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[2019] ZASCA 6
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Theron v Premier of The Western Cape Province and Another (1310/2017) [2019] ZASCA 6; (2019) 40 ILJ 1980 (SCA) (8 March 2019)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Not Reportable
Case No: 1310/2017
In
the matter between:
ERNEST
THERON
APPELLANT
and
PREMIER OF THE WESTERN
CAPE
PROVINCE
FIRST RESPONDENT
DIRECTOR-GENERAL
DEPARTMENT
OF THE PREMIER
SECOND RESPONDENT
Neutral citation:
Theron
v Premier, Western Cape
(1310/2017)
[2019] ZASCA 6
(8 March 2019)
Coram:
Lewis ADP and Cachalia, Saldulker,
Mbha and Dambuza JJA
Heard:
27 February 2019
Delivered:
8 March 2019
Summary:
Interpretation of an employment
contract: contract for fixed duration, but with right to terminate
for employer and employee on
one month’s notice; where employer
ceased to exist, contract terminable by body that assumed liability,
on one month’s
notice.
ORDER
On appeal from:
Western
Cape Division of the High Court, Cape Town (Gamble J sitting as court
of first instance):
The
appeal is dismissed with costs.
JUDGMENT
Lewis ADP (Cachalia, Saldulker, Mbha and
Dambuza JJA concurring)
[1]
The appellant, Mr Ernest Theron, was
employed as the Chief Executive Officer by the Western Cape
Provincial Development Council
(the Council) on a fixed term
employment contract, effective from 1 July 2009, and due to terminate
three years later on 30 June
2012. The Council was established by a
provincial statute, the Provincial Development Council
Act 5
of 1996. That statute was
repealed on 5 December 2011, and the Council ceased to
exist
on that date: it was disestablished. Theron’s contract of
employment accordingly terminated on the same date.
[2]
The Provincial Development Council
Repeal Act 5 of 2011 made provision for transitional arrangements
after disestablishment. Section
4 read:
‘For
the purposes of disestablishment of the Provincial Development
Council—
(a)
all movable assets and monies
held by the Provincial Development Council as at its disestablishment
are deemed to be held by the
Department of the Premier; and
(b)
all outstanding liabilities
of the Provincial Development Council as at date of disestablishment
must, subject to the Public Finance
Management Act, 1999 (Act 1 of
1999), be settled by the Department of the Premier.’
[3]
Theron claimed payment of the salary
that he would have earned had the Council not been disestablished,
until 30 June 2012, as well
as a performance bonus and leave pay,
from the Premier of the Western Cape, and the Director-General of the
Premier’s Department,
the respondents. I shall refer to them
for convenience as ‘the Premier’ and ‘the
Department’. The Premier
accepted that the various amounts
claimed were payable by her, save for the salary that Theron would
have earned in 2012. She maintained
that Theron was entitled to no
more than one month’s salary, as the contract could have been
terminated by either party on
one month’s notice. The
Department in fact paid one month’s salary to Theron in
December 2011.
[4]
Theron applied for relief to the
Commission for Conciliation Mediation and Arbitration (the CCMA)
early in 2012. The CCMA found
that it had no jurisdiction as the
Premier was not the employer. Her department had simply been burdened
with the Council’s
liabilities and Theron had not been
dismissed. Theron then instituted action in November 2012 for payment
of what he alleged was
due to him in that year.
[5]
Gamble J in the Western Cape Division of
the High Court, Cape Town, found that Theron was not entitled to
claim the additional salary
over six months, and dismissed the claim
but gave leave to appeal to this court.
[6]
At a pretrial conference held on 20 June
2017, the parties’ legal representatives agreed on a number of
common cause facts,
and framed the legal issues in dispute as
follows: whether the termination of Theron’s fixed term
employment contract could
be considered a ‘premature’
termination; and whether Theron ‘was entitled to be compensated
for damages in the
amount of the full unexpired duration of his fixed
term employment contract’ or whether he was entitled ‘to
only one
month’s notice period’ arising out of the
termination of the contract.
[7]
The agreed facts set out the terms of
the contract, including Theron’s gross annual remuneration;
that he would be entitled
to a service benefit in the form of a
performance bonus; that his salary would be adjusted annually in
accordance with a general
adjustment for Council employees; that he
was entitled to annual vacation leave of 24 days; and that the
Council and Theron acknowledged
that the contract would terminate
automatically on 30 June 2012.
[8]
Significantly, however, the contract
made provision for its termination on one month’s notice by
either party (the Council
could accept a shorter notice period), and
also provided that the Council could terminate the contract summarily
in the event of
Theron breaching it. The contract provided that ‘the
agreement may otherwise only be terminated for reasons relating to
misconduct,
operational requirements or incapacity’.
[9]
It was common cause that Theron was in
no way guilty of a breach of contract and that the Council did not
summarily terminate the
employment contract. But the Council itself
ceased to exist on 5 December 2011 when the repealing Act, signed by
the Premier,
was gazetted.
[10]
The Director General: Provincial
Strategic Management for the Western Cape, Mr B Gerber, wrote to
Theron on 8 December 2011, advising
that all staff contracts had been
terminated as a result of the disestablishment of the Council. Gerber
advised that Mr C Stuurman
had been appointed to represent the
administration, and that he would, with the assistance of Theron,
calculate salaries to be
paid, as well as leave and severance
payments.
[11]
The Department paid Theron the sum of
R90 724 on 20 December 2011, and then the sum of R235 236 on 15 March
2012. (These sums have
been rounded off.) These amounts covered a
bonus, leave pay, severance and one month’s notice. There is no
dispute as to
the amounts paid, save in respect of the notice period.
Theron maintains that he was entitled to salary until 30 June 2012,
and
calculated that as R352 728. Again the quantum is not in issue.
The only question is whether Theron is entitled to be paid anything
further by the Department. That depends on an interpretation of the
employment contract.
[12]
Clause 5 of the contract, headed
‘Duration’, read (the formatting is not reproduced here):
‘5.1
Irrespective of the date or dates of signing of this Agreement by the
parties, it is agreed and recorded that the Agreement
shall be deemed
to be of force and effect from 1 July 2009. A probationary period of
twelve months from the commencement date applies,
with performance
evaluation taking place after 4 and 8 months respectively in the
first year of probation.
5.1
The Employee hereby expressly acknowledges and accepts that the
Agreement will terminate automatically upon 30 June 2012.’
[13]
Clause 9, on which this appeal turns,
headed ‘Termination’ read (again the formatting is not
reproduced):
‘9.1
Notwithstanding anything to the contrary in clause 5.1 herein
contained,
either party
to this Agreement
may terminate
it
at any time during the currency thereof
on giving one month’s
notice
in writing to the other party. The Employer may, however,
in its discretion accept a shorter period of notice.
9.2
The Employer may terminate this Agreement
summarily
or after
notice of less than one month, as it may deem expedient,
in the
event of a breach
of the terms of this Agreement by the Employee.
The Agreement may
otherwise only
be terminated for reasons
relating to misconduct, operational requirements or incapacity.’
(My emphasis.)
[14]
Theron argues that clause 9.2 qualifies
clause 9.1: the employer need not give notice of termination in the
event of breach by the
employee. It may give the one month’s
notice to the employee only for reasons relating to misconduct,
operational requirements
or incapacity. The employer, on this
argument, is bound by the agreed duration in clause 5. The employee,
on the other hand, may
give a month’s notice and terminate the
contract at any time before it terminates by the effluxion of time.
This construction
is argued to be necessary to give meaning to the
second sentence of clause 9.2 – ‘the agreement
may
otherwise only
be terminated for
reasons’ not amounting to breach.
[15]
On this contention, the Department was
bound to perform the obligations of the former Council under the
agreement until 30 June
2012, and owed Theron salary for the 2012
period. This interpretation, he argued, was consonant with the common
law on damages
suffered by an employee. In
Fedlife
Assurance Ltd v Wolfaardt
2002 (1)
SA 49
(SCA) this court confirmed that the common law continued to
apply to employment contracts, and had not been abolished by the
provisions
of the
Labour Relations Act 66 of 1995
. The common law was
supplemented by that Act. Nugent AJA said (para 16):
‘The
continued existence of the common-law right of employees to be fully
compensated for the damages they can prove they
have suffered by
reason of an unlawful premature termination by their employers of
fixed term contracts of employment is not in
conflict with the
spirit, purport and object of the Bill of Rights’.
[16]
The right of an employee to damages has
been recognized in several cases in the Labour Court and the Labour
Appeal Court, referred
to in the judgment of Gamble J in the trial
court in this matter. And usually the quantum of damages would be the
salary that the
employee would have earned had there been no unlawful
termination:
Buthelezi v Municipal
Demarcation Board
(2004) 25 ILJ 2317
(LAC) para 9. There the Labour Appeal Court said:
‘There
is no doubt that at common law a party to a fixed-term contract has
no right to terminate such contract in the absence
of a repudiation
or a material breach of the contract by the other party. In other
words, there is no right to terminate such contract
even on notice
unless its terms provide for such termination. The rationale for this
is clear. When parties agree that their contract
will endure for a
certain period as opposed to a contract for an indefinite period,
they bind themselves to honour and perform
their respective
obligations in terms of that contract for the duration of the
contract and they plan, as they are entitled to
in the light of their
agreement, their lives [on that basis].’
[17]
Theron argues that the termination of
his contract of employment was unlawful in the sense that it was
contrary to the terms of
the contract and he is accordingly entitled
to damages. The Department was not entitled to give him notice of
termination and in
any event did not do so.
[18]
The Premier argues, on the other hand,
that this interpretation negates the first subclause in clause 9.
This gives both parties,
employer and employee, the right to
terminate on one month’s notice.
Subclause 2
does not qualify subclause
1. If anything, the second sentence reading ‘The
Agreement
may otherwise only be terminated for reasons relating to
misconduct . . .’ demonstrates that there are three instances
where
the contract may be terminated: on the giving of notice under
subclause 1; summarily on breach by the employee under subclause 2;
and thirdly, where there is some misconduct that must, presumably, be
investigated, or there are operational reasons that must
likewise be
followed up, or incapacity which must also be considered. In the
third instance, it is not contemplated
that notice
is required. In effect, the Premier submits that this sentence
is the third point of clause 9.
[19]
It is as well at this stage to refer to
the principles dealing with the interpretation of contracts. It is
now clear that interpretation
is a unitary exercise, which starts
with the text to be interpreted, and considers it within the contract
as a whole, and in context.
As put most pithily by Unterhalter AJ in
Betterbridge (Pty) Ltd v Masilo &
others NNO
2015 (2) SA 396
(GNP)
para 8 (referring to the decision of this court in
Natal
Joint Municipal Pension Fund v Endumeni Municipality
[2012]
ZASCA 13
;
2012 (4) SA 593
(SCA)) ‘the interpretation of
language, including statutory language, is a unitary endeavor
requiring the consideration of
text, context and purpose’.
[20]
Most recently, this court in
The
City of Tshwane Metropolitan Municipality v Blair Atholl Homeowners
Association
[2018] ZASCA 176
(
Tshwane
)
para 59, referred to the English approach set out by Lord Hodge in
Wood v Capita Insurance Ltd
[2017]
UKSC 24
para 10:
‘The
court’s task is to ascertain the objective meaning of the
language which the parties have chosen to express their
agreement. It
has long been accepted that this is not a literalist exercise focused
solely on a parsing of the wording of the particular
clause but that
the court must consider the contract as a whole and, depending on the
nature, formality and quality of drafting
of the contract, give more
or less weight to elements of the wider context in reaching its view
as to that objective meaning. In
Prenn v Simmonds
[1971] 1 WLR
1381
(1383H- 1385D) and in
Reardon Smith Line Ltd v Yngvar
Hansen-Tangen
[1976] 1 WLR 989
(997), Lord Wilberforce affirmed
the potential relevance to the task of interpreting the parties’
contract of the factual
background known to the parties at or before
the date of the contract, excluding evidence of the prior
negotiations.’
[21]
Navsa ADP continued, in
Tshwane
,
(para 61):
‘It is fair to say that this court has
navigated away from a narrow peering at words in an agreement and has
repeatedly stated
that words in a document must not be considered in
isolation. It has repeatedly been emphatic that a restrictive
consideration
of words without regard to context has to be avoided.
It is also correct that the distinction between context and
background circumstances
has been jettisoned. This court, in
Natal
Joint Municipal Pension Fund v Endumeni Municipality
. . . stated
that the purpose of the provision being interpreted is also
encompassed in the enquiry. The words have to be interpreted
sensibly
and not have an un-business-like result. These factors have to be
considered holistically, akin to the unitary approach.’
(Footnotes omitted.)
[22]
The contract between Theron and the
Council must thus be considered as a whole, and clauses 5 and 9 read
together. The contract
was of limited duration (three years) but was
terminable in terms of clause 9. Subclauses 1 and 2 of clause 9
cannot be examined
without reference to one another. We have to ask
what purpose they were designed to achieve and look for a sensible
meaning to
be attributed to all the parts.
[23]
If Theron’s construction were to
be accepted, that subclause 2 qualifies subclause 1, then little
purpose would have been
served by the latter. Only the employee would
have had the right to terminate on one month’s notice. The
employer would not
have had the right to terminate on notice. It
could terminate only on breach by the employee, with or without
notice. And in the
event that there was misconduct or another
incident mentioned in the second sentence. But not otherwise.
[24]
Could that have been intended by either
Theron or the Council? Why would the Council have intended that
Theron would have a right
to terminate on notice but that it would
not? It is highly unlikely that that would have been the case. And
the words indicating
that ‘either party . . . may terminate . .
. on giving one month’s notice’ would be entirely
superfluous on this
construction. So too would the provision in
clause 9.2, that in the event of breach by the employee, no notice,
or less than a
month’s notice, could be given to the employee,
be superfluous.
[25]
On the other hand, if we do not accept
the Theron construction, what could the second sentence of clause 9.2
possibly mean? It is
hardly a model of clarity. It does not state
which party can terminate in the event of misconduct (one assumes it
was the employer)
and whether it would be on notice, or pending an
investigation of circumstances. However, I consider the Premier’s
submission
to be more coherent and plausible: termination for reasons
relating to misconduct and other circumstances was included to ensure
that where further investigations needed to be done immediate notice
did not have to be given.
[26]
Accordingly, the Premier was entitled to
terminate on notice to Theron. It is true that he was not given
formal notification in
his personal capacity. But he was advised, as
CEO of the Council, by the Premier as early as September 2010, that
the Provincial
Cabinet proposed to disestablish the Council, and that
members had been informed of this earlier in the year. The Premier
stated
that the contracts of employment of all employees of the
Council would terminate in March 2011, after due process had been
followed.
In the end, it was only disestablished in December 2011,
but Theron and other employees had had ample notice before then that
their
contracts would terminate.
[27]
Gamble J in the trial court held that
where there is no breach of the employment contract, but a lawful
termination, the measure
of an employee’s claim is limited to
the loss of salary for the notice period. Theron was paid that
amount. Accordingly he
dismissed the action. I consider that the
finding was correct.
[28]
The appeal is dismissed with costs.
C H Lewis
Acting Deputy President
APPEARANCES
For
Appellant:
A C Oosthuizen SC (with him S Mahomed)
Instructed by:
M Z Solomon Attorneys, Grassy Park
Honey Attorneys, Bloemfontein
For
Respondents: E A de Villiers-Jansen
Instructed by:
State Attorney, Cape Town
State Attorney, Bloemfontein