Imperial Transport Services (Pty) Ltd v William Steering (CA5/98) [1998] ZALAC 15 (24 November 1998)

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[1998] ZALAC 15
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Imperial Transport Services (Pty) Ltd v Stirling (CA5/98) [1998] ZALAC 15; [1999] 3 BLLR 201 (LAC) (24 November 1998)

IN THE LABOUR APPEAL COURT OF SOUTH AFRICA
HELD AT CAPE TOWN
Case Number: CA5/98
In the matter between
Imperial Transport Services (Pty)
Ltd
Appellant
and
William Stirling
Respondent
JUDGMENT
[1] Mr William Stirling, respondent herein, was
employed by Imperial Transport Services (Pty) Ltd, appellant herein,
as a national
technical manager. His employment was terminated on
17 November 1996. The reason was that, as a result of the
re-allocation of
his functions, his services had become redundant to
the needs of the company. His retrenchment was, as a consequence,
considered
necessary. Consequent thereon, Stirling challenged the
termination of his employment in the Industrial Court. He alleged,
inter
alia, that it constituted an unfair labour practice and sought
a determination to that effect in terms of Section 46(9) of the

Labour Relations Act, No 28 of 1956, as amended, (“the Act”).
The relief he sought was reinstatement.
[2] The industrial court agreed with Stirling.
It awarded Stirling compensation in the sum of R121 500.00 and
ordered that the
amount be paid by 2 February 1998, failing which,
the said sum was to bear interest at the rate of 15% per annum. In
addition,
the company was ordered to pay costs as between party and
party on the High Court scale.
[3] The company now appeals to this court against
that determination and order.
[4] The central issue in this appeal is whether
there was proper prior consultation by the appellant (“the
company”) with Stirling,
in respect of his redundancy.
[5] The essential facts are not in dispute.
[6] The company is involved in the business of
transportation. It provides,
inter alia
, tourism and coaching
services. In 1995 the company was not doing well. It was
experiencing difficulties in a number of areas.
However, it had
potential because its underlying business was sound, as it was well
known in the international tourist market.
The company began to hire
personnel with a view to addressing its problems.
[7] Stirling was hired during February 1995 as a
national technical manager, with a view to addressing the technical
side of the
business which was also experiencing difficulties. His
functions were advisory in nature. His responsibilities included,
inter alia
, giving technical advice to the various branches
of the company and advising the company on the purchase of new motor
vehicles.
He enjoyed a considerable amount of autonomy on the
technical side of the business.
[8] Andrew John Miles was hired in May 1995 as a
managing director, in order to give the company a new direction. He
has a degree
in engineering and a Master of Business Administration.
Stirling thereafter reported to Miles.
[9] After studying the business environment in
which the company operated, Miles developed an essentially
two-pronged business strategy
for the company. The first aspect
involved restructuring the company into two business units, the
Charter and the Touring divisions.
Each division was to be headed by
a general manager. Richard Lendrum who had been the regional
manager, was promoted to the position
of the general manager to head
the charter division. Under this new structure, Stirling was
required to report to Lendrum in regard
to all of the five South
African branches of the company, while he reported to Miles in
respect of the Namibian branch.
[10] The other aspect of the strategy focused on,
inter alia
, improving performance and cost efficiency. This
strategy involved,
inter alia
, upgrading the branches and
giving them more autonomy on technical aspects. The responsibility
of giving technical advice to branches
was re-allocated to workshop
managers who were capable of giving advice outside of their own
immediate branches. Miles, with his
engineering expertise, also
became more and more involved in giving technical advice to the
branches. Other technical functions
were sub-contracted.
[11] The said business strategy was implemented
as of January 1996. The implementation was an evolutionary process
which occurred
over a period of time. Miles and Lendrum had ongoing
discussions about the implementation of this strategy, its impact on
the staff
across the board and, in particular, on the position
occupied by Stirling. However, they did not involve Stirling in
their discussions.
[12] As a consequence of the implementation of
this business strategy, most, if not all, of the functions
previously performed by
Stirling were re-allocated to the branch
managers and their respective maintenance personnel. Others were
either assumed by management,
or sub-contracted.
[13] Prior to the decision to re-allocate some of
his functions, Stirling was not consulted.
[14] The re-allocation of the functions which
were the responsibility of Stirling resulted in him becoming
redundant. This fact
was communicated to Stirling for the first time
at a meeting held on 16 October 1996.
[15] The meeting of 16 October came about as
follows.
[16] The meeting had been called at the instance
of Stirling. Over a period of time, he had become concerned that his
experience
and expertise were being under-utilised. In particular,
Stirling was concerned about “the distinct lack of job description
and
areas of responsibilities” which had become apparent, and
which had resulted “in inter-departmental meddling and
interference”.
This prompted Stirling to seek clarity on his job
portfolio, and, in particular, where it fitted into the company.
[17] He had many discussions with Lendrum in this
regard. In the course of those discussions, Stirling was afforded
the opportunity
to relocate to Johannesburg. The idea of relocating
to Johannesburg was acceptable to Stirling. In due course, the
relocation
of Stirling to Johannesburg became more than a mere
possibility. Subsequently, Lendrum requested Stirling to furnish him
with a
proposed job description setting out the functions that he
was performing at the time and what he perceived his future
functions
with the company to be. On 9 September Stirling duly
prepared the proposed job description and submitted it to Lendrum,
and urged
him to comment thereon in writing. This job description
was prepared on the basis that Stirling would be relocating to
Johannesburg.
When the comments were not forthcoming, on 8 October
Stirling requested to meet with Lendrum in Johannesburg, in order to
discuss
his proposed job description. Lendrum agreed to meet with
Stirling when he came to Cape Town. As Lendrum was due to be in Cape

Town on 16 and 17 October, he subsequently arranged to meet with
Stirling on 16 October. Hence the meeting of 16 October.
[18] There is a dispute between Stirling and
Lendrum as to what transpired at the meeting of 16 October. This
meeting was also attended
by Mr Paddy Vella, the financial manager
of the company. However, it is common cause that Stirling was
shocked when he was told
that the purpose of the meeting was not to
discuss his proposed job description but to discuss the fact that he
had become redundant.
The company saw this meeting as the
commencement of the consultation in respect of Stirling’s
redundancy. Stirling insisted on
discussing his job description as
proposed by him. Nothing came out of this meeting and it was
postponed to the following day,
that is, 17 October. No progress was
made on 17 October either. These two meetings were characterised by
emotional outbursts and
heated arguments. It was quite apparent that
Stirling was very upset at being told that he had become redundant.
At the request
of Stirling, the meeting on 17 October was adjourned
to 18 October.
[19] On 18 October Lendrum was not present as he
had apparently returned to Johannesburg. Vella was left to finalise
the discussions
with Stirling. By this stage, Stirling accepted the
reality that he must go. Vella informed Stirling of the package he
would receive.
He also informed him that his last date of employment
would be 17 November. On the same day, Vella addressed a letter to
Stirling
setting out the package as well as advising Stirling that:
As indicated to you during our
discussions, the relocation of responsibilities within the division
to branch managers and their
respective maintenance personnel,
increasing their autonomy and the expertise within management
itself, has resulted in the above
position becoming redundant.
[20] So much for the facts.
[21] The unfair labour practice definition in the
Act imposed on the employer a duty of prior consultation with
employees and, where
applicable, a trade union, before termination
of employment on non-disciplinary grounds. (
Atlantis Diesel
Engines (Pty) Ltd v National Union of Metalworkers
[1995] ZASCA 30
;
1995 (3) SA
22
(A)
at 28B;
South African Clothing and Textile Workers
Union and Others v Discreto, a Division of Trump and Springbok
Holdings
, an unreported decision of the Labour Appeal Court,
Case No. JA95/97, delivered on 22 June 1998, para 6). As a general
matter,
this duty arises when the employer, having foreseen a need
for, contemplates retrenchment. (
Atlantis Diesel
,
supra
,
at 28F-G;
SACTWU v Discreto
,
supra
, at para 6).
The duty to consult requires the employer to consult in good faith.
For the consultation process to be fair, the employer
is required to
make a full disclosure of relevant information to the affected
employees where circumstances permit. In addition,
the consultation
should endeavour to avoid retrenchment or minimise its effects by
engaging in a joint problem solving exercise
aimed at achieving
consensus. (
Atlantis Diesel
,
supra
, at 29F-G).
I should add here that employers or their representatives should be
given reasonable notice of the date, time and
place of consultation
so as to prepare for the consultation.
[22] The question which arises in this appeal is
when does the duty to consult arise where termination of employment
is brought
about by the deliberate conduct of the employer, such as
restructuring of the business or introduction of changes in its
operation.
It seems to me that in such a case, the duty arises when
the employer, having foreseen the need for it, contemplates changes
which
might affect the job positions of certain employees. When an
employer contemplates changes in its business, fairness dictates
that
the employer should, before implementing those changes, ask the
question: “Are there any job positions which might be affected
by
the contemplated change?”. If there are job positions which might
be affected by the contemplated changes, the employees whose
jobs
might be affected are, as a matter of fairness, entitled to be
consulted before such changes are implemented.
[23] The need to consult before changes are
implemented is obvious. Consultation provides an opportunity,
inter
alia
, to explain the reasons for the proposed changes, to hear
representations on possible ways and means of avoiding the loss of
jobs,
or minimising the effects of the changes and to discuss and
consider alternatives. Any representations made after the
implementation
of changes are more likely to be met with the natural
reaction to justify the changes. (
SACTWU v Discreto
,
supra
,
at para 9).
[24] The requirement of consultation prior to the
implementation of the changes is not likely to prejudice the
employer. A distinction
ought to be made between the loss of jobs,
which is brought about by external factors such as a downturn in the
economy, on the
one hand, and the loss of jobs by reason of internal
factors, such as the restructuring or the introduction of new
technology,
on the other hand. Although both these factors result in
the retrenchment of employees, there is an important distinction
which
is relevant when one considers the stage at which the duty to
consult arises. In general, in the case of a loss of jobs brought
about by internal changes, the employer is in control of the
situation and need not make hasty decisions. Time is not as critical
as it is when retrenchment is due to an economic downturn, and where
any delay might severely prejudice the employer (
Hlongwane and
Another v Plastics (Pty) Ltd
(1990) 11 ILJ 191 (IC) at 176D).
[25] The ultimate decision whether to implement
the change falls squarely within the competence and responsibility
of management.
It is not for the court to tell the employer what
changes may or may not be made in its business. Suffice it if the
changes are
informed by commercial or business rationale (
South
African Clothing and Textile Workers Union and Others v Discreto, a
Division of Trump and Springbok Holdings
, para 5).
[26] Here the company did not consult with
Stirling prior to the re-allocation of his functions. Stirling
became redundant as a
direct consequence of this re-allocation. When
the company purported to consult with Stirling on 16 October, it had
already re-allocated
his functions and he had become redundant. The
company should have consulted with Stirling prior to the
re-allocation of his functions.
The company, therefore, failed in
its duty of prior consultation.
[27] Apart from the aforegoing, the manner in
which the company treated Stirling leaves much to be desired.
Lendrum knew that Stirling
was concerned about his position, yet he
and Miles were busy effecting changes which were to affect
Stirling’s position. Lendrum
pretended to Stirling that the
meeting of 16 October was to discuss Stirling’s proposed job
description and his possible relocation
to Johannesburg. Yet Lendrum
knew that what was going to be discussed at that meeting was the
fact that Stirling had become redundant.
Stirling was not given any
prior notice to prepare for the meeting. Stirling’s attitude at
the meeting was, in these circumstances,
understandable. Indeed to
expect otherwise would have been too much to expect of human nature.
[28] Prior to the meeting of 16 October Lendrum
and Miles had already considered alternative options. They had found
none. At the
meeting they expected Stirling to come up with
substantive proposals, yet they had not given him notice of what was
to be discussed
at the meeting. He, therefore, came to the meeting
unprepared for what was to be discussed. The proposals that he
advanced were
rejected without any detailed discussions. He was not
provided with any detailed information as to why these proposals
were being
rejected. It is difficult to fathom what purpose the
consultation could have achieved in these circumstances. The
conclusion that
Stirling was presented with a
fait accompli
at the meeting, is irresistible.
[29] However, it cannot be said that the decision
to make Stirling redundant was devoid of a commercial rationale. It
is common
cause that the company had difficulties. The changes that
were implemented by the company were reasonable to improve
performance
and efficiency.
[30] In the result, the decision to terminate the
employment of Stirling was unfair for want of compliance with the
requirements
of prior consultation.
[31] It now remains to consider whether this
court should interfere with the amount of compensation awarded to
Stirling.
[32] The industrial court found that had the
company consulted with Stirling during the period from January to
October, Stirling
would not have been subjected to unfair labour
practice. It, therefore, found “it fair and equitable to
compensate him for that
period of time.”
[33] Mr Oosthuizen, who appeared on behalf of the
company, criticised the approach of the industrial court on the
grounds that there
was no basis for the finding that consultation
with Stirling should have commenced in January, and that the
consultation process
would have taken 9 months.
[34] This criticism is not without merit. There
is no evidence that the charges, which ultimately led to Stirling
becoming redundant,
were contemplated as early as January. The
evidence of Lendrum and Vella on this aspect was very vague.
Lendrum denied that Stirling’s
redundancy could have been
contemplated as early as January. He pointed out the fact that
“towards the beginning of 1996"
he had issued a memorandum
urging the personnel to utilize Stirling’s skills.
[35] There is, therefore, no basis for finding
that consultation should have commenced in January. Nor is there
any basis for the
finding that the consultation process would have
lasted for 9 months. Consequently, the industrial court committed a
misdirection
in approaching the question of compensation on the
basis that the consultation should have commenced in January and
that it would
have taken 9 months. In view of this misdirection,
this court is free to determine the amount of compensation. (
Bank
of Lisbon International v Pinheiro
[1998] 19 ILJ 549 (LAC) at
para 43)
[36] The Act gives no guidance on the principles
applicable in determining compensation when, as here, there was a
commercial rationale
for the redundancy but the employer did not
follow a fair procedure before deciding on retrenchment. (
Bank
of Lisbon International v Pinheiro
,
supra
, para 43) As
Myburgh J P observed in the
Bank of Lisbon
case, what
complicates the determination of the appropriate compensation in a
case such as the one before us, is that the employee
is compensated
for being retrenched.
[37] In determining what an appropriate award of
compensation is, there are, generally speaking, factors which the
court is entitled
to take into account. These include: the nature
of the breach of duty; the possibility that the employee might have
remained in
the employment in a lesser position had proper
consultation taken place; the adequacy of the retrenchment package;
failure to accommodate
the employee in the new structure; the
employee’s period of service; the age of the employee. (
Bank
of Lisbon, supra
, paras 45 and 46;
Hoogenoeg Andolusita (Pty)
Ltd v National Union of Mineworkers & Others
, (1992) 13 ILJ
17 (LAC) at 96G-97D.)
[38] Stirling had been head hunted to come and
work for the company. He had to relocate from Johannesburg to Cape
Town. He was
55 years old at the time. He only remained with the
company for 18 months. At his age finding employment is not going
to be easy.
Indeed, he had made numerous attempts to secure
employment, without success. He was badly treated by the company.
Without any
form of consultation, his functions were re-allocated to
others. Thereafter he was misled into believing that he was
attending
a meeting to discuss his possible relocation to
Johannesburg when, in fact, what was to be discussed was his
redundancy. He attended
a meeting which was to discuss his fate
without being afforded an opportunity to prepare for the meeting.
Yet at the meeting,
he was expected to come up with substantive
proposals. His proposals were rejected out of hand.
[39] Having regard to the foregoing, a reasonable
amount of compensation is the amount of R 121 500.00.
[40] In the event, the appeal is dismissed with
costs.
Ngcobo J A
I agree
Myburgh J P
I agree
Froneman D J P
DATE OF HEARING: 17 November 1998
DATE OF JUDGMENT: 24 November 1998
COUNSEL FOR APPELLANT: Adv A C Oosthuizen
instructed by Findlay & Tait
COUNSEL FOR RESPONDENT: Adv P A L Gamble
instructed by Syfret Godlonton-Fuller Moore Inc