Forecourt Express (Pty) Ltd v South African Transport and Allied Workers Union and Others (JA52/03) [2006] ZALAC 4; [2007] 2 BLLR 101 (LAC); (2006) 27 ILJ 2537 (LAC) (13 September 2006)

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[2006] ZALAC 4
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Forecourt Express (Pty) Ltd v South African Transport and Allied Workers Union and Others (JA52/03) [2006] ZALAC 4; [2007] 2 BLLR 101 (LAC); (2006) 27 ILJ 2537 (LAC) (13 September 2006)

65
IN THE LABOUR
APPEAL COURT OF SOUTH AFRICA
HELD IN JOHANNESBURG
Case No. JA52/03
In
the matter between
FORECOURT EXPRESS (Pty)Ltd Appellant
And
SOUTH AFRICAN TRANSPORT and
ALLIED
WORKERS UNION First respondent
ABRAM
MONYELO AND 54 OTHERS Second and Further
Respondents
___________________________________________________________
JUDGMENT
­­­­­­­­­­­­­­­­­­­­___________________________________________________________
ZONDO JP
Introduction
[1] I have had the benefit of reading in draft the
judgment prepared by my friend and Colleague, Mlambo AJA, in this
matter. I agree
with him that the finding of the Court a quo that the
dismissal of the second and further respondents by the appellant was
procedurally
unfair cannot be sustained and that the dismissal was
procedurally fair. However, I am unable to share my Colleague’s
finding that
the dismissal was substantively unfair as was also found
by the Labour Court. In my judgement the Labour Court erred in
concluding
that the dismissal was substantively unfair. I explain my
approach and reasoning here below.
[2] Mlambo AJA has already set out the sequence of
events and the facts of this matter. Accordingly, it is not necessary
for me to
do the same. I shall only focus on the question whether
there was a fair reason for the dismissal and deal with the issues
and evidence
relating to that question. I may have something to say
about procedural fairness in addition to what Mlambo AJA says about
procedural
fairness in his judgment.
[3] Section 188 of the Labour Relations Act, 1995 (Act
66 of 1995)(“
the Act
”)
requires that there be a fair reason to dismiss and that a fair
procedure be followed before a dismissal can be said to be fair.
If
there is no fair reason for a dismissal exists and/or no fair
procedure was followed before the dismissal, the dismissal is unfair.
Evidence relating to the
reason for the dismissal of the second and further respondents
[4] In order to determine whether there was a fair
reason for the dismissal of the second and further respondents, it is
necessary
to first determine what the reason for the dismissal was
and thereafter the question whether that reason was fair can be
decided.
To determine what the reason was, it seems to me necessary
to have regard to correspondence between the parties, the pleadings
and
the oral evidence. Accordingly, I now propose to consider such
matters.
[5] In its letter of the 27
th
August 1999 the appellant informed the union in the first paragraph
of that letter why it had sought the Daimler Chrysler contract.
The
first paragraph of the letter read thus:
“
Forecourt has acquired the operation as
certain synergistic opportunities exist between this operation and
other contracts (i.e. the
Volkswagen SA contract) operated by
Forecourt. Utilising these opportunities will not only make the Fauna
Operation a viable prospect
but it would also enhance the viability
of Forecourt’s other vehicle ferrying operations.
”
It also stated upfront that significant changes had to
be made to the Fauna operation if it was to remain viable.
[6] It will be seen from the extract from the letter of
27 August that the appellant’s objective in seeking to acquire the
Fauna
operation was to exploit certain opportunities and enhance the
viability of the appellant’s other vehicle ferrying operations.
In
that paragraph the appellant also said:
“
It
is our view that this operation cannot continue to be operated on a
viable basis without making a significant change to the operation.
The financial performance of Fauna has been less than satisfactory
during the recent past.”
[7] In paragraph 2 of the letter the appellant set out
the operational changes that it thought were necessary in order to
make the
Fauna operation viable and to also exploit the opportunities
that it thought the acquisition of the Fauna operation would present.
In paragraph 2 the appellant wrote:
“
A
fleet of 13 carriers vehicles are currently operated by this
operation on a
double crew basis. It is our proposal to change the fleet as
follows:-
Five (5) of the current vehicles are old and in our
opinion no longer viable. Mr Fourie has offered to purchase these
vehicles.
Six (6) of the remaining vehicles will be sold to a
company called Accurate Auto Ferriers with whom Forecourt will
subcontract for
ferrying vehicles in terms of its contract.
Forecourt’s overhead and operating costs will be reduced as it
will not be required
to operate these vehicles on a permanent basis.
Vehicles will be contracted in on a demand basis whenever required.
The remaining two (2) vehicles are available to be
sold to owner drivers with whom Forecourt will contract to ferry
vehicles.
The eight (8) vehicles referred to in (ii) and (iii)
above will be utilised for local ferrying of vehicles and not for
Forecourts
long distance needs.
For the purpose of long distance ferrying Forecourt
proposes to subcontract with Highway Carriers – a sister company.
Highway
currently operates multi-purpose carrier vehicles. These
vehicles could carry motor vehicles in one direction and a general
freight
load on the return leg, obviously bring significant
efficiencies and cost savings to the operation.
Further efficiencies can be achieved by utilising
vehicles used on Forecourts Volkswagen contract more effectively by
using these
vehicles for the Fauna operation where possible.”
[8] It is clear from the letter of the 27
th
August that the appellant thought that the manner in which the Fauna
operation had been conducted was not viable and it wanted to
run it
differently. Running it differently meant running it the way the
appellant had been running the Volkswagen contract. That
the
appellant should prefer to run the Fauna operation in the way it had
been running the Volkswagen contract is understandable because
that
was the only way of operating a vehicle ferrying operation in which
it had experience. The union did not respond to that letter
to
dispute anything contained therein.
[9] In the meeting of the 7
th
September 1999 between the appellant and the union the appellant’s
representatives informed the union that the appellant’s position
in
seeking to make the changes that it was seeking to make in the Fauna
operation was justified “
given the financial
situation of the company in the recent past as well as to achieve
synergy with other operations
.” This
appears in par 4 of the agreed minutes of that meeting. The minutes
of that meeting also reflect that the appellant’s
representatives
informed the union that, although the Fauna operation was “
taken
over as a going concern,”
the appellant
wanted to effect certain changes to make it profitable. In this
regard the minutes reflect that the appellant’s representatives
also explained that the
“(c)hanges are also
necessary to make other operations of Forecourt more profitable
.”
They also informed the union that “
with the
efficiencies which could be obtained by utilising vehicles from other
contracts as well as the multi- purpose vehicles from
Highway
Carriers the need for convoy drivers will be reduced. The company
will negotiate with labour brokers to utilise existing
drivers of the
company when the need for convoys arise (sic).”
[10] In par 3.1 of their statement of claim filed in the
Labour Court the respondents alleged that the second and further
respondents
were dismissed without any fair reason. In paragraphs
26.1 – 26.2 of its amended response the appellant put up the
following defence:
“
26.1 The
[appellant] is a third party logistic company involved in the
business of ferrying motor vehicles. The [appellant] does not
own
carriers, employ carriers or convoy drivers or operate a mechanical
workshop. It concludes contracts to ferry commercial and
passenger
vehicles, supervises the logistics of ferrying those vehicles and
outsources ferrying i.e. collection and delivery, to
ferrying
operators
.
Fauna was bought to obtain the contract to ferry
motor vehicles for Daimler Chrysler South Africa (Pty)Ltd held by
Fauna.”
In their evidence both Du Plessis and Gibb were able to
prove these statements. Indeed, the respondents’ only witness did
not contradict
their evidence. In paragraphs 26.3 of the appellant’s
amended response the appellant gave reasons why it did not seek to
operate
Fauna as a going concern. The appellant said that this was
because of the reasons given in paragraphs 26.1 and 26.2 as quoted
above,
that Fauna was not profitable or sustainable, and that the
appellant could not afford financially to sustain Fauna’s continued
operation. In par 26.4 of the appellant’s amended response the
appellant alleged that the Fauna operation was not profitable and
its
erstwhile owner had been unable to recapitalise the business. In
Court it became common cause that Mr Kruger, the previous owner
of
the Fauna operation, had failed to recapitalise the Fauna operation.
As to the profitability of the operation, Counsel for the
respondents
never put it to the appellant’s witnesses that the Fauna operation
was profitable. He also did not call Kruger to testify
to that effect
even though he had a statement by Kruger and indicated that he could
call him as a witness.
[11] Du Plessis explained how the appellant got into the
vehicle ferry market or industry. He said in his evidence in chief:
“…
why
we got into the market, it’s because, just to give you a bit of
background, it was a closed shop market the whole motor ferry
industry. You had four companies, and
they’ve
had three companies and … it’s been a monopoly within South
Africa. The reason how we got in, what gave us the edge
is the
carriers that we subcontract out to, being Imperial, Cargo and
actually the owner drivers. The trailers are multi-purpose,
as I’ve
mentioned earlier, and the only way we could have done at viable
rates is to have product going down, so we running full
down and
we’re running full up where the opposition only moves cars, so they
move cars up and they move cars down because they’ve
got numerous
contracts. So the reason why we could not also look at these carriers
or the trailers especially is they were not designed
to fit into the
whole logistics set up that Forecourt had at that point in time.”
Although much of Du Plessis’ evidence was challenged,
this part of his evidence was not challenged. The appellant sold the
whole
fleet that it acquired from Fauna. Mr Kruger apparently kept
four or five of the vehicles.
[12] In his evidence Du Plessis said that the convoy
drivers based at Eikenhof became “
casualties
”
because Daimler Chrysler required that its vehicles be transported
off-wheels. Du Plessis said that Daimler Chrysler gave the
appellant
a time frame within which to ensure that all its vehicles were
transported “
off-wheels
”
and the appellant passed the information about the time frame to its
subcontractors. Du Plessis also gave evidence to the effect
that the
appellant’s initial idea was that it would retrench almost all the
Fauna employees. When he was asked why, his answer
was that the
appellant did not employ drivers, did not keep carriers and did not
operate a mechanical workshop. He continued thus:
“
When
[the appellant] started up from day one in September 1998, not one
driver has been employed by them, and this is not only unique
to the
facility up here, it’s down in (inaudible) office, where our head
office is with VW. We do not employ any drivers whatsoever.”
[13] With regard to the union’s suggestion made at the
time of the consultation process that the retrenchment be postponed
by three
to six months, Du Plessis said:
“We
could not take on these Fauna drivers and set up a separate division
now to run the carriers.”
He also said the
appellant could not accept the union’s proposal because
“as I’ve said, we had the depot Cargo and owner drivers, their
carriers were multi-purpose. The rate we had for Mercedes Benz
was
(sic) in such a way that if we had to run carriers empty, we had to
run carriers down empty
and
bring back cars, we would never, …, after the first month, we would
have gone down, it was just totally impossible to do it
that way, and
we did not employ drivers. We had not one driver on Forecourt’s
books. We would now have to go and employ these …
15 or whatever
convoy drivers and Forecourt did not, as I’ve said, have our own
drivers, we did not employ any drivers whatsoever.”
Van der Walt testified that he saw no purpose in postponing the
implementation of the retrenchment or the consultation process. When
Counsel for the respondents asked Van der Walt what harm the
appellant would have suffered if the consultation process was delayed
for a few weeks, his answer was:
“
The [appellant] would now have operated the Fauna
operation on a non-profitable basis, included losses, and [it] would
have forfeited
the opportunities and the benefits [it] would have got
in [its] other businesses by integrating this into those businesses.”
[14] Du Plessis said that, while he could not testify
about the financial position of Fauna, he could testify about the
condition
of Fauna’s vehicles. He said that the conditions of some
of those vehicles was shocking. Du Plessis must have described those
vehicles
like this during his evidence at least about four times. An
attempt was made to challenge his evidence in this regard under
cross-examination,
but, in my judgement, his evidence about some of
the vehicles is probably true. In this regard I point out that, in so
far as Monyela’s
evidence is inconsistent with that of Du Plessis
in this regard, Du Plessis’ evidence must be preferred. He had a
reason to look
at the vehicles closely.
[15] Counsel for the respondents put it to Du Plessis
that, after the 17
th
September 1999 (that is the date when the second and further
respondents were informed that their services were being terminated
with effect from the 30
th
September 1999) the appellant continued to do the work which the
second and further respondents had been doing but now used employees
employed by labour brokers to do work. Du Plessis conceded that this
was true but went on to say that this was done at hugely reduced
costs to the appellant. Du Plessis explained: “
what
was happening now, we were paying the labour brokers per vehicle
moved. So if there was no demand, there were no costs incurred.
If
there were vehicles to be moved, we would then pay that driver per
vehicle or the labour broker, per vehicle moved. Because of
the
nature
of the business at Eikenhof and the inconsistent
volumes, we could not have 20 drivers
sitting
and wait[ing] for vehicles to be moved from the storage yard or
vehicles to be ordered. We couldn’t employ 20 people to
sit and
wait for vehicles to go out.”
[16] At this stage of Du Plessis’ cross-examination
Counsel for the respondents asked him where the documentation was to
support
what he had just said. In response Du Plessis said:
“I
can get you a copy of the rates agreed to with the subcontractors,
it’s not (inaudible) labour brokers, it is per, and if need
be I
can, I know a lot of the rates off the top of my head, I can give
those to the court if need be, and it’s not per hour, we
pay all
drivers and all subcontractors, even the subcontract carriers that
work out at Kaalfontein are paid per vehicle moved and
not per hour
your Lordship.”
At this stage Counsel for
the respondents asked Du Plessis why he was offering such
documentation when he was almost finished with
cross-examining him
and why he had not offered it earlier. To this Du Plessis responded:
“
Mr Van der Riet, you haven’t requested it
earlier. You have got the onus here Mr Van der Riet, unfortunately.”
[17] Mr Gibb was asked whether the appellant had been
interested in acquiring Fauna’s carriers and trailers. He answered
that they
were not but had to buy them because the Fauna operation
was being sold to them as a going concern. He put it thus: “
We
weren’t interested in acquiring the carriers for our own purposes
because our modus operandi is completely different…”
.
He was then asked what the appellant’s modus operandi was. Gibb
explained the appellant’s modus operandi in these terms:
“
Forecourt
Express was awarded a R 450 million contract by
Volkswagen
South Africa on the basis of a unique activity and the activity rests
upon the fact that Forecourt Express move cars in
the conventional
manner, with trailers that are specially designed to move cars. But
these trailers collapse and are designed to
convey freight from the
point of destination back to the motor plant, so the value
proposition for the motor manufacturer is a significant
reduction in
the cost levels. So you need very very sophisticated, extremely
expensive equipment to be able to do this, but it is
the only way in
our view that our business model could be sustainable.”
Gibb was then asked whether Kruger had had the kind of
equipment that he was saying was critical for the sustainability of
the appellant’s
business model and he replied in the negative.
[18] Gibb was asked how the Daimler Chrysler contract
was going to be integrated into the appellant’s modus operandi. He
answered:
“
Well Forecourt Express has a very
very sophisticated information technology platform, designed by Dia
Data, in terms of which all
of the motor vehicles are tracked, traced
and dealers can access the inventory through the internet. Now
clearly it’s a very very
expensive platform and in Daimler
Chrysler’s case our platform was expanded to include Daimler
Chrysler. So the opportunities for
us in terms of service enhancement
and reduction in cost are obvious because the volumes that we would
generate through Daimler Chrysler’s
volumes, as well as other
contracts we had obtained, lowered the effect of cost of this
information IT platform
.”
[19] Gibb was asked about Fauna’s financial position.
He said that “
it was common cause that the
company was incurring losses, and clearly was in need of a major
capital injection to actually enable
it to compete in what had become
a changed market environment.
” Asked why he
was saying that the market environment had changed, Gibb explained:
“
Forecourt
Express is owned …
70% by Cargo Africa and 30% by a private Port Elizabeth company.
Cargo Africa itself is owned 60% by Imperial
Holdings. Imperial
Holdings is one of South Africa’s largest industrial conglomerates,
and Forecourt Express, by coming into this
market with its changed
modus operandi, with its new emphasis on service and low costs, has
changed the landscape of this particular
sector on the other
companies, because without the innovation of being able to return
with freight on your carriers the other carriers
or the other players
are at a competitive disadvantage to our own business from a pricing
point of view.”
[20] Gibb testified that he had seen Fauna’s financial
statements and had formed a view that Fauna’s operation was not
viable.
He said that the Fauna operation needed a major capital
injection. When Counsel for the respondents asked him why in
principle Mr
Kruger would not have had access to a financial loan
capital, Gibb said that the loan capital that would have been
required by the
Fauna operation would have been about R 25 to R30
million and he doubted that any financial institution would have
advanced such
a large sum of money “
against
Kruger’s business model and his income statement and, on that basis
you know there was a fundamental difference between
our business
model and his. Our business model was one of a completely viable and
dynamic approach to dealing with the industry,
going into 2000, 2001,
2002. His was a model that had not been re-engineered or looked at
and had been overtaken by events and it
was no longer sustainable.”
Counsel for the respondents did not challenge this
evidence by Gibb. The respondents’ only witness, Monyela, also did
not contradict
this evidence by Gibb.
[21] Counsel for the respondents attempted to suggest to
Gibb that, although the latter might have seen Fauna’s financial
statement,
he had not been given the information that he would have
required to make a proper assessment of the Fauna operation. Gibb’s
response
was emphatic and telling. He said:
“…
without wishing to sound immodest, I’m
regarded as one of the logistics industries leading entrepreneurs. I
intimately understand
whether the transport business or logistics
business is profitable or not, pretty much the same kind of expertise
that Raymond Ackermann
would be able to give with regard to the
review of a retail organisation, and I have absolutely no doubt that
that business was absolutely,
and by any criteria, under severe
financial pressure. By no stretch of the imagination was it
sustainable.”
[22] Counsel for the respondents sought to pursue this
line of inquiry. Counsel asked Gibbs whether Mr Kruger had actually
“given you facts and figures, and whether
his financial statements that he produced to you, gave you facts and
figures to have a
precise picture of exactly what, at that point in
time, what his current situation was.”
Gibb’s
answer was in the affirmative. Counsel then asked Gibb “
whether
in other words in August he actually made a further loss, whether in
July he made a further loss, or whether he perhaps just
broke even or
perhaps, obviously in the long term your view is that there was no
chance that he can go on, but did you have the actual
information
from Mr Kruger to assess what the situation on a specific day to day
basis was at the time that you took over the contract?
”
Gibb’s answer was firm and unequivocal. He said: “
Yes
I did
.” As if in disbelief, Counsel for the
respondents then asked Gibb this question. “
You
did get the figures
?” Gibb answered: “
Yes
”.
Counsel for the respondents then asked Gibb where those facts and
figures were. Gibb answered: “
The facts and
figures were discussed. [Mr Kruger] had a business adviser whose name
I forget, but we went through the monthly income
statements for two
or three months, so I had a precise understanding of what the
prevailing trading conditions were at the time.”
[24] Later on Counsel for the respondents asked Gibb
whether there wasn’t a document that would have been given to Du
Plessis to
show how the Fauna business looked like. Gibb’s answer
was:
“
I
wasn’t even remotely interested in how Mr Kruger ran his business
because with our expertise we were going to always run the business
properly and professionally, and we would not take anything from that
business, with respect to Mr Kruger, there is nothing that
Mr Kruger
could actua
lly
impact on us with regard [to] how to operate that business, nothing
whatsoever.”
Thereafter Gibb said:
“I looked
at the income statements and saw how they were structured and
realised what financial predicament he was in. But that
was not of
interest to us because we weren’t going to operate the business
with his methodology, so it was [of] a passing interest.”
[24] When told that Kruger had told Counsel for the
respondents that he himself had realised that he had to recapitalise
his business
but that there was no way he could not have continued
the business for another few months without making losses, Gibb’s
answer
was: “
I can’t comment on his
opinion.”
Gibb also said:
“
If
we applied the kind of accounting standards that we apply as part of
the listed group I have no doubt that
[Kruger]
would have actually been incurring massive losses.”
Kruger was not called to give his evidence and
contradict Gibb’s evidence to the effect inter alia that continuing
the Fauna operation
in the way that he had been running it was
unsustainable and that that operation was under huge financial
constraints.
[25] In re-examination Gibb was asked why the appellant
got rid of Kruger’s carriers at a time when the carriers that were
to be
suitable for the mode of operation of the appellant were not
yet available. Gibb’s answer is worth quoting in full. He said:
“
Because
part of the sustainability of the business going forward is that Mr
Kruger’s carriers or the way in which he operated the
business is
that vehicles would come from East London with motor vehicles, and
those vehicles, once they had arrived on the Reef,
would discharge
the motor vehicles and then go back empty to East London. Now East
London is about 950 kilometres from Johannesburg.
You can imagine at
today’s cost of diesel, etc what the cost of running these vehicles
back to East London empty was. Now if you
compare that with our
business model, our business model see the carrier that can convey 11
motor cars from East London as opposed
to Mr Kruger’s carriers that
could only convey 7 motor vehicles. So our new technology carriers
carried 11 cars versus Mr Kruger’s
7. Our carriers operate from
East London with 11,
10 or 11 cars to the yard here, the very position here, and they
return with cargo. Now it’s self-evident and common sense that
we
have a massive cost advantage, and the basis of our business was that
without technology there is no way that the business could
sustain
itself. So that’s the rationale.”
[26] Gibb said that the fact that their business model
entailed that carriers would leave East London with cars and to be
driven to
the Reef and return with cargo was the reason why
Volkswagen actually awarded the appellant a long term contract. He
said that this
model had been implemented from 1998 when the
appellant got the VW contract.
[27] The
question whether there was a fair reason for the dismissal of the
second and further respondents must be determined with
reference to
two questions. The first one is: what was the reason for the
dismissal? The second one is: was the reason for the dismissal
a fair
reason? I turn to deal with the first question.
What was the reason for the
dismissal?
[28] It was never suggested to any of the appellant’s
witnesses during their cross-examination that on taking the Fauna
operation
over the appellant was not entitled to run it in the way it
thought viable or in the way in which it had experience in running
such
a business. That no such suggestion was ever made is not, in my
judgement, surprising because there can be no doubt that as a general
rule an employer has a right to choose the way in which he will run
his business provided that, in so far as workers are concerned,
he
respect their contracts of employment and obtains their consent if he
wishes to amend such contracts or consults with them or
their
representatives as contemplated by sec 189 of the Act if he
contemplates dismissing them for operational requirements arising
out
of such choice. Indeed, he can even resort to the measure of a
lock-out to try and compel them to agree to such changes as he
might
wish to make to their contracts of employment. Of course, as this
Court said in
Chemical Workers Industrial
Union & others v Algorex (Pty)Ltd (2003) 24 ILJ 1917 (LAC
),
it s unfair for an employer, in selecting a solution to deal with
problems in his business, to choose a solution that entails job
losses if there is another solution which can satisfactorily address
his problems without any job losses.
[29] It
was never the respondents’ case that the appellant acted wrongly or
unfairly or unlawfully in insisting on running the Fauna
operation in
accordance with its preferred way of running a car ferrying business.
This means, in my judgment, that the submission
by Counsel for the
respondents that the appellant should have proceeded to run the Fauna
business for six months or so to understand
it is unsustainable. Why
would the appellant have to study how Kruger had been running the
Fauna business when it was never going
to run it in any way other
than in its preferred way? To say that the appellant should have
agreed to the union’s proposal to postpone
the retrenchment
consultations for about six months was to suggest that during that
period the appellant should have run the Fauna
operation the way that
Kruger had run it. There is no basis in law for such a suggestion. In
fact, given Gibb’s uncontradicted
evidence that the way in which
the Fauna business was run under Kruger was such that the business
was not viable, to suggest that
the appellant should have run the
Fauna operation for another six months or so is to suggest that the
appellant should have run the
operation on the same basis on which
Kruger had run it which was not viable.
[30] It is also clear from Gibb’s evidence that he is
very knowledgeable on the transport sector or the car ferrying
business and
Counsel for the respondents was not able to challenge
much of his evidence. I do not think that the Court is qualified to
say that
the appellant should have opted for the Kruger way of
running the Fauna business for six months as opposed to immediately
integrating
it with its other operations and running it in the way it
did. If the Court is qualified to say anything, I am very clear in my
own
mind that the appellant was right in steering as much away from
the Kruger way of running the Fauna business as possible and in
integrating
the Fauna business with its other operations. The
advantages and benefits for the latter route were very good as
explained by Gibb
and Du Plessis in their respective evidence.
[31] If the appellant were to have continued operating
the Fauna operation on the basis of continuing to employ the second
and further
respondents, that could only be if the appellant
continued to run the Fauna operation in the way that Kruger had done.
The appellant
could not have continued to run the Fauna operation for
six months and employ the second and further respondents during that
time
if it run the Fauna operation in accordance with its preferred
way of running that business because its preferred way excluded the
employment of drivers, the keeping of carriers but it envisaged the
use of labour brokers and subcontractors. Furthermore, it is
to
suggest that it should have run it contrary to the requirement of its
client, Daimler Chrysler, that its vehicles be transported
off-wheels. Such a suggestion is, in my judgement, unjustifiable,
particularly when regard is had to the fact that not once did Counsel
for the respondents or the respondents’ only witness suggest that
that was a better way of running the Fauna business than the
appellant’s way.
[32] There
was also the question of peaks and valleys that was the subject of
much debate in the Court a quo and in this Court. The
appellant said
that the operation at Eikenhof was subject to peaks and valleys. The
respondents disputed this. Du Plessis was adamant
that the Fauna
operation was subject to peaks and valleys. Monyela was adamant that
it was not.
[33] The
issue of peaks and valleys had been raised during the consultation
process. The appellant’s initial stance was that the
work of the
convoy drivers based in East London was also subject to peaks and
valleys and sought to retrench them as well. However,
later, after
some consultation meeting with the union and further investigation,
the appellant came to the conclusion that the work
of the convoy
drivers in East London was not subject to peaks and valleys and
decided to retain them. With regard to the work at
Eikenhof, the
appellant maintained that there were peaks and valleys and did not
change its mind.
[34] Counsel for the respondents put it to Du Plessis
during the latter’s cross-examination that, where there are no
“
peaks and valleys
”
and work is consistent, it would be more costly to use labour brokers
than to use permanent employees. Du Plessis conceded that
this was
true. It is important to note that Du Plessis’ concession was made
in regard to a situation where there were no peaks
and valleys. A
little earlier before this, Du Plessis had testified that, due to
peaks and valleys, it made more sense to use labour
brokers because
the appellant paid only for cars actually moved whereas, if the
appellant used permanently employed employees, it
would be paying
them per hour and not per car moved. In my judgement, even if it can
be said that the appellant did not prove “
peaks
”
and “
valleys
”, it
was entitled to prefer the use of labour brokers and subcontractors
to the use of permanently employed workers because the
former
arrangement gave it certain benefits which the latter arrangement did
not offer. Accordingly, whether the peaks and valley
were proved is
neither here nor there. The appellant was entitled to choose a way of
doing business that was less risky. The way
of using labour brokers
and subcontractors was less risky than the one of using permanent
workers.
[35] A question that arises is: why would the appellant
say that there were peaks and valleys in Eikenhof and proceed to
retrench
the workers there when in fact there were no peaks and
valleys, particularly when, with regard to East London, it had
changed its
earlier position and retained the convoy drivers on the
basis that the union was right in regard to the East London convoy
drivers?
I accept that the union’s case was that it never said this
but the fact of the matter is that, on its own version, it said that
there were no peaks and valleys anywhere. Once it had said this the
appellant went and investigated the issue further and found that
at
least in regard to the East London drivers what the union said was
true. At any rate, whether there were peaks and valleys in
the work
of convoy drivers at Eikenhof, the fact of the matter is that Daimler
Chrystler wanted its vehicles to be transported off-wheels
and the
appellant wanted to run the Fauna operation so as to have a
competitive edge and for reasons of efficiency and costs.
[36] It is in the light of all of the above that the
question as to what the reason for the dismissal of the second and
further respondents
was has to be determined. The second and further
respondents were not dismissed because Fauna had been making a loss
before it sold
its business to the appellant. They were also not
dismissed because the appellant had made a financial loss in the nine
months before
its purchase of the Fauna operation. The second and
further respondents were dismissed because the appellant had decided
to run the
Fauna business in a certain way that was different from
the way that the Fauna operation had been run before. That way of
running
the business was one in terms of which the appellant did not
employ drivers, did not own its own carriers, did not operate a
workshop,
had transport Daimler Chrysler’s vehicles transported
“
off wheels
” as
required by Daimler Chrysler and used labour brokers and
subcontractors to run the business. As the vehicles were to
transported
off-wheels, convoy drivers were to have no future in the
Fauna operation as convoy drivers.
[37] The appellant preferred to run the Fauna operation
on the basis of integrating it into its other operations because that
would
give it certain benefits and a competitive edge over its
competitors. It would also reduce costs for the appellant because,
for example,
as the evidence revealed, the appellant would be able to
pay the labour brokers for a vehicle that had been actually moved and
not
per hour and also because the specially designed carriers that
would be used were able, after delivering vehicles to their
destinations,
to return with cargo on their return trip whereas in
terms of the way of running the business that was used at Fauna by
the Krugers,
the carriers ran empty on their return trips after
delivering vehicles.
[38] In the light of all of the above it seems to me
that the reason for the dismissal of the second and further
respondents was that,
in the light of the way in which the appellant
was going to run its business – it not employing drivers, not
keeping carriers,
not operating a workshop and using sub-contractors
and labour brokers - there was no work for which the appellant could
continue
to employ them.
Was the reason for dismissal
a fair reason?
[39] I have in effect said above that the appellant was
entitled to choose the manner in which it would run its business
provided
that it did not change the terms and conditions of
employment of the employees without their consent, and provided that,
if it contemplated
the dismissal of the employees, it complied with
its obligations provided for in sec 189 of the Act. If it is accepted
that the appellant
was entitled to decide to run the Fauna operation
in a way that was different from the manner in which the Krugers had
run it and
was entitled to insist on running it in the way it
proposed to run it, then there can be no doubt that a necessary
consequence of
such decision or choice was that it had no work for
the second and further respondents. In this case the reason why the
appellant
had no work for the second and further respondents was that
its preferred way of running a car ferrying business necessarily
entailed
that it would not employ drivers, would not own or keep
carriers and would not run a workshop. Its way of running that
business entailed
the use of labour brokers, subcontractors and
certain specially designed carriers which were able, after delivering
cars to their
destinations e.g. dealers, to collapse and carry
freight on their return trip. This way of running the appellant’s
business left
the second and further respondents with no work.
Incontestably the fact that an employer has no work itself to give to
workers to
perform is a fair reason to dismiss.
[40] In any event both in its letter of the 27
th
August 1999 and in the subsequent consultations with the union the
appellant invited those employees of the Fauna operation who were
interested in getting employment with the labour broker and the
subcontractor (who were going to be involved in doing the work
previously
done by the Fauna employees) to submit their names so that
it could facilitate their employment by the labour broker and the
subcontractor
but the second and further respondents spurned that
offer. As a result the labour broker and the subcontractor did not
employ them.
This is common cause.
[41] There was an attempt to say that an offer of
employment with a labour broker was not such an attractive idea
because the employment
would have entailed that the employees work
only on the days when the labour broker had work for them. It was
suggested by Monyela
that employment by a labour broker would have
meant that employees would on some days have spent money to travel
from the townships
to work and found that they were turned away on
the basis that there was no work on those days. This may well have
been so but the
fact of the matter is that, if the appellant was in
law entitled to use a labour broker - and it was not the respondents’
case
that the use of a labour broker in this case was unfair, there
is nothing that could be done about such an
eventuality. It is interesting that Monyela testified as
he did in regard to the second and further respondents’ attitude to
employment
by the labour brokers and subcontractors and yet in their
letter of the 17
th
September 1999 addressed to the appellant the second and further
respondents’ attorneys actually wrote, among other things, that
the
second and further respondents were entitled to be transferred to the
employment of the labour brokers and, I assume, subcontractors.
In my
view the second and further respondents’ loss of income arose out
of their refusal of the offer of employment by the subcontractor
and
labour broker and not from their dismissal. It seems to me that the
second and further respondents are, in this regard, the authors
of
their own misfortune.
[42] In
the light of the above there can, in my judgement, be no doubt that
the reason for the dismissal of the second and further
respondents
was a fair reason.
The Court a quo’s finding on substantive
fairness
[43] The Court a quo found that the dismissal of the
second and further respondents was substantively and procedurally
unfair. The
Court a quo dealt with the substantive fairness of the
dismissal in paragraphs 13 – 21 of its judgment. In par 17 of its
judgement
the Court a quo stated that the appellant had failed in its
letter of the 27
th
August 1999 to mention, or, to give motivation for, the dismissal of
“
all 14 yard workers
.”
It then stated that the appellant had failed to justify their
dismissal. It further stated that the appellant had, as an after
thought, sought to justify their dismissal on grounds of “
efficiency
and the financial situation as the main reasons.
”
I am unable to agree with the Court a quo that the appellant did not
justify the dismissal of the yard workers. The fact of the
matter is
that the appellant decided to use only a certain way of running its
business. That way of running its business meant that
it needed only
about three yard workers. It retained those three yard workers. The
respondents did not lead any evidence to show
that, after the
appellant had begun to rely only on three yard workers, the three
yard workers had more work than they could handle
and it had become
necessary to employ more workers.
[44] In par 18 of its judgment the Court a quo stated
that the appellant had not placed any evidence before it in support
of its contention
that the financial situation of Fauna was hopeless
and had been so for a considerable period. In my judgement the Court
a quo overlooked
the evidence given by Gibb on the financial position
of Fauna. That evidence was not challenged under cross-examination.
That evidence
was not contradicted by Monyela, the respondents’
only witness. Gibb testified in very clear and unequivocal terms
that, having
seen Fauna’s financial statements, he had no doubt
that Fauna was under considerable financial pressure. He also said
that he had
no doubt that, if he were to have applied the accounting
principles that were applied by the appellant’s group, Fauna would
have
been making huge losses. The respondents’ Counsel informed the
Court a quo during his cross-examination of the appellant’s
witnesses
that he had a witness statement from Mr Kruger and that he
could be calling Mr Kruger as a witness but he did not call him and
no
explanation was tendered as to why Kruger was not called to
contradict Gibb’s evidence that Fauna was under considerable
financial
pressure. It is also noteworthy that Counsel for the
respondents did not at any stage put it to the appellant’s
witnesses that
Kruger would testify that Fauna was making a profit.
He also did not put it to them that Kruger’s reason for selling the
business
had nothing to do with the financial pressure under which
Gibb said Fauna was operating.
[45] At any rate Fauna’s financial position was not an
important factor. Gibb made this very clear in his evidence when he
said
that Fauna’s financial position was only of a passing interest
to him. He explained the relevance of Fauna’s financial statements
to him as relating to getting to understand why Kruger was selling
the Fauna operation and not because Kruger was going to have any
impact on how the appellant operated the Fauna operation. Gibb made
it clear that the appellant was never going to run the Fauna
operation in the same way that Kruger had operated it. He said that
the appellant was always going to run the Fauna business in
accordance
with the appellant’s way of operating a car ferrying
business. It seems to me from paragraph 18 of the Court a quo’s
judgment
that that Court regarded the financial position of Fauna as
having been a significant factor in the determination of the question
whether there was a fair reason for the dismissal. It was not
significant at all.
[46] I am unable to follow paragraph 19 of the Court a
quo’s judgment. In paragraphs 20 and 21 the Court a quo said that
the appellant
had failed to prove that the drivers were “
subject
to peaks and valleys
.” I have already dealt
above with the issue of peaks and valleys and do not propose to add
to what I have already said. The Court
a quo also suggested by
implication that the appellant should have entertained the proposal
by the union that it postpone the retrenchment
consultation process
for some time so that its management could gain an understanding of
the Fauna business. The Court a quo had
no basis to criticise the
appellant in this regard because a reading of Gibb’s evidence makes
it abundantly clear that he had a
clear enough understanding of the
Fauna business to be able to say that he wanted to have nothing to do
with the manner in which
Kruger had been running the Fauna operation.
Gibb was part of the team that negotiated the purchase of the Fauna
operation with its
then owners. He had seen the financial statements
of the operation. He had had discussions with Mr Kruger. He was clear
in his own
mind that the Fauna business was not viable. It is also
clear from not only Gibb’s evidence but also from that of Du
Plessis that
the appellant had from the start wanted to integrate the
Fauna operation with its other operations such as the Volkswagen
contract
and to run it in accordance with the appellant’s way of
running a car ferrying business. It, therefore, seems to me that, the
reasons
upon which the Court a quo relied to support its finding that
the second and further respondent’s dismissal was substantively
unfair
are not sustainable and stand to be rejected.
Procedural fairness
[47] I have already said above that I agree with Mlambo
AJA that the dismissal was procedurally fair. I do so for the reasons
that
he gives in his judgment for that finding. However, I do want to
deal with two or so aspects in regard to procedural fairness. In
the
letter of the 17
th
September 1999 to the appellant, the respondents’ attorney accused
the appellant of having made the final decision to retrench
prior to
embarking on or completing the consultation process. This accusation
is without any merit. As has been said by this Court
in NE
HAWU
& others v University of Pretoria
[2006] 5 BLLR 437
(LAC)
at par 51 “
(s)ec 189 of the Act does
envisage that the employer may come to the first consultation table
with a proposal that can be said to
be not only his preferred
proposal but, indeed, one that he strongly views as the solution to
the problem.”
It seems to me that the
appellant approached the consultation with a strong view as to how to
deal with the employees from the Fauna
operation but as open to
different proposals if they were viable. That is why, although it
initially envisaged the dismissal of
almost all the employees, the
appellant changed its mind and retained 20 employees after the union
had disputed that the convoy drivers
were underutilised or were
subject to peaks and valleys. The appellant also increased the notice
period from one week to two weeks
after consultation with the union.
It also increased the severance pay. Whereas in terms of its first
proposal, an employee would
have received no severance pay for part
of a year as opposed to a completed year, it changed this and
committed itself to paying
a week’s pay for any part of a year.
[48] In my judgement, to the extent that the
consultation process failed to produce a consensus, this was not the
appellant’s fault.
In this regard it is important to remember that
Monyela’s evidence was that during the consultation the union’s
attitude was
that, as there was, as far as the union was concerned,
no need to retrench, the union was only interested in discussing two
issues,
namely, severance pay and notice pay and not any other issues
that are normally discussed at a retrenchment consultation. It was
the union which was not co-operating in the consultation process. It
ought to have discussed all issues even if this was done under
protest if it was not persuaded that there was a need to retrench. As
the union was not interested in discussing any matters at the
consultation meetings other than the two matters, it seems to me that
the Court a quo erred in criticising the appellant’s conduct
in
relation to the consultation process.
[49] The Court a quo stated in par 24 of its judgment
that the appellant did not comply with the requirement of sec 189 in
its letter
of the 27
th
August 1999 or in the subsequent consultations in that it had not
indicated what alternatives it had considered before proposing
dismissals and the reasons for rejecting each one of such
alternatives. It may be true that the appellant did not do this in
the
letter of 27 August but the union was free to ask the appellant
to disclose this if this was of any interest to it or if it felt
that
this prejudiced it in the consultation process. The union did not
complain about this because it was not interested or did not
feel
prejudiced by the omission.
[50] The Court a quo also said that the appellant did
not propose the method for selecting employees to be retrenched.
There is no
merit in this criticism because the appellant initially
intended all employees to be retrenched. Monyela’s evidence was to
the
effect that this was the union’s understanding as well. The
Court a quo also said that the yard workers were not disclosed as
likely
to be retrenched. Once again Van der Walt’s evidence was
that his understanding as well as that of the union at the
consultation
was that all employees, which would include the yard
workers, were candidates for retrenchment. Indeed, Counsel for the
respondents
did not argue this point about yard workers both in his
heads of argument and in his oral argument before us. The Court a quo
went
on to say that the selection criteria adopted by the appellant
was arbitrary. Counsel for the respondents did not advance this
argument
and, in my view, correctly so, on the facts of this case.
For these reasons and those given by Mlambo AJA in his judgment in
regard
to procedural fairness I am of the opinion that the appellant
acted procedurally fairly in dismissing the second and further
respondents
and the Court a quo’s finding to the contrary is one I
am unable to share.
[51] In conclusion I am of the opinion that the appeal
should succeed and the cross-appeal be dismissed. With regard to cost
I am
of the view that this is a matter where the requirements of law
and fairness dictate that there should be no order of costs. It was,
in my view, legitimate that the issues raised by this matter be
brought to court and be pronounced upon.
[52] In the premises I would make the following order:
The appeal is upheld.
The cross-appeal is dismissed.
There is to be no order as to costs on appeal and
cross-appeal.
The order of the Court a quo is set aside and replaced
with the following one:
“
1. The applicants’ claim is dismissed.
There is to be no order as to costs.”
Zondo JP
I
agree.
Davis
AJA
Appearances:
For
the appellant : Adv TJ Bruinders SC
Instructed
by : Bowman Gilfillan Inc
For
the respondent : Adv J G Van der Riet SC
Instructed
by : Cheadle Thompson & Haysom Inc
Date
of judgment : 16 August 2006
IN THE LABOUR APPEAL
COURT OF SOUTH AFRICA
(HELD AT JOHANNESBURG)
Case
No: JA 52/03
FORECOURT
EXPRESS (PTY) LTD Appellant
(Respondent
in the Court
a
quo
)
and
SOUTH
AFRICAN TRANSPORT AND
ALLIED
WORKERS’ UNION First Respondent
ABRAM
MONYELO AND 54 OTHERS Second and Further Respondents
(Applicants
in the Court
a
quo
)
__________________________________________________________
[1] This appeal concerns
the fairness of the dismissal of the individual respondents, by the
appellant, based on operational requirements.
The court
a
quo
found that the dismissal was substantively and procedurally
unfair
and ordered the appellant to pay the individual respondents
compensation of 12 months wages each but declined to reinstate
them.
This appeal, with the leave of the court a quo, is directed at the
finding that the dismissal was substantively and procedurally
unfair
as well as the compensation award. Leave was also granted to the
respondents to appeal against the order refusing to grant
reinstatement. In what follows, I set out the background of the
dispute between the parties.
[2] The appellant is a
third party logistics company involved in the business of ferrying
commercial and passenger motor vehicles.
It does not undertake the
actual ferrying but concludes contracts with subcontractors to
undertake the freight responsibilities
i.e. the collection and
delivery of the vehicles. What the appellant does is to supervise the
logistics of the freight of the vehicles.
In view of
conducting
business in this manner the appellant does not own carriers, nor
employ permanent staff such as drivers, and does not operate
mechanical
workshops.
[3] During 1999 the
appellant and Fauna Motorvervoer (Pty) Ltd (Fauna) concluded an
agreement for the sale of Fauna’s business to
the appellant, as a
going concern, for R12 million. The effective date of the
sale was 1 September
1999. The individual respondents were all, at that time, employed by
Fauna and they were members of the first
respondent (the union),
which had concluded a recognition agreement with Fauna.
[4] Fauna was a transport
company whose sole source of business was a contract with Daimler
Chrysler South Africa (Daimler) for the
ferrying of passenger and
commercial vehicles. The contract entailed that Fauna ferry those
vehicles from Daimler’s factory in
East London to dealers in
Gauteng. Commercial vehicles were driven by convoy drivers and
passenger vehicles were ferried by its fleet
of carriers from East
London to a holding site at Eikenhof in Gauteng from where they were
ferried, driven to or collected by Mercedes
and Honda dealerships in
Gauteng. Unlike the appellant, Fauna was directly involved in the
actual ferrying of the vehicles.
[5] Due to this direct
involvement in the freight (of vehicles)
business
Fauna owned a fleet of thirteen (13) carrier vehicles to undertake
the
freight
obligation between East London and Eikenhof. Fauna also employed
convoy and carrier drivers, workshop employees, yard and
administrative staff. The yard and administrative staff were
employed predominantly at its Eikenhof site, whilst the convoy and
carrier drivers,
as
well as yard inspectors were employed at the East London site. The
majority of the individual respondents who were dismissed were
employed at the Eikenhof site.
[6] Subsequent to the
conclusion of the sale and before the appellant took over Fauna’s
business, a meeting was held between the
appellant, Fauna and the
Union) on 20 August 1999. The purpose of that meeting was to inform
the Union of the acquisition of Fauna
by the appellant as well as the
latter’s intention to restructure the business. It was agreed at
that meeting that the appellant
and the union would meet on 26 August
1999 to consult regarding the appellant’s proposed changes to the
operations.
[7]
On 26 August 1999 the envisaged meeting took place but the
appellant’s proposals were not yet ready. It was agreed that the
appellant would send its proposals to the union per letter the next
day. Indeed on 27 August 1999 the appellant sent a letter to
the
union advising it of its contemplation to restructure the business as
well as detailing its restructuring proposals. The contents
of the
letter formed the basis of the discussions in the subsequent
consultation meetings. It is important therefore to provide a
comprehensive exposition of the restructuring proposals as expressed
in this letter.
[8] The letter stated
that the business could not continue to be operated on a viable basis
without restructuring it significantly
and that Fauna’s financial
performance had been less than satisfactory in the recent past; that
the way in which the freight of
vehicles was done by Fauna was costly
and inefficient and that significant peaks and valleys were present
regarding the demand for
the delivery of vehicles.
[9] The letter then set
out the following proposals:
[9.1] that five (5) of
Fauna’s thirteen carrier vehicles were old and no longer viable.
Based on this view the Appellant proposed
that they be sold to a
certain Mr Fourie;
[9.2]
that six (6) of the remaining vehicles be sold to a company called
Accurate Auto Ferriers with whom the appellant intended
to
subcontract for the freight of the vehicles in Gauteng. This proposal
would, in appellant’s view, reduce the appellant’s overhead
and
operating costs as the carrier vehicles would be owned by a different
company and would be contracted only on a demand basis.
[9.3] that
the remaining two (2) vehicles would be sold to owner/drivers with
whom the appellant intended to contract on the same
basis as with
Accurate Auto Ferriers;
[9.4] for
long distance ferrying the letter proposed that a sister company,
Highway Carriers, be subcontracted to undertake this responsibility.

The letter stated that Highway Carriers was the preferred
subcontractor because it would operate multi purpose carrier vehicles
which would ferry vehicles in one direction and general freight on
the return leg;
[9.5] the appellant
proposed not to employ any permanent staff due to its view that the
operation as it existed then was inefficient
and costly, with
significant peaks and valleys. The letter stated that as and when the
appellant needed staff it would source this
from a labour brokers.
[9.6] the
letter stated further that the implications of the aforegoing
proposals were that, if implemented, there be would no need
to
operate a workshop, meaning that the Fauna workshop would shut down;
[9.7] the
letter further stated that further cost savings would be achieved by
integrating the management of the Fauna operation with
the
appellant’s existing operations;
[9.8] the
letter mentioned that the implications of implementing the
appellant’s proposals, for employees, were that:
(a)
the appellant would negotiate with Accurate Auto Ferriers regarding
the possible employment of six (6) drivers to operate the
carrier
vehicles intended to be sold to Accurate Auto Ferriers, subject to
negotiating conditions of employment;
a further two (2)
drivers would be identified to take over the two carrier vehicles
proposed to be operated on an owner/driver subcontract
basis;
that this meant that a
total of eighteen (18) drivers would be surplus and should suitable
alternatives not be found it regrettably
meant that they would be
retrenched.
that an attempt would
be made to reach agreement with the labour brokers who would provide
temporary convoy drivers, to consider
employing drivers who had
become surplus. These drivers could be utilised on an ad hoc basis
in accordance with the demands for
the movement of vehicles in
convoy;
that should the workshop
be closed it would result in a total of eight (8) workshop employees
also becoming redundant and that should
suitable alternatives not be
found that they too would be retrenched;
that the proposed
integration of the administration and management functions with that
of the appellant would also render a number
of employees redundant
including the tea lady;
[10] The letter was
followed by the second consultation meeting on 7 September 1999 to
discuss the appellant’s proposals. At this
meeting the union
contended that the appellant could not retrench employees transferred
under s 197
1
of the Labour Relations Act No 66 of 1995 (“the Act”)
.
The union voiced its opposition to the proposed retrenchment because
it felt that the appellant was simply replacing its members
(the
individual respondents) with labour brokers.
[11] Though discussions
about severance packages were also entered into, no agreement was
reached on any aspect. The union’s proposal
was that a six (6) week
severance pay for every year worked and four
week’s
notice pay be paid to each retrenched employee as opposed to the
appellant’s proposal of one week severance pay and one
week’s
notice pay. The union’s proposal was however reduced after a caucus
to four week’s severance pay and two week’s notice
pay. On the
other hand the appellant raised its offer to one week’s severance
pay for every year or part thereof worked and two
week’s notice
pay.
[12] Apart from disputing
that convoy drivers were subject to peaks and valleys the union never
debated the proposed retrenchment
or need to retrench carrier
drivers, workshop employees or other employees in the bargaining
unit. This was due to its stance that
there was no evidence to
support the view that Fauna’s operation was costly and neither
profitable nor viable. Furthermore although
the appellant did not
give an indication when retrenchments were likely to take effect it
intimated that as far as it was concerned
the matter was urgent and
that it preferred that the restructuring and retrenchments be
finalised as soon as possible.
[13] The third
consultation meeting was held three days later on 10 September 1999.
At that meeting the union proposed that the appellant
hold over
retrenchments for six (6) months after which the necessity thereof
could be revisited. The union further proposed that
a bargaining
council sub-committee be set up to look into the employment of
sub-contractors. These proposals were not acceptable
to the appellant
in view of its stated position that it was financially unable to run
the Fauna operation without restructuring it
nor was it financially
able to tolerate the delay that would inevitably follow the
involvement of the bargaining council in a lengthy
mediation process.
The appellant also shifted from its position of retrenching all
employees and proposed to retain two yard attendants
at the Eikenhof
site and one inspector at the East London site. The union did not
debate this
proposal
was never debated by the union nor did it make any counter proposals.
However the union stuck to its reduced proposal of
four (4) week’s
severance pay for every year worked and two (2) week’s notice pay.
This was however not acceptable to the appellant.
[14] The last
consultation meeting was held on the 16
th
of September 1999. At this meeting the appellant shifted further from
its previous position proposing to retain all the seventeen
(17)
convoy drivers in East London. The appellant repeated its offer to
assist retrenches with jobs
as drivers with Accurate
Auto Ferriers and as owner/drivers with Cargo Africa as well as
pursue employment prospects on their behalf
with labour brokers.
This was not acceptable to the union.
[15] On 17 September 1999
the appellant wrote a letter to the union giving it notice of the
retrenchment of the individual respondents,
effective on 30 of
September 1999. The employees also received individual notices of
retrenchment to the same effect.
[16] The court a quo
appears to have favoured a stricter test in assessing whether the
appellant had established a commercial rationale
for the decision to
dismiss based on operational requirements.
2
The learned Judge then reasoned that from the evidence adduced it
was clear that, in terms of its business model, the appellant
did not
own carriers nor did it employ drivers; that it would not change this
model
despite
acquiring Fauna; that this model entailed the outright outsourcing of
carriers and the permanent use of labour brokers drivers;
and that
the
appellant
was only interested in the Daimler contract when it acquired Fauna.
[17] The court a quo
proceeded to find that as early as 23 August 1999, when the Fauna
sale was concluded, the appellant had already
concluded that it would
sell all existing carriers and engage the services of labour brokers
.
The
court a quo also noted that the appellant had omitted to include
fourteen 14 yard employees based at Eikenhof, in its retrenchment
proposals of 27 August 1999 and concluded that the appellant had
failed to justify the retrenchment of these employees.
[18] The court a quo
further found that the appellant had failed to place any evidence
before it in support of its contention that
Fauna’s financial
situation was hopeless. The court a quo also noted that the
appellant’s 1999 financial statements reflected
a loss of just over
R2 million but that despite this loss the appellant was still in a
position to purchase the Fauna business for
over R12 million. This
state of affairs led the court a quo to doubt the respondent’s
contentions that it was in a precarious financial
position justifying
the retrenchment of the individual respondents. Furthermore the court
a quo accepted evidence that even though
the Daimler contract
required the appellant to ferry its motor vehicles off wheels this,
however, was phased in over a period of
a year from the time the
appellant acquired Fauna. In that regard, so reasoned the court a
quo, there was no valid reason to retrench
all the Eikenhof drivers
at the same time in September 1999. The court a quo also found that
the appellant had failed to substantiate
its contention that drivers
were subject to peaks and valleys. In this regard the court a quo
reasoned that the appellant had made
this allegation in its proposals
of 27 August 1999 - ie a few days before it took control of the Fauna
operation and logically gain
sufficient knowledge about the Eikenhof
business activities. The court a quo further found that despite this
logical shortcoming
the appellant was not amenable to entertain
proposals for a delay of the restructuring process
to
allow the parties to (further) assess the Fauna business in order to
ascertain if there was in fact a real need to restructure
and to
retrench.
[19] Based on the
aforegoing reasoning the court a quo found that the appellant had
failed to discharge its onus of establishing
the existence of
commercially rational
reasons to dismiss based on operational requirements. The court a
quo further found that the appellant simply
replaced the individual
respondents with labour brokers in order to streamline the Fauna
operations to fit its business model.
[20] As far as procedural
fairness was concerned the court a quo found that the appellant had
also not complied with a fair procedure
before it dismissed the
individual respondents. In this regard the court a quo felt that the
appellant’s letter of 27 August 1999
and the subsequent
consultations disclosed no alternatives that the appellant had
considered before proposing the dismissals and
the reasons for
rejecting such alternatives; that there was no disclosure of the
method employed by the appellant for selecting the
employees it
intended to dismiss.
[21] The court a quo
further found that the appellant, in selecting employees to be
retrenched had failed to consider the last in
first out (Lifo)
method, the skills level of the employees, whether there were
employees close to retirement, proposing voluntary
retrenchment as
well as a consideration of general work performance and conduct. The
court stated in this regard that the selection
criteria adopted by
the appellant
were
arbitrary and that in the final analysis the dismissals were also
procedurally unfair.
[22] In this court and in
the heads of argument Mr Bruinders, counsel for the appellant,
submitted that the factual findings arrived
at by the court
a
quo
were wrong and were contradicted by the evidence adduced by the
appellant during the trial. The findings referred to being that:
the
appellant outsources carriers and permanently uses labour brokers as
convoy drivers; the appellant purchased Fauna – who had
previously
employed the employees – with the intention of replacing them with
labour brokers; the appellant did not adduce any
evidence of Fauna’s
financial situation and statements and that the appellant’s
evidence of Fauna’s financial situation was
a mere
ipse dixit
;
the appellant was not in any financial difficulty having been able to
acquire Fauna for R12 million ; the appellant’s June 1999
financials raised doubts about the true efficiency of the appellant’s
much vaunted business model; the appellant simply replaced
the
individual respondents with labour brokers to streamline the Fauna
operations to fit it’s business model; the appellant did
not
substantiate its contention that the delivery of new vehicles to
dealers was subject to peaks and valleys; the appellant did
not give
the Fauna business model some time to see if there was a real need to
retrench and that there was no valid reason to retrench
all convoy
drivers in September 1999 when ferrying vehicles off-wheels was
phased in over a period of one (1) year after that.
Mr
Bruinders submitted that these findings were not supported by the
evidence of the union and the employees.
[23] Mr Bruinders
further submitted that this court should follow the reasoning in
Kotze vs Rebel Liquor Discount Liquor Group (Pty)
Ltd (2000) 21 ILJ
129 (LAC) in assessing whether the appellant has established a
commercial rationale for the decision to retrench.
In this regard
counsel submitted that the appellant had a genuine commercially
rational reason for retrenching the individual respondents
and that
the retrenchment was not a sham or a manoeuvre to rid itself of the
individual respondents for a reason other than a genuine
and
commercial one.
[24] Mr Bruinders also
submitted, with regard to procedural fairness, that this court should
find that the appellant complied with
the ultimate purpose of Section
189 of the Act. In this regard counsel submitted that the appellant
truly engaged the respondents
in a joint consensus seeking process as
borne out by evidence.
[25] The questions to be
answered in this appeal therefore are whether the court a quo was
correct in finding that the appellant had
failed to establish the
existence of commercially rational reasons to dismiss, based on
operational requirements. Regarding the approach
to be adopted in
determining this aspect it is worthwhile to refer to the comments of
Van Niekerk AJ in Mababolo and Others vs Manchu
Consulting CC (1999)
20 ILJ 1826 (LC) at 1831 where he stated: “
The
first issue that the court is required
…
is the substantive fairness of the applicant’s dismissal. Section
188 of the Labour Relations Act 66 of 1995 (the LRA) requires
an
employer that dismisses an employee for reasons relating to
operational requirements to establish a fair reason for the
dismissal.
The approach adopted by this court is to require the
employer to provide substantive proof of a need to retrench in the
form of
a commercially rational and sustainable reason, but not to
question the commercial imperatives that underlay that decision,
unless
some ulterior
motive
is established. In other words, it is not the function of the court
to second-guess the employer’s decision to retrench.
It is not
appropriate to intervene only because the decision taken by the
employer was not the one to which the court would have
come in the
same circumstances
”.
The
other question is similarly whether the court a quo can be faulted
for finding that the dismissals were procedurally unfair. It
must
also be established whether the appellant has disclosed what
alternatives it considered which could have avoided the dismissals
altogether or minimised them and whether dismissal was the last
resort.
[26] It must be pointed
out that the case made out by the appellant in the court a quo and in
this appeal is that it is a third party
logistics company involved in
the business of ferrying motor vehicles; that it’s involvement in
the business is on the logistics
side: that it outsources the actual
freight of motor vehicles to other operators hence it did not own any
carrier vehicles nor employed
permanent staff for this purpose; that
it did not consider the Fauna business to be a viable proposition
without radical restructuring
entailing the reduction of a full time
payroll; that when the Fauna operation was acquired it was operating
at a loss and could not
recapitalise its fleet and further that it
had taken over all the debts of the business incurred up to the
effective date of the
sale and that it was obvious that the business
could not continue to operate for any period of time without radical
restructuring.
[27] This court has in
the in other matters dealt with the approach to be adopted in
deciding such matters. One case that comes to
mind is Chemical
Workers Industrial Union & Others vs Algorax (Pty) Ltd (2003) 24
ILJ 1917 (LAC). In that case Zondo JP stated
at paragraphs 69-70
that:
“
Sometimes
it is said that a court should not be critical of the solution that
an employer had decided to employ in order to resolve
a problem in
its business because it normally will not have the business knowledge
or expertise which the employer as a business
person may have to deal
with problems in the workplace. This is true. However, it is not
absolute and should not be taken too far.
When either the Labour
Court or this court is seized with a dispute about the fairness of a
dismissal, it has to determine the fairness
of the dismissal
objectively. The question whether the dismissal was fair or not must
be answered by the court.
The court must not
defer to the employer for the purpose of answering that question. In
other words it cannot say that the employer
thinks it is fair, and
therefore, it is or should be fair.
Furthermore, the court
should not hesitate to deal with an issue which requires
no
special expertise, skills or knowledge that it does not have but
simply requires common sense or logic, especially where the employer
has had an opportunity of commenting on such an issue and has not
said anything that indicates that any special knowledge or expertise
is required. This is such a case. The respondent’s problem
required simple common sense and did not involve any complicated
business
transaction or decision. Accordingly, where, as in this
case, the employer has chosen a solution that results in a dismissal
or
in dismissals of a number of employees when there is an obvious
and clear way in which it could have addressed the problems without
any employees losing their jobs or with fewer job losses, and the
court is satisfied, after hearing the employer on such a solution,
that it can work, the court should not hesitate to deal with the
matter on the basis of the employer using that solution which
preserves
jobs rather than one which causes job losses. This is
especially so because resort to dismissal, especially a so-called
no-fault
dismissal, which some regard as the death
penalty
in the field of labour and employment law, is meant to be a measure
of last resort.
”
[28] Simply put an
obligation is placed on any employer to avoid dismissing employees
for operational reasons if there are alternatives
which could avoid
or minimize the number of dismissals. The employer must consider
such other alternatives and must disclose its
reasons for rejecting
them. In the Algorax matter the following was also stated:
“
It seems to me that
the reason for the lawmaker to require all of these things from the
employer was to place an obligation on the
employer to only resort to
dismissing employees for operational requirements as a measure of
last resort. If that is correct, the
court is entitled to intervene
where it is clear that certain measures could have been taken to
address the problems without dismissals
for operational reasons or
where it is clear that dismissal was not resorted to as a measure of
last resort.”
[29] As pointed out above
the appellant’s case in the court a quo and in this court is based
partly on its business model of outsourcing
the freight of motor
vehicles and partly on the supposedly non viable and loss making
Fauna operation it acquired. Regarding the
appellant’s preferred
business
model the law is clear as espoused in the Mamabolo and Algorax
judgements (supra) that it is not for the court to second-guess
the
employer in how best to manage and restructure its business
operations.
[30] It is also clear as
stated in Algorax that even if a court is not expected to
second-guess an employer’s reasons, it remains
the court’s
function to answer the question whether a dismissal is fair and that
in answering the question the court should not
abdicate this
obligation simply because the employer says it acted fairly. An
examination of the evidence establishes that the appellant’s
proposals set out in its letter of 27 August 1999 were all carried
out save for the retention of seventeen (17) convoy drivers and
one
(1) yard inspector based in East London and two (2) yard employees in
Eikenhof.
[31] There
is no dispute that during the consultations more specifically at the
meeting of 10 September 1999 union proposed that the
appellant should
defer the dismissals for a period of some six (6) months to assess if
indeed the Fauna operation was not viable,
as alleged by the
appellant, and was making a loss and subject to peaks and valleys.
Based on this proposal the union also proposed
that a bargaining
council committee be drawn in to mediate the
employment
of labour brokers. This proposal was rejected by the appellant on the
basis that it was financially unable to run Fauna
as a transport
operation for six (6) months nor was it financially able to tolerate
the delay that would inevitably follow the involvement
of the
bargaining council in a lengthy mediation process.
[32] The rejection of the
deferral proposal has proven to be the appellant’s undoing in this
case. This is because the appellant’s
preferred mode of ferrying
motor vehicles was the so-called multi-purpose carrier vehicles, used
by Highway Carriers, which could
ferry motor vehicles in one
direction and general freight on the return leg. Highway Carriers
had, at the time of the retrenchment,
not yet acquired these multi
purpose vehicles. As things turned out it took some twelve (12)
months before these multi purpose vehicles
were in full use. In the
meantime whilst waiting for these multi purpose vehicles to become
operational and having retrenched the
individual respondents, the
appellant conducted the Fauna operation in the same way as Fauna did
but used labour brokers.
[33] This state of
affairs demonstrates, in my view, that the appellant acted unfairly
in refusing to defer the retrenchments either
as proposed by the
union or for the simple reason that the multi-purpose vehicles were
not available. That means that implementation
of that proposal in
September 1999 was premature. That this was unfair is also borne out
by the fact that the appellant turned a
whole business operation on
its head within a few days of acquiring it without running it for any
period of time to provide a more
objective view of the business’s
viability. This is demonstrative of unnecessary and unwarranted
haste particularly when one considers
that the appellant started
using labour brokers even before it dismissed the individual
respondents. The reason for using labour
brokers as early as that,
according to the appellant, was that it had a high vehicle delivery
demand at that time. Such a phenomenon
was
not unusual to the Fauna business. Monyela, the union witness,
stated that this was not unusual and that when a higher demand
for
deliveries was experienced yard employees would be expected to assist
with the delivery of vehicles.
[34] Section 189 provides
that:
“
(1) when an
employer contemplates dismissing one or more employees for reasons
based on the employer’s operational requirements,
the employer must
consult –
(a) any person whom
the employer is required to consult in terms of a collective
agreement;
the employer and the
other consulting parties must in the consultation envisaged by
subsection (1) and (3) engage in a meaningful
joint
consensus-seeking process and attempt to reach consensus on –
appropriate measures
–
to avoid the
dismissals;
to minimise the
number of dismissals;
to change the
timing of the dismissals; and
to mitigate the
adverse effects of the dismissals
the method of
selecting the employees to be dismissed; and
the severance pay for
dismissed employees.
…
..”
[35] In my view deferring
the dismissals by twelve (12) months was a viable alternative that
would have minimised and mitigated the
adverse effects of the
dismissals and the failure to change the timing thereof was clearly
unfair. The timing of the retrenchments
was therefore unfair as the
need for the services of the individual respondents remained for some
time after they were retrenched.
This court stated in Chemical
Workers Industrial Union and Others v Algorax (supra) that dismissals
should be a measure of last
resort.
In
casu
the dismissals were clearly not a measure of last resort, and that
renders them unfair.
[36] It must also be
pointed out that it cannot be said that the appellant’s proposals
that the retrenched employees could find
employment with labour
brokers were alternatives to dismissal. This is so because that
route still entailed loss of employment,
permanent for that matter,
with the appellant. Employment by labour brokers would be ad hoc at
most.
[37] The appellant sought
to justify the dismissals and their timing on Fauna’s alleged
financial woes and the supposedly unsustainability
of its operation.
This, as the court a quo found, was nothing more than an allegation.
Despite the valiant attempts of the appellant’s
witnesses, Gibbs in
particular, to paint a dismal picture of Fauna’s operation, this
foundered dismally. Save for Gibb’s unsubstantiated
allegations to
this effect no shred of evidence of this can be found in the record.
[38] The inability of the
appellant to produce evidence of the dismal state of the Fauna
operation is not surprising. It can be ascribed
to the appellant’s
adherence to its business model. It is because of this adherence that
it turned the Fauna business on its head.
Because of this it refused
to defer the dismissals until it had satisfied itself and
demonstrated to the union that Fauna’s financial
woes and the
supposedly unsustainability of its operation were real. Clearly
therefore the court a quo cannot be criticised for finding
that the
dismissal of the individual respondents were substantively unfair.
The appellant’s conduct in this matter is the clearest
demonstration that the appellant’s interest in Fauna was the
Daimler contract and nothing else. This was stated by its own
witnesses
who also stated that the reason Fauna was acquired as a
going concern was due to the insistence of Fauna’s erstwhile
owners. What
this shows is that the appellant was not about to
acquire a permanent workforce and the baggage this came with.
[39] As pointed out above
the appellant has the managerial prerogative to manage and direct its
operations. But the courts retain
the power to decree whether
anything done by an employer in the name of business alignment or
restructuring which leads to loss of
jobs was fair. The
determination of whether this was fair entails an examination of the
reasons relied on to undertake the restructuring.
In General Food
Industries Ltd v Food Allied Workers Union (2004) 25 ILJ 1260 (LAC)
this court, relying on the case of Fry’s Metals
(Pty) Ltd v
National Union of Metal Workers of SA & others (2003) 24 ILJ 133
(LAC), stated that it is not unfair for an employer
to restructure a
profitable business to make even more profit and remain competitive,
even if this leads to job losses.
[40] The court made that
statement in that case because it was satisfied that the employer had
established, not by simply alleging,
but by demonstrating that
restructuring would enhance the business and bring in more profit.
In casu all we have is the criticism
of the Fauna operation with no
demonstration how the restructuring was cost effective.
[[41] I must point out
that the respondents expressly disavowed reliance on Section 197 of
the Act in this case. I mention this for
the simple reason that no
mention is made in this judgement of the effect of this section of
the fairness or not of the appellant’s
conduct in dismissing
employees of a concern it acquired as a going concern even before
taking it over under the guise of restructuring.
It may well be that
this violates Section 197.
[42] In so far as
procedural fairness is concerned I am persuaded that the appellant
cannot be criticised. The evidence demonstrates
that it engaged the
union in an objective manner in a joint consensus seeking exercise.
That this was so is demonstrated by the
movement in stance regarding
the severance pay as well as the retention of at least twenty (20)
employees who had initially been
earmarked for dismissal. This
change of stance was influenced by the union’s input during the
consultation meetings. It appears
justified therefore to find that
the court a quo erred when it found that the dismissal was also
procedurally unfair. The court a
quo seems to have overlooked the
evidence regarding the consultation meetings as well as the limited
proposals emanating from the
union.
[43] In so far as the
relief aspect is concerned and more particularly the cross-appeal it
is correct that the appellant has shut
down the departments in which
the individual respondents were employed. It would therefore be
completely impractical in my view,
to order the reinstatement of the
employees, for this very reason. In any way I cannot fault the
exercise of the discretion of the
court
a
quo
to
award twelve (12) months compensation only. I propose to uphold
that order.
[44] A subsidiary issue
was raised by Mr Van der Riet, counsel for the respondents, relating
to the refusal of the court a quo to
award compensation to a number
of dismissed employees who did not file affidavits, like the others,
proving their loss after their
dismissal. Though Mr Van der Riet
raised this issue he did not press it, correctly so in my view as the
failure by this group of
respondents to file affidavits was fatal to
their cause. The court a quo cannot be faulted for excluding them.
[45] Regarding the issue
of costs it is my view that the appeal was fractionally successful.
This is in relation to the reversal of
the finding of procedural
unfairness. This reversal however has not influenced the compensation
award and for that reason, I hold
the view that overall, the appeal
was unsuccessful.
[46] Under
the circumstances the following the order is granted:
1.
The order of the court a quo is set aside and is substituted by the
following order:
‘
1. The dismissal of
the second to further applicants listed in annexure A on 30 September
1999 was substantively unfair.
2. The respondent is
ordered to pay compensation of twelve months each to the second to
further applicants listed in annexure A.
3. The respondent is
ordered to pay the costs of this matter.’
2. The appeal is
dismissed with costs.
3. The cross appeal is
dismissed with costs.
D
Mlambo
Acting
Judge of appeal
Date of judgment 13 September 2006
1
Section
197: ‘(2) If a transfer of a business takes place, unless
otherwise agreed in terms of ss (6) –
the
new employer is automatically substituted in the place of the old
employer in respect of all contracts of employment in existence
immediately before the date of transfer;
(b) all the rights and obligations between the old
employee and an
employee
at the time of the transfer continue
in force as if they had been rights and obligations between the new
employer and the
employee
;
(c) anything
done before the transfer by or in relation to the old employer,
including the
dismissal
of an employee or the commission of
an unfair labour practice or act of unfair discrimination, is
considered to have been done
by or in relation to the new employer;
and
(d) the
transfer does not interrupt an
employee’s
continuity of
employment, and an
employee’s
contract of employment
continues with the new employer as if with the old employer.’
2
The
court referred in this regard to the case of BMD Knitting Mills
(Pty) Ltd vs SACTWU
(2001) 7 BLLR 705
(LAC) and Nehawu and Others vs
the Agricultural Research Council and Others
(2000) 9 BLLR 1081
(LC)