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[2018] ZALCPE 2
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Argent Steel Group t/a Sentech Industries v Motor Industry Bargaining Council and Others (PR150/14) [2018] ZALCPE 2 (30 January 2018)
Of
interest to other judges
THE
LABOUR COURT OF SOUTH AFRICA,
HELD
AT PORT ELIZABETH
Case
No: PR 150/14
In
the matter between:
ARGENT
STEEL GROUP T/A
SENTECH
INDUSTRIES
Applicant
and
MOTOR
INDUSTRY BARGAINING
COUNCIL
First
Respondent
EXEMPTION
APPEAL BOARD
Second
Respondent
NATIONAL
UNION OF
METALWORKERS
OF SOUTH AFRICA
Third
Respondent
Delivered
:
30 January 2018
Summary:
(Review –exemption board rulings - Condonation application –
practice manual time limits –prima
facie merits of review
application weak – consultation insufficient – financial
information opaque – nature of
process and application do not
necessarily require applicant to be called to clarify incoherent
motivation – relative sophistication
of applicant also a
consideration)
JUDGMENT
LAGRANGE
J
Background
[1]
This review application concerns the refusal of an exemption board
and an exemption appeal board to grant the applicant employer
(‘Argent’) exemption from paying an increase on actual
wages paid to its employees falling within the scope of the
main
collective agreement of the first respondent, a bargaining council
(‘MIBCO’). Consequently, the application concerns
both a
review of the dismissal of the appeal against original decision and
the original exemption ruling itself. The court’s
jurisdiction
to hear the reviews is derived from s158 (1)(g) of the Labour
Relations Act, 66 of 1995 (‘the LRA’) which
provides that
it may “... subject to section 145, review the performance or
purported performance of any function provided
for in this Act on any
grounds that are permissible in law; …” The attack on
the boards’ decisions is based
on reasonableness and being
denied a fair hearing.
[2]
There are two preliminary issues relating to whether or not the
applicants dilatory prosecution of the review application should
be
condoned and whether or not the review application should be treated
as dismissed because of the deeming provision of clause
16.3 of the
Labour Court Practice Manual in terms of which an application for
review which is archived is treated as if the application
has been
dismissed.
[3]
The 180 employees of Argent who were affected by the application,
were all being paid wage rates higher than the minimum wage
rates
stipulated in the MIBCO main agreement. Argent is a member of one of
the employer organisation parties to the collective
agreement. The
application for exemption from paying the 2013 wage increase
(applicable for the period 1 September 2013 until 31
August 2014) was
made to the Eastern Cape Regional Council of MIBCO in October that
year. The National Union of Metalworkers of
South Africa (‘Numsa’)
objected to the application on various economic grounds.
[4]
The application was considered at a meeting of MIBCO’s wage
exemption board on 27 March 2014 and declined. The reasons
for
declining the application were set out in a letter dated 4 April
2014, in response to a letter from Argent requesting reasons
for the
board’s decision:
“…
.
Please be advised that
while the board and takes various considerations at this meeting, it
is not the Council’s intent to
supply the extensive detail
thereof, but rather,
the salient points
that resulted in the
Wage Exemption Board’s decline of your application as follows:
1. The
proof of Consultation was not satisfied in that the Employees appear
to be informed rather than consulted.
It could not be confirmed that
all
Employees were represented as only the NUMSA
representative’s submissions were noted.
2. The
Financial Statements did not support the employer’s motivation
and some of the reasons supplied were:
2.1
The Audit Report was not included
2.2
A detailed income statement was not supplied
2.3
The projection figures did not make sense e.g. fluctuation in GP% is
unjustified. The Net Loss
in the projection seems to be overstated.”
(emphasis added)
[5]
In late April 2014, Argent appealed against the decision. The grounds
of appeal were set out in an affidavit from Argent’s
General
Manager, Mr G Lennon (‘Lennon’). Amongst other things,
the affidavit dealt with the particular reasons why
the original
application was refused. On the question of the alleged lack of
consultation he stated:
“
5.2.7
The Company has not taken the decision to apply for exemption
lightly. They take
cognizance that their staff are affected by the
application, however there is a duty on the Applicant to ensure that
all measures
are taken in order to ensure that their staff have job
security and all employment in future. All employees were consulted
on the
exemption before the application was made. (Find attached a
copy of the letter from Jurie Liebenberg marked Annexure “D”
annexed hereto as proof thereof) a meeting was called with all the
monthly paid employees, Supervision and the shop stewards. (Find
attached a copy of 8 affidavits from the supervisors marked Annexure
“I” annexed hereto as proof thereof.)
They were shown
the financials of the company and informed of the necessity of
applying for exemption. The only point raised was
that the employer
should have been informed of this before the strike. Management
responded by saying that due to the customer
base (Motor industries
not running during the strike) it would have been forced to implement
short time over this period which
would have resulted in a loss of
income to the employees
.
5.2.8 Shop Stewards and
supervisors
were
requested to get the message through
to
ALL
[1]
the employees in the same manner it had been presented to them (Find
attached a copy of the meeting minutes marked Annexure “E”
annexed hereto as proof thereof). The employees demanded a meeting
with the General Manager on the 23
rd
October 2014. The general manager explained the reason for the
application and explained that he could only make the exemption
application once the increase had been finalised.
All
employees were given a chance to ask questions or give their views. A
number of employees said they would rather the company
closed down
and they be retrenched and keep their jobs without increase
.”
(emphasis added)
[6]
On the financial issues, Lennon’s affidavit in support of the
appeal stressed the following, which had not been previously
mentioned:
6.1
A stock take in April 2014 revealed that incorrect costings of stock
had resulted in overstating
sales margins on goods sold, when in fact
the business had suffered a stock loss of R 7.2 million.
6.2
A shortage of work had added R 4.5 million to this loss.
6.3
The business is a division of the Argent Group Pty Ltd (‘the
Group’) and accordingly
the audited figures relate to the group
as a whole. The affidavit reiterated that a letter from the group of
auditors had been
submitted with the original application confirming
an extract from the group’s annual financial statements
relating to the
Argent business division, which was again included in
the appeal documents.
6.4
Based on updated figures, ARGENT anticipated further losses in the
first quarter of the 2014 financial
year and if forced to pay the
increases due, would incur an additional loss of approximately R1.65
million.
6.5
Various stratagems had been adopted to cut expenses, generate
additional income without incurring
additional infrastructural
expenditure and quoting on additional work.
Lennon also offered to
make further oral submissions if additional information was required
by the exemption board. He also offered
to make the auditors
available for questioning by the board if that was required.
[7]
The appeal was considered by the wage exemption board appeal body at
a meeting on 26 May 2014. In the letter declining to reverse
the
original decision, the appeal board gave the following reasons:
“
That the committee
declined the Sentech Industries-Wage Exemption Appeal application due
to the following requirements not being
met:
1.
Proof of Consultation
1.1.
The reasons supplied for the initial decline were not remedied that
it could not
be established that all employees were in fact consulted
with and it still remained that the employees were merely informed
and
not consulted with.
2.
Financials
2.1.
The Audit Report remained outstanding as the letter from Grant
Thornton was inadequate
to fulfil this requirement of Audited
Financial Statements.
2.2.
The income
statement was supplied but in the form of Management Accounts which
further stipulated a profit figure that was inconsistent
with their
Financial Statements and their letter dated 25 April 2014, signed off
by the financial manager and detached as Annexure
“J”
[2]
of the employer’s appeal application documents; and
2.3.
The projected balance sheet figures were still inaccurate that they
do not balance.”
In short, the appeal was
dismissed partly for formal non-compliance, partly for lack of
consultation and partly on account of the
incoherence of the
financial information which was provided.
Condonation
[8]
The review application was only finalised approximately eleven months
after it was launched timeously on 7 July 2014. There
was a delay in
obtaining the record which was the responsibility of the first and
second respondent for lodging. Mr
Quixley
, appearing for the
respondents, argued that the responsibility for filing the record lay
with the applicant and they had done nothing
to accelerate the
process until the second week of November 2014. Although it does not
sit well for the respondents to complain
that the applicant did not
make an effort to ensure the record was lodged timeously, when it the
respondents were the ones who
had to provide the record, it is true
that there is no evidence pointing to an effort by the applicant to
obtain the record for
a few months.
[9]
A further delay was caused by difficulties locating the record at
court once it was lodged. The respondents lodged the record
on 16
February 2015 but the applicant were only able to locate it at court
on 3 March 2015, whereafter they filed it on 30 March,
again
unnecessarily late. The parties also engaged each other in
negotiations to try and settle the matter and the applicant sought
and obtained an indulgence from the respondents to file its
supplementary affidavit late on 22 April. As matters turned out, the
supplementary affidavit was filed on 28 April 2015, a nearly a week
after the period of indulgence which the respondents had agreed,
and
about a fortnight after it was due in terms of Rule 7A(8) .
Apparently, this was owing to the unavailability of a signatory
and
an intervening long weekend. The respondents filed their answering
affidavit promptly by 12 May and Argent belatedly asked
for the
resubmission of certain pages which were not legible and then filed
its replying affidavit on 4 June, some three and a
half weeks’
late. The respondents objected to the late filing of the replying
affidavit.
[10]
In the second half of 2015, negotiations ensued between Argent and
NUMSA to try and resolve the underlying dispute without
success.
Apart from referring to such discussions taking place in August that
year, Argent provided no clarity as to when those
discussions came to
an end. It is trite that a party seeking condonation must explain all
periods of delay and what the applicant
has provided by way of an
explanation for doing nothing to set the matter down between August
and December 2015 is woefully inadequate.
Moreover, there is no
evidence that the respondents would even have been aware of these
discussions with NUMSA.
[11]
In any event, it was only when the respondents wrote to the registrar
pointing out that the matter should be regarded as archived
in terms
of the practice manual that Argent quickly requested the registrar to
set the review application down for a hearing. This
was nearly 17
months after the review application was launched. By that stage, it
still had not applied for condonation for the
late filing of the
record or its supplementary or replying affidavits. It also did not
make any representations on the archiving
of the file despite the
respondents’ letter to the registrar. It still took another
three months for it to file its condonation
application, which did on
15 March 2016, without even bothering to explain why it had not done
this since July 2015. Consequently,
the application was only ripe for
hearing nearly twenty months after the application had been launched.
This resulted in the file
being placed before a judge for a practice
direction. The honourable Cele J who considered the application
pointed out that the
matter could have been set down once pleadings
had closed and directed that the issue of condonation be dealt with
when the application
was set down.
[12]
Insofar as the applicant did not comply with
section 145
(5) of the
Labour Relations Act, 66 of 1995
, which requires the applicant to
request a review to be set down for hearing within six months of
launching the review application,
I accept that this would not have
applied to a review application launched prior to the LRA amendments
which took effect from 1
March 2015.
[13]
All things considered, one is left with an overwhelming sense that
Argent was no way wanted to expedite the prosecution of
the review
application. Even if allowance is made for the delay of respondents
in lodging the record, the applicant made no attempt
to accelerate
this until mid-December 2014, nearly 5 months after initiating the
review proceedings. In terms of clause 16.1 of
the practice manual no
further process in the matter had been served for more than six
months and the file ought to have been archived.
Only when the
respondents asked the file to be archived in terms of the practice
manual, which had been effective since 1 April
2013), did Argent then
ask that the matter to be set down and said nothing about its
non-compliance with the time periods
in the manual. When it launched
its condonation application, it also did not bother to address the
failure to comply with the clause
16.1 of the practice manual, which
compounds its dilatoriness in the matter. Likewise, it made not the
slightest attempt to explain
the late filing of the condonation
application itself.
[14]
It is trite
law that a party seeking condonation must apply for condonation as
soon as it perceives the need to do so. That should
have been clear
to Argent by the time it filed its replying affidavit in 2014. In
keeping with its casual approach to the condonation
application, it
failed to even address prospects of success of the review application
as it was required to.
[3]
In
short, Argent did not act with the expedition expected in such
applications and the explanations for the various delays are
weak
and, in relation to some periods such as the period between August
and December 2015, completely absent. The application was
also
materially defective in failing to deal with the merits of the review
applications. In passing, I note that Argent’s
attorneys are
well versed in practice in the Labour Court’s and ought to have
been well aware of what was expected of Argent.
[15]
As to the merits of the application, it is true that the matter is a
somewhat unusual one dealing as it does with the review
of decisions
by bodies appointed as part of a self -regulatory mechanism by a
bargaining council whose purpose is in no small way
dedicated to the
enforcement of collective agreements. The nature of the decisions
which were taken by the two boards are of a
qualitatively different
kind to that of typical awards in rights disputes. I accept also that
it is a matter of considerable importance
to all the affected
parties. Nonetheless, an applicant who regards a matter as important
ought to demonstrate that in the prosecution
of the review and not
rely on that as a license to conduct its application in a desultory
manner.
[16]
Even if I ignore the absence of ARGENT pleading its prospects of
success in the condonation application, I am not persuaded
that it
has a reasonable prospect of succeeding in establishing that either
board unreasonably refused the exemption application.
In particular
this is because it is difficult to see how ARGENT could overcome the
requirement that it consulted sufficiently before
making the
application, even if it might have some prospect, though slight on
the evidence, that if it had consulted then appeal
board ought to
have allowed it to make further inputs giving the incoherent state of
its motivation for the exemption. The prospective
merits are dealt
with in detail below. Accordingly, the application for condonation
must be dismissed and consequently the review
application as well.
For the sake of completeness I will also address the question of
‘reviving’ the review application
under the provisions of
the practice manual.
Archiving
and deemed dismissal of the application under the practice manual
[17]
The respondents suggested that Argent also failed to bring an
application to revive the review application which ought to be
considered dismissed until such time as such an application was
brought and succeeded. The pertinent provisions of the practice
manual relating to the archiving of the review application are the
following:
“
11.2.7
A review application is by its nature an urgent application. An
applicant in a review application
is therefore required to ensure
that all the necessary papers in the application are filed within
twelve (12) months of the date
of the launch of the application
(excluding Heads of Arguments) and the registrar is informed in
writing that the application is
ready for allocation for hearing.
Where this time limit is not complied with, the application will be
archived and be regarded
as lapsed unless good cause is shown why the
application should not to be archived or be removed from the archive.
…
16.1
In spite of any other provision in this manual, the Registrar will
archive a file in the following circumstances:
·
In the case of an application in terms of
Rule 7
or
Rule 7A
, when a
period of six months has elapsed without any steps taken by the
applicant from the date of filing the application, or the
date of the
last process filed.
…
16.2
A party to a dispute in which the file has been archived may submit
an application, on
affidavit, for the retrieval of the file, on
notice to all other parties to the dispute. The provisions of
Rule 7
will apply to an application brought in terms of this provision.
16.3
Where a file has been placed in archives, it shall have the same
consequences as to further conduct by any respondent party
as to the
matter having been dismissed.”
[18]
In support
of their argument they cited the case of
Edcon
(Pty) Ltd v Commission for Conciliation, Mediation & Arbitration
& others: In re Thulare & others v Edcon (Pty)
Ltd
[4]
where Banks AJ, with a classical flourish, expressed the effect of
the provisions thus:
“
[24] This has been
confirmed by Molahlehi J
in Tadyn Trading CC t/a D Tadyn
Consulting Services v Steiner & others
from which it is clear
that all practice directives are competent and should be adhered to
and are not merely guidelines. I respectfully
agree with this
interpretation, which is fortified by the peremptory language used in
clause 16 of the Practice Manual with regard
to the legal effect of a
court file having been archived. In my view it seems clear that the
deemed archiving of a review court
file is to consign the unfortunate
file to a form of limbo without ever being formally dismissed and
from which the file may never
emerge unless a properly motivated
revival application demonstrating 'good cause' enters to rescue it
from a shadowy netherworld
akin to the Asphodel Meadows of Greek
Mythology”
[19]
This
approach was followed in other Labour Court judgements and more
recently has been affirmed by the Labour appeal Court in the
case of
Samuels
v Old Mutual Bank
[5]
:
[15] The Practice Manual
is not intended to change or amend the existing Rules of the Labour
Court but to enforce and give effect
to the rules, the
Labour
Relations Act as
well as various decisions of the courts on the
matters addressed in the practice manual and the rules.
Its
provisions therefore are binding
.
The Labour Court’s
discretion in interpreting and applying the provisions of the
Practice Manual remains intact
,
depending on the facts and
circumstances of a particular matter before the court
.
[16] Clause 16.2 does not
specifically state that in an application for the retrieval of the
file, a party who brings that application
must show good cause why
the file must be retrieved from the archive. It however states in no
uncertain terms that the provisions
of
rule 7
will apply in an
application brought under the clause 16.2. Clause 11.2.7 applicable
to
rule 7
and
rule 7A
applications requires that a party who applies
for a file to be removed from the archive must show good cause why
the file must
be removed from the archive. Furthermore, an applicant
who applies for a file that has been archived for failure to comply
with
an order by a judge to file a pretrial minute, to be removed
from archives, has to show good cause why such a file should be
removed
from the archives. There is therefore no doubt that showing
good cause is a requirement for a file to be removed or retrieved
from
the archives in terms of clause 16.2.
[17]
In essence, an
application for the retrieval of a file from the archives is a form
of an application for condonation for failure
to comply with the
court rules, time frames and directives
. Showing good cause
demands that the application be bona fide; that the applicant provide
a reasonable explanation which covers
the entire period of the
default; and show that he/she has reasonable prospects of success in
the main application, and lastly,
that it is in the interest of
justice to grant the order. It has to be noted that it is not a
requirement that the applicant must
deal fully with the merits of the
dispute to establish reasonable prospects of success. It is
sufficient to set out facts which,
if established, would result in
his/her success.
In the end, the decision to grant or refuse
condonation is a discretion to be exercised by the court hearing the
application which
must be judiciously exercised
.”
(emphasis added)
[20]
As I understand the decision, the LAC is unequivocal about the
obligation of litigants to comply with the practice manual.
That
would include an obligation to apply to revive a review application
by way of an application under
rule 7
, which Argent abjectly failed
to do in this case. However, on the facts of this case it appears
that the review file was not actually
archived by the registrar.
Instead the file was referred to a judge for a directive, who set the
matter down for hearing. In the
absence of the file been archived,
the deeming provisions of the practice manual did not come into
effect and Argent was not obliged
to apply for the revival of the
application. Nonetheless, the failure to comply with the time periods
in clauses 11.2.7 and 16.1
of the practice manual are compounding
factors in evaluating the condonation application, as mentioned
above.
Merits
of the review
The
legal framework of the exemption process
[21]
In terms of
section 31
(k) of the LRA every bargaining Council
constitution must provide for a “procedure for exemption from
collective agreements.”
Further, it is a requirement if a
bargaining council wishes to extend a collective agreement to
non-parties that the agreement
must make provision for an appeal
forum. The applicable provisions in the LRA at the time the exemption
was sought in 2014 read:
“
32(3)
A collective agreement may not be extended in terms of subsection (2)
unless the Minister is
satisfied that-
(a)
the decision by the bargaining council to request the extension
of
the collective agreement complies with the provisions of subsection
(1);
(b)
the majority of all the employees who, upon extension of the
collective agreement, will fall within the scope of the agreement,
are members of the trade unions that are parties to the bargaining
council;
(c)
the members of the employers' organisations that are parties
to the
bargaining council will, upon the extension of the collective
agreement, be found to employ the majority of all the employees
who
fall within the scope of the collective agreement;
(d)
the non-parties specified in the request fall within the bargaining
council's registered scope;
(e)
provision is made in the collective agreement for an independent
body
to hear and decide , as soon as possible, any appeal brought against
-
the bargaining council’s
refusal of a non-party’s application for exemption from the
provisions of the collective agreement;
the withdrawal of such an
exemption by the bargaining council;
(f) the collective
agreement contains criteria that must be applied by the independent
body when it considers an appeal, and that
those criteria are fair
and promote the primary objects of this Act; and
(g)
the terms of the collective agreement do not discriminate
against
non-parties.
[22]
The
amendments to the LRA
[6]
, which
mostly took effect on 1 January 2015
[7]
,
were intended to strengthen the functioning of exemption mechanisms
by: requiring bargaining Councils to have effective exemption
procedures to deal with applications for exemption by non-parties;
speeding up appeal procedures and barring representatives of
parties
to the Council or their members from participating in appeal
bodies.
[8]
[23]
In
conformity with these requirements, the main agreement of MIBCO
[9]
contains the following provisions :
“
CLAUSE 8:
ENFORCEMENT
8.1
EXEMPTIONS
(1) General Exemption
from all Clauses
(a) Exemption
from any of the provisions of any of the Council's Agreements may be
granted by the Council or Regional
Councils, to any party on
application.
(b)
Application for exemption shall be made to the secretary of the
Regional Council within whose area the applicant
operates or is
employed.
(c) The
Regional Council or the Council, as the case may be, shall fix the
conditions subject to which such exemptions
shall be valid, and may,
if it deems fit, after one week's notice has been given, in writing,
to the person(s) concerned, withdraw
any licence of exemption .
(d) The
secretary of the Regional Council or the General Secretary of the
Council, as the case may be, shall issue to
every person granted
exemption , a licence signed by him setting out -
(i) the name
of the person concerned;
(ii) the
provisions of this Agreement from which exemption is granted;
(iii) the
conditions subject to which such exemption is granted; and
(iv) the
period during which the exemption shall be valid.
(e) In
respect of establishments registered under Chapters II or III of this
Agreement, the following exemptions procedure
applies:
(i) An
employer that applies for an exemption in order to pay a lesser wage
increase or to be exempted from paying on
actuals shall complete the
wage exemption application form available on request from the local
Regional Councils.
(ii) The
employer shall consult its employees on the employer's intention to
apply for an exemption and the application
for exemption must contain
details and proof of the consultation process.
(iii) The
employer, in the application shall furnish all relevant financial
information supporting the motivation for
the exemption applied for.
(iv) The
employer shall lodge the application for exemption with the local
Regional Council and the employer shall specify
that it is a Chapter
II or III application for an exemption and the employer shall specify
the exact nature of the exemption applied
for as prescribed in
paragraph (e)(i) of this clause.
(v) The
Regional Council shall make a decision on the application for an
exemption within 30 days from the date upon
which the application was
lodged with the Regional Council.
(vi) If the
application of a non-party establishment for the exemption is
rejected, the employer may lodge an appeal
with the Independent Board
and if the application of a Party establishment is rejected the
employer may appeal to the National
Council.
(f) The
Secretary of the Regional Council or the General Secretary of the
Council, as the case may be, shall-
(i) number
consecutively all licences issued;
(ii) retain a
copy of each licence issued; and
(iii) where
exemption is granted to an employee, forward a copy of the licence to
the employer concerned.
(g) The
Secretary of the Regional Council or the General Secretary, as the
case may be, shall issue to every person
granted a licence, a letter
of authority signed by him setting out, read with the changes
required by the context, the information
referred to in subclauses
(e) and (f) above.
(2) Exemption from the
Motor Industry's Retirement Funds
(a) When
applications for exemption are received from employers or a group of
employees, requesting exemption from the
Motor Industry's retirement
funds in order to join an alternative approved fund, the following
shall be observed: …
(b) The
Secretary of the Regional Council or the General Secretary, as the
case may be, shall issue to every person
granted a licence, a letter
of authority signed by him setting out, read with the changes
required by the context, the information
referred to in sub-clause
(1) of this clause.
(3) Exemptions
relating to actual/guaranteed increases
(a)
Individual employers seeking exemption to pay a lesser actual wage
increase and/or a guaranteed increase or to be
exempted from paying
such, must obtain the wage exemption application form available on
request from their local Regional Council.
(b)
Applications for exemption not to pay the agreed prescribed minimum
wage increases will not be accepted or considered
in terms of these
exemption procedures.
(c) The
application must be lodged with the Regional Council and must include
the following supporting documents-
(i) Formal
financial information
(ii) A
written motivation
(iii)
Details and proof of the consultation process between the employer,
employees and relevant MIBCO Trade Unions
.
(d)
Applications must be lodged with the Regional Council and scrutinized
within 21 days from the date the Council has
circularized all
employers with the amending Agreements and wage schedules, either
hand-delivered or by registered mail or by fax
or E-mail, in the
prescribed format.
(e) The Wage
Exemptions Board will make a decision on the application within 14
days of the conclusion of the first
period, i.e. 21 days as referred
to in sub-clause (d) hereof.
(f) Applicant
employers will be advised of the outcome within seven days by fax
where applicable and by registered mail.
(g) Non-party
establishments may appeal to the Exemptions Board and party
establishments to the National Council within
14 days from the date
of receipt of the registered post or fax advising of the rejection of
the application.
(h) Appeal
hearings will be attended by the Council's Auditors to assist with
the interpretation of the financial information
.
8.2 EXEMPTION
BOARD
(1) In terms of section
32(3)(e) of the Act the Council hereby establishes an independent
body, to be known as the Exemptions Board,
to consider appeals from
non-parties against a refusal of a non-party's application for
exemption from the provisions of a published
collective agreement and
the withdrawal of such an exemption by the Council.
(2) Any non-party
employer may lodge an appeal with the Council against the Council's
refusal of an application for an exemption
from the provisions of a
published collective agreement and the withdrawal of such an
exemption by the Council, in which event
the following procedure
shall apply:
(a) An appeal
shall be in writing and shall be addressed to the Regional Secretary
concerned for consideration by the
Exemptions Board appointed by the
Council.
(b) All
appeals shall be considered by the Council or regional councils with
due regard to the criteria contained in
the collective agreement when
considering applications for exemptions by non-parties.
(c)
All
appeals shall be substantiated or motivated by the
applicant and
shall include the following details:
(i) the
period for which the exemption is required;
(ii) the
Agreement and clauses or sub-clauses of the Agreement from which
exemption is required;
(iii)
proof
that the exemption applied for has been discussed by the employer,
his employees and their respective representatives; and
the responses
resulting from such consultation, either in support of or against the
application, are to be included with the appeal
.
(3) The Exemptions Board
may, having regard to the individual merits of each appeal, grant or
refuse the appeal if-
(a) it does
not undermine the agreement;
(b) it is
fair to the employer or his employees and other employers and
employees in the Industry
.
(4) The Exemptions Board
shall deal with all appeals within 30 days of the date on which the
appeal was submitted: Provided that
the Board may defer a decision
to a following meeting if additional motivation or substantiation or
information is considered necessary
to make a decision on the appeal
.
(5) Once the Exemptions
Board has granted an exemption, it must issue a certificate and
advise the applicant(s) accordingly within
14 days of the date of its
decision.
(6) When the Exemptions
Board dismisses or dismisses part of an appeal for exemption it shall
advise the applicant(s) within 14
days of the date of such decision.
(7) Exemption criteria:
The Exemptions Board must consider all appeals with reference to the
following criteria:
(a) the
written substantiation and motivation submitted by the applicant;
(b) the
extent of consultation with and the petition for or against granting
the exemption as provided by employers
or employees who are to be
affected by the exemption if granted;
(c) the scope
of exemption required;
(d) the
infringement of basic conditions of employment rights;
(e) the fact
that a competitive advantage is not created by the exemption;
(f) the
viewing of the exemption from any employee benefit fund or training
provision in relation to the alternative
compatible bona fide benefit
or provision, including the cost of the employee, transferability,
administration management and cost,
growth and stability;
(g) the
extent to which the proposed exemption undermines collective
bargaining and labour peace in the Motor Industry;
(h) any
existing special economic or other circumstances which warrant the
granting of the exemption ;
(i)
cognizance of the recommendations contained in the Report of the
Presidential Commission to Investigate Labour Market
Policy; and
(j) any
recommendation from the Council.”
(Emphasis added)
Subclause 8.1 (3) is the
provision under which the exemption application was brought.
Grounds
of review
Introduction
[24]
Argent attacked both legs of the reasoning of the bodies which
deliberated on the application for exemption and the appeal.
The
attack relates to the alleged unreasonableness of the decisions based
on supposed material irregularities committed in the
form of
disregarding material and relevant information and of failing to
assess the totality of the information in a fair and balanced
fashion, thereby denying Argent its right to a fair hearing. Had the
exemption bodies considered the information before them holistically,
they could not have avoided agreeing to the application. Argent also
claims that if any part of its motivation for exemption was
unclear,
the two bodies should have allowed Argent to make representations
rather than declining the applications.
[25]
More
particularly, in relation to the finding of both bodies that the
consultative requirements for an exemption application were
not met,
Argent contends that there was sufficient proof of consultation with
the affected employees which the two bodies failed
to appreciate. On
the second leg, the applicant merely baldly states that the bodies’
finding that the financial statements
did not support its motivation
was not sustainable on the record. What is astonishing is that these
sweeping averments, lacking
in specificity, were made in the
supplementary affidavit
after
considering the record. It seems the applicant contrived to make the
respondent justify the decisions in their answering affidavit,
which
they obligingly, but unnecessarily, did. Even then the applicant
avoided dealing with them in reply. Strictly speaking, these
contentions advanced by ARGENT are simply conclusions and are lacking
in the necessary factual detail necessary to make out a case
for
review and I would have be inclined to dismiss the application on
this ground alone
[10]
, but the
respondents did not complain about the factual paucity of the
founding papers, and whether the court ought
mero
motu
to
dismiss the application on this ground was not canvassed with the
parties. Accordingly, I have considered the merits as contended
for
by the parties both in the affidavits and the argument.
Compliance
with prerequisites for exemption
[26]
Clauses 8.1 (1) (b) and 8.1 (3) (c) of the main agreement set out the
various prerequisites exemption applications must meet.
The first
contention of the respondents in this regard is that Argent failed to
provide proof that it had consulted with all employees
about the
intended exemption application before submitting it and the
documentation only revealed that employees were “informed”
about the intended exemption application. As such, Argent did not
provide ‘proof of the consultation process between the
employer, employees and relevant MIBCO trade unions’ as
required by clause 8.1 (3) (c) (iii).
[27]
Such evidence that was provided with the original application were
the minutes of two meetings on 22 and 23 October 2013 which
merely
showed that employees were presented with a
fait accompli
and
no genuine opportunity to make their own inputs. The respondents also
made something of the fact that Annexure “A”
attached to
the pro forma exemption application form was not signed by a single
employee. The Annexure essentially contains a declaration
by
individual employees that they were consulted on the application for
exemption as provided for in the main agreement. It does
not require
that they express any view on whether or not they agree with the
proposal. However, the respondents did not press this
point in
argument and acknowledged this was a minor issue.
[28]
The minutes of the meeting held on 22 October 2013 with “management,
supervisors, team leaders, union representatives
at Argent
industries” headed “Re: Company’s financial
situation
and decision to submit
Application for Exemption
from paying increases” (emphasis added) essentially record what
Lennon did, namely to explain the company’s financial
situation
and the reasons for the difficulties it was facing including the fact
that a strike in the component industry had reduced
orders. He also
mentioned a loss of approximately R 8.8 million to date and that the
increase would cost the company a further
R 2.2 million per year. The
minute records amongst other things:
“
5. Mr Lennon Has
urged all the parties present at the meeting
to convey the message
to the respective area and try and make the people understand the
situation that we all work together to revive the situation.
…
7. Mr Lennon also
explained that the company is going to apply for an exemption for
paying increases, because the wage bill is too
high. He also noted
that the salaried staff had not received wage increases.
Mr Lennon ask whether
they were any questions from the attendees.
[The minute then records
a question by an employee whether the company could not have
addressed workers before the matter went on
strike, to which he
responded that it would not have made a difference anyway because
customers would not drawing stock and the
majority of the workforce
would have been on short time anyway.]
8. Mr Lennon has urged
once again
that the message be conveyed to the workforce
in
the correct manner.”
(
Sic
, emphasis
added)
[29]
The second meeting on the following day (23 October 2013) was a
direct result of the previous day’s meeting as reflected
in the
minutes. This meeting report was described as a meeting “…held
with employees at Argent Industries”.
The summary of the
meeting records the following:
“
1. Mr Lennon was
summoned to the canteen by the employees. He was informed that they
refused to go back to work unless the company
withdraws its
application to MIBCO requesting exemption from the pay increase.
2. Mr Lennon mentioned
company is having financial difficulties and informed the employees
that he was applying for the exemption
as the company cannot afford
the additional costs.
3. Mr Lennon informed the
employees that
he was only informing them that he was filing the
application, it was up to the board committee to grant the
application should
it be just
ified.
4. Mr Lennon informed the
shop stewards that it wasn’t illegal strike and said the
employees could face disciplinary action
if they did not go back to
work.
5. Mr Lennon asked Phaphu
the local organiser to come through to convince the employees to go
back to work.
6.Phaphu spoke to the
employees and
informed them that the union would oppose the
application
and inform the employees to go back to work, which
they did at 09H30.”
(
Sic,
emphasis
added)
[30]
After the application had already been submitted, a further meeting
about it was held on 28 October 2030 with a NUMSA organiser
and shop
stewards. At that meeting, the union organiser specifically asked
Lennon for “an update on the situation”
and if Lennon had
“any suggestions to avoid the current situation.” It was
further recorded that: “Mr Daweti
[the union organiser]
believes that it is unfair for the company not to pay the increases
to the workers after workers have embarked
on a four-week strike. Mr
Daweti asked if the company have any proposal, offer to put on the
table regarding the increases”
(
sic
). In response,
Lennon reiterated that the situation was unchanged and that the
exemption would be considered by the exemption board.
The union then
reaffirmed its intention to oppose the application and asked the
company to submit audited financial statements
to the exemption board
if requested to do so. The union organiser also expressed his
surprise that the company is still in the
situation it claimed after
implementing retrenchments, to which Lennon responded that his
intention was to keep the company operating
and stop further losses.
[31]
Argent contended that both boards’ had adopted a formalistic
interpretation of the requirement of consultation and failed
to
appreciate that Argent had substantially complied with the
consultation requirement. It also argued that by providing evidence
of consultations with the workforce when it submitted the
application, it had satisfied clause 8.1 (3) (c)(iii).
[32]
Similarly, in relation to the requirement to provide “formal
financial information”, the very nature of that phrase
was
imprecise and did not prescribe that only particular financial
information in the form of audited financial statements would
be
sufficient to meet the threshold for consideration of an exemption
application. Argent argued that the question whether provision
of
these documents was peremptory was a matter of context and argued
that the threshold here was distinguishable from other situations
where formal compliance might be considered absolutely essential,
such as the provision of valid current tax certificates in the
submission of tender documents.
[33]
The respondents argued that the application form itself stipulated in
paragraph 11.1 that in the case of a Pty Ltd company,
audited
financial statements for the past three years had to be provided.
They made the point that, strictly speaking, the entity
applying for
exemption was the group and not Argent, because Argent was merely a
division and not a separate legal entity. Its
non-compliance with the
requirement of providing its own audited financial statements
rendered the application fatally defective
ab initio
. The
extraction of the financial statements of Argent from those audited
documents, even if confirmed by the auditors, was not
sufficient
according to the respondents. Assuming that the application form
could stipulate the precise requirements of the financial
information
to be provided under the heading’ formal financial
information’, in my view, the respondents were somewhat
inflexible in interpreting the most appropriate information as being
the audited financial statements of the group. A letter from
the
auditors certifying that the information comprising the financial
statements of Argent had been extracted from the group financial
statements ought to have been sufficient to meet the exemption
boards’ requirements given that Argent was a discrete
operational
entity within the group but did not have its own audited
financial statements. This is discussed further below when dealing
with
the substantive merits.
An
opportunity to be heard at the appeal stage?
[34]
The applicant sought to bolster its argument by arguing that the
appeal board ought to have provided the applicant with an
opportunity
to be heard, which it submits at the very least includes an
opportunity to deal with any issues of clarity about the
application
which troubled the board by making written submissions on those
issues. Mr
Le Roux
, who appeared for the applicant, argued
that this was the type of application which required an additional
feature of this nature
to make the process fair. At this juncture it
should be mentioned that this argument in my view was barely pleaded
in the founding
papers and it is highly debatable whether I need to
deal with it at all. Insofar as it is necessary, I will do so
briefly.
[35]
Argent likened the process to a tendering process and made reference
to
Administrative Law in South Africa
, where the learned
author C Hoexter deals with section 3 of the Promotion of
Administrative Justice Act, 3 of 2000, (‘PAJA’)
and what
she calls “the variable content of fairness”:
“
A
crucial consideration is the administrative context of the decision,
as it (or more usually the legislation governing it) usually
bring
special features or meanings to the concept of fairness. For
instance, in Metro projects CC v Klerksdorp Local Municipality
Conradie JA had the following to say about fairness in the context of
procurement:
Fairness must be decided
on the circumstances of each case. It may in given circumstances be
fair to ask a tenderer to explain an
ambiguity in its tender; it may
be fair to allow a tenderer to correct an obvious mistake; it may,
particularly in a complex tender,
be fair to ask for clarification or
details required for its proper evaluation. Whatever is not cause the
process to lose the attribute
of fairness or, in the local government
sphere, the attributes of transparency competitiveness and cost
effectiveness.
The
exigencies of the circumstances and the practical limitations also
important. For instance, the Constitutional Court has held
that
consulting hundreds of property owners who are likely to have been
affected by designs for roads would have been both costly
practically
impossible, and that it was therefore sensible to conform maximally
to the exigencies and practicalities of the circumstances
time.’
In
working out what is fair the courts are wary of over judicialising
administrative processes. They recognise that administrative
decision-makers not courts of law, and that they should not have to
adopt the strict procedures of such courts…. Indeed,
at common
law decision-makers have largely been committed to adopt whatever
procedures they like, provided that they observe the
principles of
fair play. In broad terms, those principles require
firstly, that the person
concerned must be given a reasonable time in which to assemble
relevant information and parent forward
his representations; secondly
you must be put in possession of such information as will render his
right to make representations
a real, and not an illusory one.
This
flexible approach is upheld in the provisions of s 3 of the PAJA,
which mirror the principles of the common law in a number
of
respects. In particular, S 3(2) (k) expressly recognises that a fair
procedure ‘depends on the circumstances of the case’.
Section 3 (2) (b) of the act sets out the minimum requirements of
fairness broadly, using open-ended terminology that allows for
variations in interpretation in different contexts. For example, the
precise form of the first ingredient- a ’reasonable
opportunity
to make representations’-could vary widely from case to case.
Fairness might require a full scale or hearing
in the disciplinary
setting; but in another context, merely filling in a form might
qualify as a reasonable opportunity to make
representations.
[11]
[36]
However, Mr
Le Roux
argued that it was only where the board had difficulty in
understanding the motivation for the application that special
allowance
be made for the applicant to address the appeal board on
those points. He also placed reliance on the case of
Ncungama
& others v Bargaining Council for the Liquor Catering &
Accommodation Trades, South Coast, KwaZulu Natal &
another
[12]
, in which it was held in passing that a council’s refusal to
grant an exemption was found to be procedurally defective because
the
council did not give the applicants an opportunity to respond to
written comments made by their employer opposing their
application.
[13]
In that case,
the court was dealing with a single stage deliberative process and
the comments were coming from an interested party
in the matter,
unlike in this instance. Nonetheless, Argent asserted that the
guiding principle was that court in that case had
taken account of
adverse comments without giving the applicants an opportunity to
address those. Accordingly, it mattered not where
the adverse comment
emanated from. Moreover, Argent argued that Lennon’s offer in
the appeal document to attend the hearing
to deal with any issues
that might arise in the appeal hearing was another reason the appeal
body should have allowed Argent to
make representations, though it
did not go so far as to argue that making oneself available to make
representations created an
entitlement to do so.
[37]
In general, I do not think that the analogy with a tender process is
appropriate. In a tender process, a central object of
the process is
for the party calling for and considering tenders to make sure that
it is able to procure goods or services in the
most cost-effective
manner without unfairly prejudicing competing tenderers. In that
context it makes sense that the procuring
party would not want to be
deprived of an advantageous tender for want of certainty about the
terms of the tender, provided of
course that it treats other
tenderers in the same way. Secondly, in the tender process in
Metro
Projects
the court was not dealing with a procedure which
provided for an appeal. In this matter, the applicant effectively had
a second
opportunity to motivate its application and address
deficiencies in it. Also, by the very nature of the exemption
application,
Argent sought to be treated more advantageously than its
competitors and to treat its employees less favourably than others in
the same occupations in the sector. The applicant is essentially
asking for exceptional treatment and in those circumstances it
really
fell to it to persuade the board that it was entitled to more
favourable treatment. Furthermore, unlike the tender situation,
the
information required to consider the exemption application will
usually be almost entirely within the applicant’s own
knowledge
and it has to explain the unique position it finds itself that
distinguishes it from its competitors and justifies advantageous
treatment for itself and disadvantageous treatment for the affected
employees. It is not a situation in which its tender terms
are being
evaluated soley against tender specifications issued by the party
considering the tender. In addition, in this instance,
the applicant
is also not a small business lacking the financial capacity to
present a coherent motivation. It is part of a large
industrial group
comprising 13 business divisions with financial managers and
independent auditors. It ought to be able to present
its financial
arguments in a coherent fashion in motivation of its application,
without the assistance of the board. Later on in
the judgment the
manner in which the motivation was conveyed will be considered. It is
sufficient to say at this juncture that
it was somewhat perfunctory
and poorly explained.
[38]
Nonetheless, clause 8.2 (4) of the appeal procedure does provide that
the board may defer a decision to a later meeting if
additional
motivation, substantiation or information is considered necessary to
make a decision on the appeal. Clearly, that provision
anticipates
that there may be situations where a submission is unsubstantiated or
where information is provided but motivation
based on the information
is lacking. In argument, no specific reliance was placed on this
clause by Argent, though it did offer
to clarify issues at the
hearing if the board required it. It is arguable that the appeal
board ought to have deferred the decision
owing to the confusing
state of the financial information and the real motivation, if it was
satisfied that sufficient consultations
had taken place.
The
merits – threshold issues or substantive issues?
[39]
Argent contended that both bodies had concerned themselves merely
with whether or not the formal prerequisites of the exemption
application had been met without dealing with the intrinsic merits of
the material before them.
[40]
The board’s evaluation of the consultation question led to a
conclusion that there had not been with all employees and
that the
process was merely an information sharing one. In essence, this might
be construed as a threshold issue but the appeal
board was making a
finding which went beyond merely the provision of proof of
consultation: essentially its finding was substantive
in nature and
concerned the
sufficiency
of consultation, which it was
required to assess under clause 7(b) of the procedure.
Sufficient
consultation?
[41]
In respect of the requirement of consultation with employees, Argent
argued that the concept of consultation in the context
of an
exemption application could not be equated with the purposive and
extensive form of consultation envisaged when retrenchments
are
contemplated as in s 189 of the LRA. Further, Argent had candidly
conveyed the workforce’s complete opposition to the
exemption
application and was not seeking to represent that they were in any
way in agreement with it. Consequently, the board
could have no doubt
of the attitude of employees towards the application when
deliberating on the application. The appeal board’s
rejection
of the appeal relating to financial issues in part dealt with what
financial documents had be submitted (a threshold
requirement) and in
part whether the financial information provided was coherent enough
to support the exemption application (a
substantive issue). Threshold
and substantive questions are addressed below.
[42]
Argent argued it was clear from the evidence of the second meeting of
23 October, which was placed before the appeal body,
that union and
non-union employees had been present and expressed their opposition
to the exemption application. In addition, there
had been a further
meeting with union representatives where there had been an
opportunity for an exchange of views which the union
had taken. The
extent of consultation was something both boards were required to
consider in terms of clause 8.2 (7) (b) of the
procedure.
[43]
The respondents retorted that what was missing from the interactions
with employees was an opportunity for the employees to
engage with
Argent to present their views to it for consideration. At both the
meetings in October, the employer made clear that
it was merely
informing employees of its intention to apply for the exemption. The
letter motivating the exemption application
was signed on 23 October
and even when the company met with NUMSA and shop stewards on 28
October and Argent was asked if it had
changed its position, it
simply reiterated that nothing had changed and it was submitting the
application. The respondents conceded
in argument that the process
did not require the same kind of extensive consultation envisaged in
retrenchment discussions, but
it is clear from the minutes of the
meetings mentioned that they were essentially to convey the
employer’s intentions rather
than any serious attempt to engage
with workers or the union in the form of inviting alternative ways of
addressing the financial
problem Argent was confronting. The
respondents readily agreed that the mere fact that employees had
refused to sign the Annexure
indicating that they had been consulted,
was not in itself fatal to the exemption application. However, it was
the absence of a
genuine exchange of views in those meetings which
justified the conclusion that consultation had not taken place. Such
exchanges
that are mentioned were reactions to a decision already
taken by ARGENT.
[44]
On the information before the boards there was sufficient evidence
that the process followed by Argent was not a consultative
one and
the boards were more than justified in concluding that consultation
had not taken place, even if they might have been over-strict
in
interpreting the requirement to mean that the employer should prove
every employee participated in it. In that regard, in my
view, as
long as an employer could show that all employees had an opportunity
to make an input in response to management’s
presentation to
employees that ought to suffice. Nonetheless, on the evidence before
the boards, the nature of the meetings which
were held did not entail
a consultative process irrespective of whether they were attended by
all employees or not. It was also
argued that NUMSA’s rejection
of the application rendered a consultative process irrelevant.
However, the fact that a representative
union opposed the application
is not evidence of the existence of a consultative process. At least
part of the object of consultation
must be to see if the interested
parties can open up discussions on alternatives to the exemption. In
the absence of sufficient
consultation, the application was bound to
fail as an important requirement for granting exemption was not met,
even if the financial
motivation could have been shown to be more
coherent after obtaining more clarity on that aspect.
[45]
This was also something that Argent could have remedied, simply by
inviting the union and employees to make representations
on how the
company could otherwise address its financial difficulty without
resorting to the exemption application and then considering
any such
representations made and providing feedback, without being expected
to try and reach agreement on alternatives.
Financial
motivation
[46]
On the matter of the financial information before the board, Argent
maintained that the threshold requirement had been met
with the
information provided, and on whatever interpretation of that
information could be made the information revealed that even
on the
smallest historic loss discernible on the documents and on the
projections for the forthcoming financial year (2014), which
was
particularly important, Argent was ‘in trouble’
[47]
More particularly, in attacking the reasoning of the boards on the
financial information, Argent makes the following points:
47.1 As a
threshold requirement, there could be no audit report of Argent as
such because it was merely a division of
the group and such a report
would reveal little or nothing about Argent’s profitability as
an operating division of the group,
and it is its profitability as an
operating entity which is relevant to the exemption application.
Moreover, a letter from auditors
confirming that the figures in the
financial statement had been correctly extracted from the group
financial statements, should
have been sufficient to satisfy board of
the authenticity thereof. The respondents argued strenuously that it
was absolutely essential
that the audited group statements should
have been provided as per Annexure “D”, because they
might have revealed that
the group as a whole was immensely
profitable. I am inclined to agree with Argent that the most relevant
information was information
relating to the financial viability of
Argent as self-sufficient operating entity, albeit that it was part
of a bigger company,
since Argents was the entity in respect of which
the exemption was sought. Looked at from another perspective, it was
the impact
of the wage increase on the costs and income generating
capacity of Argent that ought to have been considered the most
relevant
factors. The fact that Argent might have had recourse to
other sources of finance to bolster its own poor financial situation
is
a factor which, is really incidental to evaluating the impact of
the wage increase on the business’s operational viability,
which should be the primary concern of the bargaining council, as
that is the operational entity falling within the scope of the
exemption.
47.2 Argent
further argued that the board was unreasonable in concluding that
profit figures in the financial statements,
management accounts and
the letter of the financial manager dated 25 April 2014 were
inconsistent. Argent contends that its financial
manager’s
letter directly referred to the financial statements prepared by the
auditors which reflected net pre-tax net income
for the financial
year ending March 2013 as R 6,543,621-00. The letter indicated that
once an intercompany loan received from a
sister company of R 7, 143,
937-89 was included, Argent suffered an actual loss of R 600,316-00
for the period. Moreover, the loan
was clearly reflected on the first
page of the trial balance of 31 March 2014 under the description
“Loan Account- New Joules
North”. Two remarks can be made
in this regard. Firstly, it immediately raises the question if the
inter-company loan ought
to have been reflected in the financial
statement in the first place as ordinarily a loan would not appear in
the income statement
but in the balance sheet and only interest
payments on the loan which would be reflected in the income
statements. Thirdly, the
impression Argent sought to create was that
the loan would impact on the net profit for the 2013 financial year
converting a net
profit of R 6, 54 million to a loss of approximately
R 600,000, yet it did not explain why the income statement extracted
by the
auditors did not account for this, if indeed it ought to have
been included in calculating the net profit for the 2013 financial
year. It is only in the trial balance for the 2014 financial year
that the loan appears as an account entry. The information provided
by Argent in relation to the 2013 financial year and in particular
the derivation of the net profit for the year do raise a number
of
questions which are not easily answered on the face of the documents
provided. Argent’s attitude is that the boards ought
to have
given it a chance to explain itself more fully and that their failure
to do so amounted to a reviewable irregularity. Despite
the board
having the option of deferring the decision to obtain more inputs. In
this instance, the explanation of Argent’s
financial situation
in 2013 and 2014 was murky because it offered varying explanations
for its predicament and its cross referencing
between the
explanations and the financial information was poor, despite having
had the opportunity to clarify matters at the appeal
stage. Secondly,
whatever formal financial information was required of it, Argent
remained responsible for persuading the exemption
bodies that it was
deserving of exemption. If its original motivation was not clear, in
the context of it being an entity which
is part of a large corporate
group, comprising 13 divisions, it is only reasonable to expect that
it would have been able to at
the appeal stage. Argent is not a sole
proprietorship owned by someone with limited financial or bookkeeping
expertise.
47.3 Argent
also claimed that the board’s comment that the balance sheet
figures did not balance showed that the
appeal board failed to
appreciate that the line items on the pro forma Annexure D required
by the council as part of the exemption
application did not comprise
a complete balance sheet as such but merely set out most of the items
which could be extracted from
a balance sheet. Moreover, it contended
that this weakness in the design of the form did not detract from the
importance of the
evidence of the projected figures for 2014, which
anticipated a further decline in operating profits dropping from 42%
in 2011
to an anticipated 30% in 2013 and a dramatic loss in pre-tax
income of nearly R 12 million in 2014.
47.4 In
relation to the complaint that the balance sheet items did not
balance, scrutiny of the figures used by Argent
to populate Annexure
D reveals why those figures do not result in the expected equivalence
of total assets to total equity and
liabilities. For reasons which
Argent did not make clear, it did not mention changes in net equity
in Annexure D, though this might
be in part excused by the absence of
a line item for such an entry on the form. More seriously, Argent
also failed to include loans
from group companies under the entry for
current liabilities. These loans account for a very significant part
of the discrepancy
between total assets and total equity and
liabilities each year. To illustrate this with reference to the 2013
figures, ‘Current
liabilities’ were recorded as
approximately R 17.1 million on Annexure D, but as nearly R 68
million on Argent’s balance
sheet. The principal reason for the
huge discrepancy is that Argent omitted to include under the item
‘Current liabilities’
the loans from group companies
totalling nearly R 51 million. Leaving aside the fact that the
‘balance sheet’ portion
of Annexure D appears to have
erroneously omitted changes in net equity, if Argent had included
company loans under current liabilities
as it should have, the
glaring imbalance on Annexure D would have been far less significant
and noteworthy. If it had a reason
for this omission it ought to have
explained it given the impact it had, but nowhere in the motivation
it submitted, did Argent
attempt to deal with this omission, which
would have gone a long way to explaining why the discrepancy in the
balance sheet portion
of Annexure D was so immense. Even if the form
omitted one line item, that cannot explain Argent’s failure to
accurately
reflect its current liabilities. Given the nature of the
application it was for Argent explain apparent anomalies, which would
have been obviously apparent to the person preparing the form, if not
when the original application was made, at least when the
appeal was
lodged and the financial manager had become involved in making the
representations. Instead, it presented an account
which even allowing
for the limitations of the form was far from accurate and clearly did
reveal an inexplicably large discrepancy
in the balance. In this
respect and others its representations were incoherent and
perfunctory.
47.5
Interestingly, Argent did not take issue with the finding of the
exemption board that the financial projections
did not make sense and
the net loss in the projection appear to be overstated. In Lennon’s
letter of 23 October 2013 he motivates
for the exemption on the basis
that Argent had been running at a loss for ‘a long period’
and outlined measures adopted
at that stage had helped to reduce the
loss but not eliminate it. That letter makes absolutely no reference
as to why the estimated
loss for 2014 was expected to be dramatically
different. Accepting, for argument’s sake, that Argent had in
fact suffered
a loss of approximately R 600,000 for the 2013
financial year, this was projected to escalate to a massive R 11, 73
million loss
in 2014, amounting to a nearly twenty-fold increase in
the loss. Such a dramatic increase cannot be explained simply by a
continuation
of the pattern of the previous year, especially if, on
Argent’s own account was entirely attributable to the R 7
million
inter-company. The projected figure can only suggest some
other dramatic anticipated change Argent’s financial position,
which is nowhere sought to explain. It had the responsibility to
justify why it should be treated exceptionally and the projection
without an explanation for the projection did not do that.
47.6 It is
only when the appeal document was submitted that such an explanation
was forthcoming for the vastly different
figure. Previously the
motivation had been that the company was simply in a loss-making
situation and needed relief which could
be obtained if it were
exempted from the wage increase which it estimated would save it R 2
million. In his affidavit Lennon provides
an entirely different
explanation:
“
5.3.1.1
The applicant has come under tremendous financial pressure
due to
incorrect costings
that resulted in a stock loss of R
7,207,196-00 caused by overstating margin’s. This was picked up
when the stock take was
carried
out in April 2013
. The
previous managing director did not update the product costing, in
order to recover the cost of sales for goods sold he used
a
theoretical margin. Unfortunately the margin he used was too high
this made the company look like it was running profitably
unfortunately this was not the case.
5.3.1.2
The
applicant experienced
further losses due to insufficient work which
has resulted in a loss of R 4,528,259-87. This was also highlighted
when the correct
costings were implemented. By using the actual
margins it is now possible to accurately calculate the corrected
breakeven point.
Thus bringing the total loss for the year to R11,
735,455-87”
Even so, the new
explanation does not make any reference to the projected income
statement to explain which line items were impacted
by this
discovery. It also does not seek to explain why the figure did not
affect the 2013 financial year rather than the 2014
projection if it
was something picked up right at the start of the 2014 financial
year. It is also not clear whether those erroneous
costings related
to forward sales or past sales. At the very least, Argent should have
cross-referenced the figures mentioned in
his affidavit to the
projected income statement. Argent might well have been able to
explain these ambiguities and anomalies, though
it hasn’t done
so to date. Apart from this, the statement suggests that the company
believed it was running profitably at
the start of the 2013 financial
year yet this is at odds with Argent’s own claim that it ended
that year was a loss of R
600,000-00. Once again, the need for
clarifying the explanation does not stem from new concerns expressed
by the board but from
the opacity of Argent’s own motivation,
which should have been clearer from the start.
47.7 On the
information presented to the boards, the explanation for Argent’s
position was an incoherent one and
it would not have been
unreasonable for the boards to have rejected the application on
financial grounds as inadequately motivated.
47.8 The
incoherence of the explanations also makes it questionable whether
the appeal board ought to have deferred
a decision to allow Argent to
be given a further opportunity to provide additional input when it
had not been able to present a
coherent account of its difficulties
even after two attempts with the expertise at its disposal. However,
in any event it is not
necessary to decide this as I am satisfied the
boards were entitled to reject the application on the basis of the
insufficiency
of consultation’.
Order
[1]
The applicant’s condonation application is dismissed.
[2]
The review application is dismissed.
[3]
The applicant must pay the first and second respondents’ costs.
_______________________
Lagrange
J
Judge
of the Labour Court of South Africa
APPEARANCES
APPLICANT:
F
Le Roux instructed by
Bakker
Attorneys
FIRST
AND SECOND RESPONDENTS:
G
G M Quixley instructed by
Cliffe
Dekker Attorneys
[1]
Original emphasis
[2]
Annexure “J” is a letter from Argent's financial manager
attaching clearer copies of financial statements signed
by the
auditors and pointing out that on account of an internal company
loan from a sister company, Argent suffered an actual
loss of
approximately R 600,000 rather than a year-to-date profit of R 6.5
million for the year ending March 2013.
[3]
See e.g.
Samuels
v Old Mutual Bank
(2017)
38
ILJ
1790
(LAC)
at 1796, para [17]
[4]
(2016) 37 ILJ 434 (LC) at 441.
[5]
(2017) 38
ILJ
1790
(LAC) at 1796-7
[6]
Notice No. 629, GG 37921 of 18 August 2014.
[7]
Proc R .87, GG 38317, of 19 December 2014.
[8]
More specifically, the new and amended sub-sections read:
“
32
…
(dA)
the bargaining council has in place an effective procedure to deal
with
applications by non-parties for exemptions from the provisions
of the collective agreement and is able to decide an application
for
an exemption within 30 days;
…
(e) provision is made in
the collective agreement for an independent body to hear and decide
, as soon as possible and not later
than 30 days after the appeal is
lodged, any appeal brought against - …
(3A)
No representative, office-bearer or official
of a trade union or
employers’ organisation party to the bargaining council may be
a member of, or participate in the deliberations
of, the appeal body
established in terms of subsection (3)(e).”
[9]
Extended by the Minister of Labour under R GG No. 37508 : 4 April
2014 GG No. 37508 : 4 April 2014
[10]
See in this regard, authorities reiterating the trite proposition
that new grounds of review cannot be raised in argument viz:
Tao
Ying Metal Industry (Pty) Ltd v Pooe NO & others
(2007) 28
ILJ
1949
(SCA) at 1986, par [122] and 1979, para [198];
Betlane
v Shelly Court CC
2011
(1) SA 388
(CC) at 396, par [29];
Netherburn
Engineering CC t/a Netherburn Ceramics v Mudau NO & others
(2009) 30
ILJ
269 (LAC) at 280, par [28]
and
Northam
Platinum Ltd v Fganyago NO & others
(2010) 31
ILJ
713 (LC) at 720-721, paras [27] – [29]. Further, that the
facts relied on must be pleaded in the founding papers except
where
allowance should be made for lay litigants. See, e.g.
Rothschild
v AMT Construction
(1999) 20
ILJ
2929 (LC) at 2932, par [9] and
National
Union of Mineworkers v Commission for Conciliation, Mediation &
Arbitration & others
(2013) 34
ILJ
2913 (LC) at 2924 par [45]. In particular, see the LAC decision in
Comtech
(Pty) Ltd v Molony NO and Others (DArgent2/05)
[2007] ZALAC 40
(21 December 2007) in which it was said:
“
[15] The
difficulty with the appellant’s case in this regard relates to
whether the founding affidavit contains the factual
grounds required
by Rule 7A (2) (c) of the Rules of the Labour Court. Rule 7A (2) (c)
of the Rules of the Labour Court requires
a party who applies for a
review, such as the appellant in this matter, to deliver a notice of
motion that must be supported
by “an affidavit setting out the
factual and legal grounds upon which the applicant relies to have
the decision or proceedings
corrected or set aside.” Rule 7A
requires the notice of motion to call upon, in this case, the
commissioner “to show
cause why the decision or proceeding
should not be reviewed and corrected or set aside.”
[16]
In my view, the contents of par 15 of the founding affidavit
relate
to conclusions of law. There is nothing either in par 15 or anywhere
else in the founding affidavit which sets out the
factual grounds
upon which the appellant sought to base its legal grounds of review.
In par 15 of the founding affidavit the
deponent said that the
commissioner erred in his award in that he “failed and or
neglected and/or refused to apply his
mind to the evidence led at
the arbitration proceedings” but did not motivate this bald
allegation by reference either
to the evidence or the award.”
…
[18]
It is arguable that the award in this case could possibly
be
reviewable if the founding affidavit had been properly drawn and the
correct grounds of review had been relied upon and proper
factual
basis for such grounds had been set out. But, as the papers stand,
it seems to me that I have no choice but to find that
the appeal
falls to be dismissed for the absence of a factual basis for the
appellants complaints on review.”
[11]
C Hoexter, Administrative Law in South Africa, Juta, (2ed) at 365-6.
[12]
[2002] 8 BLLR 766 (LC)
[13]
At 771, paras [32] – [33].