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[2012] ZALAC 13
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Herholdt v Nedbank Ltd (DA 20/2010) [2012] ZALAC 13; [2012] 9 BLLR 857 (LAC); (2012) 33 ILJ 1789 (LAC) (4 May 2012)
THE LABOUR
APPEAL COURT OF SOUTH AFRICA, DURBAN
JUDGMENT
Reportable
Case no: DA 20/2010
In the matter between:
ANDRE HERHOLDT
…...............................................................................
Appellant
and
NEDBANK LIMITED
…...........................................................................
Respondent
Heard: 23 August 2011
Delivered: 04 May 2012
Summary: Review of arbitrator’s
award. Labour Court finding that the commissioner ignored relevant
evidence, and failed to
apply his mind to a number of material
issues, and as a result committed gross irregularities in the conduct
of the arbitration.
Labour Court reviewing award - Approach of the
court
a quo
correct and consistent with the prevailing law
regarding review on grounds of unreasonableness. Appeal dismissed
with costs.
______________________________________________________________
JUDGMENT
______________________________________________________________
MURPHY AJA
[1] This is an appeal against the
judgment of the Labour Court (Gush J) in which it set aside on review
an arbitration award of
the Commission for Conciliation, Mediation
and Arbitration (“the CCMA”) and substituted it with an
order that the dismissal
of the appellant by the respondent was fair.
The appeal is with the leave of the court
a quo
.
[2] The respondent, Nedbank Limited, a
banking institution providing a broad range of financial services,
dismissed the appellant,
a financial broker, on the grounds that he
dishonestly failed to declare a conflict of interest arising from his
being nominated
as a beneficiary in the will of a client.
[3] The relevant charge, being the
main charge proffered against the appellant, read as follows:
‘
DISHONESTY
In
that during or about the period December 2007 to June 2008 and
despite the legal duty on an employee to avoid any conflict of
interest between his own interests and that of his employer and the
clear provisions of the Conflict of Interest Policy, Ethics
Policy,
as well as the General Conditions of Employment, you failed to
disclose to Nedbank the conflict that developed as a result
of your
relationship with Mr. John Frederick Smith when you became aware
thereof or at any time thereafter, until confronted with
its
existence. This failure to disclose has resulted in regulatory and
reputational risk to Nedbank
.’
[4] The conflict of interest policy is
a detailed document embodying its objectives, scope and the
applicable principles governing
the behaviour of directors and
employers of the respondent. These require
inter alia
that an
employee should ensure that his services are rendered in good faith
and must in no way detract from the relationship of
trust. Employees
are expected to uphold ethical standards, which include an obligation
not to work against Nedbank’s interests.
The policy recognises
that a conflict of interest may arise when an employee enters into
any engagement in which he or she may
acquire a personal interest
which may conflict with the interests of Nedbank or may appear to
compromise the employee’s ability
to perform his or her duties
impartially. Clause 4.1.1 of the policy imposes a duty on an employee
‘when rendering his/her
services, always to act exclusively in
the interests of his/her employer -therefore his/her conduct, when
rendering such services
should never result in his/her private
interests or the interests of either being in conflict with the
execution of his/her duties
or the interests of his/her employer.”
Clause 4.1.10 provides that Nedbank and the clients of Nedbank
“expect an employee
not only to disclose any circumstances that
may produce a conflict of interest, but also to recuse
himself/herself from any decision
making process in regard to the
issue in question.” Clause 4.4 requires employees to
familiarise themselves with the relevant
policies of Nedbank and to
disclose conflicts actively. It states: “when in doubt,
disclosure, consultation and guidance
must be sought from your
manager and compliance officer.’ [5] An annexure to the policy
headed: “Disclosure of Gifts”,
includes the following:
‘
All
employees are required to make a written declaration as soon as is
reasonably possible … on receipt of any gifts, benefits,
services or favours of any nature whatsoever (“gifts”) on
account of, or in the course of, his/her duties as an employee.’
Gifts greater than R10 000 require
executive approval after ensuring that there is not an actual or
perceived conflict of interests
with the recipient’s duties to
Nedbank. There is no specific reference in the policy to a
prohibition on employees benefitting
from client’s wills, but
being a benefit, disclosure and approval are apparently necessary.
[6] The appellant received a copy of
the conflict of interest policy in September 2007 and made a
declaration of his conflicts of
interests. The respondent accordingly
assumed that the appellant was aware of the policy and should have
known he was obliged to
disclose the fact that he had been made a
beneficiary in terms of the will of his client, Mr John Smith. The
appellant was found
guilty on the main charge and dismissed on 14
July 2008. He then referred an unfair dismissal dispute to the CCMA
which culminated
in arbitration proceedings before Ms Grobler, (“the
commissioner”) in late January 2009. The commissioner issued an
award on 11 February 2009 in which she found that the appellant’s
dismissal was unfair and ordered his reinstatement. In
her opinion,
the respondent failed to prove that the appellant knew that a
conflict of interest existed. In addition she held that
the
respondent had not established that the appellant acted dishonestly
or caused any regulatory or reputational risk to the respondent
as a
result of the non-disclosure of the conflict of interest.
[7] On review, the Labour Court held
that the commissioner had failed to apply her mind to a number of
material issues and as a
consequence committed gross irregularities
in the conduct of the arbitration. It set aside the award and
substituted it with an
order that the dismissal was fair and ordered
the appellant to pay the costs of the review.
[8] The issues for determination on
appeal are whether the Labour Court rightly decided that the
commissioner failed to apply her
mind to a number of material issues,
thereby committing gross irregularities in the conduct of the
arbitration, and whether the
arbitration award is not one that a
reasonable commissioner could make.
[9] The appellant commenced employment
with the respondent as a financial planner and broker in 1994. He
enjoyed considerable success
in his position and was highly regarded
by colleagues and clients. In 1996 the appellant befriended Mr John
Smith and his life
partner Mr Wilfred Cibane. Between 1998 and 2008
he performed various financial services for Smith and Cibane on an
intermittent
basis. In 1998 he assisted them with tax clearances and
their wills, and in 2006 he sold a policy to Smith for which he
received
a commission. It is not disputed that Smith was thus a
client of the appellant, who the appellant assisted to make specific
investment
decisions.
[10] In late 2007, Smith and Cibane,
who were both old and frail, entered into an agreement with a certain
Mr and Mrs Wheeler for
the building of a garden flat on their
property, where Smith and Cibane would live. Pending completion of
the building, it was
agreed that Smith and Cibane would move in with
the Wheelers. On 26 December 2007, Smith contacted the appellant and
requested
a meeting for the purpose of amending his will. At that
stage Smith’s will appointed Cibane as his heir and left the
residue
of his estate to him. By December 2007 Cibane had become
mortally ill and it seemed likely that he would pre-decease Smith.
The
appellant met with Smith on 27 December 2007. Smith informed the
appellant that he wished to make bequests to him and the Wheelers.
The appellant indicated to Smith that because he acted as his
financial advisor he did not think it was appropriate for him to
receive a bequest. Smith insisted and the appellant agreed to be a
beneficiary in the will and to receive a legacy in the amount
of ₤92
000.
[11] On the same day the appellant
telephoned Mr Garth Williamson, a legal adviser at BOE Trust, and
sought advice in relation to
his becoming a beneficiary in a client’s
will. Williamson was employed by BOE Trust as a fiduciary specialist
and routinely
provided a wills drafting service to Nedbank financial
planners. In his evidence before the commissioner, Williamson
testified
that he had cautioned the appellant “because of the
advisor/client relationship there’s possibilities of conflicts
of interest and that sort of thing”. Wary of a possible
perception of undue influence, Williamson suggested that Smith should
sign a letter confirming that he was acting of his own volition,
which the appellant should then give to his manager, who would
need
to know about the situation for “risk purposes”. BOE
Trust is an independent and separate entity to Nedbank, but
the two
entities have an ongoing relationship in terms of which BOE Trust is
Nedbank’s product provider for wills. Any will
generated by a
Nedbank financial planner would normally (depending on the wishes of
the client) be handled by BOE Trust.
[12] Smith executed his new will on 28
December 2007 and signed a further document prepared in draft by
Williamson in which he confirmed
that the bequest of his offshore
investment to the appellant was in accordance with his instructions
and that he had not been influenced
in any way to make the bequest.
On the same day the appellant handed over the newly executed will and
the document in a sealed
envelope to BOE Trust. It is common cause
that these documents were never delivered to the appellant’s
manager. The appellant
testified that he believed BOE Trust would
deliver the documents to his manager.
[13] Cibane died in January 2008.
Thereafter the relationship between Smith and the Wheelers soured,
and the appellant moved Smith
into his home, which he shared with his
life partner, Mr Wayne Dalvaux. During February 2008 an acrimonious
situation developed
between the Wheelers on the one hand and Smith
and the appellant on the other, regarding several matters including
Smith’s
furniture, the agreement and finance for the building
of the garden flat, the will and other issues. The quarrel resulted
in demands
being made by both sides. On 13 March 2008 a letter of
demand was sent by attorneys on behalf of Smith, demanding repayment
of
the sum of R250 000, being monies advanced in respect of the
building of the garden flat. On 17 March 2008 the Wheelers’
attorneys replied that they were preparing affidavits concerning the
conduct of the appellant in his capacity as a financial adviser
to
Smith. The attorneys then filed a complaint regarding the appellant
with the Financial Services Board (“FSB”) on
3 April
2008. The appellant responded to the complaint and filed affidavits
with the FSB, including a lengthy one attested to by
Smith refuting
the allegations of impropriety made by the Wheelers.
[14] In a letter dated 30 April 2008
addressed by Mr G. Palmer, the attorney acting for Smith, to the
Wheeler’s attorney,
the following is stated:
‘
Copies
of the affidavits and all other relevant information have already
been handed to the Regional Manager of Nedbank Financial
Planning,
who has been fully appraised (sic) of the situation. ….. …
We
would once again request that you draw to your client’s
attention that Mr John Smith’s last Will and Testament is
a
private document and none of their concern.’
[15] It is common cause that the
statement regarding the disclosure to Nedbank was incorrect. Palmer
testified in this regard before
the CCMA that he had misunderstood
during a telephone conversation with the appellant that Nedbank had
been placed in the picture.
The appellant testified that he had
assumed Nedbank was aware of his position as a beneficiary after he
gave the documents to Williamson.
He however did not instruct Palmer
that copies of all the affidavits, including those making up the
complaint to the FSB, had been
handed to Nedbank. Palmer had
misunderstood his instructions.
[16] On 14 May 2008 the FSB sent a
copy of the complaint by email to Ms L Lindeque at Nedbank requesting
Nedbank to investigate
and to respond to the FSB no later than 23 May
2008. This email was sent to the wrong address and the complaint had
to be re-sent
on 29 May 2008.
[17] In the interim, on 22 or 23 May
2008, five months after becoming a beneficiary, the appellant
contacted his regional manager,
Ms Esterhuizen, with whom he had a
friendship as well as a professional relationship, and disclosed to
her for the first time that
there was a possibility that he
might
“be becoming an heir in a will”. Esterhuizen told him
that he was obliged to disclose all the details to his area manager,
Noel Snyman, and that the conflict would then be referred for
consideration and decision to the compliance department.
[18] A few days later, on 27 May 2008,
Smith executed another will removing the Wheelers as beneficiaries
and bequeathing the entire
residue of his estate to the appellant and
Wayne Dalvaux, the appellant’s life partner. The instruction to
change the will
was given by Smith to the appellant who carried out
the instruction. Once again, Smith signed a document stating that he
had not
been unduly influenced. The appellant dropped off the new
will and the document at BOE not long after they were executed. He
did
not follow Esterhuizen’s advice to declare his interest and
make disclosure to Noel Snyman for the purposes of obtaining a
decision from the compliance department. Moreover, the next day, 28
May 2008, both the appellant and Esterhuizen attended a convention
of
the Financial Planning Institute. Esterhuizen knew about the
appellant’s friendship with Smith and the fact that Smith
had
moved into his home. Despite their discussing Smith at the
convention, the appellant failed to disclose to Esterhuizen that
Smith was the client of whom he had spoken in their telephone
conversation and that subsequent to that conversation he and Dalvaux
had become the heirs under the will executed the previous day.
[19] When Nedbank eventually received
a copy of the complaint from the FSB on 29 May 2008, Ms Taryn
Steenkamp, a legal compliance
officer at Nedbank, straightaway
emailed Esterhuizen, Snyman and the appellant, attaching a copy of
the complaint and requesting
the appellant to provide his version of
the events. The appellant did so and furnished relevant
documentation.
[20] Not long afterwards, on 13 June
2008, Smith amended his will yet again, this time excluding the
appellant as a beneficiary
and leaving the entire residue of his
estate to Dalvaux, the appellant’s partner. Smith also
nominated LHSF (instead of BOE
Trust) as the executor of his estate.
On the same day the appellant was charged with misconduct and
suspended. Smith died age 92
on 22 June 2008.
[21] The appellant visited the offices
of BOE Trust on 13 June 2008 and established that the documents he
had handed to Williamson
in December 2007 had not been forwarded to
Nedbank.
[22] In order to determine the dispute
referred to the CCMA, the commissioner had to decide whether the
dismissal was substantively
fair. Given that the disciplinary hearing
had concluded that the appellant was guilty on the main charge of
dishonesty, the principal
issue was whether the appellant
deliberately failed to disclose his interest in Smith’s will to
Esterhuizen and Snyman. This,
counsel submitted, required the
commissioner to apply her mind properly to a number of relevant
issues, namely:
(a) whether the appellant knew that
there was a conflict of interest;
(b) whether the appellant’s
dealings with Williamson on 27 December 2007 constituted proper
disclosure in fact and in law;
(c) the reason the appellant failed to
make full and proper disclosure to Esterhuizen and Snyman;
(d) the reason for the appellant not
disclosing to Nedbank the complaint made to the FSB by the Wheelers;
(e) the implications of the incorrect
allegation in Palmer’s letter that Nedbank had been apprised of
the situation;
(f) the import of the telephone
conversation between the appellant and Esterhuizen on 23 May 2008;
(g) the failure of the appellant to
inform Snyman and Esterhuizen about the contents of Smith’s
will of 27 May 2008; and
(h) the appellant’s
non-disclosure to Esterhuizen on 28 May 2008 that he had in fact
become a beneficiary under the second
will.
Proper consideration of these facts
was required for the purpose of determining the appellant’s
state of mind and whether
the non-disclosure of the conflict of
interests was deliberate and accordingly dishonest.
[23] The commissioner’s award is
long and detailed. In the final analysis she held that the respondent
had failed to prove
on a balance of probabilities that the appellant
had acted dishonestly, or knew that there was a conflict of interest,
and accordingly
she was not able to conclude that the information was
deliberately withheld. She held further that the respondent had not
proved
that the non-disclosure resulted in any regulatory and/or
reputational risk to Nedbank, because it was unlikely that it would
lose
its licence under the circumstances.
[24] The commissioner noted moreover
that the respondent did not have an explicit rule speaking to the
duty of an employee to disclose
the fact that he or she was a
beneficiary in terms of a client’s will; and she considered the
charge against the appellant
to be vague because ‘other than
the heading the charge itself makes no mention of dishonesty’.
She accepted that the
appellant was concerned about the situation to
the point that he consulted with Williamson, but in fact he had
realised for the
first time that there was a conflict of interest
when he conceded as much under cross-examination. In her opinion,
neither the
appellant nor Williamson fully appreciated that there was
a conflict of interest. She was satisfied that the “letter”
included in the envelope with the will which was given to Williamson
constituted sufficient disclosure to the respondent and indicated
further that the appellant intended or wished to be in compliance.
She also believed Palmer’s explanation that he had
misunderstood
the appellant’s instructions regarding disclosure
to Nedbank.
[25] The grounds upon which the
respondent sought review of the award before the Labour Court alleged
that the commissioner had
failed to apply her mind properly to the
material facts and thereby committed a latent gross irregularity
equating to an act of
process-related unreasonableness. The Labour
Court agreed stating that it was required to consider whether the
commissioner failed
to take into account factors that she was bound
to take into consideration and if so whether her conduct amounted to
a gross irregularity
as contemplated in section 145 of the Labour
Relations Act 66 of 1995 (“the LRA”) with the resulting
decision not being
that of a reasonable decision-maker.
[26] As regards the finding that the
charge was vague, the Labour Court, held, in my view correctly, that
the charge clearly sets
out the misconduct complained of with
reference to the conflict of interest policy and refers to a general
duty of disclosure between
employee and employer which arises in such
situations. The allegation of a failure to disclose under the heading
of “dishonesty”
alleges in effect a deliberate
non-disclosure.
[27] The Labour Court held that the
finding that neither the appellant nor Williamson knew that a
nomination as a beneficiary in
a client’s will amounted to a
conflict of interest was unsustainable. Firstly, such a finding
ignored and contradicted Williamson’s
material evidence that he
warned the appellant of the possible conflict and of the issue of
undue influence and advised him to
report it to the respondent for
risk purposes. Moreover, the evidence establishes that the appellant
had signed the policy. He
was also an experienced senior financial
advisor, who, on his own admission, was originally not comfortable
with the idea of being
a beneficiary; thus his approach to Williamson
for advice on the question, which advice he effectively chose to
disregard. He also
ignored the advice given to him by Esterhuizen on
the phone and opted not to disclose the true and complete nature of
his enquiry
when he spoke to her on the day after the second will was
executed. His conduct was also in contravention of the dictates of
the
policy that conflicts should be disclosed actively and when in
doubt. He sought advice and guidance because he appreciated the
potential for difficulty, but failed to follow through with proper
disclosure. Accordingly, in the view of the Labour Court, the
commissioner’s conclusions regarding the appellant’s
state of mind were not justifiable (rationally connected to the
evidence before her). She did not take into account his motivation in
seeking advice from Williamson and Esterhuizen and his not
complying
with their suggestion to disclose the conflict to Noel Snyman.
[28] The Labour Court looked upon the
commissioner’s finding that there was no rule or policy
requiring disclosure of nomination
as a beneficiary in a client’s
will as a manifest indication that she did not understand the policy
or simply did not take
it in account. Had she applied her mind to the
policy she would have appreciated that the nomination was a benefit
obtained in
the course of the appellant’s employment, but also
resulted in a situation where the appellant’s private interests
may have led to a possible conflict with his employer’s
interests (reputational and regulatory risk) and his ability to
perform
his duty to his client impartially. That being the case, he
had a duty to disclose in order that the compliance department might
manage the risk in the best interests of all concerned, including the
appellant. The commissioner evidently did not appreciate
or grasp
this underlying rationale of the policy and thus failed to take
account of an important relevant consideration, as well
as the
fiduciary duties of the appellant.
[29] Moreover, the appellant’s
version (accepted by the commissioner) that he only realised that
there was a conflict of interest
during his cross examination fails
to take heed of his evidence that he was initially uncomfortable, the
reality of his experience
and his position of seniority.
[30] The Labour Court rejected the
commissioner’s finding that the “letter” filed with
the will and given to Williamson
and BOE Trust constituted disclosure
and revealed an intention or desire to be compliant. The learned
judge observed:
‘
Firstly
the so-called letter is not a letter at all, it is not addressed to
the applicant (Nedbank) or any of its managers, secondly
it does not
purport to disclose anything and lastly as explained by the third
respondent (the appellant) it was to be used in the
case of the will
being disputed by anybody. In fact the nature of the document signed
by Smith and the purpose for which it was
obtained suggest quite
clearly that it was intended to be filed with the will and was not a
notification at all.’
The commissioner’s finding did
not recognise the nature of the notification required by the policy
(comprehensive details
to be provided timeously to the appropriate
manager) and discounted the fact that the appellant did not act in
accordance with
the advice given to him by both Williamson and
Esterhuizen.
[31] Finally, the Labour Court was
further of the view that the commissioner failed to take account of
the inherent improbabilities
of Palmer’s explanation regarding
his instructions and the reason for the false claim to the Wheeler’s
attorney that
there had been full and proper disclosure to Nedbank.
The importance and explicit nature of the assurance given by Palmer,
in the
opinion of the learned judge, rendered the suggestion of a
misunderstanding inherently improbable.
[32] The Labour Court accordingly
concluded that the award was not reasonable given the evidence and
material which was placed before
the commissioner and because she
failed to apply her mind to a number of material issues and as a
consequence committed gross irregularities
in the conduct of the
arbitration.
[33] In reaching
the conclusion it did, the Labour Court followed the approach adopted
in
Southern
Sun Hotel Interests (Pty) Ltd v CCMA and others
1
in which van
Niekerk J held that a CCMA award is reviewable where it is shown that
the commissioner’s process related conduct
is found wanting.
The line of reasoning in that decision elaborates upon the standard
of review enunciated by the Constitutional
Court in
Sidumo
and Another v Rustenburg Platinum Mines Ltd and Others,
2
which stated the
test to be whether the decision reached by the commissioner is one
that a reasonable decision maker could not reach.
In
Southern
Sun Hotel Interests (Pty) Ltd v CCMA and Others
,
van Niekerk J
expressed the opinion that the reasonableness requirement is relevant
to both process and outcome. In other words
an award will be
reviewable if it suffers either from dialectical unreasonableness or
is substantively unreasonable in its outcome.
[34] In his seminal
work
Administrative
Law
,
3
Prof. Lawrence
Baxter, in his discussion of review on grounds of unreasonableness,
makes the point that whether a certain proposition
is substantively
reasonable depends on whether it is supported by arguments and
considerations recognised as valid, even if not
conclusive. It is
thus possible to be both reasonable and wrong. Distinguishing between
dialectical and substantive unreasonableness,
he elucidates on the
two species of unreasonableness:
4
‘
As
far as the procedural or
dialectical
facet
of decision-making is concerned, it is possible to adjudge someone to
be reasonable or unreasonable without necessarily identifying
or
disagreeing with their views. Using ‘unreasonableness’ in
this way, it is clear that to adjudge someone reasonable
or
unreasonable is not the same as adjudging them
right
or
wrong
.
That is why it is a confusion to assert that the admission of
‘unreasonableness’ as a ground of review would blur
the
distinction between review and appeal. On the other hand, the
substantive unreasonableness of the conclusion reached (e.g.
whether
the correct weight has been attached to each consideration or whether
the ‘best’ values have been adopted)
is a matter for each
individual’s subjective assessment. Some philosophers have
suggested that it is
likely
that ‘reasonable men’ will reach the same conclusions
but, in the nature of practical discourse, this is not necessarily
so. Hence dialectical reasonableness is usually more susceptible to
second and third party appraisal than is substantive reasonableness.’
[35] The test of
reasonableness expressed in
Sidumo
mirrors
that enacted in section 6(2)(h) of the Promotion of Administrative
Justice Act 3 of 2000 (“PAJA”) which empowers
a court to
judicially review an administrative action if the exercise of the
power or the performance of the function is so unreasonable
that no
reasonable person could have so exercised the power or performed the
function. That review ground exists alongside other
dialectical
reasonableness grounds in section 6(2) of PAJA ( for instance: acting
with an ulterior purpose; taking account of irrelevant
considerations; ignoring relevant considerations; acting arbitrarily,
capriciously or in bad faith; acting under dictation; and
irrationality). One may surmise therefore that the review ground in
section 6(2)(h) of PAJA grants a power to review on grounds
of
unreasonableness of a more substantive nature in the sense that the
ultimate decision is assessed with regard to the sufficiency
and
cogency of the evidence to determine if it is reasonably supportable.
The question under such a test is whether the evidence
is such that a
reasonable person, acting reasonably, could have reached the decision
on the evidence and the inferences drawn from
it.
5
By necessity this
involves consideration of both substance and merits in relation to
the outcome, but allows a measure of legitimate
diversity and
deviance from the correct or perfect decision. The enquiry is
directed less at the method and more at the result
of the
proceedings. That being so, the reasonableness or otherwise of a
commissioner’s decision will not depend exclusively
upon the
reasons that the commissioner gives for the decision. Other reasons
upon which the commissioner did not rely to support
his decision or
finding but which can render the decision reasonable or unreasonable
must also be considered.
6
[36] In
Southern
Sun Hotel Interests (Pty) Ltd v CCMA and Others
,
7
van Niekerk J
correctly dismissed the suggestion that it might be inferred from the
Sidumo
line
of reasoning that in an application for review brought under section
145 of the LRA, process-related conduct by a commissioner
is not
relevant. Where a commissioner fails to have regard to material
facts, this will constitute a gross irregularity in the
conduct of
the arbitration proceedings because the commissioner would have
unreasonably failed to perform his or her mandate and
thereby have
prevented the aggrieved party from having its case fully and fairly
determined. Proper consideration of all the relevant
and material
facts and issues is indispensable to a reasonable decision and if a
decision-maker fails to take account of a relevant
factor which he or
she is bound to consider, the resulting decision will not be
reasonable in a dialectical sense. Likewise, where
a commissioner
does not apply his or her mind to the issues in a case the decision
will not be reasonable.
8
Relying on these
principles, van Niekerk J concluded:
9
‘
If
a commissioner fails to take material evidence into account, or has
regard to evidence that is irrelevant, or the commissioner
commits
some other misconduct or a gross irregularity during the proceedings
under review and a party is likely to be prejudiced
as a consequence,
the commissioner’s decision is liable to be set aside
regardless of the result of the proceedings or whether
on the basis
of the record of the proceedings, that result is nonetheless capable
of justification.’
[37] As I have
explained, the Labour Court in the present case followed this line of
reasoning in arriving at its conclusion that
the decision of the
commissioner was unreasonable. In his notice of appeal the appellant
contended that the Labour Court erred
in over-emphasising the process
by which the arbitrator reached her award. Mr
Findlay
submitted that the
emphasis on process was misplaced in that the court was required to
consider whether the decision, based on the
material admitted as
evidence, was one which a reasonable decision-maker could not reach.
And while the failure to take into account
relevant evidence may in
certain circumstances constitute an irregularity the respondent was
required to show that the commissioner
gravely misunderstood the
evidence. He submitted that a review does not require an in-depth
analysis of the commissioner’s
finding on each and every issue.
All that is required, he contended, is to ascertain whether or not
the commissioner considered
the issue and came to a conclusion on the
facts, supported by the evidence, which was sufficiently reasonable
to justify the decision.
Put in another way, the target on review is
the result or outcome rather than the process, and if that is
sustainable as reasonable,
no more should be expected.
[38] I am unable to
agree with those submissions principally because, as I have
discussed, the weight of authority favours greater
scrutiny and
section 145(2) of the LRA expressly permits the review of awards on
the ground of irregularity. In
Sidumo,
Ngcobo J stated:
10
‘
It
follows therefore that where a commissioner fails to have regard to
material facts, the arbitration proceedings cannot in principle
be
said to be fair because the commissioner fails to perform his or her
mandate. In so doing …… the commissioner’s
action
prevents the aggrieved party from having its case fully and fairly
determined. This constitutes a gross irregularity in
the conduct of
the arbitration, as contemplated in section 145(2)(a)(ii) of the LRA.
And the ensuing award falls to be set aside
not because the result is
wrong but because the commissioner has committed a gross irregularity
in the conduct of the arbitration
proceedings.’
[39] This approach
has been followed subsequently by this Court in
Ellerine
Holdings Ltd v CCMA and Others
11
;
and appears to have been endorsed by the Constitutional Court in
CUSA
v Tao Ying Metal Industries and Others
12
where it was stated
that it is now axiomatic that a commissioner is required to apply his
or her mind to the issues before him.
One of the duties of a
commissioner is to determine the material facts and then to apply the
provisions of the LRA to those facts
in answering the question
whether the dismissal was for a fair reason. Commissioners who do not
do so do not fairly adjudicate
the issues and the resulting decision
and award will be unreasonable. Whether or not an arbitration award
or decision or finding
of a commissioner is reasonable must be
determined objectively with due regard to all the evidence that was
before him or her and
what the issues were.
13
There is no
requirement that the commissioner must have deprived the aggrieved
party of a fair trial by misconceiving the whole
nature of enquiry.
The threshold for interference is lower than that; it being
sufficient that the commissioner has failed to apply
his mind to
certain of the material facts or issues before him, with such having
potential for prejudice and the possibility that
the result may have
been different. This standard recognises that dialectical and
substantive reasonableness are intrinsically
inter-linked and that
latent process irregularities carry the inherent risk of causing an
unreasonable substantive outcome.
[40] That said
though, the distinction remains important. The basic principle laid
down in
Ellis
v Morgan; Ellis v Dessai
14
still applies.
There the court said:
‘
But
an irregularity in 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.’
In short, if the
conduct of the commissioner prevents a fair trial of the issues, even
if perfectly well-intentioned and
bona
fide
,
though mistaken, then such conduct will amount to a gross
irregularity,
15
and that will be
enough to successfully found a review under section 145(2) of the
LRA. The court by necessity must scrutinise the
reasons of the
commissioner not to determine whether the result is correct; or for
that matter substantively reasonable, but to
determine whether there
is a latent irregularity, that is, an irregularity that has taken
place within the mind of the commissioner,
which will only be
ascertainable from his or her reasons.
[41] In conclusion therefore, I accept
that the approach of the court
a quo
was correct and
consistent with the prevailing law regarding review on grounds of
unreasonableness.
[42] The appellant has challenged
several of the factual conclusions of the Labour Court upon which it
based its finding that the
decision of the commissioner was
unreasonable because she failed to apply her mind to a number of
material issues and as a consequence
committed gross irregularities
in the conduct of the arbitration. I turn now to these.
[43] During the course of the
appellant’s cross-examination before the CCMA he was asked
whether he accepted that if there
is a conflict of interest and an
employee made a conscious decision not to disclose it that such would
amount to an act of dishonesty
which would be a dismissable offence.
The appellant agreed that if there was a conscious decision not to
disclose that such would
indeed be dishonesty justifying dismissal.
This “concession”, if indeed such, gave rise to some
argument. In her finding
the commissioner held however that the
appellant was not dishonest because he believed either that there was
in fact no conflict
of interests or that he had disclosed the
conflict. As I understand her reasoning, she regarded the concession
as being a hypothetical
concession of principle rather than any
admission of wrongdoing. In that she was correct, in my view. In
paragraph 36.2 of its
judgment the Labour Court noted that the
appellant had made the concession, but it is not clear whether the
learned judge regarded
it to be an admission of wrongdoing. Counsel
for the appellant has submitted that the Labour Court erred in this
respect by accepting
that there had been an admission of dishonesty.
[44] The submission, with respect, is
unfounded. As I have said, the judgment is unclear about the weight,
if any, that was attached
to the concession. The reference to it in
paragraph 36.2 faithfully records its hypothetical nature by stating
“that
if
he had made a conscious decision not to
disclose it, it would amount to dishonesty and justify his
dismissal”. I am unable
to find any further reference to the
concession in the judgment; nor is there any finding that the
commissioner failed to take
account of that consideration resulting
ipso facto
in the award being unreasonable. The Labour Court’s
finding that the commissioner had misapplied her mind to the evidence
and the issue of dishonesty is predicated not on the concession made
by the appellant during cross examination. Rather, it is based
upon
the commissioner not taking account of the fact that the appellant
never brought the Wheelers’ complaint to the attention
of
Nedbank; was complicit in falsely communicating that Nedbank had been
informed about the potential conflict of interests, when
it had not
been; failed to disclose to Esterhuizen his interest in Smith’s
will during their telephonic discussion on 23
May 2008; did not
follow Esterhuizen’s advice regarding the need to disclose the
conflict to Noel Snyman; and did not tell
Esterhuizen of his interest
in Smith’s will at the conference of the Financial Planning
Institute the day after the second
will was executed, despite
discussing Smith with her.
[45] While it is correct that the
commissioner gave these facts and issues some thought and
consideration, it cannot be said that
she applied her mind to them
properly. Her finding that the discussion with Esterhuizen was a
general one, related to another client
and should be viewed together
with the appellant’s belief that he had made disclosure via
Williamson, which was corroborated
by Williamson, totally
misconstrued the evidence and the nature of the enquiry in relation
to the issue of deliberate non-disclosure.
Esterhuizen’s
evidence that she advised the appellant to make disclosure to Noel
Snyman, and that she took it upon herself
to alert Snyman that the
issue might arise in her absence, was unchallenged under cross
examination. That means that the appellant
did not disclose to her
that he was in fact already a beneficiary. Her evidence was that he
disclosed to her that he might possibly
become a beneficiary. It
means also that he was at that point fully apprised of the conflict
and still failed to disclose his status
as a legatee under the first
will and as heir under the second will when he was nominated as such
a few days later. The conclusion
that the appellant deliberately did
not disclose the conflict is inescapable. The commissioner’s
finding to the contrary
is wholly unsustainable, and more than a
plausible intimation that she failed to apply her mind properly to
the material facts
and the relevant issues.
[46] The finding that neither the
appellant nor Williamson understood that the appellant’s
nomination constituted a potential
conflict of interests lies in the
face of Williamson’s evidence. The appellant approached
Williamson because he felt uncomfortable
and thus, in my opinion, had
more than an intuitive inkling about the existence of a conflict of
interests. Williamson shared that
view. He testified that for that
very reason he advised the appellant to act cautiously and
specifically told the appellant to
disclose the bequest to Nedbank
management so that they could have insight into the risks involved
which needed to be managed.
[47] This evidence gives the lie to
the appellant’s supposed belief that he had made full and
proper disclosure in the letter
handed to BOE Trust. Besides the fact
that the letter did not constitute disclosure for the reasons stated
by the Labour Court,
had the appellant honestly believed that he had
satisfied his obligation to make disclosure by delivering the letter
to BOE Trust,
then he would not have sought advice from Esterhuizen
on May 2008. It is reasonable to infer that he sought advice because
he had
more than a suspicion that something extra was required in the
way of direct and full disclosure to his own management at Nedbank.
And, yet, when told that, he opted again not to make disclosure. Such
an inference has adverse implications for the credibility
of the
appellant and supports a finding that his explanation regarding his
instructions to Palmer is inherently improbable and
implausible. More
likely he was disingenuously attempting to cover his tracks. The
conclusions to the contrary by the commissioner
were clearly wrong,
and were effectively conceded to be such by counsel for the
appellant. He argued that such notwithstanding
the outcome of the
trial was nonetheless reasonable. The ultimate issue is whether the
wrong findings amount equally to failures
and defects that render the
award unreasonable or irregular.
[48] Similarly problematic was the
commissioner’s finding that there was no rule requiring
disclosure. The Labour Court, it
will be recalled, held that this
indicated that the commissioner either did not understand the
conflict of interest policy or simply
did not take it into account. I
agree with the appellant that the import of the commissioner’s
finding was not that there
was no disclosure requirement, but was
rather that the lack of an explicit reference in the policy to a
conflict of this specific
kind somehow mitigates the contravention
and reinforced the conclusion that despite the appellant’s
discomfort he was not
in fact aware of the conflict of interest until
the implications of his conduct struck him fully during his
cross-examination.
Whatever the case, the fact remains that the
policy which the appellant signed did indeed regulate this kind of
conflict (which
self-evidently is a conflict of interests), and the
appellant’s conduct reveals he knew it to be one. In any event,
even
had the appellant been ignorant initially, (such being
inherently unlikely given his position, the aims and objectives of
the policy,
and his feeling of discomfort), he could have been under
no illusion after discussing the matter with Williamson, and then
again
later with Esterhuizen. The commissioner’s conclusion
otherwise is unsustainable on the totality of the evidence and an
unmistakable
indication that she failed to take account of relevant
considerations and misapplied her mind to the facts and the law of
evidence.
[49] Finally, the commissioner’s
finding, on the basis of a supposed concession by the compliance
officer Steenkamp, that
the conflict of interest posed no risk to
Nedbank was irrational and not justifiable with reference to the
evidence or reasons
given for the finding; and hence reviewable.
Steenkamp conceded that it was unlikely that Nedbank would lose its
licence because
of the contravention of the legislation regulating
conflicts of interest. The commissioner however ignored Steenkamp’s
evidence
that the complaint would impact on its risk profile with the
FSB. Moreover, the reputational risk to Nedbank is self-evident.
[50] The respondent accordingly
submitted that by failing to apply her mind to numerous material
facts and considerations, the commissioner
deprived Nedbank of a fair
trial and thus committed a latent gross irregularity equating to an
act of process-related unreasonableness.
The facts and considerations
ignored by the commissioner, it is contended, were of such a material
nature that the failure to consider
them deprived Nedbank of a fair
trial. Put differently, the submission is to the effect that, the
commissioner could not reject
the respondent’s version that the
appellant deliberately failed to disclose the conflict without these
facts and considerations
being taken into account and still expect
that it could be said that there had been a fair trial of the matter.
The predictable
rejoinder of the appellant, to which I have already
alluded, is that the Labour Court scrutinised the award as if it was
hearing
an appeal and failed to keep in mind the distinction between
an appeal and a review and substituted its own findings relating to
particular issues for those of the commissioner. Thus, while
conceding that the commissioner might have got it wrong on some of
the issues, the appellant submitted that the commissioner applied her
mind to all the relevant issues, considered them and arrived
at a
decision which while incorrect in the opinion of the Labour Court was
nonetheless reasonable in the sense of being a legitimate
deviance
from the correct decision.
[51] I disagree. The range and extent
of latent irregularities in the award leave no doubt that there has
not been a fair trial
of the issues. The commissioner not only
ignored material evidence in relation to the deliberate conduct of
the appellant but fundamentally
misconstrued the conflict of
interests policy of the respondent with the consequence that her
method in determining the issues
was latently irregular and in the
final analysis led concurrently to a result that was not only
incorrect but substantively unreasonable
in the sense that no
reasonable commissioner, acting reasonably, could have reached the
decision on the evidence and the inferences
drawn from it.
[52] I am conscious
that my verdict, so expressed, comes close to introducing a
requirement of substantive reasonableness going
beyond procedural
propriety or rationality. This invites the predictable criticism of
blurring the line between an appeal and a
review, involving as it
does a consideration of the merits and outcome of the decision. The
courts consistently acknowledge that
the line between a review on the
grounds of substantive reasonableness and an appeal on the merits is
a fine one and at times difficult
to draw. Nevertheless, as Ngcobo J
pointed out in
Sidumo
16
,
it is a distinction
that we are obliged to maintain if we are to honour the intention of
the legislature.
[53] The drafters
of the
Labour Relations Act
17
expressly
opted to
limit the relief available in relation to awards of the CCMA. In the
Explanatory
Memorandum
,
18
they explained
their preference thus:
‘
The
absence of an appeal from the arbitrator’s award speeds up the
process and frees it from the legalism that accompanies
appeal
proceedings. It is tempting to provide for appeals because dismissal
is a very serious matter …. However, this temptation
must be
resisted as appeals lead to records, lengthy proceedings, lawyers,
legalism, inordinate delays and high costs. Appeals
have a negative
impact on reinstatement as a remedy, they undermine the basic purpose
of the legislation and they make the system
too expensive for
individuals and small business.’
I doubt that this rationale survives
closer scrutiny. In my candid opinion, the idea that reviews are
preferable to appeals has
been shown to have been misplaced, with
respect, as is amply demonstrated by the present case. None of the
reasons advanced in
the
Explanatory Memorandum
is factual.
Reviews, just like appeals, lead to records, lengthy proceedings,
lawyers, legalism, inordinate delays and high costs.
The record in
the present matter is more than 1000 pages and would have been no
more had it been an appeal. Both parties were represented
by lawyers,
that is, attorneys and two counsel, including senior counsel. The
proceedings have taken more than three and a half
years from the date
of dismissal and there is no reason to assume that an appeal would
have taken any longer. The laudable objective
of a simple, quick,
cheap and non-legalistic approach to the adjudication of unfair
dismissals does not appear to have been achieved
by constraining the
relief against CCMA awards to review on the grounds of
reasonableness. Indeed, I suspect, the opposite may
be the case.
[54] As for the charge of “legalism”,
in my experience reviews lend themselves to greater legalism than
appeals. The
investigation and assessment of regularity can become
arcane, pedantic and remote from the standpoint of lay litigants. It
seems
to me a far easier exercise to determine whether a
commissioner’s decision is right or wrong on the facts or the
law than
it is to ferret out and measure latent irregularities, or to
make a value based assessment of whether a commissioner acted
reasonably
in making a value based assessment of an employer’s
fairness. The chances for subjective inconsistency are multiplied.
Added
to that, there is the somewhat unpalatable truth that litigants
in a compulsory adjudication process are expected without demur
to
abide decisions which might be wrong on the facts or in law, on the
expedient basis that they are deemed to be reasonable. The
moral case
for that option in contractual and voluntary arbitration, being that
it is an election based on informed consent in
which the parties get
to choose their own arbitrator, is absent and deficient when applied
to the compulsory resolution of labour
disputes in a constitutional
order where everyone has the right to have any dispute resolved by
the application of law.
[55] Besides, I
imagine, few decisions that are wrong are likely to be upheld as
reasonable. Leaving aside the moral hazard of a
message to
commissioners that there is no need for them to get their decisions
right, it being enough if they act reasonably, commissioners
who get
it wrong on the facts will usually commit the concomitant
irregularity of not taking full or proper account of material
evidence, and where they err on the law, they will fall short in not
having properly applied their minds to the issues and thereby
have
denied the parties a fair trial. The inexorable truth is that wrong
decisions are rarely reasonable. If that is true, the
hypothetical
reward from limiting intervention to a reasonableness or rationality
review is dubious. On the contrary, we risk reducing
the final
adjudication of labour disputes to an exercise in semantics or hair
splitting in pursuit of a perceived socially expedient
advantage that
is at best illusory. Our experience in adjudicating reviews of awards
issued in terms of the LRA and the controversy
around this
19
only demonstrate
that the requirement of substantive reasonableness is practically
necessary to deal with obviously wrong awards.
[56] I would therefore tentatively
venture that the time has come for the social partners and the
legislature to think again. Justice
for all concerned might be better
served were the relief against awards to take the form of an appeal
rather than a review. The
protection granted by a narrower basis for
intervention is, in all likelihood, fanciful -a chimera.
[57] For the reasons stated, the
Labour Court did not err in its findings that the commissioner
ignored or discounted relevant evidence,
failed to apply her mind to
a number of material issues and as a consequence committed gross
irregularities in the conduct of the
arbitration. The appeal should
accordingly be dismissed. There is no reason why in this matter costs
should not follow the result.
[58] Accordingly, the appeal is
dismissed and the appellant is ordered to pay the respondent’s
costs, including the costs
occasioned by the employment of two
counsel.
_________________
MURPHY AJA
Mlambo JP and Mocumie AJA concurred in
the judgment of Murphy AJA.
APPEARANCES
FOR THE APPELLANT: A.FINDLAY SC and
R.G UNGERER
Instructed by Weber Attorneys
FOR THE RESPONDENT: K. TIP SC and G.
FOURIE
Instructed by:Cliffe Dekker Hofmeyer
INC
1
[2009]
11 BLLR 1128
(LC)
2
(2007)
28 ILJ 2405 (CC) at 2439F
3
Juta
and Co Ltd, 1984 at 486 and 487
et seq.
4
Ibid
at 486.
5
Standard
Bank of Bophuthatswana Ltd v Reynolds NO
1995
(3) SA 74
(B) at 96 - 97
6
Fidelity
Cash Management Service v CCMA and Others
[2008]
3 BLLR 197
(LAC) 226G-H
7
Note
1 above.
8
Minister
of Health and Another v New Clicks South Africa (Pty) Ltd and Others
(TAC and Another as amici curiae)
2006
(2) SA 311
(CC); and
Sidumo and Another
v Rustenburg Platinum Mines Ltd and Others
(2007)
28 ILJ 2405 (CC) at 2490-2491
9
Above
n1 at p
ara 17
10
Sidumo
supra
at p
ara 268.
11
(2008)
29 ILJ 2899 (LAC) at 2905G-I.
12
[2009]
1 BLLR 1
(CC) at paras 76 and 134.
13
Fidelity
Cash Management Services v CCMA and Others
[2008]
3 BLLR 197 (LAC) 227C
14
1909
TS 576
at 581
15
Goldfields
Investment Ltd and Another v City Council of Johannesburg and
Another
1938 TPD 551, 560
16
Note
2 above at 2482-3
17
Act
66 of 1995
18
(1995)
16 ILJ 278 at 318
19
The
numerous matters that have been considered by the Labour Court and
LAC in this regard from the pre
Carephone
era culminating in
Sidumo
provide ample proof of this context.