REPORTABLE
IN THE LABOUR COURT OF SOUTH AFRICA
HELD AT CAPE TOWN
CASE NO: C801/2001
In the matter between:
THE UNIVERSITY OF THE WESTERN CAPE
ACADEMIC STAFF UNION First
Applicant
THE FURTHER APPLICANTS WHOSE NAMES
ARE SET OUT IN ANNEXURE “A” HERETO 2 nd to 41 st Applicants (the individual Applicants)
and
THE UNIVERSITY OF THE WESTERN CAPE
Respondent
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JUDGMENT
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PILLAY D, J
This is an application concerning the interpretation and application of a collective
agreement that was made an order of court in settlement of a retrenchment
dispute.
The term of the collective agreement that forms the subject of this dispute is the
following:
“1. All retrenched employees who are part of this agreement shall
receive….
(e) payment of accumulated leave up to a maximum of 365 days”
Submissions for the Applicants
The Applicants contended that this term, read together with the clause D7.2.1. of
the University of the Western Cape Human Resource Policy Document (the
Policy Document), entitled the individuals to “full pay” as leave.
The term “full pay” was normal pay, plus allowances and benefits. This was the
equivalent of the cash value of the leave if they had taken it whilst in the employ
of the Respondent. There was no dispute that if leave were taken whilst they
were still in the employ of the Respondent they would have received the full pay
i.e. basic pay plus benefits and allowances. This was the same basis on which
pay during suspension was calculated.
The cash value of the leave should be the equivalent of the cost of labour to the
employer. To the basic wages therefore, the costs of the Respondent’s
contribution to employee benefits must be added to determine the cash value of
the leave. In this way the practical difficulties of determining the amount of
benefits and allowances actually accrued to each employee could be avoided.
Clause 1.e of the collective agreement created a right which the Applicants did
not previously have. As such, its meaning must be determined independently of
anachronistic practices and policies. There was no consensus that the past
practice would apply as the Applicants had no knowledge of what it was. The
value of the entitlement should be determined solely by clause D7.2.1. of the
Policy Document.
By applying the parol evidence rule to the collective agreement, no recourse
should be had to extrinsic evidence, unless it was indicatory in nature or
contextualised the background ( Johnstone v Leal 1980 (3) SA 927 (A) @ 943E;
Sun Packaging (Pty) Ltd v Vreulink 1996 (4) SA 176 (A) @ 184B; Delmas Milling
Co. Ltd v du Plessis 1955 3 SA AD at 454. )
Reliance was also placed on European case law and cases relied upon by
Brassey (in Employment law Volume 1 at E1:1923 viz. Liquidators of the
Agriculture of the Supply Association Limited v Taylor 1922 TPD 301; Wallach’s
Printing and Publishing Co. v Wallach 1932 AD 46 ) for the meaning of “full pay”.
It was submitted belatedly in Supplementary Heads in the alternative to the
aforegoing, that the Applicants were entitled as a matter of law to the leave
prescribed in the Basic Conditions of Employment Act No 75 of 1997 (“the
BCEA”) from 1 December 1998 when it became effective until their dismissal on
31 December 1997. The BCEA therefore trumped the collective agreement. That
amounted to one day’s leave for those dismissed on 31 December 1998 and
eleven days for those dismissed on 30 June 1999.
The Respondent’s submissions
The Respondent began by expatiating the approach to interpreting contracts. It
resisted the Applicants’ submissions on the basis that it was a tacit term of the
collective agreement that the individual Applicants would be paid their
accumulated leave according to the Respondent’s practice and the Policy
Document.
The relevant clause of the Policy Document was not clause D7.2.1 but D7.3.2.2
that should be considered when determining the calculation of the leave pay.
The Respondent’s practice and the Policy Document distinguished between leave
payable to those in employment and those who were not. Those whose services
were terminated were entitled to leave based only on their basic salary only. That
is what was already paid to the individual Applicants in this case.
Alternatively to the aforegoing, “full pay” in the collective agreement must be
defined by reference to the definitions of “pay” and “salary and wages” in the
Policy Document. In that event, the individual Applicants would be entitled only to
their basic pay plus any pensionable allowances and privileges in kind. The only
pensionable allowances were the departmental head and the housing
allowances.
The European and South African cases and the BCEA relied upon by the
Applicants were irrelevant because “full pay” was already defined in the Policy
Document. Furthermore, the European cases dealt with the application of laws
different from our own law and decided in contexts that did not directly relate to
the calculation of leave pay. The South African cases which had been decided
in the early part of the last century, also did not assist in this regard.
Inclusion of the Respondent’s contribution to allowances and benefits in the leave
pay was inappropriate for several reasons. The benefits were payments due to
third parties. The individual Applicants were not assured of receiving the whole of
these contributions, which were payable in terms of the rules of such third parties,
such as the pension and medical aid funds. In respect of certain allowances and
benefits they merely had a spes. It could therefore not be assumed that the cost
to the Respondent was equal to the value that the individual Applicants would
receive.
The existence of the collective agreement in the context of the practice and the
Policy Document also meant that the BCEA did not apply.
Analysis
Two scenarios present themselves against this background: either there was no
consensus between the parties as to how leave pay would be calculated in which
event the collective agreement about this issue did not come into existence. Or,
there was tacit consensus in which case the collective agreement about leave
pay did come into existence.
There is a common will between the parties to abide by the collective agreement.
Their difficulty is in agreeing now what they each meant then when the collective
agreement was concluded. In Total South Africa v Bekker 1992 (1) SA 617 (A)
624G625D it was held that the court should make an effort to determine the
common intention of the parties by way of linguistic treatment having regard to
the textual and factual contexts. The first enquiry therefore is to establish
whether there was a tacit term in the collective agreement about the calculation of
the leave pay, and if so, what the term was.
The “golden rule” of interpretation is that the language of a document must be
given its ordinary and grammatical meaning, unless this would lead to absurdity,
repugnancy or inconsistency with the rest of the document.
After ascertaining the literal meaning of the term, regard must be had to the
context in which it is used, including the nature and purpose of the contract, the
background circumstances which explain the genesis and purpose of the
contract, i.e. matters that the parties would probably have contemplated when
they contracted; and to then apply extrinsic evidence about the surrounding
circumstances ( Coopers & Lybrand v Bryant 1995(3) SA 761 A @ 767E768E ).
Extrinsic evidence is not admissible unless it is identificatory. Evidence that is
identificatory may not be used for interpretation but to apply an agreement to the
facts ( Delmas Milling Co, supra ).
Both parties presented arguable cases on the interpretation of clause 1.e of the
collective agreement. That alone suggests that the wording of the collective
agreement is ambiguous.
The ordinary meaning of clause 1.e is simply that the Respondent must pay the
individual Applicants their accumulated leave standing to their credit at the time of
dismissal. It is silent about how that pay is to be calculated.
I find that clause 1.e of the collective agreement is ambiguous and that the
intention of the parties has to be determined by recourse to extraneous material.
It was common cause that the calculation of the leave pay was not discussed
during the negotiations that preceded the conclusion of the collective agreement.
Both sides also defer to the Policy Document i.e. to extraneous material to clarify
and support their respective interpretations of clause 1.e of the collective
agreement. However, they disagree about which clauses of the Policy Document
apply and how they must be interpreted.
If regard is to be had to extrinsic evidence then all relevant and admissible
evidence must be considered. The submission for the Applicants that only
Clause D7.2.1. must be considered to determine the meaning of Clause 1.e. of
the collective agreement, is rejected. There is also no reason to limit recourse to
extrinsic evidence to the Policy Document only. The evidence of the practice is
relevant and must be admitted.
Clause D7.2.1. of the Policy Document provides :
“Group A
Rector, ViceRector and Teaching Staff
Persons temporarily employed in any such capacity are eligible for only onehalf
of the accumulative vacation leave and sick leave prescribed herein.
Accumulative vacation leave with full pay: 20 day per annum
……..
Sick leave….
Half pay 90 days”
Clause D7.2.1. does not assist in defining what “full pay” means. Nor does it say
how accumulated leave pay should be calculated. However, it evidences that a
distinction is made between “halfpay” in other circumstances mentioned later in
that clause. The probabilities are therefore that the word “full” was used to
emphasise the distinction.
Clause D7.3.2.2. provides :
“When an employee leaves the service of the University, s/he cannot claim
payment of the cash value of any leave outstanding to his/her credit: provided
that these provisions shall not preclude the payment of leave gratuities under
conditions provided for in Chapter DVIII of the Civil Service Regulations.”
Regard may also be had to the Respondent’s past practice, which, as it happens,
was substantially consistent with the Policy Document. The Applicants do not
deny the existence of the practice. They claim that they were not aware of it.
In determining what the intention of the parties was the approach in Standard
Bank v Efroiken & Newman 1924 AD 171 which determined the intention of the
parties as to the choice of law, provides a useful guide. What would the
calculation of leave pay have been if the parties had applied their minds to this
aspect during the negotiation?
Although the entitlement to accumulated leave on termination did not exist before
the collective agreement, the Respondent had a discretion to confer such
entitlement in appropriate cases. The payment of leave pay on termination of
employment was therefore not without precedent.
The practice was to apply the formula set out in the Chapter DVIII of the Civil
Service Regulations which was also referred to in the Policy Document at clause
D7.3.2.2. The Regulations provide that the payment must be based on
“die basiese jaarlikse salaries van die beampte of werk nemer en die jaarlikse
ekwivalent van alle pensioendraende toelaas wat aan hom betaalbaar is op die
laaste dag van sy diens”
These Regulations read with the Policy Document provided that if the
Respondent agreed to pay accumulated leave pay on termination of employment,
the calculation must be based on the basic salary and pensionable allowances
only. None of the allowances or benefits claimed by the Applicants were
pensionable.
If the Applicants had a formulation different from the practice and the Policy
Document they would have articulated it during the negotiations.
It does not assist the Applicants to rely on the European case law. These and
some of the South African cases they cite deal inter alia with the right to leave
pay as a principle and the fact that it is conceivable that benefits and allowances
can be incorporated in the meaning of leave pay. What needs to be determined
is whether in this case the parties had such or any other intention.
The approach under European law also differs substantially from the BCEA and
Respondent’s practice and policy. If the Applicants intended that or any other
formulation to apply they would have expressed their intentions. As they were
silent, there is a reasonable presumption that it was also the Applicants’ intention
that the Respondent’s practice and policy would apply. They may not have been
aware of the practice was. But, they could not reasonably have believed that
there was no practice at all. I find that they tacitly acquiesced in the application of
the Policy Document to which the Applicants had access and the practice.
The Applicants’ approach to calculating full pay, namely by taking the
Respondent’s contributions as the value of the benefits and adding them to the
basic pay, is convenient for the reasons advanced by Mr Benjamin. Neither side
could find authority in South African case law for this formulation. Whether it is
consistent with our common law approach to compensation for contractual and
delictual damages needs to be thoroughly investigated. It may require legislative
intervention to achieve the effect that the Applicants claim.
However, I do not need to decide this issue as I have found that the parties
intended to apply the established practice and the Policy Document.
Finally, I deal with the submission about the BCEA trumping the collective
agreement. Section 5 of the BCEA provides :
“This Act or anything done under it takes precedence over any agreement,
whether entered into before or after the commencement of this Act.”
The clear purpose of this provision is to ensure that employers and employees
enjoy the full protection of the BCEA. It could not have been the intention of the
legislature to deprive parties of rights or better rights they may have acquired by
collective bargaining or dispute resolution. (section 4 of the BCEA)
The collective agreement was a compromise to settle a dispute. It created a right
which the Applicants did not previously have. In that sense it is distinguishable
from agreements which disadvantage parties.
Furthermore, the right was for the payment of “full pay”, not “remuneration” as
defined in the BCEA. The BCEA prescribes that the calculation of leave pay be
defined in the BCEA. The BCEA prescribes that the calculation of leave pay be
based on remuneration. Remuneration is defined to include payment in money or
kind or both. The parties deliberately chose the words “full pay” instead of
“remuneration” which they used in clauses preceding clause 1.e of the collective
agreement. The parties therefore tacitly elected not to render the collective
agreement subject to the BCEA. That being so, and having regard to the primacy
of collective bargaining and dispute resolution by consensus, the BCEA was, I
find, excluded by tacit agreement by the parties.
The amount to be paid as leave pay therefore is in terms of the practice and the
Policy Document, read with the Chapter VIII of the Civil Service Regulations, that
is only the basic salary.
The application is dismissed with no order as to costs.
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PILLAY D, J
DATE OF HEARING: 15th MARCH 2002
DATE OF JUDGMENT: 25 March 2002
FOR THE APPLICANTS: Mr Paul Benjamin
INSTRUCTED BY: CHEADLE THOMPSON & HAYSON INC
FOR THE RESPONDENT: Adv M W Janisch
INSTRUCTED BY: E MOOSA, WAGLAY & PETERSEN