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[2017] ZALCCT 14
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Pennell v Delevere Investments South Africa (Pty) Ltd (C1009/2014, C330/2015) [2017] ZALCCT 14 (21 April 2017)
THE
LABOUR COURT OF SOUTH AFRICA, CAPE TOWN
JUDGMENT
NOT
REPORTABLE
case
no: C1009/2014 & C330/2015
In the
matter between:
ROSS
PENNELL
Applicant
and
DELEVERE
INVESTMENTS SOUTH AFRICA (PTY)
LTD Respondent
Heard
:
6-8 June 2016; 23 November 2019
Delivered
:
21 April 2017
JUDGMENT
RABKIN-NAICKER
J
[1] Two
matters were consolidated for hearing before me. Under case number
C1009/2014, the applicant seeks payment of outstanding
commission
(“straight, override and trail commission”), notice pay
and an unpaid portion of his bonus. Under case number
C330/2015, the
applicant seeks compensation in respect of an alleged unfair labour
practice relating to demotion. This matter was
referred to this Court
in terms of section 191(6) of the LRA.
[2] When
this matter was first enrolled for trial in November 2015, the
respondent raised two points in limine on which I ruled
ex tempore on
the 18 November 2015. The trial proceeded on the basis of the said
ruling on 6-8 June 2016 in short,I found that
applicant could
not persist with relief sought under C1009/14 in respect of his
alleged promotion to Senior Area Manager. Further,
that applicant
could persist with a claim in respect of an alleged oral bonus
agreement. I heard oral argument on the 23 November
2016.
[3] The
following chronology of events which led to the claims before court
are common cause as follows:
3.1
The applicant was employed by the respondent from 1 June 2011. As
from 1 February
2013, he was promoted to the position of Area Manager
(Cape Town).
3.2
The applicant is British and worked in South Africa under a work
permit (spousal
permit). His permit expired on 12 June 2014. At trial
applicant clarified that he was in South Africa on a temporary
residence
visa, a spousal visa, and that it was endorsed for him to
run his own business. He alleged in testimony before me, that was not
gainsaid, that the nature of the endorsement was known to the
respondent and despite same they entered into an employment contract.
3.3
On about 30 April 2014, applicant had a meeting with Nigel Green, the
De Vere’s
Group CEO and a director of the respondent. It is the
applicant’s case that an oral agreement was concluded at this
meeting
in terms of which the respondent would pay the applicant a
bonus of GBP 150 000, of which to date only GBP 20 000 has been paid.
The applicant claims the balance of GBP130 000.
3.4
The respondent suspended the applicant with effect from 4 July 2014.
3.5
On 16 July 2014, the applicant was called to attend a meeting with
Greg Stockton
(who at the time held the position of Divisional
Manager- Africa). It is applicant’s case that he was told in
this meeting
that he was to be demoted to the position of Senior
Wealth Advisor and that such demotion was subsequently announced to
the entire
team that reported to him.
3.6
The applicant faced a disciplinary hearing in August 2014. The main
issues were
dishonesty and negligence pertaining to his work permit.
The chairperson found that the applicant had been negligent but not
dishonest
in respect thereto. The applicant was issued with a final
written warning on 21 August 2014.
3.7
On 8 September 2014, the respondent terminated the applicant’s
employment
in writing on the basis that he was not in possession of a
work permit. He was informed that since this was a no-fault
termination
he would be paid one month’s notice pay. This has
not been paid to date.
3.8
The applicant has also not been paid various amounts of outstanding
salary (commission)
which he alleges are due to him.
[4] The
respondent’s defences regarding commission payments are
summarised in applicant’s heads of argument as follows:
4.1
Because the applicant’s work permit had expired, it was
impossible for
the respondent to perform its obligations under the
contract (paying the applicant his commission); alternatively, the
respondent
is exempt from paying him.
4.2
The respondent relied on clause 7.4 of the applicant’s
contract, alleging
(a) that the applicant has breached his restraint
of trade agreement; and (b) that therefore the respondent is entitled
to deduct
any commission owing to him “as a contribution
towards the damages for that breach”. This line of defence was
not pursued
before me in argument on behalf of the respondent.
4.3
That the applicant was never entitled to “trail”
commission.
[5] The
quantum of notice pay claimed is GBP 29 461 which amount
includes the outstanding commission claimed. In respect of
trail
commission GBP 4 250 is claimed. Straight commission is claimed by
the applicant in the amount of GBP 15 279. Further override
commission is claimed in respect of the period of 6 months following
applicant’s promotion to Area Manager, an amount of
GBP
24 837, and the period of his suspension 4 July to 8 September
2014, GBP 21 657.
[6] The
applicant testified that the respondent is a financial advisory
business giving financial advice to expatriates, primarily
British
and internationally minded investors. He clarified that straight
commission was on business he was actually responsible
for writing.
Override commission was payable in respect of 10% of all commissions
earned by the team which he managed. He testified
that the trail
commission he claims, was derived from 0.35% per annum of monies
invested by Cape Town clients advised by Cape Town
Consultants, under
his management, in trail paying funds as designated by the
respondent. This was supposed to be paid to him quarterly
in arrears.
Trail paying funds are investments that pay trail investment to
incentivise financial advisors to leave their client’s
monies
invested in those funds for a long period of time. The last time he
was paid trail commission was on the 29 May 2014.
[7] No
evidence was led by the respondent to challenge applicant’s
entitlement to trail commission and no questions were put
to
applicant in cross examination in this respect. Although the
respondent had denied the applicant’s entitlement to this
type
of commission in the pleadings, its own schedules produced for trial
reflected that he was paid this commission from time
to time.
[8] In as
far as straight commission was concerned, the claim being for GPB 15
279, the respondent disputed the applicant’s
entitlement to
commission in respect of the following clients: Judd, Read, Nowicki
and Wells.
[9] The
respondent disputed the Judd claims on the basis that that client had
moved to Spain and it was contrary to an internal
De Vere policy to
write business for a client who was not in South Africa. The
applicant testified that there were two separate
claims arising from
business written for Judd, one dated the 26 November 2013 (GPB 3692)
and one dated 25 June 2014 (GPB 1911).
Judd was in South Africa at
the time of the first transaction and only moved to Spain at the end
of the second one.
[10] The
applicant testified that he knew of a general internal policy that if
a client lived in another country, any business should
be referred to
the De Vere branch of that country. He approached his line manager Mr
Taylor to authorise the business and received
this authorisation. The
business was approved by De Vere’s compliance departments in
South Africa and Malta.
[11] In
response to the applicant’s request for admissions the
respondent disputed applicant’s claims in respect of
business
written for Read on the basis that the relevant paperwork was
“unlawfully amended” without getting Read’s
consent. Applicant testified that there were five separate claims in
respect to Read. The first transaction dated the 1 November
2013 (for
GBP 720) had nothing to do with the respondent’s complaint
which related to four “fund allocation”
transactions
dated 22 April 2014. Applicant’s testimony was that he
had obtained a final dealing instruction from Read
and that Read was
happy with the investments. The respondent’s
documentation reflected that the fund selections had
taken place and
had successfully passed through the compliance departments in South
Africa and Malta. He stated that the business
had been issued. The
evidence relating to Read was not challenged in
cross-examination.
[12] The
respondent disputed the Applicant’s claims to commission in
respect of Nowicki and Wells on the ground that at the
time of
Applicant’s dismissal the applicant was not aware whether or
not the business had been issued. The applicant was
only able to
testify that to his best knowledge and belief the business would have
been issued. No evidence was led by the respondent
on these claims.
[13] In
as far as the applicant’s claim for Area Manager Override
Commission, the respondent raised a specific defence relating
to the
claim of GBP 21 657 covering the period when applicant was on
suspension. This was put to the applicant in cross-examination
and he
conceded that two of his colleagues were appointed area managers at
this time. He agreed that if they were the area managers
when
commission was paid, they were entitled to such commission. At the
same time he also insisted that although suspended he was
also an
area manager at that time.
[14] The
respondent’s primary defence to the applicant’s
commission and notice pay claims is that it was prohibited,
with effect from 13 June 2014 (when the applicant’s permit
lapsed) from performing its obligations under the employment contract
by virtue of the operation of the
Immigration Act 13 of 2002
.
[15] The
respondent relies on
section 38(1)
of the
Immigration Act, which
provides that no person shall employ:
“
(a)
an illegal foreigner;
(b)
a foreigner whose status does not authorise him or her to be employed
by such person; or
(c)
a foreigner on terms, conditions or in a capacity different from
those contemplated in such foreigner’s status.”
[16]
Section 49
of the
Immigration Act provides
that anyone “
who
knowingly employs an illegal foreigner or a foreigner in violation of
this Act, shall be guilty of an offence”
.
[17] Mr
Leslie for the applicant relied on
Discovery Health Ltd v CCMA
(2008) 29 ILJ 1480 (LC) in which the court was called on to
consider whether a foreign national who works for another person
without
a valid work permit was an “employee” within the
meaning of the LRA. The court answered this question in the
affirmative.
The primary basis for its conclusion, he submitted, was
that properly interpreted in line with the Constitution, the
prohibition
on employing illegal foreigners found in
section 38
of
the
Immigration Act
did
not
have the effect of rendering the
employment contract invalid. At paragraphs 30 to 33 the court held as
follows:
“
[30]
The right to fair labour practices is a fundamental right. There is
no clear indication from the terms of
s 38(1)
of the
Immigration Act
(or
any of the Act's other provisions) that the statute intends to
limit that right, or accomplish more than to penalize persons who
employ others on unauthorized terms. As I have noted, the Act does
not penalize the conduct of any person who accepts or performs
work
that is not authorized.
The Act does not explicitly
proscribe contracts concluded with those who are engaged to render
work in circumstances where their
engagement is unauthorized, nor
does it provide that contracts are not enforceable in those
circumstances.
[31]
There is a sound policy reason for adopting a construction of s 38(1)
that does not limit the right to fair labour practices.
If s 38(1)
were to render a contract of employment concluded with a foreign
national who does not possess a work permit void, it
is not difficult
to imagine the inequitable consequences that might flow from a
provision to that effect. An unscrupulous employer,
prepared to risk
criminal sanction under s 38, might employ a foreign national and at
the end of the payment period, simply refuse
to pay her the
remuneration due, on the basis of the invalidity of the contract. In
these circumstances, the employee would be
deprived of a remedy in
contract, and if Discovery Health's contention is correct, she would
be without a remedy in terms of labour
legislation. The same employer
might take advantage of an employee by requiring work to be performed
in breach of the BCEA, for
example, by requiring the employee to work
hours in excess of the statutory maximum and by denying
her the required
time off and rights to annual leave, sick leave and
family responsibility leave. It does not require much imagination to
construct
other examples of the abuse that might easily follow a
conclusion to the effect that the legislature intended that contract
be
invalid where the employer party acted in breach of s 38(1) of the
Act. This is particularly so when persons without the required
authorization accept work in circumstances where their life choices
may be limited and where they are powerless (on account of
their
unauthorized engagement) to initiate any right of recourse against
those who engage them.
[32]
Far from defeating the purposes of the
Immigration Act, to
sanction a
claim of contractual invalidity in these circumstances would defeat
the primary purpose of s 23(1) of the Constitution
which is to give
effect, through the medium of labour legislation, to the right to
fair labour practices.
[33]
In my judgment therefore, by criminalizing only the conduct of an
employer who employs a foreign national without a valid permit
and by
failing to proscribe explicitly a contract of employment concluded in
these circumstances,
the legislature did not intend to
render invalid the underlying contract
. …”
(emphasis added)
[18] Mr
Leslie submitted that it is now firmly established that the absence
of a valid work permit does not invalidate an employment
contract.
The contract remains valid and enforceable. The respondent therefore
cannot rely on the
Immigration Act as
a basis on which to avoid
compliance with its contractual obligations. It should be noted that
the cases relied on for this proposition
[1]
were decided in the context of whether undocumented workers were
beneficiaries of the right to fair labour practices and in particular
whether they bore the rights accorded by the LRA. Apart from the
unfair labour practice claim, this matter brought in terms of
section
77(3)
of the BCEA, concerns contractual claims by a highly paid
employee and issues regarding protection of the vulnerable are not in
play. However, as the Court in
Edcon
v Steenkamp, and Related Matters
[2]
stated:
“
The
principles governing non-compliance with statutory requirements,
alluded to above, are well established. The crucial enquiry
is
whether the legislature contemplated that the relevant failure should
be visited with nullity. The governing principle was encapsulated
in
an oft-cited passage in the English case of Howard v Bodington as
follows:
'No
universal rule can be laid down for the construction of statutes,
as to whether mandatory enactments shall be considered
directory only or obligatory, with an implied nullification for
disobedience. It is the duty of the courts . . . to try to get
at the
real intention of the legislature by carefully attending to the whole
scope of the statute to be construed.'
Various
factors must be considered, such as —
'the
subject-matter of the prohibition, its purpose in the context of the
legislation . . . the remedies provided in the event
of breach, the
nature of the mischief which it
was designed to remedy or
avoid and any cognizable impropriety or inconvenience which may flow
from invalidity'.
Then
the court must ask whether it was truly intended that anything done
contrary to the provisions in question was necessarily
to be visited
with nullity. The fact that a statute provides for remedies in the
event of a breach of its provisions is a significant
factor counting
against an inference of invalidity. An equally important
consideration is whether a declaration of invalidity would
have
capricious, disproportionate or inequitable consequences. The
principle was enunciated as follows in Pottie v
Kotze:
A
further compulsory penalty of invalidity would . . . have capricious
effects, the severity of which might be out of all proportion
to that
of the prescribed penalties, it would bring about inequitable results
as between the parties concerned and it would
upset
transactions which . . . the legislature could have no reason to view
with disfavour…….”
[19]
Given the authority in this court in respect of the
Immigration Act
and
its impact on employment contracts and employment relationships,
and by virtue of the provision in that Act of a remedy for the
breach
of its provisions in regard to employment of non-citizens, the
employment contract between the parties should not be regarded
as
invalid. The applicant’s evidence that he had never in fact
worked for the respondent with the correct endorsement on
his visa
and that the respondent had been aware of same, was not gainsaid at
trial. This evidential material is an example of how
inequitable
results can come about if an additional penalty of invalidity is read
into the statute.
The Bonus
[20] The
applicant’s testimony about the oral agreement between himself
and Mr Green in respect of a bonus on or about 30
April 2014 was that
the material terms were as follows:
15.1
He would be paid GBP 150 000 unconditionally upfront and that
the payment was immediately due. The payment
on his version was to
prevent him resigning and joining a competitor recently established
by the respondent’s erstwhile divisional
manager for Africa.
15.2
If he remained in the employ of the respondent for 12 months, he
would receive a further GPB 100 000 plus
a percentage based on the
performance of the Cape Town office (for example if the business grew
by 20%, he would receive
GPB 120 000).
15.3
The above terms were reached at the meeting and it was further agreed
that Green would subsequently ensure
that the terms of the agreement
were reduced to writing.
[21] The
applicant recorded the terms he alleged above in an email to Green on
the 16 July 2014. Green did not respond to this.
[22] The
respondent called two witnesses at trial. The first was Mr Nigel
Green. He testified that the respondent, which he owns,
has offices
in 40 different companies in the world. He had come to South Africa
when the person in charge of South Africa (Featherby)
had resigned
and he talked to managers on an individual basis. As Featherby was a
popular person, he wanted to talk to individual
managers about
whether they stayed with the company or left. Asked what the
discussions related to he described these as “..it
was Mr
Pennell asking for something and me coming back with something
different. And on occasions he was leaving and then he was
staying so
it as that type of relationship.”
[23]
Green confirmed he saw the discussions as pertaining to a retention
bonus. His version of the terms of the oral agreement (which
was not
pleaded) was that he agreed in principle that once the agreement was
reduced to writing and signed the applicant would
be entitled to
payment of GBP 50 000 as a retention bonus. This would be subject to
a claw-back (100 % after 8 months and 50% before
12 months). If the
applicant increased the performance of the Cape Town branch over the
next 12 months, he would receive a performance-based
bonus (e.g if
performance improved 100% he would receive another GBP 50 000 and so
on). Green was adamant that until the agreement
was drawn up and
signed it would not be binding on the parties.
[24] It
was submitted on behalf of the applicant that Green’s evidence
was of a poor nature. I would agree. Green did not
have an
independent recollection of the meeting that took place with
applicant and did not recall whether it took place in Johannesburg
or
Cape Town. His version of the meeting was not put to the applicant in
cross-examination save for that Mr Green would testify
that an amount
of GBP 50 000 was discussed. Nothing was put to the applicant
regarding claw back conditions or a performance element
to the bonus.
Although it was put to the applicant during cross-examination that
Green would testify he never got the 16 July 2014
email from
applicant setting out the terms of the agreement, Green contradicted
this in his evidence when he admitted receipt,
albeit a few weeks
later.
[25] It
was put to Green under cross-examination that it would be highly
unusual in any commercial transaction, to pay over money
before the
agreement under which you’re paying that money is concluded. He
agreed with that proposition. The cross-examination
continued as
follows:
“
And
we know that you made a part payment of this amount, on your version
50 000, on Mr Pennell’s version 150 000,
you made
part payment of that amount in June 2014, of 20 000, is that
right? ---I did.
And
I must put it to you, because I’m going to argue this, that the
fact that you started performing under the agreement,
shows that the
agreement was binding. ---I don’t accept that.
So
on your version you made this payment out of the kindness of your
heart?....I believed that we would complete an agreement, and
I was
embarrassed at the fact that the lawyers had taken a long time to do
something that should have been relatively straightforward….”
[26] It
was submitted on behalf of the applicant that Green’s version
that there was no binding agreement until it was reduced
to writing
and signed, is undermined by the fact that he make part payment of
GBP 20 000 on 30 June 2014, at the same time apologising
for the
delay. It was also argued that undisputed background and surrounding
facts supported applicant’s version on the retention
bonus
agreement being the following:
26.1
At the time the alleged agreement was concluded respondent was in a
crisis. Featherby had recently resigned
to set up business in direct
competition with the respondent. A number of employees left with him,
including seven out of the eight
top managers in the country
(excluding only the applicant) and between 20 and 30 more junior
staff.
26.2
Green stated under cross examination that it would be massively
inconvenient if the applicant also quit the
company with his team and
that it would take him 18 months to two years to put together a Cape
Town team.
26.3
The applicant was one of the top five performing managers globally
and the Cape Town office was the number
1 office in the African
division.
[27] It
was argued on behalf of the respondent that it matters not whether
the payment had to be made immediately or whether it
was a delayed
payment or whether it was 50 000 GBP or 150 000 GBP. Because the
applicant’s services were not retained due
to the fact that his
work permit had expired shortly after the alleged agreement was
concluded, ‘the very purpose of the
agreement could not be
achieved and the condition could not be fulfilled.” The
submission is premised on the legal
consequences of provisions of the
Immigration Act, which
I have dealt with above.
[28] I am
of the view that applicant was a more credible witness and given the
surrounding circumstances, his evidence as to the
terms of the
retention bonus agreement should be accepted i.e. that the balance of
GBP130 000 was unconditional and due and payable
prior to the
applicant’s dismissal.
Notice
Pay
[29] The
applicant’s claim for notice pay of GBP 29 461 is also
primarily opposed by respondent on the basis of the impact
of the
Immigration Act’s
provisions which approach, as I have dealt
with above, stands to be rejected. Notice pay was in fact tendered by
the company, on
the basis that the dismissal of applicant was ‘a
no fault termination’. I see no reason why this should not be
paid
as offered. However, it was common cause before me that the
applicant owed the respondent an amount of GBP 8 100. This
should
be deducted from the notice pay claimed.
Unfair
labour practice: demotion
[30] The
applicant’s unfair labour practice claim is premised on the
following: At a meeting of 16 July 2014, Mr Gregory Stockton
informed
him that he was being demoted. No prior notice of the respondent’s
intention to demote had been given, and he received
no fair
opportunity to state his case prior to the decision being taken.
Furthermore, the respondent notified the applicant’s
entire
team on 18 July 2014 of his demotion to the position of Senior
Advisor. Two replacement area managers had been appointed
prior to
the meeting on 16 July 2014. Mr Leslie submits that the court should
award a substantial solatium for the loss of applicant’s
right
to a fair procedure which materially impacted on the applicant’s
reputation and good name in a tight-knit industry.
[31] For
the respondent Mr Malan submitted that the applicant never returned
to work and that he never rendered any services to
the company as a
Senior Wealth Advisor. For the purposes of the trial, at the
termination of his employment (8 September 2015)
applicant held the
position of Area Manager and his claims for commission and in respect
of notice pay have been calculated on
that basis. In other words, the
respondent underlines that there was no loss in earnings. The alleged
demotion in fact did not
take place. It would seem to me therefore
that the real issue that applicant complains of is his alleged
reputational damage caused
by the announcement that he would not be
returning to the company as Area Manager but in a lower position. On
the facts before
me, no demotion or lessening of status qua employee
has taken place. I do not consider that the applicant has proved an
unfair
labour practice in terms of section 186(2)(a) of the Labour
Relations Act and his claim in this respect stands to be dismissed.
[32] In
all the above circumstances, I make the following order:
Order
1.
The respondent is to pay the applicant the following amounts:
1.1
The amount of GBP 21 361 in respect of notice pay;
1.2
The amount of GBP 66 023 in respect of outstanding commission;
1.3
The amount of GBP 130 000 in respect of the bonus agreement.
2.
The calculation of the above amounts into South African Rands shall
be made at time of payment;
3.
The respondent shall make the payments on one and the same day within
14 calendar days of this
order.
4.
The respondent shall pay the costs in respect of C1009/2014.
5.
The applicant shall pay the costs in respect of C330/2015
_________________
H.
Rabkin-Naicker
Judge
of the Labour Court
Appearances:
Applicant:
GA Leslie instructed by Abrahams & Gross INC
Respondent:
LM Malan instructed by Bowman Gilfillan Attorneys.
. 83A
Presumption as to who is employee
(1) A
person who works for, or renders services to, any other person is
presumed, until the contrary is proved, to be an employee,
regardless
of the form of the contract, if any one or more of the following
factors is present:
(a)
The manner in which the person works is subject to the control or
direction of another person;
(b)
the person's hours of work are subject to the control or direction of
another person;
(c)
in the case of a person who works for an organisation, the person is
a part of that
organisation;
(d)
the person has worked for that other person for an average of at
least 40 hours per month
over the last three months;
(e)
the person is economically dependent on the other person for whom
that person works or renders
services;
(f)
the person is provided with tools of trade or work equipment by the
other person;
or
(g)
the person only works for or renders services to one person.
(2)
Subsection (1) does not apply to any person who earns in excess of
the amount determined by the Minister in terms of section
6 (3).
(3) If a
proposed or existing work arrangement involves persons who earn
amounts equal to or below the amounts determined by the
Minister in
terms of section 6 (3), any of the contracting parties may approach
the CCMA for an advisory award about whether the
persons involved in
the arrangement are employees.
[1]
Discovery Health Ltd v CCMA(2008) 29 ILJ 1480 (LC); Ndikumdwayi v
Valkenberg Hospital
(2012) 8 BLLR 795
(LC); Southern Sun Hotel
Interests (Pty) Ltd v CCMA (2011) 32 ILJ 2756 (LC); Ravhura v Zungu
NO
[2015] 4 BLLR 423
(LC).
[2]
2015 (4) SA 247
(LAC) at paras 44 & 45