Bank of Lisbon International v Pinheiro (JA51/97) [1998] ZALAC 16 (11 February 1998)

About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Labour Appeal Court
SAFLII
>>
Databases
>>
South Africa: Labour Appeal Court
>>
1998
>>
[1998] ZALAC 16
|

|

Bank of Lisbon International v Pinheiro (JA51/97) [1998] ZALAC 16 (11 February 1998)

IN THE LABOUR
APPEAL COURT OF SOUTH
AFRICA
(HELD AT
JOHANNESBURG)
Case no:
JA51/97
In
the matter between
THE BANK OF
LISBON INTERNATIONAL
Appellant
and
LUIS HENRIQUE
das NEVES de BARROS PINHEIRO
Respondent
_____________________________________________________________________
JUDGMENT
___________________________________________________________________
The respondent
was employed by the appellant as assistant general manager. At the
time of his retrenchment in mid-1995 he had forty
years experience
in the banking industry, eighteen years of which were spent in the
service of the appellant. The respondent was
62 years old, three
years away from retirement.
By late 1994
the appellant was in serious financial trouble and faced the
prospect of losing its banking licence. In April 1995,
Mercantile
Bank Holdings Limited (“Mercantile Bank”), concluded an
agreement with the appellant’s shareholders in terms of
which it
acquired the entire shareholding in the appellant. In April 1995
Mercantile Bank assumed control of the appellant. In
terms of the
restructuring of the appellant by Mercantile Bank the post of
regional manager was created and that of assistant
general manager
was abolished. On 18 April the general manager, Mr Taylor, and
shortly afterwards, an assistant general manager,
Mr Mendes, were
retrenched.
On 25 April a
meeting took place between Dr Saude, an executive director of the
appellant, Mr Prentice, the human resources manager
of Mercantile
Bank, and the respondent. The respondent was informed of the
appellant’s financial problems and that his post had
become
redundant in terms of the proposed restructuring of the appellant. A
document was handed to him containing a proposed retrenchment
package. The respondent was upset by his treatment, reacted by
saying that he was not willing to negotiate with Prentice, and left.
The factual
dispute between the parties was whether, as contended by Prentice,
the respondent was expressly told that alternatives
to retrenchment
would be considered, or, as contended by the respondent, he was told
by Prentice that his retrenchment was with
immediate effect, and
that all that remained for future discussion was the amount of the
retrenchment package.
On returning to
his office, the respondent wrote a letter to Mrs White, the human
resources manager of the appellant, in which he
recorded his version
of what had transpired in the meeting.
At the end of
that day, 25 April, the respondent left his office, never to return,
except to participate in the retrenchment exercise,
and he did not
thereafter again work for the appellant.
On 2 May the
respondent received a letter from the appellant signed by Saude in
which it was denied that the respondent’s services
had been
terminated with immediate effect on 25 April. The appellant’s
anxiety to consult “on possible alternatives to possible
retrenchment” was conveyed to the respondent. On 5 May the
respondent replied to the letter of 28 April by reiterating his
version
of the meeting of 25 April, stated that he was available for
consultations, and tendered his services.
On 9 May the
respondent addressed a letter to Saude in which he sought
particulars about what impact his retrenchment would have
on his
pension. Throughout the subsequent meetings which took place a major
concern of the respondent was whether he could be retrenched
on the
basis that he would retire with a full pension.
On the
following day the respondent received a letter signed by Mrs White,
dated 4 May, on behalf of the appellant, in which she
set out the
respondent’s retrenchment package (in a total sum of R121 602,
71). The letter stated that the retrenchment would
be effective
from 31 May. The respondent was thanked for his past services. The
respondent immediately rejected the offer and stated
that he was
awaiting “the holding of proper discussions”. On the same day
Saude wrote a letter to the respondent in which he
repeated the
appellant’s version of the meeting of 25 April and invited
discussions on “any alternatives to the proposed retrenchment”.
On 11 May the
respondent reiterated that on 25 April he had been confronted “with
the fait accompli that [he] had become redundant”
and agreed to
hold constructive consultations. In an undated letter which was
probably written on 12 May Prentice repudiated Mrs
White’s letter
of 4 May on the ground that she had assumed that the respondent was
a member of the South African Society of Bank
Officials (“SASBO”),
the trade union with which Prentice had negotiated a retrenchment
package for SASBO members employed by
the appellant. Prentice
recorded that at the meeting of 25 April the respondent had
indicated that he “would not be prepared
to have any further
discussions in the Bank of Lisbon’s Head Office”.
On 12 May the
respondent responded that he would like “to hold the proposed
discussions”.
On 17 May a
meeting took place between Prentice, the respondent and the daughter
of the respondent, Mrs Goodman, an attorney. Mrs
Goodman handed
Prentice a typed counter offer. The terms of the retrenchment
package were discussed in detail.
The factual
dispute between the parties is whether Mrs Goodman reserved the
respondent’s rights in general terms, as contended
for by Prentice
or, as Mrs Goodman contended, specifically in relation to
alternatives to retrenchment. Mrs Goodman testified that
she made a
note during the meeting in these terms: “We reserve our rights to
discuss alternatives”.
On 19 May a
further meeting was held between Prentice, respondent and Mrs
Goodman to discuss the retrenchment package. Prentice
handed a
letter to Mrs Goodman in which certain counter proposals were made.
The factual
dispute is whether Mrs Goodman again reserved the respondent’s
“rights re discussion of alternatives” and recorded
such a
reservation in her handwriting on the copy of the letter which
Prentice had handed to her.
For reasons
which follow later, it is not necessary to resolve those factual
disputes.
On 23 May
another meeting was held between Prentice, the respondent and Mrs
Goodman. The retrenchment package was again discussed,
but no
progress was made.
On 26 May the
appellant made a “without prejudice” offer to the respondent in
which the appellant agreed to pay him the sum
of R174 383,15, made
up as follows:
* One month’s
salary in lieu of notice until
End of June,
1995 R12 440,00
* pro-rated
bonus calculated until 30 June 1995 R 6 220,00
* outstanding
leave paid until 30 June 1995 R38 516,15
(80.5 days)
* 8 month’s
severance pay in recognition of
total length of
service R99 520,00
* Housing
subsidy of 8 x R915.80 per month R 7 326,40
* Additional
payment to liquidate outstanding
bond R10
360.60
Total R174
383.15
The effective
date of the retrenchment was moved to 30 June.
On 14 June a
final meeting took place at which the parties were represented by
their respective attorneys in order to attempt to
settle the matter.
Settlement was not achieved.
During July the
appellant paid the respondent a retrenchment package of R 161 943,15
made up as follows:
Pro-rata bonus
calculated until 30 June 1995 R 6 220,00
Outstanding
leave pay R 38 516,15
Eight
month’s severance pay R 99 520,00
Additional
payment to liquidate outstanding R 10 360,60
bond
It is common
cause that at no time during the period 25 April to 14 June 1995 did
the parties ever discuss alternatives to retrenchments.
The respondent
instituted proceedings against the appellant at first in terms of s
43 and subsequently in terms of s 46(9) of the
Labour Relations Act,
28 of 1956 (“the Act”).
In its plea in
the s 46(9) proceedings the appellant took the point in limine that
the respondent had compromised any claim which
he might have had
against the appellant. Three court days, interspersed over a period
of about seven months, were devoted to the
point in limine. On the
first day of the trial the industrial court disposed of the point
by finding that the issue of the alleged
compromise should be heard
with the evidence on the merits. Presumably as a result of a
concession made by Prentice in evidence
that the dispute had not in
fact been compromised by the respondent, the appellant did not rely
on the compromise either in the
industrial court or on appeal.
At the trial
the respondent, Mrs Goodman, Prentice and Mr van Deventer, an
executive director of Mercantile Bank, gave evidence.
Before the
conclusion of the case the parties reached an agreement that the
patrimonial loss suffered by the respondent as a consequence
of his
dismissal was R420 000.
The industrial
court found that
- the
retrenchment was procedurally unfair in that consultations on
alternatives to retrenchment had not been held;
- both
parties were equally to blame for the failure to hold proper
consultations;
- the
respondent was entitled to payment of the sum of R280 000, being two
thirds of the agreed loss of the amount of R420 000.
No order as to
costs was made.
The appellant
filed a notice of appeal in which it conceded that the retrenchment
had been procedurally unfair and tendered to pay
the respondent an
amount equal to six months salary( R 80 134,80). The appellant
conceded that:
(a) “it ought
to have given the respondent reasonable notice prior to 25 April 1995
of its intention to held consultations about
its proposed
retrenchment of the respondent”; and
(b) the
industrial court “correctly held that the appellant was under a
duty to initiate consultations as to alternative positions
which were
available to the respondent and that its failure to do so amounted
to a procedural irregularity.” The appellant submitted
further
that, “having regard to the senior position occupied by the
respondent, the above failure ought not to be construed as
a major
procedural irregularity, especially having regard to the fact that
the respondent was not suited to the positions of regional
manager
and/or branch manager.”
The respondent
filed a notice of cross-appeal on the basis that he should have been
awarded the sum of R420 000 and costs, including
the costs incurred
in dealing with the point in limine.
The appellant’s
case in the industrial court was that at the meeting of 25 April
1995 Prentice offered to discuss alternatives
to retrenchment in
future discussions, that that offer was subsequently repeated in
writing, and that the failure to consult was
due to the fault of the
respondent, who refused to cooperate.
The
probabilities are that at the meeting of 25 April, Prentice did not
offer to discuss alternatives to retrenchments; the appellant’s
subsequent offers to consult in that regard were not genuine; the
appellant did not intend to retain the respondent on its payroll
in
any capacity; all that the appellant was open to discuss was the
quantum of the respondent’s retrenchment package; and the
respondent, in the belief that consultations on alternatives to
retrenchments would be fruitless, was not prepared to discuss

alternatives.
One begins the
inquiry into the probabilities by asking what alternatives to
retrenchment the appellant would have discussed. The
only
alternative was to employ the respondent in another capacity.
Prentice did not say what alternative employment the respondent
would have been offered. The evidence-in-chief of van Deventer was
that appellant was considered for the two new posts of regional
manager but the appellant did not consider him experienced enough.
Two outsiders, one from Standard Bank and the other from Santam
Bank, were appointed instead. The other position which was
considered was branch manager, but once again, the respondent was
found
wanting. Van Deventer did say in cross-examination that had
the respondent cooperated and had consultations been held, other
positions,
such as that of internal auditor, could have been
discussed. That evidence, if true, renders the appellant’s
failure to offer
the respondent an alternative position even more
reprehensible.
The
probabilities, however, are that the appellant, as managed by
Mercantile Bank from April 1995, had no intention to retain the
respondent as its employee.
The new broom,
Mercantile Bank, intended to sweep clean: a general manager and two
assistant general managers of the appellant were
retrenched within
days of the take-over.
That explains
why Prentice never raised alternatives to retrenchment at the
meetings of 17, 19 and 23 May. By the time the meeting
of 17 May
took place, contrary to his attitude at the meeting of 25 April, the
respondent had gone on record a number of times
to indicate his
willingness to consult on alternatives to retrenchment. Prentice
testified that he intended to raise alternative
employment “in the
Bank of Lisbon or maybe even Mercantile Bank” at the meeting of 17
May, yet no such discussion took place.
The reality was that all
the appellant was willing to discuss was the quantum of the
retrenchment package.
The time to
discuss alternatives to retrenchment was at the meeting of 25 April.
The respondent was a senior employee, close to
retirement.
Logically, alternatives to retrenchment should have been discussed
before the terms of a retrenchment package. A package
is discussed
only if there are no alternatives to retrenchment. Prentice did not,
however, raise any alternatives to retrenchment.
Instead he handed
the respondent a document, which he had prepared prior to the
meeting, containing details of a package based
on what Prentice had
agreed with SASBO. Prentice moved directly from redundancy to
compensation, without the necessary intervening
step of attempting
to avoid dismissal.
After the
meeting of 25 April both parties conducted themselves as if the
respondent’s services had been terminated, even though
he remained
on the appellant’s payroll pending resolution of the dispute
relating to the retrenchment package. After the meeting,
Saude
telephoned the respondent, apologised for what had happened in the
meeting, and told the respondent to give his work in progress
to
his, Saude’s, secretary. The respondent packed his personal
belongings, informed the branch managers who had reported to him
that he had been dismissed, and bade farewell to his colleagues in
head office. At the end of that working day the respondent removed
his belongings, packed them in the boot of his car, and left the
building. Saude, who saw the respondent loading his belongings
in
his car, did not stop him, nor did Saude or anyone else employed by
the appellant require the respondent to work. Rather, the
respondent
did not again work for the appellant, despite being paid for the
period 25 April to 30 June. As early as 2 May, Mr O’Dwyer,
one of
the newly appointed regional managers, occupied the respondent’s
office.
The respondent,
not surprisingly, placed great emphasis on Mrs White’s letter of 4
May, in which it was indicated that the respondent
had been
retrenched by that date. Mrs White was not called to explain her
letter. Prentice in his undated letter speculated that
Mrs White
must have assumed that the respondent was a member of SASBO and that
he had been retrenched as part of the retrenchment
of the SASBO
members. In the absence of Mrs White, who did not testify, not much
value should be attached to that explanation.
Perhaps as result of a
Freudian slip, Mrs White reflected the true intention of the
appellant.
The appellant’s
failure to consult with the respondent on alternatives on
retrenchment, was a serious one, particularly if one
has regard to
the respondent’s long service, his age, and the obvious advantage
to him to remain in the employ of the appellant
until retirement.
If the
appellant, as testified to by Van Deventer, had alternative
positions to offer the respondent, the consultation process might
have concluded on the basis that the respondent remained in the
appellant’s employ, albeit in another capacity at a lower salary.

If the appellant did not intend to offer the respondent another
position, it should have made its position clear to the respondent,
provided a justification for its stance, and given the respondent
the opportunity to persuade the appellant nevertheless to retain
his
services in some capacity or another.
The industrial
court found that the respondent was partly to blame for the failure
to consult because the respondent “stubbornly
refused to accept
the repeated assurances by [the appellant] that his services had in
fact not been terminated”, that respondent
did not raise
alternatives to retrenchment at any of the meetings, and that his
conduct demonstrated that he was not willing to
consult. The
reasoning of the industrial court is partly based on the premise
that the respondent’s services had not been terminated
on 25
April. The truth is that the appellant had terminated the
respondent’s services on 25 April in the sense that he was no
longer required to work for the appellant.
The industrial
court, however, correctly took the respondent to task for not
raising alternatives to retrenchment at any meetings.
The
respondent deliberately ignored the appellant’s written calls for
suggestions for alternatives to retrenchment . He testified
that at
the meeting of 17 May he was not “open for consultation” because
he “knew beforehand that there were no positions
in the bank for
[him] because the door was closed on 25 April”. While not raising
alternatives to retrenchment - and he testified
that he had one in
mind - the respondent and Mrs Goodman were careful to reserve his
right to challenge the retrenchment if no
settlement was reached.
The respondent did not deal with the appellant in good faith.
The industrial
court misdirected itself in not finding that had proper
consultations been held, the respondent might have remained
in the
employ of the appellant until retirement age. The probabilities are
that had the respondent continued in employment he
would have earned
less, possibly substantially less, than he did as assistant general
manager. The true measure of his patrimonial
loss is, therefore,
not R420 000,00 but some lesser amount.
As the
industrial court misdirected itself in the award of compensation,
this Court is free to fix the amount of compensation. Section
46(9)(c) provides that the industrial court shall determine the
unfair labour practice dispute “on such terms as it may deem
reasonable, including but not limited to the ordering of
reinstatement or compensation”. The section gives no guidance on
what
principles should be applied to the award of compensation where
there was a commercial rationale for the redundancy of an employee’s
post, as in this case, but the employer did not adopt a fair
procedure before deciding on retrenchment.
What makes the
award of compensation more complicated in this matter is that the
respondent was compensated by the appellant for
being retrenched. In
addition to paying the respondent outstanding leave pay and a pro
rata bonus, the appellant paid “eight
months severance pay” in
an amount of R99 520, 00, and the respondent’s bond in the sum of
R10 360,00.
The
retrenchment package paid to the respondent in July 1995 was about
R40 000,00 more than the original offer. However, because
the
unfairness in the present case consisted of a failure to consult on
possible alternatives and, consequently, the possibility
exists that
the respondent might have remained in the employ of the appellant in
a lesser position, the adequacy of the retrenchment
package is not
the only, or even central, factor to be considered.
Other factors
which should be taken into account are the appellant’s failure to
give notice of its intention to retrench, the
failure by the
appellant to attempt to accommodate the respondent in the new
structure, the respondent’s length of service and
age, and the
breach by the appellant in a material respect of its duty to consult
prior to retrenchment, and the uncooperative
and obstructive
attitude adopted by the respondent during the consultation process.
Taking those
factors into account, a reasonable amount of compensation is the
amount of R150 000,00.
The industrial
court should have awarded the respondent the costs of the s 46(9)
proceedings, including the costs incurred in dealing
with the point
in limine. As subsequently conceded by the appellant, the dispute
had not been settled and the dismissal was procedurally
unfair. Had
the appellant made those concessions initially the proceedings in
the industrial court could have been avoided or substantially
reduced.
The respondent
sought the costs of the point in limine on the High Court scale as
between attorney and client. The submission was
that at the specific
instance of the industrial court the appellant was asked to agree to
a stated case by the respondent. The
appellant, however, refused to
agree to a stated case; the point in limine could never have been
decided separately from the merits
as that would have lead to a
duplication of much of the evidence; and Prentice conceded in
evidence that the matter had never been
compromised.
If one has
regard to the factors that there was no merit in the point in limine
and that it was not a true point in limine in that
it could never be
decided separately from the merits of the dispute, one is driven to
the conclusion that the point was taken in
order to cause delay. In
fact, by pursuing the point in limine, the appellant delayed the
final adjudication of the dispute by
a period of about seven months.
Not only was the prosecution of the respondent’s case delayed, but
he was required to finance
the appearance of counsel on those three
occasions, when the appellant, to its knowledge, had no case. In all
those circumstances,
it seems to me to be appropriate that a special
award of costs should be made.
Both parties
have achieved substantial success on appeal. It is accordingly in
accordance with the requirements of the law and
fairness that each
party should pay its own costs on appeal.
The order which
is made is the following:-
1. The appeal is
upheld to the extent reflected in paragraph 3.2
2. The
cross-appeal is upheld to the extent reflected in paragraph 3.3.
3. The
order of the industrial court is altered to read:-
“
1. The
dismissal of the applicant by the respondent is declared to be an
unfair labour practice.
2. The
respondent is ordered to pay the applicant compensation in the sum of
R150 000,00.
3. The
respondent is ordered to pay the applicant the costs of the
proceedings in terms of s 46(9) of the Labour Relations Act, 28
of
1956, on the High Court scale, including the costs relating to the
point in limine taken by the respondent, which latter costs
are to be
paid on the High Court scale as between attorney and client.”
4. There is no
order in respect of the costs of the appeal and the cross-appeal.
____________________
Myburgh JP
I
concur
_________________
Froneman
DJP
_________________
Kroon
JA
Date
of hearing: 4/2/98
Date
of judgment: 11/2/98
Appearing
for the appellant : Mr M.J. van As instructed by Mr A de Kock of
Hofmeyr Herbstein Gihwala & Cluver Inc
Appearing
for the respondent : Mr N.F. Rautenbach
This
judgment is available on the Internet at Website:
www.law.wits.ac.za/labour crt.