Agricultural and Rural Development Authority (ARDA) v Francis Baureni and 18 0thers SC 12/19

“In the final analysis, I take the view that the legislature could not possibly have intended that the complex processes enjoined in the orderly and equitable implementation of s 12C should be concluded and finalized within the limited time frame of only 14 days. To obligate both the Board and the employer concerned to make hurried and ill-considered choices and decisions would certainly not serve the interests of justice at the workplace as contemplated by s 2A of the Labour Act. As I have already indicated, a liberal and expansive interpretation of s 12C is in the best interests not only of the employees but also of the employer.”

Introduction

Act 5 of 2015 brought about a minimum retrenchment package payable to employees whose contracts are terminated on notice among other grounds.  This minimum retrenchment package was also applicable to a certain class of employees whose contracts were terminated on notice following the infamous Zuva Petroleum judgment. ARDA v Francis Baureni and 18 0thers is peculiar, in my view, because it relates to the interpretation of section 12C which section has been misunderstood since inception. This case also deals with the evidentiary burden in instances were an employer alleges that it has an incapacity to pay the minimum retrenchment package.

Background

The employees, in this case, had their contracts terminated on notice in December 2015. Whilst a claim to determining the fairness of their dismissal was pending an inquiry by a labour officer, the employer made an application for exemption from paying the minimum retrenchment package. The application was lodged with the retrenchment board. On hearing the dispute, the Retrenchment Board determined that the employer should pay the full retrenchment package. It was ordered that the payment will be in the form a lump sum as well as instalments spanning over a period of six months. The employer was not happy. An appeal was lodged against the decision of the Retrenchment Board. On hearing the appeal, the Labour Court dismissed it. The decision of the Labour Court then resulted in the current appeal dispute.

Findings and the law

In its first ground of appeal, the employer challenged the constitutionality of the retrospective application of the minimum retrenchment package that has come with Act 5 of 2015. This ground had to be correctly abandoned considering the Gratermans Case (2018) which had found nothing unconstitutional about the retrospective application of the Act.

The most important aspect of this judgement is, in my view, the interpretation of section 12C (3) and related provisions. This section holds that when an application for exemption is brought before the retrenchment board is must be “responded” to within 14 days, failure of which it will be deemed to have been granted in favour of the applicant. The applicant company argued that the word “respond” means that the board would have dealt with the matter and finalised it within the requisite period. The argument went on to state that, because the board had not determined the matter within 14 days, the matter must be decided in favour of the applicant company. The court did not agree. The Court made use of the ordinary grammatical meaning of the word “respond” and came to a finding that such a word did not mean that the board would have to conclude the matter within 14 days. It remarked as follows:

“The word “respond”, in its ordinary connotation, means “to say or do something as a reaction to something that has been said or done” (per the Cambridge English Dictionary). The word clearly does not denote anything akin to a final or definitive decision on anything raised by one person for a response to be given by another. Rather, it signifies an exchange of words or conduct between one or more individuals”

 It also argued that a period of 14 days it too little a time to completely deal with issues relating to incapacity to pay a retrenchment package. It determined that “respond” should be deemed to mean action taken by the board upon receipt of the application for exemption. In the court’s view, such action includes inviting parties to the hearing.

Further, the court made a finding that the applicant company had continued to take part in the proceedings called upon by the board even after the period of 14 days had elapsed. This meant that the applicant accepted that the proceedings were still valid.

In as far as evidence of incapacity to pay was concerned the court noted that the applicant company failed to place evidence before the court to show its inability to pay. The company had referred to unaudited financial statements, but such statements were never placed before the court. In addition, the bank statements that it had sought to rely on were deemed to be not enough proof of incapacity. The court had no other option, it decisively remarked;

“The onus clearly lay on the appellant to show that it should be exempted from paying the minimum retrenchment packages due to the respondents. As I have already stated, it failed to produce any meaningful evidence to substantiate its claim of insolvency or incapacity to pay the paltry sum of $55,000.00 that was ordered by the Board to be paid, partly as lump sums and partly by way of installments. It clearly failed to discharge the evidential onus that squarely fell upon it.”

Final determination

The appeal was dismissed with costs. The matter was thus decided in favour of the respondent.

Own comment

The Supreme Court is commended for taking the opportunity to bring clarity to Section 12 as amended by Act 5 of 2015. Most people, including me, thought that if an exemption matter before a retrenchment board is not resolved within 14 days it will have to be decided in favour of the applicant. This is clearly not the case as the word “respond” was given its dictionary meaning which means the boards reaction to the application. The court also brought clarity to the type of evidence that is required to satisfy a court of the incapacity of a court in paying the minimum retrenchment package. This is important for those contemplating such an application.

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