By Mzukisi Kota on 29 May 2013

This case is concerned with the question of whether a trade union is liable for damages to its members where it has failed to perform in terms of a mandate to represent its members in proceedings before the Commission for Conciliation Mediation and Arbitration (“the CCMA”) and the Labour Court.

Broadly, the Labour Relations Act provides that where there is a dispute about the fairness of a dismissal, the dismissed employee may refer the dispute to the CCMA within 30 days of the dismissal.  If the CCMA fails to resolve the dispute through conciliation, it issues a certificate that the dispute remains unresolved and the employee may then refer the dispute to the Labour Court for adjudication.  This referral must be made within 90 days after the CCMA has issued its certificate. 

In the present case, Mr Ndlela (who passed on prior to the hearing in the court a quo and was accordingly replaced by Ms Ngcobo, the executrix of his estate) and Mr Mkhize (collectively “the respondents”) had been employed by Nestlé South Africa (Pty) Ltd (“Nestlé”) as sales representatives until their retrenchment on 15 May 2002.  Prior to their retrenchment, around the end of February / beginning of March 2002, both Ndlela and Mkhize completed and signed the membership application forms to become members of the Food and Allied Workers Union (“the Union”).  The import of this act is that at the time of their retrenchment the respondents were, in terms of the Union’s membership rules, deemed to be full members of the Union and accordingly entitled to request the Union’s assistance in relation to their employment issues.

On 12 April 2002, both Ndlela and Mkhize received letters from Nestlé informing them of the outcome of restructuring in the business and of their salary increases for the year.  In addition, the letters also communicated that management was looking forward to working with the respondents to achieve the goals set forth at the end of this restructuring.

On 6 May 2002, and notwithstanding the letters of 12 April 2002, Ndlela and Mkhize each received letters from Nestlé informing them that their services would be terminated on 15 May 2002 and set out the details of their severance packages.  Importantly, these letters indicated that Nestlé had formally informed the Union on 11 April 2002 that the respondents would be retrenched with effect from 15 May 2002.  This means that Nestlé had already taken a final decision to retrench the respondents when it addressed the letters of 12 April 2002 to the respondents informing them of their salary increases and that management was looking forward to working with them in the restructured business.

The respondents approached the Union to assist them with challenging the fairness of their dismissal and the representative of the Union agreed to do so.  To this end, the Union assisted the respondents in completing the necessary forms to refer the matter to the CCMA for conciliation and proceeded to represent the respondents at the CCMA hearing on 18 June 2002.  The CCMA conciliation failed to resolve the dispute and resulted in the Commissioner issuing a certificate of non-resolution.

At this juncture, the Union decided to consolidate all claims based on Nestlé’s unfair dismissal of the Union’s members in proceedings before the Johannesburg Labour Court.  However, it appears that either this consolidation never occurred or the respondents’ claims were not made part of the consolidated proceedings, as the Union did not ultimately refer the respondents’ claims to the Labour Court within the prescribed 90 days (or indeed at all).  The respondents only discovered that their claims had never been referred to the Labour Court about a year later when they sought assistance from the University of Durban-Westville Law Clinic.

The respondents eventually instituted proceedings in the KwaZulu-Natal High Court for damages against the Union for its failure to refer their claims to the Labour Court.  The respondents alleged that they had entered into an agreement of mandate with the Union in terms of which the Union, amongst other things, was to refer their unfair dismissal claims against Nestlé to the Labour Court and that the Union had breached this agreement.  The respondents sought damages for this alleged breach.

The High Court (Swain J), while reluctant to classify the relationship between the parties as one of mandate, nevertheless found that there was an agreement between the parties and the Union, and that, in failing to refer the respondents’ cases to the Labour Court within the prescribed 90 days (nor even to do so with a condonation application after those 90 days), the Union had breached its obligations under the agreement.  The High Court also found, on an assessment of several issues of substantive and procedural fairness, that, had the Union referred the unfair dismissal to the Labour Court, the respondents would probably have been successful in their claims.  Accordingly, the High Court found in favour of the respondents and ordered damages in the amount to which they would have been entitled had their unfair dismissal claims succeeded in the Labour Court.

The decision of the High Court was upheld on appeal to the Supreme Court of Appeal (“the SCA”).  The SCA had no difficulties in classifying the agreement between the parties as that of mandate, which obliged the Union to perform its functions faithfully, honestly and with care and diligence.  Like the High Court, the SCA found that the Union had committed breaches of its mandate, in the first place by failing timeously to refer the respondents’ disputes with Nestlé to the Labour Court and in the second place by failing to seek and secure condonation for that failure.

The Union had attempted to show that the respondents’ losses had been self-inflicted, in that they failed themselves to seek condonation from the Labour Court once it became apparent that the Union would not do so in spite of their requests.  According to this argument, if the respondents had themselves sought condonation from the Labour Court and shown good cause for the late referral (in this instance being the Union’s failure), then they may have succeeded and obtained their relief from Nestlé.  The respondents would only have a claim against the Union if they were unsuccessful in an application for condonation at the Labour Court.  Their failure to prosecute such a condonation application accordingly meant that they could not proceed against the Union.  In other words, the Union contended that the respondents, by not themselves pursuing an application for condonation, had failed to mitigate their losses as required.

The majority in the SCA (Ponnan JA and Plasket AJA, with Malan and Tshiqi JJA concurring) found that this argument could not stand for two reasons: first, the respondents’ claim against the Union was based on breach of contract rather than delict.  The consequence of the Union’s failure to diligently discharge its mandate was that it altered the nature of the respondents’ rights against Nestlé so that they could now only be exercised with the leave of the Labour Court upon good cause being shown.  If the respondents’ disputes had been referred to the Labour Court in accordance with the terms of the mandate, they would have been resolved in the respondents’ favour.  However, because of the Union’s failure, a successful application for condonation now became a necessary preliminary step to a referral of the disputes to the Labour Court.  Secondly, in accordance with established principles of the law of contract, the Union could not be permitted to take advantage of the respondents’ failure to do something when this failure is attributable to the Union’s own breach.

Southwood AJA appears to have been convinced by the Union’s contentions and consequently wrote a dissenting minority judgment.  He found that the respondents’ action in the High Court should have failed because they failed to show that the losses which they suffered were in fact caused by the Union’s breach of contract.  In his finding, the failure to recover compensation in the Labour Court was caused by the Union’s failure to seek condonation for the late filing of the respondents’ claims in the Labour Court.  According to Southwood AJA, it was necessary for the respondents to allege and prove that even if they had brought an application for condonation it would have been refused because of the Union’s delays.

The Constitutional Court will have to decide whether the High Court and the majority in the SCA decided these issues correctly.  Although this case concerns contract law and does not appear to implicate particular provisions of the Constitution, the Constitutional Court may be minded to assume jurisdiction over it on account of the important implications it bears for the practical vindication of labour rights.