Engineering Council of SA v Ramushowana NO and Others (JR186/12) [2014] ZALCJHB 389 (13 October 2014)

REPUBLIC OF SOUTH AFRICA

THE LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG

NOT REPORTABLE

CASE NO JR 186/12

In the matter between:

ENGINEERING COUNCIL OF SA

APPLICANT

and

SILAS RAMUSHOWANA N.O

1ST RESPONDENT

COMMISSION FOR CONCILIATION, MEDIATION

AND ARBITRATION

2ND RESPONDENT

SOLIDARITY obo E NAUDE

3RD RESPONDENT

Application heard: 8 October 2014

Judgment delivered: 13 October 2014

JUDGMENT

VAN NIEKERK J

Introduction

[1] This is an application brought in terms of s 145 of the Labour Relations Act to review and set aside an arbitration award issued by the first respondent (the commissioner) on 30 December 2011. In his award, the commissioner held that the employee on whose behalf the third respondent acts in these proceedings (Naude) was unfairly dismissed by the applicant. He ordered that Naude be reinstated with effect from 16 January 2012 and that he be paid an amount of R 400 207.50, the equivalent of five months’ remuneration.

The material facts

[2] Naude was employed by the applicant, a statutory council created in terms of the Engineering Profession Act, 26 of 2000. During 2008, the council decided to implement a scheme in terms of which the children of staff members could apply for financial assistance to enable them to study at approved tertiary institutions.

[3] The applicant is the father of a daughter and a son, both of whom were beneficiaries of the financial assistance scheme. The applicant prepared the relevant contracts, one for each of his children, and took them to Prof Hanrahan, then the CEO of the council, for signature on behalf of the council. On 21 April 2009, both contracts were signed by Hanrahan, the applicant and by the applicant's

children. Both contracts reflect the terms and conditions of the standard contract previously approved by the CEO. In the proceedings

under review, these were referred to as contract A.

[4] The main terms of what the council contended was the standard-form contract were that the council would grant financial assistance to the children of employees for the purposes of completing a course of study at an approved tertiary institution. By signing the agreement, the parent or legal guardian concerned undertook to bind him or herself as surety and co-principal debtor for all obligations

incurred by the student. The student was obliged to complete the course successfully and thereafter might be required to enter the council's employment for a stipulated minimum period. Should the council not offer employment to the student on the successful

completion of the course, all financial obligations between the council and the student would lapse. Further, the council was entitled to recoup the loan from a student who failed the course and to claim the loan from the student's parents as sureties if the student was unable to bear the debt.

[5] During 2011, almost two years after the contracts were signed, the council's human resources manager, Badenhorst, had occasion to examine the contracts. He noticed that those contracts on file differed from the contracts that were originally drafted and approved in 2009. This series of contracts were referred to during the arbitration proceedings as contract B so as to distinguish them from what the council contended were the original contracts, contract A. More specifically, Badenhorst noted that the clauses in contract A that referred to a parent’s liability as surety and co-principal debtor of the student’s financial obligations to the council were deleted in contract B. Further, whereas in contract A the council had the discretion to decide whether to employ the student after completion of studies, contract B imposed an obligation on the council to do so. In contract A, the council could demand the repayment of the whole of the principal debt and accrued interest from the student and/or student’s parent, whereas in contract B the right to claim against the parent had been removed. In contract A the parent bound him or herself as surety and co-principal debtor for all of the student’s obligations – this clause was deleted from contract B.

[6] Badenhorst reported his discovery to the current CEO of the council, Franks. Franks confronted the applicant with the altered contracts. In the absence of a satisfactory explanation, the applicant was suspended on full pay and his laptop computer was handed to auditors for forensic investigation. The investigation revealed that both contract A and contract B were on the applicant's computer.

[7] The applicant was charged with four counts of misconduct. Two of these are relevant for present purposes, being a charge of

fraudulently amending the financial assistance agreements to the detriment of the council and to advance the applicant's personal

interests and second, using his position to request and obtain a laptop for his personal use from a regular supplier, thereby acting

in a corrupt manner.

[8] During April and May 2011, a disciplinary hearing was conducted by an independent chair, Adv. Greg Fourie, a member of the Johannesburg

Bar. The chairperson found the applicant guilty on three of the four charges brought against him, including the two charges referred to above. He recommended that the applicant be dismissed on each of these two charges, and that he be given a written warning on the third. . The applicant was dismissed on 28 June 2011.

[9] The applicant disputed the fairness of his dismissal and referred a dispute to the CCMA. This resulted in the arbitration proceedings

held before the commissioner during October and December 2011. On 30 December 2007, the commissioner issued the award under review in which, as I have indicated, he found that the dismissal of the applicant was procedurally fair but substantively unfair.

The award

[10] The commissioner's reasoning is to be found in just two paragraphs of his award. They read as follows:

5.3. It was common cause that the applicant was involved in drafting the contracts for the Scheme and that the original contract was not part of the bundles of documents. Further that the applicant had received a laptop as a gift from Minolta and had failed to declare.

5.4 Looking at the first charge of fraudulently amending the contracts, evidence was led by the applicant after the amendments were made on the contracts and was signed by Prof Hanrahan and by the Legal Department’s Mr Fourie. Both were the respondent’s witnesses and they all testified that they sign the contract without reading them on trust that all was well. It is absurd to believe the above given their positions and qualifications to be that ignorance. The applicant did not dispute consistently that there were amendments to the contract and addendum that he insisted that he had the authority to do so and this evidence was not disputed. The fact that he took it to other people was to show that there was nothing sinister. In as far as this charge is concern; I have no doubt to accept the evidence of Mr Bhengu and Ms Van Rensburg. It was clear on the issue of the laptop through the evidence before me that the applicant had declared the gift before the CEO although there was no

formal process followed as there was no policy to do so. There was no prove by either the respondent's witness all the applicant's witness that there was corrupt activities in acquiring the laptop (sic).

The applicable legal principles

[11] The test to be applied is that enunciated by the Constitutional Court in Sidumo v Rustenburg Platinum Mines Ltd 2008 (2) SA 24 (CC). recently affirmed by the Supreme Court of appeal in Herholdt v Nedbank 2013 (6) SA 224 (SCA). In the latter judgment the court summarised the position as follows:

‘[25] In summary, the position regarding the review of CCMA awards is this: A review of a CCMA award is permissible if the defect in the proceedings falls within one of the grounds in s 145 (2) (a) of the LRA. For a defect in the conduct of the proceedings to amount to a gross irregularity as contemplated by s 145 (2)(a)(ii), the arbitrator must have misconceived the nature of the inquiry or arrived at an unreasonable result. A result will be unreasonable if it is one that a reasonable arbitrator could not reach on all the material that was before the arbitrator. Material errors of fact, as well as the weight and relevance to be attached to particular facts, are not in and of themselves sufficient for an award to be set aside, but are only of any consequence if their effect is to render the outcome unreasonable.’

[12] The Heroldt decision clarifies the Sidumo test, at least to the following extent:

a. The test to be applied is cast in the negative- the court must ask whether the arbitrator’s decision is one that could not reasonably be reached on the available material.

b. The test is concerned primarily with the result of the arbitration proceedings and not the arbitrator’s reasoning. The arbitrator’s reasons are relevant only in so far as they assist the court to determine how the result was reached, and whether the result can reasonably be reached by that route.

c. A ‘latent irregularity’ or ‘dialectical

unreasonableness’ on the part of the arbitrator (i.e. a failure by the arbitrator to take into account one or more material facts, or the taking into account of irrelevant facts, or any unreasonableness flowing from the arbitrator’s process of reasoning) is not in itself a sufficient basis for review. The arbitrator’s conduct in this regard is relevant only in so far as it renders the outcome of the arbitration proceedings unreasonable.

[13] In Goldfields Mining South Africa (Pty) Ltd v CCMA [2007] ZALC 66; [2014] 1 BLLR 20 (LAC) the Labour Appeal Court confirmed that the applicable test does not admit what has been referred to as a “process-related review”, at least in the sense that it is no longer open to a reviewing court to set aside an arbitration award only on account of a process- related irregularity on the part of the arbitrator. This has the consequence that the failure by an arbitrator to mention a material fact in the award, or to deal with any issue that has a bearing on the issue in dispute, or any error in regard to the evaluation of the facts presented at the arbitration hearing, is of no consequence. Provided that the arbitrator gave the

parties a full opportunity to state their respective cases at the hearing, identified the issue that he or she was required to

arbitrate, understood the nature of the dispute and dealt with its substantive merits, the function of the reviewing court is limited to a determination whether the arbitrator’s decision is one that could not be reached by a reasonable decision-maker on the available material.

[14] At paragraph [20] of the judgment, the court stated:

‘The questions to ask are these: (i) In terms of his or her duty to deal with the matter with the minimum of legal formalities, did the process that the arbitrator employed give the parties a full opportunity to have their say in respect of the dispute? (ii) Did the arbitrator identify the dispute he was required to arbitrate (this may in certain cases only become clear after both parties have led their evidence)? (iii) Did the arbitrator understand the nature of the dispute he or she was required to arbitrate? (iv) Did he or she deal with the substantial merits of the dispute? and (v) Is the arbitrator’s decision one that another decision-maker could reasonably have arrived at based on the evidence?

[21] Where the arbitrator fails to have regard to the material facts it is likely that he or she will fail to arrive at a reasonable decision. Where the arbitrator fails to follow proper process he or she may produce an unreasonable outcome (see Minister of Health and Another v New Clicks South Africa (Pty) Ltd and Others 2006 (2) SA 311 (CC)). But again, this is considered on the totality of the evidence not on a fragmented, piecemeal analysis. As soon as it is done in a piecemeal fashion, the evaluation of the decision arrived at by the arbitrator assumes the form of an appeal. A fragmented analysis rather than a broad-based evaluation of the totality of the evidence defeats review as a process. It follows that the argument that the failure to have regard to material facts may potentially result in a wrong decision has no place in review applications. Failure to have regard to material facts must aactually defeat the constitutional imperative that the award must be rational and reasonable - there is no room for conjecture and guesswork.

[15] In the recent decision of Head, Department of Education v Mofokeng and others (JA 14 /2014, 1 October 2014) the Labour Appeal Court, per Murphy AJA, said the following:

[30] The failure by an arbitrator to apply his or her mind to issues which are material to the determination of a case will usually be an irregularity. However, the Supreme Court of Appeal (“the SCA”) in Herholdt v Nedbank Ltd and this court in Goldfields Mining South Africa (Pty) Ltd (Kloof Gold Mine) v CCMA and others have held that before such an irregularity will result in the setting aside of the award, it must in addition reveal a misconception of the true enquiry or result in an unreasonable outcome.

[31] The determination of whether a decision is unreasonable in its result is an exercise inherently dependant on variable considerations and circumstantial factors. A finding of unreasonableness usually implies that some other ground is present, either latently or comprising manifest unlawfulness. Accordingly, the process of judicial review on grounds of unreasonableness often entails examination of inter-related questions of rationality, lawfulness and proportionality, pertaining to the purpose, basis, reasoning or effect of the decision, corresponding to the scrutiny envisioned in the distinctive review grounds developed casuistically at common law, now codified and mostly specified in section 6 of the Promotion of Administrative Justice Act (“PAJA”); such as failing to apply the mind, taking into account irrelevant considerations, ignoring relevant considerations, acting for an ulterior purpose, in bad faith, arbitrarily or capriciously etc. The court must nonetheless still consider whether, apart from the flawed reasons of or any irregularity by the arbitrator, the result could be reasonably reached in light of the issues and the evidence. Moreover, judges of the Labour Court should keep in mind that it is not only the reasonableness of the outcome which is subject to scrutiny. As the SCA held in Herholdt, the arbitrator must not misconceive the inquiry or undertake the inquiry in a misconceived manner. There must be a fair trial of the issues.

[32] However, sight may not be lost of the intention of the legislature to restrict the scope of review when it enacted section 145 of the LRA, confining review to “defects” as defined in section 145(2) being misconduct, gross irregularity, exceeding powers and improperly obtaining the award. Review is not permissible on the same grounds that apply under PAJA. Mere errors of fact or law may not be enough to vitiate the award. Something more is required. To repeat: flaws in the reasoning of the arbitrator, evidenced in the failure to apply the mind, reliance on irrelevant considerations or the ignoring of material factors etc. must be assessed with the purpose of establishing whether the arbitrator has undertaken the wrong enquiry, undertaken the enquiry in the wrong manner or arrived at an unreasonable result. Lapses in lawfulness, latent or patent irregularities and instances of dialectical unreasonableness should be of such an order (singularly or cumulatively) as to result in a misconceived inquiry or a decision which no reasonable decision-maker could reach on all the material that was before him or her.

[33] Irregularities or errors in relation to the facts or issues, therefore, may or may not produce an unreasonable outcome or provide a compelling indication that the arbitrator misconceived the inquiry. In the final analysis, it will depend on the materiality of the error or irregularity and its relation to the result. Whether the irregularity or error is material must be assessed and determined with reference to the distorting effect it may or may not have had upon the arbitrator’s conception of the inquiry, the delimitation of the issues to be determined and the ultimate outcome. If but for an error or irregularity a different outcome would have resulted, it will ex hypothesi be material to the determination of the dispute. A material error of this order would point to at least a prima facie unreasonable result. The reviewing judge must then have regard to the general nature of the decision in issue; the range of relevant

factors informing the decision; the nature of the competing interests impacted upon by the decision; and then ask whether a reasonable

equilibrium has been struck in accordance with the objects of the LRA. Provided the right question was asked and answered by the

arbitrator, a wrong answer will not necessarily be unreasonable. By the same token, an irregularity or error material to the determination of the dispute may constitute a misconception of the nature of the enquiry so as to lead to no fair trial of the issues, with the result that the award may be set aside on that ground alone. The arbitrator however must be shown to have diverted from the correct path in the conduct of the arbitration and as a result failed to address the question raised for determination.

[16] The test to be applied clearly maintains the distinction between a review and an appeal. The correctness of the commissioner’s

decision is not in issue, and the court is not entitled to interfere only because it would have come to a different conclusion on the same material. In other words, commissioners are allowed to be wrong. The applicable threshold also requires the court to overlook any lapses in reasoning on the part of the commissioner and to determine whether the outcome of the proceedings is nevertheless reasonable. But it does not follow, as Murphy AJA observed, that the court is required to engage in a reasonableness enquiry in relation to outcome where a commissioner fails to ask the right question, or where an irregularity or material error serves to constitute a material misconception of the nature of the enquiry. This is particularly so where the commissioner simply fails to address the question or questions raised for determination in the proceedings under review, with the result that one or more of the parties are denied a fair hearing.

Analysis

[17] In the present instance, the commissioner's summary of the evidence is obviously and patently inadequate. It omits material evidence and fails accurately to summarise certain material testimony. The analysis conducted by the commissioner, which in essence was an enquiry into whether on the balance of probability the applicant had proved the charges of misconduct against Naude, fails to disclose precisely what led him to the conclusion that the dismissal was substantively unfair.

[18] The commissioner appears to have found that Naude had the authority to effect changes to the contracts and that Hanrahan and Fourie were aware of these changes and made no objection to them. If this is indeed the commissioner’s finding, then it is not reconcilable with his acceptance of the testimony of Bengu and Van Rensburg, both of whom proffered a conspiracy theory raised by Naude to the effect that the charges against him had been orchestrated in an attempt to get rid of him. In fact, it was specifically put to Badenhorst that he (Badenhorst) had forged the contracts in order to achieve this end, an assertion that is repeated in the answering affidavit. If this evidence was accepted by the commissioner, then it is not at all clear why a finding that Naude was authorised to make the changes is of any relevance.

[19] Be that as it may, it was common cause at the arbitration hearing that the contracts had been amended and that there existed two different, apparently identically signed versions of each contract. It was also common cause that the signatures and initials must have been forged onto one or other version of the contracts, because the initials and signatures on the two agreements were identical and because the two versions were purportedly signed on the same date. It was conceded by Naude that a forgery must have taken place. His version was that contract B was the original contract, and contract A the forgery, having been forged by Badenhorst. This being so, the first main issue before the commissioner was whether, as the applicant contended, contract A was legitimately signed and then fraudulently amended so as to reflect in contract B, or whether contract B was the original contract signed by the parties and contract A the forgery. The second main dispute before the commissioner was who made the fraudulent amendments – Badenhorst or Naude?

[20] The two versions before the arbitrator were mutually exclusive. That being so, the commissioner was required to apply approach to the resolution of factual disputes was established some years ago in SFW Group Ltd & another v Martell et Cie & others 2003 (1) SA 11 (SCA). Instead, the commissioner summarily rejected the evidence of each of the applicant’s witnesses and made a decision on this (unreasoned) basis. The commissioner was at least required to make some attempt to assess the credibility of each of the witnesses, and to make some observation of their demeanour. He ought also to have considered the prospects of any partiality, prejudice or self-interest on their part and determined the inherent probability or improbability of the testimony of each witness. He ought then to have to have considered the probability of each party’s version.

[21] The commissioner’s failure to appreciate the nature of the enquiry before him and to ask the right questions had the result that there was no fair trial of the issues and on this basis alone, the commissioner’s award stands to be reviewed and set aside.

[22] Had the commissioner assessed the probabilities he would have found that they pointed overwhelmingly to Naude having fraudulently altered the contracts. Had the commissioner assessed the credulity of the witnesses who testified before him, he would have considered Naude’s ever-changing version of events meant simply that he could not be believed. The obvious probabilities that arise from the evidence are first, that contract B contains amendments that are to the material detriment of the council. It is highly improbable that the council would have authorized or effected such changes, especially because this would run counter to the principles on which the scheme had been approved. Secondly, whoever effected the forgery must have done so with the aim of avoiding personal liability and with the intention of securing for his or her children guaranteed employment with the council on completion of their studies. The alterations stood to benefit the employee materially. Further, Naude was the custodian of the contracts and the file in which they were complaint and had the opportunity to make the amendments. Thirdly, if contract B is the original approved contract, and if Naude had the authority to produce a contract in those terms, the question arises as to why contract B contains handwritten amendments. It is highly improbable that the standard form contract would have been approved in that form. Further, contract B contains a clause to the effect that a parent who is bound as a surety could elect to stop payments render the student finds employment. This is the only reference to suretyship in that contract. The inclusion of the clause (6.3.2) makes no sense in a contract in which there was no provision for a parent to sign surety. The probabilities are that Naude forgot to delete the clause when he made the other changes to contract A.

[23] In relation to issues of credibility, had the commissioner embarked on the required assessment of the credibility of the witnesses he would have considered that Naude’s version of events changed throughout, from the first time that he was confronted by Hanrahan, through the disciplinary proceedings and at the arbitration hearing itself. At first, Naude contended that any changes made to the agreements related to hostel fees, this, of course, was patently untrue. Later, Naude stated that the financial assistance scheme was intended as a benefit and was never a loan or other arrangement intended to fix liability on parents. At the outset of the disciplinary hearing, Naude contended that the changes had been authorized. This version finds some resonance in the answering affidavit where Naude persists with a contention that he had full authority to draft the contract terms that he said he did and that contract B was the original contract and contract A the unauthorised version.

[24] The commissioner’s failure to appreciate the nature of the enquiry aside, the following is indicative of the fact that the commissioner carried out his functions in the wrong manner. It is simply not correct, as the commissioner held, that Naude’s evidence to the effect that he had authority to make the offending changes was not in dispute. This allegation was disputed and not surprisingly, since the whole basis of the charge was that Naude had made the changes to the contracts fraudulently and without authority. Secondly, the commissioner appears to have found and placed great store by the fact that Hanrahan and Fourie read the amended contracts (which contained the offending changes) and signed them because they had no objection to them. He made this finding on the basis that he had noted that the two of them testified that they had signed contracts without reading them. The unstated corollary is that they must have read and approved of the changes. This finding is wholly irreconcilable with the conspiracy defence raised by Naude. In any event, it represents a fundamental misunderstanding of the evidence. It was not Hanrahan’s evidence that he was presented with a document in the form of contract B. What he said was that he had signed only contract A. He had requested only one change to the original contract provided to him (i.e. to clause 5.1.9). Hanrahan signed a contract with that change having been made. At no point did he sign a contract B.

[25] It is also simply not correct that Hanrahan signed the contracts relating to Naude’s children without reading them. When he was presented with those contracts, which were in the standard form, he signed them in circumstances where he had approved the standard form contract with the amendment made to clause 5.1.9. In regard to Fourie’s evidence that he had signed the contract without reading it, Fourie testified that he signed contract A on 10 February 2000. This was not in dispute. Later, during September 2010, Naude approached him and asked him to re-sign the contract, with the explanation that clause 4.3 had to be amended to provide for a cap on hostel fees. Since the clause does not affect his daughter (who lived at home with her mother) and since Fourie trusted Naude, he did not pay attention to the remainder of the terms of the contract and remained under the impression that this was the sole change. Fourie testified that he was embarrassed when he later found out that he had signed a contract that had been fraudulently amended and that he had failed to notice that the typed date on the contract was not the date on which the second contract was signed by him. This is a reasonable and credible explanation of the circumstances surrounding his signature of contract, certainly not for the commissioner to disbelieve without rational and cogent reasons.

[26] Further, a reading of the commissioner’s conclusions discloses that he appears to have accepted the conspiracy theory raised by Naude to the effect that all of the evidence against him had been fabricated in pursuit of some ulterior motive to secure his dismissal. The commissioner does not deal with this theory but simply states that he had no hesitation in accepting the evidence of those who proffered it.

[27] For these reasons, in my view, having regard to the applicable test, the commissioner's award, certainly in relation to the issue of the contracts and any forgery that may have been committed stands to be reviewed and set aside. In these circumstances, it is not necessary for me to consider further the commissioner’s findings in relation to the charges of procuring the donation of a laptop from a supplier.

[28] Given the conclusion to which I have come in relation to the commissioner’s findings on the issue of the contracts, it is not necessary for me to make any decision in relation to the commissioner’s findings and conclusion in regard to the second charge of corruption in the form of procuring a donation form a supplier. As appears from the commissioner’s analysis, the same considerations that warrant a setting aside of the award in relation to the issue of the contracts applies to this charge. It is also not necessary for me to consider the application in terms of Rule 11 in which Van Rensburg recants her testimony before the commissioner – that issue does not go to the question of whether the parties were afforded a fair trial.

[29] There would be little purpose in referring the matter back to the CCMA for consideration by another commissioner. Naude was dismissed in mid- 2011, more than four years ago. The arbitration award was issued in December 2011. A referral for rehearing would only serve to delay matters even further. The record is as complete as it can be, and the court is in a position to make an order of substitution. The applicant was guilty of an act of serious misconduct, for which dismissal is an appropriate penalty. For this reason, I intend to substitute the commissioner’s award for one that dismisses Naude’s claim of unfair dismissal.

Costs

[30] Section 162 of the LRA confers a broad discretion on the court to make orders for costs according to the requirements of the law and fairness. I must necessarily consider that the applicant has succeeded in having the commissioners award reviewed and set aside. In so far as acts on Naude’s behalf, this court has traditionally the client to make orders for costs where the parties

are engaged in a collective-bargaining relationship and with an order for costs might serve to prejudice that relationship. On enquiry, the court was informed that has a few members who are employed by the applicant, but no evidence of any collective-bargaining relationship or any prejudice that relationship was proffered. In the circumstances, it seems to me that the applicant ought to be entitled to its costs. However, the record of the proceedings under review has been unnecessarily burdened by the incorporation of the record of the disciplinary hearing. This has no relevance in the present proceedings and are failed to appreciate why these papers were incorporated. The Practice Manual makes clear that only relevant portions of the record ought to be filed. I intend therefore to order that the order for costs shall exclude any costs relating to the offending portion of the record.

[31] Finally, it is appropriate to record that at the hearing of the application, Adv. Bekker, who appeared for the third respondent

unreservedly withdrew any imputations made in the answering affidavit, deposed to by Naude, regarding what was alleged to

be bias and misconduct on the part of the chairperson of the disciplinary hearing, Adv. Fourie. That withdrawal is entirely appropriate – the allegations made against Adv. Fourie in the course of these proceedings are baseless and border on the defamatory.

For these reasons, I make the following order:

1. The arbitration award issued by the first respondent on 30 December 2011 under case number GAJB 17945-11 is reviewed and set aside.

2. The first respondent’s award is substituted by the following:

“The dismissal of the applicants was substantively and procedurally fair.”

3. The third respondent is to pay the costs of these proceedings, but for any costs associated in any manner with the filing of the record of the disciplinary hearing.

ANDRE VAN NIEKERK

JUDGE OF THE LABOUR COURT

REPRESENTATION

For the applicant: Adv. A Snider instructed by Henning Viljoen Attorneys

For the third respondent: Adv. W.P Bekker instructed by Serfontein Viljoen & Swart