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[2015] ZALCCT 67
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Saldanha Bay Municipality v SAMWU obo Wilschut and Others (C697/12) [2015] ZALCCT 67; (2016) 37 ILJ 1003 (LC) (17 November 2015)
REPUBLIC
OF SOUTH AFRICA
Reportable
Of interest to
other judges
THE
LABOUR COURT OF SOUTH AFRICA, CAPE TOWN
JUDGMENT
C
ase
no: C 697/12
In the
matter between:
SALDANHA BAY MUNICIPALITY
Applicant
and
SAMWU OBO M WILSCHUT
First Respondent
T MDZOMBANE N.O.
Second Respondent
SALGBC
JAMES FORTUIN
Third Respondent
Fourth Respondent
Heard
:
14 October 2015
Delivered
:
17 November 2015
Summary:
Review – Systems Act s 59 – whether
municipal manager was empowered to settle dispute while disciplinary
hearing was
ongoing. Application of
Turquand
rule and estoppel to
ultra vires
act
by municipal manager.
JUDGMENT
STEENKAMP
J
Introduction
[1]
The
municipal manager of the applicant, Saldanha Bay Municipality,
entered into a settlement agreement with an employee, Mr M Wilschut
(the first respondent, represented by the South African Municipal
Workers’ Union). This happened while the employee was in
the
midst of a disciplinary hearing. The Municipality contends that the
municipal manager was not empowered to do so, given the
provisions of
the Municipal Systems Act.
[1]
It dismissed him, despite the purported agreement. He referred an
unfair dismissal dispute to the South African Local Government
Bargaining Council (the third respondent). An arbitrator acting under
its auspices, Mr T Mdzombane (the second respondent) found
that the
dispute had been resolved by agreement; that the agreement was valid
and binding; hence, the dismissal was unfair; and
he ordered the
Municipality to reinstate the employee. The Municipality seeks to
have that award reviewed and set aside.
[2]
This judgment raises issues on the powers
of a municipal manager in terms of the Systems Act; the disciplinary
process prescribed
by the relevant collective agreement in the local
government sphere; and the application of the
Turquand
rule and the principle of estoppel.
Background
facts
[3]
The
employee was called to a disciplinary hearing to face eight
allegations of misconduct relating to dishonesty. This included
deliberately falsifying receipts in respect of cash payments he had
received from the public. He had misappropriated R2 100, 00.
He
admitted the misconduct.
[2]
Before the chairperson of the hearing could decide on sanction, the
employee reached an agreement with the outgoing municipal manager,
Mr
James Fortuin (the fourth respondent), who purported to act on behalf
of the Municipality. The agreement reads:
[3]
“
The
applicant hereby pleads guilty on the charges listed as from 1 to 8
respectively. Further apologises and is deeply remorsed
for bringing
the municipality into disrepute.
The
following is therefore agreed:
1.
Final warning
2.
Repayment of the amount equal to R2000, 00
in terms of our collective agreement.
3.
Relocation to enquiries at Finance
Department.
This
constitutes a full & final settlement of this matter which shall
remain confidential to the parties concerned.”
[4]
The chairperson (or “presiding
officer”) adopted the view that he was not precluded from
continuing with the disciplinary
hearing. He did so. He imposed a
sanction of dismissal. The employee lodged an internal appeal. He was
unsuccessful. He then referred
an unfair dismissal dispute to the
Bargaining Council.
The
award
[5]
The
arbitrator considered the employee’s argument that the dispute
had been settled. He applied the principle of estoppel
and the rule
in
Turquand
[4]
that an outsider contracting with a legal entity in good faith is
entitled to assume that internal requirements and procedures
had been
complied with. He found that the municipal manager had the authority
to enter into agreements on behalf of the Municipality;
that he had
entered into a full and final settlement agreement with the employee;
and that, in continuing with the disciplinary
hearing, the presiding
officer acted
ultra
vires
.
He decided that the resultant dismissal was unfair and ordered the
Municipality to reinstate the employee.
Review
grounds
[6]
Mr
Oosthuizen
,
for the Municipality, based its review application on the test set
out in
Herholdt
v Nedbank Ltd
[5]
,
i.e. that the arbitrator’s decision was so unreasonable that a
reasonable arbitrator could not reach it on the evidence
before him.
[7]
He argued that the arbitrator’s
application of the doctrine of estoppel and of the
Turquand
rule to the facts of this case had no basis in law, and that the
resultant conclusion was unreasonable. He also argued that the
presiding officer in the disciplinary hearing was not bound by the
agreement between the employee and the municipal manager and
that the
arbitrator’s finding to the contrary was unreasonable.
Evaluation
/ Analysis
[8]
In order to evaluate the Municipality’s
argument properly, one has to consider the legislative framework.
The
Systems Act
[9]
Section 59(1) of the Systems Act provides
that a municipal council must develop a system of delegation that
will maximise administrative
and operational efficiency and provide
for adequate checks and balances. Section 59(2) then sets out the
following limitations:
“
(2)
A delegation or instruction in terms of subsection (1) -
(a)
must not conflict with the Constitution, this Act or the Municipal
Structures Act;
(b)
must be in writing;
(c)
is subject to any limitations, conditions and directions the
municipal council may impose;
(d)
may include the power to sub-delegate a delegated power;
(e)
does not divest the council of the responsibility concerning the
exercise of the power or the performance of the duty; and
(f)
must be reviewed when a new council is elected or, if it is a
district council, elected and appointed.”
[10]
The
responsibilities of municipal managers are set out in s 55 of the
Systems Act. As head of administration the municipal manager
of a
municipality is, subject to the policy directions of the municipal
council, responsible and accountable for, amongst other
things, the
maintenance of discipline of staff.
[6]
[11]
These
two sections must be read in context and in conjunction with one
another. The context means the language of the rest of the
statute as
well as its apparent scope and purpose and, within limits, its
background.
[i]
[12]
Read together and in context, the effect of
these two sections appears to be this:
12.1
A municipality may authorise one of its
staff members to conduct disciplinary hearings in terms of the system
of delegations in
s 59(1).
12.2
Although the municipal manager remains
responsible and accountable for the maintenance of discipline of
staff, his actions are “subject
to the policy directions of the
municipal council”, including the powers that the council had
delegated.
12.3
The power to develop and adopt disciplinary
procedures is specifically entrusted to the municipal council itself
in terms of s 67(1)(g)
of the Systems Act.
The
SALGA agreement
[13]
The Municipality and SAMWU are bound by a
collective agreement setting out its disciplinary procedures (“the
SALGA agreement”).
It states in the agreement itself that it is
the product of collective bargaining, that its application is
peremptory and that
it is deemed to be a condition of service. It
defines the disciplinary process and the rights and obligations of
management and
employees.
[14]
The SALGA agreement sets out the powers of
the presiding officer, who has the power to:
“
with
the consent of the parties, propose compromise settlement agreements
in disposal of the whole or a portion of the issues”.
[15]
In terms of the agreement, “the
determination of the presiding officer cannot be altered by the
Municipal Manager or any other
governing structure of a
municipality”.
The
disciplinary hearing
[16]
The Municipality has developed a system of
delegations in terms of s 59 of the Systems Act. The power to appoint
chairpersons of
disciplinary hearings was devolved to director level.
It appointed a Mr Magerman to chair the enquiry. After the employee
had admitted
the misconduct, but before he had decided on sanction,
the employee presented him with the settlement agreement signed by
the municipal
manager. Magerman nevertheless continued, made a
finding on sanction, and the Municipality dismissed the employee.
[17]
The question on review is whether the
arbitrator reasonably found that the Municipality was bound by the
settlement agreement.
The
municipal manager’s power to settle
[18]
Taking into account the language of the
Systems Act, its context and its purpose, it does not appear to me
that the municipal manager
had the power to usurp the function of the
chairperson by entering into a settlement agreement with the employee
and bypassing
the disciplinary procedure.
[19]
The context includes the provisions of the
SALGA agreement. In terms of that agreement, the chairperson may
propose a compromise
agreement. It is not clear from that agreement
who is empowered to bind the Municipality. But in terms of the
Systems Act, that
power appears to have been delegated to the
chairperson.
[20]
There is nothing in either the collective
agreement or the Systems Act to suggest that the power to enter into
a settlement agreement,
bypassing the disciplinary process, was
delegated to the municipal manager. If that is so, the municipal
manager exceeded his powers
and the settlement agreement is invalid.
Estoppel
and the Turquand rule
[21]
The arbitrator relied on the principles of
estoppel and the Turquand rule to find that the municipality was
estopped from denying
the validity of the settlement agreement; or
that the employee was contracting with a legal entity (i.e. the
municipality, represented
by the municipal manager) in good faith and
that he was entitled to assume that internal requirements and
procedures had been complied
with.
[22]
I agree with Mr
Oosthuizen
that the arbitrator’s application
of the principle of estoppel on these facts and no basis in law. That
led to an unreasonable
result.
[23]
Firstly,
the doctrine of estoppel cannot be invoked to circumvent the
mandatory provisions of a duly promulgated statute.
[7]
In this case, the parties were bound by the provisions of the
collective agreement entered into in terms of section 23 of the
LRA.
[8]
That must be read together with the system of delegations established
under the Systems Act. The employee could not, by relying
on the
doctrine of estoppel, bypass those provisions. Neither could the
arbitrator.
[24]
Secondly,
a person raising a plea of estoppel must prove that, by acting on the
representation made to him, he acted to his detriment.
[9]
In this case, far from acting to his detriment, the employee
benefited from the agreement.
[25]
Thirdly,
the person relying on estoppel has to show that he acted reasonably
in relying on the representation.
[10]
A person who knows what the true position is cannot say that he was
induced to act to his prejudice on the face of the
representation.
[11]
In this case, the applicants – the employee and his trade
union, SAMWU – cannot be heard to say that they were unaware
of
the SALGA agreement. It is a collective agreement signed by SAMWU and
containing the disciplinary procedure that is applicable
to all local
government employees.
[26]
With regard to the
Turquand
rule, Mr
Bosch
quite properly conceded that the arbitrator incorrectly found that
the
Turquand
rule could be used as a mechanism to validate the settlement
agreement signed by the employee and municipal manager under
circumstances
where the municipal manager did not have the power to
into the agreement on behalf of the municipality. He did so without
accepting
that the municipal manager acted unlawfully or outside of
his powers as prescribed by the Systems Act; and even if it did, and
the arbitrator erred in applying estoppel and the
Turquand
rule, Mr
Bosch
argued
that the error was not sufficiently material to warrant the setting
aside of the award.
[27]
Mr
Bosch
properly referred the Court to a recent decision of the Supreme Court
of Appeal in
TEB
Properties
[12]
where that court found that the
Turquand
rule ought to be treated no differently from the position relating to
estoppel, namely that the claim of an innocent contracting
party to
enforcement of a contract could not make an
ultra
vires
act by a state official
intra
vires
.
And in an earlier judgement of
Mbana
v Mnquma Municipality
[13]
it was held that:
“
The
Turquand
rule can never be used as a mechanism whereby a court could or would
bind an authority such as the defendant municipality to enact
which
is
ultra vires
.”
[28]
By applying the doctrine of estoppel and
the
Turquand
rule to the facts of this case, the arbitrator committed an error of
law. And that error led directly to an unreasonable result.
Inchoate
agreement?
[29]
Not only did the municipal manager act
outside of his powers when he entered into the agreement with the
employee, but the agreement
itself is an inchoate agreement. It was
clearly envisaged to be signed by the “prosecutor”
appointed in terms of the
disciplinary provisions contained in the
binding collective agreement. The settlement agreement leaves a space
for him to do so.
He did not. Given the role played by the initiator
(or “prosecutor”) in the disciplinary proceedings in
terms of the
binding SALGA collective agreement, it appears to me
that the settlement agreement is incomplete.
[30]
Christie
describes the principles relating to partial agreements in
The
Law of Contract in South Africa.
[14]
The learned authors cite the following test from
GGEE
Alsthom
:
[15]
“
Whether
in a particular case the initial agreement acquires contractual force
or not depends upon the intention of the parties,
which is to be
gathered from their conduct, the terms of the agreement and the
surrounding circumstances.”
[31]
In the context of this case, the agreement
itself provided for the initiator to sign it, and he did not; the
power to conduct the
disciplinary hearing and propose a compromise
settlement was delegated to the chairperson, who did not accept the
agreement; and
the Council did not consider itself bound by it. All
of these considerations point to an incomplete and invalid agreement.
The
chairperson’s finding
[32]
In
any event, the chairperson’s finding in the disciplinary
hearing – overruling the ostensible settlement agreement
–
was a fair and reasonable one. In this regard, Mr
Oosthuizen
referred to the decisions of this Court and the Labour Appeal Court
in
Overstrand
Municipality.
[16]
As was the case in those judgements, the employee in this case
committed gross misconduct of a dishonest nature. The municipality
cannot be expected to keep him in its service. The municipal
manager’s decision to the contrary is grossly unreasonable,
even if he had the authority to enter into a settlement agreement.
Conclusion
[33]
the arbitrator committed an error of law by
basing his finding that the settlement agreement was binding on the
municipality on
the doctrine of estoppel and the application of the
Turquand rule. The resultant conclusion was so unreasonable that no
reasonable
arbitrator could have reached the same conclusion. The
award must be reviewed and set aside.
[34]
On the evidence before me, the finding on
sanction by the presiding officer in the disciplinary hearing –
given that the employee
had admitted to the misconduct – is
entirely reasonable and fair.
[35]
With regard to costs, I take into account
that the employee had an arbitration award in his favour. It was not
unreasonable to oppose
this application. In law and fairness, I do
not consider a costs award to be appropriate.
Order
[36]
I therefore make the following order:
36.1
The arbitration award of the second
respondent under case number WCP 111111 of 12 July 2012 is reviewed
and set aside.
36.2
The award is replaced with an award that
the dismissal of the employee, Mr Wilschut, was substantively and
procedurally fair.
_______________________
Anton
Steenkamp
Judge
of the Labour Court of South Africa
APPLICANT:
André
Oosthuizen SC
Instructed by Herold Gie.
FIRST RESPONDENT:
Craig Bosch
Instructed by Cheadle Thompson &
Haysom.
[1]
The Local Government: Municipal Systems Act, Act 32 of 2000 (“the
Systems Act”).
[2]
In the parlance of the presiding officer and the arbitrator, he
“pleaded guilty to all charges”.
[3]
Language and grammar as in original.
[4]
Royal British Bank v
Turquand
(1856) 6 El &
Bl 327; 119 ER 886.
[5]
[2013] 11 BLLR 1074
(SCA) para [25].
[6]
Systems Act s 55(1)(g).
[7]
Strydom v Die Land en
Landboubank van Suid-Afrika
1972
(1) SA 801
(A) at 815B-816B;
Mgoqi
v City of Cape Town
2006
(4) SA 355
(C) at 396 D-E;
Eastern
Cape Provincial Government v Contractprops 25 (Pty) Ltd
2001
(4) SA 142
(SCA) at 148E-H.
[8]
Labour Relations Act 66 of 1995
.
[9]
Baumann v Thomas
1920
AD 428
at
436-7; Poort
Sugar Planters (Pty) Ltd v Minister of Land
1963
(3) SA 352
(A) at 363D.
[10]
Monzali v Smith
1929
AD 382
at 389-391.
[11]
Bird v Summerville
1961
(3) SA 194
(A) at 204E;
Abrahamse
v Connock’s Pension Fund
1963 (2) SA 76
(W) at 79G;
Van
Rooyen v Minister van Openbare Werke en Gemeenskapsbou
1978
(2) SA 835
(A) at 849G.
[12]
TEB Properties cc v MEC,
Department of Health and Social Development, North West
[2012] JOL 28203
(SCA) paras [32] – [33].
[13]
[2003] JOL 12106
(Tk) paras [26] – [27].
[14]
RH Christie & GB Bradfield,
The
Law of Contract in South Africa
^
ed LexisNexis) pp 37-39.
[15]
CGEE Alsthom Equipments et
Entereprises Electriques, South African Division v GKN Sankey (Pty)
Ltd
1987 (1) SA 92E.
[16]
Overstrand Municipality v
Magerman NO
[2014] 2 BLLR
195
(LC);
Hendricks v
Overstrand Municipality
[2014] 12 BLLR 1170
(LAC); (2015) 36
ILJ
163 (LAC).
[i]
Jaga v Dönges NO
1950
(4) SA 653
(A) at 662G;
Natal
Joint Municipal Pension Fund v Endumeni Municipality
2012
(4) SA 593
(A) para [18];
Bothma-Batho
Transport v S Bothma & Seun Transport
2014
(2) SA 494
(SCA) paras [10] – [12].