Costs do not follow the result in labour matters

December 1st, 2019
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In Long v South African Breweries (Pty) Ltd and Others [2019] 6 BLLR 515 (CC) the employee, following his suspension, was dismissed by his previous employer, South
African Breweries (Pty) Ltd (SAB), after he was found to have been derelict in his duties as district manager, grossly negligent in his management of SABS’s fleet of vehicles and guilty of bringing the name of the employer into disrepute. Aggrieved by his suspension and eventual dismissal, the employee found success in the Commission for Conciliation, Mediation and Arbitration (CCMA) after the arbitrator found that his suspension amounted to an unfair labour practice and his dismissal was substantively unfair. SAB took both arbitration awards on review to the Labour Court (LC). The LC set aside both arbitration awards and ordered the employee to settle the legal expenditure incurred by SAB in both matters. The LC made the adverse costs order against the employee on the basis that both parties had argued that costs follow the result. When the matter came before the Labour Appeal Court (LAC), the LAC was tasked with determining whether it was correct for a party to incur an adverse costs order merely on the basis that he was unsuccessful.

The law

Section 162 of the Labour Relations Act 66 of 1995 (LRA) reads as follows:

‘(1) The Labour Court may make an order for the payment of costs, according to the requirements of the law and fairness.

(2) When deciding whether or not to order the payment of costs, the Labour Court may take into account –

(a) whether the matter referred to the Court ought to have been referred to arbitration in terms of this Act and, if so, the extra costs incurred in referring the matter to the Court; and

(b) the conduct of the parties –

(i) in proceeding with or defending the matter before the Court; and

(ii) during the proceedings before the Court.’

Section 162 of the LRA sets out the considerations, which a court is required to take into account before deciding whether or not to make an order as to costs. This can be summarised as follows:

  • whether making the order would be in accordance with the requirements of the law and fairness (in Vermaak v MEC for Local Government and Traditional Affairs, North West Province and Others (LAC) (unreported case no JA15/2014, 10-1-2017) (Makgoka AJA), it was held at para 10 that no hierarchy exists between the requirements of law and fairness, and thus, both requirements are on an equal footing);
  • whether the applicant ought to have referred the matter to arbitration, as opposed to the court and, if so, the cost implications resulting from the incorrect referral;
  • the conduct of the applicant in prosecuting its case and the conduct of the respondent in defending the matter; and
  • the conduct of the litigants during the ventilation of their dispute before the court.

The principles set out in Dorkin

In Member of the Executive Council for Finance, KwaZulu-Natal and Another v Dorkin and Another (2008) 29 ILJ 1707 (LAC), the LAC was tasked with deciding whether or not an adverse costs order should be made. The LAC found that it was not bound by the principle that costs follow the result. Instead, the LAC held that cost orders ought not to be made unless such an order would be in accordance with the requirements of the law and fairness. The LAC held that – in labour matters – a balancing act should be performed by the court, whereby a fair balance should be struck between, on the one hand, not unduly discouraging prospective litigants from approaching the court seeking relief in employment disputes and, on the other hand, permitting prospective litigants from crowding the court roll with frivolous cases, which ought not be brought before the court. The LAC held that, in the event that a court errs in performing the balancing act, the court should err on the side of not unduly discouraging prospective litigants from approaching the court in pursuit of appropriate relief. In so doing, the LAC held that it plays a role in dissuading employees from participating in industrial action, instead of approaching arbitral bodies or the courts for appropriate relief (para 19).

The findings in the Zungu case

The Constitutional Court (CC) in Zungu v Premier of the Province of KwaZulu-Natal and Others 2018 (6) BCLR 686 (CC) reiterated that the general principle that costs follow the result does not apply in employment matters. The CC relied on its findings in Zungu, wherein it confirmed the principles relating to costs, which were set out in the Dorkin matter, and held that it is incorrect for a court to follow the principle that costs follow the result. In addition, it was held in Zungu that a court is conferred with a discretion when determining an appropriate costs award and that such discretion is required to be exercised judicially. In circumstances where a court a quo errs in exercising its discretion judicially, the LAC or the CC, as the case may be, is permitted to interfere with the decision to mulct a party with an adverse costs order.

The findings of the CC in Long

The CC held that the LC erred in making an adverse costs order against the employee, which was premised on the principle that costs follow the result. The CC held that the LC failed to take into account the principle of fairness and the consideration of the disputants’ conduct when exercising its discretion. Consequently, the LC failed to exercise its discretion judicially. After inviting the parties to present contentions, the CC dismissed the employer’s bald submission that the employee’s seniority and conduct warranted the imposition of an adverse costs order. In the absence of reasons to support the employer’s contention, the CC held that there was no basis for making a costs order as both parties achieved a proportion of success at the conclusion of proceedings.

Conclusion

In employment matters, costs do not follow the result. A court is conferred with a discretion and is required to take into account the considerations set out in s 162 of the LRA when exercising it. In addition, the court is required to perform a balancing act, whereby it strikes a fair balance between, on the one hand, not unduly discouraging prospective litigants in the employment sector from approaching the court in pursuit of relief and, on the other hand, permitting prospective litigants from bringing frivolous cases before the court. Finally, a court must ensure that it exercises its discretion judicially before mulcting a party with an adverse costs order.

Samuel Mariens LLB (UWC) is a candidate legal practitioner at Herold Gie Attorneys in Cape Town.

This article was first published in De Rebus in 2019 (Dec) DR 12.