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[1995] ZASCA 117
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Lanzerac Manor (Pty) Ltd. v De Vries and Others (689/93) [1995] ZASCA 117; [1995] 12 BLLR 1 (AD); (1996) 17 ILJ 11 (A) (28 September 1995)
Case no: 689/93
IN THE SUPREME COURT OF SOUTH AFRICA (APPELLATE DIVISION)
In the matter between;
LANZERAC MANOR (PTY) LIMITED
Appellant
and
M DE VRIES
1st
Respondent
S ANTHONY
2nd Respondent
G AUSTIN
3rd Respondent
D
CONSTABLE
4th Respondent
E FORTUIN
5th Respondent
E
JACOBS
6th Respondent
M JACOBS
7th Respondent
S LUCAS
8th Respondent
C NKASANA
9th Respondent
S NTWANTI
10th Respondent
T PHATO
11th Respondent
C PHILANDER
12th Respondent
S SISHUBA
13th Respondent
K SMITH
14th Respondent
I TITUS
15th Respondent
D TUKUWAYO
16th Respondent
N WILBROWN
17th Respondent
Coram:
JOUBERT,HEFER, F H GROSSKOPFJJA, VAN COLLER et SCOTT AJJA
Heard:
28 August 1995
Delivered:
28 September 1995
2
JUDGMENT F H GROSSKOPF .JA:
The seventeen respondents were
employees who were retrenched by their employer, the appellant, on 14 May 1992.
They brought an application
against the appellant and two others in the
industrial court in terms of s 46(9) of the Labour Relations Act 28 of 1956
("the Act").
They sought an order declaring their retrenchment to be an unfair
labour practice in terms of the Act. The relief claimed by the
respondents was
for their reinstatement, alternatively, for compensation. The industrial court
held that the retrenchment of the
respondents did not constitute an unfair
labour practice and dismissed the application, save that the first respondent
was granted
compensation for being treated less favourably than the other
respondents. The judgment of the industrial court is reported as
De Vries
& Andere v Lanzerac Hotel & Andere
(1993) 14 ILJ 432 (IC). The
respondents appealed to the Labour Appeal Court ("the LAC") against the
industrial court's
3
decision, save insofar as it related to the unequal treatment of the
first
respondent. The LAC upheld the appeal, set aside that part of
the
industrial court's order against which the appeal was directed,
and
replaced it with the following:
"2 (a) The retrenchment of the appellants [now respondents] constituted an
unfair labour practice. (b) Each appellant [respondent]
shall be reinstated by
the second respondent [now appellant] in his or her job or a comparable job,
with its current attendant benefits,
should he or she present himself or herself
for work within 30 days of the date of this judgment or such later date as the
parties
concerned may agree, (c) The second respondent [appellant] shall in any
event within 30 days of the date of this judgment pay to
each appellant
[respondent] an amount equivalent to six times his or her monthly remuneration,
calculated at the date of dismissal
plus interest at the rate of 18,5% per annum
on the said amount over a period of one year."
The appellant was also ordered to pay the respondents' costs of appeal. The
judgment of the LAC is reported
sub nom De Vries & Others v
4
Lanzerac Hotel & Others
(1993) 14 ILJ 1460 (LAC).
The appellant
thereafter duly complied with paragraph 2(b) of the abovementioned order of the
LAC relating to the reinstatement of
the respondents. The appellant was granted
leave to appeal to this Court against the remaining orders of the LAC.
The appeal must be decided on the facts found by the LAC, but this Court is
also entitled to have regard to any additional facts which
appear from the
record of the industrial court proceedings insofar as they are not inconsistent
with the facts found by the LAC.
(See
Performing Arts Council of the
Transvaal v Paper Printing Wood and Allied Workers Union and Others
1994(2)
SA 204 (A) at 214E-G.) The conclusion of the LAC on the crucial question whether
the appellant committed an unfair labour
practice is not, however, a decision on
a "question of fact" and may therefore be reconsidered and determined by this
Court. (See
Media Workers Association of S
outh Africa and Others v Pres
s
Corporation of South Africa Ltd ('Perskor') 1992(4)
5
SA 791 (A) at 802B-I;
Performing Arts Council
case,
supra
, at
214G-
H.)
The facts found by the LAC are set out fully in its reported judgment,
and I shall refer to them insofar as is necessary for a proper
understanding of
the case.
In February 1991 Lanzerac Landgoed (Edms) Bpk, a company controlled by Mr C H
Wiese ("Wiese"), acquired the Lanzerac Estate outside
Stellenbosch. The Lanzerac
Hotel ("the hotel" ) was situated on the estate, but it was so badly run down
that it had lost its grading.
A Mr Groenewald had managed the hotel on behalf of
the former owner, and he and Wiese came to an agreement that he would conduct
the hotel business in the name of a close corporation for his own account.
However, by September 1991 the hotel business was in such
financial straits that
Groenewald's close corporation was unable to pay the staff their September
salaries. Wiese then decided to
take over the running of the hotel in the name
of Skiereiland Beleggings (Edms) Bpk,
6
another one of his companies. The name of this company was later changed to
Lanzerac Manor (Pty) Ltd, which is the present appellant.
Wiese thereupon
called a meeting of the hotel employees and told them that his company was going
to take over and conduct the hotel
business, and that they were free to apply
for re-employment at the hotel. He further informed them that although he was
not obliged
to do so, he would pay their September salaries.
Those employees
who were accepted for employment were advised in writing on 1 October 1991 by
Skiereiland Beleggings that they were
being offered a "temporary appointment"
for a trial period of two months during which they would be "assessed for
suitability for
a permanent appointment". Those who were found to be "acceptable
for a permanent appointment" would then receive another letter of
appointment.
The two month trial period went by without any further notification to the
employees. On 11 January 1992 each employee
was given a further letter informing
him or her that due to unforseen
7
circumstances no permanent appointments would be made before 31 January 1992.
No permanent appointments were made after 31 January.
The reason why no decision
could be made in this regard was Wiese's inability to find an experienced
hotelier to conduct the hotel
business. In the meantime the hotel was being run
at a huge loss. Wiese testified that he never contemplated permanent
appointments.
On 26 March 1992, nearly six months after their initial appointment, the
employees were told for the first time what the appellant
had in mind with
regard to the future of the hotel and their further employment at the hotel. By
that time agreement had been reached
between Wiese and Mr S P Fitzgerald
("Fitzgerald"), an experienced and successful hotelier. The effect of the
agreement was that
Halcyon Hotels (Pty) Ltd ("Halcyon"), a company controlled by
Fitzgerald, would enter into a partnership venture with the appellant.
Halcyon
would run the hotel as from 1 April 1992 while the appellant would be the
sleeping partner. Fitzgerald realised from the
outset that
8
the hotel was overstaffed, and that this was one of the reasons why the hotel
was running at a loss. The staff situation further deteriorated
when Wiese
started restoring the manor house on the estate as his private residence,
thereby substantially reducing the number of
rooms available for hotel guests.
This obviously necessitated a further reduction in staff. Fitzgerald insisted
that he should have
the right to determine, in accordance with his own
management criteria, which staff members had become redundant. Wiese agreed to
give Fitzgerald a free hand in deciding which employees to retrench, and
undertook on behalf of the appellant as the employer to
assume responsibility
for the severance packages of those employees who were to be retrenched.
Meetings of two different categories of employees were held on 26 March 1992.
Both Wiese and Fitzgerald addressed the meetings and
informed the employees that
the appellant and Halcyon had formed a partnership, that they had agreed that
Halcyon would manage the
hotel as from 1 April 1992, that the guest rooms in the
manor house were to
9
be taken out of service, and that at least one of the three restaurants would
be closed. The employees were further advised that the
hotel was overstaffed and
that posts would have to be rationalised, but that no employees would lose their
jobs before the end of
April 1992. They were told that all the employees would
be assessed during April by the new manager, Colleen Thompson, that they
should
therefore do their best, and that the new management would then select those
employees who would be engaged by the partnership
and those who would be
retrenched. The employees at the meetings were given an opportunity to ask
questions, but there was no reaction,
save from one employee who objected to the
suggestion that one person might be asked to do two jobs. The new management
carried out
the selection process during April 1992 and came to a final decision
as to which employees were to be retrenched. It is common cause
that the
seventeen respondents were then retrenched without being afforded the
opportunity to be heard or to make representations.
10
On 30 April 1992 the first, second and fourth to
seventeenth
respondents received letters informing them that their services had
become
redundant and would be terminated with effect from 14 May
1992. The third respondent received a similar letter on 10 April 1992,
terminating his service as from 30 April 1992. It is common cause that
the retrenchment package which was thereafter paid to each respondent
was adequate. The respondents maintained, however, that their
retrenchment amounted to an unfair labour practice, mainly because there
had been no consultation with them before their retrenchment. The LAC
concluded as follows in this regard (at 1464F-G of its reported
judgment):
"It should have been apparent to the respondent [appellant], especially where
the only retrenchment selection criterion was merit,
as it is said to have been,
that fairness cried out for giving each affected employee a chance to deal with
unfavourable conclusions
concerning his performance."
In terms of s 1 of the Act, as it read in 1992 when
the
11
dispute arose, "unfair labour practice" is defined to mean:
"any act or omission, other than a strike or lock-out, which has or may have the
effect that -
(i) any employee or class of
employees is or may be
unfairly affected or that his or their
employment
opportunities or work security is or may be prejudiced
or jeopardized thereby; (ii) the business of any employer or class of
employers is
or may be unfairly affected or disrupted thereby; (iii) labour unrest is or
may be created or promoted
thereby; (iv) the labour relationship between employer and
employee is or may be detrimentally affected
thereby;"
Before its amendment in 1991 the definition of "unfair labour practice"
specifically required "prior consultation" with an employee
or his
representative union before termination of his employment on non-disciplinary
grounds. This Court considered the definition
of unfair labour practice as it
stood before its amendment in 1991 in
Atlantis Diesel Engines (Pty) Ltd v
National Union of Metalworkers of South Africa
1995(3) SA 22 (A). In dealing
with the duty to consult
12
Smalberger JA concluded as follows at 28F-29C:
"It seems to me that the duty to consult arises, as a general rule, both in
logic and in law, when an employer, having foreseen the
need for it,
contemplates retrenchment. This stage would normally be preceded by a perception
or recognition by management that its
business enterprise is ailing or failing;
a consideration of the causes and possible remedies; an appreciation of the need
to take
remedial steps; and the identification of retrenchment as a possible
remedial measure. Once that stage has been reached, consultation
with employees
or their union representatives becomes an integral part of the process leading
to the final decision on whether or
not retrenchment is unavoidable.
Consultation provides an opportunity, inter alia, to explain the reasons for the
proposed retrenchment,
to hear representations on possible ways and means of
avoiding retrenchment (or softening its effect) and to discuss and consider
alternative measures. It does not require an employer to bargain with its
workers or their unions with regard to retrenchment. Furthermore,
the ultimate
decision to retrench is one which falls squarely within the competence and
responsibility of management.
The need to consult
before a final decision on retrenchment is taken has its rationale both in
pragmatism and in principle (cf South
Africa Roads Board v Johannesburg City
Council
1991 (4) SA 1
(A) at 13B-C).
13
It is rooted in pragmatism because the main objective must be to avoid
retrenchments altogether, alternatively, to reduce the number
of dismissals and
mitigate their consequences. Consultation provides employees or their union(s)
with a fair opportunity to make
meaningful and effective proposals relating to
the need for retrenchment or, if such need is accepted, the extent and
implementation
of the retrenchment process. It satisfies principle because it
gives effect to the desire of employees who may be affected to be
heard, and
helps serve the underlying policy of the Act, to avoid or at least minimize
industrial conflict. Where retrenchment looms
employees face the daunting
prospect of losing their employment through no fault of their own. This can have
serious consequences
and threaten industrial peace. Proper consultation
minimises resentment and promotes greater harmony in the
workplace."
It is true that the current statutory
definition of unfair labour practice does not specifically cast upon an employer
a duty to consult,
but in my opinion it could never have been the intention of
the legislature, when amending the definition in 1991, to do away with
consultation as a relevant consideration in determining whether, on the facts of
any given case, a retrenchment constituted an unfair
labour practice.
14
Counsel for the respondents submitted that there was a duty to consult with
the employees at an early stage when retrenchment was
still being contemplated.
He pointed out that the respondents were warned for the first time at the
meetings held on 26 March 1992
that their continued employment was at risk as a
result of the pending retrenchments. By then a final decision on retrenchment
had
already been taken without having afforded the employees any opportunity to
discuss the matter or to make representations, even if
only with regard to the
selection criteria and the implementation thereof. The respondents, however, did
not challenge the appellant's
right to effect such retrenchments as were found
to be necessary. What they really objected to was the manner in which the
retrenchments
were eventually carried out without hearing the affected employees
or giving them any opportunity to make representations. In view
of the
conclusion which I have reached on this latter aspect I find it unnecessary to
consider whether the appellant's failure to
consult at the earlier stage was
unfair
15
in all the circumstances.
The need for consultation became crucial once
the performance of the affected employees had been assessed, and the selection
for retrenchment
had been completed by the new management. In my opinion the
affected employees should have been afforded a proper opportunity to
make
representations and deal with any unfavourable conclusions regarding their work
performance before any final decision on their
retrenchment was made. An
opportunity to make representations would at the same time have served the
primary object of the Act, namely
to avoid or at least reduce industrial
conflict.
It is common cause that the affected employees were never given any chance to
be heard in this regard. There was therefore no way
in which they could have
satisfied themselves that their interests had been duly considered in the
selection process, and that they
had been treated as fairly as circumstances
permitted. Their retrenchment without such consultation constituted an unfair
labour
practice in my judgment.
16
The reason why the appellant never even attempted to discuss the
retrenchments with the respondents was that Wiese believed that the
retrenchment
guidelines did not apply in the case of these employees which he simply regarded
as temporary employees, Wiese was clearly
wrong in this respect, but it should
be pointed out in fairness to him that he bona fide considered prior
consultation to be unnecessary
in this case. This error on the part of Wiese
cannot, of course, justify the appellant's failure to consult with the
respondents.
According to their letters of appointment these employees were not employed
on a truly temporary basis, but rather on a probationary
basis. (See Le Roux and
Van Niekerk
The South African Law of Unfair Dismissals
at 64, 65 and 72.)
This was certainly not a case where the employer was not required to follow a
fair procedure on retrenchment simply
because the respondents were "temporary
employees".
Counsel for the appellant submitted that the only
reasonable
17
option open to the appellant in March 1992 was to conclude the partnership
agreement with Halcyon. Fitzgerald, so it is contended,
was not prepared to
conclude the agreement if it did not include a term giving Halcyon an absolute
free hand in the selection of
employees who had to be retrenched. Counsel
referred to this demand by Fitzgerald as the "Halcyon condition", and submitted
that
it placed no obligation on Halcyon to consult, while it effectively
precluded the appellant from interfering in the selection process.
The basic difficulty that I have with this defence is that it was raised for
the first time during argument on appeal in the LAC.
The Halcyon condition now
relied upon was not pleaded by the appellant. Nowhere in the pleadings was it
suggested that the appellant
would have followed the proper retrenchment
guidelines had it not been for the so-called Halcyon condition which the
appellant felt
compelled to accept. Nor was the point fully canvassed in the
evidence of either Wiese or Fitzgerald in the industrial court. In
these
circumstances I am of the
18
view that this point is not one that can properly be considered at this
stage. (See
Slagment (Pty) Ltd v Building. Construction and Allied Workers'
Union and Others
1995 (1) SA 742
(A) at 752G-753C.)
It is clear in any event that the real reason why the
appellant
did not consult with the retrenched employees was Wiese's mistaken
belief that it was not necessary to do so. In my view it had nothing to
do with the so-called Halcyon condition. I agree with the findings of the
learned judge a quo in this regard at 1464B-C of the LAC judgment, and
the following observation at 1464C-D:
"There is no suggestion that Fitzgerald's selection process would have been
unduly inhibited by adherence to the requirement of consultation
with the
work-force. Consultation was not attempted because it was thought
unnecessary."
I am not persuaded by the appellant's argument that the retrenchment of the
respondents did not constitute an unfair labour practice.
19
The appeal is accordingly dismissed with costs.
F H GROSSKOPF
Judge of Appeal
Joubert JA Hefer JA Van Coller AJA
Scott AJA Concur