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[2015] ZALCJHB 22
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Department of Co-Operative Governance, Human Settlements and Traditional Affairs, Limpopo Province and Another v Seopela NO and Others (JR226/2012) [2015] ZALCJHB 22 (4 February 2015)

REPUBLIC
OF SOUTH AFRICA
THE
LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG
JUDGMENT
Case
no: JR 226 / 2012
DATE:
04 FEBRUARY 2015
Reportable
In
the matter between:
DEPARTMENT
OF CO-OPERATIVE GOVERNANCE,
HUMAN
SETTLEMENTS AND TRADITIONAL AFFAIRS,
LIMPOPO
PROVINCE
...................................................................................
First
Applicant
MEMBER
OF THE EXECUTIVE COUNCIL, CO-OPERATIVE
GOVERNANCE,
HUMAN SETTLEMENTS AND TRADITIONAL
AFFAIRS,
LIMPOPO
PROVINCE
............................................................
Second
Applicant
And
DANIEL
SEOPELA
N.O
..............................................................................
First
Respondent
GENERAL
PUBLIC SERVICE SECTORAL
BARGAINING
COUNCIL
.......................................................................
Second
Respondent
LEPJANE
HARRY FREDDIE
MAPHUTA
..............................................
Third
Respondent
ANDREW
VONGI
KOTANE
....................................................................
Fourth
Respondent
Heard:
7 August 2014
Delivered:
4 February 2015
Summary:
Bargaining council arbitration proceedings – review of
proceedings, decisions and awards of arbitrators – test
for
review – section 145 of LRA – requires the arbitrator to
rationally and reasonably consider the evidence as a whole
and arrive
at reasonable outcome – determinations of arbitrator compared
with evidence on record – arbitrator’s
decision irregular
and unsustainable and not a reasonable outcome – award reviewed
and set aside
Gross
negligence – principles considered – conduct of employee
respondents constituting gross negligence – arbitrator’s

award to the contrary reviewable
Gross
negligence – duties of officials in terms of the PFMA –
principles considered
Practice
and procedure – arbitrator’s award irregular in several
respects – without such irregularities the award
is not a
reasonable outcome – award reviewed and set aside
Practice
and procedure – conclusion of arbitrator on substance
unsustainable – evidence on record then properly considered
and
determined – award replaced with determination that dismissal
fair.
JUDGMENT
SNYMAN,
AJ
Introduction
[1]
This matter concerns an application by the applicants to review and
set aside an arbitration award of the first respondent in
his
capacity as an arbitrator of the GPSSBC (the second respondent). This
application has been brought in terms of Section 145
of the Labour
Relations Act
[1]
(‘the LRA’).
[2]
The first applicant dismissed the third and fourth respondents on 12
August 2010, each on a charge of gross misconduct in relating
to a
settlement payment by the first applicant of R15 000 000.00
to a third party. The third and fourth respondents pursued
their
dismissal as an unfair dismissal dispute, to the second respondent,
and the matter came before the first respondent for arbitration
on 18
August and 8 November 2011. The first respondent arbitrated the
matter, and in an award dated 23 December 2011 handed down
at the
beginning of 2012, the first respondent determined that the dismissal
of the third and fourth respondents by the first applicant
was
substantively unfair, and directed the first applicant to reinstate
the third and fourth respondents subject to a final written
warning
valid for 12 months.  No back pay was awarded. It is this
determination by the first respondent that forms the subject
matter
of the review application now brought by the applicants.
Background
facts
[3]
From the outset, is must be stated that all the background facts
referred to hereunder was actually undisputed evidence before
the
first respondent. The parties in this matter (including the first
respondent as arbitrator) had concluded a written agreement
on 24
August 2011, prior to the actual commencement of the arbitration, as
to the process which was to be followed by the first
respondent in
determining this matter.  In terms of this agreed process, no
viva voce
evidence was led before the first respondent, but it
was agreed that the transcribed evidence led in the disciplinary
hearing together
with agreed bundles of documents would constitute
the evidence before the first respondent on which he would base his
determination.
It was further agreed that the first applicant and
third and fourth respondents would submit and exchange written
submissions in
support of their respective cases. I will now set out
what is the uncontested background evidence emerging from this agreed
process.
[4]
The third and fourth respondents were employed by the first
applicant.  The third respondent at the time of his dismissal,

was the senior manager: housing accreditation and the fourth
respondent was the general manager: housing administration and
property
management. Prior to holding these positions, and in
particular in 2005, the third respondent had occupied the position of
senior
manager: legal services and labour relations and the fourth
respondent was the head of housing.  In short, the third and
fourth
respondents were senior managers in the first applicant.
[5]
The matter ultimately giving rise to the dismissal of the third and
fourth respondents arose in 2003. What had happened is that
a
contractor engaged by the first applicant, being Nyarhi Developers CC
(‘Nyarhi’) had issued summons out of the High
Court under
case number 16807 / 2003 against the first applicant for alleged
breach of contract, claiming a sum of R24 837 220.00.
In
addition, the sole member of Nyarhi was one M K Masingi (‘Masingi’),
was the second plaintiff in these proceedings
in which he claimed, in
his personal capacity, one sum of R1 095 000.00 he was
liable to pay Nedcor Bank for vehicles
he bought and another sum of
R2 000 000.00 being alleged damage to his creditworthiness.
[6]
In terms of the actual contract forming the subject matter of the
claim under case number 16807 / 2003, which contract was concluded
in
July 2000, Nyarhi was contracted to build 500 housing units in
Malamulele, and would then sell these housing units, once completed,

to persons that qualify as beneficiaries.  In addition, Nyarhi
would receive a subsidy of R4 100 000.00 from the
first
applicant in conducting this work.  The work was to be completed
in 18 months from conclusion of the contract. It appears
that Nyarhi
did some preparatory work on the contract for which it was paid
R895 000.00. But, in the end, not one housing
unit was completed
under this contract.
[7]
The first applicant filed a plea in the proceedings under case number
16807 / 2003 on 24 November 2003.  The gravamen of
the first
applicant’s case was that as a result of the year 2000 flood in
Limpopo, the finance for this housing project was
allocated to
disaster relief and by agreement with Nyarhi, this agreement was
terminated and replaced with a new contract for another
project
entered to on 7 September 2000.  In terms of the contract
concluded on 7 September 2000, Nyarhi was contracted to
construct
flood relief housing units for the Levubu / Shingwedzi and the
Elim/Hlanganani TLC areas, and once completed these housing
units
would be allocated to qualifying beneficiaries.  In the case of
this September 2000 agreement, Nyarhi would receive
a subsidy of
R16 000.00 for 1085 housing units to be constructed, amounting
to R17 360 000.00.  According to the
first applicant, this
contract replaced,
in toto
, the contract forming the subject
matter of Nyarhi’s claim.
[8]
But matters do not end there. Nyarhi issued a second summons against
the first applicant 7 June 2004 under case number 14957
/ 2004. In
this summons, Nyarhi claimed R2 940 900.00, and on this
occasion, the claim was based on alleged damages resulting
from an
alleged breach of another contract concluded on 30 July 2003, between
the first applicant and Nyarhi.
[9]
In terms of the contract forming the subject matter of the claim
under case number 14957 / 2004, Nyarhi was contracted to build
500
housing units in Mufongdi, and also would then sell these housing
units, once completed, to persons that qualify as beneficiaries.

In this instance, Nyarhi would receive a subsidy of R8 000 000.00
from the first applicant in doing this work.
The work was also
to be completed in 18 months from conclusion of the contract.
And then, similar to the situation referred
to above under the first
mentioned claim, not one housing unit was completed under this
contract.
[10]
The first applicant filed a plea in the proceedings under case number
14975 / 2004 on 27 August 2004.  The
first applicant once again
put forward the same defense, being that as a result of the year 2000
flood in Limpopo, the finance
for this housing project was similarly
diverted to disaster relief and by agreement with Nyarhi, this
agreement was terminated
and replaced with the 7 September 2000
contract awarded to Nyarhi, the terms of which are set out above.
[11]
By 2005, the Nyarhi claims had become ripe for trial, and was set
down for trial on 25 January 2005.  The
case was however
postponed so as to enable the parties to explore possible
settlement.  On 14 February 2005, Mr E E Mthimunye
(‘Mthimunye’)
from the State Attorney (who was instructed to deal with the matter
on behalf of the first applicant)
wrote to the first applicant,
recapping on the merits of the case, setting out the possible risks,
and advising on prospects of
success.  Mthimunye said that he
had been informed that the plaintiff would consider any settlement
proposal and the first
applicant was asked if it would consider
‘anything’ in settlement.  The first applicant
answered on 16 February
2005, saying that it was not adverse to
settlement negotiations but that it was entirely reliant on the State
Attorney’s
assessment of its defense.  The State Attorney
then proceeded to facilitate settlement discussions.
[12]
The first applicant, pursuant to the contemplated possible settlement
of the Nyarhi claims, then established a
negotiating team to also
fully consider the claims by Nyarhi and, in particular, assess the
prospects of successfully defending
these claims, or whether the
exploration of a settlement would be more prudent.  The third
and fourth respondents were part
of the appointed members of this
negotiating team, consisting of 5 senior managers. Specifically, and
what was also required, was
a ‘final second legal opinion’
as prospects of success in defending the claims.
[13]
The Nyarhi claims were submitted to Advocate J H Dreyer SC (‘Dreyer’)
for this legal opinion.
In a written opinion dated 22 March
2005, Dreyer said that as far as he was concerned, the claims were
‘excipiable and bad
in law’. Dreyer went further and
said: ‘It should be emphasized that I do not believe that the
merits of the Consultant’s
case are weak.  In my view, the
close corporation’s claims are going to be difficult to
prove.’  As to whether
settlement would be prudent, Dreyer
said: ‘Settlement of the matters can therefore not be promoted
based on any weakness
in Consultant’s case.  This can only
be promoted based on commercial considerations.’  Dreyer
was clearly
referring to the commercial reality of incurring legal
costs in conducting the litigation, and his settlement recommendation
was
one simply aimed at avoiding the incurring of these further legal
costs.  As to the claims by Masingi personally, Dreyer was
of
the opinion that these claims were ‘spurious’ and
deserved no consideration.  The opinion of Dreyer was also
sent
to the first respondent and the negotiating team on 23 March 2005.
[14]
In addition to the opinion of Dreyer, there was another written
opinion provided by Advocate O M Matjila (‘Matjila’),
who
was Dreyer’s junior.  Similarly, Matjila was of the
opinion that ‘It needs to be emphasized, to the extent
that the
defendant proposes to settle the matter, that the latter decision
ought not to be motivated by any notion emanating from
or suggesting
a lack of merit in the defendant’s case’.  Majila
goes further and says that it was difficult to
conceive sufficient
conduct on the part of the defendant that evinces repudiation needed
to substantiate Nyarhi’s claims.
Majila referred to the
Public Finance Management Act and warned that the plaintiff must not
be overcompensated considering its
provisions.  Majila also
believed that the claims by Masingi in his personal capacity deserved
no consideration.  Majila
then proceeded to set out several
‘pointers’ that could be taken into consideration should
possible settlement be contemplated.
[15]
On 26 April 2005, Mthimunye at the State Attorney again wrote to the
first applicant, expressing his concern about
political pressure that
was being brought to bear to settle this matter at all costs.
Mthimunye recorded that a settlement
should only be considered for
‘economical reasons’ and supported counsels’
opinions in this regard.  Mthimunye
recorded that in the light
of the facts, he believed that the matter was on face value
defendable but some further preparatory
work for the matter still
needed to be done by the department in the conduct of the case.
[16]
In addition to the legal opinions, a quantity surveyor’s report
from K C Malwashe and Associates Quantity
Surveyors was obtained in
April 2003.  However, these quantify surveyors expressed no view
of any kind as to the substance
of the claims and were only tasked
with estimating possible financial loss suffered by Nyarhi.
After applying several assumptions,
the quantify surveyors found four
possible options of possible losses, ranging between an amount of
R9 665 624.82 minimum
and R17 437 994.21 maximum.
Subsequent investigation revealed that the quantify surveyors were
actually provided with
incorrect information in the course of
preparing their report, severally tainting its value.
[17]
Also part of the documentary evidence was a report dated 4 May 2005
prepared by the negotiating team itself. In
this report, the team
stated that the State Attorney and his advocates believed that the
department had a proper defense against
the claims or at least that
Nyarhi would not be able to prove the claims.  Reference was
specifically made to the counsel
opinions referred to above. But, and
inexplicably, the team selectively quotes from Dreyer’s opinion
and seems to negate
the real nub of it.  And further, worse
still, the team proceeds to comment on Majila’s opinion
seriatim
on a paragraph by paragraph basis, and in essence in
several respects tries to disavow it. It was recommended by the team
that
the department should engage Nyarhi in negotiation ‘blended
in good faith’.
[18]
On 18 May 2005, Mthimunye informed the first applicant that the case
has again been set down for trial on 25 August
2005, and recommended
that the trial should proceed. The first applicant was asked to
assist with and participate in the arrangements
in order to properly
prepare for trial. Mthimunye also briefed counsel for trial.
Mthimunye followed up with regard to trial
preparation on 6 June
2005.  What is clear from all the correspondence emanating from
Mthimunye (which I will not all refer
to) and sent to the first
applicant, is that the State Attorney was ready to proceed to trial
and was satisfied with the first
applicant’s prospects of
success in defending the claims.  And in particular, the
correspondence of Mthimunye was specifically
addressed to the
addressed to the third respondent.
[19]
On 2 August 2005, a third opinion was then obtained, this time from
one Mr Vilakazi (‘Vilakazi’) from
Vilakazi Tau Attorneys.
Vilakazi in this opinion first dealt with the claim under case number
16807 / 2003 and expressed the view
that the defendant’s plea
needed to be amended, but other than expressing this concern, he said
that ‘the claimant’s
case falls on its face’ on the
merits thereof (referring to Nyarhi’s claim).  After
providing some reasoning for
so syaing, Vilakazi concludes that the
‘claimant’s own case is not well founded’, and
records that as far as
he was concerned, the defendant (current first
applicant) has good prospects of success.  Vilakazi records:
‘Given our
view on the strength of the Client’s case, we
believe that settlement should not be overly accommodating and
generous.’
Finally, and similarly to the other opinions,
Vilakazi believed there was no need to settle Masingi’s claims
in his personal
capacity due to any lack of merit. Vilakazi then
considered the claim under case number 14975 / 2004, and in this
instance it was
his view that the claimant indeed had a strong case,
and recommended the first applicant should try and settle this matter
before
further costs were incurred.  In respect of this claim,
Vilikazi thus differed from counsels’ opinion, but it must be

pointed out that the quantum of this claim was for less than R3
million.
[20]
The negotiating team then reported back to the first applicant on 2
August 2005, and presented a formal recommendation
as to the conduct
of the matter (hereinafter referred to as ‘the
recommendation’).  Reference was made in the

recommendation to the legal opinions of Dreyer and Majila, as well as
the opinion from Vilakazi.  The conclusion by the team
was that
their analyses revealed that Nyarhi’s case and the department’s
defense were ‘highly contestable’,
whatever this may
mean. In other words, the recommendation was that the Nyarhi claims
had substance and merit. The opinion was
also expressed in the
recommendation that the most prudent course of action open to the
first respondent was to conclude a settlement
in order to eliminate
this risk of losing.  Importantly, the recommendation recorded
that the quantum of the risk was R30
million. The team proposed that
the department settle for R15 million.  As the team was
specifically appointed for the purpose
of making such a
recommendation, this recommendation was accepted without further ado
by all the functionaries in the first applicant.
[21]
On 24 August 2005, a settlement agreement was then concluded in terms
of which the two actions by Nyarhi was settled
on the basis of the
payment of a sum of R15 million.  It appears that this
settlement payment was not disclosed in the first
applicant’s
financial statements, and was discovered in an audit conducted by the
auditor general in 2006.  In an audit
report dated 14 September
2006, this payment was reflected by the office of the auditor general
as fruitless and wasteful expenditure
not disclosed.  This
report in turn led a further investigation.
[22]
In a letter dated 7 December 2006, the State Attorney wrote that
despite the matter being tasked to the State Attorney
and being dealt
with by it, the settlement agreement was entered into without the
involvement of the State Attorney.  The
State Attorney said that
this settlement was concluded contrary to the opinion of the State
Attorney and Counsel.  In essence,
the State Attorney distanced
itself from the settlement.
[23]
A comprehensive investigation into the issue of the R15 million
settlement was the undertaken in 2008. The project
manager in this
investigation was Advocate W H Moore SC (‘Moore’).
A detailed final report was provided by Moore
on 30 June 2009.
In this report, Moore stated that despite it not being possible to
establish whether the settlement was
irregular, the conclusion of the
settlement was certainly fruitless and wasteful expenditure.
Moore said that incorrect information
had been provided to the
quantity surveyors, and consequently the loss quantification should
not have played a role in the final
settlement decision.  Moore
was of the view that there was improper conduct (negligence) on the
part of the negotiating team
during the process they conducted, which
culminated in the settlement.  Moore said the following about
the recommendation
by the negotiating team on 2 August 2005 to settle
for R15 million: ‘The about turn in respect of the manner of
the proposed
settlement …. as well as the merits of the LDLGH
(referring to the first applicant) case, is astonishing.
Furthermore,
this new analyses of the merits of the LDLGH case was in
clear contradiction to the Advices of Dreyer SC, Maljila and Vilakazi
Tau Attorneys.’  It was recommended by Moore that
disciplinary proceedings be instituted against the third and fourth

respondents, being the only members of the negotiating team still
employed by the first applicant at that point in time.
[24]
Moore also had something to say about the qualifications of the third
and fourth respondents.  He recorded
that the third respondent
was in possession of a 3 year legal degree, but had no relevant or
appropriate legal experience, and
had never been admitted to practice
as attorney or advocate or undergone any law school training.
As to the fourth respondent,
Moore said he had a teaching diploma and
no other related experience.  The crux of this consideration by
Moore was that it
was unclear how they could competently make a
recommendation that contradicted three legal opinions.  Moore
came to the conclusion
that: ‘Particularly, they recommended a
course of action that they knew would result in fruitless and
wasteful expenditure
in an attempt to settle the matters at all
costs.’
[25]
On 7 December 2009, the third and fourth respondents were then
notified to attend a disciplinary hearing on a charge
of gross
misconduct.  The charge was specifically described as one of
“gross negligence’ in recommending the settlement
of R15
million in the Nyarhi claims, and in doing so, they failed to
exercise reasonable care, resulting in fruitless and wasteful

expenditure.  The disciplinary hearing commenced on 7 April 2010
and continued over several days over the next two months.
The
hearing was presided over by Mr A M Carrim, an independent third
party attorney from Polokwane.  In a written finding
dated 26
July 2010, Carrim found the third and fourth respondents guilty of
the charge against them.  After considering submissions
on
sanction, Carrim recommended the dismissal of the third and fourth
respondents in a written finding on sanction dated 12 August
2010,
and they were accordingly dismissed.
[26]
The first respondent, in his award, in essence accepted the factual
matrix as set out above.  In short, the
first respondent then
actually accepted that the third and fourth respondents did commit
misconduct in the form of the negligent
discharge of their duties on
the negotiating team.  But, and based on the reasoning that will
further be elaborated on hereunder,
the first respondent adopted the
view that the dismissal of the third and fourth respondents was
inappropriate in this instance.
This conclusion then motivated
the first respondent to find that the dismissal of the third and
fourth respondents was substantively
unfair, and to award them
reinstatement subject to a final written warning and no back pay.  It
is these conclusions of the
first respondent that then gave rise to
these review proceedings.
The
test for review
[27]
The test for review is trite. In
Sidumo
and Another v Rustenburg Platinum Mines Ltd and Others,
[2]
Navsa
AJ set the threshold test for the reasonableness of an award or
ruling as: ‘…Is the decision reached by the commissioner

one that a reasonable decision-maker could not reach?...’
[3]
Following
on, and in
CUSA
v Tao Ying Metal Industries and Others,
[4]
O'Regan
J held: ‘It is clear…. that a commissioner is obliged to
apply his or her mind to the issues in a case. Commissioners
who do
not do so are not acting lawfully and/or reasonably and their
decisions will constitute a breach of the right to administrative

justice.’
What
the Constitutional Court means in
Sidumo
and
Tao
Ying Metal Industries,
is a review test based on a comparison by a review court of the
totality of the evidence that was before the arbitrator as well
as
the issues that the arbitrator was required to determine, to the
outcome the arbitrator arrived at, in order to ascertain if
the
outcome the arbitrator came to was reasonable.
[28]
In deciding a review, it is all, in the end, about a reasonable
outcome.  As was said in
Fidelity
Cash Management Service v Commission for Conciliation, Mediation and
Arbitration and Others
[5]
:
‘
The
Constitutional Court has decided in
Sidumo
that the grounds of review set out in s 145 of the Act are suffused
by reasonableness because a CCMA arbitration award, as an
administrative action, is required by the Constitution to be lawful,
reasonable and procedurally fair. The court further held that
such an
award must be reasonable and if it is not reasonable, it can be
reviewed and set aside.
’
[29]
Two recent considerations of the
Sidumo
test
bears reference.  Firstly, the SCA in
Herholdt
v Nedbank Ltd and Another
[6]
said
the following:
[7]
‘
In
summary the position regarding the review of CCMA award is this: A
review of a CCMA award is permissible if the defect in the

proceedings fall within one of the grounds in s 145(2)(a) of the LRA.
For a defect in the conduct of the proceedings to amount
to a gross
irregularity as contemplated by s 145(2)(a)(ii), the arbitrator must
have misconceived the nature of the inquiry or
arrived at an
unreasonable result. A result will only be unreasonable if it is one
that a reasonable arbitrator could not reach
on all the material that
was before the arbitrator. Material errors of fact, as well as the
weight and relevance to be attached
to the particular facts, are not
in and of themselves sufficient for an award to be set aside, but are
only of consequence if their
effect is to render the outcome
unreasonable.
’
Secondly,
the LAC in
Gold
Fields Mining South Africa (Pty) Ltd (Kloof Gold Mine) v Commission
for Conciliation, Mediation and Arbitration and Others
[8]
applied
the
Sidumo
test
as follows:
[9]
‘
Sidumo
does not postulate a test that requires a simple
evaluation of the evidence presented to the arbitrator and based on
that evaluation,
a determination of the reasonableness of the
decision arrived at by the arbitrator… In other words, in a
case such as the
present, where a gross irregularity in the
proceedings is alleged, the enquiry is not confined to whether the
arbitrator misconceived
the nature of the proceedings, but extends to
whether the result was unreasonable, or put another way, whether the
decision that
the arbitrator arrived at is one that falls in a band
of decisions a reasonable decision maker could come to on the
available material
’
[30]
In short, and following the ratios in
Herholdt
and
Gold Fields
,
what is postulated is a two stage review test. The first stage is to
determine if a material irregularity exists in the arbitration
award
or the arbitration proceedings. This is done by considering the
proper evidence as gathered from the review record, together
with the
relevant principles of law, and then comparing this to the award and
reasoning of the arbitrator as reflected in such
award.  The
second stage in the review enquiry only follows if a material
irregularity is found to exist, and this entails
a consideration as
to whether, if this irregularity did not exist, it could reasonably
lead to a different outcome in the arbitration
proceedings. Put
differently, the second enquiry step is simply whether another
reasonable decision-maker, in conducting the arbitration
and arriving
at a determination, in the absence of the irregularity and
considering the evidence and issues as a whole, could still

reasonably arrive at the same outcome.
[31] Against the
above principles and test, the award of the first respondent in this
instance must be determined.
The
reasoning of the first respondent
[32]
As stated above, the first respondent in effect accepted the factual
matrix established by the background facts
I have summarized above.
However, and when it comes to the issue of the recommendation, the
first respondent simply does
not seem to come to grips with what is
the real issue. The first respondent records that ‘None of the
legal gurus consulted
was against the settlement’.
Despite this conclusion indeed being correct, it is unfortunately
completely misdirected.
The issue was never that there should
not have been any settlement of any kind.  The issue was, as the
‘legal gurus’
said, that any settlement should only have
as its basis what is generally known as nuisance value grounds, or,
as Dreyer called
it, ‘commercial considerations’.
On the evidence, and what counsel specifically said, was that
settlement must
not be motivated by any considerations that the first
applicant’s defense to the Nyarhi claims has no substance.
In
other words, what the first respondent should have considered was
not whether settlement per se was ever in issue, but what the
legal
advisers said about the basis of the settlement.  This
misconstruing of the real issue unfortunately had a material
impact
on the ultimate outcome arrived at by the first respondent, which I
will deal with hereunder.
[33]
When dealing in his award with the obligations that actually rested
on the third and fourth respondents, the first
respondent fortunately
gets it right.  The first respondent rejects the contention by
the third and fourth respondents that
the provisions of the PFMA
[10]
does not apply to them and that they accordingly did not transgress
any rule in terms thereof.  The first respondent accepts
that
the third and fourth respondents were officials in the first
applicant, were senior employees, and had ‘enormous
responsibilities’.
The first respondent went so far as to
find that the third and fourth respondents were ‘trying to
escape their own bodies
and expect to live outside their bodies’
by contending that the PFMA did not apply to them.  As
ineloquent as this description
by the first respondent may be, it is
clear to me that what the first respondent is actually saying is that
the third and fourth
respondents are deliberately trying disavow the
application of the PFMA on them.  This is an important
consideration in deciding
this matter, which I will address
hereunder.
[34]
Having found that the PFMA does find application, the first
respondent then deals with the opinions placed before
the negotiating
team as to the issue of how the Nyarhi claims should be dealt with.
The first respondent actually held that
the third and fourth
respondents ‘placed little weight on the opinions which were
likely to benefit the department in their
quest to have the dispute
settled’. Furthermore, and in dealing with the defense offered
by the third and fourth respondents
that they were pressurized by the
other team members to make the recommendation, the first respondent
pertinently rejected this
as ‘far-fetched’ and being
unsubstantiated by any evidence.  Whilst the first respondent
approached the determination
of the manner in which the opinions were
considered by the team correctly, he unfortunately stops far short of
what would ultimately
be a proper final determination of this very
important issue. What the first respondent says nothing about is the
immediately clear
and undeniable disconnect between the opinions
provided and the recommendation made.  As Moore says in his
investigation report,
there is an inexplicable ‘about turn’.
In effect, two counsel specifically say the Nyarhi claims have no
merit
and would be difficult to prove, and that the claims by Masingi
personally are so spurious as to not warrant any attention where
it
came to settlement.  But, and despite this, and nothing else to
the contrary to rely on, the team recommends that the Nyathi
claims
have merit, there is a risk for the full value of R30 million claimed
(which includes the claims by Masingi personally)
and that monetary
settlement is really the only option. I consider this to be a
fundamental issue, which seems to have entirely
escaped the first
respondent.
[35]
Even if one also considers the opinion by Vilakazi, he was
ad idem
with the two counsels’ views, save for the second claim under
case number 14957 / 2004 (which was less than R3 million) in
respect
of which Vilakazi thought Nyarhi did have prospects.  Why
Vilikazi’s opinion was even necessary is beyond me,
considering
the clear opinion by senior and junior counsel as supported by the
State Attorney, who was briefed in and attending
to the matter.
But even taking Vilakazi’s opinion into account on its own,
which was given on the very same day as
the recommendation, it is
entirely inconsistent with substantiating a recommendation of a R15
million settlement.  Added to
all the above, and as appears from
the report by Moore, none of the negotiating team members were in any
event in a position so
as to legitimately and properly contradict any
external legal opinion, considering their lack of experience and
qualification.
Finally, even the State Attorney was bypassed in
this whole process, who supported the counsels’ opinions.
In a nutshell,
the recommendation to settle for a sum of R15 million
made by the team in my view makes no sense of any kind.  It has
no foundation
whatsoever, considering the legal opinions on which it
should have been based.  I am firmly of the view that at best
for the
third and fourth respondents, for them to have made the
recommendation that they did (as part of the team of course) shows
complete
indifference to the discharge of their duties in an
acceptable and responsible manner and an utter failure to appreciate
the consequences
of their conduct.
[36]
Considering the above, I then have much difficulty with how the first
respondent concludes his reasoning on the
issue of the recommendation
and its consequences. The first respondent finds that it was not
possible to say that the recommendation
resulted in wasteful and
fruitless expenditure.  The reasons given by the first
respondent for coming to this conclusion,
I regret to say, is
difficult to comprehend.  The first respondent starts off by
saying that at least the recommendation caused
the matter to be
settled.  But that is like saying, for example, that at least an
employee who negligently failed to secure
a gas main only caused part
of the factory to blow up and not all of it.  The reasoning is
preposterous and cannot justify
a settlement of R15 million that
never should have happened in the first place.  It is however
the next conclusion the first
respondent comes to that bears specific
mention, and I am compelled to quote it verbatim as follows: ‘It
is my view no person
is better positioned to say the recommendation
was indeed wasteful and fruitless expenditure except the prophet and
we are dot
dealing with the cases from prophetic offices but we deal
with the merits of each case’ (sic).  I do not understand
what this means.  If it means that the first respondent found
there is no evidence that the recommendation led to wasteful
and
fruitless expenditure and to make such a conclusion would be
prophetic divination, then this finding not only has no foundation
in
fact, but would be an entirely irregular and unjustified conclusion.
I say this for the following reasons:
36.1
The PFMA defines ‘
fruitless and wasteful
expenditure’ as
expenditure which was
made in vain and would
have been avoided
had reasonable care been exercised.  This is certainly the case
in casu
;
36.2
Considering the complete disconnection that existed between the legal
opinions and the recommendation,
and especially considering the
absence of any explanation or justification for this, one can only
conclude that no reasonable care
has been exercised in making the
recommendation.  In my view, it can comfortably be said that the
recommendation shows complete
indifference to the opinions;
36.3
A pertinent illustration of the mentioned indifference shown can be
found in the fact that
the recommendation records that the first
applicant’s risk is for R30 million. But this includes the
amount of some R3 million
in respect of the claims by Masinga in his
personal capacity which all legal opinions unequivocally made clear
had no merit at
all and was actually spurious;
36.4
Both the auditor general (after conducting an audit) and Moore (after
conducting a detailed
investigation) determined that the settlement
payment was wasteful and fruitless expenditure. There was nothing
offered by the
third and fourth respondents to gainsay this;
36.5
The recommendation was the direct cause for the R15 million
settlement payment.  Had
the third and fourth respondents
exercised proper and due (reasonable) care, such a recommendation
simply could not have been made
in the first place.  As such,
the settlement payment could have been avoided;
36.6
Therefore, the recommendation can be nothing else but the direct
cause of wasteful and
fruitless expenditure.
[37]
The final part of the first respondent’s reasoning relates to
the nature of the recommendation.  According
to the first
respondent, the recommendation is just that.  It is not binding
and need not be followed.  The first respondent
reasons that it
was up to the MEC and HOD to follow the recommendation or not, and
since they chose to follow it, it was them who
committed wasteful and
fruitless expenditure even if it existed. But in the same breath, the
first respondent says that the third
and fourth respondents were
indeed negligent because they made a recommendation that was
‘questionable’.  The
first respondent however
concludes that this failure by the third and fourth respondents was
not gross negligence, but just ordinary
negligence.  I cannot
accept this kind of reasoning.  It negates the very reason why a
specific team was appointed to
attend to a specific and important
issue.  Mr Laka, who represented the third and fourth
respondents, in any event conceded,
when I asked him, that the
recommendation made by the team played a ‘critical role’
in the decision to settle for R15
million. But even without this
concession, the reasoning of the first respondent is simply
unsustainable for the simple reason
that the MEC and HOD in reality
had nothing else to base their decision on, other than the
recommendation.  That after all
was why the team existed.
The MEC and HOD followed exactly, to the letter, what the team
recommended.  There was no
further consideration or debate.
In fact, all the requisite approvals were granted at the foot of the
recommendation document
itself.  The simple point has to be –
was it not for the recommendation there would not have been a
settlement for R15
million.
[38]
Mr Laka argued that the MEC and HOD were free to reject the
recommendation.  But this kind of argument again
loses sight of
the very purpose behind the appointment of a five man team
specifically tasked to come up with a final appropriate
solution in
the Nyarhi claims.  With the matter being on the steps of Court,
the MEC and HOD had to know whether they should
fight, or beat a
dignified retreat in the form of a proper settlement.  The team
was tasked to get opinion, consider all options,
and propose a
solution.  Considering the case was set down for trial on 25
August 2005, along with the considerable pressure
being applied by
the State Attorney as to what to do about the trial, it is highly
unlikely that the MEC and HOD would have rejected
any recommendation
made by the team, especially considering it was only finally made
some three weeks before trial.  It is
my view that considering
this context, there was an even greater responsibility on the team to
make a proper recommendation, especially
considering the bypassing of
the State Attorney.  The only reasonable conclusion has to be
that whatever the team recommended,
the MEC and HOD would follow.
[39]
As stated above, the first respondent accepted that the PFMA applies
to the third and fourth respondents.
The first respondent
however unfortunately failed to have proper consideration to the fact
that the third and fourth respondents
unjustifiably sought to disavow
the application of the PFMA to them.  Such failed approach of
the third and fourth respondent
in my view had to in itself have a
consequence in determining this matter.  In this respect, I
consider this to be a deliberate
attempt by the third and fourth
respondents to negate the clear duty that rested upon them to
safeguard the financial interests
of the first applicant, because
they know the consequences of their failure. Section 57 of the PFMA
provides as follows as to the
responsibilities of officials in public
entities:
‘
An
official in a public entity —
(a)
must ensure that the system of financial management and internal
control established for that public entity is carried out within
the
area of responsibility of that official;
(b)
is responsible for the effective, efficient, economical and
transparent use of financial and other resources within that
official's
area of responsibility;
(c)
must
take effective and appropriate steps to prevent, within that
official's area of responsibility, any irregular expenditure and

fruitless and wasteful expenditure and any under collection of
revenue due;
(d)
must comply with the provisions of this Act to the extent
applicable to that official, including any delegations and
instructions
in terms of section 56; and
(e)
is responsible for the management, including the safe-guarding,
of the assets and the management of the liabilities within that
official's area of responsibility.'
And
then in terms of section 81(3) of the PFMA:
‘
An
official of a public entity to whom a power or duty is assigned in
terms of
section 56
commits
an act of financial misconduct if that official wilfully or
negligently fails to exercise that power
or perform that
duty.’
There
can be no doubt that the third and fourth respondents are officials
of the first applicant, as the first respondent himself
accepted.
The third and fourth respondents were specifically tasked to deal
with the Nyarhi claims, in line with the duties
as set out above.
Therefore, and once the PFMA thus applied, it follows that the
negligent failure by the third and fourth respondents
to comply with
these duties must be misconduct.  This the third and fourth
respondents in my view knew was the case, and tried
to avoid.
In itself, this is bordering on dishonesty.
[40]
Based on all the above circumstances and considerations, the
misconduct at hand is far more than just ordinary
negligence, as the
first respondent finds.  Considering the complete lack of
consideration of the legal opinions by the negotiating
team
(including the third and fourth respondents), I am convinced gross
negligence in fact exists, as such failure can only be
tantamount to
a complete failure to take proper care, and failure to consider the
actual consequences of the recommendation (being
that it would result
in fruitless and wasteful expenditure).  In deciding what
constitutes gross negligence, the Court in
Transnet
Ltd t/a Portnet v Owners of the MV Stella Tingas and Another
[11]
said:
‘…
.
it is not consciousness of risk-taking that distinguishes gross
negligence from ordinary negligence. …. If consciously
taking
a risk is reasonable there will be no negligence at all. If a person
foresees the risk of harm but acts, or fails to act,
in the
unreasonable belief that he or she will be able to avoid the danger
or that for some other reason it will not eventuate,
the conduct in
question may amount to ordinary negligence or it may amount to gross
negligence (or recklessness in the wide sense)
depending on the
circumstances. …. even in the absence of conscious
risk-taking, conduct may depart so radically from the
standard of the
reasonable person as to amount to gross negligence …. It
follows that whether there is conscious risk-taking
or not, it is
necessary in each case to determine whether the deviation from what
is reasonable is so marked as to justify it being
condemned as gross
.…
Dicta
in
modern judgments, although sometimes more appropriate in respect of
dolus
eventualis,
similarly reflect the extreme nature of the negligence required to
constitute gross negligence. Some examples are: 'no consideration

whatever to the consequences of his acts' (
Central
South African Railways v Adlington & Co
1906
TS 964
at 973); 'a total disregard of duty' (
Rosenthal
v Marks
1944 TPD 172
at 180); 'nalatigheid van 'n baie ernstige aard' or ''n
besondere hoë graad van nalatigheid' (
S
v Smith en
Andere
1973
(3) SA 217 (T)
at
219A - B); 'ordinary negligence of an aggravated form which falls
short of wilfulness' (
Bickle
v
Joint
Ministers of Law and Order
1980
(2) SA 764 (R)
at
770C); 'an entire failure to give consideration to the consequences
of one's actions' (
S
v Dhlamini
1988
(2) SA 302
(A)
at
308D).” It follows, I think, that to qualify as gross
negligence the conduct in question, although falling short of dolus

eventualis, must involve a departure from the standard of the
reasonable person to such an extent that it may properly be
categorised
as extreme; it must demonstrate, where there is found to
be conscious risk-taking, a complete obtuseness of mind or, where
there
is no conscious risk-taking, a total failure to take care .…’
Applying the above
ratio in
Stella Tingas
in casu
, the conduct of the
third and fourth respondents would therefore be gross negligence
because it demonstrates a complete failure
to take care and give
consideration to the consequences of their actions, in making the
recommendation. The fruitless attempts
by the third and fourth
respondents to distance themselves from their statutory duty
aggravates the failure.
[41]
A further judgment of relevance is that of
Nampak
Corrugated Wadeville v Khoza
[12]
,
in
which case the employee party was charged and dismissed for gross
negligence in that he had failed to take proper care of equipment
for
which he was responsible. The Industrial Court found that the
employee was negligent but could not find gross negligence to
exist,
on a basis similar to the approach of the first respondent
in
casu
.
The LAC disagreed with the Industrial Court and held:
‘…
The
probable explanation for his conduct, in these circumstances, is
simply that he deliberately neglected to perform his duties.

Consequently, I do not share the view of the Industrial Court that
the evidence against Khoza was so circumstantial that it could
not be
used to explain his conduct. It was Khoza who had to furnish that
explanation. In the absence of any credible explanation,
the
inference that he deliberately neglected to perform his duty is
irresistible. This finding by the employer cannot be faulted.’
I
consider the same reasoning to applicable in the current proceedings
before me, especially in the absence of any proper explanation
by the
third and fourth respondents which could justify why the
recommendation had been made in the form it was and why there was

such a disconnect with.
[42]
I also take guidance from the judgment in
Stoop
and Another v Rand Water
[13]
,
which dealt with circumstances comparable to the matter
in
casu
.
The judgment dealt with the approval by officials in a public entity
employer of irregular invoices.  One of the officials,
one
Buckle, sought to answer the misconduct he had been accused of, by
saying that he was not approving the invoices but simply
‘noting’
them.  The Court said the following, in upholding the dismissal
of the officials:
[14]
‘
Buckle's
version that he was simply noting also begs the question: What was he
noting? Was he also 'noting' the glaring irregularities
that are so
glaring that it is plain to see? Even if he was only 'noting', why
did he not once query an invoice?
Lastly,
Buckle's version is inconsistent with general accounting principles,
practice in the PFMA environment and common sense.
…. At the
very least, he should have said something about the blatant
irregularities yet month after month, year after year,
he allowed
these irregular invoices to proceed to the finance department for
payment. It also makes no commercial sense merely
to 'note' an
invoice. Furthermore, when a person signs an invoice, he must
reasonably believe that others could rely on his
signature or hold
him accountable. ….’
The
Court also dealt with the issue that actual payment was then made in
terms of these invoices and said:
[15]
‘
I
am satisfied that the respondent has establish that Buckle and Stoop
had caused the losses. Had they not acted fraudulently,
the
respondent would not have made the overpayments to SWR on the
strength of the fraudulent invoices. I am, therefore, satisfied
that
there is a causal link between the breach and the damages suffered by
the respondent. I am also satisfied that there exists
both a
factual and legal cause for the loss suffered.’
Applying
the same kind of reasoning as that adopted in
Stoop
, referred
to above, the third and fourth respondents must have known that the
recommendation to settle for R15 million and the
reasons given for
that recommendation, was entirely at odds with the legal opinions.
If the third and fourth respondents
did not wish endorse this
recommendation they should have raised a complaint or formally
distanced themselves from it. The third
and fourth respondents,
considering the task specifically bestowed on them, must have known
that this recommendation was in breach
of the provisions of the
PFMA.  And finally, this recommendation was the cause for the
settlement payment being made and thus
causing wasteful expenditure
incurred by the first applicant of R15 million.  The same as was
the case in
Stoop
, the third and fourth respondents’
dismissal was justified.
[43]
In summary therefore, I find that the following conclusions made and
reasoning adopted by the first respondent,
in his award, to
constitute gross irregularities:
43.1
The conclusion of the first respondent that counsel and the attorney
was not adverse to
settlement and this to some extent justified the
conduct of the third respondents because all that happened is that
the matter
was settled, was irregular.  As I said, it was never
about a difficulty with settlement per se, but it was about on what
basis
settlement should be considered.  In this regard, and in
particular, all the legal opinions confirmed that the matter should

only be settled on a commercial basis and not on the basis that the
first applicant’s case had no merit;
43.2
The fact that the first respondent failed to give proper
consideration to the unjustified
attempts by the third and fourth
respondents to distance themselves from their duties under the PFMA,
is irregular;
43.3
The failure by the first respondent to have proper regard to the
complete disconnect between
the legal opinions and recommendation
ultimately made by the third and fourth respondents, without any
explanation for it, is irregular;
43.4
The conclusion by the first respondent that there was no evidence
that the recommendation
resulted in fruitless and wasteful
expenditure, is irregular.  The recommendation was certainly the
direct cause of the existence
of fruitless and wasteful expenditure;
43.5
The finding that the conduct of the third and fourth respondent did
not constitute gross
negligence is irregular; and
43.6
The view of the first respondent that the MEC and HOD was not obliged
to follow the recommendation,
because the recommendation was just a
recommendation, as some basis of exoneration of the third and fourth
respondents, is irregular.
As I have said, was it not the
recommendation, the settlement would not have happened at R15
million.
But
do these irregularities then render the ultimate outcome in this
matter to be an unreasonable outcome, this enquiry being the
second
part of the review test?
[44]
In my view, there can be no doubt that the gross irregularities
referred to render the entire outcome in this matter
to be
unreasonable.  Was it not for the existence of these
irregularities, the first respondent simply could not have reasonably

arrived at the conclusions that he did.  I say this because once
these irregularities are taken out of the equation, then
the only
reasonable outcome has to be that the third and fourth respondents
were indeed guilty of gross negligence and that they
had earned their
dismissal.  In short, I consider this to be case because once
the existence of gross negligence and not just
ordinary negligence is
accepted, proper consideration is given to the duties and obligations
of the third and fourth respondents
in respect of which they failed,
proper consideration is given to completely and entirely inexplicable
and unjustified disconnect
between the legal opinions and the
recommendation made, and finally that the recommendation was actually
the
sine qua non
for the settlement of R15 million, the only
reasonable outcome is that dismissal of the third and fourth
respondents was justified.
Any conclusion to the contrary is
reviewable.
Conclusion
[45]
Therefore, and based on the reasons set out above, I conclude that
the first respondent’s award simply cannot
be sustained. This
compels me to review and set aside the award of the first respondent
as being a gross irregularity and following
on, an award a reasonable
decision maker could not come to in the circumstances.
[46]
Having reviewed and set aside the award of the first respondent, I
see no reason to remit this matter back to the second respondent

again for determination
de novo
before another arbitrator. As
stated above, the factual matrix in this matter was actually
uncontested, and the evidence submitted
was done by agreement.
None of this will change going forward.  There is simply no
reason why I cannot finally determine
this matter, now, and both
parties, when this matter was argued, actually agreed that this was
the appropriate course of action.
[47] In addition,
the misconduct dates back to 2005, the disciplinary proceedings and
dismissal to 2010, and the arbitration to
2011. It is in my view
unpalatable to have all of this start over and be considered again,
now in 2015, if this matter is indeed
remitted back to the second
respondent. It is a constitutional imperative that employment
disputes must be speedily resolved. I
will refer to what several
Constitutional Justices said, starting with Skweyiya J in
Khumalo
and Another v Member of the Executive Council for Education:
KwaZulu-Natal
[16]
where the learned Judge said: ‘… the importance of
resolving labour disputes in good time is thus central to the LRA

framework. ….’. Similarly, and in
Aviation
Union of SA and Another v SA Airways (Pty) Ltd and Others
[17]
,
Jafta J held: ‘….Speedy resolution is a distinctive
feature of adjudication in labour relations disputes ….’.

And in
National
Education Health and Allied Workers Union v University of Cape Town
and Others
[18]
Ngcobo J said: ‘By their very nature labour disputes must be
resolved expeditiously and be brought to finality so that the
parties
can organize their affairs accordingly. They affect our economy and
labour peace. It is in the public interest that labour
disputes be
resolved speedily …’.  In such hallowed company, I
feel entirely justified in concluding that this
matter must now
finally come to an end.
[48] I am fortified
in my consideration that this matter must be finally determined by
the fact the further conduct of this matter,
all over again, would be
done at taxpayers’ expense.  Being mindful of the very
statutory provisions with regard to
wasteful expenditure, I am of the
view that arbitration
de novo
would be nothing more than
wasteful expenditure.  I am not going to put an already strained
provincial fiscus through this
expense again.
[49]
I, therefore, intend to substitute the arbitration award of the first
respondent with an award that the third and fourth respondents’

dismissal was substantively fair, and thus be upheld.
[50]
This then only leaves the issue of costs. In terms of the provisions
of section 162(1) and (2) of the LRA, I have a wide discretion
where
it comes to the issue of costs. I must confess that I am somewhat
conflicted where it comes to costs.
The applicants
succeeded in Court, which motivates a costs award in their favour.
I however also consider the responsible
and actual amicable and
co-operative manner in which the arbitration was conducted by both
the parties, especially the fact that
evidence was placed before the
first respondent as agreed evidence.  Had the first respondent
then simply did that which he
was supposed to do, and reasonably
determined the matter, then all of the litigation in this matter
would not have been necessary.
Therefore, and although the applicants
were successful, I do not intend to burden the third and fourth
respondent with a costs
order, especially considering the opportunity
afforded to me to bring this matter finally to an end.
I
accordingly exercise my discretion as to costs in this matter by
making no order as to costs.
Order
[51]
In the premises, I make the following order:
51.1
The applicants’ review application is granted.
51.2
The arbitration award of the first respondent, being arbitrator
Daniel Seopela, which is dated 23 December 2011 and issued
under case
number GPBC 344/2010, is reviewed and set aside.
51.3
The arbitration award is substituted and replaced with an award that
the dismissal of the third respondent (L H F Mathutha)
and the fourth
respondent (A V Kotane), by the first applicant, was substantively
fair.
51.4
There is no order as to costs.
Snyman
AJ
Acting
Judge of the Labour Court
APPEARANCES:
For
the Applicant: Advocate G I Hulley
Instructed
by: Verveen Attorneys
For
the Third Respondent: Advocate A P Laka SC
Instructed
by: Rammutla-At-Law Attorneys
[1]
No 66 of 1995.
[2]
(2007)
28
ILJ
2405
(CC).
[3]
Ibid
at para 110.
[4]
(2008)
29
ILJ
2461 (CC)
at para 134.
[5]
(2008)
29
ILJ
964 (LAC) at para 96.
[6]
[2013] 11 BLLR 1074
(SCA)
per
Cachalia and Wallis JJA.
[7]
Id
at para 25.
[8]
[2007] ZALC 66
;
[2014]
1
BLLR 20
(LAC)
per
Wag
lay
JP.
[9]
Id
at para 14.
[10]
Public
Finance Management Act 1 of 1999
.
[11]
2003
(2) SA 473
(SCA) at para 7.
[12]
(1999)
20 ILJ 578 (LAC)
at
para 35.
[13]
(2014) 35 ILJ 1391 (LC).
[14]
Id
at paras 113 – 114.
[15]
Id
at para 118.
[16]
(2014) 35
ILJ
613 (CC) at para 42.
[17]
(2011) 32
ILJ
2861
(CC) at para 76.
[18]
(2003) 24
ILJ
95 (CC) at para 31.