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[2015] ZALCJHB 59
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Syrex (Pty) Ltd v Ramfolo (J1267/14) [2015] ZALCJHB 59; (2015) 36 ILJ 2132 (LC) (27 February 2015)
REPUBLIC
OF SOUTH AFRICA
THE LABOUR COURT
OF SOUTH AFRICA, JOHANNESBURG
JUDGMENT
Case
No: J1267/14
DATE:
27 FEBRUARY 2015
Reportable
In
the matter between:
SYREX
(PTY)
LTD
...................................................................................................................
Applicant
And
ANNAH
LERATO
RAMFOLO
...........................................................................................
Respondent
Heard: 17
February 2015
Delivered: 27
February 2015
Summary:
Application for the payment of damages arising from breach of
contract and recovery of agreed training costs; Application
launched under s. 77(3) of the BCEA; First part of the claim based on
failure to serve notice period of two months and the second
seeks to
recover training costs; No proof of loss actually suffered in respect
of the damages claim; Claim for training costs found
to be arising
from a penalty stipulation as envisaged by Act 15 of 1962 and s. 3
thereof invoked
mero motu
;
Penalty reduced to NIL on account of it being
disproportionately excessive with no prejudice having been suffered
by the
Applicant; Application dismissed with no order as to costs.
JUDGMENT
VOYI, AJ
[1]
This matter pertains to a claim for
contractual damages allegedly suffered by the Applicant. The
Applicant seeks to recover, by
way of application, damages ostensibly
suffered as a result of the Respondent’s failure to serve the
agreed two months’
notice when she resigned from the
Applicant’s employ. The Applicant also seeks to recover an
amount classified as training
costs.
[2]
The
application is launched under the provisions of s 77(3) of the Basic
Conditions of Employment Act.
[1]
It is axiomatic that a claim of the present nature can be brought
before this court under the provisions of s 77(3) of the BCEA.
[2]
[3]
The Applicant’s claim for damages is
premised on a written contract of employment that was signed by both
parties on 22 May
2013. In terms of the signed contract of
employment, the Respondent’s employment with the Applicant
commenced on 3 June 2013.
The Respondent was employed in the capacity
of HR Officer and Administrator: Category 01.
[4]
In terms of clause 14.1 of the written
contract of employment, the Respondent could only terminate her
employment with the Applicant
by giving two calendar months’
written notice. Put differently, the Respondent was required to serve
a notice period of two
calendar months upon her termination of the
employment relationship. In this matter, the Respondent failed to
honour this contractual
obligation. She simply resigned with
immediate effect on 10 September 2013. This was clearly in breach of
the written contract
of employment, particularly clause 14.1 thereof.
On account of this breach of contract, the Applicant seeks to recover
its alleged
damages.
[5]
It
is trite law that a party who claims damages must prove that he
actually
suffered damages or loss as a result of the breach of contract.
[3]
It is clear to me that the Applicant must prove that the damages
claimed were, indeed, suffered as a result of the Respondent’s
breach of contract. To merely allude to the contractual terms as
entitling a party to lay a claim for damages is not sufficient.
There
must be actual proof of the damages or loss allegedly suffered.
[6]
It
was the approach of this court in
SA
Music Rights Organisation Ltd v Mphatsoe
[4]
that a claimant, in matters of the present nature, must establish the
actual loss consequent on the breach of contract. This approach
was
reiterated by this court in
Labournet
Payment Solutions (Pty) Ltd v Vosloo
,
[5]
where it was ultimately found that the claimant had ‘…failed
to show the alleged loss it suffered (either because
of failure to
give 30 or seven days' notice as the case may be) was as a result of
the breach of the employment contract by the
respondent
.
’
[7]
In laying the basis for the loss suffered,
the following is stated in the Applicant’s founding affidavit:
‘
The
failure of the Respondent to serve her two (2) months’ notice
upon termination of her employment has caused the Applicant
damage
and prejudice. The Applicant is presently left without the services
of an HR Officer and Administrator. The implication
of the
Respondent’s conduct is rather detrimental to the Applicant in
that the latter no longer enjoys the services of any
personnel in its
Human Resources Department. The Respondent’s resignation came
at a time when the Applicant had already experienced
a previous loss
of an HR Officer under very similar circumstances which cost the
Applicant an approximate amount of R 23 232.10
to secure the
urgent services of a temp in this position. In the circumstances
therefore the Applicant is now left in the same
position as the
Respondent’s resignation has now forced the Applicant to
immediately source the services of another temp
HR Officer so that
the Human Resources department can function while the Applicant
commences the recruitment process. The Respondent
is accordingly
liable in law to compensate the Applicant for such damages suffered.’
[8]
What becomes apparent from the above is
that the Applicant was forced to immediately source the services of
another temporary HR
Officer so that its Human Resources Department
can function. It also becomes apparent that the Applicant commenced a
recruitment
process to fill the vacancy left by the Respondent’s
unceremonious departure.
[9]
There is regrettably no evidence put
forward by the Applicant in relation to the other temporary HR
Officer that was immediately
secured. It is not known the extent to
which the Applicant was out of pocket due to this temporary measure
as there is no evidence
to this end.
[10]
It is equally not known if the services of
the temporary HR Officer were secured for the full two months during
which the Respondent
was obliged to serve her notice period.
Furthermore, it is not known if the recruitment process was finalised
within the two months
period or way thereafter. All of these
disparities have a bearing on the damages allegedly suffered by the
Applicant.
[11]
Without these aspects of the claim having
been adequately addressed, it cannot be said that the Applicant has
established it actually
suffered damages or loss as a result of the
Respondent’s breach of contract. The Applicant, in establishing
the damages allegedly
suffered, simply relies on the fact that the
Respondent ought to have served two months’ notice, without
more. That to me
is simply inadequate. I reiterate that damages
suffered have to be proved. Absent such proof in the present matter,
the Applicant’s
claim can therefore not succeed.
[12]
In highlighting the necessity of actual
proof of the damages suffered, it is apposite to allude to the
following judgments.
[13]
In
Aaron's
Whale Rock Trust v Murray and Roberts Ltd and Another
,
[6]
it was held thus:
‘
Where
damages can be assessed with exact mathematical precision, a
plaintiff is expected to adduce sufficient evidence to meet this
requirement. Where, as is the case here, this cannot be done, the
plaintiff must lead such evidence as is available to it (but
of
adequate sufficiency) so as to enable the Court to quantify his
damages and to make an appropriate award in his favour. The
Court
must not be faced with an exercise in guesswork; what is required of
a plaintiff is that he should put before the Court enough
evidence
from which it can, albeit with difficulty, compensate him by an award
of money as a fair approximation of his mathematically
unquantifiable
loss.’
[7]
[14]
In
Esso
Standard SA (Pty) Ltd v Katz
,
[8]
the following was held with regard to the necessity of producing
proof of damages suffered:
‘
In
the present case it might be said with some justification that the
plaintiff should have sought the assistance of an accountant.
He
failed to do so, but it does not follow that he should be non-suited.
Whether or not a plaintiff should be non-suited depends
on whether he
has adduced all the evidence reasonably available to him…
and is a problem which has engaged the attention
of the Courts from
time to time.’
The
court went on to quote with approval the following passage in
Hersman
v Shapiro and Co
:
[9]
‘
Monetary
damage having been suffered, it is necessary for the Court to assess
the amount and make the best use it can of the evidence
before it.
There are cases where the assessment by the Court is very little more
than an estimate; but even so, if it is certain
that pecuniary damage
has been suffered, the Court is bound to award damages. It is not so
bound in the case where evidence is
available to the plaintiff which
he has not produced; in those circumstances the Court is justified in
giving, and does give, absolution
from the instance. But where the
best evidence available has been produced, though it is not entirely
of a conclusive character
and does not permit of a mathematical
calculation of the damages suffered, still, if it is the
best evidence available,
the Court must use it and arrive at a
conclusion based upon it.’
[15]
In
Aaron's
Whale Rock Trust v Murray and Roberts Ltd and Another
(
supra
),
the court also held as follows:
‘
Thus
where evidence is available to a plaintiff to place before the Court
to assist it in quantifying damages, and this is not produced,
so
that it is impossible for the Court to do so, or there is no, or
quite insufficient, evidence which can be produced by an unfortunate
plaintiff, he must fail and the defendant must be absolved from the
instance.’
[10]
[16]
In making reference to these judgments, I
find myself taking a rather longwinded route which leads me to the
very same destination
reached by this court in its judgments in
SA
Music Rights Organisation Ltd v Mphatsoe
(
supra
)
and
Labournet Payment Solutions (Pty)
Ltd v Vosloo
(
supra
).
The aim is to emphasise the need to prove or establish the actual
loss suffered as a result of the breach complained of.
[17]
In order for the Applicant’s claim
for damages to succeed, I have to be satisfied on the impact of the
Respondent’s
breach in monetary terms. I cannot simply go with
what is baldly alleged on the papers before me.
[18]
The Applicant proceeded with its case on
the assumption that once breach is established, the payment for the
damages allegedly suffered
automatically follows. That cannot be the
case. There has to be a nexus between the beach and the loss
actually
suffered. I reiterate the term actually. Without proof of the actual
loss suffered, I am unable to make that necessary connection.
It is
my judgment, therefore, that absent proof of the damages or loss
actually suffered, the Applicant’s claim for damages
cannot
succeed.
[19]
The
above aside, I now turn to the Applicant’s claim for the
‘training costs’ in the amount of R45900.00. This
claim
is also founded on the contract of employment entered into between
the parties on 22 May 2013. Abruptly from clause 14.5
onwards,
[11]
the contract of employment provides as follows:
‘
14.5
The attendance at this training by the employer (sic) shall be
considered to be in-occupation training of the employee.
14.6 It is recorded
and agreed that the total value of the in-occupation probationary
training contemplated by this agreement, which
includes time,
expertise and actual disbursements expended by the company, shall be
in the amount of three times the employee’s
monthly cost to
company salary.
14.7 In exchange for
the in-occupation probationary training provided by the company to
the employee in terms of this agreement,
the employee agrees and
undertakes as follows:
14.7.1 The
employee shall serve the company for a minimum period of at least 1
(one) year, as an employee of the company in
terms of the
employee’s\contract (sic) of employment, which period shall be
calculated from the date of signature of this
agreement by the
company.
14.7.2 In the
event of the employment of the employee with the company terminating
for any cause or reason whatsoever, be
it resignation or any other
form of termination of employment, prior to the expiry of the time
period in terms of clause 14.6 above,
then and in such event the
employees shall immediately be obliged and required to pay the sum of
three times the employee’s
monthly cost to company salary.
14.7.3 The sum of
three times the employee’s monthly cost to company salary shall
be immediately due, owing and payable by
the employee to the company
with effect from the date of termination of employment of the
employee with the company in the circumstances
contemplated by clause
14.6.2 above.’
[20]
On closer consideration of the contract of
employment, it becomes apparent that the above-quoted clause is
somehow misplaced. There
is a clause, namely clause 3, under the
heading ‘Training Period’ which bears relation to the
contents of clauses 14.5
to 14.7 as quoted above. Clause 3 of the
contract of employment effectively deals with probation. This clause
particularly provides
as follows:
‘
3.1
The employee shall serve the company and the company shall employ the
employee for a probationary period (“
the
training period
”) of three (3)
months, calculated from the starting date of employment specified in
clause 2.1 above.
3.2 The employment
is subject to a probationary period during which time this contract
may be terminated by the company by giving
the employee one (1)
month’s notice in writing. Considerations during the probation
period will include, but not be limited
to; the employee’s
suitability for the position, their attitude (in the opinion of the
company) as well as their adaptation
to the work environment. During
this period the company will give the employee reasonable training,
guidance, evaluation or counselling
in order for the employee to
render a satisfactory level of performance.’
[21]
In the contract of employment between the
parties, the Applicant puts value to the training to be provided
during the probation
period. To this end, clause 14.6 of the contract
of employment states that ‘… the total value of the
in-occupation
probationary training contemplated by [the contract of
employment], which includes time, expertise and actual disbursements
expended
by the company, shall be in the amount of three times the
employee’s monthly cost to company salary.’
[22]
Under clause 14.7.1 of the contract of
employment, it is stipulated that the Respondent would have to pay
back the value of the
in-occupation probationary training should she
not complete a minimum of at least one year as an employee of the
Applicant. It
is common cause that the Respondent did not serve the
minimum period of one year. The Respondent only worked for the
Applicant
for a period of less than four months, it being from 3 June
2013 to 10 September 2013.
[23]
On account of the Respondent not having
served the minimum period of at least one year, the Applicant now
invokes the provisions
of clause 14.7.2 and seeks to recover the
value of the in-occupation probationary training. The Applicant
labels this as ‘training
costs’.
[24]
It
seems to me that clause 14.7.2 of the contract of employment is
nothing but a penalty stipulation. In terms of s 1(1) of the
Conventional Penalties Act,
[12]
a penalty stipulation is defined to be a term which provides as
follows:
‘…
that
any person shall, in respect of an act or omission in conflict with a
contractual obligation, be liable to pay a sum of money
or deliver or
perform anything for the benefit of any other person, hereinafter
referred to as a creditor, either by way of a penalty
or as
liquidated damages…’
[25]
In the present matter, it was a stipulation
in the contract of employment that the Respondent shall be liable to
pay the total value
of the in-occupation probationary training (in
the amount of R45 900.00) should she resign prior to serving the
minimum period
of one year. In ss 1(2) of the Conventional Penalties
Act, it is stated that any sum of money for the payment of which a
person
may so become liable under ss 1(1) is a penalty.
[26]
When
a question arises as to whether a particular clause amounts to a
penalty stipulation as contemplated by ss 1(1) of the Conventional
Penalties Act, it becomes useful to employ the basic test that was
laid down in
De
Pinto and Another v Rensea Investments (Pty) Ltd
,
[13]
where the then Appellate Division stated thus:
‘…
the
test is whether the [parties] intended it to operate in
terorrem
,
i.e. as a penalty in the common law sense.’
[27]
It
was also pointed out in
Pearl
Assurance Co. Ltd v Union Government
[14]
that the clause in issue must have been inserted ‘… as a
fine, or as a punishment, or to frighten the obligor to carry
out the
terms of [the] contract.’
[28]
In my view, clause 14.7.2 of the contract
of employment was introduced as a weapon in
terorrem
.
The clause was inserted to force the Respondent to stay with the
Applicant for, at least, one year or else face liability of an
amount
three times her monthly cost to company salary.
[29]
The terror that was intended by the
introduction of clause 14.7.2 becomes even more apparent if one
considers the exorbitant amount
to be paid back by the Respondent for
training that was allegedly offered in-house as part of the probation
period.
[30]
By resigning barely four months into
employment and in not serving the Applicant for the minimum period of
one year as it was agreed
upon in the contract of employment, the
Respondent committed an act in conflict with her contractual
obligation. She, therefore,
breached the contract of employment, in
particular clause 14.7.1 thereof.
[31]
In
Plumbago
Financial Services (Pty) Ltd t/a Toshiba Rentals v Janap Joseph t/a
Project Finance
,
[15]
it was held that for ‘…a provision to constitute a
penalty it must be one which derives from a breach of contract.’
This is an important determiner and it was decisive in
Sun
Packaging (Pty) Ltd v Vreulink
in the overall consideration of whether a clause amounts to a penalty
stipulation within the meaning of ss 1(1) of the Conventional
Penalties Act.
[32]
Being thus satisfied that clause 14.7.2 is
a penalty stipulation, I do feel duty-bound to consider the
implications of s 3 of the
Conventional Penalties Act thereon. This
necessity arises from the observable excessiveness of the penalty
sought to be recovered
from the Respondent on account of her breach
of clause 14.7.1 of the contract of employment. Under s 3 of the
Conventional Penalties
Act, it is stated thus:
‘
If
upon the hearing of a claim for a penalty, it appears to the court
that such penalty is out of proportion to the prejudice suffered
by
the creditor by reason of the act or omission in respect of which the
penalty was stipulated, the court may reduce the penalty
to such
extent as it may consider equitable in the circumstances: Provided
that in determining the extent of such prejudice the
court shall take
into consideration not only the creditor’s proprietary
interest, but every other rightful interest which
may be affected by
the act or omission in question.’
[33]
This matter came before this court on an
unopposed basis. The Respondent was also in default. A question that
arises, therefore,
is whether this court would, under such
circumstances, be entitled to reduce the penalty
mero
motu
and without the Respondent having
advanced a case that the penalty is out of proportion to the
prejudice suffered. I hold the considered
view that this court is
entitled to do so.
[34]
In
Western
Bank Ltd v Meyer; Western Bank Ltd v De Waal; Western Bank Ltd v
Swart and Another
,
[16]
the following authoritative stance was taken:
‘
The
word 'may' in sec. 3 does not merely confer a discretion, but a power
coupled with a duty. See
Western Credit
Bank Ltd. v Kajee
, 1967 E (4) SA 386
(N) at p. 393B. The Court must apply the provisions of sec. 3 where
it appears to it that there is a disproportion
such as is visualised
by that section. The Courts will therefore apply sec. 3 even where,
in an action for enforcement of a penalty,
the debtor is in default
of appearance. See
Ephron Bros. Holdings
(Pty.) Ltd. v Foutzitzoglou,
1968 (3)
SA 226
(W)
.’
The court went
further and held as follows at pp 699F – 700A:
‘
The
meaning to be assigned to the words 'if it appears to the Court' in
this context has been discussed in
Maiden
v David Jones (Pty.) Ltd
1969
(1) SA 59
(N)
at
p. 64. There is no reason to differ from what is there said. It
follows that a Court will not reduce the penalty unless it is
clear
or plain to the Court that the penalty is 'out of proportion to the
prejudice suffered.' The words 'out of proportion' have
also been
interpreted. It seems that by the use of these words it was intended
that the penalty is markedly, not infinitesimally,
beyond the
prejudice suffered, and that the excess is such that it would be
unfair to the debtor not to reduce the penalty. (See
Western
Credit Bank Ltd v Kajee
,
(
supra)
at p. 391C - D). In this regard the Legislature has not provided any
yardstick by which the 'proportion' is to be measured, or
to be
determined. It is a matter left entirely to the discretion of the
Court which, so it seems to us, should only interfere if,
bearing in
mind that an object of a penalty clause is to compel the debtor to
implement his obligations under the contract by providing
harsh
consequences should he default, it nevertheless is of the opinion
that the penalty is unduly severe to an extent that it
offends
against one's sense of justice and equity.’
[35]
In the matter before me, the penalty is
glaringly excessive. The Applicant seeks to recover what it labels as
‘training costs’
in respect of an in-house training that
was offered to the Respondent during her probation period. There is
no indication of the
Applicant having actually incurred these
‘training costs’.
[36]
Even
more disturbing, the Applicant seeks to recover ‘training
costs’ in respect of training that it was, in any event,
obliged to provide to the Respondent during the probation period. In
this regard, item 8(1)(e) of the Code of Good Practice: Dismissal
[17]
states in no uncertain terms that ‘[a]n employer should give an
employee reasonable evaluation, instruction, training, guidance
or
counselling in order to allow the employee to render a satisfactory
service.’
[37]
In this matter, the training allegedly
offered to the Respondent was clearly not out-of-the ordinary and was
simply part and parcel
of probation. There is no evidence to the
contrary.
[38]
In fact and under clause 3.2 of the
contract of employment, the Applicant accepted that it would ‘…give
the [Respondent]
reasonable training, guidance, evaluation or
counselling in order for [her] to render a satisfactory level of
performance.’
[39]
It is, in the final analysis, my considered
view that the alleged ‘training costs’ are exceedingly
excessive and the
penalty is way out of proportion to the prejudice
that may have been suffered by the Applicant in providing training to
an employee
on probation.
[40]
As indicated herein before, there is no
indication of the costs that were actually incurred to train the
Respondent. There is, equally,
no indication of whether indeed such
training was offered and for how long. In the exercise of my judicial
discretion, it would
be just and equitable to reduce the penalty to
NIL.
[41]
The Applicant undertook to provide the
Respondent with training as part of the probation period. The
training was provided internally
as an ‘in-occupation
probationary training’. As a weapon in
terorrem
,
the Applicant sought to place value on this training and to obligate
the Respondent to stay in its employ for at least one year,
failing
which she would have to pay the determined value for the training
allegedly offered.
[42]
In conclusion, I find no prejudice suffered
which would warrant the enforcement of the penalty stipulation,
whether fully or partially.
I conclude, therefore, by holding that
the penalty of R45 900.00 is exceedingly severe and does offend my
sense of justice and
equity. In the circumstances, the Applicant’s
claim to recover the said penalty cannot succeed. It stands to fail.
[43]
I, therefore, order as follows:
(i)
The Applicant’s application, launched
under s 77(3) of the BCEA for the recovery of contractual damages and
training costs
from the Respondent, is hereby dismissed.
(ii)
There is no order as to costs.
Voyi,
AJ
Acting
Judge of the Labour Court of South Africa
APPEARANCES:
For the
Applicant: Ms S Morgan (Attorney) of Snyman Attorneys
For
the Respondent: (No appearance)
[1]
Act
No. 75 of 1997 (“the BCEA”)
[2]
See
Rand
Water v Stoop and Another
(2013) 34
ILJ
579 (LAC) at para’s 21, 30 and 31.
[3]
See
Swart
v Van der Vyver
1970 (1) 633 (A) at 634C-D.
[4]
(2009)
30
ILJ
2482 (LC).
[5]
(2009)
30
ILJ
2437
(LC) at para 23.
[6]
1992
(1) SA 652
(C).
[7]
Ibid
at 655H-J.
[8]
1981
(1) SA 964
(A) at 969D-E.
[9]
1926
TPD 367
at 379.
[10]
Aaron's
Whale Rock Trust v Murray and Roberts Ltd and Another
(
supra
)
at 956E-F.
[11]
Under
the heading ‘Termination of Employment’.
[12]
Act
No 15 of 1962.
[13]
1977
(2) SA 1000
(A) at 1007A.
[14]
1933
AD 277
at 290.
[15]
2008
(3) SA 47
(C) at para 24.
[16]
1973
(4) SA 697
(T) at 699E-F.
[17]
Under
Schedule 8 to the Labour Relations Act, No. 66 of 1995 (“the
LRA”).