IN THE LABOUR COURT OF SOUTH AFRICA
(HELD AT CAPE TOWN )
CASE NO : C 662/2002
In the matter between:
CAPE MANUFACTURING ENGINEERS (PTY) LIMITED Applicant
and
METAL AND ENGINEERING INDUSTRIES
BARGAINING COUNCIL
THE INDEPENDENT EXEMPTIONS APPEAL
BOARD OF THE METAL AND ENGINEERING
INDUSTRIES BARGAINING COUNCIL Second Respondent
NATIONAL EMPLOYEES TRADE UNION Third Respondent
NATIONAL UNION OF METALWORKERS OF
SOUTH AFRICA Fourth Respondent
___________________________________________________________
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JUDGMENT
________________________________________________________________
_
TIP A J
INTRODUCTION
1 The applicant is a company which manufactures components for the arms
industry and, in a separate division, automotive components. It is
indirectly affiliated to the Steel and Engineering Industries Federation of
South Africa. The latter is the coordinating body for the engineering
industry; it is a member of the first respondent.
2 The first respondent, the Metal and Engineering Industries Bargaining
Council (“the Council”), is a national bargaining council registered in terms
of section 29 of the Labour Relations Act 66 of 1995 (“the LRA”). It
operates in terms of a duly approved constitution in accordance with which
committees have been established in various regions throughout South
Africa. These are referred to as regional councils. In relation to the
events material to this matter, the applicant has dealt at all times with the
Cape Regional Council (“the Cape Council”).
3 Many aspects of the metal and engineering industries are governed and
regulated through the consolidated Main Agreement. The current
agreement was promulgated on 31 March 1998. It has been reenacted
with amendments from time to time. Clause 23 deals with exemptions
and provision is made in clause 23(5)(a) for the appointment of the second
respondent, being the Independent Exemptions Appeal Board (“the
Board”).
4 The third and fourth respondents are trade unions whose members are
affected by the present proceedings. The third respondent is the National
Employees Trade Union. As described more fully below, its appeal
against an exemption granted to the applicant has led to the present
review.
THE EXEMPTION AND THE APPEAL
5 The main agreement provides for the payment to scheduled employees of
an annual leave enhancement pay. In essence this is an annual lump
sum bonus payment. On 25 October 2001 the applicant sought an
exemption in respect of this payment from the Cape Council. That
application was made in consequence of certain changes in the market
place that had resulted in a marked negative impact on the applicant’s
turnover. Not all the details thereof are relevant for the purpose of this
judgment. It is sufficient to record that the applicant contended that it had
sustained a materially reduced turnover; it had been required to make
significant capital expenditure in order to redirect its business; as a result,
it was experiencing a cashflow crisis which directly affected its capacity to
make bonus payments.
6 These considerations were set out in the application for exemption, which
was accompanied by:
6.1 a profit and loss statement for the period ending August 2001;
6.2 an actual vs budget variance analysis in relation to costs and
overheads;
6.3 a graphical representation of the applicant’s bank balance from 4
July 1995 to 18 September 2001;
6.4 a cash flow forecast for the period January 2001 to February 2002;
6.5 a graphical representation of inter alia the relationship between
wages and sales for the period February 1999 to July 2001.
7 The application for exemption was granted by the Cape Council. This
decision was communicated to the applicant in a letter dated 13 December
2001. The letter included the following statement:
“The National Employees Trade Union have however submitted an
appeal against the decision of the Cape Regional Council, copy attached, which
will be forwarded to the Independent Exemption Board for consideration on the
15 January 2002. ”
8 The notice of appeal is dated 6 December 2001, which appears to have
been the date on which the Cape Council granted the exemption. The
letter of appeal is in the following terms:
“Met hierdie skrywe versoek NETU u om die besluit wat
vanmôre (06/12/01) geneem is om CME se versoek toe te staan
i.v.m. vrystelling om hierdie jaar nie verlof bonusse te betaal
dringend hersien word.
“CME het korttyd opgeskort en ‘n skrywe aan u gestuur waar
hulle aansoek doen om meer oortyd te werk gedurende die
‘shutdown’.
“Hierdie werknemers van CME en lede van NETU (90%) verdien
hulle bonuses, en is in dispuut met hierdie besluit.
“Sal u asseblief dringend die vrystelling hersien en ‘n
regstelling maak. Hou in gedagte dat myself en Wendy van
Consani Eng aan u aanbeveel het dat dit nie moet toegestaan word
nie.”
9 Three aspects of this letter are to be noted at this stage. They are inter
related considerations, which I will consider more fully below:
9.1 The terms of the letter suggest that the third respondent was
requesting the Cape Council to itself reconsider and correct the
exemption that it had granted.
9.2 Two particular factual grounds are identified, namely that the
applicant had suspended short time and that it had requested to
work more overtime during the shut down period.
9.3 It appears also that the writer of the letter, being the regional
organiser of the third respondent, as well as another engineering
manufacturer had recommended to the Cape Council that the
exemption should not be granted. What the terms of those
communications were is not reflected in the letter. It is similarly not
apparent that these objections were brought to the attention of the
applicant, so that it could respond thereto.
10 In the founding affidavit lodged for the purpose of the present review, the
managing director of the applicant dealt with the contentions that it had
suspended short time and applied for work during the shut down. In
essence the response is that whilst there was an overall shortage of work,
certain work centres within a division of the applicant were overloaded. It
was also important to ensure that orders that were received were rapidly
dealt with. In consequence, it was said that the termination of short time
“did not in any way indicate that the financial or cash flow position had improved . On
the contrary, it reduced the savings which had been made and so placed a further strain
on cashflow. ” Likewise, the request to work during the shut down was
justified on the basis of a need to deal immediately with orders from
European customers. This too “ did not indicate that the financial position had
improved”.
11 Curiously, these explanations together with the relevant documentation
were not placed before the Board, or for that matter, before the Cape
Council. Indeed, the applicant appears not to have reacted at all to the
third respondent’s notice of appeal.
12 A few days before the appeal, which was determined on 15 January 2002,
the applicant was contacted by Ms Kelly who is the administrative
manager of the first respondent. A request was made that the applicant
should furnish a copy of its last audited financial statements for
consideration by the Board. Somewhat unhelpfully, the applicant took up
the position that such information was irrelevant, because the financial
difficulties which had led to the application for exemption had mainly
arisen after February 2001.
13 I should add that the application for exemption form, which was completed
by the applicant and submitted to the Cape Council, provides that:
“For a wage exemption, the most recent audited financial statements and
auditors report together with management accounts covering the period from the
date of the last audit to two months prior to the date of application, must be
attached to this application. ”
One imagines that the purpose of that requirement is to ensure that
an objective and vouched statement of the applicant’s financial position is
made available, to which more recent unaudited management accounts
can be related. The applicant had not put up audited statements with its
initial application. Strictly speaking, its application was to that extent
defective. However, no query was raised by the first respondent in
relation to this, nor did it form any part of the appeal against the granting of
the exemption.
14 Although I have observed that the applicant was not especially helpful in
electing not to provide the information requested by Ms Kelly, that does
not imply that I consider its bona fides to be at issue. Viewing the
documentation as a whole, it is plain that the applicant was satisfied that
all relevant information setting out its financial affairs in relation to the
exemption application had been disclosed by it in support of its
application. I should add further that Ms Kelly evidently did not suggest to
the applicant that the fate of the appeal might be determined by the
presence or absence of the last audited statements.
15 On 15 January 2002 the Board met. It inter alia considered the appeal
lodged by the third respondent. On the following day it announced its
decision in these terms:
“The Independent Exemptions Appeal Board considered the appeal in
the above at the meeting which was held on 15 January 2002 and decided to
grant the appeal against the granting of the exemption. The reason is that the
financial statements do not provide sufficient information to enable the Board to
establish what the savings will be if the exemption is granted or that the financial
hardship warrants the granting of an exemption. ”
16 It is this decision which forms the subject matter of the present review.
After this decision, the applicant was called upon to make the bonus
payments. In time this led to submissions being tabled at a meeting of
the Board held on 21 May 2002. The Board recorded its views as
follows:
“The submission made by the company was tabled at the meeting of the
Independent Exemptions Appeal Board on 21 May 2002.
“The Board were of the opinion that the decision which was made, that
being to uphold the appeal of the trade union was the correct decision based on
the available information. The Board, in furtherance, is a body of final instance
in the structures of the Bargaining Council and cannot review its own decisions. ”
17 In its founding affidavit, the applicant has set out various grounds. Those
that have been persisted with may be summarised as follows:
17.1 The Board did not follow the procedures set out for it in the main
agreement, in that it did not give proper consideration to the
information that had been placed before it.
17.2 The Board did not comply with the requirements of the audi alterim
partem rule, in that the applicant was not afforded an opportunity to
be heard.
17.3 The decision of the Board was so unreasonable as to be
unjustifiable and did not deal rationally with the material before it.
18 The application for review, insofar as it is founded on the above grounds,
is not opposed by any of the respondents. However, an explanatory
affidavit was filed on behalf of the first and second respondents. The
affidavit inter alia sets out aspects of the procedure followed by the Board.
Its procedure thus described, includes the following components:
18.1 “The Independent Exemptions Appeal Board considers the appeal entirely upon
the documentation provided by both parties to the Regional Council. Oral
representations are not received. ”
18.2 “In the event of the Independent Exemptions Appeal Board not being able to
make a decision on the tabled documents, it will request the Regional Council to
submit the relevant additional information. ”
18.3 “If the additional information constitutes a material difference to the outcome of
the appeal the Independent Exemptions Appeal Board will refer the appeal back
to the Regional Council for reconsideration. Either party will then be at liberty to
appeal against the decision of the Regional Council. ”
18.4 “The Independent Exemptions Appeal Board’s decision is based on the
documents as set out above. It relies entirely upon the representations
presented to it by the [Bargaining Council] on behalf of the parties. The Main
Agreement or any other agreement and the Labour Relations Act are taken into account
when the decision to uphold or dismiss the appeal is taken. ”
18.5 “Written reasons for the decision are not automatically given. However if the parties
request written reasons for the decision, the Independent Exemptions Appeal Board will
provide such written reasons. ”
19 Before turning to an evaluation of the Board’s conduct in relation to the present
appeal, and aspects of the procedure described by it, it will be appropriate to set
out the relevant provisions of clause 23(5) of the Main Agreement:
“(a) An independent body, referred to as the Independent Exemptions
Appeal Board (the Board), is hereby appointed and shall consider, in
accordance with the provisions of section 32(e) and (f) of the Act, any appeal
against an exemption granted or refused by the Council, or a withdrawal of an
exemption.
(b) The Council Secretary will, on receipt of an appeal against a
decision of the Council, submit it to the Independent
Exemptions Appeal Board for consideration and finalisation.
(c) In considering an appeal the Board shall consider the recommendations
of the Council, any further submissions by the employers or employees
and shall take into account the criteria set out above and also any other
representations received in relation to the application. ”
20 The reference to “ the criteria set out above ” is evidently a cross reference to
clause 23(2) which catalogues “ fundamental principles for consideration ” in
relation to the grant or refusal of exemptions by the first respondent.
Save for indicating that those principles are calculated inter alia to promote
a process in which the Council has regard to the views and interests of all
interested parties, it is not necessary for the purpose of this judgment to
detail the content of this clause.
POWERS AND FUNCTIONS
21 The reference in clause 23(5)(a) of the Main Agreement to section 32(e)
and (f) of the LRA is neither precise nor fully efficacious. It is evidently
intended to be a reference to provisions of section 32(3), which deals with
conditions that must be satisfied in order for a collective agreement to be
extended to nonparties. The applicant has deliberately elected not to
pursue any point in relation to this aspect of the statutory framework and.
On this basis neither the first nor the second respondents have entered
the fray. Accordingly, I refrain from dealing with this question, since it
appears to be common cause that, notwithstanding the relevant elements
in clause 23(5) of the Main Agreement, it has at all times been the
intention of its subscribing members that the Board should deal with
matters such as those that have arisen in the present case, subject of
course to other regulatory aspects.
22 More germane to this matter are the provisions of clause 23(5)(c) of the
Main Agreement, which I have set out above. That clause stipulates what
the Board is to take into account when it considers an appeal. It spans the
‘recommendations’ of the Council, further submissions by employers and
employees, the criteria to be taken into account when considering an
exemption application and ‘any other representations received in relation
to the application’. Clearly, this clause cannot be interpreted as one that
exhaustively described the material to be placed before the Board since it
makes no mention of, for instance, the most fundamental material of all,
being the application itself with its supporting documentation, as well as
the notice of appeal and any documentation that might have accompanied
it.
23 At the same time, however, it is equally plain that the Main Agreement
contemplates an appeal in the conventional sense, namely that the
original record should be placed before the appeal tribunal together with
any ‘further submissions’ that immediately affected parties may wish to
make in relation to the issues raised by the appeal. In this context, it is to
be noted that the reference to ‘other representations’ is confined to those
that had been made in relation to the original application; it does not
amount to a broad power to receive such representations in relation to the
appeal.
24 More pertinently, it is clear that the Main Agreement does not envisage
that the Board should set about a process akin to further investigation in
relation to the merits of the application. In the particular context of this
case, I agree with Mr Leslie, who appeared for the applicant, that the
Board is not empowered through clause 23(5)(c) to call for additional
information.
25 I have set out above passages from the affidavit of Ms Kelly in which the
modus operandi of the Board has been described. Scrutiny of those
passages reveals a logical anomaly it its approach:
25.1 If it has been provided with a full record of the proceedings in the
Council, the Board will inevitably be in a position to determine
whether the Council’s decision was correctly reached in relation to
the material before it. In my view, that properly delimits the nature
of its function.
25.2 It follows that it is a faulty premise to form the view that a decision
on the appeal cannot be taken unless additional information is
furnished.
25.3 A further faulty premise underlies the approach that, once such
additional information is provided, no decision will be taken on the
appeal if the outcome of the appeal will be affected by the very
same additional information – without which it was considered that
no decision could be made in the first place.
25.4 In that event, according to the Board’s procedure, the case is
referred back to the initial decision maker, in this case the Cape
Council. Precisely what the status and mechanism of such referral
back might be is unclear. Because the Appeal Board has taken no
decision, the original decision of the Council would of course still be
in place. Ordinarily, the effect of this would be to constitute the
Council as its own appeal or reviewing authority, a result which
directly affronts the operation of the functus officio rule. I set out
this conclusion subject to the provisions of clause 23(4)(d) of the
Main Agreement, with which I will shortly deal.
25.5 Conversely, if the additional information solicited by the Board will
not affect the outcome of the appeal, then the question presents
itself: why could a decision on the appeal not be taken in the
absence of such information.
25.6 A further fundamental difficulty arises from the procedure followed
by the Board, in relation to the application of the audi alteram
partem rule. As it is reflected in Ms Kelly’s affidavit, the process of
the Board gathering additional information appears not to be
accompanied by any collateral facility for pertinent representations
to be made by parties. Indeed, in this case, there was a direct
approach by the Board to the applicant. That appears to have been
entirely unilateral in nature.
25.7 That represents one face of the difficulty inherent in an appeal body
pursuing the acquisition of additional – and original – information.
The obverse is that if representations were to be received in relation
to additional information, the appeal body would to one or other
degree convert itself into a forum of first instance. If it then takes a
decision to refer the matter back, it will have taken up a position,
that might compromise it in the event of a subsequent appeal based
on the same information.
26 In short, the procedure that has been adopted by the Board is neither
compatible with the common law principles governing administrative
action, nor consistent with the particular provisions of clause 23(5)(c) of
the Main Agreement. In the present case, it has followed that procedure.
Although its request for audited statements was fruitless, it is clear that
this played an important if not decisive role in its decision to uphold the
appeal. For the reasons outlined above, its decision cannot stand.
27 There is a further ground on which the review must succeed. This arises
from the dichotomy between the grounds set out in the appeal notice
lodged by the third respondent. They are directed, in essence, to the
issues of shorttime and overtime. Those grounds raise factual questions
as to the extent of that work and its relationship to the financial capacity of
the applicant to pay bonuses. Even within its own paradigm of operation,
the Board made no attempt to obtain information in relation to those
questions. Its request for the last audited statements could patently not
assist it in relation to the complaints raised by the third respondent.
Likewise, the stated reasons for the Board’s decision as reflected in its
letter of 16 January 2002 (cited above) bear no direct or materially
discernible relationship with the grounds of appeal advanced by the
National Employees Trade Union. Prima facie those grounds were neither
considered nor decided.
THE RELIEF SOUGHT
28 The relevant part of the relief sought by the applicant in the event that the
Board’s decision be set aside is as follows: “… that the third respondent’s
appeal be remitted to the second respondent for fresh consideration, and
that the applicant and any other interested party be granted an adequate
opportunity to make such representations and submit such documentation
as they may see fit prior to any decision being made on the merits of the
appeal.”
29 Relief in those terms would reproduce the difficulties that I have already
set out concerning, in short, the conflation of an original and an appeal
jurisdiction, particularly insofar as it envisages the submission of such
fresh evidential material as the applicant or any other interested party
“may see fit .” Plainly, to the extent that the Board could ever receive
supplementary evidence, that would have to be limited and exceptional
and, in the normal way, subject to application and not as of unbounded
right.
30 In order to determine the appropriate relief, it is necessary to return to the
point of delivery of the ‘appeal’ letter from the third respondent on 6
December 2001. As I have already indicated, that letter purports to be a
request for the Cape Council itself to reconsider its grant of the exemption.
In appropriate circumstances, the Council and its regional committees has
the power to do so, in terms of clause 23(4)(d): “ The Council may
withdraw the exemption at its discretion .”
31 This provision and its implications were not fully argued before me and I
will give no definitive judgment on its purpose or scope. Nonetheless, it is
clear that the Council is empowered to revoke an exemption at its own
instance or on application to it. That is a power that is entirely
independent of the appeal mechanism contained in clause 23(5). It is by
no means an unfettered power and requires, as a minimum, that the
exercise of the discretion to act is not only in accordance with the ordinary
requirements of natural justice but also in a manner that is reasoned and
reasonable. Arbitrary withdrawals would be subject to challenge.
32 It is also clear that the exercise of this power would normally be in
consequence of new facts and circumstances relevant to the exemption
being placed before the Council. Those facts and circumstances might
arise after the decision to grant the exemption, with the result that the
exemption is no longer objectively justifiable, or they may have been
present before the decision but having been in one or other fashion
withheld from the Council’s consideration. In either of those eventualities,
it would generally be artificial and incompetent to submit the matter to the
Board as though it were an appeal.
33 In the context of those general remarks, there is an important lacuna in the
narrative of events that has been placed before me. That concerns the
timing of the third respondent’s complaint. It appears that the complaint
was made directly after the Cape Council’s approval of the exemption.
What is entirely unclear, however, is when the underlying facts arose. The
letter does not indicate when shorttime was stopped. It also does not
indicate when overtime was started. The applicant’s papers are similarly
silent on this aspect.
34 It follows that it is impossible for me to determine whether the third
respondent is raising new facts and circumstances, properly so described,
or whether it is raising facts and circumstances in existence at the time of
the granting of the exemption. Likewise, it is not apparent from the papers
whether or not these considerations were brought to the attention of the
Cape Council before it reached its decision and, collaterally, whether the
applicant was aware of this, were that indeed the position.
35 The upshot of this is that there is no demonstration through the papers
filed in this review that the first respondent has considered whether the
third respondent’s objections fall to be dealt with in terms of clause 23(4)
(d) or through some other process. Prima facie if the third respondent’s
letter does not deal with matters already placed before the Council, it is
difficult to see that it could give rise to an appeal in a manner appropriate
for the attention of the Board. Resultantly, it is my view that the Council
has not discharged a necessary preliminary function, being to evaluate
whether or not the provisions of clause 23(4)(d) should be addressed.
Instead of doing so, it has – on the face of what is before me – routinely
and incorrectly transmitted the third respondent’s letter to the Board as
though it were selfevidently an appeal. As already described, the Board
compounded the fault by routinely treating the letter as though it were
precisely that. It follows that the first respondent should be required to
address this matter in relation to clause 23(4)(d). Plainly, it is undesirable
that I should give any directions as to what should take place thereafter.
36 I make the following order:
1 The decision of the second respondent taken on 15 January
2002 to uphold an appeal against the exemption granted by the first
respondent on 6 December 2001 is hereby reviewed and set aside.
2 This matter is remitted to the first respondent for
consideration by it in relation to the provisions of clause 23(4)(d) of
the Main Agreement.
3 For that purpose, the applicant, the third respondent and any
other interested party may make representations to the first
respondent, which may include relevant documentation.
4 There is no order as to costs.
_______________________________
K S TIP
Acting Judge of the Labour Court
Date of hearing : 8 May 2003
Date of judgment : 27 June 2003
For the applicant : Adv G A Leslie, instructed by Bagraims
Attorneys