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[2007] ZALAC 30
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Anglo Office Supplies (Pty) Ltd v Lotz (JA 32/06) [2007] ZALAC 30; (2008) 29 ILJ 953 (LAC) (22 November 2007)
20
IN THE LABOUR APPEAL COURT OF
SOUTH AFRICA
HELD IN JOHANNESBURG
Case no: JA 32/06
IN THE MATTER BETWEEN
Anglo Office Supplies (PTY)
LTD
Appellant
and
Roger Lotz Respondent
JUDGMENT
TLALETSI AJA
Introduction
[
1]
This is an appeal against a judgment of the Labour Court on a point
in limine
that was raised by the appellant against the respondent in relation
to a dispute concerning the dismissal
of
the respondent by the appellant which the respondent referred to the
Labour Court for adjudication. The nature of the
point in limine
will become clear later herein. The Labour Court dismissed the
point in limine
. The Labour Court refused a subsequent
application for leave to appeal. The appellant petitioned the Judge
President of this Court
for leave to appeal and this Court
subsequently granted the appellant leave to appeal to this Court
against the order of the Labour
Court.
[2]
The appellant is a duly registered company conducting, as part of
its business, retail of stationery products. The respondent
was
employed by the appellant as a sales representative in its retail
division. On the 3
rd
September 2004 the appellant
dismissed the respondent from its employ. The respondent was
aggrieved by such dismissal which he
regarded as unfair. Naturally,
the appellant regarded the dismissal as fair. A dispute arose between
the parties about the fairness
or otherwise of the respondent’s
dismissal. He referred the dispute to the Commission for
Conciliation, Mediation and Arbitration
(“CCMA”) for
conciliation. When attempts at conciliation failed, the respondent
referred the dispute to the Labour
Court for adjudication in terms of
sec 191(5) of the
Labour Relations Act
(Act 66 of 1995) (“the
Act”). In this regard the respondent duly served and filed his
statement of claim.
[3]
In due course the appellant served and filed its response to the
respondent’s statement of claim. Later it filed and
served an
amended response to the statement of claim. In the light of the
nature and effect of the point
in limine
that the appellant
took against the respondent, it is necessary to quote the relevant
allegations made by the respondent in his
statement of claim to found
his claim against the appellant. The respondent’s statement of
claim read thus:
“
3.
Statement of fact that will be relied on to establish the Applicant’s
claim
3.1
On or about 27 January 2003 the Applicant and the respondent, then
known as Double Option Trading 39 (Pty) Ltd entered into
an
employment contract whereby the applicant was employed as a Sales
Representative.
3.2
The Applicant performed his duties as set out in the employment
contract.
3.3
Double Option Trading 39 (Pty) Ltd at some point changed its name to
that of the Respondent.
3.4
At or about August 2004 the Applicant was requested by Howard Tucker,
(“Tucker”), the Managing Director of the Respondent,
to
attend an interview with a company known as Makulu Time Office
Products (Pty) Ltd (“Makulu”) as the retail division
in
which the Applicant worked was to be sold to Makulu.
3.5
The Applicant attended the aforementioned interview with, inter alia,
Makulu’s Managing Director, Neville Davies (“Davies”).
3.6
At the interview the Applicant discovered that the terms and
conditions of his employment with the Makulu would differ drastically
to that of the Respondent. The Applicant voiced his concerns to
Tucker related to the change in the terms and conditions of his
employment, Tucker, representing the respondent, failed to respond to
the Applicant’s concerns as aforementioned.
3.7
The Applicant was not offered a position of employment with the
Makulu under same or similar conditions enjoyed with the respondent,
or at all.
3.8
On 1 September 2004, the Respondent, represented by Tucker, notified
the Applicant that his employment had been terminated.
No
disciplinary hearing was held nor was the Applicant advised that he
had committed a dismissable offence.
3.9
Tucker wrote to the Applicant again on 3 September 2004 and advised
him that he did not work his notice period and thereby making
his
dismissal instantaneous.
3.10
The Application (sic) thereafter referred a dispute to the Commission
for Conciliation for (sic) Mediation and Arbitration
(“CCMA”),
which dispute remained unresolved after conciliation.
3.11
On 21 September 2004 Tucker wrote a letter to certain of the
Respondent’s clients stating that Makulu had purchased the
commercial stationery customer base of the Respondent and that the
purchase was effective on 1 October 2004.
3.12
The Applicant had performed his functions as a sales representative
within the commercial stationery division of the Respondent.
3.13
The Applicant’s average salary for the preceding six months was
R37 000 (THIRTY SEVEN THOUSAND RAND)
4.
LEGAL ISSUES THAT ARISE FROM THE FACTS
The
Applicant was unfairly dismissed without a substantive reason and a
proper procedure being followed. His dismissal was automatically
unfair in terms of Section 187(1)(g) of the LRA”.
The
relief sought by the respondent was twenty four months compensation
and costs of suit.
[4]
Section 187(1)(g) upon which the respondent relies for its claim
provides:
“
A
dismissal is automatically unfair if the employer, in dismissing the
employee, acts contrary to section 5 or, if the reason for
the
dismissal is-
(g)
a transfer, or a reason related to a transfer, contemplated in
section 197 or 197A;or”
[5]
Having set out the respondents’ relevant allegations in his
statement of claim, it is necessary to quote the
point in limine
that was taken by the appellant in its amended response to the
respondent’s statement of claim. The relevant part of the
response
reads as follows:
“
1A
POINT IN LIMINE
1A(i)
On the Applicant’s own version his employment with the
Respondent was terminated on or about 3 September 2004.
1A(ii)
The Respondent transferred as part of its business, namely the retail
operations, as a going concern to Makhulu Time Office
Products (Pty)
Ltd with effect from 1 October 2004.
1A(iii)
In terms of Section 197(2)(c) of the Labour Relations Act, anything
done before the transfer by or in relation to the old
employer (the
Respondent) including the dismissal of an employee or the commission
of an unfair labour practice or act of unfair
discrimination, is
considered to have done by or in relation to the new employer.
1A(iv)
In the circumstances, the Respondent is not liable to the Applicant
for the relief claimed in this Application and as such,
the
Respondent prays that the Applicant’s Application be dismissed
with costs”.
[6]
Section 197(2)(c) of the Act upon which the appellant relies
provides:
“
If
a transfer of a business takes place, unless otherwise agreed in
terms of subsection (6)-
…
..
…
..
Anything
done before the transfer by or in relation to the old employer,
including the dismissal of an employee or 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
…
.”
[7]
Subsequently, the parties agreed that the Labour Court should decide
the
point in limine
before the matter could go to trial on the
merits if in the end it would go to trial on the merits. In due
course the matter was
set down for argument on the appellant’s
point in limine
before the Labour Court. Heads of argument
were filed by the parties. It was agreed between the parties that for
purposes of the
adjudication of
the point in limine,
the
respondent’s allegations as contained in his statement of claim
would be regarded as correct.
Proceedings
in the Labour Court
[8]
The issue for determination before the Labour Court was whether the
provisions of sec 197(2)(c) of the Act could be interpreted
to mean
that the respondent should have properly instituted his claim of
unfair dismissal against Makulu (Pty) Ltd the new owner
of the retail
of the appellant’s business, as opposed to the appellant.
[9]
The appellant contended that since the respondent averred on his
papers that his dismissal was for a reason related to the transfer
of
a part of the business as a going concern, the provisions of Sec
197(2)(c) of the Act were automatically triggered. This, it
was
contended, meant that anything done by the appellant before the
transfer of the relevant part of the business to Makulu, including
the dismissal of the appellant, should be considered to have been
done by or in relation to Makulu. As a result, so went the argument,
the appellant was not liable to the respondent for the relief claimed
and the respondent should have cited Makulu and not the appellant.
[10]
The Labour Court expressed the view that there are sufficient
indications in the reported cases that not in every case of a
transfer in terms of section 197 would an employee be obliged to have
recourse against the new employer and that it is a matter
to be
determined with reference to the particular facts of each case. The
Labour Court accepted as critical the fact that the respondent
was
not included on the list of the employees to be transferred. This
fact, the Labour Court reasoned, suggested that the respondent
was
withdrawn from the transfer process. The Court further noted that one
particular employee who had been transferred and in respect
of whom
there appeared to have been a pending dispute, was singled out and
provision was made in the contract for the ‘handling
of his
case’, whereas no such provision was made in respect of the
appellant.
[11]
The Court a quo further remarked that it is not a
sine qua non
that the employment contracts of employees be transferred as well
for a transaction to qualify as a transfer of a business as a going
concern within the meaning of Sec 197 of the Act. It held that the
test is not whether the respondent was ultimately transferred,
but
whether his dismissal was for a reason related to the contemplated
transfer. The Labour Court dismissed the point
in limine
with
costs.
The
Appeal
[12] The
notice of appeal was filed 12 days out of time. The appellant has
filed an application for condonation which is opposed
by the
respondent. The reason for the delay is attributed to the financial
difficulties experienced by the appellant during the
course of
litigation of this case. This problem led to the appellant having to
suspend its decision to lodge the appeal pending
the sale of its main
assets to raise funds. It was only when the appellant was almost sure
that the purchase price was guaranteed
that it proceeded with the
appeal. In response, the respondent contended that the explanation
for the delay should be rejected.
It was contended that the appellant
could have noted the appeal which was not an expensive exercise at
least up to that stage and
only reconsider its financial position
thereafter to determine whether it could proceed with the appeal. It
was conceded by the
respondent’s counsel that the delay of 12
days in filing the notice of appeal was not excessive. There is also
no doubt that
the respondent did not suffer any prejudice as a result
of that delay of 12 days. It may well be that the appellant should
have
filed the notice earlier but, quite clearly, this is a case
where condonation should be granted even before a consideration of
the merits of appeal. Accordingly, I see no reason why the delay in
filing the notice of appeal should not be condoned.
[13]
The grounds of appeal relied upon in the notice of appeal are that
the labour court erred:
[13.1]
by finding that there are sufficient indications in the reported
cases that not in every case of a transfer in terms of section
197
would an employee be obliged to have recourse against the new
employer;
[13.2]
in not recognising that in terms of section 197(2)(c) of the Act the
new employer assumes liability, as a matter of law,
for “anything
done before the transfer by or in relation to the old employer
including the dismissal of an employee”;
[13.3]
in not recognising that any party that has some potential liability
of the kind outlined in section 197(2)(c) must be before
court to
answer to and/or oppose that potential liability;
[13.4]
in equity and or in law in dismissing the point
in limine
with
costs;
[14]
Before us, Counsel for the appellant contended that the Labour Court
should have found that the provisions of Section 197(2)(c)
of the Act
were applicable and as such the new employer assumed liability, as a
matter of law, for the dismissal of the respondent.
He submitted that
the relief sought is fatally flawed and cannot succeed against the
appellant as long as it is based on the facts
as contained in the
statement of claim. He submitted that Makulu should have been cited
as the respondent.
[15]
Upon a proper consideration of the appellant’s
point in
limine
what the appellant is saying in effect is that the
respondent’s statement of claim does not disclose any cause of
action against
it because, if the allegations contained therein are
true, the appellant dismissed the respondent for a reason connected
with the
transfer of the appellant’s retail division to Makulu
as a going concern. The appellant contends that, where an old
employer
as envisaged in sec 197(1) of the Act dismisses one of its
employees employed in a part of its business that is about to be or
is being transferred as a going concern to a new employer as
envisaged in sec 197(1) of the Act and such a dismissal is related
to
the transfer or a reason related to the transfer of such part of the
business, in terms of sec 197(2)(c) of the Act it is the
new employer
in this case Makulu who is liable for such dismissal and the employee
should sue such new employer and not the old
employer. As the
appellant is the old employer, so went the argument, it should not
have been sued. The reference to the appellant
being the old employer
and Makulu being the new employer is based on those concepts as used
in sec 197(1) of the Act.
[16]
For the purpose of properly considering the appeal it is convenient
to quote the relevant sections again.
[16.1]
Section 197(1) and (2) of the Act provides:
“
(1) In
this section and in section 197(A) –
“
business”,
includes the whole or part of any business, trade, undertaking or
service; and
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;
(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.”
(emphasis added)
[17.2]
Section 187(1)(g) of the Act upon which the respondent relied in his
statement of claim to contend that his dismissal was
automatically
unfair provides as follows:
“
A
dismissal is automatically unfair if the employer, in dismissing the
employee, acts contrary to section 5 or, if the reason for
the
dismissal is-
(g)
a transfer, or a reason related to a transfer, contemplated in
section 197 or 197A;or”
There
can be no doubt that the respondent’s reliance upon sec
187(1)(g) of the Act in his statement of claim means that his
case
was that the appellant dismissed him because of the transfer, or for
a reason related to the transfer of the retail division
to Makulu.
[18]
The predecessor to section 197(2)(c) which is the old section
197(2)(a) before section 197 was substituted by section 49 of
Labour
Relations Amendment Act
12 of 2002
read as follows:
“
If
a business, trade or undertaking is transferred in the circumstances
referred to in sub-section (1) (a), unless otherwise agreed,
all the
rights and obligations between the old employer and each employee at
the time of the transfer continue in force as if they
had been rights
and obligations between the new employer and each employee and,
anything done before the transfer by or in relation
to the employer
will be considered to have been done by or in relation to the new
employer.”
[19]
In his minority judgment in
National Education Health & Allied
Workers Union v University of Cape Town & others
(2002) 23
ILJ 306 (LAC)
(2002) 4 BLLR 311
(LAC)
Zondo JP
, interpreting
the provisions of the old
Sec 197(2)(a)
, laid down the principle as
follows at p 347D-F para [92]:
“
When
a business is transferred by one employer to another as a going
concern in solvent circumstances, neither the consent of the
employees nor that of the business transferor and business transferee
is required, before the contracts of employment of the employees
become contracts between each employee and the new employer unless
there is agreement with the workers or their representatives
to the
contrary, the new employer assumes liability for all the actions done
by the old employer in relation to each employee and
also acquires
any rights that the old employer may have had in relation to each
employee; for all intents and purposes the business
transferee takes
the position of the transferor.”
[20]
The above principle was unanimously approved by the Constitutional
Court on appeal in
National Education Health & Allied Workers
Union v University of Cape Town
(2003) 24 ILJ 95 (CC) at p 122 C
para [64] where it was held:
“
Reading
the section as a whole, and, in particular, having regard to the fact
that all rights and obligations flowing from employment
with the
transferring employer are transferred to the new employer in the case
of a solvent business; that in the case of an insolvent
business the
contracts of employment are transferred; that the transfer of
business does not interrupt the workers’ continuity
of
employment; the inference that the transferee employer takes over the
workers and that the transferee employer is, by operation
of law,
substituted in the place of the transferor employer is irresistible.
It follows by necessary implication”.
(The
case is also reported as
[2002] ZACC 27
;
2003 (2) BCLR 154
;
2003 (3) SA 1
(CC);
[2003] 5 BLLR 413
(CC).
[21]
The Constitutional Court held further that, if there was any doubt
about the principle referred to above, the new
section 197
puts
matters beyond doubt by providing that the ‘
new employer is
automatically substituted in the place of the old employer in respect
of all contracts of employment.’
[22]
The legal position enunciated in the above authorities makes it clear
that the new employer steps into the shoes of the old
employer by
operation of law. Unless there is agreement with the employees or
their representatives to the contrary, the new employer
assumes
liability for all the actions done by the old employer in relation to
each employee. This means that if an employee is
dismissed before the
transfer of a business or the relevant part of the business, the new
employer is liable for such dismissal
even though it is the old
employer who actually dismissed the employee. Indeed, all the rights
that the dismissed employee had
against the old employer at the time
of the transfer of the business, including the right to institute or
pursue legal proceedings
in a dismissal dispute, becomes a right that
he has against the new employer. Accordingly such an employee must,
where he has instituted
proceedings against the old employer, pursue
those proceedings against the new employer instead of the old
employer. The result
would be that if the dismissal is found, after
the transfer of the business, to have been unfair, any order of
reinstatement would
probably have to be made against the new
employer. See:
Transport Fleet Maintenance (Pty) Ltd & Another
v National Union Metal Workers of SA & Others
(2004) 25 ILJ
104 (LAC)
at p 114H to 115B;
[2003] 10 BLLR 975
;
[2004] 3 BLLR
199
(LAC);
National Education Health & Allied Workers Union v
University of Cape Town & others (LAC)
supra: at p343G-344A
para [80] and [81].
[23]
Counsel for the respondent submitted that the decision of the Labour
Court should be upheld for a number of reasons. He contended
that the
respondent was not part of the business unit that was transferred to
Makulu because his transfer was ‘withdrawn’
by the
appellant as he was not on the list of the employees to be
transferred. His second submission was that the provisions of
section
197(2)(c)
were not applicable in this case because the parties to the
sale agreement have, by implication, limited the liability of Makulu
to only employees listed in the schedule attached to the agreement as
part of the warranty clause. His third submission was that
this Court
should take an approach which creates the least uncertainty between
the parties. In this regard, he submitted that we
should find that,
because only part of a business had been sold to Makulu and that the
appellant continued trading, the respondent
should be deemed to have
been dismissed by the old employer unless there were clear
indications that it was the intention of the
parties that Makulu
accepted responsibility for the respondent.
[24]
It is evident from the statement of claim that the respondent
specifically based its cause of action on the fact that he was
dismissed within the context of a transfer of a business as a going
concern. At paragraph 4 of his statement of claim, under legal
issues
that arise from the facts, he stated that his dismissal was
automatically unfair in terms of ‘
section 187(1)(g)
of the
LRA.’
[25]
Because the parties agreed in the Labour Court that the point
in
limine
should be decided solely on the basis of the allegations
in the statement of claim and the sale agreement, the respondent
cannot
now change and say that his dismissal was not as he had
alleged in the statement of claim. Similarly, the Labour Court’s
conclusion that the respondent was withdrawn from the transfer
process is not supported by the agreed facts. Accordingly, the basis
upon which the respondent sought to take himself out of
sec 197(2)(b)
and (c) was one that fell outside the agreement of the parties that
the
point in limine
be decided on the basis that his
allegations in the statement of claim were true.
[26]
In my view, the picture which is sketched out by the respondent
places him squarely within the ambit of
section 197
of the Act. On
his own version he was informed in no uncertain terms that part of
the appellant’s business in which he was
employed was being
sold and that he attended an interview as part of the transfer of the
business unit. He, however, was dissatisfied
with the terms and
conditions at Makulu. On his own version his dismissal was connected
to the transfer of the business and at
the time of the transfer he
had a dispute pending with the appellant. Nowhere does he allege that
he reached an agreement with
the appellant that he would not be part
of the business unit to be transferred and that his dismissal could
not have been connected
to the transfer.
[28]
I find no merit in the submission that because only part of the
business was transferred the respondent should be deemed to
have been
dismissed by the appellant in order not to create an uncertainty.
There is no uncertainty in the statement of claim as
to the
circumstances that led to the respondent’s dismissal and what
transpired after his dismissal.
[29]
A reading of the respondents
statement of claim, the provisions of
sec 187(1)(g)
of the Act that
he refers to in his statement of claim and the provisions of
sec
197(2)(b)
and (c) of the Act reveals that the dismissal was for a
reason connected with the transfer. The respondent was told of his
dismissal
on the 3
rd
of September 2004.The sale agreement pursuant to which the retail
division was to be sold and transferred was signed on 8 September
2004 which was five days later. It seems from the statement of claim
that the dismissal was on notice because it is alleged that
he was
told after 3
rd
September 2004 that he did not need to serve his notice. If his
notice was a week’s notice, it seems that the dismissal took
effect after the sale agreement had been signed. If the notice was a
months notice, which is likely, then the notice period ended
in
October 2004 because it would either have begun running on 3 or 4
September 2004 in which case it would have ended on 3 October
or it
would have in law run from 1 October. In either case the dismissal
would have taken effect after the transfer of the relevant
part of
the business.
[30]
I therefore come to the conclusion that on the fact alleged in the
statement of claim, if the dispute were to go to trial and
the
respondent were to be successful no order would be competent against
appellant. The statement of claim as it stands does not
disclose a
cause of action against the appellant. The appeal should therefore be
upheld. With regard to costs I am of the view
that no order of costs
should be made in this case.
[31]
In the result I make the following order:
1.
The application for condonation for the late filing of
the
notice of appeal is granted.
2.
The appeal is upheld.
3.
There is to be no order as to costs on appeal.
4.
The order of the Labour Court is set aside and replaced with the
following order:
(a)
The
point in limine
is upheld.
(b)The
applicant is granted leave to amend his statement of claim, if so
advised within 30 calendar days from the 22
nd
November
2007 failing which his claim against the respondent will be deemed to
have been dismissed.
(c)
There is to be no order as to costs.
____________
Tlaletsi
AJA
I
agree.
______________
Zondo
JP
I
agree.
__________
Waglay
JA
Appearances:
For
the Appellant: Adv Graham
Instructed
by: Marshall Attorneys
For
the Respondent: Adv Lennox
Instructed
by: Moni Attorneys
Date
of Judgment: 22 November 2007