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[2021] ZALAC 10
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Wilson v Prinsloo; In re: Prinsloo v Expidor 163 CC t/a The League of Gentleman and Another (CA12/19) [2021] ZALAC 10; [2021] 8 BLLR 805 (LAC) ; (2021) 42 ILJ 1714 (GJ) (31 May 2021)
IN THE LABOUR APPEAL
COURT OF SOUTH AFRICA, CAPE TOWN
Not reportable
Case no: CA12/19
In the matter between:
JOHN STEWART
WILSON
Appellant
and
SEAN
PRINSLOO
Respondent
In re:
SEAN
PRINSLOO
Applicant
and
EXPIDOR 163 CC t/a THE
LEAGUE OF
GENTLEMENT
First Respondent
JOHN STEWART
WILSON
Second Respondent
Heard:
23 September 2020
Delivered:
31 May 2021
Coram:
Davis JA, Jappie JA and Kathree Setiloane AJA
JUDGMENT
DAVIS JA
Introduction
[1]
The essence of this appeal concerns the
question of whether it was appropriate, on the facts before the court
a quo, to lift the
corporate veil.
[2]
The court a quo answered the question in
the affirmative and accordingly ordered that the appellant was liable
for the obligations
arising from the employment relationship between
the first respondent (Expidor 163 CC t/a The League of Gentlemen) and
the respondent
(applicant in the court a quo). The court a quo
further ordered that the appellant was liable to comply with an
arbitration award
which had been issued in favour of the respondent
on 22 February 2016 and which award had been made an order of court
on 20 January
2017. With the leave of the court a quo the appellant
has approached this court.
Factual Background
[3]
On 4 March 2014 the respondent was
appointed as the marketing manager of the League of Gentlemen(LOG).
The letter of appointment
was signed by the operations manager for
LOG, Mr Derrick Stewart. According to the affidavit deposed to
by the respondent,
no reference was made to Expidor 163 CC (Expidor)
in this correspondence. According to the respondent, after Mr Stewart
passed
away on 6 July 2015, the appellant called him to a meeting on
9 July 2015 and advised that he will be closing LOG with immediate
effect. At the same meeting, he offered the respondent an option to
buy the business of LOG. When the respondent failed to secure
the
necessary loan and therefore was not able to acquire the business, he
approached the appellant and requested a retrenchment
package.
[4]
In order to assist in procuring a
retrenchment package, the respondent sought advice from Mr Deon De
Jager of Solidarity. Mr De
Jager contacted the appellants’
attorney and it was at this point that he was advised that LOG was
the trading name of Expidor
163 CC and that the respondent was
employed by Expidor.
[5]
As a result, Solidarity, acting on behalf
of the respondent, cited
Expidor as the employer in a dispute
that was referred to the CCMA on 23 September 2015 and later on 19
October 2015.
[6]
At conciliation proceedings on 16 October 2015, the appellant
advised that LOG was insolvent and that the respondent had been
dismissed.
As a result, the commissioner charged with an
attempt at conciliation, advised the respondent that he would have to
refer an unfair
dismissal dispute to the CCMA. This was done by
Solidarity on behalf of respondent on 19 October 2015. In its
referral both Expidor
and appellant were cited. A further
conciliation meeting took place on 9 November 2015 which appellant
attended.
[7]
When the arbitration proceedings began on
10 February 2016 the appellant did not attend. An arbitration award
was issued in favour
of respondent on 22 February 2016, ordering LOG
to pay the respondent the amount of R 165 669.25 on or before 10
March 2016.
[8]
Subsequent events proved that the award was
unenforceable, as Expidor had no assets. This situation was conveyed
to respondent in
September 2015. Subsequent thereto, the
respondent approached the court
a quo
for relief to the effect that the appellant be joined as a party to
the proceedings, that it be ordered that he (appellant) was
the
respondent’s employer, that he be held jointly and severally
liable for the obligations arising from the employment relationship
between Expidor and respondent, and further that the appellant be
held jointly and severally liable with Expidor for the obligations
flowing from the award issued by the CCMA.
The judgment of the
court
a quo
[9]
The court a quo correctly noted that what
the respondent sought was an order declaring that appellant was his
true employer for
the purposes of joint and several liabilities in
respect of obligations arising from his employment relationship with
Expidor.
It is significant that the respondent did not rely
upon s 65 of the Close Corporation Act 69 of 1984. Its importance to
this appeal
necessitates that it be carefully considered. The section
provides:
‘
Whenever
a Court on application by an interested person, or in any proceedings
in which a corporation is involved, finds that the
incorporation of,
or any act by or on behalf of, or any use of, that corporation
constitutes a gross abuse of the juristic personality
of the
corporation as a separate entity , the Court may declare that the
corporation is to be deemed not to be a juristic person
in respect of
such rights, obligations or liabilities of the corporation, or of
such member or members thereof, or of such other
person or persons,
as are specified in the declaration, and the Court may give such
further order or orders as it may deem fit
in order to give effect to
such declaration.’
[10]
Notwithstanding that the case of the
respondent was not brought in terms of this section which expressly
deals with the question
of looking beyond the identity of the
corporation, the court
a quo
lifted the corporate veil on the basis of a number of evidential
findings; in particular, that:
1.
The appellant did not dispute that on
Stewart’s advice, a pre-employment meeting with the respondent
had taken place to assess
the latter’s suitability for the
position of marketing manager. The appellant had attended this
meeting;
2.
The appellant had admitted discussing the
operations of the LOG in that meeting with a view to adopting a
turnaround strategy;
3.
The appellant had met the respondent at the
commencement of his employment;
4.
The respondent’s salary had been paid
by the appellant in cash and he had stayed on the property owned by
the appellant during
the period of his employment, albeit that the
appellant had contended that he had permitted this occupation as a
favour to the
respondent because the latter had struggled to find
accommodation.
5.
The appellant had admitted that he was a
sole member of the corporation and that he had provided periodic
financial contributions
to the business operation and had attended to
the premises of the business.
6.
The appellant admitted that he had
controlled the business and held ownership of the vehicles which are
the core of the operations
of the business which provided a shuttle
service;
7.
The appellant admitted that he had advised
the respondent about his dismissal and offered to pay him
retrenchment package;
8.
The appellant had offered to sell LOG and
its business to the respondent.
[11]
On the basis of this evidence, the court
a
quo
concluded that ‘Prinsloo [the
respondent] had discharged the evidential basis to disregard the
company’s separate personality
and a case has been made out as
to why the corporate veil in respect of Wilson [the appellant] should
be lifted’.
The appeal
[12]
The appellant’s counsel submitted
that the court
a quo
had committed a number of errors of fact. It had erroneously
found that the appellant had been cited as a party to the arbitration
proceedings, whereas the evidence showed clearly that while the
papers submitted to the CCMA had referred to the appellant as a
contact person, the appellant had elected not to participate in the
arbitration proceedings and no finding had been made against
him by
the arbitrator. In addition, much of the factual findings of
the court a quo turned on the level of participation
of appellant in
the business of the LOG, whereas his entire explanation was based on
the contention that he was not involved in
the day to day running of
the business. These daily business operations had been controlled by
Mr Stewart.
[13]
In addition, the appellant’s counsel
contended that there was no evidence which suggested that this
version did not constitute
a genuine dispute of fact of a kind that
had to be dispositive in a case brought by way of affidavits. In this
regard, the appellant’s
counsel referred to what Heher JA said
in
Wightman t/a JW Construction v
Headfor (Pty) Ltd and another
[2008] ZASCA 6
;
2008 (3)
SA 371
(SCA) at para 13:
‘
A
real genuine and bona fide dispute of fact can exist only when the
court is satisfied that the party purports to raise the dispute
has
in his affidavits seriously and unambiguously addressed the facts
said to be disputed. There will off course be instances
where a
bare denial meets the requirement because there is no other way open
to the disputed party and nothing more can therefore
be expected of
him.
’
[14]
The upshot of the submission was that the
evidence as presented on the affidavits, and read holistically, did
not provide a justification
for finding that the explanation, that
the appellant was not involved in the day to day running of the
business, was so palpably
and plausibly farfetched or untenable that
it stood to be rejected without more.
[15]
The evidential disputes notwithstanding,
the more significant problem for the purposes of deciding this appeal
was the manner in
which the court a quo sought to lift the corporate
veil. There is, in my view, no general, free floating
discretion
available to a court to disregard a corporate entity’s
separate juristic personality, in this case that of a close
corporation,
other than to seek relief in terms of s 65 of the Close
Corporation Act.
[16]
In
Cape
Pacific Limited v Lubner Controlling Investments (Pty) Ltd and others
[1995] ZASCA 53
;
1995 (4) SA 790
(A) 203, Smalberger JA citing
dicta
from
Dadoo Ltd and others v Krugersdorp
Municipal Council
1920 AD 530
to the
effect that, given particular circumstances a court might disregard
corporate personality. The decision is based on having
regard to the
substance rather than the form of things Thus Smalberger JA said:
‘
Whatever
the position, it is probably fair to say that a court has no general
discretion simply to disregard a company’s separate
legal
personality whenever it considers it just to do so.’ (at para
29)
[17]
The learned judge went on to say at
paragraph 31 that
‘
where fraud,
dishonesty or other improper conduct are found to be present other
considerations will come into play. The need
to preserve the
separate corporate identity would in such circumstances have to be
balanced against policy considerations which
arise in favour of
piercing the corporate veil
.
’
In this connection, the learned judge added that
‘
if a company, otherwise legitimately
established and operated, is misused in a particular instance to
perpetuate a fraud or for
a dishonest or improper purpose, there is
no reason in principle or logic why its separate personality cannot
be disregarded in
relation to the transaction in question (in order
to fix individuals responsible for personal liability) while giving
full effect
to it in other respects
.’
(at para 33)
[18]
From these
dicta,
it is clear that, absent the
application of s 65 of the Close Corporation Act, the respondent bore
the onus to show that Expidor
had been run by the appellant on the
basis of fraud or that there was some other dishonest or improper
purpose in the manner in
which its affairs were conducted: in
particular, with the intent or purpose of avoiding a legal
obligation.
[19]
In the founding affidavit there is simply
no evidence offered to make such a finding. No more than a series of
unsubstantiated conclusions
are contained in the respondent’s
affidavit including:
‘
Wilson
at all times and for a number of years assumed personal
responsibility for the persistent losses and liabilities of Expidor
until the time of my unfair dismissal at which time Wilson elected to
distance himself from Expidors liability.
For years Wilson assumed
personal responsibility for Expidor’s liabilities until the
time of my unfair dismissal at which
time Wilson first indicated that
I was employed by Expidor and not by him.
Expidor is simply the
mere alter ego or business conduit of Wilson. Wilson’s
role, function and powers are those of
Expidor. The only
differentiation that can be made between the actions of Wilson and
Expidor may be a document indicating
that he CC had been registered.’
[20]
None of these conclusions provide the
requisite evidence that the business was managed in a fraudulent
manner or for some improper
objective with a view to avoiding the
obligations that Expidor might have owed towards the respondent or
any other third party.
Indeed, as I have indicated, the
respondent stated in his founding affidavit that he was employed by
LOG as Marketing Manager as
from 4 March 2014. Further as the
appellant noted in his answering affidavit:
‘
Nevertheless,
assuming that Prinsloo is being truthful about when he became aware
of the existence of the first respondent [Expidor],
he gives evidence
before the commissioner at the CCMA stating (according to the
commissioner, and under oath) that ‘the [first]
respondent had
used two different company registration numbers under the business
name Expidor 163 CC and traded as the League
of Gentlemen
.’
[21]
None of this evidence provided by the
respondent amounts to a ‘gross abuse of juristic personality’
which would justify
a court applying its powers in terms of s 65 of
the Close Corporation Act to declare that the corporation is deemed
not to be a
juristic person. The fact that the section was not
invoked by the respondent in his cause of action only compounds the
problem
[22]
In summary, there is no evidential basis by
which the court
a quo
could have held the appellant liable for an obligation which the
respondent could not enforce against Expidor because the latter
is
insolvent.
[23]
For these reasons, the appeal must succeed.
The following order is therefore made:
1.
The appeal is upheld with costs.
2.
The order of the court a quo of 9 May 2019
is set aside and substituted with the following:
‘
The
application is dismissed with costs.’
_____________
Davis JA
Jappie
JA and Kathree Setiloane AJA concur.
APPEARANCES
FOR THE APPELLANT
Adv T Moller
Instructed by Johan
Venter & Associates
FOR THE RESPONDENT
Willem Jacobs of Willem Jacobs & Associates