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[2011] ZALCCT 17
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Solidarity and Others v Eskom Holdings Ltd (C 207/2003) [2011] ZALCCT 17; (2012) 33 ILJ 464 (LC) (5 August 2011)
REPUBLIC OF SOUTH AFRICA
Reportable
Of
interest to other judges
THE LABOUR COURT OF SOUTH AFRICA, CAPE TOWN
JUDGMENT
CASE
NO: C 207 / 2003
In the matter between:
SOLIDARITY
…..........................................................................
First
applicant
RN
HUTCHINGS & OTHERS
…......................
Second
and further applicants
and
ESKOM
HOLDINGS LTD
…...........................................................
Respondent
Heard
: 25- 29 October 2010; 29 November 2010; 9 June 2011
Delivered
: 5 August 2011
Summary:
Applicants claim that Eskom agreed to early
retirement without penalties for nuclear operators. The agreement was
embodied in a
Management Directive. Eskom withdrew the directive and
argued that the agreement was unenforceable; that there was no
consensus;
and that the director who allegedly entered into the
agreement; was not authorised to do so.
Held
that the
applicants could rely on Eskom’s manifestation of assent; and
that Eskom is bound by the agreement.
JUDGMENT
STEENKAMP J
Introduction
This matter considers the doctrine of quasi-mutual assent and the
application of the
Turquand
rule. Solidarity, the trade union
acting for the second and further applicants, alleges an agreement
between it and the respondent,
Eskom Holdings Ltd, giving reactor
operators at Koeberg Nuclear Power Station the right to early
retirement without the loss
of benefits. It argues that there was an
actual agreement to this effect; alternatively, it relies on Eskom’s
manifestation
of assent.
The case was initially referred to the Labour Court as long ago as
may 2003. Eskom raised a special plea that the claim had prescribed.
That aspect was heard as a point
in limine
in the Labour
Court in September 2004. Judgment was handed down on 19 January
2005, ruling that the special plea was upheld.
Leave to appeal was
granted on 1 September 2005. The applicants appealed and the
respondent cross-appealed. The finding was overturned
on appeal by
the Labour Appeal Court in February 2008. It was eventually referred
back to this court for trial and came before
me on 25 October 2010.
The trial continued in October and November 2010. Further trial days
were set aside to hear the evidence
of the Koeberg power station
manager, Mr Peter Prozesky. Neither party elected to call him. The
parties had to wait for a transcript
of the proceedings. Once that
had been obtained, the applicants filed their heads of argument on
20 May 2011 and the respondent
did so on 3 June 2011. Oral argument
was heard on 9 June 2011. This judgement was prepared during the
July recess.
The parties
The first applicant is Solidarity, a registered trade union that was
previously known as MWU Solidarity and before that as the
Mineworkers’ Union or Mynwerkersunie. It acts in its own name
and on the part of 34 of its members (the second and further
applicants) who were or are employed at the Koeberg nuclear power
station as licensed operators, either reactor operators (“RO’s”)
or senior reactor operators (“SRO’s”). The
respondent, Eskom Holdings Ltd, has its head office at Megawatt
Park, Sandton. Koeberg nuclear power station at Melkbosstrand
outside Cape Town is a business unit that forms part of the Eskom
generation group.
The issue to be decided
Solidarity’s statement of case
Solidarity relies on the agreement contained in a document styled as
Management Directive 102 (Rev 2). Under that instrument,
MD102 (rev
2),
1
Eskom undertakes to defray the loss otherwise incurred through early
retirement by making the requisite contribution to the pension
fund.
The payment is to be made out of the Koeberg budget, as testified by
the then Group Human Resources Manager for the Generation
Division
of Eskom, Ms Nerina Begg (née Boshoff).
Solidarity contends that the agreement was proposed –
effectively, in principle - on 10 July 1998 in a meeting at Koeberg
inter alia
by Mr Bruce Crookes, the Executive Director
(Generation) (authorised by the Eskom CEO, Mr AJ Morgan) and
accepted in principle
by the operators present at the meeting.
Solidarity then goes on to plead that the agreement was ultimately
finalised on 2 November 1998 by the adoption of MD102 duly
signed
under the authority of Mr Peter Prozesky, the Power Station Manager.
Eskom’s Response on the in-principle agreement
On the issue of whether an in-principle agreement was reached on
10 July 1998, Eskom admits that proposals were indeed made
for
deemed service, the effect of which would be to secure a right to
early retirement without penalties that would be financed
out of the
Koeberg budget.
Eskom denies, however, that such an agreement was reached, whether
in principle or at all. In addition, it denies that Crookes
was
authorised to enter into any such agreement. According to Eskom, the
agreement, once drawn up by ‘a task team’,
would only
come into force once approved by Crookes and the Executive Director:
Human Resources. It contends that the meeting
of 10 July 1998
was called to consider and discuss proposals regarding an early
retirement scheme; that no consensus was
reached as to the
implementation of the alleged agreement; that the early retirement
scheme contained in MD 102 had not
been authorised by Eskom’s
Head Office; and that no manager nor official at Koeberg was
authorised by Head Office to give
effect to, or publish any changes
to the retirement scheme for licensed operators.
The applicants contend that, in dealing with this question, Eskom
impliedly accepts that MD102, if approved by head office, could
properly have been signed off by or under the authority of Prozesky,
since it is pleaded that he could, and did, legitimately
sign
off on a bonus agreement. Put another way, no dispute is raised in
the Response about his ability to sign off on an early
retirement
scheme that has been sanctioned by head office.
Eskom’s Response on whether MD102 was validly concluded
On this issue Eskom does not deny that MD102, if valid, can be
characterized as an agreement between Eskom and the operators.
What
it contends is that the conclusion of the agreement ‘was not
authorised by Eskom’s Head Office, Sandton’.
In the
context of the pleadings, this must mean Crookes and the Executive
Director: Human Resources, since they are said to be
the persons who
could authorize the in-principle agreement.
Solidarity’s Replication
In its replication, Solidarity raises the doctrine of quasi-mutual
assent – in essence, a species of estoppel.
This plea is broad enough to bring the
Turquand
rule
(considered below) into operation. That is the principle, laid down
in
Royal British Bank v Turquand
2
that:
‘
[a]
third party is entitled to assume that all internal formalities have
been complied with if the person acting on behalf of the
company is
acting within the usual authority of the office that he holds or
purports to hold – and where that is the case,
it does not
matter whether or not the third party in fact knew of the power of
delegation.’
3
De Wet & Yeats
4
also refer to the doctrine as “die leerstuk van toegerekende
kennis”. In terms of this doctrine third parties dealing
with
the company are entitled to assume that a company’s board of
directors, managing director or a director who purports
to be acting
on behalf of the company, is acting within his or her “scope
of authority” and can bind the company.
The issue to be decided, then, is whether there was an actual
agreement between the parties; and if not, if Solidarity can rely
on
Eskom’s manifestation of assent. Eskom further argues that,
even if there was consensus, the agreement is unenforceable.
The facts emerging from the evidence
Solidarity led the evidence of:
Mr Derrick Douglass, past chairman of the Koeberg branch of
MWU/Solidarity.
Mr Robin Hutchings, an operator at Koeberg.
Mr Raymond Wilcewski, a MWU/Solidarity shop steward at Koeberg.
Taken in the main, their evidence concerned the structures and
personnel of Eskom; Eskom’s conditions of employment; the
meeting of 10 July 1998 at which Crookes made his proposals; and the
events leading up to and following the adoption of MD102.
Eskom called two witnesses.
Mr AJ Morgan, the erstwhile Chief Executive of Eskom, spoke in
generalities about the bureaucratic processes in Eskom.
Ms Nerina Begg (née Boshoff) was the Group HR Manager for
the Generation Division of Eskom in 1998.
Crookes was in charge of the Generation Division at Eskom. In that
capacity, he could make decisions within his budget for the
Division, Koeberg included, provided they remained in compliance
with Eskom standing instructions. Begg’s testimony confirms
that he had the power to decide whether the early retirement
provisions would continue or be withdrawn.
In 1995 Mr Willem Jungschläger, a psychologist at Eskom,
compiled a report concerning early retirement for licensed
operators
and other workers in stressful jobs at Eskom. He proposed that they
be considered for early retirement and that licensed
operators
should be taken off shift work five years before retirement.
The proposals in the Jungschläger report were not implemented.
In April 1995 Mr Crookes decided not to introduce early
retirement for any category of Eskom employee.
On 10 February 1997 the senior shift supervisors at Koeberg
wrote to Mr Crookes requesting that licensed operators
be
seconded to less stressful positions or be granted early retirement
and for the policy to be documented. The letter was signed
by a
number of RO’s including Mr Hutchings, who testified in these
proceedings. The letter stated, inter alia:
“
Early
retirement
Many
SSS’s
5
are now in the 45-50 age group. Due to the stressful nature of the
work it is common international practice to allow early retirement
or
secondment to a less stressful position on daywork hours...
“
Recently
a Shift Manager was seconded to a daywork position in the training
group, we would like Eskom Management to continue this
practice for
all licensed operators and for the policy to be documented.
...
“
We
would appreciate an early response to this letter as our experience
with Koeberg’s management has left us with very little
patience. You are our last hope of achieving the above goals through
any meaningful discussion with Eskom management. None of us
want to
progress to alternative means of action without giving you every
opportunity.”
Mr Crookes replied by letter dated 13 March 1997 in the
following terms:
“
I
wish to update you on the progress with my investigation on the
issues raised by you.
Unfortunately,
I am not in a position to respond at this stage, as each issue needs
thorough investigation. The objective is to
establish a positive
outcome for yourselves [
sic
] and the organisation.
Expertise
[
sic
] in senior management have been requested to assist me in
the process.
I
appreciate the urgency of this matter, however, no quick fix
solutions can address or overcome the problems experienced.
I
should be in a position to share my findings with you by 2 April
1997.”
Mr Crookes responded fully in a letter dated 1 April 1997,
referring to “the results of my investigations into
your
concerns.” Under the heading, “Early Retirement”,
he said:
“
A
decision has been made at Executive Director level during April 1995
not to systematically introduce early retirement to any category
of
Eskom employee. This was following a study undertaken into various
categories of employee, in particular Koeberg operators and
other
shift workers, by Willem Jungschlager...”
Under the heading, “Remuneration”, Crookes continued:
“
I
have been working with several advisors to investigate these issues
and have approved in principle a draft Koeberg Management
Directive.
This directive deals with changes in the remuneration structure for,
amongst others, SRO licensees.
I
have instructed the Power Station Manager
6
to convene a working group at the station to discuss the content of
this directive with yourselves [
sic
] and other affected
parties and stake holders.”
On 23 June 1997 Mr Hutchings addressed a letter to
Mr B. Winckler, the Council for Nuclear Safety
representative.
It was copied to the CEO of Eskom, Mr A. Morgan,
concerning excessive overtime work by operators and extra
examinations
they had to take. A reply dated 1 July 1997 on
behalf of Mr Morgan was sent to Mr Hutchings. In the
letter, Morgan
states:
“
I
hereby acknowledge receipt of your letter dated 23 June 1997.
The
right way to deal with this matter would have been through the Power
Station Manager
7
and the Executive Director (Generation).
8
Nevertheless I have asked Mr Bruce Crookes, Executive Director
(Generation), to look into the issues raised in your letter as a
matter of urgency.
Once
Mr Crookes has come back to me and I am in possession of his input I
will respond to you in more detail.”
Despite this promise, neither Morgan nor Crookes responded to
Hutchings.
Despite Morgan’s promise that Crookes would “look into”
the issues raised by Hutchings “as a matter of
urgency”,
the next significant moment appears to be almost a year later. At a
monthly meeting of the Generation Executive
Committee (GEC) in May
1998, Mr Crookes informed Ms Nerina Begg (then
Ms Boshoff), the Group Human Resources (HR)
Manager
(Generation) at Eskom’s Head Office, and Mr Peter
Prozesky, the Power Station Manager, that they had to deal
with some
issues around potential early retirement and bonuses for licensed
operators. He instructed Mr Prozesky to put
his thoughts on
paper so that it could be discussed at the next GEC meeting.
At the next GEC meeting in June 1998, Mr Prozesky prepared some
information about a bonus system to attract and retain licensed
operators. According to Begg, however, there was no information
relating to the early retirement proposal. Unfortunately Eskom
could
not provide any minutes of that or any other relevant meeting.
Prozesky did not testify. I shall return to both those aspects
at a
later stage. It was agreed that Mr Prozesky would prepare
PowerPoint slides on topics to be discussed, namely the bonus
system
and early retirement, at a meeting at Koeberg to be held on 10 July
1998. This latter meeting would turn out to be
highly significant,
and the question of whether an agreement had been reached, at least
in principle, turns primarily on that
meeting. Once again, though,
neither the minutes of that meeting nor Prozesky’s PowerPoint
presentation is available; and
Prozesky did not testify.
According to Ms Begg, neither she nor Mr Crookes had any
proposals concerning early retirement when they went to the meeting
at Koeberg on 10 July 1998. Prior to the meeting they had a
briefing session. I deal with Begg’s evidence more fully
at a
later stage; however, I find it highly improbable that Crookes would
not have had any such proposals, given that he had
delegated
Prozesky to prepare slides on that very topic, which was already a
contentious one and one that he (Crookes) had promised
to address
urgently.
When Mr Crookes came to Koeberg on 10 July 1998, it was
the first time that the issue of early retirement was discussed
directly with licensed operators. He apparently met with licensed
operators some years before, regarding a 14
th
cheque
prior to 10 July 1998. Between July 1997 and 10 July 1998,
there was no discussion between Croookes and MWU,
its Chairperson,
Mr Douglass, or any other member of MWU, regarding early
retirement. MWU did not put up any proposal regarding
early
retirement at the meeting of 10 July 1998. According to
Douglass, the MWU had proposals, “but because of what
Mr
Crookes said we left it at his proposal. We were happy with what he
said.”
Mr Crookes opened the meeting on 10 July 1998. He said
that he was there to listen to the concerns of the operators.
According to the applicants’ witnesses, he also proffered a
set of proposals for an extra bonus and early retirement without
penalties. According to Hutchings, Crookes pertinently explained
that this was being structured in such a way as to circumvent
head
office and central bargaining. Although Begg protested in her
evidence that Crookes could not and would not have done so,
the
applicants’ evidence is, on a balance of probabilities, borne
out by later events.
Mr Prozesky did a slide or PowerPoint presentation of certain
proposals, after which there were discussions in groups and
an
open-floor question and answer session before Mr Crookes closed
the meeting. Ms Begg acted as the facilitator at
the meeting.
Pursuant to the meeting of 10 July 1998, two working groups
were formed. One had to work on the bonus system and the other
on
the early retirement proposal. The task team which dealt with the
early retirement proposal comprised Ms Begg, supported
by a
team from the group structure of Eskom, and Mr Prozesky with a
small team from Koeberg. Mr Jan Olckers, a remuneration
specialist, and Mr Andries Heystek, served on the task team in
respect of early retirement, attended meetings at Koeberg
and
reported to Ms Begg. No formal meetings were held but the
information was circulated and several telephonic discussions
took
place. In respect of the early retirement proposal, the task team
explored options which included exploring early retirement
wider
than Koeberg. International research was done and work categories
outside of Koeberg had to be looked at to formulate some
kind of
concept and craft a document relating to early retirement.
Mr Douglass, who testified on behalf of the applicants, was the
Chairperson of MWU for at least seven years. He was a shop
steward
for some six years. He testified that he was aware of the fact that
contributions to the pension fund, medical aid and
annual leave
would comprise conditions of service that must be negotiated at the
Central Negotiating Forum. He knew that early
retirement had not
been negotiated with the unions. But he testified that, when Crookes
addressed them on 10 July 1998, the employees
were of the opinion
that the issues he discussed with them had already been negotiated
with the Managing Director, Morgan.
Mr Wilcewski, who also testified on behalf of the applicants,
was the Vice Chairperson of MWU for 7 to 8 years. He has extensive
experience as a shop steward. He too was aware of Eskom’s
procedures relating to retirement. On 10 July 1998 he knew
that
the condoned service purportedly given in terms of the alleged
agreement was going to be brought about at local level at
Koeberg.
There was a recognition agreement in place at the time of the
alleged agreement. Anything relating to conditions of service at
that time was negotiated annually, normally in the first half of the
year, because the outcome was implemented by 1 July
of any
year. Any changes to conditions of service had to be placed on the
agenda and negotiated with trade unions. Conditions
of service,
including pension, would be negotiated at the main forum, the CNF.
However, the applicants were of the view that,
if Crookes was
willing to agree to early retirement for SRO’s at Executive
Director level, it could be implemented at Koeberg
level by the
Power Station Manager, Prozesky.
By analogy, the bonus system had to be approved at corporate level
in Eskom’s Head Office. The draft proposals relating
to the
bonus system had to be supported by the Executive Director
(Generation) and Ms Begg. It then had to be taken to the
relevant persons in the corporate remuneration structures, and the
Generation Group HR Manager. It was then referred back to
Koeberg to
follow the required procedure i.e. Mr Prozesky would engage the
stakeholders and once consensus had been reached,
they would produce
a management directive and the bonus system would be implemented. It
took between July 1998 and 2 November
1998 to implement the
bonus system.
On 13 July 1998, Prozesky addressed a letter to the operating
department staff at Koeberg under the heading, “Reward and
recognition and early retirement proposal”. He told them:
“
At
the meeting of 10 July [1998], proposals were made and endorsed by
the Executive Director (Generation)
9
on the above issues. I am instructing the Operating Manager to
consult with all Operating Department staff, Operating Training
Group
staff and Koeberg Trade Unions in order to provide me with a mandate
to proceed with the development of details surrounding
these
proposals.
A
brief description of the principles involved in each of these
proposals is outlined below. Remember that the aim of these proposals
is to find a set of proposals that could be readily implemented
within the authority of the Executive Director (Generation) at
Koeberg Power Station, and would not necessitate lengthy deliberation
at national level. The ED(G) gave his assurances that such
proposals
would be implemented as of 01 August 1998.”
Under the heading, “Early retirement proposal”, Prozesky
continued:
“
For
licensed operators a system would applied [
sic
]
whereby the individual would qualify for additional third service
according to the following formula:
For
each one year of active licensed duty, or part thereof on a pro rata
basis, the individual would be credited with (for example)
1.33 years
service. This would enable the licensed operator to qualify for early
retirement, depending on the number of years service
at this level.
The
business unit
10
would then make a contribution to the Eskom pension fund that would
match the normal pension penalties that would be applied to
the
individual for the early retirement.
The
scheme would be able to be exercised on a voluntary basis by each
individual."
On 19 August 1998, Prozesky sent an almost identical letter to Begg,
except that the example of 1.33 years of service had been
amended to
1.5 years; and he stated pertinently: “Details would be
negotiated and included in the Koeberg Management Directive
No 102.”
Remarkably, Begg did not respond.
According to Ms Begg, there was no corporate stance on the early
retirement proposal by 19 October 1998, despite Mr Prozesky’s
frequent queries in this regard. She informed Mr Prozesky
accordingly.
On 20 October 1998 Mr Olckers sent an e-mail to Ms Begg
with a recommendation that Koeberg prepare a draft procedure
for
early retirement to be discussed with the HR group staff. According
to Begg, the content of this e-mail was conveyed to Mr Prozesky,
but she could find no proof that it had been done.
On 2 November 1998 Ms Begg sent a letter to Mr Prozesky
under the heading, “Proposed recognition system
for licensed
operators”. She said: “You may proceed to negotiate and
implement the above system at BU
11
level.”
In her evidence, Ms Begg testified that this letter referred only to
the reward or bonus system, and not to early retirement.
It was put
to her under cross-examination that both issues were dealt with
together, as in Prozesky’s earlier letter. I
shall return to
the probabilities.
MD 102 was published at Koeberg on 2 November 1998. It was
signed off by Messrs Prozesky, Brian Dowds and JE Hanekom. It
was
not tabled at Eskom’s Management Board for consideration or
deliberation. A management directive (such as MD 102)
is a
document unique to Koeberg, ie published at business unit level.
Documents issued by Eskom’s Head Office at Megawatt
Park,
Sandton, are known as “
ESKADAA”
documents. On
1 April 1997 pension in respect of any Eskom employee was
regulated by an ESKADAA document. On 10 July
1998 the position
was exactly the same. A management directive such as MD 102
cannot trump an ESKADAA policy.
On 10 November 1998 Ms Kotie Kompaan, Ms Begg’s
secretary, forwarded an e-mail (referring to a meeting on
19 October
1998) from Mr Jan Olckers to Mr Brian Dowds at Koeberg. It
states that the request for early retirement
was not supported, as
similar requests were made by Eskom pilots and employees working at
national control, even with good business
cases. It was suggested
that a presentation be made to the relevant pension fund advisory
council, but this did not happen.
After the bonus system had been implemented, on 14 January
1999, Ms Begg and Mr Ehud Matya, the Executive Director
designate, went to Koeberg to assist Mr Prozesky. The unions
other than MWU/Solidarity -- more specifically NUM and NUMSA
-- were
unhappy that the bonus system had been implemented for the licensed
operators and were threatening industrial action,
more specifically,
the disruption of the outage planned for January 1999.
Whilst at Koeberg in January 1999, Ms Begg discovered –
according to her, for the first time -- that MD 102 also
contained an early retirement scheme. The early retirement scheme
was immediately withdrawn on 14 January 1999. She informed
Mr Crookes of the withdrawal of the early retirement scheme in
MD 102 and according to her, he was satisfied that the
right
action had been taken.
The early retirement part of MD 102 was never implemented. As a
result, MWU/Solidarity declared a dispute. At an internal
conciliation meeting on 22 January 1999, Mr Peter Prozesky
informed MWU that the early retirement proposal had been
withdrawn
because there had been a “miscommunication / misunderstanding”
between power station management and Generation
HR manager; that he
had understood from Begg’s letter of 2 November 1998 that he
could implement “all aspects”
of the proposals,
including early retirement; but that it was “subsequently
determined” that approval had only been
given to proceed with
and implement the remuneration recognition (i.e. bonus) part of the
proposal, and not the early retirement
portion, as it was “still
under review by Corporate”. MWU stated that their dispute
remained unresolved. They requested
that Mr Wilcewski be
nominated to serve on the national working group.
When Crookes returned from sick leave, he asked Begg for a report
about what had happened. In the written document dated 19 January
1999, she explained away the ‘mistake’ as a species of
‘poor communication’. She conceded that ‘there
was
negligence’, but that ‘no intentional harm was planned’.
She made nothing of the supposed failure to observe
the standing
instructions governing changes to conditions of employment. She
contented herself with the statement that, in adopting
the bonus
scheme, ‘no known policy was breached’ since ‘this
was a principled decision’. Seemingly, this
was enough to
enable her to escape disciplinary action.
Over the ensuing years, Eskom took no steps to resolve the issue in
the central collective bargaining forums.
Begg explained that it was not enrolled for bargaining since it had
no support from Eskom.
Prozesky was unable to make any formal progress in the light of
this attitude, but with one notable exception he kept to his
promise to exercise his discretion in favour of the approval of
applications for early retirement.
The ‘withdrawal’ of MD102 was unprocedural in terms of
Eskom’s internal processes. Technically, it remains
in place
to this day, but is not being implemented. The reason it has not
been removed from the database, according to Eskom,
is that
Solidarity will not permit its retraction for so long as this
dispute is continuing.
The failure to call Prozesky
If here was one person who could give the most valuable evidence as
to what occurred on 10 July 1998; how he understood his mandate;
and
how it was implemented, it was the power station manager at Koeberg,
Mr Peter Prozesky. He was present in court throughout
the
proceedings. The court expected the respondent – with whose
other witnesses he was sitting all along – to call
him. To the
surprise of the court, Eskom did not. Instead, they belatedly made
him available to the applicants after Eskom had
closed its case, but
the applicants did not call him either. To the frustration of the
court, then, I was deprived of the evidence
of the most pertinent
witness.
Mr
Schippers,
for Eskom, protested that the onus rests on the
applicants, and they were free to call Prozesky in rebuttal after
Eskom had closed
its case and made Prozesky available. But I agree
with Mr
Brassey
, for the applicants, that despite the onus,
the party that could have been expected to call Proesky was Eskom.
Prozesky purported
to have acted on Eskom’s behalf in the
process by which MD102 was adopted. He also testified for Eskom in
the earlier proceedings
that went on appeal to the Labour Appeal
Court. In those circumstances, Eskom –
was the party that could naturally have been expected to call them;
appreciated as much, since it took time specifically to consider
whether Prozesky should be called.
Prozesky was an important, even crucial, actor in the events giving
rise to the adoption of MD102.
Inter alia
-
he was present at the important meeting on 10 July 1998 at which
Crookes presented his proposals;
he himself gave a presentation with the aid of PowerPoint slides
and/or a flip chart;
he was the person who principally liaised with Begg;
he was the person who authorised the adoption of MD102;
he undertook to honour the intent of MD102 –
by utilizing the Koeberg budget;
to give Koeberg operators the benefit of early retirement in the
exercise of his discretion.
Much of the evidence given by Begg under cross-examination
conflicted with stances taken by Prozesky in the correspondence.
The conflicts, which were generally on matters that were highly
germane to the issues in the case, called out for resolution,
and
they could be resolved only by finding out what Prozesky had to say
about them. This is particularly so as Crookes, the
other important
actor, was no longer alive to give evidence.
At the time, Prozesky was a senior executive with a track record of
honesty, conscientiousness and reliability. Eskom could
not, in
consequence, have believed that his evidence would be valueless.
The only conclusion to be drawn is that his evidence,
if led, would
have resolved the conflicts against Eskom and so caused
considerable damage to Eskom’s case.
In the present case, I am constrained to conclude that Prozesky
would have given evidence consistent with the stance he articulated
in correspondence and in support of the steps he actually took. In
addition, it is proper to discern a fear that, if he did so
testify,
his evidence might be preferred to that of the witnesses actually
called.
Given these assumptions, the court can legitimately draw an adverse
inference against Eskom for failing to call Prozesky.
‘
A
party’s failure to call available witnesses may in exceptional
circumstances lead to an adverse inference being drawn against
the
party concerned. The extent to which such inference can be drawn will
depend on the circumstances of the case.’
12
Such an inference cannot but cast a shadow over the whole of the
testimony adduced by Eskom.
Even though the overall onus rests on the applicants, Prozesky was
clearly a witness “in the respondent’s camp”.
As
Smalberger J explained with regard to a similar situation in
Kroon
v JL Clark Cotton Company (Pty) Ltd:
13
“
There
is also the fact that Bennie, although available, was not called as a
witness by the defendant to refute the evidence of the
plaintiff and
Zietsman. This raises the vexed question of what inference can be
drawn from the failure to call an available witness.
Everything
depends upon the circumstances of each particular case (
Hoffmann
and Zeffertt (supra
at
473)). If a witness is available to both sides, and there is no
particular reason why he should not be called by one side rather
than
the other, it will be difficult to found an inference for omitting to
do so against either. In that situation, in terms of
the decision in
Brand
v Minister of Justice and Another
1959
(4) SA 712
(A)
,
no more can be said than that the party bearing the
onus
runs
the risk of losing if the remaining witnesses are insufficient to
carry the necessary degree of conviction. In the present
case there
is no
onus
on
the defendant. But the circumstances are such that the failure by the
defendant to call Bennie justifies, in my view, an adverse
inference
being drawn against it. It is true that Bennie, being a servant of
Elanco at the relevant time, was potentially Elanco's
witness. But
throughout the piece the defendant and Elanco have made common cause,
and Bennie is clearly someone in the defendant's
camp.”
Was there consensus?
Messrs Crookes and Prozesky were the people best placed to put
beyond doubt whether the parties reached consensus on early
retirement without loss of benefits at the meeting of 10 July 1998,
as subsequently embodied in MD 102. But Crookes is dead and
Prozesky, whilst alive, present and available, was not called to
testify. I therefore have to decide this question on a balance
of
probabilities at the hand of those witnesses who did testify, and
the contemporaneous documentary evidence.
In this regard, I am inclined to attach rather more weight to the
contemporaneous documentary evidence than to the memories of
witnesses who are testifying 13 years later about the events of a
single meeting, except where that evidence is corroborated.
The
court’s frustration at the absence of testimony by Prozesky,
though, is further exacerbated by the dearth of documentary
evidence
discovered by Eskom, including any minutes or notes whatsoever
emanating from the all-important meeting of 10 July 1998,
including
Prozesky’s PowerPoint presentation.
Unfortunately, this absence of relevant documentation was a signal
feature of Eskom’s case. For an entity that prides itself,
according to Begg, on meticulous record-keeping, and for people like
Crookes and Prozesky who were known to be sticklers for
rules who
‘played it by the book’, as one witness put it, it
beggars belief that they would not have kept the relevant
records
when Solidarity (then MWU) had declared a dispute and litigation was
pending.
Eskom’s failure or inability to produce documents that had
admittedly been generated but were not to hand, is disconcerting.
This included board minutes and correspondence with the other trade
unions about the implementation of MD 102. Many of these
documents
seemed,
prima facie
, to be potentially damaging to Eskom’s
case. The explanation for the absence of these documents is far from
satisfactory.
On a balance of probabilities, it is hard to reach any conclusion
other than that those present at the 10 July 1998 meeting did
reach
consensus, at least in principle. Begg is the only witness who was
present who disputes this. Prozesky, inexplicably, did
not testify;
and his PowerPoint presentation has disappeared. The applicant’s
witnesses are all clear as to what their
understanding after the
meeting was.
Begg was not an entirely satisfactory witness. Her testimony often
appeared to be rehearsed, and her oft-repeated line of defence
–
that the correct procedures through the head office structures at
Megawatt Park and the national collective bargaining
structures had
not been followed – was not raised in Eskom’s pleadings.
It only pleaded that MD 102 “had not
been authorised by
Eskom’s Head Office, Sandton, and had been incorporated in
error in the said Directive.”
Perhaps the most striking contemporaneous explanation of what
actually occurred at the meeting, and how it was understood by
those
present, was Prozesky’s summary in his letter of 13 July 1998,
i.e. three days later. That letter refers pertinently
to proposals
that were “made and endorsed” by Crookes at the 10 July
meeting; that it could “readily be implemented
within the
authority of the Executive Director (Generation) and Koeberg Power
Station”; and it spelt out the basics of
the early retirement
proposal. Prozesky did not come to explain to the court how this
very definite interpretation of events
could have been wrong.
Neither did anyone raise any objection to it until six months later,
in January 1999 – this despite
the fact that Prozesky spelt
out the very same understanding, based on the meeting of 10 July, in
his letter to Begg on 19 August
1998. Begg did not even bother to
respond to the letter.
It is also quite improbable that neither Begg, nor Crookes, nor
Morgan, nor any other senior employee at Eskom, bar Prozesky,
would
have had sight of MD102 – implemented on 2 November 1998 –
prior to January 1999. It becomes even more improbable
in the light
of Begg’s concession that Prozesky was pestering her for a
response on both the bonus system and early retirement;
her email to
Prozesky on 15 October 1998 that reassures him that the “Early
Retirment [sic] Option is with Con Engelbrecht
and you will have
Corporates [
sic
] final stance by Monday 19 Oct 1998”;
that the conditions of service would not be influenced as it is a
principled decision;
and her letter to Prozesky on 2 November 1998
under the heading, “Proposed recognition system for licenced
[
sic
] operators” stating that: “You may proceed
to negotiate and implement the above system at BU Level.” On
the
same day – 2 November 1998 – the comprehensive
document, comprising 11 pages in minute detail, is signed off as
authorised
by Prozesky; and signed off by the compiler, JE Hanekom,
as well as the production manager, Brian Dowds. It could not have
been
hastily compiled on that same day.
Did Crookes and Prozesky have actual authority to enter into the
agreement?
For the following reasons, it is more probable than not that Crookes
and Prozesky had actual authority to conclude the agreement
embodied
in MD 102:
Morgan pressed Crookes to do what in any event he was entitled, as
Executive Director (Generation), to do: sort out the problems
raised by the operators.
On 10 July 1998 Crookes and Prozesky made in-principle proposals to
the operators on the matter of early retirement that, in
general,
were acceptable to them.
Prozesky was tasked to establish a task team through which the
proposals might be implemented. This team produced MD102.
Prozesky signed off on MD102. He had the authority to do so, and
that authority encompassed the power to grant bonuses in this
way,
as Begg conceded. In doing so, he brought an agreement to fruition
that embodied the early retirement provisions, as well
as the bonus
benefit.
The payments were to come out of the Koeberg budget, and Prozesky
had the authority to manage this budget. Crookes supported
him in
the use of the budget to finance the extra benefits and, in the
full knowledge of what the standing procedures required,
both were
comfortable about proceeding to implement the two new benefits.
But I need not decide whether these individuals did, in fact, have
actual authority. Mr
Brassey
invited me to use Occam’s
razor
14
in order to decide the matter. I intend to take up that invitation.
If the applicants succeed on their alternative argument,
based on
Eskom’s manifestation of assent and the
Turquand
rule,
I need not decide whether Crookes had actual authority.
Can the applicants rely on Eskom’s manifestation of assent?
In the alternative, Solidarity relies on Eskom’s manifestation
of assent. Its case under this head is that –
Eskom accepts–
that Crookes received Morgan’s mandate and, in any event,
had the authority to make proposals of the sort he made;
in addition, that Prozesky had the authority to effectuate the
formal adoption of MD102.
Eskom, Ms Begg testified, is not resisting this claim because of
the money: it is seeking to preserve the hegemony of its internal
processes. What Eskom says is that the exercise of their powers was
subject to approval by certain people in head office (and,
as the
case developed, at the collective bargaining table). This approval,
it says, was never given.
These contentions, needless to say, are in no way conceded by
Solidarity. Even if they are established, however, Solidarity
argues that they make out no defence, for the preconditions for the
exercise of the power, being matters of internal management,
must
be left out of account in determining whether an official of a
corporate entity validly exercised the power that he admittedly
has
or, by reason of his office, can be taken to have.
So much is clear from the
Turquand
rule, discussed above.
Eskom argued that, even if Mr Crookes had represented that he
had the requisite authority to enter into the alleged agreement,
it
would still not avail the applicants. Where a party to a contract
purports to act in a representative capacity but in fact
has no
authority to do so, the person whom he purports to represent –
in this case Eskom – is not held bound by the
contract unless
Eskom, by its own conduct, justified the applicants’ belief
that authority existed.
15
Mr
Schippers
submitted that there is no evidence that there
was any appearance of authority on the part of Mr. Crookes,
created by Eskom.
16
In fact, he argued, the evidence points the other way. MD 102
was a Koeberg management directive adopted by Mr. Prozesky
at
Koeberg. Eskom’s Head Office did not give Koeberg any
authorisation to include any proposal in relation to early
retirement
in MD 102. Neither was such an instruction given by
either Mr Crookes or Ms Begg.
On the probabilities, I have already found that Crookes created the
impression – in the minds not only of the operators,
but also
of Prozesky, a management representative – that Prozesky could
implement the early retirement proposal at Koeberg
level.
There can be no question but that Crookes was seen to be the
“directing mind” of Eskom when he, together with
Prozesky
and Begg, met with the operators on 10 July 1998. As Heher
JA put it in
Consolidated News Agencies (Pty) Ltd (in
liquidation) v Mobile Telephone Networks (Pty) Ltd and another:
17
“
In
each case the court strives to determine whether it is the company
which has spoken or acted to a particular effect through the
voice or
conduct of a human agency and is thereby to be held to the
consequences, or whether that agency was engaged in an activity
which
cannot fairly be attributed to the company. Each case raises
different facts and the eventual conclusion must depend upon
inference and probability in the absence of express evidence of
adoption of the statements or conduct as the company's own.
Respondents'
counsel referred us to the following dictum from
Re
Bank of Credit and Commerce International SA (In Liquidation) (No
15): Morris v Bank of India
C
[2005]
2 BCLC 328
(CA) as to the kind of factors that a court would look at
in determining whether a particular natural person is the directing
mind
of the company for a particular act or state of mind. The rules
of attribution would -
'typically
depend on factors such as these: the agent's importance or seniority
in the hierarchy of the company: the more senior
he is, the easier it
is to attribute. His significance and freedom to act in the context
of a particular transaction: the more
it is his transaction, and the
more he is effectively left to get on with it by the board, the
easier it is to attribute. The degree
to which the board is informed,
and the extent to which it was, in the broadest sense, put upon
enquiry: the greater the grounds
for suspicion or even concern or
questioning, the easier it is to attribute, if questions were not
raised or answers were too readily
accepted by the board.'
In the present case, Crookes was, as the Executive Director
(Generation), in a senior position; he was clearly “left to
get on with it” by the Board when he went to Koeberg to
address the operators; and he created the clear impression that
he
was acting on behalf of Eskom. Prozesky clearly understood it that
way, and implemented the agreement at business unit level
on that
basis.
The same principle was explained in the context of a city council in
Potchefstroomse Stadsraad v Kotze:
18
“
Die
juiste posisie is dat raadsbesluite waardeur opdragte aan die
stadsklerk gegee word handelinge aangaande die interne bestuur
van
die raad is. Soos blyk uit die aanhaling hierbo uit die
Turquand
saak
word 'n onderskeid getref tussen aangeleenthede van publieke aard en
handelinge aangaande die interne bestuur van liggame.
Terwyl kennis
van die inhoud van eersgenoemde veronderstel word kan die bestaan van
laasgenoemde afgelei word en veronderstel word
dat daaraan voldoen
is. Hierdie reël is, soos appèlregter GREENBERG in die
Mine
Workers' Union
saak
19
supra
,
bl. 845, sê:
'
. . . based on the principle of convenience, for business could not
be carried on if a person dealing with the apparent agents
of a
company was compelled to call for evidence that all internal
regulations had been duly observed.'
In the present case, it could not have been expected of the
applicants to interrogate Crookes and Prozesky as to whether they
had the requisite authority from the Board of Eskom to enter into
the agreement as they did. Crookes was quite obviously acting
as the
agent of Eskom – he flew to Koeberg from Megawatt Park in
order to address their concerns on behalf of Eskom, not
on a frolic
of his own. The applicants quite rightly assumed that internal
processes had been complied with. And that perception
was
strengthened by Prozesky’s letter to them, three days letter,
in which he reiterated that proposals were “made
and endorsed”
by Crookes; and that they “could be readily implemented within
the authority of the Executive Director
(Generation) and Koberg
Power Station”.
I find, therefore, that the applicants were entitled to rely on
Eskom’s manifestation of assent.
Was the agreement enforceable?
Eskom further argues that, even if there was an agreement, it is
unenforceable because it concerned conditions of service that
had
not been centrally negotiated.
It was confirmed in evidence that the Eskom Recognition Agreement
1994 (reference ESKPVAAB5) was in force at the relevant time.
There
were nine trade unions which were party to that agreement, including
MWU.
Clause 4.2 of the Recognition Agreement provides inter alia, as
follows:
“
4.2
SENTRALE NASIONALE FORUM
4.2.1
Die Sentrale Nasionale Forum is ‘n geïntegreerde forum vir
al Eskom se werknemers en dit is die gepaste forum waar
alle
nasionale onderhandelinge, konsultasies en deel van inligting
plaasvind, maar dit maak ook voorsiening vir Groep spesifieke
kwessies. Alle aangeleenthede wat ‘n Eskom nasionale impak mag
hê moet by hierdie forum hanteer word, bv onderhandelinge
oor
salarisse, diensvoorwaardes, byvoordele en ander Eskom nasionale of
Groep spesifieke beleidsaangeleenthede.”
Mr
Schippers
submitted that the subject matter of the alleged
agreement – early retirement for a specific category of Eskom
employees,
namely licensed operators – plainly constitutes a
condition of service.
Mr Douglass, the Chairperson of MWU, conceded that a pension
benefit is a condition of service that must be negotiated.
He knew
that early retirement had not been negotiated with the unions.
The fact that no agreement had been entered into for the reason that
the retirement scheme had to be approved by Eskom’s
Head
Office, is an issue raised in the response. However, the submission
that it is a condition of service that had to be negotiated
with the
unions, was only raised by Eskom in the evidence and in argument. I
will nevertheless deal with it.
Ms Begg testified that the issues on the table on 10 July
1998 related to a condition of service, which could not be
“readily
implemented” under the authority of either the local Business
Unit Manager at Eskom or the Executive Director
(Generation). Eskom
argues that early retirement is a condition of service which is
governed by a recognition agreement with
labour and has to be
negotiated with trade unions. Apart from this, early retirement also
needed to go through the Management
Board of Eskom and ultimately
the Electricity Council, before a mandate could be given to the
management of Eskom to negotiate
the issue of early retirement at a
bargaining forum. It would then have to go back to the Management
Board and the Electricity
Council as well as the pension fund,
before it could actually be implemented.
The evidence of Mr. Morgan, the Chairman of Eskom’s
Management Board and the Chairman of the Electricity Council,
was
likewise that he considered the issue of early retirement to be a
condition of service which had to be referred to the Management
Board, which in turn would refer it to a working group under the
recognition agreement to look at the consequence of such a decision.
Once it had gone through that process within the working group in
the consultation forums, it would have to go back to the Management
Board. A proposal for early retirement of the kind in question had
to be dealt with according to the negotiation framework in
place as
determined by the recognition agreement.
Mr
Schippers
submitted that early retirement for licensed
operators at Koeberg is a matter which has a national impact, as
contemplated in
clause 4.2.1 of the Recognition Agreement, because:
The alleged agreement purports to grant individual licensed
operators additional condoned service, which enables them to
qualify for early retirement. For each year of active licensed
duty, a licensed operator is credited with 1.5 years’
service. This benefit is given to a select group of employees.
Aside from this, the unchallenged evidence is that early retirement
for licensed operators could potentially have a national
impact.
The early retirement proposal was a potential precedent for
national control staff, pilots and other categories of
staff
involved in shift work or physical work, such as artisans and line
workers.
It follows, Mr
Schippers
submitted, that defrayment of the
loss otherwise incurred by making the requisite contribution to the
relevant pension fund out
of Koeberg’s budget, is quite
irrelevant. It does not change the fact, he argued, that granting
early retirement to a select
group of employees in Eskom constitutes
a change in their conditions of service.
The Labour Appeal Court has held that changes to the rules of a
compulsory pension fund benefit was an element of an employee’s
“conditions and benefits of employment” in terms of the
union’s recognition agreement with the bank in that
case; and
that the bank’s refusal to negotiate with the representative
trade union in respect of a change to the pension
fund rules
constituted an unfair labour practice under the 1956 LRA.
20
Mr
Schippers
accordingly submitted that inasmuch as the
alleged agreement constitutes a change to conditions of service,
which did not follow
the procedures prescribed in terms of the
Recognition Agreement, it is unenforceable.
Attractive as this argument appears, I do not agree.
The way in which the early retirement benefit was to be granted, is
that an extra payment would be made out of the Koeberg budget.
That
payment would be made to the pension fund and not to the employees
themselves; but it is undisputed that Prozesky, as the
power station
manager, had the authority to pay bonuses (such as a 14
th
cheque) out of the Koeberg budget. I do not understand there to be a
major difference between the two methods of payment: the
fact that
the recipient of the extra payment in the one case is the pension
fund rather than the employees directly, does not
transmogrify it
into a condition of service. In any event, Prozesky has been giving
effect to the spirit of MD 102 in individual
cases over the last 13
years without any objection or discipline from Megawatt Park.
Furthermore, Eskom’s senior human resources advisor, Mr M
Young, himself expressly stated in a letter to Solidarity on
1
October 2002 that “early retirement is
not
a condition
of service”.
21
Like Prozesky, Young was present at these court proceedings but was
not called to testify.
I find that the agreement that reactor operators could opt for early
retirement without penalties did not constitute an amendment
to
conditions of service that had to be centrally negotiated with other
trade unions. It gave the affected operators an enhanced
benefit, at
the election of individual employees, that was within the budget and
authority of the Koeberg business unit.
Conclusion
I find that Eskom is bound by the agreement embodied in MD102 (Rev
2).
Costs
Eskom has, for the past 13 years, attempted to escape its
obligations under an agreement entered into by its agents and a
promise
made to the applicants, many of whom are by now too old to
benefit from it. Some have already retired and others have resigned.
Eskom’s conduct of the case has been distinctly unhelpful.
Relevant documents were only discovered during the course of
the
trial, and some essential documents cannot, somewhat inexplicably,
be found to this day. The decision not to call the most
pertinent
witness, Mr Prozesky, was unhelpful to the resolution of the
dispute. In law and fairness, I see no reason why costs
should not
follow the result.
Ruling
It is declared that the respondent is bound by the provisions of
Management Directive MD 102 (Rev 2) dated 2 November 1998.
The respondent is directed to implement the provisions of MD 102
(Rev 2) with immediate effect.
The respondent is ordered to pay the applicants’ costs of
suit, including the costs of senior counsel.
____________________
A J Steenkamp
Judge of the Labour Court
APPEARANCES
APPLICANTS: MSM Brassey SC
Instructed by De Lange attorneys, Durbanville.
RESPONDENT: Ashton Schippers SC
Instructed by J Ramages attorneys, Athlone.
1
Hereafter
referred to as MD102
2
(1856)
6 El & Bl 327
[1856] EngR 470
; ;
119 ER 886.
3
Blackman,
Jooste & Everingham
Commentary on the Companies Act
4-36.
4
JC
de Wet & AH van Wyk,
Die
Suid-Afrikaanse Kontraktereg en Handelsreg
(1978)
p 556.
5
Senior
Shift Supervisors
6
This
refers to the Power Station Manager at Koeberg, Mr Peter Prozesky.
7
i.e.
Prozesky.
8
i.e.
Crookes.
9
i.e.
Crookes
10
i.e.
Koeberg power station.
11
i.e.
business unit level.
12
Schwikkard
& van der Merwe
Principles of Evidence
2 ed (2002) 513
13
1983
(2) SA 197 (E) 209 C-E
14
i.e.
the principle that
one should not
increase, beyond what is necessary, the number of entities required
to explain anything. (Ascribed to English philosopher
and logician
William of Ockham (
c. 1288 – c. 1348)
.
Also expressed as the
lex
parsimoniae).
15
Joubert
et al:
The Law of South Africa
(2
nd
ed, 2003) vol
1 p 204 para 210;
South African Eagle Insurance Co. Ltd v NBS
Bank Ltd.
2002 (1) SA 560
(SCA) para 31.
16
NBS
Bank Ltd v Cape Produce Co. (Pty) Ltd and Others
2002 (1) SA 396
(SCA) paras 24 and 25.
17
2010
(3) SA 382
(SCA) para [31]
18
1960
(3) SA 616 (A) 622 C-D.
19
Mine
Workers' Union v J. J. Prinsloo
1948
(3) SA 831 (AA)
.
20
SA
Society of Bank Officials v Bank of Lisbon International
(1994)
15 ILJ (LAC) 555 at 559A-G. See also
SA Clothing & Textile
Workers Union v Garlick Stores (1922)
(Pty) Ltd
(1996) 17
ILJ 255 (IC) at 260G-J.
21
Bold
in original.