Clear Channel Independent (Pty) Ltd v Savage NO and Another (JR2803/06) [2008] ZALC 166; [2009] 5 BLLR 439 (CC) ; (2009) 30 ILJ 1593 (LC) (21 November 2008)

IN THE LABOUR COURT OF SOUTH AFRICA

HELD IN JOHANNESBURG

CASE NO: JR 2803/06

In the matter between:

CLEAR CHANNEL INDEPENDENT

(PROPRIETORY) LIMITED APPLICANT

and

SAVAGE, KATE N.O. 1ST RESPONDENT

JOHANNES GEORGE DE WET 2ND RESPONDENT

JUDGMENT

molahlehi J

Introduction

This is an application to review and set aside the arbitration award issued by the first respondent (the arbitrator) dated 13 October 2006. In terms of that award the arbitrator found the dismissal of the second respondent (the employee) to have been

substantively unfair and ordered that he be reinstated without loss of benefits.

Initially after his dismissal the employee referred his dispute to the Commission for Conciliation, Mediation and Arbitration (the CCMA) in the terms of the Labour Relations Act 66 of 1995 (the LRA). The CCMA lacked jurisdiction pursuant to the contract of employment and accordingly the matter was referred to private arbitration in terms of the Arbitration Act 42 of 1965.

Background facts

The employee who was prior to his dismissal employed as a General Manager for the Namibian Division of the applicant, reported to the Managing Director-African Division, Mr Willie who has since passed away.

The employee was charged with gross misconduct arising from the submission of a tender of an expression of interest for the provision of advertising rights at the Sam Nujoma Stadium in Windhoek (the stadium), Namibia. The tender which was submitted to the Windhoek City Council was submitted jointly with Ogilvy Namibia (Ogilvy) and the Namibian Mine Workers Investment Company (the NAM-NIC).

The charges which led to the dismissal of the employee were as follows:

“1. On or about 15th July 2005, you entered into some time of arrangement which binds CCI Namibia to two other parties, without the requisite authorisation

from the Company having bee had and obtained;

2. You have bound the Company into some type of credit arrangement by virtue of the fact that you either expressly, or by implication, guaranteed certain revenue generation of the bill boards component of the project as security of the Windhoek City Council without necessary authorisation having first being had and obtained;

3. You committed capital investment for the purpose of securing the project in question without adherering to internal control and approval of mechanisms in this regard. Any such commitment would have required the written authorisation of myself, the Managing Director and the Chief Financial Officer;

4. At no stage did you acquire the approval of any member of Senior Management to proceed with either the preliminary discussions, the drafting and conceptualisation of the tender submission, or discussing the implications thereof until after the event under consideration.”

The management report of June 2005, compiled by the employee indicated that the applicant would not be able to tender for the advertising rights of the stadium because of non-compliance with BEE requirements. However, on the 7th July 2005, the employee purchased the relevant tender documents for the advertising rights at the stadium. The employee confirmed that the applicant would not succeed if it made a tender submission with the General Manager, Mr Stuart when he enquired about the tender on 7th July 2005.

Despite the above advice the employee, attended the site meeting at the stadium on the 11th July 2005. On the 15th July 2005, the employee submitted a tender in the name of the “Consortium,” for advertising in the stadium. The consortium comprised of NAM-NIC.

The complaint of the applicant during the arbitration hearing was that the employee proceeded to tender for the advertising rights in the stadium without seeking the approval of his superiors.

On 3rd August 2005, the tender which was submitted by the consortium which included the applicant was approved by the Local Tender Board of the City of Windhoek. The employee communicated the outcome of the tender to the general manager, Willie, and the role of the applicant in it on the 5th August 2005.

On receipt of the information regarding the tender, Willie addressed an email to the employee which read as follows:

“Morning George,

Barry will be back from leave today and I have schedule a meeting to discuss with you and James, the recent tender award re: the Sam Nujoma Stadium. I must be honest and advice you that the manner in which this tender was handled by you with regard to CCI’s involvement within a three way consortium bid, leaves a lot to be desired and question many aspects of motive…”.

Another email was addressed the employee on the same day by Willie and it reads as follows:

“…The area of concern that you have not answered sufficiently in my opinion is that you did not at anytime discuss this project with me neither after submission of the tender did you write to me to advice that you had done what you did. I am not questioning your level of enthusiasm in attempting to pursue a new business direction, but you of all GMs should know that you cannot work in isolation of your peers at the higher level that are specifically employed to be the interfaced between operational and shareholder levels. You have committed the Company credit to a payment structure of a concession fee the Council that others (myself and James) should have had insight into before the fact and not afterwards. This is particularly concerning and shows disregard for existing policies and procedures that you or should be aware of.

I will discuss with you in more detail after doing so with Barry and James tomorrow”.

In response to the above the employee addressed an email on the 18th August 2005 wherein she wrote:

“Afternoon Russell

Have you guys made any decision about the visit to Namibia yet? The parties we need to speak to are all waiting to hear from you as they are eager to get this on the go. The other issue we need to move on or let go of is the stadium. Has any decision been made in this regard? Looking at the results below, the turnover as well as the profit we stand to make from this project will go a long way in rectifying the situation for this branch”.

The applicant contended in its founding affidavit that notwithstanding the instructions from his, superior the employee proceeded with the execution and implementation of the contract by:

Entering into a signed contract with Standard Bank in the name of the applicant in respect of the advertising at the Stadium;

He commissioned the construction of various signage the stadium by placing orders there or for with a sub-contractor of the applicant and as such committed the applicant capital expenditure in the amount of R61 400;

In relation to the partners with whom the tender was jointly made with the applicant complained that:

“ NAM-MIC, the Empowerment Wing of the Namibian Mine Workers Union, an entity with which the Applicant had no previous dealings or relationship and which certainly was not the party with whom the Applicant was exploring a partnership. In fact, the Second Respondent was aware of on going discussions which had reached an advance stage with an alternative entity known as “Paragon” with a view to forming a BEE Alliance;

Ogilvy Namibia, an advertising agency and the applicant’s second biggest client in Namibia whose part owner and Managing Director, one Anney Mouton (“Mouton”) was involved in a personal relationship with the Second Respondent at the time.”

Grounds for review and the award

The applicant in its grounds for review criticised the arbitrator for failing to apply her mind to the relevant issues before her and failure to give effect to her powers and duties in terms of the Arbitration Act. The approach adopted by the arbitrator was also criticised for being unjustified on the facts and for being inconsistent with her statutory duties. The other grounds are based on the justifiability, the connectivity between the evidenciary material placed before the arbitrator with the application of the relevant legal principles and the complaint that the arbitrator acted unreasonably and in appropriately in misconstructing the oral and the documentary evidence which was before her.

In her award the arbitrator found that the employee did not enter into “some form of arrangement”, binding on the applicant with Ogilvy and NAM-NIC. The arbitrator reasoned that the arrangement concluded between the respondent and the other two entities was an agreement to submit a tender with the understanding that if the bid was successful a consortium would be formed. In other words the arbitrator found that the agreement which existed between the parties was that they would submit the tender jointly and if successful they would then form a consortium. Put differently the arrangement the employee concluded with the two entities did not commit or bind the applicant to the consortium. Reference in the tender documents did not according to the arbitrator change the legal nature of the consortium as the consortium with a binding legal status was still to be formed.

The arbitrator further found that the employee did not sign the tender documents itself and the reason for that was that he was still to obtain a mandate to do so from his superiors. Thus Ogilvy and NAM-NIC were both aware or could reasonably have been

assumed to have been aware that the participation of the applicant in the tender was conditional depending upon the employee obtaining

the approval and authorisation from his superiors.

In relation to the issue of committing capital expenditure without adhering to the internal controls and approval mechanisms, the arbitrator accepted that the applicant had internal control procedures in place relating to the approval of capital expenditure and CER applications. To this extent the arbitrator found that the envisaged capital expenditure cost to be paid from the profits were included in the tender documents. She however found that these commitments would have been binding only if the applicant elected to proceed with the tender. Because they were conditional upon the applicant proceeding with the tender process, they did not amount to a binding commitment by the employee on the applicant.

The arbitrator rejected the contention that the employee in failing to communicate the issue of the tender and the arrangement he made with the two other entities was motivated by bad faith as having no merits.

It was on the basis of the above discussion that the arbitrator found the employee not guilty of gross misconduct.

In dealing with the issue of the installation of the bill boards and road stars, the arbitrator found that it may have been overly zealous on part of the employee to have proceeded with the installation of the bill boards without authorisation from his superiors including the signing of the tender contract with the City Council. However, the arbitrator found the employee not guilty of

gross negligence because according to her the cost to the contractor arising from the installation was covered by Ogilvy and the

applicant suffered no loss as a result.

The arbitrator found that there was no rule requiring the employee to obtain authorisation from his superiors prior to engaging in preliminary discussions or conceptualisation of business opportunities. Similarly, the arbitrator found that there was no

clear evidence before her proving the existence of a rule requiring the employee to obtain authorisation prior submitting a tender.

As concerning the issue of negligence the arbitrator found that the applicant failed to prove that the employee could have reasonably expected that his conduct could cause harm to the applicant. It was for this reason that the arbitrator concluded that the employee was not guilty of negligence.

Evaluation

Mr Hutchinson, for the applicant argued that the test to apply in assessing whether or not the arbitration award is reviewable was that of a reasonable decision-maker as enunciated in Sidumo and Another v Platinum Mines Ltd and Others 2008 (2) SA 24 (CC). In support of this argument he submitted that Sidumo applies to private arbitration because the right to a fair labour practise as provided for in the Constitution applies to every employee. In other words the essence of this argument, as I understand it, is that reasonableness is suffused into the provisions of section 33 of the Arbitration Act. The argument is also based on policy consideration for a need for a single and uniform test to apply to labour related review matters.

In the supplementary heads of arguments, Mr Hutchinson in support of the argument that Sidumo’s test should apply to private arbitration relied on the unreported decision of Vodacom (Pty) Ltd v Annali Geldenhuis Case No: JR 3232/06, where the Court in dealing with the review under section 33 of the Arbitration Act held that:

“In my view the remarks made in Sidumo apply equally to awards made in terms of the Arbitration Act. An arbitration award is required to be reasonable because, if it is not reasonable, it fails to meet the Constitutional requirement that an administrative action must be reasonable and, once it is not reasonable it can be reviewed and set aside.”

Mr Hutchinson further argued that the decision in Telcordia Technologies Inc v Telkom SA Limited [2006] ZASCA 112; 2007 (5) BCLR 503 (SCA), did not apply to the facts of this case because in that case the Supreme Court of Appeal was dealing with a commercial and not a labour dispute. The Telcordia decision was applied by this Court in the Academic & Professional Staff Association v Pretorious N.O and Others (2008) 29 ILJ 318 (LC). It would seem the applicant distinguishes that case on basis that it dealt with the review of a private arbitration award concerning the cancellation of a collective agreement.

The issue of whether a review Court in private arbitrations is restricted to the grounds referred to in section 33 of the Arbitration Act or the wider test applied in the compulsory arbitration under section 145 of the LRA dates back to the days of the justifiability test as set out in Carephone Pty Ltd v Marcus N.O & Others (1998) 19 ILJ 1424 (LAC).

Initially the Labour Court raised doubts as to the applicability of the wider test of review under section 145 of the LRA, to the private arbitrations under the Arbitration Act. See in this regard, Transwerk v Independent Mediation & Arbitration Services of SA & Another (2002) 23 ILJ 2313 (LC).

In Transnet Ltd v HOSPERSA & Other (1999) 20 ILJ 1293 (LC), the Court held on the basis of the similarity of the provisions of section 33 of the Arbitration Act and section 145 of the LRA that the wider test as enunciated in Carephone was applicable to private arbitration awards.

A similar approach was adopted in the Orange Toyota (Kimberly) v Van der Walt & Others (2001) 1 BLLR 85 (LC), where the Court at paragraph 13 held that:

“[13] The Arbitration Act, like any other Act must be read subject to the Constitution of the Republic of South Africa 108 of 1996. It follows that the test for review of the CCMA arbitration awards set out in Carephone (Pty) Ltd v Marcus NO & Others (1998) 19 ILJ 1425 (LAC) would equally apply to reviews in terms of section 33 of the Arbitration Act (see NUM v Brand NO & Another [1999] 8 BLLR 849 (LC) and Transnet Ltd v HOSPERSA & Another (1999) 20 ILJ 1293 (LC).”

In Eskom v Hiemstra NO & Others (1999) 10 BLLR 1041 (LC), the Court in finding that the Transnet Ltd v HOSPERSA was wrongly decided held:

“[17] The basis of the decision in Carephone was that the CCMA was an organ of state. Being an organ of state and exercising a compulsory function a commissioner of the CCMA was obliged to adhere to Section 33 of the Bill of Rights included in the Constitution of the Republic of South Africa of 1996 (as read with item 23 (b) of Schedule 6). This section deals with the nature of administrative fairness which persons may expect from an organ of state in South Africa.

[18] An arbitration, conducted on a voluntary basis in terms of the Arbitration Act of 1965 need not, and is usually not, conducted by an organ of state. In this case the parties’ arbitrator is a private citizen and not an organ of state. Section 33 and the test of justifiability is not applicable to this situation. Policy considerations do not enter into picture for our law has always recognised that by choosing one’s forum one may be choosing a different standard of justice.”

The Labour Appeal Court had an opportunity to consider the applicability of the wider review test in private arbitrations in the case of Stocks Civil Engineering (Pty) Ltd v Rip NO & Another (2002) 3 BLLR 189 (LAC). In that case the Court accepted the approach adopted in the Eskom v Hiemstra’s case and held that:

“[24] …Private arbitrations are subject to the Arbitration Act 42 of 1965. Section 40 provides for an exception where an Act of Parliament expressly or by implication excludes its operation. An example is section 145 of the LRA. There is no such exception in the case of private arbitrations. Consideration of expediency based upon the fact that the arbitration provisions of the LRA coincides with those of the Arbitration Act and that it would be preferable for the Labour Court to apply one test throughout, cannot override the clear provisions of the Arbitration Act. I do not share the view of Molahledi AJ (sic) in the Orange Toyota case (supra paragraph 13) that the Arbitration Act is to be read subject to the Constitution and that therefore the test for the review of the CCMA arbitration awards set out in Carephone judgment will equally apply to reviews in terms of section 33 of the Arbitration Act. The important difference between the two types of arbitrations is that CCMA arbitrations were held to be by an organ of state to which the Constitutional precepts for just administrative action applied, whereas private arbitrations are not. This arbitration therefore has to be evaluated against the norms laid down in section 33(1) of the Arbitration Act as if this were a High Court doing likewise.”

Van Dijkhost AJA differed with the decision of Wallis AJ in Shoprite Checkers (Pty) Ltd v Ramdaw NO & Others (2000) 21 ILJ 1232 (LC), where the Court expressed the view at (paragraph 61) that the arbitrations under the LRA and those under section 33 of the Arbitration Act should be treated alike.

Zondo JP in the Stocks Civil Engineering’s case in dealing with this matter had this to say:

“[73] As the arbitration in this matter was a private arbitration as opposed to compulsory arbitration provided for under the Labour Relations Act 66 of 1995 (“the Act”), the provisions of section 145 would ordinarily not be applicable with the result that the award would fall outside the ambit of the decision of this Court in Carephone Pty Ltd v Marcus NO & Others (1998) 19 ILJ (LAC).”

See also in this regard NUM obo 35 Employees v Grogan NO & Another (2007) 4 BLLR 289 (LC).

In Sidumo, Navsa AJ in drawing the distinction between compulsory arbitration in terms of the LRA and private arbitration referred in footnote 93 to Telcordia Technologies Inc v Telkom SA Limited 2000 (3) SA 266 (SCA). In this regard the Learned Judge said:

“[88] Compulsory arbitration in terms of the LRA are different from private arbitrations. CCMA commissioners exercise public power which impacts on the parties before them. In the language of the pre-constitutional administrative law order, it would have been described as an administrative body exercising a quasi-judicial function. I conclude that a commissioner conducting a CCMA arbitration is performing an administrative action.”

It is clear, in my view, that the norms that apply in reviews of private arbitrations review are those found in the provisions of section 33 of the Arbitration Act and the wider test of review of section 145 of the LRA, is not applicable to private arbitrations under section 33 of the Arbitration Act.

I do not agree with the Mr Hutchinson that the decision in Telcordia (Supra) does not apply to labour disputes because it is related to a commercial dispute. Section 33 of the Arbitration Act, makes no distinction between disputes relating to commercial and those relating to labour matters. It is therefore my view that the test as set out in Telcordia applies is in reviews of private labour disputes. The test to apply is set out in that case as follows:

“[50] By agreeing to arbitration parties to a dispute necessarily agree that the fairness of the hearing will be determined by the provisions of the Act and nothing else. Typically, they agree to waive the right of appeal, which in context means that they waive the right to have the merits of their dispute relitigated or reconsidered. They may, obviously, agree otherwise by appointing an arbitral appeal panel, something that did not happen in this case.

[51] Last, by agreeing to arbitration the parties limit interference by courts to the ground of procedural irregularities set out in section 33(1) of the Act. By necessary implication they waive the right to rely on any further ground of review, “common law” or otherwise. If they wish to extend the grounds, they may do so by agreement but then they have to agree on an appeal panel because they cannot by agreement impose jurisdiction on the court.”

In other words by agreeing to refer their disputes to private arbitration the parties limit interference by Court to the grounds of procedural irregularities as set out in section 33(1) of the Arbitration Act. The consequence of agreeing to refer the matter to private arbitration is that the parties waive right to rely on any further ground of review be it “common law” or otherwise. The grounds of review as set out in section 33(1) of the Arbitration Act can only be extended by agreement between the parties. It would seem to me in this regard that the parties may well agree that the

grounds for review should include the reasonable decision maker test as suffused in section 145 if the LRA in term of the Sidumo decision. In the absence of an agreement incorporating reasonable decision-maker test into the terms of reference the applicable law in as far as review of private arbitration is concerned is that as set out in Telcordia.

In the present case there is no agreement to extend the grounds of review. The parties have however, agreed that in determining the appropriateness of the section the arbitrator would refer the provisions of section 193(2) of the LRA which provides as follows:

“The arbitrator must require the employer to reinstate or re-employ the employee unless-

(a) the employee does not wish to be reinstated or re-employed;

(b) the circumstance surrounding the dismissal are such that a continued working relationship would be intolerable;

(c) is not reasonably practicable for the employer to reinstate or re-employ the employee or

(d) the dismissal is unfair only because the employer did not follow the correct procedure.”

Turning to the facts of this case it is clear that the applicant did not confine its attack of the arbitrator’s award to those ground as set out in section 33 of the Arbitration Act which provides as follows:

“(a) Any member of the arbitration tribunal has misconducted himself in relation to his duties as arbitrator or empire; or

(b) An arbitration tribunal has committed any gross irregularity in the conduct of the arbitration proceedings or has exceeded its powers; or

(c) An award has been improperly obtained.”

It should be clear from the earlier discussion that my view based on the authorities reviewed is that the review of private arbitration, as is the case in the present instance, is confined to the test set out in Telcordia. In my view in the present instance the arbitrator cannot be faulted for failing to apply her mind to the issues as set out in the terms of reference nor can it be said that she has failed to appreciate the task given to her and how to deal with the issue that she was confronted with.

In her arbitration award the arbitrator set out the evidence as it was presented by both parties. She in considering whether the dismissal was fair took into account several factors including the fact that the applicant suffered no loss as a result of the conduct of the employee. The arbitrator found that no financial consequences arose for the applicant when it did not proceed with the tender. The arbitrator gave a detailed analysis of all the issue that arose from the evidence presented and arrived at

a conclusion that falls within the powers given to her by the terms of reference.

It is trite that it is not every irregularity in the conduct of arbitration that would invite interference from the Court. The Court will interfere where the irregularity is so gross that the affected party can be said to have been denied a fair hearing as a result. The applicant has not on its papers established the existence any of the grounds set out in section 33 of the Arbitration Act.

In as far as the order of reinstatement is concerned I am unable to fault the arbitrator particularly having regard to the fact that she arrived at the conclusion after considering the principles set out in section 193 of the LRA which had been incorporate into the terms of reference of the arbitrator. In the circumstances, my view is, that the applicant’s application to review the award of the arbitrator stands to be dismissed.

There is no reason why costs should not follow the result.

In the premises, the application to review and set aside the award of the arbitrator is dismissed with costs.

_______________

Molahlehi J

Date of Hearing : 19th June 2008

Date of Judgment : 21st November 2008

Appearances

For the Applicant : Adv W J Hutchinson

Instructed by : Fluxmans Attorneys

For the Respondent: Mr S Hardie of Stephen Hardie Attorneys

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