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Stocks Civil Engineering (Pty) Ltd v Rip NO and Another (JA52/00) [2002] ZALAC 3 (1 February 2002)
.RTF of original document
IN THE LABOUR APPEAL COURT OF SOUTH AFRICA
HELD AT JOHANNESBURG
IN THE LABOUR APPEAL COURT OF SOUTH
AFRICA
HELD AT JOHANNESBURG
Case no: JA52/00
In the matter between
Stocks Civil Engineering (Pty) Ltd Appellant
and
Advocate M M Rip NO First Respondent
M M Murray Second Respondent
JUDGMENT
VAN DIJKHORST AJA:
Introduction
1.
This is an appeal against a judgment of the Labour Court dismissing the appellant’s review application with costs. In that court
the appellant sought to review the award handed down by the first respondent sitting as an arbitrator in accordance with a private
arbitration agreement between the parties in a dispute relating to the second respondent’s alleged dismissal by the appellant.
2.
The appellant’s case was that the second respondent’s services were terminated by agreement. Despite the fact that the
sole witness in the matter, Mr Saxby, managing director of the appellant, who was found to be a good and reliable witness, testified
to the contrary, the arbitrator found that the second respondent had been dismissed and that the onus placed on an employer by section
192(2) of the Labour Relations Act 66 of 1995 (the LRA) to prove that any dismissal was fair had not been discharged. He found that
the dismissal of the second respondent was both substantively and procedurally unfair. The arbitrator declined to reinstate the second
respondent but awarded him compensation in the sum of R511 573 which sum represents the remuneration the second respondent would
have been paid from the day he left the appellant’s employment until the arbitration was concluded.
3.
In the review application the appellant contended that the manner in which the arbitrator reached his findings on the merits and on
awarding relief, rendered his award reviewable. The arbitrator, first respondent, did not oppose the review and left the matter in
the hands of the Court.
Jurisdiction
4.
The second respondent, who opposed the application on the merits, took a jurisdictional point in limine that the dispute referred
to arbitration related to the fairness of the dismissal for operational reasons and accordingly is not a dispute as contemplated
in the provisions of section 157(3) of the LRA.
5.
The Labour Court rejected the second respondent’s contention that it did not have jurisdiction to hear the matter, heard it,
and found that the arbitrator’s decision on both the merits and the relief awarded was not reviewable.
6.
Section 157(3) of the LRA provides: “ Any reference to the court in the Arbitration Act, 1965 (Act 42 0f 1965), must be interpreted
as referring to the Labour Court when an arbitration is conducted under that Act in respect of any dispute that may be referred to
arbitration in terms of this Act.” The court of review in respect of any dispute relating to an arbitration in terms of the
Arbitration Act is therefore the Labour Court when the dispute may be referred to arbitration under the Labour Relations Act of 1995.
7.
In the present case the reason for the dismissal was based on the employer’s operational requirements and the dispute must therefore
be adjudicated in the Labour Court. But in section 141(1) of the LRA it is provided that if the parties to such a dispute prefer
to have the matter arbitrated by the Commission for Conciliation, Mediation and Arbitration, the latter is obliged to arbitrate the
dispute. The dispute is therefore a dispute “that may be referred to arbitration in terms of this act” within the contemplation
of section 157(3) of the LRA. cf Eskom vs Hiemstra NO and others (1999) 20 ILJ 2364 (LAC) 2365 I-2367A (paras 8-14); Orange Toyota
(Kimberley) v van der Walt & others 2001 (1) BLLR 85 (LC); Transnet Ltd v HOSPERSA & another 1999 20 ILJ 1293 (LC) and Shoprite
Checkers (Pty) Ltd v Ramdaw NO & others 2000 7 BLLR 835 (LC) paras 64, 74. The decision of the Labour Court that it had jurisdiction
to hear the review application was therefore correct. The appellant’s counsel abandoned this jurisdictional objection on appeal.
Interpretation of section 194
8.
The arbitrator’s decision to award compensation in the sum of R511 573 to the second respondent was based on his understanding
that section 194 (2) of the LRA provides that the compensation awarded to an employee, whose dismissal is found to be substantively
unfair, must not be “less than the amount specified in subsection (1)” of section 194, namely “ equal to the remuneration
that the employee would have been paid between the date of dismissal and the last day of the hearing of the arbitration”.
9.
It is now accepted law that when an arbitrator has to apply section 194(1), he has to exercise a judicial discretion as to whether
or not to award compensation. Johnson & Johnson (Pty) Ltd vs CWIU (1998) 12 BLLR 1209 (LAC); Lorentzen vs Sanacem (Pty) Ltd (2000)
7 BLLR 763 (LAC); Mkhonto vs Ford NO and others (2000) 7 BLLR 768 (LAC); Alpha Plant and Services (Pty) Ltd vs Simmonds and others
(2001) 3 BLLR 261 (LAC). Although these cases dealt with procedural unfairness, there is no reason not to apply the reasoning therein
to cases of substantive unfairness and the compensation payable in respect thereof in terms of section 194(2). The reasoning in Johnson
& Johnson’s case (paras 38, 39, 40) is based on the provisions of section 158(1)(a)(v) of the LRA in terms of which the
Labour Court “may make any appropriate order, including an award of compensation”. It is only when the appropriate order is an award of compensation that the provisions
of section 194 become operative. In the case of substantive unfairness in the dismissal the latter section requires that such amount
must be just and equitable in all the circumstances [and then sets certain parameters]. It follows that the Court, after making its
finding that the dismissal was substantively unfair, has a discretion to award compensation or not. This discretion has to be exercised
judicially in the light of what is just and equitable. Only after this discretion has been exercised in favour of an award of compensation,
must the Court direct its mind to the application of the provisions of section194.
Evidence
10.
Is the arbitrator’s decision that the second respondent had been dismissed reviewable? The second respondent elected not to
give evidence. The sole witness in the case was Mr Saxby, who testified for the appellant. The arbitrator found him to be an honest
and open witness who left a favourable impression. His evidence was that the appellant’s company which deals with civil engineering
projects such as toll roads, road construction, the building of bridges and waterworks, and township development, acquired the services
of the second respondent for the expressed purpose of expanding its operations into Africa. A new division was created and the second
respondent was employed to lead it. He commenced his services on 1 September 1997 at a remuneration far in excess of that of Mr Saxby
himself, who was the managing director. The second respondent was regarded as one of the senior executives of the appellant and the
prospects of his division were deemed to be extremely favourable.
11.
It, however, transpired that the second respondent did not deliver the goods. The Stocks International Division was fast losing money.
This aspect became a concern with the board of directors and had been enjoying attention since May 1998. At the 24 July 1998 board
of directors meeting it was pertinently discussed that the issue now had to be dealt with and that matters could not continue on
this basis. Mr Saxby stated that he believed the Stocks International Division should be closed down and that the second respondent
should leave. He arranged a meeting with the second respondent on 29 July 1998 with the specific intention to discuss this view with
him. The discussion was amicable and the second respondent agreed that the division was making a loss and should be closed down.
Mr Saxby then requested the second respondent to come back with a proposal of what he believed to be due to him. A second meeting
took place on 31 July 1998. At this time the discussion centered around the paying out to the second respondent of whatever he was
entitled to. The latter proposed payments set out on exhibit B14, a document headed “Termination Benefits”. The negotiations
appeared to break down as Mr Saxby was happy with the figures presented to him save that he required repayment of a R250 000 commencement
loan which had been advanced to the second respondent. This would wipe out the benefits the second respondent claimed he was entitled
to. The second respondent’s attitude was that this was not a loan but a joining bonus which was not repayable. This was the
sole bone of contention. No agreement was reached between the parties as to what was due to the second respondent upon termination
of his employment.
Appellant’s contentions
12.
The Labour Court correctly found that the arbitrator never considered whether or not the second respondent should receive no compensation
at all. The appellant’s complaint is that it is equally clear that the arbitrator never considered whether it would be “
just and equitable in all the circumstances” to award compensation “less than the amount specified in subsection (1)”.
It is further argued that in terms of the arbitration agreement the arbitrator in determining the dispute was given “powers
equivalent to that of a judge in the Labour Court”. In the event that he found the dismissal unfair, he was accordingly enjoined
to apply sections 193 and 194 of the LRA. It is submitted that the arbitrator in awarding compensation never exercised the powers
he was enjoined to exercise and that he therefore in awarding the sum mentioned to the second respondent acted outside his powers.
Therefore, so it is contended, his decision amounts to a reviewable irregularity within the contemplation of section 33(1)(b) of
the Arbitration Act 42 of 1965 and should be set aside. It is further submitted that the manner in which the arbitrator decided to
award compensation to the second respondent amounts to a latent gross irregularity in the proceedings. (cf Goldfields Investment
Ltd vs City Council of Johannesburg 1938 TPD 551 at 560-561). The arbitrator’s misunderstanding of the provisions of section
194 (2) resulted in him “misconceiving the nature of the enquiry, or of (his) duties in connection therewith.” For this
submission further reference is made to Paper, Printing, Wood and Allied Workers Union vs Pienaar NO 1993 (4) SA 621 (A) at 638G-J
and Toyota SA Motors (Pty) Ltd vs Radebe (2000) 21 ILJ 340 (LAC) at 351F-352A, 354E-355H. It is further submitted that had the arbitrator
acted properly within his terms of reference he would have exercised his discretion against awarding the compensation. He should
have taken into account factors such as the fact that the second respondent joined the appellant less than a year before the termination
of his services; that he had found alternative employment soon after the termination of his services; that he had refused to repay
the R250 000 commencement loan/joining bonus he had received from the appellant; that he was offered payment of his full contractual
notice period despite the fact that he was not required to work; that the appellant had not attempted to comply with the requirements
of section 189 of the Act because it in good faith held the view that the services of the second respondent had been terminated by
consent; that the second respondent did nothing to alert the appellant to the fact that he would later contend that the appellant
ought to have followed the procedures in section 189; and that as head of the international division the second respondent was at
least partially responsible for the fact that it was closed down. This was the argument.
Criticism of arbitrator’s approach
13.
Against this background the arbitrator comes to the following conclusion. “ I cannot accordingly find that a consensual agreement
to terminate the employment relationship was ever brokered or reached between the parties. It was argued on behalf of the second
respondent that the applicant in accepting that he should leave, had in fact agreed to leave, and the fact that the financial remuneration
could later not be resolved, does not detract from this alleged agreement. I find this concept very difficult to accept in that clearly
the applicant would not agree to terminate his employment unless he was satisfied with the remunerative benefits that would go with
such termination. The two are inseparable and it is improbable that the applicant agreed to the one without consensus on the other.
Section 192 (2) of the act places an onus on the employer to prove that any dismissal is fair. In this regard the respondent has
not discharged this onus.”
14.
This finding by the arbitrator flies in the face of the evidence which is that there was an agreement that the second respondent would
leave, that he in fact left and that he was paid out three months salary in lieu of notice.
15.
In my view the reasoning of the arbitrator set out above is suspect. The conclusion that the second respondent would not have agreed
to terminate his employment unless he was satisfied with the remunerative benefits that would go with such termination, is wrong
in view of the fact that there was no disagreement about the termination benefits and the sole dissent was about the commencement
loan/bonus. It appears that the arbitrator did not consider that there was an onus on the second respondent to prove that he had
been dismissed ( section 192(1)) before there rested an onus on the appellant in terms of section 192 (2) of the LRA to prove that
such dismissal was fair.
16.
Counsel for the respondent sought support for the finding that the respondent had been dismissed in what she argued were concessions
under cross-examination by Mr Saxby that there was no agreement. Read in their proper context they do not support that submission.
They relate to the absence of agreement on the monetary dispute, not to the consensus on respondent’s departure. It is significant
that the arbitrator does not rely on these alleged concessions for his finding, which he would inevitably have done had he thought
that they meant what counsel contends. In fact counsel’s cross-examination was at variance with a letter written by her client
on 5 August 1998 to Mr Saxby in which he stated: “In our talks ... we ... agreed the following: 1 Due to Stocks Civil Engineering’s
(SCE) intention to reduce its commitments and activities cross-border, the International Division’s activities would be discontinued.
Therefore my contract with SCE would be rescinded on 31st July 1998.” The remainder of this long letter deals with winding
up arrangements and emoluments payable. The arbitrator did not refer to this letter.
Procedural unfairness
17.
The arbitrator found that the dismissal was both procedurally and “substantially” (sic) unfair. If there was a dismissal
it was for operational reasons and the prescripts of section 189 had not been followed. But was it necessarily for that reason procedurally
unfair? A “mechanical checklist approach” was frowned upon in Johnson & Johnson’s case (para 29) and it was stated that the proper approach is to ascertain whether
the purpose of the section, namely the occurrence of a joint consensus-seeking process, has been achieved. Section 189 requires consultation.
That happened in the present case. The section requires that consensus must be sought on appropriate measures to avoid dismissals,
change the timing and mitigate the adverse effects. There was consensus. It was that the second respondent would leave immediately
but receive three months remuneration. The section requires that consensus be sought on severance pay. The second respondent produced
his proposals thereon in exhibit B14 and they were acceptable to the appellant. The section requires that the employer must disclose
all relevant information. In this case the employee had the best information at his disposal. He was the head of the division concerned.
He never asked for additional information. It was accepted by both parties that he could not be accommodated elsewhere in the group.
He never raised this possibility. He left and took up employment elsewhere. In these circumstances the purpose of section 189 was
achieved. It would be highly technical and wrong to hold that the section has not been materially complied with. In my view the arbitrator
wrongly concluded that the procedure had been unfair.
Substantive unfairness
18.
Was the dismissal substantively unfair? The international division was running at a loss. There was consensus that it should be closed
down. The second respondent accepted that he had no further role to play in the appellant’s operations. He did not suggest
that he be elsewhere employed within the appellant’s organization. In fact at his remuneration, far in excess of that of the
managing director, that would have been impossible. He accepted the situation and sought and immediately obtained other employment.
In these circumstances I find it difficult to accept that the dismissal, if such it was, was substantively unfair. The finding of
the arbitrator that the closing of the Stocks International Division was simply a method of “losing” the second respondent
has no factual basis.
No reinstatement
