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10 Dec 2019
BY Silindokuhle Magagula

The recovery of losses suffered as a result of employee misconduct

Usually when an employee is alleged to have committed misconduct, the employee is taken through a disciplinary process and thereafter dismissed if found guilty of such misconduct. Most of the time employers are satisfied with this outcome. However, that was not the case with the Passenger Rail Agency of South Africa (“PRASA”).

After finding an employee, Mr Mshushisi Daniel Mthimkhulu, guilty of misconduct and dismissing him, PRASA approached the High Court to recover the loss it suffered as a result of the misconduct. It did so on the basis of two allegations. The first was that Mr Mthimkhulu had, when he applied for the post of Executive Manager: Engineering Services, misrepresented to PRASA that he had acquired certain academic qualifications. The second was that he had, a few months later, fraudulently misrepresented to PRASA that he had been offered a post by a German company at a salary higher than he was being paid by PRASA and that he had a doctorate from a German university.

In Passenger Rail Agency of South Africa v Mthimkhulu the Court upheld PRASA’s claim. It rejected Mr Mthikhulu’s evidence and accepted the evidence of PRASA with regard to the following facts.

  • In March 2010 Mr Mthimkhulu misrepresented to PRASA that he had a National Diploma and a Bachelor’s Degree from the Vaal University of Technology. This persuaded PRASA to appoint him to the position of Executive Manager: Engineering Services at a salary higher than he had been receiving in his previous post within PRASA.
  • In September 2010 Mr Mthimkhulu again falsely represented to PRASA that: (i) he had been awarded a doctorate by one of Europe's leading universities, the Technische Universitat Munchen: and, (ii) he had received a job offer from a German company, DB Schenker, for a position as an engineering services specialist at a salary of ZAR2 800 000.00 per annum. This resulted in PRASA making a counter-offer to him in terms of which he would also be paid a salary of ZAR2 800 000.00 per annum. Mr Mthimkhulu accepted this counter-offer.
  • In July 2015, five years later, the Group Chief Executive of PRASA sang his praises during a press conference. He introduced Mr Mthimkhulu as “Dr Mthimkhulu” and stated that German companies wanted him to work for them. The following day a News24 article was published which raised doubts about his qualifications and his registration with the Engineering Council of South Africa. This resulted in PRASA instituting a formal inquiry into his qualifications and requesting him to submit copies of all his qualifications.
  • An envelope was submitted to PRASA containing, amongst other documents, a certificate headed Technikon Vaal Triangle Nasionale Diploma Engineering Mechanical. (Although Mr Mthimkhulu denied that he had provided the document to PRASA, the Court found that the document was either delivered to PRASA by Mr Mthimkhulu or some other person acting on his direction.)
  • PRASA thereafter made enquiries with Vaal Triangle Technikon. The Technikon indicated that, although Mr Mthimkhulu had registered for a National Diploma in Mechanical Engineering, he never completed the course.
  • This discovery was a sufficient ground for PRASA to suspend him. In response to the letter of suspension, he tendered his resignation. However, he could not avoid disciplinary proceedings being instituted against him because he was still required to serve a full calendar month’s notice. The outcome of the proceedings was that he was found guilty of misconduct and dismissed.

The Court granted an order in terms of which Mr Mthimkhulu was ordered to pay damages to PRASA in the amount of ZAR5 771 854.39. This represented the difference in salary between what he actually received after September 2010 and that he would have received after this date if he had not misrepresented to PRASA that a German company was prepared to pay him a higher salary. Why the payment of damages was not ordered in respect of the earlier misrepresentation that led to his employment as Executive Manager: Engineering Services is not clear from the judgment.

Also of interest was the Court’s willingness to admit as evidence various documents submitted by PRASA, despite the fact that this constituted hearsay evidence. It did so in terms of section 3(1) of the Law of Evidence Amendment Act 45 of 1988. This section provides that hearsay evidence can be admitted if it is in the interests of justice to admit the hearsay evidence. PRASA argued that the evidence should be admitted for various reasons.

  • PRASA had, in the past, faced difficulties in obtaining evidence in corruption cases. Often records were not kept, were missing, were destroyed or not provided to auditors.
  • The previous few years had seen a large number of resignations and dismissals and many people who had first-hand knowledge of relevance to investigations were no longer employed by PRASA and their whereabouts were unknown. Some employees were unwilling to co-operate with investigators or had sought to obstruct investigations.
  • PRASA had encountered similar difficulties in investigating this matter.
  • The Group Chief Executive of PRASA at the relevant time could not be trusted to testify truthfully. The Supreme Court of Appeal had found that he acted fraudulently whilst employed by PRASA.
  • The hearsay evidence had substantial probative value. Evidence had been led as to the source of the documents and how they were discovered. They were also contemporaneous records of what had occurred.
  • Mr Mthimkhulu was prejudiced only to the extent that he was unable to test the evidence through cross-examination. He had, however, had an opportunity to test the evidence of witnesses regarding the source and integrity of the documents and had had ample opportunity to digest the evidence and to find evidence in rebuttal.
  • Finally there was the fact that this was a matter involving fraud and corruption within a state-owned enterprise. PRASA is enjoined to recover losses arising from fraudulent or corrupt conduct.

The Court ‘wholeheartedly’ agreed with these submissions


This case will certainly be an encouragement to many employers, particularly state-owned entities which appear to be the playing field for corruption. This is because it illustrates that, in addition to disciplining (and probably dismissing) their employees for misconduct, they can also approach the Courts to recover any patrimonial loss suffered as a result of the misconduct. This case dealt with a loss suffered as result of a fraudulent misrepresentation; but the approach adopted could also apply to other forms of misconduct such as theft or negligent conduct. While some employers may opt not to pursue this leg of the race because of, inter alia, legal costs and protracted litigation, other employers may use this option as a matter of principle to set an example to their employees.  

The willingness of the Court to admit hearsay evidence may also assist employers in this regard.

Reviewed by Peter le Roux, an Executive Consultant in the Employment department

Silindokuhle Magagula

Associate | Employment

+27 82 708 0190