Pretorius and Another v Transport Pension Fund and Another [2018] 7 BLLR 633 (CC); (2018) 39 ILJ 1937 (CC)
Section 23 of the Bill of Rights refers to "everyone" having the right to fair labour practices and its purpose is to protect persons from unfair labour practices that originated in an employer-employee relationship. Labour law jurisprudence under the LRA recognises that unfair labour practices under the Act may extend beyond the termination of employment. There are strong policy grounds not to restrict the protection of section 23 to only those who have contracts of employment.
Facts:
The applicants, Mr Pretorius and Mr Kwapa, are acting in a certified class action on behalf of approximately 60 000 similarly situated former employees of Transnet who were now pensioner-members of the first two respondents, the Transport Pension Fund and the Transnet Second Defined Benefit Fund (collectively "the Funds") in a certified class action. The applicants brought three claims in the High Court.
The first claim related to a "1989 promise" allegedly made during the run-up to the establishment of Transnet. The applicants claim that they were promised that the practice of annually increasing members' pensions by at least 70% of the rate of inflation, in addition to the annual 2% increase to which they were contractually entitled, would continue. They contended that there had been a breach of contract by the Funds since 2003 because the Funds' annual increase to the members' pensions was significantly lower than what they contend had been promised by Transnet's and the Funds' predecessors. The applicants also argued that the failure to keep the promise constituted unlawful state action and an unfair labour practice. They asked the High Court to declare that the Funds' failure to keep this "promise" was unlawful.
The second claim concerned Transnet's obligations to maintain the Funds in sound financial condition, paying into them if necessary. That obligation was said to have been inherited by Transnet from its previous transportation bodies. The applicants argued that Transnet did not fulfil its obligation and asked that Transnet be declared indebted to the Funds for the necessary payments.
The third claim related to an alleged "unlawful donation" made by one of the Funds to Transnet. The fund is said to have donated 40% of its members' surplus to Transnet. The applicants sought to have the donation declared unlawful and invalid and for the Fund to be reimbursed by Transnet.
The respondents raised various exceptions to these in the High Court.
The High Court dismissed some of the exceptions raised by the respondents but upheld three exceptions to the cause of action. The first upheld exception concerned the claim for "unlawful state action" on the basis that the claim ought to have been brought under the Promotion of Administrative Justice Act. The second was that the breach of contract claim was "vague and embarrassing" as the applicants' amended particulars of claim lacked the particularity necessary to sustain the cause of action based on breach of contract. The last exception related to the cause of action based on an unfair labour practice which was partially upheld on the grounds that it lacked particularity with respect to averring that an employment relationship had existed between the applicants and the Fund. The High Court, however, rejected the argument that such claim could only have been brought under the Labour Relations Act.
The Supreme Court of Appeal refused leave to appeal against the orders upholding exceptions, and refused conditional leave to cross-appeal against the orders rejecting exceptions. It did so on the grounds that there were no prospects of success, nor any other compelling reason to hear the appeals.
In the Constitutional Court, the applicants sought leave to appeal against the High Court order upholding the exceptions. They argued that the effect of the High Court order was to deprive them of the opportunity to pursue two constitutional causes of action in the class action proceedings as those causes of action were effectively dismissed on exception.
In a unanimous judgment written by Froneman J, the Constitutional Court granted leave to appeal and upheld the appeal against the order of the High Court upholding the exceptions. The Constitutional Court replaced the High Courts' main orders with an order that the exceptions raised by the respondents are dismissed with costs. The cost order against the applicants in the SCA was replaced with a cost order in their favour in the Constitutional Court.
The second and third applications were conditional applications filed by the Funds and Transnet respectively for leave to cross-appeal against the High Court's order. The applications concerned exceptions raised by the respondents in the High Court which were not upheld. Those applications were only to be considered in the event that the Constitutional Court granted the applicants' leave to appeal.
The Constitutional Court did grant the applicants' leave to appeal and the conditional applications were considered and dismissed with costs. The dismissal of the conditional applications does not preclude the respondents from raising substantive defences to the applicants' claims to be determined at the trial in the High Court.
Extract from the judgment:
Froneman J:
[9] The applicants pleaded that the failure to keep the promise was unlawful on three grounds: breach of contract, unlawful state action and an unfair labour practice. Exception was taken to the first as being vague and embarrassing and to the other two as disclosing no cause of action and being bad in law.
[10] In the High Court, Legodi J upheld the exception to the contractual claim as vague and embarrassing because it did not contain sufficient particularity regarding: who would decide the rate of the pension increase; when the decision would be made and implemented; who would benefit from the promise; the period that the promise would endure; and, if the promise was in perpetuity, whether it was capable of termination. With regard to the unlawful state action claim, he held that the state action complained of could only be administrative action and should thus have been challenged under the provisions of the Promotion of Administrative Justice Act7 (PAJA). The exception to the unfair labour practice claim was upheld on the ground that the particulars of claim failed to aver the existence of a labour relationship between the applicants and the respondents.
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The unfair labour practice claim
[46] The third cause of action pleaded as flowing from the 1989 promise was that the failure to pay constituted an unfair labour practice in breach of section 23(1) of the Constitution.46 The High Court upheld the exception to this leg of the respondents' application on the ground that it must be pleaded that there was and is an employer-employee relationship between the applicants and the respondents and that they failed to do so.
[47] That appears to be unnecessarily restrictive. The section refers to "everyone" having the right and its purpose is to protect persons from unfair labour practices that originated in an employer-employee relationship. Labour law jurisprudence under the Labour Relations Act (LRA) recognises that unfair labour practices under the Act may extend beyond the termination of employment.
[48] Contemporary labour trends highlight the need to take a broad view of fair labour practice rights in section 23(1). Fewer and fewer people are in formal employment; fewer of those in formal employment have union backing and protection. More and more people find themselves in the "twilight zone" of employment as supposed "independent contractors" in time-based employment subject to faceless multinational companies who may operate from a web presence. In short, the LRA tabulated the fair labour practice rights of only those enjoying the benefit of formal employment - but not otherwise. Though the facts of this case do not involve these considerations, they provide a compelling basis not to restrict the protection of section 23 to only those who have contracts of employment.
[49] Two other objections against this part of the claim were raised in argument. The one was that direct reliance on the Constitution rather than on the provisions of the LRA relating to unfair labour practices undermined the principle of subsidiarity. The other was that the new pension funds never employed any of the applicants.
[50] The application of the principle of subsidiarity in relation to the LRA and other labour legislation is complex. The Constitution in some instances, like with the rights of access to information and just administrative action require national legislation to give effect to these rights. The same requirement is not made in section 23. The LRA itself, however, sets that as one of its objects. Nevertheless there are other pieces of labour legislation that also cover aspects of potential unfair labour practices.
[51] The principle of subsidiarity was recently considered by this Court in My Vote Counts. 54 Neither the majority nor minority judgments in that case are directly on point because the issue involved a provision of the Constitution that required Parliament to act. Section 23(1) lacks that requirement. A decision by Parliament not to cover the entire field would not fail to fulfil a duty in the Constitution. A fair labour practice claimant may be entitled to rely on the Constitution directly without having to show that the LRA (or patchwork of other statutes) is deficient.
[52] The majority judgment in My Vote Counts expressly disavowed that subsidiarity was a hard rule: "We should not be understood to suggest that the principle of constitutional subsidiarity applies as a hard and fast rule. There are decisions in which this Court has said that the principle may not apply. This Court is yet to develop the principle to a point where the inner and outer contours of its reach are clearly delineated. It is not necessary to do that in this case."
[53] This indicates that as in Fetal Assessment Centre this is a matter where the "factual situation is complex and the legal position uncertain". Here there is more than enough legal uncertainty to send the unfair labour practice claim to trial.
[54] If it is accepted that in this matter the principle of subsidiarity does not apply, at least at the exception stage, there is no reason to find that a claim against the new pension funds is facially implausible. A claim like this, invoking the fundamental right to fair labour practices under section 23, has not been litigated before. We should not hold - on exception - that the constitutional guarantee against unfair labour practices does not extend to the actions of pension funds taken in concert with an employer.
[55] The appeal against the upholding of the exception to the unfair labour practice claim must also succeed.