Old Mutual has emerged victorious in its seven-month-long battle with axed CEO Peter Moyo, with the Johannesburg High Court paving the way for SA’s second-largest life insurer to not reinstate him and start a process to replace him with a permanent leader. 

On Tuesday, 14 January 2020, the court upheld Old Mutual’s application to appeal against a 30 July 2019 ruling by Judge Brian Mashile that ordered the temporary reinstatement of Moyo as CEO and blocked the insurer from appointing his successor. 

A full bench of judges – Pieter Meyer, Raylene Keightley and Keoagile Matojane – set aside Mashile’s ruling, finding that the dismissal of Moyo by Old Mutual was lawful and didn’t flout clauses of his employment contract with the insurer. The ruling affirmed Old Mutual’s right as an employer to dismiss an employee that it has accused of gross misconduct and believes its relationship with them has broken-down irreparably. 

However, Moyo plans to fight back, as his lawyer, Eric Mabuza, wrote a letter to Old Mutual, informing it that the axed CEO intends to petition the Supreme Court of Appeal (SCA) to challenge the ruling. Mabuza said the legal implications of Moyo’s pending challenge at the SCA means that the earlier ruling, which temporarily reinstated him as CEO, remains “valid and operational”. 

Mabuza said Moyo will still forge ahead with another lawsuit against Old Mutual, called Part B, wherein he wants the insurer’s 14-member board, including board chair Trevor Manuel, to be declared delinquent under the Companies Act. In this lawsuit, Moyo is also claiming contractual and reputational damages from Old Mutual amounting to R250-million.

Business Maverick understands that Old Mutual is prepared to fight against any further legal action to be launched by Moyo, including the SCA petition. 

This adds another twist to the protracted corporate warfare between both parties that has weighed on Old Mutual’s share price, which has fallen by 9.3% since Moyo was suspended on 23 may 2019 on the grounds of “a material breakdown in the relationship of trust and confidence”, and dismissed on 18 June 2019. The drop means that R9.7-billion has been wiped off Old Mutual’s market capitalisation to date. The battle has also overshadowed the life insurer’s homecoming, with 2019 marking a year since it moved its primary listing and headquarters to SA from London after 19 years.

The ruling will likely appease Old Mutual’s second-largest institutional shareholder, Allan Gray (with a more than 9% shareholding), which recently said it hoped the courts rule in the insurer’s favour and for Moyo to leave without a financial settlement.

Vindication of Old Mutual 

Moyo, who was visibly disappointed by Old Mutual’s victory, was also slapped with the cost order as he has to pay the legal fees of two of the insurer’s and Manuel’s senior counsel. Moyo also has to foot the legal bill for two senior counsels representing Old Mutual’s 14 non-executive directors. 

Old Mutual spokesperson Tabby Tsengiwe said the latest ruling vindicates the insurer for its decision to fire Moyo. “The judgment provides legal clarity on corporate governance and board stewardship, including the relationship between the board and its executive leadership, in this instance, the CEO of the company,” she said. 

Tsengiwe added that Old Mutual’s latest court victory means that its board is now free to start the search for a permanent CEO. Old Mutual has been without a permanent CEO for seven months, with Iain Williamson holding the fort since Moyo was fired.

To recap: Moyo was fired for allegedly pocketing dividend payments worth R30.6-million linked to an investment holding firm he co-founded called NMT Capital – in which Old Mutual has a 20% stake, which it acquired in 2005 as part of a Black Economic Empowerment deal.  Moyo chaired an NMT Capital meeting on 4 July 2018, where he allegedly declared an ordinary dividend worth R105-million and allegedly paid himself dividends even though Old Mutual’s preference share dividends had not been paid. 

Moyo’s case has been about how he was dismissed in terms of his employment contract, arguing that he was entitled to a disciplinary hearing first even though Old Mutual terminated his contract on six months’ notice with pay of R4-million for the entire period.  In other words, he chose to fight Old Mutual on contractual grounds rather than unfair dismissal under the Labour Relations Act (LRA). 

Why the court ruled in Old Mutuals favour 

The first high court’s ruling, delivered by Mashile, found that Moyo should be temporarily reinstated pending Part B of his lawsuit because the insurer didn’t offer him a disciplinary or pre-dismissal arbitration hearing in terms of clause 24.1.1 of his employment contract.

However, Meyer disagreed with Mashile’s approach. Meyer wrote in his ruling (concurred by Keightley and Matojane) that Mashile wrongly viewed Moyo’s case through a “labour-law prism” – in the sense that Old Mutual treated Moyo unfairly when it fired him on six months’ notice and without a disciplinary hearing – even though Moyo didn’t rely on the LRA.

“However, there is no such self-standing common-law right to fairness in employment contracts. A right to be treated fairly when a contract is terminated only exists if it is expressly or impliedly incorporated in the contract,” said Meyer, adding that a clause for fairness and a right to a disciplinary hearing are not incorporated in Moyo’s contract with Old Mutual. 

Meyer said Moyo’s employment contract must be read together with clause 24.1 (dealing with his contract being valid for a limited period until his retirement age of 60 (he is currently 57) but can be terminated by either party with or without a six months’ notice or on grounds valid under the LRA); clause 24.2 (which gives Old Mutual the right to terminate Moyo’s contract if he is found to be guilty of misconduct, which would entitle Old Mutual to dismiss him); and clause 25.1 (dealing with Old Mutual being entitled, within its sole discretion, to decide whether or not to hold an internal disciplinary inquiry, or to proceed instead via a pre-dismissal arbitration procedure under the LRA). 

Moyo argued that clause 25.1 affords him a contractual right to a disciplinary hearing and that Old Mutual was obligated to subject him to a hearing when he was accused of misconduct. This was affirmed by Mashile. However, Meyer said the clause gives Old Mutual alone the discretion “and not an obligation” to hold a disciplinary hearing. 

“Moyo’s interpretation would lead to the absurdity and unbusinesslike result that the employer would be obliged in every instance where allegations of misconduct have been raised against the executive, to hold either an internal disciplinary enquiry or pre-dismissal arbitration, even though the employer, for reasons of its own, does not wish to pursue the matter any further or take disciplinary action.” BM

Story updated.