National Union of Metalworkers of South Africa (NUMSA) v Motor Industry Staff Association (MISA) and Others (JA15/2023) [2024] ZALAC 73; (2025) 46 ILJ 109 (LAC) (6 September 2024)

THE LABOUR APPEAL COURT OF SOUTH AFRICA, JOHANNESBURG

Reportable

Case No: JA 15/2023

In the matter between:

NATIONAL UNION OF METALWORKERS

OF SOUTH AFRICA (NUMSA)

Appellant

and

MOTOR INDUSTRY STAFF ASSOCIATION

(MISA)

First Respondent

RETAIL MOTOR INDUSTRY ORGANISATION

(RMI)

Second Respondent

FUEL RETAILERS’ ASSOCIATION (FRA)

Third Respondent

NATIONAL EMPLOYERS’ ASSOCIATION OF

SOUTH AFRICA (NEASA)

Fourth Respondent

MOTOR INDUSTRY BARGAINING COUNCILl

(MIBCO)

Fifth Respondent

DARCY DU TOIT N.O.

Sixth Respondent

Heard: 16 May 2024

Delivered: 06 September 2024

Coram: Musi JA, Van Niekerk JA et Govindjee AJA

JUDGMENT

VAN NIEKERK JA

Introduction

[1] The fifth respondent (MIBCO) is a bargaining council, duly registered in terms of s 29 of the Labour Relations Act[1] (LRA), with a registered scope that includes the retail motor industry. This appeal concerns a dispute about the interpretation of MIBCO’s constitution.

[2] Clause 5.2.1 of MIBCO’s constitution deals with the admission of parties to membership of the council. The clause establishes a threshold for admission and provides:

‘The applicant must represent at least 5% of all employers or employees engaged or employed in the sector or area as defined in 2.12 hereof.’

“Sector and area” are defined in clause 2.2 as “the sector and area in respect of which the Council is registered from time to time”. Once a party is found to have met the threshold of representivity and admitted to membership, seats on the council are allocated on a proportionate basis. The representativeness of parties is reviewed every December, based on membership as verified by a party’s external auditors. Although clause 5.4 of the constitution permits a party to withdraw from the council by giving three months’ notice of its intention to do so, the constitution is silent on the consequences of a party’s level of representivity falling below the 5% threshold for admission to membership.

[3] The present dispute concerns the consequences of a failure by a party to the council to maintain the threshold fixed by clause 5.2.1. After an annual review of membership, the representivity of the fourth respondent (NEASA) was found to have fallen below the 5% threshold, NUMSA contended that NEASA’s failure to maintain that threshold had the consequence that it was no longer a member of MIBCO. NEASA and other parties to MIBCO denied that there was any term of the constitution that contemplated this consequence.

[4] The dispute was ultimately referred to an arbitration hearing conducted by the sixth respondent (the arbitrator). On 3 June 2020,

the arbitrator issued an award in favour of the appellant, who had contended that a tacit or an implied term should be read into the constitution to the effect that if a party’s representivity fell below the 5% threshold, it ceased to be a member of MIBCO. In essence, the arbitrator found that it is a tacit term of the MIBCO constitution that if a party trade union or employers’

organisation falls below the 5% threshold required for admission to membership of MIBCO, its membership of MIBCO ceases.

[5] The respondents sought to review and set aside the arbitrator’s award. In a judgment delivered on 7 November 2022, the Labour Court set aside the award and substituted it with a ruling to the effect that there was no tacit term as found by the arbitrator, and that it remained for MIBCO to decide the fate of any party whose membership fell below the 5% admission threshold.

[6] The appellant appeals against the Labour Court’s order, with the leave of this Court.

[7] The appellant seeks condonation for the late delivery of the notice of appeal. The period of delay is not excessive and the explanation

for the delay is satisfactory. The dispute also raises an issue that is of significance beyond the parochial interests of the parties, and no substantial prejudice would be caused to the first and second respondents, who oppose the appeal, should condonation be granted. The late filing of the notice of appeal is thus condoned.

Material facts

[8] The background facts are a matter of common cause. The origins of the present dispute have their roots in a multi-faceted dispute that emerged during 2013 when the second respondent (RMI) suspected the third respondent (FRA) of inflating its membership figures. Both RMI and FRA are employers’ organisations. The inflation of numbers alleged by RMI would have entitled FRA to an extra seat on MIBCO at RMI’s expense. The parties agreed to resolve the issue by having MIBCO’s auditors at the time, KPMG, conduct an audit. The audit confirmed that FRA was entitled to an extra seat on MIBCO and that RMI should lose a seat. RMI refused to accept the outcome of the audit. In November 2017, at MIBCO’s annual general meeting, it was resolved that the governing board would determine a process to resolve the dispute. In February 2018, the governing board resolved to appoint an auditor independent of the parties and MIBCO to conduct an independent audit. The criteria of the audit were agreed upon. It was also agreed that the report issued by the auditor would be final and binding. In August 2018, MIBCO completed a letter of engagement with Ngubane Auditors. Ngubane produced an initial report in March 2019 and a final report in August 2019. The final report concluded that NEASA’s membership of MIBCO had fallen below the 5% admission threshold. The report was accepted by FRA but not by RMI or NEASA.

[9] At MIBCO’s annual general meeting in 2019, the meeting could not proceed as NUMSA and FRA contended that NEASA was no longer a party to MIBCO, its membership having fallen below the required threshold. NUMSA referred a dispute about the interpretation and application of the MIBCO Constitution to MIBCO’s dispute resolution centre, contending that NEASA was no longer a party to MIBCO. The matter was referred to arbitration in terms of MIBCO’s constitution, and opposed by the first respondent (MISA), RMI and NEASA. MISA and RMI also referred disputes about the interpretation and application of the constitution, which were also referred to arbitration. These disputes were opposed by NUMSA and FRA.[2]

[10] The three disputes were consolidated and dealt with in a single arbitration process. Integral to the NUMSA dispute was its contention

that the MIBCO constitution contained an implied or tacit term to the effect that if a party failed to maintain a level of representatively

at the 5% threshold, that party could no longer be a party to MIBCO. FRA supported NUMSA’s contention with respect to the tacit term. MISA, RMI and NEASA contended that there was no such tacit term to be found in the constitution. The parties agreed that this issue be separated from other issues that arose in the dispute, and disposed of first. The parties also agreed that no evidence would be presented at the arbitration hearing, and that they would submit a written argument to the arbitrator.

The arbitration proceedings

[11] At the arbitration hearing, it was a matter of common cause that the MIBCO constitution is a collective agreement and that it fell to be interpreted accordingly. It was also not in dispute that while the constitution prescribed a 5% membership threshold for application for admission to MIBCO, the constitution was silent on the consequences of any subsequent fall in membership to less than 5%. NUMSA submitted that clause 5.2.1 ought properly to be interpreted to mean that a 5% level of membership is the minimum required to contribute meaningfully to the objects and purposes of MIBCO, and that an implied or tacit term ought to be read into the constitution to provide that when a party’s representivity fell below that level after admission to membership, the party concerned can no longer be a member of MIBCO.

[12] The respondents in the present appeal submitted that there was nothing in MIBCO’s constitution to regulate the cessation of membership on the basis contended for by NUMSA and specifically, that the 5% threshold applied only to an application for membership to MIBCO but not to any continuation of membership. Thus, after meeting the threshold for admission to MIBCO, nothing prevented a party whose representivity subsequently fell below the threshold level from continuing to participate in MIBCO’s activities.

[13] The arbitrator considered first whether it could be said that the outcome contended by NUMSA (i.e. that the 5% threshold for membership

continues to apply after the admission of a party membership of MIBCO) could be inferred as an implied term. He held that the primary

source of any such clause must be the LRA, and in particular the importance attached by the LRA to representivity and the promotion of orderly collective bargaining at the sectoral level. In his view, these considerations militated against a finding that representivity

ceases to be of significance once a party is admitted to membership of MIBCO. The arbitrator considered that the involvement of the parties to MIBCO in collective bargaining commences at the time of admission and that therefore, “their degree of representivity can only demonstrate its real importance from that point onwards”.

[14] The arbitrator concluded:[3]

‘It appears both more “sensible” and more “businesslike” that the 5% threshold should be understood as a means for ensuring the effectiveness of parties to the council rather than a formula that may allow the council to be populated by organisations that have lost the capacity to engage effectively in collective bargaining. It is the parties’ device for determining, in the words of the Labour Court, “who they will bargain with”.’

[15] The arbitrator considered and ultimately rejected a submission based on Fuel Retailers Association of SA v Motor Industry Bargaining Council (Fuel Retailers)[4] where a party excluded from membership of a bargaining council (coincidentally also MIBCO) had sought to invoke s 56(6) of the LRA. That section empowers the Labour Court, on application by any party excluded from membership of the bargaining council, to admit the applicant as a party to the council, adapt the constitution of the council, and make any other appropriate order. The arbitrator observed that these are extraordinary powers, in essence entitling the Labour Court to intervene in the parties agreed arrangements, and that it went without saying that the court would not likely exercise these powers. In any event, as the court observed, in the case in question, the court was of the view that the applicant had met the required threshold. The arbitrator held that the judgment in no way detracted from a bargaining council’s competence to regulate admission to its ranks, and that it certainly did not justify the conclusion that clause 5.2.1, simply because it was potentially capable of being set aside by the Labour Court in terms of s 56, was less than binding. A fortiori, the clause had full effect unless and until any decision was taken by the Labour Court to set it aside.

[16] On the issue of the existence of the implied term for which NUMSA contended, the arbitrator found ultimately that it was unnecessary

for him to rule on the existence of the implied term contended for by NUMSA, but suggested that “there are strong indications that this may be the case”.

[17] The arbitrator then turned to NUMSA’s contention that it is a tacit term of MIBCO’s constitution that if a party trade union or employers’ organisation falls below the 5% membership threshold required for admission to MIBCO, its membership of MIBCO ceases and they are no longer parties to the council.

[18] The arbitrator considered how, at the time clause 5.2.1 was drafted, the parties would have responded to two questions, drawn from the parties’ respective heads of argument, by an “officious bystander”. The first question was “[w]hat happens if a trade union or employer association falls below the 5% threshold?”; the second, posed by NUMSA, “[s]hould the 5% threshold cease to be relevant once a party is admitted to membership?’

[19] The arbitrator rejected a submission that the tacit term contended for by NUMSA could not exist because the question “[w]hat happens if a trade union or employer association falls below the 5% threshold?” was too vague and ambiguous. The arbitrator held that a tacit term may be definable in greater or lesser detail, depending on its substance. The question was whether the content of the term itself, as opposed to its implications, was sufficiently clear and exact. The arbitrator held that the term contended for by NUMSA (“[o]nce a trade union or employer organisation falls below the 5% threshold, they are no longer parties to MIBCO”), was a clear and sufficient formulation. Finally, the arbitrator considered that the parties were all well aware of the LRA’s emphasis on majoritarianism and the weight given to the concept of “sufficient representivity” of parties in collective bargaining. This reinforced the likelihood that the parties envisaged the agreed 5% membership threshold for admission to MIBCO as a “minimum level of representivity required during the currency of the parties’ membership of MIBCO”.

[20] For the arbitrator, the position was even clearer when the question posed by NUMSA was considered – “[s]hould the 5% threshold cease to be relevant once a party is admitted to membership?” The arbitrator considered that given that the parties were ad idem as to the reasons for and importance of the 5% threshold as a means of excluding unrepresentative organisations, “it is most unlikely that they would have dismissed its importance in almost the same breath. Had that question been put to them, it seems barely conceivable that the answer would have been a unanimous ‘yes’”.

[21] The arbitrator thus found that on a balance of probabilities, “it is a tacit term of MIBCO’s constitution that, if a party trade union below the 5% membership threshold required for admission to its membership of MIBCO ceases”.[5]

Labour Court proceedings

[22] Multiple aspects of the arbitrator’s award were challenged on review. The applicants in those proceedings submitted that the arbitrator’s decision to uphold the implied term contended for by NUMSA fell outside of a band of decisions to which a reasonable decision-maker could come on the available material. The Labour Court upheld this submission.

[23] The Court identified three difficulties with the approach adopted by the arbitrator. The first is what the court considered to be the arbitrator’s assumption that the 5% threshold was a sine qua non for orderly collective bargaining. The Court held that the minimum threshold for admission as a party to MIBCO is not an absolute requirement, and in this context made reference to 56 (5) of the LRA, which permits the Labour Court to order the admission of a

party to a bargaining council if a bargaining council has refused to admit that party. The Court found that by parity of reasoning, “the admission threshold could never be a sole factor to be considered in order to determine the termination of a party’s membership to MIBCO as contended by NUMSA”. The second hurdle identified by the Court was the “tacit term argument”, where the Labour Court, after reference to the authorities on the requirements relevant to the implication of a term into a contract, but without elaboration, held that the arbitrator had “obviously misconstrued the bystander test”. Finally, the Labour Court held that even if the officious bystander test had been correctly construed, its application was misplaced as the instrument to be interpreted as a collective agreement as opposed to a commercial contract. In the Court’s view, the matter turned ultimately on a constructional choice that had to be resolved by reference to the text and the context in which the collective agreement had been concluded or amended. The Court referred in particular to the judgment in Fuel Retailers, where the Labour Court had admitted the FRA to membership of MIBCO, even though the FRA had failed to meet the 5% threshold for membership. The Court did so on the basis that the FRA and its members were in any event bound by the MIBCO constitution, obliged to pay various levies and dues to MIBCO and that the FRA’s admission to membership would make MIBCO more representative of employers in the sector. In relation to the interpretation of clause 5.2.1, the Court found that these considerations were relevant to any decision to terminate membership of MIBCO, and that it was MIBCO that was best placed to review the effectiveness of any party’s continued membership. Should MIBCO decide to terminate the affected party’s membership, it should do so on reasonable notice after affording the party an opportunity to address the complaint.

[24] Further, the Court found that the arbitrator had misdirected himself by adopting a “narrow construction” of clause 5.2.1, and that a “wider construction” (which meant that MIBCO should determine the fate of a party whose representivity fell below the 5% admission threshold), would better accord with commercial reality. The Labour Court thus concluded that the construction

advanced by NUMSA was untenable and that the review application should succeed. The Court substituted the arbitrator’s ruling

with a ruling to the effect that NEASA’s membership as a party to the MIBCO “did not terminate automatically when its membership figures were below the 5% threshold”.

The appeal

[25] The appeal is confined to the Labour Court’s finding on the arbitrator’s tacit term ruling. In essence, the appellant

contends that the Labour Court erred in granting the order to review and set aside the arbitrator’s award. The appellant seeks an order upholding the appeal and substituting the Labour Court’s order with an order to the effect that the review application be dismissed.

[26] What remains is to determine the issue that serves before this Court – whether the arbitrator committed a material error of law by importing an unexpressed term into the MIBCO constitution to the effect that a party’s membership terminates automatically

should that party after admission to MIBCO fail to maintain a threshold of representivity of 5%, thus rendering his award reviewable.

Analysis

The standard for review

[27] Fundamental to the appeal is the standard of review to be applied. The Labour Court set aside the arbitrator’s award on the basis that the award was “incorrect/unreasonable”. At the hearing, there was some debate on the test that the Labour Court ought properly to apply where, as in the present instance, a party seeks to review and set aside an arbitration award issued in terms of s 24 (2) of the LRA (i.e. where the dispute concerns the application and interpretation of a collective agreement). This court has previously applied a threshold of reasonableness.[6] While at a general level, the ultimate principle on which a review is based is one of the reasonableness of the outcome as opposed to correctness,[7] a number of subsequent judgments have held that the review test is bifurcated, and that in some instances at least, an award issued by an arbitrator is reviewable if it is incorrect, with the review court free to substitute its own view as to what the arbitrator’s decision should have been.[8] In Herbert v Head Education – Western Cape Education Department & others[9] this Court affirmed that the wrong interpretation of an instrument by an arbitrator could constitute a reviewable irregularity as envisaged by s 145 of the LRA because the outcome is incorrect. Referring to MacDonald’s Transport Upington (Pty) Ltd v Association of Mineworkers & Construction Union & others[10] and National Union of Metalworkers of SA v Assign Services & others,[11] this Court held that where an arbitrator commits a material error of law in the interpretation of a collective agreement, the result is an award that is both incorrect and unreasonable, capable of review either on the basis of its incorrectness or for being unreasonable.

As Myburgh observes, what the court said here is no more than that where a commissioner is incorrect on the law, this is unreasonable,

but nothing more than incorrectness need be established.[12]

[28] The review application was argued in the Labour Court on the basis of an application of the reasonableness threshold, in circumstances where the unreasonableness of the arbitrator’s award was attacked on the basis that the arbitrator was alleged to have committed a material error of law. As will appear from the authorities referred to below, where alleged imputed tacit terms are in issue, these terms are based on a legal fiction. Their existence or otherwise is thus a question of law. The issue before us then is whether the conclusion to which the arbitrator came to was correct, given that “a reasonable arbitrator does not get a legal point wrong”.[13]

Rules of interpretation

[29] Turning then to the question of the arbitrator’s interpretation of the MIBCO constitution, it is a well-established principle that the constitution of a bargaining council is a collective agreement as defined in s 213 of the LRA, in that it is a written agreement concerned with matters of mutual interest concluded between registered trade unions and employers’ organisations.[14]

[30] As far back as 1997, this Court recognised that a collective agreement concluded in terms of the LRA is not an ordinary contract, and that the context within which the collective agreement operates is vastly different from that of a commercial contract. Collective agreements operate within the framework established by the LRA and the interpretation of a collective agreement ought to be approached with the objects and purpose of the LRA in mind.[15] In North East Cape Forests v SA Agricultural Plantation & Allied Workers Union & others,[16] Froneman DJP stated:

It is, in my view, quite clear that these primary objects of the Act are better served by the practical approach to the interpretation and application of the collective agreement as set out in the judgment of Myburgh JP, rather than by reference to purely contractual principles. On the particular facts of this case the object of orderly collective bargaining and effective expression of the fundamental right to strike will be frustrated by the latter approach.’

[31] In eThekwini Municipality (Health Department) v Independent Municipal & Allied Trade Union obo Foster & others,[17] this Court held that a collective agreement must be interpreted “in such a manner as to ensure effective and sound industrial relations”.[18] Further, in Western Cape Department of Health v Van Wyk and others,[19] this Court held:

‘In interpreting the collective agreement the arbitrator is required to consider the aim, purpose and all the terms of the collective agreement. Furthermore, the arbitrator is enjoined to bear in mind that a collective agreement is not like an ordinary contract. Since the arbitrator derives his/her powers from the Act he/she must at all times take into account the primary objects of the Act. The primary objects of the Act are better served by an approach that is practical to the interpretation and application of such agreements, namely, to promote the effective, fair and speedy resolution of labour disputes. In addition, it is expected of the arbitrator to adopt an interpretation and application that is fair to the parties.’

[32] What these decisions make clear is that when a collective agreement is interpreted, in contrast to a commercial contract, a more normative approach is required. In the case of commercial contracts, a degree of primacy is placed on contractual autonomy, in the form particularly of the intention of the parties. When a collective agreement is interpreted, values based on the social character of the agreement are relevant. To this end, the common law canons of interpretation of contracts offer obvious guidance[20] but must necessarily be tempered, where appropriate, with a consideration of the statutory context in which a collective agreement is concluded and specifically, the objects and purposes of the LRA.

[33] Contrary to what the Labour Court appeared to suggest, when collective agreements are interpreted, there is thus no reason in principle to exclude consideration of the canons of interpretation that govern the incorporation of unexpressed terms in a commercial

contract. Indeed, when an unexpressed term is sought to be read into a collective agreement, the applicable common law principles are an obvious point of departure.

[34] The locus classicus remains Alfred McAlpine & Son (Pty) Ltd v Transvaal Provincial Administration[21] where the court said:

‘In legal parlance the expression “implied term” is an ambiguous one in that it is often used, without discrimination, to denote two, possibly three, distinct concepts. In the first place, it is used to describe an unexpressed provision of the contract which the law imports therein, generally as a matter of course, without reference to the actual intention of the parties. The intention of the parties is not totally ignored. Such a term is not normally implied if it is in conflict with the express provisions of the contract. On the other hand, it does not originate in the contractual consensus… In a sense “implied term” is, in this context, a misnomer in that in content it simply represents a legal duty (giving rise to a correlative right) imposed by law, unless excluded by the parties, in the case of certain classes of contracts, it is a naturalium of the contract in question.

In the second place, “implied term” is used to denote an unexpressed provision of the contract which derives from the common intention of the parties, as inferred by the Court from the express terms of the contract and the surrounding circumstances. In supplying such an implied term the Court, in truth, declares the contract entered into by the parties…

The tacit term, on the other hand, is a provision that must be found, if it is to be found at all, in the unexpressed intention of the parties. Factors which might fail to exclude an implied term might nevertheless negative the inference of a tacit term… The Court does not readily import a tacit term... Before it can imply a tacit term the Court must be satisfied, upon a consideration in a reasonable and businesslike manner of the terms of the contract and the admissible evidence of surrounding circumstances, that an implication necessarily arises that the parties intended to contract on the basis of the suggested term.‘

[35] In the later decision of Seven Eleven Corporation of SA (Pty) Ltd v Cancun Trading No 150 CC,[22] Lewis JA said the following:

[t]he distinction between implied and tacit terms is now trite. The former is a term implied by the law, the latter a term implied by the facts… The principle applied over many years is that the term to be incorporated in the contract must be necessary, not merely desirable. The classic tests used to give effect to this principle do not, however, take into account the actual intentions of the respective parties. They require the court to consider whether the term contended for would give “business efficacy” to the contract; or to ask what the “officious bystander” - a person who is not a party to the contract but asked whether the term is necessary - would say. These are objective tests. (Own emphasis).

[36] Wilkins NO v Voges,[23] draws a distinction between actual and imputed assent. Nienaber JA explained:

‘A tacit term, one so self-evident as to go without saying, can be actual or imputed. It is actual if both parties thought about a matter which is pertinent but did not bother to declare their assent. It is imputed if they would have assented about such a matter if only they had thought about it - which they did not do because they overlooked a present fact or failed to anticipate a future one. Being unspoken, a tacit term is invariably a matter of inference. It is an inference as to what both parties must or would have had in mind. The inference must be a necessary one: after all, if several conceivable terms are equally plausible, none of them can be said to be axiomatic.’

[37] In Bezuidenhout v Otto and others (Bezuidenhout)[24] Wunsh J clearly explained the distinction between tacit terms and implied terms:

‘What is not always appreciated in some of the books is the difference between the following:

1. A tacit term, which is sometimes called an implied term

In earlier cases also described as an implied term, which a court will find to exist when:

(a) it is necessary to import it to give business efficacy to the contract; or

(b) the parties did not, in fact, apply their minds to it, but if an officious bystander had asked them if it should have been in the contract, they would unhesitatingly have responded in the affirmative…

2. A tacit term proper

That is to say one which the parties actually agreed upon, but did not articulate; a terms they did agree to, as distinguished from one they must have agreed to. The inquiry is whether on the basis of the proved facts and circumstances it was probable that a tacit agreement had been reached.

[38] The present case falls into the first category identified in Bezuidenhout. To avoid confusion, I refer to the term that NUMSA seeks to import as an “imputed tacit term”. When an imputed tacit term is sought to be imported, a court is not entitled to import the term into a contract simply because it is convenient, fair, reasonable or even sensible to do so. In City of Cape Town (CMC Administration) v Bourbon-Leftly NO and another (Bourbon-Leftly)[25] the SCA summarised the principles that apply:

‘[19] A discussion of the legal principles regarding tacit terms is to be found in the judgment of Nienaber JA in Wilkins NO v Voges [1994] ZASCA 53; 1994 (3) SA 130 (A) at 136H-137D. These principles have since been applied by this court, inter alia, in Botha v Coopers & Lybrand 2002 (5) SA 347 (SCA) paragraphs 22-25 and in Consol Ltd t/a Consol Glass v Twee Jonge Gezellen (Pty) Ltd and another [2004] 1 All SA 1 (SCA) paragraphs 50-52. As stated in these cases, a tacit term is based on an inference of what both parties must or would necessarily have agreed to, but which, for some reason or other, remained unexpressed. Like all other inferences, acceptance of the proposed tacit term is entirely dependent on the facts. But, as also appears from the cases referred to, a tacit term is not easily inferred by the courts. The reason for this reluctance is closely linked to the postulate that the courts can neither make contracts for people, nor supplement their agreements merely because it appears reasonable or convenient to do so (see eg Alfred McAlpine & Son (Pty) Ltd v Transvaal Provincial Administration 1974 (3) SA 506 (A) at 532H). It follows that a term cannot be inferred because it would, on the application of the well-known “officious

bystander” test, have been unreasonable of one of the parties not to agree to it upon the bystander’s suggestion. Nor can it be inferred because it would be convenient and might therefore very well have been incorporated in the contract if the parties had thought about it at the time. A proposed tacit term can only be imported into a contract if the court is satisfied that the parties would necessarily have agreed upon such a term if it had been suggested to them at the time (see eg Alfred McAlpine (supra) at 532H-533B and Consol Ltd t/a Consol Glass (supra) paragraph 50). If the inference is that the response by one of the parties to the bystander’s question might have been that he would first like to discuss and consider the suggested term, the importation of the term would not be justified. (Own emphasis)

[20] In deciding whether the suggested term can be inferred, the Court will have regard primarily to the express terms of the contract and to the surrounding circumstances under which it was entered into. It has also been recognised in some cases, however, that the subsequent conduct of the parties can be indicative of the presence or absence of the proposed tacit term (see eg Wilkins NO v Voges (supra) at 143C-E; Botha v Coopers & Lybrand (supra) paragraph 25).’ (Own emphasis)

[39] What the test requires, whether in the form of the officious bystander test or the business efficacy test, is an objective assessment of what the parties, as reasonable people, would have agreed to. [26]

[40] In the present instance, there is no dispute that the MIBCO constitution fails to address the unforeseen eventuality of a party admitted to membership subsequently failing to maintain the threshold required for admission. Put another way, there is no express term of the constitution that deals with the consequences if a party, after admission to MIBCO, fails to maintain the 5% threshold. Nor is there any evidence of any surrounding circumstances present either at the time the constitution was agreed or by way of any subsequent conduct, that might be indicative of the presence or otherwise of the tacit term for which NUMSA contends. In these circumstances, the arbitrator was required, as he did, to look beyond the expression of consensus (as represented by the terms of the MIBCO constitution) and determine the existence or otherwise of an unexpressed term for what amounted to an unforeseen eventuality. Specifically, what was in issue was the existence of the imputed tacit term for which NUMSA contended.

[41] The arbitrator’s conclusion that an imputed tacit term had been established such that a failure to maintain the 5% admission threshold would result in a cessation of membership of MIBCO rests on two propositions. The first is that in setting the 5% threshold for admission, the drafters of the MIBCO constitution must have agreed that 5% represented the minimum level of representivity for a party to contribute meaningfully to collective bargaining under MIBCO’s auspices. The second proposition is that given the validity of the first, it makes no sense to suggest that after admission to membership, a party’s level of representivity was meaningless. The arbitrator observed that a party’s involvement in the business of MIBCO commences from the time of admission, and that party’s degree of representivity “can only demonstrate its real importance from that point onwards”. Put another way, what the arbitrator found is that it could not be seriously suggested that having agreed that 5% was the minimum level for meaningful engagement in collective bargaining, that agreement would be discarded after admission to membership. Specifically:

‘Where parties to a bargaining council decide on a threshold of representivity I do not see what other interpretation can be given to their decision except that it represents their common understanding of the level of membership a party must have in order to participate meaningfully in the primary activity of the council.

35. I therefore understand the 5% threshold to be intended as an attribute of or condition for membership of MIBCO. This means that, if a party ceases to satisfy this condition, its membership of MIBCO must cease.’

[42] What the authorities suggest is that the officious bystander test does not engage what amounts to a speculative discussion on the parties’ responses to hypothetical interpolations by an intrusive third party; at its core is the requirement of necessity to give business efficacy to the contract, without seeking to improve on the contract or introducing terms that make it fairer or more reasonable.[27] Two elements are relevant – obviousness (in the sense that if the officious bystander had suggested the term to the parties at the time of contracting, they would have without question agreed to include it as an express term), and business necessity. “Business necessity” in this sense is not absolute necessity – what is required is that there should be business efficacy such that the contract would lack commercial or practical coherence without the term.[28]

[43] The first leg of the arbitrator’s reasoning is that in setting the 5% threshold for admission, the parties to the constitution must have agreed that 5% represented the minimum level of representivity for a party to make a meaningful contribution to the collective bargaining and other activities of MIBCO. Secondly, the arbitrator reasoned that since the parties agreed on the 5% threshold for admission, it made no sense to suggest that, post admission, the level of representivity becomes meaningless. As the arbitrator observed, the parties’ degree of representivity can only demonstrate its real importance from the point of admission onward. None of these reasons are seriously disputed. What is disputed is the leap from these reasons to the arbitrator’s conclusion that the 5% threshold “was intended to be an attribute or condition for membership of MIBCO. This means that, if a party ceases to satisfy this condition, its membership of MIBCO must cease”. The arbitrator’s findings make clear that in these circumstances, he considers that membership ceases ipso facto, without further process or intervention by MIBCO.

[44] To deal first with the obviousness requirement, even if one were to grant the arbitrator that having accepted a threshold of 5% for admission to membership, the parties would attach importance to that figure for the purposes of excluding unrepresentative parties, it does not necessarily follow that the parties would have agreed to an express term in terms of which a party whose membership falls short of the threshold is automatically, without more, deprived of membership of MIBCO. It is far from obvious that viewed objectively, the officious bystander’s question on the consequences of a failure to maintain the 5% threshold post admission would be met with the response “Of course, that party’s membership of MIBCO will immediately terminate; we did not trouble to say that; it is too clear”. The parties to MIBCO are registered employers’ organisations and registered trade unions. It is safe to assume that they and their office-bearers and officials have experience in matters of bargaining council governance, and the concept of representivity for the purposes of collective bargaining. They agreed on the terms on which a party could withdraw from membership of MIBCO.[29] It is not unreasonable in these circumstances to assume that the constitution’s silence on the consequences of a party failing

to maintain the 5% threshold post admission was deliberate, and that the matter was left for MIBCO to resolve internally in accordance

with the decision-making processes established by the constitution. Clauses 6.1.3 and 6.1.4 make provision respectively for the annual review of the number of representatives on the MIBCO council based on verified membership and a variation of the number of representatives, provided only that the number of employer and employee representatives remains equal. When a party’s representivity is found lacking after a clause 6.1.3 review, there is no reason why MIBCO, by way of resolution, cannot address the matter and decide on appropriate consequences. This conclusion is bolstered by the fact that the MIBCO constitution would require amendment, and registration of the amendment in terms of s 57(3)(a) of the LRA, to be effective. Indeed, the constitution was amended by resolution in November 2015 to admit NEASA as a party to MIBCO. The amendment, registered in December 2015 by the registrar of labour relations, had the effect that NEASA was reflected as an employer member of the council, and that in clause 6.1.1 of the constitution, NEASA was reflected as having been allocated two representatives (out of a total of 60) on the council. All of this was done in compliance with clause 5.3 of the constitution, which requires any allocation of the number of representatives after admission of a new party to be effected by way of an amendment to the constitution. All of these express terms suggest that the parties would not have assented to the term sought to be imputed by NUMSA if only they would have thought about it. The express wording of the MIBCO constitution, viewed as a whole and in context, suggests that had the parties intended to provide for the automatic termination of membership consequent on a failure by a party to maintain the 5% admission threshold, they would have said

so.

[45] In short, the leap from the conclusion that the 5% threshold was significant in that it represents the minimum level for meaningful participation in collective bargaining to the conclusion that a failure to maintain that threshold results in the immediate cessation of membership, is a leap too far.

[46] Secondly, the arbitrator was required to determine whether the term sought to be incorporated was necessary to give practical and coherent effect to the constitution. There was no suggestion by the parties, nor is there any finding by the arbitrator, that the constitution is unworkable or otherwise lacking in coherence on account of the absence of the term sought to be imputed by NUMSA. Nor does the material that served before the arbitrator call into question, absent the term sought to be incorporated, the MIBCO constitution would be incoherent or ineffective. It is clear from the authorities that an unexpressed term cannot be incorporated simply because it would be convenient, or if the term and might have been incorporated in the contract if the parties had thought about it at the time.

[47] As recorded above, this Court has held that a collective agreement is not to be interpreted by a straightforward application of the common law rules regulating the interpretation of commercial contracts. On the contrary, the policy and purposes of the LRA constitute a significant touchstone. Although the arbitrator placed some emphasis on the importance that the LRA attaches to representivity in the collective bargaining process, the principle of majoritarianism and the promotion of orderly collective bargaining, these are by no means definitive considerations. Of considerably more significance is the autonomy that the LRA affords bargaining councils. As Murphy J pointed out in Free Market Foundation v Minister of Labour & others,[30] “self-regulation on the basis of majoritarianism and voluntarism is a cornerstone of the policy of industrial pluralism”.[31] It may well be, as NUMSA submits, that the parties to MIBCO agreed that a 5% threshold for membership is an agreement on the level at which a party can contribute meaningfully to the objects and purposes of MIBCO. When a member fails to maintain that threshold on an ongoing basis, considerations of autonomy dictate that the consequences are ultimately a matter best addressed by MIBCO. This is not to suggest that the powers of bargaining councils are not constrained. Bargaining councils derive their powers both from the LRA and the collective agreements that are concluded under their auspices. Any non-compliance by a bargaining council with any of the statutory provisions regulating the exercise of a bargaining council’s statutory functions and powers may ultimately be referred to the Labour Court for adjudication.[32] Further, to the extent that a bargaining council exercises public power in the course of its decision-making, its decisions are

reviewable under the principle of legality, which requires conformity with the standards of lawfulness and non-arbitrariness.[33]

[48] In summary, the arbitrator failed properly to apply the requirements of obviousness and business efficacy that attach to the officious bystander test. The arbitrator crossed the line between the legitimate incorporation of a term on the grounds of obviousness and business efficacy, on the one hand, and on the other hand, the making of a contract for the parties. There is also no imperative suggested by the objects and purposes of the LRA that demands a term to be imported into the MIBCO constitution requiring the automatic termination of the membership of a party whose representivity falls below the 5% admission requirement.

[49] Inferring an imputed term into a collective agreement is based on a legal fiction, and is consequently a question of law. By coming to the conclusion that he did, the arbitrator committed a material error of law, and the award is reviewable on that account. The order granted by the Labour Court was thus correct, and the appeal must fail.

Costs

[50] Finally, in relation to costs, the requirements of the law and fairness are best satisfied by each party bearing its own costs.

Order

1. The appeal is dismissed.

2. There is no order as to costs.

A van Niekerk JA

Musi JA et Govindjee AJA concur

APPEARANCES:

FOR THE APPLICANT: Adv C Orr SC

Instructed by Haffegee Roskam Savage Inc

FOR THE FIRST AND SECOND

RESPONDENTS: G Ebersohn, Gerrie Ebersohn Attorneys

[1] Act 66 of 1995, as amended.

[2] RMI declared a dispute relating to the criteria used by MIBCO to verify membership figures. MISA declared a dispute consequent on a failure by NUMSA and FRA to submit their 2019 audited membership figures to MIBCO.

[3] Paragraph 25 of the award.

[4] [2001] 6 BLLR 605 (LC).

[5] Arbitration award at para 47.

[6] See, for example, SAMWU v South Africa Local Government Bargaining Council & others [2012] 4 BLLR 334 (LAC); (2012) 33 ILJ 353 (LAC) at para 10.

[7] Bestel v Astral Operations Ltd & others [2011] 2 BLLR 129 (LAC) at para 18.

[8] See Anton Myburgh SC ‘The Correctness Standard of Review’ (2023) 44 ILJ 724.

[9] (2022) 43 ILJ 1618 (LAC); [2022] 8 BLLR 712 (LAC).

[10] (2016) 37 ILJ 2593 (LAC); [2017] 2 BLLR 105 (LAC).

[11] (2017) 38 ILJ 1978 (LAC); [2017] 10 BLLR 1008 (LAC).

[12] Myburgh supra at 726.

[13] Herbert v Head of Education at para 24.

[14] Wallenius Wilhelmsen Logistics Vehicle Services v National Union of Metalworkers of SA & others (2019) 40 ILJ 1254 (LAC); [2019] 8 BLLR 795 (LAC) at para 27.

[15] Du Toit Labour Relations Law – A Comprehensive Guide 7th ed. at 366.

[16] (1997) 18 ILJ 971 (LAC) at 980.

[17] (2012) 33 ILJ 152 (LAC).

[18] Ibid at para 27.

[19] [2014] 11 BLLR 1122 (LAC); (2014) 35 ILJ 20 at para 22.

[20] D du Toit, C Bosch, D Woolfrey et al Labour Relations Law: A Comprehensive Guide 7th ed. LexisNexis at 365.

[21] 1974 (3) SA 506 (A) at 531D-532G.

[22] [2005] All SA 256 (SCA) at paras 32 - 33.

[23] [1994] ZASCA 53; 1994 (3) SA 130 (A) at 136 H-J.

[24] 1996 (3) SA 339 (W) at 344A-E.

[25] [2006] 1 All SA 561 (SCA).

[26] In Van Aardt v Galway 2012 (2) SA 312 (SCA). The SCA (per Wallis JA), at fn 20, noted the “officious bystander” and “business efficacy” tests are derived from English law, where the expression “implied term” is used to encompass both the implied term and the tacit term of South African law. The court notes that these two tests evolved in relation to terms implied in fact and are used in South Africa as tests for the imputation of a tacit term. The tests “are not necessarily congruent”, nor are they the only basis upon which to determine whether there is a tacit term in a contract.

[27] Bourbon-Leftly (supra).

[28] Marks and Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Ltd and another [2016] AC 742.

[29] See clause 5.4 which requires three months’ written notice, addressed to the secretary.

[30] (2016) 37 ILJ 1638 (GP); [2016] 8 BLLR 805 (GP).

[31] Ibid at para 29.

[32] See s 63 of the LRA.

[33] Pharmaceutical Manufacturers Association of SA and another: In re Ex parte President of the Republic of South Africa and others [2000] ZACC 1; 2000 (2) SA 674 (CC).