This blog was co-authored by Tristan Marot, Candidate Attorney.

The Labour Appeal Court has recently restated the law on common mistake as it applies to having a settlement agreement set aside in Murray and Roberts (Pty) Ltd v The Commission for Conciliation, Mediation and Arbitration & Others.

The matter stemmed from a dispute between the Murray and Roberts and trade union AMCU (Association of Mineworkers and Construction Union) referred to the CCMA in which AMCU sought “to be granted organisational rights” as it related to workers of Murray and Roberts at Kusile Power Station. On the day of hearing Murray and Roberts raised the point that “for AMCU to become entitled to the organisational rights it sought, it was legally required to become a member of the MEIBC, and in order for it to become such a member it was required to demonstrate to the MEIBC [Metals Engineering Industries Bargaining Council] that it had no less than 5000 members in the industry in which that bargaining council operated.” This was due to a collective bargaining agreement which was already in place with the MEIBC.

Without any points being decided upon, the parties entered into a settlement agreement in which AMCU undertook to withdraw the dispute and instead submit its audited membership numbers to the MEIBC in order to secure organisational rights through that method.

Just under a year later the parties were back at the CCMA with the same dispute. Murray and Roberts argued that the matter was res judicata (already decided). The CCMA dismissed the matter on a preliminary point of jurisdiction. AMCU then appealed the matter to the Labour Court.

At the Labour Court, AMCU applied to have the settlement agreement set aside on the grounds of unilateral, alternatively common, mistake that it was based on a wrong assumption of the law relating to threshold agreements. The court relying on Concor Projects (Pty) Ltd t/a Concor Opencast Mining v Commission for Conciliation Mediation and Arbitration and Others held that since the agreement was on the evidence founded upon that common mistake “which mistake is impliedly treated as a condition which must exist in order to bring the agreement into operation, [the agreement must] be set aside formally if necessary, or treated as set aside and as invalid without any process or proceedings to do so”.

Murray and Roberts  then appealed this ruling to the Labour Appeals Court, arguing that while there may have been a common mistake, this was not “impliedly treated as a condition which must exist in order to bring the agreement into operation”.

Referring to Van Reenen Steel (Pty) Ltd v Smith NO and Transnet v Rubenstein, the Labour Appeal Court held that the principle on common mistake is more correctly formulated as requiring three elements to be proven:

  • the contract was based on a common assumption;
  • the assumption was incorrect; and
  • the subject matter of the assumption was vital to the transaction – in other words, had both parties been aware of the true position the transaction would not have been entered into.

The Labour Appeal Court dismissed the appeal finding that AMCU had satisfied the three elements. The settlement agreement should remain set aside as ordered by the lower court.