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[2013] ZALAC 5
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Palace Engineering Services (Pty) Ltd v Phasa (JA82/2011) [2013] ZALAC 5 (21 February 2013)
Reportable
REPUBLIC
OF SOUTH AFRICA
THE LABOUR APPEAL
COURT OF SOUTH AFRICA, JOHANNESBURG
Case no: JA82/2011
In the matter between:
PALACE ENGINEERING
SERVICES (PTY)
LIMITED
...........................................................................
Appellant
(Respondent
a quo
)
and
PHASHA, MAFIHLE ERNEST
.........................................
Respondent
(Applicant
a quo
)
Heard: 22 November
2012
Delivered: 21 February
2013
Summary: Reinstatement
of appeal- late filing of appeal due to late receipt of order
granting leave to appeal- explanation reasonable-
Prospects of
success based on dismissal for operational requirement- employer
failing to consult with employee- employer accepting
procedural
unfairness of dismissal-dismissal not preceded by a fair process may
result in difficulties for an employer to show
the substantive
fairness of a dismissal - no alternative employment to retrenchment
offered to employee- no reasonable prospects
of success- application
for the reinstatement of the appeal dismissed
with costs.
Coram: Landman AJA,
Waglay AJP and Zondi AJA (concurring)
___________________________________________________________________
JUDGMENT
LANDMAN AJA
Introduction
[1] Palace Engineering
Services (Pty) Ltd, the appellant, seeks to appeal against a judgment
of the Labour Court (Bhoola J) handed
down on 1 July 2011 in terms of
which the learned judge held that, Mafihle Ernest Phasha, the
respondent, was unfairly retrenched
and ordered his reinstatement.
The appeal is with leave of the court
a quo
.
Reinstatement of the
appeal
[2] The appeal had lapsed
and an application to reinstate the appealed was filed. The
application was opposed. Unfortunately, Mr
Jackson, who appeared on
behalf of the appellant, had not been briefed with a copy of this
application and consequently he was
not able to argue it. We decided
to hear the merits of the appeal and to consider the condonation
application in the light of the
merits and the papers filed.
[3] The appellant’s
attorney has set out in detail the difficulties which caused the
record to be filed out of time. It is
clear that the appellant kept
the respondent’s attorney informed of all the developments. The
late delivery of the record
was occasioned by the late receipt of the
order granting leave to appeal by the appellant and its attorneys.
The preparation of
the record was hindered by the intervention of the
Christmas and New Year break and more so by the difficulties
encountered by
the typists employed by iAfrica, the transcribers, in
locating all the documents required to be inserted in the record. The
explanation
is acceptable.
[4] The success of the
application however turns on the prospects of success. It is to that
that I turn.
The facts
[5] The relevant facts
can be summarised as follows:
The respondent was
employed by ERWAT prior to his employment as Project
Manager/Engineer (Projects) with Palace Engineering Services
(Pty)
Ltd on 1 July 2006.
On 28 June 2007, the
parties signed a fixed term contract which would expire on 31 March
2010. On 25 July 2008, the respondent
and other employees became
employees of the appellant. The respondent’s contract expired
on 31 March 2010 but was tacitly
extended.
On 24 May 2010, Mr Alf
Hare provided the respondent with two notices. One was a notice of
retrenchment. This notice was dated
20 May and stated that he was
retrenched with effect from 1 June 2010 with his last working day
being 31 July. The second notice
was entitled “Notice of
Intended Staff Retrenchments 20 May 2010”. That afternoon the
respondent was given a further
notice. This notice stated that his
last working day would be 30 June 2010.
The respondent was
dismissed. Conciliation was unsuccessful and the respondent applied
to the court
a quo
for relief.
Admissions
[6] Prior to the trial,
the appellant conceded that the respondent's dismissal, for
operational requirements, was procedurally unfair
and delivered a
written offer to settle the respondent's claim in terms of Rule 34 of
the Uniform Rules of Court. The appellant
maintained that the
respondent's dismissal for operational requirements was substantively
fair.
The appellant’s
contentions
[7] The thrust of the
appeal is that:
the court
a quo
should have found that the respondent's dismissal for operational
requirements was substantively fair; alternatively
the reinstatement of the
respondent into the appellant's employ was neither a just nor a
practicable order.
Having regard to the
appellant's concession regarding the procedural unfairness of
respondent's dismissal, the court
a quo
should have had
regard to the offer to settle in terms of High Court Rule 34 and, if
satisfied with it, should not have ordered
costs against the
appellant.
[8] Mr Jackson pointed
out that Mr Alf Hare, the former Divisional Executive, gave evidence
regarding the appellant's parlous financial
state at the time of the
respondent's retrenchment. From 1 April 2009 to 31 March 2010 a net
loss of R2 582 677.56 was recorded
by the company. In the following
financial year the appellant's net loss expanded dramatically to R5
745 413. The respondent stated
that he was not placed in a position
to dispute this. The respondent admitted that months prior to his
retrenchment he was aware
of the appellant's cash flow problems.
[9] Mr Jackson developed
these submissions further but, as I am prepared to accept that the
appellant was in financial difficulties,
I need not set them out.
[10] Mr Jackson submitted
that Mr Hare’s testimony that the appellant could not
accommodate the respondent because he was
not a registered engineer
should have been upheld. Mr Hare testified that there were two new
vacancies (February and June 2010)
for appellant's Port Elizabeth
office arising out of recent resignations. These positions required
professional engineers registered
with the Engineering Council of
South Africa and that at the time the respondent was not a registered
engineer. This also applied
to the post advertised in June 2011 for a
professionally registered electrical engineer in East London.
[11] Mr Jackson submitted
that the respondent could not have been accommodated in several
building projects which the appellant
was allegedly involved in at
the time of his retrenchment. He challenged the respondent’s
evidence on the following basis:
The respondent was a
specialist in water affairs, whether that be potable or waste water.
Indeed, most of Respondent's qualifications
are also in water
affairs.
It was never suggested
to Mr Hare that as an alternative to retrenchment, the respondent
could have been moved to one of many
building projects which were
allegedly available in the company at the time.
Respondent’s
version that he could be placed on a building project only appeared
during the respondent's examination in
chief for the first time and
appears to be a recent fabrication or an afterthought at best.
During the months
preceding the respondent's retrenchment he did not even once suggest
to Mr Hare that if there were no new water
programs in the pipeline,
he could be employed on a building project.
The probabilities
accordingly suggest that there was no alternative work for
respondent in the building division or any other
division of the
appellant’s company. No new projects had been secured by the
appellant.
[12] Mr Jackson also
submitted that one final determinant regarding the probabilities of
whether the respondent's dismissal was
substantively fair is whether
in the months preceding his retrenchment, the respondent was not
performing any work or simply studying
in his office or playing
computer games. This submission rested upon:
The evidence of Mr Hare
that in the six months prior to respondent's retrenchment, the
respondent was not a busy man at all and
on several occasions Mr
Hare had walked into his office to find the respondent studying or
playing computer games.
It was not put to Mr
Hare that the respondent would deny having studied and played
computer games during office hours. Rather
there was simply a
question put to Mr Hare to the effect that "Do you expect this
Court to believe that?”
The respondent failed to
adduce any evidence during his examination-in-chief to deny that he
had partaken in these activities.
The respondent, in the
two years that he worked under Mr Hare, always viewed Mr Hare as an
honest man.
Evaluation
Financial situation
[13] The respondent
suggested, for the reasons referred to in his evidence, that the
appellant’s financial position was not
as perilous as Hare
testified. However, I am prepared to accept that the appellant was in
financial distress which worsened. This
brings me to the nub of the
case. Was the dismissal of the respondent substantively fair? The
onus
rested on the appellant to show that it was. In the case
of a proposed retrenchment for operational reasons the purpose of
procedural
fairness is to ensure that the dismissal is substantively
fair. When a dismissal is not preceded by a fair process, as in this
case, it may be extremely difficult, although not impossible, for an
employer to show that a dismissal was substantively fair. See
Kotze
v Rebel Discount Liquor Group (Pty) Ltd
(2000) 21 ILJ 129 (LAC)
at para 1371.
[14] The appellant’s
difficulty is compounded by what can charitably be described as the
misleading version in the pleadings
that there were "extensive
consultations" with the respondent prior to his retrenchment.
This misrepresentation was conceded
at the last moment. The letters
addressed to the respondent which sought to convey the impression of
consultation also add to the
appellant’s problems.
[15] Had the appellant’s
representatives consulted with the respondent, he would have told
them what was on record, that he
had qualifications and experience in
waste water. Instead Hare proceeded from the incorrect premise that
the respondent’s
expertise lay only in potable water. If Hare
sought alternative employment for the respondent, it follows that he
would have looked
in the wrong area. Although no new water projects
had been recently obtained Mr Hare conceded that there were existing
water projects
and two new water projects were possibly in the
pipeline.
[16] Hare also proceeded
from the premise that the respondent had no knowledge and experience
in building management and building
service projects. Hare did not
explore the possibility of an alternative position in such projects.
Once more had Hare consulted
with the respondent he would have been
made aware that the respondent had experience on building services
projects. The respondent
was in fact in charge of building services
projects for the appellant when he was promoted to the position of
Engineering Manager:
Mechanical (HOD).
[17] Mr Jackson submitted
that it was only during the respondent's examination-in-chief that
he, for the first time, suggested that
he had experience in building
projects. Mr Jackson also submitted that during the months preceding
the respondent's retrenchment
he did not suggest to Mr Hare that if
there were no new water projects in the pipeline, he could be
employed in a building capacity.
In the end Mr Jackson submitted the
respondent’s evidence on this score appears to be a recent
fabrication or an afterthought
at best.
[18] The respondent was
only advised on 20 May that he had been selected for retrenchment and
that he was to be dismissed. The respondent
was not consulted prior
to his retrenchment. As he did not know that he was in the firing
line, so to speak, he would not have
had any reason to explore
alternative posts within the organisation. His skills as regards
building projects can hardly be a fabrication
or afterthought. The
appellant initially employed him on account of these skills. The
respondent’s contract of employment
clearly states in annexure
“A” that the respondent’s task directives were to
include,
inter alia
, “Leading, training and assisting a
team of mechanical technical technicians in building services...”
[19] The respondent was
unaware that other employees were being retrenched until the trial
commenced. The most that can be said
is that the respondent was aware
that the appellant was experiencing a cash flow problem.
[20] Mr Hare was not
aware whether there was work for the respondent to do in other
divisions which had once been part of his responsibilities.
Hare
testified that someone else had taken over the responsibility for
projects related to waste water. The new Divisional Executive
responsible for such projects did not testify.
[21] I am not convinced
that the respondent was kept fully occupied during the six months
prior to his dismissal. Mr Hare’s
evidence that on several
occasions he had walked into his office to find the respondent
studying or playing computer games made
an impression on him. Mr Hare
was irked by what he found. But the
onus
rested on the
appellant to show that objectively there was no work for the
respondent to do and that no work could reasonably be
found for him
to do.
[22] Something was made
of the respondent’s inability to register with the council as a
technologist but it does not relate
to the reasons for his dismissal.
Reinstatement
inappropriate?
[23] Mr Jackson made the
following submissions regarding the order of reinstatement of the
respondent with retrospective effect:
It was common cause at
the hearing of the trial that the Respondent's position had not been
filled at all subsequent to his retrenchment.
Even in the financial
year post-Respondent's retrenchment, the Appellant was still making
massive financial losses.
Mr Hare’s evidence
was that the respondent, if reinstated, would simply sit around
again doing nothing.
[24] In granting the
relief of reinstatement, the court
a quo
reasoned as follows:
‘
...The
applicant seeks reinstatement. He was employed by the respondent for
four years and testified that he was unemployed for
five months and
struggled to find work after his retrenchment. He has since been
employed at ERWAT again but at a significantly
reduced salary. The
respondent submitted that this was confirmation of the impact of the
global downturn in the engineering consulting
industry, and that it
was provided in section 193(2)(c) to order his reinstatement. However
no evidence was led in this regard
and in the context of Hare's
admission that he was not aware of business plans for the
restructured division into which the applicant
would in all
likelihood fit, there is no reason why reinstatement should not be
ordered. The Applicant also purchased a house close
to his office
when he was offered employment with the respondent and had a new baby
when he was retrenched. He received some UIF
income but was mainly
reliant on his wife .for support. Given the undisputed evidence of
the applicant that there was available
work in waste water and that
he had experience in building service projects, there is no reason
why it would not be reasonably
practicable, for the respondent to
reinstate him... ‘.
[25] Reinstatement is the
primary remedy to be afforded to an employee who has been unfairly
dismissed. No consultation had taken
place with the respondent. Mr
Hare was defending the appellant’s stance in the witness box;
not endeavouring to find a solution
as the
Labour Relations Act 66 of
1995
requires. It is appropriate that this procedure be conducted
properly. It cannot be said that there are no prospects of a position
being found for the respondent. If there is nothing to be done the
appellant may well retrench him after following the proper procedure.
Reinstatement and
mitigation of loss
[26] The respondent was
dismissed on 30 June 2010. The respondent remained unemployed for
some five months. He had financial responsibilities.
He relied on
UIF. He was able to obtain a position at ERWAT as from December 2010.
He earned half the salary which he had been
paid while employed by
the appellant. At the time of his trial he was still paying off what
he said was a large bank overdraft.
[27] Mr Jackson contended
that the order of reinstatement, made by the court
a quo
, does
not take into account the unfair advantage which respondent would
gain in circumstances where for the period he was re-employed
at
ERWAT (from December 2010 onwards). It was further submitted that the
respondent would, by his own admission, receive double
pay.
[28] Mr Vuyo submitted
that the respondent was not unfairly advantaged by the order of
reinstatement. The respondent testified on
the challenges he had to
endure after being unfairly retrenched. It could not have been
expected of the respondent to simply wait
for the outcome of this
particular case. He had to secure employment to make ends meet. It is
submitted that this complaint is
devoid of substance.
[29] Mr Jackson did not
develop his submission that the respondent was under a duty to
mitigate his loss or to reduce the appellant’s
burden, by
seeking employment. His submission is that something less than full
reinstatement should be ordered and that the degree
of reinstatement
should be reduced by an amount or a rebate taking into account what
the respondent has earned in the interim.
[30] The common law
concept of specific performance approximates to the concept of
statutory reinstatement. In
Toerien v University of Stellenbosch
(1996) 17 ILJ 56 (C), followed in
Davids v Boland Rugby (Pty) Ltd
(C12/10) [2011] ZALCCT 35 (5 September 2011), it was held by Traverso
J (as she then was) that where an employee claimed specific
performance for his unlawful termination of employment the employer
was not entitled to deduct amounts the employee earned from
other
sources. I am of the view that the common law position referred to in
the
Toerien
judgment applies to statutory reinstatement.
Costs in the court
a
quo
[31] Mr Jackson submitted
that having regard to the appellant's concession regarding the
procedural unfairness of respondent's dismissal,
the court
a quo
should, it is submitted, have had regard to the offer to settle in
terms of High Court
Rule 34
and, if satisfied with same, should not
have ordered costs against the appellant.
[32] The purpose of a
tender in terms of
Rule 34
is to possibly protect a litigant in the
event that the other side is awarded judgment in a lesser amount than
the amount set out
in the tender. The court would not normally know
that there was a tender much less know of the contents of the tender.
However,
Bhoola J was informed by Mr Jackson that a tender had been
made although she was not told about the contents of the appellant’s
tender. Once judgment was given it was for the appellant to bring the
contents of the notice to the court’s attention, through
the
registrar, for court to consider the question of costs afresh. This
was not done but the appellant seeks to challenge the cost
order on
the basis of that tender. No information has been placed before us as
to the contents of the tender.
[33] Moreover, this Court
cannot consider the matter on the basis of the tender because no
order, as regards the costs in relation
to the tender, has been made
by the court
a quo
. If this Court were to consider the issue,
this Court would be assuming a function of the court
a quo
without that court having first exercised its discretion. This simply
cannot be done.
[34] No other complaint
has been lodged about the order of costs by the court
a quo
.
Costs of appeal
[35] The respondent seeks
a special order of costs of the appeal against the appellant. He does
so on the basis that:
(a) The appellant put
forward a fabricated defence to the effect that there were "extensive
consultations" with the respondent
prior to his retrenchment and
it was only when the trial commenced that this was retracted and the
procedural unfairness of the
respondent's dismissal was conceded.
(b) In this appeal, the
appellant still persists with its unwarranted and baseless attacks on
the judgment and reasoning of the
court
a quo
and more
importantly the appellant continued in the appeal to argue that
respondent’s suggestion that he had experience in
the building
projects was a fabrication, when appellant had head-hunted the
respondent to work in its building projects and the
respondent had in
fact worked in the appellant’s building projects until he was
promoted.
(c) The appellant is
simply appealing in order to delay having to reinstate the respondent
and pay him his back-pay “which
is way over R1 million”.
[36] There is no
cross–appeal against the cost order made by the court
a quo
.
Therefore the first ground cannot stand alone. It is true that the
appeal is to be dismissed but I am of the view that, having
regard to
the fact that costs do not automatically follow the result in this
Court, costs should be awarded on the ordinary scale.
[37] It follows that as
there are no reasonable prospects of success the application for the
reinstatement of the appeal cannot
succeed.
Order
[38] In the premises:
The application for
reinstatement of the appeal is dismissed with costs.
_____________
A A Landman AJA
I agree
______________
B Waglay AJP
I agree
_____________
D H Zondi AJA
APPEARANCES:
FOR THE APPELLANT: Adv B
M Jackson
Instructed by Fullard
Meyer Morrison INC
FOR THE RESPONDENT:
Ndumiso Voyi INC