National Union of Mineworkers and Others v Eskom Holdings SOC (JS257/15) [2018] ZALCJHB 170 (8 May 2018)

Principle:

Where an employer cannot show that a mistake in calculating an increase was reasonable and where the other party made no representation inducing the mistake, the employer will be liable for salary adjustments represented to the employees.

Facts:

The General Manager at Kulisile Power Station, signed letters dated 10 May 2012 under the head "Salary Review - Salary Adjustment" which were handed over to employees. The letters read almost the same except for the difference in the salary amounts.

On 22 May 2012 Eskom issued payslips to the employees. The amounts appearing on the payslips differed from those as contained in the letters.

Aggrieved by the salary discrepancy they lodged a grievance with the Human Resources Department of Eskom. They contended that they had accepted the original offers as contained in the letters dated 10 May 2012; considered the offer by Eskom; and accepted this as a binding contract between the parties which Eskom has breached. The employees also contended that Eskom had unilaterally changed the terms and conditions of their employment. They did not regard the letters of 10 May 2012 as an error because they were signed by the general manager who should have picked up the error but did not.

On 30 July 2012 a grievance session was held. The General Manager's explanation in that session was to the effect that the salary letters were written and quality checked by the Human Resources Shared Services Unit staff who are not part of Kusile Power Station and the error occurred between the two groups. He further explained that the fact that letters had been issued to the employees with incorrect figures was brought to his attention before the payment of salaries and the filing of the grievance by the employees.

The representative trade union referred a claim to the Labour Court in terms of s 77(3) of the BCEA. The nature of the claim was an allegation of breach of contract by Eskom. The issue for determination was whether or not there was a breach of contract by Eskom or whether a bona fide mistake was made on 10 May 2012.

Eskom raised two defences. First, Eskom claimed that the employees failed to accept the offers made on 10 May 2012; second, if the offers were accepted, the letters contained reasonable and justifiable errors which were of no force and effect.The argument presented on behalf of the employees that the adjustment of salaries involves vigorous quality checks by various departments and that Eskom should have picked up the so-called mistake prior to issuing the letters dated 10 May 2012 was accepted by the court as sound.

The court said there was no set method of accepting or rejecting the offer of the salary adjustment. The fact that the letters dated 10 May 2012 were signed by an Executive Member, Mr Masango, gave credence to the assertion that due process was followed.

The court ordered Eskom to comply with the terms and conditions of the contract entered into on 10 May 2012 with the applicants;to pay arrear salaries in adjustment of the difference that the applicants received for the period 01 May 2012 to date and to pay costs of suit on a party and party scale.

Extract from the judgment:

Mamosebo AJ

[19]   The Appellate Division has clarified the relationship between unilateral mistake and quasi-mutual assent in George v Fairmead (Pty) Ltd where Fagan CJ said:

"When can an error be said to be Justus for the purpose of entitling a man to repudiate his apparent consent to a contractual term? As I read the decisions, our Courts, in applying the test, have taken into account the fact that there is another party involved and have considered his position. They have, in effect, said: Has the first party - the one who is trying to resile - been to blame in the sense that by his conduct he has led the other party, as a reasonable man, to believe that he was binding himself? (vide Logan v Beit 1890 (7) SC 197; I. Pieters& Company v Solomon, 1911 AD 121 esp at pp. 130, 137; Van Ryn Wine and Spirit Company v Chandos Bar, 1928 TPD 417,esp. at pp. 422, 423, 424; Hodgson Bros., v South African Railways 1928 CPD257 at p. 261). If his mistake is due to a misrepresentation, whether innocent or fraudulent, by the other party, then, of course, it is the second party who is to blame and the first party is not bound."

[20]   National & Overseas Distributors Corporation (Pty) Ltd v Potato Board concerned an attempt by the Board to escape from a contract which resulted from its manager mistakenly writing to inform the company that its tender had been accepted when he should have written to one of the other tenderers. Schreiner JA expanded on what he pronounced earlier in the George v Fairmead(supra) as follows:

"If the respondent had been a natural person who had accepted a tender according to its terms, there is no doubt that a contract would have been made when the acceptance was communicated to the tenderer, as by posting it. It would not be possible for such a natural person, if he repudiated, to escape liability by proving that he had posted the wrong letter or the like. That follows from the generally objective approach to the creation of contracts which our law follows. (See Van Ryn Wine and Spirit Co v Chandos Bar, 1928 TPD 417 at pp. 424, 425; Irvin and Johnson (S.A) Ltd v Kaplan, 1940 CPD 647 at pp. 650, 651; and the cases therein cited.) No other approach would be consistent with fairness or practicality. Our law allows a party to set up his own mistake in certain circumstances in order to escape liability under a contract into which he has entered. But where the other party has not made any misrepresentation and has not appreciated at the time of acceptance that his offer was being accepted under a misapprehension, the scope for a defence of unilateral mistake is very narrow, if it exists at all. At least the mistake (error) would have to be reasonable (Justus) and it would have to be pleaded."

[21]   The applicants were under the impression that Mr Masango was offering them a market-related ad hoc salary adjustment which was equivalent to the minimum salaries earned by persons within their specific field and positions. There was no misapprehension. They did not make any misrepresentations to him. They could not have known at the time of receipt of those letters that there was a mistake. They also did not cause that mistake. In my view, Eskom cannot escape from the contract because the alleged mistake is due to their fault of not thoroughly verifying the correctness of the contents of the letters by not only the person who typed them but its entire HR Division. Clearly, Eskom's personnel failed to carry out their duties and their fault cannot be placed at the doorstep of the applicants. It is inconceivable that Mr Masango did not even bother to read the letters before appending his signature thereon. In my view, Eskom cannot claim that the error is Justus. I am not satisfied that Eskom has discharged the onus to show that its mistake was reasonable. I am therefore not persuaded by Eskom's defence of mistake. It is my view that the applicants stand to succeed in their claim.

[22]   Counsel for the applicants, Ms Jackson, made submissions relying on the Turquand Rule which was not pleaded by the applicants. In view of my conclusion above it is not necessary to deal with that argument.

[23]   I am now left with the question of costs. In my view, it will be in accordance with the requirements of the law and fairness that Eskom to pay the costs of suit.

[24]   I accordingly make the following order:

Order
  1. Eskom Holdings (SOC) Limited, the respondent, is ordered to comply with the terms and conditions of the contract entered into on 10 May 2012 with the applicants;
  2. The respondent is to pay arrear salaries in adjustment of the difference that the applicants received for the period 01 May 2012 to date.
  3. That the respondent is to pay costs of suit on a party and party scale.