MEC for Health Gauteng v Public Service Co-Ordinating Association of South Africa and Others (JR705/05) [2006] ZALC 79; [2007] 6 BLLR 538 (LC); (2006) 27 ILJ 2638 (LC) (19 July 2006)

IN THE LABOUR COURT OF SOUTH AFRICA

HELD IN JOHANNESBURG

Reportable

CASE NO: J 13/05-

JR 705/05

In the matter between

MEC FOR HEALTH, GAUTENG APPLICANT

and

PUBLIC SERVICE CO-ORDINATING FIRST RESPONDENT

ASSOCIATION OF SOUTH AFRICA

E. TLHOTLHALEMAJE NO

SECOND RESPONDENT

PUBLIC SERVANTS ASSOCIATION OF THIRD RESPONDENT

SOUTH AFRICA obo MEMBERS

____________________________________________________________________

JUDGMENT

MOKGOATLHENG AJ

INTRODUCTION

[1] This is a review application in terms of section 158(1)(g) of the Labour Relations Act of an award issued by the second respondent (the arbitrator).

[2] Prior to the 1st April 1998, the third respondents’ members were entitled to annual automatic salary increments.

[3] On the 20 June 1996, Clause XXXV of Resolution 3 of 1996, abolished the annual automatic progression of granting salary increments, and introduced a managerial prerogative exercised by the applicant to grant deserving personnel second and third notch increments related to performance based on certain criteria and subject to affordability.

[4] The applicant’s failure to award notch increments to the third respondents’ members pursuant to Clause XXXV of Resolution 3 of 1996 for the period the 1st of April 1998 – 31st March 2003, precipitated a dispute between the parties.

[5] The parties’ negotiations were unsuccessful. They referred the dispute to arbitration.

[6] The issue referred to the arbitrator to decide was a narrow one, he was to decide whether the applicant is obliged to make payment of notch increments to the third respondent’s members for the period of 1st April 1998 to 31st March 2003.

[7] The arbitrator made an award after considering the evidential material before him. The applicant seeks to review and set aside this award.

[8] The applicant assails the award on the basis that;

(a) the arbitrator exceeded his powers, he misconceived the nature of his powers and his terms of reference, that as a result he committed a gross irregularity, and has failed to apply his mind to the evidential material before him.

[9] The arbitration was not conducted under the auspices of the CCMA, it was conducted under the aegis of the first respondent. The arbitration relates to the interpretation of a collective agreement

[10] Section 191(5)(a)(iv) of the LRA provides that;

“(5) If a council or a commissioner has certified that the dispute remains unresolved, or if 30 days have expired since the council or the Commission received the referral and the dispute remains unresolved-

(a) the council or the Commission must arbitrate the dispute at the request of the employee if-

(i)……………..

(ii)…………….

(iii)……………

(iv) the dispute concerns an unfair labour practice;”

[11] Section 158(1)(g) of the LRA does not stipulate the Act applicable in reviewing awards emanating from a bargaining council.

[12] In Portnet (A division of Transnet Limited) v Finnemore and Others (1999) 19 ILJ 151 (LC) at 152 G-153 D) it was held that arbitrations under the auspices of bargaining councils are held in terms of the Arbitration Act 42 1965. I associate myself fully with this contention.

[13] Section 146 of the LRA precludes the application of, the Arbitration Act 42 of 1965 to arbitrations conducted by the CCMA. The applicability of the Arbitration Act is not precluded from arbitrations held under the auspices of a bargaining council.

[14] Section 40 of the Arbitration Act 42 of 1965 determines whether the LRA or the Arbitration Act governs the review of an arbitration award held under a bargaining council. Section 40 provides that;

“this Act shall apply to every arbitration under any law passed before or after the commencement of this Act as if the arbitration were pursuant to an arbitration agreement and as if that other law were an arbitration agreement, provided that if that other law is an Act of parliament this Act shall not apply to any such arbitration in so far as this Act is excluded by or is inconsistent with the other law or is inconsistent with the Regulations or procedure authorised or recognised by that other law”

[15] In Carephone (Pty) Ltd v Marcus and Others (1998) 11 BLLR 1093 (LAC) it was held that the CCMA is an organ of state as defined in section 239 of the Constitution of South Africa Act No. 108 of 1996, and exercises a compulsory arbitral administrative action.

[16] A bargaining council is not an organ of state, an arbitrator conducting an arbitration under a bargaining council is not performing an administrative action, he performs a quasi judicial function.

[17] Wallis AJ in Shoprite Checkers (Pty) Ltd v Ramdaw and Others [2000] 21 ILJ 1232 (LC) held that the CCMA in exercising its arbitration functions is not an administrative body as held by Carephone.

[18] In my view this arbitration has to be conducted in terms of the Section 33 of the Arbitration Act 42 of 1965 because such arbitration was conducted by an arbitrator pursuant to an arbitration agreement.

[19] Section 33 of the Arbitration Act provides that;

(a) “where any member of an arbitration tribunal has misconducted himself in relation to his duties as arbitrator or umpire, 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, the court may, on application of any party to the reference after due notice to the other party or parties, make an order setting the award aside.”

[20] In Fedsure Life Insurance Ltd v Greater Johannesburg Transistional Council and Others 1999(1) SA 374 (CC) it was held that the rationale for the test as set out in Carephone is incorrect. In my view, this does not however abrogate the applicability of the test formulated in Carephone to arbitrations held in terms of the LRA or the Arbitration Act.

“Is there a rational objective basis justifying the connection made by the administrative decision-maker between the material properly available to him and the conclusion her or she eventually arrived at?”

[22] I agree that the test formulated in Carephone properly sets out the modus operandi regarding the deductive and inferential reasoning an arbitrator must engage before he reaches his conclusions in determining his award. If an arbitrator’s decision is not premised on the evidential material before him, then he has misdirected himself in relation to his mandate and can be said to have failed to properly apply his mind to the issue before him that therefore he has committed an irregularity because his conclusion is not rational or justifiable as it is not logically connected to the evidential material before him.

[23] Goldstone JA (as he then was) had occasion to consider section 33 of the Arbitration Act 42 of 1965 and remarked as follows;

“It is only in those cases which fall within the provisions of s 33(1) of the Arbitration Act that a Court is empowered to intervene. If an arbitrator exceeds his powers by making a determination outside the terms of the submission, that would be a case falling under s 33(1)(b). As to misconduct, it is clear that the word does not extend to bona fide mistakes the arbitrator may make whether as to fact or law. It is only where a mistake is so gross or manifest that it would be evidence of misconduct or partiality that a Court might be moved to vacate an award: Dickenson & Brown v Fisher’s Executors 1915 AD 166 at 174-81. It was held in Donner v Ehrlich 1928 WLD 159 at 161 that even a gross mistake, unless it establishes mala fides or partiality, would be insufficient to warrant interference.”

See Almalgamated Clothing and Textile Workers Union of Smith Africa v Veldspun (Pty) Ltd [1993] ZASCA 158; 1994 (1) SA 162 A at 169C-D.

[24] The parties in arguing the matter before me did so by extending the limited scope of review encapsulated in section 33 of the Arbitration Act by invoking the wide review grounds espoused in Carephone. In fact Adv Van Der Merwe on behalf of the third respondent contended that the arbitrator’s powers were derived from section 138 of the LRA. Adv Sutherland on behalf of the applicant argued that the award was unjustifiable as it was not rationally connected to the evidential material.

FACTUAL BACKGROUND

[1] In order to determine whether the arbitrator’s award is defective, it is apposite to consider the factual matrix on which the award is predicated.

[2] The evidential material agreed to and placed before the arbitrator consisted of the following documents;

(a) Circular 1 of 1996 Annexure “G” Guidelines issued pursuant to Resolution 3 of 1996, paragraph (1)(a) thereof provides,

“Although personnel forfeit their right to salary progression, departments / provincial administrations have a managerial prerogative to grant deserving personnel in their service the second or third notch of the salary ranges linked to their ranks / post classes based on their personal profiles”

(b) Paragraph 2 thereof provided that;

“……….only those employees who have distinguished themselves by way of a personal profile which is markedly higher than the norm set for the posts they occupy, may be considered for recognition by the granting of a higher notch on the relevant salary range”.

(c) Clause 3 thereof provided that;

“Performance and affordability should be the main determining factors in determining the number of personnel to be placed on the second or third notch of the salary range”.

“In terms of the proposed salary grading system normal / automatic salary progression based on the annual granting of salary increments on a salary scale, is abolished”.

(d) Resolution 3 of 1999, a collective agreement in relation to the third respondent members’ remunerative allowances and benefits. Clause xxxv of this resolution provided that;

“the current dispensation on merit bonuses and other forms of recognition of outstanding performance, innovations or achievements shall remain in force until the parties negotiate, in line with the requirements of the Labour Relations Act of 1995 a new agreement on the topic”.

(e) The Public Finance Management Act 1999

(f) The National Treasury Guidelines for the preparation of annual reports,

[3] Pursuant to Clause XXXV of Resolution 3 of 1996 merit awards were to be granted by the applicant exercising its managerial prerogative subject to performance and affordability. The factors to be considered in selecting the employees who qualify for notch increments are;

i. Skills,

ii. Knowledge,

iii. Experience,

iv. Training,

v. Qualifications, and

vi. Performance

[4] Resolution 3 of 1996 was superseded by Resolution 3 of 1999. It is common cause that since 1st April 1998 the applicant has not granted notch increments. The applicant argues that it cannot afford to grant notch increments as a result of financial constraints.

[5] The applicant contends that it has an unfettered managerial prerogative to grant notch increments, and has no obligation to consult the third respondent in the exercise of its prerogative.

[6] The applicant argues that it has to adhere to stringent Treasury regulations and cannot incur irregular expenditure, or exceed the amount appropriated for a particular vote or a main division within a vote, that personnel expenditure may not be increased without approval; that, an accounting officer may not overspend by exceeding the amount appropriated for a particular vote.

[7] The third respondent argues that the dispute is not about the payment of the notches, but is about the implementation of the notch increments, and says that the applicant was obliged to consult the third respondent, and cannot unilaterally conclude that it had budgetary constraints precluding it from granting notch increments.

THE DELAY IN LAUNCHING THE REVIEW APPLICATION

[1] The applicant has instituted the review application in terms of section 158 (1) (g) about seven days short of six months after the receipt of the award. Sections 158 1 (g) provides that the application for review has to be brought within a reasonable time.

[2] The applicant received the award on the 8th October 2004. The review application was launched on the 30th March 2005. The applicant states that after receiving this award, its labour and human resources departments attempted to negotiate with the third respondent in accordance with terms of the award. Such negotiations were fruitless.

[3] The applicant says thereafter the award was referred to it’s legal section on or about the 11th November 2004. The state attorney was informed on the 26th November 2004 that the applicant was considering a review application. The applicant’s legal department thereafter sought the necessary mandate to commence review proceedings.

[4] The applicant says that there was a lack of effective communication between its various sections that, this contributed to the delay in launching the review proceedings, and contends that the delay was exacerbated by the December/January holiday period when business operations in the country are held in abeyance.

[5] The applicant contends that it launched the review proceedings within a reasonable time before the award was made an order of court, and argues that the most important consideration is the content and significance of the award in law, that without it being made an order of court, the award has no legal effect.

[6] The third respondent contends that the review application was not instituted within a reasonable time, that, a period in excess of five months and twenty four days is inordinately excessive.

[7] The third respondent argues that the applicant has not proffered a reasonable explanation for its long delay between the 25th October 2004 to the 29th March 2005.

[8] The respondent contends that as the application for review was not brought within a reasonable time, the applicant is obliged to lodge a substantive application for condonation, that the failure to do so renders the application on this basis alone dismissible.

[9] The respondent’s contention is that a reasonable time envisaged by a section 158(1)(g) review application is six weeks from the date of the knowledge of the award.

[10] Adv Van Der Merwe on behalf of the respondent referred me to the decision of CWIU & Another v Ryan and Others (2001) 3 BLLR 337 (LC) in support of his submissions. This decision in my view supports the contention that every case must be adjudicated on its merits, it is not prescriptive.

[11] In that case, Pillay J condoned that delay of about six and a half months in bringing a review application. The learned judge found that the application could have been brought within two and a half months or less, allowing for the December vacation, however that, in the absence of prejudice, mere delay is not sufficient to bar a review application.

[12] The assessment of the reasonableness of the “concept within a personable period” must be determined in relation to the prevailing circumstances. In this matter, it is generally accepted that the country goes into a state of congenital slumber during the middle of December to the middle of January.

[13] The applicant is a Government Department, its consultative processes are different from private individual consultative mechanisms regarding mandates and instructions.

[14] There is an explanation that the applicant had to carefully consider the award before attempting to engage the third respondent in negotiations.

[15] Adv Sutherland argued on behalf of the applicant, that the most important consideration in the assessment of a reasonable period is, the significance of the award in law, that this award can have no legal effect until such time that it is made an order of this court. I agree with this submission because the arbitrator ordered the parties to negotiate. Such negotiations did not eventuate. In my view, no party can contend that it suffered prejudice before the award was made an order of this court having regard to the nature of the award.

[16] The award orders the parties to negotiate within 60 days of its making, this period has long elapsed, the parties have not commenced negotiating, in fact the respondent has instituted an application in terms of Section 158(1)(c) to make the award an order of this court, that application is dependant on the outcome of this review application,

[17] The other consideration, is the importance of this matter. Both parties need finality, both parties will suffer prejudice if there is not certainty and finality with regard to the assailment of the award in this review application.

[18] The final consideration is the prospects of success, and whether the arbitrator’s decision is reviewable or not. In exercising my discretion I have considered and applied the ratio decidendi espoused in the matter of Radebe v Government of the Republic of South Africa and Others 1995 (3) SA 787 N at page 798 J, and the principles enunciated in the case of in Melanie V Santam Insurance Company LTD 1962 (4) SA S31(A).

[19] Taking all the circumstances of this matter into consideration, I am of the view that this application for review was instituted within a reasonable time, in the premises the application for condonation is granted.

[See Setsokosane Busdiens Edms V Voorsitter Nasionalw Vervoer & Kommise en ‘n Ander 1986 (2) 8A57 (a) at 59H-J.]

EVALUATION OF EVIDENCE AND ARGUMENT

[1] Halsbury’s the Laws of the England, vol 2 on arbitration at 402 states;

“Where an arbitrator fails to comply with the terms, express or implied, of the arbitration agreement, that will amount to misconduct”.

[2] Nicholson JA in Crown Chickens (Pty) Ltd t/a Rocklands Poultry v Kapp and Others [2002] 6 BLLR 493 LAC at par 54 stated that:

“The arbitrator must have applied his mind seriously to the issues at hand and reasoned his way to the conclusion. Such conclusion must be justifiable as to the reasons given in the sense that it is defensible, not necessarily in every respect, but as regards the important logical steps on the road to his order”.

[3] Adv Sutherland on behalf of the applicant argues that the arbitrator exceeded his powers by ordering mediation, that this was beyond his province, that he thus committed an irregularity.

[4] Adv Sutherland contends that the arbitrator failed to appreciate and grasp what Resolution 3 of 1996 did, it abolished the previous automatic salary progression based on an annual granting of salary increment as regulated by the Public Service Staff Code, and ushered in a new dispensation in terms whereof, the third respondent’s members forfeited their right to automatic notch increments, and in turn recognised the applicant’s managerial prerogative to determine the awarding of notch increments to deserving personnel according to the determining criteria of performance and affordability.

[5] Adv Sutherland contends that the arbitrator critically misconceived what Resolution 3 of 1999 referred to when it provided that;

“the current dispensation merit bonuses and other forms of recognition of outstanding performance, innovation or achievements shall remain in force until the parties negotiate line with the requirement of the Labour Relational Act a new agreement on the topic”. By the “current dispensation”, he submits is referred to Resolution 3 of 1996 and not the Public Service Staff Code as found by the arbitrator, because the latter was abolished.

[6] The arbitrator by finding that the “current dispensation” meant in that context, that which immediately preceded it, was the Public Service Staff Code, and that this was the regime in terms of which notch increases would be awarded committed misconduct because he totally misconceived that what immediately preceded Resolution 3 of 1999 was Resolution 3 of 1996 whose currency was extended by the latter resolution.

[7] Adv. Sutherland argues that the applicant did not award notch increments for the period 1st April 1998 to 31st May 2003 simply because they were unaffordable, this assertion he submits was not controverted by any factual evidence from the third respondent save to categorise this statement as untruthful.

[8] Adv Van der Merwe on behalf of the third respondent contends that the arbitrator did not exceed his powers, as the dispute concerned the applicant’s unilateral refusal to consider the awarding of notch increments to deserving employees, he submits that it made sense to order the parties to negotiate the criteria for the purpose of the assessment of notch increments.

[9] Adv Van Der Merwe argues that since the arbitrator did not have any restrictive terms of reference, he generally had wide powers to rule on the interpretation and applicability of a collective agreement.

[10] Adv. Van Der Merwe contends that there was no basis for an unwarranted adherence to a fixed principle in that, when the arbitrator referred to the “old regime” he clearly meant the “current dispensation” as referred to in the collective agreement in question, that is the system that had applied at the time of the conclusion of the collective agreement.

[11] Adv Van Der Merwe submits that the “current system” was never one of exclusive managerial prerogative to not pay any awards at all, but one of identifying deserving employees, as previously practised by the applicant.

[12] Adv Van Der Merwe contends that if the arbitrator made a factual error in finding that reference to the “current dispensation” alluded to the Public Service Staff Code, then this was of little relevance and had no material effect on the outcome and was of no force or effect on the arbitrator’s reasoning in arriving at his conclusions.

[13] The Adv. Van Der Merwe contends that the arbitrator issued an award which is rational, logical, justifiable and defensible in the particular circumstances as he had to determine a dispute of this nature on reasonable grounds.

[14] Adv. Van Der Merwe submits that the arbitrator’s powers are derived from section 138 (9) of the LRA. Section 138 (9) provides that;

“The commissioner may make any appropriate arbitration award in terms of this Act, including, but not limited to, an award:–

(a) that gives effect to any collective agreement;

(b) that gives effect to the provisions and primary objects of this Act;

(c) that includes, or is in the form of, a declaratory order”.

[15] Adv Van Der Merwe submits that this is not a private arbitration in terms of the Arbitration Act 42 of 1965 were the terms of reference in the traditional sense are the “Bible” so to speak. In his view the crisp question is whether the applicant could unilaterally do away with the merit system. He contends it could not, because the third respondent’s members have a right to be considered for merit awards in terms of certain prescripts, he argues that the employer has violated the collective agreement because nowhere in Annexure “G” does it give the employer the prerogative or discretion to completely do away with the merit system.

[16] It is common cause that the arbitrator was asked to answer the question, is the applicant obliged to make payment of notch increments to the third respondents’ members as from 1 April 1998 to 31 March 2003.

[17] In my view if the answer is in the affirmative, the arbitrator was enjoined to investigate and determine the reason(s) why the applicant did not effect payment of notch increments, and whether the reasons proffered by the applicant are reasonable and justifiable having regard to Resolution 3 of 1996.

[18] Before considering the reasons predicating the award, it is apposite to consider what is intended and meant by prerogative or indeed discretion within the ambit of the Resolution 3 of 1996.

[19] A prerogative is an exclusive right or power. A discretion is a right or power to act in certain circumstances according to personal judgment and conscience in the discharge of a duty”.

See Black’s Law Dictionary 7th Edition.

[20] In the case of O’Leary v Salisbury City Council 1975 3 SA 859 (RA) 863, It was held that:

“Where an official is granted an unfettered discretion, there is a limitation of powers implied by law, that the official will apply his mind properly to the question before him, consider it honestly and bona fide, without any ulterior motive and not impose a conclusion which no reasonable man so acting could have done”

[21] In my view the arbitrator was to enquire whether the applicant in not having awarded notch increments, did so contrary to the behest of the collective agreement, that is, Resolutions 3 of 1996 and that the applicant’s conduct was arbitrary, and grossly unreasonable having regard to the provisions of the resolution.

See Pretoria Liquor Licensing Board v Made 1944 TPD 419 at 437.

[22] In my view the arbitrator’s finding that nowhere in Annexure “G” does it give the employer the power, prerogative or discretion to completely do away with the merit award system is flawed. The arbitrator misconceives the factual reality, there is no evidence that the applicant abandoned the merit award system. The applicant states that it has not been able to execute its managerial prerogative to assess and implement the granting of merit awards because it was visited by budgetary constraints. This evidence was not controverted.

[23] The arbitrator’s finding that the “current dispensation” refers to the old Public Service Staff Code” which dealt with the terms and conditions of employment is the premise that validates the basis of all his conclusions. In my view the arbitrator’s raison d’être renders his reasoning and the justification of his conclusions defective. The arbitrator in making this finding misconstrued the behest of the applicable managerial prerogative and committed a gross irregularity.

[24] The applicant’s prerogative in assessing which of the third respondent’s members merit notch increments is unfettered, the old regime - the Public Service Staff Code - is no longer extant, it was abolished by Resolution 3 of 1996.

[25] Clause XXXV of Resolution 3 of 1996 does not contain a discretion it contains a prerogative. Clause XXXV contains the mechanism of implementing notch increments.

[26] Critically the arbitrator found that, to determine whether the applicant exercised its discretion in good faith in not considering notch increments for the period in question, is a matter that required oral evidence, yet startingly the arbitrator finds that prima facie he is of the view that, the decision to completely cease to consider notch increments without consultations can only imply malafides on the part of the applicant. This conclusion is not supported by evidence.

[27] The arbitrator’s award in ordering the parties to renegotiate is flawed. Clause XXXV of Resolution 3 of 1996 does not make provision for negotiations or consultations. There is no evidence supporting the finding that the applicant should consult with the third respondent in the exercise of it’s managerial prerogative.

[28] The arbitrator in considering whether the merit awards have to be granted, correctly had regard to the provisions of the PFMA and Treasury Regulations then startlingly finds without contrary evidence, that it is however doubted whether the applicant’s failure to implement same during the period in question was not solely due to financial constraints.

[29] Clause XXXV of Resolution 3 of 1996 does not contain a clause obliging the parties to consult, yet the arbitrator found that the right to consult is derived from the agreement (Resolution) that the applicant had no authority on its own, to vary or refuse to implement the provisions of the Resolution 3 of 1996.

[30] The arbitrator misconstrued the terms of reference and has committed a gross irregularity because he misconceived the concept of managerial prerogative as obliging the applicant to discuss financial constraints with the PSA. There is no evidence supporting his finding that, he is however of the view that the financial constraints is a red herring, and an attempt at concealing the applicant’s administrative and bureaucratic ineptitude, and that the applicant was malafides.

[31] Adv. Sutherland has urged me that because the parties have concluded a comprehensive pre-arbitration minute, that there is virtually no dispute of fact, that the parties written representations and the evidential material that was before the arbitrator is before this court, I should exercise my discretion and adjudicate the matter. He contends that to remit the matter to the bargaining council would serve no purpose and would simply protract the dispute. Adv. Van Der Merwe did not make any submissions in this regard.

[32] In my view Adv. Sutherland’s submissions have merit. It would be burdensome on the parties to again traverse the same issues all over again. No evidence was adduced at the bargaining council, in my view it will serve no purpose to remit this matter to that forum.

[33] I am persuaded to exercise my discretion in complying with the spirit and purport and objective of the Labour Relations Act in expeditiously resolving this dispute and bringing this matter to finality.

[34] In the premises I find that the award is defective and susceptible to be interfered with; in that the conclusions arrived at are irrational and are not justifiable and not connected to the evidential material before the arbitrator.

[35] In exercising my discretion, I find that the applicant although obliged to make payment of notch increments to the third respondent’s members from the 1st April 1998 to 31st March 2003, it’s failure to exercise it’s managerial prerogative to grant deserving personnel in it’s service second or third notch increments was due to financial constraints.

[36] Adv. Sutherland urged me to make an order awarding costs against the third respondent including the costs of two counsels. I am however of the view that this is a matter which is distinguishable from the general rule that costs follow the result because of it’s peculiar circumstances. In the premises the application for costs is not acceded to.

______________________________________

MOKGOATLHENG AJ

ACTING JUDGE OF THE LABOUR COURT

APPEARANCES

FOR THE APPLICANT: ADV. SUTHERLAND S.C & ADV. NAZREM RAJAB-BUDLENDER

Instructed by STATE ATTORNEY

FOR THE RESPONDENT: ADV VAN DER MERWE

Instructed by BOUWERS ATTORNEYS

DATE OF TRIAL: 23 MARCH 2006

DATE OF JUDGMENT: 19 JULY 2006