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[2019] ZALCJHB 274
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Intercape Ferreira Mainliner (Pty) Ltd v Mcwade and Others (JR158/17) [2019] ZALCJHB 274; (2020) 41 ILJ 208 (LC); [2020] 2 BLLR 199 (LC) (18 September 2019)
THE
LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG
JUDGMENT
Reportable
CASE
NO: JR158/17
In the matter between:
INTERCAPE FERREIRA
MAINLINER
(PTY)
LTD
Applicant
and
RORY
MARK MCWADE
First
Respondent
THE COMMISSION FOR
CONCILIATION
MEDIATION
AND ARBITRATION
Second
Respondent
EVELINE
MOLEFE N.O.
Third
Respondent
Heard: 13 September
2019
Judgment
delivered: 18 September 2019
JUDGMENT
VAN
NIEKERK J
[1]
This case concerns the nature and extent of the obligation that rests
on an applicant for
employment to disclose the circumstances
surrounding a termination of employment with a previous employer.
[2]
The first respondent (the employee) was employed by the applicant in
May 2015 as a
general manager. There is no dispute that it was
anticipated that he would be groomed for and in due course be
appointed to the
position of the applicant’s chief executive
officer. This expectation was not realized. In June 2016, the
employee was dismissed
after a disciplinary hearing conducted by an
independent senior attorney into four allegations of misconduct. The
most significant
of these, for present purposes at least, is that
prior to his appointment, the employee failed to disclose to his then
prospective
employer the circumstances surrounding the termination of
his employment with Cargo Carriers Zimbabwe.
[3]
The employee contested the fairness of his dismissal and the matter
was referred to
arbitration. The third respondent (the arbitrator)
issued the following award:
1.
The dismissal of the Applicant was both substantively fair and
procedurally unfair
(sic).
2.
The Respondent, Intercape Ferreira Mainliner (Pty) Ltd is ordered to
compensate,
the Applicant Mr. Rory McWade five (5) month’s
(sic) salary calculated as R 134 500 x 5 months = R672 500,00 by no
later
than 11 February 2016.
3.
Interest is payable from the date of the award, at the same rate as
prescribed
from time to time in terms of the prescribed Rate of
Interest Act 55 of 1975.
4.
There is no order as to costs.
[4]
The parties agree that paragraph 1 the award should read that the
employee’s
dismissal ‘was substantively unfair and
procedurally unfair’.
[5]
Before drawing her conclusion, the arbitrator summarised the evidence
and reviewed
the case law. Her reasoning is apparent from the
following paragraphs:
(74)
From case law it is clear that the courts differentiated between
instances where false information
was given and when the prospective
employee failed to disclose certain information about the previous
employment. With the first
instance the court have viewed giving
false information as misrepresentation of facts which is a dishonesty
offence related to
fraud. In this instance intention to defraud must
be shown to find the employee guilty of the misconduct. However, when
the employee
has failed to disclosed (sic) certain information during
recruitment cannot be viewed as submitting false information and
therefore
there is no misrepresentation of facts or any element of
dishonesty as there is no legal duty to disclose.
(75)
The Respondent have also in this case erred in submitting that the
Applicant submitted false
information and referred to its
Disciplinary Code which provides that submitting false information in
the CV or during employment
is a dishonesty offence with the
competent sanction of dismissal. Therefore, it was imperative for the
Respondent to specified
exactly what information it required from the
Applicant during the recruitment process and if the Applicant lied
about the circumstances
related to his departure, the non-disclosure
agreement and the mutual separation agreement, he would then be
dismissed for misrepresentation
of facts. In this case the Applicant
merely, did not disclose the facts surrounding his previous
employment and that led to his
departure.
(76)
Therefore, in the absence of any obligation to disclose circumstances
of the Applicant’s
departure from his previous employer which
includes allegations of fraud and bribery, relations with the unions
and the government
of Zimbabwe, the allegations that the Applicant
was arrested for failure to heed to a summon by the government, the
non-disclosure
agreement and the mutual separation agreement, I
cannot find that the applicant broke any rule.
[6]
Reduced to its basics, what the arbitrator appears to conclude is
that the employee
committed no misconduct because the applicant
failed to establish that it had sought specific information during
the interview
process regarding the employee’s termination of
employment with Cargo Carriers, and that the responses given by the
employee
were false. The arbitrator does not appear to recognise that
outside of the category of deliberate, false representations of fact,
a prospective employee may nonetheless be required to disclose
information not specifically requested, if that information is
material to the decision to employ; or where (as in the present
instance) a question is asked, that a less than honest and complete
answer might form the basis of a dismissal when the truth is
ultimately discovered. The applicant thus submits that in reaching
her conclusion, the arbitrator committed a material error of law and
that in any event, the conclusion to which the arbitrator
came falls
outside of a band of decisions to which a reasonable decision-maker
could come on the available evidence. The first
challenge amounts to
a ‘correctness’ enquiry; the second is one of
reasonableness.
[7]
The relevant factual matrix, which is not disputed, is that prior to
his appointment by
the applicant, the employee was employed by the
Cargo Carrier Group in Zimbabwe. During the period August to October
2014, Cargo
Carriers made allegations against the employee that
extended to bribery and corruption, and the use of company assets
without prior
permission. On 15 October 2014 the employee was
suspended. During the course of the suspension, the presidency of
Zimbabwe, the
Zimbabwean Labour Court and the Zimbabwean Trade Union
Congress became involved in the dispute. The employee was summoned to
appear
at the Presidency and at the Labour Court on different
occasions during his suspension, although he did not heed the
summonses
in question. Military personnel physically took the
employee to the Zimbabwe Department of Labour to answer questions
regarding
his suspension. After some 38 days of suspension, he
employee took the advice of his legal representatives to institute
action
against his employer. The papers were not served because the
parties commenced negotiations on a mutually acceptable basis on
which
to part ways. These resulted in a settlement agreement.
[8]
In the interview process preceding his appointment as the applicant’s
general
manager, the employee was specifically asked about the
circumstances of his leaving cargo carriers. On his application form,
the
employee stated that his reasons for leaving the employ of Cargo
Carriers were ‘New owners, Zim economy’. At the first
meeting conducted as part of the interview process, the employee was
asked about the circumstances of his departure from Cargo
Carriers.
He did not mention any of the above circumstances. At a meeting with
the applicant’s CEO in Harare, and in response
to the same
question, the employee stated that there was a ‘difference of
opinion’ on ethical standards. Again, no
mention was made of
any of the events recorded above. At a further meeting with the
applicant’s board, the applicant was
specifically asked if
there was anything that should concern the applicant in relation to
his departure from Cargo Carriers, the
employee did not mention any
of the events referred to above.
[9]
The test to be applied is one that recognises and reinforces the
distinction between
a review and an appeal. This court is entitled to
intervene if and only if the arbitrator’s decision is one that
falls outside
of a band of decisions to which a reasonable
decision-maker could come on the available material. The
locus
classicus
remains
Head of Department of Education v Mofokeng &
others
[2015] 1 BLLR 50
(LAC)
,
where the LAC said the
following:
[30]
The failure by an arbitrator to apply his or her mind to issues which
are material to the determination of a case will usually
be an
irregularity. However, the Supreme Court of Appeal (“the SCA”)
in
Herholdt v Nedbank Ltd
and this court in
Goldfields
Mining South Africa (Pty) Ltd (Kloof Gold Mine) v CCMA and others
have held that before such an irregularity will result in the setting
aside of the award, it must in addition reveal a misconception
of the
true enquiry or result in an unreasonable outcome…
[32]
…Mere errors of fact or law may not be enough to vitiate the
award. Something more is required. To repeat: flaws in
the reasoning
of the arbitrator, evidenced in the failure to apply the mind,
reliance on irrelevant considerations or the ignoring
of material
factors etc. must be assessed with the purpose of establishing
whether the arbitrator has undertaken the wrong enquiry,
undertaken
the enquiry in the wrong manner or arrived at an unreasonable result.
Lapses in lawfulness, latent or patent irregularities
and instances
of dialectical unreasonableness should be of such an order
(singularly or cumulatively) as to result in a misconceived
inquiry
or a decision which no reasonable decision-maker could reach on all
the material that was before him or her.
[33]
Irregularities or errors in relation to the facts or issues,
therefore, may or may not produce
an unreasonable outcome or provide
a compelling indication that the arbitrator misconceived the inquiry.
In the final analysis,
it will depend on the materiality of the error
or irregularity and its relation to the result. Whether the
irregularity or error
is material must be assessed and determined
with reference to the distorting effect it may or may not have had
upon the arbitrator’s
conception of the inquiry, the
delimitation of the issues to be determined and the ultimate outcome.
If but for an error or irregularity
a different outcome would have
resulted, it will
ex hypothesi
be material to the
determination of the dispute. A material error of this order would
point to at least a
prima facie
unreasonable result. The
reviewing judge must then have regard to the general nature of the
decision in issue; the range of relevant
factors informing the
decision; the nature of the competing interests impacted upon by the
decision; and then ask whether a reasonable
equilibrium has been
struck in accordance with the objects of the LRA. Provided the right
question was asked and answered by the
arbitrator, a wrong answer
will not necessarily be unreasonable. By the same token, if an
irregularity or error material to the
determination of the dispute
may constitute a misconception of the nature of the enquiry so as to
lead to no fair trial of the
issues, with the result that the award
may be set aside on that ground alone. The arbitrator however must be
shown to have diverted
from the correct path in the conduct of the
arbitration and as a result failed to address the question raised for
determination.
[10]
The applicant’s grounds for review extend to both an incorrect
interpretation of law by the arbitrator,
and to the unreasonableness
of her finding. There is nothing inconsistent with this approach,
indeed, is not often, if ever, that
an incorrect decision by or a
decision made on the basis of a material error of law will meet the
reasonableness threshold (see
Coega
Development Corporation (Pty) Ltd v
Commission for Conciliation, Mediation
and Arbitration & others
[2016] 2
BLLR 151
(LC)). The applicant’s correctness challenge is
specifically founded on the decision by the Labour Appeal Court in
National Union of Metalworkers of SA v
Assign Services & others
(2017) 38
ILJ
1978
(LAC) where the court said:
[32]
An incorrect interpretation of the law by a commissioner is,
logically, a material error of law
which will result in both an
incorrect and unreasonable award. Such an award can either be
attacked on the basis of its correctness
or for being unreasonable.
[11]
The nature and extent of the obligation to disclose facts during the
recruitment process where
defined by this court in
Galesitoe v
CCMA & others
[2017] 7 BLLR 690
(LC), where the court said
the following, at paragraph 11 of the judgment:
Accordingly, it is not
unreasonable to ensure that a person applying for the senior level of
post in question would have realised
that the nature of his
relationship with his former employer was a material consideration
for his prospective new employer and
could affect his employment
prospects. That would have given rise to the obligation to disclose
having regard to the principle
enunciated in
ABSA v Fouche
which the LAC and the LC followed in the
Fipaza
case.
[12]
What escaped the arbitrator in the present instance is that the
applicant’s case was not
that the employee had made a material
misrepresentation of fact or that he had given false information
during the course of the
interview process. The applicant’s
case before the arbitrator was that given the circumstances, the
employee ought properly
in response to the question regarding the
termination of his employment with Cargo Carriers to have disclosed
the facts surrounding
the termination of his employment with Cargo
Carriers, and that his failure to make that disclosure constituted a
serious act of
misconduct. Of course, the failure to make disclosure
must be material, at least in the sense that the prospective employer
would
have conducted its own enquiry into the relevant events and
determined eligibility or suitability for employment as a
consequence.
[13]
In these circumstances, and particularly given the fact that the
employee was being interviewed
for the post (in effect) of CEO
designate of a family business whose operations extend to Zimbabwe,
the employee committed an act
of serious misconduct by failing to
disclose the circumstances of his parting of the ways with Cargo
Carriers. It is not sufficient
to say, as did Mr. van As on the
employee’s behalf, that the settlement agreement had the
consequence that the employee had
no contractual duty to disclose the
circumstances surrounding the termination of his employment with
Cargo Carriers, since he voluntarily
resigned and was never found
guilty of any misconduct. In essence, the employee’s case was
that he had nothing to disclose,
and that it was never proven that
anything he did disclose was false. I have some difficulty with this
approach, based as it is
on the contractual principles of
non-disclosure and misrepresentation by silence or omission. We are
not dealing with a contractual
dispute – the issue in the
present instance is ultimately one of ethics. For this reason, cases
such as
Absa Bank Ltd v Fouche
2003 (1) SA 176
(SCA), (which
concerned the relationship of a banker and client) are useful to the
extent that they fix the test for the lawfulness
of a non-contractual
non-disclosure as one premised on what ‘would be mutually
recognised by honest men in the circumstances
(see paragraph 5 of the
judgment). As Lagrange J put it in
Galetsitoe
[2017] 7 BLLR
690
(LC), it is not unreasonable to infer that a person applying for
a senior position should realise that the nature of his or her
relationship with a former employer is a material consideration for a
prospective new employer and could affect his or her employment
prospects (at paragraph 11).
[14]
Much was made in the arbitration hearing about a non-disclosure
agreement signed by the employee
on his departure from Cargo
Carriers. There is no dispute about the existence of the agreement;
the employee claimed (and the applicant
denied) that he had disclosed
the agreement at all three stages of the interview process. The
employee’s evidence in this
regard was found to be unreliable,
and the applicant’s version (that there had been no disclosure)
upheld. While there
is no basis to interfere with the
arbitrator’s credibility finding against the employee, I agree
with Mr. Malan, who appeared
for the applicant, that the issue of the
non-disclosure agreement is a red herring. What matters for present
purposes are the factual
circumstances that led to the signature of
the agreement, not the agreement itself or its contents, which in any
event provide
for little more than the notice and other payments to
which the employee was in any event entitled.
[15]
Had the arbitrator applied the principle established by
Galesitoe
,
she would have appreciated that given the seniority of the position
for which the applicant had applied, and given the nature
of the
circumstances surrounding the employee’s termination of
employment with Cargo Carriers, notwithstanding the fact that
it was
effected by mutual consent, the employee ought to have made full and
proper disclosure of those facts. Objectively considered,
a failure
to disclose matters that included allegations of bribery, corruption,
intervention by the military, the president, and
litigation against
his former employer is material – any reasonable employer would
wish to investigate these facts before
concluding a recruitment
process. This is particularly so when the prospective employer (as
the applicant is), is a family owned
business with business in
Zimbabwe, and where the employee was appointed specifically as a
successor to the applicant’s CEO.
The materiality of the
non-disclosure was the subject of uncontested evidence by the
applicant’s witnesses that had the circumstances
of the
employee’s termination of employment with Cargo Carriers been
known, their decision to appoint the employee might
well have been
different.
[16]
In summary: the arbitrator failed to ask the right question –
the enquiry before her was
whether in all the circumstances the
employee was obliged to disclose the facts surrounding the mutually
agreed termination of
his employment with Cargo Carriers. The
arbitrator’s award thus stands to be set aside on the basis
that it is incorrect.
Even if this is not a sufficient ground for
this court to interfere, the outcome of the arbitration proceedings
(as represented
by the arbitrator’s decision) fails to meet the
reasonableness threshold, and the award stands to be set aside on
that basis.
The facts surrounding the employee’s termination of
employment by Cargo Carriers are patently material, and their
disclosure
was required. The applicant’s failure to make
disclosure constituted an act of misconduct sufficiently serious to
warrant
his dismissal.
[17]
Given my conclusion in relation to the charge of non-disclosure of
material information, it is
not necessary for me to consider the
applicant’s remaining grounds for review, or the arbitrator’s
findings in relation
to the balance of the charges of misconduct
brought against the employee.
[18]
There is no merit in remitting the matter to the CCMA for rehearing.
The disciplinary hearing
was conducted over some 6 days; the
arbitration hearing (a rehash of the disciplinary hearing) was
conducted over the same period.
The costs of the various proceedings
must have outstripped the value of the award, and the interests of
finality are now paramount.
I intend therefore to substitute the
arbitrator’s’ decision for one that to the effect that
the employee’s dismissal
was substantively and procedurally
fair.
[19]
Finally, in relation to costs, in
Long v South African Breweries
2019 (5) BCLR 609
(CC), the Constitutional Court affirmed the
approach to the exercise of a discretion in terms of s 162 and awards
of costs in this
court:
[27]
It is well accepted that in labour matters, the general principle
that costs follow the result
does not apply…This principle is
based on section 162 of the LRA, which reads:
(1) The Labour Court may
make an order for the payment of costs, according to the requirements
of the law and fairness.
(2) When deciding whether
or not to order the payment of costs, the Labour Court may take into
account—
(a) whether the matter
referred to the Court ought to have been referred to arbitration in
terms of this Act and, if so, the extra
costs incurred in referring
the matter to the Court; and
(b) the conduct of the
parties—
(i) in proceeding
with or defending the matter before the Court; and
(ii) during the
proceedings before the Court.”
[28]
The relationship between the general principle of costs and section
162 was considered and settled by this Court in
Zungu
:
“
In this matter,
there is nothing on the record indicating why the Labour Court and
Labour Appeal Court awarded costs against the
applicant.
Neither court gave reasons for doing so. It seems that both
courts simply followed the rule that costs follow
the result.
This is not correct…”
[20]
This court is ordinarily reluctant to make orders for costs against
individual employees, for whom the prospect
of an adverse costs order
may serve to inhibit the exercise of what they perceive as their
rights. This is not an immutable rule.
In the present instance, the
employee is clearly not without means, but the length of the record
is likely to have the consequence
of a significant sum being taxed
and allowed by the taxing master. On the other hand, the applicant
has been obliged to incur costs
in filing and pursuing the review
application, and it has succeeded in having the award reviewed and
set aside. It seems to me
that in the present circumstances, the
interests of the law and fairness require that the employee pay at
least a portion of the
applicant’s costs. In my view, a sum
equivalent to 20% of the applicant’s costs will best serve
those interests.
I make the following
order:
1.
The arbitration award issued by the third
respondent under case number GATW 8726/16 on 16 January 2016 is
reviewed and set aside.
2.
The arbitration award is substituted by the
following:
‘
The
applicant’s dismissal was substantively and procedurally fair’.
3.
The first respondent is to pay the costs of
the application, limited to 20% of the applicant’s taxed costs.
André van Niekerk
Judge
REPRESENTATION
For
the applicant: Mr. F Malan, ENS Africa Inc.
For the first respondent:
Adv. E van As, instructed by JC van der Walt attorneys