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[2020] ZALAC 1
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Khum MK Investments and Bie Joint Venture (Pty) Ltd v Commission for Conciliation, Mediation and Arbitration and Others (JA52/2018) [2020] ZALAC 1; [2020] 4 BLLR 362 (LAC); (2020) 41 ILJ 1129 (LAC) (6 January 2020)
IN
THE LABOUR COURT OF APPEAL OF SOUTH AFRICA, JOHANNESBURG
Reportable
Case
no: JA52/2018
In
the matter between:
KHUM
MK INVESTMENTS
AND
BIE JOINT VENTURE (PTY) LTD
Appellant
and
COMMISSION
FOR CONCILIATION,
MEDIATION
AND ARBITRATION
First Respondent
BOYCE,
T N.O.
Second
Respondent
SOLIDARITY
obo MARAIS AND OTHERS Third
Respondent
ESKOM
HOLDINGS SOC LTD
Fourth
Respondent
Heard:
7 November 2019
Delivered:
6 January 2020
Summary:
Employer relying on an implied automatic clause to justify
termination of employees’ fixed-term contract - court
finding
that .no provision existed in the employment contract for the
automatic termination of the contract in the event that Eskom
terminated the contract with employer – further that provision
is made in the contract for the automatic termination by effluxion
of
time. Appeal dismissed with costs.
Coram:
Waglay JP, Sutherland JA and Murphy AJA
JUDGMENT
MURPHY
AJA
[1]
The appellant (“Khum”) appeals against the decision of
the Labour Court
(Moshoana J) dismissing its application to review
the award of the second respondent (“the commissioner”).
The issue
to be determined is whether the termination of the
contracts of the members (“the employees”) of the third
respondent
(“Solidarity”) constituted a dismissal as
defined in section 186(1) of the Labour Relations Act.
[1]
[2]
Khum was a special purpose vehicle company established to provide
persons to perform
the services contained in a professional services
contract (“PSA”) concluded by Khum with the fourth
respondent (“Eskom”).
Eskom was Khum’s only client.
The duration period of the PSA was five years, with a starting date
of 14 April 2009 and completion
on 13 April 2014. Each task order in
respect of the services to be rendered to Eskom had a specific
starting and completion date.
[3]
Khum recruited 333 persons, including the employees (Messrs Marais,
Jacobs and Vorster),
to perform the services required by the PSA. It
is common cause that the employees entered into fixed term contracts
of employment
with Khum, referred to as “the Contractor
Agreement”, which by agreement would terminate on 30 April
2014. The relevant
provisions governing the duration of the contract
are set out in Clause 3 of the Contractor Agreement which read:
‘
3.1
The contractor is hereby appointed as a contractor to the JV (Khum)
commencing on 18
th
June 2012 for the period ending April 2014 of his/her role as….
3.2
7 (Seven) days written notice must be given by either party should a
party wish to terminate this agreement, for any reason
whatsoever,
save for completion of the assignee’s role on the Eskom
contract.
3.3
Should the contractor commit a breach which is deemed material, then
24 (twenty four) hours’ written notice will be given
to
terminate this agreement.’
[4]
Clause 2 of the Contractor Agreement, in addition to stipulating the
commencement
date, provided that the contract would be rendered null
and void and of no force or effect, and construed as terminated, if
the
employee failed or neglected to inform Khum of any circumstances
or information relating to issues like state of health, criminal
record, credit record or addictions. Clause 6 of the Contractor
Agreement included a provision permitting cancellation of the
contract in specific instances by the innocent party in the event of
breach of contract. These were the only provisions in the Contractor
Agreement dealing with the duration and termination of the contract.
[5]
The employees only rendered services in terms of task orders to Eskom
and their employment
was linked to the joint venture project between
Khum and Eskom.
[6]
Prior to the contemplated completion date of the PSA, in
correspondence dated 13 August
2013, 10 October 2013 and 11 October
2013, Eskom notified Khum that certain specified task orders were
cancelled with immediate
effect. The cancellation notices recorded
that no notice period was applicable in respect of the specified task
orders.
[7]
Khum then issued written notice of termination in terms of the
Contractor Agreement
to Marais, Jacobs and Vorster. The termination
letter to Marais is dated 14 August 2013 while those to Jacobs and
Vorster were
dated 27 September 2014. The termination letters
addressed to Jacobs and Vorster were identical. The relevant part of
the letters
read:
‘
In
accordance to the terms of the Contractor Agreement (Section 3.2):
A.
We hereby exercise the right to put you on notice for the termination
of the contract; your last day will be on Wednesday, 30
th
October 2013…’
[8]
The termination letter to Marais read the same, except his last day
was stated to
be Friday 13
th
September 2013. The reference
to “Section 3.2” in the letters is a reference to clause
3.2, the term of the Contractor
Agreement which provided that seven
days written notice “must be given by either party should a
party wish to terminate this
agreement, for any reason whatsoever,
save for completion of the assignee’s role on the Eskom
contract”.
[9]
Jacobs’ last working day was 10 October 2013 and he was paid
notice pay for
October 2013. Vorster’s last working day was 10
October 2013 and he was paid notice pay for October 2013. Marais’
last
working day was 13 September 2013 and he was paid until 13
September 2013.
[10]
Solidarity referred an unfair dismissal dispute to the Commission for
Conciliation, Mediation
and Arbitration (CCMA) on behalf of the
employees. Khum argued that the employees were independent
contractors and hence that the
CCMA lacked jurisdiction to determine
the dispute. The commissioner ruled that the employees were employees
of Khum and accepted
that he had jurisdiction.
[11]
At the subsequent arbitration proceedings, Khum submitted that the
employees were not dismissed
as contemplated in section 186(1) of the
LRA. Its argument was premised on the contention that the Contractor
Agreements automatically
terminated due to the cancellation of the
task orders and in terms of the termination clause regulating the
relationship between
Khum and the employees.
[12]
Section 186(1)(a) of the LRA defines a dismissal to mean,
inter
alia
,
that an employer has terminated employment with or without notice.
[2]
For there to be a dismissal in terms of this provision there must be
an act by the employer that terminates the contract. The employer
must engage in an act which brings the contract of employment to an
end.
[3]
Khum contends that
Eskom’s termination of the task orders constituted an event
that terminated the contracts between it and
the employees and thus
it, as employer, had not engaged in an act terminating employment. It
relied on the wording of clause 3.2
of the Contractor Agreement in
support of that contention. The provision, it may be re-called,
provided that seven days written
notice had to be given when either
party wished to terminate the agreement, for any reason whatsoever,
“save for completion
of the assignee’s role on the Eskom
contract”. The proviso, it was argued, envisaged the automatic
termination of employment
on completion of Khum’s (the
assignee’s) role in the Eskom contract, which happened when
Eskom notified Khum that the
various task orders had been cancelled
with immediate effect in its letters of 13 August 2013, 10 October
2013 and 11 October 2013.
[13]
The commissioner held that the employees had been dismissed as
contemplated in section 186(1)(a)
of the LRA. He reasoned as follows:
‘
The
abovementioned contention by the respondent that the applicants were
not dismissed is, with respect, ill-conceived since the
said clause
3.2 of the contractor agreement does not stipulate that the
contractor
agreement
(my emphasis) may be terminated “for any reasons whatsoever”.
Clause 3.2 of the contractor agreement simply makes provision
for a
mandatory notice period of 7 days which must be given by either party
wishing to terminate the agreement “for any reason
whatsoever”
(besides the completion of the applicants’ roles on the Eskom
contracts). Stated differently, all that
is meant by clause 3.2 of
the contractor agreement is that, whatever reason either party may
have for wishing to terminate the
contractor agreement, 7 days
written notice must be given. Clause 3.2 of the contractor agreement
therefore, does not provide that
the contractor agreement itself may
be terminated “for any reason whatsoever” and the
respondent remains enjoined,
in terms of the LRA, to prove that there
was a fair reason for the termination of the applicants’
contractor agreements.
The respondent, in other words, continued to
bear the onus to “prove that the dismissal is fair” (vide
Section 192
(2) of the LRA) and clause 3.2 of the contractor
agreements does not, by any stretch of the imagination, entitle the
respondent
to dismiss the applicants without having a fair reason to
do so.’
[14]
The commissioner held that there was no fair reason for the
dismissal, and given Khum’s
mistaken belief that the contracts
had terminated automatically, the dismissals were not preceded by a
fair procedure either. He
awarded the employees substantial
compensation based on the unexpired terms of their contracts.
[15]
When determining the amount of compensation, the commissioner
appeared to take no account of
the fact that in terms of clause 3.2
of the Contractor Agreement Khum could have lawfully terminated the
contracts on seven days’
notice “for any reason
whatsoever”, including the cancellation of the task orders. The
Contractor Agreement was not
a fixed term contract terminable only by
the effluxion of time. It could be terminated on notice. Be that as
it may, the commissioner
awarded compensation equivalent to the
amount that would have been paid had the contract run for its fixed
term. He directed Khum
to pay the following amounts: Jacobs R490 656;
Vorster R394 850, 40; Marais R538 483, 59.
[16]
In the Labour Court, Khum persisted with only one ground of review,
namely that the employees
had not been dismissed because their
contract had automatically terminated. It abandoned its earlier
contention that the employees
were independent contractors and took
no issue with the findings of substantive and procedural unfairness
or the amount of compensation.
The Labour Court upheld the
commissioner’s jurisdictional finding as correct. It agreed
with the commissioner that Khum had
in fact dismissed the three
employees when it issued the termination letters terminating their
contracts with notice. At that point,
Khum had not assumed that the
contracts were automatically terminated. The Labour Court held
further that clause 3.2 of the Contractor
Agreement in any event did
not provide for automatic termination in the event of the termination
of the PSA.
[17]
On appeal, Khum again limited its grounds of appeal to the claim that
the Labour Court erred
in not finding that the employees were not
dismissed because the fixed term contracts had terminated on the
occurrence of a specific
event, namely the cancellation of the task
orders by Khum’s only client Eskom, being the specific project
for which the employees
had been recruited. The essential question
then is whether the terms of the Contractor Agreement provided for
automatic termination
in the event of the task orders being cancelled
by Eskom.
[18]
The proviso to clause 3.2 of the Contractor Agreement does not
explicitly deal with automatic
termination. Clause 3.2 is concerned
primarily with the notice period upon which the contract can be
terminated in instances other
than the contract ending through the
effluxion of time at the conclusion of the fixed term in April 2014.
It provides that the
contract can be terminated for “any reason
whatsoever” on 7 days’ notice. The proviso to clause 3.2
merely allows
for summary termination without notice when the reason
for the termination is “the completion of the assignee’s
role
on the Eskom contract”. The meaning of the proviso is
clear and unambiguous. The language does not permit an interpretation
that the contract automatically would terminate on the completion of
the assignee’s role, it merely stipulates that the seven
day
notice period will not be applicable in that event.
[19]
That interpretation is supported not only by the plain meaning of the
language of clause 3.2
but also the intra-textual context. Clause 3.2
is an alternative to automatic termination of the contract through
the effluxion
of time on expiry of the fixed term as provided for in
clause 3.1. The express overall intention in relation to the
termination
of the contract was for the contract to expire
automatically through the effluxion of time on expiry of the fixed
term in terms
of clause 3.1, but to permit also the alternatives of
terminating on seven days’ notice for any reason whatsoever and
for
even lesser notice in the two instances contemplated in clause
3.2 and clause 3.3, respectively the completion of the assignee’s
role on the Eskom contract (no notice) and a material breach of
contract (24 hours’ notice).
[20]
Hence, the express provisions of clause 3 of the Contactor Agreement
contemplate four instances
of termination of the contract: i)
automatic termination by the effluxion of time at the end of April
2014; ii) termination on
seven days’ notice for any reason
whatsoever; iii) termination without notice on completion of the
assignee’s role
on the Eskom contract; and iv) termination on
24 hours’ notice on a material breach of contract. No provision
is made for
the automatic termination of the Contractor Agreement in
the event that Eskom terminated the PSA.
[4]
In that event, clause 3.2 required either no notice or seven days’
notice when terminating for that reason. The letters of
termination
served on the employees in fact gave much longer notice.
[21]
Khum argued further that at the very least it was a tacit term in the
Contractor Agreement that
the recruitment and deployment of the
employees at Eskom was in terms of the PSA and reliant on the issuing
of task orders by Eskom.
It maintains that all the circumstances
surrounding and relating to the contract
[5]
indicate that the parties had automatic termination in mind even
though they did not express it in the written instrument. It in
effect submitted that a common unexpressed term permitting automatic
termination could be inferred from the surrounding circumstances.
[22]
The submission is not sustainable for two principal reasons. Firstly,
tacit terms are unexpressed
provisions of the contract derived from
the common intention of the parties as inferred not only from the
surrounding circumstances
but also from the express terms of the
written contract.
[6]
Therefore,
before a tacit term may be imported into the contract, it is
necessary to examine the express terms of the contract;
and a tacit
term should not be readily imported when the express terms
specifically address the matter in question. Where the parties
have
expressly agreed upon a term and given expression to that agreement
in the written contract in unambiguous terms, reliance
on the
surrounding circumstances to alter the clear meaning or to broaden
the ambit of the express term may not be justified.
[7]
In the present case, the term sought to be imported by Khum would
significantly vary the terms of clause 3 which expressly provide
for
one particular instance of automatic termination (on expiry of the
fixed term) and termination by notice in other instances.
Importing a
tacit term catering for automatic termination by events other than
the expiry of the fixed term would involve implying
such a term into
the contract in contradiction to the express term allowing automatic
termination in the specific limited circumstances
envisaged in clause
3.1.
[23]
Secondly, a tacit term allowing automatic termination on cancellation
of the task orders is not
necessary to give business efficacy or
functionality to the contract. A tacit term can only be implied into
a contract if it is
necessary in the business sense to give it
efficacy;
[8]
and courts should
not do so unless there arises from the express language of the
contract and the surrounding circumstances such
an inference that the
parties must have intended the term in question and hence the court
is necessarily driven to the conclusion
that it must be imported.
[9]
In this case, any need to terminate the contract in the event of
Eskom cancelling the PSA was adequately provided for by permitting
Khum to cancel on operational requirements grounds without notice,
provided it acted fairly in terms of section 189 of the LRA.
[24]
Moreover, the manner in which Khum in fact terminated the contracts
by the letters of termination
giving the employees more than one
month’s notice was consistent with an understanding that notice
by the employer was in
fact required. The conduct of Khum, being part
of the surrounding circumstances, is inconsistent with the notion
that a term allowing
for automatic termination on grounds other than
the expiry of the fixed term was within the actual contemplation of
the parties
at the time of the conclusion of the contract or they
would have agreed to such had the officious bystander at that time
suggested
its express inclusion in the contract.
[10]
Additionally, and perhaps decisively, the provisions of clause 4.4 of
the Contractor Agreement stipulate that “no party shall
be
bound by any express or implied term, representation, warranty,
promise or the like not recoded herein, whether it induced the
contract and/or whether it was negligent or not.”
[25]
In the result, the conclusion is inescapable that clause 3 of the
Contractor Agreements did not
allow for automatic termination of the
contact in the event of Eskom cancelling the task orders. When Khum
issued the letters of
termination to the employees it terminated
their employment with notice and its conduct fell within the
definition of a dismissal
in section 186(1)(a) of the LRA. The
decision of the commissioner to assume jurisdiction on that basis was
correct and the Labour
Court did not err in upholding it. The appeal
accordingly must fail.
[26]
In the premises, the appeal is dismissed with costs.
___________________
JR
Murphy
Acting
Judge of Appeal
I
agree
__________________
B
Waglay
Judge
President
I
agree
_________________
R
Sutherland
Judge
of Appeal
APPEARANCES:
FOR
THE APPELLANT:
Adv. F Venter & M Deyl
Instructed
by: Durandt Du Toit Pelser Attorneys
FOR
THE RESPONDENT:
Adv DJ Groenewald
Instructed
by Serfontein Viljoen & Swart Attorneys
[1]
Act 66 of 1995.
[2]
Section 186(1)(b) of the LRA includes within the ambit of a
dismissal a situation where an employer fails to renew a fixed term
contract where the employee reasonably expected the employer to
renew it or to retain the employee on an indefinite basis. Where
the
employee has no reasonable expectation of renewal or retention, the
expiry of the fixed term contract would result in automatic
termination and would not constitute a dismissal. This situation
does not apply in the present case because the contract ended
prior
to the expiry of the fixed term. Khum contends that the Contractor
Agreement automatically terminated before the end of
the expiry of
the fixed term by reason of the cancellation of the PSA.
[3]
Enforce
Security Group v Mwelase Fikile and 46 others
[2017] 38 ILJ 1041 (LAC)
[4]
Khum placed reliance upon various decisions in the Labour Court in
support of its contention that automatic termination was envisaged
by the terms of the Contractor Agreements. The Labour Court
correctly distinguished these cases and held Khum’s reliance
upon them to be misplaced. In
Enforce
Security Group v Mwelase Fikile and 46 others
[2017] 38 ILJ 1041 (LAC), this court upheld a claim of automatic
termination. However, the express provisions of that contract
unambiguously provided that the employee’s employment with the
employer and its duration was “totally dependent on
the
duration of the Company’s contract with the Client/s and that
the Employee’s contract of employment shall automatically
terminate. Such termination shall not be construed as retrenchment
but a completion of contract.” On appeal in this
court,
Khum referred also to
dicta
of the Labour Court in
Pecton
Outsourcing Solutions CC v Pillemer N.O. and Others
[2016] 2 BLLR 186
(LC) to the effect that the substance of the
reason for termination over its form may be decisive. That is not
entirely correct.
The issue is whether the contract permits for its
automatic termination on specified grounds. In any event, in that
case too,
the contract expressly and unambiguously provided for
automatic termination where the contract between the employer and
the client
was cancelled.
[5]
See
Barnabas
Plein and Company v Sol Jacobson and Son
1928
AD 25
at 31 – 32
[6]
Alfred
McAlpine & Son (Pty) Ltd v Transvaal Provincial Administration
1974 (3) SA 506 (A) 531-532
[7]
Union
Government (Minister of Railways) v Faux Ltd
1916 AD 105
, 112; and
SA
Mutual Aid Society v Cape Town Chamber of Commerce
1962 (1) SA 598
(A) 615D.
[8]
Reigate
v Union Manufacturing Co (Ramsbottom)
[1918] 1 KB 592, 605
[9]
Union
Government (Minister of Railways) v Faux Ltd
1916 AD 105, 112
[10]
See
Wilkins
v Voges
[1994] ZASCA 53
;
1994 (3) SA 130
(A) 136I; and
Techni-Pak
Sales (Pty) Ltd v Hall
1968 (3) SA 231
(W) 236-237.