Factors to be considered when making costs awards in labour matters

September 1st, 2018
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By Deon Mouton

The Labour Relations Act 66 of 1995 (LRA) states that a commissioner may make a costs order in accordance with the requirements of law and fairness, in a manner conforming with the rules made by the Commission for Conciliation, Mediation and Arbitration (CCMA) and having taken into account any relevant Code of Good Practice issued by National Economic Development and Labour Council and guidelines issued by the CCMA (s 138(10) of the LRA).

The CCMA Guidelines: Misconduct Arbitration (CCMA Guidelines) item 142, under ‘Costs awards’ confirms that an arbitrator must exercise its discretion to award costs in terms of the requirements of law and fairness.

Rule 39(1) of the CCMA Rules echo the LRA and set out factors, which the arbitrator should consider when making a costs award (s 138(10) of the LRA).

The LRA also states that the Labour Court (LC) may make a costs order according to the requirements of the law and fairness and s 162(2) of the LRA sets out the factors to be considered when deciding whether or not to grant a costs order.

Withdrawals and postponements

The LC in Van den Berg v SA Police Service (2005) 26 ILJ 1717 (LC) at 1721-1722 held that r 13 of the rules of the LC allows a party to withdraw a matter and, when costs are not tendered, then the other party may apply for costs in terms of r 11. The rule does not require the withdrawing party to tender the costs. Costs are governed by the LRA and there is no general principal that the withdrawing party, as the losing litigant, is liable for costs of the proceedings. Generally, the LC may order the payment of costs, according to the requirements of law and fairness, having regard to the conduct of the parties in proceeding with or defending the matter. The general rule that costs should follow the result is a relevant factor to be considered. However, it may yield where fairness requires it. Proper consideration should be given to the facts and circumstances of a particular matter. Sight should not be lost of the special nature of dispute resolution in the employment context. Parties should not be discouraged when approaching the court especially individual employees. Courts should be slow in making costs orders where a genuine dispute exists and the reasons for approaching the LC were reasonable.

Order of costs in the Appellate Division and the Labour Court

In the early nineties, the Appellate Division held in National Union of Mineworkers v East Rand Gold Mine and Uranium Co Ltd 1992 (1) SA 700 (A) at 738F that the legislature decided that both the law and fairness must be taken into account in exercising a discretion with regard to costs. The Appellate Division referred with approval to a judgment in the LC in Chamber of Mines of SA v Council of Mining Unions (1990) 11 ILJ 52 (IC) at p 73E – 80J) and set out the following considerations, which may be relevant in relation to costs:

  • The provision that ‘the requirements of the law and fairness’ are to be taken into account is consistent with the role of the LC, as one in which both law and fairness are to be applied.
  • The general rule that in the absence of special circumstances costs follows the event is a relevant consideration. However, it will yield where the considerations of fairness require it.
  • Parties, and particularly individual employees, should not be discouraged from approaching the LC in such circumstances. Orders for costs may have such a result and consideration should be given to avoiding it especially where there is a genuine dispute and the approach to the court was not unreasonable. With regard to unfair labour practices, the following passage from the judgment in the Chamber of Mines case (at para 77G – I) was quoted in National Union of Mineworkers:

‘In this regard public policy demands that the industrial court takes into account considerations such as the fact that justice may be denied to parties (especially individual applicant employees) who cannot afford to run the risk of having to pay the other side’s costs. The industrial court should be easily accessible to litigants who suffer the effects of unfair labour practices, after all, every man or woman has the right to bring his or her complaints or alleged wrongs before the court and should not be penalised unnecessarily even if the litigant is misguided in bringing his or her application for relief, provided the litigant is bona fide.’

  • The parties before the LC will frequently have an on-going relationship that will survive after the dispute has been resolved by the court. A costs order, especially where the dispute has been a bona fide one, may damage that relationship and thereby detrimentally effect industrial peace and the conciliation process.
  • The conduct of the respective parties is obviously relevant especially when considerations of fairness are concerned.

The Appellate Division in National Union of Mineworkers stated that these considerations were in no way intended to be a numerus clausus. A very wide discretion is given to courts with regard to the power they exercise and no less in respect of orders for costs. Such a discretion must be exercised with proper regard to all of the facts and circumstances of each case.

Labour Courts

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) the general approach to costs of ‘the requirements of law and fairness’ in the LC was restated. ‘The requirements of law and fairness are on equal footing, and none is secondary to the other’ (Vermaak at para 10). The Labour Appeal Court (LAC) mentioned that the default position is no costs orders in the LC (Vermaak at para 14). When making costs orders the court may take into account, among others, the conduct of the parties in proceeding with the matter before the court and their conduct during the proceedings (Vermaak at para 10).

The LAC referred to Member of the Executive Council for Finance, KwaZulu-Natal and Another v Dorkin NO and Another (2008) 29 ILJ 1707 (LAC) at para 19 where the following was explained:

‘[T]he norm ought to be that cost orders are not made unless those requirements [of law and fairness] are met. In making decisions on cost orders this court should seek to strike a fair balance between, on the one hand, not unduly discouraging workers, employers, unions and employers’ organisations from approaching the Labour Court and this court to have their disputes dealt with, and, on the other, allowing those parties to bring to the Labour Court and this court frivolous cases that should not be brought to court. That is a balance that is not always easy to strike but, if the court is to err, it should err on the side of not discouraging parties to approach these courts with their disputes.’

Order of costs in arbitrations

When exercising the discretion to grant a costs order in law and fairness, the arbitrator must take the following factors of r 39 of the Rules for the Conduct of Proceedings before the CCMA into account –

‘a) the measure of success that the parties achieved;

  1. b) considerations of fairness that weigh in favour of or against granting a cost order;
  2. c) any with prejudice offers that were made with a view to settling the dispute;
  3. d) whether a party or the person who represented that party in the arbitration proceedings acted in a frivolous and vexatious manner –
  4. i) by proceeding with or defending the dispute in the arbitration proceedings; or
  5. ii) in its conduct during the arbitration proceedings;
  6. e) the effect that a costs order may have on a continued employment relationship;
  7. f) any agreement concluded between the parties to the arbitration concerning the basis on which costs should be awarded;
  8. g) the importance of the issues raised during the arbitration to the parties as well as to the labour community at large; [and]
  9. h) any other relevant factor.’

Constitutional Court

In the recent Constitutional Court (CC) decision of Zungu v Premier of the Province of KwaZulu-Natal and Others [2018] 4 BLLR 323 (CC) the court pointed out again that the correct approach in labour matters in terms of the LRA is that the losing party is not, as a norm, ordered to pay the successful party’s costs. The court held that the LC and LAC erred in not following and applying the principle in labour matters as set out in Dorkin. ‘The courts did not exercise their discretion judicially when mulcting the applicant with costs,’ the CC said (see paras 23 to 26).

It is proposed that the following considerations should be observed before seeking a costs order in labour matters governed by the LRA (CCMA Case Law Monitor 2ed (2010) at 11005-11006):

  • The general rule of our law that in the absence of special circumstances, costs follow the event is a relevant consideration. This general rule will yield where considerations of fairness require it.
  • Individual employees, in particular, should not be discouraged from approaching dispute resolution institutions created by the LRA.
  • A bona fide litigant should not be penalised even if the litigant is misguided in bringing an application for relief.
  • Where the parties will have an ongoing relationship after the dispute has been resolved, especially with a bona fide dispute, may damage the employment relationship and thereby affecting labour peace and conciliation.
  • The conduct of the parties is relevant especially when considerations of fairness are concerned.
  • Whether the issues raised are of fundamental importance, not only to the parties but to the labour community at large.
  • A very wide discretion is allowed by the LRA and discretion must be exercised judicially with regard to all the facts and circumstances of each case.
  • If the court is to err, it should err on the side of not discouraging parties from approaching these labour dispute resolution bodies with their disputes.

Conclusion

The LRA does not provide for a costs order to follow the result. Labour courts have a wide discretion on whether or not to make a costs order in favour of a successful party. Litigants should be made aware of this by their legal representatives.

Deon Mouton BProc (UFS) LLM (NWU) is a non-practising attorney and Employee Relations Manager at SABS in Pretoria.

This article was first published in De Rebus in 2018 (Sept) DR 27.

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