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[2018] ZALCCT 27
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Kidrogen (Pty) Ltd v Commission for Conciliation, Mediation and Arbitration and Others (C814/2016) [2018] ZALCCT 27; (2018) 39 ILJ 2560 (LC) (1 August 2018)
Of
interest to other judges
THE LABOUR COURT OF
SOUTH AFRICA,
HELD AT CAPE TOWN
Case no: C 814/2016
In
the matter between:
KIDROGEN
(PTY) LTD
First
Applicant
and
COMMISSION FOR
CONCILIATION,
MEDIATION
& ARBITRATION
First
Respondent
WINNIE EVERETT
(
N.O.
)
Second
Respondent
BG
NCUBE, A ERASMUS & C PRINS
Third,
Fourth and Fifth Respondents
Heard
:
7 February 2018
Delivered
:
31 July 2018
Summary:
(Review – reasonableness – finding respondents not guilty
of dishonesty unreasonable on the
evidence before the arbitrator
except on a credulous evaluation of the evidence – finding on
substantive fairness set aside
– finding on procedural fairness
for failure of chairperson to recuse himself following a complaint to
the bar council about
his conduct upheld, but no compensation due in
light of misconduct of respondents)
JUDGMENT
LAGRANGE
J
Introduction
[1]
This is an application to review an arbitration award in which the
arbitrator, Ms W Everett, found that the dismissals of the
third,
fourth, and fifth respondents (‘the respondents’), namely
Mr BG Ncube (‘Ncube’), Mr A Erasmus (‘Erasmus’)
and Mr C Prins (‘Prins’) were procedurally and
substantively unfair.
Background
[2]
The respondents had been employed by the applicant (‘Kidrogen’)
initially on fixed term contracts starting in 2011.
In September or
October 2014, they were employed on an indefinite term contracts.
Kidrogen is a vehicle operating Company providing
the city of Cape
Town with integrated rapid transport services known as My City. It
was formed when five taxi associations concluded
an agreement with
the city to relinquish their vehicles and licenses in exchange for
equity in Kidrogen. The respondents were all
former taxi operators
and as part of the agreement were appointed to senior executive
positions in Kidrogen, viz: Chief Executive
Oficcer (Ncube), Chief
Financial Officer (Erasmus) and Chief Operating Officer (Prins).
[3]
The respondents were dismissed on 20 June 2016 after prolonged
disciplinary proceedings led to them being found guilty of gross
dishonesty in that:
3.1
they allowed manual alterations in their employment contracts to be
made, which varied their annual
monthly total cost of employment
(TCOE) in an unlawful and dishonest manner (charge 1(a));
3.2
in October 2014 they unlawfully and dishonestly received a higher
TCOE salary compared to the
salary they were entitled to as recorded
in the remuneration committee report that was approved by the
applicant’s board
of directors (charge 1(b));
3.3
they unlawfully and dishonestly received back-all pay in varying
amounts in October 2014 (charge
1(c));
3.4
they enriched themselves by receiving payment in the form the 13th
cheque December 2014 in an
unlawful and dishonest manner (charge
1(d));
3.5
they unlawfully and dishonestly received a thirteenth cheque in
December 2013 (charge 1(e)), and
3.6
(f) they unlawfully and dishonestly received a discretionary bonus
during December 2014 for the
period 1 May 2013 to 30 April 2014
(charge 1(f)).
The
arbitration award
[4]
The arbitrator found that the essence of the dispute concerned
whether or not the respondents had unlawfully and dishonestly
received various adjustments to their salaries, back pay and
thirteenth cheques contrary to the principle of Total Cost of
Employment
(TCOE) remuneration packages adopted by Kidrogen’s
board as recommended in a Remuneration Committee (Remco) document and
captured in their contracts of employment. There is also a dispute as
to whether they were entitled to a performance bonus.
[5]
The relevant passages in the 2014 Remco report drawn by Mr B Lodewyk
of Grant Thornton (‘Lodewyk’) read:
5.
Key principles underpinning the Executive remuneration policy
The
Executive remuneration policy is based on the application of the
following 4 key principles or foundations.
5.1
Internal consistency: …
5.2
External competitiveness:…
5.3
8 A total cost of employment approach (TCOE): this means that the
policy seeks to establish the principle of “no hidden”
or
“additional cost” to employment. This further means that
the Remco recommendations to the board entail the total
cost of
Executive remuneration, with the exclusion only of additional
remuneration that could be awarded on the basis of performance.
5.4
A performance –based incentive model: this means that the
policy provides for the introduction of an Executive
performance-based
incentive scheme that allows Company Executives to
earn a performance-based bonus based on the incentive scheme outlined
in Performance
Bonus Policy for Executives.
Paragraph
6 of the report dealt with the benchmarking of executive salaries
within the transport industry. After setting out the
various
comparators, the recommendations made were that the CEO, COO and CFO
should receive R 1,224,729.00, R 800,000.00, and R1,
025,434.00
respectively as their annual remuneration. In terms of the existing
recorded remuneration of the respondents only the
C00’s
remuneration was recommended for an upward adjustment. The
recommended salaries for the CEO and CFO respectively remained
the
same as their existing remuneration. The benchmarking portion of the
report concluded as follows:
In
this context, subject to any additional input from the Board, the
committee recommends that the TCOE recommendations for 2014/15
be in
line with the figures outlined in the “Kidrogen current”
column in the table above and remain unchanged until
the milestone 5
has been achieved.
The
Executives are eligible to receive the annual wage/salary increases
that applies to the bargaining council employees (SARBAC).
The
required adjustment to be made and reviewed by Remco and approved by
the board on an annual basis effective 1 July.
The
fifth ‘milestone’ to be achieved was the last rollout of
the final MyCiti route in terms of Kidrogen’s contract
with the
city. The concluding paragraph of the report stated:
8.
Recommendations pertaining to the 2014/15 financial year
It
is recommended that in respect of the 2014/15 financial year the
board:
8.1
approves the Executive remuneration policy principles outlined in
section 5 of this report.
8.2
approves the undertaking of an annual review of Executive
remuneration, including the undertaking of a benchmarking process,
at
least 2 months prior to the end of the financial year.
8.3
notes the benchmark information provided in section 6 of this report.
8.4
approves the performance-based incentive scheme outlined under the
policy of performance bonus for Executives puts into place
mechanisms
to allow for the monitoring and assessment of Executive performance
in terms of the scheme.
8.5
approves the car allowances scheme outlined in the policy.
8.6
approves the annual increases for Executives, not exceeding the
annual bargaining council increase for staff that fall within
the
bargaining council structure, subject to the Company policy be
developed and submitted to REMCO.
8.7
approves the recommendations pertaining to the Key Performance Areas
for the positions of CEO, COO and CFO outlined in section
8,9 and 10
of this report.
9.8
approves the 2014/15 Executive remuneration recommendations outlined
in directors remuneration applicable to non-Executive board
members.
9.10
requests the Remuneration Committee to, based on the TCOE and
Performance – based incentive scheme recommendations in
this
report, instruct the Company’s legal advisors to prepare
employment contracts for the three Executive management positions
addressed in the report.
[6]
At a board meeting of Kidrogen on 29 May 2014, the following
resolutions were taken arising from the Remco report as appears
from
this extract of the minutes:
The
Chairperson highlighted that the only difference in the
recommendation by the Remuneration Committee was the remuneration of
the Chief Operating Officer
It
was RESOLVED for because the will will all or are a a for all will
(…)
That
the annual remuneration package of the Chief operating Officer of R
800 000.00 be approved.
It
was RESOLVED: (…)
That
the board of directors approve:
·
the Executive remuneration policy principles
outlined in section 5
of the remuneration committee report;
·
the
undertaking of an annual review of Executive remuneration
,
including the benchmarking process, at least 2 months prior to the
end of the financial year;
·
the
performance-based incentive scheme
outlined under the
policy of performance bonus for Executives and puts into place
mechanisms to allow for the monitoring and assessment
of Executive
performance in terms of the scheme;
·
the recommendations
pertaining to the Key Performance Areas
for the positions of CEO, CEO and CFO outlined in section 8, 9 and 10
of the Remuneration Committee report.
(emphasis
added)
It
is clear from the resolution that the board only adopted aspects of
the Remco report. The reference to sections 8, 9 and 10 of
the report
referred to sections setting out the key performance indicators of
the CE0, COO and CFO respectively. The minutes of
the Board meeting
also record that Bowman Gilfillan should prepare employment contracts
for the three executive management positions
addressed in the
remuneration committee report.
[7]
The relevant provisions in the respondents’ contracts of
employment were identical except for differences in the quantum
of
the package. The relevant provisions of Erasmus’s contract
read:
8
REMUNERATION
8.1
The Executive’s package shall be based on a “total cost
of employment” basis (TCOE) being an amount of R
1,025,434.32
R 1 115 764.20
per annum, representing the
total cost to the Company of employing the Executive and encompassing
the following:
annual
salary in terms of clause 8.5 below;
thirteenth
cheque in terms of clause 8.6 below; and
any
benefits paid by the Company on the Executive’s behalf in terms
of clause 8.7 below
8.2
The TCOE shall exclude additional remuneration that could be awarded
on the basis of performance in terms of clause 9 below.
8.3
Subject to clause 8.4, the Executives TCOE shall be reviewed by the
Company’s remuneration committee on an annual basis
at least 2
months prior to the end of the Company’s financial year.
8.4
The first annual review of the Executives TCO E terms of clause 8.3
shall
only be conducted 2 months prior to the end of the Company’s
financial year in the financial year in which milestone
5, being the
final milestone to be rolled out in terms of the 12 year contract
concluded between the Company and the City of Cape
Town on 30 August
2013 (…), has been achieved.
8.5
Salary
8.5.1
the Executive’s gross monthly salary shall be R
78
879.56
R
92 980-35
(…) per month (the
Salary).
…
8.5.4
The Company may review the salary annually without any obligation to
increase it. Any adjustment to the salary will be dependent
on a
range of factors that may vary from time to time, which will be
determined in the Company’s sole discretion. Consequently,
there should be no presumption or expectation of an increase.
8.6
Thirteenth Cheque
In
addition to the salary referred to above, the Executive shall be
entitled to a thirteenth cheque equal to his monthly salary,
less any
applicable tax (…) but shall not exceed the TCOE.
Notwithstanding the foregoing, in respect of the year 2014, the
Thirteenth Cheque shall be prorated with reference to the number of
months worked in 2014. …
…
9.
DISCRETIONARY BONUS
9.1
The Company may, at its discretion, pay to the Executive a
discretionary bonus from time to time.
9.2
the amount of such discretionary bonus, if any, shall be determined
with reference to the Company’s financial performance
and shall
be calculated as follows: …
…
9.4
payment of a discretionary bonus, if any, shall be effected to the
Executive during the month of December following the end
of the
Company’s financial year in terms of which discretionary bonus
was calculated.
…
9.7
Nothing in this clause guarantees payment of a bonus or gives rise to
a legitimate expectation of any payment. Furthermore,
in the event
the Company pays the Executive a discretionary bonus in terms of this
clause, Executive hereby acknowledges and agrees
that such bonus is
of a voluntary, gratuitous and discretionary nature, and that there
shall not arise, either out of a once-off
recurring payment of this
nature, any obligation on the part of the Company to make such bonus
payments, whether in respect of
the past or in the future
(italicised
and
ruled
text represent alterations in
manuscript)
[8]
The Remco report was discussed again at the board meeting of 28
August 2014, at which all of the respondents were present. It
was
noted that the contracts of employment were nearly finalised. Lodewyk
made certain recommendations regarding the provision
of car
allowances and the inclusion of an annual increase. No decision was
taken on these recommendations save to say that the
chairperson
“…confirmed that an equitable proposal be put together
by B G Ncube and his team for the board to consider,
for
recommendation, in terms of recognition of the key individuals.”
[9]
The arbitrator characterised the respondents’ defence as
essentially being that the Remco document and the subsequent
contracts of employment prepared on that document erroneously
captured the TCOE principle as they appeared to exclude a thirteenth
cheque, increases and performance bonuses. It was the respondents’
contention that the adjustments made to their remuneration,
for which
they were subsequently charged, were simply to give effect to the
Remco document. Moreover, they maintained that the
employer was
inconsistent because the acting CEO, after their suspension, was paid
the same remuneration package as one of the
applicants, which
ought not to have been the case if the applicants were not entitled
to the payments they received.
[10]
The arbitrator admitted evidence of the alleged error in the
calculation as she regarded it as necessary to determine the
substantial merits of the dispute as required by section 138 of the
LRA, despite objections by the employer that this was in breach
of
the parole evidence rule. Moreover, the document in which the error
originated was the Remco document and not the contracts
of employment
which were consequent to that.
[11]
In relation to the Remco document, the arbitrator’s critical
findings may be summarised as follows:
11.1
The Remco document was self-contradictory because it purported to
create a system of remuneration based on TCOE,
but that is not what
it created, because travel and car allowances were not included in
the calculation even though the only items
of remuneration that was
supposed to be excluded were performance bonuses.
11.2
The board compounded the problems of the Remco report by specifically
approving some recommendations but not others
while resolving that
the report should form the basis of contracts of employment.
Consequently the report created uncertainty around
entitlements and
its own recommendations.
11.3
The applicants had contended that the report was erroneous in
particular because it reflected TCOE as an amount
that was lower than
the actual TCOE paid at that time. The arbitrator accepted that it
could not have been the intention of the
Board or Remco that they
would earn less than what they were earning before. In relation to
the specific charges, she found that:
[12]
In relation to the charges, the arbitrator’s findings, stated
briefly, are set out below:
12.1
Charge 1(a). She accepted that it was not for the respondents to
approve a handwritten correction on their contracts
affording them an
unexplained 8.8% increase. She found that on the strict reading of
the contracts that they were not entitled
to the altered amounts but
she also accepted that it was never intended they would have earned
less than they did before because
their salaries were now divided by
13 to provide for a thirteenth cheque and it was probable that the
TCOE had been incorrectly
stated which resulted in a flawed contract.
Nevertheless she found it was not for the respondents to approve a
correction, but
they were obliged to take the alteration to the board
for approval because it amounted to a change in the contract of
employment.
Nonetheless, the arbitrator declined to make a finding
who had instructed the changes to be made to correct the supposed
error,
and in the absence of being able to determine that issue, she
decided that she could not say that the alterations were made
dishonestly.
The fact that the changes had not been approved by the
board she attributed to the negligence, incompetence and lack of
corporate
governance of the board as a whole.
[13]
Charge 1 (b) and (c). These two charges are essentially interrelated
and the arbitrator’s conclusions flow from finding
on the first
charge.
[14]
The arbitrator found that the Remco document did provide for a
recommended SARBPAC increase but that, this still required board
approval and that the applicants accepted the payments without board
approval being granted. She accepted the CEO’s defence
that he
merely approved the payments “for processing” because the
payments for processing after they had been prepared
by the office
manager and accountant. Once again, the arbitrator saw this as a
demonstration of negligence on the part of the directors
but not of
any dishonest intent on the part of the respondents, whom she found
genuinely believed they were entitled to the increase
because it was
awarded in previous years and it was provided for in the Remco
document, albeit it “somewhat ambiguously”.
Remarkably,
what the arbitrator failed to deal with at all is that, the October
2014 increase followed immediately after an increase
the previous
month of 9.5%, giving the respondents a total annual increase of 19%
over the two months.
[15]
Charge 1(d) concerned the receipt of a 13th cheque in December 2014.
The arbitrator reiterated her reasoning that it would
not make sense
for the applicants to receive less than they previously did by
excluding a 13th cheque and although they were not
entitled to it,
based on the wording of the documents their receipt of it was merely
irresponsible and not dishonest.
[16]
Charge 1(e) concerned the receipt of a 13th cheque in December 2013,
which the arbitrator found was a continuation of previous
annual
bonuses and there was no dishonesty involved in their receipt of this
payment.
[17]
Charge 1(f) concerned the payment of a discretionary bonus for the
period 1 May 2013 to 30 April 2014 which was paid in December
2014.
The arbitrator found that although this was in conflict with the
entitlements on the face of the documents and that the wrong
months
we used in the calculation, the applicants had simply relied on a
calculation done by others and had accepted payment. Once
again, she
agreed that these payments ought to have been approved by the board,
but could not find that the applicants had been
dishonest. Lodewyk
had conceded under cross-examination that the payment of this
discretionary bonus in December 2014 calculated
on the period January
2014 to November 2014 was irregular.
[18]
The arbitrator’s concluding findings are stated in summary,
form paragraph 37 of her award:
“
Overall,
my finding is that on strict reading of the contract of employment,
which the respondent’s representative adopted,
the three
directors were not entitled to a number payments they received. It is
not in dispute that the applicants received and
accepted these
monies, and that Erasmus approved the payment. But they did not make
the calculations or prepare the payments for
processing. It is not
difficult to conclude that this was wrong, but I cannot find it was
dishonest. Dishonesty involves deceitful
intent and this the employer
has failed to prove.”
[19]
The arbitrator added that the respondents, were made executive
directors without any experience and had relied heavily on the
advice
from the City of Cape Town and various other experts. Further, the
documents on which the contracts were based were confusing.
She also
accepted that they were grossly negligent in signing for receiving
payments but they were never charged for negligence
the employer had
to stand or fall by this charge of dishonesty.
[20]
The arbitrator also endorsed the respondent’s contention that
effectively the charges were simply used as a way to oust
them by
another clique. She found this claim was supported by the evidence
that the new acting CEO’s earnings were in line
with Ncube’s,
instead of being reduced, which demonstrated that the board was
selective when it came to applying the TCOE
principle.
[21]
Lastly, the arbitrator found that their dismissals were procedurally
unfair because the chairperson had refused to recuse himself
after
they had laid a complaint against him at the Cape Bar Association
concerning his alleged intoxication. The arbitrator was
of the view
that such a serious complaint against him was sufficient grounds for
them to have a reasonable apprehension he might
have been biased
against them whether or not he was in fact biased. Even though he was
appointed to conduct the hearing by the
employer, the employer ought
to have cancelled his appointment at that stage or agreed that he
recuse himself. The arbitrator
dismissed another procedural
complaint about the chairperson proceeding with the enquiry in the
respondents’ absence when
they failed to attend the hearing
despite knowing that the enquiry would proceed on that day. On
the basis of the chairperson’s
non-recusal, she found the
dismissals were also procedurally unfair.
[22]
Despite their dismissal being substantively and procedurally unfair
the arbitrator awarded them 6 months remuneration as compensation
rather than reinstating them. Her rationale for not reinstating them
was as follows:
The
bottom line is I would be failing my duty to make an appropriate
award if I were to reinstate the applicants. As executives,
however
they came to be appointed, they have responsibilities. By receiving
monies to which they were not entitled, and failing
to ensure board
approval for a number of payments, they demonstrated incompetence and
negligence.
In
addition, in determining the relief, the arbitrator took into account
that the respondents would not find equipment to work or
similar
salaries elsewhere as they were not qualified to do such work.
Grounds
of review
[23]
In the main, the applicant argues that on the evidence before her,
the arbitrator could not have reasonably concluded that
the
respondents were not dishonest. In particular, the applicant submits
that, in so far as it was alleged by the respondents that
amendments
they signed for in the contracts were to rectify an error in the
contract, their conduct in doing so could not reasonably
be construed
as mere negligence, incompetence or poor corporate governance. In
circumstances, where the respondents declined to
refer the amendments
back to the board, the applicant contends their conduct could only
have been construed as dishonest. In addition,
their conduct in
receiving increases in two consecutive months amounting to 19%
overall could not be in anyway construed as mere
incompetence,
negligence or poor corporate governance.
[24]
It also takes issue with her finding that she could not consider the
appropriateness of their dismissal for gross negligence
because they
were not dismissed for that reason, but could consider the fact that
she found them grossly negligent as the principal
reason for not
reinstating them.
[25]
The applicant further contends the arbitrator should not have allowed
the admission of the evidence of the chairperson of Remco
to the
effect that there were errors in the Remco report, because the board
had considered those recommendations and they had been
translated
into the respondent’s contracts of employment. The applicant’s
representative at the arbitration hearing
objected to the
introduction of this evidence on the basis that it amounted to the
admission of extraneous evidence as to the interpretation
of the
respondents’ employment contracts and therefore disregarded the
parole evidence rule. Moreover, the consequence of
admitting that
evidence materially affected the arbitrator’s findings in
deciding that the respondents were not guilty of
dishonesty.
[26]
Lastly, the applicant argues that the arbitrator erred in law in
deciding, because she accepted that there were errors in the
Remco
report, that the contracts of employment entered into with the
respondents were therefore flawed.
Evaluation
[27]
Starting with the last mentioned ground first, the difficulties with
the arbitrator’s reasoning start with her glib acceptance
that
the REMCO document was contradictory, and further supposedly
complicated by the board adopting some recommendations and not
others. There was simply no basis except on the most superficial
reading of the REMCO report for concluding that it was contradictory.
It clearly distinguished items such as a transport allowance which
fell outside the TCOE principle. The board’s intentions
were also clear enough. It was not obliged to adopt everything in the
REMCO report and did not. The arbitrator appears implicitly
to have
adopted the view that when the contracts were drawn up, they should
have represented some sort of amalgam of what was in
the REMCO report
and what the board approved, instead of taking as her starting point
that anything in the contract which had not
been approved by the
board was at least potentially suspect.
[28]
In presenting their case, the respondents had made much of the fact
that the recommended TCOE remuneration figures for all
three of them
were not expressly adopted by the board and therefore not everything
in the contracts had the board’s imprimatur.
But it is very
obvious from the sentence preceding the board resolution adopting the
COO’s salary in August 2014 that the
board only expressly
referred to his remuneration because it represented a departure from
the recommended determination of the
CEO’s and CFO’s
recommended salaries, which the board implicitly endorsed. Moreover,
all of the respondents initially
signed the contracts with those
salaries in them.
[29]
However, the arbitrator then came to the inexplicable conclusion that
the contracts were ‘flawed’. The legal nature
of this
conclusion is elusive, though it suggests a defect that required
correction and appears to have provided the arbitrator
with a
springboard for affording the respondents’ extraordinary
latitude in the interpretation and even amendment of their
contracts.
Firstly, it suffers from its own logical flaw, namely, merely because
the board did not endorse all recommendations
of Remco, it does not
follow that the contracts which accorded with the board’s
resolutions had some inherent defect. The
arbitrator should
have accepted that unless there was some material difficulty in
interpreting what should have been in the contracts
because of an
ambiguous reference in the board’s to the REMCO report, the
contracts as approved by the board set out the
respondent’s
terms and conditions of remuneration.
[30]
She ought then to have assessed if the additional remuneration
actually received by the respondents, but not due to them under
their
contracts and which amounted to R 554, 533.95, R 463, 107.72 and R
357,831.38 for the CEO, CFO and COO respectively, could
plausibly
have been received in the naïve but
bona fide
belief they
were probably entitled to them. In this regard, it is important to
note that despite suggesting the contracts were
flawed, the
arbitrator nevertheless found that the respondents were not entitled
to: the salary increase of approximately 9.5 %
in October 2014 in the
absence of board approval which they did not obtain; the payment of a
thirteenth cheque in December 2014;
the payment of discretionary
bonuses in December 2014, in the absence of board approval and based
on the wrong financial figure.
[31]
Had the arbitrator not started with the notion of a flawed and
unclear contract, but accepted that the terms of the contracts
were
clear, she would necessarily had to scrutinise the reasons advanced
by the respondents for justifying their unquestioning
receipt of the
sums in question in that light. However, because she accepted the
suggestion that the respondents’ entitlements
were blurry, it
was easier to arrive at a conclusion that they were simply careless
in checking on their entitlements and were
misled into receiving
enormous windfalls that were not due.
[32]
This material misconstruction of the evidence relating to the REMCO
report, the board resolutions and the contracts, impacts
on the
merits of the first ground of review. Erasmus as the CFO sought to
rationalise the respondents’ acceptance of the
bounty that came
their way as
bona fide
. On the one hand, he portrayed himself
and the other respondents as proverbial ‘babes’ in the
corporate wood, who were
not equipped to deal with the roles they
found themselves in. He repeatedly and disingenuously avoided trying
to use the word ‘approved’
for his authorisation of the
expenditure in question. He expected the arbitrator to simply accept
that if a request to ‘release’
funds came from the
financial administrative staff, who assured him it was in order, he
would simply sign off on the expenditure.
Strangely, despite pleading
ignorance of how the figures were arrived and that he took all
requests for payments on trust, he doggedly
defended every erroneous
payment made in their favour as being aligned with their
understanding of what they were entitled to.
His spirited defence of
every payment as justified, is hard to reconcile with a claim that
they were simply passive recipients
of such largesse, which they
assumed was due to them because they were told by others that was the
case. Moreover, Erasmus’s
evasive testimony under
cross-examination hardly conveyed the impression that he was unable
to understand the terms of the contract,
but rather that he was
unwilling to accept the clear implications thereof.
[33]
Certain of the transactions he approved, positively yelled out for an
explanation how the respondents could possibly have believed
they did
not need board approval for them.
33.1
Firstly, they simply endorsed handwritten amendments to their
contracts which they knew had taken some months’
to finalise
and which altered the remuneration the board had approved,
particularly in circumstances where the original contracts
had
only very recently been concluded. Those amendments entailed a
significant alteration of the basic remuneration of over 8%
of the
TCOE package. The only rationale Erasmus could come up with for this
adjustment was that it was to include SARBAC increases
but he could
not explain why the percentage did not equate to the SARBAC increase.
He could offer no credible explanation based
on the contract why they
should have got that increase and sedulously avoided conceding that
neither clauses 8.3 nor 8.4 of the
contract had been met, which were
both pre-requisites for any adjustment of the their TCOE packages. It
is extremely difficult
to understand how the arbitrator could have
understood that the amendment of their contracts without so much as a
nod to the rest
of the board, given the very clear conditions in
clauses 8.3 and 8.4, could have been done in good faith.
33.2
Secondly, quite apart from the fact that neither the board
resolutions nor the contracts reflected their entitlement
to the
SARBAC increases as recommended in the REMCO report and despite
clauses 8.3 and 8.4 of the contracts, the arbitrator accepted
that
they did not act in bad faith in receiving an October increase after
receiving one the previous month adding up to a nearly
19 % increase
on the their basic remuneration without an involvement of the board.
33.3
Further, it was evident Erasmus was well aware of the difference
between the thirteenth cheque and discretionary
bonus from an email
he sent to one of the financial staff. Despite the discretionary
nature of the performance bonus and the fact
that it was clearly
something for the Company to decide to award, this too was simply
accepted as having been granted without any
board resolution, and
even though it entailed the payment of amounts close to three months’
salary each. Only the most selective
reading of the contractual
provisions relating to the payment of this bonus could have led any
of the respondents to believe that
it was a matter which did not
require the Company to deliberate on first and formally decide on.
[34]
In short, only on a most credulous evaluation of the evidence, could
the arbitrator have concluded that the respondents’
acceptance
of unauthorised payments which raised their TCOE remuneration by at
least 30 % above what the board approved in the
same year they had
agreed to the original TCOE was entirely
bona fide
and
received in the genuine belief that none of these payments required
board approval despite the board deliberations on the original
TCOE.
The same goes for the arbitrator blithely accepting the
bona fides
of the respondents in accepting payment of the discretionary bonus.
[35]
In the circumstances, I am satisfied that even if it might not have
been a reviewable irregularity for the arbitrator to admit
evidence
of the REMCO report, there is sufficient reason on the other grounds
of review to find that no reasonable arbitrator could
have concluded
that the respondents were
bona fide
in accepting the payments
they did, solely on the supposed say so, of financial staff.
Accordingly, she could not reasonably have
found they were not guilty
of dishonesty.
[36]
The applicant also challenges the arbitrator’s finding that
their dismissal was procedurally unfair based on the failure
of the
chairperson to recuse himself after the disciplinary hearing had
endured for nearly a month, but when a complaint was lodged
against
him based on his alleged intoxication on one occasion near the end of
the enquiry. I cannot say the arbitrator’s
conclusion
that he ought to have recused himself in the circumstances, even if
there may have been an element of opportunism in
lodging the
complaint, and that it could be construed as procedurally unfair that
he did not do so. Nonetheless, because of my
view on the substantive
fairness of the respondents’ dismissals, I do not think any
compensation is warranted for such unfairness.
Substituted
finding and costs
[37]
In the light of the above, I am satisfied that the respondents’
were not entitled to the various payments mentioned in
the charges
for which they were dismissed and that overall, their conduct in
receiving all those payments was dishonest and warranted
their
dismissal. Insofar as the finding of procedural unfairness
stands, it does not warrant any compensation in my view
given the
extent to which they were unlawfully enriched by their dishonest
conduct.
[38]
On the question of costs, I am inclined to award costs against the
respondents, but in view of the fact that they were understandably
defending an award in their favour, I have declined to do so.
Order
[1]
The arbitration award of the second respondent dated 13
November 2016 issued
under case number WECT 11309-16, is
reviewed and set aside, save that her finding that the third, fourth
and fifth respondents
dismissals’ were procedurally unfair is
upheld.
[2]
The second respondent’s finding that the third, fourth and
fifth respondents’
dismissals were substantively unfair is
substituted with a finding that their dismissals were substantively
fair.
[3]
No order is made as to costs.
_______________________
Lagrange
J
Judge
of the Labour Court of South Africa
APPEARANCES
APPLICANT:
C
de Kock instructed by
Carelse
Khan Attorneys
RESPONDENT:
L
Ackermann instructed by
Bernadt,
Vukic, Potash & Getz.