About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Labour Appeal Court
SAFLII
>>
Databases
>>
South Africa: Labour Appeal Court
>>
2004
>>
[2004] ZALAC 20
|
|
Buthelezi v Municipal Demarcation Board (JA37/2002) [2004] ZALAC 20; [2005] 2 BLLR 115 (LAC); (2004) 25 ILJ 2317 (LAC) (22 September 2004)
18
IN THE LABOUR COURT APPEAL
COURT OF SOUTH AFRICA
HELD
IN JOHANNESBURG
CASE
NO.: JA37/2002
In the matter between:
NKANYISO
EUSTACE BUTHELEZI APPELLANT
And
MUNICIPAL
DERMACATION BOARD RESPONDENT
JUDGMENT
JAFTA
AJA
[1] On 24 January 2000 the respondent appointed the
appellant as a deputy manager in charge of its financial operations.
The contract
of employment between the parties was for a fixed term
of five years, running from 24 January 2000 to 23 January 2005. On 22
November
2000 the respondent gave the appellant a notice of
retrenchment. The notice stated
, inter alia,
that the
respondent had embarked upon an institutional restructuring process
in terms whereof certain positions could be rendered
redundant. The
notice gave detailed reasons for the proposed restructuring and
stated that the appellant’s post was one of
the three posts
which could be redundant. The notice invited the appellant to respond
to the proposal made therein and furnish
the respondent by not later
than 27 November 2000 with alternative suggestions to his possible
retrenchment.
[2] On 24 November 2000 the appellant responded to the
notice by requesting an extension of time within which he was
required to
make proposals for alternatives to the proposed
retrenchment. He also asked for certain information. He was granted
an extension
of time up to 30 November to make his proposals.
Meanwhile the appellant had instructed a labour consultant to act on
his behalf
in the matter relating to the proposed retrenchment. The
consultant addressed a letter to the respondent suggesting that there
be a consultation meeting to deal with the matter. The respondent
agreed that the parties meet on 6 December 2000 to consider
alternative
proposals from the appellant. At that meeting the
appellant placed his proposals before the respondent which were
considered and
discussed by the parties.
[3] The respondent invited the appellant and another
employee to apply for a different vacant post within its structure.
On 11 December
2000 the appellant and Mr Hillary Monare (the other
employee) were interviewed for the post. The appellant was
unsuccessful while
Mr Monare was appointed to the post.
[4] On 13 December 2000 the appellant was served with a
notice of dismissal with effect from 28 February 2001 but he was
required
to vacate his office with immediate effect and return the
keys thereto to the respondent. In that notice the appellant was
further
informed that the respondent did not require his services as
from 13 December 2000. A dispute arose between him and the respondent
about the fairness of the dismissal. He referred that dispute to the
Commission for Conciliation, Mediation and Arbitration (“
the
CCMA”
) for conciliation. When conciliation became
unsuccessful, the appellant approached the Labour Court for the
adjudication of the
dispute and sought reinstatement together with
payment of compensation.
[5] The matter came before Brassey AJ in the Labour
Court. In that Court the appellant argued that the termination of his
employment
contract was substantively unfair by virtue of the fact
that the parties had concluded a fixed – term contract of
employment
and that the respondent could not terminate such contract
for operational requirements during its currency. The respondent
disputed
the contention that the appellant had been employed on a
fixed – term contract of employment. However, the Court a quo
found
that such agreement had been concluded by the parties. The
Court a quo also concluded that the appellant’s dismissal was
substantively unfair. It reasoned that the appellant’s
dismissal during the currency of the fixed–term contract
rendered
it substantively unfair. But it went on to find the
dismissal to have been, in other respects, substantively fair. For
example,
the
Court a quo
found that, since the respondent had
a fair reason to restructure its business, the appellant’s
retrenchment was, in this
respect, substantively fair. The
Court a
quo
also concluded that the dismissal was procedurally unfair but
“
not by reason of the manner in which the restructuring was
executed nor by reason of the manner in which [the appellant] was
selected
for retrenchment, but by reason of the manner in which his
dismissal was effectuated which was unfair and constituted an
invasion
of his dignity.”
[6] Although the
Court a quo
fount that the
dismissal was substantively unfair, albeit to a limited extent, it
concluded that the appellant was not entitled
to compensation claimed
in respect of the period following the date on which he had allegedly
committed an act of misconduct which,
in the opinion of the
Court
a quo
, could have entitled the respondent to dismiss him. In this
regard reference was made to “
scurrilous accusations
”
allegedly made by the appellant against the respondent. The
Court
a quo
held that, since the appellant had committed an act of
misconduct prior to the date on which the dismissal became effective
(28
February 2001), he was not entitled to any compensation. As a
result the appellant’s claim for compensation was dismissed
with costs. With the leave of the
Court a quo
, the appellant
now appeals against the whole judgement and order issued by that
Court.
The appeal
[7] In essence, the appellant contended that the
dismissal was substantively unfair because the respondent had no
right in law
to terminate the fixed term contract of employment
between them prior to the expiry of its term even if there were
operational
requirements which could have justified a termination of
contract for an indefinite period. He also argued that the
Court a
quo
, having found that the dismissal was substantively and
procedurally unfair, should have awarded him compensation. He further
contended
that the
Court a quo
erred in finding that his
retrenchment complied with the requirements of s 189 of the Labour
Relations Act 66 of 1995 (“
the Act
”). On behalf of
the respondent these contentions were disputed and it was submitted
that, where there are operational requirements
that would justify a
dismissal, an employer is entitled to dismiss an employee even if his
contract of employment is for a fixed
term. It was submitted on
behalf of the respondent that there was a fair reason for the
dismissal of the appellant which were based
on the respondent’s
operational requirements. It was further submitted on the
respondent’s behalf that in any event,
even if the dismissal
was unfair, the Court a quo’s decision that the appellant
should not be awarded any compensation was
justified and correct.
Substantive unfairness
[8] The
Court a quo’s
finding to the effect
that the parties had concluded a fixed – term contract of
employment is of critical importance to the
adjudication of this
appeal. That finding was not challenged on appeal. This is
significant because the enquiry into the substantive
fairness of the
dismissal should proceed from the premise that the parties had
entered into a valid fixed – term contract
of employment which
was intended to endure until January 2005 but was prematurely
terminated in December 2000 by the respondent,
allegedly on grounds
of operational requirements.
[9] The first question that arises in the present matter
is whether the respondent was entitled to terminate the employment
contract
between it and the appellant when it cancelled it. There is
no doubt that at common law a party to a fixed – term contract
has no right to terminate such contract in the absence of a
repudiation or a material breach of the contract by the other party.
In other words there is no right to terminate such contract even on
notice unless its terms provide for such termination. The rationale
for this is clear. When parties agree that their contract will endure
for a certain period as opposed to a contract for an indefinite
period, they bind themselves to honour and perform their respective
obligations in terms of that contract for the duration of the
contract and they plan, as they are entitled to in the light of their
agreement, their lives on the basis that the obligations
of the
contract will be performed for the duration of that contract in the
absence of a material breach of the contract. Each party
is entitled
to expect that the other has carefully looked into the future and has
satisfied itself that it can meet its obligations
for the entire term
in the absence of any material breach. Accordingly, no party is
entitled to later seek to escape its obligations
in terms of the
contract on the basis that its assessment of the future had been
erroneous or had overlooked certain things. Under
the common law
there is no right to terminate of a fixed – term contract of
employment prematurely in the absence of a material
breach of such
contract by the other party.
[10] Faced with the common law position as stated above
Mr Fabricius, who appeared for the respondent, argued that
the
Court a quo
did not appreciate the inroads made by the Act into
the common law. To illustrate his point, Mr Fabricius referred to the
case
of
National Automobile and Allied Workers Union v Borg –
Warmer SA 1994(3)SA 15 (A).
In that case the Appellate Division
observed that the Labour Relations Act 28 of 1956 had altered the
common law by recognising
the relationship between an employer and an
employee beyond the termination of the contract of employment under
the common law.
In developing his argument Mr Fabricius submitted
that the Act has made significant inroads into the common law by
enlarging the
definition of a dismissal to include a situation where
an employee reasonably expected an employer to renew a fixed –
term
contract on the same terms but the employer renews it on
different terms or refuses to renew it. He submitted further that
this
magnanimity of the Act in relation to employees as demonstrated
by the extended definition of the word “
dismissal
”
should equally apply to employers. He contended that a failure to do
so would amount to inequality and unfair discrimination
which are
outlawed by s 9 of the Constitution. He also contended that the
common law rule referred to in paragraph [9] above should
be
developed in terms of s 39(2) of the Constitution so as to create a
lawful remedy for an employer whose business requires restructuring
during the currency of a fixed-term employment contract. He submitted
that to do this was necessary in order to ensure fairness
to
employers because otherwise they would be precluded from dismissing
employees who are on fixed term contracts even when there
are sound
operational requirements warranting such dismissal.
[11] The answer to Mr Fabricius’ argument is a
simple one. His argument is based on the premise that the rule that
parties
to a fixed term contract should be held to such contract for
the duration of the term of the contract in the absence of any
material
breach of the terms of such contract is unfair to an
employer who wants to restructure his business before the expiry of
the term
of such contract. If we are unable to uphold this premise,
then the very foundation of Mr Fabricius’ argument falls away.
I have no hesitation in concluding that there is no unfairness in
such a situation. This is so simply because the employer is free
not
to enter into a fixed term contract but to conclude a contract for an
indefinite period if he thinks that there is a risk that
he might
have to dispense with the employee’s services before the expiry
of the term. If he chooses to enter into a fixed
term contract, he
takes the risk that he might have need to dismiss the employee
mid-term but is prepared to take that risk. If
he has elected to take
such a risk, he cannot be heard to complain when the risk
materializes. The employee also takes a risk that
during the term of
the contract he could be offered a more lucrative job while he has an
obligation to complete the contract term.
Both parties make a choice
and there is no unfairness in the exercise of that choice.
[12] It is true that labour legislation (including
certain provisions of the Act) has amended the common law in certain
respects.
However, it has not amended the general principles that a
fixed term contract may not be cancelled unilaterally during its
currency
in the absence of a material breach of such contract. The
case of Borg-Warner and the provision in sec 186 which renders a
failure
to renew a contract of employment in certain circumstances to
be a dismissal are only illustrations of the amendment of the common
law in the specific areas with which they are concerned and nothing
more. To uphold Mr Fabricuis’ submission would mean that
the
Act has amended the common law in regard to the principle under
discussion. Generally, our courts have declined to interpret
a
statute as taking away existing rights unless that was the purpose
intended by the legislature and that is expressed in clear
and
unambiguous terms in the statute itself. In
SA Breweries Ltd v
Food & Allied Workers Union and Others 1990(1) SA 92 (A)
Smalberger JA
said in part at 99F:
“
There is a presumption against the deprivation
of, or interference with, common law rights, and in the case of
ambiguity an interpretation
which preserves those rights will be
favoured …”
[13] Although in
SA Breweries Ltd
the Court was
concerned with interpreting the Labour Relations Act of 1956, the
principle it affirmed regarding the application
of the presumption to
interpretation of statutes still applies. The presumption was
recently applied in construing the provisions
of the Act in
Fedlife
Assurance Ltd v Wolfaardt
2002 (1) SA 49
(SCA)
. In this case
Nugent AJA (as he then was) rejected the argument advanced by the
appellant to the effect that in codifying the rights
and remedies in
chapter 8, the current Labour Relations Act (Act 66 of 1995) deprived
employees of the common – law right
to enforce the terms of a
fixed – term contract of employment. The learned Acting Judge
of Appeal (with the concurrence of
Howie JA, Marais JA
and
Mpati JA)
said at paragraphs [16]-[18]:
“
[16] In consideration whether the 1995 Act
should be construed to that effect it must be borne in mind that it
is presumed that
the Legislature did not intend to interfere with
existing law and a fortiori not to deprive parties of existing
remedies for wrongs
done to them. A statute will be construed as
doing so only if that appears expressly or by necessary implication.
While the advent
of the Constitution, and s 39(2) in particular, has
not had the effect of prohibiting entirely the use of the presumption
against
legislative alteration of the existing law (whether common
law or statute) when interpreting a statute which is less than clear,
it nevertheless limits its field of application. The same is true of
the presumption against the deprivation of existing rights.
To
illustrate: where a statute is ambiguous as to whether or not an
existing law or right has been repealed, abolished or altered
and the
existing law or right is not in harmony with the spirit, purport and
objects of the Bill of Fights’ there would appear
to be no
justification for invoking such presumption. But where the existing
law or right is not unharmonious the presumption will
still find
application.
The continued existence of the common- law
right of employees to be fully compensated for the damages they can
prove they have suffered
by reason of an unlawful premature
termination by their employers of fixed term contracts of employment
is not in conflict with
the spirit, purport and objects of the Bill
of rights
and it is appropriate to invoke the presumption
in the present case.
[17]
The 1995 Act does not expressly abrogate an
employee’s common- law entitled to enforce contractual rights
nor do I think that
it does so by necessary implication
. On the
contrary there are clear indications in the 1995 Act that the
Legislature had no intention of doing so.
[18] The clearest indication that it had no such
intention is s 186 (b), which extends the meaning of ‘dismissal’
to
include the following circumstances:
‘
(A)n employee reasonably expected the employer
to renew a fixed term contract of employment on the same or similar
terms but the
employer offered to renew it on less favourable terms,
or did not renew it.’
It is significant that although the Legislature dealt
specifically with fixed-term contracts in this definition it did not
include
the premature termination of such a contract notwithstanding
that such a termination would be manifestly unfair. The reason for
that is plain:
The common law right to enforce such term remained
intact.
And it was thus not necessary to declare a premature
termination to be an unfair dismissal. The very reference to fixed
term contracts
makes it clear that the Legislature recognized their
continued enforceability and any other construction would render the
definition
absurd.” [Emphasis added]
[14] Without a clear indication from the Act that the
legislature intended to alter the common law rule relating to a
premature
termination of a fixed – term contract during its
currency, it cannot be contended that the Act has such effect. This
view
accords with the presumption referred to above which can,
however, be rebutted by the legislature in clear and unambiguous
terms
(
cf Casely NO v Minister of Defence 1973(1) SA 630(A) at 640
A-D
).
[15] The contention by Mr Fabricius that it is
inconsistent with the Constitution not to accord employers the right
to terminate
fixed – term contracts of employment for
operational requirements while employees have in their favour the
enlarged definition
of dismissal has no merit. I also find no
substance in the argument that the common law rule, which says an
employee under a fixed
– term contract of employment is
entitled to enforce it, should be developed in terms of s 39 (2) of
the Constitution. Mr
Fabricius did not specify which section of the
Constitution is in conflict with an employee’s common law right
to enforce
a fixed – term contract of employment which has been
terminated prematurely by the employer. In this regard the arguments
advanced by the respondent are seriously undermined by the
interpretation of the Act which was adopted
in
Wolfaardt’s
case (supra). In that case Nugent AJA stated instructively that the
common – law right to enforce prematurely terminated
fixed –
term contracts of employment was not in conflict with the spirit,
purport and objects of the Bill of Rights and went
on to say that
such right remains intact. In the circumstances I conclude that s 39
(2) of the Constitution cannot be invoked in
the present matter
because the common – law rules we are dealing with here are
consistent with the spirit, purport and objects
of the Bill of
Rights.
[16] In the light of the aforegoing I conclude that the
respondent had no right in law to terminate the contract of
employment between
itself and the appellant. Accordingly, the
termination of such contract before the end of its term was unfair
and constituted an
unfair dismissal. The dismissal was accordingly
substantively unfair in the fullest possible sense. I say in the
fullest possible
sense because the
Court a quo
qualified its
finding that the dismissal was substantively unfair by saying that it
was unfair in certain respects but in other
respects it was
substantively fair. The qualification was wholly unjustified. In the
light of the conclusion I have reached on
the substantive fairness,
the question of procedural fairness becomes academic in this matter.
The operational requirements, if
any existed, did not in law give the
respondent the right to terminate the contract of employment between
the parties.
Compensation
[17] The
Court a quo
found that the appropriate
compensation to redress substantive unfairness was an amount
equivalent to the remuneration the appellant
would have been paid for
the balance of the contract period less the amount he obtained from
other employment. It calculated such
amount to be equivalent to three
months’ pay on the basis that the appellant obtained a better
paying job from another employer
three months after his dismissal.
However, the Court eventually came to the conclusion that the
appellant was not entitled to such
compensation because he had made
certain “
scurrilous accusations
” against the
respondent.
[18] The
Court a quo
reasoned that the
“
scurrilous accusations
” would have entitled the
respondent to dismiss the appellant for misconduct which meant that
the appellant’s dismissal
could have been justified. The Court
found that the accusations were made in an affidavit deposed to by
the appellant on 11 February
2001 and filed in support of a
condonation application lodged at the Commission for Conciliation,
Mediation and Arbitration (“
the CCMA
”) when he
referred the dismissal dispute to that body for conciliation. The
Court a quo
dealt with this issue in an ambivalent manner and
stated:
“
At common law Buthelezi would be entitled to
damages in the amount of three months’ pay. I am not sitting as
a common law
court but sitting to consider the question of
compensation under the statute. What I discover is that if he had
continued in employment
after the middle of December he would in any
event have been justifiably dismissed for misconduct in February by
reason of the
allegations that he made in the application for
condonation. That, though it is based on a set of speculative or
rather hypothetical
premises, is nonetheless, it seems to me, an
appropriate way to consider what should be the moment at which (sic)
at claim based
on compensation should properly be valuated. In those
circumstances he gets nothing at all so far as the equation with
damage for
breach of contract is concerned because he has got
everything he might otherwise have been entitled to, he having been
paid until
well after 11 February.”
[19] I am unable to uphold the
Court a quo’s
refusal to award compensation to the appellant. Firstly, the
conclusion that the appellant could have been justifiably dismissed
for misconduct was based on speculation. Furthermore, the appellant
having alleged in his statement of claim that his dismissal
was
unlawful because it did not comply with the terms of the employment
contract which permitted only a dismissal for misconduct,
the
respondent did not plead that the dismissal was justified by the
appellant’s alleged misconduct pertaining to averments
made in
the condonation application. Nor did it place evidence before the
Court a quo showing that it could have dismissed the
appellant for
such averments. In fact in his testimony the respondent’s
chairperson did not regard the allegations as sufficiently
serious to
have warranted a dismissal.
[20] At the hearing of this appeal the parties were in
agreement that the appellant could only be entitled to compensation
equivalent
to three months’ salary because he was employed
elsewhere at a better salary three months after his dismissal. This
proposition
is consistent with the approach adopted in
Meyers v
Abrahamsom 1952(3) SA 121(C).
In that case
Van Winsen J
laid down the correct approach for computing damages for a premature
dismissal in the following terms at 127E:
“
The measure of damages accorded such employee
is, both in our law and in the English law, the actual loss suffered
by him represented
by the sum due to him of the unexpired period of
the contract less any sum he earned or could reasonably have earned
during such
latter period in similar employment.”
As both parties were agreed that this would be the
correct approach, I propose to give effect to it.
[21] There remains the issue of the purported cross-
appeal lodged by the respondent. Although no order was issued by the
Court
a quo against the respondent, it filed a “
cross-appeal
”
against the f
indings
made by that Court on substantive and
procedural unfairness and the finding that the respondent had
committed
iniuria
and insulted the appellant in his dignity.
The only order made in this matter was the one dismissing the claim
with costs.
Appeals against judgements or orders of the Labour
Court, which include cross-appeals, are regulated by s 166 of the
Act. The relevant
portion of the section reads as follows:
“
(
1) Any party to any proceedings before the
Labour Court may apply to the Labour Court for leave to appeal to the
Labour Appeal Court
against any final judgement or final order of the
Labour Court.”
[22] It is quite plain from the wording of s 166(1) that
appeals and cross-appeals can only be noted and prosecuted against
final
judgements or orders. There can be no appeals against reasons
or findings in a judgement (
cf Pretoria Garrison Institutes v
Danish Variety Products (Pty) Ltd
1948 (1) SA 839
(A) and De Vos v
Cooper and Ferreira
1999 (4) SA 1290
(SCA) at paragraph [17]).
The
decision in
De Vos
dealt with s 20 of the Supreme Court Act 59
of 1959 which is couched in words similar to s 166(1) of the Act. In
my view the purported
cross – appeal should be struck off the
roll with costs. In the result the appeal must succeed.
[23] In the premises the following order is made:
[1] The appeal is upheld with costs.
[2] The cross-appeal is struck off the roll with costs.
[3] The order of the Court a quo is set aside and
replaced with the following order:
“
(a)
The applicant’s dismissal on 13
December 2000 is declared to have been substantively unfair.
(b) The respondent is ordered to pay to the applicant
an amount equivalent to three months’ salary calculated at the
rate
of his pay at the time of his dismissal.
(c) The respondent is ordered to pay the applicant’s
costs.”
__________________
JAFTA
AJA
I
agree.
_______________
ZONDO
JP
I
agree.
_______________
DAVIS
AJA
Appearances:
For
the appellant : Adv. L. A. Cook
Instructed
by : Lebea & Associates
For
the respondents: Adv. H. J. Fabricius SC
Instructed
by : Macrobert Inc.
Date
of judgment : 22 September 2004