A nursing sister was dismissed on 26 November 2010 supposedly for a reason related to her misconduct.   Although employed by a labour broker her ‘client’ was a hospital group where her services were contracted to a hospital for specific projects and on fixed terms of service.   After a referring an unfair dismissal dispute to the CCMA it was settled.   On mature reflection, and despite having being advised by an attorney, the sister applied to the High Court to have the settlement agreement declared null and void and of no legal effect.   It was vaguely suggested the CCMA commissioner had unduly influenced her to sign the settlement agreement.

The High Court heard argument concerning jurisdiction, undue influence, alleged fraud, contra bonis mores, public policy , the pari delictum rule and simple justice before deciding that the Labour Court and not the High Court had jurisdiction as the dispute concerned a labour dispute and not a contractual dispute.

In L v Nursing Response CC  (1541/2012) [2013] ZAECPEHC 47 (17 October 2013) the employee submitted that the settlement agreement that recorded a benign reason for the termination of the employment contract (such as the expiry of a fixed–term contract) is contrary to public policy when the true reason was dismissal for an alleged breach of disciplinary code.

Extracts from the judgment [footnotes omitted]

[9]        Turning to the case at hand, the applicant in her founding affidavit complains about the settlement agreement which she states that it contains false information and perpetuates a fraudulent situation.   She states that it is contra bonos mores and she prays that it be declared void ab initio or set aside on the ground of fraud.   She states that at the time when she entered into the Settlement Agreement she was overcome with emotion brought on by the immediacy of the situation at the [CCMA] and the influence by the [commissioner], and the pressure pertaining to the pending arbitration itself.

Alleged fraud

[10]      Mr Dyke has submitted that an analysis of the pleadings in this matter elicits an interpretation that what is challenged is simply the lawfulness of a contract, a claim cognisable in this Court.   He contended that the substantive nature of the dispute does not fall under the LRA.   It is merely the fraudulent nature of the contract.   He therefore submitted that this Court does have jurisdiction to entertain this application.

. . .

[12]      It is clear from the applicant’s papers that the Settlement Agreement which she seeks to have declared void abo initio or set aside on the ground of fraud was concluded in order to settle a dispute which had been referred to the [CCMA] for resolution.

The agreement clearly stated that it is in full and final settlement of all disputes arising out of the employment relationship, etc.   Furthermore the Settlement Agreement document reflects the agreement to have been concluded in the [CCMA].   It seems to me that the underlying dispute, which this Settlement Agreement is recorded to have settled, is inextricably bound to this agreement.   Also the allegation pointing to the influence by the [commissioner] in the conclusion of the agreement, in my view, further bundles the latter into this web.

Underlying dispute

I find it, therefore, difficult to characterise the dispute relating to the Settlement Agreement without considering the nature of the underlying dispute whose resolution culminated in its conclusion.   I am more inclined to agree with the submissions by Mr Shene and Mr Mullins in this regard.

[13]      The other dimension in this matter is that when the applicant felt that she had been unfairly dismissed, she accordingly referred the dispute to the [CCMA], seeking re-instatement.   On date of the hearing a mediation process took place which culminated in the conclusion of this Settlement Agreement which she now wants to have impugned.

. . . .


[16]      Reverting to the case at hand, the applicant has chosen to abandon the process she had followed in the CCMA and approached this Court.   It seems to me that she was not well-advised in abandoning the process that she started in the CCMA.   In my view, this is the route she should have followed to its very end rather than getting involved in what seems to me to be forum-shopping.   More-so that the Labour Court has an-exclusive jurisdiction to rectify or cancel a settlement agreement.

[17]      For the above reasons I have come to the conclusion that this Court has no jurisdiction to entertain this application and it, therefore, falls to be dismissed on that point alone.

[18]      In the event I am wrong in my afore-said conclusion, I proceed to deal with the merits.

Legally represented

[19]      The applicant states that she concluded the Settlement Agreement on the urging or influence of the [commissioner]; was overcome with emotion brought on by the immediacy of the situation and the pressure pertaining to the pending arbitration itself.

The applicant was represented by an attorney in the [CCMA] when a decision was made to proceed with mediation.   She states that the attorney recommended to her to take the deal as it stood despite the inaccuracy thereof in order to settle the matter.

She raises no complaints against that attorney in the manner she legally assisted her.   The applicant also does not give full information as to how she was urged or influenced by the [commissioner] to conclude the Settlement Agreement and also as to how that happened on the face of her legal representative.

Section 138(3) of the LRA allows the Commissioner, if all the parties consent, to suspend the arbitration proceedings and attempt to solve the dispute through conciliation.   It seems to me that this is what the Commissioner did in this matter.

Received settlement benefits

The Settlement Agreement provided for some moneys to be paid to the applicant; they were paid and she accepted them.   Furthermore the applicant has not shown the nature and extent of the influence by the [commissioner] or how it was undue.   She had to show that [commissioner] exerted improper pressure on her in such a manner that she was incapable of exercising independent will.

It is a question of fact in each case whether undue influence exist.   In my view, the applicant has not furnished sufficient information to successfully assail the Settlement Agreement on the ground of undue influence.

Public policy

[20]      The applicant further attacks the Settlement Agreement on the ground that it perpetuates a fraud on prospective employers and that it is contra bonus mores and should be declared void ab initio or set aside.

[21]      Regarding aspect (i) above, the [labour broker’s] response is that it is not false as the Settlement Agreement correctly states that the applicant was never placed on suspension in terms of the [labour broker’s] internal procedures and policies.   Furthermore the applicant stated in her affidavit in support of her application for the joinder of the [labour broker], that she was suspended by the [client].

I fully agree with these contentions.

Consequently, in my view, the applicant’s reliance on this aspect to attack the Settlement Agreement has no merit.

. . . .

False statements

[24]      In case I am also wrong in this conclusion I proceed to deal with the applicant’s attack on the Settlement Agreement on the ground that it is contra bonos mores and contrary to public policy.

I will first sketch out briefly a legal background on this point and thereafter deal with the submission by Counsel.

[25]      Smallberger JA in Sasfin (Pty) Ltd v Beukes  accepted that it serves no useful purpose to classify contracts into those contrary to the common law, those against public policy and those contra bonos mores since the three expressions are interchangeable.   He went further to confirm the authoritative statement of the Court’s power to condemn a contract in the following words of Innes CJ in Eastwood v Shepstone.

“Now this Court has power to treat as void and to refuse in any way to recognise contracts and transactions which are against public policy or contrary to good morals.   It is a power not to be hastily or rashly exercised, but once it is clear that any arrangement is against public policy, the Court would be wanting in its duty if it hesitated to declare such an arrangement void.   What we have to look at is the tendency of the proposed transaction, not its actually proved result.”

The Appellate Division had again to grapple with “this often difficult problem (as called by Smalberger JA at 9 E) in Botha (now Griessel) v Finanscredit (Pty) Ltd.  In that matter Hoexter JA restated the principles from SASFIN as follows:-

“I proceed to consider whether the provisions of clause 7 are, in the language of the majority judgment in the Sasfin case (at 8 C-D).

‘……clearly inimical to the interests of the community, whether they are contrary to law or morality, or run counter to social or economic expedience……….and accordingly, unenforceable on the grounds of public policy.   In such an investigation ………there must be borne in mind

(a) that, while public policy generally favours the utmost freedom of contract, it nevertheless properly takes into account the necessity for doing simple justice between man and man, and

(b) that a Court’s power to declare contracts contrary to public policy should be exercised sparingly and only in cases in which the impropriety of the transaction and the element of public harm are manifest.

So approaching in the enquiry in the instant matter, I am not persuaded that the provisions of clause 7 of the suretyships are plainly improper and  unconscionable.   While at first blush the provisions of clause 7 may seem somewhat rigorous they cannot, I think, have regard to the particular circumstances of the present case, fittingly be described as unduly harsh or oppressive.   The enquiry is directed to.   ‘………the tendency of the proposed transaction, not its actually proved result’ ”.

Contrary to public policy

[26]      Mr Dyke has submitted that a contract which records a benign reason for the termination of an employment contract (such as the expiry of a fixed–term contract) when in fact the true reason for termination of the employment contract was a dismissal for an alleged breach of disciplinary code (which renders the conduct of a serious nature) is contrary to public policy.

He contended that it is contrary to public policy in as much as persons wishing to employ the applicant are not appraised of the true reason for the termination of her employment and she is placed in an invidious position of having to explain to prospective employers if she wishes the truth to be told as to what actually happened.   This, of course, places her at a disadvantage in the employment market, but ignoring that fact for the moment, if she were to remain silent, she perpetuates a clear fraud on prospective employers at large.   So he argued.

He further submitted that that conduct offends the general sense of justice of the community as manifested in public opinion.

[27]      Borrowing from the words of Nicholas AJA in Longman Distillers Ltd v Drop Inn Group.

public policy is an imprecise and elusive concept”.   It is said to reflect the mores and fundamental assumptions of the community.   It is the general sense of justice of the community, the boni mores, manifested in the public opinion.”

Nicholas AJA went further to say at 813 H-J:-

“When a Court is asked to hold that something is against public policy, it does well to remind itself of the much-quoted passage in the judgment of Burrough J in Richardson v Mellish (1824) 2 Bing 294 (130 ER 2294 at 303):-

‘I, for one, protest……against arguing too strongly upon public policy; it is a very unruly horse, and when once you get astride it you never know where it will carry you.   It may lead you from the sound law.   It is never argued at all but when other points fail’.”

Practice at the CCMA

[28]      Turning to this case, where there is an uncontroverted statement by the [labour broker], quoted in paragraph 18 above, that the disputes at[CCMA] are frequently settled by stating in a settlement agreement a different reason for the termination of the employment relationship, I find it difficult to accept that such agreement runs counter the business ethics of that section of the community.

To put it in other words, I find it difficult to accept that such Settlement Agreement is “clearly inimical to the interests of the community” or runs “counter to social or economic expedience”.   Bearing in mind that the power to declare contracts contrary to public policy should be exercised sparingly and only in the clearest of cases, in my view, the case at hand cannot be described as such.

[29]      The other dimension to this issue arises from the argument by Mr Shene that even if the Settlement Agreement was illegal, the maxim in pari delicto potior est conditio defendentis triggers in.  

Par delictum rule

Mr Mullins in support of this argument contended that the applicant was knowingly a party to an agreement that she claims contains incorrect information.   He states that there has been performance in that the applicant has been paid three months salary which she accepted.   He submitted that in the circumstances the applicant is prevented from having a Settlement Agreement set aside by virtue of the par delictum rule.   Having been a party to what she believes to have been a fraudulent transaction, the applicant cannot now complain that she is unhappy with the outcome.   So he argued.   He cited in support of his argument Jajbhay v Cassim.    

Mr Mullins further stated that the applicant denies in her replying affidavit that the terms she now complains of were included at her instance.   He submitted that those terms are solely for the applicant’s benefit and on a preponderance of probabilities it is she, and not the first and second respondents, who would have insisted on them forming part of the Settlement Agreement.   He further pointed out that the applicant has waited for more than a year to take any action.   He contended that the applicant must have realised at the time, or very shortly thereafter that the terms of the Settlement Agreement may cause her difficulties in the future, yet she has waited an unreasonably long time before taking any action.

Stratford CJ in Jajbhay v Cassim supra, remarked at 544 as follows on the par delictum rule:-

“the rule expressed in the maxim in pari delicto potior conditio defendentis is not one that can or ought to be applied in all cases, but  it is subject to exceptions which in each case must be found to exist only by regard to the principle of public policy.”  He went further to say “public policy should properly take into account the doing of simple justice between man and man.”

Simple justice

In the light of the contentions by Mr Mullins on the conduct of the applicant in relation to the Settlement Agreement, as mentioned above, with which I fully agree, I am not persuaded that the instant case is one to which an exception to the par delictum rule can be found to exist having regard to the principle of public policy.   Simply put, I am of the view that simple justice between man and man does not demand such exception to be found to exist in this matter.   Consequently this leg in the argument for the applicant has to fall.