IN THE LABOUR COURT APPEAL COURT OF SOUTH AFRICA
HELD IN JOHANNESBURG
CASE NO.: JA37/2002
In the matter between:
NKANYISO EUSTACE BUTHELEZI APPELLANT
And
MUNICIPAL DERMACATION BOARD RESPONDENT
JUDGMENT
JAFTA AJA
[1] On 24 January 2000 the respondent appointed the appellant as a deputy manager in
charge of its financial operations. The contract of employment between the parties was for a
fixed term of five years, running from 24 January 2000 to 23 January 2005. On 22
November 2000 the respondent gave the appellant a notice of retrenchment. The notice
stated, inter alia, that the respondent had embarked upon an institutional restructuring
process in terms whereof certain positions could be rendered redundant. The notice gave
detailed reasons for the proposed restructuring and stated that the appellant’s post was one of
the three posts which could be redundant. The notice invited the appellant to respond to the
proposal made therein and furnish the respondent by not later than 27 November 2000 with
alternative suggestions to his possible retrenchment.
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[2] On 24 November 2000 the appellant responded to the notice by requesting an
extension of time within which he was required to make proposals for alternatives to the
proposed retrenchment. He also asked for certain information. He was granted an extension
of time up to 30 November to make his proposals. Meanwhile the appellant had instructed a
labour consultant to act on his behalf in the matter relating to the proposed retrenchment.
The consultant addressed a letter to the respondent suggesting that there be a consultation
meeting to deal with the matter. The respondent agreed that the parties meet on 6 December
2000 to consider alternative proposals from the appellant. At that meeting the appellant
placed his proposals before the respondent which were considered and discussed by the
parties.
[3] The respondent invited the appellant and another employee to apply for a different
vacant post within its structure. On 11 December 2000 the appellant and Mr Hillary Monare
(the other employee) were interviewed for the post. The appellant was unsuccessful while
Mr Monare was appointed to the post.
[4] On 13 December 2000 the appellant was served with a notice of dismissal with effect
from 28 February 2001 but he was required to vacate his office with immediate effect and
return the keys thereto to the respondent. In that notice the appellant was further informed
that the respondent did not require his services as from 13 December 2000. A dispute arose
between him and the respondent about the fairness of the dismissal. He referred that dispute
to the Commission for Conciliation, Mediation and Arbitration (“ the CCMA” ) for
conciliation. When conciliation became unsuccessful, the appellant approached the Labour
Court for the adjudication of the dispute and sought reinstatement together with payment of
compensation.
[5] The matter came before Brassey AJ in the Labour Court. In that Court the appellant
[5] The matter came before Brassey AJ in the Labour Court. In that Court the appellant
argued that the termination of his employment contract was substantively unfair by virtue of
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the fact that the parties had concluded a fixed – term contract of employment and that the
respondent could not terminate such contract for operational requirements during its
currency. The respondent disputed the contention that the appellant had been employed on a
fixed – term contract of employment. However, the Court a quo found that such agreement
had been concluded by the parties. The Court a quo also concluded that the appellant’s
dismissal was substantively unfair. It reasoned that the appellant’s dismissal during the
currency of the fixed–term contract rendered it substantively unfair. But it went on to find
the dismissal to have been, in other respects, substantively fair. For example, the Court a
quo found that, since the respondent had a fair reason to restructure its business, the
appellant’s retrenchment was, in this respect, substantively fair. The Court a quo also
concluded that the dismissal was procedurally unfair but “ not by reason of the manner in
which the restructuring was executed nor by reason of the manner in which [the
appellant] was selected for retrenchment, but by reason of the manner in which his
dismissal was effectuated which was unfair and constituted an invasion of his dignity.”
[6] Although the Court a quo fount that the dismissal was substantively unfair, albeit to a
limited extent, it concluded that the appellant was not entitled to compensation claimed in
respect of the period following the date on which he had allegedly committed an act of
misconduct which, in the opinion of the Court a quo , could have entitled the respondent to
dismiss him. In this regard reference was made to “ scurrilous accusations ” allegedly made
by the appellant against the respondent. The Court a quo held that, since the appellant had
committed an act of misconduct prior to the date on which the dismissal became effective
committed an act of misconduct prior to the date on which the dismissal became effective
(28 February 2001), he was not entitled to any compensation. As a result the appellant’s
claim for compensation was dismissed with costs. With the leave of the Court a quo , the
appellant now appeals against the whole judgement and order issued by that Court.
The appeal
[7] In essence, the appellant contended that the dismissal was substantively unfair
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because the respondent had no right in law to terminate the fixed term contract of
employment between them prior to the expiry of its term even if there were operational
requirements which could have justified a termination of contract for an indefinite period.
He also argued that the Court a quo , having found that the dismissal was substantively and
procedurally unfair, should have awarded him compensation. He further contended that the
Court a quo erred in finding that his retrenchment complied with the requirements of s 189
of the Labour Relations Act 66 of 1995 (“ the Act ”). On behalf of the respondent these
contentions were disputed and it was submitted that, where there are operational
requirements that would justify a dismissal, an employer is entitled to dismiss an employee
even if his contract of employment is for a fixed term. It was submitted on behalf of the
respondent that there was a fair reason for the dismissal of the appellant which were based
on the respondent’s operational requirements. It was further submitted on the respondent’s
behalf that in any event, even if the dismissal was unfair, the Court a quo’s decision that the
appellant should not be awarded any compensation was justified and correct.
Substantive unfairness
[8] The Court a quo’s finding to the effect that the parties had concluded a fixed – term
contract of employment is of critical importance to the adjudication of this appeal. That
finding was not challenged on appeal. This is significant because the enquiry into the
substantive fairness of the dismissal should proceed from the premise that the parties had
entered into a valid fixed – term contract of employment which was intended to endure until
January 2005 but was prematurely terminated in December 2000 by the respondent,
allegedly on grounds of operational requirements.
allegedly on grounds of operational requirements.
[9] The first question that arises in the present matter is whether the respondent was
entitled to terminate the employment contract between it and the appellant when it cancelled
it. There is no doubt that at common law a party to a fixed – term contract has no right to
terminate such contract in the absence of a repudiation or a material breach of the contract
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by the other party. In other words there is no right to terminate such contract even on notice
unless its terms provide for such termination. The rationale for this is clear. When parties
agree that their contract will endure for a certain period as opposed to a contract for an
indefinite period, they bind themselves to honour and perform their respective obligations in
terms of that contract for the duration of the contract and they plan, as they are entitled to in
the light of their agreement, their lives on the basis that the obligations of the contract will
be performed for the duration of that contract in the absence of a material breach of the
contract. Each party is entitled to expect that the other has carefully looked into the future
and has satisfied itself that it can meet its obligations for the entire term in the absence of
any material breach. Accordingly, no party is entitled to later seek to escape its obligations
in terms of the contract on the basis that its assessment of the future had been erroneous or
had overlooked certain things. Under the common law there is no right to terminate of a
fixed – term contract of employment prematurely in the absence of a material breach of such
contract by the other party.
[10] Faced with the common law position as stated above Mr Fabricius, who appeared for
the respondent, argued that the Court a quo did not appreciate the inroads made by the Act
into the common law. To illustrate his point, Mr Fabricius referred to the case of National
Automobile and Allied Workers Union v Borg – Warmer SA 1994(3)SA 15 (A). In that
case the Appellate Division observed that the Labour Relations Act 28 of 1956 had altered
the common law by recognising the relationship between an employer and an employee
beyond the termination of the contract of employment under the common law. In developing
his argument Mr Fabricius submitted that the Act has made significant inroads into the
common law by enlarging the definition of a dismissal to include a situation where an
employee reasonably expected an employer to renew a fixed – term contract on the same
terms but the employer renews it on different terms or refuses to renew it. He submitted
further that this magnanimity of the Act in relation to employees as demonstrated by the
extended definition of the word “ dismissal” should equally apply to employers. He
contended that a failure to do so would amount to inequality and unfair discrimination which
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are outlawed by s 9 of the Constitution. He also contended that the common law rule
referred to in paragraph [9] above should be developed in terms of s 39(2) of the
Constitution so as to create a lawful remedy for an employer whose business requires
restructuring during the currency of a fixedterm employment contract. He submitted that to
do this was necessary in order to ensure fairness to employers because otherwise they would
be precluded from dismissing employees who are on fixed term contracts even when there
are sound operational requirements warranting such dismissal.
[11] The answer to Mr Fabricius’ argument is a simple one. His argument is based on the
premise that the rule that parties to a fixed term contract should be held to such contract for
the duration of the term of the contract in the absence of any material breach of the terms of
such contract is unfair to an employer who wants to restructure his business before the
expiry of the term of such contract. If we are unable to uphold this premise, then the very
foundation of Mr Fabricius’ argument falls away. I have no hesitation in concluding that
there is no unfairness in such a situation. This is so simply because the employer is free not
to enter into a fixed term contract but to conclude a contract for an indefinite period if he
thinks that there is a risk that he might have to dispense with the employee’s services before
the expiry of the term. If he chooses to enter into a fixed term contract, he takes the risk that
he might have need to dismiss the employee midterm but is prepared to take that risk. If he
has elected to take such a risk, he cannot be heard to complain when the risk materializes.
The employee also takes a risk that during the term of the contract he could be offered a
more lucrative job while he has an obligation to complete the contract term. Both parties
more lucrative job while he has an obligation to complete the contract term. Both parties
make a choice and there is no unfairness in the exercise of that choice.
[12] It is true that labour legislation (including certain provisions of the Act) has amended
the common law in certain respects. However, it has not amended the general principles that
a fixed term contract may not be cancelled unilaterally during its currency in the absence of
a material breach of such contract. The case of BorgWarner and the provision in sec 186
which renders a failure to renew a contract of employment in certain circumstances to be a
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dismissal are only illustrations of the amendment of the common law in the specific areas
with which they are concerned and nothing more. To uphold Mr Fabricuis’ submission
would mean that the Act has amended the common law in regard to the principle under
discussion. Generally, our courts have declined to interpret a statute as taking away existing
rights unless that was the purpose intended by the legislature and that is expressed in clear
and unambiguous terms in the statute itself. In SA Breweries Ltd v Food & Allied
Workers Union and Others 1990(1) SA 92 (A) Smalberger JA said in part at 99F:
“There is a presumption against the deprivation of, or interference with, common law
rights, and in the case of ambiguity an interpretation which preserves those rights will
be favoured …”
[13] Although in SA Breweries Ltd the Court was concerned with interpreting the Labour
Relations Act of 1956, the principle it affirmed regarding the application of the presumption
to interpretation of statutes still applies. The presumption was recently applied in construing
the provisions of the Act in Fedlife Assurance Ltd v Wolfaardt 2002 (1) SA 49 (SCA) . In
this case Nugent AJA (as he then was) rejected the argument advanced by the appellant to
the effect that in codifying the rights and remedies in chapter 8, the current Labour Relations
Act (Act 66 of 1995) deprived employees of the common – law right to enforce the terms of
a fixed – term contract of employment. The learned Acting Judge of Appeal (with the
concurrence of Howie JA, Marais JA and Mpati JA) said at paragraphs [16][18]:
“[16] In consideration whether the 1995 Act should be construed to that effect it must
be borne in mind that it is presumed that the Legislature did not intend to interfere
with existing law and a fortiori not to deprive parties of existing remedies for wrongs
with existing law and a fortiori not to deprive parties of existing remedies for wrongs
done to them. A statute will be construed as doing so only if that appears expressly or
by necessary implication. While the advent of the Constitution, and s 39(2) in
particular, has not had the effect of prohibiting entirely the use of the presumption
against legislative alteration of the existing law (whether common law or statute) when
interpreting a statute which is less than clear, it nevertheless limits its field of
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application. The same is true of the presumption against the deprivation of existing
rights. To illustrate: where a statute is ambiguous as to whether or not an existing law
or right has been repealed, abolished or altered and the existing law or right is not in
harmony with the spirit, purport and objects of the Bill of Fights’ there would appear
to be no justification for invoking such presumption. But where the existing law or
right is not unharmonious the presumption will still find application. The continued
existence of the common law right of employees to be fully compensated for the damages
they can prove they have suffered by reason of an unlawful premature termination by
their employers of fixed term contracts of employment is not in conflict with the spirit,
purport and objects of the Bill of rights and it is appropriate to invoke the presumption
in the present case.
[17] The 1995 Act does not expressly abrogate an employee’s common law entitled to
enforce contractual rights nor do I think that it does so by necessary implication . On the
contrary there are clear indications in the 1995 Act that the Legislature had no
intention of doing so.
[18] The clearest indication that it had no such intention is s 186 (b), which extends
the meaning of ‘dismissal’ to include the following circumstances:
‘(A)n employee reasonably expected the employer to renew a fixed term contract of
employment on the same or similar terms but the employer offered to renew it on less
favourable terms, or did not renew it.’
It is significant that although the Legislature dealt specifically with fixedterm
contracts in this definition it did not include the premature termination of such a
contract notwithstanding that such a termination would be manifestly unfair. The
reason for that is plain: The common law right to enforce such term remained intact.
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And it was thus not necessary to declare a premature termination to be an unfair
dismissal. The very reference to fixed term contracts makes it clear that the Legislature
recognized their continued enforceability and any other construction would render the
definition absurd.” [Emphasis added]
[14] Without a clear indication from the Act that the legislature intended to alter the
common law rule relating to a premature termination of a fixed – term contract during its
currency, it cannot be contended that the Act has such effect. This view accords with the
presumption referred to above which can, however, be rebutted by the legislature in clear
and unambiguous terms ( cf Casely NO v Minister of Defence 1973(1) SA 630(A) at 640
AD).
[15] The contention by Mr Fabricius that it is inconsistent with the Constitution not to
accord employers the right to terminate fixed – term contracts of employment for operational
requirements while employees have in their favour the enlarged definition of dismissal has
no merit. I also find no substance in the argument that the common law rule, which says an
employee under a fixed – term contract of employment is entitled to enforce it, should be
developed in terms of s 39 (2) of the Constitution. Mr Fabricius did not specify which
section of the Constitution is in conflict with an employee’s common law right to enforce a
fixed – term contract of employment which has been terminated prematurely by the
employer. In this regard the arguments advanced by the respondent are seriously undermined
by the interpretation of the Act which was adopted in Wolfaardt’s case (supra). In that case
Nugent AJA stated instructively that the common – law right to enforce prematurely
terminated fixed – term contracts of employment was not in conflict with the spirit, purport
terminated fixed – term contracts of employment was not in conflict with the spirit, purport
and objects of the Bill of Rights and went on to say that such right remains intact. In the
circumstances I conclude that s 39 (2) of the Constitution cannot be invoked in the present
matter because the common – law rules we are dealing with here are consistent with the
spirit, purport and objects of the Bill of Rights.
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[16] In the light of the aforegoing I conclude that the respondent had no right in law to
terminate the contract of employment between itself and the appellant. Accordingly, the
termination of such contract before the end of its term was unfair and constituted an unfair
dismissal. The dismissal was accordingly substantively unfair in the fullest possible sense. I
say in the fullest possible sense because the Court a quo qualified its finding that the
dismissal was substantively unfair by saying that it was unfair in certain respects but in other
respects it was substantively fair. The qualification was wholly unjustified. In the light of the
conclusion I have reached on the substantive fairness, the question of procedural fairness
becomes academic in this matter. The operational requirements, if any existed, did not in law
give the respondent the right to terminate the contract of employment between the parties.
Compensation
[17] The Court a quo found that the appropriate compensation to redress substantive
unfairness was an amount equivalent to the remuneration the appellant would have been paid
for the balance of the contract period less the amount he obtained from other employment. It
calculated such amount to be equivalent to three months’ pay on the basis that the appellant
obtained a better paying job from another employer three months after his dismissal.
However, the Court eventually came to the conclusion that the appellant was not entitled to
such compensation because he had made certain “ scurrilous accusations ” against the
respondent.
[18] The Court a quo reasoned that the “ scurrilous accusations ” would have entitled the
respondent to dismiss the appellant for misconduct which meant that the appellant’s
dismissal could have been justified. The Court found that the accusations were made in an
dismissal could have been justified. The Court found that the accusations were made in an
affidavit deposed to by the appellant on 11 February 2001 and filed in support of a
condonation application lodged at the Commission for Conciliation, Mediation and
Arbitration (“ the CCMA ”) when he referred the dismissal dispute to that body for
conciliation. The Court a quo dealt with this issue in an ambivalent manner and stated:
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“At common law Buthelezi would be entitled to damages in the amount of three
months’ pay. I am not sitting as a common law court but sitting to consider the
question of compensation under the statute. What I discover is that if he had continued
in employment after the middle of December he would in any event have been
justifiably dismissed for misconduct in February by reason of the allegations that he
made in the application for condonation. That, though it is based on a set of speculative
or rather hypothetical premises, is nonetheless, it seems to me, an appropriate way to
consider what should be the moment at which (sic) at claim based on compensation
should properly be valuated. In those circumstances he gets nothing at all so far as the
equation with damage for breach of contract is concerned because he has got
everything he might otherwise have been entitled to, he having been paid until well
after 11 February.”
[19] I am unable to uphold the Court a quo’s refusal to award compensation to the
appellant. Firstly, the conclusion that the appellant could have been justifiably dismissed for
misconduct was based on speculation. Furthermore, the appellant having alleged in his
statement of claim that his dismissal was unlawful because it did not comply with the terms
of the employment contract which permitted only a dismissal for misconduct, the respondent
did not plead that the dismissal was justified by the appellant’s alleged misconduct
pertaining to averments made in the condonation application. Nor did it place evidence
before the Court a quo showing that it could have dismissed the appellant for such
averments. In fact in his testimony the respondent’s chairperson did not regard the
allegations as sufficiently serious to have warranted a dismissal.
[20] At the hearing of this appeal the parties were in agreement that the appellant could
only be entitled to compensation equivalent to three months’ salary because he was
employed elsewhere at a better salary three months after his dismissal. This proposition is
consistent with the approach adopted in Meyers v Abrahamsom 1952(3) SA 121(C). In
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that case Van Winsen J laid down the correct approach for computing damages for a
premature dismissal in the following terms at 127E:
“The measure of damages accorded such employee is, both in our law and in the
English law, the actual loss suffered by him represented by the sum due to him of the
unexpired period of the contract less any sum he earned or could reasonably have
earned during such latter period in similar employment.”
As both parties were agreed that this would be the correct approach, I propose to give effect
to it.
[21] There remains the issue of the purported cross appeal lodged by the respondent.
Although no order was issued by the Court a quo against the respondent, it filed a “ cross
appeal” against the f indings made by that Court on substantive and procedural unfairness
and the finding that the respondent had committed iniuria and insulted the appellant in his
dignity. The only order made in this matter was the one dismissing the claim with costs.
Appeals against judgements or orders of the Labour Court, which include crossappeals, are
regulated by s 166 of the Act. The relevant portion of the section reads as follows:
“(1) Any party to any proceedings before the Labour Court may apply to the Labour
Court for leave to appeal to the Labour Appeal Court against any final judgement or
final order of the Labour Court.”
[22] It is quite plain from the wording of s 166(1) that appeals and crossappeals can only
be noted and prosecuted against final judgements or orders. There can be no appeals against
reasons or findings in a judgement ( cf Pretoria Garrison Institutes v Danish Variety
Products (Pty) Ltd 1948 (1) SA 839 (A) and De Vos v Cooper and Ferreira 1999 (4) SA
1290 (SCA) at paragraph [17]). The decision in De Vos dealt with s 20 of the Supreme
Court Act 59 of 1959 which is couched in words similar to s 166(1) of the Act. In my view
Court Act 59 of 1959 which is couched in words similar to s 166(1) of the Act. In my view
the purported cross – appeal should be struck off the roll with costs. In the result the appeal
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must succeed.
[23] In the premises the following order is made:
[1] The appeal is upheld with costs.
[2] The crossappeal is struck off the roll with costs.
[3] The order of the Court a quo is set aside and replaced with the following order:
“(a) The applicant’s dismissal on 13 December 2000 is declared to have been
substantively unfair.
(b) The respondent is ordered to pay to the applicant an amount equivalent to three
months’ salary calculated at the rate of his pay at the time of his dismissal.
(c) The respondent is ordered to pay the applicant’s costs.”
__________________
JAFTA AJA
I agree.
_______________
ZONDO JP
I agree.
_______________
DAVIS AJA
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Appearances:
For the appellant : Adv. L. A. Cook
Instructed by : Lebea & Associates
For the respondents: Adv. H. J. Fabricius SC
Instructed by : Macrobert Inc.
Date of judgment : 22 September 2004
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