(Herholdt v Nedbank) 7.5.2013 (Cape Town Chapter).

SASLAW CAPE TOWN CHAPTER SEMINAR

7 March 2013

Presenter:

Anton Myburgh SC

Title:

50 SHADES OF REASONABLENESS Herholdt v Nedbank; Myers v SAPS

50 SHADES OF REASONABLENESS

History of reviews •

Carephone

•

Sidumo (LAC)

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Sidumo (SCA)

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Sidumo (CC)

•

Herholdt (LAC)

Herholdt v Nedbank

Who would have thought that after •

15 years and 3000 review judgments,

•

5 years since Sidumo, and

•

3 of its review judgments being overturned by the SCA,

the LAC would now propose the scrapping of reviews in favour of appeals?

Herholdt v Nedbank

How did the LAC arrive at this? •

‘Commissioners who get it wrong on the facts will usually commit the concomitant irregularity of not taking full or proper account of material evidence, and where they err on the law, they will fall short in not having properly applied their minds to the issues and thereby have denied the parties a fair trial. The inexorable truth is that wrong decisions are rarely reasonable. If that is true, the hypothetical reward for limiting intervention to a reasonableness or rationality review is dubious.’

Herholdt v Nedbank

A trilogy of LAC judgments • Gaga v Angloplats • Afrox Healthcare v CCMA • Herholdt v Nedbank

Herholdt v Nedbank

Key findings • • • • •

• •

Section 145 grounds and the Sidumo test can be relied on 2 broad types of reviews: result-based and process-related 2 types of unreasonableness: substantive and processrelated Substantive unreasonableness: a wrong decision will rarely be reasonable A latent gross irregularity = process-related unreasonableness A process-related error usually leads to substantive unreasonableness A process-related review can succeed without assailing the result - here the test is the potential for prejudice

Herholdt v Nedbank

2 key findings in Sidumo • Firstly para 110 (Navsa AJ):

o

‘Is the decision reached by the commissioner one that a reasonable decision-maker could not reach?’

Herholdt v Nedbank

2 key findings in Sidumo • Secondly para 258 (Ngcobo J): o

Where a commissioner fails to have regard to material facts, the arbitration proceedings cannot … be said to be fair because the commissioner fails to perform his or her mandate. In so doing … the commissioner’s action prevents the aggrieved party from having its case fully and fairly determined. This constitutes a gross irregularity … . And the ensuing award falls to be set aside not because the result is wrong but because the commissioner has committed a gross irregularity.’

Herholdt v Nedbank

Relevant background • Herholdt was a successful financial broker • Appointed as a beneficiary in a dying client’s will £92 000 • Failed to disclose this in terms of a conflict of interest policy • Dismissed for dishonesty • Found not guilty and reinstated by a CCMA commissioner • Nedbank brought a process-related review • The LC (per Gush J) granted the review and found the dismissal fair

Herholdt v Nedbank

(1) The LAC’s findings on the review test •

2 types of unreasonableness: o ‘An award will be reviewable if it suffers from dialectical [process-related] unreasonableness or is substantively unreasonable in its outcome.’

Herholdt v Nedbank

• Substantive unreasonableness: o The test is the Sidumo test o Fidelity Cash Management (Zondo JP) endorsed o The decision will pass muster if it is ‘reasonably supportable’ o Allows for ‘a measure of legitimate diversity and deviance from the correct or perfect decision’ o But ‘wrong decisions are rarely reasonable’

Herholdt v Nedbank

• Process-related unreasonableness: o ‘Where a commissioner fails to have regard to material facts, this will constitute a gross irregularity in the conduct of the arbitration proceedings … . Proper consideration of all relevant and material facts and issues is indispensable to a reasonable decision and if a decision-maker fails to take account of a relevant factor which he or she is bound to consider, the resulting decision will not be reasonable in the dialectical sense.’

Herholdt v Nedbank

• The LAC endorsed Southern Sun (Van Niekerk J): o ‘If a commissioner fails to take material evidence into account, or has regard to evidence that is irrelevant … and a party is likely to be prejudiced as a consequence, the commissioner’s decision is liable to be set aside regardless of the result of the proceedings or whether … that result is nonetheless capable of justification.’

Herholdt v Nedbank

• Herholdt’s argument in summary: o ‘All that is required, he contended, is to ascertain whether … the commissioner considered the issue and came to a conclusion on the facts, supported by the evidence, which was sufficiently reasonable to justify the decision. Put in another way, the target on review is the result or outcome rather than the process, and if that is sustainable as reasonable, no more should be expected.’

Herholdt v Nedbank

• The LAC’s response: o ‘I am unable to agree with those submissions principally because … the weight of authority favours greater scrutiny and section 145(2) … expressly permits the review of awards on the grounds of [a gross] irregularity.’ o Ngcobo J’s gross irregularity dictum in Sidumo was then quoted with approval.

Herholdt v Nedbank

• Further in relation irregularities:

to

latent

gross

o ‘There is no requirement that the commissioner must have deprived the aggrieved party of a fair trial by misconstruing the whole nature of the enquiry. The threshold for interference is lower than that; it being sufficient that the commissioner has failed to apply his mind to certain of the material facts or issues before him, with such having potential for prejudice and the possibility that the result may have been different.’

Herholdt v Nedbank

• Unreasonableness interlinked: o ‘Dialectical and substantive reasonableness are intrinsically inter-linked and … latent process irregularities carry the inherent risk of causing an unreasonable substantive outcome.’

Herholdt v Nedbank

(2) The LAC’s findings on the award •

•

•

‘While it is correct that the commissioner gave these facts and issues some thought and consideration, it cannot be said that she applied her mind to them properly.’ ‘The commissioner’s finding to the contrary is … more than a plausible intimation that she failed to apply her mind properly to the facts and the relevant issues.’ ‘The commissioner’s conclusion is … an unmistakable indication that she failed to take account of relevant considerations and misapplied her mind to the facts.’

Herholdt v Nedbank

•

The LAC’s conclusion: o ‘The range and extent of latent irregularities in the award leave no doubt that there has not been a fair trial of the issues. The commissioner not only ignored material evidence in relation to the deliberate conduct of the appellant but fundamentally misconstrued the conflict of interests policy of the respondent with the consequence that her method in determining the issues was latently irregular and in the final analysis led concurrently to a result that was not only incorrect but substantively unreasonable.’

Herholdt v Nedbank

Gaga v Angloplats: •

‘If a commissioner does not take into account a factor that he is bound to take into account, his or her decision invariably will be unreasonable. The flaw in process alone will usually be sufficient to set aside the award on the grounds of it being a latent gross irregularity, permitting a review in terms of section 145.’

Herholdt v Nedbank

• The LAC on the LC’s decision: o ‘The Labour Court did not err in its findings that the commissioner ignored or discounted relevant evidence, failed to apply her mind to a number of material issues and as a consequence committed gross irregularities in the conduct of the arbitration.’

Herholdt v Nedbank

(3) The LAC’s obiter comments •

Defunct explanatory memorandum: o

‘The absence of an appeal from an arbitrator’s award speeds up the process and frees it from the legalism that accompanies appeal proceedings. It is tempting to provide for appeals because dismissal is a very serious matter … . However, this temptation must be resisted as appeals lead to records, lengthy proceedings, lawyers, legalism, inordinate delays and high costs. Appeals have a negative impact on reinstatement as a remedy, they undermine the basic purpose of the legislation and they make the system too expensive for individuals and small business.’

Herholdt v Nedbank

• Legislative intervention: o ‘I would therefore tentatively venture that the time has come for the social partners and the legislature to think again. Justice for all concerned might be better served were the relief against awards to take the form of an appeal rather than a review. The protection granted by a narrower basis for intervention is, in all likelihood, fanciful – a chimera.’

Herholdt v Nedbank

Key findings • • • • •

• •

Section 145 grounds and the Sidumo test can be relied on 2 broad types of reviews: result-based and process-related 2 types of unreasonableness: substantive and processrelated Substantive unreasonableness: a wrong decision will rarely be reasonable A latent gross irregularity = process-related unreasonableness A process-related error usually leads to substantive unreasonableness A process-related review can succeed without assailing the result - here the test is the potential for prejudice

Myers v SAPS

Facts: • •

• • • •

Employed by SAPS as superintendent and commander of dog unit Made a statement to Die Burger published under the byline ‘Maitland: Commander breaks silence. Red tape allows dogs to suffer’ In breach of standing order 156 Dismissed for doing so CCMA – dismissal upheld Labour Court – award set aside on process grounds

Myers v SAPS

LAC (Waglay AJP): • ‘Whatever one’s personal view may be, the test [on review] as set out in Sidumo and as stated above, is whether or not the arbitrator’s decision that dismissal is an appropriate sanction is a decision that a reasonable decision-maker could reach.’

Myers v SAPS

LAC (Waglay AJP) cont: •

‘A consideration of all the relevant facts and circumstances, including the evidence presented at the arbitration in the form of a record, also leads to the conclusion, that Myers, although aware of the fact that the SAPS management was addressing the concerns raised about the diet of the dogs and despite being told that he could not be involved with the management in addressing the problem, sought to challenge their authority without any regard to the rules that regulate his conduct at the workplace. In these circumstances, I cannot accept that the arbitrator’s decision fell outside of the band of decisions to which reasonable people could come. While it is a harsh sanction, it is not so unreasonable that it stands to be reviewed and set-aside.’

Myers v SAPS

SCA found: •

‘It must therefore follow that to survive scrutiny the decision to dismiss must be ‘reasonable’ and reasonableness must be tested in the light of the facts and circumstances of a given case. In its judgment … the LAC correctly recognised that the test for dismissal was the one set out in Sidumo. In my view, however, it erred in its application of the test to the facts in the present matter. … the [LAC] accepted that the sanction imposed on the appellant was ‘a harsh sanction’ but then added that ‘it is not so unreasonable that it stands to be reviewed and set aside’.’

Myers v SAPS

SCA (cont): •

‘The … [LAC] appears to have accepted that the decision was unreasonable, but not sufficiently unreasonable to warrant interference. This seems to be an application of the ‘gross unreasonableness’ test of the pre-1994 era. By adopting such a standard the court inadvertently imported a higher standard than that contemplated in Sidumo. Were this to be the test, it would mean that a dismissed employee seeking to set aside a dismissal would have to show not only that the decision-maker’s decision is unreasonable but that it is ‘so unreasonable’ that it falls to be reviewed and set aside. That cannot be the test.’

50 SHADES OF REASONABLENESS

Citations: o o o o o o o o

Herholdt v Nedbank Ltd (2012) 23 ILJ 1789 (LAC) Sidumo v Rustenburg Platinum Mines [2007] 12 BLLR 1097 (CC) Gaga v Anglo Platinum [2012] 3 BLLR 285 (LAC) Afrox Healthcare v CCMA (2012) 33 ILJ 1381 (LAC) Southern Sun Hotel Interests v CCMA [2009] 11 BLLR 1128 (LC) Fidelity Cash Management Service v CCMA [2008] 3 BLLR 197 (LAC) National Commissioner of the SAPS v Myers [2012] 7 BLLR 688 (LAC) Myers v National Commissioner of the SAPS (425/2012) [2012] ZASCA (29/11/2012)