HM Liebowitz (Pty) Ltd t/a Auto Industrial Centre Group of Companies v Fernandes (DA3/01) [2002] ZALAC 1 (1 February 2002)

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[2002] ZALAC 1
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HM Liebowitz (Pty) Ltd t/a Auto Industrial Centre Group of Companies v Fernandes (DA3/01) [2002] ZALAC 1; [2002] 4 BLLR 291 (LAC); (2002) 23 ILJ 278 (LAC) (1 February 2002)

IN THE LABOUR APPEAL COURT OF
SOUTH AFRICA
HELD IN DURBAN
Case no: DA3/01
In the appeal between
H.M. LIEBOWITZ (PTY) LTD t/a
THE
AUTO INDUSTRIAL CENTRE
GROUP
OF COMPANIES Appellant
and
LOUIS ALBERTO
FERNANDES Respondent
________________________________________________________________
JUDGEMENT
_______________________________________________________________
ZONDO JP
Introduction
[1] I have had the opportunity of
reading the judgement prepared by Page AJA which appears after this
judgement. I agree with him
that the appeal falls to be dismissed
with costs. The reasoning which Page AJA has relied upon to reach
that conclusion is based
almost entirely on considerations relating
to situations to which s194(1) of the Labour Relations Act, 1995 (Act
66 of 1995)(
“the
Act”
) applies
and on court decisions that deal with such situations whereas that
subsection does not apply to the case before us. Subsection
(2) of
sec 194 does. That judgement attaches insufficient weight to the
provisions of sec 194(2) of the Act and the fundamental differences
between the provisions of s194(1) and those of s194(2). Regrettably I
am unable to agree with that approach . In my view the correct
approach must take sufficient account of the specific provisions of
s194(2). It must also demonstrate a sufficient appreciation of
the
limited nature, if any, of the weight that may be attached to Court
decisions that relate to sec 194(1) when the case before
us is one in
which sec194(2) applies. I therefore set out below my reasons for the
conclusion that the appeal should be dismissed
with costs.
Background
[2] After
the appellant had dismissed the respondent from its employ, a dispute
arose between the two on whether that dismissal was
fair and what
relief, if any, the respondent was entitled to if it was unfair. In
adjudicating the dispute the Labour Court concluded
that the
dismissal was both substantively and procedurally unfair. Substantive
unfairness was based on the appellant having failed
to prove that
there was a fair reason related to the respondent’s conduct,
capacity or based on the appellant’s operational requirements
justifying the respondent’s dismissal. It ordered the appellant to
pay the respondent compensation in an amount equal to twelve
months’
remuneration, severance pay and costs. As the respondent’s monthly
remuneration was R15000,00 per month the compensation
totalled R180
000,00. At the time of the trial in the Labour Court, a period of
more than 12 months had expired since the dismissal
. The appellant
has appealed to this Court against only the order awarding the
respondent compensation and costs. It has not challenged
the finding
that the dismissal was both substantively and procedurally unfair.
The appeal
[3] The
appellant contends that the Court a quo should not have awarded any
compensation to the respondent. In other words, it should
have
refused to exercise its discretion in favour of awarding him
compensation. For this contention the appellant relies on certain
circumstances of this case. Page AJA has set these out in par 4 of
his judgement. For convenience I also set them out. They are that:
The respondent was employed by
the appellant from April 1997 to the end of May 1998 when the notice
of termination given to him
on 17 April 1998 expired.
He obtained alternative
employment on 1
st
August 1998, and was thus only unemployed for two months.
The respondent challenged his
dismissal and the various attempts to resolve the dispute occupied
more than 12 months before the
matter came to trial before the
Labour Court.
As there was no suitable post
available for respondent, the appellant was unable to resort to the
expedient of reinstating him in
order to avoid the payment of R180
000,00 which
would otherwise follow in terms of s194(2) if his dismissal was
found to be unfair in terms of that section.
In the premises the appellant
made the tender of R75 000,00 already mentioned, which it calculated
to be a more than adequate compensation,
not only for the
patrimonial loss suffered by the respondent, but also as solatium
for whatever injury respondent may have suffered
if his dismissal
proved to be unfair.
The respondent refused this
tender. Appellant contends that in so doing, he acted unreasonably
to such a degree as to justify the
Court in refusing to award him
compensation in terms of the section.
[4] Section 193 of the Act makes
provision for remedies that the Labour Court (or an arbitrator in the
case of arbitration proceedings)
may grant if it finds that a
dismissal is unfair. It provides that
“
the Labour Court or the arbitrator may:
order the employer to
reinstate the employee from any date not earlier than the date of
dismissal;
order the employer to re -
employ the employee, either in the
work in which
the employee was employed before the dismissal or in other
reasonably suitable work on any terms and from any date
not earlier
than the date of dismissal; or
order the employer to pay
compensation to the employee”.
[5] Sec 193(3) gives the Labour
Court power, in addition to any order that it may make in terms of
ss(1), to make any other order
that it considers appropriate in the
circumstances when the case before it is one where it has found the
dismissal to be automatically
unfair or if the case before it relates
to a dismissal based on operational requirements.
[6] Sec
194(1) - (3) reads thus:-
“
(1) If a dismissal is
unfair only because the employer did not follow a fair procedure,
compensation must be equal to the remuneration
that the employee
would have been paid between the date of dismissal and the last day
of the hearing of the arbitration or adjudication,
as the case may
be, calculated at the employee’s rate of remuneration on the date
of dismissal. Compensation may, however, not
be awarded in respect of
any unreasonable period of delay that was caused by the employee in
initiating a claim.
The compensation awarded to an
employee whose dismissal is found to be unfair because the employer
did not prove that the reason
for dismissal was a fair reason
related to the employee’s conduct, capacity or based on the
employer’s operational requirements,
must be just and equitable in
all the circumstances, but not less than the amount specified in
subsection (1), and not more than
the equivalent of 12 months’
remuneration calculated at the employee’s rate of remuneration on
the date of dismissal.
The compensation awarded to an
employee whose dismissal is automatically unfair must be just and
equitable in all the circumstances,
but not more than the equivalent
of 24 months’ remuneration calculated at the employee’s rate of
remuneration on the date of
dismissal.”
[7] Section 194 deals with limits
on compensation. Ss(1) deals with a case where the dismissal is
unfair only because the employer
did not follow a fair procedure.
Ss(2) deals with a case where the dismissal has been found to be
unfair
“because
the employer did not prove that the reason for dismissal was a fair
reason related to the employee’s conduct, capacity
or based on the
employer’s operational requirements”
.
Ss(3) deals with a case where the dismissal is automatically unfair.
[8] This matter raises the
question of whether the Labour Court, or, an arbitrator in the case
of arbitration proceedings, has a discretion
to refuse to award
compensation to an employee whose dismissal it has found to be unfair
by reason of the fact that the employer
has failed to prove that
there was a fair reason for the dismissal and in respect of which it
has found that the employer did not
follow a fair procedure. If the
Court has such a discretion, the next question that this case raises
is that of what factors are
relevant to the exercise of that
discretion. This Court has not previously had occasion to pronounce
on this issue. The decision
of this Court in
Johnson
and Johnson(Pty) Ltd v Chemical Workers Industrial Union (1999) 20
ILJ 89 (LAC)
did
not deal with such a case. It dealt with a case where the only reason
why the dismissal had been found unfair was that the employer
had not
followed any fair procedure in dismissing the employees. The same
applies to the two other decisions of this Court referred
to in Page
AJA’s judgement, namely,
Lorentzen
v Sanachem (Pty)
Ltd (2000) 21 ILJ
1075 (LAC)
and
Alpha Plant &
Services (Pty) Ltd v Simmonds & Others (2001) 22 ILJ 357 (LAC)
.
The decisions of the Labour Court that are referred to in Page AJA’s
judgement, namely
Whall
v
Brandadd
Marketing (Pty) Ltd (1999) 20 ILJ 1314 (LC), Auy der Hein v
University of Cape Town (2000) 21 ILJ 178 (LC
)
and
Scribante v
Avgold
Ltd
(2000) 21 ILJ
1864 (LC),
also
dealt with the same type of case.
[9] The
question that arises in this matter is: under which subsection of
s194 does a case fall where the dismissal is unfair both
because the
employer has failed to prove a fair reason to dismiss related to the
employee’s conduct or capacity or based on the
employer’s
operational requirements and where no fair procedure was followed?
Obviously such a case does not fall under ss(1)
because, for a case
to fall under ss(1) the position must be that there is only one
reason why the dismissal is unfair and it must
be that the employer
did not follow a fair procedure. Where there are two or more reasons
rendering the dismissal unfair, ss(1) is
not applicable. That is
because of the use of the word “only” in the subsection.
[10] Does
such a case fall under ss (2) or ss(3) or both? I think that only a
case where the dismissal is an automatically unfair
dismissal falls
under ss (3) despite the fact that the reason for such dismissal also
constitutes no fair reason to dismiss. This
is because a special
category has been provided for such cases, namely, ss (3). Neither
ss(1) nor ss(2) applies to such a case.
In my view a case such as
this one, where the dismissal is unfair both because the employer has
failed to prove the existence of
a fair reason to dismiss and because
the employer has failed to follow a fair procedure falls under the
provisions of ss(2). The
language used in ss(1) excludes a case where
there are two or more reasons rendering the dismissal unfair. It also
excludes those
cases where, although there is one reason why the
dismissal is unfair, such reason is not the employer’s failure to
follow a fair
procedure. There is no exclusion in ss(2) of a case
where the absence of a fair reason to dismiss is not the only reason
rendering
the dismissal unfair. This is, in my judgement, the
significance of the absence of the word “only” in ss(2) which is
present
in ss(1).
[11] This
matter was argued on the basis that the Court a quo had a discretion
to refuse to award compensation. I am prepared to deal
with the
matter on that basis, too. In passing I mention that it seems to me
that it will be very difficult to find a case where,
after finding a
dismissal to have been unfair both because there was no fair reason
to dismiss the employee and because the employer
failed to follow a
fair procedure, the Court or an arbitrator would nevertheless
consider it appropriate to exercise its discretion
against awarding
the employee compensation or reinstatement.
[12] Subsections
(1) and (2) of sec194 deal with different situations and there are
fundamental differences between the two subsections.
The differences
between the two subsections are the following:-
(a) ss(1) deals with a case where
the employer had a fair reason to dismiss but has failed to follow a
fair procedure whereas ss(2)
deals with a case where the employer has
no fair reason to dismiss; this means that in the case of ss (1), if
the reason for the
dismissal is misconduct, the employee has been
proved to be guilty of misconduct of sufficient seriousness to
justify his dismissal
but the employer failed to follow a fair
procedure, whereas, in the case of ss(2), where, for example, the
reason for dismissal was
based on the employee’s alleged
misconduct, it means that the employee is innocent of any misconduct
of so serious a nature as
to justify his dismissal;
whereas ss(1) is limited to a
case where the unfairness of the dismissal is due to the employer’s
failure to follow a fair procedure,
ss(2) is not limited to cases
where the unfairness relates only to the absence of a fair reason to
dismiss;
whereas ss(1) is limited to cases
where the unfairness is based on a single reason and it is the one
specified therein, there is
no such limitation in ss(2);
whereas ss(1) specifies one
formula that ensures that, if the Court or the arbitrator exercises
its discretion in favour of awarding
compensation, the amount to be
awarded is certain, this is not the case with ss(2).
in a ss(1) situation the remedy
of reinstatement is not competent
(see
Mzeku & Others v Volkswagen SA (Pty) Ltd & Other
2001 (4) SA
1009
(LAC par 79 at 1037F
)
whereas in a ss(2) situation reinstalment is not only competent but
it is the primary remedy (see s 193(2)) and Mzeku’s case,
supra,
at paras 72 - 78;)
whereas ss(1) does not contain
any express requirement that compensation awarded to an employee
under it must be
“just
and
equitable in all the circumstances”
,
ss(2) contains such a requirement;
whereas in ss(1) an express
provision is made to the effect that compensation may not be awarded
in respect of any unreasonable
period of delay that is caused by the
employee in initiating or prosecuting a claim, there is no express
provision to such effect
in ss(2); of course, this does not mean
that under ss(2) an employee may be awarded compensation for an
unreasonable period of
delay caused by him because, subject to the
minimum prescribed in the subsection, the employee could be deprived
of compensation
for such period on the basis that to award him
compensation for such period would offend the requirement of the
subsection that
compensation must be “
just
and equitable in all the circumstances”.
[13] In
considering whether the factors relied upon by the appellant for its
contention that the Court a quo should have refused to
award
compensation are relevant and what weight, if any, should be given to
them, the Court must, in my judgement, consider the above
fundamental
differences between the two subsections and, make its decision on a
full appreciation of their role in ss(2). What may
have been said in
decisions dealing with ss(1) is of very limited assistance, if any,
in making such a decision, although, quite
obviously, one cannot deal
with any one of the three subsections without bearing the others in
mind.
[14] One
of the grounds on which the appellant relies to contend that the
Court a quo should have exercised its discretion against
awarding any
compensation to the respondent is the duration of the respondent’s
employment with the appellant at the time of his
dismissal. The
respondent had been employed for about a year when he was dismissed.
I think the appellant’s point is that, if it
appears that the
compensation that must be awarded, if any is to be awarded, is a
large amount, the Court must bear in mind that
the respondent had
been in the appellant’s employ for a limited period and, should
rather not be awarded any compensation at all.
Is the length of
service relevant to such a question?
[15] Although
length of service may be relevant to a case where the only reason why
the dismissal is unfair is that the employer failed
to follow a fair
procedure, I can see no reason why it would be relevant in a case
where there existed no fair reason for the employer
to dismiss the
employee in the first place. The illogicality of the proposition in a
case to which ss(2) applies is obvious. To regard
length of service
as relevant would amount to letting the employer benefit from his own
unacceptable conduct because the employer
would dismiss the employee
for no fair reason before he can acquire a long service that may be
taken into account to the employer’s
prejudice if the employee is
dismissed later rather than sooner. In a case where the dismissal is
unfair only because the employer
did not follow a fair procedure, one
is dealing with an employee who did not deserve to continue in the
employ of the employer in
any event because there was a fair reason
to dismiss such a employee and the employer only got the procedure
wrong whereas in a ss(2)
case one is dealing with an employee who
should not have been dismissed in the first place and who should have
been allowed to continue
in the employer’s employ. I therefore
conclude that in this case the respondent’s length of service was
irrelevant and the Court
a quo was correct in not taking it into
account.
[16] Another
ground on which the appellant relied for its contention that the
Court a quo should have refused to award compensation
is that the
respondent obtained alternative employment within two months of
dismissal which means that he was unemployed only for
two months. It
is this contention that raises the question of the relevance of
patrimonial loss to the question whether the Court
a quo should have
refused to award compensation.
[17] Page AJA expresses the view
that the reasoning which has led the Labour Court and this Court to
the conclusions that they have
reached in the decisions he refers to
“is helpful in
determining the circumstances under which the Court should exercise
its discretion in favour of, or against, awarding
compensation”
.
I am unable to agree with this view - at least not without
qualification. As I have already said, those decisions relate to
ss(1)
situations and not ss(2) situations and, for that reason, the
reasoning in those decisions is, in my view, of very limited
assistance,
if any.
[18] The view is also expressed
that
“ the
ruling by
this
Court that patrimonial loss is irrelevant to the exercise of this
Court’s discretion has enjoyed almost general acceptance
and has
never been reversed”
.
It is also suggested that that ruling
“
remains
binding
on this Court unless it is shown to be clearly wrong which has not
even been contended by the appellant
”.
I am also unable to share the view that the ruling of this Court in
Johnson and
Johnson
that
patrimonial loss is irrelevant to the exercise of the discretion to
award or not to award compensation is binding on this Court
in this
matter before us. In
Johnson and
Johnson
this Court was dealing with a ss(1) situation whereas in the case
before us ss(1) has no application. I have been unable to find
any
decisions where this Court has made a ruling on the relevance or
otherwise of patrimonial loss in a ss(2) situation. Obviously,
in
dealing with a ss(2) situation, one cannot disregard the provisions
of ss(1) altogether but that is very different from saying
that a
ruling made in relation to ss(1) is binding on us when we deal with a
ss(2) situation.
[19] It has also been said that,
although the ruling that patrimonial loss is irrelevant to the
exercise of the discretion whether
or not to award compensation was
enunciated with reference to procedural unfairness as contemplated by
s194(1),
“it
must apply a fortiori to
substantive
unfairness
contemplated in s 194(2) which incorporates the minimum criterion
laid down by ss(1)”
.
As already indicated, I am unable to share this view. In my view the
question whether or not patrimonial loss is relevant to the
exercise
of the discretion to award or not to award compensation in a ss(2)
situation cannot be decided on the basis of the provisions
of ss(1)
and the decisions of courts relating to that subsection with little
or no regard being had to the provisions of ss(2). Indeed,
the
provisions of ss(2) are pivotal to such a decision, particularly in
the light of the fundamental differences that exist between
the two
subsections as already shown above.
[20] I have previously had
occasion, sitting in the Labour Court, to deal with the provisions of
s194(1),(2) and (3) extensively.
This was in
Adams
& Others v Coin Security Group (Pty) Ltd (1999) 20 ILJ 1192 (LC)
at paras 91 (p 1218) to 100 (p 1220), in particular at paras 94 to
100. The main concern about s194(1) is that the only discretion
that
the Court has is whether to award or not to award compensation and
that, if it exercises its discretion in favour of awarding
compensation, it has no power to determine the amount but must award
the amount of compensation that the statutory formula dictates
should
be awarded to the employee even if such amount is much higher than
the employee’s actual loss or is much higher than the
amount that
the Court would have considered just and equitable to award in the
particular circumstances.
[21] In dealing with the question
of the discretion whether to award or not to award compensation in a
ss(2) situation, three scenarios
are contemplated in ss(2). The first
scenario is where the period that has lapsed from the date of
dismissal to the last day of the
hearing is less than 12 months e.g.
if it is one month. In such a case the minimum compensation that is
awardable to the employee
is one month’s remuneration and the
maximum awardable is 12 months remuneration. If, in such a case, the
employee seeks the minimum
compensation or if the Court is seeking to
award the minimum compensation, the requirement in ss(2) that
compensation that is awarded
must be
“ just and equitable in all the circumstances”
is
of no relevance because a lesser amount than that cannot be awarded.
[22] The second scenario is where
the period from the date of dismissal to the last day of the hearing
is less than 12 months and
the compensation claimed or sought to be
awarded is above the minimum but less than the maximum. In such a
case it seems to me that
patrimonial loss is relevant because, if no
patrimonial loss was suffered, an award of compensation exceeding the
minimum may offend
the requirement of the subsection that
compensation awarded must be
“just
and equitable in all the
circumstances”.
This does not necessarily mean that the absence of patrimonial loss
would operate as a bar to the Court awarding compensation exceeding
the minimum. Indeed, there may well be circumstances which satisfy
the Court that, despite the absence of patrimonial loss, it would
be
“just and
equitable in all the circumstances
”
for the Court to award the employee compensation that goes beyond the
minimum - even upto the maximum.
[23] The
third scenario is where the period that has lapsed from the date of
dismissal to the last day of hearing is 12 months or
more. In such a
case the only compensation that can be awarded, if compensation is
awarded, constitutes both the minimum and the
maximum. In that case,
which is the same as the case before us, the application of ss(2)
will produce the same result, namely, the
same amount of
compensation. Whether one regards that amount of compensation as the
minimum or as the maximum makes no difference.
In that case
patrimonial loss is irrelevant. In the light of all this I conclude
that, on the facts of this case, the fact that the
respondent only
suffered loss of income of two months is irrelevant. The appellant’s
contention that the Court a quo should have
taken this into account
falls to be rejected.
[24] The
appellant also contended that the Court a quo should have taken into
account the fact that attempts to resolve the dispute
had taken more
than 12 months. This contention was not directed at blaming the delay
on the respondent. That being the case, I can
see no reason why it
can be said that the delay should operate so as to prejudice the
respondent only. The appellant also contended
that the Court a quo
should have taken into account that there was no suitable post
available for the respondent and, as a result,
the appellant could
not offer the respondent reinstatement if it sought to avoid the
payment of the amount of R180 000,00. This contention
is inconsistent
with the finding of the Court a quo that the appellant had no fair
reason to dismiss the respondent. If the Court
a quo had been
satisfied that the appellant had no suitable post in which it could
have continued to employ the respondent, it would
not have held that
the appellant had failed to show the existence of a fair reason to
dismiss the respondent. As the correctness
of this finding of the
Court a quo was not challenged on appeal, the appeal must be decided
on the basis that the appellant had no
fair reason to dismiss the
respondent and that the respondent could have continued in the
appellant’s employ.
[25] The appellant also referred
to the fact that it made the tender of R75 000,00 to the respondent
at the commencement of the trial
in the Court a quo. In this regard
the appellant made two submissions. The one was that such amount was
more than adequate compensation
not only for the patrimonial loss
suffered by the respondent but also as a solatium for whatever injury
the respondent may have suffered.
The second was that in refusing
such
“tender”,
the respondent acted so unreasonably that the Court should have
refused to award him any compensation. As I have found that, on
the
facts of this matter, patrimonial loss was irrelevant, the fact that
the amount of the
“tender”
was more than the patrimonial loss suffered by the respondent is also
irrelevant and could not have been relied upon by the Court
a quo to
refuse to award the respondent compensation.
[26] I
also do not agree that the respondent acted unreasonably in rejecting
the so called “tender” of R75 000,00. In the first
place the
appellant had had no fair reason to dismiss the respondent. In any
event by its very conduct of offering the respondent
some money, the
appellant was, in my view, intimating both to the respondent and the
Court a quo that it did not think that this
was a case where the
respondent deserved no compensation at all. If the position (which
the appellant seems by its conduct to have
shared) was that the
respondent did deserve compensation, then, on the facts of this
matter, the amount he was entitled to was R180
000,00. Neither less
nor more. If he had sufficient confidence in his case, as he
obviously had, he was entitled in those circumstances
to reject the
so - called “tender” and pursue his claim in court. In these
circumstances I agree with the order made by Page
AJA that the appeal
be dismissed with costs.
RMM Zondo
Judge
President
I agree.
C.R. Nicholson
Judge of
Appeal
Appearance:
For
Appellant: Adv. M. Pillemer SC
Instructed
by: Sheptone & Wylie Attorneys
For
Respondent: Adv. M.J.D. Wallis SC
Instructed
by: Deneys Reitz Attorneys Inc
Date of
Judgement: 1 February 2002