IN THE LABOUR COURT OF SOUTH AFRICA
HELD AT BRAAMFONTEIN CASE NO JR221/01
In the matter between:
TRANSWERK Applicant
and
IMSSA First Respondent
R ESSACK Second Respondent
TECHNICAL WORKERS UNION
on behalf of PIENAAR AND SMIT Third Respondent
JUDGMENT
FREUND A J:
INTRODUCTION
1 On 25 July 2000 the applicant (Transnet Limited trading as
"Transwerk") and the third respondent (the Technical Workers
Union, acting on behalf of two of its members, Messrs Pienaar
and Smit) submitted a dispute for arbitration by the second
respondent (Ms R Essack). Clause 2 of the arbitration agreement
between the parties provided as follows:
1
"2. The issue which the arbitrator will be asked to decide is whether
in the arbitrator's opinion based on evidence presented in the
arbitration:
2.1.1 there is fair cause to find that an unfair labour practice had been
committed against Mr Pienaar and Mr Smit;
2.1.2 whether the company is obliged to remunerate Mr Pienaar and Mr
Smit on the level for which they applied. (Retrospectively)."
2 The second respondent heard evidence and argument from the
parties and on 22 November 2000 she handed down her award.
In this application the applicant applies to review and set aside
the second respondent's award.
THE FACTUAL BACKGROUND
3 The proceedings before the second respondent were not tape
recorded. The second respondent's handwritten notes have been
made available but these notes are not easy to read and the
applicant has taken no steps to have them typed. Mr Maleka, who
appeared on behalf of the applicant when the application was
argued before me, waived reliance on any ground of review
requiring the court to consider what evidence
was or was not before the second respondent. He was content to
argue the application on the basis of the correctness of the facts
as found by the second respondent in her award. His submission
was that, accepting the correctness of all the factual findings
made by the second respondent, her award fell to be reviewed
and set aside.
4 From the second respondent's award, the following material facts
in relation to the underlying dispute are apparent:
4.1 During the period September/October 1997, the applicant
advertised two "110 level" (i.e. middle management) posts, for
the positions of operational manager and customer services
manager. The advertisement stated that these posts were
"110 B" and "110 C" posts respectively, i.e. that they had grade
levels "B" and "C" attached to them. These grade levels implied,
to those conversant with the applicant's remuneration policies,
particular levels of remuneration.
4.2 However, at the time that the posts were advertised, the
applicant (Transnet Ltd) had already issued an internal directive
to its business units (such as Transwerk) directing them no longer
to apply the previously applicable policy of linking pay levels in
respect of managerial staff to grade levels such as "110 B" or
"110 C". In terms of the new policy, all appointments to
managerial posts (including the middle management "110"
group) were to be made at the minimum salary scale for that
group, with movement thereafter being based on individual
performance evaluations.
4.3 Messrs Pienaar and Smit applied for and were interviewed for the
two posts concerned. They considered the posts to constitute
promotions and they anticipated that, if appointed, they would
receive the remuneration levels traditionally associated with a
110 B and 110 C graded job. They were unaware when
interviewed of the internal directive to change the remuneration
policy.
4.4 Messrs Pienaar and Smit were selected for the positions and
asked to sign letters of appointment for their new positions. The
letters of appointment set out the relevant job titles and specified
the applicable total annual salary package. These salary
packages were below the salary packages which would have
been applicable in terms of the previous job grading system.
4.5 On 14 January 1998 Messrs Pienaar and Smit signed their
respective letters of appointment.
4.6 Messrs Pienaar and Smit testified that before signing their letters
of appointment they had raised with their superior, one Mr Susan,
their concern that the letters of appointment did not correctly
reflect the remuneration they had expected. They were still
unaware of the change of policy. They testified that Mr Susan
had urged them to sign the letters of appointment so as not to
lose their appointments. According to the award "both applicants
believed that Mr Susan would "fix up the error"". (According to
the second respondent's notes of Mr Pienaar's evidence, Pienaar
actually testified that "(Mr Susan) said don't worry - they will fix it
later". Her notes also show that Mr Smit testified that when he
raised his concern that the "levels (were) not correct", Mr Susan
said "HR will fix it".)
4.7 Mr Susan stated in his evidence that, when Mr Pienaar and Mr
Smit queried their letters of appointment, he responded by
saying that "we will enquire and see if it can be rectified".
However, he testified that he did not promise anything. He
testified that upon investigation of the situation he had learnt of
the applicant's policy to abolish the old job levels and that he
ultimately spelt this all out clearly to Mr Pienaar and Mr Smit.
THE AWARD
5 After setting out her summary of the evidence, the second
respondent proceeded to analyse the evidence. She held that
the applicant had made a "mistake" in its advertisement of the
jobs. Although the second respondent does not state this in
terms, it is clear that the "mistake" to which she refers is the fact
that the jobs were advertised as "110 B" and "110 C" jobs, which
implied specific levels of remuneration, when the applicant's
policy at the time was no longer to peg managerial salary levels
to job grades of this type.
6 The second respondent then posed the following question:
"Did the Company, by not including the specific levels and any
change to remuneration, in its letters of appointment, in fact
rectify its error?"
(I should mention that the second respondent's notes suggest
that it was the applicant's defence before her that it had
"rectified its error" in the letters of appointment.)
7 In the next portion of her award she analysed the letters of
appointment. Although she does not say this in terms, I find that
the tenor of her award is to answer the question posed by her
and quoted above in the negative.
8 The second respondent went on to say the following:
1
"Prior to the enquiries made by the applicants, no attempt was
made by management to notify the men of the error and it was
only as a result of their endeavours that the reality emerged.
And such emergence was indeed a slow and painful (for the
applicants) process. The only evidence of management making a
structured attempt to inform the applicants appears in a letter
dated 23rd of November 1998 ...".
9 She held that the applicant, being the party guilty of committing
a blatant error in the advertisement, had been under a duty to
correct its error in a formal, direct and honest manner. She
found that it had failed in this regard.
10 The second respondent was also critical of the disparity of
treatment between Mr Pienaar and Mr Smit, on the one hand, and
one Mr Slabbert, on the other hand. She held that the applicant's
treatment was:
"... in sharp contradiction to the appointment of a Mr Slabbert
who was appointed at a much higher salary than the entrance
level of R 127 000, in July 2000. How Mr Strydom (sic) (should
presumably read "Slabbert") qualified for the distinction was not
satisfactorily explained ...".
11 The second respondent was not impressed by the manner in
which the two employees' grievance had been rejected by the
chief executive manager of Transwerk, Mr C Smit. The essence
of the letter rejecting the grievance was the following:
1
"By accepting your letter of appointment, the signing of the
memorandum of agreement for middle management by you and
by taking up your new post you have indicated to me that you
accepted the conditions coupled to the post which includes the
salary.
In view of the above I can unfortunately not review your salary."
12 The second respondent commented:
"I cannot accept the deadly cold tone and attitude of Mr Smit's
letter which takes it for granted that the signing of the letters of
appointment meant acceptance of the salary scale."
13 The second respondent concluded that the applicant "failed in its
duty to Mr Pienaar and Mr Smit". She then went on to consider
what compensation should be awarded and made an order that
they each be paid R 30 000 as compensation and that their
salary levels be increased.
GROUNDS OF REVIEW
14 In his heads of argument on behalf of the applicant, Mr Maleka
sought to rely on two grounds of review. The first was that "the
second respondent committed gross irregularity". The second
was that "the award was not justifiable or rational, having regard
to the material placed before her and the conclusion arrived at by
her".
15 It is necessary to determine whether these grounds of review can
be relied upon at all in the circumstances of the present
application.
Gross irregularity
16 This case concerns an arbitration award made by an arbitrator
appointed in accordance with the constitution of a bargaining
council. It does not concern an alleged defect in arbitration
proceedings conducted under the auspices of the Commission for
Conciliation, Mediation and Arbitration ("CCMA") and section145
of the Labour Relations Act 66 of 1995 ("the LRA") therefore has
no application. As is correctly recognised by the applicant in its
replying affidavit, this application is governed by s33 of the
Arbitration Act 42 of 1965. (See Portnet (a division of Transnet
Ltd) v Finnemore and Others [1999] 2 BLLR 151 (LC); Seardel
Group Trading (Pty) Ltd t/a the Bonwit Group v Andrews NO and
Others [2000] 10 BLLR 1219 (LC).)
17 Section 33(1) of the Arbitration Act provides:
"(1) Where -
(a) any member of an arbitration tribunal has misconducted himself
in relation to his duties as arbitrator or umpire; or
(b) an arbitration tribunal has committed any gross irregularity in the
conduct of the arbitration proceedings or has exceeded its
powers; or
(c) an award has been improperly obtained,
the court may, on the application of any party to the reference
after due notice to the other party or parties, make an order
setting the award aside."
18 It is clear that if second respondent "has committed any gross
irregularity in the conduct of the arbitration proceedings" her
decision is reviewable in terms of s33(1)(b) of the Arbitration Act.
19 Mr Maleka submitted that the second respondent's reasoning in
her award was so flawed as to disclose a "latent gross
irregularity". In this regard he relied upon the decision of the
Labour Appeal Court in Toyota SA Motors (Pty) Ltd v Radebe and
Others (2000) 21 ILJ 340 (LAC) in which the following passage by
Schreiner J, as he then was, in Goldfields Investment Ltd and
Another v City Council of Johannesburg and Another 1938 TPD
551 at 560 was cited with approval:
"It seems to me that gross irregularities fall broadly into two
classes, those that take place openly, as part of the conduct of
the trial - they might be called patent irregularities - and those
that take place inside the mind of the judicial officer, which are
only ascertainable for the reasons given by him and which might
be called latent .... Neither in the case of latent nor in the case of
patent irregularities need there be any intentional arbitrariness of
conduct or any conscious denial of justice .... The crucial question
is whether it prevented a fair trial of the issue. If it did prevent a
fair trial of the issues then it will amount to a gross irregularity.
In matters relating to the merits the magistrate may err by
mistaking or misunderstanding the point in issue. In the latter
case it may be said that he is in a sense failing to address his
mind to the true point to be decided and therefore failing to
afford the parties a fair trial. But that is not necessarily the case.
Where the point relates only to the merits of the case, it would be
straining the language to describe it as a gross irregularity or a
denial of a fair trial. One would say that the magistrate has
decided the case fairly but has gone wrong on the law. But if the
mistake leads to the court's not merely missing or
misunderstanding a point of law on the merits, but to its
misconceiving the whole nature of the enquiry, or of its duties in
connection therewith, then it is in accordance with the ordinary
use of the language to say that the losing party has not had a fair
trial."
20 It is clear that, if a "latent gross irregularity" as contemplated in
the above passage can be shown, the second respondent's award
falls to be reviewed and set aside. I shall consider below whether
this has been shown.
Justifiability and rationality
21 I turn now to consider whether it is open to this court to set aside
21 I turn now to consider whether it is open to this court to set aside
the second respondent's award if it should be shown that the
award was not "justifiable" or "rational".
22 Carephone (Pty) v Marcus NO and Others (1998) 19 ILJ 1425
(LAC) was a case concerning the review of an award made by a
commissioner of the CCMA. It was held by the Labour Appeal
Court that the applicant was confined to the review grounds
provided for in s145(2) of the LRA. However it was also held that,
where a commissioner exceeds the constitutional constraints on
his or her powers on arbitration, this can be reviewed by the
Labour Court under s145(2)(a)(iii) (which permits review on the
basis that the commissioner exceeded his or her powers). At
paragraph 31 of his judgment in Carephone, Froneman DJP
stated:
"The peg on which the extended scope of review has been hung
is the constitutional provision that administrative action must be
justifiable in relation to the reasons given for it (s33 and item
23(b) of schedule 6 to the Constitution). This provision
introduces a requirement of rationality in the merit or outcome of
the administrative decision. This goes beyond mere procedural
impropriety as a ground for review, or irrationality only as
evidence of procedural impropriety."
23 Froneman DJP elaborated further as follows (in paragraph 37):
"... It seems to me that one will never be able to formulate a
more specific test other than, in one way or another, asking the
question: is there a rational objective basis justifying the
connection made by the administrative decision-maker between
the material properly available to him and the conclusion he or
she eventually arrived at?"
24 In Shoprite Checkers (Pty) Ltd v Ramdaw NO and Others (2001)
22 ILJ 1603 (LAC) the Labour Appeal Court reaffirmed the
approach adopted in Carephone in respect of reviews, in terms of
s145 of the LRA, of arbitration awards by CCMA commissioners.
25 In Stocks Civil Engineering (Pty) Ltd v Rip NO and Another [2002]
3 BLLR 189 (LAC), the Labour Appeal Court recently had to
consider a review of what is referred to in the judgment as a
"private" arbitration. In a minority, concurring judgment Van
Dijkhorst AJA stated as follows (in paragraphs 23 and 24):
"[23] The question which arises is whether, if these arbitrations are
reviewable, the Arbitration Act or the principles applicable in
reviews under the LRA should govern the proceedings. One line
of thought is that as section 33(1) of the Arbitration Act and
section 145 of the LRA are virtually the same, this Court and the
Labour Court should apply the same norm under both, viz that of
rational justifiability laid down in Carephone (Pty) Ltd v Marcus
NO & Others (1998) 19 ILJ 1625 (LAC) (now since this matter was
heard redefined by this Court as rationality in Shoprite Checkers
(Pty) Ltd v Ramdaw NO & Others 2001 (4) SA 1038 (LAC)
paragraph 25). This approach is to be found in Transnet v
HOSPERSA (1999) 20 ILJ 1293 (LC) paragraph 15; NUM v Brand
NO & Another (1999) 8 BLLR 849 (LC) paragraph 14 and Orange
Toyota (Kimberley) v Van der Walt & Others [2001] 1 BLLR 85
(LC). The other line of thought is that whatever the test may be
for matters falling under the LRA regime, private arbitrations are
to be reviewed (also in the Labour Court) in terms of the norms
laid down in section 33(1) of the Arbitration Act. The latter view
was expressed in Eskom v Hiemstra NO & Others (1999) 20 ILJ
2362 (LC) and Seardel Group Trading (Pty) Ltd t/a Bonwit Group v
Andrews NO & Others [2000] 10 BLLR 1219 (LC).
[24] In my view the latter is the correct approach. Private arbitrations
are subject to the Arbitration Act 42 of 1965. Section 40 provides
for an exception where an Act of parliament expressly or by
implication excludes its operation. An example is section 145 of
the LRA. There is no such exception in the case of private
arbitrations. Considerations of expediency based upon the fact
that the arbitration provisions of the LRA coincide with those in
the Arbitration Act and that it would be preferable for Labour
Courts to apply one test throughout, cannot override the clear
provisions of the Arbitration Act. I do not share the view of
Molahledi AJ in the Orange Toyota case (supra) paragraph 13 that
the Arbitration Act is to be read subject to the Constitution and
that therefore the test for reviews of the CCMA arbitration awards
set out in the Carephone judgment would equally apply to
reviews in terms of section 33 of the Arbitration Act. The
important difference between the two types of arbitration is that
CCMA arbitrations were held to be by an organ of state to which
the constitutional precepts for just administrative action applied,
whereas private arbitrations are not. This arbitration therefore
has to be evaluated against the norms laid down in section 33(1)
of the Arbitration Act as if this were a High Court doing likewise. "
(My emphasis)
26 In the majority judgment, Zondo JP (with whom Comrie AJA
concurred) stated as follows (at paragraph 73):
"As the arbitration in this matter was a private arbitration as
opposed to a compulsory arbitration provided for under the
Labour Relations Act 66 of 1995 ("the Act"), the provisions of
section 145 would ordinarily not be applicable with the result that
the award would fall outside the ambit of the decision of this
Court in Carephone (Pty) Ltd v Marcus NO and Others (1998) 19
ILJ 1425 (LAC)."
Court in Carephone (Pty) Ltd v Marcus NO and Others (1998) 19
ILJ 1425 (LAC)."
27 However, Zondo JP went on to find that the terms of reference
which were agreed to between the parties in the relevant
arbitration agreement were such that the arbitrator was obliged
to give a rational decision. Accordingly, if the arbitrator had
given a decision which was irrational or unjustifiable, his award
would be reviewable on the basis laid down in Carephone.
28 In my view the decision by the Labour Appeal Court in Rip is
authority for the proposition that, subject to any ground of review
which may flow from the terms of reference of the relevant
arbitration agreement, a "private" arbitration award is not
susceptible to review on the Carephone basis. I am bound by
this.
29 Does it make any difference if the arbitration is conducted by an
arbitrator appointed by a bargaining council and, to this extent, is
not a "private" arbitration?
30 In Shoprite Checkers supra the Labour Appeal Court had cause to
consider the judgment of the Constitutional Court in
Pharmaceutical Manufacturers of SA: In re Ex Parte President of
the RSA 2000 (2) SA 674 (CC). In paragraphs 17 and 18 of his
judgment in Shoprite Checkers, Zondo JP referred to paragraphs
84, 85, 86 and 89 of the judgment of Chaskalson P (as the then
was) in the Pharmaceutical Manufacturers case. In my view it is
necessary for me to quote only paragraphs 84 and 85 thereof:
1
"[84] In S v Makwanyane Ackermann J characterised the new
constitutional order in the following terms:
'We have moved from a past characterised by much which was
arbitrary and unequal in the operation of the law to a present and
a future in a constitutional State where State action must be such
that it is capable of being analysed and justified rationally. The
idea of the constitutional State presupposes a system whose
operation can be rationally tested against or in terms of the law.
Arbitrariness, by its very nature, is dissonant with these core
concepts of our new constitutional order.'
Similarly, in Prinsloo v Van der Linde and Another this Court held
that when Parliament enacts legislation that differentiates
between groups or individuals it is required to act in a rational
manner:
'In regard to mere differentiation the constitutional State is
expected to act in a rational manner. It should not regulate in an
arbitrary manner or manifest "naked preferences" that serve no
legitimate governmental purpose, for that would be inconsistent
with the rule of law and the fundamental premises of the
constitutional State.'
[85] It is a requirement of the rule of law that the exercise of public
power by the Executive and other functionaries should not be
arbitrary. Decisions must be rationally related to the purpose for
which the power was given, otherwise they are in effect arbitrary
and inconsistent with this requirement. It follows that in order to
pass constitutional scrutiny the exercise of public power by the
Executive and other functionaries must, at least, comply with this
requirement. If it does not, it falls short of the standard
demanded by our Constitution for such action."
31 At paragraph 19 of his judgment in Shoprite Checkers, Zondo JP
continued as follows:
"What is clear from the judgment of the Constitutional Court is
that:
(1) as long as a particular decision is the result of an exercise of
that:
(1) as long as a particular decision is the result of an exercise of
public power, such a decision can be set aside by a court if it is
irrational;
(2) the bona fides of the person who made the decision do not by
themselves put such a person's decision beyond the scrutiny of
the court;
(3) the rationality of a decision made in the exercise of public power
must be determined objectively;
(4) a court cannot interfere with a decision simply because it
disagrees with it or considers that the power was exercised
inappropriately;
(5) a decision that is objectively irrational is likely to be made only
rarely;
(6) decisions (of the executive and other functionaries) must be
rationally related to the purpose for which the power was given,
otherwise they are in effect arbitrary and inconsistent with the
requirement of the rule of law that the exercise of public power
by the executive and other functionaries should not be arbitrary."
32 At paragraphs 25 and 26 of his judgment, Zondo JP continued as
follows:
"[25] There can be no doubt that in Carephone this court viewed the
concept of justifiability as related, at least to some extent, to the
concept of rationality but emphasized, correctly in my view, in
the context of the fact that it was dealing with s33 read with item
23 which expressly use the adjective 'justifiable', that it should
stick to the term 'justifiable'. In the light of this I am of the view
that, although the terms 'justifiable' and 'rational' may not,
strictly speaking, be synonymous, they bear a sufficiently similar
meaning to justify the conclusion that rationality can be said to
be accommodated within the concept of justifiability as used in
Carephone. In this regard I am satisfied that a decision that is
justifiable cannot be said to be irrational and a decision that is
irrational cannot be said to be justifiable.
[26] In the light of the above it appears to me that counsel for the
appellant was right in his submission that whether or not
Carephone was wrongly decided has become largely academic as
a result of the judgment of the Constitutional Court in the
Pharmaceutical Manufacturers' case which decided in effect that
in our law rationality has become a constitutional requirement for
all decisions taken in the exercise of all public power.
Irrationality of such decisions is now a ground of review and,
quite clearly, the issuing of an arbitration award by a CCMA
commissioner under the Act is an exercise of public power and
must, therefore, meet the constitutional requirements of
rationality. If an award fails to meet this constitutional
requirement, it can be set aside on this ground."
33 I am, with respect, not certain that the concept of "rationality" as
referred to by the Constitutional Court in the Pharmaceutical
Manufacturers' case is the same as the concept of "justifiability"
as referred to in the Carephone case (and in item 23 of schedule
6 to the Constitution). It seems to me that the Constitutional
Court may have had in mind a "rationality" test that is less
demanding of the executive and other functionaries than the
Carephone "justifiability" test. However, in my view I am bound
by the findings of the Labour Appeal Court in Shoprite Checkers
that "rationality can be said to be accommodated within the
concept of justifiability as used in Carephone" and that "a
decision that is justifiable cannot be said to be irrational and a
decision that is irrational cannot be said to be justifiable". In my
view I am also bound by the Labour Appeal Court's finding that
"as long as a particular decision is the result of an exercise of
public power", such a decision can be set aside by a court if it is
"irrational" (in the sense that the Labour Appeal Court construed
that term).
34 It therefore appears to me that, if the award made by the second
respondent was "the result of an exercise of public power", I am
required by Shoprite Checkers to hold that it is reviewable on a
justifiability/ rationality test.
35 In my view the onus to place before this court facts sufficient to
show that the second respondent's award was the result of an
exercise of public power lay on the applicant. I am not satisfied
that the applicant has discharged this onus.
36 Firstly, the applicant has not shown that the LRA required the
present dispute to be referred to arbitration, i.e. that this was a
compulsory arbitration. In this regard it is relevant to refer to
certain provisions of the LRA.
37 Section 51 of the LRA confers on bargaining councils dispute
resolution functions comparable in some respects to those of the
CCMA.
38 Sections 51(2)(a)(i) and (ii) provide:
"(i) The parties to a council must attempt to resolve any dispute
between themselves in accordance with the constitution of the
council.
(ii) For the purposes of sub-paragraph (i), the parties to a council
include the members of any registered trade union or registered
employers' organisation that is a party to the council."
Whilst s51(2)(a) (which must be read with s30(1)(i) and (j))
permits resolution of disputes between parties to a council by
arbitration, it does not require this.
39 Section 51(3) provides:
"(3) If a dispute is referred to a council in terms of this Act and any
party to that dispute is not a party to that council, the council
must attempt to resolve the dispute -
(a) through conciliation; and
(b) if the dispute remains unresolved after conciliation, the council
must arbitrate the dispute if -
(i) this Act requires arbitration and any party to the dispute has
requested that it be resolved through arbitration; or
(ii) all the parties to the dispute consent to arbitration under the
auspices of the council."
40 Section 51(6) provides:
"A council may enter into an agreement with the Commission or
an accredited agency in terms of which the Commission or
accredited agency is to perform, on behalf of the council, its
dispute resolution functions in terms of this section."
41 Section 52 provides:
"(1) With a view to performing its dispute resolutions functions in
terms of section 51(3), every council must -
(a) apply to the governing body of the Commission for accreditation
to perform those functions; or
(b) appoint an accredited agency to perform those of the functions
referred to in section 51(3) for which the council is not
accredited.
(2) The council must advise the Commission in writing as soon as
possible of the appointment of an accredited agency in terms of
subsection (1)(b), and the terms of that appointment."
42 The applicant did not disclose in its founding affidavit how or why
the present dispute was referred to the second respondent for
arbitration. However, the arbitration agreement, which is an
annexure to the founding affidavit, does record the following:
"This dispute has been lodged in accordance with clause 13.4 of
the Constitution of the Transnet Bargaining Council. Conciliation
proceedings were unsuccessful."
The constitution of the council was not placed before me.
Although this is not expressly stated in the affidavits, I believe
that the applicant and the third respondent are, in all probability,
parties to the Transnet Bargaining Council. If so, it would appear
that the arbitration was conducted pursuant to s51(2)(a)(i) of the
LRA, i.e. that it was an arbitration permitted, but not compelled,
by the LRA. The applicant has, in any event, not shown that the
aforegoing is not correct.
43 In my view an arbitration conducted between the parties to a
bargaining council in accordance with an arbitration clause
contained in the constitution of that council (and not in
accordance with any statutory obligation under the LRA to
arbitrate) cannot be regarded as "the result of an exercise of
public power". I can understand the force of an argument that
arbitration compelled by a statute (such as the LRA) is not
voluntary and that an arbitration award made pursuant to such
an arbitration is the result of an exercise of public power. See
Total Support Management v Diversified Health Systems (SA)
2002 (4) SA 667 (SCA) at 674 para 26. However, where the
arbitration is not required by statute but is the consequence of an
agreement between the relevant parties, I do not think that it can
fairly be said that the arbitration award is the result of an
exercise of public power. In my view, such an arbitration is
essentially "private" (as referred to in Rip .) See the Total
Support Management judgment supra at 673 paras 24 and 25.
44 Furthermore, sight should not be lost of the fact that the
rationality test propounded by the Constitutional Court in the
Pharmaceutical Manufacturers case was based on the idea that
"the constitutional State" presupposes a system whose operation
can be rationally tested. Where an arbitrator is appointed by
parties to a bargaining council to arbitrate a dispute which the
LRA does not required to be arbitrated, I do not think that the
arbitrator can be considered to form part of "the State". The
position of such an arbitrator is, in my view, fundamentally
different from the position of a commissioner appointed by the
CCMA (which is clearly an organ of state) to arbitrate an
arbitration which, in terms of the LRA, is compulsory. (It is not
necessary for me, for the purposes of this judgment, to consider
whether an arbitrator appointed by a bargaining council to
arbitrate in a compulsory arbitration can be regarded as an organ
of state or whether an award by such an arbitrator is the result of
the exercise of public power.
45 My conclusion that the second respondent's award is not the
result of an exercise of public power is reinforced in the present
matter by the nature of the issue which she was asked to decide
(quoted in the first paragraph of this judgment). The first
question which she was required to decide was whether, in her
opinion based on the evidence presented in the arbitration,
"there is fair cause to find that an unfair labour practice had been
committed against Mr Pienaar and Mr Smit". Counsel
representing both parties were in agreement that these terms of
reference did not confine the second respondent to applying the
LRA. In particular, it was agreed that the second respondent was
not limited to determining whether a residual unfair labour
practice as contemplated in item 2(1)(b) of schedule 7 to the LRA
had been committed. (That provision defines as a residual unfair
labour practice "any act or omission that arises between an
employer and an employee involving ... the unfair conduct of the
employer relating to the promotion, demotion or training of an
employee or relating to the provision of benefits to an
employee".) The issue before the second respondent was
therefore not an issue which the LRA requires to be resolved by
arbitration.
46 In my view it follows from what I have stated above that the
rationality test laid down by the Constitutional Court in the
Pharmaceutical Manufacturers' case, as interpreted by the
Labour Appeal Court in the Shoprite Checkers case, does not
apply. In my view this case is indistinguishable from the "private
arbitration" which formed the subject matter of the Rip decision.
47 It is also necessary to deal with a submission made by Mr
Maluleka, on behalf of the applicant, that the applicant is entitled
to rely upon s6(2) of the Promotion of Administrative Justice Act,
No 3 of 2000 (hereinafter "the PAJA"). That section provides:
"A court or tribunal has the power to judicially review an
administrative action if -
...
(f) the action itself -
(i) ...
(ii) is not rationally connected to -
(aa) the purpose for which it was taken;
(bb) the purpose of the empowering provisions;
(cc) the information before the administrator; or
(dd) the reasons given for it by the administrator.
(g) ..."
48 In my view the PAJA cannot be relied upon by the applicant in the
present matter because the award in the present case does not
amount to "administrative action" as contemplated in that Act. To
constitute "administrative action" in terms of s1 of the PAJA, the
relevant decision must be a decision taken when exercising a
public power or performing a public function. As referred to
above, I do not believe that the second respondent's award was
made in the exercise of a public power or whilst performing a
public function. Furthermore, to constitute "administrative
action" the action must amount to a "decision" as that term is
defined in s1 of the PAJA. The definition of "decision" makes
clear that the term relates only to "any decision of an
administrative nature ...". I do not think that the second
respondent's award amounts to a decision "of an administrative
nature". See Total Support Management, supra, at 673
paragraphs 23 to 25; Patcor Quarries CC v Issroff & Others 1998
(4) BCLR 467 (SE) at 479E-F; Seardel Group Trading (Pty) Ltd t/a
The Bondwit Group v Andrews NO & Others (2000) 21 ILJ 1666
(LC) at paras 36-38.
49 In Volkswagen SA (Pty) Ltd v Brand NO & Others (2001) 22 ILJ
993 (LC) Landman J stated the following (at para 53):
"I should add that there are two other reasons why the PAJ is not
applicable to this review. In the first place it does not seem that
the PAJ repeals section 145 of the LRA. Secondly, assuming that
it does, the Act, strange but true, does not apply, as far as the
Labour Court is concerned, until rules have been promulgated.
See s7(4) of the PAJ. The Labour Court is not a high court
although it has a similar status and standing. Mr Wallace, who is
a member of the Rules Board, stated that rules had not yet been
drafted."
50 The Volkswagen case was a review of an award by a CCMA
commissioner. However, in my view the same reasoning applies
to the present case. It is in my view doubtful, to say the least,
that the PAJA repeals s33 of the Arbitration Act. However,
assuming that it does, it appears that the rules contemplated in
s7(4) of the PAJA have still not come into operation. I respectfully
concur with Landman J that the consequence of this is that the
Labour Court is not entitled at this stage to apply the provisions
of the PAJA.
51 I do not think that the finding by the Labour Appeal Court in
Shoprite Checkers supra (at para 29) that "the PAJA may well be
applicable to the making of an arbitration award by the CCMA"
requires me to find that the PAJA does apply in casu. Firstly, the
Labour Appeal Court did not find that the PAJA is in fact
applicable to the making of an arbitration award by the CCMA.
Secondly, for the reasons referred to above I believe that an
arbitration award by an arbitrator appointed by a bargaining
council in a non-compulsory arbitration is in any event
distinguishable from an arbitration award made in a compulsory
arbitration by a CCMA commissioner. Even if the PAJA applies to
CCMA commissioners' awards, I do not think that it applies to an
award by an arbitrator appointed by a bargaining council in the
circumstances referred to above.
52 Mr Maleka also submitted on behalf of the applicant that the
second respondent's terms of reference entitle this court to apply
the Carephone test, on the same basis as was done in the
majority judgment in Rip. I do not agree. In Rip, clause 2.1 of
the arbitration agreement provided:
"The arbitrator shall in relation to the applicant's alleged unfair
dismissal claim, have powers equivalent to that ( sic) of a Judge in
the Labour Court. In addition the rules of the Labour Court will be
applicable..."
Zondo JP held (at paragraph 80) that it was implicit in a judge's
powers that a judge's decision must be rational or justifiable. He
therefore found that the powers conferred by the terms of
reference on the arbitrator bound the arbitrator to give a rational
decision. If the decision was irrational or unjustifiable, the
arbitrator had exceeded his powers within the meaning of that
phrase as used by the Labour Appeal Court in Carephone.
53 The terms of reference in the present case are, in my view,
distinguishable. Clause 3 of the arbitration agreement provides:
"We agree that the arbitrator will have the power to decide upon
the procedure which she will follow at the hearing of this matter."
No provision in the agreement is analogous to the provision in
the agreement in the Rip case conferring "the powers equivalent
to that of a judge in the Labour Court" or providing that "the rules
of the Labour Court will be applicable". I do not think that the
definition of the issue in clause 2 of the arbitration agreement in
the present case justifies an inference that the parties intended
to limit the powers of the second respondent in the manner in
which the powers were held to have been limited in the
arbitration agreement applicable in the Rip case.
54 I conclude, therefore, that neither the "justifiability" test laid
down in Carephone, nor the "rationality" test laid down in
Shoprite Checkers can be relied upon as a potential ground of
review in the present application.
55 However, in case I am wrong in this regard, I shall also refer
below to my views in relation to the "justifiability" and
"rationality" of the second respondent's award.
APPLYING THE LAW TO THE FACTS
56 I can understand the force of some of the criticisms made by the
applicant against the second respondent's award. For example,
the second respondent does not appear to have afforded any
significant weight to the consideration that Messrs Pienaar and
Smit, having signed the letters of appointment, should not be
permitted to challenge the payment of salaries in accordance
with those letters of appointment as an unfair labour practice.
Had I been sitting as the arbitrator or in an appeal I might well
have reached a different conclusion.
57 However I am not satisfied that the second respondent's
reasoning was so flawed as to disclose a "latent gross
irregularity", in the sense in which that phrase is utilised in the
Goldfields Investment case supra. To adapt the language used in
the Goldfields Investment case, this is a case in which the second
respondent may perhaps have gone wrong on the law, but in my
view she did not misconceive the whole nature of the enquiry, or
her duties in connection therewith. She applied her mind to the
facts. She noted that the origin of the dispute lay in the
applicant's mistake when advertising the jobs. She found that,
being the party guilty of committing a blatant error in the
advertisement, the applicant had been under a duty to correct its
error in a formal, direct and honest manner. She found that it
had failed in this regard. Although she does not say so in terms,
it is necessarily implicit in her award that she concluded that
there was fair cause to find that an unfair labour practice had
been committed by the applicant against Messrs Pienaar and
Smit. She therefore directed the applicant to remunerate Messrs
Pienaar and Smit in the manner she considered appropriate.
Whether she was right or wrong in reaching her conclusion, I do
not think that it can be said that she misconceived the whole
nature of the enquiry or misconceived her duties in connection
therewith. It follows that in my view she did not commit any
gross irregularity in the conduct of the arbitration proceedings, as
contemplated in s33(1)(b) of the Arbitration Act.
58 If my analysis of the law above is correct, this is a sufficient basis
to dismiss the application. However, if I am wrong in concluding
that the "justifiability" and/or "rationality" tests do not apply, I
think it appropriate to mention that, even on these tests, I do not
think that the applicant should succeed. In my view there was a
rational objective basis justifying the connection made by the
second respondent between the material properly available to
her and the conclusion that she eventually arrived at. Mr Maleka
conceded, in my view correctly, that the second respondent was
not merely bound to apply the common law on contract. Even if,
contractually, Messrs Pienaar and Smit had no basis to complain
about the remuneration that they received, it was open to the
second respondent to determine whether the failure to pay them
in accordance with the expectation created by the advertisement
constituted an unfair labour practice. It is implicit in the second
respondent's award that she found that the expectations of
higher salaries held by Messrs Pienaar and Smit were entirely
understandable, having regard to the manner in which the jobs
had been advertised and the failure by anyone on behalf of the
applicant prior to their appointments to inform them about the
applicant's change in remuneration policy. The second
respondent was of the view - which I cannot find to be irrational
or unjustifiable - that this had, as a matter of fairness, given rise
to an obligation on the part of the applicant to correct its error in
a formal, direct and honest manner. She also found, in my view
not irrationally, that the applicant did not do this. In these
circumstances I do not think that it can be said that there was no
rational objective basis upon which she was entitled to conclude
that the second respondent had committed an unfair labour
practice. It is my view, therefore, that it has not been shown that
the second respondent's award is reviewable on the basis of a
"justifiability" or "rationality" test.
59 For the above reasons, the application is dismissed, with costs.
A J FREUND
ACTING JUDGE OF THE LABOUR
COURT
DATE OF HEARING : 23 May 2002
DATE OF JUDGMENT :
FOR THE APPLICANT : Adv I V Maleka instructed by Tshiqi Attorneys
FOR THE THIRD RESPONDENT : Adv Hutchinson, instructed by Fluxman Rabinowitz
Raphaely Weiner Inc
2002.118