Lawyers and other businesses charge for representing clients but trade unions may not do so; they are not allowed to conduct any ‘business for gain’.   But  trade unions may ‘promise’ to represent their members in labour disputes.   Legally this is regarded as a mandate despite the absence of any reward.   Members who suffer any loss through a breach of that mandate may claim  damages from the trade union upon proof of unfair or wrongful dismissal.

On 28 March 2013 in FAWU v Ngcobo NO [unreported judgment SCA353/12] the Supreme Court of Appeal upheld the judgment of Swain J [see Ngcobo NO v FAWU] and disallowed the appeal of the trade union.

Justices Ponnan and Plasket delivered the majority judgment with justices Malan and Tshiqi concurring and justice Southwood dissenting.

The judgment of the High Court was confirmed in which justice Swain ordered  FAWU to pay the two former members R214,464 together with interest thereon at the rate of 15.5 per cent per annum from 28 August 2004 to date of payment.

Recent relevant posts

Spare a thought for trade union ‘managers’

Like any other business trade unions also have problems managing their ‘businesses’ and ensuring they remain solvent.   Trade unions may demand wage adjustments linked to the rise in inflation for their members.   But most trade unions do not always have the luxury of doing the same for their union officials.   Trade unions are forbidden by law from conducting any ‘business for gain’.

FAWU ordered to compensate members for Nestlé’s unfair dismissal

The first known judgment in SA where a trade union has been ordered to compensate members for failing to pursue an unfair dismissal claim against their employer after agreeing to do so.

Extracts from SCA judgment in FAWU v Ngcobo NO

[45] It is important to note at the outset that the claim of the respondents is based not on delict, but on a breach of contract.   What they allege is that there was a contract between the parties which imposed an obligation on FAWU that it failed to perform in the manner contemplated by that contract.

The first duty of the court is therefore to determine the nature of the obligation imposed upon FAWU by the contract.   It may well be that in terms of its constitution FAWU may not have been obliged to assist the respondents.

But that can hardly avail it now.   For, the simple truth is that FAWU had in fact undertaken to represent the respondents in their dispute with Nestlé.

Not just that, it thereafter did in fact do so before the Commission for Conciliation, Mediation and Arbitration (the CCMA).

Thus whether the respondents did indeed qualify for such assistance in terms of FAWU’s constitution is, on the view that we take of the matter, a red herring.

That the contract in question is one of mandate appears to admit of no dispute.

Once it accepted that mandate FAWU was obliged to perform its functions faithfully, honestly and with care and diligence (David Trust v Aegis Insurance Co Ltd 2000 (3) SA 289 (SCA) para 20).

It mattered not that it was not to receive any remuneration for the discharge of that obligation.   For, as Hoexter JA made plain in Bloom’s Woollens (Pty) Ltd v Taylor 1962 (2) SA 532 (A) at 539G-H

‘ . . . I wish to emphasise that in our law a person who has undertaken an obligation is bound duly to perform it, whether or not he is to receive remuneration’.

[46] At the outset we should perhaps dispose of a contention sought to be advanced on behalf of FAWU that being a trade union and not an attorney a less exacting standard should be expected of it.   There is a short answer to that contention.   It is to be found in the following dictum of Graham JP in Mead v Clarke 1922 EDL 49 at 51:

‘Voet (XVII.1.9.) points out that where a man has expressly or tacitly professed to have business capability he ought not to have undertaken an affair for which he was not qualified and in which he knew or ought to have known that his own lack of skill would be damaging to the interests of his principal.

And Story, in his work on Bailments, sec. 175, states the same principle:

“Nor will want of ability to perform the contract be any defence to the contracting party, for though the law exacts no impossible things, yet it may justly require that every man should know his own strength before he undertakes to do an act.   And if he deludes another by false pretensions to skill he shall be responsible for any injury that may be occasioned by such delusion.”‘

[47] In our view the mandate given to FAWU was a relatively simple one – it was to take such steps as were necessary to have the respondents’ labour dispute with their employer determined in accordance with the provisions of the LRA.

That it could easily have done.   FAWU committed breaches of its mandate.

It did so in the first place by failing to timeously refer the respondents’ dispute with Nestlé to the Labour Court (LC) and in the second place by failing to secure condonation for that failure.

In both instances it failed to act honestly or diligently.

When the dispute remained unresolved and a certificate to that effect issued by the CCMA on 18 June 2002, the respondents acquired an unconditional right to approach the LC to have that dispute resolved.

FAWU well knew that the respondents’ dispute had to be referred to the LC within 90 days of the issuance by the CCMA of its certificate.   That much emerges from its own correspondence to the respondents and Nestlé.

FAWU, moreover, failed to inform the respondents that the matter had not been referred within the requisite 90 days or to keep them apprised of the progress of their case (because, one suspects, there was none).

It took a visit by the respondents to the University of Durban-Westville Law Clinic for them to learn that no papers had been filed with the LC.   That was approximately one year after the CCMA certificate of non-resolution had issued.

The consequence of FAWU’s failure to diligently discharge its mandate by failing to timeously refer the respondents’ dispute with Nestlé to the LC was that it altered the nature of the respondents’ right to one that could now only be exercised with the leave of the LC upon good cause being shown.

A successful application for condonation thus became a necessary preliminary to a referral of the dispute to the LC.

. . . .

[50] It is now contended by FAWU that the respondents’ failure to themselves apply for condonation somehow operates as a bar to the institution of the civil action against it.   We cannot agree.

In our view while the obtaining of condonation may have been a necessary preliminary to the referral by the respondents of their dispute with Nestlé to the LC, it is not for this action.

For, it seems to us that all that the respondents had to establish to succeed in this action as against FAWU is that: had their dispute been referred to the LC by it in accordance with the terms of the mandate it would have been resolved in their favour.   .   .   .

[51] Having accepted the mandate the principal duty of FAWU was to carry it out.   In breach of that duty it failed to timeously refer the dispute to the LC.

It is trite that in those circumstances the respondents had an election to either hold FAWU to its undertaking by claiming performance of it of what it had bound itself to do or to claim damages (Haynes v Kings William’s Town Municipality 1951 (2) SA 371 (A) at 378D-E).

Some eight decades ago the position was articulated thus by Watermeyer J in Abrahamse & Sons v SA Railways and Harbours 1933 CPD 626 at 638-639:

‘It is a rule in the law of contracts that where one party to a contract does an act which makes it impossible for him to perform his promise, or renounces, or refuses to perform, his obligation under the contract, the other party is put to his election.

He can either treat such refusal as a breach of contract and sue for damages or he can hold the defaulting party to the contract and insist on performance.

If he elects to treat the default as a breach the contract is at an end; if, on the other hand, he refuses to accept the default as a breach, then he keeps the contract alive, he can insist on performance and the other party then has a further opportunity to perform his obligation notwithstanding his previous repudiation’.

.   .   .

[55] The learned Judge then proceeded to a consideration of damages.   In Steenkamp v Du Toit 1910 TPD 171 at 175 Innes CJ stated:

‘A man, therefore, who has failed to carry out his contractual obligation, is liable for such damages as he must reasonably have known would naturally and probably result from the breach; such damages, in other words, as given his knowledge of the circumstances, might naturally be expected to follow the breach.’

.   .   .   .

[59] The compensation for the wrong in failing to give effect to an employee’s right to a fair procedure, according to Froneman DJP, is not based on patrimonial or actual loss but is in the nature of a solatium for the loss of the right and is punitive to the extent that an employer who breached the right must pay a penalty for causing the loss (Johnson & Johnson (Pty) Ltd v Chemical Workers Industrial Union (1999) 20 ILJ 89 (LAC) para 41).

In Highveld Steel & Vanadium Corporation Ltd v National Union of Metalworkers of SA & others (2004) 25 ILJ 71 (LAC), the LAC considered the factors to be taken into account in determining whether to grant compensation for procedurally unfair retrenchments under the all or nothing regime.

The following were, inter alia, considered relevant:

(a) the extent of the employer’s deviation;

(b) the severance packages and lengths of service;

(c) the ages of the retrenched employees; and

(d) whether it would have been easy for the retrenched employees to find other employment.

.   .   .   .

[63] In the result we would dismiss both the appeal and the cross-appeal and order the appellant to pay the costs of the former.