Stocks Civil Engineering (Pty) Ltd v Rip NO and Another (JA52/00) [2002] ZALAC 3 (1 February 2002)

About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Labour Appeal Court
SAFLII
>>
Databases
>>
South Africa: Labour Appeal Court
>>
2002
>>
[2002] ZALAC 3
|

|

Stocks Civil Engineering (Pty) Ltd v Rip NO and Another (JA52/00) [2002] ZALAC 3; [2002] 3 BLLR 189 (LAC); (2002) 23 ILJ 358 (LAC) (1 February 2002)

IN
THE LABOUR APPEAL COURT OF SOUTH AFRICA
HELD
AT JOHANNESBURG
IN
THE LABOUR APPEAL COURT OF SOUTH AFRICA
HELD AT
JOHANNESBURG
Case no:
JA52/00
In
the matter between
Stocks
Civil Engineering (Pty) Ltd
Appellant
and
Advocate
M M Rip NO
First Respondent
M
M Murray
Second Respondent
JUDGMENT
VAN
DIJKHORST AJA:
Introduction
This is an appeal against a judgment of the
Labour Court dismissing the appellant’s review application with
costs. In that court
the appellant sought to review the award
handed down by the first respondent sitting as an arbitrator in
accordance with a private
arbitration agreement between the parties
in a dispute relating to the second respondent’s alleged dismissal
by the appellant.
The appellant’s case was that the second
respondent’s services were terminated by agreement. Despite the
fact that the sole
witness in the matter, Mr Saxby, managing
director of the appellant, who was found to be a good and reliable
witness, testified
to the contrary, the arbitrator found that the
second respondent had been dismissed and that the onus placed on an
employer by
section 192(2) of the Labour Relations Act 66 of 1995
(the LRA) to prove that any dismissal was fair had not been
discharged. He
found that the dismissal of the second respondent was
both substantively and procedurally unfair. The arbitrator declined
to reinstate
the second respondent but awarded him compensation in
the sum of R511 573 which sum represents the remuneration the second
respondent
would have been paid from the day he left the appellant’s
employment until the arbitration was concluded.
In the review application the appellant
contended that the manner in which the arbitrator reached his
findings on the merits and
on awarding relief, rendered his award
reviewable. The arbitrator, first respondent, did not oppose the
review and left the matter
in the hands of the Court.
Jurisdiction
The second respondent, who opposed the
application on the merits, took a jurisdictional point in limine
that the dispute referred
to arbitration related to the fairness of
the dismissal for operational reasons and accordingly is not a
dispute as contemplated
in the provisions of section 157(3) of the
LRA.
The Labour Court rejected the second
respondent’s contention that it did not have jurisdiction to hear
the matter, heard it,
and found that the arbitrator’s decision on
both the merits and the relief awarded was not reviewable.
Section 157(3) of the LRA provides: “
Any reference to the court in the Arbitration Act, 1965 (Act 42 0f
1965), must be interpreted
as referring to the Labour Court when an
arbitration is conducted under that Act in respect of any dispute
that may be referred
to arbitration in terms of this Act.” The
court of review in respect of any dispute relating to an arbitration
in terms of the
Arbitration Act is
therefore the Labour Court when
the dispute may be referred to arbitration under the
Labour
Relations Act of 1995
.
In the present case the reason for the
dismissal was based on the employer’s operational requirements and
the dispute must therefore
be adjudicated in the Labour Court. But
in
section 141(1)
of the LRA it is provided that if the parties to
such a dispute prefer to have the matter arbitrated by the
Commission for Conciliation,
Mediation and Arbitration, the latter
is obliged to arbitrate the dispute. The dispute is therefore a
dispute “that may be referred
to arbitration in terms of this act”
within the contemplation of
section 157(3)
of the LRA. cf Eskom vs
Hiemstra NO and others (1999) 20 ILJ 2364 (LAC) 2365 I-2367A (paras
8-14); Orange Toyota (Kimberley) v
van der Walt & others
2001
(1) BLLR 85
(LC); Transnet Ltd v HOSPERSA & another 1999 20 ILJ
1293 (LC) and Shoprite Checkers (Pty) Ltd v Ramdaw NO & others
2000 7 BLLR 835
(LC) paras 64, 74. The decision of the Labour Court
that it had jurisdiction to hear the review application was
therefore correct.
The appellant’s counsel abandoned this
jurisdictional objection on appeal.
Interpretation of
section 194
The arbitrator’s decision to award
compensation in the sum of R511 573 to the second respondent was
based on his understanding
that
section 194
(2) of the LRA provides
that the compensation awarded to an employee, whose dismissal is
found to be substantively unfair, must
not be “less than the
amount specified in subsection (1)” of
section 194
, namely “
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”.
It is now accepted law that when an
arbitrator has to apply
section 194(1)
, he has to exercise a
judicial discretion as to whether or not to award compensation.
Johnson & Johnson (Pty) Ltd vs CWIU
(1998) 12 BLLR 1209
(LAC);
Lorentzen vs Sanacem (Pty) Ltd
(2000) 7 BLLR 763
(LAC); Mkhonto vs
Ford NO and others
(2000) 7 BLLR 768
(LAC); Alpha Plant and Services
(Pty) Ltd vs Simmonds and others
(2001) 3 BLLR 261
(LAC). Although
these cases dealt with procedural unfairness, there is no reason not
to apply the reasoning therein to cases
of substantive unfairness
and the compensation payable in respect thereof in terms of
section
194(2).
The reasoning in Johnson & Johnson’s case (paras 38,
39, 40) is based on the provisions of
section 158(1)(a)(v)
of the
LRA in terms of which the Labour Court “may make
any appropriate
order,
including an award of compensation”. It is only when the
appropriate order is an award of compensation that the provisions
of
section 194
become operative. In the case of substantive unfairness
in the dismissal the latter section requires that such amount must
be just
and equitable in all the circumstances [and then sets
certain parameters]. It follows that the Court, after making its
finding
that the dismissal was substantively unfair, has a
discretion to award compensation or not. This discretion has to be
exercised
judicially in the light of what is just and equitable.
Only after this discretion has been exercised in favour of an award
of compensation,
must the Court direct its mind to the application
of the provisions of section194.
Evidence
Is the arbitrator’s decision that the
second respondent had been dismissed reviewable? The second
respondent elected not to give
evidence. The sole witness in the
case was Mr Saxby, who testified for the appellant. The arbitrator
found him to be an honest
and open witness who left a favourable
impression. His evidence was that the appellant’s company which
deals with civil engineering
projects such as toll roads, road
construction, the building of bridges and waterworks, and township
development, acquired the
services of the second respondent for the
expressed purpose of expanding its operations into Africa. A new
division was created
and the second respondent was employed to lead
it. He commenced his services on 1 September 1997 at a remuneration
far in excess
of that of Mr Saxby himself, who was the managing
director. The second respondent was regarded as one of the senior
executives
of the appellant and the prospects of his division were
deemed to be extremely favourable.
It, however, transpired that the second
respondent did not deliver the goods. The Stocks International
Division was fast losing
money. This aspect became a concern with
the board of directors and had been enjoying attention since May
1998. At the 24 July
1998 board of directors meeting it was
pertinently discussed that the issue now had to be dealt with and
that matters could not
continue on this basis. Mr Saxby stated that
he believed the Stocks International Division should be closed down
and that the second
respondent should leave. He arranged a meeting
with the second respondent on 29 July 1998 with the specific
intention to discuss
this view with him. The discussion was amicable
and the second respondent agreed that the division was making a
loss and should
be closed down. Mr Saxby then requested the second
respondent to come back with a proposal of what he believed to be
due to him.
A second meeting took place on 31 July 1998. At this
time the discussion centered around the paying out to the second
respondent
of whatever he was entitled to. The latter proposed
payments set out on exhibit B14, a document headed “Termination
Benefits”.
The negotiations appeared to break down as Mr Saxby was
happy with the figures presented to him save that he required
repayment
of a R250 000 commencement loan which had been advanced to
the second respondent. This would wipe out the benefits the second
respondent
claimed he was entitled to. The second respondent’s
attitude was that this was not a loan but a joining bonus which was
not repayable.
This was the sole bone of contention. No agreement
was reached between the parties as to what was due to the second
respondent
upon termination of his employment.
Appellant’s contentions
The Labour Court correctly found that the
arbitrator never considered whether or not the second respondent
should receive no compensation
at all. The appellant’s complaint
is that it is equally clear that the arbitrator never considered
whether it would be “ just
and equitable in all the circumstances”
to award compensation “less than the amount specified in
subsection (1)”. It is
further argued that in terms of the
arbitration agreement the arbitrator in determining the dispute was
given “powers equivalent
to that of a judge in the Labour Court”.
In the event that he found the dismissal unfair, he was accordingly
enjoined to apply
sections 193
and
194
of the LRA. It is submitted
that the arbitrator in awarding compensation never exercised the
powers he was enjoined to exercise
and that he therefore in awarding
the sum mentioned to the second respondent acted outside his powers.
Therefore, so it is contended,
his decision amounts to a reviewable
irregularity within the contemplation of
section 33(1)(b)
of the
Arbitration Act 42 of 1965
and should be set aside. It is further
submitted that the manner in which the arbitrator decided to award
compensation to the second
respondent amounts to a latent gross
irregularity in the proceedings. (cf Goldfields Investment Ltd vs
City Council of Johannesburg
1938 TPD 551
at 560-561). The
arbitrator’s misunderstanding of the provisions of
section 194
(2)
resulted in him “misconceiving the nature of the enquiry, or of
(his) duties in connection therewith.” For this submission
further
reference is made to Paper, Printing, Wood and Allied Workers Union
vs Pienaar NO
[1993] ZASCA 98
;
1993 (4) SA 621
(A) at 638G-J and Toyota SA Motors
(Pty) Ltd vs Radebe (2000) 21 ILJ 340 (LAC) at 351F-352A, 354E-355H.
It is further submitted
that had the arbitrator acted properly
within his terms of reference he would have exercised his discretion
against awarding the
compensation. He should have taken into account
factors such as the fact that the second respondent joined the
appellant less than
a year before the termination of his services;
that he had found alternative employment soon after the termination
of his services;
that he had refused to repay the R250 000
commencement loan/joining bonus he had received from the appellant;
that he was offered
payment of his full contractual notice period
despite the fact that he was not required to work; that the
appellant had not attempted
to comply with the requirements of
section 189 of the Act because it in good faith held the view that
the services of the second
respondent had been terminated by
consent; that the second respondent did nothing to alert the
appellant to the fact that he would
later contend that the appellant
ought to have followed the procedures in section 189; and that as
head of the international division
the second respondent was at
least partially responsible for the fact that it was closed down.
This was the argument.
Criticism of arbitrator’s approach
Against this background the arbitrator
comes to the following conclusion. “ I cannot accordingly find
that a consensual agreement
to terminate the employment relationship
was ever brokered or reached between the parties. It was argued on
behalf of the second
respondent that the applicant in accepting that
he should leave, had in fact agreed to leave, and the fact that the
financial remuneration
could later not be resolved, does not detract
from this alleged agreement. I find this concept very difficult to
accept in that
clearly the applicant would not agree to terminate
his employment unless he was satisfied with the remunerative
benefits that would
go with such termination. The two are
inseparable and it is improbable that the applicant agreed to the
one without consensus on
the other. Section 192 (2) of the act
places an onus on the employer to prove that any dismissal is fair.
In this regard the respondent
has not discharged this onus.”
This finding by the arbitrator flies in the
face of the evidence which is that there was an agreement that the
second respondent
would leave, that he in fact left and that he was
paid out three months salary in lieu of notice.
In my view the reasoning of the arbitrator
set out above is suspect. The conclusion that the second respondent
would not have agreed
to terminate his employment unless he was
satisfied with the remunerative benefits that would go with such
termination, is wrong
in view of the fact that there was no
disagreement about the termination benefits and the sole dissent was
about the commencement
loan/bonus. It appears that the arbitrator
did not consider that there was an onus on the second respondent to
prove that he had
been dismissed ( section 192(1)) before there
rested an onus on the appellant in terms of section 192 (2) of the
LRA to prove that
such dismissal was fair.
Counsel for the respondent sought support
for the finding that the respondent had been dismissed in what she
argued were concessions
under cross-examination by Mr Saxby that
there was no agreement. Read in their proper context they do not
support that submission.
They relate to the absence of agreement on
the monetary dispute, not to the consensus on respondent’s
departure. It is significant
that the arbitrator does not rely on
these alleged concessions for his finding, which he would inevitably
have done had he thought
that they meant what counsel contends. In
fact counsel’s cross-examination was at variance with a letter
written by her client
on 5 August 1998 to Mr Saxby in which he
stated: “In our talks ... we ... agreed the following: 1 Due to
Stocks Civil Engineering’s
(SCE) intention to reduce its
commitments and activities cross-border, the International
Division’s activities would be discontinued.
Therefore my contract
with SCE would be rescinded on 31st July 1998.” The remainder of
this long letter deals with winding up
arrangements and emoluments
payable. The arbitrator did not refer to this letter.
Procedural unfairness
The arbitrator found that the dismissal was
both procedurally and “substantially” (sic) unfair. If there was
a dismissal it
was for operational reasons and the prescripts of
section 189 had not been followed. But was it necessarily for that
reason procedurally
unfair? A “mechanical checklist approach”
was frowned upon in Johnson
& Johnson’s case (para 29) and it was stated that the proper
approach is to ascertain whether
the purpose of the section, namely
the occurrence of a joint consensus-seeking process, has been
achieved. Section 189 requires
consultation. That happened in the
present case. The section requires that consensus must be sought on
appropriate measures to
avoid dismissals, change the timing and
mitigate the adverse effects. There was consensus. It was that the
second respondent would
leave immediately but receive three months
remuneration. The section requires that consensus be sought on
severance pay. The second
respondent produced his proposals thereon
in exhibit B14 and they were acceptable to the appellant. The
section requires that the
employer must disclose all relevant
information. In this case the employee had the best information at
his disposal. He was the
head of the division concerned. He never
asked for additional information. It was accepted by both parties
that he could not be
accommodated elsewhere in the group. He never
raised this possibility. He left and took up employment elsewhere.
In these circumstances
the purpose of section 189 was achieved. It
would be highly technical and wrong to hold that the section has not
been materially
complied with. In my view the arbitrator wrongly
concluded that the procedure had been unfair.
Substantive unfairness
Was the dismissal substantively unfair?
The international division was running at a loss. There was
consensus that it should be
closed down. The second respondent
accepted that he had no further role to play in the appellant’s
operations. He did not suggest
that he be elsewhere employed within
the appellant’s organization. In fact at his remuneration, far in
excess of that of the
managing director, that would have been
impossible. He accepted the situation and sought and immediately
obtained other employment.
In these circumstances I find it
difficult to accept that the dismissal, if such it was, was
substantively unfair. The finding
of the arbitrator that the
closing of the Stocks International Division was simply a method of
“losing” the second respondent
has no factual basis.
No reinstatement
The arbitrator found that this was not a
matter where reinstatement is the correct option. I agree.
Arbitrator’s calculation
The arbitrator thereupon determined the
value of the monthly remuneration of the second respondent at R69
556.00, quoted section
194 of the LRA, stated that it dealt with the
limits on compensation, found that section 194 (2) is applicable in
view of his finding
that the employee’s dismissal was both
substantively and procedurally unfair, and found that he accordingly
had to make an award
equal to at least that set out in section 194
(1) and not more than the equivalent of 12 months remuneration. He
added that such
an award, however, must be just and equitable in
all the circumstances.
The arbitrator had regard to the fact that
Mr Saxby as well as the second respondent were prepared to accept
the amounts set out
in exhibit B14 as a fair and reasonable
termination benefit. This came to R229 866,52. He also had regard
to the fact that the
second respondent was re-employed although he
had no details of his employment or remuneration level. In the
light of the fact
that the second respondent had not placed any
evidence before him, he found that it would be just and equitable in
these circumstances
to make an award of compensation “at the
minimum statutory compensation required and that is compensation
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.” Accordingly
an award was made of compensation at
the monthly remuneration of R69 556,00 from 1 August 1998 to 11
March 1999 (being the date
on which the arbitration ended). This
constituted seven months and eleven days. The fact that of this
period three months remuneration
had already been agreed upon,
played no role. No award of costs was made .
It is clear from the above that the
approach and award of the arbitrator are open to serious criticism
in a number of respects,
namely his approach and finding on the
dismissal issue, his findings of procedural and substantive
unfairness, his failure to consider
and apply the principles set out
in Johnson & Johnson’s case and his consequent voluntary
limitation of his discretion.
Review principles
The question which arises is whether, if
these aberrations are reviewable, the
Arbitration Act or
the
principles applicable in reviews under the LRA should govern the
proceedings. One line of thought is that as
section 33(1)
of the
Arbitration Act and
section 145
of the LRA are virtually the same,
this Court and the Labour Court should apply the same norm under
both, viz that of rational
justifiability laid down in Carephone
(Pty) Ltd v Marcus NO & others (1998) 19 ILJ 1625 (LAC) [ Now
since this matter was heard
redefined by this Court as rationality
in Shoprite Checkers (Pty) Ltd v Ramdaw NO and Others
2001 4 SA 1038
(LAC) para 25 ]. This approach is to be found in Transnet v HOSPERSA
(1999) 20 ILJ 1293 (LC) para 15; NUM v Brand NO & another
1999 8
BLLR 849
(LC) para 14 and Orange Toyota (Kimberley) v van der Walt &
others
2001 1 BLLR 85
(LC). The other line of thought is that
whatever the test may be for matters falling under the LRA regime,
private arbitrations
are to be reviewed (also in the Labour Court)
in terms of the norms laid down in
section 33(1)
of the
Arbitration
Act. The
latter view was expressed in Eskom v Hiemstra NO &
others (1999) 20 ILJ 2362 (LC) and Seardel Group Trading (Pty) Ltd
t/a
Bouwit Group v Andrews NO & others
2000 10 BLLR 1219
(LC).
In my view the latter is the correct
approach. Private arbitrations are subject to the
Arbitration Act,
1965
.
Section 40
provides for an exception where an Act of
parliament expressly or by implication excludes its operation. An
example is section
145 of the LRA. There is no such exception in the
case of private arbitrations. Considerations of expediency based
upon the fact
that the arbitration provisions of the LRA coincide
with those in the
Arbitration Act and
that it would be preferable
for Labour Courts to apply one test throughout, cannot override the
clear provisions of the
Arbitration Act. I
do not share the view of
Molahledi AJ in the Orange Toyota case supra para 13 that the
Arbitration Act is
to be read subject to the constitution and that
therefore the test for review of the CCMA arbitration awards set out
in the Carephone
judgment would equally apply to reviews in terms of
section 33
of the
Arbitration Act. The
important difference between
the two types of arbitration is that CCMA arbitrations were held to
be by an organ of state to which
the constitutional precepts for
just administrative action applied, whereas private arbitrations are
not. This arbitration therefore
has to be evaluated against the
norms laid down in
section 33(1)
of the
Arbitration Act as
if this
were a High Court doing likewise.
As this arbitration is reviewable under
section 33
of the
Arbitration Act I
will not concern myself with the
controversy over Carephone’s case raised by obiter remarks in
Toyota SA Motors (Pty) Ltd v Radebe
& others
2000 3 BLLR 243
(LAC) para 42 It must be remarked however, that in the latter case
the Court obiter advocated the fair trial test (para 42) on
the
basis of the Goldfields Investment case which is discussed below.
In Toyota SA Motors (Pty) Ltd v Radebe &
Others para 31 it was stated that the review under
sec 158(1)(g)
of
the LRA is the “full form of review previously referred to as
common-law review. The review mentioned in
s 145
was based on the
Arbitration Act 42 of 1965
, and is of a more limited nature.” No
particulars are given. Nicholson JA referred to the case of
Goldfields Investment, stated
that it had been followed in a long
line of cases - the latest being Paper, Printing, Wood & Allied
Workers Union v Pienaar
NO & Others
1993 4 SA 631
(A) 638G and
concluded “on the authority of the abovementioned judgments the
latent gross irregularity had to be such that it
prevents a fair
trial of the issues.”
When the case law is used to illustrate
principles of general application it should be remembered that the
dicta must be read against
the background of the wording of the
relevant statute. In the locus classicus on reviews Johannesburg
Consolidated Investment
Company v Johannesburg Town Council
1903 TS
111
the Court classified reviews according to the procedure
applicable. The first class, which was instituted by summons, was
the
review of the proceedings of inferior courts. This was governed
by the provisions of the Administration of Justice Proclamation
14
of 1902 (Transvaal).
Section 19
set out the grounds, which can be
summarized as: incompetency of the Court in respect of the cause or
in respect of the Judge himself;
malice or corruption on the part of
the Judge; gross irregularity in the proceedings; the admission of
illegal or incompetent evidence
or the rejection of legal and
competent evidence. The second class which rested on “somewhat
wider” grounds, was that instituted
by motion in respect of the
review of public bodies. This type of review was not based on the
said proclamation, but on the High
Court’s inherent power to
review the proceedings of such bodies based on the common law. (
Under this mode the review of domestic
tribunals was later
accommodated ). The third type of review was that which arose in
particular instances where it was statutorily
created and was “much
wider” than the powers which the Court had under the other two.
This was the popular sense of the word
review. The majority of the
Court held that a Valuation Court was not an inferior court of law
and that therefore the first type
of review was not applicable but
the second (common law) type was. It is however clear that the Court
meant that the power to review
and its extent was embedded in the
particular enactment which granted it and should be found there.
The common-law review powers were clarified
in Hira and another v Booysen and another
1992 4 SA 69
(A). The
Appellate Division there grappled with the question when the bona
fide misinterpretation of a statute by an official
sitting as
chairman of a statutory disciplinary enquiry into conduct of
teachers will be reviewable. Corbett CJ after stating
that the
“common law review” was the mode applicable, set out the
relevant principles. I extract therefrom succinctly what
is
relevant to the present case (which is not about a statutory
tribunal). Non-performance or wrong performance of a statutory
duty
or power is reviewable. Where that duty or power is essentially a
decision-making one (as opposed to a judicial one) the
grounds for
review are limited. These are set out in Johannesburg Stock
Exchange and Another v Witwatersrand Nigel Ltd and Another
1988 3 SA
132
(A) 152A-E. Where the complaint is that the tribunal committed
an error of law, the reviewability of the decision will depend upon
whether exclusive authority was granted to the tribunal to decide
the question of law. Where the tribunal exercises powers or
functions of a purely juridical nature, it is improbable that it has
been granted exclusive jurisdiction to decide all questions,
including the meaning of statutory criteria to be applied and the
scope of its powers. If the decision cannot be arrived at should
the correct criterion be applied, it may justifiably be concluded
(in the context of an error of law) that the tribunal ‘asked
itself the wrong question’ or ‘applied the wrong test’ or
‘based its decision on some matter not prescribed for its
decision’
or ‘failed to apply its mind to the relevant issues in
accordance with the behests of the statute’. Such decision is
reviewable.
The above was said in the context of the
exercise of a statutory duty. It was applied by this Court in
Kaefer Insulation (Pty)
Ltd v President of the Industrial Court &
Others
1998 3 BLLR 230
(LAC) 239 in the review of an interlocutory
order by the Industrial Court which had misinterpreted the
principles applicable to
rescission of judgments.
The Labour Court has no inherent common law
powers of review. Its powers are to be found within the confines of
its enabling act.
In the case of reviews of awards of
commissioners of the CCMA it is
section 145
of the LRA, in the
review of functions, acts and omissions under the LRA
section
158(1)(g)
of that Act, and in the case of private arbitrations
section 33(1)
of the
Arbitration Act.
It
is clear that common law review powers
are not granted by
section 33(1).
Neither are the “wide powers”
of review in the popular sense of a total rehearing of the merits.
But it does not follow
that for this reason the first, so-called
“narrow” review is the option. The scope of this review is to
be determined from
section 33(1)
itself, bearing in mind that terms
used in the statute may historically have acquired a special
jurisprudential meaning.
Wallis AJ in Shoprite Checkers (Pty) Ltd v
Randaw NO & Others (2000) 21 ILJ 1232 (LC) dealt with the test
on review. The
learned judge in criticizing the judgment of this
Court in Carephone (Pty) Ltd v Marcus NO & others (1998) 19 ILJ
1425 (LAC)
and the rational justifiability test for review there
laid down, expressed the view (para 61) that arbitrations under the
LRA and
those under
section 33
of the
Arbitration Act 42 of 1965
should be treated alike, that the grounds for review should be
limited to those applicable under the latter Act, and that the

intention appears to have been that of the three types of review
identified by Innes CJ in the Johannesburg Consolidated Investment
Company case it was a review of the first type that was intended in
section 145 of the LRA; and not even the common law review
of which
the scope has been broadened by cases like Johannesburg Stock
Exchange & another v Witwatesrand Nigel Ltd & another
1988 3
SA 132
(A) 152A-E; Jacobs & ‘n ander v Waks ea
1992 1 SA 521
(A) and Hira & another v Booysen & another
1992 4 SA 69
(A).
I respectfully differ from this view. I
have demonstrated above that the Johannesburg Consolidated
Investment Company case limited
the first type of review to that of
the decisions of lower courts and dealt with the Valuation Court’s
review under the second
category. It would be wrong, in my view, to
attempt first to categorize and then on the strength thereof to
curtail the powers
of the reviewing Court. The starting point and
finishing line must be the relevant enactment, properly interpreted.
In this case
section 33(1)
of the
Arbitration Act. cf
Amalgamated
Clothing & Textile Workers Union v Veldspun Ltd
1994 1 SA 162
(A)169
I respectfully differ from Landman J who in
Eskom v Hiemstra NO
supra
paras 20, 23 bases the Court’s review powers on a lack of
impartiality and independence on the part of the arbitrator. The
true
basis is the absence of a fair trial because the arbitrator did
not function as (impliedly) agreed. Impartiality and a lack of

independence are merely some of the possible manifestations of
dysfunction. This will be dealt with later. The statement that “the
arbitrator is the judge of the law for purposes of the arbitration
and a fortiori the arbitrator cannot do wrong” (para 27) is
too
wide. He may not lay down the law. He is to apply it. He may not
redefine his function. The arbitration agreement defines
it.
Baldwin v Bateman
1908 TS 54
, 56; Clark v African Guarantee and
Indemnity Co Ltd
1915 CPD 68
, 76. He may not curtail his functions
within or expand them outside the parameters of the arbitration
agreement.
Section 33(1)
sets out four grounds of
review: (i) Misconduct by the arbitrator in relation to his duties
as arbitrator: (ii) Where the arbitrator
has committed a gross
irregularity in the conduct of the arbitration proceedings; (iii)
Where the arbitrator has exceeded his powers;
and (iv) Where the
award has been improperly obtained.
It will be noted that these grounds are not
synonymous to those considered as grounds under the first type of
review mentioned in
the Johannesburg Consolidated Investment case,
the
locus classicus
on reviews. Far from it.
Misconduct
Counsel for the respondent emphasized that
we are not at liberty to interfere with the arbitrator’s factual
findings on the dismissal,
however wrong they may be, and that there
is no appeal against his finding of procedural and substantive
unfairness even though
it is in conflict with the evidence. Such
approach, which amounts to a mechanical refusal to act, would in my
view be incorrect.
I will through a review of the relevant case law
(which is not unanimous) seek to establish that in certain respects
errors of
law and fact are reviewable in private arbitrations.
Before the question can be answered whether
there was misconduct by the arbitrator in relation to his duties it
has first to be
established what those duties were. His function is
normally a judicial one. As stated in Hira’s case, it is
improbable that
in such a case he has the exclusive power to the
exclusion of the courts to determine what the law is. A moment’s
reflection
leads to the conclusion that, in the absence of clear
indications to the contrary, an arbitration agreement by implication
prescribes
that the arbitrator is to apply the law of the land and
that he has to act reasonably ( which includes rationally). The
words
of Kotze J in Lazarus v Goldberg and another
1920 CPD 154
, 157
are apposite: “According to the practice of the Roman-Dutch law, a
submission to arbitration (Verblyf) was always subject
to the
conditio tacita that the arbitration should proceed according to law
and justice. Although our modern practice has somewhat
departed
from that of the Roman-Dutch law in regard to the procedure for
setting aside an award, the above principle...still exists
at the
present day.” Support for the view that there is an implied term
in every arbitration agreement that the law will be upheld
by the
arbitrator and that his award may be tested with the reasonableness
test is to be found in the judgment of Jansen JA in
Theron v Ring
van Wellington N G Sendingkerk in SA
1976 2 SA 1
(A) 22B-23C and the
Roman-Dutch and English law referred to by the learned Judge.
Further support is to be found in the
Arbitration Act itself
. In
section 20
it provides the mechanism (presumably because many
arbitrators have no legal learning) for obtaining a binding opinion
on the law
from the court or from counsel.
The starting point should be the approach
of the Appellate Division in Dickenson & Brown v Fisher’s
Executors
1915 AD 166
, 174-5 namely that the parties have
voluntarily entered upon the arbitration process and selected their
own judge to resolve the
dispute, and that it is therefore
appropriate that they be bound by his decision. In this case the
Appellate Division considered
misconduct in terms of section 18 of
the Natal Arbitration Act of 1898 which provided:”Where an
arbitrator or umpire has misconducted
himself ... the Court may set
the appointment or award aside.” It was contended that there was
an error on the face of the award
as the umpire had placed a wrong
construction on the deed of partnership. In this context the Court
held that a bona fide mistake
of law or fact could not be
characterized as misconduct and that unlike English law a mistake of
law was not reviewable. The Court
declined to define misconduct
“for it is a word which explains itself”. Some wrongful or
improper conduct was required.
In Donner v Ehrlich
1928 WLD 159
, 160
Solomon J stated:”As I read Dickenson and Brown v Fisher’s
Executors
1915 AD 160
the misconduct which entitles a Court to set
aside the award of an arbitrator must amount to dishonesty.” In my
view this is
an unwarranted contraction of the meaning set out in
Dickenson’s case, which was ”some wrongful or improper conduct”
(176).
In Allied Mineral Development Corporation v
Gemsbok Vlei Kwartsiet
1968 1 SA 7
(C) 12, 17 the Court left the
question open whether an arbitrator who had failed to notice that an
agreement was invalid (and therefore
committed an error of law) was
guilty of misconduct.
RPM Konstruksie (Edms) Bpk v Robinson en
‘n ander
1979 3 SA 632
(C) was a case in which it was sought to
set aside an award, but the grounds upon which this was based are
not ascertainable from
the judgment. Fagan J did remark (635H),
obiter it seems, that in interpreting an award it could not be
assumed that an arbitrator
knows and applies the principles of our
law. No authority is given for this bald statement. The learned
Judge did however refer
to Dickenson’s case for his statement that
the parties are bound by the findings of the arbitrator even though
he errs in law
or fact (636A). In my respectful view this statement
is too wide.
In Benjamin v Sobac SA Building &
Construction (Pty) Ltd
1989 4 SA 940
(C) 940, 971 Selikowitz J
pointed out that Solomon JA in the Dickenson case when discussing
the ground of misconduct and stating
that an element of wrongfulness
or impropriety was required, was dealing with “personal
misconduct”, but that misconduct in
relation to the proceedings
did not require an element of personal turpitude and could be a bona
fide error in the procedure denying
a party a fair trial. See also
Naidoo v Estate Mahomed and others
1951 1 SA 915
(NPD) 9 In
Steeledale Cladding (Pty) Ltd v Parsons NO and another
2001 2 SA 663
(DCLD) Levinsohn J after stating (668D) that section 33(1) codifies
the existing law, and referring to Dickenson’s case, quoted
with
approval from the judgment of Selikowitz J in Benjamin’s case
(971A-D) on this point.
In Kolber and another v Sourcecom Solutions
(Pty) Ltd and others
2001 2 SA 1097
(C) 1107 it was held that gross
carelessness or gross error does not constitute misconduct under
sec33(1)(a) unless there is moral
turpitude or mala fides.
In Amalgamated Clothing & Textile
Workers Union v Veldspun Ltd
1994 1 SA 162
(A) 169 Goldstone JA
stated:“It is only in those cases which fall within the provisions
of s 33(1) of the Arbitration Act that
a Court is empowered to
interfere. If an arbitrator exceeds his powers by making a
determination outside the terms of the submission,
that would be a
case falling under s33(1)(b). As to misconduct, it is clear that
the word does not extend to bona fide mistakes
the arbitrator may
make whether as to fact or law. It is only where a mistake is so
gross or manifest that it would be evidence
of misconduct or
partiality that a court might be moved to vacate an award.” The
distinction between personal misconduct and
misconduct in the
proceedings drawn by Selikowitz J in Benjamin’s case was not
referred to. It probably did not arise because
the complaint was
that the arbitrator made an award that would constitute an unfair
labour practice , be contrary to public policy
and / or require the
employer to commit a criminal offence. The complaint was therefore
about the outcome, not the method. The
Veldspun case is unusual as
the parties had “referred to the arbitrator the very question as
to his jurisdiction”and were held
to be bound by his ruling
thereon.
In Monticello (Pty) Ltd v Edgerton
1982 1
SA 762
(ZSC) the Zimbabwe Supreme Court held that “misconduct of
proceedings” in section 12 of the Zimbabwe Arbitration Act
included
a wrong application of the legal principles relating to
costs.
In Clark v African Guarantee and Indemnity
Co Ltd
1915 CPD 68
78 the question was left open whether the
English law that the Court will not enforce an award where a mistake
of law is apparent
on the face of it, was applicable. The Court
stated that before an award could be set aside on the ground of a
lack of evidence
to support it, such absence must establish “ a
total want of that judicial capacity which is required even of an
ordinary fair-minded
layman appointed to adjudicate by the parties
to a dispute.”
In Hyperchemicals International (Pty) Ltd
and Another v Maybaker Agrichem (Pty) Ltd and Another
1992 1 SA 89
(WLD) Preiss J was called upon to decide whether “misconduct” as
used in section 33(1)(a) included the so-called legal misconduct
known to English law. He quoted Mustill and Boyd’s Commercial
Arbitration:”Although from the point of view of logic the word
misconduct is entirely appropriate to describe the conduct of
proceedings otherwise than in the way required by law, the choice
of
language has proved to be unfortunate, especially since the 1889 Act
referred only to the arbitrator having misconducted himself.
Arbitrators...were understandingly resentful of the implication that
the work which they have carried out in good faith involved
personal
misconduct. The Courts have been sensitive to this resentment and
have constantly taken pains to point out to arbitrators
that
allegations of misconduct do not necessarily mean what they appear
to say... There has been a tendency to invent a category
of
technical misconduct which is contrasted with misconduct of a more
personal nature.”
After referring to Dickenson’s, Donner’s
and Clark’s cases which were pre-1965 and RPM Konstruksie’s case
(which merely followed
them) the learned Judge held that the phrase
in the 1965 Act was substantially the same as in the old Natal Act of
1898 and concluded
that “legal misconduct” was not a ground for
review. “Mistake, no matter how gross, is not misconduct; at most,
gross mistake
may provide evidence of misconduct in the sense that it
may be so gross or manifest that it could not have been made without
misconduct
on the part of the arbitrator” The meaning of the total
phrase “misconduct in relation to his duties” was not dealt with,
nor
the question whether the addition of the words “in relation to
his duties” might not evidence an intention on the part of the
legislator to include the concept of legal misconduct as in England
and as the Appeal Court invited the legislator to do should it
deem
it fit. (Dickenson’s case 181)
In Bester v Easigas (Pty) Ltd and Another
1993 1 SA 30
(C) 35, 36 Brand AJ (with King J) followed the
Hyperchemicals judgment, stating that the differences between the
1989 and 1965
Acts were not material. The view of Selikowitz J in
Benjamin’s case was overruled. The meaning of misconduct was not
limited
to dishonesty (as had been done in Donner’s case) but said
to be moral turpitude or mala fides. However, in
Badenhorst-Schnettler
v Nel en ‘n ander
2001 3 SA 631
(C) Cleaver
J, without reference to Bester v Easigas supra ( which autority
was binding upon him) or to the Hyperchemicals
judgment followed the
approach of Selikowitz J in Benjamin’s case.
A failure by the arbitrator to exercise the
duties he has taken upon himself will be dereliction of duties and
thus misconduct.
This was the view of Basson J in Seardel’s case
para 79 supported by a quotation from Halsbury’s Laws of England
vol 2 p
402 that where an arbitrator fails to comply with the
terms, express or implied, of the arbitration agreement, that will
amount
to misconduct. No South African authority was referred to.
In that case the failure to apply Labour Appeal Court precedents
which
the arbitrator was obliged to do in terms of a collective
agreement, was held to be misconduct, alternatively exceeding of
powers
(paras 78, 80).
What can then be concluded on the meaning
of misconduct by an arbitrator in relation to his duties? The
judgments evidence tension
between the requirements of speed and
finality in arbitration (and therefore a minimum of interference by
the Courts) and the requirement
of fairness (which is a public
policy consideration and also the supposition upon which the
arbitrator’s appointment is based).
When one analyses the grounds
set out in section 33(1) it is clear that the first three relate to
the manner in which the arbitrator
functioned, not to the outcome of
the arbitration. The fourth ground, i.e. where the award has been
improperly obtained, is also
a ground which relates to function.
Where for example, false evidence is adduced or a bribe is taken, it
detrimentally affects
the arbitrator’s judicial functioning. It
is also clear that the grounds overlap. The taking of a bribe is
misconduct and renders
the award improperly obtained. Where the
arbitrator seriously shirks his duties it can be classified as
misconduct or a gross
irregularity in the proceedings. These are
some examples. It is not an “either or” situation.
In my view the following principles emerge:
A court is entitled on review to determine whether an arbitrator
in fact functioned
as arbitrator in the way that he upon his
appointment impliedly undertook to do, namely by acting honestly,
duly considering all
the evidence before him and having due regard
to the applicable legal principles. If he does this, but reaches
the wrong conclusion,
so be it. But if he does not and shirks his
task, he does not function as an arbitrator and reneges on the
agreement under which
he was appointed. His award will then be
tainted and reviewable. It is equally implicit in the agreement
under which an arbitrator
is appointed that he is fully cognizant
with the extent of and limits to any discretion or powers he may
have. If he is not and
such ignorance impacts upon his award, he
has not functioned properly and his award will be reviewable. An
error of law or fact
may be evidence of the above in given
circumstances, but may in others merely be part of the incorrect
reasoning leading to an
incorrect result. In short, material
malfunctioning is reviewable, a wrong result
per
se
not (unless it evidences
malfunctioning). If the malfunctioning is in relation to his
duties, that would be misconduct by the arbitrator
as it would be a
breach of the implied terms of his appointment.
Gross irregularity
In Goldfields Investments Ltd v City
Council of Johannesburg & another
1938 TPD 551
,560 (a case
according to Corbett CJ in Hira’s case 87A dealing with the first
and narrowest species of review, not common law
review) Schreiner J
distinguished between gross irregularities that are patent – and
occur during the course of the trial –
and those that are latent –
that occur in the mind of the judicial officer . These are only
ascertainable from the reasons given
by him. In neither case need
there be intentional arbitrariness of conduct or any conscious
denial of justice. The crucial question
is whether the irregularity
prevented a fair trial of the issues. A wrong conclusion on law or
fact does not necessarily lead to
a conclusion that there has not
been a fair trial. But if a mistake of law leads to a material
misconception of the nature of the
inquiry or of the court’s
duties in connection therewith, then the losing party has not had a
fair trial.
The concept of irregularity in the
proceedings was dealt with by the Full Court in Ellis v Morgan and
Dessai
1909 TS 576
, 581 which remarked that “..an irregularity in
the proceedings does not mean an incorrect judgment; it refers not
to the result
but to the methods of a trial, such as, for example,
some high-handed or mistaken action which has prevented the
aggrieved party
from having his case fully and fairly determined.”
Mala fides is therefore not a prerequisite and the bottom line is:
has there
been a fair trial? See also Paper, Printing, Wood and
Allied Workers Union v Pienaar NO
[1993] ZASCA 98
;
1993 4 SA 621
(A) 638H. In this
case Botha JA expressed doubts whether the approach to errors of law
in the context of common law reviews as
summarized in Hira’s
case, can be accommodated under section 24(1) (c) of the Supreme
Court Act 59 of 1959 which grants the
power of review in the case
of gross irregularity in the proceedings (639D). In so far as
errors of law relate to the functions
of an arbitrator, I do not
share the doubts. Such errors, if material, amount to a gross
irregularity in the sense this phrase
has acquired.
The meaning of the phrase “gross
irregularity” has therefore been widened to include latent thought
processes in the mind of
the arbitrator which adversely impact upon
the fairness of the proceedings. It must be accepted that the
legislature was aware
of this when the Arbitration Act was passed.
It would appear that in the absence of a
ground of misconduct in the Supreme Court legislation in the sense
set out above the Courts
extended the meaning of gross irregularity
in the proceedings to include latent errors of law which impacted
upon the arbitrator’s
function. In my view those facts slot
better into the niche of misconduct.
In Tuesday Industries (Pty) Ltd v Condor
Industries (Pty) Ltd and another
1978 4 SA 379
(T) 383 it was held
that a court will not interfere with a discretion exercised by an
arbitrator if it is based on some evidence
merely because the
finding is erroneous or unreasonable. Interference would be
justified if there is no evidence to support the
finding and there
has been a gross irregularity or a failure of natural justice.
In Wittstock t/a J D Distributors v De
Villiers
1999 3 SA 866
(ECD) 873D Erasmus J stated: “It seems to
me that, in the absence of fraud or dishonesty on the part of the
arbitrator or patent
error or absurdity in his interpretation of his
mandate, the parties are bound by his identification of the subject
matter of the
dispute.”
Mia v D J L Properties (Waltloo) (Pty) Ltd
and another
2000 4 SA 220
(T) 230 applied the definition of gross
irregularity of the Goldfields Investments judgment.
In respect of the meaning of gross
irregularity in the conduct of the proceedings there is clarity. It
includes both patent irregularities
and latent ones. The latter
include an incorrect grasp by the arbitrator of his jurisdiction and
powers. To an extent this may
overlap with exceeding his powers
which would be a manifestation of the former.
Exceeding of powers
This ground for review is clear. In
Seardel’s case Basson J regarded the non-exercise of a power when
there was an obligation
to do so as an instance hereof. This can,
however, be better accomodated under either misconduct or gross
irregularity in its
extended sense.
Conclusion
In our case the arbitrator had the powers
and duties of a Labour Court judge. Those duties include the duty to
apply the law, not
create his own. He had to find it, not make it.
In the present case it is not necessary to
determine whether the arbitrator’s functioning was defective in
respect of his incorrect
finding on the dismissal and the procedural
and substantive unfairness issues. I therefore leave open the
question whether his
conclusions thereon evidence misconduct in
relation to his duties and / or gross irregularity in the
proceedings. He acted dysfunctionally
in respect of his approach to
the question of compensation by disregarding the principles
expounded in the Johnson & Johnson
case, thereby materially
limiting his discretion. His award is therefore tainted and
reviewable. It must be set aside.
Should we refer the matter back to the
arbitrator or impose our own “award”? All the relevant facts
are before us. However,
the discretion is that of the arbitrator.
On appeal we have in terms of section 33 the power to set aside the
award, which would
include setting aside a part of the award. If
requested, we may submit the dispute to a new tribunal. No such
request was made.
In this case the outcome is obvious. On the facts
set out above in paragraphs 10, 11 and 18 read with the benefits
agreed as payable
and set out in exhibit B14, any discretionary
award of compensation must be nil. These agreed benefits were not
in dispute and
thus not referred to the arbitrator. They were not
included in the award and need not be dealt with in our order. It
would serve
no purpose to refer the matter back to this arbitrator
or to another one.
I propose the following order:
1 The appeal is upheld with
costs.
2 The order of the Labour Court is set aside
and the following order is substituted therefor: “The award of the
arbitrator is set
aside with costs. No order is made in respect of
the costs of the arbitration.”
Van Dijkhorst AJA
For appellant: Adv J
G van der Riet S C
instructed by Edward
Nathan & Friedland (Pty) Ltd
Johannesburg
For second
respondent: Adv M E D Moyses
instructed by Ehlers
Inc
Pretoria
Date of hearing: 7
June 2001
Date of judgment: 1
February 2002
CASE
NO: JA52/00
In
the matter between
STOCK
CIVIL ENGINEERING (PTY)LTD Appellant
And
ADVOCATE
MM RIP N.O First Respondent
M
M MURRAY Second Respondent
JUDGEMENT
_______________________________________________________________
ZONDO
JP
Introduction
[1] I
have had the benefit of reading the judgement prepared by my
Colleague Van Dijkhorst AJA in this matter. I agree with the order
proposed by him. However, I prefer to confine my reasons to those I
give below.
[2] It
is not necessary to set out the facts of this matter in this
judgement in any great detail as they have been adequately set
out in
Van Dijkhorst AJA’s judgement. It will suffice to state only those
facts that are necessary for a proper understanding of
this
judgement.
Brief
facts
[3] The
second respondent had been employed by the appellant. The contract of
employment between the parties was terminated. The respondent
sought
to bring an unfair dismissal claim against the appellant. The
appellant took the attitude that the termination of the contract
of
employment occurred pursuant to an agreement between the parties that
it be terminated.
[4] The
appellant and the second respondent then concluded an arbitration
agreement providing for the dispute between them relating
to the
termination of employment of the second respondent to be arbitrated
privately. The first respondent was appointed to arbitrate
that
dispute. The terms of reference and the powers of the arbitrator were
set out in clause 2(1) of the arbitration agreement. Clause
2(1) read
thus:-
“
Powers
of the arbitrator and terms of reference
2.1 The
arbitrator shall in relation to the applicant’s alleged unfair
dismissal claim, have powers equivalent to that (sic) of
a Judge in
the Labour Court. In addition the rules of the Labour Court will be
applicable;
”
The
arbitration and the review
[5] The
first respondent arbitrated the dispute. One of the issues he had to
decide was an issue that had been raised by the appellant
to the
effect that there had been no dismissal in the sense of a unilateral
dismissal of the second respondent by the appellant but
that the two
parties had agreed that the contract of employment be terminated. The
second respondent’s stance on this was that
there had been a
dismissal in the sense of a unilateral decision by the appellant to
dismiss him and that there had been no mutual
agreement that his
contract of employment be terminated. The first respondent decided
that there had been no mutual agreement to
terminate the second
respondent’s contract of employment. His arbitration award was to
the effect that the dismissal had been
both procedurally and
substantively unfair. He awarded the second respondent compensation
amounting to R 511 573,00. The appellant
then brought an application
in the Labour Court to review and set aside the award. One of the
points taken by the second respondent
was that the Labour Court had
no jurisdiction to deal with such matter. The Labour Court dismissed
this point and proceeded to deal
with the balance of issues. The
Labour Court dismissed the application with costs. With the leave of
that court, the matter now comes
before this Court on appeal.
The
appeal
[6] On
appeal the second respondent pursued the point that the Labour Court
had lacked jurisdiction. In his judgement Van Dijkhorst
AJA has
dealt with this point. For the reasons given by Van Dijkhorst AJA, I
agree with him that the point cannot be upheld.
[7] The
ground on which the appellant relied to have the first respondent’s
award set aside is that, in making the award that he
made, the first
respondent exceeded his powers within the contemplation of sec
33(1)(b) of the Arbitration Act, 1965 (Act no: 42
of 1965) (
“the
Arbitration Act”)
.
The appellant’s attack was directed first and foremost at the first
respondent’s decision that the appellant and the second
respondent
did not reach agreement that the second respondent’s contract of
employment be terminated. The appellant contended that
the first
respondent’s decision in this regard fell to be reviewed and set
aside. If this contention by the appellant is upheld,
the need to
deal with the appellant’s attack on the first respondent’s
decision to award the second respondent compensation will
fall away.
[8] As
the arbitration in this matter was a private arbitration as opposed
to a compulsory arbitration provided for under the Labour
Relations
Act, 1995 ( Act 66 of 1995) (
“
the Act”
),
the provisions of sec 145 would ordinarily not be applicable with the
result that the award would fall outside the ambit of the
decision of
this Court in
Carephone
(Pty) Ltd v Marcus NO & Others (1998) 19 ILJ 1425 (LAC)
.
However, in this matter the appellant contends that the terms of
reference which were agreed to between the parties in the arbitration
agreement incorporated the notion that the first respondent’s award
had to be justifiable or rational failing which it would be
susceptible to being reviewed and set aside.
[9] In
par 6.4. of the founding affidavit the appellant provided what, in
its contention, the terms of reference agreed upon between
the
parties in this matter mean. Par 6.4. reads thus:-
“
As
appears from annexure RS3, the first respondent’s terms of
reference enjoined him to decide the matter in the same way that a
Labour Court judge would be obliged to decide the matter. I am
advised that this means that he would not act in accordance with his
terms of reference if he did not decide the matter on the evidence
before him and in accordance with the applicable legal rules and
principles. I am further advised
that the
first respondent’s terms of reference incorporate the notion that
his decision must have
a
rational objective basis justifying the conclusions reached by him on
the issues in dispute between the parties, on the evidence
properly
before him and in accordance with the applicable legal principles”.
(My emphasis).
[10] The
second respondent’s answer to par 6.4 is to be found in par 6.8 of
his answering affidavit. After admitting that the terms
of reference
agreed to between the parties were contained in annexure
“RS3"
to the founding affidavit, the second respondent denied the remaining
allegations in par 6.4 but stated that, in any event, these
were
matters for legal argument. In argument before us, Counsel for the
second respondent submitted that the only grounds on which
the award
in this case could be set aside were those contained in
sec 33(1)
of
the
Arbitration Act. He
submitted that the ground of justifiability
was not one of those grounds.
[11] In
Carephone this Court held that, when a commissioner of the Commission
for Conciliation, Mediation and Arbitration( CCMA),
makes an
arbitration award in terms of the Act, his award must have
“
a rational objective basis justifying the connection made by the
[commissioner] between the material properly available to him
and the
conclusion he or she eventually arrived at.”
[(1998)
19
ILJ
1425 (LAC) at 1435E - F]
.
One cannot help but notice the striking similarities between this
statement by this Court in Carephone and the last sentence in
par 6.4
of the founding affidavit.
[12]
This Court continued in Carephone and held that, if a commissioner
made an award that is not justifiable or that does not have
a
rational objective basis justifying the connection made by the
commissioner between the material properly available to him and
the
conclusion he or she arrived at, he would be exceeding his powers as
contemplated by sec 145(2)(a)(iii) of the Act. Sec 145(2)(a)(iii)
of
the Act gives the exceeding of his powers by a commissioner of the
CCMA as a ground upon which his award can be reviewed and
set aside.
In
sec 33(1)(b)
of the
Arbitration Act it
is also provided that an
arbitration award of an arbitration tribunal may be set aside inter
alia on the ground that the arbitration
tribunal exceeded its powers.
In
Pharmaceutical
Manufacturers of SA in re Ex Parte President of the RSA
[2000] ZACC 1
;
2000 (2) SA
674
(C C) par 85
the Constitutional Court held that anybody exercising public power is
required by the Constitution to exercise it rationally and
that if,
in the exercise of such power, he or she makes a decision that is
irrational, such decision can be reviewed and set aside
by a court of
competent jurisdiction.
[13] In
Shoprite
Checkers (Pty) Ltd v Ramdaw N.O and Others (2001) 22 ILJ 1603 (LAC)
at 1613E-1614I
this Court had cause to examine the relationship between
justifiability as a requirement for the validity of a decision or
action
taken under sec 33 of the Constitution as interpreted by this
Court in Carephone and rationality as a requirement for the validity
of a decision or action taken in the exercise of public power as
interpreted by the Constitutional Court in the Pharmaceutical
Manufacturers’s
case. After an analysis of the two decisions, this
Court concluded in Shoprite Checkers at par 25 at 1614 that, although
they did
not, strictly speaking, bear the same meaning, the two
terms, namely, justifiability and rationality, bore a
“sufficiently
similar meaning to justify the conclusion that rationality can be
said to be accommodated within the concept justifiability
as used in
Carephone.”
The
Court continued in the next sentence:
“In
this regard I am satisfied that a decision that is justifiable cannot
be said to be irrational and a decision that is irrational
cannot be
said to be justifiable”.
Did
the terms of reference in this matter incorporate the requirement of
justifiability or rationality for the award?
[14] A
question that may arise in this matter is whether a judge - including
a judge of the Labour Court - exercises public power
when he or she
decides disputes that come before him or her. If he or she exercises
public power in deciding such disputes, then,
quite clearly, he or
she is obliged to give a decision that is rational or justifiable. A
judge of the Labour Court is appointed
in terms of s 174(6) of the
Constitution read with s 154(1) of the Act. A discussion of the
appointment of judges of the Labour Court,
the status and powers of
the Labour Court, all of which may be relevant to the determination
of such question, is to be found in
the judgement of this Court in
Langeveldt v Vryburg
Transitional
Local Council and Others
2001 (6) BCLR 554
(LAC) at 557 I - 562F
.
In terms of sec 154(6) of the Act a person who is appointed as a
judge of the Labour Court who is not already a judge of a High
Court
is required, before he or she can perform his or her functions, to
take an oath or make a solemn affirmation in the prescribed
form
before the Judge President of the Labour Court. In terms of the
prescribed oath a judge of the Labour Court swears that he will
“uphold
and protect the Constitution of the Republic and the fundamental
rights therein and in so doing administer justice to all
without
fear, favour or prejudice in accordance with the Constitution and the
law of the Republic”.
[15] In
my judgement it is not necessary to decide whether or not a judge
exercises public power when he or she decides cases that
come before
him or her. This is so because whatever label one can give to the
power that a judge exercises when he or she decides
cases that come
before him or her, it is implicit in that kind of power that the
judge’s decision must be rational or justifiable.
Bearing in mind
that the Constitution requires decisions made by public officials and
certain functionaries to be rational, there
can be no basis for any
proposition that a decision made by a judge is not required to be
rational. In the light of this I am of
the view that, when the
appellant and the second respondent in their arbitration agreement
vested the first respondent with
“
the powers equivalent to that of a judge in the Labour Court”
and said that
“
the rules of
the
Labour Court will be applicable
”,
they bound the first respondent, as their arbitrator, to give a
rational decision. Accordingly, if the first respondent has given
a
decision that is irrational or unjustifiable, he has exceeded his
powers within the meaning of that phrase as used by this Court
in
Carephone. This would accord with the ground relied upon by the
appellant in the founding affidavit. His decision would then fall
to
be reviewed and set aside in such a case.
Is
the appellant’s award justifiable?
[16] The
first respondent was called upon to decide, among other issues, the
question of whether or not there had been a dismissal
of the second
respondent by the appellant. This issue arose because the appellant
and the second respondent had different versions
about how they
parted ways. The appellant’s version was that the two parties had
reached agreement that the second respondent’s
contract of
employment be terminated and what they had failed to reach agreement
on was whether the second respondent was entitled
to keep a certain
amount of R250 000,00. The appellant’s version was that the amount
had been a loan and the second respondent
was obliged to repay it.
The second respondent’s version was that the amount had been a
bonus and he was not required to repay
it. On the issue of the
termination of the contract of employment, the second respondent’s
stance in the pleadings was that the
appellant had dismissed him - in
the sense that it was the appellant’s own unilateral decision to
terminate the contract of employment.
He maintained in the pleadings
that there had been no agreement on his part that his contract be
terminated.
[17] In
the arbitration before the first respondent the appellant’s Mr
Saxby gave evidence supporting the appellant’s version
as set out
in the preceding paragraph. He testified that the only issue the
parties could not reach agreement on was the amount of
R250
000,00.The second respondent did not give any evidence to rebut the
appellant’s version in any respect nor did he call any
witness to
testify on his behalf.
[18] The
first respondent rejected the appellant’s version that the two
parties had reached agreement that the second respondent’s
contract
of employment be terminated. He gave two reasons for rejecting the
appellant’s version. The first was that he found it
“very
difficult to accept in that clearly the [second respondent] would not
agree to terminate his employment unless he was satisfied
with the
remunerative benefits that would go with such
termination”
.
He stated that the two issues were
“
inseparable and it is improbable that the [second respondent] agreed
to the one without consensus on the other”.
The second reason given by the first respondent was that sec 192(2)
of the Act
“places
an onus on the employer to prove that any dismissal is fair”
.
The first respondent then said in the next sentence:
“In this respect the [appellant] has not discharged this onus”
.
[19] Let
me deal with the first reason first. The first respondent said that
it was improbable that the second respondent had agreed
that his
contract of employment be terminated prior to agreement being reached
on what he would be paid because the two issues were,
in his view,
inseparable. This on its own is not improbable. The second respondent
could have easily agreed to the termination of
his contract of
employment first prior to the parties agreeing on the payment to be
made to him. This could happen if he did not
anticipate any
difficulty with the parties reaching agreement on the other issue.
[20] It
could also happen, if he thought there was another way for him to
secure payment if there was no agreement between the parties.
He
could also easily deal with these two issues separately if his
position was that he also did not want to remain in the appellant’s
employment if the appellant felt that he should leave. Of course,
there can be no doubt that a shrewd negotiator would take the
attitude
that he would not agree to the termination of his contract
of employment before there was an agreement on what he would be paid.
But not everybody is a shrewd negotiator. There was, in my view, no
basis whatsoever for the first respondent to have thought that
the
second respondent could not have agreed to the termination of his
contract prior to the parties agreeing on what he was going
to be
paid. Quite often an employer and an employee reach agreement that
the employee will work for the employer without the two
of them first
agreeing on the employee’s salary and the employee proceeds to
commence his duties. This would normally happen when
both parties
genuinely hope to soon reach agreement on the salary.
[21] In
this regard it is as well to bear in mind that the evidence that was
given by Mr Saxby about how the parties commenced their
employment
relationship in this matter reveals that the second respondent and
the appellant reached agreement that the second respondent
commence
his duties before they had completed their negotiations on certain
aspects. The fact that the parties had not as yet reached
agreement
on certain issues did not detract from the fact that the two had
nevertheless reached agreement that the second respondent
would work
for the appellant. The reason why the second respondent agreed to
commence duties despite the fact that agreement had
not yet been
reached on certain issues must have been that he was hopeful that
agreement would be reached in due course on the outstanding
issues.
It follows, in my view, that the reason advanced by the first
respondent for rejecting Mr Saxby’s version is fatally flawed.
[22] The
second reason, namely, that the appellant had failed to discharge the
onus resting upon it in terms of sec 192(2) of the
Act to prove that
the dismissal was fair is no reason at all for the rejection of the
appellant’s version that the second respondent
and the appellant
had reached agreement that the second respondent’s contract of
employment be terminated. In fact the reliance
by the first
respondent on the appellant’s onus to prove that the dismissal was
fair demonstrates that, in referring to the appellant’s
version
that the termination of the second respondent’s contract of
employment was terminated by mutual agreement, the first respondent
was considering the merits of the dismissal dispute. Otherwise his
reliance on the onus to prove the fairness of the dismissal makes
no
sense. The first respondent had first to consider the question
whether the second respondent had discharged the onus to prove
the
existence of the dismissal before he could consider the question
whether the appellant had discharged the onus to prove that
the
dismissal was fair.
[23] The
appellant’s contention that the second respondent’s contract of
employment was terminated by mutual agreement raised
two separate
issues. The one was whether or not the second respondent had been
dismissed in the sense that the appellant acted unilaterally
in
dismissing him. This was like a point in limine because, if there was
no dismissal in this sense, that would be the end of the
matter as
there would be no dismissal whose fairness could be inquired into.
The other went to the merits in the sense that, if it
was found that
the termination had been by mutual agreement, it could not be said
that there was any unfairness.
[24] Despite
the fact that the appellant’s contention went to both a preliminary
issue as well as the merits of the dispute, the
first respondent had
to bear in mind that there were important but different provisions
relating to onus that were relevant to each
one of the two issues.
These are that, in relation to the question whether there had a
dismissal in the sense of a unilateral dismissal
of the second
respondent by the appellant, the second respondent bore the onus of
proof in terms of s192(1) and that, if the second
respondent
discharged this onus and proved that a dismissal had taken place,
then in relation to whether or not the dismissal was
fair, the
appellant bore the onus to prove that in terms of sec 192(2). S192(2)
reads:
“
If the existence of the dismissal is established, the employer must
prove that the dismissal is fair”
.
It is clear from this provision that the employer’s onus does not
arise until the employee has discharged his own onus to prove
the
existence of the dismissal.
[25] The
first respondent was obliged to first deal with the question whether
there had been a dismissal and with that he had to consider
the onus
that the second respondent bore to prove the existence of a
dismissal.If he found that there had been no dismissal, that
would
have been the end of the matter. Only if he found that there had been
a dismissal, could he then proceed to consider whether
such dismissal
had been unfair. It is only in considering the latter question that
he could consider the onus that the appellant
would have borne of
proving that such dismissal had been fair. In considering the
question of whether the existence of a dismissal
had been proved, the
first respondent had to take into account that:-
the
second respondent had not given any evidence or called any witness
to rebut Mr Saxby’s evidence;
Mr
Saxby was, on the first respondent’s own finding, an honest
witness who made a good impression on him;
the
onus to prove the existence of the dismissal rested on the second
respondent and not the appellant;
in
the second respondent’s letter dated the 5
th
August 1998 addressed to Mr Saxby there were statements which seemed
to corroborate the appellant’s version because they were
to the
effect that the two had agreed that the second respondent’s
contract of employment be
“rescinded
with effect from the 31
st
July 1998"
and to the effect that the two parties had agreed to negotiate an
amicable settlement between the appellant and the second respondent;
the statements to this effect appear in the first three paragraphs
of the letter; the relevant portion of the letter reads:-
“
Dear
Richard
1.
In our talks on Wednesday, 29
th
July and Friday, 31
st
July
we
discussed and agreed
the following:
Due
to Stocks Civil Engineering’s (SCE)
intention
to reduce its commitments and activities cross - border, the
International Division’s activities would be discontinued.
Therefore
my contract with SCE would be rescinded on 31
st
July
1998.
2.
We
agreed to negotiate an amicable settlement between SCE and myself.
3.
Due to my short period of employment you agreed to give me a
reference
justifying the circumstances of
my
early leaving
.
I explained that I intended to stay in South Africa until at least
December 1998 because of commitments with my children’s
schooling
and university and you agreed to pay the contractual 3 month’s
notice”.
(
My
emphasis
)
.
[26] The
first respondent did not refer to anyone of these important factors
in considering the question of whether to accept the
appellant’s
version. These factors were not only relevant but fundamental in the
consideration of the question whether there had
been a dismissal in
the sense that the appellant had terminated the second respondent’s
contract of employment unilaterally.
[27] The
first respondent could not reject the appellant’s version that
there had been no dismissal without these issues being taken
into
account and still expect that it could be said that there had been a
fair trial of issues. In my view the first respondent’s
failure to
take them into account and the fact that instead the first respondent
relied on the employer’s onus to prove the fairness
of the
dismissal before it was established that there had been a dismissal
shows beyond any doubt that the first respondent did not
consider the
question whether a dismissal had been proved. If he did consider it,
he disregarded matters that were so vital to that
issue that the
inference is inescapable that he had no proper appreciation of the
legal implications arising out of that issue with
the result that it
cannot, in my view, be said that there had been a fair trial of
issues. This constituted a gross irregularity.
In any event the first
respondent had no power to proceed to consider the merits of the
matter before he could deal with the question
of whether the
existence of a dismissal had been proved. To this extent I agree that
he exceeded his powers.
[28] I
am also satisfied that the first respondent’s decision to reject
the appellant’s version is irrational, without any basis
and is
wholly unjustifiable if regard is had to the following:-
the
first respondent rejected the appellant’s version despite the fact
that he said that he found Mr Saxby an honest witness who
made a
good impression on him; the first respondent did not even attempt to
reconcile these two apparently conflicting findings;
the
first respondent failed to explain why, having found that Mr Saxby
was an honest witness, he nevertheless would not accept his
version
that the termination was by mutual agreement;
the
second respondent did not testify or call any witness in order to
rebut Mr Saxby’s evidence;
the
first respondent did not take into account the fact that the second
respondent bore the onus to prove the existence of the alleged
dismissal; the first respondent failed to do this despite the fact
that in the last sentence of the first page of his award, he
had
noted that the parties had not reached agreement on issues of onus
and had promised to deal with onus where relevant; in this
case he
must have regarded onus as irrelevant and yet it was highly relevant
and could well have been decisive;
The
first respondent did not take into account the fact that the second
respondent’s letter of the 5
th
August 1998 addressed to Mr Saxby contained statements which seemed
to corroborate Mr Saxby’s version that the termination was
by
mutual agreement;
the
fact that one of the reasons given by the first respondent for
rejecting the appellant’s version was flawed and that the only
other reason advanced by the first respondent for his finding was
completely irrelevant to the issue of whether there had been
a
dismissal; this left his finding completely without foundation.
[29] In
these circumstances the first respondent’s award cannot stand and
falls to be set aside.
RMM
Zondo
Judge
President
I
agree.
RG
Comrie
Acting
Judge of Appeal
Appearance:
For
the Appellant: Adv. J.G Van der Riet SC
Instructed
by: Edward Nathan & Friedland
For
the First Respondent: No appearance
For
the Second Respondent: Adv. M.E.D. Moyses
Instructed
by: Ehlers Attorneys
Date
of judgement: 1 February 2002