The SA Post Office (Sapo) adopted an “opportunistic” and “cynical” approach when, while claiming to be concerned about the rights of social grant beneficiaries and its customers, it infringed the rights of its employees and sought, through “legal sophistry”, to place itself above the law.
This was the view of the Supreme Court of Appeal (SCA) when, in a judgment handed down on 30 December last year, it ordered Sapo to pay contributions to the Post Office Retirement Fund.
In September last year, Sapo reached a settlement with trade union Solidarity in terms of which it agreed to pay over contributions of some R600 million owed to Medipos Medical Scheme.
The Post Office Retirement Fund approached the Gauteng High Court in July 2020 after Sapo failed to pay employer and employee contributions of R40m a month for May and June 2020. Arrear contributions have been mounting since then.
The High Court dismissed the application, with costs.
It said the lockdown had profoundly affected Sapo’s activities. Forcing Sapo to pay the contributions would endanger “key constitutional rights and values”, because Sapo might not be able to provide universal and affordable postal service and pay social grants on behalf of the SA Social Security Agency (Sassa).
It said a court “… cannot make an order the implementation of which would not come to fruition”; and that Sapo had made it clear that “even if it can be compelled to pay the amounts claimed by the fund by a court order, it will be impossible for it to pay”.
Social security of Sapo’s employees
The SCA said the High Court “committed an irregularity” by holding that while fund rule 3.3 ordinarily obliged Sapo to pay contributions monthly to the fund, the extraordinary times of the lockdown required a different result.
The High Court ignored both the plain meaning of the rule and the fundamental rights of Sapo’s employees to social security and to fair labour practices.
It also ignored the founding constitutional value of the rule of law. The purpose of the obligation was to enable Sapo to fulfil its employees’ fundamental rights to social security in terms of section 27(1)(c) of the Constitution.
The SCA said Sapo’s obligations to Sassa beneficiaries could not have a bearing on its failure to pay contributions to the fund. Social grants are paid out of Sassa’s budget, and Sassa pays Sapo for providing this service.
The SCA said there was no provision in the Constitution that empowers Sapo to decide which of its creditors it wishes to pay and which not, in order to prioritise its spending.
“If such an extraordinary power existed, its effect would be to undermine the rule of law by placing organs of state above the law in respect of the payment of their contractual and statutory obligations.”
Sapo’s financial woes pre-date the pandemic
The SCA rejected Sapo’s argument that the payment of contributions had become impossible as a result of the Covid-19 pandemic, with the result that supervening impossibility of performance extinguished its obligation to pay contributions.
The evidence indicated that Sapo’s financial woes pre-dated the pandemic and were caused by managerial failures. Covid-19 had only made its financial problems worse. In July 2019, for instance, more than six months before the onset of the pandemic, it incurred a loss of R34m. To this extent, its financial difficulties were foreseeable and avoidable, with the fault lying squarely with the management of Sapo.
Second, Sapo chose to pay certain of its creditors and not others, including the fund. It could have decided not to pay another creditor and, instead, to pay the fund. Performance was thus not objectively impossible.
Third, the impossibility of performance was relative and not absolute, as the law requires. This means that if a person undertakes to do something that, generally speaking, can be done, but which that particular person is unable to do, because, for instance, of a deterioration in their financial position, they remain liable on their undertaking. Impossibility of performance does not excuse them from liability because the impossibility is relative to them and not absolute.
The SCA set aside the High Court’s order and ordered Sapo to pay the contributions to the fund. It also ordered Sapo to pay the costs of the High Court and the appeal court proceedings.