CONSTITUTIONAL COURT OF SOUTH AFRICA
Cases CCT 21/21, 28/21, 29/21 and 44/21
Case CCT 21/21
In the matter between:
NATIONAL EDUCATION HEALTH
AND ALLIED WORKERS UNION Applicant
and
MINISTER OF PUBLIC SERVICE
AND ADMINISTRATION First Respondent
MINISTER OF BASIC EDUCATION Second Respondent
MINISTER OF JUSTICE AND CORRECTIONAL
SERVICES Third Respondent
MINISTER OF POLICE Fourth Respondent
NATIONAL DIRECTOR OF
PUBLIC PROSECUTIONS Fifth Respondent
MINISTER OF FINANCE Sixth Respondent
DEPARTMENT OF PUBLIC SERVICE
AND ADMINISTRATION Seventh Respondent
PUBLIC SERVICE CO-ORDINATING
BARGAINING COUNCIL Eighth Respondent
DEMOCRATIC NURSING ORGANISATION
OF SOUTH AFRICA Ninth Respondent
POLICE AND PRISONS CIVIL RIGHTS UNION Tenth Respondent
NATIONAL UNION OF PUBLIC SERVICE
AND ALLIED WORKERS UNION Eleventh Respondent
SOUTH AFRICAN POLICING UNION Twelfth Respondent
SOUTH AFRICAN DEMOCRATIC
TEACHERS UNION Thirteenth Respondent
PUBLIC SERVANTS ASSOCIATION Fourteenth Respondent
NATIONAL PROFESSIONAL TEACHERS
ORGANISATION OF SOUTH AFRICA Fifteenth Respondent
HEALTH AND OTHER SERVICES PERSONNEL
TRADE UNION OF SOUTH AFRICA Sixteenth Respondent
SOUTH AFRICAN TEACHERS UNION Seventeenth Respondent
NATIONAL TEACHERS UNION Eighteenth Respondent
Case CCT 28/21
In the matter between:
SOUTH AFRICAN DEMOCRATIC
TEACHERS UNION First Applicant
POLICE AND PRISONS CIVIL RIGHTS UNION Second Applicant
DEMOCRATIC NURSING ORGANISATION OF
SOUTH AFRICA Third Applicant
and
DEPARTMENT OF PUBLIC SERVICE
AND ADMINISTRATION First Respondent
MINISTER OF PUBLIC SERVICES
AND ADMINISTRATION Second Respondent
MINISTER OF FINANCE Third Respondent
PUBLIC SERVICE CO-ORDINATING
BARGAINING COUNCIL Fourth Respondent
NATIONAL DIRECTOR OF PUBLIC PROSECUTIONS Fifth Respondent
MINISTER OF JUSTICE AND CORRECTIONAL
SERVICES Sixth Respondent
MINISTER OF BASIC EDUCATION Seventh Respondent
MINISTER OF POLICE Eighth Respondent
SOUTH AFRICAN POLICE UNION Ninth Respondent
PUBLIC SERVANTS ASSOCIATION Tenth Respondent
NATIONAL PROFESSIONAL TEACHERS
ORGANISATION OF SOUTH AFRICA Eleventh Respondent
HEALTH AND OTHER SERVICES PERSONNEL
TRADE UNION OF SOUTH AFRICA Twelfth Respondent
SOUTH AFRICAN TEACHERS UNION Thirteenth Respondent
NATIONAL TEACHERS UNION Fourteenth Respondent
NATIONAL EDUCATION, HEALTH AND
ALLIED WORKERS UNION Fifteenth Respondent
NATIONAL UNION OF PUBLIC SERVICE
AND ALLIED WORKERS UNION Sixteenth Respondent
Case CCT 29/21
In the matter between:
PUBLIC SERVANTS ASSOCIATION First Applicant
NATIONAL PROFESSIONAL TEACHERS
ORGANISATION OF SOUTH AFRICA Second Applicant
HEALTH AND OTHER SERVICES PERSONNEL
TRADE UNION OF SOUTH AFRICA Third Applicant
SOUTH AFRICAN TEACHERS UNION Fourth Applicant
NATIONAL TEACHERS UNION Fifth Applicant
and
MINISTER OF PUBLIC SERVICE
AND ADMINISTRATION First Respondent
MINISTER OF BASIC EDUCATION Second Respondent
MINISTER OF JUSTICE AND
CORRECTIONAL SERVICES Third Respondent
MINISTER OF POLICE Fourth Respondent
NATIONAL DIRECTOR OF
PUBLIC PROSECUTIONS Fifth Respondent
MINISTER OF FINANCE Sixth Respondent
DEPARTMENT OF PUBLIC SERVICE
AND ADMINISTRATION Seventh Respondent
PUBLIC SERVICE CO-ORDINATING
BARGAINING COUNCIL Eighth Respondent
DEMOCRATIC NURSING ORGANISATION
OF SOUTH AFRICA Ninth Respondent
NATIONAL EDUCATION HEALTH AND
ALLIED WORKERS UNION Tenth Respondent
POLICE AND PRISONS CIVIL RIGHTS UNION Eleventh Respondent
NATIONAL UNION OF PUBLIC SERVICE AND
ALLIED WORKERS UNION Twelfth Respondent
SOUTH AFRICAN POLICING UNION Thirteenth Respondent
SOUTH AFRICAN DEMOCRATIC
TEACHERS UNION Fourteenth Respondent
Case CCT 44/21
In the matter between:
NATIONAL UNION OF PUBLIC SERVICE
AND ALLIED WORKERS Applicant
and
MINISTER OF PUBLIC SERVICE AND
ADMINISTRATION First Respondent
MINISTER OF BASIC EDUCATION Second Respondent
MINISTER OF JUSTICE AND
CORRECTIONAL SERVICES Third Respondent
MINISTER OF POLICE Fourth Respondent
NATIONAL DIRECTOR OF PUBLIC
PROSECUTIONS Fifth Respondent
MINISTER OF FINANCE Sixth Respondent
DEPARTMENT OF PUBLIC SERVICE
AND ADMINISTRATION Seventh Respondent
PUBLIC SERVICE CO-ORDINATING
BARGAINING COUNCIL Eighth Respondent
DEMOCRATIC NURSING ORGANISATION
OF SOUTH AFRICA Ninth Respondent
NATIONAL EDUCATION HEALTH AND
ALLIED WORKERS UNION Tenth Respondent
POLICE AND PRISONS CIVIL RIGHTS
UNION Eleventh Respondent
SOUTH AFRICAN POLICING UNION Twelfth Respondent
SOUTH AFRICAN DEMOCRATIC TEACHERS
UNION Thirteenth Respondent
PUBLIC SERVANTS ASSOCIATION Fourteenth Respondent
NATIONAL PROFESSIONAL TEACHERS
ORGANISATION OF SOUTH AFRICA Fifteenth Respondent
HEALTH AND OTHER SERVICES PERSONNEL
TRADE UNION OF SOUTH AFRICA Sixteenth Respondent
SOUTH AFRICAN TEACHERS UNION Seventeenth Respondent
NATIONAL TEACHERS UNION Eighteenth Respondent
Neutral citation: National Education Health and Allied Workers Union v Minister
of Public Service and Administration and Others ; South African
Democratic Teachers Union and Others v Department of Public
Service and Administration and Others; Public Servants
Association and Others v Minister of Public Service and
Administration and Others; National Union of Public Service and
Allied Workers Union v Minister of Public Service and
Administration and Others [2022] ZACC 6
Coram: Madlanga J, Madondo AJ, Majiedt J, Mhlantla J, Pillay AJ,
Rogers AJ, Theron J, Tlaletsi AJ and Tshiqi J.
Judgments: Madondo AJ (unanimous)
Heard on: 24 August 2021
Decided on: 28 February 2022
Summary: Sections 213, 215 and 216 of the Constitution — regulations 78
and 79 of the Public Service Regulations — collective bargaining
Leave to appeal is granted — clause 3.3 of the collective
agreement is invalid and unlawful — appeal is dismissed — no
order as to costs
ORDER
On appeal from the Labour Appeal Court of South Africa (hearing the matter as a court
of first instance), in respect of CCT 21/21; 28/21; 29/21 and 44/21, the following order
is made:
7
1. Leave to appeal is granted.
2. The appeal is dismissed.
3. There is no order as to costs.
JUDGMENT
MADONDO AJ ( Madlanga J, Majiedt J, Mhlantla J, Pillay AJ, Rogers AJ, Theron J,
Tlaletsi AJ and Tshiqi J concurring)
Essential context
In this matter the applicant unions, representing their respective members
employed in the public se ctor, seek leave to appeal against the judgment and order of
the Labour Appeal Court , in which it declared the enforcement of clause 3.3 of
Resolution 1: Agreement on the Salary Adjustments and Improvements on Conditions
of Service in the Public Service for th e Period 2018/2019; 2019/2020 and 2020/2021
(the collective agreement), regulating the salary structures of public service employees
for three consecutive financial years, invalid and unlawful. The Labour Appeal Court
dismissed the application for enforcement of such collective agreement on the grounds
that it had been concluded in contravention of regulations 78 and 79 of the Public
Service Regulations (Regulations),1 read with sections 213, 215 and 216 of the
Constitution.
At issue in this matter is the validity and enforceability of clause 3.3 of the
collective agreement concluded in 2018 between the State and various trade unions,
which determined public sector wage increases for the 2020/2021 period.
1 Public Service Regulations, GN R877 GG 40167, 29 July 2016.
MADONDO AJ
8
At the heart of this issue is regulation 79 of the Regulations, which provides that
the State can enter into a collective agreement only if—
(a) there is a realistic calculation of the costs involved in both the current and
the subsequent fiscal year;
(b) the agreement does not conflict with Treasury regulations; and
(c) the relevant governmental authority can cover the costs from its ow n
departmental budget or based on a written commitment to provide
additional funds from Treasury; or from the budgets of other departments
with their written agreement and Treasury approval.
The State contends that these mandatory requirements were not satisfied before
it entered into the impugned collective agreement, and it is therefore unlawful and
unenforceable. It contends further that enforcing the agreement wou ld cost the fiscus
R29 billion, which it does not have.
By contrast, the unions allege that on 25 April 2018, Cabinet approved the
conclusion of the collective agreement, and since the Minister of Finance is a member
of Cabinet, this constituted substantial compliance with regulations 78 and 79. The
unions, therefore, contend that the collective agreement is lawful and enforceable and
that even if the collective agreement was not lawfully concluded , it should still be
enforced. This, the unions contend further, is because the State unreasonably delayed
in applying to declare the collective agreement unlawful, and that the interests of justice
demand that the agreement be enforced.
Parties
This matter comprises four consolidated applications. Th e parties in each
application are described in turn. The applicant in the first application is the National
Education Health and Allied Workers Union (NEHAWU), a trade union duly registered
in terms of the Labour Relations Act2 (LRA) and a signatory to the collective agreement.
2 66 of 1995.
MADONDO AJ
9
The first, second and third applicants in the second application are the South African
Democratic Teachers Union ( SADTU), the Police and Prisons Civil Rights Union
(POPCRU), and the Democratic Nursing Organisation of South Africa ( DENOSA),
trade unions duly registered in terms of the LRA. The applicants in the third application,
the Public Servants Association (PSA), the National P rofessional Teachers
Organisation of South Africa (NAPTOSA), the Health and Other Services Personnel
Trade Union of South Africa (HOSPERSA), the South African Teachers Union (SATU)
and the National Teachers Union (N ATU), are also trade unions registered as such in
terms of the LRA. And the applicant in the fourth application is the National Union of
Public Service and Allied Workers (NUPSAW), a trade union duly registered in terms
of the LRA. The applicant unions in the third and fourth applications were not
signatories to the collective agreement but their members are nonetheless bound by its
terms.
The respondents, in part, are the Minister of Public Service and Administration
and the Department of Public Service and Administration ( collectively referred to as
the DPSA), the employer responsible for the negotiation and implementation of the
collective agreement, and the Minister of Finance, the Minister responsible for public
finance principles and policy. The respondents are referred to as the State.
Background
On 31 October 2017, the Committee of Ministers (COM) consisting of, among
others, the Minister of Public Service and Administration and Minister of Finance ,
mandated the DPSA’s chief negotiator to negotiate public sector wage increases for the
2018 to 2021 period with trade union representatives at the Public Service
Co-ordinating Bargaining Council (PSCBC).
In November 2017, the National Treasury (Treasury) prepared the 2017 Medium
Term Budget Policy Statement (MTBPS) in terms of which R128.5 billion was set aside
to fund the compensation increases for all public service employees over the period
2018/2019 to 2020/2021. Of this amount, R110 billion was allocated to fund the cost
MADONDO AJ
10
of compensation increases for employees in the PSCBC bargaining unit . Effect was
given to these and other recommendations in the MTBPS with the passing of the
Adjustments Appropriation Act,3 and various other pieces of legislation. Subsequently,
wage negotiations began.
The first relevant offer was tabled by the State’s representative on
7 December 2017 and would have kept the total compensation expenditure within the
budgeted R128.5 billion . The trade union representatives rejected the offer and
proposed a substantially larger increase. As a result, negotiations were adjourned until
9 January 2018.
On 25 January 2018, the State’s representative tabled a five-year offer strikingly
different to its previous one. However, it was not mandated to make this offer, and the
offer exceeded the budgeted amount of R128.5 billion. The applicants initially rejected
this offer and again countered with a larger increase. The following day, the parties
produced a draft agreement for a three -year wage agreement exceeding the budgeted
amount by R30.2 billion – including an excess amount of R13.2 billion required for the
enforcement of clause 3.3 – which they undertook to seek mandates to enter into.
On 7 February 2018, at a meeting of the COM, the State’s represe ntative
requested that T reasury approve a R15 billion increase of the budgeted amount for
compensation increases. It remains unclear why an increase of R15 billion rather than
R30.2 billion was sought, when the draft agreement would have exceeded the allocated
budget by the latter amount. On 14 February 2018, the then Minister of Finance,
Mr Malusi Gigaba, rejected this request. To free up funds for the proposed increase, he
suggested that bonus packages be restricted, that voluntary retirement be offered to
approximately 19 000 public servants, and that overtime payments be curtailed. It is
apparent that even if these measures had been successfully implemented, the State
3 12 of 2017.
MADONDO AJ
11
would have battled to free up sufficient funds to bring the draft agreement within
budget.
On 20 March 2018, the COM met and reprimanded its negotiating team for
failing to observe its mandate by tabling an offer which exceeded the allocated budget.
On 4 April 2018, negotiations recommenced, and the State proposed a reduced offer
which was within the budgeted amount but was rejected by the applicants who insisted
that effect be given to the offer of 25 January 2018.
On 19 April 2018, the COM met again to receive clarity on the state of the
negotiations. The State ’s representative explained that there were three options in
respect of the 25 January 2018 offer: the first was to withdraw the offer, but that carried
the risk of being accused by the unions of negotiating in bad faith; the second was to
confirm the offer , however this would mean that the agreed wage increases would
exceed the allocated budget ; and the third was t o confirm the offer subject to an
agreement on measures which would bring it within the budget. The COM resolved to
seek direction on this issue from Cabinet.
On 25 April 2018, Cabinet resolved that the DPSA and the Minister of Finance
should deliberate on the cost implications of the offer of 25 January 2018 . The State
was not able to withdraw it and Cabinet instructed the DPSA to regularise the offer and
proceed to conclude the agreement.
On 2 May 2018, T reasury delivered a presentation to the COM and explained
that, given the State’s financial position it could not implement the offer of
25 January 2018 (which entailed annual increases exceeding the Consumer Price Index
(CPI)) without a headcount reduction of 36 000 public servants. The scope for reducing
the headcount, however, was limited since this could adversely affect service delivery.
Over the three-year term of the proposed wage deal, T reasury thought that a plausible
headcount reduction would be only 14 263 public servants. The other option was to
limit increases to the CPI for all three years. Together with the implementation of the
MADONDO AJ
12
equalisation of pay progression, and the extension of the housing allowance to spouses
in 2020/2021, this would allow the State to stay within the budget for the three-year
term of the wage deal. The following day, negotiations recommenced and there was
engagement about the need for cost cutting measures to bring the offer within the
budget.
On 21 May 2018, the State entered into an agreement with the relevant trade
union representatives which incorporated the collective agreement. This agreement was
signed by a majority of trade union representatives at the PSCBC and became binding
on all parties. The State suggests that this agreement was conditional on it
implementing various cost cutting measures but admit s that the applicants refused to
allow a clause to this effect to be included in the agreement. However, the applicants
contend that the collective agreement was never intended to have such a condition.
The collective agreement comprised three central clauses—
(a) clause 3.1 regulated wage increases for 2018/2019;
(b) clause 3.2 regulated wage increases for 2019/2020; and
(c) clause 3.3 regulated wage increases for 2020/2021.
The 2020/2021 wage increase expired on 31 March 2021. The effect of these three
clauses was that the allocated budget would be exceeded by R30 .2 billion, an excess
not approved at all by any Act of Parliament.
After the conclusion of this agreement, South Africa’s economic situati on
deteriorated m arkedly. Despite this, the 2018/ 2019 and 20 19/2020 increases were
implemented. In his 2018 MTBPS, the Minister of Finance drew attention to the fact
that the public service wage agreement exceeded budgeted baselines by R30. 2 billion
over the medium term, and said that T reasury had not allocated additional money for
this, and that national and provincial departments would “be expected to absorb these
costs within their compensation baselines”. In other words, the departments needed to
engage in cost -cutting measures to afford the wage increases. It seems that this was
MADONDO AJ
13
successfully achieved in the first two financial years of the wage agreement but not in
the third year. The State contends that this was because enforcement of the two clauses
did not result in it exceeding the allocated budget. E nforcement of clause 3.3 would
cause the State to exceed that budget. As at May 2018, when the collective agreement
was concluded, the amount by which implementing clause 3.3 was anticipated to exceed
the budget for the 2020/2021 period was R13.2 billion.4 However, by 2020, the cost of
implementing clause 3.3 in terms of the State was expected to substantially exceed this
amount.
In 2019, South Africa’s economic situation deteriorated further and
on 30 October, Mr Tito Mboweni, the then Minister of Finance, noted in his MTBPS
that public sector wages had increased by about 66% in the last 10 years and that cost
cutting measures were therefore urgent. A document annexed to the 2019 MTBPS
revealed that in 2018/ 2019, spending on the compensation of State employees
accounted for 35.4% of consolidated national expenditure. On 26 February 2020,
Treasury announced that it had revised downward its projections of South Africa’s
economic growth and that real growth for 2019 was 0.9%.
Additionally, on 25 March 2020, the PSCBC reconvened, and the State’s
representative proposed a revis ed wage increase for the 2020/2021 period. This
increase would still have afforded certain public sector employees above inflation wage
increases and would still have exceeded the allocated budget, but it was a reduction on
the amount promised in terms of clause 3.3 of the collective agreement. This offer was
rejected by the applicants, and the State maintained that it was simply unable to
implement clause 3.3. The unions refused to revise the agreement and insisted on its
implementation. It is common cause that clause 3.3 was not implemented on
1 April 2020.
4 See [11].
MADONDO AJ
14
Litigation history
Bargaining Council, Arbitration, and Labour Court
On 2 April 2020, some of the applicants referred a dispute to the PSCBC. The
dispute was conciliated on 20 May 2020. However, the conciliation was uns uccessful,
with the issue about the enforcement of clause 3.3 of the collective agreement remaining
unresolved. Consequently, the applicants referred the dispute to arbitration.
Before the arbitration was finalised, on 8 June 2020, the applicants launched an
application in the Labour Court seeking an order to compel the State to comply with the
collective agreement for the 2020/2021 financial year. The State launched a
counter-application seeking declaratory relief regarding the legality of the collective
agreement and its enforcement. The arbitration was subsequently postponed by
agreement pending the outcome of the Labour Court applications.
The parties agreed to request the Labour Appeal Court to hear the matter as a
court of first instance in terms of section 175 of the LRA. This request was granted.
Labour Appeal Court
The Labour Appeal Court had to determine whether the impugned clause 3.3 was
concluded in contravention of regulations 78 and 79. It recognised that the two
regulations imposed—
“a requirement for the conclusion of a collective agreement by the State to this extent:
the cost of the collective agreement must be covered from the budget of the relevant
department of State or on the basis of a written com mitment from the T reasury to
provide additional funds or, alternatively, from the budget of other departments or
agencies with their written consent together with approval from National Treasury.”5
5 Public Servants Association v Minister of Public Service and Administration [2020] ZALAC 54; (2021) 42 ILJ
796 (LAC) (Labour Appeal Court judgment) at para 14.
MADONDO AJ
15
The Court found that the “cost of the collective agreement could not be covered
solely” from the Minister of Public Service and Administration’s budget; that Treasury
had not provided a written commitment to guarantee additional funding and no further
agreements were made by other departments or agencies in acco rdance with the
regulations.6 It also found that the Minister of Finance’s letter dated 14 February 2018
evinced “the absence of any commitment by National Treasury of the kind required
expressly by regulation 79” and the respondents’ case was supported “ by the lack of
evidence of any written agreement by any other department of State”.7
On the issue of the delay by the respondents to approach the courts and review
the collective agreement, the Labour Appeal Court acknowledged that:
“While there is prejudice to the applicants and union respondents, there is also massive
prejudice to the public interest at large, given that an additional R37.2 billion will have
to be found to finance the costs of increases pursuant to clause 3.3 of the collective
agreement. This imposes a significant burden on the fiscus.”8
Therefore, it held—
“the prejudice caused by refusing to adjudicate upon the legality of clause 3.3 in
circumstances where so large a sum of money is required from the public purse and
where it is common cause that the State finances are in an even more parlous state than
they were before the advent of Covid-19, all dicta te that the discretion of this C ourt
should be exercised in favour of examining whether there is a legal justification for the
payment of so large a sum of public monies to a relatively small cohort of the South
African population.”9
The Labour Appeal Court considered the applicants’ contention that the State
was bound by Cabinet’s approval of the draft agreement dated 26 January 2018 and that
6 Id at para 15.
7 Id at para 23.
8 Id at para 30.
9 Id at para 31.
MADONDO AJ
16
the DPSA had been authorised to act on behalf of the State at the PSCBC. The
applicants’ contention was that, on this authority, the DPSA made an offer to the
applicants which they accepted. On this, the Court held:
“That, however, does no t represent complian ce with the express wording of
regulation 79, read together with section 216(2) of the Constitution which provides that
‘[t]he national treasury must enforce compliance with the measures established in terms
of subsection (1), and may s top the transfer of funds to an organ of state if that organ
of state commits a serious or persistent material breach of those measures’.
National Treasury is given a particular status under the Constitution. The constitutional
provision set out in secti on 216 of the Constitution ensures that National Treasury is
one of the guardrails to ensure that the appropriate standard of constitutional
governance is adhered to by the executive. The inclusion of the role of National
Treasury in regulation 79 fits to gether with the purpose of section 216 of the
Constitution. Absent compliance with regulation 79, it matters not whether Cabinet
might have approved the agreement, in that, whatever the Minister of Finance may or
may not have said in Cabinet cannot be read to equate to compliance with section 216
of the Constitution read together with regulation 79. The argument that the collective
agreement breached the applicable regulations, namely regulations 78 and 79, must
thus be upheld.”10
On the consequence of declaring the collective agreement invalid, the Labour
Appeal Court considered section 172(1)(b) of the Constitution , which grants a court
deciding a constitutional matter wide remedial powers , and the Constitutional Court’s
decision in Gijima.11 The Labour Appeal Court found that this matter and Gijima are
distinguishable:
“In that case, the concern related to one contract entered into between Gijima and SITA.
It was understandable i n the circumstances that the C ourt found it just and equitable,
10 Id at paras 32-3.
11 State Information Technology Agency SOC Limited v Gijima Holdings (Pty) Ltd [2017] ZACC 40; 2018 (2) SA
23 (CC); 2018 (2) BCLR 240 (CC) (Gijima).
MADONDO AJ
17
under the circumstances of an inordinate delay, to justify an order which would not
penalise the innocent party, being Gijima.
In the present case, the dispute is far more complex; hence the problem of the
polycentric dispute which is set out in the introductio n to this judgment. The
submission on behalf of certain of the respondent unions is illuminating in that it
reflects that certain of these parties have understood the parlous financial position in
which the fiscus finds itself and thus the country in the wake of the Covid-19 pandemic.
They were prepared to accept a staggered approach to the compliance with
clause 3.3.”12
Consequently, the Labour Appeal Court found that the exercise of discretion is
case specific and in the exercise of such discretion it is important to consider the “effect
on the public purpose in general and the impact on millions of South Africans who
barely survive on a da y-to-day basis and need all the help the State may be able to
provide”.13 Furthermore, it found that—
“it does not appear to be just and equitable to order government to expend significant
and scarce financial resources on employees whose jobs are already secured and
salaries have been paid in full, particularly in circumstances where the imperative exists
for the recovery of the economy to the benefit of millions of vulnerable people. For
example, the provision of social grants to fellow South Africans living on the margin
could well be imperilled by such a decision, as might the need to pay for significant
and critical additional medical costs caused by the pandemic”.14
The Court therefore declared the enforcement of clause 3.3 unlawful for violating
sections 213 and 215 of the Constitution , as well as the impugned regulations and as a
result dismissed the application.15
12 Labour Appeal Court judgment above n 5 at paras 43-4.
13 Id at para 46.
14 Id at para 45.
15 Id at para 51.
MADONDO AJ
18
Submissions before this Court
Applicants’ submissions on jurisdiction and leave to appeal
The applicants argue that this matter engages this Court’s constitutional
jurisdiction because it concerns the effect of section 23(5) of the Constitution on the
validity and enforceability of the impugned collective agreement.
They contend further that this matter engages the Court’s general jurisdiction
because it requires th is Court to assess : whether the common law rules of contract
require enforcement of the collective agreement; the effect of regulations 78 and 79 on
the collective agreement; and whether the Labour Appeal Court correctly applied the
rules on delay. They submit that the interests of justice require that leave be granted
because the ap plication has prospects of success, and the Labour Appeal Court’s
decision, if left undisturbed, will have far-reaching consequences for the enforceability
of collective agreements.
Applicants’ submissions on merits
NEHAWU’s submissions
NEHAWU argues that the Labour Appeal Court’s judgment undermines the
scheme of the LRA and the right to collective bargaining. In this regard, it alleges that
the effect of the judgment is to limit section 23( 5) of the Constitution read with
section 23(1) of the LRA without that Court having ascertained that such a limitation is
justified by section 36 of the Constitution . It also submits that t he LRA specifically
regulates disputes about collective agreements hence it was impermissible for the
Labour Appeal Court to rely on sections 213 and 215 of the Constitution, in
circumstances where the relevant provision of the LRA had not been challenged.
NEHAWU also argues that the Labour Appeal Court erred in relying on the
Minister of Finance’s letter dated 14 February 2018 as a basis for refusing to accept that
the respondents had authority to conclude the collective agreement on behalf of the
MADONDO AJ
19
State. This is because in terms of the Oudekraal16 principle, Cabinet’s decision to
approve the conclusion of the collective agreement was valid and binding until set aside
by a court of law. Finally, it also argues that the State’s delay in prosecuting the review
of its decision to conclude the collective agreement should not have been condoned by
the Labour Appeal Court. This, it says, is because the delay was inordinate, and the
State failed to provide an adequate explanation for the delay.
SADTU, POPCRU and DENOSA’s submissions
Similar to what NEHAWU contends, SADTU, POPCRU and DENOSA submit
that the Labour Appeal Court erred in condoning the State’s delay in prosecuting its
review application. In particular, they argue that the Labour Appeal Court weakened
the test for delay to an interest of justice inquiry, without properly applying the
principles set out in Gijima and Buffalo City.17
They contend further that the collective agreement was lawfully concluded
because, in terms of section 91(2) of the Constitution, once Cabinet approved the offer
to be made to the applicants, all Ministers were bound by the approval, including the
Minister of Public Service and Administration and Minister of Finance. And since
Cabinet approved the conclusion of the collective agreement, the Labour Appeal Court
should have inferred that the requirements of regulation 78 and 7 9 were satisfied .
Furthermore, the agreement was therefore lawfully concluded.
SADTU, POPCRU and DENOSA further contend that, even if the collective
agreement is found to be unlawful, justice and equity demand that clause 3.3 be
enforced. This is because, among other things , as State employees they are innocent
bystanders to the State’s failure to act lawfully, and they have relied, to their prejudice,
on the representation that the agreement would be enforced. In addition, if the
agreement is not enforced, it will breed distrust and debilitate the process of collective
16 Oudekraal Estates (Pty) Ltd v City of Cape Town [2004] ZASCA 48; 2004 (6) SA 222 (SCA) (Oudekraal).
17 Buffalo City Metropolitan Municipality v Asla Construction (Pty) Ltd [2019] ZACC 15; 2019 (4) SA 331 (CC);
2019 (6) BCLR 661 (CC) (Buffalo City).
MADONDO AJ
20
bargaining with the State . In any event, enforcement can take place on a staggered
basis, which the parties can be ordered to negotiate . And although the collective
agreement lapsed on 31 March 2021, the matter is not moot. This is because , they
submit further, if the collective agreement is valid, the delay in getting the matter
resolved by the courts has not extinguished the State’s obligations. And even if the
matter is moot, they submit that it raises important questions of princip le and the
interests of justice therefore require that it is decided.
PSA, NAPTOSA, HOSPERSA, SATU and NTU’s submissions
These applicants submit that the collective agreement was validly concluded
pursuant to the provisions of the LRA which take precedence over the impugned
regulations, and the collective agreement is thus enforceable. After the Minister of
Finance’s letter of 14 February 2018, he failed to object to the conclusion of the
collective agreement , and approved funding for enforcement of the collective
agreement. In addition, regulation 4 of the PSA regulations permits the Minister of
DPSA, under justifiable circumstances, to authorise deviation from any regulation, and
such authorisation need not be in writing. The conduct of both the Minister of Finance
and of DPSA thus demonstrate s that T reasury approved the conclusion of the
agreement, alternatively, that deviation from the regulations was authorised. As such,
there was actual, alternatively, substantial compliance with the regulations.
They submit that although it is settled law that estoppel cannot be invoked if its
effect is the perpetuation of a situation prohibited by law, a distinction must be drawn
between cases where the S tate acts intra and ultra vires (with and without legal
authority). Where the S tate has the power to act and is required to comply with
necessary formalities, then in the absence of anything to the contrary, a party contracting
with it is entitled to assume that these formalities have been complied with. In the latter
situation, it is not a question of the Stat e acting ultra vires but rather whether, in
exercising the power that it has, the State has complied with its internal procedures. In
this situation, the counter -party to the contract with the State may successfully invoke
the doctrine of estoppel.
MADONDO AJ
21
Additionally, they aver that e ven if there was non -compliance with the
regulations, it does not render the collective agreement a nullity . That is so because it
is a well-established legal principle that a contract which is entered into contrary to a
statutory prohibition is void if the statute expressly or impliedly lays down nullity of
the contract as th e sanction for its breach . Properly interpreted, the PSA and its
regulations do not provide for such a consequence. In addition, this Court must always
seek an interpretation of legal provisions that upholds a collective agreement rather than
one which renders a collective agreement a nullity, because this would denude
constitutional rights.
They argue that a finding that clause 3.3 of the collective agreement was invalid
has profound consequences, with which the Labour Appeal Court did not grapple, and
which this Court must. In particular, the collective agreement would be invalid in its
entirety, and the past and present public sector wage payments would thus be without
legal basis. And , such a finding also permits the State to resile from a collective
agreement, where it has breached its own procedures, despite there being no fault on
the part of the counter-parties. This, they submit, deals a death -blow to the very heart
of collective bargaining.
This group of unions further submit that policy considerations and the maxim
pacta sunt servanda (agreements must be honoured) demand that clause 3.3 should be
implemented, albeit at the cost of retrenchments, and its enforcement is therefore not
objectively impossible. Finally, they submit that contrary to the Minister of Finance’s
submission, if the collective agreement is found to be lawful, it would be just and
equitable to require specific performance. This is because their members have had the
collective agreement imposed on them without consent as it is a product of collective
bargaining and they have been precluded from exercising their right to strike for three
years by virtue of the collective agreement.
MADONDO AJ
22
NUPSAW’s submissions
NUPSAW submits that the Labour Appeal Court failed to consider the
implications of concluding a collective agreement. D eclaring the agreement unlawful
not only infringes its members right to collective bargaining, but undermines the very
purpose of collective bargaining.
NUPSAW argues that the Labour Appeal Court failed to consider the doctrine
of estoppel which prevents the State from seeking to escape its contractual obligations
under the agreement in question , which it entered into upon approval by Cabinet and
fulfilled the first two clauses of the agreement. NUPSAW argues further that the
sanctity of contract s must be upheld and the principle of vertrouensteorie (reliance
theory) applied. Allowing the State to escape its obligations, the argument continues,
would undermine the purpose and enforceability of collective agreements. If the Labour
Appeal Court had applied the maxim pacta sunt servanda , it would have come to a
different conclusion. Thus, if this Court finds that there was non -compliance with the
prescripts of regulations 78 and 79, it should find that there was substantial compliance
as evidenced by the COM’s and Cabinet’s decisions authorising, inter alia, clause 3.3
of the agreement. Furthermore, the Court should consider the Oudekraal principle
which provides that an unlawful act may produce legally recognisable consequences.
Lastly, NUPSAW submits that the Labour Appeal Court misdirect ed itself by
relying on t he incorrect excess amount of R37.8 billion when the true figure is
R13.2 billion. This alone, NUPSAW argues, should have the judgment set aside.
Respondents’ submissions on jurisdiction and leave to appeal
The respondents argue that this matter does not engage the Court’s jurisdiction
because the unions ’ founding affidavit s in the Labour Appeal Court, in which they
sought specific performance , made no mention of section 23 of the Constitution.
Instead, the dispute was merely contractual, and section 23 has been belatedly invoked
to engage this Court’s jurisdiction. The applicants’ reliance on section 23 is in any
MADONDO AJ
23
event impermissible, as absent an attack on regulations 78 and 79, the applicants cannot
contend that section 23 trumps these regulations. Similarly, the applicants cannot rely
directly on section 23 when the LRA gives effect to section 23 rights. The various
arguable points of law raised by the applicants are not in reality arguable, because they
have no prospects of success. In short, the respondents submit that it is trite law that
agreements which do not comply with mandatory requirements are unenforceable. For
the same reason, the respondents argue further that the interests of justice milit ate
against granting leave, because the application bears no reasonable prospects of success.
Respondents’ submissions on merits
DPSA’s submissions
The DPSA argues that the conclusion of the collective agreement did not comply
with th e mandatory statutory provisions prescribed by regulations 78(2) and 79(c)
because the common cause evidence reveals that : they could not cover the cost of the
wage increases from their department’s own budget; they could not recover the cost
from other d epartments; and the Mi nister of Finance did not approve the collective
agreement. Therefore, it contends that the collective agreement is invalid and
unenforceable.
The DPSA argues further that although the Minister is permitted in terms of
regulation 4 to deviate from regulations 78 and 79 under justifiable circumstances , no
such authorisation took place. They argue that this raises an allegation of fact that the
Minister of Public Service and Administration in fact permitted a deviation from the
regulations. Therefore, continues the argument, this had to be raised by the unions in
their affidavits – which they never did – to enable the DPSA to respond.
On whether Cabinet authorised the conclusion of the agreement, the DPSA
submits that the applicants’ submission is factual ly flawed. This is because Cabinet’s
approval was conditional on the successful implementation of the cost -cutting
MADONDO AJ
24
measures. In addition, they submit that Cabinet’s mandate made clear that it did not
approve the collective agreement.
The DPSA contends that the result of non-compliance with regulations 78 and 79
is invalidity. This, they explain, is because the legal rationale for the consequence of
invalidity is that courts should not validate the very mischief that legislation or
regulations seek to prevent and here, the mischief that regulations 78(2) and 79(c) seek
to prevent is expending public funds without approval.
The DPSA submits that the applicants cannot rely on estoppel because the State’s
failure to comply with statutory requ irements cannot be remedied by it and to allow
such reliance would be to validate an unlawfully concluded contract.
The DPSA further submits that if the Labour Appeal Court refused to condone
the delay , it would have refused to declare unlawful a collective agreement th at
conflicted with the mandatory regulations. Importantly, it submits, had it refused , it
would have abandoned its constitutional duties in terms of section 172(1)(a) of the
Constitution of declaring conduct inconsistent with the Constitution invalid. Therefore,
it submits further, that the prejudice to the State far outweighs any prejudice the unions
and its members suffered because of the delay.
In addition, the DPSA contends that in its opposition to the relief sought by the
PSA (as opposed to its c ounter-application), the DPSA did not raise a collateral
challenge, and therefore was not subject to the ordinary rules of delay. It explains that
this is because a collateral challenge occurs where a functionary is seeking to coerce
compliance with an administrative act, and not where an organ of state contends that a
contract is invalid for want of compliance with mandatory legislative requirements. The
DPSA contends further that on the strength of Khumalo,18 the Labour Appeal Court was
18 Khumalo v MEC for Education, KwaZulu-Natal [2013] ZACC 49; 2014 (5) SA 579 (CC); 2014 (3) BCLR 333
(CC).
MADONDO AJ
25
correct to conclu de that whatever the nature of the objection to validity, it had a
discretion to decide whether to condone any delay in raising the defence of invalidity.
On the appropriateness of the remedy, the DPSA submits that a just and equitable
remedy requires an outcome fair to all implicated parties. They argue that the applicants
failed to put up facts to support a just and equitable remedy in their favour. Furthermore,
the State must discharge its obligations to the poor and vulnerable members of society
by stretching its resources to assist them, which would be just and equitable, as opposed
to requiring the enforcement of a clause which would place a strain on the State’s
capacity to fulfil its constitutional obligations while benefitting a comparatively small
group of public servants who are guaranteed a job and a salary.
Minister of Finance’s submissions
The Minister submits that State organs are obliged to act within the law , and
courts are obliged to declare any contrary conduct unlawful and inconsistent with the
Constitution. This requires that collective agreements must satisfy the standard of
lawfulness which ensures that public power , especially that which has fiscal
consequences, complies with the rule of law. The Minister submits further that where
a collective agreement is concluded in contravention of a statute, and where
enforcement of the impugned contract would defeat the purpose of the statute, such
non-compliance results in invalidity of the impugned contract.
It is clear, the submission goes, that the costs of the collective agreement could
not be covered by the DPSA, no w ritten commitment was made by Treasury , and no
written agreements were forthcoming from ot her departments or agencies. Therefore,
there was no compliance with regulations 78 and 79. In addition, the purpose of these
regulations is to prevent public funds from being syphoned off via collective agreements
without sufficient public funds. In the instant case, non-compliance with regulations 78
and 79, and the consequent conclusion of the collective agreement, are plainly at odds
with this purpose. Therefore, the agreement is invalid and unenforceable, and the
question of specific performance does not arise.
MADONDO AJ
26
However, even if it did, to require specific performance is inappropriate in the
circumstances because this would be unjust or unfair. It would not be fair or just to
enforce the clause where this would interfere with the State’s obligat ion to protect the
lives of vulnerable people exposed to the consequences of the Covid-19 pandemic. And
because civil servants receive inflation-beating and private sector outperforming salary
increases, t o insist on specific performance will infringe on sec tion 7(2) of the
Constitution. The Minister submits that where it is not just and equitable to enforce a
particular clause in the circumstanc es of a concrete case, then non -enforcement is the
constitutionally appropriate remedy. And if the clause or contract in question does not
comply with the law, then enforcement is precluded per se and no discretion even arises.
Relatedly, the Minister submits that the refusal to enforce the collective agreement will
not, as the applicants contend, sound the death -knell of collective bargaining because,
as the unions concede, the impugned point of law is specific to this case.
To the extent that the applicants have properly raised a section 23 argument, the
Minister contends that their interpretation of section 23(5) of the Constitution is
untenable. This is because the applicants contend for an interpretation which immutably
results in the specific performance of a collective agreement irrespective of the social
and economic conditions applying at the time of concluding and enforcing the collective
agreement in question. The Minister also contends that this interpretation runs contrary
to CUSA,19 where it was suggested that collective agreements must yield to the rule of
law. He also contends that such an interpretation runs contrary to international law,
which plays an important role in interpreting section 23.
In this regard, the Minister contends that relevant international law, including
documents adopted by the International Labour Organisation, and foreign law, reveal
that public sector wage agreements are subject to fiscal constraints, parliamentary
approval and emergency measures which may freeze the increases.
19 CUSA v Tao Ying Metal Industries [2008] ZACC 15; 2009 (2) SA 204 (CC); 2009 (1) BCLR 1 (CC).
MADONDO AJ
27
In response to the applic ants’ reliance on waiver or estoppel, the Minister
submits that this argument is legally untenable because it is not permissible in law to
purport to waive compliance with a requirement imposed in the public interest, or to
effect something forbidden by la w. And it is factually untenable, because waiver and
estoppel (neither o f which is readily presumed) have not been established by the
applicants, which bear the full onus in this respect.
Regarding the argument that the Minister of Finance approved the c ollective
agreement through Cabinet’s approval, the Minister argues that Cabinet had no power
to grant the approvals required under regulations 78 and 79, and did not purport to grant
any such approval. In any event, its approval or non-approval is not a jurisdictional fact
falling within the powers of the Cabinet, but that of Treasury . Lastly, contrary to the
applicants’ submissions, section 92(2) of the Constitution does not provide that Cabinet
members are bound in law by the decisions of Cabinet in th e exercise of their own
separate powers and duties under legislation applicable to them individually. Thus , no
collective Cabinet accountability arises.
Regarding the respondents’ delay in initiating the counter -application, the
Minister submits, relying on Khumalo,20 that it is clear that condonation was not
required; the Labour Appeal Court judicially exercised its discretion and no prejudice
is alleged by the applicants.
Issues
The issue s for de termination are whether the matter engages this Court’s
jurisdiction, and the validity and enforceability of the impugned collective agreement,
particularly clause 3.3. An enquiry into these issues requires one to grapple with:
whether this matter is moot, and if it is, whether it is in the interests of justic e for this
Court to adjudicate on it; whether the State is entitled to renege on the collective
20 Khumalo above n 18 at para 44.
MADONDO AJ
28
agreement it voluntarily entered into in its capacity as the employer; whether the
doctrine of estoppel finds application in the matter; whether the State’s del ay in
challenging the legality of the impugned collective agreement is reasonable; whether
specific performance is an appropriate remedy in this matter; and the determination of
a just and equitable remedy.
Jurisdiction and leave to appeal
The matter engages the jurisdiction of this Court as it deals with issues relating
to the breach of sections 213, 215 and 216 of the Constitution read with regulations 78
and 79 and the interpretation and limitation of the right to engage in collective
bargaining as ensh rined in section 23 of the Constitution and regulated by the LRA
which, among other things, gives effect to such right.21
Whether the State acted beyond its powers when concluding the wage agreement
and the question of validity of the resultant wage agreement are constitutional matters.22
Also, the matter raises arguable points of law of public importance, namely , the effect
the non-compliance with the impugned regulations has on the validity and
enforceability of the collective agreement entered into between the parties in terms of
the LRA, and whether the State is entitled to raise its non-compliance with
regulations 78 and 79 and relevant constitutional provisions as a defence against the
enforcement of a collective agreement which it freely and voluntarily entered into.
When the State’s negotiators enter into collective agreements on behalf of the
State, they are exercising a power derived from the Constitution and legislation in
pursuit of constitutional obligations. For this as well this matter raises constitutional
issues and engages the jurisdiction of this Court. Furthermore, O’Regan J in CUSA
said:
21 Sections 167(3)(b) and (c) and 167(7) of the Constitution.
22 See Steenkamp N.O. v Provincial Tender Board, Eastern Cape [2006] ZACC 16; 2007 (3) SA 121 (CC); 2007
(3) BCLR 300 (CC).
MADONDO AJ
29
“If it is clear that the enforcement of the bargaining agreement materially affects the
right to engage in collective bargaining or any other right in the Bill of Rights, its
interpretation will give rise to a constitutional issue . Where, however, the
interpretation is concerned with a provision that does not affect the right to engage in
collective bargaining nor any other right entrenched in the Bill of Rights, but concerns
substantive terms and conditions which have been negotiated (which by and large are
the stuff of bargaining council agreements), it does not seem to me that a constitutional
issue is automatically engaged.”23
The rationale for this is that the right to collective bargaining is entrenched under
section 23(5) of the Constitution and regulated by the LRA in order to safeguard the
rights to equality and dignity for the benefit and protection of employees and employers.
In light of the complex issues this matter raises, it is in the interests of justice that leave
to appeal is granted.
Mootness
This issue arises from the fact that the 2020/2021 wage increase expired on
31 March 2021. It has been argued on behalf of the applicant unions that if the
collective agreement is valid, the delay in getting the matter resolved by the courts does
not have the effect of extinguishing the State’s obligations, hence it may be ordered to
meet its obligations with effect from the d ate they fell due. The State may also be
ordered to meet its obligations in future in accordance with the terms of a just and
equitable remedy granted by this Court. An inevitable conclusion in this regard is that
the non-fulfilment of clause 3.3 of the impugned collective agreement has the effect of
extending the life of the collective agreement beyond its duration.
In Langeberg Municipality ,24 this Court held that the factors a court must
consider when deciding whether a matter is moot include “the nature and extent of the
23 CUSA above n 19 at para 126.
24 Independent Electoral Commission v Langeberg Municipality [2001] ZACC 23; 2001 (3) SA 925 (CC); 2009
(9) BCLR 883 (CC) (Langeberg Municipality).
MADONDO AJ
30
practical effect that any possible order might have , the importance of the issue , its
complexity and the fullness or otherwise of the argument advanced”.25 It is so that the
collective agreement covered a period of three financial years ending 31 March 2021.
But it is mistaken to think that rights, if any, that accrued in terms , and during the
existence, of the collective agreement terminated on the last date covered by the
agreement. Once those rights, if any, had accrued, they r emained enforceable beyond
the existence of the collective agreement. And that endures until enforcement is not
possible through, for example, prescription. Thus, that this matter is moot is plainly
without merit.
Validity of the collective agreement
The State contends that the collective agreement falls foul of the constitutional
principle of legality for violating the provisions of regulations 78 and 79 read with
sections 213, 215 and 216 of the Constitution. It is, therefore, unenforceable. It further
contends that t he mandatory requirements set out in these provisions were imposed
precisely to ensure fiscal affordability and sustainability.
A formal distinction was previously drawn between mandatory or peremptory
provisions on the one hand , and directory ones on the other. The former “needs exact
[strict] compliance for it to have the stipulated legal consequence, and any purported
compliance falling short of that is a nullity ”.26 And the latter only needs to be
substantially complied with to have full legal effect.27 However, such strict mechanical
approach was abandoned by this Court’s endorsement of Van Dyk28 in African Christian
Democratic Party, where it held that:
25 Id at para 11. See also National Coalition for Gay and Lesbian Equality v Minister of Home Affairs [1999]
ZACC 17; 2000 (2) SA 1 (CC); 2000 (1) BCLR 39 (CC) fn 18.
26 Nkisimane v Santam Insurance Co. Ltd 1978 (2) SA 430 (A) at 433H-434B. See also Hoexter Administrative
Law in South Africa 2 ed (Juta & Co Ltd, Cape Town 2012) at 48-50 and 292-5.
27 Nkisimane id at 434C-D.
28 Weenen Transitional Local Council v Van Dyk [2002] ZASCA 6; 2002 (4) SA 653 (SCA) (Van Dyk).
MADONDO AJ
31
“It seems . . .that the correct approach to the objection that the appellant had failed to
comply with the requirements of section 166 of the ordinance is to follow a
common-sense approach by asking the question whether the steps taken by the local
authority were effective to bring about the exigibility of the claim measured against the
intention of the legislature as ascertained from the language, scope and purpose of the
enactment as a whole and the statutory requirement in particular. Legalistic debates as
to whether the enactment is peremptory (imperative, absolute, mandatory, a categorical
imperative) or merely directory; whether ‘shall’ should be read as ‘may’; whether strict
as opposed to substantial compliance is required; whether delegated legislation dealing
with formal requirements are of legislative or administrative nat ure, etc. may be
interesting, but seldom essential to the outcome of a real case before the courts. They
tell us what the outcome of the court’s interpretation of the particular enactment is; they
cannot tell us how to interpret.”29
The purported compliance with a statutory injunction can no longer be
determined by a mere label such as peremptory or directory. The distinction between
whether the legislation is mandatory or directory is not necessarily determinative of the
question whether failure to comply with its provisions inevitably results in nullity. All
statutes must be construed consistently with the Constitution. 30 In deciding whether
there has been compliance with the statutory injunction, what is important is the object
sought to be achieved by the injunction and whether this object has indeed been
achieved.31 The central element is to link the question of compliance to the purpose of
the provision. It has to be determined “whether what the applicant did constituted
compliance with the statutory provisions viewed in the light of their purpose”.32
It is also a fundamental principle of our law that an actor must be legally
empowered to perform any act in question and that public power may only be exercised
29 African Christian Democratic Party v Electoral Commission [2006] ZACC 1; 2006 (3) SA 305 (CC); 2006 (5)
BCLR 579 (CC) at para 25.
30 Cool Ideas 1186 CC v Hubbard [2014] ZACC 16; 2014 (4) SA 474 (CC); 2014 (8) BCLR 869 (CC) at para 28.
31 See Maharaj v Rampersad 1964 (4) SA 638 (A) at 643G.
32 African Christian Democratic Party above n 29. See also Allpay Consolidated Investment Holdings (Pty) Ltd
v Chief Executive Officer, South African Social Security Agency [2013] ZACC 42; 2014 (1) SA 604 (CC); 2014
(1) BCLR 1 (CC) at para 30.
MADONDO AJ
32
by a lawfully const ituted authority. The act must be performed in accordance with
substantive and procedural requirements prescribed by the empowering provisions.33
In Fedsure, this Court held:
“It seems central to the conception of our constitutional order that the Legislature and
Executive in every sphere are constrained by the principle that they may exercise no
power and perform no function beyond that conferred upon them by the law.
There is of course no doubt that the common-law principle of ultra vires remains under
the new constitutional order. However, they are underpinned (and supplemented where
necessary) by a constitutional principle of legality.”34
The State contends that since clause 3.3 of the collective agreement was
concluded in violation of sections 213, 215 and 216 of the Constitution by failing to
comply with the provisions of regulations 78 and 79, it is therefore invalid and unlawful
and should be set aside on that ground alone. It has been argued further, on behalf of
the State, that an organ o f state is only permitted to act within the limits of powers
conferred on it by the law.35 This is done to ensure accountability in the allocation of
public resources, and compliance with the rule of law.
The State further contends that the common law pos ition is that in order for a
collective agreement to have any legal force, compliance with the statute is essential. 36
The statutory regime provides that a collective agreement may only be concluded if
33 Hoexter above n 26 at 254-6.
34 Fedsure Life Assurance Ltd v Greater Johannesburg Transitional Metropolitan Council [1998] ZACC 17; 1999
(1) SA 374 (CC); 1998 (12) BCLR 1458 (CC) (Fedsure) at paras 58-9.
35 Pharmaceutical Manufacturers Association of South Africa: In re Ex parte President of the Republic of South
Africa [2000] ZACC 1; 2000 (2) SA 674 (CC); 2000 (3) BCLR 241(CC) at para 79 and Fedsure id at para 56.
36 Consolidated Woolwashing and Processing Mills Ltd v President of the Industrial Court [1985] ZASCA 54 at
858 H-859 H relying on South African Association of Municipal Employees (Pretoria Branch v Pretoria City
Council) 1948 (1) SA 11 (T) at para 17.
MADONDO AJ
33
specific requirements are met . The rule of law princi ple requires that all State action
must comply with the law, particularly the Constitution.
Section 213 of the Constitution provides for payments from the National
Revenue Fund only insofar as money has been appropriated by an Act of Parliament, or
is a direct charge authorised by the Constitution or under national legislation.37 It has
been argued on behalf of the Minister of Finance that as there was non-compliance with
section 213 of the Constitution, section 39 of the Public Finan ce Management Act 38
(PFMA) was flouted. This section outlines the responsibilities of the accounting officer
of the relevant department which, among other things, are to ensure that “expenditure
of the department is in accordance with the vote of the depar tment and the main
divisions within the vote” and that “effective and appropriate steps are taken to prevent
overspending”. These are procedur al formalities that the accounting officer in any
department must comply with, and are aimed at ensuring that the re is no unwarranted
expenditure. Such procedur al formalities are designed purely for the purposes of
financial and fiscal control , and prevent ing overspending of public resources to the
detriment of citizens by the department. They, therefore, serve to protect members of
the public at large.
Section 215 of the Constitution provides for effective financial management of
the economy, debt and the public sector through budgetary processes. 39 It has been
37 Section 213 of the Constitution provides:
“(1) There is a National Revenue Fund into which all money received by the national
government must be paid, except money reasonably excluded by an Act of Parliament.
(2) Money may be withdrawn from the National Revenue Fund only—
(a) in terms of an appropriation by an Act of Parliament;
(b) as a direct charge against the National Revenue Fund, where it is provided for
in the Constitution or an Act of Parliament.
(3) A province’s equitable share of revenue raised nationally is a direct charge against the
National Revenue Fund.”
38 1 of 1999.
39 Section 215 of the Constitution provides:
MADONDO AJ
34
argued on behalf of the Minister of Finance that the public sector’s unbudgeted wage
bill results in debilitating debt. The unbudgeted wage bill also circumvents financial
management as contemplated by the Constitution and national legislation. By-passing
financial management does not augur well for proper fiscal control. The budget must
also contain proposals as to how any anticipated deficit will be financed.
Regulation 79(b) provides mechanisms to cover the deficit by allowing “the relevant
governmental authority” to do so “from the budgets of other de partments with their
written agreement, and Treasury approval ”. In the present case such proposal s were
mooted between the parties as the collective agreement was concluded without
compliance with the Regulations, hence it did not form part of the budget.
The respondents argue that in declaring the collective agreement invalid, the
Labour Appeal Court relied on the wording of section 216(2) of the Constitution, read
with regulation 79, which provides that Treasury “must enforce compliance with the
measures established in terms of sub -section (1), and may stop the transfer of funds to
an organ of state if that organ of state commits a serious or persistent material breach
of those measures”.
“(1) National, provincial and municipal budgets and budgetary processes must promote
transparency, accountability and the effective financial management of economy, debt
and public sector.
(2) National legislation must provide—
(a) the form of national, provincial and municipal budgets;
(b) when national and provincial budgets must be tabled; and
(c) that budgets in each sphere of government must show the sources of revenue
and the way which proposed expenditure will comply national legislation.
(3) Budgets in each sphere of government must contain—
(a) estimates of revenue and expenditure, differentiating between capital and
current expenditure;
(b) proposals for financing any anticipated deficit for the period to which they
apply; and
(c) an indication of intentions regarding borrowing and other forms of public
liability that will increase public debt during the ensuing year.”
MADONDO AJ
35
The Labour Appeal Court in this regard held:
“The constitutional provision set out in section 216 of the Constitution ensures that
National Treasury is one of the guardrails to ensure that the appropriate standard of
constitutional governance is adhered to by the Executive. The inclusion of the role of
National Treasury in regulation 79 fits together with the purpose of section 216 of the
Constitution. Absent compliance with regulation 79, it matters not whether the Cabinet
might have approved the agreement, in that, whatever the Minister of Finance may or
may not have said in Cabinet cannot be read to equate to compliance with section 216
of the Constitution read together with regulation 79.”40
The Minister of Finance argued that the collective agreement in question was
incongruent with section 216 of the Constitution,41 which provides that national
legislation must establish Treasury and prescribe measures to ensure transparency and
expenditure control in each sphere of government. This pertains to the regulation of
financial and fiscal matters as well as treasury control, which is also done in the public
interest. These internal procedures are designed for the purposes of financial and fiscal
control, and management by the departments as well as the political accountability of
the Minister of Finance to e nsure the safety of the public purse . And they must be
complied with.
40 Labour Appeal Court judgment above n 5 at para 33.
41 Section 216 of the Constitution provides:
“(1) National legislation must establish a national treasury and prescribe measures to ensure
both transparency and expenditure control in each sphere of government, by
introducing—
(a) generally recognised accounting practice;
(b) uniform expenditure classifications; and
(c) uniform treasury norms and standards.
(2) The national treasury must enforce compliance with the measures established in terms
of subsection (1), and may stop the transfer of funds to an organ of state if that organ
of state commits a serious or persistent material breach of those measures.”
MADONDO AJ
36
The conditions imposed on an appropriation in the Schedule to the Adjustments
Appropriation Act 42 were imposed to promote transparency , accountability and the
effective management of th e appropriation.43 The Minister of Finance argues that the
statutory regime applicable to the current contract provides that a collective agreement
may only be concluded if specific fiscal requirements are met. Sections 213, 215 and
216 of the Constitution serve as a check on the executive authority or departments when
using money from the public purse to ensure transparency, accountability, and sound
management of the revenue, expenditure and assets for the benefit of the citizens at
large. It therefore follows , the Minister argues, that failure to comply with such
provisions is fatal to the resultant collective agreement.
Regulation 78, mandating and managing collective bargaining, empowers the
executive authority to engage in negotiations and conclude collective agreements on
behalf of the State. In setting the prerequisite s which the executive authority must
comply with on entering into a collective agreement, reg ulation 78(2) provides the
following:
“(2) An executive authority may enter into a collective agreement on a matter of
mutual interest only if that authority—
(a) is responsible for managing collective bargaining on behalf of the State
as employer in that forum;
(b) has authority to deal with the matter concerned; and
(c) meets the fiscal requirements contained in regulation 79.”
Regulation 79 provides:
“An executive authority shall enter into a collective agreement in the appropriate
bargaining council on any matter that has financial implications only if—
(a) he or she has a r ealistic calculation of the costs involved in both the
current and the subsequent fiscal year;
42 12 of 2017.
43 Section 4(1) of the Adjustments Appropriation Act.
MADONDO AJ
37
(b) the agreement does not conflict with the Treasury Regulations; and
(c) he or she can cover the cost—
(i) from his or her departmental budget;
(ii) on the bas is of a written commitment from the Treasu ry to
provide additional funds; or
(iii) from the budgets of other departments or agencies with their
written agreement and Treasury approval.”
Regulations 78 and 79 were promulgated by the Minister of Public Service and
Administration under section 41 of the P ublic Service A ct,44 and must be read and
interpreted in conjunction with it.45 Under regulation 78(2) the Minister may enter into
a collective agreement “only if the fiscal requirements contained in regul ation 79” are
met. In terms of regulation 78(3), the Minister is authorised to negotiate a collective
agreement on behalf of the State, as the employer, in the PSCBC. Regulation 79(c), in
turn, authorises the Minister to enter into a collective agreement with financial
implications only if the Minister concerned can cover the costs of the collective
agreement from his or her departmental budget, or on the basis of a written commitment
from Treasury to provide additional funds , or if the costs can be cover ed from funds
from other departments or agencies with their written consent coupled with T reasury
approval.
These are conditions precedent to the Minister’s exercise of the power to
negotiate and conclude collective agreements on behalf of the State. These conditions
are also referred to as jurisdictional facts simply because the exercise of power depends
on their existence. 46 In the present case, the evidence has established that no such
jurisdictional facts existed when the Minister purported to enter i nto the collective
agreement on behalf of the State.
44 103 of 1994.
45 See regulation 2 of the Regulations.
46 Premier, Gauteng v Democratic Alliance [2021] ZACC 34; 2022 (1) SA 16 (CC); 2021 (12) BCLR 1406 (CC)
at para 69.
MADONDO AJ
38
Upon a proper construction, the provisions of regulations 78 and 79 clothe the
Minister of Public Service and Administration with the necessary authority to negotiate
and conclude a collective agreement on behalf of the State and set the parameters within
which this must be done. If the Minister acts outside these regulations she or he lacks
the necessary authority and act s ultra vires. Approval by the Cabinet or COM is not
one of the jurisdictional facts, which must exist, when the Minister exercises his or her
powers and performs his or her functions under regulations 78 and 79. The Cabinet has
no power to grant the approval required under these regulations. Such power is invested
in the Minister of Public Service and Administration, subject to the prerequisites set by
the regulations.
Section 92(2) of the Constitution, which the applicant unions referred to, does
not provi de that the members of the Cabinet are collectively bound in law to the
decisions of the Cabinet in the exercise of their own separate powers and performance
of their functions under legislation applicable to them individually. Needless to say, in
the exercise of their powers and performance of their duties, the Ministers are, in terms
of section 92(2), held collectively accountable to Parliament. The Cabinet or COM
approval could not have had the effect of authorising the Minister to legally conclude a
collective agreement in contravention of the provisions of regulations 78 and 79. As a
consequence, the applicants’ reliance on section 92(2) in this context is misconceived.
The end result is that the State’s failure, in its capacity as the employer, to comply
with the requirements of regulations 78 and 79 renders the resultant collective
agreement entered into between the parties under the LRA invalid and unlawful. To
hold otherwise, would amount to validating the mischief the relevant constitutional
provisions and regulations seek to prevent.
Estoppel
I turn to consider whether the State can be estopped from relying on its
non-compliance with the regulations.
MADONDO AJ
39
An essential element of estoppel is that there must have been a representation of
some kind consisting of words or conduct including acts, omissions or silence. 47 The
applicants must prove that relying on the truth of the representation, the y acted to their
prejudice. However, they cannot be heard to say they were misled into relying on a
representation when they had knowledge of the true facts and therefore knew that the
representation was untrue or incorrect. The estoppel assertor can only successfully rely
on estoppel if the reasonable person in the position of the estoppel assertor would also
have been misled by the conduct on which estoppel is found. Persons contracting in
good faith with a statutory body or its agents are not bound, in the absence of knowledge
to the contrary, to enquire whether the relevant internal formalities have indeed been
complied with.48 Such persons may rely on estoppel if the defence raised is that the
relevant internal formalities were not complied with. The applicants and their members
knew from the outset that there were no funds guaranteed for the implementation of the
salary increments over the period of three years. And they were aware from the onset
that the lack of funds flouted the regulations. They also knew that cost-cutting measures
which could have brought the increase within the allocated budget had not been
implemented. This was because the unions did not agree to cost-cutting measures being
a condition of the agreement. This being the position, on first principles the applicants
cannot claim that there was a representation on which they relied to their prejudice.
They were as much aware of the non-compliance with the prescripts set by
regulations 78 and 79 as the State was. What prejudice their members have suffered is
not the result of a representation by the State on something of which the applicants were
unaware. It is the result of the applicants’ insistence that the agreement be concluded
despite the fact that the prescripts had not been complied with.
Thus, it is not necessary to deal with the question whether public policy does not
permit estoppel to operate in circumstances where its application would produce a result
which is not permitted by law.
47 Universal Stores Ltd v Ok Bazaars 1973 (4) SA 747 (A).
48 National and Overseas Distributors Corporation (Pty) Ltd v Potato Board 1958 (2) SA 473 (A).
MADONDO AJ
40
Delay in challenging the legality and validity of the collective agreement
The long standing rule is that legality reviews must be initiated without undue
delay and that the courts have the discretion to refuse a review application because of
the delay or to overlook the delay.49 As this Court has held on several occasions, undue
delay should not be tolerated as it brings about various difficulties ranging from
prejudice to the other party , weakening a court’s ability to consider the merits of a
review and undermining the public ’s interest in certainty and finality. 50 It is common
cause that the State challenged the validity of the impugned collective agreement after
two years of its conclusion when it had performed its obligations in terms clauses 3.1
and 3.2 of the collective agreement.
This begs the question whether the State’s delay can be overlooked and whether
the State is entitled to rely on its failure to comply with the provisions of regulations 78
and 79 read with the relevant provisions of the Constitution as a defenc e against the
enforcement of the collective agreement and thereby evad e its obligations. The
applicants argue that allowing the State to do so would offend the principles of fairness
and justice as well as the rule enunciated in Gijima, that a party should not benefit out
of its wrongdoing.51
49 Altech Radio Holdings (Pty) Ltd v Tshwane City [2020] ZASCA 122 ; 2021 (3) SA 25 (SCA) at para 18 and
Wolgroeiers Afslaers (Edms) Bpk v Munisipaliteit Van Kaapstad [1977] ZASCA 2 ; 1978 (1) SA 13 (A) at
39H-40A.
50 Department of Transport v Tasima (Pty) Ltd [2016] ZACC 39; 2017 (2) SA 622 (CC); 2017 (1) BCLR 1 (CC)
(Tasima) at para 160.
51 In Gijima above n 11 at para 54, this Court held—
“it seems to us that justice and equity dictate that, despite the invalidity of the award of
[Department of Defence] agreement [State Information Technology Agency SOC Ltd] must not
benefit from having given Gijima false assurance and form its own undue delay in instituting
proceedings. Gijima may well have performed in terms of the contract, while [State Information
Technology Agency SOC Ltd] sat idly by and only rai sed the question of the invalidity of the
contract when Gijima instituted arbitration proceedings. In the circumstances, a just and
equitable remedy is that the award of the contract and the subsequent decisions to extend it be
declared invalid with the r ider that the declaration of invalidity must not have the effect to
divesting Gijima of rights to which – but for the declaration of invalidity – it might have been
entitled.”
MADONDO AJ
41
The applicants seek an order forcing the State to perform in terms of clause 3.3.
The State reacted by contending that the impugned collective agreement was not valid
or lawful since it had failed to comply with the procedures and formalities contained in
regulations 78 and 79. The applicants argued that the State was not entitled to invoke
a collateral challenge because it had , throughout, been aware of the invalidity and
unlawfulness of the collective agreement. Such point seems not to take the case of the
applicants any further. Given the conclusion I reach on the issue of delay, it is
unnecessary to decide whether the State was entitled to raise the validity of the
collective agree ment as a collateral -challenge defence 52 in response to a coercive
application by the unions, or whether the State was required to raise its challenge by
way of a counter-application for review. There was in fact such a counter-application.
I shall assume that the counter -application was necessary and that ordinary delay
principles apply to the counter-application.
Though the Labour Appeal Court tersely dealt with the question whether the
State’s delay in initiating the proceedings reviewing the legality and validity of the
impugned collective agreement was unreasonable, it rightly found that such a delay was
quite inordinate and unreasonable. The Court relied on Khumalo which recognised that
it should be “slow to allow procedural obstacles to prevent it from investigating a
challenge to the lawfulness of the exercise of pu blic power”.53 It thus found that the
prejudice caused by a refusal to adjudicate upon the legality of the clause in question,
where so large a sum of money was required from the public purse in circumstances
52 A collateral challenge can be raised when the impugned administrative act is invoked to coerce compliance. In
Oudekraal above n 1 6, the Supreme Court of Appeal at para 35 stated that a person may mount a collateral
challenge “because the legal force of the coercive action will most often depend upon the legal validity of the
administrative act in question”. In these cases, it was also held in City of Cape Town v Helderberg Park
Development (Pty) Ltd [2008] ZASCA 79; 2008 (6) SA 12 (SCA) at para 50 that there is no time limit within
which the collateral challenge should be raised. It is in fact settled law that the target of the compulsion “is entitled
to await events and resist only when the unlawful condition is invoked to coerce it into compliance”. A notable
example given is that of a person who may have been supine until an attempt to compel is made and only then he
or she can contend that he or she should not be ordered to comply because the act is itself invalid. Neither failure
to challenge the unlawfulness by appeal or review is a bar to exercise the right to defend onesel f in such a case.
The rationale for this is that for the impugned administrative act to be enforced, it must be valid and lawful. If
the agreement or administrative act in question is invalid and unlawful, the compliance sought will be inconsistent
with the rule of law.
53 Khumalo above n 18 at para 45.
MADONDO AJ
42
where State finances were in an even more parlous state than before the advent of
Covid-19, dictated that the Court’s discretion should be exercised in favour of
examining whether there was a legal justification for the payment of s uch a sum of
money to a relatively small section of the population.54
This Court in Khumalo carefully considered the question of delay and said—
“it is a long-standing rule that a legality review must be initiated without undue delay
and that courts have the power (as part of the inherent jurisdiction to regulate their own
proceedings) to refuse a review application in the face of an undue delay in i nitiating
proceedings or to overlook the delay. This discretion is not open -ended and must be
informed by the values of the Constitution.”55
In the present case, the State was required to explain its delay in challenging the legality
of the impugned colle ctive agreement proactively. To date, it has not proffered any
plausible explanation for its delay for such a lengthy period. The Minister was made
aware that no additional funds would be made available to fund a collective agreement
that exceeded the fi scal envelope by R30.2 billion. The State committed itself to
addressing the shortfall and that was not successful either. Instead of instituting
proceedings reviewing the legality of the impugned collective agreement, it performed
in terms of clauses 3.1 and 3.2 of the collective agreement.
After finding that the delay by the State was unreasonable, the L abour Appeal
Court correctly went on to determine whether in the circumstances of this case there
was a basis for overlooking the delay. In Gijima, this Court stated that there must be a
basis for the exercise of a discretion to overlook the inordinate delay and held that:
“From this, we see that no discretion can be exercised in the air. If we are to exercise
a discretion to overlook the inordinate delay in this matter, there must be a basis for us
54 Labour Appeal Court judgment above n 5 at para 31.
55 Khumalo above n 18 at para 44.
MADONDO AJ
43
to do so. That basis may be gleaned from the facts placed before us by the parties or
objectively available factors. We see no possible basis for the exercise of the discretion
here.”56
In the present c ase, after declaring the impugned collective agreement invalid ,
the Labour Appeal Court exercised its discretion to overlook the inordinate delay . It
did so, among others, on the basis that it would not be just and equitable to order the
State to expend s ignificant and scarce financial resources on employees whose jobs
were secured and whose salaries had been paid in full, particularly in circumstances
where the imperative existed for the recovery of the economy to the benefit of millions
of vulnerable people. The Labour Appeal Court had regard to the provision of social
grants to fellow South Africans living on the margin who could be imperilled by such
a decision. In the opinion of the Labour Appeal Court, the polycentric nature of the
dispute was far more complex. Regard being had to the State’s financial constraint s,
the impact on millions of South Africans who barely survive on a day -to-day and need
all the help the State may be able to provide formed part of the considerations.
The respondents argue that it is not possible for the State to implement clause 3.3
due to the Covid-19 pandemic. The Minister of Finance, argued that it is not fair or just
to enforce clause 3.3 in circumstances where this would necessarily impede the State’s
ability to protect the lives and livelihoods of vulnerable people exposed to s evere
consequences of the Covid-19 pandemic. He went on to argue that the enforcement of
clause 3.3 would infringe section 7(2) of the Constitu tion and rights entrenched in the
Bill of Rights. Further, he contends that the State must fulfil its fiscal, constitutional
and legal obligations towards human rights bearers.
The State is now compelled by the Covid-19 circumstances to spend additional
funds to protect vulnerable people, some of whom have been rendered destitute by job
losses or salary cuts in the private sector. This , according to the respondents, creates a
56 Gijima above n 11 at para 49.
MADONDO AJ
44
great need for accelerated progressive reali sation of the rights to health care, food,
sanitation or social welfare as the Covid-19 circumstances demand.
On account of the Covid-19 pandemic, it is also imperative for the State to spend
public funds (which are already in deficit) to alleviate the pl ight of the poor and
vulnerable citizens . Among other things, the deficit is exacerbated by drastically
reduced tax and other revenue , and the State’s increased constitutional obligations
arising from the pandemic. Regrettably, according to the respondents, the State cannot
in the circumstances accede to the applicants’ claim for further increases. It has been
argued on behalf of the State that the outcome for which the applicant unions contend
is not just and equitable. It is unaffordable, unbudgeted for and unauthorised by law.
The emphasis is now only on the enforcement of clause 3.3 but it is, however,
not in dispute that clause 3.3, if implemented, would indeed precipitate a fiscal crisis
directly detracting from the State’s ability to alleviate th e plight of the poorest of the
poor. According to the Minister of Finance , enforcing clause 3.3 is not sustainable
particularly during the prevailing Covid-19 pandemic as it would plunge the State into
substantial excess debt. Contrary to NUPSAW’s submission, and as the Minister of
Finance contends, whether the correct amount of this excess is R13.2 billion or
R37.8 billion or R29 billion as the State says in this Court, enforcement of clause 3.3
will have significant and prejudicial budgetary implications. Accordingly, to the extent
that the Labour Appeal Court incorrectly assumed that the correct amount of the
forecasted excess was R37.8 billion, this could not have had a material effect on its
decision.
The evidence establishes that none of the Covid-19 consequences were foreseen
or reasonably foreseeable when the collective agreement was concluded. Not even the
adverse fiscal developments pre-dating the Covid-19 pandemic were foreseen. Instead,
all the parties involved in the collective bargaining process knew that the budgetary
deficit in the collective agreement w as proposed to be reduced by way of cost-cutting
measures. But, this did not occur as it was frustrated by the applicant s and other trade
MADONDO AJ
45
unions. According to the State, the material change of circumstances , and the
applicants’ negative attitude towards re-negotiation and revision of clause 3.3, rendered
the enforcement of the collective agreement practically impossible. Taking into account
the fact that the conclusion of the collective agreement in question was from the outset
in breach of the provisions and the Constitution, it ought not to have been implemented
at all. Given the circumstances preventing compliance with clause 3.3, the inevitable
conclusion is that the Labour Appeal Court rightly condoned the delay by the State to
challenge the legality of the impugned collective agreement. Regard being had to that
Court’s treatment of the dispute between the parties, I am satisfied that all the factors
for and against the condonation of the delay were properly considered.
Just and equitable remedy
Ultimately, I turn to consider a just and eq uitable remedy in terms of
section 172(1)(b) of the Constitution pursuant to the declaration that clause 3.3 of the
impugned collective agreement is invalid and unlawful. The circumstances of the case
must be examined in order to determine whether factual certainty requires some
amelioration of legality and, if so, to what extent. The approach taken will depend on
the kind of challenge presented – direct or collateral, the interests involved and the
extent or materiality of the breach that occurs in each particular case.57
The evidence establishes that the State, in its capacity as the employer, duly
complied with its obligations in terms of clauses 3.1 and 3.2 of the impugned collective
agreement by effecting the necessary salary adjustments for the 2018/2019 and
2019/2020 financial years. The controversy began on the eve of the implementation of
salary increases for the 2020/2021 financial year. In the third year, the State, conscious
not to threaten the lives of the entire nation and the econo my, could not honour its
obligations in terms of the agreement. Realising that it could not afford to pay the salary
increments in terms of clause 3.3 of the agreement, the State approached the applicants
57 Bengwenyama Minerals (Pty) Ltd v Genorah Resources (Pty) Ltd [2010] ZACC 26; 2011 (4) SA 113 (CC);
2011 (3) BCLR 229 (CC) at para 85.
MADONDO AJ
46
in good faith to renegotiate clause 3.3, so as to bring it within the approved budget. The
applicants repeatedly repudiated the se efforts and demanded that the State fulfil its
obligations regardless of the Covid-19 pandemic. They argued that section 7(2) of the
Constitution provides that the State must respect, protect, promote and fulfil the rights
of the citizens entrenched in the Bill of Rights, and in terms of section 2 of the
Constitution, it is obliged to fulfil such duty.
According to the applicants, the State has since repudiated and defaulted on the
implementation of the salary adjustments for the final year. They submit that the State’s
contention regarding the invalidity and unlawfulness of the collective agreement is just
a stratagem to evade its obligation s. As a conseque nce, the applicant s seek specific
performance on the grounds that the State has reneged on its obligations, which it had
freely and voluntarily entered into, and that the delay in challenging the validity of the
collective agreement was inordinate and unreasonable.
Furthermore, t he applicants contend that specific performance is a just and
equitable remedy on the basis that there had been substantial performance under the
collective agreement. However, because the agreement was void ab initio (has no legal
force) this question does not arise, and this Court need not address it. Thus, the
contention is without merit. The general rule is that if an invalid agreement is void, it
gives rise to no legal obligations, which means the State cannot be ordered to comply
nor can it be expected to perform, as there is nothing in the eyes of the law to be
complied with nor enforced. In the circumstances, ordering specific performance would
be unjust and defeat the purpose of regulations 78 and 79.
The applicants also contend that public policy requires the implementation of
clause 3.3 despite its invalidity. They say that one would consider the intention of the
parties which could be said to be the compelling reason for the conclusion of the
impugned agreement and its enforcement for a period of two years, notwithstanding the
parties being aware of its invalidity from inception. The applicants also argued that the
State should not benefit from its wrongdoing, being its failure to comply with the
MADONDO AJ
47
jurisdictional prerequisites prescribed in regulations 78 and 79 for the conclusion of a
collective agreement. And because the State may be said to have benefitted by staving
off strike action in the public sector, thereby securing and maintaining labour peace for
the period of three years, whilst precluding the applicant s and their members from
exercising their right to strike , the applicants are entitled to an equitable remedy .
However, the applicants seem to ignore the fact that the State has expended a huge sum
of money at the expense of poor citizens, in adjusting and paying out salary increases
to public servants for the period of two years under an invalid collective agreement.
Compared to the State, the applicants and their members can be said to have been
unjustifiably enriched, they actually and materially benefitted from the impugned
collective agreement. Firstly, the employees had their jobs secured and received
year-on-year salary increments in the public sector outstripping inflation and
outperforming the private sector salary increases. This occurred at a time when the rest
of the country’s workforce , including high -echelon public servants, Cabinet and
Parliament, had suffered salary cuts or freezes as a consequence of the economic and
the Covid-19 pandemic. Secondly, clauses 3.1 and 3.2 by default still stand, as they are
not being challenged.
The Labour Appeal Court found that the Gijima decision was distinguis hable
from the present case since the contract had been entered into between two parties,
whereas, in this case, the dispute is far more complex and has polycentric consequences.
In the present case, the applicants benefitted from the agreement despite the fact that it
was invalid and unlawful from the outset. It is also clear that t he State has expended
substantial financial resources on the adjustment of the public servants ’ salaries over
the period of two years and requiring the enforcement of clause 3.3 will directly affect
its difficult task of managing the recovery of the economy and protecting the lives and
livelihoods of the nation’s people during the Covid-19 pandemic.
In the Labour Appeal Court , the applicant s proposed that the State should be
ordered to meet its obligation in a “phased in manner” without proffering any
MADONDO AJ
48
explanation as to how this would be structured . However, before this Court, the
applicants changed t heir stance on specific performance and proposed that the
declaration of invalidity be suspended on condition that the parties renegotiate with a
view to agree on the manner in which clause 3.3 can be fairly and justly implemented.
Such a proposal has already been over taken by events. The evidence establishes that
the wage negotiations for the next wage cycle were already underway by the time this
matter was heard in the Labour Appeal Court. The State had by then opened its doors
to renegotiate or consult on any compensation -related matter including the impugned
collective agreement. Unfortunately, the applicant s and their members did not avail
themselves of such an opportunity.
In sum, i f clause 3.3 were to be enforced, the amount available for service
delivery in all its manifestations would be significantly reduced. In this regard, the State
has laid emphasis on the impact that the Covid -19 pandemic has had on its financia l
resources, including the need to protect the lives and livelihoods of vulnerable people
exposed to the sever e consequences of the pandemic. In the present economic and
health circumstances facing the country, it would not be just and equitable to require
the State to make good the illicit salary increases it promised at the expense of far more
pressing needs affecting the country.
Order
In respect of CCT 21/21; 28/21; 29/21 and 44/21, the following order is made:
1. Leave to appeal is granted.
2. The appeal is dismissed.
3. There is no order as to costs.
For the Applicants in CCT 21/21:
For the First to Third Applicants
in CCT 28/21:
For the First to Fourth Applicants
in CCT 29/21:
For the Applicants in CCT 44/21:
For the First to Fifth and Seventh
Respondents in CCT 21/21; 29/21
and 44/21; and the First, Second,
Fifth, Seventh and Eight
Respondents in CCT 28/21:
For the Sixth Respondents in
CCT 21/21; 29/21 and 44/21;
and Third Respondents
in CCT 28/21:
W M okhare SC and E Masombuka
instructed by Mdhluli Pearce Mdzikwa
Incorporated
N Maenetje SC and M Salukazana
instructed by Cheadle Thompson &
Haysom Incorporated
C Orr SC, C Whitcutt SC and G Phajane
instructed by Bowmans Gilfillan
Incorporated
D Gomba in structed by Ndumiso Voyi
Incorporated
T J Bruinders SC and
J Thobela-Mkhulisi instructed by the
State Attorney, Pretoria
J J Gauntlett SC QC and F B Pelser
instructed by the State Attorney,
Pretoria