THE LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG
Reportable
Case numbers: JS 641/17
In the matter between:
RFS ADMINISTRATORS (PTY) LTD Applicant
and
SEAN LINDO SAMONS First Respondent
MARINETT DE FORTIER Second Respondent
MARIE JANSEN VAN RENSBURG Third Respondent
NATIONAL PENSION FUND FOR MUNICIPAL
WORKERS (“NPFMW”) Fourth Respondent
NATIONAL FUND FOR MUNICIPAL WORKERS
(“NFMW”) Fifth Respondent
Heard: 15 – 19 August 2022
Delivered: 30 August 2022
Summary: Section 77 (3) of the Basic Conditions of Empl oyment Act, No. 75
of 1997 referral. The applicant alleges a breach of an oral employment contract,
2
alternatively a breach of a Human Resources Policy accepted by the
respondents on 14 August 2014. It seeks a remedy of disgorgement on the basis
that its alleged employees earned extra income from entities it had “seconded”
them to. In the alternative, it seeks damages based on the alleged breach of
contract or conditions of employment. A section 77 (3) claim is a civil claim and
the principle of cost s following the results finds application. The section is
reserved for any matter concerning a contract of employment. A party seeking
to claim a remedy of disgorgement must prove all the elements applicable to the
remedy. If the remedy arises from a breach of a contract, the party claiming it
must prove (a) the alleged contract; (b) breach of that contract; and (c) the
causal connection between the breach and the remedy of disgorgement.
A party seeking contractual damages must prove and quantify the damages
allegedly suffered by it. The loss or damage must be because of the breach. The
applicant failed to prove the existen ce of an employment contract upon which
the remedy of disgorgement may be predicated. Similarly, the applicant failed
to establish the employment contract upon which the alleged contractual
damages are predicated. Held: (1) The applicant’s claim is dismiss ed. (2) The
applicant to pay the costs of the proceedings.
JUDGMENT
MOSHOANA, J
Introduction
[1] As an opening gambit , the parties to this dispute generated about nine lever-
arch files of documents1. Such created an impression that the matter is factually
complex. The transcript of these proceedings shall demonstrate that not all the
documents were referred to in evidence. It must follow that those documents
1 Too many trees died in vain.
3
that were not referred to in evidence were irrelevant to the dispute. Barring the
fact that the applicant’s primary relief (disgorgement) is not one that is
customarily sought in the Labour Court, the dispute is nothing but an ordinary
breach of contract claim. It is a referral made in terms of rule 6 of the Rules for
the Conduct of Proceedings in the Labour Court. The referral is made in
accordance with section 77 (3) read with 77A (e) of the Basic Conditions of
Employment Act 2 (BCEA). In terms of section 77 (3) the Labour Court has
concurrent jurisdiction with the civil courts to hear and determine any matter
concerning a contract of employment. Section 77A (e) mainly deals with the
issue of the relief. In precise terms, the relief sought by the applicant is couched
in the following terms:
“1. Payment in the sum of R492 000.00 as against the first respondent,
being for money received by the first respondent from the fourth and
fifth respondents during the period 1 July 2013 to 31 May 2016. As well
as payment in the sum of R317 967.95. Payment of interest a tempore
morae. Payment of costs on a punitive scale.
2. Payment in the sum of R78 356.84 as against the second respondent.
Payment of interest a tempore morae. Payment of costs on a punitive
scale.
3. Payment in the sum of R104 602.65 as against the third respondent.
Payment of interest a tempore morae. Payment of costs on a punitive
scale.”
[2] All the respondents cited in this matter duly oppose this claim . This Court
received viva voce evidence from five witnesses. Two of whom, namely Mr Du
Plooy (Du Plooy) and Mr Mphahlele (Mphahlele) testified on behalf of the
applicant. Three of whom , being the first respondent (Mr S L Samons)
(Samons); the second respondent (Ms M De Fortier) (Fortier); and the third
respondent (Ms M Jansen Van Rensburg) (Van Rensburg) testified in their own
defence. There was no relief sought against the remainder of the respondents;
defence. There was no relief sought against the remainder of the respondents;
namely the National Pension Fund for Municipal Workers and the National Fund
2 Act 75 of 1997.
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for Municipal Workers; hereinafter collectively referred to as the ‘Funds”. For
the purposes of this judgment, it is not necessary to recount all the evidence
tendered in this Court. The main witness for the applicant was Du Plooy. The
evidence of Mphahlele was of little or no value to the applicant’s case.
Background facts and evidence.
[3] Inasmuch as the witnesses gave a detailed background to the dispute, this
dispute turns on two periods; namely after September 2011 and June 2013.
There is no dispute that Samons, Fortier and Van Rensburg (the employees)
were in the employ of the applicant, RF S Administrators (Pty) Ltd (RFS)
effective from different periods. It is also not in dispute that at some point the
employees were ‘seconded’ to the Funds in order to perform some functions,
which may be described as “the Principal Office functions”. Relev ant to this
dispute on or about 1 July 2009, RFS’s predecessor entered into an
administration agreement with the Funds. On 25 August 2011 a similar
agreement, which was to commence on 1 September 2011 was concluded
between the Funds and the RFS. Key to thi s dispute is clause 4.11 of the
previously mentioned administrative agreement. It provided thus:
“4.11 Principal Officer, Secretarial Services and Meetings
The ADMINISTRATOR (RFS) will as part of this agreement and fees referred
to in terms of clause 6.23 remunerate the Principal Officer, the FUND Secretary
and Personal Assistant to the Principal Officer. The persons as above shall be
appointed by the FUND with the approval of the ADMINISTRATOR and the
FUND shall notify the REGISTRAR of the appointment of the Principal Officer.
[4] On or about 25 July 2011, and prior to the abovementioned administrative
agreement concluded on 25 August 2011, Samons penned an important
missive to the Executive Committee of the Fund. In effect, he raised a concern
3 Clause 6.2 reads “Fees for the Standard Administrative Services shall be an amount equal to 1.20%
(ONE comma TWO ZERO PERCENT) of the total monthly salaries of all the members of the FUND,
inclusive of VAT thereon.”
5
about the independence of the office of the Principal Officer of the Fund. After
having sketched the relevant background he stated amongst other things that:
“To further eliminate the concern of my ind ependence and to change the
procedure in line with the operation of how the bigger competitive funds
operate, the Executive Committee has requested that I consider changing my
employment contract to also be directly with the fund. I have agreed to such,
on condition that my benefits and conditions at least remain the same. I attach
hereto a draft employment agreement for consideration.”
[5] On 3 August 2011, Samons attended the Exco meeting of RFS. Importantly,
the minutes of that meeting recorded the following:
“6 Principal Officer Employment Contract
SS (Samons) informed the meeting that the trustees are adamant that the
Principal Officer should be employed by the fund and not by the administrator
as is currently the case. The stated reason is independen ce. The salary
administration will still be done by RFS.
[6] On the version of Samons, that is when he resigned with his last day of service
as 31 August 2011. On Du Plooy’s version the above recorded was given for
information purposes only and it was simply ignored by the Exco of RFS.
[7] As indicated earlier on 25 August 2011, the new administrative agreement was
concluded. Of significance, on the same date, Samons concluded an
employment agreement with the Funds. Later on, on 14 August 2014 Samons
signed a d ocument styled Human Resources Policy. On the same day, he
signed a document styled Addendum to the HR Policy. Of significance, the
addendum recorded the following:
“The conditions contained in this addendum supersedes the conditions
contained in the RFS Administrators (Pty) Ltd HR Policy and is specific to
employees seconded to the office of the Principal Officer for National Fund for
Municipal Workers (NFMW).”
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[8] Van Rensburg and Fortier also signed the document styled Human Resources
Policy and the addendum on the same date. Du Plooy gave detailed evidence
that RFS had paid remuneration of the employees and handled almost all
human resources functions in respect of the employees. The employees do not
dispute that. They effectively state that such an arrangement arose because of
clause 4.11 of the administration agreement.
[9] It remained undisputed that around 2013, Fortier was transferred from RFS and
was provided with an appointment letter for the Funds. Persistently, Du Plooy
testified that the employe es remained in the employment of RFS. Whilst the
employees and Du Plooy are in agreement that for the period 2009 up to and
including 31 August 2011, there was an employment relationship at the back
end of the so -called “ secondment agreement ”, Du Plooy on t he one hand
persistently testified that that employment relationship persisted until 29
February 2016 for Fortier and Van Rensburg and until May 2016 for Samons.
The version of the employees is that on 1 September 2011, Van Rensburg and
Samons ceased employment, and Fortier ceased employment in 2013.
[10] Both Fortier and Van Rensburg tendered resignations letters to RFS. On Du
Plooy’s version, the resignation letters spelled the end of the employment
relationship. On the version of both, as advised, the letters sought to terminate
the human resources services, which were rendered pursuant to clause 4.11 of
the administration agreement.
[11] Around 2015, the trustees of the Funds took resolutions to remunerate the
employees some bonuses. The amou nts now claimed by RFS were paid as
bonuses to the employees . On Du Plooy’s version those amounts were
received secretly and without the consent of RFS. As confirmed by Mphahlele,
the finance department of RFS was aware of the payments since RFS was
administering payments on behalf of the Funds. On the evidence of Du Plooy,
administering payments on behalf of the Funds. On the evidence of Du Plooy,
the payments were received in breach of the employment contract s
alternatively the provisions of the HR Policy. Had he known that the employees
received the bonus payments, he would have not paid them sal aries for three
7
months. On or about 18 August 2017 RFS referred the present dispute in terms
of section 77 (3) of the BCEA to this Court for adjudication.
Argument
[12] This being a trial action, the Court listened to oral submissions immediately after
the delivery of viva voce testimony and extensively debated with the legal
representatives of the parties. Both representative s sought to be afforded an
opportunity to finalise their written submissions. Indeed, on 22 August 2022,
both representatives armed this Court with very useful written submissions to
aid this Court to pen this judgment. Only the salient points will be addressed in
this part of the judgment. The rest of the submissions shall be referred to as
and when it becomes essential in the body of this judgment.
[13] In summary, Mr Mosam SC appearing with Ms Odendaal for RFS correctly
submitted that the key issue in this matter is whether there was an employer
and employee relationship between RFS and the employees at the time the y
received the bonus payments from the Funds. Relying on the decision of the
Supreme Court of Appeal in the matter of Ganes and Another v Telecom
Namibia Ltd 4, Mosam SC correctly submitted that an employee owes an
employer a duty of good faith. That duty encapsulates a duty not to make secret
profits in the course of the employment by virtue of holding a position as an
employee. Correctly, an employer is entitled to claim from an employee a profit
made secretly. After placing an interpretation on certain recordal of the minutes,
he submitted that the contention that Samons resigned from RFS should be
rejected.
[14] With regard to the two ladies, he submitted that because they sent the
resignation letters, they remained employees of RFS until 2016. To a large
degree, Mosam SC emphasised that the evidence of Du Plooy was
unchallenged. Because of which he drew certain conclusions. He turned to the
4 2004 (3) SA 615 (SCA).
8
HR Policy. He quibbled with the word supersede as employed in the addendum
and submitted that all it meant to convey is an amendment of the HR Policy.
[15] With regard to the payments to the employees by the Fund, he placed emphasis
on the fact that RFS did not give consent to receive the payments and such fact
remained undisputed. With regard to the key question of the existence of an
employer and employee relationship, he placed reliance on the decision of the
Labour Appeal Court in SITA (Pty) Ltd v CCMA and others5. He sought to apply
the test in SITA on what he labelled ‘unique factual matrix’ of this case. Thus,
he emerged with a submission that the employees remained the employees of
RFS and they were such at the relevant time.
[16] In disputing the resignation of Samons, he placed reliance on section 37 (4) of
the BCEA which requires notice of termination of employment to be in writing.
He placed reliance o n the decision of TAWU and others v Natal C o-operative
Timber Ltd6. He referred to the employment contract of Samons as a ‘purported
contract of employment’ . He submitted that the terms of that employment
contract are in direct breach with the secondment agreement.
[17] With regard to the remedy of disgorgement, he placed reliance on the case of
Phillips v Fieldstone Africa (Pty) Ltd and another 7. He emphasised the lack of
consent by RFS. He ultimately submitted that the employees breached their
fiduciary du ty, which is a breach arising from an employment contract 8, in
particular the secondment agreement. Ultimately, he submitted that RFS is
entitled to disgorgement of the profits received by the employees. He made no
pertinent submissions on the issue of damages.
[18] On the othe r hand, Mr Van Der Walt SC who appeared on behalf of the
employees addressed the key issue of employer and employee relationship.
He submitted that the definition of an employee in section 1 of the BCEA is of
He submitted that the definition of an employee in section 1 of the BCEA is of
significance. He submitted that over analysing insignificant inconsistencies like
5 (2008) 29 ILJ 2234 (LAC).
6 (1992) 13 ILJ 1154 (D).
7 2004 (3) SA 465 (SCA).
8 In support of the submission, he relied on Rand Water v Stoop and others [2013] 2 BLLR 162 (LAC).
9
the lack of formal letter of resignation would serve no purpose at all. He
submitted that based on the overall objective assessment of the fact s, the
probabilities are that the employees were in the employ of the Funds when the
undisputed bonus payments were made.
[19] With regard to the remedy of disgor gement, he submitted that two elements
must exist in order to successfully claim the remedy; namely (a) fiduciary
relationship; and (b) the profit must have been made in secret. He submitted
that the employees did not owe a fiduciary duty and there was no element of
secrecy when the payments of the bonuses were made. He addressed the
damages issue and submitted that the payments to the employees did not
constitute damages. There was no causal nexus established between the
alleged breach and the damages. Ult imately, he submitted that RFS failed to
prove its claim and the claim must be dismissed with an ordinary costs order,
since the Labour Court sat determining a civil claim.
Evaluation
[20] As outlined above this is a typical breach of contract claim. In terms of the pre-
trial agreement between the parties, this Court is called upon to determine
effectively three issues; namely;
1 Whether the first, second and third respondents, at all times material to
the payments, which for m the subject matter of the app licant’s claim
were employed by the applicant;
2 If it be found that a contract of employment did in fact exist between the
applicant and the first, second and third respondents, at the time the
aforesaid payments were allegedly made by the fourth and fifth
respondents to the first, second and third respondents they were made
and received in breach of such employment contracts, and as such
whether they constituted secret profits, and whether or not the applicant
is entitled to claim such payments as damages suffered by it.
3 Whether in any event the applicant gave its free consent in respect of
3 Whether in any event the applicant gave its free consent in respect of
any payments made by the fourth and fifth respondents to the first,
second and/or third respondents.
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4 Whether the applicant’s claims have been instituted purely in an attempt
to harass the respondents9.’
[21] In order to decide these issues, it is important to make a sojourn to the
statement of case and response (“pleadings”).
The applicant’s stated case.
[22] For the purposes of this judgment, the relevant portions of the sta tement case
provides as follows:
“12. During or about November 2007, the applicant represented by C J du
Plooy and First respondent acting personally, concluded an oral
agreement of secondment in terms of which the applicant seconded the
first respondent to the Funds to perform the functions of Principal Officer
of the Funds. Notwithstanding such secondment, the first respondent
remained an employee of the applicant on the following express,
alternatively, implied, further alternatively, tacit terms:
12.1 …
12.2 …
12.3 …
12.4 The first respondent would not without the applicant’s permission be
entitled to earn any further remuneration or bonuses from the Funds.
16. During or about May 2013, the applicant repre sented by C J du Plooy
and second respondent acting personally, concluded an oral agreement
of secondment in terms of which the applicant seconded the second
respondent to the Funds to perform the functions of a professional
assistant to Principal Officer (first respondent) of the Funds.
Notwithstanding such secondment, the second respondent remained
9 No evidence was tendered in support of this allegation. It seem irrelevant to the case of either of the
parties before me.
11
an employee of the applicant on the following express, alternatively,
implied, further alternatively, tacit terms:
16.1 …
16.2 …
16.3 …
16.4 The second respondent would not without the applicant’s permission be
entitled to earn any further remuneration or bonuses from the Funds.
20. During or about 2001, the applicant represented by C J du Plooy and
third respondent acting personally, concluded an oral agreement of
secondment in ter ms of which the applicant seconded the third
respondent to the Funds to perform the functions of a secretary of the
Funds. Notwithstan ding such secondment, the third respondent
remained an employee of the applicant on the following express,
alternatively, implied, further alternatively, tacit terms:
20.1 …
20.2 …
20.3 …
20.4 The third respondent would not without the applicant’s permission be
entitled to earn any further remuneration or bonuses from the Funds.
[23] In respect of all the employees, RFS alleged as an alternative to the alleged
terms that they agreed to the HR Policy that contained an obligation to declare
any interest in any other organisation that could potentially offer them financial
benefit. With regard to the breach , RFS alleged that the emp loyees breached
their employment contract by accepting the additional remuneration. In the
alternative, they breached clause 4 of the HR Policy by failing to declare that
they received additional remuneration.
[24] Regard being had to the stated case, the appl icant is bound to a case to the
effect that in receiving the bonuses, the employees breached the oral terms of
the employment contract, in particular that as employees, they would not
without permission be entitled to earn any further remuneration or bonuses from
the Funds, alternatively that they breached the HR Policy by failing to declare
those remunerations.
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Respondents’ response.
[25] It is cardinally important to point out that in the Labour Court there are no
pleadings in action proceedings contemplated in Rule 6 . Thus, a statement of
response does not assume a shape or character of a plea in terms of the
Uniform Rules and it is not a plea. Rule 6 (3) of the Labour Court Rules defines
a response as a document containing the same information required by subrule
(1). In terms of subrule (1) (b) (ii) and (iii), what is required is a clear and concise
statement of the material facts on which a party relies. The statement must be
sufficiently particular. A clear and concise s tatement of the legal issues that
arise from the material facts, which statement must be sufficiently particular. On
the other hand rule 22 (2) of the Uniform Rules provides that the defendant shall
in his plea either admit or deny or confess and avoid all the material facts
alleged in the combined summons or declaration or state which of the said facts
are not admitted and to what extent, and shall clearly and concisely state all
material facts upon which he relies. It is true that this is a civil matter, however,
it is a matter initiated in the Labour Court and not the High Court. Throughout
the trial, Mr Mosam SC kept on reminding this Court and the respondents that
they are bound by their pleadings. As stated above, t here are no pleadings in
a stricto sensu in the Labour Court.
[26] In the Labour Court, what binds the parties before a trial resumes is the
consensual document called a pre -trial minute10. It constitutes an agreement
out of which neither party may resile. Since the statement of response is not a
plea, it was not required of the respondents to, admit, deny, confess or avoid
any of the material allegations made by the applicant. Therefore, it cannot be
correct to remotely suggest that the terms of the oral agreement alleged by RFS
are admitted. As one of the legal issues, the respondents clearly and concisely
are admitted. As one of the legal issues, the respondents clearly and concisely
stated that the first issue that arises is whether or not an employment contract
existed at the relevant times between the parties. Inasmuch as Mr Van der Walt
SC for the respondents made a leg al concession that, the terms of the oral
agreement have been admitted from 2009 – 2011 and not thereafter, that legal
10 See: Telkom SA SOC Ltd v Van Staden and Others (2021) 42 ILJ 869 (LAC) at para 16.
13
concession is wrong in as far as the statement of response read with the pre -
trial minutes is concerned. Accordingly, it is not binding on this Court. What the
statement of response spectacularly allege is that on 1 September 2011, both
Samons and Van Rensburg ceased to be employees of RFS. In respect of
Fortier the employment relationship ceased on 1 June 2013.
[27] A pre-trial document is a crucial document pre -hearing of evidence. Although
the parties in this matter were admirably and expertly represented, they failed
to dextrously set out facts which are common cause as required by rule 6 (4)
(b) (ii) of the Labour Court Rules. In the Court’s view, the pre-trial minute filed
in these proceedings is woefully deficient. Nowhere has it been set out as being
common cause the terms of the oral agreement as alleged by RFS. If RFS
wished an admission of the alleged terms to be common cause, it should have
insisted on its recordal as such in the pre-trial minutes. Having not done that, it
behoved RFS to establish the contract it predicates its claim on and all its terms
through evidence. As it shall be demonstrated la ter, the applicant’s only
relevant witness, Du Plooy failed to discharge the onus to establish the oral
agreement and its terms.
Was there an employment relationship at the relevant time?
[28] In order to answer this question, owing to the fact that the applicant invoked the
jurisdictional powers of this Court under section 77 (3) of the BCEA, this Court
must have regard to the definition of an employee in section 1 of the BCEA. In
terms thereof, an employee means any person excluding an independent
contractor, who works for another person or for the State and who receives, or
is entitled to receive any remuneration and any other person who in any manner
assists in carrying on or conducting the business of an employer and
“employed” and “employment” have a corresponding meaning.
“employed” and “employment” have a corresponding meaning.
[29] In relation to RFS, after the so -called secondment, it does not appear that the
employees fitted the definition of an employee. Although both parties were
content with referring to what became in 2009 as a secondment, actually,
Samons was appointed statutorily and effectively no longer carried on with the
14
legal functions he was appointed for, for the benefit of RFS. In performing the
statutory functions, Samons effectively worked for the Funds and not RFS.
Similarly, when Van Rensburg and Fortier started performing functions for the
Funds, they ceased to fit the definitional requirements of an employee. To be
an employee, that person must (a) work for another person (RFS) and (b) must
receive remuneration in return for the work or (c) mus t assist in carrying on or
conducting the business of an employer (RFS). On the uncontested evidence,
the Principal Officer office served the Funds and not the service provider (RFS)
of the Fund s. In terms of section 8 ( 1) of the Pensions Fund Act 11, a fund is
obliged to have a Principal Officer.
[30] This Court agrees with Mr Van der Walt SC , that in effect w hat RFS did was
labour broking as opposed to a secondment. Labour broking happens when a
Temporary Employment Services (TES) provides labourers to client companies
on a temporary basis. Grammatically, the term secondment means a temporary
transfer of an official or worker to another position or employment. It is actually
an agreement between the employer and the host (another entity) in terms of
which an employer is allowed to assign an employee to another organisation
for a specified duration for the purposes of developing good business
relationships, enhancing an employee’s particular skill set or for sharing the
particular expertise of that employee with the host company. Nevertheless, on
the uncontested evidence, and as clause 6.2 of the administration agreement
provides, the fee payable to RFS by the Funds is for the Standard
Administrative and Accounting Services. It became common cause that out of
the fees the salaries of the employees wa s payable. This evidence simply
implies that the employees received or were entitled to receive remuneration
from the Funds. Clause 4.11 of the administration agreement makes it plain
from the Funds. Clause 4.11 of the administration agreement makes it plain
that the fees encapsulate the remuneration of the employees.
[31] The fact that RFS paid remuneration to the employees administratively does
not suggest that the employees received their remuneration from RFS. Du
Plooy testified that the 1.2% constituted its income. Based on 6.1 what must be
11 No. 24 of 1956.
15
regarded as an income of RFS should be the Standard Administrative and
Accounting services. Either way, in terms of clause 4 of the employment
contracts of Samons, the Funds were liable to pay him remuneration.
[32] The conclusion this Court reaches is that on the evidence before it, the
employer and employee relationship ended when the employees worked for the
Funds and were remunerated or entitled to be remunerated by the Funds. The
fact that administratively, RFS managed the finances and the human resources
requirements of the Principal Officer’s office does not suggest that the
employment relationship continued.
Was there a fiduciary relationship?
[33] As indicated above, Mosam SC submitted that the fiduciary relationship arises
from the secondment agreement. According to Du Plooy, the secondment
agreement was an oral one. He became extremely ambivalent when he testified
about the terms of that oral agreement. As indicated above , this Court is not
satisfied that a true secondment agreement came into being. The general
principle is that for fiduciary duties to arise, there must, within the particular
relationship concerned, be specific contractual obligations, which the employee
has undertaken which have placed him in a situation where equity imposes
these rigorous duties in addition to the contractual obligations. 12 The Court of
Appeal in Helmut Integrated Systems v Tunnard 13 stated that it is now
commonplace to observe that not e very employee owes obligations as a
fiduciary to his employer.
[34] The prevailing view therefore is that all employees do not necessarily or
automatically owe fiduciary duties to their employers. Circumstances may arise
in the context of an employment relatio nship, or arising out of it, which, when
12 University of Nottingham v Fishel [2000] ICR 1462. See also Kathy Idensohn: Some Issues in
Relation to the Incidence of Common Law Fiduciary Accountability in Relationships of Employment
(2022) 43 ILJ 1.
(2022) 43 ILJ 1.
13 [2006] EWCA Civ 1735 para 37.
16
they occur, will place the employee in the position of a fiduciary 14. Whether an
employee has placed himself or herself in a position where he must act solely
in the interest of his employer will depend on the terms of employment and the
nature and purpose of the employee’s functions, duties, and responsibilities. In
casu, the office of the Principal Officer is statutory in nature and solely serve
the interests of the Funds.
[35] Under the circumstances, it cannot be sai d that RFS placed any form of
reliance15 on the employees serving as an office of the Principal Officer for the
Funds. On the facts of this case, RFS failed dismally to demonstrate a fiduciary
duty on the part of the employees. In September 2011 and June 2013
respectively, the employees severed the umbilical cord between themselves
and RFS. Accordingly, they owed no fiduciary duties to RFS.
Was there a contract of employment at the relevant dates?
[36] It is worth emphasizing that an employer and employee relationship may exist
without an em ployment agreement. An employment agreement is concluded
for the purposes of setting out the terms of an employer and employee
relationship. Although an oral agreement is acceptable in law, a written
agreement is preferable since it makes proving of the terms much easier. RFS
alleges an oral agreement. Thus, it bears the onus to prove the existence of the
oral contract and its terms. The elements of a cause of action for breach of
contract are (a) the existence of a contract and (b) the breach of a term of that
contract. On establishing the existence of the contract, Du Plooy testified about
the secondment agreement in 2007 in respect of Samons. He testified that the
terms of that secondment agreement were that Samons must go over to the
Funds, act in good faith, and there was no additional remuneration for him. With
regard to the ladies (Fortier and Van Rensburg) , he referred to the same oral
regard to the ladies (Fortier and Van Rensburg) , he referred to the same oral
secondment agreement and terms. Later in his testimony, he vaguely alluded
14 Fishel at 1496.
15 See Volvo Southern Africa (Pty) Ltd v Yssel 2009 (6) SA 531 (SCA).
17
to an oral employment contract its terms b eing that the employees are not
entitled to earn extra income and if they do, they must pay it over to RFS.
[37] On the version of Du Plooy, the alleged contracts (secondment and
employment) and their alleged terms continued until February 2016 and May
2016 re spectively. On the employees’ version, the oral employment and
secondment agreements ended on 1 September 2011 and 1 June 2013
respectively. Although Du Plooy was not sufficiently challenged on the alleged
oral contracts and the terms thereof, the respondents disputed the existence of
any employment contract after 1 September 2011 and 1 June 2013
respectively. In this regard, this Court is faced with two conflicting versions. The
only way to resolve the conflict is to employ the technique suggested in
Stellenbosch Farmers' Winery Group Ltd and another v Martell and Cie SA and
others16. Before this Court ventures into that balancing exercise, it must be
stated that the onus lies on RFS to establish the existence of a contract and its
terms – he who alleges must prove17. In order to sue based on a contract, such
a contract must be extant.
[38] In law, there are about six instances where a contract may be regarded as
having been terminated. Those are; (a) where one party is in breach of contract
entitling the other party to cancel the agreement (repudiation); (b) where one
party is entitled to rescind by reason of the other party’s misrepresentation,
undue influence or duress (rescission) ; (c) where a contract is void by reason
of mistake, non est factum – that is not my doing; or Statute; (d) where the
parties agree to bring the contract to an end (mutual discharge); (e) where the
contract provides for termination in the event of force majeure (force majeure);
and (f) where some unforeseen event prevents the parties from performing the
contract (frustration).
[39] On the facts of this case, it is clear that the employees must have repudiated
[39] On the facts of this case, it is clear that the employees must have repudiated
their alleged employment contracts or there was a mutual termination thereof .
16 [2002] JOL 10175 (SCA).
17 Pillay v Krishna and Another 1946 AD 946.
18
When the Exco of RFS was informed that the Principal Officer should be
employed by the Funds, by word and by deed, the employ ees unequivocally
demonstrated an intention to not be bound by their employment contracts with
RFS. On 25 July 2011, Samons indicated that he had already agreed to the
suggestion of the Executive Committee of the Funds to change his employment
contract. It is settled law that resignation is a unilateral act that does not require
acceptance by an employer party 18. The decision of Datacolor International
(Pty) Ltd v Intamarket (Pty) Ltd19 remains the leading authority when it comes
to what repudiation of an agreement is. The Court there held:
‘Repudiation is accordingly not a matter of intention, it is a matter of perception.
The perception is that of a reasonable person placed in the position of the
aggrieved party. The test is whether such notional reasonable person would
conclude that proper performance (in accordance with a true interpretation of
the agreement) will not be forthcoming…The conduct from which the inference
of impending non -performance is to be drawn must be clear -cut and
unequivocal, i.e. not equally consistent with any other feasible hypothesis.
Repudiation, it has often been stated, is a ‘serious matter’ …requiring anxious
consideration and – because parties must be assumed to be predisposed to
respect rather than to disregard their contractual commitments – not lightly to
be presumed.’
[40] The most common cause of discharge or termination is performance. Where
there is a clear -cut impending non-performance, the other party performing in
that manner indicates unwillingness to be bound by the agreed terms . It is
indeed so that repudiation affords the aggrieved party an election to either
accept the repudiation cancel and sue for damages or insist on performance
and where necessary seek the remedy of specific performance. When the
actions of Samons and the other employees became clear to no longer be
actions of Samons and the other employees became clear to no longer be
bound by the agreed terms, D u Plooy simply ignored the situation and did not
insist on specific performance. It was clear that regard being had to the conduct
18 See: Toyota SA Motors (Pty) Ltd v CCMA and others (2016) 37 ILJ 313 (CC).
19 2001 (2) SA 284 (SCA) at p. 294 F – 295 B.
19
of the employees that they do not intend to repent from their evinced inte ntion
to no longer be bound to the employment terms with RFS. The Supreme Court
of Appeal (SCA) in Basson and Others v Hanna20, stated the following:
“[19] Objectively viewed, Basson’s actions after 7 June 2007 constituted
conduct from which the only reasonable inference that could be drawn
was that he did not regard himself bound by the agreement and that he
was not prepared to perform its terms21.
[41] Accordingly, this Court must accept that the employees repudiated the oral
employment contracts and Du Plooy must have accepted the repudiation, since
he did not insist on specific performance, despite the conduct of the employees
objectively viewed evincing unequivocally not to be bound by the contractual
arrangements with RFS . Termination happened in law. Repudiation happens
by deed or conduct. Even though Samons did not submit a formal written
resignation, by his conduct – agreeing to the proposal of the Executive
Committee, verbalising his intention at the Exco meeting and concluding a
written contract of employment with the fund – he clearly evinced an intention
to not be contractually bound to RFS. Section 37 (4) of the BCEA does not
suggest that for termination to happen same must be in writing only. The section
deals with notification as opposed to an act of termination.
[42] Where an employer like RFS, is faced with persistent repudiation, it seems
foolhardy in my view, for that employer to hold a view that the employment
relationship persists. Particularly in an instance where the employee no longer
performs the functions ben eficial to an employer. It is undisputed that from 1
September 2011, Samons and Van Rensburg no longer performed services for
the benefit of RFS. It is also undisputed that from 1 June 2013, Fortier no longer
performed services for the benefit of RFS. Most importantly, other than being a
conduit, RFS was not remunerating or contractually obliged to remunerate the
conduit, RFS was not remunerating or contractually obliged to remunerate the
employees. No reasonable employer can accept an employment relationship
20 2017 (3) SA 22 (SCA) at para 19.
21 See also: Nash v Golden Dumps (Pty) Ltd 1985 (3) SA 1 (A) at 22D-F.
20
where the employer does not consume services. It must be so that by failing to
perform services for the benefit of RFS, the employees unequivocally
demonstrated by deed and conduct to no longer be bound contractually. As
indicated, repudiation puts the innoce nt party to an election. Making of an
election happens in my view by conduct or by word. On the facts of this case,
when Du Plooy approved that the employees be appointed by the Funds , the
COO transferring Fortier, RFS was making an election to accept what was a
clear repudiation of the employment arrangement. The law is clea r and
undisputed that an election once made cannot be retracted. 22 Having once
elected to treat a contract as having been repudiated by the other party, the
aggrieved party cannot of his own volition revive his right to treat the contract
as still being in force.23
[43] On the probabilities, the version of the employees that on 1 September 2011
and 1 June 2013, the employment contract s terminated is supported by other
objective evidence (the contract of employment signed by Samons on 25
August 2011, the transfer and the appointment letters in 2013, RFS approved
their appointment by the Fund as set out in clause 4.11 of the administration
agreement and that the employees did not perform any functions for the benefit
of RFS). On the other hand, it is improbable that the so -called secondment
agreement continued after 2011 and 2013 respectively. Surely if Du Plooy had
wished to keep the terms of the employment agreement alive, he could have
rejected the idea of the Executive Committee of the Fund the moment he got
wind of it, which was on 3 August 2011. The transfer letter of Fortier signed by
the COO of RFS makes it plain that the position is transferred to the Principal
Officer of the Fund. Nowhere does the transfer letter state that the terms of the
oral employment agreement with RFS remains intact.
[44] This Court must deal with the issue of the “resignation” letters by Van Rensburg
[44] This Court must deal with the issue of the “resignation” letters by Van Rensburg
and Fortier. It is because of their resignation letters that Du Plooy testified that
22 See: Culverwell and another v Brown 1990 (1) SA 7 (A), Nash v Golden Dumps (Pty) Ltd 1985 (3)
SA 1 (A) and Primat Construction CC v Nelson Mandela Bay Metropolitan Municipality 2017 (5) SA
420 (SCA).
23 See: Macnaughton v Stone 1949 Can LII 117 (ON SC), Saunders v Multi Builders Ltd 1981 CanLII
768 (BC SC).
21
they remained e mployees of RFS until 2016. It is common cause that at the
time the resignation letters were penned, the pair were exclusively performing
functions for the Funds. Resignation is a unilateral act on the part of an
employee terminating an employment relation ship or contract. The authorities
have it; it requires no acceptance by an employer. Logic dictates that where an
employment relationship or contract terminated earlier, terminating it again
must be regarded as a step pro non scripto. In Arafdien v Soeker24 the Court
usefully suggested that a meaningless term must be regarded as pro non
scripto. In Arafdien, an offer to purchase contained a term that the offer must
be accepted before a stipulated time. At the time the offer was made, the
stipulated time had passed. The Court correctly held that that term containing
a passed stipulated time must be regarded as pro non scripto as it became
meaningless.
[45] There is a saying that certain things are only worth the paper written on them.
This expression simply implies that although it has been written down and
seems official, it is in fact worthless because what has been promise d will not
be done. The pair promised that by the end of February 2016 they will terminate
their employment with RFS. That promise could not have seen the light of day
because at the time when the promise was made, there was no longer an
employer and employee relationship between the pair and RFS. Elsewhere25,
RFS had given a legal undertaking that the persons (Principal Officer, Secretary
and Personal Assistant) shall be appointed by the Fund with its approval. It
must be stated that the support staff (Secretary and Personal Assistant) are not
statutory appointments. When RFS approved their appointment, that simply
meant it approved that they shall work for the Funds. Any argument to suggest
that the provisions of clause 4.11 does not suggest termination of employment
is rejected.
that the provisions of clause 4.11 does not suggest termination of employment
is rejected.
[46] The pair testified that they penned the resignation letters in order to signify their
intention to terminate the human resources services, which were still pr ovided
24 1982 (2) SA 570 (C).
25 Clause 4.11 of the administration agreement.
22
by RFS at that time. Mosam SC sought to make a riveting hoo-ha about the
contents of the minutes of the board of trustees of the Fund held on 19 February
2019. The minute recorded the following:
“4.4.2 Employment agreements: NFMW staff
It was resolved that
(i) Entering of employment agreements between the fund and Ms Jansen
van Rensburg and Ms M de Fort ier be approved, subject to the
following:
1 Following of normal compliance processes in respect of
agreements.
2 The employment conditions and remuneration will be on
the same basis as their current employment with RFS
Administrators.”
[47] Mosam SC placed heavy emphasis on the words “ current employment with
RFS Administrators ”. Factually as at this stage, the appointment of the two
ladies was made to the Funds with the approval of RFS, in 2011 in respect of
Van Rensburg and in 2013 in respect of Fortier. As a matter of fact, as at that
time, the pair signed the HR Policy and the addendum . As at that time, the
arrangement was that RFS pays the employees’ remuneration on the strength
of the extant administrative agreement. The matter of Natal Joint Municipal
Pension Fund v Endumeni Municipality 26 informs us that contextual
interpretation requires taking into accoun t the prevailing circumstances when
the document was created. In the context of this meeting , relied upon by RFS
what was current was the HR Policy and the remuneration arrangement and
not employment with RFS. Interpreting the words underlined above selectively
without taking into account the context certainly leads to an absurdity.
[48] Accordingly, the version of the pair that when they penned the resignation
letters they aimed at terminating t he HR and remuneration service is more
probable. The version of D u Plooy that it was only then that they ended their
employment relationship with RFS is improbable, regard being had t o the
26 2012 (4) SA 593 (SCA).
23
provisions of clause 4.11 and the letters in 2013. Since it is improbable, it must
be rejected as such.
Was there a breach?
[49] Mr Van der Walt SC submitted that RFS failed to prove any breach. I agree. A
breach happens when the agreed terms are not complied with. Where the
obligations (terms) no longer exist, there can be no speak of a breach. Breach
of what? Once the obligations (terms) are discharged there can never be a case
of breach.
Conclusions on the existence of a contract of employment
[50] Based on the evidence presented in this Court RFS failed to discharge the onus
to prove the existence of an employment contract at the relevant time. Thus,
there was no obligation on the employees to not accept the bonus payments
from their employers, the Funds.
The alternative claim based on the HR Policy and the addendum.
[51] The case allege d by RFS is that the employees breached the provisions of
clause 4 of the HR Policy dated 14 August 2014. It became common cause that
when ink fell onto paper in respect of this HR Policy, the oral employment
contract had ended between RFS and the employees. It is indeed so that at the
time ink fell onto paper, the alleged offending payments, which were not to be
earned, in terms of the defunct employment contract, were not made yet.
[52] RFS conjured up a case and alleged that by failing to declare the payment so
received the employees breached the HR Policy. The ve ritable question
becomes, what wa s the status of the HR Policy appertaining the employees
before me?
[53] In answering this question this Court, as it must, must depart from a premis e
that on 14 August 2014, there was no longer an employer and employee
24
relationship between RFS and the employees neither was there extant and
valid employment contract s. Ordinarily human resources policies form part of
employment contracts. The policies d eal with employment conditions.
Therefore, this policy is indeed a strange one, as in extraordinary. The primary
rule of interpretation is to consider the language, grammar and syntax
contained in any document. There is no dispute that the COO of RFS draft ed
this document. Therefore, on application of the contra proferentem rule, if the
wording is incurably ambiguous, RFS must suffer because it had the power to
make the meaning plain.27 This Court takes a view that the words employed in
the policy and the addendum do not obdurately suffer from incurable obscurity.
The meaning is plain, lucid and perspicuous.
[54] On the face of the policy, there occurs the following words:
“The policy stipulated and contained in this document is applicable to
employees of the following companies:
Retirement Fund Solutions Holdings (Pty) Ltd…
RFS Administrators (Pty) Ltd…
RFS Home Loans (Pty) Ltd…
[55] Thus, in order for the document to find app lication there must be an employer
and employee relationship between a particular employee and any of the
named companies. Simply on the wording set out above, the HR Policy finds
no application to the employees before me , since they were on the
preponderance of probabilities not employees of any of the listed companies.
[56] The parties involved in this matter were alive to the above conundrum with
regard to the employees at the Fund. In an attempt to resolve the conundrum,
an addendum to the HR policy was generated. The addendum, amongst others
provided as follows:
27 Zietsman v Allied Building Society 1989 3 SA 166 (O) 177D-E.
25
“Addendum to HR Policy
Employees seconded to the NFMW
August 2014
The conditions contained in this addendum supersede the conditions contained
in the R FS Administrators (Pty) Ltd HR Policy and is specific to employees
seconded to the office of the Principal Officer for National Fund for Municipal
Workers (NFMW).”
[57] During the cross-examination of Du Plooy, Mr Van der Walt SC was cowed into
taking the foot off the pedal by an objection raised by Mosam SC to the effect
that the employees ’ “pleaded” case demonstrated some admission of the
applicability of the HR policy onto the employees . Although Van der Walt SC
abandoned this perfect line of cross -examination, this Court takes a view that
the alleged “pleaded” case does not demonstrate an admission. The statement
of response reveals the following material fact:
“26.6 The first, second and third respondent plead that a proper construction
of the HR Policy r ead in the context of … the addenda signed
by…indicates that the effect of the addenda was to make the HR policy
applicable as between the fifth respondent as Employer and the … as
the fifth respondent’s employees, and not as between the applicant and
the … as employer and employees respectively.”
[58] What the employees did was to place their own construction on the relevant
documents. Interpretation of any document is a matter of law as opposed to
fact. Thus, it becomes the duty of a Court of law to do that and not defer to the
interpretation of the parties 28. The Constitutional Court in University of
Johannesburg v Auckland Park Theological Seminary and others 29 suggested
a unitary approach where context, the text and purpose are to be considered
holistically and simultaneously.
28 University of Johannesburg v Auckland Park Theological Seminary and others 2021 (6) SA 1 (CC).
29 2021 (6) SA 1 (CC).
26
[59] The text uses the word supersede. The grammatical meaning of that word is to
take the place of a thing previously in authority or use. The context is such that
at that time, there was no longer an employer and e mployee relationship
between RFS and the employees. However, RFS continued to provide human
resources support for the Fund as the Fund was not equipped to do so. This on
the strength of the administration agreement. It seems clear that the intended
purpose of the HR Policy and the addendum was to regulate conditions of
employment. It is unheard of for a non -employer to regulate employment
conditions of a non-employee.
[60] The conclusion to reach on application of the unitary approach suggested by
the Constitutional Court, is that the HR Policy did not apply to the employees
and was indeed superseded by the addendum in so far as the “ seconded
employees” are concerned. This conclusion makes it unnecessary for this Court
to have regard to the provisions of clause 4 of the HR Policy. An argument that
the addendum sought to amend the HR Policy is rejected. The word supersede
does not mean amend on any benign interpretation.
[61] In the unlikely event that this Court is wrong, clause 4 in the main deals with
declaration as opposed to prevention of having interest. RFS suggests that the
employees were obligated to declare the financial benefit they received from
the F unds. Once more, application of the unitary approach is key. The text
clearly provides that the obligation of an employee is to declare interest in an
organisation that potentially offer financial benefit. It was no secret that the
employees were placed or to be placed at the Fund. In addition, it was no secret
that the Fund may in paying the salaries to the e mployees offer a financial
benefit (performance bonuses) to them. In fact , Du Plooy testified that if any
bonuses were to be paid, they would arise from the 1.2% fees. Similarly, the
bonuses were to be paid, they would arise from the 1.2% fees. Similarly, the
context was such that the employees were exclusively plying their trade to the
Funds and no one else. Their performance was evaluated by the Funds. Their
salary was paid by RFS as a conduit using the money of the Funds.
Accordingly, it must have been within the contemplation of the Funds, RFS and
the employees that if the employees surpass their performance, they may be
rewarded for that. On RFS’s case, the applicable HR Policy provides in clause
27
18.8.5.2 that remuneration is one of the elements related to the performance
evaluation. It does contemplate payment of a reward based on the principle of
affordability and company performance.
[62] Quintessentially, it must be axiomatic that when RFS accepted the obligation
to remunerate in clause 4.11, it accepted that such remuneration has as one of
its elements performance evaluation that may lead to a financial reward. Thus,
it cannot be said that the employees breached clause 4 of the HR Policy. Clause
4 deals with a potential as opposed to fact. Potential means having or showing
the capacity to develop into something in the future. The potential to earn a
bonus has always been there. RFS has the wrong end of the stick on this one.
There was no obligation in clause 4 to declare that remuneration was received.
The obligation is to declare the potential. As pointed out it is more probable than
not that at some point the remuneration would encapsulate bonus payments if
earned through performance and not some secret devious means.
[63] Accordingly, the conclusion to reach is that the HR Policy is inapplicable to the
employees and if applicable, clause 4 thereof has not been breached by the
employees. The alternative claim must, as it should suffer the same fate.
Secret profits and disgorgement
[64] In the p re-trial minutes, the question is styled as (a) whether the payments
constituted secret profits and (b) whether the RFS gave its free consent in
respect of any payments made t o the employees. In the joint practice note for
trial RFS introduced disgorgement as a remedy.
[65] The first question to deal with is whether the payments constitute secret profits.
Van Der Walt SC submitted that the payments do not constitute secret profits
on the basis that RFS officials were aware of the impending payments. In
English law, a secret profit is a profit made by an employee who uses his
employer’s premises and business facilities in order to engage in unauthorised
employer’s premises and business facilities in order to engage in unauthorised
trade on his own behalf. A common example is a bar manager who purchases
beer from a brewery in his own right and sells it in the bar in competition with,
28
or in preference to, that of his employer. The profit the bar manager makes is a
secret profit30.
[66] There is a marked difference between a bonus and a profit. Bonus is a form of
remuneration. By definition bonus means a sum of money added to a person’s
wages for good performance. Section 1 of the BCEA defines remuneration to
be any payment in money or in kind or both in money and in kind, made or
owing to any person in return for that person working for any other person. On
the other hand, a profit is a financial gain, especially the difference between the
amount earned and the amount spent. What occurred in this instance does not
fit the definition of a profit let alone a secret profit. As indicated earlier, it was
within the contemplation of RFS that the employees may be rewarded for
exceptional performance. The fact that RFS did not give free consent does not
suggest that the payments amount to secret profits. This Court doubts that the
earning of a bonus based on performance requires any free consent, even in
an instance where an employee has been seconded to another employer.
[67] Faced with secret profits, the remedy available to an employer is known as
disgorgement. It is a remedy requiring a party who profits from illegal or
wrongful acts to give up any profits he or she made because of his or her illegal
or wrongful conduct. Thi s remedy was implanted in to our legal system by
English law. It is not an independent cause of action but a remedy for breach
of contract. Customary remedy for a breach of contract is compensation,
usually measured in the form of expectation damages31. This means the plaintiff
is generally entitled to be placed in the same situation, with respect to damages
as if the contract had been performed.
[68] Disgorgement is a measure of relief based solely upon the defendant’s profits
rather than the plaintiff’s loss. In other words, if the payments amount to secret
rather than the plaintiff’s loss. In other words, if the payments amount to secret
profit, all RFS needs to show is not its actual patrimonial loss but that the
employees made a gain or profit. It is an exceptional remedy, available where
30 See: Lister v Stubbs (1890) 45 Ch D 1, CA.
31 See: Bank of America Canada v Mutual Trust Co 2002 SCC 43.
29
a plaintiff has shown that ordina ry remedies of contract law are inadequate to
protect and vindicate his or her contractual right.
[69] An English case that explains the remedy properly is that of Attorney General
v Blake32. In this case, Mr George Blake, a former member of the UK’s Secret
Intelligence Service, in 1989 entered into a contract to publish a book of state
secrets that he had undertaken never to reveal, thereby breaching his
contractual undertaking. By the time of publication of the book, the information
was no longer confidential and its disclosure caused no loss to the Crown.
Therefore, no compensatory damages could be awarded to vindicate the
government’s contractual right nor to deter and denounce the wrong committed
by the defendant. Lord Nicholls explained that:
“Normally t he remedies of damages, specific performance and injunction,
coupled with the characterisation of some contractual obligations as fiduciary,
will provide an adequate response to a breach of contract. It will be only in
exceptional cases, where those remedies are inadequate, that any question of
accounting for profits will arise”33
[70] In Atlantic Lottery Corporation Inc v Babstock34 the Supreme Court of Canada,
per Brown J, penning for the majority stated the following:
“[59] …I say this, first because disgorgement is available for breach of
contract only where, at the minimum other remedies are inadequate .
Circumstances of inadequacy arise when the nature of the claimant’s
interest is such that it cannot be vindicated by other forms of relief. This
may arise where , for an example, the plaintiff’s loss is “impossible to
calculate” or where the plaintiff’s interest in performance is not reflected
as purely economic measure… Where, as here, the argument is that
the quantum loss is equal to the defendant’s gain, but the plaintiff would
simply rather pursue disgorgement, a gain -based remedy is not
appropriate.
32 [2001] 1 AC 268 (HL).
33 Ibid at page 285.
34 2020 SCC 19.
30
[61] Disgorgement for breach of contract is exceptional relief; it is not
available at the plaintiff’s election to obviate matters of proof…”
[71] I plentifully agree with the sentiments expressed by Brown J. Actually,
disgorgement is not an alternative remedy for breach of contract. A primary
remedy for breach of contract is an order for specific performance. As its
alternative is a claim for contractual damages. Disgorgement becomes a
remedy sui generis. It does not arise out of choice in order to obviate matters
of proof.
[72] Karakatsanis J wrote a minority judgment in Babstock35. He opined thus:
“[123] The overarching question in awarding disgorgement for breach of
contract is whether, in all the circumstances, other remedies would not
adequately protect or vindicate the contractual right.”
[73] The learned Justice went further and concluded that:
“[155] As Er nest J. Weinrib has recognised in the compensatory context,
causation connects the plaintiff and defendant… The same reasoning
requires a causal link between a wrong and a gain.
[156] In the context of a breach of contract, it is similarly important to connect
the breach to the gain to be disgorged… Applying a “but-for-the-breach”
standard ensures a causal connection between the quantum of gain
and the plaintiff’s right.
[157] All this means that the plaintiffs need to provide some methodology that
is ‘sufficiently credible or plausible to establish some basis in fact for the
commonality requirement", that is, a realistic prospect of assessing
class-wide monetary relief in the aggregate…”
[74] Once more, I plentifully agree with the sentiments expressed by the erudite
Justice. The breach alleged by RFS is simply that the employees agreed not to
earn extra income and in breach, they did earn extra income. As a point of
35 Atlantic Lottery Corp. Inc v Babstock, 2020 SCC 19.
31
departure, this extra income does not constitute a profit that would have
accrued to RFS. In o ther words , had the employees not earned an extra
income, RFS would not have earned those bonuses for itself. Thus , there is a
serious disconnect between the alleged breach and the gain made. There can
be no legal basis to suggest that in performing exceptionally in order to earn an
extra income, the employees competed with RFS. Although the employees did
not strenuously challenge this oral term, this Court takes a view that it was an
ex post facto creation in order to attempt a remedy of disgorgement.
[75] Similarly, the breach of clause of 4 of the HR Policy does not give rise to a
disgorgement relief. Had the employees declared the potential financial benefit,
they would still not earn anything themselves. Once they earn it, they have no
obligation to declare the earnings. Once more on application of the but-for test,
had the employees failed to declare the potential there is no gain to have been
made.
[76] In conclusion, this Court opines that the remedy of disgorgement is not
available to RFS. Moreover, RFS failed to suggest any methodology that this
Court may employ to connect the alleged gain and the alleged breach. For all
the above reasons, the claim for the disgorgement relief is bound to fail.
Contractual Damages claim.
[77] In law, damages are a surrogate for performance. It is awarded in lieu of specific
performance for the aggrieved to claim the objective monetary value of the
agreed performance, which is not received as a result of the aggressor’s
breach.36
[78] Accordingly, the aggrieved must establish that the loss was caused by the
aggressor’s breach and that the loss was not too remote. The aggrieved bears
the onus of proving the extent of the loss . As a general principle where two
parties have made a contract which one o f them has broken, the damages
36 See: Erasmus, Gauntlet and Visser “Damages” in LAWSA 7 para 45.
32
which the other party ought to receive in respect of such breach of contract
should be such as may fairly and reasonably be considered either arising
naturally, that is according to the usual course of things, from such breac h of
contract itself, or such as may reasonably be supposed to have been in
contemplation of both parties, at the time they made the contract, as the
probable result of the breach of it37.
[79] In Commonwealth v Amann Aviation (Pty) Ltd 38, Deane J set out the principle
that must apply in assessment of damages and said:
“The general principle governing the assessment of compensatory damages in
both contract and tort is that the plaintiff should receive the monetary sum
which, so far as money can represent fair and adequate compensation for the
loss or injury sustained by reason of the defendant’s wrongful conduct.”
[80] Damages in contract seeks to place a plaintiff in the position, which would have
occurred had the breach not happened.39 In casu, the only testimony presented
by Du Plooy in proving the loss is that, had he known that the employees
received bonuses, he would not have paid them for an equivalent of three
months. As indicated earlier, even if the employees did not breach the alleged
term of not earning extra income, RFS would not have been in a position to
receive any compensation for itself. On Du Plooy’s version, the term was such
that the money so earned must be paid to RFS. Logically, if the employees earn
no extra income, there will be nothing to be paid to RFS. By not earning extra
income, in order to respect the term of the alleged contract, which is the
performance required of them, RFS does not accrue any pecuniary advantage.
The situation would have been different, if the clause allowed them to earn extra
money but obliged them to pay it over to RFS. In that situation failure to pay
over the money as contractually obliged (performance) would certainly lead to
a loss, which is the equivalent of the money so earned.
a loss, which is the equivalent of the money so earned.
37 See Hadley v Baxendale [1854] 9 Ex 341 [156 E R 145] 16.
38 (1991) 174 CLR 64 at p. 116.
39 See: Monarch SS Co Ltd v A/B Karlshamns Oljeifabriker [1949] AC 196 and Robinson v Harman
(1848) 1 Ex 850 at 855.
33
[81] With regard to the alternative claim of the breach of clause 4 of the HR Policy,
performance equates declaration of potential financial interest. If an employee
fails to declare a potential interest, it is too remote a damage that should an
employee achieve financia l reward, then the reward is the equivalent of the
failure to declare. Such damages would not have been within the contemplation
of the parties when they contracted. Clause 4 does not prevent an employee to
have financial interest; all it requires is the declaration of the potential. There is
no monetary value that can be attached to a failure to declare. If there is any,
the onus rests on RFS to show that monetary value and it has failed to do so
before me.
[82] Accordingly, the conclusion this Court reaches i s that RFS failed to discharge
its onus to prove the contractual damages. Accordingly, its claim for damages
must fail.
The issue of costs
[83] This is a civil matter and not a labour matter. Accordingly, the principle of costs
not following the results does not find application. This Court disagrees with a
submission by Mosam SC that the principle in Zungu v Premier of the Province
of KwaZulu-Natal and Others40 applies in casu. RFS invoked the provisions of
section 77 (3) of the BCEA since the dispute involves or concerns an
employment contract. In terms of this section, the Labour Court has concurrent
jurisdiction with the civil Courts. Thus , it can be said that the Labour Court in
hearing this matter, exer cises its civil jurisdiction as opposed to the LRA
jurisdiction. In order to demonstrate the point, the parties before me could have
comfortably debated this matter in the High Court. Now that they are in the
Labour Court, this Court is not hearing a “ labour matter” but a civil matter. In
the Labour Court, the Constitutional Court decreed indiscriminately that the
ordinary rule of costs following the results does not apply. Conversely, if these
ordinary rule of costs following the results does not apply. Conversely, if these
selfsame parties were in the High Court the ordinary rule would have applied
with relative ease. Recently the Constitutional Court in Union for Police Security
40 (2018) 39 ILJ 523 (CC).
34
and Corrections Organisation v South African Custodial Management (Pty) Ltd
and Others 41 judgment decreed that the exclusion of the ordinary rule finds
expression in the provisions of section 162 of the LRA.
[84] It may be competently argued that section 162 operates for matters under the
banner of the exclusive jurisdiction of the LRA. I suppose, the Constitutional
Court should with absolute certainty clarify what is meant by labour matters.
However, there is some indication when the following, as said by the Court in
UPSCO, is heeded:
“[31] …The crisp point I am making rather, is this: when costs orders are too
readily made against those who seek to vindicate their constitutionally-
entrenched labour rights in the specialist institutions created by the
LRA, employers and employees alike may be left with no option but to
resort to industrial action to remedy disputes that the LRA places
beyond the purview of protected industrial action. That would cultivate
unlawfulness and be inimical to the foundational value of the rule of law
underpinning our democratic order.
[32] It is therefore imperative for our democracy that the doors of labour
dispute resolution be kept wide open for litigants to air their grievances,
so that unlawful industrial action, and all its potential consequences, is
generally avoided. That accords with the scheme of the LRA, which
contemplates industrial action only where no other avenues are readily
available. The rule against automatic costs orders is an integral part of
that scheme in that it ensures access to labour dispute resolution
institutions and no doubt enlarges the width by which the doors of those
institutions are kept open.”42
[85] It must be indisputable that in the above quoted; reference is made to the
Labour Court as a specialist labour disputes resolution body. Involved herein is
a contractual dispute as opposed to a labour dispute. This Court must assume
a contractual dispute as opposed to a labour dispute. This Court must assume
that the rule of no automatic cost orders does not find application in contractual
41 [2021] 12 BLLR 1173 (CC).
42 Ibid at para 31.
35
disputes43. What obtains is the ordinary rule of costs following the results. This
rule is grounded on the principle that a successful party must not be deprived
of its success costs. It is a principle that is constitutionally defendable. The
employees achieved outright success. In my view, their opposition of this claim
was warranted and reasonable.
[86] For all the above reasons, the following order is made:
Order
1. The applicant’s claim is dismissed
2. The applicant to pay the respondents’ costs.
_______________________
GN Moshoana
Judge of the Labour Court of South Africa
43 See: Skinner and others v Nampak Products Limited and others (2021) 42 ILJ 838 (LAC) at para
47.
36
Appearances:
For the Applicant: Mr A Mosam SC and T Odendaal
Instructed by: J F Mare Attorneys, Pretoria.
For the Respondents: Mr T van der Walt SC
Instructed by: Nysschen Attorneys, Gallo Manor.