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[2007] ZALAC 38
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Zikhethele Trade (Pty) Ltd v COSAWU obo Members and Others (CA7/2005) [2007] ZALAC 38; (2007) 28 ILJ 2742 (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)-
(a)
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 being 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 respondent, 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.
(b)
the application is struck off the roll.
(c)
In so far as it may be necessary, leave is
hereby granted for the joinder of Fresh Produce Terminals in this
application.
(d)
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