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[2012] ZALAC 43
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Ngema and Others v Screenex Wire Waring Manufactures (Pty) Ltd and Another (JA 1/2012) [2012] ZALAC 43; (2013) 34 ILJ 1470 (LAC) (12 December 2012)
Reportable
REPUBLIC
OF SOUTH AFRICA
IN
THE LABOUR APPEAL COURT OF SOUTH AFRICA, JOHANNESBURG
JUDGMENT
Case no: JA 1/2012
In the matter between:
JAFTA NGEMA and 24 OTHERS
......................................................................
Appellants
and
SCREENEX WIRE WARING
MANUFACTURERS (PTY) LTD
..............................................................
First
Respondent
SCREENEX MANUFACTURING (PTY) LTD
t/a JOHNSON SCREENEX
................................................................
Second
Respondent
Delivered: 12 December 2012
JUDGMENT
DAVIS JA
Introduction
[1] This is an
appeal, with the leave of the court
a
quo,
against
the judgment and order dismissing an application to substitute the
second respondent as judgment debtor in an action which
had been
brought against the first respondent, the old employer.
1
The second
respondent had never been joined in these proceedings which had been
finally disposed of by this Court prior to the present
application
being launched.
[2] This dispute is best understood
with reference to the chronology of relevant events, to which I now
turn.
The factual chronology
[3] During July and August 2005, first
respondent embarked on a retrenchment process with appellants. In
December 2005, first respondent
dismissed the appellants for
operational requirements. Appellants referred the dispute against
first respondent to the Labour Court.
During March 2006, the business
of the first respondent was sold as a going concern to the second
respondent. During August 2007,
the Labour Court ordered that the
appellants be reinstated by the first respondent. During September
2007, the shareholding in
the second respondent was sold to the
current owner. Accordingly, from that time on, the second respondent
traded as Johnson Screenex.
In September 2009, this Court dismissed
an appeal by the first respondent against the reinstatement order
which had been made by
the Labour Court against first respondent.
During May 2010, the appellants brought an application in which they
sought to substitute
the second respondent as judgment debtor in this
reinstatement order; hence the present proceedings.
[4] These facts therefore raise the
following issues which require determination in this appeal.
1. Is the effect of s 197 of the
Labour Relations Act 66 of 1995 (‘LRA’) to automatically
effect a joinder or substitution
of the new employer as a judgment
debtor in relief obtained against the old employer?
2. Does s197 have an effect of
trumping established principles relating to joinder as set out in
Amalgamated Engineering Union v Minister of Labour
1946 (3) SA
637
(A)?
Section 197 of the LRA
[5] To the extent that it is relevant
to this dispute, s197 of the LRA provides thus:
‘
197
Transfer of contract of employment
(1)
In this section and in section 197A-
(a)
“business” includes the whole or a 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;
(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 in 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.’ (my
emphasis)
[6] The effect of this section has
been canvassed in numerous decisions of our highest courts. See, for
example,
NEHAWU v University of Cape Town and Others
2003 (2)
BCLR 154
(CC) at paras 62 – 65. Jones AJA in
Telkom SA Ltd
and Others v Blom and Others
set out the current position thus:
‘
[This]
section brings about a statutory assignment of the employment
contracts. The result is similar to the situation where a new
owner
becomes
ex
lege
the
substituted lessor of leased premises.’
2
[7] As the decisions make it clear,
the very purpose of s 197 is to ensure an automatic transfer of
employment contracts from the
old to the new employer, in which the
transfer of the business as a going concern takes place and existing
workers are protected
against a loss of employment when the business
is so transferred. See, in particular,
NEHAWU v University of Cape
Town and Others
,
supra
at para 62 – 63.
[8] It must follow, pursuant to this
provision, that the employees who were dismissed before a transfer of
the business took place
may enforce their claims against the new
employer. See
Anglo Office Supplies (Pty) Ltd v Lotz
(2008) 29
ILJ 953 (LAC) at paras 19 – 22.
[9] The present dispute sensibly does
not concern a criticism of this jurisprudence. Rather it relates to a
point that flows from
the transfer of rights and obligations
ex
lege
from the old employer to the new employer, namely, if the
new employer is automatically substituted in any litigation in place
of the old employer so that the employees acquire a claim against the
new employer, does it follow that this claim is enforced merely
by
operation of law or do the employees need to proceed against the new
employer in order to enforce their claim?
[10] The court
a quo
answered
these questions in the negative. It found in this case that the
transfer of the business occurred after the dismissals
but before the
dispute was heard in the Labour Court. La Grange J pointed out that
when the matter, brought by the first respondent
against the
reinstatement order, proceeded on appeal in this Court:
‘
[i]t
is apparent that by then the individual applicants have been made
aware of the transfer which had taken place. At that point,
even
though it was at the appeal stage, they ought to have applied for
second respondent to be joined in these proceedings but
they did not…
Even if the second respondent could not have disputed the fairness of
the dismissals, it ought to have been
heard on the question of relief
which after all is something that could directly affect it and not
merely in a financial sense
.’
at paras 21 and 24 of the judgment of the court
a
quo
.
Evaluation
[11] Mr Nalane, who appeared on behalf
of the appellants, submitted that if the old employer’s
obligations are transferred
to the new employer
ex lege,
it
must follow that they are automatically enforceable by the employees
against the new employer. By contrast, Mr Redding who appeared
with
Mr Fourie on behalf of second respondent submitted that neither s 197
nor the authorities on point hold that, by operation
of law, the new
employer is automatically substituted in any litigation against the
old employer. While the employees may acquire
a claim against the new
employer by operation of law it does not follow that the claim is
enforced by operation of law.
[12] Mr Nalane’s submission
finds support in the approach which this Court adopted in the
Lotz
case
supra
. In that case, the court was confronted with a
point
in limine
to the effect that as the respondent had
transferred its business a month after an employee’s contract
of employment with
respondent had been terminated in terms of s 197
(2) (c) of the LRA, it was not the respondent, who was liable to the
applicant
for the relief claimed, but rather the new employer who had
taken over the business, subsequent to the termination of the
employee’s
employment. In upholding this point, Tlaletsi JA (as
he then was) said at para 22:
‘
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 all legal proceedings in a dismissal dispute,
become 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, in
any order of reinstatement would probably have to be made against the
new employer
.’
[13] That
dictum
is directly
applicable to the present dispute. The appellants manifestly enjoyed
the same rights against the new employer as they
held against the old
employer by operation of law, namely s 197 of the LRA. But that did
not mean that there was no requirement
that the employees as holders
of these rights should not be required to pursue them against the new
employer, if they wished to
enforce them against the latter party. As
Navsa JA stated in
Ex Parte Body Corporate of Caroline Court
2001 (4) SA 1230
(SCA) at para 9:
‘
It
is a principle of our law that interested parties should be afforded
an opportunity to be heard in matters in which they have
a direct and
substantial interest.’
See
also
Amalgamated
Engineering Union
,
supra
at 651
.
[14] In this case, the second
respondent must, save if there is an express exclusion of its rights
in terms of the LRA, enjoy the
same rights to be heard as is set out
in these
dicta
. There is no express exclusion in the LRA that
an interested party, such as second respondent, should not be
afforded an opportunity
to be heard in a matter where it has a direct
and substantial interest. In this case, the dispute was no longer
about whether the
appellants had been unfairly dismissed. That issue
had been disposed of by this Court in the judgment of Zondo JP who
dismissed
an appeal against the judgment and order of Hendricks AJ to
the effect that the dismissal of the appellants was both procedurally
and substantially unfair. That did not mean that the second
respondent did not have right to be heard with regard to the question
of the appropriate remedy.
[15] While reinstatement may be the
default position, pursuant to a finding that employees such as
appellants had been unfairly
dismissed, s 193 (2) of the Act provides
for circumstances where the Labour Court may refuse to reinstate or
reemploy the employees
in question. Accordingly, second respondent,
at the least, was entitled to be heard on the specific question of
relief. The appellants’
proper course of action should
therefore have been to ensure that the second respondent was joined
to the proceedings so that it
could be heard on a matter in which it
had a direct or substantial interest namely the appropriate relief.
[16] This conclusion follows the
approach adopted by this Court in the
Lotz
case,
supra
,
which judgment is, in my view, correct and must be followed in the
present dispute.
Waiver
[17] In an alternative argument, the
appellants contended that the second respondent had waived any rights
that it might have had
to be joined in the retrenchment proceedings
because it was aware of these proceedings and chose not to react. The
only evidence
which appellants were able to produce in this
connection was a letter on 09 June 2009 which was generated by the
old employer’s
attorneys. There is nothing in that letter which
suggests that second respondent had waived its rights to be heard in
the present
dispute. The letter does not amount to a representation
by the second respondent that it had agreed to submit to and be bound
by
any judgment which had been given by the Labour Court or the
Labour Appeal Court in the earlier proceedings.
[18] Understandably much was made by
the appellants that they have suffered as a result of the finding of
the court
a quo
. There can be no question that the failure to
join the second respondent has worked to the significant prejudice of
the appellants.
However in this case, the appellants were assisted by
their union and thus had the benefit of legal advice. Furthermore,
the business
of the first respondent was sold as a going concern more
than a year and a half before an order was granted by the Labour
Court
during August 2007 to the effect that the appellants must be
reinstated by the first respondent. Appellant’s and their
representative
had more than a fair opportunity to have properly
joined the second respondent in proceedings in which it had a direct
and substantial
interest.
[18] For all of these reasons
therefore, there is no basis by which appellants would be entitled to
substitute the second respondent
as judgment debtor. The appeal is
dismissed with costs, including the costs of two counsel.
_____________
Davis JA
Hlophe AJA and Landman AJA concurred
with this judgment.
APPEARANCES:
FOR THE APPELLANTS: Advocate F Nalane
INSTRUCTED BY: Maserumule Inc
FOR THE SECOND RESPONDENT: Advocate
Redding SC
INSTRUCTED BY: Glyn Marais Inc
1
The
judgment is cited as
Ngema and Others v
Screenex Wire Weaving registered as Screenex Manufacturing (Pty) Ltd
and Others
(2012) 33 ILJ 681 (LC).
2
2005
(5) SA 532
(SCA) at para 8.