Zikhethele Trade (Pty) Ltd v COSAWU and Others (CA 7/2005) [2007] ZALAC 17; [2008] 2 BLLR 163 (LAC) (29 June 2007)

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[2007] ZALAC 17
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Zikhethele Trade (Pty) Ltd v COSAWU and Others (CA 7/2005) [2007] ZALAC 17; [2008] 2 BLLR 163 (LAC) (29 June 2007)

IN THE LABOUR APPEAL COURT OF SOUTH AFRICA HELD AT
JOHANNESBURG
CASE NO: CA 7/2005
IN THE MATTER BETWEEN
ZIKHETHELE TRADE (PTY) LTD APPELLANT
AND
COSAWU FIRST RESPONDENT
(on behalf of its members)
FAIZEL BARDIEN N.O SECOND RESPONDENT
In his capacity as trustee of Zelpy
2178 (pty) Ltd Formerly trading as
Khulisa Terminal Services
(in liquidation)
JURGENS JOHANNES STEENKAMP THIRD RESPONDENT
In his capacity as trustees of Zelpy 2178
(Pty) Ltd formerly trading as Khulisa
Terminal Services
(in liquidation)
JUDGEMNT
JAPPIE AJA
[1] This matter came before this
Court on the 7
th
November 2006.Up until then the matter had been unopposed but when
the matter was called the first respondent, the Commercial Services

and Allied Workers Union (COSAWU), through its attorneys, sought an
adjournment so that it could present argument in the appeal.
Having
heard argument in the application for the adjournment we came to the
conclusion that no sound reasons existed for the matter
to be
adjourned and the application was accordingly refused. Nevertheless,
the first respondent was afforded an opportunity to
deliver written
argument in response to the argument delivered in court on behalf of
the appellant, Zikhethele Trade (Pty) Ltd.
In due course this was
done.
[2] The appellant appeals against a
judgment of the Labour Court sitting in Cape Town delivered by Murphy
AJ. The Labour Court granted
a declaratory order declaring that
certain members of the first respondent, based in Cape Town and
identified in a list annexed
to the Notice of Motion, were in the
employ of the appellant. Further, it was declared that all the rights
and obligations between
Khulisa Terminal Services (“Khulisa”), a
company in liquidation and under the trusteeship of the second and
third respondents,
and the above mentioned members of the first
respondent, as at 31
st
March 2005, continued to be in force as if they had been rights and
obligations between the appellant and the aforesaid members
of the
first respondent.
BACKGROUND
[
3] The
first respondent had represented 181 employees of Khulisa then
working at the harbours in Cape Town, Port Elizabeth and Durban.
It
was the business of Khulisa to supply terminal and stevedoring
services to a company known as Fresh Produce Terminals (“FPT”)
at
the aforementioned three ports.
[4] Up until 2000
the first respondent’s members had been employed directly by FPT
when the latter decided to outsource the terminal and stevedoring

services, as part of a Black Economic Empowerment initiative, to
Signal Hill Manpower Specialist (Pty) Ltd (“Signal Hill”)
to
which some of the first respondent’s members were transferred in
terms of section 197 of the Labour Relations Act 66 of 1995(“the

Act”).
[5] Signal Hill performed the terminal services in Cape
Town and in Durban. In Durban, Signal Hill outsourced the terminal
services
to a company known as Sizonke Logistics (Pty) Ltd. In Cape
Town, Signal Hill outsourced the terminal services to a company known

as Evening Rainbow (Pty) Ltd. This company was then headed by Mr
Nathi Mfundisi (“Mfundisi”) who is current managing director
of
the appellant.
[6] The contracts for the rending of
terminal services at the various harbours terminated on the 28
th
February 2004. FPT at that stage proposed that the three different
companies, i.e. , Evening Rainbow (Pty) Ltd, Sizonke Logistics
(Pty)
Ltd and Signal Hill Manpower Specialist (Pty) Ltd should merge to
form one company to provide the total services solution
at all the
three harbours. To give effect to this proposal Khulisa was formed in
or about January 2004. Mfundisi occupied the position
of managing
director, whilst Mr Johan Immelman (“Immelman”) became the
operations director thereof.
[7] FPT and Khulisa subsequently entered into an
agreement in terms of which Khulisa would provide the terminal
services at the
three harbours.
[8] A dispute arose between management and employees of
Khulisa which caused FPT to terminate its agreement with Khulisa. FPT
embarked
on a tender process and invited the two factions within
Khulisa, being the “Mfundisi faction”, on the one hand, and the
faction
headed by Immelman, on the other, to tender for the terminal
services.
[9] Two
new companies were formed. Mfundisi formed the appellant and Immelman
revived a shelf company known as Business Venture Investments
No. 829
(Pty) Ltd trading as Signal Hill Operation Services. Both companies
tendered for the contract to provide terminal services
for FPT. It
was agreed that Khulisa would continue with the operations until 31
st
March. Thereafter, either Immelman’s or Mfundisi’s company would
take over the operations and step into the shoes of Khulisa
from the
1
st
April 2005.
[10] At the time most of the Cape Town members of the
first respondent pledged their support to Immelman while those
employees
in Durban and Port Elizabeth did not express an allegiance
either way.
[11] On the 14
th
March 2005 FPT awarded the contract to be the national services
provider in respect of all terminal and stevedoring services to
the
appellant.
[12] Correspondence was entered into
between the first respondent and the appellant seeking clarity as to
whether Khulisa’s employees
were to be retrenched in terms of
section 189 of the Act or whether they would be transferred
automatically to the appellant.
[13] On the 1
st
April 2005 the appellant notified all the employees of Khulisa in
Cape Town that they would be seconded to the appellant as from
the
1
st
April until the 11 April 2005.
[14] The secondment was extended
pending the outcome of proceedings in the High Court, Cape of Good
Hope Provincial Division, between
Business Venture Investment and
FPT, in which proceedings Business Venture Investments had sought to
interdict the implementation
of the tender that had been awarded to
the appellant by FPT.
[15] The appellant then invited
those members of the first respondent who were in the employ of
Khulisa to apply for employment
with the appellant. It notified the
first respondent’s members that the appellant would decide who to
employ and would notify
those who had applied for employment of its
decision. The appellant eventually employed 104 out of the 147
former Khulisa employees
in Cape Town and further employed all former
Khulisa employees in Durban and Port Elizabeth.
[16] It is against this background
that the first respondent contended that the business of Khulisa had
been transferred to the
appellant as a going concern and that all
employees of Khulisa had been transferred, through the operation of
law, into the employ
of the appellant. This was said to have occurred
in terms of section 197 of the Act.
Proceedings
before the Labour Court
[17] In the Labour Court the first
respondent sought a declaratory order declaring that the contracts of
employment which had existed
between its members in Cape Town and
Khulisa as at the 31 March 2005 were automatically transferred to the
appellant. The first
respondent contended that the contracts were automatically
transferred in terms of section 197(2) of the Act. It is convenient

to quote both subsections 1 and 2 of section 197.
They read as follows-:
“
(1)
In this section and in section 197A-
(a)
‘business’
includes the whole or part of any business, trade,
undertaking
or service and
(b)
‘transfer’
means the transfer of a business by one employer (‘the old
employer’) to another employer (‘the new employer’)
as a going
concern.
(2) If a
transfer of a business takes place, unless otherwise agreed in terms
of
subsection
(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 employer 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;”
[18] The appellant argued that the
Court a quo
should have first dealt with certain procedural aspects of the
application before it considered the merits of the application and

raised four points in limine in its opposition to the application.
One of the points in limine raised by the appellant was that
there
had been a non-joinder of FPT. The appellant argued that, if a
transfer of the contracts of employment had occurred as envisaged
in
section 197 of the Act, such a transfer would have occurred as a
result of FPT”s conduct in cancelling the contract it had
with
Khulisa and then awarding the same to the appellant. If there was a
transfer of business or services as envisaged by section
197 of the
Act, then that would be the transfer of FPT’s business or service.
It was argued, therefore, that FPT clearly had
a direct and
substantial interest in the court proceedings. FPT might wish to
resist any proceedings aimed at declaring that what
it did in
cancelling the contract with Khulisa and awarding it to the appellant
attracted the provisions of section 197 of the
Act. If such an order
was made without FPT having been joined or being given an opportunity
to indicate that it would abide the
decision of the Court, FPT would
not be bound by such an order and it would be entitled to seek to
have such an order set aside.
[19] The Labour Court saw no merit in
the point in limine and dismissed it. It then granted the first
respondent the declaratory
order it sought. The appellant then
applied for and was granted leave to appeal to this Court.
The
Appeal
[20] Before this Court, counsel for
the appellant submitted that the
Court
a quo
had erred in
dismissing the point of non-joinder. He submitted that quite clearly
FPT had a substantial and legal interest in the
proceedings before
the
Court a quo.
Essentially counsel
for the appellant advanced the same argument that was presented
before the
Court a
quo
on this point.
[21] In its written heads of
argument, submitted after the date on which the appeal was heard, the
first respondent did
not
at all address the point of the non-joinder of FPT. It made no
submissions in this regard.
[22
] The
Court a quo
had
concluded that the transfer from Khulisa to the appellant took place
in two phases and stated its conclusion as follows-:
“
In
the premises I am satisfied on the facts and in the circumstances of
this case that a transfer of business took place in two phases
when
FPT cancelled the contract with Khulisa with effect from 31
st
March 2005 and then granted the contract to Zikhethele with effect
from 1
st
April 2005. As a consequence, Zikhethele was automatically
substituted in place of Khulisa in respect of all contracts of
employment
in existence on 31
st
March 2005 and all the rights and obligations between Khulisa and its
employees continued in force as if there had been rights
and
obligations between Zikhethele and the employees
”
[23
] In
Khumalo v Wilkins
and Another
1972 (4) SA 470
(N)
Milne. J at 475A stated the position in regard to the necessity of
joining parties in proceedings in which they have an interest
as
follows-:
“
In my
view, once it is shown that the a party is a necessary party in the
sense that he is directly and substantially interested
in the issues
raised in the proceedings before the court and that his rights may be
affected by the judgment of the court and the
court will not deal
with those issues without such joinder being effected and no question
of discretion nor of convenience arises.
”
[24
] In
my view it is implicit in the findings of the
Court
a quo
that, when
FPT cancelled the contract with Khulisa on the 31
st
March 2005, the employees of Khulisa were then transferred to FPT and
when FPT then granted the stevedoring contract to the appellant
with
effect from the 1
st
April 2005, the employees were then transferred from FPT to the
appellant. FPT thus had direct interest in the proceedings before
the
Labour Court.
[25] That b
eing
the position the
Court
a quo
ought to have
held that FPT had a direct and substantial interest in the
proceedings before the Court. It would appear that the
Court
a quo
failed to
appreciate that the order which it made would have legal consequences
for FPT. The
Court a
quo
ought not to
have proceeded with the application without FPT being joined as a
party. Accordingly, it erred in granting the order
which it granted
without FPT having been joined or having indicated that it would
abide the decision of the Court.
[26] The appellant sought the leave
of this Court to lead further evidence in this matter. It was argued
that as the application
in the
Court
a quo
had been
brought as a matter of urgency the appellant was unable, due to time
constraints, to place all relevant material evidence
before the
Court
a quo.
The evidence
which the appellant sought to lead was set out in an affidavit
deposed to by Mfundisi. In the said affidavit Mfundisi
alleges that
those members of the first respondent whom the first respondent
sought to declare as being in the employ of the appellant
had
expressly stated and had, through their conduct, made clear that they
did not wish to be transferred into the employ of the
appellant. In
seeking to lead this further evidence the appellant submitted that
the facts outlined above constituted circumstances
which, could have
materially altered the finding of the
Court
a quo.
[27
] As
I have already concluded that the
Court
a quo
had erred in
proceeding with the application without FPT being joined in the
proceedings, it is unnecessary for this Court to deal
with the other
remaining issues raised by the appellant in this appeal including the
application to lead further evidence. In light
of the above the
appeal must succeed. The
Court
a quo
should have
upheld the objection to the non-joinder of FPT. This does not mean
that the
Court a quo
should have dismissed the application. It should simply have struck
it off the roll to enable the party which had brought the application

to join FPT. If need be, the
Court
a quo
could also
have granted leave for FPT to be joined.
[28] The first res
pondent,
in its written heads of argument, has argued that this Court should
not award any costs in this matter in the event of
the appeal being
upheld. It has submitted that the first respondent is a small and
“financially fragile trade union”. It has
further argued that it
is in the public interest for it to defend the judgment of the
Court
a quo.
In the light
of all the circumstances of this case including the fact that the
appeal was not opposed until the eleventh hour,
it seems to me that
the requirements of the laws and fairness dictate that no order as to
costs should be made.
[29] In the result I make the following order:
1. The appeal is upheld.
2. The
order of the Labour Court is set aside and replaced with
the following order-:
“(a) the objection to the
non-joinder of Fresh Produce
Terminals is hereby upheld
.
the application is struck off the roll.
In so far as it may be necessary, leave is hereby
granted for the joinder of Fresh Produce Terminals in this
application.
There is to be no order as to
costs.”
Jappie AJA
I agree.
Zondo JP
I agree.
Khampepe AJA
Date of Judgment: 29 June 2007
On behalf of the Appellants: Adv. G.O van Niekerk SC
Instructed by Mundell incorporated
Cape Town
On behalf of the Respondents: Mr D. Cartwright
Instructed by
David Cartwright Attorneys
Johannesburg
12