MAKONI
JA:
This
is an appeal against part of the judgment of the Labour Court setting
aside an arbitral award in terms of which the respondent was ordered
to pay the appellant the sum of US$17,500.00.
THE
BACKGROUND
The
appellant was employed by the respondent as a Secretary General. On 2
June 2012, the National Governing Council (the Council) of the
respondent held a meeting in which Council members expressed concerns
regarding the performance, by the appellant, of her work. As a
result, it was recommended that the appellant be suspended from work
pending investigations into her conduct or alternatively that she be
given the option to resign.
The
appellant elected to resign and did so by letter dated 3 June 2012.
On
the same date the resignation was acknowledged, in writing, by the
respondent's Acting President. The following was set out in the
letter;
“The
Board resolved that in the event of you resigning instead of a
suspension with pay that you will be entitled to all your benefits.
Outlined hereunder are all your benefits Leave days accrued Gratuity
One month's notice salary Toyota Prado registration number ABH3278
that you have been using Phone handset Laptop you are currently
using.”
On
6 June 2012, the Honorary Treasurer of the respondent, one Mr Gotora,
who was tasked with overseeing the handover takeover process between
the appellant and the new office bearer, wrote a letter to the
appellant stating that the respondent was to meet the costs related
to the change of ownership of the vehicle.
As
a result, the appellant made a claim of US$17,500.00 being the
residual duty payable to ZIMRA upon the disposal of the vehicle by
the respondent that is the cost of the change of ownership.
On
2 March 2013, the Council convened a meeting to deliberate on the
appellant's claim.
Mr
Gotora was reprimanded for generating the communication as he had no
authority to do so. It was stated that considering the level of the
employee in issue, communication was to be done by either the
President or the Secretary General.
On
5 March 2013, Mr Gotora wrote a letter to the Acting President and
copied same to the appellant, retracting the statement that he had
made regarding the respondent meeting the change of ownership costs
for the motor vehicle. He also conceded that he had acted without the
mandate of the Board.
Following
the retraction, the appellant referred the matter to a Labour Officer
claiming the sum of US$ 17,500.00 from the respondent.
Conciliation
failed and the matter was referred to an arbitrator who ordered the
respondent to honour the undertaking made on its behalf by the
Honorary Treasurer. The arbitrator held that the Honorary Treasurer's
undertaking remained valid and binding on the respondent. He referred
to the case of Royal British Bank v Turquand (1856) 6 E & B 327,
ER 886 and reasoned that the appellant was not supposed to know the
legitimacy of the undertaking made by the Honorary Treasurer on
behalf of the respondent. As such, the Honorary Treasurer bound the
respondent.
Aggrieved
by the arbitral award, the respondent appealed to the Labour Court.
It
challenged the decision of the arbitrator on the basis that the
communication, in issue, had been made without the approval of the
Board, and that in any event, the communication had been retracted
and could not be given effect to. The respondent further argued that
there was no basis for the arbitrator to rely on the letter by Mr
Gotora as it could not give benefits not outlined in the initial
letter by the Acting President wherein all the benefits due to the
appellant had been expressly stipulated. Further to that, the
practice was that employees who received such a benefit would meet
their own costs of transfer.
The
respondent also expressed the view that the Turquand Rule was
inapplicable because the appellant knew or ought to have reasonably
known that the Honorary Treasurer was not an executive member and
could not make binding decisions on behalf of the respondent.
The
respondent also averred that, should the amount be due, it was
payable to the Commissioner or ZIMRA and not to the appellant.
The
respondent also contended that the arbitrator had cast upon it an
obligation cast by law on a transferee of property.
The
appellant opposed the appeal.
She
contended that the respondent sought to interfere with the findings
of fact made by the arbitrator. She argued that the arbitrator
correctly found that the undertaking was never retracted and remained
valid. The appellant further contended that the undertaking to pay
the transfer costs was an employment benefit and as such, arguments
on the law of transfer or taxation were irrelevant.
DETERMINATION
OF THE COURT A QUO
The
court a quo found that the appellant was not entitled to the transfer
costs of the motor vehicle. It held that the communication by the
Honorary Treasurer could not bind the respondent. It found that the
turquand rule was inapplicable and neither could it be said that Mr
Gotora had ostensible authority to bind the respondent.
The
court reasoned that the appellant was not some innocent third party
but occupied the highest post in the respondent and was aware or
ought to have been aware of the authoritative communications in the
organisation.
The
court further explained that even if it was to be assumed that Mr
Gotora was acting under delegated authority, there was no evidence of
such delegation.
In
any event Mr Gotora had also confirmed that he had made the
communication without the required authority.
The
court also noted that the letter of 3 June 2012 by the Acting
President, which set out all the benefits the appellant was to get,
made no mention of transfer costs. As such, Mr Gotora's letter
could not be read to vary or supplement the package already offered
to the respondent by the Board and properly transmitted to the
respondent by the Acting President.
The
court further held that the transfer costs were payable to the
Zimbabwe Revenue Authority and not the respondent.
It
also found that there was no law that precluded parties to deviate
from the provisions of the Customs and Excise Act [Chapter 23:02] by
paying another's transfer costs since what the law requires is that
the transfer costs be paid.
The
appellant, dissatisfied with the outcome, launched the present appeal
based on the following grounds:
GROUNDS
OF APPEAL
1.
That the court a quo erred in granting the respondent's appeal as
regards the award of US$17,500.00 and thus upsetting, without legal
basis, the arbitrator's factual finding that the evidence furnished
by the respondent to prove the Treasurer's lack of authority was
stage-managed.
2.
That the court a quo grossly erred in interfering with the
arbitrators discretion to award the appellant US$17,500.00 as
evidence placed before him showed that there was never any valid
retraction on the respondent's commitment to pay the US$17,500.00.
3.
That the court a quo grossly erred in granting the respondent's
appeal with respect to award of US$17,500.00 as the finding by the
arbitrator that the undertaking to meet the costs of transfer was
validly made cannot be faulted given that the respondent accepted
provisions in the letter of undertaking by the Honorary Treasurer.
4.
That the court a quo grossly erred in granting the respondent's
appeal with respect to the award of US$17,500.00 as it erroneously
made a finding that the mention of ZINARA cost instead of transfer
costs in the letter of retraction by the Honorary Treasurer was an
error by the respondent when no such evidence of a mistake or error
was alleged or argued before it by the respondent of any of the
parties.
5.
That the court a quo erred by making a finding that the US$17,500.00
should have been paid to the Zimbabwe Revenue Authority and not to
the appellant when such issue was not properly before the court a quo
in terms of the grounds of appeal that were before it and when such
issue did not affect the appellant's eventual entitlement to the
benefit.
SUBMISSIONS
IN THIS COURT
At
the hearing of the appeal, counsel for the respondent, Ms Damiso,
raised a point in limine to the effect that the appeal was invalid
for the reason that the appellant's notice of appeal reflected that
the appeal was against part of the judgment of the court a quo when
essentially the appeal is against the entire judgment. She moved that
the appeal be struck off the roll with costs.
On
the other hand, Mr Zhuwarara for the appellant submitted that there
was a concession made in the court a quo regarding the pension issue.
Therefore, the appeal before the court a quo succeeded in part. The
appellant was therefore appealing against the one part regarding the
claim of US$17,500-00. The point was conceded by Ms Damiso.
As
a result, by consent, the point in limine was dismissed.
I
now turn to the arguments of the parties on the merits.
Mr
Zhuwarara made the following submissions;
The
court a quo dealt with the matter afresh and re-assessed the evidence
and made its own determination. The court a quo, in setting aside the
arbitral award, upset the arbitrator's factual findings. In
particular, the arbitrator's finding that the treasurer had the
authority to make the communication as the treasurer's lack of
authority was stage-managed. The arbitrator's finding could only be
upset on the basis of gross unreasonableness. Once the arbitrator
held that the turquand rule applied in the circumstances of the
matter, the court a quo was not at liberty to re-hear the matter but
to assess whether the factual findings of the arbitrator were grossly
unreasonable.
This
does not feature anywhere in the judgment of the court a quo.
In
considering the turquand rule the court a quo ignored one fundamental
aspect that the employer communicated through its honorary treasurer.
Thereafter the organisation was silent for a year. It then retracted
the offer after a meeting where the appellant did not attend. The
respondent allowed the appellant to have no doubt that the transfer
costs would be met by the respondent. The turquand rule was designed
to protect the appellant in the circumstances. The appellant was now
an outsider on the basis of her resignation. Her ability to relate to
the internal mechanism had been cut.
Ms
Damiso on the other hand contended that there were no factual issues
which arose in the appeal before the court a quo. She argued that the
full list of benefits due to the appellant were approved by the Board
and communicated by the Acting President. These benefits did not
include transfer costs of the motor vehicle. She also contended that
the court a quo properly identified the issue for consideration as to
whether the turquand rule was applicable in the circumstances of the
case. Ms Damiso further submitted that a person in the position of
the appellant could not claim the benefits of the turquand rule since
the appellant knew how the respondent was run. Had the benefits been
revised, the Acting President, being the person who had communicated
the benefits, was the one to communicate the change in those
benefits.
ISSUES
FOR DETERMINATION
From
the grounds of appeal and the submissions above two issues fall for
determination and these are;
1.
Whether or not the court a quo's finding that the Honorary
Treasurer lacked authority to make the undertaking unduly interfered
with the arbitrator's factual findings.
2.
Whether the undertaking made by the treasurer is binding on the
respondent by virtue of the provisions of the turquand rule.
THE
LAW
It
is settled law that an Appellate Court can only interfere with the
findings of fact made by a lower court in exceptional circumstances.
In
Hama vs National Railways of Zimbabwe 1996 (1) ZLR 664 (S) at p 670,
KORSAH JA remarked:
“The
general rule of the law as regards irrationality, is that an
Appellate Court will not interfere with a decision of a trial court
based purely on a finding of fact unless it is satisfied that, having
regard to the evidence placed before the trial court, the finding
complained of is so outrageous in its defiance of logic that no
sensible person who had applied his mind to the question to be
decided could have arrived at such a conclusion. …”
In
Susan Rich v Jack Rich SC16/01, EBRAHIM JA cited with approval the
remarks in Hoffman and Zeffert, The South African Law of Evidence,
4th ed, at p 489, that:
“There
are no rules of law which define circumstances in which a finding of
fact may be reversed, but as a matter of common sense the Appellate
Court must recognize that the trial court was in some respects better
situated to make such findings. In particular, the trial court was
able to observe the demeanor of the witnesses, and courts of appeal
are therefore very reluctant to disturb findings which depend upon
credibility. The Appeal Court has rather more latitude in criticizing
the reasons which the court a quo has given for its decision.
The
reasons given for accepting certain evidence may be unsatisfactory,
e.g. they may involve a clear non sequitur. Alternatively, it may be
plain from the record that the reasons are based upon a false
premise, e.g. a mistake of fact, or that the trial judge has ignored
some fact which is clearly relevant. Errors of this kind are
generally referred to as misdirections of fact.
Where
there has been no misdirection of fact by the trial court, the Appeal
Court will only reverse it when it is convinced that it is wrong.”
(Own emphasis)
In
Reserve Bank of Zimbabwe v Granger and Anor SC34/01, at pp 5 to 6 of
the cyclostyled judgment, the court held that if an appeal is to be
related to the facts “there must be an allegation that there has
been a misdirection on the facts which is so unreasonable that no
sensible person who had applied his mind to the facts would have
arrived at such a decision. And a misdirection of fact is either a
failure to appreciate a fact at all, or a finding of fact that is
contrary to the evidence actually presented.”
In
Zvokusekwa v Bikita Rural District Council SC44/15 this Court
clarified this obvious but often misunderstood position. It said;
“[20]
It is correct, as submitted by the appellant, that an appeal to this
Court must be based on a point of law.
What
constitutes a point of law has been stated and restated in a number
of decisions of this Court. See for example Muzuva v Limited Bottlers
(Pvt) Ltd 1994 (1) ZLR 217 (S); Hama v NRZ 1996 (1) ZLR 664; RBZ v
Granger & Anor SC34/01.
[21]
It is also correct that in RBZ v Granger & Anor (supra), this
Court stated that if an appeal is to be related to the facts, 'there
must be an allegation that there has been a misdirection on the facts
which is so unreasonable that no sensible person who has applied his
mind to the facts would have arrived at such a decision. And a
misdirection of fact is either a failure to appreciate a fact at all,
or a finding of fact that is contrary to the evidence actually
presented.'
[22]
In my view, the remarks made in Granger's case (supra) need to be
qualified, to the extent that they may be interpreted as saying that,
to constitute a point of law, in all cases where findings of fact are
attacked, there must be an allegation that there was a misdirection
on the facts which was so unreasonable that no sensible person
properly applying his mind would have arrived at such a decision.
One
must, I think, be guided by the substance of the grounds of appeal
and not the form.
Legal
practitioners often exhibit different styles in formulating such
grounds. What is important at the end of the day is that the grounds
must disclose the basis upon which the decision of the lower court is
impugned in a clear and concise manner.
If
it is clear that an appellant is criticising a finding by an inferior
court on the basis that such finding was contrary to the evidence led
or was not supported by such evidence, such a ground cannot be said
to be improper merely because the words 'there has been a
misdirection on the facts which is so unreasonable that no sensible
person … would have arrived at such a decision' have not been
added thereto.
If
it is evident that the gravamen is that an inferior court mistook the
facts and consequently reached a wrong conclusion, such an attack
would clearly raise an issue of law and the failure to include the
words referred to above would not render such an appeal defective.
After all, there is no magic in the above stated phrase and very
often the words are simply regurgitated without any issue of law
being raised. See, for example the case of Sable Chemical Industries
v David Peter Easterbrook SC18/10 where it was noted that the words
'erred on a question of law' are sometimes included in grounds of
appeal but without any question of law actually being raised.”
See
also Kukwenge v Clan Transport Co 2001 (1) ZLR 199 (S) and Mutsuta
and Another v Cagar (Pvt) Ltd 2009 (2) ZLR p327 (S).
APPLICATION
OF THE LAW TO THE FACTS
The
court a quo properly identified the issue to be determined as
follows:
“The
issue that falls for determination in this appeal is whether the
honorary treasurer of the appellant had ostensible authority to bind
the appellant. In other words, the issue is whether the Turquand Rule
applies in the circumstances of this matter.”
This
was an issue of law which the court a quo dealt with based, as it is,
on facts that are essentially common cause.
In
light of the authorities cited above, one can conclude that failure
to appreciate a fact at all or a finding of fact contrary to evidence
actually presented constitutes a misdirection which warrants
interference by an appellate body.
The
arbitrator found that the treasurer had authority by virtue of
occupation of that post, his attendance in meetings involving
important decision making by the respondent, that the authority had
been delegated to him by the Acting President and that the letter of
retraction was 'stage managed', as it came nine months after the
initial letter, in anticipation of a civil suit.
These
findings were not based on evidence presented before him but were
based on suppositions.
The
fact that someone occupies what he termed an important position in
the organisation does not clothe that person with authority to make
decisions on behalf on the organisation. No evidence was led to
confirm that the Acting president had delegated his functions to the
honorary treasurer. His finding regarding the letter of retraction is
a clear indication that he did not appreciate that the respondent was
run by a Board
which met when the need arose.
It
is my view that the arbitrator's findings, that the treasurer had
authority, in light of the evidence presented before him was a
misdirection.
In
making that finding, he completely ignored the fact that it was not
in dispute that “all the benefits” due to the appellant upon her
resignation were outlined by the Acting President in a letter dated 3
June 2012 as follows:
(i)
Leave days accrued.
(ii)
Gratuity.
(iii)
One-month notice salary.
(iv)
Toyota Prado, that you have been using.
(v)
Phone handset.
(vi)
Laptop you are currently using.
It
is apparent that the benefits did not include the costs of transfer.
It
is also not in dispute that, the letter by which the Honorary
Treasurer stated that the respondent was going to meet the cost
relating to change of ownership of the motor vehicle awarded to her
was not authorised. This emerged from the meeting of 2 March 2013.
The Honorary Treasurer acknowledged that he had no authority to do so
and took “full responsibility” of the mistake.
Once
the statement was duly retracted, its validity and enforceability
necessarily fell away.
The
communication made by the Honorary Treasurer could not bind the
respondent neither could it be enforced against it.
Further
to that, no Board
meeting was convened neither is there a resolution on record
authorizing Mr Gotora to make the undertaking he made.
The
subject matter of the communication being a significant financial
undertaking by the respondent, it was obligatory for Mr Gotora to
obtain the approval of the Board. Further to that, Mr Gotora's
letter highlighted that the communication was a “follow up” on
the Acting President's letter of 3 June 2013. There was no approval
by the Board or the Acting President who had initially communicated
to the appellant nor was there ratification after it had been made.
He also rejected the established precedent, that the respondent did
not pay for such costs, without any justification.
Accordingly,
it is my view that the decision of the court a quo was well founded.
The arbitrator's decision was a misdirection in that he made
findings, contrary to evidence actually presented.
WHETHER
THE UNDERTAKING MADE BY THE TREASURER IS BINDING ON THE RESPONDENT BY
VIRTUE OF THE PROVISIONS OF THE TURQUAND RULE
Having
found that the undertaking by the honorary treasurer was not binding
on the respondent, it is necessary to determine whether the turquand
rule can aid the appellant's case.
I
am of the view that it cannot.
The
arbitrator invoked the principles of the turquand rule to show that
the respondent was liable to pay the costs of transfer. It is also
the appellant's argument that where a person is dealing with
another in fair dealing, the turquand rule should apply.
In
Mills vs Tanganda Tea Company Ltd HH12/13, which is almost on all
fours with this case, in the following instructive dictum, it was
stated, at p53 of cyclostyled judgment;
“…I
do not think that there is any basis for invoking ostensible
authority in relation to Beaumont's actions. Firstly, the fact that
he was the Group Chief Executive of Meikles Limited does not mean
that he had the requisite ostensible authority by virtue of that
position to negotiate and conclude severance packages on behalf of
respondent. There is nothing in the papers to suggest that he
normally exercised that function in that particular capacity…the
applicant was not some third party dealing with an agent or employee
of the respondent. He was its Managing Director and, given that
position, I can see no justification for extending the doctrine of
ostensible or apparent authority to the facts of this case.”
The
turquand rule is a company law principle emanating from the old case
of Royal British Bank v Turquand (1856) 6E & B 327. Simply put
the rule states that where a person conducts the affairs of the
company in a manner which appears to be perfectly consonant with the
Articles
of Association,
those so dealing with him externally are not to be affected by
irregularities which may exist in the internal management of the
company.
The
turquand rule was aptly captured in the case of Victoria Falls Steam
Train Co (Pvt) Ltd v Wankie Colliery Co Ltd, HH03-04, where the court
stated the following:
“The
rule in Royal British Bank v Turquand (1856) 6E & B327, 119 ER
886, which prevents a corporation from relying on non-compliance with
its internal procedures to avoid contractual liabilities towards a
third party, applies only where the third party was a genuine
outsider acting in good faith, and where the transaction was carried
out in good faith and was a legitimate one within the powers of the
corporation though lacking completeness in terms of the corporation's
internal arrangements.
The
rule does not apply in cases where there has been a forgery, nor
should it apply in the analogous case where the transaction has been
carried out in deliberate violation of the internal procedures of the
corporation.” (Emphasis added).
H.S
Cilliers and M.L Benade in their book Company Law, Practitioner's
edition at pp 66-67 state the rationale behind the rule as put across
in the Turquand case supra as follows:
“For
third parties it is an impossible task to investigate all the
internal proceedings of a company in order to ascertain whether
someone, who could potentially be a representative in terms of the
Articles,
in fact had the necessary authority. He would not find any
prohibition of the relevant act - an authority to act subject to
compliance with certain formalities but nevertheless a clear
authority.”
The
turquand rule has since been codified in our company law as section
12 of the Companies Act [Chapter 24:03] which provides that:
“12.
Presumption of Regularity
Any
person having dealings with a company or with someone deriving title
from a company shall be entitled to make the following assumptions,
and the company and anyone deriving authority title from it shall be
estopped from denying their truth;
(a)
that the company's internal regulations have been complied with;
(b)
……
(c)
that every person whom the company, acting through its members in
general meeting or through its board of directors or its manager or
secretary, represents to be an officer or agent of the company, has
been duly appointed and has authority to exercise the functions
customarily exercised by an officer or agent of the kind concerned;
(d)
………
(e)
………
Provided
that -
(i)……..
(ii)
a person shall not be entitled to make such assumptions if he has
actual knowledge to the contrary or if he reasonably ought to know
the contrary.
(iii)
………..”
From
the above cited authorities, it is clear that the turquand rule is
meant to protect genuine outsiders who deal with a company in good
faith, and where the transaction was carried out in good faith and
was a legitimate one within the powers of the corporation.
In
casu, the appellant was clearly not some third party dealing with an
agent or employee of the respondent but occupied the highest post in
the respondent as its Secretary General.
As
at 6 June 2012, the appellant was still an employee given that her
contract terminated on 8 June 2012. She knew how the respondent was
run. She had the letter from the Acting President outlining all the
benefits approved by the Board. She could not have assumed and had no
basis for assuming that the Board had met again inside the two days
to revise the benefits as already offered. Even if it did, the
revision would have been communicated by the person who communicated
the benefits to her in the first place.
In
any event, in her position as Secretary General, she must have known
that any decision in that regard would require a Board resolution
from the respondent authorising the Honorary Treasurer to generate
the communication to her.
Further
to that, the rule does not operate where the transaction has been
carried out in deliberate violation of the internal procedures of the
corporation.
What
can be derived from the papers filed of record is that the
communication was carried out in breach of the internal procedures of
the corporation in that, the Honorary Treasurer had no mandate to
generate such communication, which role was the preserve of the
Acting President or the Secretary General pursuant to a Board
meeting.
By
virtue of this, the binding nature of the communication fell away.
What
further militates against the application of the rule is the fact
that the Secretary General had actual knowledge or was reasonably
expected to know that the internal procedures of the company had not
been met. This is so because having worked for the respondent for a
period of eleven years, the appellant was well aware of how the
internal procedures of the respondent were carried out. It therefore
follows that, due to the fact that the Honorary Treasurer had not
been given the mandate to make the communication, there is no
justification for the application of the turquand rule.
I
also associate myself with the court a quo's decision that there is
no basis for invoking ostensible authority in relation to the
Honorary Treasurer actions.
Firstly,
the fact that he was the Honorary Treasurer did not confer him with
the requisite ostensible authority by virtue of that position to make
an offer for the payment of the transfer costs on behalf of the
respondent without the mandate from the Board to do so.
Secondly,
there is also nothing on the papers to suggest that he normally
exercised that function in that particular capacity. See Mills supra.
In
light of the above, the court a quo cannot be faulted for holding
that the appellant was not entitled to the transfer costs as the
Honorary Treasurer's undertaking did not bind the respondent. It
had no legal effect.
Neither
the turquand rule nor the principle of ostensible authority aid the
appellant's case.
The
appellant has failed to establish a basis for interfering with the
decision reached by the court a quo. The appeal must fail.
Both
parties prayed for costs but the respondent put a rider that “to
the extent that the appeal is indubitably vexatious, the court is at
large to consider an award of costs on the higher scale.” The
appeal cannot be described as indubitably vexatious. There is
therefore no basis for awarding costs on a higher scale.
In
the result, l make the following order:
The
appeal be and is hereby dismissed with costs.
HLATSHWAYO,
JA: I agree
BERE
JA: I agree
Chambati
Mataka & Makonese, appellant's legal practitioners
Coughlan
Welsh & Guest, respondent's legal practitioners
