are more discouraged by leaving the bereft plaintiff unhelped and the doubly delinquent defendant in possession of his illgotten gains. I cannot agree with this view, which I think would not so much discourage such transactions but would tend to promote a more reprehensible form of trickery by scoundrels without such honour as even thieves are sometimes supposed to possess, and public policy should properly take into account the doing of simple justice between man and man.’

[63] In summary, clauses that public policy cannot tolerate include those that are ‘draconian’, ‘so gratuitously harsh and oppressive’,[8] that are ‘clearly inimical to the interests of the community’, that are ‘contrary to law or morality’, that ‘run counter to social or economic expedience’^[9] or are ‘unconscionable and incompatible with public interest’.^[10]

 

Developing the common law

 

[64] Should the common law concept of contra bonos mores be developed in order to comply with the Constitution of the Republic of South Africa, 1996?

 

[65] In Johannesburg Country Club v Stott and Another[11] the SCA anticipated without deciding that contracts incompatible with constitutional values may require adaptation of the common law to be consistent with the spirit purport and objects of the bill of rights.[12] In Murray v Minister of Defence[13] it unhesitatingly held:

 

‘However, it is, in my view, best to understand the impact of these [labour law] rights on this case through the constitutional development of the common law contract of employment. This contract has always imposed mutual obligations of confidence and trust between employer and employee. Developed as it must be to promote the spirit, purport and objects of the Bill of Rights, the common law of employment must be held to impose on all employers a duty of fair dealing at all times with their employees – even those that the LRA does not cover.’ (Footnotes omitted)

 

[66] Two years later in South African Maritime Safety Authority v McKenzie[14] the SCA doubted that it was even necessary to develop the common law to recognize an ‘“obligation of confidence and trust”’ which is well-established in our law. The court pointed out:

‘[54]…What is important to bear in mind is that the effect of any extended duty of fair dealing must be worked out in individual cases in the light of the statutory provisions giving effect to the constitutional guarantee of fair labour practices. …. Murray  seems to me to be authority for no more than the proposition that an employee who is not subject to the LRA enjoys the same right as other employees not to be constructively dismissed, whatever else might have been said en passant. It is possible that there is some need to develop the common law by importing into the contract of such employees terms that give effect to their right to fair labour practices but that is not a matter that need now concern us.

 

[55] I do not think that any of the cases I have referred to can be said to have decided authoritatively that the common law is to be developed by importing into contracts of employment generally rights flowing from the constitutional right to fair labour practices. It is uncontroversial that the LRA is intended to give effect to that constitutional right and I see no present call, certainly not in this case, for the common law to be developed so as to duplicate those rights (at least so far as it relates to employees who are subject to that Act).’

 

[67] Barkhuizen v Napier 2007 (5) SA 323 (CC) [2007] ZACC 5; (2007 (7) BCLR 691) at para 28 settles the question of public policy and contracts as follows:

 

‘Determining the content of public policy was once fraught with difficulties. That is no longer the case. Since the advent of our constitutional democracy, public policy is now deeply rooted in our Constitution and the values that underlie it. Indeed, the founding provisions of our Constitution make it plain: our Constitutional democracy is founded on, among other values, the values of human dignity, the achievement of equality and the advancement of human rights and freedoms, and the rule of law.’ (Footnotes omitted)

[68] In this case the plaintiff asserts a right to forfeiture that the defendant resists with a counterclaim for transfer of membership interests and underpayment of her remuneration. She claims under the common law the right to fair dealing[15] and to be protected against agreements that are contra bonos mores. [16] These rights are ingrained into our common law. Accordingly, I am in respectful agreement with South African Maritime Safety Authority v McKenzie that the common law needs no development in order for the defendant to assert these rights. These rights are also codified into our labour laws. Unlike Murray, an officer in the South African Defence Force, the defendant was protected by the Labour Relations Act 56 of 1995 (LRA). However, she does not assert her labour law right not to be constructively dismissed in order to claim the remedies under the LRA. In fact she does not refer to or rely on the LRA at all. She claims that the plaintiff constructively frustrated her fulfilment of her obligations under their agreements by leaving her no choice but to resign. Furthermore, her claims are not restricted to labour laws. Her counterclaim is one of a plethora of possible common law claims that overlap with or fall beyond the protection of labour laws. It is enforceable under the Constitution because she is not attempting to duplicate or circumvent the rights and remedies regulated under labour laws. [17]

[69] I now set out to investigate whether clause 7 is against public policy in circumstances in which an employee might be deprived of her remuneration.

 

Is clause 7 contra bonos mores?  

 

[70] As to whether the defendant can be deprived of her remuneration under clause 7 I defer to Otto Kahn-Freund who famously observed that:

 

‘[T]he relation between an employer and an isolated employee or worker is typically a relation between a bearer of power and one who is not a bearer of power. In its inception it is an act of submission, in its operation it is a condition of subordination, however much the submission and the subordination may be concealed by that indispensable figment of the legal mind known as the “contract of employment” The main object of labour law has always been, and we venture to say will always be, to be a countervailing force to counteract the inequality of bargaining power which is inherent and must be inherent in the employment relationship.'[18]

[71] In endorsing Kahn-Freund’s analysis of inequality in employment, the Constitutional Court (CC) urged:[19]

 

‘In deciding how commissioners should approach the task of determining the fairness of a dismissal, it is important to bear in mind that security of employment is a core value of the Constitution which has been given effect to by the LRA. This is a protection afforded to employees who are vulnerable. Their vulnerability flows from the inequality that characterizes employment in modern developing economies.’ (Court’s footnotes omitted)

[72] A respected labour law academic elaborates:

 

‘A contract, in other words, presupposes agreement between equals – that is, between parties equally able to stipulate the terms that they find acceptable and walk away if the other party does not agree. Workers in general cannot do so; the labour market is a buyer’s market far more often than a seller’s market.’[20]

 

[73] Citing Kahn-Freund above LAWSA points to the link between employment and the Constitution in the following extract:[21]

 

‘However, one needs to look at the personal and dependent nature of the employment relationship. The purpose of constitutionally guaranteeing labour rights is the protection of human beings, not of businesses, and the protection of vulnerable human beings, the workers.’

 

[74] Grogan illuminates that the inequality is definitional:

 

‘(T)he courts regard the control actually or potentially exercised by the employer over the employee as one of the main characteristics, if not the key characteristic, of the employment relationship. This means that unless there is an element of hierarchical authority in the relationship, the parties are by definition not employers and employees.  Apart from the fact that subordination is by definition a characteristic of the employment relationship, the relationship between the employer and employee is also in fact unequal. Historically, the requirements of the contract of employment reflect the unequal distribution of social and economic power out of which it emerged. …

 

Given the nature of South African society, very few, if any other than employees with rare and marketable skills, can realistically be described as possessing bargaining power equal to those of their employers. The truth is that employers retain the ultimate leverage because it is they who, in the final analysis, decide who they will employ, and determine what they are prepared to pay for labour.’[22](Footnotes omitted)

 

[75] In contrast to the opinions above, influential economist Geoff Hogbin takes a different view:

 

‘[Like] … goods and services traded through markets, wages and other terms of employment are determined largely by supply and demand [t]here is no reason to suppose that the employer side of the market has inherent power over the employee side in determining wages and other conditions of employment’.[23]

 

[76] In my view, whatever market and other external forces may influence terms and conditions, ultimately it is the employer who wields the power to dismiss the employee for economic and other reasons and who decides whether he will pay the employee. Furthermore, Hogbin’s conclusions are based on circumstances he found in Australia. In South Africa, the Employment Equity Commission’s (EEC) Report 2012[24] illustrates the coincidence of race and gender on the one hand with low paying jobs that entrench poverty and powerlessness on the other hand.[25] Hogbin’s thesis does not apply to these circumstances in which the supply side of low and unskilled labour predominate and dwarf the demand for such labour.

 

[77] Inequality inherent in the employment relationship is institutionalised into our economic system. Biowatch Trust v Registrar, Genetic Resources 2009 (6) SA 232 (CC) (2009 (10) BCLR 1014) para 17 responded as follows to systemic unfairness:

‘It is true that our Constitution is a transformative one based on the understanding that there is a great deal of systemic unfairness in our society. This could be an important, even decisive factor to be taken into account in determining the actual substantive merits of the litigation.’

 

[78] Calcified over centuries along class and racial lines such inequality has deepened the divide between rich, powerful owners of enterprises on the one hand and poor, powerless employees on the other hand. So structured the employment relationship collides again and again with the rights and values of equality and dignity in the Constitution. Consequently, the Constitution and labour laws recognise employees as a vulnerable status-based group discriminated under institutionalised socio-economic conditions. Labour laws passed under the Constitution are the most visible and forceful brake on laizzes faire employment agreements. Such recognition imports into public policy the protection of employees as a vulnerable group. When employees claim protections under the common law decision-makers should intervene ‘to counteract the inequality of the bargaining power which is inherent and must be inherent in the employment relationship.'[26]

 

[79] The right to socio-economic equality and dignity might also be engaged. Socio-economic status is not a listed ground of discrimination. Discrimination on an unspecified ground exists if it is based on attributes or characteristics that have the potential to impair the fundamental dignity of persons as human beings, or to affect them adversely in a comparably serious manner.[27] Socio-economic status is more than an unspecified ground of discrimination.[28] However, as this ground was not ventilated I take it no further.

 

[80] Our constitution is characterised as being transformative[29] precisely because it is intended for use as a tool to terminate socio economic inequality and injustices. Taking my cue from the authorities above, when interpreting and considering claims under employment contracts the relationship of inequality must inform the determination as to whether an agreement or the relief claimed is contra bonos mores. To ignore the inherent inequality and to rely on the formalism of consenting parties with the capacity to contract would deny to the Constitution its transformative function. This is not to say that a court should rescue a recalcitrant employee merely because he is an employee and therefore vulnerable. For instance, an employee who steals his employer’s information in breach of a restraint of trade falls beyond the protection of the common law, labour law and the Constitution.[30] It simply means that when disputes about employment contracts are challenged under the common law, they should be scrutinised under the Constitution to ensure that they are not contrary to law or morality, that they do not run counter to social or economic expedience, that they do justice between man and man[31] and that they are therefore not contra bonos mores.

 

[81] Equality and discrimination law expert Prof Sandra Fredman finds that ‘status-based’ inequalities, such as gender, race or ethnicity are inseparable from socio-economic inequality;[32] hence the disproportionate concentration of poverty amongst women and black people, a fact borne out by the EEC report above. Socio-economic inequality is usually addressed by policy and through the political process such as promulgating labour laws. Hence courts are usually reticent about engaging in distributive issues. However, the learned author argues that separating status-based measures from redistributive measures limits the ability to make real equality of opportunity and genuine choice possible.[33] She motivates for a multi-dimensional conception of equality which incorporates both recognition and redistribution issues. Importantly, she underscores the interaction between equality and dignity, which play out in complaints against e.g. sexual harassment, racist abuse and the humiliation of old people.[34] She advocates a social democratic model to best synchronise redistribution and recognition.[35]

 

[82] Some judgments acknowledge that our Constitution is not libertarian[36] but ‘promotes an entirely different vision of our society. A transformative constitution needs to engage with concepts of power and community.[37] With the Constitution entrenching third generation rights[38] such as access to housing and the right to education, and the CC having to give effect to them if it is to play a genuinely transformative role, it is hard to describe our Constitution as anything but inclining towards social democratic.

 

[83] In this case the controversy as to whether claims are justiciable is avoided. This case presents as justiciable claims arising from the interpretation of employment agreements the determination of which can be distributive if effect is given to constitutional values.

 

[84] The plaintiff as the owner of the business and employer held a position of power over the defendant, an isolated employee. The plaintiff described the defendant as an exceptional worker, with an amazing group of loyal clients and as an asset to the business. Yet she was easily replaced on her departure with several employees who were employed on a commission only basis. From the evidence it emerges that she stood her ground when bargaining for herself, but only up to a point. Initially she could not risk losing her job. If she was aware at the time that the 2004 agreement reduced her pay in the 2002 agreement, she did not challenge it. By 2011 when she had boosted her bargaining position by her superior performance she was able to hold her ground better. Ultimately, the plaintiff terminated the bargaining for the 2011 agreement with his take it or leave it stance.

[85] The validity and enforceability of only clause 7 is disputed. The defendant has not placed in issue that under the extension agreement she was getting only 4% instead of 15.38% per annum of Bubaluba that she got under the 2002 agreement. Clause 7 is severable from the rest of the agreements.  Having the security of almost another eight years employment until December 2015 was a right she would have wished to secure at that time. Therefore the extension agreement, excluding clause 7, cannot be said to be unconscionable or unjust. Consequently, she has no automatic right to the unearned portion of the member’s interest.

[86] In contrast, clause 7 is a forfeiture of a portion of the remuneration she had earned. To permit the plaintiff to reclaim from the defendant her member’s interest in Bubaluba, whether in terms of the 2002 agreement or the extension agreement, would mean denying her hard earned remuneration. Such remuneration also translated into the home she provided for herself, her unemployed husband and children. To permit the forfeiture of her 12% member’s interest in Bubaluba would be improper, unconscionable, an injustice and importantly, contrary to social and economic expedience. Accordingly, I find that clause 7 is contra bonos mores and that the defendant is entitled to the transfer of the 12% member’s interest in Bubaluba she earned under the extension agreement.  Whether she is entitled to the unearned balance of the shares depends on whether she resigned voluntarily or was constructively dismissed.

 

Voluntary resignation or constructive dismissal

 

[87] What constitutes constructive dismissal was summarized in Murray v Minister of Defence 2009 (3) SA 130 (SCA) ([2008] [2008] ZASCA 44; 6 BLLR 513; [2008] 3 All SA 66) para 12;

‘... the employee must prove that the resignation was not voluntary, and that it was not intended to terminate the employment relationship. Once this is established, the inquiry is whether the employer … had without reasonable and proper cause conducted itself in a manner calculated or likely to destroy or seriously damage the relationship of confidence and trust with the employee. Looking at the employer's conduct as a whole and in its cumulative impact, the courts have asked in such cases whether its effect, judged reasonably and sensibly, was such that the employee could not be expected to put up with it.’ [39]

[88] In the case of a breach of trust by an employee for say, stealing or some other act of dishonesty, the employer’s default position of dismissing the employee is generally unassailable.[40] Conversely, when an employer is untrustworthy an employee should be free to resign and claim on the grounds of constructive dismissal.

[89] To substantiate her claims based on constructive dismissal the defendant supplied the following further particulars for trial which correspond substantially with her emails summarised above:

i. The plaintiff effectively demoted the defendant in her capacity as operations manageress by requiring her to vacate the upstairs office and to work on the ground floor where all labour brokers were located.

ii. The plaintiff levelled unfounded allegations alternatively insinuated without any lawful justification or basis that the defendant was not maintaining her working hours and that the defendant had recklessly incurred bad debts.

iii. The plaintiff imposed unreasonable targets, alternatively imposed unreasonable demands on the defendant rendering the defendant’s continued employment with the plaintiff intolerable.

iv. The plaintiff made the defendant feel pressurised.

v. The plaintiff nagged the defendant about increasing her turn-over from approximately 100 to 300 loads a month.

vi. The plaintiff was not satisfied even when the defendant met the increased targets.

vii. The plaintiff forced the defendant to increase her working hours by requiring her to work outside the normal hours by purchasing her a laptop computer affording her access to the computer system from her home.

viii. The defendant was forced to spend hours away from her husband and children and not have leave approved when she applied for it.

ix. The plaintiff was seldom in his office to assist and when he was, he was pushy and agitated.

x. The defendant became depressed and suffered from sleeplessness.

xi. The defendant was, as a consequence, obliged to seek medical treatment.

[90] Significantly, these particulars omitted to mention breaches of their remuneration agreements, in particular the 2011 agreement that triggered the breakdown in their relationship. Her emails also downplay the remuneration issue. Clearly the plaintiff breached the 2011 agreement by underpaying her. The amendment now sought to fix this omission in the further particulars must be granted. However, the plaintiff’s under-emphasis of the remuneration is a telling indicator that it was not the primary cause of the breakdown of the relationship. Her emails and the further particulars reveal more complex relationship issues.

 

[91] For context, something needs to be said about the relationship between the parties. The defendant had to leave school after attending standard six in order to help her father in their family business. The family business consisted of a grocery retail store with a small transport division. When she approached the plaintiff for a job he turned her down at the first interview. She returned shortly and insisted that he employ her. Taken aback by her confidence he did so. They became friends. She regarded him as a confidant and father figure. Mostly, they trusted each other. During his testimony he acknowledged that she would not lie. Although he also testified that he would not go back on his word, the evidence shows otherwise.

[92] The nature of the industry was pressurised and stressful. The defendant loved her work. She was highly motivated. She worked long hours. Initially, she willingly used the laptop from home to work well into the night. The joy of her job was as much if not a greater incentive than the higher remuneration it brought. She valued the respect and the dignity that came with the job and the relationship she had struck with the plaintiff.

 

[93] She did not challenge the plaintiff’s underpayment of her wages with the reversal of the 2002 agreement by the 2004 agreement. Believing him at the time she was prepared to vacate the house or pay for it to stay on. Importantly, she did not institute these proceedings for underpayment for her wages. Nor is there evidence that she prosecuted an unfair dismissal claim under the LRA.   It was the plaintiff who launched this action on 20 December 2011. By that stage many of her claims for underpayment of her wages had prescribed.

 

[94] She was not aware of the amount of profits she had generated since the 2002 agreement until her constructive dismissal. She became aware of it only when she started to prepare for this case. On the schedules that she generated it emerges that the defendant generated a profit of R16 748 714.41for the business since September 2002. The plaintiff had testified that his aim was to remunerate her with a package that amounted to 30% of profits. If he had done that he would have paid her R5 024 614.32. What he in fact paid her was R3 346 852.28 leaving a shortfall of R1 677 762.04. After deducting R230 000 he expended for the house and the R300 000 to secure her services, his underpayment is still over a million. To deduct the current value of the house at R800 000 according to valuations she obtained at his request would not be the correct approach because her remuneration was R230 000 not the value of the house at some future date. Even if one were to do so, it would leave a shortfall of R877 762.04.

 

[95]      Sighing with apparent frustration the plaintiff testified that the defendant wanted to renegotiate the terms constantly. However, the evidence shows that it was he who initiated the variation of the 2002 agreement, the extension agreement and the 2011 agreement when an agreement was in place until December 2015. He attempted unsuccessfully to secure a restraint of a trade agreement with her in 2010.

[96] Against this background the host of relationship factors subsumed his underpayment of her remuneration. She was even prepared to sacrifice her income in order to have more time with her family. Her emails ooze with anger and hurt that he was more preoccupied with extracting money out of her than showing her human kindness and respect. She complained that work was no longer a pleasure for her. She raised the remuneration issue to point out that she was not prepared to increase her turnover by 125% if she was going to earn less than 24% of the profits. Furthermore, it aggrieved her that new employees got more benefits than she did. Her reference to ‘skin colour’ was obviously to her race as an Indian even though she denied in court that she implied that he was a racist. However, in a subsequent email she repeats her complaint that he made her feel inferior as usual and was rude to her.

 

[97] Their relationship began to unravel in 2011 when she confirmed that she would not be extending her contract beyond February 2016. About 2010 he had allowed her to occupy a private office upstairs away from the general floor of brokers and to renovate it at her expense. He permitted her to employ her own personal assistant whom she paid or contributed to from her own funds. After she refused to extend her contract in 2011 he instructed her to join the general pool of brokers. In his opinion, the brokers had to work as a team. If her genuinely believed this to be the case it does not explain why he offered to re-establish her in a satellite office in Pennington after she resigned. Unsurprisingly therefore to her this was a demotion not only in her mind but it was also apparent from the way her subordinates responded to her. Unhappy as she was she obeyed his instruction.

 

[98] At the inception of their relationship when the defendant could not afford napkins for her child, the plaintiff willingly paid for flights for her, her husband and child to return from Zambia to work for him. In 2011 when he offered to fly her to Cape Town to discuss their problems with him there, to take as much as three months leave and finally offering her a new deal after her resignation, commercial considerations remained at stake. As the manageress of the transport brokers and the highest performer she would have been a loss to his business if he did not secure her employment. If she started her own business she would have been a threat. His hypocrisy was all too evident in the syrupy sweetness of his letter terminating her services with immediate effect and withholding her October salary. In none of her emails does she complain about the general manager or demand that the plaintiff get rid of him. She accounted to the plaintiff directly and it was he who hurt her deeply.

 

[99] In my diagnosis the underpayment of her wages was miniscule in comparison to the plaintiff breaking her trust, treating her as an inferior Black person and being unappreciative of the sacrifices she made for the business at the expense of her family. Notwithstanding the detailed explanations she proffered in her emails, the plaintiff had not fathomed even at their meeting on 26 October 2011 why she had retaliated against him so antagonistically. Her reasons were fully explained in her emails. Clearly the plaintiff refused to acknowledge them. In summary, she resigned because she found the inequality in their relationship intolerable and his treatment of her was an affront to her dignity. She wielded the only weapon in her hand. That was to resign and start her own business in competition with him.

 

[100]   The plaintiff conceded that by February 2009 the defendant would have acquired the entire membership interest in Bubaluba but for the extension agreement. As the plaintiff precipitated her resignation the doctrine of fictional fulfilment applies. I have no hesitation in finding that the plaintiff constructively dismissed the defendant by his own dishonourable conduct. But for her dismissal, the defendant would have been entitled to the transfer of all the membership interest in Bubaluba. Consequently, I conclude that the plaintiff should transfer all his membership interest to the defendant.

 

Is clause 7 an incentive or a penalty?

 

[101]   Based on my findings and conclusions above it follows that the defendant is not liable for any penalties in terms of the Conventional Penalties Act. However, the submission by counsel for the plaintiff that clause 7 was an incentive and not a penalty invites the court’s response. The incentive in the extension agreement appears in paragraph 3 in which the plaintiff agreed to transfer the remaining shares over eight years at 4% annually. Clause 7 is unambiguously a forfeiture of benefits in favour of the employer. As such it is a penalty.

 

[102] If any penalty were to be imposed on the defendant at all it must be proportional to the prejudice suffered by the plaintiff.[41] In Botha and Another v Rich N.O and Others[42] the CC found it would be a disproportionate sanction to deprive the debtor of the opportunity to have the property transferred to her in view of the considerable portion of the purchase price she had already paid. It balanced this view with imposing a condition upon her to pay the arrears and outstanding amounts in rates, taxes and service fees.

 

[103] The plaintiff did not prove any prejudice he suffered on the premature termination of the defendant’s employment. To reverse the transfer of shares in Bubaluba would be grossly unfair and prejudicial to the defendant.[43] It is common cause that she had acquired 76.9% plus 12% of the membership interest but only 45% of it had been transferred into the name of the defendant. The defendant earned all the membership interest by remaining in employment for long as she did. Furthermore, I found above that it was the plaintiff who dismissed her constructively and unlawfully. Consequently, no penalty should be imposed on the defendant.

 

[104]   I am indebted to counsel for helpfully narrowing down the issues in dispute, relieving me of the task of deciding questions such as outstanding leave and other pay.  Counsels’ heads of argument and the bundles also facilitated my judgment.

 

ORDER

 

Plaintiff’s Claim

 

[A] The plaintiff succeeds to the extent that clause 7 is rectified to read ‘employee’ instead of ‘employer’ on line three of the extension agreement.

 

[B] The plaintiff’s claim for the transfer of the membership interests to the second defendant from the first defendant is dismissed with costs.

 

Defendant’s Counter-Claim

 

[C] The first defendant is granted leave to amend paragraph 1 of her Further Particulars for Trial dated 7 February 2014 by adding the following:

‘1.10    the plaintiff failed to effect payment to the first defendant of her agreed remuneration for the months of July, August and September 2011;

1.11     the plaintiff demoted the defendant in her capacity as operations manageress by requiring her to vacate her offices on the first floor of the premises occupied by the plaintiff and to work in an open-plan office on the ground floor where all other labour brokers were located.’

 

[D] Judgment is granted in favour of the first defendant and against the plaintiff for:

 

1.    the payment of the sum of R104 964.22 made up as follows:

July commissions    R11 927.61

August commissions           R11 366.96

September commissions    R10 409.24

October salary including commissions    R53 911.90

Leave pay (by agreement)

(12,125 days 48,4 hours x R168.33) R17 348.51

R104 964.22

2. interest in the amounts of:

2.1. R11 927.61 at the rate of 15.5% per annum with effect from 31 July 2011 until 31 July 2014 and thereafter at the rate of 9% per annum to date of payment;

2.2. R11 366.96 at the rate of 15.5% per annum with effect from 31 August 2011 until 31 July 2014 and thereafter at the rate of 9% per annum to date of payment;

2.3. R10 409.24 at the rate of 15.5% per annum with effect from 30 September 2011 until 31 July 2014 and thereafter at the rate of 9% per annum to date of payment;

2.4. R53 911.90 at the rate of 15.5% per annum with effect from 31 October 2011 until 31 July 2014 and thereafter at the rate of 9% per annum to date of payment;

2.5. R17 348.51 at the rate of 15.5% per annum with effect from 31 October 2011 until July 2014 and thereafter at the rate of 9% per annum to date of payment.

[E] The extension agreement that was concluded between the plaintiff and the first defendant on 28 February 2008 is rectified by substituting clause 3 with the following new clause:

“The parties confirm that to date hereof the employer is liable to transfer to the employee 76.9% of the member’s interest in Bubaluba Properties CC. It is further agreed that the Employer shall for the remaining eight (8) years transfer to the employee a further four (4%) per cent members interest annually from the end of February 2009”

[F] The plaintiff shall sign all documents and do all such things as may be necessary in order to effect registration of transfer from the name of the plaintiff into the name of the first defendant of 55% of the membership interest in the second defendant.

[G] Failing compliance by the plaintiff with the preceding paragraph of this order within 10 (ten) days from the date of this order, the sheriff of this honourable court is authorised and directed to do all such things as may be necessary on behalf of the first defendant to give effect to such order;

[H] Costs of suit including all reserved costs and the costs of senior counsel.

D. Pillay J

APPEARANCES

Counsel for the Plaintiff : A.M Annandale S.C

Instructed by : Calitz Crockart &

Associates

Ref: RAC/lb/02V007001

Tel: 031 202 3100

Fax: 031202 3110

Counsel for the 1^st Defendant : V I Gajoo S.C

Instructed by : Anand Nepaul Attorneys

Ref: SJ K173

Tel: (031) 327 4600

Fax: (031) 327 4613

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