Du Toit and Another v Mpumalanga Development Corporation (JA63/99) [2001] ZALAC 17 (15 February 2001)

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[2001] ZALAC 17
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Du Toit and Another v Mpumalanga Development Corporation (JA63/99) [2001] ZALAC 17 (15 February 2001)

IN THE
LABOUR APPEAL COURT OF SOUTH AFRICA
HELD
AT JOHANNESBURG
CASE NO: JA 63/99
In
the matter between:
C P J
DU TOIT
First Appellant
R
G HERBST
Second Appellant
and
MPUMALANGA
DEVELOPMENT CORPORATION
Respondent
___________________________________________________________________________
JUDGMENT
__________________________________________________________________________
MOGOENG
JA
INTRODUCTION
[1] This
is an appeal against a determination made by the Industrial Court in
terms of section 46(9) of the Labour Relations Act No.
28 of 1956.
The determination made was to the effect that the Appellants’
dismissal constituted an unfair labour practice on the
basis that it
was procedurally unfair. Apart from making a declaratory order that
the dismissal constituted an unfair labour practice,
the Industrial
Court declined to make an order of reinstatement or compensation. No
order as to costs was made. The Appellants
appeal against the
Industrial Court’s refusal to order reinstatement or compensation
and costs in their favour. There is no cross
appeal against the
declaratory order of the Industrial Court that the dismissal
constituted an unfair labour practice. The issues
before us are
whether:
(a) the
Industrial Court should have found that the Appellants’ dismissal
was substantively unfair;
(b) the
Appellants should have been reinstated or awarded compensation over
and above the severance packages they were paid;
(c) an
order for costs should have been made in the Appellants’ favour.
I will now
briefly set out the background to this case.
BACKGROUND
[2] The
first Appellant, Mr C.P.J du Toit, was the Chief Executive Officer
(“CEO”) of the KwaNdebele Development Corporation (“KNDC”)
for six years. The second Appellant, Mr R.G Herbst, was
the CEO of the Kangwane Economic Development Corporation (“KEDC”)
from 1987 to 1989 and later rejoined it in 1992 until 1996.
Mr Keevie, whose dismissal is not relevant to this appeal, was
the CEO of Agriwane. These CEO’s were the only link between the
Board of Directors of their respective parastatals and management.

These corporations were parastatal organisations created by statute
to advance separate development in the KwaNdebele and Kangwane
homelands. They were both incorporated in the Eastern Transvaal
Province which is now known as the Mpumalanga Province.
[3] As
early as 1993 the Appellants were aware of the fact that with the
advent of the new political dispensation, the KNDC and KEDC
would,
together with Agriwane, be incorporated into one development
corporation. They both attended meetings between March 1994
and
November 1995 at which it transpired that the KNDC, KEDC and Agriwane
would be disbanded and only one development corporation
would be
created in Mpumalanga which would be headed by a managing director.
The positions of the CEO’s of the homeland development
corporations
would become redundant. The Appellants understood and endorsed the
need for the amalgamation. They both played an
active role in this
transformation process. On numerous occasions the Appellants were
informed that the status quo could not be
maintained and that their
positions in the new structure that was to be created could not be
guaranteed.
[4] The
homeland development corporations were
de facto
dismantled in
July 1995. The members of the Board of Directors of these
corporations were relieved of their duties. The Appellants
reported
to an interim structure (Board of Directors) under the chairmanship
of Mr Eugene Nyathi and later to Mr Mabuza who was the
Executive
Chairman of the new MDC Board of Directors. Mr Nyathi stripped the
Appellants of all the authority and functions they
used to have and
delegated to them such authority and functions as he deemed necessary
for the day to day operations of the corporations.
Mr Mabuza
followed suit.
[5] The
Eastern Transvaal Development Corporation Act No. 4 of 1995 (“the
Act”) came into operation on 01 November 1995. Its
object was ‘to
provide for the establishment of the Eastern Transvaal Development
Corporation Limited, for the transformation,
restructuring and
amalgamation of existing development corporations and their
subsidiaries . . . and to complement the reconstruction
and
development program . . .’
[6] Section
40 of the Act repealed the KwaNdebele Corporations Act No. 2 of 1985
and the Kangwane Corporations Act No. 4 of 1985 which
created the
previous development corporations headed by the Appellants. The Act
changed the name of the new corporation, which is
referred to in
paragraph [5] above, to Mpumalanga Development Corporation.
[7] The
Respondent took transfer of all the assets and liabilities of the old
development corporations and all the employees of the
homeland
corporations were deemed to be employed by the Respondent subject to
rationalisation arrangements in terms of section 41(3)
of the Act.
[8] The
Act gave no security of tenure to any employees. Their contracts of
employment were deemed to be transferred from the old
development
corporations but subject to rationalisation arrangements. Though the
Act does not define what rationalisation arrangements
are, its long
title contemplates rationalisation to include transformation,
restructuring and amalgamation of existing development
corporations
and their subsidiaries.
[9] After
the Act came into operation, the Appellants continued to perform
functions delegated to them by Mr Mabuza. The Appellants
identified
two possible positions that they could occupy in the MDC. One was
that of a managing director, the other of regional
CEO’s. They
were not appointed to these positions. Although they applied for the
managing director position, and were short listed,
Mr Mogorosi was
eventually appointed to that position. Mr Mabuza explained that the
Appellants were not given or offered the positions
of regional CEO’s
because his vision of regional CEO’s did not include the
Appellants. The Appellants did not challenge the
failure of the
Respondent to appoint them to the positions of regional CEO’s.
[10] The
services of the Appellants were terminated by Mr Mogorosi on
14 March 1996. The reason he furnished for the Appellants’
dismissal is that the appointment of the managing director had
rendered their positions redundant and non-existent. He also
highlighted
the need to avoid a duplication of functions which would
result from their continued employment. He went on to determine
severance
packages for the Appellants which they accepted and spent.
[11] The
Industrial Court treated this case as a retrenchment case. The
Appellants contend that there was no valid reason for their
dismissal
and that they were not retrenched but merely dismissed for no valid
reason. The payment of severance packages which is
made only in
cases of retrenchment, the fact that the new corporation was
admittedly being transformed, and the reasons given by
Mr Mogorosi
for the Appellants’ dismissal have convinced me that they were
dismissed for operational reasons. Therefore I will
deal with this
matter on the basis that the Appellants were retrenched. I turn now
to consider the substantive fairness of the Appellants’
retrenchment.
SUBSTANTIVE
FAIRNESS
[12] The
Act amalgamated the three homeland development corporations and
established a new corporation to serve the needs of the whole
province. It also created the position of a managing director. This
position is the embodiment of the pre-existing CEO positions
in the
old corporations. When the new managing director was appointed he
not only assumed all the functions and responsibilities
the
Appellants used to have, but he also became the only official link
between the Board of the new corporation and management.
The
creation of the position of managing director and the appointment of
the incumbent rendered the positions of the Appellants redundant.
[13] In
so far as there was a possibility that some vacancy could arise for
regional CEO’s, those positions did not exist at the
time of the
Appellants’ dismissal. Furthermore, once those posts were created,
they would have been advertised and it is not the
Appellants’ case
that they applied but they were not appointed. It was not for the
Industrial Court or this Court to speculate
about whether or not the
Appellants should or could have been appointed if those vacancies
were advertised.
[14] I
am satisfied that the Appellants’ dismissal was substantively fair.
I deal with the relief sought herebelow.
THE
RELIEF SOUGHT
Reinstatement
[15] The
Appellants seek reinstatement with full back pay. In dealing with
this aspect it is important to bear in mind that the Industrial
Court, though it found that the dismissal of the Appellants was
procedurally unfair, had a discretion whether or not to reinstate
the
Appellants. (See
PACT v PAPER PRINTING WOOD & ALLIED
WORKERS’ UNION & OTHERS
(1994) 15 ILJ (A) at 78A-B).
[16] In
the exercise of that discretion the Court
a quo
obviously had
to take into account that the dismissal of the Appellants was
substantively fair, that the Appellants received generous
severance
packages, and the fact that the new corporation was in the process of
being dissolved must have weighed heavily against
making an order for
reinstatement. Furthermore, the Appellants did not, at the time of
their dismissal, occupy any positions to
which they could be
reinstated. Their positions had become redundant and non-existent.
[17] I
am satisfied that the Industrial Court cannot be faulted for not
reinstating the Appellants.
Compensation
[18] The
Appellants seek compensation as an alternative to reinstatement. The
first Appellant seeks compensation of R2 366 009.00
while the
second Appellant seeks compensation of R2 628 700.00.
[19] The
Appellants received severance packages. The first Appellant received
a package of R519 659.00 and the second Appellant
was paid
R381 000.00. They contend that the Industrial Court erred in
not awarding them compensation notwithstanding the fact
that the
Industrial Court found their dismissal to be procedurally unfair.
[20] The
effect of the reasoning of the Industrial Court is that, although the
Appellants were entitled to compensation, the severance
packages that
were paid to them were so generous that the compensation that it
would otherwise have awarded them would not have been
more than those
packages. The Industrial Court effectively treated those packages as
if they included a measure of compensation
and was satisfied that
they adequately addressed the complaint which could have been
addressed by an award of compensation. Clearly
the Court was
satisfied that the packages were so generous that no additional
compensation was necessary. I am satisfied that there
is no basis
for interfering with the decision of the Industrial Court in this
connection.
[21] The
appeal must fail on the merits.
COSTS
Costs
of the Industrial Court
[22] The
Appellants contend that the Industrial Court erred in not awarding
them costs. This submission ignores the fact that both
parties were
successful in the Industrial Court. The Appellants only succeeded to
prove that their dismissal was procedurally unfair.
The Respondent
successfully demonstrated that the Appellants’ dismissal was
substantively fair and that the Appellants were not
entitled to
compensation in addition to their generous severance packages. The
Appellants therefore attained some insignificant
victory whereas the
Respondent achieved substantial and meaningful success. I cannot
therefore see any basis for interfering with
the way the Industrial
Court exercised its discretion with respect to costs. The other
costs to consider are costs of this appeal.
Costs
of Appeal
[23] Three
matters are relevant to the issue of costs on this appeal. They both
have to do with the manner in which the Respondent’s
attorneys have
handled this appeal. The first is that, after the Appellants’
attorneys had served the Appellants’ application
for the
condonation of the late delivery of the record on them, they decided
not to file any affidavits to oppose the application.
They had not
perused the record to satisfy themselves that the record that had
been filed was complete and contained all evidence
and documents
which were material for the proper determination of the appeal. A
few days before the date of the hearing of the appeal,
the parties
filed a notice of the removal of the appeal from the roll. When this
notice was brought to the attention of the Judge
President, the Judge
President directed that any party who wanted the matter to be
postponed or removed from the roll would have
to make a substantive
application which would be heard on the date of the hearing of the
appeal. On the morning of the hearing of
the appeal, the Respondent
filed an application for the postponement of the appeal. The filing
of that application is the second
matter which is relevant to the
issue of costs.
[24] The
application for the postponement of the appeal was filed so late that
the Appellants were not afforded any opportunity to
prepare opposing
affidavits. The Court also had no time to read the application
papers before the matter could be called in Court.
The basis for the
application was that a certain exhibit “O” was missing from the
record. This caused the Court and, no doubt,
the Appellants’
attorneys and counsel immense inconvenience. Had the Respondent’s
attorneys examined the record soon after it
was served on them with a
view to determining whether it was complete and proper, they would
have decided whether exhibit “O”
was relevant. As it turned out
during argument, exhibit “O” was not material to either party’s
case and should not have formed
any basis for a postponement
application. Mr Tip withdrew the application after it transpired
that exhibit “O” was not material.
All this could have been
avoided if the Respondent’s attorneys had examined the record
timeously as it was their duty to do so.
If, in doing this, they
were hampered by the fact that other attorneys had represented the
Respondent in the Industrial Court, they
could have enlisted the
assistance of those attorneys. They failed to do so.
[25] The
third matter which is relevant to the issue of costs is the fact that
the Respondent filed its heads of argument late. Although
the Court
allowed the Respondent to oppose the appeal, this conduct on the
Respondent’s part caused further inconvenience to the
Court.
[26] The
Court views the manner in which the Respondent or its legal
representatives have handled the Respondent’s opposition to
the
appeal very seriously. I consider that this is a proper case in
which it should mark its disapproval with an appropriate order
of
costs. In my view an appropriate order of costs would be one in
terms of which: (a) the Respondent’s attorneys are ordered
not to
charge the Respondent any fee for perusing the record; (b) the
Respondent’s attorneys are ordered not to charge the Respondent
any
fee for the postponement application; (c) no order is made as to
costs.
[27] In
the result, I make the following order:
“
(a) The
appeal is dismissed;
(b) The
Respondent’s attorneys are not to charge the Respondent any fee in
connection with the perusal of the record;
(c) The
Respondent’s attorneys are not to charge the Respondent any fee for
the postponement application;
(d) There
will be no order as to costs.”
____________________
M.T.R.
MOGOENG
JUDGE
OF APPEAL
I agree
________________
R.M.M.
ZONDO
JUDGE
PRESIDENT
I
agree
_________________
J.
TRAVERSO
ACTING
JUDGE OF APPEAL
Appearances
Appearing
for the Appellant : K.S. Tip SC (with him F.A. Boda)
instructed
by
Maserumule Incorporated
Appearing
for the Respondent : E.S.J. van Graan
instructed by
Mac
Roberts de Villiers Lunnon & Tindall Inc.
Date
of hearing : 07 September 2000
Date
of judgment : 15 February 2001