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[2011] ZALCJHB 98
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Mtethwa v Mkhondo Municipality (JS 382/07) [2011] ZALCJHB 98 (16 November 2011)
REPUBLIC OF SOUTH
AFRICA
Reportable
Of
interest to other judges
THE LABOUR COURT OF SOUTH AFRICA
(HELD AT BRAAMFONTEIN)
Case: JS 382/07
In the matter between:
JABULISILE PEARL MTHETWA
…......................................................
Applicant
and
MKHONDO MUNICIPALITY
…..........................................................
Respondent
JUDGMENT
HEAD NOTES: (Term of Municipal
Manager- claim for balance of FT contract - amendment of MSA act)
LAGRANGE, J:
Introduction
The applicant in this matter is a
former municipal manager of the respondent who was employed as such
until the termination of
their services on 13 February 2007.
Although there is a dispute about which of two written contracts the
applicant was employed
under, it is common cause that at the time of
her dismissal she had been employed for a fixed term period of five
years at an
annual salary of R 360,000-00. The respondent had
initially filed a special plea to the effect that the dispute ought
to have
been referred to arbitration but this claim was subsequently
withdrawn before trial.
At the heart of the dispute is a
question about which contract the applicant was employed under at
the time of her dismissal.
While it is trite law that oral evidence
will generally not be admitted for the purpose of interpreting a
written contract, a
dispute about which contract is applicable is
not affected by the same concerns.
The two contracts
At issue are two versions of
purported contracts, one dated 2 September 2002 and the other signed
on 2 August 2002, which will
be referred to as the September and
August documents respectively. The applicant relies on the September
document for her claim.
The August document was not signed by the
executive mayor of the municipality, Mr Gamede, but was signed by
the applicant, whereas
the September document was signed both by the
mayor and the applicant. The August contract also only bears the
signature of one
witness whereas two witnesses attest to the
September document. It is useful to set out some of the salient
comparable provisions
of the two documents.
The principal term relating to the
duration of the contract in the August document reads:
"3.2 Notwithstanding the date of
signature hereof, this agreement, and the appointment referred to in
3.1, shall commence and
shall in all respects be deemed to have
commenced on 2 January 2002 (date), shall endure for a fixed term of
five (5) years and
shall, subject to 3.3 below, terminate
automatically onto the January 200[?]
1
(drafting note: section 57 (6) (a) of
the Systems Act provides that the period may not be longer than 2
years after the election
of the next Council of the Municipality)."
The comparable provision in the
September document reads:
“
3.2
Notwithstanding the date of signature hereof, this agreement, and the
appointment referred to in 3.1, shall commence and shall
in all
respects be deemed to have commenced on 2 January 2002 (date), shall
endure up to the date of election and it will be extended
for a
further period of two years (drafting note: section 57 (6) (a) of the
Systems Act provides that the period may not be longer
than 2 years
after the election of the next Council of the Municipality)."
Clauses 3.3 of each document are also
not identical to each other. The provision in the August document
reads:
"3.3 it is specifically recorded
that there is no expectation that this agreement will be renewed or
prolonged beyond the period
referred to in 3.2, other than by
agreement between the parties and provided that:..."
By contrast,Clause 3.3 in the
September document reads:
"3.3 it is specifically recorded
that this agreement may be renewed or prolonged beyond the period
referred to in 3.2, by negotiation
between the parties, provided the
negotiations to renew this agreement shall be started not later than
3 (three) months before
the expiry of this agreement."
Both documents contain the following
provisions which are material to this dispute:
"3.3.3 the failure to renew or
extend the period referred to in 3.2 above shall constitute a
retirement of the Municipal Manager
and the Municipal Manager shall
be entitled to have retirement benefits (Gratuity Pension Fund) and
Medical Aid cover and any additional
remuneration or compensation in
respect of the completion of such period.
3.3.4 for the purposes of clarity, the
party is specifically recorded this agreement will come to an
automatic end on expiry of
the fixed period, and shall not be
construed as termination based on the municipality's operational
requirements, nor as an unfair
dismissal. Accordingly, the reference
in clause 3.3.3 above to additional remuneration or compensation to
which the municipal manager
shall not be entitled, shall include but
not be limited to, severance pay, notice pay, pensions/retirement and
medical aid benefits
to which an employee may otherwise be entitled
to in the event of termination based on an employer's operational
requirements."
The two documents also contain a
provision headed "Condition Precedent", the provisions of
which are the same in both,
which reads:
"4.1 Notwithstanding anything to
the contrary contained in this agreement, the Municipal Manager shall
be required to include
a performance agreement with the Mayor of the
Municipality within ... /222
2
days of the appointment of the
Municipal Manager (drafting note: section 57 (2) (k) of the Systems
act stipulates that it should
be "a reasonable period"), as
contemplated by section 57 of the Systems act, failing which no
agreement shall come into
force or effect, alternatively this
agreement shall automatically terminate immediately upon the expiry
of the period referred
to in this clause for which such performance
agreement ought to have been concluded, or upon expiry of such
reasonable extension
of the period as may be agreed to by the
Municipality for such purposes.”
4.2 The Municipal Manager specifically
acknowledges and agrees that the termination of this agreement, for
the reasons set out in
clause 4.1 above, and of any employment
relationship that may have arisen prior to the conclusion of a
performance agreement, shall
constitute a fair and lawful
termination."
A further provision common to both
contracts that needs to be mentioned is clause 17.1, which stated:
"17.1 The parties to this
agreement agree that
this
agreement constitutes the whole of the agreement and arrangement for
the employment of the municipal manager
with
effect from 02-01-2002 /........
3
(date) and that with effect from such
date supersedes all previous agreements and arrangements relating to
the engagement of employment
of the municipal manager by the
municipality, its predecessors or any of its associated entities.
17.2
This
agreement therefore constitutes the sole agreement between the
parties and no representation not contained herein shall be
of any
force between the parties
."
(emphasis added)
Both documents contained an identical
non-variation clause, which states:
"Except by resolution of the
executive authority of the municipality, no variation, modification
or waiver of any provision
of this agreement, or consent to any
departure therefrom, shall in any way be of any force or affect
unless confirmed in writing
and signed by the parties and then such
variation, modification, waiver or consent shall be effective only in
the specific instance
and for that purpose and to the extent for
which it was made or given."
The evidence
The advertisement for the post of
municipal manager contained a subtitle '5-year performance-based
contract'. The applicant testified
when she received a letter of
appointment issued on 28 November 2001, she merely accepted the
appointment and the employment
contract and performance contract was
still to be signed. In the letter of appointment signed by the mayor
stated:
"It is a pleasure to inform you
that you were appointed as municipal manager with effect from 2
January 2002 on a five-year
contract.
Your salary package will be R 242 465,
83 until such time that performance management agreement is
negotiated and signed when you're
remuneration package will be
confirmed which will be before the end of February 2002." (
sic
)
The applicant acknowledged that she
signed the August contract but that she did so only in the sense
that she was acknowledging
the draft under consideration at that
stage. She claimed that the draft was discussed with the mayor and
she pointed out to him
in areas that need to be dealt with. The
person who had signed as a witness according to her was a deputy
director and accordingly
her subordinate. She disputed that the
mayor had later signed this first document, when it was suggested to
her in cross-examination.
Certainly, no documentary or oral evidence
was tendered by the respondent in support of the claim that he had.
Regarding the September contract, the
applicant maintained that this was the correct contract because the
executive mayor, as
the political head, had signed it and it was
witnessed by the directors of Corporate Services and Finance,
respectively. According
to her understanding of the duration of the
contract it should have run from January 2002 to February 2008. The
municipal elections
were held on 1 March 2006 and consequently, if
clause 3.2 of the September document was relied upon, her employment
was due to
end on 29 February 2008.
Although these are issues bordering
on the interpretation of the contract the applicant, also pointed
out in her testimony that
clause 3.2 of the August document did not
clearly identified a year on which the contract was due to
automatically terminate.
Mtshali in his testimony claimed that it
should have read ‘2007’.
On 13 February 2007, the executive
mayor, who by then was Mrs B MK, issued a letter terminating the
applicant’s services
with immediate effect, in terms of a
resolution of the Council at a special meeting held on the same day.
The termination letter
confirmed that the applicant would receive
her full salary for February and March that year.
According to the minutes of the
special council meeting, the purpose of the meeting was convened to
hear a report on recent developments
concerning the municipal
manager’s contract term and to finalise the matter. It appears
from the minute that at an earlier
meeting held on 24 January 2007
it was decided that the executive mayor should negotiate a
settlement amount with the municipal
manager to buy her out and then
report to the council for a final decision. Evidently, this did not
happen and the executive
mayor tabled a report before the council
requesting it to finalise the termination of the municipal manager’s
contract.
The report noted that in terms of the letter of
appointment her five-year contract lapsed on 2 January 2007. The
mayor’s
report stated that it was only when the council had to
appoint a new municipal manager that it was discovered that the
applicant
had a “running employment contract until 28 February
2008." When this was discovered, the council sought legal
opinion
before making a decision on the matter, because it had
recently emerged that the applicant had signed “another
contract”
on 2 August 2002 in terms of which her services
terminated automatically after five years on 2 January 2007.
Moreover, the report
continued, in terms of clause 4 of the contract
it could not be varied except by resolution of the Council.
Accordingly, the
mayor concluded that the contract dated 2 August
2002 and the appointment letter bound the applicant.
The applicant felt that her services
had been terminated prematurely and without regard to the clause
requiring the municipality
to negotiate with her prior to the end of
the contract. Under cross-examination, the applicant claimed that
the executive mayor
had finalised the contract with her, acting
under powers delegated to him by the council in terms of the
Municipal System's Act.
In support of this she referred to a summary
of decisions of the council in which the following appeared under an
item headed
“Interview - Vacancy of Muncipal Manager”:
“”
1.
That it was noted that the 1
st
preferred candidate, Mbileleni Ambrose Ngcobo, was not considered due
to his financial demands being unaffordable.
2. That the 2
nd
preferred
candidate, J Mtethwa, was then considered
subject to final
negotiations with her
.”
(emphasis added)
She was also asked why the executive
mayor did not approve the draft contract of August. Her explanation
was that the draft document
was still based on the conditions in
town clerks’ contracts and SALGA had issued an amended
document. For example, town
clerks were previously entitled to a
100% housing allowance which was no longer part of the new
conditions. The applicant could
not say with any precision when the
new draft had been prepared by SALGA. When asked why she maintained
that the August document
was only a draft the main reasons she gave
was that it was not signed by the mayor and contained no figure for
remuneration.
She had signed it as a document drawn up in
preparation for the signing of the contract and she had been a party
to the preparation
of the document.
It was put to the applicant that the
respondent would say that the council had decided to appoint a
municipal manager for five
years, advertised the post on those terms
and stipulated a five-year term in the letter of appointment. The
applicant's response
was simply that they did not constitute a
written contract of employment. She agreed that she could not point
to a council resolution
extending the term by a further two years
but maintained that the council had delegated authority to conclude
a contract of employment
to the executive mayor. The applicant did
not dispute that the special meeting held on 24 January 2007, which
delegated the mayor
to negotiate a settlement amount with her, was
prompted by the fact that she had just produced the copy of the
contract which
she relied on, and did not mean that the council
accepted the validity of that contract.
The applicant also conceded that she
had applied for the post of municipal manager when it was advertised
in 2006 even though
she believed that her contract was due to run
for another two years after the 2006 municipal elections. If I
understand her evidence
correctly she did so as a precaution in case
the municipality tried to repudiate her contract. She later
clarified that she did
so in anticipation of her contract lapsing
within a year and she was aware that the appointment process would
take a while.
It was also suggested to the
applicant that in her position as municipal manager she was able to
have drafted the September document
and had access to
administration. She accepted that she might have had easier access
to the records but denied drafting the document
and pointed out that
it had been signed by the mayor. The respondent’s
representative subsequently clarified that it was
not disputing the
authenticity of the signature of the mayor on the September
document, but was only disputing his authority
to sign it.
Mr N M Mtshali testified for the
respondent. He had been a member of the executive committee since
2000 and member of the mayoral
committee since 2006. As a member of
EXCO he had interviewed the applicant when she first applied for the
municipal manager’s
post. He recalled that the council had
delegated the mayor to appoint a municipal manager for a five-year
term. He maintained
that if the term was to be extended, it should
have been approved by the Council, but the September document was
never placed
before the Council for consideration.
It was only when the council had to
consider a number of posts in which the incumbent terms of office
were expiring in 2006 that
the council became aware of the September
document. He claimed that if the executive mayor had recommended an
extension of the
applicant's term of office by two years he would
not have objected to this but would have needed an explanation for
the extension.
Mtshali accepted that the extract
from the Council minutes relating to the interviews conducted for
the vacant municipal manager’s
post, when the applicant first
applied for it, delegated authority to the executive mayor to
negotiate final terms and conditions
of the municipal manager’s
employment. However, he could not point to any resolution in which a
five-year term had been
stipulated. Under cross-examination, Mtshali
qualified his statement that the executive mayor had been delegated
to finalise
the applicant’s terms of employment, by stating
that the negotiation only related to her remuneration and not to the
contract
itself. He was adamant that if the applicant had suggested
in negotiations that the term be longer then that issue should have
been referred back to the council. He also maintained that it had
been the executive mayor's responsibility to report back on
his
negotiations, but also could not identify any decision of the
Council where this was stipulated.
Mtshali conceded that the purported
August contract should have been signed by both parties and
acknowledged that the signatures
on the September document did give
it the appearance of a concluded contract of employment. He also
agreed that the salary of
R 242,000 set out in the August document
was a figure still subject to further negotiation between the
applicant and the executive
mayor. Under cross-examination, Mtshali
was repeatedly challenged on why the council had taken a resolution
on 24 January 2007
to empower the executive mayor to negotiate a
settlement amount with the applicant to buy her out, if her contract
should have
terminated on 2 January 2007 according to the
respondent's version that her contract automatically ended after
five years.
Mtshali could not provide any
explanation why the September document did not supersede whatever
had been stated in the advertisement,
the letter of appointment and
the alleged August contract.
Evaluation
Before considering the evidence, the
statutory framework for the conclusion of contracts of employment of
Municipal Managers should
be considered.
The Municipal Systems Act 32 of
2000 (‘the MSA’)
The MSA contains provisions which are
directly relevant to this matter. The pertinent provisions of
Section 57 of the MSA reads:
“
57
Employment contracts for municipal managers and managers directly
accountable to municipal managers
(1) A person to be appointed as the
municipal manager of a municipality, and a person to be appointed as
a manager directly accountable
to the municipal manager, may be
appointed to that position only-
(a)
in terms of a written
employment contract with the municipality complying with the
provisions of this section
; and
(b) subject to a separate performance
agreement concluded annually as provided for in subsection (2).
(2)
The performance agreement referred to in subsection (1) (b) must-
(a) be concluded within a reasonable
time after a person has been appointed as the municipal manager or as
a manager directly accountable
to the municipal manager, and
thereafter, within one month after the beginning of the financial
year of the municipality;
(b) in the case of the municipal
manager, be entered into with the municipality as represented by the
mayor or executive mayor,
as the case may be; and
(c) in the case of a manager directly
accountable to the municipal manager, be entered into with the
municipal manager.
(3)
The employment contract
referred to in subsection (1) (a) must include
, subject to
applicable labour legislation, details of duties,
remuneration
,
benefits and other terms and conditions of employment.
(4) The performance agreement referred
to in subsection (1) (b) must include-
....
(6)
The employment contract for a municipal manager must-
(a)
be for a fixed term of
employment up to a maximum of five years, not exceeding a period
ending one year after the election of the
next council of the
municipality
;
(b) include a provision for
cancellation of the contract, in the case of non-compliance with the
employment contract or, where applicable,
the performance agreement;
(c) stipulate the terms of the renewal
of the employment contract, but only by agreement between the
parties; and
(d) reflect the values and principles
referred to in section 50, the Code of Conduct set out in Schedule 2,
and the management standards
and practices contained in section 51.
A number of inferences may be drawn
from the documents and oral evidence.
The August document was materially
incomplete in a number of importance respects, lacking as it did a
number of entries that were
necessary to create a coherent
agreement. No remuneration was stipulated in clause 7.1. and it
contained no effective date of
implementation in clause 17.1. Most
importantly, it was not signed by the employer party. Although the
expiry date of the contract
set out in clause 3.2 was incomplete,
from the rest of that clause it seems clear it should have been ‘2
January 2007’.
The omissions in the August document
do not relate to incidental issues. Remuneration is an essential
term of an employment contract.
The draft clearly places much
emphasis on it being signed. This much is evident from the
non-variation clause which only permitted
variations if they were
reduced to writing and signed by the parties. Likewise, clause 3.2
of the same document anticipated the
signature of the document and
distinguished that date from the effective date of commencement. It
is inconceivable that the parties
would have concluded a document
with a stipulation that both parties must sign any written
variations without applying the same
principle to the founding
document.
Obversely, all the items omitted in
the August document were completed in the September document. For
all intents and purposes
the September document is a complete
contract in respect of its material terms. There was no dispute that
the executive mayor
at the time had signed this document. The
respondent’s defence was that he did not have authority to do
so. However, the
only documentary record of any resolution of the
council governing the conclusion of the contract is the one produced
by the
applicant, which the respondent did not dispute the
authenticity of. That resolution clearly anticipates the appointment
of the
applicant as Municipal Manager, subject to finalising
negotiations with her. It makes no mention of a limit to the
contractual
term that could be negotiated, nor does it expressly
delegate the task of negotiation to the executive mayor. Against
this is
the oral evidence of Mtshali who recollects that the council
stipulated a contractual term of five years and would not have
departed
from what is set out in the letter of appointment and the
advertisement for the post. However, he conceded that the salary
mentioned
in letter of appointment was subject to negotiations
between the applicant and the respondent.
As to the oral evidence in support of
the August document being the correct document, it should be
mentioned that before the
Local Government Laws Amendment Act 19 of
2008
,
section 57(6)
of the MSA read:
“
The
employment contract for a municipal manager must—
(a) be for a fixed term of employment
not exceeding a period ending two years after the election of the
next council of the municipality;...”
After the amendment, the fixed terms
period was limited to a period ending one year after the election of
the next municipal council.
In my view, the analysis of the
evidence of the parties and the two purported contracts above
demonstrates that everything points
to the September document being
the final contract. Even if the August document could conceivably
have constituted a contract,
in order to constitute a valid contract
it must comply with the provisions of
section 57
of the MSA.
Sub-section 57(1) of the MSA requires that a Muncipal Manager may
only be employed in terms of a contract which complies
with the
provisions of
section 57.
One of the requirements of such a contract
under sub-section 57(3) is that it must stipulate remuneration,
which the August document
does not. As such, it is non-compliant
with the MSA and could not constitute a valid employment contract
for a municipal manager.
By terminating the applicant’s
contract eleven months’ early, the employer committed a
fundamental breach of the contract,
entitling the applicant to
accept the respondent’s repudiation and claim damages.
Relief
According to clause 3.2 of the
September contract the applicant’s employment should have
ended two years after the last
local government election on 1 March
2006, which would have taken the applicant’s employment to 28
February 2008. Instead,
her services were terminated on 13 February
2007 and she was paid up to the end of March 2007. If she had
continued working until
the end of her contract she would have
received remuneration from 1 April 2007 to 28 February 2008, a
period of 11 months.
The applicant’s monthly
remuneration was R 330,000-00. Although the applicant had claimed
she had suffered damages in the
region of R 477,000-00 she did not
attempt to prove damages beyond the loss of her salary. Her
uncontested testimony is that
she only obtained employment in April
2008, so she was unemployed for the duration of the unexpired
portion of her contract.
Order
Accordingly, an order is made in the
following terms:
The respondent is ordered to pay the
applicant R 330,000-00 within 14 days of the date of this judgment.
The respondent must pay the
applicant’s costs.
R LAGRANGE, J
JUDGE OF THE LABOUR COURT
Date of trial: 13 - 14 July 2010
Date of Judgment: 16 November 2011
Appearances
For the applicant: M M Van Niekerk
of Van Niekerk Attorneys
For the respondent: Z S Sibeko
instructed by TMN Kgomo Attorneys
1
Handwritten
date unclear. See Mtshali’s contention set out in paragraph
[15] of the judgment.
2
The
September contract contains no stipulation on the number of days for
concluding a performance agreement. The August contract
stipulates a
222 day period for this purpose.
3
The
September document stipulated 2 January 2002,as the effective date,
but the August document did not stipulate any date in
this
provision, though it did specify the same date in clause 3.2.