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IN THE LABOUR COURT OF SOUTH AFRICA

SITTING IN DURBAN

REPORTABLE

CASE NO D1544/02

Date of hearing 2004/09/1

Date of hearing 2004/09/14

In the matter between

MELANIE LEACH LEWIS Applicant

and

RMB PROPERTIES (PTY) LTD First Respondent

L. SHEAR N.O Second Respondent

________________________________________________________

JUDGMENT DELIVERED BY THE HONOURABLE MADAM JUSTICE PILLAY

ON 14 SEPTEMBER 2004

________________________________________________________

ON BEHALF OF APPLICANT: MR G O VAN NIEKERK SC

ON BEHALF OF FIRST RESPONDENT MR M J D WALLIS SC with

MR BUIRSKI

TRANSCRIBER

SNELLER RECORDINGS (PROPRIETARY) LTD – DURBAN

JUDGMENT 14 SEPTEMBER 2004

PILLAY J

[1] This review is prefaced by an application for condonation for its late filing. The parties agreed that if the applicant succeeds on the merits condonation should be granted.

[2] The applicant was the Regional Manager of the first respondent at its Durban Office since 1998. Prior to that she was employed in a similar position with Southern Life Association Limited for ten years until it merged with the first respondent. The first respondent is in the business of providing property development services.

[3] In June 2002 the applicant was notified of a disciplinary action to be taken against her. By agreement, the parties referred the dispute to the second respondent, to be heard as a private arbitration in terms of the Arbitration Act No 42 of 1965 and the Labour Relations Act No 66 of 1995, as amended. The applicant was found guilty and dismissed on the following charges:

(1) gross negligence relating to the procurement of tenant installation services and the management of staff responsibilities; and

(2) a breach of the duty of good faith to the first respondent by placing herself in a situation where an outside commercial interest conflicted with her duty to act in the best interests of the first respondent at all times.

[4] The first charge arose in relation to alterations that were to be made to a property in Durban for purposes of renting it to First National Bank ("FNB"). Responsibility for such tenant installation work rested with one Jooste, who reported to the applicant. His job was, amongst other things, to get three quotations from contractors to undertake the alterations and supply the materials. One of the contractors to whom the first respondent awarded the bulk of such contracts was Woodford Interiors, which was owned by one Dan James, the applicant's fiancé. Dieter Helmrich, a director of the first respondent in the Property Management Division represented the first respondent at the arbitration. The applicant reported to him. He and his superiors were aware of the applicant's relationship with James.

[5] When the applicant was on leave Jooste was dismissed on charges of gross insubordination and dishonesty for not implementing the first respondent's tenant installation procedures, not properly evaluating the tenders obtained for the FNB contract and not utilising the first respondent's Minor Works Contract for the FNB tenant installation.

[6] The applicant denied the first charge against her. Her defence was that prior to March 2002 there were no written installation procedures. On 6 March 2002 a set of procedures was sent to the Durban office. That was after the FNB installation. As a result, they were irrelevant to the proceedings against her. All Helmrich had instructed about the tenant installations being given to Woodford Interiors was that it should be an "above board" manner. So she testified at the arbitration.

[7] The first respondent denied that there were no written instructions prior to March 2002. Helmrich testified that he had implemented a verbal policy during his visit to Durban during April 2001. Jooste and the applicant were aware of the instructions. Moreover, the applicant had admitted receiving a written instruction on 20 November 2001 that a minor works contract must be used for work in excess of R100 000. The applicant had not used the contract. Her explanation at the arbitration was that she was under extreme pressure. So it was submitted for first respondent at the arbitration.

[8] On this charge the second respondent reasoned as follows:

"Frankly, it is not my intention to make a credibility finding and to determine whether, in fact, Mr Helmrich did present a seven point procedure in the form of an instruction or not. I believe that it is common cause that at least some of the so-called points have been communicated and accepted by the Employee. This relates to:

1. the fact that in event of a large tenant installation work, the tenant installation manager would be obliged to obtain three tenders/quotes for such work.

2. that in relation to larger works, the tenant installation manager and the Regional Manager would be obliged to complete a Minor Works Contract, which would have to be signed by the manager and the Regional Manager, as well as the contractor.

3. that a proper evaluation process would have to be followed in relation to adjudicating the tenders submitted; and

4. that the procedure followed would have to be above board and, more particularly, in relation to the Employee where Mr Don James and/or his companies had submitted quotations/tenders. Particular care would have to be taken that the procedure was 'wholly above board'."

[9] The second respondent agreed with the first respondent's witness that the applicant's failure to ensure that the contract with James, on behalf of his firm, Woodford Interiors, was duly signed by the parties, was grossly negligent as the purpose of the contract was to pass risk to the contractor, James. This was especially important in the FNB contract as the first respondent was in a position of possible risk and potential prejudice because the tender was subject to remeasurement. The second respondent found that:

"the instruction issued by Fred de Witt relating to the Minor Works Contract was clear and unambiguous. I believe that the Employee's oversight relating to such a large piece of work - the largest that year - is unacceptable. I believe for her to say it was merely an oversight, in my view, is not acceptable. I believe the position is compounded by the fact that she was aware that in relation to Don James/Woodford Interiors, every effort should be made to ensure that the process was above board. She said that she assumed that Mr Jooste would follow the accepted process. However, as a signatory to the Minor Works Contract, the Employee must have known, or ought to have known, that no written contract was presented to the successful contractor. I agree with Mr van der Merwe when he said that given the fact that the tender was subject to re - measurement, it was more necessary to reduce the terms to writing to ensure that a final price had been agreed upon. Not to do so, in my view, is negligent. It is my view that the tender process in relation to FNB fell short at least in three senses, and as the responsible Regional Manager, it is my view that the Employee was grossly negligent in not ensuring that a proper process was followed. I say this also in the light of the fact that Mr Helmrich had already expressed his concerns as early as April 2001 and the audit report had been received during the middle of that year. This, coupled with Mr de Witt's e-mail of 20 November, should have made the Employee more alert and aware of what was required. I therefore find the employee guilty of charge 1."

[10] The second charge arose as a result of the applicant's interest in Sacramento Investments CC (“Sacramento”). The case against the applicant was that she did not disclose her outside commercial interest to the first respondent, had a conflict of interests with the first respondent, had competed with the first respondent and enriched herself at the expense of the first respondent.

[11] Her defence was that Sacramento was a development of a small commercial building in Durban. Her interest in it was only a 25% membership. She submitted that the case against her was based on her alleged contravention of paragraph 4 of the first respondent's Code of Conduct in that she had a personal interest in a transaction to which the first respondent or its holding company was a party. She conceded that she had not obtained first respondent's permission to invest in Sacramento but denied that she contravened the Code of Conduct. She also contended that the sanction of dismissal was grossly unreasonable.

[12] The first respondent pointed out that the 25% membership interest in Sacramento was the largest individual membership holding of all the six members of the close corporation. It rejected the submission that Sacramento had invested in a small commercial building. The building was sold for R11,2 million. It denied that its case against the applicant was limited to a breach of the Code of Conduct. The charges expressly included breaches of her obligations to the first respondent at common law. The charge was not only about her having a personal interest in which the first respondent was a party but about her duty of good faith to the first respondent, which precluded her from being directly or indirectly involved in or having an interest in another business or doing anything which created a conflict of interest between her personal interests and those of the first respondent.

[13] Underlying the breach of the duty of good faith were the following common cause facts pleaded by the first respondent, to which there is no reply:

"37.8.1 Sacramento and the First Respondent competed for tenants in the same tenant pool.

2. Sacramento managed the Millennium Three building in a similar fashion to the manner in which the First Respondent manages property in the Durban area.

3. Sacramento developed the building known as Millennium Three when property development is part of the First Respondent's business.

37.8.4 Sacramento leased building space in the corporate market. At first the applicant did not refer this business opportunity to the First Respondent, nor did she disclose her interest herein. Later on when Sacramento could not fully lease all its space the mandate was given to the First Respondent, specifically Ms Guthrie to find tenants for the building. The applicant herself admitted that she and Sacramento gained a benefit from the work that was done by Sacramento when it found tenants for the building. The Applicant conceded that this may be a conflict of interest.

37.8.5 Applicant enriched herself by partaking in this development without referring it to the First Respondent.

37.8.6 The usage of the applicant's time and equipment at the First Respondent. It is common cause that the Applicant used the First Respondent's personal computers in her dealings on behalf of Sacramento. In fact, the original lease documents, draft agreements of sale with Paramount Property Fund Limited and correspondence were all found on the Applicant's computer in her office. The applicant furthermore admitted that she had meetings in relation to Sacramento during office hours and as early as 08h00 in the morning on some days. This clearly constituted a conflict of interest, especially when one bears in mind that the Applicant was regional manager of the Durban office."

[14] The second respondent agreed with the submissions made on behalf of the applicant at the arbitration that clause 4.4.2.1 (quoted below) should be interpreted restrictively and in the context of an interest in relation to clause 4.4.1 (quoted below). Unless there was an interest as defined, there would be no obligation to disclose to the first respondent. He reasoned further as follows:

"An employee who has a direct or indirect personal interest or derives any benefit from a transaction to which RMBH Group is also a party shall constitute a conflict of interest. A conflict of interest (as defined), or a situation that may lead to a conflict of interest (as defined) should be avoided and prevented at all times. (My words inserted.) In order to fall within the ambit of this definition, the Employer would have to establish that RMBH was actually a party to any transaction. As I have indicated, the mere fact that the company was instructed to procure tenants did not, in my view, make it a party. This clause (4.4.2.2) does not per se , refer to an interest in a transaction to which the RMBH Group is also a party. It is, in my view, arguable that it can be separated from 4.4.1, in which case an obligation to seek such permission would arise. It is also my view that an interest, as specified in 4.4.2.2 would include an investment in a company, or a closed corporation, more particularly a company or closed corporation which is in the business of earning an income from leasing space. It is my view that by virtue of 4.4.2.2 the Employee had an obligation to seek permission from the Managing Director of the Employer re: her interest in Sacramento Investments CC. However, I believe the inquiry does not end here. I must go further. While I have agreed with Mr van Niekerk in relation to his interpretation of clause 4.4.1 and 4.4.2 concerning the definition of a conflict of interest, I do not believe that the Code itself does not exclude or override the common law. What the Code does is set out certain grounds which would constitute a conflict of interest, wherein disclose would be required. It does not, with respect, purport to define the entire terrain of conflict or potential conflict. What it does do, however, is attempt to protect the Employer from any conflict of interest. It acts, in a way, as a pre - emptive document in order to avoid a conflict by means of disclosure. The Code does not have the same status as legislation and thus cannot exclude the common law. It is my view, that the Code was drafted as a pre - emptive document in order to avoid any possible or potential conflict of interest and thus to give an Employee an opportunity to disclose any potential conflict of interest, and thus to obtain permission from the Employer, to carry on any activity, but with the knowledge of his or her employer."

[15] The second respondent then analysed the common law duty of good faith, and concluded thus:

"It is thus my view that the Code attempts to prevent a situation where an employee shall not put herself in a situation where she is in any form of conflict with her employer. I believe that, in her position as Regional Manager, the Employee had a higher duty to maintain this principle. I believe that the Employee, as the Regional Manager, had a fiduciary duty to uphold this principle, and also to be custodian of the principles contained in the Code. The purpose of the Code is clearly to avoid a situation where a potential or actual conflict of interest might come into play. The remedy, of course, is simple. If an employee believes that he or she is in a position which might give rise to a conflict, she is obliged to disclose the possibility to the employer. Not to do so, in my view, is to conceal the position. It is my view that the Employee, by virtue of the 25% membership in the closed corporation, a closed corporation established for the very purpose of developing a commercial property, leasing the property and then selling the said property for gain, was in a position which created a conflict of interest between herself and her employer."

The submissions for the applicant

[16] The second respondent's reasoning on the first charge is challenged on the ground that it is a latent gross irregularity or gross misconduct. The second respondent's reasoning was so flawed that he failed to apply his mind to the material issues and thereby deprived the applicant of a fair trial. In particular, the second respondent failed to resolve the dispute of fact relating to the tenant installation procedures. Despite this, submitted Mr van Niekerk for the applicant, the second respondent accepted that the applicant was in breach of the tender process. Moreover, the second respondent's reasoning that the applicant had not concluded the agreement with the contractor in writing was key to his finding that the applicant had been grossly negligent.

[17] The disciplinary code drew a distinction between negligence gross negligence by imposing the sanctions of final written warning and dismissal, respectively. By reasoning as he did, the second respondent Mr van Niekerk submitted, did not properly apply his mind to the distinction between negligence and gross negligence. By concluding that the applicant was grossly negligent he ignored the fact that she was working under pressure and that the Minor Works Contract was introduced shortly before the awarding of the FNB tenant installation contract to Woodford Interiors.

[18] Mr van Niekerk relied on Stocks Civil Engineering (Pty) Ltd v Rip N.O. and Another (2002) 23 ILJ 358 (LAC) and Goldfields Investments Ltd v City Council of Johannesburg and Another 1938 TPD 551 at 560.

[19] The applicant challenges the reasoning on the second charge on the ground that the second respondent committed a gross irregularity in concluding that the applicant breached the Code of Conduct and that his decision was irrational.

[20] Mr van Niekerk submitted that, firstly, the applicant's 25% interest in Sacramento was not in breach of the Code of Conduct.

[21] Secondly, the second respondent's interpretation of clause 4.4 (quoted below) was so wrong that it is clear that he did not apply his mind properly to the clause. This was evident from the second respondent's conclusion that the Code of Conduct attempted to prevent a situation where an employee put herself in a situation where she was in conflict with her employer. This conclusion was wrong in the light of the wording of clause 4.4.

[22] Thirdly, the case against the applicant was based entirely on her breach of the Code of Conduct and, but for her failure to obtain permission to invest in Sacramento, she had not breached the code. However, the second respondent went further and held that, as a regional manager, she owed a common-law duty of fidelity to the first respondent.

[23] Finally, the second respondent's findings also ignored the evidence of Witness Guthrie, then employed by the first respondent as a property broker, that the Sacramento development did not fit the profile of investment in which the first respondent was interested. The first respondent did not invest in speculative developments. The Sacramento investment did not meet the first respondent's superior AAA criteria for investment. Besides, the first respondent had not purchased property in Durban when the applicant had invested in Sacramento.

Submissions for the first respondent

[24] The starting point for Mr Wallis, who appeared with Mr Buirski for the first respondent, was to categorise this review as a statutory review as it is brought in terms of section 33 of the Arbitration Act. The limits of such a review are narrow. Moreover, a bona fide or a gross mistake is not misconduct, nor does "misconduct" include legal misconduct. (Total Support Management (Pty) Ltd v Diversified Health Systems (SA) (Pty) Ltd 2002 (4) SA 661 (SCA).) The powers of such a statutory review are less extensive than a "common-law" review, as articulated in Hira v Booysen 1992 (4) SA 69 (A) at 84F-I and 93A-J, which is now subsumed by the Promotion of Administrative Justice Act ("PAJA"), Act No 3 of 2002 and the cases relating to the constitutional right to just administrative action, namely Pharmaceutical Manufacturers Association of South African and Another: In re Ex Parte President of the Republic of South Africa and Others 2000 (2) SA 674 (CC) at para 90; Bato Star Fishing (Pty) Ltd v Minister of Environmental Affairs and Tourism and Another (2004) BCLR 687 (CC) at paras 22-25.

[25] Sections 33(1) and 34 of the Constitution Act No 108 of 1996 neither apply to arbitrators under the Arbitration Act nor justify a departure from the common law principles governing arbitration, which provide inter alia that parties who resort to arbitration thereby agree to forego a right of appeal. (Total Support Management, supra at paras 24, 25, 27 and 28.)

[26] The reason for these limitations is because the parties implicitly abandon the right to litigate and agree to be bound by an arbitrator's decision. (Amalgamated Clothing and Textile Worker Union v Veldspun 1994 (1) SA 162 (A) at 169.)

[27] The applicant bears the onus to establish that there are good grounds of review. (Total Support above at 672F-G; Davies v Chairman, Committee of the Johannesburg Stock Exchange 1991 (4) SA 43 (W) at 47H.)

[28] On the first charge of gross negligence, Mr Wallis relied on the facts that were common cause and submitted that there was no basis on which the second respondent's decision could be challenged.

[29] On the second charge Mr Wallis submitted that the principal basis upon which the second respondent recommended the applicant's dismissal was the finding that she was guilty of breaching her duty of good faith to the first respondent by putting herself in a situation where her outside commercial interests in Sacramento created a conflict with her duty to act in the best interests of the first respondent.

[30] Mr Wallis relied extensively on Philips v Fieldstone Africa (Pty) Ltd and Another 2004 (3) SA 465 (SCA) at paras 29-35, 478E-482F and Robinson v Randfontein Estates Goldmining Company Limited 1921 AD 168 at 177 in support of the submission that the applicant had a duty of good faith to the first respondent and that her dismissal was the appropriate sanction. (SAPPI Novoboard (Pty) Ltd v Bolleurs (1998) 19 ILJ 784 (LAC) at 786F, 787H.)

[31] It was not disputed that the applicant did have in a fiduciary relationship with the first respondent. As regional manager she was the most senior employee of the first respondent in KwaZulu-Natal. She exercised considerable discretion and power and was the principal officer in the region able to render the first respondent especially vulnerable to the improper exercise of that discretion. Given her fiduciary position at the time the Sacramento opportunity arose, she had a duty to disclose this to the first respondent. She did not do so. If it did not occur to her to do so, then that not only demonstrated her unfitness for the post but it was also not a mitigating excuse.

[32] Despite her denial of a conflict of interest with the first respondent, the applicant was constrained to make significant concessions which resulted in the second respondent correctly finding that she had a conflict of interests with the first respondent and that she had breached a duty of good faith. There was no merit in the applicant's contention that she was charged only with a contravention of paragraph 4 of the code of conduct as the further particulars supplied to her explicitly informed her that the section of the code relied on was headed "Guidelines on ethics-related issues".

[33] The submission that the development undertaken by Sacramento would not have been undertaken by the first respondent ignores the reputational risk attaching to her involvement in Sacramento and consequently the first respondent also being associated with it. It was submitted that on the second charge too the second respondent's decision could not be challenged.

Analysis

[34] This was a private arbitration. In the arbitration agreement the parties agreed that on review any of the grounds recognised in common law, the Arbitration Act or section 145 of the Labour Relations Act, as amended, may be relied on. They further agreed that unless the arbitration agreement provided otherwise, the Arbitration Act would apply. As a private arbitration, the norms laid down in section 33 of the Arbitration Act must apply. (Stocks at 360G-H and 378B-C.)

[35] My first task is to establish the principles of a review on the grounds of misconduct and gross irregularity. In Total Support above the Supreme Court of Appeal held:

"It was clear from the authorities that the basis on which an award could be set aside due to misconduct was very narrow. A gross or manifest mistake was not sufficient, but at best provided evidence of misconduct which, taken alone or in conjunction with other considerations, would ultimately have to be sufficiently compelling to justify an inference (as the most likely inference) of what had in the past variously been described as 'wrongful and improper conduct', 'dishonesty', 'mala fides or partiality' or moral turpitude." (Para 21 at 672E-I.)

Not even legal misconduct fell within the ambit of misconduct as envisaged by section 33(1)(a) of the Arbitration Act. (Total Support at para 18.)

[36] In coming to this conclusion, the SCA applied the decisions, inter alia, in Dickinson and Downe v Fishers Executive 1915 AD 166; Donner v Ehrlich 1928 WLD 159; Ellis v Morgan, Ellis v Desai 1905 TS 576; Hyper Chemicals International (Pty) Ltd and Another v Maybaker Agrichem (Pty) Ltd and Another 1992 (1) SA 89 (W).

[37] In Stocks above, Van Dijkhorst AJA, writing for himself, rejected the argument that a Court is not at liberty to interfere with an arbitrator's factual findings on dismissal, however wrong they may be. That, he said, was a mechanical refusal to act, and was incorrect.

[38] The Learned Judge then proceeded to review the case law. He cited Dickinson with approval. However, he disagreed with Solomon J's interpretation of it in Donner. Solomon J read Dickinson to mean that misconduct which entitles a Court to set aside the award must amount to dishonesty. This, in Van Dijkhorst AJA's view was an "unwarranted contraction of the meaning set out in Dickinson's case which was some wrongful or improper conduct". He then referred to the judgment of Selikowitz J in Benjamin v Sobac South African Building and Construction (Pty) Limited 1989 (4) SA 940 (C), where it was held that misconduct in relation to the proceedings did not require an element of personal turpitude and could be a bona fide error in the procedure, denying a party a fair trial. Several provincial decisions followed Benjamin: Naidoo v Estate Mohamed and Others 1951 (1) SA 915 (N); Steeledale Cladding (Pty) Limited v Parsons N.O. and Another 2001 (2) SA 663 (D).

[39] However, Benjamin was not approved by the Supreme Court of Appeal in Total Support even though the Court was referred to it. Van Dijkhorst AJA then considered Hyper Chemicals (above). He did not follow it because the total phrase "misconduct in relation to his duties” was not dealt with. However, as indicated above, the Supreme Court of Appeal approved Hyper Chemicals. van Dijkhorst AJA concluded thus:

"Material malfunctioning is reviewable, a wrong result per se not (unless it evidences malfunctioning). If the malfunctioning is in relation to his duties, that would be misconduct by the arbitrator as it would be a breach of the implied terms of his appointment."

[40] However, it is not evident from the judgment that the other members of the LAC Bench aligned themselves with this view. Zondo JP, writing for the majority, preferred to give his own reasons for the judgment. Hence I am not bound by the LAC decision in Stocks. However, I am bound by the SCA decision in Total, support, which I intend to apply.

[41] I turn to consider the grounds of review. The applicant challenges the award on the ground of misconduct. She also refers to it being a gross irregularity in the context in which that expression was used in Goldfields Investments Ltd v City Council of Johannesburg and Another 1938 TPD 551 at 560, and referred to by Van Dijkhorst AJA, that is, a latent gross irregularity occurring in the mind of the arbitrator.

[42] In this case the applicant contended that the second respondent failed to apply his mind to the material issues resulting in her being deprived of a fair trial. Gross irregularities in reasoning or gross errors do not per se justify the setting aside of an award. The applicant will have to go further and establish impropriety and mala fides amounting to dishonesty. (Total Support at para 35.) To get her job back, the applicant has to succeed in setting aside the second respondent's decision on both charges.

[43] I turn to consider the reasoning on the first charge. The attack on the award is firstly that the second respondent did not resolve the dispute of facts relating to the tenant installation procedures but nevertheless concluded that she was in breach of the tender process.

[44] The second respondent demonstrated in his award that he was aware of the dispute of fact. He consciously elected not to make a credibility finding because he found that he could decide the issue on the common cause facts. His identification of the four common cause facts quoted above is not attacked by the applicant. On the contrary, she conceded them at the arbitration. In the circumstances, it was not necessary for the second respondent to resolve this dispute of fact. Even if he had done so and found that the applicant had not received the instruction until after the FNB contract was signed, the second respondent would still have had to reconcile that finding with the common cause facts. The common cause facts are a summary of the procedures that had to be followed which were known to the applicant when she awarded the FNB contract to her fiancé.

[45] The second attack on the first charge is that the second respondent did not distinguish between negligence and gross negligence. His finding that the applicant had failed to conclude the FNB contract in writing and his failure to take into account the pressure under which she worked evidences the second's respondent flawed reasoning and resulted in the conclusion that she was not negligent but grossly negligent. So it was submitted.

[46] The second respondent was alive to the distinction, since it was argued before him. However, he does not explain his election in his award. He is not expected to record every submission in his award.

[47] The question is whether his conclusion of gross negligence follows logically from the proven or common cause facts. It was common cause that the applicant, as regional manager, had a duty to supervise Jooste. She had been alerted about problems that might arise from contracts awarded to her fiancé. The way she managed the contracts with her fiancé impacted on her reputation and consequently on the first respondent. She knew that three quotations had to be obtained from contractors, yet in the FNB contract, the largest contract of the year, she did not do this. The applicant admitted that she had not signed the contract but contended that it was an oversight.

[48] The second respondent also did not show in his award that he took into account the fact that the applicant was under pressure. However, having regard to her level of seniority and her rate of remuneration she was expected to carry out a superior level of responsibility. Moreover, she had to be alive to the fact that she was transacting the largest contract for the year. If she was not, and failed to implement procedural safeguards to ensure there was compliance with the first respondents instructions and rules then she was not only grossly negligent but her suitability for the position is called into question.

[49] Evidence led on the second charge showed that the applicant was conducting the affairs of her personal investment in Sacramento at the expense of the first respondent's time and resources. If this put her under pressure, the first respondent should hardly have to pay for that too.

[50] From the aforegoing, the only logical conclusion was for the second respondent to find her guilty of gross negligence.

[51] I turn to the second charge of breach of the duty of good faith. The recent decision in Philips is on all fours with this case. To begin with, that case spells out the approach to be followed in cases of this nature. (Philips at 480D-G per Heher).

[52] The first step is to examine the facts and circumstances to determine whether there is a fiduciary relationship with the principal. The second step is to examine the relationship to see what duties are imposed on the agent or employee. The third step is to determine whether the agent had committed a breach of the duty by placing herself where her duty and interest possibly conflicted. The final step is to decide whether the profits made fell within the scope and ambit of the agent's duty. This is the approach I intend to apply to the second charge.

[53] It was common cause that as an employee she was in a fiduciary position in relation to the first respondent. More than that, however, the applicant bound herself contractually when she commenced employment with the first respondent.

[54] The material terms of the Code of Conduct are as follows.

"1.1 The purpose of this code is to promote and enforce ethical business practices and standards throughout the RMB Group."

And:

"Guidelines on ethics-related issues.

4.1 Integrity and objectivity.

4.1.1 It is the obligation of employees to be fair, honest and free of conflicts of interest, prejudice and bias, even if this entails sacrificing personal advantage.

4.1.3 Employees should avoid any influence, interest or relationship, whether direct or indirect, which may be regarded as being incompatible with integrity and objectivity."

"4.4 Conflicts of interest

4.4.1 Where any employee has any direct or indirect personal interest (in) or derives any benefit from any transaction to which the RMBH Group is also a party, it shall constitute a conflict of interest. A conflict of interest or any situation that may lead to a conflict of interest should be avoided and prevented at all times.

4.4.2 The onus for the prior disclosure of such interest rests with the employee and included, inter alia, prior disclosure of the following:

4.4.2.1 All appointments as directors of public or private companies outside the RMBH Group and in any close corporations or public bodies.

4.4.2.2 Employees shall not without the prior permission, which shall not be unreasonably withheld, of the Managing Director of RMBP, ("the MD") be directly or indirectly involved in or have an interest in another business, undertaking or profession. Employees may not without prior written permission of the MD be employed on any basis outside the RMBH Group, nor hold positions on town councils, etcetera. Cultural activities are not included in this provision.

4.4.3 Problems in identifying unethical behaviour or in resolving ethical conflict should be reviewed with an immediate supervisor and if not resolved, with higher managerial level."

[55] The Code continues in the form of a Personal Ethics Checklist. The pertinent questions there are:

"1. Is it honourable? Is there anyone that you do not wish to know about this transaction or proposed action and from whom you would like to hide it?

2. Is it honest? Does it violate the Code of Conduct, any other code, any code of ethics or any agreement, actual or implied, or does it otherwise betray any trust?

3. Does it avoid the possibility of a conflict of interest? Are there any considerations that might bias your judgment or influence your judgment in any way?"

[56] The employment contract therefore not only establishes the relationship but also spells out the applicant's obligations to the first respondent. Her duties are further elaborated on in her job description. These included managing and reviewing regional overhead budget of approximately R1,5 million, identifying key performance markets in the region, and motivating for specific areas for new investments, managing staff and authorising unlimited budgeted tenant installation costs and unbudgeted per transaction costs of up to R100 000 if recoverable and up to R25 000 if not recoverable.

[57] As the most senior employee of the first respondent in the region, I agree with Mr Wallis that the applicant exercised wide discretion and power. By investing in Sacramento, the applicant clearly put herself in a position where her duties and interests conflicted. She conceded as much when she admitted the following: The investment undertaken by Sacramento was established as a rental enterprise. She had a duty to refer leads relating to property development opportunities to the first respondent and to grow the region by looking out for new property management opportunities. Sacramento managed the property itself, in order to save itself property management fees and commission. The first respondent was in the business of managing property and could have managed the Sacramento property. The first respondent derived no benefit whatsoever from the applicant's involvement in the Sacramento transaction. The Sacramento property was developed and initially let by Sacramento without giving the first respondent an opportunity to do so. The opportunity to provide cleaning and security services in respect to Sacramento was not offered to the first respondent, despite it offering these services.

[58] Her defence is that it was a small investment, that her membership was only 25%, that the investment fell outside the ambit of interest of the first respondent who invested in AAA rated properties are invalid against the charge of a breach of fiduciary duty. The only defence open to her was that she had made full disclosure to the first respondent and had secured its consent. (Philips paragraph 31, 479D, 480C-D.) It is common cause that she had done neither.

[59] Her complaint that the 2^nd respondent ignored the evidence of Guthrie also does not affect the outcome of the arbitration firstly because the evidence does not constitute a valid defence. Secondly, when weighed against her admissions, the evidence of a breach of the duty of good faith is overwhelming.

[60] As I understand, the applicant's challenge to the award on the second charge is on the limited basis that the charge was confined to a contravention of paragraph 4 of the Code of Conduct. This is simply not borne out by the facts. The charges were also founded on the common law which was the basis of the arbitrator's finding. The second respondent dealt with the common law in the context of the Code of Conduct as a whole.

[61] Having regard to her concessions and the common cause facts referred to by Mr Wallis in his argument, it is quite clear that the profits fell into the scope and ambit of her duties. Moreover, such profits were made at the expense of the first respondent's resources. As a member of a close corporation, her position was distinguishable from that of a shareholder in a company managed by directors. This distinction is an important one drawn to my attention by Mr Wallis. From her own evidence, the applicant exercised hands-on involvement in the management of her interest in Sacramento.

[62] The applicant's involvement in Sacramento is the clearest example of a conflict of interest in employment. The Code of Conduct should have left her in no doubt about her duty to disclose and the circumstances in which a conflict could arise. If she did not entertain any doubt about any her obligations, despite the Code of Conduct, then this would be so serious an error of judgment that one would question her competence.

[63] Both charges do not come close to being irregularities or gross irregularities amounting to misconduct as defined in Total Support. The award is therefore unassailable.

[64] In conclusion, I record my gratitude to both counsel for the succinct heads and helpful presentation of the case, given the particular difficulty the Court had experienced in not having had an opportunity to read the papers in advance.

[65] The order that I grant therefore is to dismiss the application for condonation with costs, including the costs of the review and two counsel.

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