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[2014] ZALAC 71
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National Transport Movement (NTM) and Others v Passenger Rail Agency of South Africa Limited (PRASA) (JA36/12) [2014] ZALAC 71; [2015] 3 BLLR 300 (LAC); (2015) 36 ILJ 1275 (LAC) (27 November 2014)
REPUBLIC OF SOUTH
AFRICA
IN THE LABOUR APPEAL
COURT OF
SOUTH AFRICA, JOHANNESBURG
Case
no: JA36/12
Reportable
In the matter between:
THE PUBLIC SERVANTS
ASOCIATION OF SOUTH AFRICA
ON BEHALF OF ITS
MEMBERS
Appellant
and
T T GWANYA
N.O.
First Respondent
G NKWINTI
N.O.
Second Respondent
Heard:
03 September 2013
Delivered:
27 November 2014
Summary:
Interpretation and enforcement of settlement agreements made orders
of court- Parties entering into a settlement agreement
which made an
order of court. Employer terminating settlement agreement- appellant
seeking declaratory order against employer-
A settlement agreement
made an order of court remained a contractual agreement and cannot be
elevated to the status of a court
order. A settlement agreement made
an order of court enforceable by way of contempt of court proceedings
if it is breached and
its terms are clear and unambiguous.
Enforcement of settlement agreement made an order of court depending
on the nature of the
dispute. Evidence showing settlement agreement a
collective agreement. Settlement agreement made an order of court a
collective
agreement and may be terminated on reasonable notice.
Dispute about the interpretation and enforcement of a collective
agreement
should follow the route provided for by the LRA. Labour
Court’s judgment upheld. Appeal dismissed.
Coram:
Waglay JP, Francis
et
Dlodlo AJJA
JUDGMENT
FRANCIS AJA
Introduction
[1]
This is an appeal against the judgment and order of the court
a
quo
(Conradie AJ) in term of which it dismissed an application to
declare the respondents to be in contempt of a court order. Leave to
appeal was granted by the court
a quo.
Background facts
[2]
The appellant is the Public Servants Association (PSA) acting on
behalf of its members
who are employees in the office of the
Registrar of Deeds.
[3]
The first respondent who is cited in his official capacity is the
Director General
of the Department of Rural Development and Land
Reform (the Department). The second respondent is cited in his
official capacity
as the Minister of that Department.
[4]
During 2006, the appellant’s members, who are employees in the
Office of the
Registrar of Deeds, gave notice that they wanted to
embark on strike action. The Department brought an urgent application
to interdict
the strike. The matter was resolved between the parties
after they had concluded a settlement agreement signed by their
authorised
representatives. The urgent application was withdrawn in
terms of the settlement agreement which was unrelated to the urgent
application.
Curiously, the settlement agreement was made an Order of
Court.
[5]
The settlement agreement provides for the payment of a so-called
“Piecework
and Production Incentive Scheme” (the Scheme)
bonus to members of the appellant for the increased or additional
workload
handled during certain periods set out in the settlement
agreement. These periods were essentially when the South African
economy
was buoyant with the resultant high volumes of property
transactions being registered in the Deeds Office. There was no
definite
or specific period stated in the settlement agreement that
the Scheme would endure, but it was generally understood that it was
a by-product of the then economic boom.
[6]
The first respondent continued to comply with the terms of the
settlement agreement
until 14 January 2009 when it gave notice of its
intention to terminate the aforesaid Scheme with effect from 1
February 2009 due
to the fact that the increased or additional
workload catered for by the collective agreement no longer existed.
[7]
Flowing from the aforesaid notice of termination, the appellant
alleged that the first
and second respondents are in contempt of the
court order, alternatively in breach of the court order.
The proceedings in
the court
a quo
[8]
The appellant brought an application to hold the respondents in
contempt of court
for failing to give effect to the order granted on
13 November 2006 or in the alternative to be in breach of the
aforesaid court
order. The appellant also sought an order declaring
that the first and second respondents are bound to extend to the
appellant’s
members employed in the office of the Registrar of
Deeds the benefits emanating from the norms approved by the
Director-General
of the Department on 11 August 2006, referred to in
“FA5” and “FA” to the appellant’s
founding affidavit.
During argument, the appellant abandoned the
relief sought against the second respondent.
[9]
The court
a quo
said that the fact that a settlement agreement
is made an order of court does not mean that all the terms of the
settlement agreement
automatically become terms of the court order.
It stated that it is simply assumed that this is the case, with
little if any consideration
given to the nature of the settlement
agreement. There are inherent difficulties in clothing a settlement
agreement in the terms
of a court order. It was, said the court,
that when the court made the settlement agreement an order of court,
all that it
was doing was acknowledging that the matter before it was
withdrawn, and that the parties had reached an agreement about how
they
would address the underlying dispute going forward. In other
words, the specific terms of the settlement agreement do not
necessarily
form part of the court order. The court said that it was
noteworthy that clause 4 of the settlement agreement records that the
parties would inform the court on the day when the interdict
application was to be heard and that the matter is withdrawn on the
basis that it has become settled between the parties. The fact that
the settlement agreement contains an option to make the agreement
an
order of court does not mean that the details relating to the
incentive Scheme also forms part of the court order. All that
is
included in the ambit of the order is that the parties have reached
an agreement on how to resolve the matter going forward.
A court
should distinguish clearly between orders of court and their
enforcement on the one hand, and deeds of settlement on the
other
hand. The former is concerned with procedural principles and the
protection of the courts’ dignity and honour and the
latter
with the law of contract.
[10]
The court
a quo
stated that the fact that a settlement
agreement is made an order of court does not mean that it is
enforceable as such. The purpose
of a court order should not, except
in certain circumstances, be to record contractual terms between the
parties, as the court
is not a registry of obligations. Rather, the
purpose of the court order should be to bring a dispute to closure.
This cannot be
achieved where the settlement agreement is not capable
or ready for enforcement by execution. The court
a quo
said
that the settlement agreement in question was in its view not capable
of ready execution. A host of disputes could arise relating
to the
interpretation and application of the settlement agreement, which
would make enforcement of it on the strength of a court
order
undesirable.
[11]
The court
a quo
stated further that the settlement agreement
in this matter, in fact and in law, is a collective agreement as
contemplated in the
Labour Relations Act 66 of 1995 (the LRA). The
normal principle applicable to a collective agreement which is
concluded for an
indefinite period, such as the one in question, is
that it may be terminated on reasonable notice. In this regard,
section 23(4)
of the LRA provides that unless the collective
agreement provides otherwise, any party to a collective agreement
that is concluded
for an indefinite period may terminate the
agreement by giving reasonable notice in writing to the other
parties.
[12]
The court
a quo
stated that in this case, to the extent that
there is a conflict between the duty to observe a court order and the
right to terminate
the collective agreement, it was of the view that
the collective agreement must prevail.
[13]
The court
a quo
said that the conclusion of collective
agreements through the process of collective bargaining is what
underpins our labour relations
system. It added that if the
appellant’s argument was accepted, then the Department would
never be in a position to alter
or terminate the incentive Scheme
without approaching that court for an order that the underlying
agreement be varied or terminated.
The court would be called upon to
resolve through litigation that which must be resolved through
collective bargaining. Such an
approach would be inconsistent with
the LRA. This would mean that if the parties agree to vary, add to,
delete or cancel the agreement
as provided for in clause 6, this
would be of no force and effect unless sanctioned by the court. This,
the court said, cannot
be correct.
[14]
The court
a quo
said that it did not agree that the
appellant’s members’ contracts were varied to include the
incentive bonus and as
such they should continue to be entitled to
the bonus even though the agreement is cancelled. Given the nature of
the right, they
only enjoyed it for as long as the collective
agreement was in force. Based on these reasons, the court did not
believe that there
was a breach of the court order and that the
respondents could not be held to be in contempt of court. The
application was thus
dismissed with costs.
On appeal
[15]
On appeal, the appellant’s counsel abandoned the first ground
of appeal which relates to
the contempt of court charge on the
grounds that one of the requirements for contempt of court namely
that the respondents had
wilfully disobeyed a court order was not
met. They persisted however with the alternative relief that was
sought: for a declaratory
order. The appellant seeks the enforcement
of the settlement agreement.
[16]
The appellant contended that the respondents do not have a right to
terminate the settlement
agreement. Once the settlement agreement has
been made a court order, its terms become an order of court. It was
further contended
by the appellant that the court
a quo
had
found that the settlement agreement, being a collective agreement is
capable of termination on reasonable notice. The respondents
never
made it their case that they terminated the settlement agreement on
reasonable notice. Secondly, the collective agreement
had the effect
of varying the individual’s employees’ contracts of
employment and so the termination of the settlement
agreement would
leave the rights of the individual employees intact. There is no
universal right to terminate a contract by virtue
of one party’s
perception of changed circumstances.
[17]
It was further contended that in terms of section 23(3) of the LRA,
the terms of the settlement
agreement varied the contracts of
employment of the individual employees. Thus, even if the settlement
agreement could be cancelled,
it would not affect the rights of the
individual employees. The relief that was sought in prayer 3 of the
notice of motion sought
to enforce the rights of the individual
employees.
Analysis of the
facts and arguments raised
[18]
Section 158(1)(c) of the LRA states that the Labour Court may make
any arbitration award or settlement
agreement an order of court.
Section 158(1A) states that for the purposes of subsection (1)(c), a
settlement agreement is a written
agreement in settlement of a
dispute that a party has the right to refer to arbitration or to the
Labour Court, excluding a dispute
that a party is only entitled to
refer to arbitration in terms of section 22(4), 74(4) or 75(7).
Section 22(4) deals with the procedure
to be followed in disputes
about organisational rights. Section 74(4) deals with disputes in
essential services and 75(7) with
disputes in maintenance services.
[19]
It is common cause that the parties concluded a settlement agreement
after members of the appellant
went on strike. They agreed that the
settlement agreement could be made an order of court in terms of the
provisions of the LRA.
In their settlement agreement, they had agreed
that the collective agreement signed on 11 February 2004 would no
longer regulate
the relations between them. They agreed that the
norms that applied on 30 June 2002 would continue to be utilised
until 31 December
2006. The tariffs that applied since 30 June 2002
would be adjusted upwards on an annual basis at the same rate as the
annual salary
increments that applied to the affected staff, with
effect from 1 July 2002; that the Department would recalculate the
amounts
payable to employees in terms of the abovementioned clauses
and then any outstanding amounts payable to such employees would be
paid to them in monthly batches with final payment to be made by not
later than 31 March 2007. The attached norms approved by the
Director
General on 11 August 2006 would apply with effect from 1 January
2007. The aforesaid tariffs would continue to be adjusted
on an
annual basis in the same way indicated in “‘clause 3”.
“Clause 5.1” of the agreement provides
that no agreement
varying, adding to, deleting from or cancelling this agreement shall
be effective unless recorded in writing
and signed by or on behalf of
the parties.
[20]
It was further common cause that the first respondent had on 13
January 2009 taken a decision
to terminate the Scheme with effect
from 1 February 2009. That decision was explained in a letter dated
18 November 2009. It stated
that its interpretation of the court
order was different to that of the appellant’s. It said that
the implication of the
court order is that as long as the Scheme was
in place, the norms as agreed to in the settlement agreement which
was made an order
of court would apply. The settlement agreement does
not provide that the Scheme would be in place
ad infinitum
and
that was never the intention of the Department. It said that the
termination of the Scheme did not violate the court order and
that,
whilst the Scheme was in place, it did not change the norms.
[21]
It is clear from the aforesaid that the parties have different
interpretations about the actual
meaning of the settlement agreement
that was made an order of court. In other words, there is a dispute
about what the settlement
agreement means. Section 24 of the LRA
deals with disputes about collective agreements. It sets out a
procedure that must be followed
when such a dispute arises. It
provides for example for a dispute first to be referred to the
Council or the Commission for conciliation
and thereafter to
arbitration. Importantly, section 24(8) of the LRA provides as
follows:
‘
If
there is a dispute about the interpretation of application of a
settlement agreement contemplated in either section 142A or
158(1)(c), a party mat refer the dispute to the council or the
Commission and subsections (3) to (5), with the necessary changes,
apply to that dispute.’
[22]
The appellant should have referred the dispute either to the Council
or the Commission first
for conciliation and if it remained
unresolved to the Council or Commission for arbitration.
[23]
The appellant did not follow section 24(8) of the LRA but approached
the Labour Court for a contempt
of court order alternatively breach
of court and declaratory relief. On appeal, the appellant no longer
seeks a contempt of court
order but an order for breach of the
settlement agreement and declaratory relief.
[24]
The only issues that arise in this matter are whether the respondents
were in breach of the settlement
agreement that was made an order of
court and whether this Court should issue the declaratory order
sought by the appellant. Deciding
whether the respondents have
breached the settlement agreement, involves interpretation of the
agreement that was made an order
of court.
[25]
It is common cause that the parties had drafted a settlement
agreement which was by agreement
between them made an Order of Court.
Once the settlement agreement becomes an order of court, an aggrieved
party may approach the
Labour Court to enforce the order by way of
contempt proceedings should all the requirements of contempt of court
be met. It follows
and logic dictates that once the agreement has
been made an order of court, it becomes an order of court and may be
enforced by
way of contempt of court proceedings if it is breached.
However the court should still consider what the nature of the
settlement
is all about that was made an order of court. If it is one
that involves a collective agreement or the interpretation of such a
collective agreement, an aggrieved party cannot approach this Court
for an order for contempt of court or breach of a court order
but
should rather utilise the provisions of the LRA that deals with such
disputes.
[26]
In the matter of
South
African post office Ltd v Communication Workers Union obo Permanent
Part-time Employees
(SAPO),
[1]
the court warned
against simply making an agreement an order of court precisely
because agreements all too often contain conditions
that must be
fulfilled for the happening or not happening of an event or the
agreement contains ambiguity or uncertainty requiring
extraneous
evidence to ascertain the agreed terms and give effect to the terms
of the agreement. In
SAPO,
the court dealt with the situation where parties sought to make an
agreement an order of court for purpose extrinsic to the execution
of
the terms of a settlement. The parties were through the back door
seeking to validate a failure to comply with certain processes
without following the prescribed route. In that judgment, the court
also only dealt with making orders of those agreements that
can
effectively be implemented without the need to debate any of its
terms. In other words, only making such agreements an order
of court
that can be executable by the sheriff because it is clear and certain
and can leave no doubt as to its import and failure
to comply with
the order would then amount to contempt of court.
[27]
Other than those agreements referred to above there are those
agreements which are basically
contracts that are concluded between
the litigants. This matter is an example of a contract between the
parties.
[28]
Where the court is approached to make a contract between the parties
an order of court, it must
not readily do so even if the parties
desire that the agreement be made an order of court because the court
should not be, as stated
above, in the judgment, a recorder of
contractual terms or a registry of duties and obligations agreed to
by the parties involved
in litigation.
[29]
The present matter illustrates the dangers of simply making an
agreement an order of court. The
agreement deals with how the parties
would address a dispute that exists between them. It is a contract
between the parties. Making
that an order of court does not give the
contract the status of a court order all it does is sets out or
should have set out the
basis upon which legal proceedings were
terminated.
[30]
The agreement then remains an agreement between the parties and the
natural rules relating to
agreements will apply.
[31]
The court
a quo
correctly found that the settlement agreement
constituted a collective agreement. The court said that the court
order merely recorded
the settlement agreement between the parties
without an element of the court requiring obedience with its terms as
a court order.
The application was thus correctly dismissed.
[32]
The appeal in the circumstances stands to be dismissed.
[33]
I have taken into account that the parties do have an on-going
relationship and do not believe
that costs should follow the result.
An appropriate order is that each party is to pay its own costs.
[34]
In the circumstances, I make the following order:
34.1
The appeal is dismissed;
34.2
Each party is to pay its own costs.
_____________
F
rancis
AJA
Waglay
JP and Dlodlo AJA concur in the judgment of Francis AJA
APPEARANCES:
FOR
APPELLANT:
H A Van Der Merwe
Instructed by Martin
Weir-Smith Attorneys
FOR
RESPONDENTS:
W R Mokari SC with A Olua
Instructed
by State Attorneys
[1]
[2013]
12 BLLR 1203 (LAC).