THE ‘CALDERBANK OFFER’ FINDS ITS WAY INTO SOUTH AFRICAN LAW

In many instances, the litigation process of bringing a matter to its finality has become a tedious and lengthy one, lasting for anything from three to four years, if not longer.

And the cost implications of such a prolonged process has become exorbitant not only for the unsuccessful party who will ultimately pay the party and party costs (in personal injury claims usually being the Defendant) but also for the successful party, in respect of the attorney and client costs, which are deducted from the settlement amount (usually to the Plaintiff).

Rule 34 of the High Court Rules which deals with offers of settlement states the following:

(1) In any action in which a sum of money is claimed, either alone or with any other relief, the defendant may at any time unconditionally or without prejudice make a written offer to settle the plaintiff’s claim. Such offer shall be signed either by the defendant himself or by his attorney if the latter has been authorised thereto in writing.

(10) No offer or tender in terms of this rule made without prejudice shall be disclosed to the court at any time before judgment has been given. No reference to such offer or tender shall appear on any file in the office of the registrar containing the papers in the said case.

(11) The fact that an offer or tender referred to in this rule has been made may be brought to the notice of the court after judgment has been given as being relevant to the question of costs.

Rule 34 of the High Rules of Court as it currently stands is specifically designed as a tool that the Defendant may use to place the Plaintiff at risk for paying costs. If the Defendant makes an offer and a lower amount is awarded at trial, the Defendant may then seek a cost order against the Plaintiff.

Although no express mention is made of the Plaintiff being able to make a without prejudice offer, it also does not expressly or by necessary implication mention that if a Plaintiff makes a tender, that same cannot be relied upon when considering the issue of costs.

In the United Kingdom and Australia, it has become common practice for a Plaintiff to make an offer to the Defendant, thereby putting the Defendant at risk of paying “indemnity costs”. In personal injury litigation in South Africa it has become more common that, once the Plaintiff is in possession of all its medico-legal reports and once the claim has been completely quantified, the Plaintiff then addresses a “without prejudice” settlement proposal to the Defendant, in an attempt to reach an early settlement of the matter which results in costs being minimised.

A Calderbank offer is an offer to settle a dispute, putting the other side on notice that, if the dispute goes before any court and the outcome is less favourable to the other side compared to the Calderbank Offer being made, then the side making the offer is entitled to more of their costs being recovered.
This is because, if the other side had accepted the offer, then they would have been better off and neither side would have had to spend money taking the matter to court.

Most of these offers made by the Plaintiff often either go unnoticed or a significant period of time passes before any response is received from the Defendant, if at all. The case of Calderbank v Calderbank [1975] 3 ALL ER 333 (CA) being cited in the judgement of D and Another v MEC for Health and Social Development, Western Cape Provincial Government (2747/10) [2017] ZAWCHC 17; 2017(5) SA 134 (WCC) could bring about new developments in South African law where the Plaintiff’s offer of settlement amount was less than the amount granted by a judge once judgment is handed down.

The Calderbank case was an important English Court of Appeal decision – a divorce case where the husband (Defendant) was said to have caused an unreasonable delay in the legal proceedings and he was then ordered to pay his wife’s (Plaintiff) legal costs as a result thereof.

The Calderbank case was then challenged in the United Kingdom, but eventually became practice that “Calderbank Offers” can be made. The practice was subsequently written into the United Kingdom and Australia’s Rules of Court.

The highlighted principle of the Calderbank case is that the Plaintiff can place the Defendant on risk by making an offer of settlement.  If such an offer is ignored by the Defendant and the Plaintiff is awarded more when the matter proceeds to trial and judgment is handed down, the Plaintiff could disclose to the Judge that a “Calderbank offer” was made. If the offer met the requirements of a “Calderbank offer”, and if ordered by the Judge, the Defendant may be held liable to pay the Plaintiff’s attorney and own client costs over and above the party and party costs for which the Defendant will already be liable for.

In the Case of D and Another V MEC for Health and Social Development, Western Cape Provincial Government, Judge Trollip stated the following “I have thus come to the conclusion that in principle “Calderbank offers” are admissible in relation to costs and can be disclosed to the court for that purpose after judgment has been given.”

Judge Trollip went on further to mention that in considering whether a punitive cost order must be made against the Defendant the court must consider among other factors, whether the Defendant behaved unreasonably, and thus put the Plaintiff to unnecessary expense by not accepting the offer or making a reasonable counter-offer.

Although the Plaintiff in the case of D and Another V MEC for Health and Social Development, Western Cape Provincial Government was not successful in being granted a punitive cost order against the Defendant, it was a breakthrough of the “Calderbank offers “being fused into South African Law.  A defendant should therefore be more cautious when considering offers made by a Plaintiff, so as to ensure that the Defendant is not at risk of paying indemnity or attorney and own client costs (over and above the party and party costs), where the Defendant forces the Plaintiff into protracted or unnecessary litigation, and a judge ultimately awards the Plaintiff the same or more in compensation than what the Plaintiff previously offered to accept as a settlement.

Calderbank offers” will therefore be a useful tool that Plaintiffs can utilise in litigation to ensure that Defendants seriously consider offers made by Plaintiffs and will result in earlier settlements and costs limitations.

by Shaina Kim Steyn | Associate

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DISPUTE RESOLUTION IN SOUTH AFRICA

The much-anticipated International Arbitration Bill, which was initially approved by Cabinet in April 2016, was again approved in March 2017 after errors in the bill were discovered and corrected. The Act came into operation as the International Arbitration Act 15 of 2017 on 20 December 2017 and incorporates the Model Law of the United Nations Commission on International Trade Law (UNCITRAL) as the cornerstone of the international arbitration regime in South Africa, providing much-needed reform in South Africa’s arbitration regulatory framework. Previously, the Arbitration Act, a 51-year-old statute, regulated both domestic and international arbitrations. For additional information on dispute resolution in South Africa, click here.

The Law Reviews has published the 10th edition of the Dispute Resolution Review, which is available in print, as an e-book and online here. The South Africa Chapter is authored by Adams & Adams Partners, Grégor Wolter, Jac Marais, Andrew Molver; and Senior Associate, Renée Nienaber.

The Dispute Resolution Review provides an indispensable overview of the civil court systems of 37 jurisdictions. It offers a guide to those who are faced with disputes that frequently cross international boundaries. As is often the way in law, difficult and complex problems can be solved in a number of ways, and this edition demonstrates that there are many different ways to organise and operate a legal system successfully. At the same time, common problems often submit to common solutions, and the curious practitioner is likely to discover that many of the solutions adopted abroad are not so different to those closer to home.

To read the full South Africa chapter, CLICK HERE.

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Reproduced with permission from Law Business Research Ltd. Published March 2018.

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THE PRINCIPLE OF REMOTENESS OF DAMAGES

The personal injury team of Adams & Adams has found itself assessing the principle of remoteness of damages on a consistent basis in the last few months with its increasing personal injury and insurance-based actions.

The principle of remoteness of damages is often assessed at the pleadings stage as it is essential that the Plaintiff only includes damages that are casually linked to its action against a delictual wrongdoer. In this regard the test in our law has been held to be a flexible one based on the principles of fairness, reasonableness and justice as is evident from the cases of International Shipping Co (Pty) Ltd v Bentley 1990 (1) SA 680 (A) at 701A-F; Smit v Abrahams 1994 (4) SA 1 (A) at 15E-G and OK Bazaars (1929) Ltd v Standard Bank of South Africa Ltd 2002 (3) SA 688 (SCA) at para 23.

In the case of S v Mokgethi 1990 (1) SA 32 (A) at 40I-41D (and supported in the case of Fourway Haulage v SA National Roads Agency (653/07) [2008] ZASCA 134) it was held that the flexible test should not be viewed as one that supersedes the principles of foreseeability, proximity or direct consequence, as has been used in the past, but rather that the aforesaid principles are not to be applied dogmatically and should be applied in a flexible manner so as to avoid a result which is so unfair or unjust that it is regarded as untenable.

If the direct consequence principle leads to a result which would be acceptable to most right-minded people, then that is accepted as not being too remote. In a matter involving a ten year old boy (“the minor”) we had to determine whether or not a claim for caregiving on behalf of his mother could be included in his claim for damages or whether it would be regarded as too remote. In this matter, the minor sustained severe injuries, inter alia, multiple broken bones in his left foot and ankle and crushed right foot resulting in 22 surgeries as a result of a non-compliant wall collapsing on his lower legs. As a result of the incident, his mother is no longer able to work and is required to avail herself to assist her minor son. If we apply the direct consequence principle, the cost of caregiving is a direct cause of the incident and the injuries sustained by the minor and are therefore not too remote to be included in the minor’s claim for damages against the delictual wrongdoer.  The same outcome would be established if we applied the proximity principle or the principles of reasonable, fairness and justice.

It is imperative to note that as a attractive as the concepts of fairness and justice may be in courts, law reform commissions and amongst legislators, it is of very little use (if at all) to legal practitioners and trial judges who are required to apply the law to concrete facts arising from real life activities (Perre v Apand (Pty) Ltd 1999 198 CLR 180 (HC of A) para 80) and it is therefore the reason that the flexible test to the principle of remoteness of damages is applied in our law.

by Jessica-Jade Faint | Candidate Attorney

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COMPETITION TRIBUNAL ENDS MASSMART EXCLUSIVE LEASE SAGA

The Massmart exclusive lease saga, which commenced with Massmart’s complaint to the Competition Commission (“the Commission”) in October 2014, has finally come to an end.

The Competition Tribunal (“the Tribunal”) yesterday upheld exceptions brought by Pick ‘n Pay, Shoprite Checkers and Spar (“the Excipients”) and dismissed Massmart’s complaint that the Excipients’ exclusive lease agreements with various shopping malls were anti-competitive and falls foul of the prohibition on restrictive vertical practices contained in Section 5(1) of the Competition Act 89 of 1998 (“the Act”).

Massmart initially self-referred the complaint to the Tribunal in 2015, following the Commission’s non-referral of Massmart’s 2014 complaint – the Commission put forth its decision to institute an enquiry into the grocery retail sector as the reason for the non-referral. A number of exceptions were raised to this first referral and Massmart was granted an opportunity to amend. Massmart’s amended referral was again the subject of a number of exceptions which were heard by the Tribunal on the 19th of September 2017 and resulted in the complaint finally being dismissed yesterday.

The common thread running through all the exceptions raised was the fact that Massmart’s complaint failed to make out a cause of action in respect of Section 5(1) of the Act – not only did Massmart fail to define the markets with sufficient particularity, it also failed to sufficiently demonstrate an anti-competitive effect. In this regard, the Tribunal stated that the “fact that Game is excluded from malls does not equate to an exclusion of competition if another rival is present…Mere proof of exclusion of a particular competitor does not suffice.

The Tribunal’s approach to exclusive lease agreements as demonstrated in this case, can be summed up by its statement that a “complainant needs to allege more than the existence of a contractual restraint.

by Misha van Niekerk | Associate

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SANDTON & CAPE TOWN LAW SEMINAR SERIES HIGHLIGHTS LATEST INTELLECTUAL PROPERTY AND COMMERCIAL LAW DEVELOPMENTS

The annual legal Crammer events presented by leading intellectual property and commercial law firm, Adams & Adams, took place recently in Johannesburg and Cape Town, respectively – bringing together in-house legal representatives, entrepreneurs and executive decision-makers for a morning of intensive panel discussions and presentations. In focusing on trade mark, copyright, patent, commercial and property law developments, legal professionals and industry guest speakers reviewed interesting updates and legislative developments on subjects ranging from innovation funding, copyright and brand development, to data protection and a number of significant IP and commercial case law studies.

In various discussions – mainly centred on trade marks, patents and commercial law – speakers brought attention to topical matters affecting organisations in a South African context. An enthralling keynote address was delivered by historian and storyteller, Michael Charton, who, in the spirit of the event, was able to cram hundreds of years of South African history into a thought-provoking and insightful story presentation, “My Father’s Coat.”

The firm’s biggest and boldest Crammer® event to date, subjects ranging from tech innovation funding; to due diligence in IP; data protection and policy in light of happenings such as the “GuptaLeaks”; rules around community schemes; trade mark judgments by the SCA; and a number of significant IP cases drew a great deal of interest. There was even time to squeeze in a fascinating chat about the now-infamous ‘monkey selfie’ by Cape Town Partners, Charné Le Roux and Phil Pla.

“These kinds of innovative events and seminars are an important part of our firm’s efforts in actively engaging with both clients and lawmakers so that we are able to pro-actively promote our customers’ interests,” commented firm Chairman, Gérard du Plessis. “In another innovative move, and as part of our annual Africa IP Network Week in September, Adams & Adams co-hosted the inaugural Africa Patent Examination Summit with the European Patent Office (EPO), where registrars, officials and examiners from twenty African jurisdictions, as well as regional bodies such as WIPO, ARIPO and OAPI met to discuss the various approaches to patent examination available and to gain insights into developments in this regard around the world.”

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DISPUTE RESOLUTION REVIEW | SOUTH AFRICA

The Dispute Resolution Review provides an indispensable overview of the civil court systems of 40 jurisdictions. It offers a guide to those who are faced with disputes that frequently cross international boundaries. This ninth edition follows the pattern of previous editions where leading practitioners in each jurisdiction set out an easily accessible guide to the key aspects of each jurisdiction’s dispute resolution rules and practice, and developments over the past 12 months. The South African Chapter has been authored by Jac Marais, Andrew Molver and Renée Nienaber from Adams & Adams.

Key developments in South Africa over the past year followed global trends and included:

  • Clarification of the effect of a pending application for a restraining order and the scope of issues capable of referral to court in terms of Section 20(1) of the Arbitration Act;
  • Further progress towards more active judicial management of the dispute resolution process;
  • Approval of the International Arbitration Bill; and
  • The Community Schemes Ombud Services Act coming into effect.

To read the full South African submission, CLICK HERE, or for the full Dispute Resolution Review publication, CLICK HERE.

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JAC MARAIS

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THE COHABITATION INTERPRETATION

When asked at a recent Comic Con about the future living arrangements of their characters, Amy and Sheldon on the hit TV series The Big Bang Theory, Jim Parsons (Sheldon) quipped “Right now, there is such a new world of living together and what that means, and working that out.” 21st Century relationships come in all shapes, forms and sizes, but what are the risks of being in a long-term relationship that is not formally recognised as a lawful marriage?

“At the outset it is important to stress that there is no such thing as a common law marriage or spouse”, says Shani van Niekerk, an Associate at Adams & Adams. “The amount of time that a couple lives together does not translate into a default marriage. We’ve had clients ask us about a “six-month rule”. It’s a total myth unfortunately.”

The consequence is that at the dissolution of the relationship, or in the event that a cohabitant dies without leaving a Will, partners are left very vulnerable and without the legislative protection which married individuals enjoy. For example, when a cohabitant dies without leaving a valid will, the partner has no right to inherit under the Intestate Succession Act. A cohabitant also cannot rely on the Maintenance of Surviving Spouses Act to secure maintenance should a partner pass away. There’s no legal obligation on either person to maintain the other – meaning no enforceable right to claim maintenance from each other.

So what can you do to protect your interests in a cohabitation relationship? Shani suggests taking a leaf out of Sheldon’s script. “The only way to be protected in our law is to enter into a cohabitation agreement. Such an agreement is in the best interests of both parties in a relationship and clarifies the expectations of the partners.”

A cohabitation agreement regulates the rights and duties between partners, and could almost be compared to an ante-nuptial contract in a civil marriage. The agreement can provide for the division and distribution of assets if the relationship ends, the rights and obligations towards each other with regards to maintenance, and parties’ obligations and respective financial contributions towards the joint home. A cohabitation agreement will be legally binding as long as it contains no provisions that are immoral or illegal, however it is important to note that a cohabitation agreement will not be enforceable insofar as third parties are concerned.

In a long-term relationship where marriage is not considered or possible, a cohabitation agreement is the smart way to live together without the fear of the future. Chatting to an experienced family law attorney and getting a cohabitation agreements drawn up may help you avoid the financial risks and potential trauma of a possible break-up.

Contact Adams & Adams for help in setting up your agreement, telephone 012 432 6000 or email:

Shani van Niekerk (Associate) | Shani.vanNiekerk@AdamsAdams.com

David Scheepers (Partner) | David.Scheepers@AdamsAdams.com

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POWER TO THE PUBLIC | AN INTERVIEW WITH ANDREW MOLVER

On 31 March 2016, the Constitutional Court of South Africa ruled unanimously in favour of the applicants in the matter regarding Nkandla, President Jacob Zuma’s homestead, as well as the powers of the Public Protector. Andrew Molver, Partner at Adams & Adams, offers his insights into this pivotal ruling.

Q: As attorneys of record for the Public Protector, what role does Adams & Adams play in the functions of her office?
A: The Office of the Public Protector is equipped with a highly skilled staff complement that manages any legal matters it’s faced with. Generally, we’re only instructed upon the anticipation or institution of formal proceedings. In that regard, our primary role has become one of defending the reports issued, findings made and remedial action taken by the Public Protector.

Q: From a personal point of view, what has it been like to work with the former Public Protector, Adv Thuli Madonsela?
A:
Working with the Public Protector has been by far the greatest highlight of my career. One of the greatest lessons I’ve learnt from her is how she remained determined to ascertain a proper definition of the Public Protector’s powers throughout the Nkandla debacle. She remained focused on helping the “Gogo Dlaminis” of the world, as she calls them, when she could quite easily have become consumed and distracted by the highly politicised and sensationalised nature of the ordeal. Even in those trying circumstances, she was steadfast in her commitment to the helpless and to leaving a legacy of empowerment to her successors by upholding the powers of her office.

Q: The powers of the Public Protector were challenged well before the Nkandla saga. How did this start?
A: The question of whether or not remedial action taken by the Public Protector is binding first arose in relation to the remedial action taken by the Public Protector in 2014 regarding the SABC and then acting-COO, Hlaudi Motsoeneng. The SABC and related parties argued that they were not bound to give effect to the Public Protector’s remedial action taken and, as they had procured an opinion from an independent law firm which cleared Motsoeneng of any wrongdoing, concluded that the findings of the Public Protector were incorrect.
In proceedings initiated by the DA as a result of the SABC’s conduct, we argued that remedial action taken by the Public Protector is legally binding and places an obligation on the subject of the remedial action to give effect to it unless and until it is reviewed and set aside by a court of law. Regrettably, the High Court did not find favour with this argument and took the view that remedial action by the Public Protector is not binding.
Fortunately, in its judgment of October 2015 in the SABC case, the Supreme Court of Appeal (SCA) set the record straight and found that remedial action taken by the Public Protector is indeed valid and binding until reviewed and set aside by a court of law and that, absent any such review, a subject of such remedial action is obliged to implement it, and cannot disregard it.

Q: Why was the Public Protector never a main applicant in either the Nkandla case or in matters beforehand? How did this help the Public Protector’s standing?
A: The SABC matter was launched by the DA, which cited the Public Protector as a respondent in the matter. The so-called Nkandla applications were launched by the EFF and the DA respectively. While the DA cited the Public Protector as a respondent, the EFF omitted to do so, which required us to apply to the Constitutional Court to intervene as a respondent in the EFF’s application.
We found it preferable for the Public Protector to be in the position of a respondent as this enabled her to abide the relief sought, as opposed to having to seek it directly, as an applicant would. This was more in keeping with the politically neutral position occupied by the Office of the Public Protector and allowed the Public Protector to avoid being drawn into the political war being waged through the litigation. In addition, by not being preoccupied with seeking the enforcement of her remedial action, the Public Protector was able to focus her submissions on obtaining a proper interpretation of her powers, which would significantly outlast any particular remedial action that formed the focus of either the SABC or Nkandla matters.

Q: Your team referred to the “Oudekraal” matter in written submissions. What is this and why was it relevant?
A: “Oudekraal” refers to the well-established principle (deriving from the matter of Oudekraal Estates (Pty) Ltd v City of Cape Town) that until a decision of an administrative nature is set aside by a court in proceedings for judicial review, it exists in fact and has legal consequences that cannot be overlooked. In its judgment in the SABC matter, the SCA found this principle to apply to reports issued and remedial action taken by the Public Protector, even if the Public Protector isn’t a typical public functionary or body, as the underlying principles arguably find greater application in her context.

Q: The Nkandla matter found that the Public Protector was correct in her assessments that the President was required to pay for a portion of the upgrades that took place at his homestead. More importantly, it confirmed the powers of the Public Protector as a Chapter 9 institution. What are those powers?
A: In essence, the Public Protector’s direct constitutional powers enable her to investigate irregular conduct in state affairs or public administration, to report on that conduct and to take appropriate action.

Q: What ideologies or approaches differentiate Adams & Adams from other commercial law firms?
A:
We try to approach our admin and constitutional matters by retaining a strong focus on why the matter is important to the client. This isn’t always obvious and often various considerations are involved. For example, in the SABC and Nkandla matters, it would have been tempting to enter the fray by siding with one of the political parties involved and attempting to enforce the remedial action in question. But what made the matters important to the Public Protector went beyond that. As mentioned, a proper definition of the powers of her office held far greater value. Apart from the objective to define the Public Protector’s powers, it was also important that she did not compromise the independence of her office thereafter. We also have a firm commitment to litigating in a manner which we believe upholds the Constitution and ensures that good law is made in its interpretation and application.


ABOUT ADAMS ON AFRICA | ISSUE 1

This article is part of a new quarterly digital publication, Adams on Africa. The publication aims to provide you with the necessary information and updates on developments in business and the law in Africa. We welcome your feedback. Articles in this issue:

A NEW CONVERSATION ON AFRICA

AFRICA REGIONAL REPORT

CHAPTER 9: THE POWERS OF THE PUBLIC PROTECTOR

DISSECTING THE NEW IP CONSULTATIVE FRAMEWORK

HOW OIL PRICES IMPACT AFRICA

ADDLED BY THE INTERWEBS

AFRICA’S LEADING LADIES

BANKING ON THE MAPUTO CORRIDOR

TOURISM – A MARKET OF OPPORTUNITIES

PHILANTHROPY’S PURPLE RAIN

PURE WATER ON TAP

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CAN AN EMPLOYER RECOVER DAMAGES FROM EMPLOYEES?

In an employer-employee relationship it often happens that an employee violates his employment agreement in a manner that results in the employer suffering damages. For example, an employee performs his duties in a grossly negligent manner and the employer suffers a financial loss or an employee decides to quit without giving the agreed upon notice. If such a situation occurs, the employer is always left wondering whether it can proceed against the employee, and if so, how to proceed and whether, it can recover damages from the employee in question.

In South Africa, it is generally believed that South African labour legislation is overprotective of employees and offers little to no protection to employers. This is evident from the myriad labour statutes that protect the rights of employees in South Africa and the high rate of success of cases brought against employers. The misconception as to the protection offered to employers is well demonstrated in the case of Rand Water v Johan Stoop (JA 78/11) where counsel for the defendant argued that the Basic Conditions of Employment Act (BCEA), 1997 was designed to only permit claims by employees against their employers and not vice versa.

However, the court in the above matter held as follow:

“there is simply no warrant for interpreting the BCEA in a partisan manner. The BCEA benefits both employers and employees….The BCEA was designed to promote the right to fair labour practice which is available to everyone employees and employers alike. If the employee can claim damages for breach, so too can the employer, to suggest otherwise is to argue that this section is unconstitutional.”

Section 77(3) of the BCEA stipulates that ‘the Labour Court has concurrent jurisdiction with the Civil Courts to hear and determine any matter concerning a contract of employment, irrespective of whether any basic condition of employment constitutes a term of that contract.’

This provision of the BCEA clearly applies both ways and permits the employer to sue and recover from an employee damages caused by the employee, if the wrongful conduct constitute a breach of the contract of employment. Obviously, the normal principles of common law applicable to claims for damages will apply to such a claim.

For example, an employer will have to prove that it actually suffered damages or loss as a result of the breach of contract. The courts have wide powers in terms of the BCEA and may make any order considered reasonable on any matter concerning a contract of employment, including an award of damages. For example, the courts have upheld claims for payment of damages resulting from the repudiation of an employment contract by an employee, and a failure by an employee to work his full notice.

However, a claim for damages may not always be the simplest and most effective route for an employer to take and there are less acrimonious courses of action to pursue. For example, an employer may make salary deductions from an employee’s remuneration, to recover loss or damages only if such damages occurred in the course of employment and was due to the fault of the employee. For such a deduction to be in compliance with the BCEA, the employer must comply with a number of requirements, such as, the employer must follow a fair procedure and give the employee a reasonable opportunity to show why the deductions should not be made, the total amount of the debt must not exceed the actual amount of the loss or damage, and the total deductions from the employee’s remuneration must not exceed one-quarter of the employee’s remuneration in monetary terms.

Unfortunately, these formalities cannot be seen as mere guidelines and have to be complied with strictly. This was confirmed by the court in Shenaaz Padayachee v Interpark Books (D243-12) where the court stated that the BCEA confers a right on the employer to make deductions from an employee’s remuneration in respect of damages or loss caused by the employee but stipulates that this cannot be done unless the prescribed formalities are complied with. These prescribed formalities include an internal hearing to determine the liability of the employee and a written agreement by the employee to reimburse the employer in respect of the damages.

If the employee does not admit liability, and consequently, does not agree to the salary deductions the employer can proceed with court action and claim contractual damages. In this instance, the employer will rely on section 77 (3) of the BCEA as set out above and establish a case of breach of the relevant employment contract. The normal principles of common law applicable to claims for damages will apply to such a claim.

In conclusion, employers should not labour under the misconception that its employees are immune to civil action. In fact, the above principles clearly demonstrate that an employer can recover damages from an employee under Section 77(3) of the BCEA if the breach by the employee of his contract of employment resulted in damages or financial loss to the employer. It has also been established that an employer can recover damages by making deductions from an employee’s salary, subject, the formalities prescribed by the BCEA.

by Thami Khoza | Candidate Attorney

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