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[2017] ZALCCT 37
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Nell v University of Cape Town (C717/2015) [2017] ZALCCT 37 (10 August 2017)
Of
interest to other judges
THE
LABOUR COURT OF SOUTH AFRICA,
HELD
IN CAPE TOWN
C
ase no: C 717/2015
In
the matter between:
FERDINAND
NELL
Applicant
and
UNIVERSITY OF CAPE TOWN
Respondent
Heard
:
27 – 29 August 2016
Delivered
:
10 August 2017
Summary:
(Claim for specific performance – alleged breach of contract –
unilateral variation of pay
class – prescription – deemed
knowledge of facts on which claim based – s 12 of
Prescription
Act 68 of 1969
)
JUDGMENT
LAGRANGE
J
Introduction
[1]
The applicant in this matter, Mr F Nell, was employed on 1 January
1996 in the post of University Engineer, Buildings and Services
Department. He was appointed in Pay Class 12 (‘PC 12’),
the third highest salary notch applicable to non-academic staff
and
became a member of the University retirement fund (‘UCTRF’),
which he was obliged to belong to. His claim arises
from an alleged
variation of his remuneration which he claims was a breach of his
contract of employment. Accordingly he seeks
an order of specific
performance to rectify the breach and a consequential claim for the
alleged shortfall in what he received
as a salary amounting to R 1,
780, 000.00 (plus interest and costs) as well as a corresponding
shortfall in contributions to the
UCTRF resulting from the same short
payment amounting to R 645, 000.00.
[2]
During the course of the proceedings, the parties agreed that the
issue of quantifying the applicant’s claim would be
deferred to
subsequent proceedings if the applicant was successful in
establishing his entitlement to be remunerated on the PC
12 scale
during the period in which the remuneration he was due is in dispute.
In part, this appears to have been done because
even if Nell should
have been remunerated in accordance with PC 12, salaries within a pay
class vary in accordance,
inter-alia
, with performance
assessments. Nell’s own estimates of what he ought to have got
were based on the maximum performance assessments
in that pay class,
and he agreed that was a matter for discussion.
[3]
Unusually, the parties could not even agree on how to word some of
the facts in dispute. In any event, the origin of the dispute
lay in
a restructuring exercise which took place in 1997. The University
claims that Nell’s original post was disestablished
in the
course of that restructuring and that he was appointed in the post of
a Maintenance Manager: Other Campuses as an alternative
to
retrenchment. The central factual disputes concern whether this
change in his post-designation, which he had agreed to, also
entailed
an agreed demotion to pay scale 11 (‘PS 11’), which was
the scale at which the new job was graded, or whether
the University
unilaterally decided only to pay him salary increases based on PS 11
until the next re-grading exercise which took
place in August 2013.
Nell claims that University’s alteration of his pay class from
PS 12 to PS 11 occurred without his
knowledge or agreement. The
second re-grading exercise in 2013 was described as a process of
“business process re-engineering”
and resulted in his
post and that of other Maintenance Managers being re-graded and
designated as PC 12 posts. Following that re-grading,
Nell once again
was remunerated on the PC 12 scale. Accordingly, his claim relates to
the period commencing with his initial post
re-designation in 1998
and ending with the re-grading of the post in August 2013
[4]
The University also raised a plea of prescription, but not in
the form of a special plea because it argued that the facts
on which
the plea of prescription was based was so inextricably linked with
evidence pertaining to the merits of the case that
the plea could not
be determined before hearing the evidence. A spat arose during the
trial as to whether this was a competent
way of dealing with the
prescription issue because the respondent had not pleaded the date on
which prescription was deemed to
have begun running.
[5]
The trial was conducted over three days. Nell testified on his own
behalf. The University called three witnesses: Mr C J Brier
(currently the Director of Projects and Capital Works and previously
the University Engineer), Ms M M Tainton (Senior HR Manager:
Compensation and Benefits) and Mr A Theys (Executive Director of
Engineering Services) referred to respectively as Brier, Tainton
and
Theys. Theys was Nell’s line manager, as the Head of
Engineering Services, from May 2005 to October 2013. Judgment
was reserved pending receipt and consideration of written heads of
argument filed after the hearing.
Material
issues
The
Terms of Nell’s Employment Contract
[6]
The applicant contends that the University unilaterally changed his
pay class from PC 12 to PC 11 and “in paying him lower
annual
increases in consequence thereof” acted in breach of the
employment contract he entered into in December 1995 and
in breach of
an agreement reached in March 1998 which was confirmed in writing in
August 1998 to the effect that his new job designation
would not
affect his remuneration. He further claims that it was an express,
alternatively implied or tacit term of that agreement
that he would
continue to receive future increases on the basis that he would
always be remunerated on the third and higher salary
notches of PC
12.
[7]
In terms of his initial letter of appointment dated 5 December 1995,
the following terms are most pertinent insofar as they
may be
relevant to his claim:
7.1 He
was appointed to the post of University engineer, Buildings and
Services Department with effect
from 1 January 1996 which was
designated as “a post in pay class 12”.
7.2 The
University reserves the right to relocate him to another department
or vary his duties if
it became necessary for any reason.
7.3 The
salary scale attached to the post ranged from R 5,018 to R 8,474 per
month and he was appointed
at a notch towards the upper end of this
range of R 7,854 per month.
7.4
Progression to higher notches was subject to good performance and he
qualified for annual increments.
7.5 He
was required to become a member of the UCTRF, a non-contributory
retirement fund (‘the
pension fund’).
[8]
Pay class 11 was the highest pay grade in the Peromnes based job
grading system by the University.
[9]
On 31 August 1998, he was issued with a memorandum from the Project
coordinator/safety and health manager, Mr C J Briers which
stated:
“
MAINTENANCE MANAGER: OTHER
CAMPUSES
With reference to the meeting held
during March, with Mr Roach, at which you accepted the duties as
Maintenance Manager: Other Campuses,
your revised job description is
attached.
As indicated remuneration package
remains unaltered. The grading for the position has still to be
completed.”
Based
on his previous 18 years’ experience in Spoornet, which he
spoke of with evident nostalgia, Nell’s understanding
was that
the reference to an unaltered remuneration package meant that he
would retain the remuneration package on which he was
originally
employed, namely PC 12, for the remainder of his career even if the
post he subsequently occupied was graded as PC 11.
The term he used
to describe this enduring personal entitlement to a prior, more
favourable, remuneration package was “personal
to holder”.
This was apparently a practice at Spoornet. Nevertheless, Nell did
concede that this principle was not contained
in his original
contract with the University nor was it promised as part of the
discussion about the new position he would occupy
after the
restructuring in 1998. Briers explained that the reference to the
remuneration package remaining unaltered in the letter
of 31 August,
simply meant that because the grading had not been done he could not
predict whether Nell’s salary would go
up or down. He could
have added the words “until further notice” but did not.
[10]
One of the reasons for filling in such a form was if there was an “
ad
hominem
promotion of incumbent”, which Briers explained was
usually used in cases of academic staff who might have reached the
top
of their scale, but whose salary needed improvement. He conceded
that it could mean that a person’s pay class was not always
tied to a post, but was unaware of any cases where this had been
done, except perhaps in the case of an academic staff member who
was
granted an increase in recognition of long service in their last year
of service.
[11]
In saying that the remuneration package remained unaltered, Nell
understood that it was guaranteed that his remuneration would
remain
the same, subject to notch progressions based on annual performance
reviews as set out in his original contract,. This meant
he would
remain at PC 12. When he was asked whether this meant he would be
paid at the mid-range or maximum range of PC 12 for
the duration of
his employment, Nell said that he believed he could be upgraded on
account of good performance to the top of the
PC 12 range and remain
there until he retired. That is what was meant when it was said that
his remuneration package remained unaltered.
As far as he was
concerned, if the University understood that it meant his salary
would remain at its current level and be managed
back to PC 11 then
it should have done so by entering into a new contract like his
original one. Tainton essentially confirmed
that when a previous post
was disestablished and a staff member was redeployed the standard
practice was that they would be issued
with a new contract explaining
the new post.
[12]
Reference was made to the ‘University Performance Improvement
Plan for PASS Staff’ published on the website provided
2.5.3
that:
“
Where the staff member accepts
a demotion, a new contract shall be entered into at the pay class of
the new post. The staff member’s
salary, where higher than the
standard package, shall be brought in line immediately with the new
pay class standard package.”
However,
Tainton agreed that this performance management tool was not the same
as the policy of ‘pegging’ which had
been referred to in
the correspondence. A procedural agreement between NEHAWU and the
University concerning the retrenchment of
permanent administrative
and support staff in pay classes 1 to 12 was also alluded to. That
agreement provided,
inter-alia,
that person is placed on
redeployment lists who are likely candidates for vacant posts would
be given new contracts of employment
to reflect their new position.
Tainton was not sure when the policy was introduced. Nonetheless, she
insisted that the practice
of pegging was one that was negotiated
with the unions and that it was a practice to award CPI increases in
such cases. She amended
her evidence on this issue slightly by saying
that ultimately, it depended on the increase which had been agreed
with the unions,
which might exceed CPI.
[13]
Nell accepted that the new post still had to be graded and when that
was done it was graded at PC 11. However, he was adamant
that should
not have affected his personal remuneration package which could not
be altered. He did not dispute that there was a
practice at the
University of pegging a person’s salary and managing it back
when they were demoted, but he was never have
made aware of the
practice until years later. He could not dispute that nobody was ever
retained on a scale personal to them as
opposed to a scale attaching
to a post. Tainton who had been employed at the University since 1997
recalled that the practice of
pegging someone’s salary and
managing their salary down with successive annual increases had
always been in place. Theys
confirmed a similar understanding of the
practice and that he learned of its existence when he encountered
Nell’s case. Tainton
mentioned that it was also used in cases
where somebody had been overpaid. Examples of this were when the
Student Affairs department
was restructured.
[14]
When Nell was asked if there was any reasonable basis why the other
two Maintenance Managers’ posts which were graded
at the same
time would have been graded at PC 11 and his at PC 12, Nell said that
his responsibilities were greater. He did not
dispute that his
immediate superior, Briers occupied a post graded at PC 12, but the
basis for believing he was entitled to continue
receiving
remuneration on that scale was because he was personally entitled to
It. Briers testified that pay scales were attached
to particular jobs
based on that job’s grading. An individual’s pay scale
would only change if they change jobs or
if their own job was
upgraded, which is what happened to Nell when his job was re-graded
in 2013 to PC 12.
[15]
Though he maintained that the only contract he had been given was his
original contract in 1995, Nell agreed that he had accepted
the
appointment to the new position, which was different from his
original appointment as University Engineer. He also agreed that
his
original post was disestablished. There was some dispute whether
Briers attended the meeting with Roach in August 1998. Nell
contended
they were both present and Briers denied that he had attended it.
According to Nell, the discussion at that meeting focused
on whether
he would get the position of Maintenance Engineer or Maintenance
Manager and not on remuneration which did not come
up as an issue.
Briers could not say what had happened at the meeting, but when it
was stated in the memo that his remuneration
package would remain
unaltered, that did not mean in perpetuity: it was subject to grading
being done.
In
March 1999, Nell wrote a long letter to the director of Human
Resource Manager, Ms J Fish (’Fish’), complaining about
various aspects of his job as an Area Maintenance Manager, which
appeared to be a generic title for maintenance manager posts with
specified geographic areas of responsibility. For present purposes
what is relevant is that Nell seemed to be still smarting from
his
demotion in the 1997 restructuring. According to him Fish said that
it was up to him if he wanted to resign. Alternatively,
Fish told him
he could accept the title and ‘enjoy the ride’ as long as
the salary remained the same, by which he understood
that he retained
his PC12 remuneration scale. Further, in January 2000, he confirmed
the composition of his remuneration package
on a
pro forma
“cost of employment” schedule, which stated
inter-alia
that his pay class was PC 12 and his cost of employment range. He
maintained that the range of salaries mentioned on the form
corresponded to the PC 12 salary scale as evidenced by a photocopy of
Cost of Employment Ranges which he obtained from his personnel
file.
He also referred to a similar
pro forma
schedules of his cost
of employment for 2001 and 2004 which he claimed reflected a cost of
employment salary range applicable to
PC 12 posts, though these forms
no longer mentioned his specific pay class. The University’s
explanation why PC 12 still
appeared on his cost of employment form
in 2000 was that when he was originally appointed to the new
position, the grading of the
post still needed to be done but the pay
class appearing on the form was never rectified subsequently as it
should have been, but
Nell had interpreted this as confirmation that
it was only his job designation which changed and not his pay class.
[16]
In 2013, Nell’s direct superior was Theys. In his
understanding, the restructuring exercise in the maintenance
department
was more of a re-grading exercise. Briers said it was part
of an attempt to streamline the department and was a fairly lengthy
process involving the trade unions. Briers also mentioned that the
job of maintenance manager was not the same job as before, but
this
was never canvassed with Nell when he testified. Nell was shocked
when Theys told him that he was being re- graded to PC 12
and he
replied that he always had been at a PC 12 level. Theys told him
that, when he came to the department in 2005, he noticed
the anomaly
that even though Nell was classified as being on PC 12, he was in
fact appearing in the departmental budget as a PC
11 employee. After
the second re-grading exercise, Nell received a letter from the
Executive Director: Human Resources regarding
his cost of employment
increase with effect from 1 August 2013. The letter stated inter-alia
that “All other conditions of
service remain the same.”
Following on from Theys’s observation, Nell delved further into
the issue, which involved
some email correspondence between Nell’s
wife and Theys to get to the bottom of the apparent reduction in his
scale of remuneration.
On 24 March 2014, Theys replied to Mrs Nell’s
email in which he stated:
“
I inherited this situation when
heading engineering services, so I was not party to what went before.
I can however report that
when I took over to engineering services,
Ferdi was being paid the same level, i.e. PC 11, as the other
maintenance managers, despite
his record showing he was a PC 12. I
enquired about this anomaly I was informed that this was an HR
adjustment predating my tenure
and that Ferdi’s position was
changed back then from the University Engineer to Maintenance
Manager: Other Campus, hence
the change to pay class.
Later, I made it my business to get
all maintenance managers regraded to PC 12, which happened towards
the latter part of 2013.
I will however need to go back and do
some more checking and will revert back later once I have more
information around Ferdi’s
case.”
[17]
The upshot of the investigation was recorded in a letter dated 9 July
2014 from Ms S Hill, HR Client Services Manager. In summary,
she
stated that following an audit review, the building and maintenance
functions were restructured in 1997. His previous post
of University
Engineer (PC 12) was dis-established and he accepted a Maintenance
Manager post (PC 11). By accepting the new post
he had accepted the
demotion and the PC 11 grading of that position which was the same as
two other Maintenance Managers posts
at the time. It was a practice
at the University that when a staff member was demoted on a no-fault
basis due to restructuring
“his/her salary can be pegged at the
rate of pay the time of the restructure.” The demoted
individual’s salary
thereafter was only adjusted by
inflationary annual increases until it was aligned with the lower pay
class range, and this is
what occurred in his case. As far as the
University was concerned, his salary was adjusted “in line
with” its “remuneration
policy and practice”.
Briers agreed that at the time Nell was appointed as a Maintenance
Manager it could not be said that
he had accepted the job and the
lower pay scale because the scale still had to be determined.
[18]
Nell claimed that he was never told that the post he was assigned to
in 1998 entailed downgrading his pay class or that his
remuneration
would be ‘pegged’ by only receiving inflation related
increases. Had he known that was the position at
the time he would
have resigned because that would have been totally unacceptable to
him. He agreed that the memo of 31 August
1998 confirming his
appointment as a Maintenance Manager stated that the grading of the
post still had to be completed, but he
was never shown an email sent
to Briers on 9 October 1998 confirming that the post had been
approved at grade PC 11. Briers testified
that he found the email on
his personal computer and it only surfaced a few days before the
trial because he had never been asked
for it before. Although he was
aware that Nell was querying his job change since 2014, nobody ever
asked him for information.
[19]
The form on which Briers authorised Nell’s change in his
appointment identified the reason for the change of appointment
as a
‘change of job title’ and not a ‘change of pay
class of post or incumbent’, but the form was undated
and the
entry for the pay class field on the form was blank. Nell also
never received another change of appointment form
in which the pay
class for Maintenance Manager was confirmed. Briers explained that
there was no entry for the pay class on the
form because at that
stage, the post had not been graded and therefore was unknown. He
agreed that there should have been a change
of appointment form
completed to reflect the change in Nell’s pay scale from PC 12
to PC 11 and that the paperwork to reflect
the change did not seem to
have been done. Briers also said that he never viewed pay class and a
job to be inseparable and that
an individual might retain a pay
class, though Tainton testified that as far as she knew this never
happened when a staff member
had been moved to a lower graded job.
Tainton testified that even if a form had not been completed for the
change in pay scale,
the new scale could have been effected in
consultation with the line manager based on the grading of the job.
Briers was not surprised
that Nell was shocked to discover that his
pay class had been changed.
[20]
The only Human Resources document, which indicated that Nell’s
pay class was PC 11 was his personal performance appraisal
form for
2012, but he claimed that he did not notice this because he did not
complete the form and Theys had simply turned it around
and presented
it to him for signing. Theys testified that 2012 was the first time
this particular format of the form had been used
and universally
applied throughout the University. Along the top of each page was a
table containing details of the individual
being assessed including
the employee’s name, job title, staff number, department, pay
class, faculty and year of review.
Nell signed the document in the
signature portions on the last two pages. Theys claimed that he knew
Nell was on pay class 11 because
all maintenance managers were on
that grade. He also said that, he gave a copy of the performance
appraisal form to Nell, but this
was not canvassed with Nell. Nell
had testified the form was not in his personnel file when he
photocopied other documentation.
Nevertheless agreed that it
would have made sense to give him a copy of the form because it set
out performance related issue
he had to attend to in the future, but
he maintained that he did not notice the references to his pay class
as PC 11 when he signed
the form. In passing, it should be mentioned
that Theys drew attention to the statement on the last page of the
form to the effect
that “Signature by any staff member denotes
participation in the discussion, not necessarily agreement to the
outcome”
[21]
Nell was referred to a detailed letter issued by the HR department in
February 2010, headed “Cost of Employment (CoE)
Increases for
Pay Classes 5 to 12 for 2010”. According to the University,
this was a standard letter sent out annually to
all employees. The
annual increase was determined by collective-bargaining between the
University and trade unions. Although Nell
could not recall that
specific letter, he agreed that such letters were issued. Attached to
the letter was a table specifying the
salary ranges for each
performance category per pay class. He conceded that in that year his
R 390,000.00 cost of employment fell
below the minimum performance
category in pay class 12, but said he had no reason to investigate
his pay class because at that
stage, he had no reason to doubt the
correctness of his pay scale. Similarly in 2011, his cost of
employment was R 413,234.00 but
in the table accompanying the 2011
circular letter, the lowest remuneration rung in PC 12 was R
462,657.00, which also showed that
his pay scale fell outside PC 12.
Although he did not dispute receiving such letters annually, he was
critical of the fact that
information of this nature was only been
provided in the course of the trial, whereas when he had tried to get
this information
from the University after 2013 he could not obtain
it. That also explained why his own estimate of what he should have
been paid
in places reflects figures which do not correspond to the
actual pay scales because he could not get that information from the
University and had to estimate figures. He could not understand why
the figures were so readily available now when he had struggled
to
obtain them all previously. His request for the history of pay class
ranges was made as early as April 2014. Tainton implied
she would
have asked for a pay scale schedule to be re-generated if she had
been asked for this information, but said the previous
schedules were
not retained on the system and were not readily accessible. The
scales had been accessible on the Internet since
2004 but only the
current one was accessible at any particular time. Nell agreed he
would have got a similar letter in 2006 showing
that his cost of
employment fell outside the range of PC 12 and within the range of PC
11, but still insisted that he had no reason
to suspect anything was
amiss which required him to investigate further. He claimed to be
unaware of pay scales being available
online since 2004. Although
Briers was sceptical about Nell’s lack of knowledge about UCT
policies he was not sure of anything
which would have alerted him to
suspect that something was amiss. No copies of the letters he ought
to have received were in his
personnel file. The cost of employment
form which he acknowledged in April 2006, unlike the 2004 form, did
not mention his pay
class.
[22]
It was the same year that Theys became Nell’s superior and
noticed the anomaly in the pay system in terms of which Nell
was
classified as being on pay scale 12, when his job had been graded on
pay scale 11. He explained that he received a spreadsheet
and pay
scales from the HR department. The system would reveal any anomalies
once the increases were entered. In Nell’s case,
it revealed an
error message which read “out of range” which meant that
his remuneration was outside the pay class
12 range. He
consulted Briers, who told him that Nell had been demoted and he
return the spreadsheet to HR with a comment
to that effect. Theys did
not see it as his responsibility to correct Nell’s HR record as
a result of previous mistakes made.
He never had a discussion with
Nell concerning his pay class until he moved back to PC 12, when he
congratulated him on the up-grading.
Theys never thought to mention
the correction of the anomaly to Nell because he had no reason to
think that Nell himself believed
he was on PC 12 because the
appointment had been a demotion and the other maintenance managers
were on PC 11.
[23]
Briers denied that his failure to mention the scale had been an
attempt to disguise the change: all that had happened was that
the HR
department had not corrected something that should have been
corrected in the past. However he did concede that Nell should
have
been advised of this. Tainton testified that the format of the cost
of employment forms changed in 2006 and that was the only
reason that
the pay range and pay class were not mentioned. However, she said the
applicable pay class would be mentioned in the
letter sent to
employees. When asked if Theys ought not to have contacted Nell when
he saw that he was on PC 12 but should have
been on PC 11, Tainton’s
comment was that, she would have thought that it would have been
understood given the fact that
other maintenance managers were on the
same PC 11 class. Theys was also of the view that Nell could not have
been unaware that
the other two Maintenance Managers were on PC 11
and was sceptical that Nell would never have compared his cost of
employment with
the pay scales which were publicised every year. He
thought it was unlikely Nell would have believed he should have been
paid more
than the other maintenance managers. On 10 April 2014, Nell
sent a very detailed letter to the Executive Director: Human
Resources
requesting information pertaining to his remuneration
record including the Pay Class ranges for every year from 1996 to
2014; his
CoE for every year; the date upon which the employer
changed his CoE from PC12 to PC11; and the identity of the person who
authorised
the change. The Director, Ms M Hoosain did not respond to
his queries and he referred the letter to Hill on 25 April, who
responded
saying he had not raised issues with the person he had been
previously been referred to but nevertheless undertook that the
issues
raised would be investigated further and they would endeavour
to respond by 9 May.
[24]
Eventually, in mid-August 2014 he received a response from Hill who
said that she was relying on documents from his personal
file and
records from the payroll system as a guide. The gist of her response
was set out in the following paragraph of her email,
viz:
“
Letter of Appointment as
Maintenance Manager and Acceptance:
On further investigation, your Letter
of Appointment as Maintenance Manager and acceptance thereof have
been misplaced. Your personal
file does contain a memo sent to you on
31 August 1998 in reference to you accepting the duties as
Maintenance Manager. A job description
is included in the
correspondence. Please find copies attached. You also make reference
to the job change (and your title of Area
Maintenance Manager) in
other correspondence written by you which is in your personal file.
You will be aware that all maintenance
managers across the University are at the level of PC 11. However, in
line with our practice
of “pegging “, our system
(Heritage and SAP) shows that your remuneration remained unaltered
from the level of PC 12
when you were demoted to Area Maintenance
Manager and that you have received inflationary salary increases
annually.”
[25]
Thereafter, Nell first sought the assistance of the staff association
and subsequently that of an attorney to try and unravel
how it had
happened that his pay scale had been reduced to PC 11. Got the His
erstwhile attorney’s polite and clear enquiry
of 24 August 2014
yielded no response from the University and a follow-up letter was
sent on 5 November 2014. Nell’s spouse
also subsequently tried
to pursue the matter by approaching Theys, who did respond but could
add nothing to what he had previously
said and he defended the
University’s previous direct responses to Nell. Nell responded
through his wife that he had never
agreed to a change in his
remuneration. On 7 November, the University responded to Nell’s
attorney’s letter as follows:
“
...please be advised that the
University have investigated this matter as follows:
·
We confirmed that in 1997, following recommendations from KPMG audit
review,
the building and plant maintenance functions were
restructured.
·
Discussions with the Executive Director: Property and Services
confirmed
that Mr Nell’s post of University engineer (PC 12)
was subsequently disestablished and he was offered a demotion in 1998
to the post of Maintenance Manager (PC 11) with his “remuneration
package remaining unaltered”.
·
It was then, and remains, a university practice that when a staff
member
is demoted due to restructuring on a no-fault basis, is/her
salary can be pegged at the rate of pay at the time of the
restructure.
Only inflationary increases are allowed until such time
that the salary is aligned with the new pay class range.
·
We confirm that our records indicate that Mr Nell received increases
and
have remained within the PC 12 range for the last 16 years. We
believe that you have not been prejudiced due to the restructuring
in
1997 and Mr Nell’s pension and other related benefits have been
compensated fairly.”
[26]
On 20 November 2014, a further letter was sent by Nell’s
erstwhile attorney which the University failed to respond to.
In May
2015, Nell’s current attorneys of record advised that he was
considering legal proceedings and that his estimated
claim against
the University was approximately R 2, 4 Million but also appealed to
the University to see if the matter could not
be settled. This
prompted a response from University seven weeks later in which the
University’s defence to Nell’s
claim was developed
further with additional allegations not previously made in the
University’s correspondence. While reaffirming
the contents of
Hill’s letter of 9 July 2014, the University elaborated
further:
“
2. Our instructions are that:
2.1
Your client’s employment history is summarised in our client’s
letter to your client dated 9 July 2014.
2.2
Despite his assertions to the contrary, your client was at
all
material times aware that the position that he occupied from 1998 was
at a pay class 11, in common with other maintenance managers
employed
at the same level as him at the time.
2.3
It is correct that your client was informed, when he took up
the
maintenance manager position in 1998, that his remuneration package
would remain unaltered. His remuneration package did indeed
remain
unaltered at the time, and it was in fact increased from year to year
by at least the minimum percentage agreed by collective
agreement
from time to time. Your client was not at any stage given an
undertaking that his remuneration package would remain within
the
range applicable to pay class 12 positions.
2.4
Since 2005 your client’s remuneration package has fallen below
the range applicable to pay class 12 position. At all material times
until 2013, however, the position he occupied fell within
pay class
11 and not pay class 12.
2.5
Your client was aware of this, raised no objection to it, and cannot
now seek to contend that he was entitled to higher remuneration for a
period that goes back some 10 years. In confirmation of this,
we
attach a copy of the performance document for your client used the
year 2012, signed at various places by client and reflecting
clearly
at various pages that his position was a pay class 11.
2.6
During 2013 your client’s position in common with other
positions
at the same level, was re-graded and he has since been
compensated within the range applicable to pay class 11I positions.
3. Our client is satisfied it is
treated your client fairly at all material times, and in a manner
consistent with his contract
of employment and its remuneration
policy and practice. ..”
[27]
The last letter acknowledged that, Nell was actually not remunerated
within the pay scale 12 range after 2005, contrary to
what was
previously stated. It also asserted that, he was fully aware that he
was employed in a lower rated position quite apart
from what was
asserted in the letter of 9 July to the effect that his acceptance of
the new post entailed acceptance of the associated
pay scale. It also
effectively equates the phrase “remuneration package”
with his existing salary and not with his
existing salary scale.
Analysis
Prescription
[28]
The respondent pleaded that Nell’s claim had prescribed. Nell
was well aware that proceedings were initiated years after
the breach
allegedly arose and in replication to the plea of prescription stated
that he was not aware of the facts giving rise
to his claim prior to
15 August 2013. When respondent’s counsel started to question
Nell about when he became aware of his
claim, an objection was raised
by Nell’s counsel to permitting such questions because the date
on which the respondent alleged
Nell became aware of the facts of his
claim had not been pleaded. If the applicant felt prejudiced by
the respondent’s
failure to allege a specific date when he
would have become aware of those facts the proper procedure would
have been to except
to the plea on the ground it was vague and
embarrassing or to ask for further particulars before trial. The
applicant led evidence
as to why he believed he only became aware of
the facts giving rise to his claim at a certain time and ultimately
the court had
to decide this on the basis of all the evidence.
Accordingly, I allowed the respondent to proceed with its attempt to
adduce evidence
from Nell in support of its prescription point.
[29]
The period of prescription for an ordinary debt which includes a debt
for arrear remuneration is three years in terms of s
11(d) of the
Prescription Act 68 of 1969 (‘the
Prescription Act&rsquo
;).
Section 12
of the same Act provides :
“
12 When prescription
begins to run
(1) Subject to the provisions of
subsections (2), (3), and (4), prescription shall commence to run as
soon as the debt is due.
(2) If the debtor wilfully prevents
the creditor from coming to know of the existence of the debt,
prescription shall not commence
to run until the creditor becomes
aware of the existence of the debt.
(3) A debt shall not be deemed to be
due until the creditor has knowledge of the identity of the debtor
and of the facts from which
the debt arises: Provided that a creditor
shall be deemed to have such knowledge if he could have acquired it
by exercising reasonable
care.”
[30]
Nell’s counsel submitted that he did not know that his
remuneration package had fallen into the range applicable to PC11
until August 2013. Consequently he did not know of the facts on which
his claim of arrear wages was based until then and prescription
only
began to run from that date. Accordingly, any arrear salary claim
prior to August 2013, could be launched provided he did
so by August
2016.
[31]
For the purposes of this discussion, it seems that insofar as Nell
was not paid what was due to him there are two dates when
salary
arrears would have started to accrue, depending on whether his claim
is confined to a claim of not being paid less than
a PC 12 employee
or if one considers his claim that he was entitled to be remunerated
at the third highest notch on PC I2, which
he had identified with the
mid-point of PCI 2 salary range. In the latter case his remuneration
fell below the mid-point of PC12
in 2000 and in the case of falling
below the PC12 range altogether the debt became due in 2006.
[32]
Nell’s spontaneous and undisputed reaction to the news that he
was being ‘upgraded’ to PC 12 when congratulated
by Theys
was not the reaction of someone who was under the impression they
were on a lower grade. There was no reason to suggest
that his
response at this point was contrived but was an accurate reflection
of what he believed. The next question to consider
then is whether,
despite that being his genuine state of mind, he should nonetheless
in law be deemed to have had such knowledge
at an earlier date
because ‘he could have acquired it by exercising reasonable
care’
‘
.
[33]
More commonly, disputes about when deemed knowledge arises concern
cases where the identity of the debtor is not obvious or
when damage
or losses were suffered, as in the case of delictual claims. In this
instance, the dispute is solely about when by
exercising reasonable
care Nell could have learnt that he was either not being paid as a PC
12 employee at all, or was not being
paid at the PC 12 notch he
believed he was entitled to.
[34]
The SCA has summarised the
interpretation of the requirements of care in
Gunase
v Anirudh
[1]
as follows:
“
[14] Section 12(3) imposes a
duty on the creditor to exercise reasonable care to
obtain knowledge of the identity of
the debtor and the facts from
which the debt arises. A creditor is not allowed to postpone the
commencement of the running of prescription
by his failure to take
necessary steps. In Burley Appliances Ltd v Grobbelaar NO and Others
2004 (1) SA 602
(C) ([2009
3 All SA 505)
at 607G Nel J said that —
'the
declarator is contrary to the established principle that a creditor
cannot by supine inaction arbitrarily and at will postpone
the
commencement of prescription' .
See also Consol Ltd t/a Consol Glass v
Twee Jonge Gezellen (Pty) Ltd and Another (2)
2005 (6) SA 23
(C)
([2004]
1 All SA 1)
para 26; and D Uitenhage Municipality v
Molloy
[1997] ZASCA 112
;
1998 (2) SA 735
(SCA) ([1998]
1 All SA 140)
at 742A – C.
[15] In Drennan Maud & Partners v
Pennington Town Board
[1998] ZASCA 29
;
1998 (3) SA 200
(SCA) ([1998]
2 All SA 571)
at
209F – G Oliver JA said
'Section
12(3) of the Act provides that a creditor shall be deemed to have the
required knowledge if he could have acquired it by
exercising
reasonable care. In my view the requirement exercising reasonable
care requires diligence not only in the ascertainment
of the facts
underlying the debt, but also in relation to the evaluation and
significance of those facts.
This means that
the creditor is
deemed to have the requisite knowledge if a reasonable person in his
position would have deduced the identity of
the debtor and the facts
from which the debt arises.'
In Leketi v Tladi NO and Others
[2010]
3 All SA 519
(SCA) para 18 G Mthiyane JA said:
'It seems to me that the
adverse operation of s 12(3) is not dependent upon a creditor's
subjective evaluation of the presence or
absence of knowledge or
minimum facts sufficient for the institution of a claim.
In terms
of
s 12(3)
of the
Prescription Act, the
deemed knowledge imputed to
the creditor requires the application of an objective standard rather
than a subjective one
. In order to determine whether the
appellant exercised reasonable care,
his conduct must be tested by
reference to the steps which a reasonable person in his or her
position would have taken to acquire
knowledge
of the fraud on
the part of Albert.'
The impact of
s 12(1)
read in
conjunction with
s 12(3)
is that prescription starts to run as soon
as the creditor has or ought to have knowledge of the identity of the
debtor and the
facts from which the debt arises.”
(emphasis
added)
[35]
In the circumstances of this matter, what steps would a reasonable
person in Nell’s position have taken to acquire knowledge
of
the alleged breach of contract and consequential underpayment. It is
clear that once he heard that the University did not share
his view
that he was not graded as an employee on PC 12 before the
restructuring of the maintenance department in 2013, he began
what
turned out to be an arduous process of investigating his pay class
status and whether he had been remunerated in accordance
with his
previous understanding that he was on PC 12. There can be no question
in my mind that he took reasonable steps to ascertain
if he might had
been unlawfully relegated to a lower pay class. The issue therefore
is whether he had sufficient information to
have taken such steps
earlier.
[36]
In essence, Nell claims that there was no reason for him to have
embarked on any investigation prior to 2013 as there was no
reason
for him to believe that he might be underpaid. According to him it
was only when his suspicions were aroused in 2013 that
he saw the
need to take such steps.
[37]
The respondent effectively argues that even if it failed to advise
Nell that he had in fact been employed in a lower graded
post, as it
should have done when the grading had been determined by October
1998, it had provided him with sufficient documentary
information on
an annual basis that would have alerted him to any apparent
discrepancy between what he believed he was entitled
to by virtue of
believing that he was on PC 12 and what he received. The information
relied on by the University is threefold.
Firstly, it consisted of
annual cost of employment letters sent to staff after annual
increases were determined. Attached to those
letters were schedules
indicating with varying degrees of detail the minimum and maximum
scales for different pay classes for the
forthcoming year. Secondly,
there were personalised cost of employment letters sent to employees,
attached to which was a schedule
showing details of the composition
of that employee’s remuneration, which the employee was
supposed to sign and return confirming
that they accepted the
composition and structure of their salary package. The third type of
document relied on by the University
is the annual performance review
forms completed by his superior and which he signed in
acknowledgement that he had participated
in the performance review
assessment.
[38]
To deal with the latter forms first, the respondent argues that
because Nell’s pay class was indicated as PC 11 on the
performance assessment review forms in 2012, he would have been aware
then that there might be a problem with his remuneration
because it
would indicate that he was not classified as PC 12. While I accept
that the form did mention his pay class on more than
one page, the
primary purpose of that document was to set out an assessment of his
performance and remedial action. The document
was also produced in
the context of a discussion about his performance and he was not been
asked to confirm details relating to
his remuneration. In my view it
would be contrived to say that one of the steps he could reasonably
have been expected to take
was to take note of the pay class entry on
that form, even if he had been given a copy for his future reference
for his future
conduct for performance evaluation purposes.
[39]
The personalised cost of employment letters which employees had to
scrutinise and confirm at the beginning of each year were
self-evidently mainly for the purpose of confirming the internal
composition of an employee’s remuneration package for the
coming year. That document was directly related to the individual
employee’s remuneration and advised the employee of their
gross
remuneration and the breakdown thereof for the coming year and would
have included any salary improvements due to the employee
from the
beginning of the year. The earliest examples of these forms issued to
Nell were the schedules showing his individual cost
of employment for
2000, 2001, 2004 and 2006. Only the 2000 form actually identified the
pay class by name and in that form his
pay class was identified as PC
12. The forms issued to him in the remaining years not stipulate a
pay class nor was any provision
made for a pay class entry on the
form.
[40]
However, the 2001 and 2004 forms did contain an entry entitled “COE
Range” followed by the minimum and maximum
pay notches for the
pay class into which the employee fell but without identifying the
pay class by number. An employee who believed
they ought to be on a
particular notch would have been able to get at least a rough
indication whether their remuneration fell
closer to the minimum
notch, in the middle of the pay class band or near the top of the pay
class. In Nell’s case, a glance
at the COE Range which appeared
directly under his own cost of employment reveals that in 2001 his
personnel cost of employment
of 225,000 was not far from the middle
of the range which was at approximately R 230,000. On his own
estimates which he did in
preparation for the trial he believed that
if he retained the third highest notch in PC 12 that would place him
at the middle of
that pay class salary range. Similarly, in 2004 his
cost of remuneration was approximately R 281,000 which was not very
far off
the middle of the cost of employment range stated on the form
of approximately 290,000 bearing in mind that the bottom of the scale
was approximately R 249,500 and the highest notch was approximately R
331,000. In the absence of the pay class range being identified
as PC
11 on the form it would not have been unreasonable for Nell reading
that form to believe that he was in the middle of the
pay class range
which applied to him as he expected to be. Consequently, if I accept
that it is improbable that any employee, let
alone someone of such
seniority such as Nell, would have not been interested in where they
fell in their pay class, a cursory assessment
of the information
provided on these forms would not have alerted him to any discrepancy
requiring investigation. I agree that
his personal cost of employment
was always somewhat below the midpoint of the scale provided but the
discrepancy was not so great
that he would necessarily have felt he
was on the incorrect notch. The 2006 form no longer contained
information about the cost
of employment range and did not provide
sufficient information to alert Nell to any possible misalignment of
his salary and pay
scale.
[41]
However, this was not the only form Nell received annually. He also
received notifications about the annual increases which
were
accompanied with the new pay scales for each pay class. His
explanation for not perusing the new pay scales was simply that
he
had no reason to suspect that anything was wrong with his pay. I find
it very hard to accept this evidence as plausible. He
was not
disinterested in his level of remuneration nor was he disinterested
in where he stood in the notch rankings of his pay
class. The
information in the general notices gave him ready access to quickly
confirm where he stood in the pay scale rankings.
It may not have
been enough to make him think that something was amiss because his
cost of employment was always a bit lower than
the midpoint of the
salary range where he expected to be, but it is difficult to believe
he would not even have been curious to
confirm that he still remained
on the third highest notch, despite being consistently slightly below
the middle of the range. Even
if that discrepancy had not worried him
overmuch it is difficult to accept on a balance of probabilities that
over several years
he would not have once tried to see where his own
remuneration fitted in the salary bands. What Nell would have the
court accept
is that he did not do this once from 2005. Had he done
so in that year it would have been obvious that his salary barely
fell within
the PC 12 range and that in all subsequent years it fell
below the minimum notch for PC 12. In any event, he had more than
sufficient
information at his disposal to identify if there was
something amiss with his remuneration at the time his new annual
remuneration
took effect each year and his new monthly salary fell
due. It is reasonable to expect that with that information and given
his
level of seniority he would have identified that something might
have been amiss at the very least by the beginning of 2012, based
on
his perception that he was contractually entitled to be regarded as a
PC 12 employee and remunerated as such, more particularly
at the
third highest notch of that scale. In my view, even this is still a
very generous time allowance because it assumes an extended
period of
disinterest on his part in verifying his remuneration status relative
to the pay scales over an extended period during
which his own
remuneration fell below the PC 12 minima he believed he was more than
entitled to.
[42]
Proceedings were launched on 28 August 2015 more than three years
after even the outer limit of the time period in which he
had access
to the information that would have made it possible for him to launch
his claim for specific performance, based on his
own view of his
personal pay class. A reasonable person in his position with that
information would have realised that his remuneration
did not
correspond with the pay class he believed he belonged to and would
have taken steps prior to 2013. Consequently, I am satisfied
that the
applicant must be deemed to have had sufficient knowledge based on
the information which had been provided to him in the
ordinary
correspondence relating to his remuneration and salary scales to
launch proceedings more than three years before he initiated
these
proceedings. He is deemed to have had the knowledge of the facts from
which the debt (which includes the specific performance
of his
contract) arose in terms of
s 12(3)
of the
Prescription Act and
accordingly the debt has prescribed.
[43]
The above conclusion is reached on the assumption that Nell could
have had no reason to doubt his continued PC 12 classification
after
his post at that level was disestablished. I should add that in
the circumstances of this matter that I am sceptical
he would not
have been more wary about ascertaining and confirming the status of
his remuneration and therefore more assiduous
in checking that he had
not been downgraded. He knew that the disestablishment of his first
post and his appointment to the Maintenance
Manager position was a
demotion. He relied heavily on the wording of a memorandum which he
attached inordinate weight to the wording
of the memo that his
“remuneration package remains unaltered”. In his mind the
phrase “remuneration package”
embraced not only the
current remuneration package he was receiving but the pay class he
was previously in which was linked to
the grading of the
disestablished post. At the very least he ought to have considered
more limited interpretations were possible,
such as simply
interpreting it to mean his current remuneration package would not be
affected.
[44]
He assumed, without any factual basis for doing so, that the
University necessarily had the same ‘personal to holder’
remuneration policy as his previous employer, Spoornet. He was
expressly advised that the grading of the new post was yet to be
done
and never received any formal notice of what it was. He was not
concerned that he never received a new contract and
despite the HR
formalities of the university the memo and circumstantial factors
were enough to assure him that he and the university
had agreed that
he had now acquired a personal pay class status irrespective of the
grade of job he occupied.
[45]
I accept that the administrative bungles of the university,
particularly the omissions of the HR department to properly formalise
Nell’s new appointment and to correct documentation to reflect
the correct pay class of his new job might have encouraged
Nell to
believe that his pay class and not merely his current remuneration
package remained unchanged, even though that circumstantial
evidence
might not necessarily be interpreted as evidence of an agreement.
Increasingly though, the remuneration increase information
provided
to him annually ought reasonably to have raised concerns in his mind
whether he and the university were genuinely in agreement
as regards
his pay class.
Costs
[46]
In the ordinary course of litigation, the applicant ought to pay the
respondent’s costs. However, I accept that his contention
his
claim had not prescribed was not frivolously made and that the
university was also unable over a considerable time to provide
any
unequivocal evidence that his PC 11 remuneration scale had been
agreed to. In parenthesis, I do not wish to suggest by so saying
that
it implies conversely he would have retained entitlement to a pay
class rather than simply retaining his current employment
package in
monetary terms based on the memo and in the absence of a new
contract. Nevertheless, the failure of the university to
complete the
formalities in relation to his new position materially contributed to
the contractual fog governing his employment
relationship with the
university and understandably would have lent support to Nell’s
belief he might have had a legitimate
contractual claim for breach of
contract.
[47]
I am also concerned about how long it took the university despite
repeated requests from Nell and his legal representatives
over a
considerable time to provide the full details of the scales governing
remuneration, even if Nell did receive these over
the years. I
believe there is good reason to think that if the material had been
made available timeously before trial, instead
of on the eve of
trial, the trial might have been avoided.
[48]
In the circumstances, an equitable cost order considering the
outcome, the conduct of the respondent in dealing with the
applicant’s
requests for information and belated confirmation
of pay scales requires the respondent to pay half the applicant’s
costs.
Order
[1]
The applicant’s claim has prescribed.
[2]
The respondent must pay half the applicant’s costs including
the costs of counsel.
_______________________________
Lagrange
J
Judge
of the Labour Court of South Africa
APPEARANCES
APPLICANT:
S
Harvey instructed by
Machanik
Attorneys
RESPONDENT:
D
Bosch instructed by
Bowman
Gillfillan Inc.
[1]
2012 (2) SA 398
(SCA) at 402