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[2010] ZAECPEHC 46
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Royal Albatros (Pty) Ltd and Another v Dekra Automotive (Pty) Ltd and Another (1669/2010) [2010] ZAECPEHC 46 (15 July 2010)
Reportable
IN THE HIGH COURT OF SOUTH AFRICA
(EASTERN CAPE, PORT ELIZABETH)
Case No: 1669/2010
Date
Heard: 1/07/2010
Date
Delivered: 15/07/2010
In the matter between
ROYAL
ALBATROSS (PTY) LTD
First
Applicant
KIRT
HERMAN
Second
Applicant
and
DEKRA
AUTOMOTIVE (PTY) LTD
First Respondent
DEKRA
AUTOMOTIVE HOLDINGS (PTY) LTD
Second
Respondent
JUDGMENT
REVELAS J
[1] The
applicants approached this court in urgent proceedings, seeking a
declarator to the effect that the dismissal of the second
applicant
on 3 June 2010 by the first respondent was unlawful and invalid, and
further, an order reinstating the second applicant in his
former
position as area manager of the first respondent. The applicants
expressly disavowed any reliance upon the provisions of
the Labour
Relations Act 66 of 1995 (“the LRA”), and submitted that
they only seek to enforce their common law contractual
rights and
constitutionally entrenched rights to “fair labour practices”
guaranteed by section 23(1) of the Bill of
Rights in the
Constitution.
[2] The
employment relationship between the second applicant and fi
rst
respondent arose from an agreement of purchase and sale of the first
applicant’s business to the first respondent as a
going
concern. The first applicant conducted the business of roadworthy
testing, technical examinations and multipoint checks
in respect of
many types of vehicles. It also provided other motor industry
related services from selected locations in,
inter
alia
East London and Port Elizabeth. The second applicant was its
director.
[3] On 6 October
2009, the parties concluded the aforementioned agreement in terms
whereof the first applicant’s business
would be sold to the
first respondent, who already owned forty testing stations in the
country. The agreement was signed by the
second applicant who
concluded the agreement on behalf of the first applicant.
[4] The terms of
the agreement most relevant to the present application were the
following:
(a) The purchase
price of R9 million was payable to the first applicant in three
distinct payment phases. The first payment would
be upon the
successful transfer of certain licenses to the first respondent. The
first payment, would be R5 million. This first
phase was completed.
(b) The second
phase was the payment of R2 million if targets relating to the nett
profit of the business before taxation, and its
turnover were
achieved by 30 April 2010. This payment was also conditional upon
the successful transfer of certain licences and
warrantees.
(c)
If
the targets were not achieved, this payment (of R2 million) would be
carried over for determination in the third phase, in October
2010,
when the last R2 million was due. In this month, the first
respondent would pay R2 million or R4 million also, depending
on the
achievement of certain targets relating to nett profit and turnover.
[5] T
he
targets at certain future dates were certainly material terms and
preconditions for payment, since they account for almost half
of the
actual purchase price. To this end, clause 4.1.13 of the agreement
provided for the second applicant’s continued
management of the
business as area manager for a period of twelve months (which would
come to an end in October 2010), or until
the expiry of the said
period (also October 2010) at which, if certain targets were
achieved, R4 million was payable to the first
applicant.
[6] Given the
events which followed and which brought the parties to court, the
conditions relating to the second applicant’s
appointment as
manager should be quoted in full:
“
4.1
The
rights and obligations of the parties under this agreement are
subject to, and conditional upon the fulfilment of all of the
following suspensive conditions by no later than 30 September 2009. …
“
4.1.13
The
employment of Kirt Herman as the area manager – DEKRA
Automotive Eastern Cape at a cost to company (CTC) package of R480
000 per annum for a period of 12 months, in accordance with a proper
employment
contract
,
which will clearly outline an authority mandate including the scope
of his authority and obligations within DEKRA Eastern Cape,
which may
change from time to time as agreed by both parties; …”
(emphasis added)
[7]
No
additional formal contract of employment (or ‘proper employment
contact’) was ever concluded between the parties,
but the
second applicant continued to work for the first respondent at a
salary and all went well until a few months later, and
in particular,
the period before the end of April 2010, when the second payment by
the first respondent became due and owing.
[8] The second payment was not made
on 30 April 2010. The first respondent explained that this payment
would be based on sales
figures up to and inclusive of 30 April 2010,
having been collated and audited before payment could be made. The
condition that
certain licences and warrantees be transferred was
fees also not complied with. The second applicant said he believed
that the
first respondent had cash flow problems (a fact which was
vehemently denied by the first respondent and seemed improbable on
these
papers considering its many other testing stations) and took
matters in his own hands.
[9] On 10 May
2010 the first applicant transferred R1 182 570.60 from the
first respondent’s bank account into the
first applicant’s
bank account and subsequently, on 18 May 2010 he transferred
R1,130,000,00 out of the latter account into
an account of a company
called Dandyshelf CC, controlled by himself. The second applicant
had no authority to transfer the money
as he did. Technically it
constituted theft. The first respondent addressed the second
applicant’s fears of non-payment
by requesting him to transfer
the money back into the first respondent’s account and offered
to retransfer it back immediately
and proffered a breakdown as to how
the remainder would be paid to the first applicant.
[10] This act of
misconduct was not the only cause of the first respondent’s
displeasure with the second applicant as manager.
According to the
first respondent, the second applicant also spent R9 740.00 of
its money on his private
vehicle without authorisation and granted to himself, five
unauthorized loans amounting to R80 128.18. He allegedly also
instructed staff members to deposit all cheques received into the
first applicant’s bank account, contradicting a standing
instruction and certain clauses of the warranties set out in Annexure
“A” of the agreement of sale. It was further
the first
respondent’s case that the employees of the business were
informed by the second applicant that they were not employed
by the
first respondent (as they
de
facto
were, as a result of it having purchased the business as a going
concern), but by the first applicant (the seller). The second
applicant allegedly also told the employees that the first respondent
was insolvent. All the aforesaid, the first respondent saw
as
breaches of the agreement of sale, in particular clause 22 thereof
which requires the parties to the agreement to act in the
utmost good
faith with each other.
[11] On 26 May
2010 the second applicant was suspended by the first respondent
pending the outcome of the disciplinary enquiry to
be held into the
allegations set out above, which were embodied in a charge sheet.
The second applicant contended that he was
not an employee, and the
chairperson, in the first part of the hearing, held on 2 June 2010,
made a ruling that the second applicant
was indeed the first
respondent’s employee, as born out by the agreement of sale and
the law. The second part of the disciplinary
hearing was held on the
3
rd
of June 2010, in the absence of the second applicant who was only
notified of the hearing the previous evening that the hearing
would
be held at 09h00 the following morning.
[12] The second
applicant was dismissed on that day. The chairperson of the hearing,
had immediately prior to the hearing, represented
a Mrs Yolande
Barnard, the first respondent’s Relationship Manager in Rosslyn
(Gauteng) presently acting as area manager
since the second
applicants suspension, in civil proceedings in the Magistrate’s
Court against the second applicant. At
her behest, an interim
interdict was obtained in the Magistrate’s Court in Port
Elizabeth, prohibiting the second applicant
from coming within 150
metres of the six premises, formerly under control of the first
applicant.
[13] The
applicant’s challenge to his dismissal and the process followed
to facilitate it, was firstly, that the chairperson,
Mr Bosch, was
bias, as a result of his direct involvement in the interdict sought
by Mrs Barnard, who was also the complainant
in the disciplinary
hearing. Mr Bosch was also the first respondent’s in-house
labour consultant. Secondly, the second
applicant argued that he was
not afforded sufficient time to prepare for the disciplinary hearing
due to the short notice period
given in a fax he does not recall
receiving. Thirdly, it was argued by the applicants that the
mediation/ arbitration clause (clause
17) in the agreement of sale,
in terms of which all disputes between partied arising from the
agreement would be mediated, and
if to no avail, arbitrated,
precluded any disciplinary enquiry into the misconduct of any of the
parties to the agreement.
[14] Inasmuch as
the aforesaid challenges are aimed at the alleged procedural
unfairness of the dismissal, the main thrust of the
applicants’
case is that by seeking the second applicant’s reinstatement in
his position as area manager, albeit only
until the end of October
2010, they are seeking no more than the enforcement of specific
performance of the common law contract
concluded with the first
respondent.
[15] The first
question to be determined in this matter is the question of
jurisdiction. The respondents argued that this matter
should have
been persued in the LRA Forums, in other words, the second applicant
should have referred his dispute with the first
respondent about an
alleged unfair dismissal to the Commission for Conciliation Mediation
and Arbitration (the CCMA), or a relevant
bargaining council, to
arbitrated.
[16] In support
of their argument that the High Court indeed had the necessary
jurisdiction to decide this application, the applicants
relied on the
matter of
Makanya
v University of Zululand
[2009] 4 All SA 146
(SCA). In that matter the appellant contended
that the termination of his services constituted a breach of
contract. He then
tendered his services but was not remunerated. He
instituted action for orders compelling his former employer to pay
him his remuneration
and other monies under his contract of
employment with them, and not reinstatement. Nugent JA, presiding in
the aforesaid appeal,
in paragraph [4] page 149 of his judgment with
regard to the jurisdictional objection raised, said: “Whatever
explanation
is given, invariably leads one back to the decision of
the Constitutional Court in
Chirwa
v Transnet
3
2008(3) BCLR 251 in which the majority expressed the view that the
High Court had no jurisdiction to consider the claim in that
case”.
(A claim to set aside a dismissal)
[17] The learned
judge of appeal then concluded the
Chirwa
was not about jurisdiction at all, and that the High Court was not
precluded from entertaining an application by an employee for
the
enforcement of his contract of employment. In the same matter, in
paragraphs [35] to [41], three other matters where jurisdictional
challenges were raised were referred to. They are
United
Public Servants Association of South Africa v Digomo NO
[2005]
26 ILJ 1957 (SCA);
Boxer
Superstores, Mthatha v Mbenya and Another
2007(5) SA 450 (SAC) and
Fredericks
v MEC for Education and Training, Eastern Cape
[2001] ZACC 6
;
2002
(2) BCLR 113
(CC).
[18] Nugent JA
was of the view that none of the aforesaid cases were actually about
jurisdiction, but about whether the claims in
those cases were good
in law, and that the claimants in each case, (dismissed employees)
had a potential claim for enforcement
of an LRA right (which was
enforceable only in a Labour Forum), but each claimant also had a
potential claim for the enforcement
of a right outside the LRA,
enforceable either in the High Court or in the Labour Court. He held
that the claimant in each case
was capable of pursuing both claims in
the Labour Court, either simultaneously or in succession. None of
these claims were for
reinstatement.
[19] There were
judgments, apart from
Makanya,
which also do not support the applicants’ argument in this
matter. In
Gcaba
v
Minister
for Safety and Security and Others
2010 (1) SA 238
(CC) it was held that Section 157 (2) of the LRA,
which confirmed the concurrent jurisdiction of the Labour and High
Court in the
circumstances prescribed therein, could not be read to
permit the High Court to have jurisdiction over those matters that
fell
within the exclusive purview of the Labour Court (paragraphs
[70] – [72] at 261 E – 262 F).
[
20] In
Tsika
v Buffalo City Municipality
2009 (3) SA 628
ECD the plaintiff, a dismissed municipal manager,
claimed payment to him by the defendant, in the High Court, of
R2 071 359.23
with interest. The amount comprised of an
amount deducted by the defendant from two preservation fund policies
into which part
of the plaintiff’s salary had been paid, and a
further amount of R1 800 000.00, the equivalent of eighteen months of
his
gross salary in terms of a clause in his contract of employment
which he claimed entitled him to the aforesaid amount as an
ex
gratia
payment. He did not claim reinstatement. The defendant,
in
limine
raised a special plea that the Court lacked jurisdiction to hear the
matter, relying on the judgment in
Chirwa
.
The plea was dismissed. Grogan AJ, who presided in the case,
recognised that for purposes of deciding the matter before him,
he
was “compelled to enter the murky waters stirred up by the
debute over
Chirwa
”
and, with respect, did so in a manner which brought more clarity and
certainty to this debate.
[21] To sum up
from the head note in
Tsika,
the law as it stands on the jurisdiction of the High Court in labour
and employment matters is as follows:
In matters in
which the cause of action is covered by the LRA and for which the
LRA provides a remedy
,
fall within the exclusive jurisdiction of the Labour Court, and
therefore outside the jurisdiction of the High Court.
Employees of
statutory institutions may not bring actions in the High Court under
PAJA, or by way of application for common-law
review in respect of
matters covered by the LRA.
Employees may not bypass the LRA
dispute-resolution procedure and approach with claims based on their
constitutional right to
fair labour practices.
The High Court and other Civil
Courts retain their common-law jurisdiction to entertain claims for
damages arising from alleged
breaches of contracts of employment and
the acts or commission of either party after the termination of
employment and the Labour
Court has concurrent jurisdiction to
determine such matters. (Paragraph [66] at 653 E – 654 A).
[22] From the
aforesaid it is clear that if the second applicant had sued for
damages arising from his contract of employment, he
would have been
in the right court. However, his pleaded case is that his dismissal
was unlawful and that he seeks reinstatement.
This type of claim
belongs in the LRA Forums and not this Court.
[23]
Tsika
was also referred to Wallis AJ in
South
African
Maritime
Safety Authority v McKenzie
2010 (3) SA 601
at paragraph [7] 608 F – G. The respondent
claimed damages in the High Court after pursuing his remedies under
the LRA and,
reaching a settlement agreement with the appellant for
the payment of remuneration, (twelve months’ salary). The
claim for
damages in the High Court was for what he would have
earned, had he not been dismissed. The appeal succeeded and the
respondent’s
claim for damages was dismissed. Wallis AJA
rejected the notion that an employee was entitled to damages
and
statutory compensation based on unfair dismissal. In this regard he
referred to a case decided in the United Kingdom,
Johnson
v Unisys Ltd
[2001] ALL ER 801
(HL). In that matter, an employee who was
summarily dismissed referred a dispute to a labour tribunal which
held that his dismissal
was unfair and awarded him compensation in
terms of the English equivalent of the LRA provisions governing
unfair dismissals.
[24] In addition,
the employee sued for damages based on unfair dismissal. He argued
that apart from his statutory rights, there
was also an implied term
in his contract of employment of trust and confidence, and based
thereupon, it was not open to his employer
to dismiss him unfairly.
The main reason for dismissing his claim was that the court felt that
“
a
common law right embracing the manner in which an employee is
dismissed cannot satisfactorily co-exist with the statutory right
not
to be unfairly dismissed. A newly developed common law right of this
nature, covering the same ground as the statutory right,
would fly in
the face of the limits Parliament has already prescribed……
It would also defeat the intention of Parliament
that claims of this
nature should be decided by specialist tribunals not the ordinary
courts of law.”
(at
803 g – j).
[25] Wallis AJA
(with whom Nugent JA concurred), associated himself with the
aforesaid views and added at paragraph [33], page 620
F – I.
“. . . there is the further bar South Africa that the
legislation in question has been enacted in order to
give effect to a
constitutionally protected right, and therefore the courts must be
astute not to allow the legislative expression
of the constitutional
right to be circumvented by way of the side-wind of an implied term
in contracts of employment.”
[26] What is to
be understood from the aforesaid judgments, is that an employee may
seek damages for breach of contract or moneys
owing in terms of his
employment contract in the High Court, in certain circumstances, but
may not seek reinstatement (a statutory
remedy) based on his
dismissal, in the High Court, in any circumstances because the LRA
already includes the protection that is
necessary.
[27] Very
apposite to this matter, and also quoted by Wallis AJA in the
SAMSA
matter (at paragraph [33] G – H), is the following, passage
from
Chirwa
in paragraphs 16 – 18:
“
The LRA
includes the principles of natural justice. The dual fairness
requirements are one example a dismissal needs to be substantively
and procedurally fair. By doing so, the LRA guarantees that an
employee will be protected by the rules of natural justice and
that
the procedural fairness requirements will satisfy the
audi
alteram
partem
principle and the rule against bias. . . . Similarly, an employee is
protected from arbitrary and irrational decisions, through
substantive fairness requirements and a right not be subjected to
unfair labour practices.”
[28] In deciding
this matter, I have considered carefully, whether or not the
agreement of sale which gave rise to the second applicant’s
employment with the first respondent could be construed to oust the
application of the LRA to the situation in which the second
applicant
found himself, and whether I could permit him to enforce specific
performance by way of reinstatement. I could not.
The contract of
sale has two components which are relevant to this application. The
one is the commercial component and the other
is the employment
relationship one. In my view, the two components are not two
indivisible agreements as contended by the applicants.
As I
understood their argument, the first respondent’s ability to
pay the remainder of the purchase price in the second
phase was
completely intertwined with, and dependant on the second applicant’s
temporary contract of employment as area manager.
This was not borne
out by the evidence.
[29] The contract
also refers to a proper contract of employment to be drafted, which
did not eventuate. The fact that a formal,
separate contract
employment was not drafted, does not detract from the fact that an
employment relationship existed over and above
the agreement of sale.
If the second applicant, for whatever reason, could no longer be
employed by the first respondent, the
latter would still be liable to
pay the first applicant the remainder of the purchase price (R4
million) for the purchase of the
business.
[30] The fact
that a separate formal employment contract had not yet been drafted,
did not automatically invoke the provisions of
clause 17 (the
mediation/arbitration clause) of the sale agreement, in the case of
misconduct. The parties envisaged two agreements
in the contract
signed by them. One was for the second appellant’s employment
and the other for the contract of sale. This
fact tends to militate
against the notion that the parties should have embarked on a
mediation process when a managerial employee
(even if he is a party
to the sale) misconducts himself in the manner as alleged by the
employer (purchaser). The agreement to
draft a proper employment
contract later, is the strongest indication that there was an
agreement that disciplinary matters would
not be dealt with by way of
mediation as envisaged in clause 17 of the agreement. That clause
pertained to other possible disputes,
not of an employment nature,
which may arise between them.
[31] The second
applicants’ entire attack on his dismissal, including the
alleged contravention of the arbitration clause
in the
sales agreement, are matters which should be raised in a Labour
Forum, not this Court.
[32] Consequently, the application
is dismissed with costs.
__________________
E REVELAS
Judge of the High Court
Counsel for the Applicants: Adv TA
Barnard
Instructed by: Friedman Scheckter
Attorneys
Instructed
by: Davout Wolhuter and Associate (1
st
and 2
nd
Applicants’ Attorney)
Counsel for the Respondents: Adv SD
Maritz
Instructed by: Goldberg & De
Villiers Inc.
PARTIES:
ROYAL
ALBATROSS (PTY) LTD AND 1 OTHER
v
DEKRA
AUTOMOTIVE (PTY) LTD AND 1 OTHER
Case
Number: 1669/2010
High
Court: Eastern Cape – Port Elizabeth
Date
Heard: 1 July 2010
Date
Delivered: 15 July 2010
JUDGE(S):
Revelas J
LEGAL
REPRESENTATIVES –
Appearances:
for
the Applicant(s): Adv TA Barnard
for
the Respondent(s): Adv SD Maritz
Instructing
attorneys:
Applicant(s):
Friedman Scheckter Attorneys
Davout
Wolhuter and Associate (1
st
and 2
nd
Applicants’ Attorney)
Respondent(s):
Goldberg & De Villiers Inc.
CASE
INFORMATION –
Nature
of proceedings
:
Key
Words
: