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[2000] ZASCA 182
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Baudach v United Tobacco Company Ltd (126/98) [2000] ZASCA 182; [2000] 3 All SA 153 (A); 2000 (4) SA 436 (SCA); (2000) 21 ILJ 2241 (SCA) (30 May 2000)
REPORTABLE
Case Number : 126 / 98
IN
THE SUPREME COURT OF APPEAL
OF
SOUTH AFRICA
In
the matter between :
TREVOR BAUDACH
Appellant
and
UNITED TOBACCO COMPANY LTD
Respondent
Composition of the Court: Grosskopf, Olivier, Scott,
Streicher JJA and Melunsky AJA
Date of hearing: 22 May 2000
Date of delivery: 30 May 2000
S
U M M A R Y
Unfair
labour practice - employer misrepresenting to employee that his
position had become redundant - agreement to accept package
in full
and final settlement not binding.
J U D G M E N T
PJJ OLIVIER
[1]
This
is an appeal against the judgment of Froneman J in the Labour
Appeal Court (“the LAC”),
upholding an appeal by the present respondent, the United Tobacco
Company (“UTC”),
against a judgment by the Industrial
Court in favour of the appellant, Trevor Baudach. The appeal is
with leave of the court
a
quo
. It is
properly before us by virtue of item 22 (4) of Schedule 7 to the
Labour Relations Act 66 of 1995 (“the LRA of 1995"),
which
provides that any pending appeal from the decision of the LAC to this
Court in terms of ss 17 C and 64 of the previous Labour
Relations Act
28 of 1956 (“the LRA of 1956") must be dealt with as if
the last-mentioned Act had not been repealed.
[2]
Baudach
was employed by UTC for a period of 26 years, from 1969
until 1995. Immediately prior to his dismissal, which
gave rise to the present litigation, he held a senior position in UTC
as
the regional manager of Kwazulu Natal. On 23 November 1994 he
was summoned by letter from the head office of UCT in Johannesburg
to
attend a meeting there on 28 November 1994. He had no inkling of
the reason for the request. At the meeting he was informed
that his
services were no longer needed by UTC because, due to the
restructuring of its trade marketing department, his position,
as
regional manager had become redundant. He was offered a settlement
package and told that if he did not accept this package
the usual
retrenchment procedures would apply. It is common cause that the
said package would leave him in a much better financial
position than
would normal retrenchment.
[3]
On
the same day a UTC letter was handed to him, confirming the
“
consultation” on that day between himself
and Mr John Greenleese (the National Trade Marketing Manager), Mr P
Fourie (the
Human Resources Director) and Mr J Vos (the Divisional
Manager).
The relevant part of the letter reads as follows :
“
The Company, over the
past year has experienced a marked and dramatic decrease in its
performance due to depressed and decreasing
sales volumes. The
Company, from an economic point of view and out of necessity has been
forced as a result to restructure its
trade marketing department.
After much deliberation and consideration it is with regret that the
Company must advise that your
services have become incompatible with
the Company’s future needs in Trade Marketing.
The Company,
without prejudice to its rights and
in
full and final settlement of the termination of your services
is prepared to offer to yourself a retrenchment package of R292
943,95 being in respect of the following :
1 Three months notice pay
effective 1 January 1995;
2 Full annual bonus in respect
of 1994 and 1995;
3 All outstanding leave pay due
to yourself;
4 All employment benefits up and
until 31 March 1995.”
(My emphasis)
[4]
Baudach
requested time to consider the matter and returned to his
home in Durban. In December he received a further
letter from UTC dated 14 December 1994, confirming that
“
...
your position within the Company has become incompatible with the
Company’s future needs in Trade Marketing and that your
position within the said department has become
redundant
.
Pursuant to
the said consultations [
i.e.
those in November 1994], we hereby confirm that your contract of
employment will terminate on 31 December 1994. The Company in
full
and final settlement of the termination of your services, shall pay
yourself the following
redundancy
package : ...”
(My
emphasis)
Details of the package were then given.
[5]
At
the foot of the page there appears the following stipulation :
“
I, T.
Baudach, confirm receipt and acceptance of the redundancy package
offered to myself by United Tobacco Company Limited and
confirm that
the same is
in
full and final settlement of all claims arising out of the
termination of my employment
with United Tobacco Company Limited. I am signing this agreement on
a free and voluntary basis.”
(My
emphasis)
Baudach signed this note on 18 December 1994.
[6]
As
a result of further calculations and tax implications, it was agreed
that the second letter should be withdrawn and it was
replaced with one from UTC head office (signed by Fourie) dated 31
January
1995. It provided that Baudach’s employment would
terminate on 31 March 1995; set out amended package figures; and
requested
Baudach, “should the above arrangement be acceptable
to you”, to sign an acceptance provided for at the end of the
letter which reads :
“
I, Trevor Baudach hereby
confirm my acceptance of the above termination payments in full and
final settlement of monies owing to
me by United Tobacco.”
Baudach signed the acceptance on 7 February 1995 and
returned the letter, so countersigned, to UTC headquarters.
[7]
Baudach
left the employment of UTC on 31 March 1995 and the
termination payments as set out in the third letter were
paid to him. Notwithstanding these facts, Baudach brought an
application
in September 1995, in terms of s 45 (a) of the LRA of
1956, in the Industrial Court at Durban against UTC, alleging that
the termination
of his employment was both substantively and
procedurally unfair. He prayed for orders :
1 declaring his dismissal by UTC with effect from 31
March 1995 be an unfair labour practice;
2 that he be reinstated in his former position; and
3 that compensation in an amount to be determined by the
Industrial Court for the “loss of any benefits, damages and
sentimental
damages” be paid to him by UTC.
[8]
In
reply to the application UTC pleaded on the merits and also filed
a special plea to the effect that the matter had been
settled by the
acceptance of UTC’s offer when Baudach signed the
“full and final
settlement” stipulations as set out above.
[9]
At
a pre-trial conference Baudach’s legal representatives
delivered a reply to the special plea, averring that the
circumstances
under which the respondent signed the acceptance was
unfair “in particular because [UTC] misrepresented to the
applicant
that his post had become redundant when in truth it had
not.” The alleged misrepresentation was also relied on in
support
of Baudach’s claim that his dismissal was substantively
unfair.
[10]
At
the pre-trial conference a further important step was taken, when
Baudach made it clear that he no longer sought
reinstatement, but only compensation for his unfair dismissal. And
in the course
of his opening address, the legal representative of
Baudach indicated that it was not the latter’s intention to
claim the
setting aside of his acceptance of the benefits paid out to
him, but to set them off against the larger amount to which he was
entitled as compensation for his unfair dismissal.
[11]
The
trial proceeded before the Industrial Court, presided over by Dr
H Grobler assisted by two assessors, on the basis set
out above. Baudach
as well as Fourie testified, the latter on behalf of
UTC.
[12]
It
soon transpired that the cause of Baudach’s complaint was that
he
had accepted the termination of his
employment and the package offered him because he believed the
representations made by UTC that
his retrenchment was a
fait
accompli
as the
position held by him had become redundant, whereas he learned,
towards the end of February 1995 or early in March 1995,
that in fact
his job had not become redundant. A young woman, Mrs Zita Hanson,
had been appointed in his place as acting regional
manager in Kwazulu
Natal and she was later replaced by another young woman who was
appointed as regional manager. He obtained
the last-mentioned
information towards the middle of March 1995. His evidence was that
he was never informed that his position
(which was represented to him
as being redundant) would in fact continue to exist.
[13]
Baudach
also testified that he would have reached the pensionable
age with UTC a mere 28 months after the termination of
his services
and that, had an alternative position been offered to
him with UTC, he
would seriously have considered accepting it to
safeguard his pension.
Although UTC was a very big organisation, he was never
given the choice
of another position. Under these circumstances he
accepted the package
and signed the acceptance.
[14]
In
the course of Fourie’s evidence it transpired that the real
reason
for terminating Baudach’s employment was that UTC
had decided that
there was a need for change in the marketing division in
Kwazulu Natal.
They needed someone who was “far more aggressive,
dynamic, has more
leadership than he had, at that time. And it was
appropriate to change the
person in that position.” Fourie later admitted
that UTC was not dealing
here with a case of retrenchment or redundancy but with
Baudach’s
“
incompatibility” or “unsuitability”
and his “leadership style”; he was not
“
dynamic” and had a low “energy
level”. It was also stated by Fourie that
Baudach was in fact informed during the meeting in
Johannesburg,
mentioned above, that he was unsuitable for the position
he held. This
evidence is in conflict with that of Baudach and is
inconsistent with the
reasons advanced in the three UTC letters.
[15]
The
misrepresentation as to the reason for Baudach’s dismissal
apparent from the said letters - that Baudach’s
position had become redundant - was fully exposed when it was
admitted
by UTC in the pre-trial minutes that his position had never
become redundant and that it was filled by other persons after his
employment terminated.
[16]
The
Industrial Court found in favour of Baudach on the basis that
his services were terminated in pursuance of a purported
retrenchment and that he had been misled into believing that his
services
were being terminated on the basis that his position would
disappear in the course of a restructuring exercise.
It is also implicit in the judgment of the Industrial
Court that the misrepresentation was committed intentionally. It
was said
by the President:
“
In view of the fact that
there were no grounds on which to terminate [Baudach’s]
services, and because [UTC] had ostensibly
acted over hastily, it
would appear that it was decided to style his dismissal as a
retrenchment - which it clearly was not.”
This,
coupled with the lack of proper consultation, led the court to find
that Baudach’s dismissal was substantively and procedurally
unfair, and to grant him compensation in the amount of R276 625,00
with costs.
[17]
UTC
successfully appealed to the LAC. In the course of his
judgment Froneman J held that the factual findings of
the Industrial Court
were justified. But, he said, the Court had not dealt
in express terms with
the issues raised in the special plea; they had been
rejected by
implication, for reasons that are not apparent. The
learned judge then
stated that the first question that arises from the
special plea is whether
Baudach’s claim in the Industrial Court was not,
in essence, a claim for
damages based on misrepresentation, and, if so, whether
that court had
jurisdiction to entertain the claim.
[18]
The
learned judge then dealt with the argument of Baudach’s legal
representative that the misrepresentation in the present
case
constituted an unfair labour practice as envisaged by s 1 of the L R
A of 1956,
viz
any act or omission which has or may have the effect of unfairly
affecting any employee or prejudicing his employment opportunities
or work security. He also referred to the argument that the legal
effect of Baudach’s acceptance of the termination payments
must
be overridden by the equitable jurisdiction of the Industrial Court
and should therefore effectively be ignored.
[19]
Firstly
Froneman J relied on a dictum by Van den Heever JA in
National
Automobile and Allied Workers Union
(
now known
as
National Union of
Metal Workers of SA
)
v Borg-Warner SA (Pty) Ltd
(1994) 15 ILJ 509 (A) at 518 B - C, F - H). Van den Heever JA,
after saying that the termination of an employer-employee
relationship
did not terminate the relationship envisaged by the LRA
of 1956 merely because the relationship had ended in common law,
concluded
however by saying : “ ... when both parties so agree,
or when equity permits, the relationship does come to an end”.
These concluding words, in Froneman J’s opinion, applied to
the present case.
Froneman J then said that the question is whether the
consensual termination of the contractual relationship also amounted
to a
termination of the employment relationship itself. In the
present case, he said, the express terms of Baudach’s
acceptance
of the termination benefits admits of no reasonable
construction other than that his employment relationship would come
to an end;
that the payments were in respect of the termination of
the employment relationship; and that these payments constituted a
full
and final settlement of monies owing to him by UTC arising from
the termination of his employment relationship with UTC.
[20]
It
follows, so the learned judge reasoned, that when Baudach
instituted his claim in the Industrial Court, he was no
longer an employee
in terms of the LRA of 1956, unless he proved that his
acceptance of the
termination benefits was not binding. The learned
judge held that he
expressly chose to do exactly the opposite, namely to
abide by his
acceptance of these benefits. In so doing, the learned
judge said, he had
placed himself beyond the jurisdiction of the Industrial
Court’s unfair
labour practice jurisdiction. “He cannot,”
observed the learned judge,
“
have his cake and eat it.”
[21]
For
the reasons that follow I am in respectful disagreement with the
learned judge
a
quo.
From the very beginning of the litigation Baudach based
his claim on the concept of unfair labour practice. He relied this
on
two grounds, firstly the misrepresentation (discussed above), and,
secondly, the lack of consultation.
As regards the misrepresentation,
his case was, at least impliedly, that the misrepresentation had a
dual effect: it amounted
to an unfair labour practice and entitled
him to resile from the agreement of settlement (according to both
well-known common
law principles and principles of unfair labour
practice). In bringing the action for reinstatement alternatively
for compensation
and by tendering to have the amount already received
taken into consideration in calculating the
quantum
of the compensation, he at least impliedly resiled from or lawfully
rescinded the settlement agreement, whether by virtue of the
common
law or as an incidence of the unfair labour practice. In the light
of the finding of the Industrial Court that the misrepresentation
was
committed intentionally, he was entitled so to do, and his claim was
rightly upheld in the Industrial Court (see also for
analogous cases
Unilong Freight
Distributors (Pty) Ltd v Muller
[1997] ZASCA 87
;
1998 (1) SA 581
(SCA) especially at 591 I - 592 B, (a case of
duress);
Mediterranean
Woollen Mills v South African Clothing and Textile Workers’
Union
1998 (2)
SA 1099
(SCA) especially at 1103 D-J, (a case of misrepresentation)).
[22]
It
follows that the alleged settlement agreement could not validly be
raised by UTC as a defence. For the
purposes of the LRA of 1956 he was entitled to be treated as an
ex-employee and, by fiction
law, as if the labour relationship
between UTC and himself were still
in
esse
. The
Industrial Court had jurisdiction to deal with his claim, which was
for compensation by virtue of the LRA of 1956, and not
a common law
claim for damages, as the learned judge
a
quo
thought.
[23]
The
Industrial Court was correct in finding that UTC had committed
an unfair labour practice against
Baudach. The misrepresentation was clearly the cause that induced
Baudach to accept the settlement.
It was,
per
se
, an unfair
labour practice. Furthermore, there was no proper and honest
consultation with Baudach, explaining to him in what
respect his
services were unsatisfactory and affording him an opportunity to
counter the allegations. Nor was he given an opportunity
to improve
on his past performance; nor was he offered an alternative position
in the company. What in truth was an unfair dismissal
was clothed
as a retrenchment.
[24]
The
Industrial Court as trial court awarded Baudach a sum in
compensation after hearing all the evidence. The
amount claimed was not seriously contested, except for an amount of
R5 600,00,
which was deducted from the claim. In this Court no
convincing argument was advanced as to why the award should be
interfered
with.
[25]
Three
applications for condonation were presented to this Court, two
by the appellant and one by the respondent. The only
application that was contested was one by the appellant. His
attorneys
were late in lodging the Notice of Appeal in this Court, in
delivering the record of appeal and in providing security for costs.
It transpired that the appeal was timeously prepared and a notice of
appeal was forwarded to the correspondents of the appellant’s
attorneys in Bloemfontein. Before the notice could be lodged with
the Registrar of this Court, the appellant’s attorney
was
informed by various members of the staff of the Registrar of the new
LAC that the appeal had to be prosecuted in that Court
and not in
the Supreme Court of Appeal. All this occurred shortly after the LRA
of 1995 had come into effect. Apparently there
was confusion in the
office of the Registrar of the new LAC about the effect of that Act
and the transitional provisions. The
attorney erroneously followed
the advice given him by the said members of staff of the new LAC.
[26]
In
my view, the attorney’s explanation is
bona
fide
and
acceptable.
Having regard also to his strong case on the merits, the
appellant’s failure to comply with the prescribed time limits
should
be condoned. All three applications should therefore be
granted. As to the costs of the applications, the appellant ought
to pay the costs of the first-mentioned application, but on an
unopposed basis only. The opposition to it was not warranted.
In
the other two applications, each party should pay its own costs.
[27]
The
following order is made :
1 The appeal succeeds with costs.
2 The judgment and order of the court
a quo
are set aside and replaced with the following order :
“
1 The appeal is dismissed with costs,
and
2 The order made by the Industrial Court in
this matter is reinstated.”
3 The appellant’s application for condonation of
his failure to lodge his Notice of Appeal within the prescribed time
limits
and his failure to deliver the record of the appeal and to
provide security timeously is granted. The costs of the application
on an unopposed basis are to paid by the appellant.
4 The appellant’s application for condonation of
his failure to attach the order granting leave to appeal to the
Notice of
Appeal and of the incorrect citation of this Court in the
heading on the record of appeal is granted; each party to pay its own
costs.
5 The respondent’s application for condonation of
the late filing of its opposing affidavit in the application
mentioned in
par 3 hereof, is granted; each party to pay its own
costs.
P J J OLIVIER JA
CONCURRING
:
GROSSKOPF
JA
SCOTT
JA
STREICHER
JA
MELUNSKY
AJA