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[2009] ZALCJHB 104
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South African Music Rights Organisation Ltd v Mphatsoe (J595/08) [2009] ZALCJHB 104 (23 March 2009)
IN
THE LABOUR COURT OF SOUTH AFRICA
HELD
AT JOHANNESBURG
REPORTABLE
CASE
NO. J 595/08
In
the matter between:
SOUTH
AFRICAN MUSIC RIGHTS
ORGANISATION
LTD
Applicant
and
D.M.
MPHATSOE
Respondent
JUDGMENT
VAN
NIEKERK J
[1]
The applicant (SAMRO) applies in terms of section 77(3) of the BCEA
for orders declaring that the respondent’s notice
of
termination of employment given on 8 January 2008 was ineffective to
terminate his contract of employment, that the contract
terminated on
29 February 2008, and that the respondent breached the contract when
he ceased work on 8 February 2008, thereby failing
to work until the
expiry of the notice period. SAMRO also claims damages from the
respondent for the breach of contract that it
alleges.
[2]
The factual circumstances that give rise to this application are not
contentious. SAMRO employed the respondent during September
2006 as
an accounts executive. Paragraph 13 of the respondent’s letter
of appointment provides that notice of termination
of employment for
permanent staff is “one calendar month, in writing from the
part of Management, or staff member”.
[3]
When the respondent returned from leave on 8 January 2008, he handed
a letter, purporting to be a notice of his intention to
terminate his
employment contract, to SAMRO’s human resources manager. The
second paragraph of the letter reads:
“
I hereby give
notice of termination of my employment with Southern African Music
Rights Organization (“SAMRO”) with
effect from 31 January
2008.
[4]
For reasons that are not apparent, SAMRO did not take kindly to the
respondent’s resignation. It advised the respondent
that his
notice of termination of employment did not comply with his
employment contract, because the notice required by the contract
was
to run form the first day of a month to expire on the last day of the
same month. SAMRO did not contend that the notice given
by the
respondent was invalid - it advised the respondent that the notice
given on 8 January became effective on 1 February 2008,
to expire on
29 February 2008.
[5]
The respondent disputed this interpretation of his contract He
conceded that the notice period initiated by his letter dated
8
January did not expire on 31 January, but contended that the calendar
month’s notice that he was required to give expired
on 8
February 2008. SAMRO rejected this interpretation and insisted that
the respondent work until 29 February, being the end of
the calendar
month of February. The respondent ceased working for SAMRO on 8
February 2008.
[6]
The first issue raised in this application is the meaning of
“calendar month” and whether the respondent gave a
calendar month’s notice to terminate his employment. The second
is the calculation of the quantum of damages, if any, suffered
by
SAMRO consequent on any breach of contract committed by the
respondent.
[7]
The respondent, who appeared on his own behalf, submitted that the
words “calendar month” did not necessarily require
that
notice runs from the first day of a month to the last day of the same
month. He submitted that a calendar month means that
notice could be
given on any day of the month, to run until the same day but one of
the following month. He was entitled, on this
basis, to give notice
on 8 January, to expire on 7 February. In support of this submission,
the respondent referred to the Interpretation
Act, 33 of 1957. The
Act defines a “month” as a “calendar month”.
The respondent also relies on Devenish
Interpretation of Statutes
(Juta & Co) to submit that a calendar month need not necessarily
run form the beginning of a month. Finally, the respondent
relies on
section 1 of the BCEA, which defines a “month” as a
calendar month, but without any indication that a calendar
month
necessarily runs from the first day of a month to the last day of the
same month, and s 37 of the Act, which entitles a party
to a contract
of employment to terminate an employment contract on not less than
four weeks’ notice if the employee has been
employed for a year
or more.
[8]
Mr. Mahlangu, who appeared for SAMRO, submitted that the requirement
of a calendar month’s notice required notice to be
given to
take effect on the first day of a month, and to expire on the last
day. In support of this submission, Mr. Mahlangu relied
on the
principle established by
Tiopaizi
v Bulawayo Municipality
1923
AD 317
, where the Appellate Division held that except in the case of
“domestic or menial servants”, and in the absence of
agreement or custom to the contrary, a monthly contract for an
indefinite period requires a month’s notice, to expire at the
end of a month.
[1]
The rule in
Tiopaizi
was
confirmed, he submitted, in
Honono
v Willowvale Bantu School Board
1961 (4) SA 408
(C), and in
Stocks
and Stocks Holdings v Mphelo
1996 (2) SA 864
(T).
[9]
In
Stocks and Stocks,
the High Court considered the
interpretation of a contract that provided that after the conclusion
of the probationary period,
“this contract shall continue for
an indefinite period and shall then be subject to termination on one
calendar month’s
written notice by either party”. The
employer gave notice of termination on 13 October, stating that the
contract of employment
would terminate on 15 November. Botha J
reviewed the case law dealing with notice periods in leases and
contracts of employment.
In
Fulton
v Nunn
1904 TS 123
,
the court held that the period of notice in the case of a monthly
lease must expire at the end of the month, a month being a calendar
month. This principle was extended to employment contracts in
Pemberton NO v Kessel
1905 TS 174
, where the court held that
notice of termination of employment, where it was to run with a
monthly period, had to be given at the
end of the preceding month.
Tiopaizi
reaffirmed this rule, with the gloss that notice
given on the first day of the month to expire on the last day, was
valid. This
position was affirmed in
Honono’s
case. The
court concluded by stating:
“
The rationale for
the rule in
Fulton
v Nunn
and
Pemberton
NO v Kessel
is still good in our time. Leases and service contracts are commonly
entered into with effect from the beginning of a calendar
month.
Vacancies arise at the end of the month. In that way the practice of
filling them at the beginning of the month is perpetuated.
It is
therefore clear that the period of notice had to expire at the end of
a calendar month, in this case the month of November.”
[2]
[10]
Finally, Mr. Mahlangu also relied on
Edgars Consolidated Stores
Ltd v Federal Council of Retail and Allied Workers union
(2004)
25
ILJ
1051 (LAC) where the LAC, it was submitted, had
followed
Honono’s
case.
[11]
There is no merit in the respondent’s submissions, based, as
they are, on rules of statutory interpretation rather than
the
interpretation of the contract to which he was a party. In relation
to s 37 of the BCEA, that section fixes a minimum period
of notice.
Parties are free to contract, as they have done in this instance, for
a more favourable term, and will be held to that
term. But the
authorities referred to by SAMRO are equally unpersuasive.
Stocks
and Stocks
is the only clear authority for the proposition that
when a contract requires a calendar month’s notice, notice is
effective
from the first day of the month and expires on the last. I
have my doubts as to whether this proposition is capable of elevation
to the level of principle. First, the judgments reviewed in
Stocks
and Stocks
, many of which are traditionally relied on to support
the interpretation for which SAMRO contends, do not directly concern
the
interpretation of a term in a contract of employment that
requires a calendar month’s notice. Rather, they are concerned
with what might constitute reasonable notice in circumstances where a
contract provides for tenancy or employment for an indefinite
duration, in circumstances where the rent or remuneration
respectively is paid on a monthly basis. Secondly, at the level of
purpose
and policy, the assumption in
Stocks and Stocks
that
the dictates of the labour market are such that employers fill
vacancies on the first day of a month thus requiring notice
periods
to expire on the last, is tenuous, to say the least.
[12]
Similarly, the
Edgars
judgment provides no support for Mr.
Mahlangu’s submission. A careful scrutiny of the judgment
reveals that in that case
the Court assumed for the purposes of
argument that a recognition agreement requiring three months’
notice of termination
meant three calendar months in the sense that
notice commenced running on the first day of a month. The Court was
not required
to decide whether valid notice could be given on a day
other than the first day of a month, nor did it make any decision to
that
effect.
[13]
The proper approach, in my view, is that expressed by Comrie AJA in
his brief concurring judgment in
Edgars
.
Comrie AJA observed that a month or a calendar month does not
necessarily begin on the first day of the month any more than
a
calendar year necessarily begins on 1 January. What is necessary is
to ascertain the intention of the parties by way of interpretation,
an exercise in which the language and nature of the contract is
relevant.
[3]
This approach
avoids the application of mechanical and possibly arbitrary rules to
the variety of circumstances that inevitably
manifest themselves when
employment is terminated, and enjoins a court to focus primarily on
the terms of the contract between
the parties.
[14]
Words used in contracts should not be interpreted in isolation,
rather than in the light of the contract read as a whole.
[4]
When a word is used in one part of a contract, there is a presumption
that the same word, used elsewhere in the contract, bears
the same
meaning.
[5]
Where that
word is qualified by an adjective, it seems to me that if the actual
or potential effect of the qualifier is to
modify the word’s
meaning, then it must be presumed that the parties intended that the
meaning, as modified, be applied.
Another significant indicator of
the intended effect of a qualifier is the context in which the word
and its qualifier are used.
A word unqualified used consistently in
one context, and then used elsewhere, in a different context, with a
qualifier, would normally
be a strong indication that the qualifier
ought to be accorded significance. In the present instance, the
parties use the term
“month” with some frequency, and the
term “calendar month” only in relation to the notice
required to terminate
the contract. Clause 1.2, for example, requires
SAMRO to pay emoluments “monthly in arrears”. Clause 1.3
establishes
a probationary period of “six months”.
Pension and medical aid contributions are to be deducted on a
“monthly
basis” (clauses 4 and 5). Bonuses are pro
rated to the number of “months worked” in the first year
of service
(clause 7). The use of the adjective “calendar”
in the context of those provisions of the contract regulating
termination
of employment indicates that the parties attached some
significance to the distinction between a “month” and a
“calendar
month”, and that they intended a specific,
separate meaning in each case. Those instances where the word “month”
is used is consistent with the interpretation that the month referred
to need not necessarily run from the beginning of a month.
By using
the term “calendar month” in the termination clause, the
parties obviously intended a meaning that in the
circumstances can
only be the meaning for which SAMRO contends. It follows that the
respondent was obliged to give notice of termination
of his
employment so as to take effect on the first day of a month and run
to the last, and that he breached his employment contract
when he
failed or refused to work until 29 February 2008.
[15]
I turn now to SAMRO’s claim for damages consequent on the
respondent’s breach of contract in the form of his failure
to
give the required notice. Wallis points out that the circumstances in
which an employer would seek to recover damages from an
employee for
a breach by the employee of the employment contract must be extremely
limited, although in principle an employer is
entitled to recover any
loss that it suffers consequent on such breach.
[6]
In these proceedings, the respondent claims the amount of R13 642.84,
being the value of services that SAMRO alleges the respondent
would
have provided had he worked after 8 February 2008, less the value of
the services he rendered to SAMRO from 1 to 8 February
2008. The net
amount claimed is R5457.12.
[16]
SAMRO contends that the respondent’s cessation of work “caused
the applicant damages” in the sum referred
to above, calculated
as it is based on equating the value of services lost with the
remuneration that the respondent would have
earned had he remained in
SAMRO’s employment until 28 February.
[17]
The view that a wrongful termination of employment be it at the
instance of the employer or, as in this case, by the employee,
is
remediable only because of its prematurity (i.e. the denial of the
promised period of notice or fixed term of employment) may
have its
roots in the now repealed 1983 BCEA. Section 14(4)(b) of that Act
provided that an employee could avoid working an agreed
notice period
provided that the employee paid the employer a sum equivalent to the
remuneration that would have been earned during
the notice period
[7]
.
As Mark Freedland points out in his seminal work
The
Personal Contract of Employment
,
[8]
and for the moment viewing the application of the rule from the
perspective of a breach by an employer, this approach reflects
a
conclusion that the purpose of damages for wrongful dismissal is only
to protect a worker’s interest in remuneration and
benefits for
the denied period of notice or unexpired fixed term, and that the
quantification is to be conducted on the assumption
that the worker’s
pecuniary losses are limited to that remuneration and those
benefits.
[9]
While this approach
has a particular procedural and remedial context, it appears to
remain the dominant approach of English law
(see
Johnson
v Unisys Ltd
[2001] UKHL 13
;
[2001]
ICR 480
(HL)).
[18]
In the present matter, SAMRO proffers no proof of any damages that it
suffered consequent on the respondent having ceased work
prematurely.
The deponent to the founding affidavit, SAMRO’s general
manager: legal and governance services, says only the
following:
The respondent’s
cessation of working for the applicant caused the applicant damages
in the amount of R13 642.84 (being the
value of the services he would
have provided to SAMRO had he worked after 8 February 2008. The value
of the services the respondent
rendered from 1 to 8 February is R5
457.12. Accordingly, the respondent is indebted to the applicant in
the amount of R8 185.12
(after setting off the amount of R13 642.84
against R5 457.12).
[19]
This formulation of SAMRO’s claim for damages begs a number of
questions. First, there is no logical basis on which to
assume that
SAMRO’s losses are necessarily limited to the remuneration and
benefits that the respondent would have earned
in a denied period of
notice. When he resigned, the respondent may, for example, have been
teetering on the brink of redundancy,
making no significant
contribution to SAMRO’s business operations. In these
circumstances, to have been relieved of the obligation
to pay the
respondent’s salary for the balance of the notice period would
be a benefit rather than a burden - there is little
likelihood of any
pecuniary loss in these circumstances. On the other hand, the
respondent may have been an employee with rare
and highly sought
after skills, necessitating the engagement at a premium of a
similarly skilled temporary employee. I see no reason
why the
application of the general rule would not entitle SAMRO in those
circumstances to recover its losses, even though they
may exceed what
the respondent would have been paid had he worked his full notice
period. These examples can be taken further -
what if the respondent
had been instrumental in securing a business transaction from which
SAMRO would benefit by a substantial
commission, and had breached his
contract to commence work for a competitor in circumstances where the
competitor stands to benefit
instead? Surely SAMRO in those
circumstances ought to have a claim for damages against the
respondent beyond what the limited damages
rule provides? These are
difficult questions of law and policy, particularly in the light of
the recent judgments of the Supreme
Court of Appeal that recognise a
mutual contractual obligation of fair dealing between employer and
employee (see, for example,
Old
Mutual Life Assurance Co SA Ltd v Gumbi
[2007] 8 BLLR 699
(SCA) and
Boxer
Superstores Mthatha v Mbenya
(2007)
28
ILJ
2209 (SCA).
[10]
The
introduction of a contractual right to fair dealing in the employment
relationship calls into question the assumption that
the purpose of
damages for breach of an employment contract is simply to protect the
aggrieved party’s interest in a denied
period of notice, or the
unexpired portion of a fixed term contract. Breaches of mutual
obligations of trust and confidence are
unlikely to be remedied by an
approach to the assessment of damages for breach of an employment
contract such as that for which
SAMRO contends. Happily, in the
present matter, I need venture no further than SAMRO’s founding
affidavit and the obvious
conclusion that it fails to establish any
factual foundation on which its claim for damages might be assessed.
In short, SAMRO
has failed to establish any loss consequent on the
respondent’s breach of contract. For that reason, SAMRO’s
claim
for damages must fail.
I
accordingly make the following order:
1.
The respondent breached his contract of employment by failing to work
until 29
February 2008.
2.
The applicant is to pay the respondent his
remuneration for the period 1 to 8 February 2008, being the sum of
R5457.12.
3.
There is no order as to costs.
ANDRE
VAN NIEKERK
JUDGE
OF THE LABOUR COURT
Date
of Hearing: 04 December 2008
Date
of judgment: 23 March 2009
Appearances:
For
the applicant: Mr Mahlangu from Cheadle Thompson and Haysom Inc.
For
the Respondent: In person
[1]
Scoble, in his discussion on reasonable notice in the case of
monthly paid employees, describes what he terms the “sharp
distinction in law” between a common law servant on the one
hand and a domestic or labouring servant on the other. In the
former
case, the servant was entitled to a calendar months’ notice,
being notice that was effective from the first day
of a month to the
last. Therefore, for example, notice given on 17 December would not
expire until 31 January. (See Scoble
The
Law of Master and Servant
Butterworths,
1956, at p. 315). See Paul Benjamin’s article “The
Contract of Employment and Domestic Workers”
(1980) 1
ILJ
187 at
191, in which the author reviews the history of the exception
applied to domestic workers and argues cogently for its demise)
[2]
At 869B
[3]
At 1060C-D.
[4]
Young v
Liberty Life Association
1991(2) SA 246 (W).
[5]
Kellaway
Principles
of Legal Interpretation, Satatutes, Contrcats and Wills
(Lexis Nexis, 1995, at 437.
[6]
Wallis
Labour
and Employment Law
at 6-15.
[7]
In
NEWU
v CCMA & others
[2007] ZALAC 3
(13 March 2007)
,
at Paragraph 16, the Labour Appeal Court observed: “Where the
employee has resigned without giving notice in circumstances
where
he was obliged to give notice, usually the employer does not even
sue the employee for damages which in law he would be
entitled to do
and the damages would be the equivalent of the notice pay. However,
if an employer wants to sue an employee in
such a situation, he does
have a right to do so both at common law and in terms of the BCEA.
Employers hardly use even this right.”
[8]
Oxford University Press, Oxford, 2003.
[9]
Freedland, at 362. Freedland refers to this as the “limited
damages rule”.
[10]
See
especially
paragraph 9 of the latter judgment, where the Court was obviously
alive to the tensions created by capped awards of
compensation under
the LRA and the prospect of a more open-ended claim for contractual
damages at common law.