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IN THE LABOUR COURT OF SOUTH AFRICA

HELD AT JOHANNESBURG

CASE NO. J1217/98

In the matter between:

RHM TECHNICAL UNDERWRITERS CC. APPLICANT

and

NERINE KAHN FIRST RESPONDENT

THE COMMISSION FOR CONCILIATION SECOND RESPONDENT

MEDIATION AND ARBITRATIONPATRICK MURRAY THIRD RESPONDENT

_______________________________________________________________

JUDGEMENT

______________________________________________________________

SEADY A J

[1] This is an application to review and set aside the arbitration award made by the first respondent (the Commissioner) on 4 May 1998, under the auspices of the CCMA. In terms of the award the respondent’s dismissal was found to be substantively and procedurally unfair and the applicant was ordered to pay R121 820,85 as compensation to the third respondent (Murray).

[2] The review proceedings were launched on 27 May 1998 and opposed by Murray. The matter came before me as an opposed application on 20 October 1998. Both parties filed heads of argument that have assisted court in reaching a decision.

THE FACTS

[3] Mr Murray was employed, as a claims manager, by the applicant from 1 July 1996 until his dismissal on 25 August 1997. He was paid until the end of September 1997. His pre-tax salary was R18 741,67 per month. On 10 December 1997 Mr Murray obtained other employment at a higher salary.

[4] The Commissioner found the dismissal to be substantively and procedurally unfair. The applicant does not seek to review either of these

findings.

[5] The compensation awarded by the Commissioner was a sum equal to the renumeration that Murray would have received from the date of

dismissal to the last day of the hearing of the arbitration, less the

renumeration he received for August and September 1997. It totalled R121 820,85.

[6] It is common cause that the Commissioner considered whether to award reinstatement or compensation and she sets out justifiable reasons for not awarding reinstatement. It is further common cause that in determining the amount of compensation to be awarded, the Commissioner had regard to a large number of academic and judicial authorities and also to the Explanatory Memorandum to the Draft Labour Relations Bill. She weighed these conflicting authorities and reached a decision on the amount of compensation to be awarded. Even though compensation was to be awarded in terms of section 194(2) because the dismissal was both substantively and procedurally unfair, the Commissioner had to interpret section 194(1). She was required to do so ecause section 194(2) directs that compensation for substantive and procedural unfairness cannot be less than the amount specified in subsection(1). In her own words she found herself “in the unenviable position” of having to consider the merits of conflicting approaches of the Labour Court to the interpretation of section 194(1). She opted for the approach that treated the provisions of section 194(1) as a rigid formula.

[8] She also considered in terms of section 194(1) whether the amount of compensation should be reduced in respect of any unreasonable delays

caused by Murray in initiating or processing the dispute. She found that

there were no unreasonable delays attributable to Murray.

GROUNDS FOR REVIEW

[9] In its founding papers the applicant submits that the Commissioner :a) failed to apply her mind to how much compensation to award to Murray because she erred in interpreting the provisions of the Act dealing with permissible awards;

b) in exercising discretion to award just and equitable

compensation failed to apply her mind to the ability of the applicant to finance the compensation;

c) acted ultra vires her powers by awarding compensation that

amounts to punitive damages ; and

d) committed a legal error and acted ultra vires her powers and

as such failed to apply her mind properly alternatively

committed a reviewable irregularity.

[10] These submissions, on which the applicant founded its application to review and set aside the award, attack the Commissioner’s interpretation of how to calculate compensation in terms of section 194(1). The attack is based on the view that she erred in interpreting section 194(1) as giving her no discretion as to how to compute the amount of compensation to be awarded. Her finding that section 194(1) provides for a fixed penalty is attacked.

[11] The applicant’s submissions attack the compensation awarded as

exceeding the financial loss suffered by Murray. Permitting him to “profit” is regarded as an improper imposition of a penalty on the

applicant. The “ punitive” nature of the award is regarded as erroneous,

evidence of the Commissioner’s failure to apply her mind and that she acted ultra vires.

[12] It is not apparent from the Notice of Motion and the founding affidavit if the application to review and set aside is brought in terms of section 145 or section 158 of the Act. However, from the applicant’s heads of argument it appears that the matter should be dealt with in terms of section 145 of the Act: The applicant submits that the Commissioner

committed a gross irregularity in the conduct of the proceedings and/or

exceeded her powers as contemplated in section 145 of the Act. A review

of arbitration proceedings under the auspices of the CCMA must proceed

under section 145 of the Act. The court cannot invoke its power of

review in terms of section 158(1)(g) in respect of these arbitrations. See

CAREPHONE (PTY) LTD v MARCUS NO AND OTHERS (LAC) ,

UNREPORTED, Case No. JA 52/98 at [29] p. 13.

[13] In its heads of argument the applicant focuses its contentions into the following submissions :The Commissioner failed to recognise that she had a discretion to grant compensation or not to grant compensation. She accordingly did not exercise this discretion. This failure is a reviewable

error of law or irregularity, and she committed a gross irregularity and/or exceeded her powers.

[14] It is not difficult to see why the applicants have adopted this focus. On, 1 September 1998 the Labour Appeal Court handed down judgement in JOHNSON & JOHNSON (PTY) LTD CWIU CASE NO :PA 15/97. The judgement clarifies how compensation for procedural unfairness must be calculated in terms of section 194(1) of the Act. It lays to rest the jurisprudential controversy that existed and with which the Commissioner was confronted. We now know that :“The compensation for the wrong in failing to give effect to an employee’s right to a fair procedure is not based on patrimonial or actual loss. It is in the nature of a solatium for the loss of the right, and is punitive to the extent that an

employer (who breached the right) must pay a fixed penalty for causing the loss” [para 41] p.17 We also now know that :“If a dismissal is found to be unfair solely for want of compliance with a proper procedure the Labour Court, or an arbitrator appointed under the LRA, thus has a

discretion whether to award compensation or not. If compensation is awarded it must be in accordance with the formula set out in section 194(1); nothing more, nothing less. The discretion not to award compensation in the particular circumstances of the case must, of course, also be exercised judicially.” [para 40] p.17

[15] In the light of JOHNSON & JOHNSON’s interpretation of how to calculate compensation in terms of section 194(1) the explicit on which the applicant relied for relief in its founding

papers were longer sustainable. Mr Cassim, on behalf of the applicants contends that implicit in those submissions is an attack on the Commissioner’s failure to exercise a discretion to grant compensation or

no consequential relief as required by JOHNSON & JOHNSON. This

discretion is founded on section 193(1) read with section 158(1)(a)(v)-

“ The express terms relate to the making of a compensation award in section 193(1) (and section 158(1)(a)(v)) are permissive in nature (“may”). In contrast the exclusion of reinstatement or re-employment as remedies in a procedurally unfair dismissal in section 193(2) is in peremptory terms(“must”). On a literal reading of the section compensation need not necessarily be awarded upon a finding of a procedurally unfair dismissal; another option is to grant no consequential relief. para [38], p.17

[16] Advocate Myburg, for Mr Murray, denies this ground for review can be implied from the submissions contained in the founding papers. He says that the founding papers do not support the contention that the

Commissioner failed to exercise her discretion in terms of section 193(1)

of the Act. In fact section 193 is nowhere referred to in the applicant’s

papers. He referred the court to numerous authorities for the trite proposition that an applicant’s cause of action must be set out in its founding affidavit.

[17] The case which the respondents are now required to meet is not made out, explicitly or by implication, in the founding papers. Their answering affidavit was not directed to countering a review on this ground. Neither has the Commissioner been given the opportunity to consider this attack and formulate her response to it. These consequences are not changed by the inclusion of this submission in the applicant’s heads of argument.

[See COUNTRY FAIR v CCMA AND OTHERS 1998 6 BLLR 577

(LC)] I am not satisfied that this application can be argued on the basis

put forward in the applicant’s heads of argument without causing prejudice to the respondents. In these circumstances R v PARMANAND

1954(3) SA 833 A does not assist the applicant.

[18] In the circumstances the application must succeed or fail on the basis of the grounds of review set out in the founding papers. All of these are directed to show that the Commissioner’s interpretation of how to

calculate compensation in terms of section 194(1) was incorrect and that

to this extent she committed a reviewable irregularity and/or acted outside her powers.

[19] The Commissioner made no error of law, neither did she exceed her powers. Her interpretation of section 194(1) accords with the law as articulated by the Labour Appeal Court. It is more than justifiable; it is correct.

[20] Accordingly there is no basis to set aside the Commissioner’s award as contemplated by section 145 of the Act. The application must fail.

[21] Counsel for Mr Murray argued that the award was not reviewable even on the basis contended for in the applicant’s heads. It is not necessary for me to deal with these submissions in the light of my findings.

[22] The applicant was aware of the difficulties it faced in the light of

JOHNSON & JOHNSON (LAC). This, presumably is why the basis for

review relied on the heads differs substantially from that pleaded.

Nevertheless the applicant elected to proceed with the application. I have

taken this into account in deciding to order the applicant to pay the third

respondent’s costs.

[23] In conclusion I make the following order :

a) The application is dismissed;

b) The applicant must pay the third respondent’s costs.

______________________________

SEADY A J

Date of hearing : 20 October 1998

Date judgement : 23 October 1998

For the applicant : Advocate N. A. Cassim S.C. instructed by Perrott, Van Niekerk & Woodhouse Inc.

For the respondent : Advocate A. T. Myburg instructed by Deneys Reitz

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