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[2017] ZALAC 53
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KBC Health and Safety (Pty) Ltd v Solidarity obo Smith (JA81/16) [2017] ZALAC 53 (19 September 2017)
IN
THE LABOUR APPEAL COURT OF SOUTH AFRICA, JOHANNESBURG
Not Reportable
Case no: JA81/16
In the matter between:
KBC HEALTH &
SAFETY (PTY) LTD
Appellant
and
SOLIDARITY obo S
SMITH
First Respondent
Heard:
01 June 2017
Delivered:
19 September 2017
Summary: Application
for rescission of a default Judgment - the Labour Court refusing to
rescind the default judgment without considering
the employer’s
prospects of success.
On appeal to the
Labour Appeal Court – finding that it behoved the Labour Court
to consider whether the employer had a
bona fide
defence to
the employee’s unfair dismissal claim which
prima facie
had some prospects of success – further finding that although
the employer’s defence to the employee’s claims
was
somewhat tersely stated, in its founding papers, it established
good cause or at least a
prima facie
case fit for trial –
further finding that the Labour Court misdirected itself in
refusing to grant the rescission application.
The appeal - upheld
with no order as to costs. The order of the Labour Court substituted
with an order granting the rescission of
the default judgment.
Coram:
Davis JA, Landman JA
and
Phatshoane AJA
JUDGMENT
PHATSHOANE AJA
[1] This is an appeal
against the whole of the judgment and order of the Labour Court
(Chaane AJ) handed down on 21 June 2016 under
Case No: JS251/14
refusing to rescind and set aside the default judgment granted by
Sono AJ on 28 October 2014.The appeal is with
leave of the Court
a
quo
.
[2]
There is also before us an unopposed application for condonation of
the late delivery of the power of attorney by KBC Health
& Safety
(Pty) Ltd (“KBC”), the appellant. Rule 6(1) of the Rules
regulating the conduct of proceedings in this
Court
[1]
provides that a power of attorney authorising a representative to
prosecute the appeal or the cross-appeal must be delivered within
10
days of the delivery of any notice of appeal or cross-appeal. KBC
filed its Notice of appeal on 02 September 2016. Its power
of
attorney was delivered on 23 September 2016, five days out of time.
It gave a detailed explanation for the delay. Amongst others,
its
deponent and legal representative, Mr Sandile Thokozani Mabaso, says
that he had been moving offices and in the midst of that
the file was
incorrectly diarized for 23 September 2016. Upon discovery of the
mishap, the power of attorney was signed and immediately
filed with
the Labour Court. I am of the view that the delay is slight and the
explanation therefor reasonable. The sought condonation
is granted.
The factual background
[3] KBC generated its
revenue by offering training to learners of its clients. During 2013,
as a result of recession, KBC’s
clients requested it to review
its costs structures. This resulted in KBC training 300 learners per
day as opposed to approximately
800 learners as it used to. The
decline in training figures heralded KBC’s financial distress
which necessitated taking drastic
steps to ensure that it remained
afloat through to 2014. On 21 October 2013, it issued notices to all
its employees explaining
its financial difficulties. In that notice
it proposed,
inter alia
, as a means of avoiding retrenchments,
that the salary costs be reduced by 20% over a period of three months
starting from November
2013. The employees were invited to submit
their alternative suggestions, if any, by 25 October 2013.
[4]
Mr Henry Sipho Simelane (“Mr Simelane”), a Human Resource
Manager at KBC and a deponent to its affidavit in support
of the
rescission application, intimated that Ms Suzette Smith (“Ms
Smith”), an administrator in the employ of KBC,
and her
colleagues rejected KBC’s proposal and made counter proposals
which KBC found not to be viable. On 24 October 2013
KBC issued
Notices in terms of s189 (3)
[2]
of the Labour Relations
Act, 66 of 1995 (“the LRA”) in which it notified its
employees that it contemplated effecting
dismissals based on its
operational requirements. Mr Simelane further states that the
employees were informed that the selection
criteria, for those likely
to face retrenchment, were to be based on skills. Further
consultations took place on 28 October 2013.
Ms Smith, who commenced
employment at KBC on 01 July 2007, and other employees were
retrenched on 30 November 2013.
[5]
Ms Smith maintains that although the employees did not accede to the
employer’s 20% salary reduction they submitted alternative
suggestions which had to be reviewed and considered by KBC. This was
not done. Instead, KBC resorted to retrenchment on the assumption
that Ms Smith and others accepted the retrenchment. She says that KBC
informed the affected employees that, in the event that they
were not
amenable to accepting the 20% salary reduction, LIFO would be used as
a selection criterion to put into effect their dismissal.
Ms Smith
explained that she and her colleagues were nevertheless retrenched
without observance of the LIFO selection criterion.
[6]
Solidarity, a trade union acting on behalf of Ms Smith, referred her
alleged unfair dismissal dispute to the Metal and Engineering
Industries Bargaining Council for conciliation. The dispute remained
unresolved as at 31 January 2014. Sometime in April 2014 Solidarity
filed a statement of case with the Labour Court claiming that Ms
Smith’s retrenchment was procedurally and substantively
unfair
and sought the fullest redress obtainable in terms of s194 of the
LRA. The period for giving notice of intention to oppose
the
statement of claim expired on 10 April 2014. KBC did not enter an
appearance to defend the claim. On this basis
Solidarity
and Ms Smith filed an application for default judgment on 20 May
2014.
[7] On 28 October 2014
Sono AJ granted default judgment against KBC as follows:
‘
1.
The dismissal of the applicant [Ms Smith] was substantively and
procedurally unfair.
2.
The respondent [KBC] is ordered to pay the applicant an amount of
R124 668.00
being the equivalent of the applicant’s twelve
(12) month’s salary.
3.
Payment of the above mentioned amount must be made within 14 days of
this order.
4.
There is no order as to costs.’
[8] KBC states that it
was not aware of the order of Sono AJ until on 05 November 2014 when
Solidarity forwarded a letter to it
to which was attached the order
of the Labour Court. Mr Simelane says that he was unaware that Ms
Smith had declared a dispute
against KBC. He did not receive the
statement of case, the application for default judgment, and the
schedule of documents; otherwise,
KBC would have defended the process
because the retrenchment of Ms Smith and other employees was both
procedurally and substantively
fair.
[9]
Mr Simelane further explained that upon being made aware of Sono AJ’s
order, he set about investigating what had transpired
at the Labour
Court. The fax number, appearing in the affidavit of service, which
was used by Solidarity to correspond with KBC,
is 0866442569 which
number was mostly used for “bookings” and receipt of
invoices. Mr Simelane enquired from Ms Vashni
Rammarain, an admin
clerk at KBC, whether she received the stated documents but she could
not recall receiving them. He intimated
that all the employees,
including Ms Smith, knew what facsimile had to be used for all
correspondence that had to be brought to
his attention, as an HR
official responsible for employment related disputes, which is (011)
675 3721. This number appears in para
3.3 of the statement of claim
filed by Solidarity and para 5 of the application for default
judgment.
[3]
The papers were not
transmitted to the latter fax machine.
[10] On 18 November 2014
KBC filed an application to rescind the default judgment entered
against it. In addition to its averment
that Solidarity’s
papers were not brought to its attention, it maintained that it had a
bona fide
defence to Ms Smith unfair dismissal claim in that:
both in the statement of case and the affidavit in support of default
judgment
Solidarity only took issue with the procedural fairness of
the dismissal in that the allegation made therein was that there was
no meaningful consultation before the retrenchment was effected. Mr
Simelane argued that on the question of substantive fairness
of the
dismissal no facts were presented to the Court save that there was no
fair reason given for the dismissal. He went on to
say that Ms
Smith’s salary was R8 890.00 per month and not R10 389.00
as relayed to Sono AJ. He urged that Sono
AJ would consequently not
have ordered that Ms Smith be paid compensation in the amount of
R124 688.00.
[11]
Ms Nicolette Greeff, a legal officer in the employ of Solidarity and
the deponent to its affidavit resisting the rescission,
states that
the alternative fax number (086 644 2569) was provided by Ms
Rammarain when Solidarity faxed through the statement
of claim, who
subsequently confirmed receipt of the statement of claim. Ms Greeff
further state that on 13 May 2014 Ms Octavia
Seleka of KBC also
provided the same fax number 086 644 2569 and confirmed receipt
of the application for default judgment.
The proceedings before
the Court
a quo
[12] The Labour Court was
persuaded that there had been proper service of the statement of
claim and default judgment on KBC and
held:
‘
[11]
Outlandishly, the applicant [KBC] on the other hand just makes bald
denials which are not substantiated
by affidavits of both Ms Seleka
and Ms Vashni, both of whom are still in its employ. I am constrained
to come to this conclusion
because all which is being said about Ms
Seleka is that she was on maternity leave and could not be reached
telephonically. I expect
a reasonable employer in the like of the
applicant to have sufficient details of its employees, like their
physical addresses and
details of their next of kin to be used in the
event they cannot get hold of the employees. In fact, the applicant
does not indicate
endeavours made to get in touch with Ms Seleka
except that ‘she is currently on maternity leave, however, she
is not available
on the phone.’
Ad paras 17 -21 of the
judgment the Court went on:
‘
[17]
If regard is had to all the stubborn facts and tenacious evidence
before me, it can hardly be said
that the order sought to be
rescinded was erroneously granted in the absence of the applicant.
[18] I
am persuaded to come to a realistic conclusion that the applicant did
not only receive the
statement of claim but also received the
application for default judgment and just espoused a remiss and
conceited attitude in
dealing with the entire matter. I must add that
the statement of claim was delivered to the applicant on 01 April
2014 and the
default judgment application was delivered to the
applicant on 13 May 2014, a period of over a month apart and
confirmation of
receipt of both processes is confirmed by the two
employees.
[19] In
the absence of any other facts to the contrary, I accept that proper
service was effected
upon the applicant in respect of both the
statement of claim and the application for default judgment. I cannot
cast-off the fact
that nothing contradicts the evidence of the
applicant to the effect that there was proper service upon the
applicant.
[20] I
must emphasise that in an application of this nature it is incumbent
upon the applicant to
provide this Court with adequate and reasonable
explanation [of] its failure to oppose the action and/or application,
as the case
may be, giving rise to the order that it seeks to
rescind. The applicant failed to do so. In the absence of sufficient
explanation,
I am unable to come to the succour of the applicant by
granting it an order sought.
[21] In
fact, I am inhibited to look adversely at the conduct of the
applicant. This applicant does
not take this Court in confidence and
also approaches this Court with enormously dirty hands. The Court is
bothered by litigants
displaying this kind of conduct.’
[13] As adumbrated
earlier, the Labour Court (Chaane AJ) dismissed with costs the
application to rescind and set aside the default
judgment granted by
Sono AJ.
The grounds of appeal
[14] As its grounds of
appeal to us KBC contended that the Court
a quo
erred in:
[14.1] not taking
into account its prospect of success in the main dispute concerning
the retrenchment of Ms Smith.
[14.2] citing
authorities on rescission applications without applying the legal
principles enunciated in those authorities.
[14.3] not taking
into account that there was no affidavit by Ms Smith gainsaying Mr
Simelane’s averments that the fax
number that had to be used to
direct correspondence related to issues of employment at KBC was
011 675 3721.
[14.4] holding in
its judgment that “
Ms Seleka has put evidence forward
disputing what Ms Viljoen and Ms Slater said.’
It was
contended that no evidence was adduced by Ms Seleka to dispute what
Ms Viljoen and Slater attested to. I must immediately
say that
nothing turns on this ground.
[14.5] failing to
take into account that the evidence by KBC was to the effect that Ms
Smith’s salary was R8 890.00
and not R10 389.00 which
resulted in Sono AJ erroneously granting compensation in the amount
of R124 688.00
The evaluation
[15]
The application for the rescission of the default judgment was
brought in terms of s165 of the LRA
[4]
read with Rule 16A(1)(b)
[5]
of
the Rules for the conduct of proceedings in the Labour Court. In
Colyn
v Tiger Food Industries Ltd t/a Meadow Feed Mills (Cape),
[6]
the Court restated the principles applicable to rescission of
judgments or orders as follows:
‘
[11]….The
authorities emphasize that it is unwise to give a precise meaning to
the term 'good cause'. As Smalberger J put
it in
HDS
Construction (Pty) Ltd v Wait
[1979 (2) SA 298
(E)]:
'When dealing with words such as
''good cause'' and ''sufficient cause'' in other Rules and enactments
the Appellate Division has
refrained from attempting an exhaustive
definition of their meaning in order not to abridge or fetter in any
way the wide discretion
implied by these words (
Cairns' Executors
v Gaarn
1912 AD 181
at 186;
Silber v Ozen Wholesalers (Pty)
Ltd
1954 (2) SA 345
(A) at 352 - 3). The Court's discretion must
be exercised after a proper consideration of all the relevant
circumstances.'
With that as the underlying approach
the Courts generally expect an applicant to show good cause (a) by
giving a reasonable explanation
of his default; (b) by showing that
his application is made
bona fide
; and (c) by showing that he
has a
bona fide
defence to the plaintiff's claim which
prima
facie
has some prospect of success (
Grant v Plumbers (Pty) Ltd
[
1949 (2) SA 470
(O)],
HDS Construction (Pty) Ltd v Wait
supra,
Chetty v Law Society, Transvaal
[1985 (2) SA 756
(A)]).’
[16]
It is common cause that the statement of claim and the application
for default judgment were successfully transmitted to KBC
by telefax.
In explaining its default KBC’s case is that it was unaware
that these processes had been issued against it because
the papers
were not transmitted to the fax machine of the responsible officials
but were forwarded to a different fax machine and
received by
employees who did not appreciate their import. In
MTN
South Africa v Van Jaarsveld and Others,
[7]
the Labour Court considered a similar rescission application where
correspondence had been transmitted by facsimile but had not
reached
the official responsible and it made this important observation:
‘
[12] It is
plain from anyone who attends the hearings of the Labour Court, that
the enormous growth in the number of applications
for rescission in
circumstances where the respondent party claims that albeit on the
face of it a telefax transmission was sent,
it was not received or
did not reach the person responsible for giving it attention, leads
to the conclusion that the provisions
of the Act in this regard
require reconsideration. In my view, it is appropriate that
the statute be reappraised in this regard
and that the Rules
Board for the Labour Courts gives its attention to this matter of
procedure. As aptly illustrated on the facts
of this case, the
arrival of a document in the midst of a deluge of others, handled by
staff not inducted to divine, in the absence
of some clue, who should
be given the document nor how rapidly that should happen, may
predictably lead to delay or misplacement
or outright loss of the
document.’
[17]
The authorities are replete that a successful fax transmission slip
does not render conclusive proof that indeed a document
was
received.
[8]
The explanation
offered by Mr Simelane that the telefaxes were not forwarded to him
for his attention, as the responsible HR official,
cannot be said to
be palpably false. I am of the view that, regardless of the
reasonableness of the explanation offered by Mr Simelane
or the
implausibility thereof, it behoved the Labour Court to consider
whether KBC had a
bona
fide
defence to Ms Smith’s unfair dismissal claim which
prima
facie
has some prospects of success.
[18]
What can be gleaned from the Court
a
quo
’s
finding is that the confirmation of receipt of pleadings by the
officials of KBC, regardless of whether these employees
could
appreciate their significance or not, was dispositive of the
application for rescission of the default judgment. It is glaring
that the Court did not concern itself with the question whether KBC
had a reasonable prospect of success at the hearing in due
course.
This was a wrong approach amounting to a misdirection on its part. In
Northern
Province Local Government Association v Commission for Conciliation,
Mediation & Arbitration and Others,
[9]
the Labour Court pronounced that where the explanation was wanting in
demonstrating that there was a wholly blameless absence
of a
defaulting party at the time of the hearing, the force of that
explanation should be balanced against the force of the case
which
the employer sought to present in support of its decision to dismiss
an employee. The weight of a
bona
fide
case will usually make up for the inadequate explanation for the
default.
[19] In view of the fact
that the Court
a quo
did not consider KBC’s prospects of
success we are at large to determine this aspect which I now turn to.
[20] Save to submit that
there was no reason to retrench Ms Smith, the commercial rationale
for the retrenchment exercise was not,
on the papers before us,
seriously challenged by Solidarity and Ms Smith. At the heart of the
contestations between the parties
is the question whether they
attempted to reach consensus on the appropriate measures aimed at
avoiding the dismissal. Solidarity
argued that KBC did not consider
alternatives, short of dismissal, prior to the retrenchment of Ms
Smith and/or the alternative
proposals submitted by Ms Smith and her
colleagues. As already highlighted, KBC proposed on 21 October 2013 a
salary reduction
of 20% as a means of avoiding retrenchments.
Solidarity contended that KBC interpreted the rejection of the 20%
salary reduction
as Ms Smith’s consent for retrenchment.
Ex
facie
the s189(3) notice of retrenchment dated 24 October 2013 it
appears that there may have been some consultation between KBC and
its employees on alternative measures short of retrenchment. Para 3
of the notice in question reads in part:
‘
-
Following the review, we will consult with the individuals that are
affected
to record their individual situation and circumstances. At
this consultations, we will once again entertain alternatives to
minimise
retrenchments.
-
Furthermore
we will continue to consult with the Business Units to maximise costs
reduction interventions in their workplace.’
[21]
There are disputes of fact on the question whether the alternatives
proposed by Ms Smith
[10]
were
considered by KBC. Mr Simelane stated that: “
The
management of the company did indeed notify the employees that their
proposal was not feasible in order to save the situation
of the
company.”
It is important to remember that at the hearing in due course, which
is in the form of a trial, these disputes would ordinarily
be
resolved through the leading of oral evidence.
[22] The selection
criteria that were adopted by KBC were also placed in issue.
Solidarity argued that KBC unilaterally chose LIFO
as a method of
selecting the employees likely to be retrenched. It contended that,
despite this, LIFO was not adhered to instead
the employees who were
employed after Ms Smith, doing exactly the same job as Ms Smith, were
retained while she was retrenched.
Mr Simelane disputed that LIFO was
adopted as the selection criterion. On the reading of the Notice in
terms of s189(3) of the
LRA, it does not appear that KBC proposed
LIFO as a method of selecting the employees likely to be retrenched.
The relevant clause
in the notice reads:
‘
KBC will
conduct a business review of the current demand for services for each
of the respective Business Units. Based on the recent
demand and the
projection of what the demand will be for that business unit in the
short/medium term we will restructure the Business
Units to
effectively offer those services.
Where more than one person is involved
in a given position, consideration will be given to skills-set to
deliver the required services
at the respective Business Unit and
length of service - bearing in mind what competencies will be
required once structural and
other organisational changes are to be
made.
However, if you would like us to
consider other criteria, kindly put that forward.’
[23]
In light of the above
it
cannot be said that Mr Simelane’s averment that the employees’
skills, as opposed to LIFO, were used as the selection
criteria is
devoid of any merit. It is so that KBC’s defence to
Solidarity’s claims is somewhat tersely stated in its
founding
papers. However, I am not swayed that it has no reasonable prospects
of success. The Court
a
quo’
s
conclusion that KBC did not approach it with clean hands is not
supported by the facts. I am satisfied that KBC established good
cause or at least a
prima
facie
case fit for trial. The Court
a
quo
misdirected itself in refusing to grant the rescission application.
The corollary of this is that the appeal must succeed.
[24] On the question of
costs. I am unpersuaded that the requirements of law and fairness, in
the circumstances of this case, dictate
that any of the parties be
ordered to pay costs in respect of the proceedings both in this Court
and in the Labour Court. Therefore,
there shall be no order made as
to costs. I make the following order.
Order
1.
The
late delivery of the power of attorney by KBC Health & Safety
(Pty) Ltd, the appellant, is condoned.
2.
The
appeal is upheld with no order as to costs.
3.
The
order of the Court
a
quo
refusing the application for rescission of the default judgment
granted by the Labour Court on 28 October 2014 is set aside and
substituted with the following:
‘
1.
The application for the
rescission of the default judgment issued under Case No: JS 251/14,
dated 28 October 2014, entered against the applicant, KBC Health &
Safety (Pty) Ltd, in favour of Solidarity on behalf of Ms
S Smith,
the respondents, is hereby granted.
2.
No order is made as to costs.’
_________________________
MV Phatshoane
Acting
Judge of the Labour Appeal Court
Davis
JA and Landman JA
concur
in the judgment of Phatshoane AJA
APPEARANCES:
FOR THE APPELLANT:
Adv Z Ngwenya
Instructed by Mabaso
Attorneys
FOR
THE RESPONDENT:
Ms NG Ras (Solidarity Trade Union)
[1]
The Rules Regulating the
Conduct of Proceedings in the Labour Appeal Court are published
under GN 1666 in
GG
17495 of 14 October 1996.
[2]
Section
189(3) of the LRA requires an employer who is contemplating
dismissing its employees based on its operational requirements
to
issue a written notice inviting the other consulting party to
consult with it. In the notice the employer should disclose
in
writing all relevant information, inter alia:
(a)
the
reasons for the proposed
dismissals
;
(b)
the
alternatives that the employer considered before proposing
the
dismissals
,
and the reasons for rejecting each of those
alternatives;
(c)
the
number of
employees
likely
to be affected and the job categories in which they are employed;
(d)
the
proposed selection criteria;
(e)
the
time when the
dismissals
are
likely to take effect;
(f)
the
severance pay;
(g)
any
assistance that the employer proposes to offer to
the
employees
likely
to be dismissed.— GN 1666 of 1996
[3]
These paragraphs capture the
particulars and/or details of KBC.
[4]
Section 165 of the LRA
provides:
‘
The Labour Court,
acting of its own accord or on the application of any affected party
may vary or rescind a decision, judgment
or order-
(a)
erroneously sought or
erroneously granted in the absence of any party affected by that
judgment or order;
(b)
in which there is
an ambiguity, or an obvious error or omission, but only to the
extent of that ambiguity, error or omission;
or
(c)
granted as a result of a mistake common to the parties to the
proceedings.’
[5]
Rule 16A(1)(b) provides:
“
(1)
The court may, in addition to any other powers it may have-
(a)
…
..
(b)
on application of
any party affected, rescind any order or judgment granted in the
absence of that party.
[6]
2003 (6) SA 1
(SCA) at para 11.
[7]
(2002) 23 ILJ
1597 (LC) at 1602 para 13
[8]
See
Vemisani
Security Services CC v Mmusi and another: In re Mmusi and Another v
Vemisani Security Services CC
(2013) 34 ILJ 440 (LC) at 445-446 paras 16-18 and other authorities
cited therein.
[9]
(2001) 22 ILJ
1173 (LC).
[10]
The alternatives which Ms Smith says
were not considered by KBC are set out in the undated and unsigned
letter marked annexure
“NG6” headed “Objectives in
regards with the 20% in salary costs”.