Brief Summary

Labour Law — Settlement Agreement — Authority to Bind — Dispute regarding the binding nature of a settlement agreement entered into by the South African Local Government Association (SALGA) on behalf of its members — Appellants contending that the employee lacked authority to enter into the agreement — Unions failing to prove actual or ostensible authority of the employee — Court finding that SALGA could bind its members without a specific mandate, provided it acted within its constitutional powers — Appeal upheld, with the Labour Court's dismissal of the application on grounds of delay found to be erroneous.

Comprehensive Summary

Summary of Judgment

1. Introduction

The proceedings were an appeal to the Labour Appeal Court against an order of the Labour Court dismissing (with costs) an application for declaratory relief. The application sought declarations that a settlement agreement concluded on or about 21 February 2006, and an arbitration award of 22 February 2006 making that agreement an award, were not binding.

The appellants were the City of Johannesburg Metropolitan Municipality, Ekurhuleni Metropolitan Municipality, City of Tshwane Metropolitan Municipality, the South African Local Government Association (SALGA), and Buffalo City Municipality. The respondents were the Independent Municipal and Allied Trade Union (IMATU), the South African Municipal Workers’ Union (SAMWU), and the South African Local Government Bargaining Council (SALGBC). Mogale City Local Municipality was permitted to intervene in the appeal, although it had not been a party in the Labour Court.

In the Labour Court, IMATU raised points in limine, including unreasonable delay and standing. The Labour Court (Van Niekerk J) dismissed the application principally on delay, and also held that SALGA, as an employers’ organisation, could bind its members without an express mandate from each municipality. Leave to appeal was refused by the Labour Court, but granted on petition. On appeal, only Ekurhuleni (second appellant) and IMATU actively participated, with Mogale City intervening.

The dispute concerned the binding effect, within the local government bargaining framework, of a settlement agreement purportedly concluded by officials of SALGA with IMATU regarding the application of collective agreements and the regulation of fixed-term contracts and related employment practices by municipalities.

2. Material Facts

A dispute arose in mid-2005 when IMATU and SAMWU referred a matter to the SALGBC for conciliation, alleging that SALGA’s constituent municipalities were acting in breach of collective agreements by appointing or transferring employees on terms and conditions allegedly inconsistent with sectoral collective arrangements. When conciliation failed, the dispute was referred to arbitration during September 2005, with relief sought aimed at compelling municipalities to adhere to collective agreements (subject to section 57 of the Municipal Systems Act 32 of 2000) and to restrict the use of fixed-term contracts beyond what was contended to be permissible.

During the arbitration process, SALGA raised preliminary objections that were dismissed by the arbitrator, and the arbitration was set down for January 2006. SALGA officials (including Mr Linda Dlamini and Mr Johan van Zyl) met with representatives of major member municipalities on 11 January 2006, where concerns were raised that there was insufficient information to form a meaningful view on the merits; it was agreed SALGA would seek a postponement and reconvene after further information was obtained. Despite these efforts, a postponement was refused on 18 January 2006, and the unions led evidence; the matter was postponed to February 2006 to allow SALGA’s attorney to seek further instructions concerning settlement.

Meetings and communications between SALGA officials and IMATU continued in February 2006. On 21 February 2006, Mr van Zyl circulated an email to various SALGA members indicating that SALGA and IMATU had reached “an understanding” on a possible settlement and requested members to indicate whether SALGA had a mandate to sign the attached agreement. Despite this request, on the same day Mr Dlamini and IMATU’s deputy general secretary Mr Barend Koen signed the settlement agreement in Cape Town. On 22 February 2006, the settlement agreement was made an arbitration award by agreement, under the auspices of the SALGBC.

Member municipalities responded to Mr van Zyl’s request for a mandate around 21–22 February 2006, with several indicating that they were not prepared to provide a mandate and requesting deferral and broader consultation. These responses demonstrated that at least some members were not aware that the settlement had already been signed.

IMATU later applied for certification of the award in terms of section 51(8) read with section 143 of the Labour Relations Act 56 of 1996 (LRA), and certification occurred on 8 June 2006. A circular dated 22 March 2006, purportedly signed by SALGA’s CEO, advised municipalities to comply with the settlement agreement; SALGA’s CEO later alleged she had no recollection of signing it and suggested her electronic signature may have been used without her knowledge.

Parallel litigation ensued. The City of Cape Town brought a rescission application in the SALGBC, ultimately resulting in an award rescinding the settlement award on 21 January 2008, on the basis that the arbitrator would not have made the agreement an award had he been aware of SALGA officials’ lack of authority. Separately, SALGA and certain municipalities brought the present Labour Court application (around 1 August 2006) seeking declarations that the settlement agreement and award were not binding. The Labour Court application experienced substantial delay and was only ultimately heard in February 2013.

The principal disputed factual issue relevant to the outcome on the merits was whether SALGA had authorised the conclusion of the settlement agreement (including whether relevant SALGA officials had actual authority, whether authority could be inferred from SALGA’s conduct, and whether SALGA ratified the agreement). The Labour Appeal Court treated the lack of authorisation as established on the papers, noting that IMATU’s denials did not create a real dispute of fact on the core allegations concerning authority and the provenance of the circular.

3. Legal Issues

The central legal questions were, first, whether the Labour Court correctly dismissed the application on the basis of unreasonable delay in bringing and prosecuting the proceedings, and, if delay existed, whether the Labour Court properly exercised its discretion by considering whether the interests of justice nonetheless required determination of the merits.

Secondly, the court was required to determine whether SALGA, as a registered employers’ organisation, could bind its member municipalities through a settlement agreement reached in dispute resolution proceedings, and whether in this case SALGA had in fact validly concluded or authorised the settlement agreement.

Thirdly, the court had to decide whether the settlement agreement could bind SALGA and/or its members via ostensible authority of SALGA officials (and associated requirements of representation, reliance, and prejudice), and whether the Turquand rule assisted IMATU in the circumstances.

These issues involved a mixture of legal questions (the scope of the Labour Court’s inherent power regarding delay; the representational capacity of employers’ organisations under the LRA; the application of ostensible authority and the Turquand rule) and the application of law to facts (whether the evidence established actual or ostensible authority, or ratification).

4. Court’s Reasoning

The Labour Appeal Court accepted that the Labour Court, as a superior court under section 151 of the LRA, has inherent powers comparable to those of the High Court to regulate its process. Relying on section 173 of the Constitution, the court held that this inherent power includes the capacity to dismiss proceedings on grounds of delay, even where the matter is not a statutory review. However, it stressed that the power must be exercised only in exceptional circumstances, mindful of the section 34 constitutional right of access to courts and the need to resolve disputes by the application of law in a fair public hearing.

The court explained that delay is not to be assessed in isolation. Even where delay is unreasonable and inadequately explained, the court retains a discretion to decide whether to entertain the matter on the merits. The evaluation must consider factors linked to the interests of justice, including potential prejudice, the consequences of granting or refusing relief, the importance of the matter, and the prospects of success. In the Labour Appeal Court’s assessment, the Labour Court erred because it treated delay as effectively dispositive without weighing whether the merits should nonetheless be addressed given the nature and significance of the dispute and the prospects of success.

On the merits, the court distinguished between two related but separate inquiries. The first was whether SALGA, as an employers’ organisation, could in principle bind its members without a specific mandate from each municipality. The court endorsed the Labour Court’s conclusion on that point. It reasoned that a registered employers’ organisation does not act as an agent of each member in the strict sense but represents the collective interests of its membership. It relied on section 200(1) of the LRA, which permits a registered employers’ organisation to act in disputes in its own interest, on behalf of members, or in the interests of members. The court accepted that the statutory scheme and policy considerations of stability and certainty require that employer organisations (like unions) be capable of binding their members when acting within their powers, subject to the limitation that the organisation must act within the bounds of its constitution, the LRA, and the law generally.

The second inquiry was whether SALGA had actually authorised the settlement agreement concluded with IMATU. In addressing IMATU’s reliance on authority, the court analysed IMATU’s alternative bases: actual authority, ostensible authority, and the Turquand rule. The court held that IMATU had not established ostensible authority, because the necessary elements—particularly a representation by SALGA that the relevant persons had authority to conclude the settlement, reasonable reliance by IMATU on such representation, and consequent prejudice—were not properly proven on the papers. The assertions relied upon by IMATU were treated as inadequate to establish the required representation and reliance structure.

The court further held that the Turquand rule did not assist IMATU. It reasoned that the rule could only operate where it was shown that the officials had actual authority in terms of the organisation’s constitution, subject to the completion of internal formalities. In the absence of proof that the relevant SALGA officials had such actual authority, the Turquand rule was inapplicable.

The court also considered whether the 22 March 2006 circular could show authorisation or ratification. It accepted the evidence from SALGA’s CEO that she did not approve or sign the circular and that her electronic signature may have been used without her knowledge. It found that IMATU’s responses amounted to bare denials and did not create a genuine factual dispute sufficient to displace SALGA’s version on the papers. Accordingly, the circular was not treated as confirmation of authorisation or ratification. On this footing, the court concluded that SALGA had not authorised the settlement agreement and therefore SALGA and its members were not bound by it or by the award incorporating it. Having reached that conclusion, the court regarded it as unnecessary to decide additional arguments advanced by the appellants and the intervening party about whether the settlement constituted a collective agreement concluded outside the proper bargaining structures.

5. Outcome and Relief

The Labour Appeal Court upheld the appeal and set aside the Labour Court’s order dismissing the application. It replaced it with an order declaring that the settlement agreement dated 21 February 2006 and the SALGBC arbitration award in matter HQ 070502 dated 22 February 2006 were not binding on any of the applicants.

The court ordered IMATU (the first respondent) to pay the costs of the application in the Labour Court. It also ordered IMATU to pay the costs of the appeal, including the costs of two counsel where employed.

Cases Cited

Queenstown Fuel Distributors CC v Labuschagne NO and Others [2000] 1 BLLR 45 (Labour Appeal Court).

Lion Match Company Ltd v PPWAWU and Others [2001] 11 BLLR 1202 (Supreme Court of Appeal).

Wolgroeiers Afslaers v Munisipaliteit van Kaapstad 1978 (1) SA 13 (Appellate Division).

Gwetha v Transkei Development Corporation and Others 2006 (2) SA 603 (Supreme Court of Appeal).

Opposition to Urban Tolling Alliance (“OUTA”) and Others v The South African National Road Agency Co Ltd and Others (90/2013) [2013] ZASCA 148 (9 October 2013); [2013] 4 ALL SA 639 (Supreme Court of Appeal).

Beweging vir Christelike Volkseie Onderwys and Others v Minister of Education and Others [2012] 2 All SA 462 (Supreme Court of Appeal).

Mkwanazi v Minister of Agriculture and Forestry, KwaZulu 1990 (4) SA 763 (Durban and Coast Local Division).

Hunt v Engers 1921 CPD 757.

Western Assurance Co v Caldwell’s Trustee 1918 AD 262.

Sanford v Haley NO 2004 (3) SA 296 (Cape High Court).

Khumalo and Another v MEC for Education, KwaZulu-Natal 2014 (5) SA 579 (Constitutional Court).

Amalgamated Engineering Union v Minister of Labour 1949 (4) SA 908 (Appellate Division).

Blyvooruitzicht Gold Mining Co Ltd v Pretorius [2000] 7 BLLR 751 (Labour Appeal Court).

Mzeku and Others v Volkswagen SA (Pty) Ltd and Others [2001] 8 BLLR 857 (Labour Appeal Court).

NUM v Hernic Exploration (Pty) Ltd [2003] 4 BLLR 319 (Labour Appeal Court).

NUMSA v CCMA and Others [2000] 11 BLLR 1330 (Labour Court).

Baloyi v MNP Manufacturing [2001] 4 BLLR 389 (Labour Appeal Court).

Royal British Bank v Turquand (1856) 6 E & B 327; 1843-60 ALL ER 435.

Morris v Kanssen 1946 AC 459; (1946) 1 ALL ER 586 (House of Lords).

NBS Bank Ltd v Cape Produce Co (Pty) Ltd and Others 2002 (1) SA 396 (Supreme Court of Appeal).

Northern Metropolitan Local Council v Company Unique Finance (Pty) Ltd and Others 2012 (5) SA 323 (Supreme Court of Appeal).

Legislation Cited

Labour Relations Act 56 of 1996.

Constitution of the Republic of South Africa Act 108 of 1996.

Local Government: Municipal Systems Act 32 of 2000.

Rules of Court Cited

No specific rule of court was expressly cited by number, although the judgment referred generally to time periods under the Labour Relations Act 56 of 1996 and the Rules of the Labour Court governing application proceedings and condonation.

Held

The Labour Court had the inherent power to dismiss proceedings for unreasonable delay, but such power must be exercised only in exceptional circumstances and with due regard to the interests of justice, including constitutional access to courts, prejudice, consequences of relief, importance of the matter, and prospects of success. The Labour Court erred by dismissing the application on delay without properly considering whether the merits should nonetheless be determined.

SALGA, as an employers’ organisation, was in principle capable of binding its members when acting in their interests and within its powers, even absent a specific mandate from each municipality. However, on the facts, SALGA had not authorised the conclusion of the settlement agreement. IMATU failed to establish ostensible authority or reliance on the Turquand rule in a manner that could bind SALGA or its members. The settlement agreement and the award incorporating it were accordingly not binding on the applicants.

LEGAL PRINCIPLES

The Labour Court, as a superior court under the Labour Relations Act 56 of 1996, possesses an inherent power (rooted in the constitutional framework, including section 173 of the Constitution) to protect and regulate its own process, which includes a discretion to dismiss proceedings for unreasonable delay in appropriate cases. The exercise of that power is exceptional and must be aligned with the interests of justice and the section 34 right of access to courts.

Delay is not determinative in isolation. Even where delay is found to be unreasonable and inadequately explained, a court must consider whether justice requires that the merits be heard, taking account of factors such as the importance of the dispute, the prospects of success, and prejudice and consequences for affected parties.

A registered employers’ organisation may act in disputes in its own interest, on behalf of members, or in the interests of members under section 200(1) of the Labour Relations Act 56 of 1996, and may, within its lawful powers, bind its members through decisions taken in that representative capacity.

Where a party seeks to bind an organisation to an agreement concluded by its officials, actual authority must be shown for valid authorisation, or the strict requirements of ostensible authority must be proved (including representation by the principal, reasonable reliance, and prejudice). The Turquand rule does not assist unless it is first shown that the officials had actual authority to act, subject only to internal formalities.

City of Johannesburg Metropolitan Municipality and Others v Independent Municipal and Allied Trade Union and Others (JA112/2013) [2017] ZALAC 43; (2017) 38 ILJ 2695 (LAC) (28 June 2017)