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[2011] ZALCJHB 166
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Arbuthnot v South African Municipal Workers Union Provident Fund (JS575/09) [2011] ZALCJHB 166 (15 September 2011)
13
Reportable
IN THE LABOUR COURT OF
SOUTH AFRICA
HELD AT JOHANNESBURG
CASE NO: JS575/09
In
the matter between:
JANE
EDITH ARBUTHNOT
........................................................................
APPLICANT
and
SOUTH
AFRICAN MUNICIPAL WORKERS’
UNION
PROVIDENT FUND
....................................................................
RESPONDENT
Date
of trial: 5-7 September 2011
Date
of judgment: 15 September 2011
JUDGMENT
VAN
NIEKERK J
Introduction
[1] The applicant was
dismissed by the respondent on 1 November 2008 after being found
guilty on charges of insubordination, dishonesty
and disloyalty. The
applicant contends that her dismissal was automatically unfair
because the reason for it was that she made
a protected disclosure in
terms of the Protected Disclosures Act, 26 of 2000 (PDA).
Factual background
[2] The applicant was
employed by the respondent (‘the fund’) in June 2007 as a
paralegal officer. The fund is a pension
fund registered in terms of
the
Pension Funds Act, 24 of 1956
. The applicant was dismissed after
being found guilty on the charges referred to above, all of which
emanated from the disclosure
of documents by the applicant to Mr
Patrick Odendaal, the national benefit officer of the South African
Municipal Workers Union
(SAMWU). It is not disputed that the fund is
what is termed a union-based fund, that SAMWU was a sponsor of the
fund at the time
of its establishment, and that some 99% of the
fund’s members are members of SAMWU.
[3] Although the
disciplinary proceedings against the applicant concerned the
disclosure of four documents to Odendaal, only one
of these was
relied on in these proceedings as constituting the basis of the
protected disclosure. The document was an opinion
(‘the
opinion’) prepared for the respondent by Adv Paul Pretorius SC
and Adv K Pillay, in response to instructions
to advise the
respondent on the potential liability, if any, of the respondent’s
trustees following what was referred to
as the ‘Fidentia
scandal’. It was common cause that the fund had invested monies
in the Living Hands Trust, an entity
controlled by Fidentia, and that
as a consequence, it had sustained a significant loss. The opinion
was sought in circumstances
where relationships between the union and
the fund were tense, to say the least, and where questions where
being asked about the
trustees’ liability to beneficiaries of
the fund. The board ultimately resolved to seek opinion from counsel.
The two issues
canvassed by the opinion that are relevant to these
proceedings are whether the trustees had adequately discharged their
fiduciary
duties in respect of oversight of the funds managed by the
Living Hands Trust, and whether any potential liability had been
incurred
by them in relation to the procedures adopted for the
assessment of the suitability of guardians to manage death benefits
payable
to beneficiaries who were minors.
[4] At 10:16 on 1 October
2008, the opinion was sent by the attorneys to the applicant, by
email. At 13h46 on the same day, the
applicant sent an email to the
attorney thanking her for the opinion and stating that she would
contact her once the fund’s
principal officer, Mfeka, had
returned to the office and she had discussed it with him. At 13h47,
the applicant forwarded the opinion
to Odendaal, marked “for
your information”.
[5] The relevant parts of
the opinion read as follows:
“
[74]
The next issue to be addressed is what action was taken by Consultant
in response to the non-compliance by Living Hands and
FAM with the
FAIS and the Discretionary code.
[75] From the
information supplied to us, the trustees did not monitor the conduct
of the Living Hands Trust of FAM. Significantly,
trustees did not
invoke rights conferred by the Discretionary Code to demand
information in relation to the handling of trust monies.
[76] In this regard,
our instructions are that Consultant relied heavily on the advice
given to it by its administrators Lekana.
[77] However, even
where trustees rely on the services of Lekana to liaise with and
administer trust monies held by living hands,
the trustees cannot, in
law, escape the duty of care owed to beneficiaries. In this regard,
Honoré’s South Africa
Act of Trust 4
th
Edition states the following:
“
It
is not uncommon for a trustee to delegate the administration of a
trust to another. This may be to a co-trustee, to a firm in
which the
trustee is or is not a partner, to a relative, to a suitably
qualified professional person or even to a management committee.
Such
a course is not improper so long as it amounts only to a delegation
(the appointment of another, for whose acts one is responsible,
to
act on one’s behalf) and not to an abdication (the appointment
of another to act instead of oneself, so as to relieve
oneself of
responsibility)….it does not relieve the trustee from the duty
of supervising and checking the work of any non-trustee
to whom the
delegation may have been made. Indeed, the trustee retains office as
trustee with primary responsibility to the beneficiaries
under the
trust and is accordingly at liberty at any time to revoke the
delegation of authority.”
[78] Therefore,
trustees cannot abdicate their responsibilities towards beneficiaries
by seeking to hold Lekana responsible for
its failure to monitor the
Living Hands Trust.
[79] The trustees
ought to have properly monitored the performance of Living Hands in
order to have decided whether it was appropriate
to continue making
payments due to beneficiaries to the Trust. This is particularly so
where statutory regime creates mechanisms
to enable the close
monitoring of the performance of a FSP.
[80] Failure to
properly monitor amounts to a breach of the fiduciary duty of
trustees to act in the best interests of beneficiaries.
[81] Further, the
failure to keep records amounts to a breach of the fiduciary duties
of trustees.”
[6] In so far as the
applicant’s state of mind at the time of the disclosure is
concerned, she testified that prior to her
forwarding the opinion to
Odendaal she had raised with Mfeka regarding the requirement that a
proper assessment of the guardian’s
capacity suitability should
be made before funds were paid into trust. In particular, she was
concerned that the fund did not carry
out proper assessments as
required by the relevant legislation and various determinations by
the pension fund adjudicator. Odendaal
had been concerned about the
opinion and had telephoned her regularly to enquire about it. In her
mind, the opinion was damning,
and she was concerned that the fund
would suppress it to avoid a potential liability of R150 million
becoming public knowledge.
She thought that Odendaal would be in a
position to do something with the opinion. Under cross-examination,
the applicant elaborated
by saying that she was concerned for the
beneficiaries and their inability to meet their obligations, and that
the opinion had
confronted the trustees with a conflict of interest –
their fiduciary duties were owed to the beneficiaries yet they were
potentially liable to the beneficiaries on account on a breach of
those fiduciary duties.
[7] Mfeka testified that
on his return to his office on 2 October 2008, he asked the applicant
whether she had given the opinion
to anyone else, which she denied.
Applicant disputes this, and testified that Mfeka had said that the
opinion was not to leave
the office. After he said this, she phoned
Odendaal, who agreed to keep the opinion confidential.
[8] On 6 October 2008,
the applicant was called to Mfeka’s office. Mfeka testified
that in the presence of the board’s
chair and vice chair, he
asked the applicant whether she had given the opinion to anyone. She
said no. Mfeka then asked her whether
she had sent the opinion to the
union, which the applicant denied. He asked her whether she had sent
the opinion to Odendaal, which
she also denied. Mfeka then confronted
the applicant with a record of the email that she had addressed to
Odendaal on 1 October.
The applicant then admitted that she had lied
and that she had sent the opinion to Odendaal.
[9] A disciplinary
hearing was then convened on the basis of the charges referred to
above (insubordination, dishonesty and disloyalty)
and the applicant
was found guilty and dismissed.
Applicable legal
principles
[10] I deal first with
the principles applicable to a claim of unfair dismissal where the
reason for dismissal is contended to be
automatically unfair.
[11] Section 187 lists a
number of reasons for a dismissal that are automatically unfair. In
effect this means that if a dismissal
is based on one of the listed
grounds it is not open to an employer to justify the dismissal,
rather the inquiry moves to remedy.
As Prof Darcy du Toit observes,
whether a dismissal is automatically unfair is essentially an inquiry
into causation (see
Labour Law through the Cases
, at p LRA
8/28). The test for causation in cases where an automatically unfair
dismissal is claimed was initially articulated by
Froneman JA in
SACWU and others v Afrox (Pty) Ltd
[1999] 10 BLLR 1005
(LAC).
In that case the court drew a distinction between factual and legal
causation the former being a "but for" test,
the latter
being an inquiry into the main, dominant or proximate cause of the
dismissal.
[12] In relation to the
burden or onus of proof in cases where an automatically unfair
dismissal is claimed, in
Kroukam v SA Airlink (Pty) Ltd
[2005]
12 BLLR 1172
(LAC) Davis JA set out the following principle:
"In my view
section 187 imposes an evidential burden upon the employee to produce
evidence which is sufficient to raise a credible
possibility that an
automatically unfair dismissal has taken place. It then behoves the
employer to prove to the contrary, that
is to produce evidence to
show that the reason for the dismissal did not fall within the
circumstances envisaged in section 187
for constituting an
automatically unfair dismissal."
[13] Of course, the
causal link between a protected disclosure and a dismissal can be
easily broken if the employer is entitled
too easily to point to
other reasons for dismissal. In
Kroukam,
in dealing with the
issue of causation, and specifically a contention by the employer
that an employee who claimed to have been
victimised on account of
trade union activity was dismissed for being insubordinate, Zondo JP
recognised the potential for undermining
the relevant statutory
protections and held that if the ‘dominant or principal reason
or reasons’ for dismissal was
a reason listed in s 187(1), the
dismissal was automatically unfair. He went on to say that even if
the reasons found were not
the dominant or principal reasons for
dismissal, a dismissal was nonetheless automatically unfair if:
“
...
such reasons nevertheless played a significant role in the decision
to dismiss the appellant. In my view for policy considerations,
where
such
reasons have influenced the decision to dismiss to a significant
degree
,
the dismissal should be dealt with as an automatically unfair
dismissal in order to deter as many employers as possible from
entertaining such illegitimate matters as, for example, racism and
the exercise of rights conferred by the Act as factors in their
decision to dismiss employees”
(own
emphasis).
1
[14] The purpose of PDA
is to encourage employees to report concerns about impropriety in the
workplace and to protect those who
make such reports. The PDA’s
constitutional pedigree is set out in
Tshishonga
v Minister of Justice & Constitutional Development & another
[2007]
4 BLLR 327
, and there is no need to repeat it here. Section 3 of the
PDA provides that an employee who makes a protected disclosure may
not
be subjected to an occupational detriment by his or her employer,
on account wholly or partly of having made that disclosure. The
PDA
establishes a tiered regime under with the justification for
disclosure is set progressively higher according to the distance
of
the person to whom the disclosure is made from the subject of the
complaint.
[15] Given the nature of
the arguments advanced in this matter, a few preliminary observations
are warranted. First, the PDA achieves
a balancing of interests
between the rights to protection of employees to make public interest
disclosures, and an employer’s
interests in preserving loyalty
and confidentiality. The balance is struck by defining the subject
matter of protected disclosures
and by setting out the procedures by
which disclosures must be made to qualify for protection.
2
Where an employee
discloses information in accordance with the PDA, the employee is
protected against dismissal, whether or not
the information disclosed
is confidential, and regardless of any right of the recipient to that
information, or whether the recipient
is already in possession of the
information, or will come into possession of it in the future.
[16] The applicant relies
on s 9 of the PDA. The section reads as follows:
9. General
protected disclosure.
—
(1) Any
disclosure made in good faith by an employee—
(a) who reasonably
believes that the information disclosed, and any allegation contained
in it, are substantially true; and
(b) who does not make
the disclosure for purposes of personal gain, excluding any reward
payable in terms of any law;
is a protected
disclosure if—
one or more of the
conditions referred to in subsection (2) apply; and
(ii) in all the
circumstances of the case, it is reasonable to make the disclosure.”
[17] The conditions that
are relevant for present purposes are subsections (2) (c) and (d).
These read:
‘
(c)
that the employee making the disclosure has previously made a
disclosure of substantially the same information to—
(i) his or her
employer; or
(ii) a person or body
referred to in section 8,
in respect of which no
action was taken within a reasonable period after the disclosure; or
(d) that the
impropriety is of an exceptionally serious nature.’
[18] Section 9 (3)
establishes the factors to which the court must have regard to
determine the reasonableness of the disclosure.
The section reads:
(3) In
determining for the purposes of subsection (1) (ii) whether it
is reasonable for the employee to make the
disclosure, consideration
must be given to—
(a) the identity of
the person to whom the disclosure is made;
(b) the seriousness of
the impropriety;
(c) whether the
impropriety is continuing or is likely to occur in the future;
(d whether the
disclosure is made in breach of a duty of confidentiality of the
employer towards any other person;
(e) in a case falling
within subsection (2) (c), any action which the employer or the
person or body to whom the disclosure
was made, has taken, or might
reasonably be expected to have taken, as a result of the previous
disclosure;
( f ) in a
case falling within subsection (2) (c) (i), whether in
making the disclosure to the employer the
employee complied with any
procedure which was authorised by the employer; and
(g) the public
interest.
Issue
[19] The fund did not
dispute that the applicant’s conduct in sending an email to
Odendaal to which the opinion was attached
was a ‘disclosure’
for the purposes of the PDA. The fund contends that the disclosure
was not protected, since it did
not meet the requirements established
by s 9. The issue to be decided can be simply stated: Whether the
proximate cause of the
applicant’s dismissal was her having
disclosed the opinion to Odendaal and if so, whether the disclosure
was protected, thus
rendering the applicant’s dismissal
automatically unfair.
Analysis
[20] To the extent that
these proceedings at times appeared to take on a form of trial by
proxy, it is important to emphasise what
this trial is not about. It
is not about the trustees liability to the union consequent on the
Fidentia debacle on account of any
failure to exercise proper control
of funds invested in the Living Hands Trust, nor is it about the
lawfulness or otherwise of
the process adopted for the assessment of
guardians of minor beneficiaries to determine their ability or
otherwise to manage funds
on behalf of minors. It is also not about
whether the opinion is correct in law or not, nor is about whether
the trustees subsequent
to the disclosure have been found to be
liable to the union and its beneficiary members on account of any
breach of a fiduciary
duty. The only issue before the court is that
posed in paragraph [19] above.
[21] Although the
apparent reasons for the applicant’s dismissal were
insubordination, dishonesty and disloyalty, the causation
requirement
was conceded by Mfeka, who stated under cross-examination that the
applicant’s conduct in sending the opinion
to Odendaal was ‘one
of the main reasons’ for her dismissal. That satisfies the test
established by
Kroukam,
and nothing further need be said about
causation.
[22] In so far as the
requirements established by the PDA generally are concerned, as I
have noted, the respondent did not dispute
that the forwarding of the
opinion to Odendaal constituted a ‘disclosure’ for the
purposes of s 1 of the Act. The nature
of the document, and in
particular the fact that it constituted legal advice to which
privilege may have attached, was not a matter
that was canvassed by
the fund during the trial. Its concession effectively means that the
disclosure was of information regarding
the fund’s conduct that
shows or tends to show a failure to comply with a legal obligation,
or that a miscarriage of justice
was likely to occur (see s1 of the
PDA, paragraphs (b) and (c) of the definition of ‘disclosure’).
Further, the fund
did not dispute, assuming that the requirements of
s 9 are found to have been met, that the applicant’s dismissal
would be
an ‘occupational detriment’ as defined by s 1 of
the PDA. It is common cause that the applicant did not make the
disclosure
for purposes of personal gain. For the applicant’s
disclosure to be protected therefore, it must be established that the
applicant made the disclosure in good faith, that she reasonably
believed that the information disclosed was substantially true,
and
that one or more of the requirements in s 9 (2) apply and that it was
reasonable for the applicant to have made the disclosure.
[23] The fund submitted
that the applicant had not made the disclosure in good faith since
she acted other than with her employer’s
best interests at
heart, or, put another way, that she had acted other than in
accordance with the fiduciary duties that she owed
her employer. This
submission overlooks the nature of the protection accorded by the
PDA, which cuts across obligations to advance
the employer’s
interests to protect employees who commit acts that are by definition
disloyal, but in the greater good. It
seems to me that while there is
a degree of overlap between the factors mentioned in s 9 (1), i.e.
the requirements of good faith,
a reasonable belief that the
information disclosed is substantially true, and the absence of any
personal gain, good faith is a
discrete requirement that entails an
assessment of motive in relation to the disclosure and not, as the
respondent appeared to
submit, in terms of any employment- related
obligations of trust, confidence and loyalty. Good faith involves the
deployment of
an honest intention, and connotes an absence of malice
or of some other ulterior purpose or motive. A motive that amounts to
a
promotion of personal antagonism, for example, would almost
certainly serve to negate good faith, as would a disclosure motivated
simply by a desire to embarrass or harass an employer (see
CWU &
another v Mobile Telephone Networks (Pty) Ltd
[2003] 8 BLLR 741
(LC)).
[24] On the other hand,
where an employee acts with a view to something being done about the
failing that is disclosed, the disclosure
is likely to be made
honestly and therefore in good faith.
[25] The applicant’s
unshaken evidence was that in disclosing the opinion to Odendaal, she
had the interests of the fund’s
beneficiaries at heart. The
applicant identified a conflict of interest on the part of the
trustees who were no doubt concerned
with their own potential
liability in circumstances where their fiduciary duties lay with the
beneficiaries. She thought that Odendaal,
holding the position that
he does in the union, would be able to act on the opinion, or have
the union act on it. In this sense,
the disclosure was made to a
person who was manifestly interested in it – and in
circumstances where the applicant was acting
in the best interests of
those who might benefit by it. In these circumstances, in my view,
the applicant acted in good faith by
making the disclosure that she
did.
[26] Did the applicant
reasonably believe that the information disclosed was substantially
true? The threshold is not whether the
information is actually true –
all that is required is a reasonable belief that it is substantially
true. This requirement
must necessarily be read with the definition
of ‘disclosure’ in s 1 of the Act. The definition refers
to information
which the employee making the disclosure has ‘reason
to believe... shows or tends to show’
inter alia
a
failure to comply with any legal obligation. This formulation does
not require an employee to believe that any wrongdoing has
actually
or definitely occurred; it is sufficient that the employee believes
that the available evidence suggests that it has.
[27] In the present
instance, the applicant’s uncontradicted evidence was that she
read the opinion to suggest that the trustees
of the fund may be in
breach of their fiduciary obligations and that they were potentially
personally liable for the beneficiaries’
loss. Contrary to what
the respondent submitted, the correctness or otherwise of the opinion
is irrelevant, as is its qualified
nature. Also irrelevant is whether
the trustees were subsequently found to be in breach of their
fiduciary duties by a court or
any regulatory body. If the PDA were
to require an applicant in circumstances such as the present to wait
for proof of the validity
of a genuine concern or suspicion that is
the subject of a disclosure, the purpose of the Act would invariably
be defeated.
[28] On an assessment of
the evidence, I am satisfied that at the time the applicant forward
the opinion to Odendaal, she reasonably
believed that the opinion to
be substantially true in so far as it disclosed, potentially at
least, a breach of fiduciary duty
on the part of the fund’s
trustees and a consequent potential liability to the beneficiaries.
[29] This threshold
having been met, the disclosure by the applicant is protected if (a)
one or more of the conditions set out in
s 9 (2) have been met, and
(b) if it was reasonable in all the circumstances of the case for et
applicant to make the disclosure.
In so far as s 9(2) is concerned,
the applicant relies on paragraph (c) and (d) . In regard to
paragraph (d), in
Theron v Minister of Correctional Services &
another
(2008) 29
ILJ
1275 (LC), Nieuwoudt AJ expressed
the view that this requirement did not mean that the employer had to
be exceptionally blameworthy,
it was sufficient that the consequences
of the failure to comply with the obligation in question were
exceptionally serious. I
see no reason to depart from this
construction – it resonates with the purpose of the Act and its
endeavour to encourage
whistleblowers in the interest of accountable
and transparent governance in both the public and private sector (see
City of Tshwane Metropolitan Municipality v Engineering Council of
SA & another
[2007] ZALC 74
;
[2010] 3 BLLR 229
(SCA, at paragraph [42] of the
judgment). Generally speaking, the consequences of any failure by
trustees of a retirement fund
to comply with a legal obligation would
be exceptionally serious. In the present instance, the applicant’s
evidence was that
some R150 million was lost in the Fidentia debacle
. The fund put a figure of R40 million on the loss, but either way,
the implications
for beneficiaries are exceptionally serious,
especially the minor beneficiaries whose stipends had been
administered by the Living
Hands Trust. For them, the consequences
(which included the real possibility of being deprived of an
education) could not have
been more serious. The undisputed evidence
was that these were the minor children of deceased members of the
union, who were for
the most part unskilled low wage earners, and
that the stipends paid by the Living Hands Trust was in all
probability the only
source of income.
[30] In these
circumstances, I am satisfied that the requirements of s 9 (2) (d)
have been satisfied. It is not necessary therefore
for me to canvass
the argument that in any event s 9 (2) applied since the applicant
had previously advised Mfeka that the failure
properly to canvass the
ability of guardians to manage benefits on behalf of minor
beneficiaries was in breach of the
Pension Funds Act, and
that no
action was taken.
[31] Turning next to the
assessment of reasonableness, the list of factors in
s 9
(3) is not
exhaustive, nor are all of the listed factors are relevant in every
case. In the present instance, of some significance
is the factor
listed under paragraph (a) – the identity of the person to whom
the disclosure was made. The undisputed evidence
was that at the time
of the disclosure, Odendaal was not a trustee of the fund but in his
capacity as the union’s national
benefits officer, he attended
board meetings and received ‘board packs’ prior to
meetings of the board. He was also
the union’s primary contact
person for matters relating to union members’ retirement
benefits, and was ultimately responsible
within the union’s
structure for the management of these and other benefits. Had the
applicant disclosed the opinion to a
wider external audience, e.g.
the press, it is less likely that her disclosure would be considered
reasonable. But in the present
instance, the opinion went no further
than Odendaal, who, as I have observed, had a manifest interest in
its contents. There was
no breach of any duty of confidentiality
towards any other person. The respondent appears to have had no
measures or procedures
in place for disclosure, and the absence of
such mechanisms tend to support the reasonableness of an external
disclosure. In my
view, the disclosure of the opinion was reasonable.
[32] In summary: the
applicant’s disclosure of the opinion to Odendaal constituted a
protected disclosure, and the fact that
the disclosure was a primary
reason for her dismissal has the result that her dismissal was
automatically unfair for the purposes
of
s187
of the LRA.
Remedy
[33] The applicant seeks
compensation.
Section 194(3)
of the LRA provides that in a case such
as the present, the maximum amount that the court may award is the
equivalent of 24 months’
remuneration. The applicant’s
uncontested evidence is that she is 57 years old, and that since her
dismissal, she has been
unable to find meaningful employment. Her
reputation has suffered, and these proceedings, it would seem, are as
much about a bid
to clear her name as they are about her pursuit of
her statutory rights. On the other hand, the applicant was employed
for a relatively
short period, some 18 months. Further, in my view,
it is fair to take into account the fact that when initially
confronted by Mfeka,
the applicant lied about whether she has
disclosed the opinion to Odendaal. For the reasons stated above this
is not relevant to
causation, but it is a relevant factor in the
assessment of compensation. Although I accept that at the time the
applicant feared
for her job, the fact remains that she lied to her
employer. Having regard to these factors, the appropriate amount of
compensation
in my view is a sum equivalent to 12 months’
remuneration. The parties agreed that the applicant’s
remuneration at
the time of her dismissal was R23 950 per month.
Costs
[34] The applicant has
been substantially successful and there is no reason to deprive her
of her costs.
I accordingly make the
following order:
The applicant’s
dismissal was automatically unfair.
The applicant is awarded
compensation in the sum of R 287 400.00, being the equivalent of 12
months’ remuneration.
The respondent is to pay
the costs of these proceedings.
ANDRÉ VAN
NIEKERK
JUDGE OF THE LABOUR
COURT
Appearances: For the
applicant: Adv G Leslie, instructed by Malcolm Lyons & Brivik Inc
For the respondent: Adv F
Venter, instructed by Thyne, Hunter, Esterhuizen Attorneys.
1
At
paragraph [103].
2
See,
in general, Chapter 5 of Vickers
Freedom of Speech and Employment
(2002, OUP, Oxford).