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[2010] ZAWCHC 97
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Wicks v SA Independent Line Services (Pty) Ltd and Another (10155/2008) [2010] ZAWCHC 97 (30 April 2010)
IN THE HIGH COURT OF
SOUTH AFRICA
(WESTERN CAPE HIGH
COURT, CAPE TOWN)
REPORTABLE
CASE NO: 10155/2008
In the matter between
IAN WICKS
Applicant
and
SA INDEPENDENT LINE
SERVICES (PTY) LTD
First
Respondent
LONRHO
AFRICA (HOLDINGS) LIMITED
Second
Respondent
JUDGMENT DELIVERED ON
30 APRIL 2010
ZONDI, J
Introduction
[1] On 03 July 2008 the
applicant launched an urgent application in this Court for an order
declaring that his suspension from the
employment of the first
respondent was void, and of no force and effect; setting aside his
suspension and reinstating him as managing
director.
[2]
The Court (per Desai J) granted an interim order which was returnable
on 06 August 2008. In terms of the interim order the applicant's
suspension was declared null and void, set aside and the applicant
was reinstated as managing director with full benefits.
[3] On 06 August 2008 the
application was further postponed to 16 February 2010. In the
meantime the first respondent has been liquidated
thereby rendering
the dispute between the parties academic as the applicant's
reinstatement order cannot be given effect to.
[4]
The only issue which is before the Court is that of costs, in other
words which of the parties should be liable for costs.
[5]
In dealing with this issue I shall adopt the approach as set out in
Gamlan
Investments (Pty) Ltd and Another v Trilion Cape (Pty) Ltd and
Another
1996
(3) SA 692
(C) at 700G which is to the effect that where a disputed
application is settled on a basis which disposes of the merits except
insofar as the costs are concerned, the Court should not have to hear
evidence to decide the disputed facts in order to decide who
is
liable for costs, but should with the material at its disposal, make
a proper allocation as to costs.
[6]
The applicant seeks costs on the basis that on the merits of the
application, he would have succeeded on the return day. On
the other
hand the respondents contend that the interim order should be
discharged with costs on the grounds that the urgent application
was
misconceived and bad in law and that this Court lacks jurisdiction to
determine it as it essentially involves a labour dispute.
The
respondents point out that the applicant should have followed the
mechanisms of the Labour Relations Act.
Factual Background
[7] The applicant was
appointed as managing director of the first respondent in terms of a
contract of employment. The second respondent
became a shareholder of
the first respondent pursuant to the subscription and shareholders
agreement ("the subscription agreement").
[8]
Initially, the second respondent subscribed for a minority
shareholding but, over a period of time and as it advanced more loan
finance, it became a majority shareholder. The subscription agreement
provided for the appointment of three directors to the board
of
directors of the first respondent by the second respondent; and the
other three directors to be appointed by the existing members
of the
first respondent.
[9]
Pursuant to these rights the second respondent appointed Mr David
Lenigas, Mr Lorenz Werndel and Mr Geoffrey White as directors
while
the existing members appointed the applicant, Mr Christian Kindersley
and Mr Randal Gregg as directors. The latter resigned
in April 2008
and has not yet been replaced.
[10]
It is common cause that a board meeting of the first respondent was
held on 24 April 2008, during which a decision was taken
to the
effect that:
"Management,
including the chief operating officer, the managing director and the
chief financial officer of the company report
to PA (Albeck) and PA
reports back to the Lonrho board. GW (Geoffrey White, a director of
Sails and MD of Lonrho) seconded the
resolution and put a caveat on
the resolution that the resolution would be in force until such time
as the company demonstrates
to the board that it is operating on a
balanced commercial basis".
[11] The applicant was in
support of this resolution and expressed his willingness to
co-operate with Albeck.
[12]
On 02 June 2008 the applicant was requested to attend a meeting at
the Cape Grace Hotel for discussion relating to a management
meeting
to be held on 03 June 2008. He attended as well as Albeck, Scott and
Kindersley.
[13]
At the conclusion of the meeting the applicant was requested to leave
the room briefly, after which he was asked to return
and requested to
consider taking leave of absence of two months due to exhaustion and
stress, during which time the second respondent
would manage the
business. He was given time up until 09h00 on 03 June 2008 to
respond.
[14]
On 03 June 2008 the applicant requested written reasons for his
required leave of absence and conditions relative to his return.
[15]
On 04 June 2008 he was told by email that he was placed on suspension
pending the finalisation of an investigation.
[16] The applicant
referred to various clauses in the employment contract and
shareholders' agreement as bases for his contention
that his
suspension was unlawful. In particular he referred to clause 18.20 of
the shareholders' agreement which provides that:
"A
written resolution which is signed by the directors will be valid"
[17] The applicant
contends that as a director he never signed any such resolution
relating to his suspension nor was he involved
in or attended any
board meeting at which a decision to suspend him was taken.
[18]
Geoffrey White, who deposed to the answering affidavit on behalf of
the second respondent, alleges that although the meeting
of 03 June
2008 was not a formal board meeting with provision of the required
notice period, it was a meeting called following
a detailed
discussion between all the directors of the first respondent and was
fully sanctioned as an urgent meeting by all directors.
[19]
He further alleges that the purpose of the meeting was to enable the
applicant to persuade the first respondent's major shareholder
(the
second respondent) and the board of directors that all was well, and
that the first respondent was operating on a balanced
commercial
basis. He says the applicant was unable to answer pertinent questions
and declined to give direct answers on a wide
range of issues.
[20] He points out that
the applicant was asked to leave the room briefly because of the
respondents' directors' concern at the
attitude evidenced by the
applicant at the meeting and the ongoing losses being made by the
first respondent.
[21]
In describing the further conduct of the meeting during applicant's
absence Geoffrey White has this to say in paragraph 21
of the
answering affidavit:
"I made contact
with Lenigas, and we discussed the matter in his absence. It stands
to be emphasised that all directors (apart
from Applicant, who had
just been asked to leave the room) were present, either in person,
per telephone or authorised by those
present. We agreed that there
was an urgent necessity for the financial affairs of SAILS to be
investigated further, without interference
from Applicant. We also
agreed that he should not be present during this process, and
resolved to offer him temporary leave (on
full benefits) to overcome
this difficulty."
[22] Geoffrey White
further alleges that when the applicant contacted him and Scott the
following day he informed the applicant
that the board of directors
had decided to suspend him.
Statement of the
issues
[23] For the purposes of
determining liability for costs the question is whether the applicant
would have succeeded had the matter
proceeded on a return day.
[24]
When the matter was argued on the return day the question of urgency
was no longer an issue and the main focus was on the issue
of
jurisdiction.
The Applicant's
Case
[25] The applicant seeks
an order declaring null and void and of no force and effect his
purported suspension by the respondents
as a managing director and an
order setting it aside and reinstating him as a managing director.
[26]
The applicant advanced various causes of action in challenging his
suspension. Firstly, he contends that the effect of his
purported
suspension is to undermine his reputation as an employee in the
shipping industry, with devastating effect. He is afraid
that his
career will be permanently destroyed and he will not be able to find
work in the industry again or finance to start a
new business.
[27]
Secondly, he alleges that he was not afforded any opportunity to
state his case in respect of the reasons for his suspension
and
proposed replacement by the respondents. He states that on a number
of occasions the representatives of the second respondent
have
threatened to terminate his services or require his resignation
despite the fact that he was never informed of the respects
in which
his services or suitability as an employee fell short of the
standards required by the first respondent.
[28]
Thirdly, the applicant contends that the notice of his suspension was
invalid in that it was issued without any board decision.
The
applicant blames the board of the first respondent which he contends
should by rights have been the organ to take a decision
about his
suspension for not doing so by way of properly constituted board
decisions as required by the articles of association
and the
agreements between the parties.
[29]
Fourthly, he alleges that in terms of the shareholders' agreement,
the parties undertook to observe in its application the
principles of
good faith and that in suspending him the respondents acted in breach
of the obligation of good faith.
[30]
Fifthly, the applicant contends that his contract of employment
created a relationship of trust between him and the first respondent
and by suspending him the first respondent breached that trust
relationship.
[31]
Finally, he alleges that his employment contract imposed a
contractual duty on the part of the first respondent to extend to
him
the benefit of fair labour practices inclusive of procedural
fairness.
The Second
Respondent's Case
[32] The second
respondent denies that the applicant's suspension was unlawful. It
alleges that the applicant was suspended as managing
director in the
wake of a duly constituted management meeting and after consultation
and approval of all other directors of the
first respondent.
[33]
The second respondent further contends since the issues between the
parties involve the employment dispute, the applicant should
have
resorted to mechanisms of the Labour Relations Act.
Legal Principles
[34] The only question
with regard to jurisdiction is whether this Court had jurisdiction to
determine the issue whether the applicant's
purported suspension was
null and void by reason of the respondents' failure to call a
properly constituted board meeting to effect
such suspension.
Section
157
of the
Labour Relations Act, 66 of 1995
governs the jurisdiction
of the Labour Court.
[35]
Section 157(1)
provides as follows:
"(1) Subject to
the Constitution and section 173, and except where this Act provides
otherwise, the Labour Court has exclusive
jurisdiction in respect of
all matters that elsewhere in terms of this Act or in terms of any
other law are to be determined by
the Labour Court."
And
section 157(2) stipulates:
"2) The Labour
Court has concurrent jurisdiction with the High Court in respect of
any alleged or threatened violation of any
fundamental right
entrenched in Chapter 2 of the Constitution of the Republic of South
Africa, 1996, and arising from-
employment
and from labour relations;
any dispute over the
constitutionality of any executive or administrative act or conduct,
or any threatened executive or administrative
act or conduct, by the
State in its capacity as an employer; and
the application of
any law for the administration of which the Minister is
responsible."
[36] Section 157(1) makes
it clear that the Labour Court has exclusive jurisdiction in respect
of all matters that in terms of the
Labour Relations Act or
in terms
of any other law are to be determined by the Labour Court.
[37]
The question is whether for the purposes of
section 157
the
applicant's cause of action is the type of a matter which in terms of
the
Labour Relations Act or
in terms of any other law is to be
determined by the Labour Court.
[38] In an attempt to
remove the claim from the purview of the labour law and the exclusive
jurisdiction of the Labour Court and
place it within the concurrent
jurisdiction of the Labour Court and the High Court,
Mr
Rautenbach,
who
appeared for the applicant, in his heads and in argument disavowed
any reliance on the employment contract provisions and in
particular
the
Labour Relations Act and
relied instead on the contention that
the purported suspension of the applicant was null and void and of no
force and effect on
the basis of the first respondent's failure to
take a board resolution to effect it
("ultra
vires
argument").
He submitted that the applicant's claim was based on company law and
being so the
Labour Relations Act does
not exclude the jurisdiction
of this Court to hear the matter. He pointed out that only the cause
of action based on
ultra
vires
was
pursued when the interim order was granted. He stated that the other
causes of action are irrelevant for purposes of the present
dispute.
[39]
Mr
Rautenbach
pointed
out that in the instant matter the applicant's cause of action is
based on the alleged violation by the respondents of the
provisions
of the shareholders' agreement relating to valid board decisions. He
submitted that the applicant's suspension is null
and void in that
the first respondent failed to convene a properly constituted board
meeting at which a decision to suspend him
should have been taken.
[40]
Mr
Rautenbach
further
submitted with reference to
sections 186
and
191
of the
Labour
Relations Act that
there is no provision in the Act which enables an
employee such as the applicant to complain about non-compliance with
the company
law in respect of any decision affecting him, whether a
suspension, dismissal or any other decision.
[41]
He argued that the
Labour Relations Act creates
no remedy for an
employee who complains that a purported suspension is null and void.
He pointed out that either the CCMA or the
Labour Court would not
have jurisdiction to entertain a dispute unless it is about the
fairness of the suspension. He submitted
that in the instant case it
is the lawfulness as opposed to unfairness of the purported
suspension which is an issue and for which
the Labour Relations Act
does not exclude the High Court jurisdiction, namely whether there
was in fact, as a matter of law, any
suspension at all, or whether
the purported suspension of the applicant was null and void.
[42]
He argued that the
Labour Relations Act does
not provide for remedies
for claims founded on company law such as in the instant case. In
support of his contention he referred
to
Gcaba
v Minister for Safety and Security and Others
2010
(1) SA 238
(CC). At paragraph 73 Van Der Westhuizen J held:
"[73]
Furthermore, the LRA does not intend to destroy causes of action or
remedies and
s 157
should not be interpreted to do so. Where a remedy
lies in the High Court,
s 157(2)
cannot be read to mean that it no
longer lies there and should not be read to mean as much. Where the
judgment of Ngcobo J in Chirwa
speaks of a court for labour and
employment disputes, it refers to labour- and employment-related
disputes for which the LRA creates
specific remedies. It does not
mean that all other remedies which might lie in other courts, like
the High Court and Equality Court,
can no longer be adjudicated by
those courts. If only the Labour Court could deal with disputes
arising out of all employment relations,
remedies would be wiped out,
because the Labour Court (being a creature of statute with only
selected remedies and powers) does
not have the power to deal with
the common-law or other statutory remedies."
[43] On the other hand
Mr
Kirk-Cohen
who
appeared with
Ms
Rabkin-Naiker
for
the respondents argued for the discharge of the Rule Nisi inter alia
on the basis that this Court had no jurisdiction to hear
the matter.
He pointed out that the applicant should have approached the CCMA
with an alleged
"unfair
labour practice"
in
terms of the
Labour Relations Act.
[44
] I disagree with
Mr
Rautenbach's
contention.
The basis upon which the applicant alleges that his suspension was
unlawful, is that the board of the first respondent,
which should by
rights have been the organ to take a decision about his proposed
suspension and any investigation during such suspension
had not acted
to do so by way of properly constituted board decision as required by
the articles of association and the service
and shareholders
agreement.
[45]
The unlawfulness of the purported suspension does not deprive the
applicant of the remedies provided for by the
Labour Relations Act
and
in particular
section 193
which deals with remedies for unfair
dismissal and unfair labour practices. In my view the label or
characterisation of the conduct
complained of may not be used as a
basis to establish the High Court jurisdiction for matters which
essentially fall within the
exclusive jurisdiction of the Labour
Court or statutory agencies created under the
Labour Relations Act.
[46]
The effect of a suspension is that while on suspension the applicant
is prohibited temporarily from rendering his services
to the first
respondent pending an investigation. His suspension thus affects
employer-employee relationship.
[47]
The question is whether the
Labour Relations Act provides
for a
remedy to an employee such as the applicant who by reason of an
unlawful suspension is temporarily prohibited from rendering
his
services to his employer.
[48]
In my view suspension of an employee by an employer based upon an
unlawful conduct which is violative of either the company
law or
common law constitutes an unfair suspension for which the
Labour
Relations Act fully
provides for remedies under
section 193.
It is
therefore incorrect to contend that an employee whose suspension is
unlawful has no remedies under the
Labour Relations Act.
[49
]
By characterising the manner in which his suspension was obtained, as
unlawful the applicant could have his claim heard in the
High Court
but yet if he characterises the same conduct as unfair he could have
it heard in the Labour
Court. This approach
clearly defeats the object which the Legislature intended to achieve
through the enactment of the
Labour Relations Act.
[50
] In my view it also
places emphasis on the form of conduct and not on its substance. The
real intention of the applicant is to
obtain reinstatement as
managing director by having his purported suspension declared null
and void.
[51]
The approach contended for by the applicant also encourages the
multiplicity of laws governing labour-related matters and the
overlapping and competing jurisdictions of different Courts referred
to by Ngcobo J in
Chirwa
v Transnet Limited & Others
[2007] ZACC 23
;
2008
(3) BCLR 251
(CC) supra, at paragraph 98 which were the problems
which the legislature intended to address in enacting the
Labour
Relations Act. (See
also the remarks of Chaskalson CJ in
Pharmaceutical
Manufacturers Association of SA and Another: In re Ex Parte President
of the Republic of South Africa and Others
[2000] ZACC 1
;
2000
(2) SA 674
(CC) at paragraph 44.)
[52]
It is apposite in this regard to refer to the remarks made by Ngcobo
J (as he then was) in
Chirwa
supra,
at paragraph 92:
"[92] In United
National Public Servants Association of SA v Digomo NO and Others the
Supreme Court of Appeal held that provided
the employee's claim, as
formulated, does not purport to be one that falls within the
exclusive jurisdiction of the Labour Court,
the High Court has
jurisdiction even if the claim could have been formulated as an
unfair labour practice. The difficulty with
this view is that it
leaves it to the employee to decide in which court the dispute is to
be heard. By characterising the manner
in which the disciplinary
hearing was conducted as unfair dismissal, the employee could have
the dispute heard in the Labour Court.
Yet by characterising the same
dispute as constituting a violation of a constitutional right to just
administrative action, the
employee could have the same dispute heard
in the High Court. It could not have been the intention of the
Legislature to bring
about this consequence."
[53]
I am in agreement with the views expressed by Ngcobo J in
Chirwa.
The
dispute between the parties is a labour related one although the
rights which the applicant seeks to assert may be protected
by the
company law. The
Labour Relations Act, however
, provides for a remedy
for violation of the rights which the applicant seeks to assert. He
must therefore seek the remedy in the
Labour Relations Act.
>
[54]
The reliance by
Mr
Rautenbach
on
Boxer
Superstores Mthatha and Another v Mbenya
2007
(5) 450 (SCA);
Tsika
v Buffalo City Municipality
2009
(2) SA 628 (E) and
Fredericks
and Others v MEC for Education and Training, Eastern Cape, and Others
2002
(2) SA 693 (CC) cannot help the applicant as the applicant has
disavowed any reliance on a cause of action based on contract.
[55] In
Boxer
Superstores
the
issue was whether an employee may sue in the High Court for relief on
the basis that the disciplinary proceedings and the dismissal
were
"unlawful'
without
alleging any loss apart from salary. The Supreme Court of Appeal
answered that question in the affirmative and at 453H
held:
"This means that
every employee now has a common law contractual claim - not merely a
statutory unfair labour practice right
- to a pre-dismissal hearing.
Contractual claims are cognisable in the High Court. The fact that
they may also be cognisable in
the Labour Court through that Court's
unfair labour practice jurisdiction does not detract from the High
Court's jurisdiction'.
[56]
Boxer
Superstores
is
distinguishable from the present case, in that the SCA in that case
had to deal with a claim founded on contract whereas in the
instant
matter Counsel for the applicant disavowed any reliance on a
contractual claim.
[57]
Tsika
is
also distinguishable from the instant matter. In Tsika the plaintiff,
a former manager of the defendant, who had been dismissed
for
misconduct, claimed payment from the defendant of a sum of R2 017
359-23 part of which he claimed was unlawfully deducted by
the
defendant from two preservation-fund policies into which part of his
salary had been paid and the rest he claimed was owing
to him
pursuant to his contract of employment.
[58] In
Tsika
the
Court rejected the contention that the plaintiff's claims were
essentially labour related matters which fall to be determined
under
the
Labour Relations Act and
at paragraph 33 the Court went on to
say:
"[33] The
difficulty I have with this submission is that, unlike in Ms Chirwa's
case, there is no express provision in the
LRA which would give
either the plaintiff or the defendant direct access to the Labour
Court to pursue their respective claims
and counterclaim, or which
expressly empowers the Labour Court to grant the relief sought.
[59] In explaining why
the
Labour Relations Act was
not applicable to the matter before it,
the Court had this to say at paragraph 35:
"In this matter
the plaintiff does not dispute the fairness of his dismissal. He
merely claims a sum of money he alleges is
owing to him as a
consequence of the termination of his employment or to put it in
contractual terms, in consequence of the breach
by the defendant of
an obligation arising from his contract, and a further sum he claims
to have been unlawfully deducted from
his policies"
[60]
Fredericks
concerned
the refusal by the Eastern Cape Department of Education to approve
application for voluntary retrenchment determined in
terms of a
collective bargaining agreement. The applicants approached the High
Court to have the decision reviewed and set aside
and they based
their claim upon the alleged infringement of their rights under
sections 9 and 33 of the Constitution.
[61]
The High Court held that on the proper construction of the
Labour
Relations Act it
did not have jurisdiction to consider the matter.
[62]
In reversing the High Court's finding the Constitutional Court held
at paragraph 33:
"[33] The
applicants raise a constitutional matter.
Section 24
does not oust
the jurisdiction of the High Court to determine that dispute because
the institution responsible for the resolution
of disputes in terms
of
s 24
is not a Court of similar status to the High Court. The
effect of these conclusions is not however that a person who has a
constitutional
complaint arising out of the interpretation or
application of a collective agreement may not take that matter to the
CCMA. Nor
does it mean that the CCMA should not consider the
provisions of the Constitution in the exercise of its powers. Indeed,
like all
organs of State, it is obliged to seek to give effect to
constitutional commitments. What we do conclude, however, is that the
Legislature may not oust the jurisdiction of the High Court to
consider constitutional matters unless it assigns that jurisdiction
to a Court of similar status, even if at the same time, it confers a
similar, though not exclusive, jurisdiction upon another tribunal
or
forum. The High Court therefore erred in concluding that the dispute
in this matter concerned the interpretation or application
of a
collective agreement as contemplated by s 24.
[63] It further went on
to hold at paragraph 40:
"[40] As there is
no general jurisdiction afforded to the Labour Court in employment
matters, the jurisdiction of the High
Court is not ousted by s 157(1)
simply because a dispute is one that falls within the overall sphere
of employment relations. The
High Court's jurisdiction will only be
ousted in respect of matters that 'are to be determined' by the
Labour Court in terms of
the Act. The Concise Oxford English
Dictionary (1990 edition) defines 'determine' so as to include 'to
settle', 'to decide', and
'to fix'. Adopting this definition, a
matter to be determined by the Labour Court as contemplated by s
157(1) means a matter that
in terms of the Act is to be decided or
settled by the Labour Court"
Conclusion
[64] In conclusion I
therefore find that this Court does not have a concurrent
jurisdiction with the Labour Court to entertain the
applicant's
claim. It follows therefore that the Rule Nisi must be discharged.
Two Counsel were employed by the respondents in
this matter and it is
not suggested by the applicant that the employment of two Counsel was
not justified. In the circumstances
costs
of
two Counsel will be awarded.
The
Order
[
65]
In result the Rule Nisi is discharged with costs including costs of
two Counsel.
ZONDI D H