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IN THE LABOUR COURT OF SOUTH AFRICA
HELD AT JOHANNESBURG CASE NO J1796/99
In the matter between:
ALOYSIUS NDHLABOLE SHONGWE Applicant
and
FEDSURE MEDWAY (PTY) LTD Respondent
___________________________________________________________________________
JUDGMENT
____________________________________________________________________________
JAMMY AJ
1. There is a dispute on the papers before this Court regarding the name of the company by
which the Applicant was originally employed on or about 1 February 1995. The Applicant
states that it was known as Medway Healthcare Marketing North (Pty) Ltd. The
Respondent contends that the company was known as Medway Fund Managers North
(Pty) Ltd. That lack of consensus is immaterial to the fact that, following certain
corporate acquisitions and revisions, the company alleged by the Applicant to have been
his employer became known and traded as Fedsure Medway (Pty) Ltd, the cited
Respondent herein.
2. On or about 1 July 1997, some two years after the inception of his employment, the
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Applicant was appointed as the Respondent’s Marketing Director, a position which he
held until 30 December 1997. It is common cause that on or about 1 January 1998 the
Applicant concluded what was described as an Independent Contractor Agreement with
the holding company of the Respondent, Medway Holdings (Pty) Ltd, in which that
company was described as “the client” and the Applicant as “the contractor”. The
Agreement was expressed to be for a period of six months from 1 January 1998 but it is
not disputed that, when it expired on 30 June 1998, it was extended by mutual
agreement between the parties for a further period of six months.
3. The agreement, as is not uncommon in contracts of this nature, contained certain
carefully worded provisions which are relevant to the issues to be determined in this
dispute. The nature of the relationship between the contractor and the client was
emphasised as being “that of an independent contractor, in terms of which the
contractor will provide the client with the product of his services, being the
objectives as set out …..” . The contractor would be paid a retainer of R210 000 for
the initial six month period, divided into six equal instalments payable monthly. Those
payments, it was provided, would “not amount to remuneration, salary or
emoluments or any like payment arising out of employment, and shall amount
to a contractual amount due by the client to the contractor for services
supplied by the contractor to the client in terms of this agreement”. The client
would not be liable for any tax or other statutory obligations to the contractor who would
however “be entitled to make reasonable use of office space, stationery and
other office consumables, in order to effectively perform and obtain the
objectives ….. in terms of this agreement”. A concluding provision reads as follows:
objectives ….. in terms of this agreement”. A concluding provision reads as follows:
“Should the client invoke its right not to renew this contract, such action shall not be
construed as a retrenchment, redundancy or a dismissal”.
4. The Applicant contends, on his papers and in his evidence, that it was an express
condition precedent to the conclusion of that agreement that it would operate as “an
interim and/or alternative solution conditional upon the Respondent finding the
Applicant a suitable permanent position” , alternatively that it was expressly
warranted by the Respondent “that the agreement would lapse upon the
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Respondent finding a suitable and permanent position for the Applicant” . In
these circumstances, the Applicant contends, it was further warranted that he would have
continuing employment notwithstanding the lapse of the agreement.
5. In that context, the Applicant testified, he continued to receive what he described as his
“salary and all employment benefits” whilst the agreement was in force and to
perform the marketing functions expressly defined therein. It was his inability to
discharge the prescribed objectives within the initial six month period that necessitated
the extension of the contract for a further six months. During that period he carried out
sales, marketing and human resources functions for the whole company from its Pretoria
offices as directed to do so in the context of the objectives of the contract and
instructions from the Chairman of the company, Mr D W Jackson.
6. He was on leave, said the Applicant, during the last two weeks of December 1998 but
immediately prior to his departure, held discussions with Mr Jackson and Mr B Kelly, a
senior member of management, regarding his future with the company. The Respondent
by that time had been acquired by Fedsure Holdings (Pty) Ltd. Jackson felt that in the
context of his ability to communicate in African languages and because he would be
dealing, inter alia, with Trade Unions, he should remain with the company after the expiry
of the Independent Contractor Agreement and he was offered a proposed newly-created
position of Worksite Marketing Manager. It was agreed that the terms of a formal letter
of appointment would be drawn by Mr Kelly in conjunction with himself on his return from
leave. He was in the interim requested to “apply my mind” to proposals for a
marketing drive which he would present to management at that time.
7. When he went on leave, said the Applicant, he was clear regarding his future. The
7. When he went on leave, said the Applicant, he was clear regarding his future. The
Independent Contract would terminate on its expiry date, 31 December 1998, and his
position would then be developed as discussed.
8. It is unnecessary in my view for me to traverse in detail the Applicant’s evidence as to
what transpired on his return from leave. He had received a telefax whilst on holiday to
the effect that he was to attend a meeting in Cape Town on Monday 11 January 1999. On
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the flight there from Johannesburg he was informed by Mr Kelly that Mr Jackson had been
placed under pressure by Fedsure regarding the Respondent’s performance and the
necessity radically to reduce its operating costs. Whilst still on holiday he had received
by telefax an action plan to be discussed at the Cape Town meeting. Nowhere in that
plan did his own name appear as a participant. He assumed that this was because he
was still on leave but his functions and duties as the newly designated “Worksite
Marketing Manager” were defined. He had been furnished with an agenda for the
Cape Town meeting which was scheduled to commence at 10:30 that day but which was
in fact delayed until approximately 12:00 whilst Mr Jackson met with Mr Kelly and other
management. When Mr Jackson and Mr Kelly emerged at approximately 12:00, Mr
Jackson emphasised the necessity to reduce costs and indicated that he had expected
that reports and proposals would have been received from the Applicant and other
Regional Managers. In the light of the cost constraints and lack of progress in that
regard, they were informed that “their positions were being made redundant
immediately”. Mr Jackson then left and discussions continued with Mr Kelly who
advised him to apply for a vacant position at Fedsure in Johannesburg which would
however carry a salary of approximately one half of his current earnings, which was
unacceptable. A further meeting which Mr Kelly suggested should be held between him
and Mr Jackson was however declined by Mr Jackson who however, through Kelly,
conveyed to him an offer to pay him three months salary as a termination package. He
declined, said the Applicant, to accept this.
9. He was then instructed by Mr Kelly to fly back to Johannesburg and to shut down his
office. He left the following afternoon in order to do so. There had been no further
office. He left the following afternoon in order to do so. There had been no further
discussions and attempts by him to reach either Mr Jackson or Mr Kelly for that purpose
before he left were unsuccessful.
10. He learned through a subordinate that the Respondent then commenced to implement a
retrenchment programme and that staff had been circulated to that effect. He himself
however had by that time left the premises and had consulted his legal advisers
regarding his position. A letter was addressed to the Respondent on his behalf by
Advocate O J La Grange, (representing him in this hearing) recording the purported
termination of his employment and his perception that the trust relationship between him
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and the company had broken down. A without prejudice proposal for settlement was
incorporated.
11. What the Applicant perceived as a significant reply was then addressed to him by Mr Kelly
on 22 January 1999. Reference was made to Mr La Grange’s letter, with the
Respondent’s right reserved to respond thereto at a later stage. What Mr Kelly was doing
however, the letter expressly stated, was “addressing this letter to you as an
employee of the company.” The letter continued thus -
“Your representative makes the point that you consider that the trust relationship between
you and the company has broken down irretrievably. Whilst we do not agree with you, we
obviously cannot force you to continue with an employment relationship where you
contend that there is no basis for such a relationship.
Accordingly this letter constitutes notice to you of the termination of your contract of
employment”.
12. The letter called upon him to return certain company property and then recorded that he
would be “paid the equivalent of your February remuneration in lieu of notice as
well as all other amounts due to you in terms of your contract. We intend to
take advice as to whether you are entitled to severance pay in the
circumstances in which your employment has terminated and will revert to you
in this regard early next week. In the event that your are, we intend to consult
fully with you as contemplated in Section 189 of the Labour Relations Act 1995
read with the policies of the company in this regard”.
13. He was subsequently paid an amount, said the Applicant, supposedly in respect of his
retrenchment and based on one year’s service. There were no further meetings,
consultations or discussions in that regard and the letter advising him of the “separation
package”, expressly recorded that -
…… no suitable position has been found for you in the new company structure. It is with
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regret that your services have been terminated due to the restructuring process and
therefore please understand that it is a nofault separation” .
14. It was in that context, the Applicant concluded, that the legal proceedings culminating in the
hearing before this Court were launched by him and it is appropriate that the relief which he
seeks be here recorded –
“1 In the premises aforesaid the Applicant’s services were instantly terminated on 11
January 1999 on an arbitrary ground; alternatively;
2 For operational reasons unbeknown to the Applicant”.
The Respondent’s alleged failure, neglect and/or refusal to follow a fair and proper procedure as
required by Section 189 of the Labour Relations Act 1995 is then pleaded and the Applicant seeks
compensation “equivalent to twentyfour months remuneration calculated at the Applicant’s
rate of remuneration on the date of dismissal on 11 January 1999”.
15. No material disputes bearing upon the factual background described by the Applicant in
his testimony, emerged in the evidence given by the only witness called by the
Respondent, Mr B N Kelly. The Respondent’s financial position was steadily deteriorating
and it was obvious that a radical restructuring was necessary.
16. The Applicant was a valuable employee but it was necessary, said Mr Kelly, “to focus
him”. It was accordingly determined that he should be retained thenceforth as an
independent contractor and this proposal, which was put to him towards the end of 1997,
met with his approval. Whilst the Applicant had, to that stage, been employed by Fedsure
Medway (Pty) Ltd, the Independent Contract, in terms agreed upon, was prepared and
concluded between him and the Respondent’s holding company Medway Holdings (Pty)
Ltd.
17. When, as the expiry date of the first six month period of the contract approached in June
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1998, it was apparent that its objectives had not yet been achieved by the Applicant, it
was determined that the contract should be renewed and, writing under the letterhead of
Medway Holdings (Pty) Ltd in his capacity as Managing Director, he addressed a letter to
the Applicant, said Mr Kelly, in the following terms:
“I refer to our agreement entered into and signed on 2 February 1998.
In terms of paragraph 7.2 of the said agreement, I wish to confirm that we have consulted
with you and both parties have agreed to extend the contract for a further six month period
commencing 1 July 1998 – 31 December 1998 under the same terms and conditions.
Kindly confirm, in writing, if the conditions are acceptable to you”.
The Applicant signed acceptance of that letter on 9 June 1998.
18. Shortly before the Applicant’s departure on leave in December, said Mr Kelly, he and
Mr Jackson met with him and the lack of progress by the Respondent’s Regional Managers
in generating new business was discussed. It was decided that, once the extended period
of the Independent Contractor Agreement expired at the end of December, the Regional
Managers, of whom Mr Shongwe had been one prior to the conclusion of that contract,
would be repositioned, and would be asked, in the interim, and in anticipation of that
restructuring, to submit to a meeting in Cape Town at the end of the second week in
January business plans and feasibility studies regarding the future development of the
company. The position which would be offered to the Applicant, it was suggested, would
be the newly constituted position of Worksite Marketing Manager. At that stage in
December however this was merely a proposal and no formal offer of employment in that
regard was either made or accepted. Mr Shongwe’s evidence that he had sent to him
whilst he was on holiday a congratulatory e-mail message to the contrary, was not true
and it was significant, Mr Kelly suggested, that the Applicant had been unable to produce
and it was significant, Mr Kelly suggested, that the Applicant had been unable to produce
that message in evidence.
19. Prior to the scheduled meeting in Cape Town on 11 January, said Mr Kelly, Mr Jackson had
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contacted him and informed him of the pressure which had been brought to bear upon
him by Fedsure. Management was top heavy and it was necessary to downsize the
company. The business plans submitted by the Regional Managers, were wholly
unsatisfactory. No plan, feasibility study or report in any form had been presented by the
Applicant. It was apparent that the position of Regional Managers could not be sustained
and that their retrenchment was inevitable.
20. He was concerned, Mr Kelly testified, at the “unprofessional way in which this was
being done” but could make no progress with Mr Jackson in that context. He met on the
evening of 11 January with the Applicant and raised the possibility of a further three to six
month Independent Contract. The Applicant was not however interested and he then
conveyed to him Mr Jackson’s offer of three month’s salary.
21. He considered that the Respondent was now in a serious human resources situation and
that proper procedures should be implemented immediately. Terms of settlement were
arranged with the other Regional Mangers but the Applicant sought legal advice. His
definition of the Applicant as an “employee” in his final letter of termination on 22
January 1999 was clearly an error. Letters in similar terms had been addressed to all four
managers and he had simply not addressed his mind to Mr Shongwe’s different status.
The fact of the matter was that following the expiry of the Independent Contractor
Agreement at the end of December 1998, Mr Shongwe had at no time been formally re-
employed, either in the proposed position of Worksite Marketing Manager or otherwise.
22. Cross-examined by Mr La Grange, Mr Kelly conceded that in the context of the duties
defined for Mr Shongwe in the action plan prepared for discussion on 11 January 1999, he
would have assisted in the retrenchment programme to be implemented by the
would have assisted in the retrenchment programme to be implemented by the
Respondent. He would however, Mr Kelly attempted to explain, do so as an independent
contractor. The Respondent’s entire human resources function would be outsourced.
23. It was not true, said Mr Kelly, that the Independent Contractor Agreement had been
devised as a means of retaining the Applicant’s services in a retrenchment environment
and justifying his remuneration and other benefits. It was not, as the Applicant
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suggested, a means of disguising this cost to the Respondent by elevating him to another
status. There had been a blurring of the Applicant’s position when the contract expired
on 31 December 1998 with that of an employee but this was a bad management process
and incorrect terminology had been used in the drafting of letters which he, Mr Kelly, had
signed but which had been prepared by other persons in the human resources division
who were not aware of the specific factual details. The submission that what occurred at
that time was the Applicant’s employment from the beginning of 1999 in a new position –
Worksite Marketing Manager in accordance with the action plan, was not correct. Had the
relationship continued, it would have done so on the basis of a new Independent Contract
in that context.
ANALYSIS AND CONCLUSION
24. It has, in my opinion, been necessary for me to review to the extent which I have done so,
the evidence adduced in this matter, in order to illustrate what emerges as a pattern of
confusion and contradiction on the part of both parties. The inference which it seems to
me that I am asked by the Applicant to draw from the undisputed fact that an
Independent Contractor Agreement was concluded by him with the Respondent’s holding
company, is that this was not, in reality, what it was intended to be. It was in essence
simply a vehicle to justify the continued cost of retaining his key services in the
Respondent’s situation of financial constraint which was already necessitating staff
retrenchments. There was never an intention on the part of either party, he in effect
contends, that his employment relationship with the company should end. It was in that
context that the Worksite Marketing Manager proposal was formulated prior to the expiry
of the contract.
25. What the Applicant has failed to do however in my view, is to explain why, if the retention
of his services was so important to the Respondent, he was not simply retained in its
employ at the end of 1997. The cost implications to the Respondent would have been the
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same and the retention of his services in the retrenchment context, could presumably
have been justified on the basis of his particular skills and experience. In fact, the
Applicant alleges in his statement of case, this is precisely what occurred in or about July
1998 and while the purported contract still subsisted at that time he says, he “accepted
the position of Regional Manager, Gauteng …. and became a permanent
employee of the Respondent as defined in the Labour Relations Act No. 66 of
1995”.
26. This allegation is not surprisingly denied by the Respondent by which, however, this
denial is strangely pleaded. The services rendered by the Applicant until the end of
December 1998, it contends, were performed in terms of the agreement. This contention
however is immediately followed in the pleadings by a remarkable and incompatible
submission -
“… alternatively, Applicant was employed on a temporary basis which employment would
terminate as soon as the contemplated restructuring of the Respondent which would result
in the position of Regional Manager falling way, took place”.
27. What then appears to occur is that, at the Cape Town meeting on 11 January 1999, the
Applicant is informed that no employment is to be offered to him. His own contrary
perception, again as pleaded by him, is that on that day his employment was arbitrarily
and summarily terminated. This confusion is then further exacerbated by the
Respondent’s letter to him of 22 January 1999 purporting to terminate his services by
way of retrenchment – the attempted explanation for which by Mr Kelly being to my mind
not entirely satisfactory.
28. Whatever remains as an absolute factor in this saga however, is the uncontested
existence of the Independent Contractor’s Agreement and in the circumstances, this
Court must of necessity seek to determine this matter by reference to the substance and
wording of the contract itself.
wording of the contract itself.
29. I have already made reference to specific provisions therein which, in their wording, are
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clear and unambiguous. It is a contract evidencing in every material respect, what it
purports to be – one of locatio conductio operis. The fundamental rule relating to parol
evidence precludes, in the circumstances which I have outlined, its interpretation on any
other basis. That principle was emphatically enunciated in the seminal case of
Union Government v Vianini FerroConcrete Pipes (Pty) Ltd 1941 AD 43 at 47 where
Watermeyer J A said this
“Now this Court has accepted the rule that when a contract has been reduced to writing,
the writing is, in general, regarded as the exclusive memorial of the transaction and in a
suit between the parties no evidence to prove its terms may be given save the document or
secondary evidence of its contents, nor may the contents of such document be
contradicted, altered, added to or varied by parol evidence”.
30. Interpreted on that basis, the effect of the contract was, from its inception, to alter the
status of the Applicant from one of an employee to that of an independent contractor.
That remained the position at least until 31 December 1998 when, following an equally
plain, unambiguous and consensual extension of its initial period of operation, the
contract expired.
31. Although, for unexplained reasons Jackson himself did not testify in these proceedings, I
have concluded on the probabilities of the matter, gleaned from all the prevailing
circumstances, not the least the undisputed pressure from Fedsure under which he was
labouring at the time, that any re-employment of the Applicant was subject to his
establishing, in the form of a business plan, report or other proposals, that he was
indispensable and that in the end result, he did not do so. Notwithstanding the confused
correspondence emanating from or on behalf of Mr Kelly thereafter, I am prepared to
correspondence emanating from or on behalf of Mr Kelly thereafter, I am prepared to
accept that this was made clear to him by Mr Jackson on 11 January and again by Mr Kelly
that evening when the proposal was made to him that he should consider a further
extension of the Independent Contractor Agreement. The conclusion which I have
reached therefore from the convoluted evidence before the Court, is that at the time that
he alleges that he was dismissed, the Applicant was not employed by the Respondent
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and is not entitled to compensation or any other form of relief.
32. No submissions have been made to me as why an award of costs in this matter should
not conventionally follow the result and the order which I accordingly make is the
following:
The application is dismissed with costs.
_______________________________
B M JAMMY
Acting Judge of the Labour Court
23May 2001
Representation:
For the Applicant: Adv O J La Grange
For the Respondent: Adv S C KirkCohen instructed by Murphy Wallace Slabbert Inc.
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