SASLAW GAUTENG
CHAPTER SEMINAR
24 JULY 2012
Presenter:
Anton Myburgh SC
Title:
Herholdt v Nedbank
Is the Sidumo test in decline?
Herholdt v Nedbank
Who would have thought that after •
15 years and 3000 review judgments,
•
5 years since Sidumo, and
•
3 of its review judgments being overturned by
the SCA,
the LAC would now propose the scrapping of
reviews in favour of appeals?
Herholdt v Nedbank
How did the LAC arrive at this?
•
‘Commissioners who get it wrong on the facts will
usually commit the concomitant irregularity of not
taking full or proper account of material evidence, and
where they err on the law, they will fall short in not
having properly applied their minds to the issues and
thereby have denied the parties a fair trial. The
inexorable truth is that wrong decisions are rarely
reasonable. If that is true, the hypothetical reward for
limiting intervention to a reasonableness or rationality
review is dubious.’
Herholdt v Nedbank
A trilogy of LAC judgments
• Gaga v Angloplats
• Afrox Healthcare v CCMA
• Herholdt v Nedbank
Herholdt v Nedbank
Key findings
•
•
•
•
•
•
•
Section 145 grounds and the Sidumo test can be relied on
2 broad types of reviews: result-based and process-related
2 types of unreasonableness: substantive and processrelated
Substantive unreasonableness: a wrong decision will
rarely be reasonable
A
latent
gross
irregularity
=
process-related
unreasonableness
A process-related error usually leads to substantive
unreasonableness
A process-related review can succeed without assailing
the result - here the test is the potential for prejudice
Herholdt v Nedbank
2 key findings in Sidumo
• Firstly para 110 (Navsa AJ):
o
‘Is
the
decision
reached
by
the
commissioner one that a reasonable
decision-maker could not reach?’
Herholdt v Nedbank
2 key findings in Sidumo
• Secondly para 258 (Ngcobo J):
o
Where a commissioner fails to have regard to
material facts, the arbitration proceedings cannot …
be said to be fair because the commissioner fails to
perform his or her mandate. In so doing … the
commissioner’s action prevents the aggrieved party
from having its case fully and fairly determined. This
constitutes a gross irregularity … . And the ensuing
award falls to be set aside not because the result is
wrong but because the commissioner has
committed a gross irregularity.’
Herholdt v Nedbank
Relevant background
• Herholdt was a successful financial broker
• Appointed as a beneficiary in a dying client’s will £92 000
• Failed to disclose this in terms of a conflict of interest
policy
• Dismissed for dishonesty
• Found not guilty and reinstated by a CCMA
commissioner
• Nedbank brought a process-related review
• The LC (per Gush J) granted the review and found the
dismissal fair
Herholdt v Nedbank
(1) The LAC’s findings on the review test
•
2 types of unreasonableness:
o ‘An award will be reviewable if it suffers from
dialectical [process-related] unreasonableness or is
substantively unreasonable in its outcome.’
Herholdt v Nedbank
• Substantive unreasonableness:
o The test is the Sidumo test
o Fidelity Cash Management (Zondo JP)
endorsed
o The decision will pass muster if it is
‘reasonably supportable’
o Allows for ‘a measure of legitimate diversity
and deviance from the correct or perfect
decision’
o But ‘wrong decisions are rarely reasonable’
Herholdt v Nedbank
• Process-related unreasonableness:
o ‘Where a commissioner fails to have regard
to material facts, this will constitute a gross
irregularity in the conduct of the arbitration
proceedings … . Proper consideration of all
relevant and material facts and issues is
indispensable to a reasonable decision and
if a decision-maker fails to take account of a
relevant factor which he are she is bound to
consider, the resulting decision will not be
reasonable in the dialectical sense.’
Herholdt v Nedbank
• The LAC endorsed Southern Sun (Van
Niekerk J):
o ‘If a commissioner fails to take material
evidence into account, or has regard to
evidence that is irrelevant … and a party is
likely to be prejudiced as a consequence, the
commissioner’s decision is liable to be set
aside regardless of the result of the
proceedings or whether … that result is
nonetheless capable of justification.’
Herholdt v Nedbank
• Herholdt’s argument in summary:
o ‘All that is required, he contended, is to
ascertain whether … the commissioner
considered the issue and came to a
conclusion on the facts, supported by the
evidence, which was sufficiently reasonable to
justify the decision. Put in another way, the
target on review is the result or outcome
rather than the process, and if that is
sustainable as reasonable, no more should be
expected.’
Herholdt v Nedbank
• The LAC’s response:
o ‘I am unable to agree with those
submissions principally because … the
weight of authority favours greater scrutiny
and section 145(2) … expressly permits the
review of awards on the grounds of [a
gross] irregularity.’
o Ngcobo J’s gross irregularity dictum in
Sidumo was then quoted with approval.
Herholdt v Nedbank
• Further in relation
irregularities:
to
latent
gross
o ‘There is no requirement that the commissioner
must have deprived the aggrieved party of a fair
trial by misconstruing the whole nature of the
enquiry. The threshold for interference is lower
than that; it being sufficient that the commissioner
has failed to apply his mind to certain of the
material facts or issues before him, with such
having potential for prejudice and the possibility
that the result may have been different.’
Herholdt v Nedbank
• Unreasonableness interlinked:
o ‘Dialectical and substantive reasonableness
are intrinsically inter-linked and … latent
process irregularities carry the inherent risk of
causing
an
unreasonable
substantive
outcome.’
Herholdt v Nedbank
(2) The LAC’s findings on the award
•
•
•
‘While it is correct that the commissioner gave these
facts and issues some thought and consideration, it
cannot be said that she applied her mind to them
properly.’
‘The commissioner’s finding to the contrary is …
more than a plausible intimation that she failed to
apply her mind properly to the facts and the relevant
issues.’
‘The
commissioner’s
conclusion
is
…
an
unmistakable indication that she failed to take
account of relevant considerations and misapplied her
mind to the facts.’
Herholdt v Nedbank
•
The LAC’s conclusion:
o ‘The range and extent of latent irregularities in the
award leave no doubt that there has not been a
fair trial of the issues. The commissioner not only
ignored material evidence in relation to the
deliberate conduct of the appellant but
fundamentally misconstrued the conflict of
interests policy of the respondent with the
consequence that her method in determining the
issues was latently irregular and in the final
analysis led concurrently to a result that was not
only incorrect but substantively unreasonable.’
Herholdt v Nedbank
Gaga v Angloplats:
•
‘If a commissioner does not take into account a
factor that he is bound to take into account, his
or her decision invariably will be unreasonable.
The flaw in process alone will usually be
sufficient to set aside the award on the grounds
of it being a latent gross irregularity, permitting
a review in terms of section 145.’
Herholdt v Nedbank
• The LAC on the LC’s decision:
o ‘The Labour Court did not err in its
findings that the commissioner ignored or
discounted relevant evidence, failed to
apply her mind to a number of material
issues and as a consequence committed
gross irregularities in the conduct of the
arbitration.’
Herholdt v Nedbank
(3) The LAC’s obiter comments
•
Defunct explanatory memorandum:
o
‘The absence of an appeal from an arbitrator’s award
speeds up the process and frees it from the legalism
that accompanies appeal proceedings. It is tempting
to provide for appeals because dismissal is a very
serious matter … . However, this temptation must be
resisted as appeals lead to records, lengthy
proceedings, lawyers, legalism, inordinate delays and
high costs. Appeals have a negative impact on
reinstatement as a remedy, they undermine the basic
purpose of the legislation and they make the system
too expensive for individuals and small business.’
Herholdt v Nedbank
• Legislative intervention:
o ‘I would therefore tentatively venture that
the time has come for the social partners
and the legislature to think again. Justice
for all concerned might be better served
were the relief against awards to take the
form of an appeal rather than a review.
The protection granted by a narrower
basis for intervention is, in all likelihood,
fanciful – a chimera.’
Herholdt v Nedbank
Key findings
•
•
•
•
•
•
•
Section 145 grounds and the Sidumo test can be relied on
2 broad types of reviews: result-based and process-related
2 types of unreasonableness: substantive and processrelated
Substantive unreasonableness: a wrong decision will
rarely be reasonable
A
latent
gross
irregularity
=
process-related
unreasonableness
A process-related error usually leads to substantive
unreasonableness
A process-related review can succeed without assailing
the result - here the test is the potential for prejudice
Herholdt v Nedbank
STRAW POLL
WILL THE SCA OVERTURN HERHOLDT v NEDBANK?
Herholdt v Nedbank
Citations:
o
o
o
o
o
o
Herholdt v Nedbank (unreported)
Sidumo v Rustenburg Platinum Mines [2007] 12
BLLR 1097 (CC)
Gaga v Anglo Platinum [2012] 3 BLLR 285 (LAC)
Afrox Healthcare v CCMA (2012) 33 ILJ 1381
(LAC)
Southern Sun Hotel Interests v CCMA [2009] 11
BLLR 1128 (LC)
Fidelity Cash Management Service v CCMA [2008]
3 BLLR 197 (LAC)