About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Labour Appeal Court
SAFLII
>>
Databases
>>
South Africa: Labour Appeal Court
>>
2019
>>
[2019] ZALAC 54
|
|
City of Johannesburg v SAMWU obo Monareng and Another (JA120/2017) [2019] ZALAC 54; (2019) 40 ILJ 1753 (LAC) (20 March 2019)
IN THE LABOUR APPEAL
COURT OF SOUTH AFRICA, JOHANNESBURG
Reportable
Case no. JA 120/2017
In
the matter between:
CITY
OF JOHANNESBURG
Appellant
and
SAMWU
OBO LUCAS MONARENG
First
Respondent
THE
SHERIFF (JOHANNESBURG NORTH)
Second Respondent
Heard:
06 November
2018
Delivered: 20
March 2019
Summary:
Whether a public sector employer should provide security in
terms of section 145(7)(8)of the Labour Relations Act - employer
contending
that it is prohibited in terms of the Local Government:
Municipal Finance Management Act from furnishing security –
court upholding principles in
Rustenburg Local
Municipality
that all employers whether in the public or
private sector should be subject to the same requirement of providing
security thereby
disallowing the contrary view adopted in
Free
State Gambling
and Liquor Board.
held
that the MFMA does not prohibit the furnishing of such security by a
municipality. Further that that employers in the public
sector that
are regulated by the PFMA or the MFMA are not automatically absolved
from providing security on the stay of the enforcement
of an
arbitration award pending the decision of the Labour Court on review.
The general rule is that an employer is obliged to
provide security
in accordance with section 145(8) of the LRA unless the Labour Court
orders otherwise. Section 145(8) confers
upon the Labour Court a
discretion that it may exercise in favour of, either dispensing
altogether with the payment of security
or, reducing the amount of
security required.
court
finding that Labour Court did not provide reasons for ordering the
employer to provide security in accordance with section
145(8) of the
LRA and that its discretion was not applied justifiably. Appeal
upheld
Coram: Phatshoane
ADJP, Sutherland JA and Kathree-Setiloane AJA
JUDGMENT
KATHREE-
SETILOANE AJA
[1]
This appeal
concerns the question of whether a public sector employer should
provide security in terms of section 145(8) of the
Labour Relations
Act (“LRA”).
[1]
The
appeal lies against the Order of the Labour Court (Baloyi AJ) in
which it set a condition for the stay of the enforcement of
the
arbitration award that the City of Johannesburg (“the
appellant”) provide security in terms of section 145(8) of
the
LRA. The appellant is a municipality established in accordance with
the Local Government: Municipal Structures Act.
[2]
In
the Labour Court
[2]
On 8 June 2017, the appellant applied in terms of section 145(3) of
the
LRA for the stay of the enforcement of the arbitration award,
made on 1 August 2016 by the first respondent under the auspices of
the South African Local Government Bargaining Council (“SALGBC”),
pending the finalisation of an application to review
and set it
aside.
[3]
The Labour Court granted the application for the stay, but made it
subject
to the appellant delivering a resolution to furnish security
as required in terms of section 145(8) of the LRA. The appeal lies
against this order with leave of the Labour Court.
The
Appeal
[4]
The appellant contends that the Labour Court erred in ordering it to
provide security
as contemplated in section 145(8) of the LRA because
the giving of security would contravene section 48 of the Local
Government:
Municipal Finance Management Act 56 of 2003 (“MFMA”).
The appellant relies in support of this contention on the decision
of
the Labour Court in
Free
State Gambling and Liquor Authority v CCMA and Others
[3]
(“
Free
State Gambling and Liquor Authority”
).
There, the Labour Court (Rabkin-Naicker J) held that a public entity
need not provide security because the object of doing so
is satisfied
since the public entity's budget and finance management is governed
by the Public Finance Management Act
[4]
("PFMA") and Treasury Regulations.
[5]
Two years later, the Labour Court (Snyman AJ) in
Rustenburg
Local Municipality v South African Local Government Bargaining
Council
[5]
(“
Rustenburg
Local Municipality
”)
held that the decision in
Free
State Gambling and Liquor Authority
was wrong and that no distinction should be drawn between public and
private entities when considering the need to provide such
security.
It is the divergence of views in these two judgments that is at the
heart of this appeal.
[6]
Section 145(7) and (8) of the LRA provide:
‘
(7)
The institution of review proceedings does not suspend the operation
of an arbitration award,
unless the applicant furnishes security to
the satisfaction of the Court in accordance with subsection (8).
(8)
Unless the Labour Court directs otherwise, the security furnished as
contemplated
in subsection (7) must –
(a)
in the case of an order of reinstatement or re-employment, be
equivalent to 24 months’
remuneration; or
(b)
in the case of an order of compensation, be equivalent to the amount
of compensation
awarded.’
[7]
The Labour Court has a discretionary power under section 145(3) of
the LRA to stay
the enforcement of an arbitration award pending its
decision in the review application. It may stay the enforcement of an
arbitration
award pending finalisation of a review application
against the award with or without conditions. It may in terms of
section 145(8)
of the LRA dispense with the requirement of furnishing
security. Properly construed, section 145(3) read with section 145(7)
and
(8) should be interpreted to mean that where an applicant in a
review application furnishes security to the Labour Court in
accordance
with section 145(8) of the LRA, the operation of the
arbitration award is automatically suspended pending its decision in
the review
application. In other words, the employer need not make an
application in terms of section 145(3) of the LRA to stay the
enforcement
of the arbitration award pending the finalisation of the
review application.
[8]
However, should the employer wish to be absolved from providing
security or to provide
security in an amount less than the threshold
in subsections (8) (a) and (b), then it is required to make an
application to the
Labour Court, in terms of section 145(3), for the
stay of the enforcement of the arbitration award pending its decision
in the
review application. The employer must make out a proper case
for the stay as well as for the provision of security in accordance
with section 145(8) to be dispensed with or reduced.
[9]
The words “unless the Labour Court directs otherwise” in
section 145(8)
of the LRA must be construed broadly to mean that the
Labour Court is afforded a discretion to either: (a) exempt the
employer
from paying security on the stay of the enforcement of an
arbitration award pending its decision on review or (b) reduce the
quantum
of security to be furnished by the employer to an amount
below the threshold in sections 145(8)(a) and (b) of the LRA.
[6]
[10]
Although section 145(8) of the LRA makes specific reference to “the
applicant”, it
effectively applies to only employers. It makes
no provision for an employee who brings a review application to
furnish security.
The purpose of sections 145(7) and (8) is
essentially to dissuade employers from bringing frivolous review
applications with no
prospects of success and ensure that they are
timeously and expeditiously prosecuted.
[7]
[11]
In support of the view adopted by the Labour Court in
Free
State Gambling and Liquor Board
,
[8]
the appellant maintains that a public entity has to do no more than
aver that it is governed or regulated by public finance management
legislation to satisfy the requirements of section 145(8) of the LRA
in dispensing with security pending the review of an arbitration
award. The rationale for that conclusion, so it contends, is
self-evidently that the financial affairs of public entities are
subject to the scrutiny of the Auditor-General and their debts are
effectively underwritten by the State. The appellant also points
to
policy considerations which militate against public monies being
encumbered as security, as they need to be used for their primary
purpose of providing social services.
[12]
The appellant, in addition, argues that it is governed by the MFMA
which prohibits it from providing
security for debts other than those
necessary for the provision of the minimum level of basic municipal
services.
[9]
In particular, it relies on section 48 of the MFMA entitled
“Security” which provides that
a
municipality may, by resolution of its council, provide security for:
(a)
Any of its debt obligations;
(b)
Any debt obligations of a municipal entity under its sole control; or
(c)
Contractual obligations of the municipality undertaken in connection
with Capital
expenditure by other persons on property, plant or
equipment to be used by the municipality or such other person for the
purpose
of achieving the Objects of local government in terms of
section 152 of the Constitution.
[13]
Section 48(3) of the MFMA provides that a council resolution
authorising the provision of security
in terms of subsection (2)(a)
must determine whether the asset or right with respect to which the
security is provided, is necessary
for providing the minimum level of
basic municipal services. If so, it must indicate the manner in which
the availability of the
asset or right for the provision of that
minimum level of basic municipal services will be protected. In terms
of section 48(4)
of the MFMA, if the resolution has determined that
the asset or right is necessary for providing the minimum level of
basic municipal
services, neither the party to whom the municipal
security is provided, nor any successor or assignee of such party,
may, in the
event of a default by the municipality, deal with the
asset or right in a manner that would preclude or impede the
continuation
of that minimum level of basic municipal services.
[14]
As I understand it, section 48 of the MFMA places no prohibition on
the appellant to provide
security in accordance with section 145(8)
of the LRA. To the contrary, it enables a municipality to provide
security by a resolution
of Council for, amongst other things, “any
of its debt obligations”. An arbitration award made in favour
of a dismissed
employee would, in my view, constitute a “debt
obligation”. Section 48 does not prohibit the furnishing of
such security
by a municipality. However, even if, as contended for
by the appellant, the MFMA did contain such a prohibition, section
210 of
the LRA will prevail over it in all employment matters.
[10]
Section 210 of the LRA provides:
‘
(1) If any
conflict, relating to the matters dealt with in this Act arises
between this Act and the provisions of any other law
save for the
Constitution or any Act expressly amending this Act, the provisions
of this Act will apply.’
[15]
In
Free
State Gambling and Liquor Board
,
the applicant advanced the argument that it was exempt from
furnishing security on the basis that sections 145(7) and (8) of the
LRA were in conflict with section 66 of the Public Finance Management
Act (PFMA).
[11]
As indicated,
there the Labour Court found that the objects of providing security
were satisfied where the applicant’s budget
and financial
management are governed by the PFMA and Treasury Regulations, and
“duly authorised” averments to that
effect were made by
the applicant. Although called upon to declare sections 145(7) and
(8) of the LRA to be in conflict with section
66 of the PFMA and that
the latter provision overrides the former, the Labour Court in
Free
State Gambling
and
Liquor Board
did
not consider section 210 of the LRA.
[16]
Rightly so, in the subsequent case of
National
Department of Health v Pardesi and Another
,
[12]
(“
Pardesi
”)
the Labour Court (Van Niekerk J) held that
Free
State Gambling
and
Liquor Board
was not authority for a blanket exemption that all state or other
entities subject to the PFMA do not have to provide security
in terms
of section 145(8) of the LRA. It furthermore held that a public
entity would have to make the necessary averments before
the Labour
Court could exercise its discretion in its favour. In other words,
the public sector employer must establish on the
facts why it should
be exempt from furnishing security. The Labour concluded in
Pardesi
that
there were no facts before it that would enable it to exercise its
discretion against ordering that security should not be
furnished. It
accordingly held that the default position must apply and the
provision of section 145(7) must prevail.
[17]
What emerges from this exposition is that employers in the public
sector that are regulated by
the PFMA or the MFMA are not
automatically absolved from providing security on the stay of the
enforcement of an arbitration award
pending the decision of the
Labour Court on review. The general rule is that an employer is
obliged to provide security in accordance
with section 145(8) of the
LRA unless the Labour Court orders otherwise. Section 145(8) confers
upon the Labour Court a discretion
that it may exercise in favour of,
either dispensing altogether with the payment of security or,
reducing the amount of security
required. However, before the Labour
Court exercises its discretion under section 145(8), the employer
seeking to dispense with
the requirement to provide security for the
suspension of the enforcement of the arbitration award, must show
cause for why it
should not do so.
[18]
In
Rustenburg
Local Municipality
,
the Labour Court held as follows in relation to what good cause
entails:
[13]
‘
Good
cause in the context of motivating a departure from the security
provisions prescribed in s145(7) and (8) would involve a proper
explanation why this request should be entertained, with particular
emphasis on any material prejudice the applicant may suffer
if it is
not granted this relief. I will illustrate the point by way of an
example. A small manufacturing business with 20 employees
dismisses
10 employees for group misconduct. A CCMA commissioner then
reinstates all these employees. The required security would
be 24
months’ salary for each of these ten employees, which would
then wipe out the entire operating cash flow of the undertaking
for
several months. This is the kind of prejudice I am referring to.
Simply described, the explanation cannot be that it will be
hard to
set security, but the explanation must be that it would be unduly
onerous and harmful to be required to set the prescribed
security.’
[19]
Material prejudice to the employer is but one factor that the Labour
Court must give consideration
to – it is by no means decisive.
In exercising its discretion, the Labour Court must have regard to
the particular circumstances
of the case as well as considerations of
equity and fairness to both the employer and the employee. A factor
that the Labour Court
must take into consideration is whether the
employer is in possession of sufficient or adequate assets to meet an
order of the
review court upholding the arbitration award; the
principal concern being that the dismissed employee should not be
left unprotected
if the Labour Court decides the review application
in his or her favour.
[20]
The
onus
is on the employer seeking an exemption from furnishing security
under section 145(8) of the LRA to establish that it has assets
of a
sufficient value to meet its obligations should the arbitration award
be upheld by the Labour Court on review. On a purposive
or contextual
construction, sections 145(7) and (8) of the LRA must be construed as
requiring all employers – whether in
the public or private
sectors – to provide security. I accordingly support the
position adopted in
Rustenburg
Local Municipality
[14]
that
all employers whether in the public or private sector should be
subject to the same requirement of providing security.
[21]
The Labour Court in
Rustenburg
Local Municipality
noted that the amendment to section 145 of the LRA to include
subsections (7) and (8) was largely directed at discouraging
government
entities and municipalities from instituting review
applications that have little or no prospects of success.
[15]
It remarked that the requirement in section 145(8) of the LRA
to provide security would compel senior management in the public
sector not to commit funds unless satisfied that the review
application has prospects of succeeding, thus avoiding wasteful
expenditure
on litigation with little prospect of success.
[16]
I consequently agree with the conclusion in
Rustenburg
Local Municipality
that the decision in
Free
State Liquor and Gambling
Board
is
clearly wrong
[17]
in
particular because:
‘
the
provisions
of the PFMA, MFMA and related legislation cannot serve as a basis to
exonerate any government departments or municipalities
or like public
service entities, as employers, from
having
to provide security under s 145(7) and (8) of the LRA, in order to
secure a stay or suspension of the execution or enforcement
of an
arbitration award, pending a review application brought. If these
kinds of employers want this court to exercise a discretion
where it
comes to the issue of reducing or even dispensing with security when
deciding to grant a stay or suspension of the execution
or
enforcement of an arbitration award, then a proper case must be made
out… .’
[18]
[22]
When assessing, on appeal, the Labour
Court’s exercise of its discretionary powers in s145(8) of the
LRA, this Court must
consider whether the Labour Court properly took
into account all the factors and circumstances present in coming to
its decision,
and that the decision arrived at was justified. In
essence, this Court must consider all the facts and circumstances
which the
Labour Court had before it and then decide, based on a
proper evaluation of those facts and circumstances, whether or not
the decision
was judicially a correct one.
[23]
The facts before the Labour Court in determining whether to absolve
the appellant from furnishing
security in accordance with section
145(8) of the LRA were these:
(a)
The applicant is a municipality established in accordance with the
Local Government: Municipal
Structures Act and as such is an organ of
state with perpetual succession;
(b)
It is the largest metropolitan municipality with a substantial asset
base;
(c)
Its budget reveals that it is financially sound;
(d)
Its asset and income base demonstrates that it is financially stable;
(e)
It has a Moody’s credit rating of Prime -1.za and Aa3.za.
(f)
A rating of Prime -1 is the highest short term rating achievable. A
Prime -1 rating
means that the appellant has a superior ability to
pay short term debt obligations.
(g)
A rating of aA is the second highest long term rating achievable. The
obligations of a public
entity that receives an aA rating are judged
to be of high quality and are subject to a very low credit risk.
(f)
policy considerations militate against public monies being encumbered
as security,
as they need to be used for their primary purpose of
providing social services; and
(g)
As things stood at the time, there were 36 arbitration awards made
against the appellant
with pending review applications. The appellant
was the applicant in 13 of those applications. In most of these
matters, there
was more than one respondent. In one particular review
application, there were in excess of 35 respondents. If the appellant
is
required to put up security in each review application, the
quantum of security to be provided would be staggering. On a tally of
the existing awards against the appellant, the quantum would be in
excess of two million rands. Taking into account the pending
matters
that may go against the appellant, the quantum would in all
likelihood increase substantially.
[24]
The respondent did not file an answering affidavit to gainsay these
averments It, therefore,
remains undisputed that as a result of the
numerous review applications instituted by the appellant, the
requirement to furnish
of security in each one of these applications
is likely to have a staggering impact upon its ability to provide
social services
and service delivery in its area of jurisdiction. Its
financial stability, asset and income base, and favourable credit
rating
by an international rating agency demonstrate its ability to
satisfy the arbitration award in the event of not succeeding on
review.
[25]
The Labour Court did not provide reasons for ordering the appellant
to provide security in accordance
with section 145(8) of the LRA. The
absence of reasons inclines me to conclude that the Labour Court did
not consider the factors
listed above in exercising its discretion
under section 145(8) of the LRA. Had it done so, it would surely not
have required the
appellant to encumber public monies that should be
directed at service delivery, by furnishing security in accordance
with section
145(8) of the LRA. In particular, because the facts more
than adequately demonstrate that the appellant is in possession of
sufficient
assets to meet an order of the review court upholding the
arbitration award in the dismissed employee’s (third
respondent)
favour.
[26]
Crucially, therefore, the third respondent is shielded should the
review application be decided
in his favour. In the circumstances, I
find that that the Labour Court erred as it was not just and
equitable, on the facts presented,
for it to order the appellant to
provide security as a condition for the stay of the enforcement of
the arbitration award, pending
its decision in the review
application. The appeal accordingly succeeds.
Costs
[27]
There were two conflicting judgments on the question of security for
costs that needed resolution
in this appeal. The appeal also concerns
a novel question of law. I consider it fair and just that there
should be no order as
to costs.
Order
[28]
In the result, I order that:
1.
The appeal is upheld with no order as to costs.
2.
Paragraphs 2 and 3 of the order of the Labour Court is set aside and
substituted
with the following order:
“
The
enforcement of the award issued under case number JMD 011607 and
HO362-17 is stayed pending the decision of the Labour Court
in the
review application.”
F
Kathree-Setiloane AJA
Sutherland
JA and Phatshoane ADJP concur:
APPEARANCES:
FOR THE APPELLANT:
MJ Van As
Instructed
by Moodie and Robertson
[1]
No.66
of 1995.
[2]
No.
117 of 1998.
[3]
Free
State Gambling and Liquor Authority v CCMA and Others
(2015)
36 ILJ 2867 (LC) at paragraph 6.
[4]
No.
1 of 1999.
[5]
Rustenburg
Local Municipality v South African Local Government Bargaining
Council and Others
(2017)
38 ILJ 2596 (LC) at para 36.
[6]
Free
State Gambling
and
Liquor Board
at
para 4.3.
[7]
Rustenburg
Local Municipality
at paras 38 and 39.
[8]
Free
State Gambling and Liquor Board
at
para 6.
[9]
Section 48 of the MFMA
provides:
‘
(1)
A municipality may, by resolution of its council, provide security
for- a) any of its debt obligations;
(b)
any debt obligations of a municipal entity under its sole control;
or
(c)
contractual obligations of the municipality undertaken in connection
with
capital
expenditure by other persons on property, plant or equipment to be
used by the municipality or such other person for the
purpose of
achieving the objects of local government in terms of
section
152
of
the Constitution.
(2) A municipality may
in terms of subsection (1) provide any appropriate security,
including by-
(a)
giving a lien on, or pledging, mortgaging, ceding or otherwise
hypothecating, an asset or right, or giving any other form
of
collateral;
(b)
undertaking to effect payment directly from money or sources that
may become available and to authorise the lender or investor
direct
access to such sources to ensure payment of the secured debt or the
performance of the secured obligations, but
this form of
security may not affect compliance with
section
8(2);
(c)
undertaking to deposit funds with the lender, investor or third
party as security;
(d) agreeing to specific
payment mechanisms or procedures to ensure exclusive or dedicated
payment to lenders or investors, including
revenue intercepts,
payments into dedicated
accounts or other payment mechanisms or procedures;
(e) ceding as security
any category of revenue or rights to future revenue;
(f) undertaking to have
disputes resolved through mediation, arbitration or other dispute
resolution mechanisms;
(g) undertaking to
retain revenues or specific municipal tariffs or other charges, fees
or funds at a particular level or at a
level sufficient to meet its
financial obligations;
(h) undertaking to make
provision in its budgets for the payment of its financial
obligations, including capital and interest;
(i) agreeing to
restrictions on debt that the municipality may incur in future until
the secured debt is settled or the secured
obligations are met; and
(j) agreeing to such
other arrangements as the municipality may consider necessary and
prudent.
(3) A council resolution
authorising the provision of security in terms of subsection
(2)(a) -
(a) must determine
whether the asset or right with respect to which the security is
provided, is necessary for providing the minimum
level of basic
municipal services; and
(b) if so, must indicate
the manner in which the availability of the asset or right for
the provision of that
minimum level of basic municipal services will be protected.
(4) If the resolution
has determined that the asset or right is necessary for providing
the minimum level of basic municipal services,
neither the party to
whom the municipal security is provided, nor any successor or
assignee of such party, may, in the event
of a default by the
municipality, deal with the asset or right in a manner that would
preclude or impede the
continuation of that minimum level of basic municipal services.
(5)
A determination in terms of subsection (3) that an asset or right is
not necessary for providing the minimum level of basic
municipal
services is binding on the municipality until the secured debt has
been paid in full or the secured obligations
have been
performed in full, as the case may be.’
[10]
Rustenburg
Local Municipality
at para 37.
[11]
No.
1 of 1999.
[12]
National
Department of Health v Pardesi and Another
[2016]
ZALCJHB 492 at para 6.
[13]
Rustenburg
Local Municipality
at para 33.
[14]
Rustenburg
Local Municipality
at
para 36.
[15]
Rustenburg
Local Municipality
at
paras 38.
[16]
Rustenburg
Local Municipality
at paras 38 - 40.
[17]
Rustenburg
Local Municipality
at para 36.
[18]
Rustenburg
Local Municipality
at para 41.