Safegaurd Chemicals t/a Maris Polymers South Africa v Frydas and Others (JR631/20) [2022] ZALCJHB 359 (20 October 2022)

IN THE LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG

Reportable

Case no: JR 631/20

In the matter between

SAFEGAURD CHEMICALS t/a

MARIS POLYMERS SOUTH AFRICA Applicant

and

JOANNIS FRYDAS First

Respondent

THEMBEKILE NSIBANYONI N.O. Second

Respondent

COMMISSION FOR CONCILIATION MEDIATION

AND ARBITRATION Third

Respondent

Heard : 6 October 2022

Delivered : 20 October 2022

Summary: Review of award by Commission for Conciliation, Mediation and Arbitration (CCMA) – issue of jurisdiction of the CCMA. CCMA cannot award monetary claims over the threshold as provided for in section 73A(2) of the Basic Conditions of Employment Act No. 75 of 1997 nor any amounts in respect of an alleged breach of contract. Where the issue to be considered on review is about the jurisdiction

of the CCMA, it is not about a reasonable outcome it is about whether the CCMA had jurisdiction to make such an award from the outset.

Review of award – commissioner misconstrued the nature of the enquiry rendering a defect in the conduct of the proceedings which amounts to a gross irregularity as contemplated by section 145(2)(a)(ii) of the Labour Relations Act No.66 of 1995.

JUDGMENT

SWARTZ AJ

Introduction

[1] This is a review application to have an arbitration award (the award) dated 19 February 2020 by the second respondent, a commissioner under the auspices of the Commission for Conciliation, Mediation and Arbitration (CCMA) (the commissioner), reviewed and set aside. The award arises from the dismissal of the first respondent, Mr Joannis Frydas on 6 February 2019.

[2] The reasons for the dismissal are in dispute. The applicant (the employer) contends that the first respondent was dismissed for poor performance while the first respondent contends that he was dismissed for misconduct. The commissioner found that the first respondent was dismissed unfairly for misconduct and awarded the first respondent five months compensation as well as unpaid salaries, a 13th cheque and 20% profit share of the applicant.

[3] At the outset of the hearing, I granted condonation. Although there was no formal application for condonation, the review application was filed outside of the six week period provided for in terms of section 145 the Labour Relations Act[1] (the LRA). The first respondent did not oppose nor object to condonation being granted. The reasons for the late filing of the review application are contained in an affidavit by the applicant’s attorney in terms of rule 4(2)(b) of the Rules for the Conduct of Proceedings in the Labour Court, dated 1 June 2020.

[4] In the Constitutional Court judgement of McGregor v Public Health and Social Development Sectoral Bargaining Council and Others[2] Khampepe J stated:

“In Brummer, the Constitutional Court held that condonation should be granted if it is in the interests of justice to do so. This can be determined by reference to all relevant factors including the nature of the relief sought, the extent and cause of the delay, the effect on the administration of justice, the possibility of prejudice to the other party, and the reasonableness of the explanation for the delay[3]. The reasons furnished for the delay are genuine and provide sufficient cause to grant condonation.”

[5] I find that it is in the interests of justice to grant condonation for the late filing of this application.

[6] I shall now first sketch a more detailed background using the common cause facts and then proceed to deal with the issue of jurisdiction and in light of the conclusion on that point, I will proceed to deal with the other grounds of review raised by the applicant.

Factual background

[7] The applicant is involved in the distribution of waterproofing, damp proofing and polyurethane products. In 2016 the applicant was looking for an alternative greener product to complement its waterproofing and damp proofing business and Maris Polymers Greece was looking for a new distributor for its products in South Africa.

[8] The first respondent presented the applicant with two business options for distributing the Maris Polymers Greece product in South Africa. The applicant and the first respondent elected and agreed to option 2 which provided that the first respondent would be employed by the applicant as its General Manager, the applicant would own 100% of Maris Polymers South Africa and 12% royalties fees would be paid to Goumi Trading Services Limited.

[9] The first respondent presented the applicant with his projected sales based on Maris Polymers Greece’s previous South African distributor, Polymers Waterproofing.

[10] The first respondent resigned from Maris Greece where he was employed in the polyurethane industry in Greece and move to South Africa with his wife to be employed by the applicant and to start Maris Polymers South Africa. The applicant commenced his employment with the applicant as its General Manager on 1 October 2016.

[11] The first respondent received a salary of R130 720.00 per month (which comprised of a housing allowance, medical insurance and a car allowance). The applicant also paid for the first respondent’s cell phone and petrol expenses and the first respondent also received an annual bonus.

[12] The 12% royalties did not form part of the first respondent’s employment contact and was paid by the applicant into Goumi Trading Services Limited bank account, being the first respondent’s alter ego’s bank account in Cyprus. Part of the first respondent’s salary was also paid into Goumi Trading Services Limited’s bank account. The first respondent also had a South African bank account where the balance of his salary was paid.

[13] The first respondent contended that from the commencement of his employment the applicant was aware that the 12% royalties was being paid to the first respondent through Goumi Trading Services Limited. Mr Llewellyn and Ms Llewellyn (the directors of the applicant) at all times represented the applicant and contended that they were unaware that the royalties were being paid to the first respondent and thought that the royalties were being paid to Maris Polymers Greece.

[14] From inception of the first respondent’s employment, the applicant started having issues with the first applicant’s failure to meet his projected sales targets and to make a profit for the applicant. There is a dispute as to whether the applicant or the first respondent set the first respondent’s sales targets as well as who was responsible for the product’s pricing. In order to improve the first respondent’s sales, the first respondent requested that the applicant inter alia contract with marketing companies, employ additional sales staff and attend expos.

[15] Despite the applicant complying with the first respondent’s aforementioned requests, the applicant was still not happy with the first respondent’s volume of sales. As far as the applicant was concerned, the applicant was not making a profit. This stance by the applicant persisted until the first respondent was dismissed on 6 February 2019.

[16] As a result of the applicant’s abovementioned stance, in August 2018 the parties agreed to decrease the first respondent’s salary to R50 000.00 per month. The other terms of the amended contract of employment such as a guaranteed 13th cheque in December and the first respondent’s entitlement to 20% profit share was in dispute.

[17] On 4 February 2019 the first respondent and Mr Llewellyn had a meeting and the first respondent handed in his activity report to Mr Llewellyn. Mr Llewellyn then had to leave the meeting on 4 February 2019 early. On 5 February 2019 Mr Llewellyn sent an email to the first respondent in which Mr Llewellyn inter alia informed the first respondent that his activity report lacked detail and stated that if there was no sign of improvement in the next two months he would have to consider closing Maris Polymers South Africa. Llewellyn then requested that they meet.

[18] Attached to 5 February 2019 email, Mr Llewellyn also sent the first respondent the applicant’s financials. These financials the applicant contended were incorrect as they did not reflect all the expenses of the applicant and thereafter a second set of financials were produced by the applicant to the first respondent on 6 February 2019 which reflected all of the applicant’s expenses .

[19] On 6 February 2019 the first respondent met with Mr Llewellyn and Ms Llewellyn. Leann Naidoo an employee of the applicant that attends to the applicant’s accounts, administration and some sales was also present during this meeting. At this meeting the first respondent challenged Mr Llewellyn and Ms Llewellyn about the profit of the applicant that had been presented to him on the 5 February 2019 compared to different financial statements which were presented to the first respondent on 6 February 2019 which included more expenses. At this meeting the first respondent demanded his 20% profit share based on his understanding of the financials and his amended contract of employment.

[20] After the meeting on 6 February 2019 Mr Llewellyn sent Ms Llewellyn an email in which the first respondent was copied in on. This email states inter alia that “Reluctantly I have to agree that carrying on as we are does not provide us with the return on capital that any business owner expects. I respect that turnover has achieved in excess of R5m to date but, based on what we have to achieve this, we clearly do not experience the profits we should. With that in mind I think that we will have to terminate John’s employment with effect from 31 March 2019 as the cost to the company represents a disproportionate percentage of our expenses.”

[21] It was common cause between the parties that the abovementioned email constituted the date when the first respondent was dismissed, that being 6 February 2019.

[22] On 7 February 2019 the first respondent called a meeting with both Mr and Ms Llewellyn. A heated debated pursued between the parties. The first respondent’s last day of employment was to be 31 March 2019. The first respondent did not return to the applicant’s premises after 7 February 2019. Thereafter the first respondent approached his attorneys and referred an unfair dismissal dispute to the CCMA.

[23] The CCMA arbitration commenced on 9 May 2019 and concluded on 30 January 2020. The first respondent sought compensation for his alleged unfair dismissal as well as payment for his alleged outstanding salaries, his 13th cheque and 20% profit share.

[24] On 19 February 2020 the commissioner found the first respondent to have been substantively and procedurally unfairly dismissed and awarded the first respondent a total amount of R652 045.80 comprising of:

24.1 Salaries (April – August 2018)

R240 200.00;

24.2 13th cheque for December 2018

R50 000.00;

24.3 20% profit (March to November 2018)

R105 594.00;

24.4 20% profit (March to November 2018)

R6 251.65; and

24.5 Five months compensation

R250 000.00.

[25] The applicant served this review application on the first respondent timeously, but as a result of the lockdown only filed this review application in Court on 1 June 2020.

Jurisdiction of the CCMA to award payment other than compensation for unfair dismissals

[26] On 5 October 2022, the day before the matter was to be argued, I requested the parties’ legal representatives to prepare to address me “on a jurisdictional point pertaining to whether the CCMA/Commissioner had the necessary jurisdiction to award the employee unpaid salaries, 13th cheque and 20% profit share, specifically in terms of S73A(2) of the BCEA.”

[27] On the morning of 6 October 2022 before the matter was argued I received heads of argument on this point from the applicant’s counsel. The first respondent’s counsel addressed me on this issue in court. This jurisdictional point was dealt with by the parties at the commencement of argument.

[28] In the Constitutional Court judgment of Booi v Amathole District Municipality and Others[4] it was stated:

“It is trite that courts are bound by the issues that the litigating parties raise. However, a court can raise an issue mero motu where (i) raising it is necessary to dispose of the matter, and (ii) it is in the interests of justice to do so, which depends on the circumstances at hand.”

(Footnotes omitted)

[29] This Court has mero motu raised the question of whether the CCMA had the necessary jurisdiction to make an award in respect of the first respondent’s unpaid salaries, 13th cheque and the 20% profit share. I find that both conditions are present in this case, that it is necessary to raise this point to dispose of the award in respect of the aforementioned payments and it is in the interests of justice for this Court to do so. This issue being fundamental to the question of whether the CCMA has the authority to make an award for payment in respect of monies owing that are above the threshold and resulting from an alleged breach of an employment contract.

The Legal Framework pertaining to the CCMA jurisdiction on this point

[30] Section 73A of the Basic Conditions of Employment Act E="_ftnref5">[5] (BCEA) provides:

“Claims for failure to pay any amount

(1) Despite section 77, any employee or worker as defined in section 1 of the National Minimum Wage Act, 2018, may refer a dispute to the CCMA concerning the failure to pay any amount owing to that employee or worker in terms of this Act, the National Minimum Wage Act, 2018, a contract of employment, a sectoral determination or a collective agreement.

(2) Subsection (1) does not apply to employees or workers earning in excess of the threshold prescribed by the Minister in terms of section 6(3).

(3) An employee or worker, other than the employee or worker referred to in subsection (1), may institute a claim concerning the failure to pay any amount contemplated in subsection (1) in either the Labour Court, the High Court or, subject to their jurisdiction, the Magistrates’ Court or the small claims court.”

[31] “Earnings” means the regular annual remuneration before deductions i.e. income tax, pension, medical and similar payments but excluding similar payments (contributions) made by the employer in respect of the employee.[6]

[32] The earnings threshold, which is determined by the Minster of Employment and Labour from time to time in terms of section 6(3) of the BCEA is R224 080.30 per year (R18 673.00 per month) which came into effect from 1 March 2022. [7]

[33] Section 77(3) of the BCEA provides:

“The Labour Court has concurrent jurisdiction with the civil courts to hear and determine any matter concerning a contract of employment,

irrespective of whether any basic condition of employment constitutes a term of that contract.”

Parties’ submissions

Applicant’s argument on jurisdiction of the CCMA

[34] The applicant argued that the CCMA did not have jurisdiction to adjudicate the first respondent’s claims for his unpaid salaries and 13th cheque as the first respondent’s earnings were above the threshold and thus the first respondent’s claims were precluded by section 73A(2) of the BCEA. In respect of 20% profit share, this was a contractual claim which is beyond the CCMA’s jurisdiction.

[35] In the applicant’s supplementary heads of argument it also referred to Chimphondah v Housing Investment Partners (Pty) Ltd and Others[8] in which the court held:

“[29] In the circumstances, the award in this regard stands to be reviewed and set aside and substituted with the order that the CCMA had no jurisdiction to entertaining Mr Chimphondah’s contractual claim. Of course, Mr Chimphondah may still avail himself to the recourse provided for in terms of section 77(3). If he decides to do so, there is, in my view, nothing that might prevent the parties from agreeing to use the record of the arbitration proceedings as evidence instead of a hearing de novo.”

First Respondent’s argument on jurisdiction of the CCMA

[36] The first respondent argued that the applicant tacitly alternatively impliedly consented to the CCMA having jurisdiction to entertain the first respondent’s abovementioned monetary claims as no objection was ever raised by the applicant pertaining to the CCMA’s jurisdiction in respect of the abovementioned monies that the first respondent claimed from the applicant.

[37] In this regard the first respondent relied on section 115(1)(b)(ii) of the LRA, specifically in respect of the 20% profit share, to demonstrate that the CCMA had jurisdiction to make such an award. Section 115(1)(b)(ii) provides that the CCMA must arbitrate the dispute if “all the parties to a dispute in respect of which the Labour Court has jurisdiction consent to arbitration under the auspices of the Commission”.

[38] I was also referred to the judgment of Meyer v Butler t/a Wack-em[9] at paragraph 10 which states “A statute must be interpreted in light of and in conformity with the common law unless that statute provides otherwise…”.

[39] It was submitted further that the unpaid salaries and 13th cheque fall within section 35 of the BCEA (calculation of remuneration and wages) and read together with 74 of the BCEA gives the CCMA jurisdiction to make an award in respect of these amounts. The relevant subsections of section 74 of the BCEA (consolidation of proceedings) provides:

“(1) A dispute concerning a contravention of this Act or the National Minimum Wage Act, 2018, may be instituted jointly with proceedings instituted by an employee under Part C of this Chapter.

(2) If an employee institutes proceedings for unfair dismissal, the Labour Court or the arbitrator hearing the matter may also determine any claim for an amount that is owing to that employee in terms of this Act or the National Minimum Wage Act, 2018.”

[40] The commissioner also relied on section 74 of the BCEA to justify making an award in favour of the first respondent in respect of his unpaid salaries, 13th cheque and 20% profit share. [10]

Analysis of the parties’ arguments on the jurisdictional point

[41] It was common cause that the first respondent’s monthly earnings was R50 000.00. In terms of section 6(3) of the BCEA, the first respondent’s earnings was therefore above the threshold provided for in section 73A(2) of the BCEA.

[42] Section 73A(2) of the BCEA expressly excludes the CCMA from awarding any amount owing to an employee if such earnings are above the threshold prescribed in terms of section 6(3) of the BCEA.

[43] Section 73A(1) of the BCEA would apply to the first respondent’s unpaid salaries and the 13th cheque claim if the first respondent’s earnings were below the threshold. However, the first respondent’s earnings were above the threshold and therefore the first respondent is statutorily prohibited from claiming these amounts at the CCMA.

[44] Accordingly the reliance on Meyer v Butler t/a Wack-em is misplaced in that there is a statutory provision (section 73A (2) of the BCEA) that expressly excludes the CCMA from adjudicating the first respondent’s claim to his unpaid salaries and 13th cheque and hence any reliance on the common law is not applicable.

[45] Over and above this, not only are the abovementioned claims above the threshold but the entitlement to the 13th cheque and the unpaid salaries was in dispute. It was not common cause that these amounts formed part of the first respondent’s amended employment contract. Accordingly the claim to these amounts is also a contractual issue which falls outside the ambit of the CCMA’s jurisdiction.

[46] Only an amount that is owing to an employee in terms of the BCEA can be consolidated in proceedings for an unfair dismissal in terms of section 74 of the BCEA. The amounts that the first respondent claimed that is owing are excluded by section 73A(2) of the BCEA and therefore there is no amount owing in terms of the BCEA. Even if section 73A(2) was not applicable (which it is) the unpaid salaries and 13th cheque claims are also contractual claims that the CCMA does not have jurisdiction to adjudicate on. Accordingly, reliance by the first respondent on section 74 of the BCEA is misplaced.

[47] I find that the CCMA did not have jurisdiction to make an award in respect of the first respondents unpaid salaries and 13th cheque.

[48] In respect of the 20% profit share this is a breach of a contractual claim that does not arise from the first respondent’s earnings. Even if it did, that is if it was to be defined as part of the first respondent’s earnings, such an amount would again be above the threshold and the CCMA would not have jurisdiction to award this amount.

[49] In any event I do not consider the 20% profit share to have been part of the first respondent’s earnings as this claim falls outside the definition of earnings.

[50] The 20% profit share is in fact a claim for a breach of contract and therefore falls outside the jurisdiction of the CCMA. Only the Labour Court or the Civil Courts can determine a contractual claim in terms of section 77(3) of the BCEA. Accordingly, section 74 of the BCEA also is not applicable in respect of this claim by the first respondent.

[51] The review test is trite and well-articulated in SA Rugby Players Association and others v SA Rugby (Pty) Ltd and Others; SA Rugby (Pty) Ltd v SA Rugby Players Association Union and Another SA Rugby Players Association[11], where the Labour Appeal Court (LAC) held that the enquiry into the jurisdiction of the CCMA entails the determination whether

“objectively speaking, the facts which would give the CCMA jurisdiction to entertain the dispute existed. If such facts did not, exist the CCMA had no jurisdiction irrespective of its finding to the contrary”.[12]

[52] In HC Heat Exchangers (Pty) Ltd v Araujo and Others [13] the Labour Court in determining review applications in respect of the CCMA’s jurisdiction referred to the following previous judgments on this point:

“[36] In Fidelity Cash Management Service v Commission for Conciliation, Mediation and Arbitration and Others[14] the Court considered the now trite ordinary review test postulated by Sidumo and Another v Rustenburg Platinum Mines Ltd and Others[15] and said:

‘… Nothing said in Sidumo means that the CCMA’s arbitration award can no longer be reviewed on the grounds, for example, that the CCMA had no jurisdiction in a matter or any of the other grounds specified in section 145 of the Act. If the CCMA had no jurisdiction in a matter, the question of the reasonableness of its decision would not arise …’ (emphasis added)

[37] The aforesaid means that where the issue to be considered on review is about the jurisdiction of the CCMA or bargaining council, it is not about a reasonable outcome. What happens is that the Labour Court is entitled, if not obliged, to determine the issue of jurisdiction of its own accord. In doing so, the Labour Court determines the issue de novo in order to decide whether the determination by the arbitrator is right or wrong.” [16]

[53] This Court is obliged to determine the issue of jurisdiction of the CCMA on its own accord and hence the issue has been raised mero motu and the question of reasonableness in the review test does not arise.

[54] Section 115 (1)(b)(ii) which gives the CCMA jurisdiction if the parties consent to such jurisdiction cannot be invoked where the CCMA had no jurisdiction to entertain the dispute from the outset. As detailed above the CCMA had no jurisdiction to adjudicate the dispute in respect of the first respondent’s unpaid salaries and 13th cheque nor did it have jurisdiction to adjudicate a dispute pertaining to a claim arising out of a breach of contract. Accordingly, even if there was consent, these disputes do not fall within the ambit of the CCMA’s jurisdiction.

[55] I now turn to the various grounds of review as defined by the applicant.

Parties’ Submissions

The Applicant’s case

[56] It is the applicant’s case that the first respondent was dismissed for poor performance in that the first respondent repeatedly failed to meet his targets causing the applicant not to make a profit.

[57] The first respondent was initially solely responsible for the running of the Maris Polymers South African business and the applicant funded the business.

[58] As time went on and when it became apparent that the first respondent was not performing as he had promised to do, Mr and Ms Llewellyn got more involved in Maris Polymers South Africa.

[59] Before the first respondent started working for the applicant in October 2016, he sent the applicant projected sales that he believed he would be able to achieve and better. The projected sales was based on Lola Fillak’s (Lola) sales, being the previous distributor for Maris Polymers Greece in South Africa. The first respondent claimed that he would better Lola’s sales as she came from the Bed and Breakfast industry whereas he came from selling the polymers product in Greece and thus had a better skill set and more experience. The first respondent was responsible for setting the price of the product.

[60] From the commencement of the first respondent’s employment, the applicant supported and guided him by inter alia giving the first respondent access to Safeguard Chemicals’ database, contracting various marketing companies to assist the first respondent obtain leads for his sales, paying for expos to expose the first respondent to the South African market and employing additional sales staff to assist the first respondent obtain sales.

[61] Mr and Ms Llewellyn and the first respondent regularly met, most notable every Monday morning in order to discuss and guide the first respondent in order to help the first respondent achieve his sales. Although sales improved, the applicant was not making a profit as Maris Polymers South Africa’s expenses were very high.

[62] On 26 July 2018 Mr Llewellyn sent an email to the first respondent while the first respondent was away in Greece in which he expressed his disappointment with the applicant’s profits as being “Nil” and proposed three options moving forward. The first option was to terminate the first respondent’s employment contract, the second option was to close Maris Polymers South Africa and the third option was to reduce the first respondent’s salary to R50 000.00 per month together with medical aid and other benefits, a 13th cheque and a 20% share in the net profits.

[63] On 2 August 2018 Mr Llewellyn sent an email to the first respondent in which he stated inter alia that “John, as much as we like you and Melina, the hard truth is that we cannot continue to make payments to you without there being either a dramatic increase in sales and profitability or a reduction in monies that we are paying you…We have reached a point where we feel that the only possible way forward is for us to terminate your employment and try engage someone locally.”

[64] On 23 August 2018 Mr Llewellyn sent a further email to the first respondent in which he stated inter alia that “We appreciate that you have accepted that the employment conditions cannot remain the same as they were on initial appointment and hope that you understand that this is not personal. We want you to succeed just as much as we want the company to succeed but cannot continue with an arrangement where there was only one winner. A revised Letter of Employment based on our discussions is attached.” The amended contract of employment was never signed by the first respondent.

[65] Negotiations between the parties pursued resulting in the employment relationship continuing but the first respondent’s salary being reduced to R50 000.00 per month from August 2018. The applicant also reduced the amount of the first respondent’s sales targets. The applicant contends that the 13th cheque would not be guaranteed but performance based and the 20% profit share was contingent on there being a profit.

[66] In respect of the royalties, the applicant’s evidence was that that it stopped paying the royalties in August 2018 after the first respondent’s contract of employment was amended. Mr Llewellyn felt that the business of Maris Polymers South Africa was like “flogging a dead horse” as the business was not making any profit.

[67] In November 2018 the parties exchanged various emails about payment of the first respondent’s unpaid salary and other amounts that the first respondent was claiming from the applicant including a 13th cheque and 20% royalties / profit share. The first respondent used the term royalties interchangeably with profit share.

[68] Mr and Ms Llewellyn were disappointed in the first respondent’s lack of efforts to secure and find new sales opportunity. This was evident by the first respondent spending too much time in the office and not making enough sales calls.

[69] On 5 February 2019 Mr Llewellyn sent an email to the first respondent in which he inter alia complained about the lack of activity on the first respondent’s activity report and stated that “If there is no sign of possible improvement in the next 2 months I think that we will probably have to consider closing the company.”

[70] On 6 February 2019 the first respondent accused the applicant of doctoring its financials in order to avoid paying the first respondent his 20% profit share. Shortly after 6 February 2019 meeting and on the same day, Mr Llewellyn sent an email which dismissed the first respondent. The applicant always maintained that the reason for the first respondent’s dismissal was his poor performance.

[71] It was the applicant’s case that through its regular meetings, guidance and assistance given to the first respondent, it duly complied with The Code of Good Practice of the LRA, Schedule 8 items 8(2)(3)(4) and 9. Further as the first respondent represented himself to be an expert sales person through his CV and throughout his employment as well as the fact that he was the General Manager and responsible for the business of Maris Polymers South Africa, if there was any deviance from the Code of Good Practice it was justified because of the first respondent’s seniority and purported skill set.

[72] The applicant has raised seven grounds of review. I will deal with each ground separately.

First Ground – The Royalties

[73] The commissioner failed to properly apply her mind to the evidence in finding that the royalties was not a matter before arbitration. In so doing, the applicant submits that the commissioner should have taken cognisance that the first respondent did not reduce the royalties to alleviate the financial loss suffered by the applicant and hence failed in his responsibilities as the applicant’s General Manager, a further factor in considering the first respondent’s poor performance.

Second Ground – The Financial Statements

[74] The commissioner incorrectly found that the financial statements produced by the applicant could not be relied upon which led to the commissioner finding that the first respondent’s dismissal was substantially unfair.

Third Ground – The Pricing

[75] The commissioner failed to apply her mind in finding that the price setting of the product had been taken away from the first respondent and were too high which led the commissioner to find that the first respondent’s dismissal was unfair.

Fourth and Sixth Ground – The reason for the first respondent’s dismissal was poor performance but the commissioner based the reason for dismissal on misconduct

[76] Throughout the arbitration and in respect of all the evidence led, the reason for the first respondent’s dismissal was based on poor performance. However the commissioner failed to apply her mind when she found that the first respondent’s dismissal was for misconduct. The commissioner did not come to a decision which a reasonable decision maker would have arrived at.

Fifth Ground – The Royalty Agreement and 20% Profit Share

[77] The commissioner should not have found that the first respondent’s dismissal was because the applicant did not want to pay the first respondent the 20% profit share and the royalties. The commissioner erred in awarding the first respondent 20% profit share.

Seventh Ground – The Amended Contact of Employment of August 2018

[78] The commissioner found that the amended contract of employment as per the first respondent’s version of the terms was binding and that it was unlawful to backdate it to April 2018 and unacceptable in law.

[79] The commissioner’s finding in this regard as well as awarding the first respondent his unpaid salaries from April 2018 to August 2018 was not a decision that a reasonable decision maker would have reached.

First Respondent’s case

[80] There is no basis to review the arbitration award. There was no gross irregularities in the arbitration award and even if there was, the outcome arrived at by the commissioner was nonetheless reasonable.

[81] The first respondent contended that the reasons for his poor sales was due inter alia to:

81.1 Lola had threatened him and as a result he was unable to approach

her customers that previously bought the product from Maris Polymers Greece. The first respondent’s sales projections were based on Lola’s previous sales, which sales he could no longer pursue as a result of Lola’s threats;

81.2 the information supplied by the marketing companies was inaccurate;

81.3 he had to spend a lot of time with the customers showing them how the product worked as it was technical in nature and this impacted the time he could devote to finding new customers. He also had to spend time training the additional sales staff which had the same impact on his sales;

81.4 the pricing of the product was too high and the applicant would not reduce the price, hence it was difficult to sell the product;

81.5 the targets set by the applicant were unreasonable; and

81.6 the first respondent required additional sales staff to assist him. The sales staff that were employed by the applicant were not skilled enough and were not paid enough resulting in the majority of them leaving.

[82] The applicant knew from inception that the 12% royalties were being paid to the first respondent due to the comments made by Ms Llewellyn and the fact that the royalties and part of his salary were paid into Goumi Trading Services Limited, being the first respondent’s company and alter ego.

[83] The first respondent was put in a precarious position when he agreed to reduce his salary and amend his contract of employment. At the time he was in Greece with his wife for medical reasons and did not want to lose his job. He had no choice but to accept the reduction of his salary failing which Mr Llewellyn may have closed down Maris Polymers South Africa.

[84] The first respondent’s understanding of his amended employment contract was that his targets were reduced, he would get 20% of the applicant’s profit at the end of each quarter, no more royalties would be paid and his 13th cheque was not performance based but guaranteed.

[85] The pricing of the product was initially set by the first respondent but in 2018 Ms Llewellyn took over the pricing which he viewed as too high and responsible for the lack of substantial sales. The first respondent denied he set his own targets.

[86] The first respondent contended that the company had grown and that he was responsible for the increase of sales over the years. He was not a poor performer and that although his January 2019 activity report lacked detail it must be noted that sales were always slow in December and January.

[87] The applicant owed the respondent money as was documented in the various emails between the parties. The first respondent allowed the applicant to pay him his outstanding monies when the applicant was in a financial position to do so. The royalties agreement had nothing to do with the first respondent’s employment contract and was a separate issue.

[88] There were two sets of financials and the applicant did not want to pay the first respondent the 20% profit share based on the second set of financials which the first respondent did not believe represented the correct profit amounts.

[89] The applicant owed the first respondent 20% profit share based on the financials he relied on, unpaid salaries from April 2019 to August 2019 and his 13th cheque.

[90] On the CCMA referral form the first respondent indicated that he did not know the reason for his dismissal. At the meeting between the first respondent and Mr Llewellyn’s on 6 February 2019 Mr Llewellyn informed the first respondent that the trust relationship had broken down and that the termination of employment email had nothing to do with poor performance but was as a result of the first respondent raising issues about the financial statements and his 20% profit share. The commissioner was reasonable in finding that the dismissal was not as due to poor performance but as a result of what transpired on 5 and 6 February 2019.

[91] The royalties agreement was never presented at the arbitration and did not form part of the first respondent’s salary and thus did not form part of the employment relationship between the parties.

[92] The applicant failed to show that the commissioner committed any gross irregularity in finding that the royalties had nothing to do with the dismissal of the first respondent.

[93] There were two sets of financials. A reasonable inference was that the second set was presented in order to justify the applicant not paying the first respondent his 20% profit share. The commissioner did not commit a gross irregularity in finding the financials relied upon by the first respondent could be relied upon.

[94] The first respondent contended that the pricing was not in his control specifically after August 2018 when Ms Llewellyn took over the pricing. This impacted on the products sales and ultimately his performance. The commissioner was correct in her finding that the pricing was taken away from the first respondent and there is no ground for review on this issue.

[95] The termination of employment email of 6 February 2019 did not state that the reason for termination was poor performance.

[96] The first respondent was never warned that if he did not reach his targets he would be dismissed, only that he would not receive his bonus. No formal assessments on the first respondent’s performance was ever conducted by the applicant. The first respondent did not receive any warning for poor performance.

[97] In the 5 February 2019 email Mr Llewellyn gave the first respondent two months to achieve a turnaround however within less than 24 hours the first respondent was dismissed as the trust relationship between the parties had broken down. The first respondent contends that this was a result of the argument around the financials and the first respondent’s demand of his 20% profit share.

[98] The first respondent was never given an opportunity to state his version before he was dismissed. It was reasonable that the commissioner found that the first respondent’s dismissal was not due to poor performance but misconduct.

[99] The applicant manipulated the second set of financials to justify that the first respondent was not entitled to his 20% profit share.

[100] The commissioner was correct to award the first respondent the 20% profit share and that the applicant did not want to continue with the employment relationship where it had to pay the first respondent a 20% profit share.

[101] The first respondent’s salary was reduced from August 2018 and to deduct his salary retrospective from April 2018 is bad in law and unfair. The applicant agreed when it amended the first respondent’s employment contract that he would get a 13th cheque. This was not based on performance.

[102] The commissioner’s decision in finding that the first respondent was entitled to his unpaid salaries, 13th cheque and 20% profit share was reasonable.

Analysis

[103] In respect of the first ground of review - the royalties, on Mr Llewellyn’s own evidence he only found out that the applicant’s royalty payments were not being paid to Maris Polymers Greece when he received an email from Athena Maris dated 21 February 2019.[17] This was after the first respondent was dismissed.

[104] The applicant’s poor performance issues with the first respondent was never to do with royalties. The commissioner’s

decision to exclude the royalties dispute from the arbitration was reasonable.

[105] The second ground is based on the commissioner’s finding that favoured the first respondent’s version about the financial statements. The commissioner favoured the first respondent’s version and thus bases the 20% profit share calculations awarded to the first respondent on the first respondent’s amounts presented in his financials.

[106] As dealt with above, the 20% profit share awarded to the first respondent fell outside the CCMA’s jurisdiction. Insofar as the different financials showed a profit or not, this issue was in dispute but the commissioner found that applicant did make a profit albeit not a profit that the applicant was expecting.

[107] The commissioner found the first respondent’s dismissal was based on misconduct and therefore whether there was a profit made or not pertaining to the poor performance issue is not relevant.

[108] In respect of the third ground the pricing, again the commissioner found the first respondent’s dismissal was based on misconduct and therefore whether the pricing contributed to the poor performance issue is not relevant.

[109] The fifth ground is attacking the commissioner’s finding that the applicant was not willing to continue with the employment relationship with the first respondent due to the initial royalty agreement and the 20% net profit agreement.

[110] As dealt with above, the 20% profit share was a disputed contractual term that the CCMA did not have jurisdiction to determine. Likewise this applies to ground seven dealing with the amended agreement being retrospectively applied.

[111] The crux of the review is to be found in ground four and six that is whether the commissioner misconstrued the reason for first respondent’s dismissal. The starting point is to have regard to the issues the commissioner herself acknowledged that she had to determine. As set out in transcript commissioner acknowledged:

111.1 “…because what I understand is that this is poor work performance issue…” [18]

111.2 “But now we have agreed, all of us, that it is common cause that was poor performance, so there could not be a charge sheet”; [19]

111.3 “You agreed to poor work performance, and that is what we are going to stick with. I am not going to allow evidence on misconduct. She said, you said, you agreed, you are both advocates, you agreed, you consulted with your client, it is poor work performance. I am not going to dwell again on the issue of charge sheets ever.”;[20] and

111.4 “It cannot be. You agreed that it is poor work performance, and then it should be. If they did not do counselling, or whatever, deal with that.”[21]

[112] However in the arbitration award the commissioner does a volte-face when she finds:

112.1 “The two months which the Respondent gave to the Applicant was not honoured by the Respondent. The Applicant was dismissed the following day. Poor work performance can therefore not be the reason for the dismissal of the Applicant.”; [22]

112.2 “There is credibility in the evidence of the Applicant that due to the initial Royalty agreement and 20% net profit agreement, the Respondent was not willing to continue with the employment

relationship with the Applicant.”;[23] and

112.3 “As Maggie stated, she wanted to charge the Applicant for accusing them of doctoring the financials. It therefore ought to have been a misconduct matter. The Respondent therefore acted unfairly towards the Applicant.” [24]

[113] The correspondence between the parties especially from 26 July 2018 to 5 February 2019 all speak of inter alia the first respondent’s lack of sales and the applicant not making a profit. In some correspondences and as a result of the first respondent’s performance, Mr Llewellyn also mentions closing down Maris Polymers South Africa.

[114] Mr Llewellyn brings up the first respondent’s termination all based on the first respondent’s performance as far back as 26 July 2018,[25] and then again on 2 August 2018. [26]

[115] Even the first respondent testified “I have already said that it was a constant discussion about that we are not happy with the profits…”[27] and “As I have explained so many times, always the issue was that the company is not making profit, so many profits as we like.” [28]

[116] The first respondent further went into great detail as to why he was unable to reach Mr and Ms Llewellyn’s profit expectations (Lola, inadequate / not enough sales staff, prices too high etc). Accordingly the first respondent was mindful that his sales performance was an issue. Mr and Ms Llewellyn both regarded the first respondent’s dismissal was as a result of his poor performance.

[117] Although it is correct that on 5 February 2019 Mr Llewellyn gave the first respondent two months to improve but then the next day he dismissed him, the only probable conclusion for this is that the first respondent was dismissed in the heat of the moment after the first respondent questioned the second set of the applicant’s financials.

[118] However having regard to all the evidence presented, the underlying and constant reason for the first respondent’s dismissal was always the issue of his poor performance.

[119] In conclusion it is my view that the commissioner misconstrued the nature of the enquiry when she concluded that “it therefore ought to have been a misconduct matter.”. This resulted in the commissioner awarding the first respondent five months compensation for procedural and substantive unfairness.

[120] The review test is trite and well expounded in Department of Education v Mofokeng and Others Mofokeng[29], referred to with approval in Palluci Home Depot (Pty) Ltd v Herskowitz and Others[30], that:

“…for a defect in the conduct of the proceedings to amount to a gross irregularity as contemplated by s 145(2)(a)(ii) of the LRA, the arbitrator must have misconceived the nature of the enquiry or arrived at an unreasonable result'. Thus, as recognised in Mofokeng,

it is not only the unreasonableness of the outcome of an arbitrator's award which is subject to scrutiny, the arbitrator 'must not misconceive the enquiry or undertake the enquiry in a misconceived manner', as this would not lead to a fair trial of the issues.”

[121] In SABC v CCMA and Others [31] the CCMA had found that the employee had been unfairly dismissed because he was dismissed for misconduct while the allegations related to poor performance. The Labour Court set aside this award because the CCMA was wrong in its categorisation of the offence.

Conclusion

[122] In all the circumstances, I have no doubt that the commissioner clearly misconstrued the nature of the enquiry and accordingly rendered an incorrect award. Consequently, the award stands to be reviewed and set aside.

[123] However the first respondent was on 5 February 2019 informed by Mr Llewellyn that he had two months to improve, yet the very next day the first respondent was dismissed. This denied the first respondent of audi alteram partem given that he was expecting another two months to show improvement.

[124] Although the applicant regularly met with the first respondent, gave him assistance (staff, marketing, expos etc) and the first respondent was a senior employee, I find that the impulsive decision made by the applicant to dismiss the first respondent on 6 February 2019, albeit being a long time coming, was procedurally unfair.

[125] The amounts awarded by the commissioner for unpaid salaries, the 13th cheque and the 20% profit share were not amounts nor disputes that the CCMA had jurisdiction to award.

Costs

[126] With respect of costs and in terms of section 162(1) and (2) of the LRA, the Court has a wide discretion where it comes to the issue of costs. I do believe the first respondent had a right to oppose this matter. The commissioner misconstrued the nature of the enquiry and went beyond her jurisdictional powers as a commissioner. It is unfortunate that the applicant did not raise the issue about the CCMA’s jurisdiction at the arbitration. In all these circumstances, the appropriate order where it comes to costs, is to make no order as to costs.

[127] In the result, the following order is made:

Order

1. The arbitration award issued by the second respondent is reviewed and set aside.

2. The arbitration award is substituted with an order that the first respondent’s dismissal was substantially fair but procedurally unfair and the first respondent is entitled to compensation in an amount equivalent to one month salary.

3. There is no order as to costs.

S. Swartz

Acting Judge of the Labour Court of South Africa

Appearances:

For the Applicant: K Moodley

Instructed by: M

B Oosthuizen Attorneys

For the Respondent: A C Roestorf

Instructed by: Christelis

Artemides Attorneys

[1] No. 66 of 1995, as amended

[2] (2021) 42 ILJ 1643 (CC) at para 13

[3] Brummer v Gorfil Brothers Investments (Pty) Ltd [2000] ZACC 3; 2000 (5) BCLR 465 (CC) at para 3.

[4] (2022) 43 ILJ 91 (CC) At para 35

[5] No. 75 of 1997.

[6] Government Gazette No. 45890, 9 February 2022

[7] Government Gazette No. 45890, 9 February 2022

[8] (2021) 42 ILJ 1720 (LC).

[9] [2001] JOL 7953 (LAC)

[10] Pleadings Bundle (PB) p 54 Arbitration Award para 107

[11] (2008) 29 ILJ 2218 (LAC) (SA Rugby Players Association) at paras 39-41.

[12] See: Solid Doors (Pty) Ltd v Commissioner Theron and Others (2014) 35 ILJ 3360 (LAC) at para 19 (Solid Doors); Solidarity on behalf of Van Tonder v Armaments Corporation of SA (SOC) Ltd and Others (2019) 40 ILJ 1539 (LAC) (Solidarity) at para 5; Gold One Ltd v Madalani & Others (2020) 41 ILJ 2832 (LC) (Gold One) at para 25.

[12] See: Solid Doors (Pty) Ltd v Commissioner Theron and Others (2014) 35 ILJ 3360 (LAC) at para 19

(Solid Doors); Solidarity on behalf of Van Tonder v Armaments Corporation of SA (SOC) Ltd and

Others (2019) 40 ILJ 1539 (LAC) (Solidarity) at para 5; Gold One Ltd v Madalani & Others (2020)

41 ILJ 2832 (LC) (Gold One) at para 25.

[13] [2020] 3 BLLR 280 (LC)

[14] 2008) 29 ILJ 964 (LAC) at para 101.

[15] (2007) 28 ILJ 2405 (CC).

[16] See: Trio Glass t/a The Glass Group v Molapo NO and Others (2013) 34 ILJ 2662 (LC) at para 22.

[17] PB p 207

[18] Transcript Vol 3 p 874 l:12 - 13

[19] Transcript Vol 3 p 875 l:6 - 8

[20] Transcript Vol 3 p 906 l:17 - 22

[21] Transcript Vol 3 p 907 l:1-3

[22] PB Arbitration Award p 53 para 103

[23] PB Arbitration Award p 53 para 104

[24] PB Arbitration Award p 53 para 105 – 106

[25] PB p 127

[26] PB p 129

[27] Transcript Vol 4 p 1283 l:12 - 13

[28] Transcript Vol 4 p 1343 l:2 - 4

[29] 2015] 1 BLLR 50 (LAC) paras 31 – 33

[30] 2015) 36 ILJ 1511 (LAC) at paras 15 – 16; see also Aquarius Platinum (SA) (Pty) Ltd v Commission for Conciliation, Mediation and Arbitration and Others [2020] ZALAC 23; (2020) 41 ILJ 2059 (LAC); [2020] 11 BLLR 1071 (LAC) at para 10

[31] [2006] 6 BLLR 587 (LC).