TMS Group Industrial Services (Pty) Ltd t/a Vericon v Unitrans Supply Chain Solutions (Pty) Ltd and Others (JA58/2014) [2014] ZALAC 39; [2014] 10 BLLR 974 (LAC); (2015) 36 ILJ 197 (LAC) (6 August 2014)

About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Labour Appeal Court
SAFLII
>>
Databases
>>
South Africa: Labour Appeal Court
>>
2014
>>
[2014] ZALAC 39
|

|

TMS Group Industrial Services (Pty) Ltd t/a Vericon v Unitrans Supply Chain Solutions (Pty) Ltd and Others (JA58/2014) [2014] ZALAC 39; [2014] 10 BLLR 974 (LAC); (2015) 36 ILJ 197 (LAC) (6 August 2014)

REPUBLIC OF SOUTH
AFRICA
IN THE LABOUR APPEAL
COURT OF SOUTH AFRICA, JOHANNESBURG
Reportable
Case no: JA58/2014
In the matter between:
TMS GROUP INDUSTRIAL
SERVICES
(PTY) LTD T/A
VERICON                                                                                           Appellant
and
UNITRANS SUPPLY CHAIN
SOLUTIONS (PTY) LTD                                 First

Respondent
UNITRANS HOUSEHOLD
GOODS
LOGISTICS (PTY)
LTD                                                                            Second

Respondent
NAMPACK GLASS (PTY)
LTD                                                                    Third

Respondent
AFFECTED EMPLOYEES
LISTED IN (“A”)
TO THE NOTICE OF
MOTION                                              Fourth

to Further Respondents
Heard:
24 June 2014
Delivered:
06 August 2014
Summary: Transfer in
terms of s197 of the LRA- Employer entering into warehousing
agreement with new transferee after termination
of initial
warehousing agreement with old transferee. New transferee carrying on
the same warehousing activity previously conducted
by former
transferee, using transferor’s computer systems and other
equipment . New transferee performing the services on
the premises of
transferor. Evidence justifying conclusion that there was a transfer
of a business as a going concern from the
old employer to a new
employer. Court
a quo
’s judgment upheld. Appeal
dismissed with costs.
Coram: Waglay JP,
Tlaletsi DJP and Davis JA
JUDGMENT
DAVIS JA
Introduction
[1]
This is an appeal against a judgment of Van
Niekerk J sitting in the court
a quo
.
The learned judge held that the termination of a warehousing
agreement between first and third respondent and the conclusion of
an
agreement for the provision of similar services between third
respondent and appellant constituted a transfer of an undertaking
as
contemplated in s 197 of the Labour Relations Act 66 of 1995 (LRA).
Pursuant to this finding, the court
a
quo
held that the employment contracts
of fourth and further respondents, who were employed by second
respondent, transferred automatically
to appellant with effect from
the date of transfer, being 1 February 2014. With the leave of the
court
a quo
,
appellant has appealed this decision to this Court.
The facts
[2]
First respondent conducts the business of
providing supply chain solutions for clients. Mr van Esch, in an
affidavit on behalf of
first respondent, describes this business as,
in effect, the management of the “end to end” movements
of goods. This
entails,
inter alia
,
the following:
1.
Taking receipt of client’s products;
2.
checking the packaging to ensure quality control;
3.
ensuring that faulty products are returned to the production line;
4.
performing production counts and stock takes;
5.
storing and stockholding of products and performing stock integrity
management
functions.
6.
maintaining goods in a state of readiness for despatch to customers
of the client;
7.
identifying, repairing and/or replacing damaged or faulty packaging;
8.
coordinating and scheduling the despatch function, to ensure
efficient distribution
of product locally and across our borders
utilising available resources;
9.
engaging with third party transport providers to ensure sufficient
supply of
vehicle for planned deliveries;
10.
coordinating arrangements for urgent and non-scheduled deliveries
with various stakeholders/third
parties.
11.
managing and planning the process of despatch by preparing
appropriate documentation and
facilitating the loading of products on
to despatch trucks;
12.
compiling and maintaining records of South African revenue services
supporting documentation
for cross border deliveries;
13.
planning, coordinating and facilitating inter-facility transfers of
products both locally
and to national infrastructure;
14.
coordinating with customer for delivery of the product;
15.
managing return of used and/or faulty products;
16.
monitoring and reporting on service levels of third party
transportation provider;
17.
proof of delivery documentation conciliation, reporting and follow
up;
18.
secure storage / retention of relevant documents on behalf of Nampak;
19.
material handling equipment inspection and coordination of third
party repairs;
20.
accident and incident investigation.
[3]
Third respondent conducts a business as a
manufacturer of a wide range of glass products. These glass products
are stored on site
in warehouses to await dispatch to the customers
of third respondent. In 2007, third respondent changed its method of
business
by outsourcing the warehousing service. To this effect, on
15 April 2011; first and third respondents concluded a warehousing
agreement
which commenced on 1 February 2011 and was terminated by
the effuxion of time on 31 January 2014.
[4]
The staff, who were employed to discharge
first respondent’s obligations under the warehousing agreement,
from May 2011 were
employed by second respondent. In his answering
affidavit Mr van Esch described second respondent as a wholly owned
subsidiary
of first respondent, forming part of a specialised goods
business unit within the first respondent; that is a business unit
which
specialised in providing management warehousing services to
clients.
[5]
Mr van Esch continues:
‘
I
reiterate that the affected employees worked exclusively on a Nampak
contract and were not assigned to other contracts held by
the first
or second applicant. This is not a situation where a flexible
temporary labour is provided by a labour broker…the
second
applicant was an entity listed on invoices provided by Nampak for
work in terms of the warehousing agreement as to the Second
Applicant
Nampak Warehousing Agreement.  This was purely an accounting
function within a Unitrans Group and had no actual
impact on the
contract itself
.’
[6]
With the termination of the agreement
between first and third respondents by the effluxion of time on 31
January 2014, third respondent
entered into a relationship with the
appellant which commenced providing services to third respondent on 1
February 2014. These
services related to warehousing and
distribution.
[7]
I have employed the term ‘relationship’
to describe the arrangements between appellant and third respondent
for, as
van Niekerk J observed in the court
a
quo
, "appellant did not take the
court into its confidence by disclosing the terms of its contract
with third respondent not did
it provide any significant information
as to the factual circumstances as to how this relationship was to
proceed. In a supplementary
affidavit deposed to by Mr Sarel
Greyvenstein on behalf of appellant, it was averred that ‘the
first and second respondents
(appellant  and third respondent in
this appeal) commenced with discussing and negotiating terms and
conditions related to
such services and agreed verbally for certain
warehouse services to be rendered by the Second Respondent to the
First Respondent.
A number of material terms and
conditions, including, but not limited to pricing and costs have not
yet been agreed to between
the First and Second Respondents resulting
in a written agreement not having yet been concluded”. I shall
return to the nature
of the relationship between appellant and third
respondent.
[8]
In the initial answering affidavit deposed
to on behalf of the appellant by Mr Basson, appellant claims that
when it began to perform
services on behalf of third respondent it
did not take over “in any manner, whatsoever, any person
previously employed by
the Applicants or the First Respondent nor any
assets whether fixed, movable, corporeal or incorporeal, goodwill or
intellectual
property from neither the Applicants or the First
Respondent”. Hence it contends there is an inadequate
evidential basis
for the finding that s 197 of the LRA is applicable
to it.
The court
a quo
[9]
In his judgment, van Niekerk J found,
notwithstanding the paucity of information provided to the court by
appellant, with regard
to its relationship with third respondent, the
only reasonable inference to draw was that the services rendered by
appellant and
the assets used in the performance of these services
were substantially the same as those which had been utilised by the
first
respondent in the performance of its obligations until the
termination of its contract with third respondent on 31 January 2014.

The services that the appellant was contracted to perform could only
have been performed at the production facility of third respondent,

at the same site and within the same premises as first respondent had
previously discharged its obligations under its contract
with third
respondent. Absent any averment to the contrary, it was also
reasonable to conclude that appellant would make use of
the same
equipment and IT systems that had been employed by first respondent,
including forklifts, furniture and a computer system
that was driven
by the software of third respondent, enabling the movement of stock
to be tracked. All of the assets were and remained
the property of
third respondent and had been employed by the first respondent and,
in all probability, by the appellant in the
discharge of its
obligations to third respondent.
[10]
On this basis van Niekerk J concluded:
‘
The
warehousing service provided by the first applicant to Nampak
constituted an economic entity, or, put another way, an organized

grouping of resources.  This comprises, at least, the
contractual right to perform the services, the assets owned by Nampak

but used by the affected employees, the specific activities,
performed by the affected employees and the employees themselves.

This economic entity constitutes a service for the purposes of s 197
(1).’
[11]
Van Niekerk J went further to hold that, to
the extent that a contractual right to provide warehousing services
now vested in appellant,
the very same assets, which were used to
provide the same services by first respondent to third respondent
were now employed by
the appellant; hence the infrastructure that was
used to discharge the obligations of appellant passed from first
respondent, upon
the assumption of its obligations pursuant to the
contract to third respondent and upon the conclusion of the initial
contract.
They were then made over to appellant after appellant had
entered into its relationship with third respondent.
The appeal
[12]
Mr
Kennedy, on behalf of appellant, relied heavily for his main
submission that no business had been transferred within the meaning

of s 197 of the LRA upon the decision in
Aviation
Union of South Africa and Another v SA Airways (Pty) Ltd
and
Others
:
[1]
‘
For
a transfer to be established there must be components of the original
business which are transferred onto a third party. These
may be in a
form of assets or the taking over of workers who are assigned to
provide the service.
’
[13]
On the facts of this case, Mr Kennedy
further argued that, while appellant accepted that it concluded an
agreement with third respondent
concerning a provision of warehousing
and auditing services and that it commenced providing these services
with effect from 12
February 2014, no written agreement had been
entered into between the parties. All material terms relating to
pricing and costing
had not yet been agreed and indeed the
negotiations concerning these terms had been suspended as a result of
the litigation which
had given rise to this appeal.
[14]
As a final argument, Mr Kennedy contended
that while first respondent had been a party to a contract to provide
services to third
respondent, second respondent alone was the
employer of fourth and further respondents; hence s 197 could not
apply even if a business
was transferred from first respondent to
appellant.
[15]
To bolster his argument that no transfer
had been undertaken Mr Kennedy relied on the case of
Betts
v Brintel Helicopters Limited
[1997]
ICR 792
(CA).   In this case plaintiffs were employed by a
company providing helicopter services from three mainland bases in

terms of contracts with an oil company to transfer men and goods to
and from oil rigs to the North Sea from its base in Beccles.
When
these contracts expired on 30 June 1995, the ‘Beccles contract’
was awarded to another contractor, which did not
take over any of the
existing staff nor equipment and operated from a different helicopter
base. The court
a quo
,
granted a declaration that the plaintiffs became employees of the
second contractor on the ground that there had been a transfer
of an
undertaking for the purpose of the 1981 Regulations made by the
Secretary of State under s 2 of the European Community Act
of 1972.
The court found that the second contractor continued to perform the
same services as the first contractor had performed
under the
‘Beccles contract’.
[16]
On appeal this decision was reversed. The
Court of Appeal held that the undertaking comprised a stable economic
entity and not merely
the performance of a service or activity. The
court held that the decisive criterion for determining that there had
been a transfer
of an undertaking was that the economic entity
retained its identity in the hands of the transferee. There could be
no transfer
on the termination of one fixed term contract for
services and the commencement of another contract to provide
essentially similar
services, unless there was a concomitant transfer
of significant assets or the taking over by the new employer of a
major part
of the work force. The Court noted that the first
contractor’s operation constituted an ‘undertaking’
which comprised
of helicopters, infrastructure, staff and a
contractual right to land on oil rigs and the use of these
facilities, even if the
right to land on the oil rigs had been
transferred to the second contractor, or the transfer of only a
limited part of the original
undertaking did not amount to the
transfer of an undertaking. The undertaking, in its entirety,
retained its identity in the hands
of the second contractor; hence
there had been no transfer of an undertaking for the purposes of the
Regulations.
[17]
On the strength of this decision, Mr
Kennedy submitted that the mere fact that the service provided by the
old and new contractors
could be considered to be similar, on its own
and without more did not justify the conclusion that there had been a
transfer of
an economic entity pursuant to s197 of the LRA.
[18]
In
further support for this argument, he referred to
National
Education Health and Allied Workers Union v University of Cape Town
and Others
:
[2]
‘…
in
deciding whether a business had been transferred as a going concern
regard must be had to the substance and not the form of the

transaction.  A number of factors will be relevant to the
question whether a transfer of a business as a going concern has

occurred, such as the transfer or otherwise of assets both tangible
and intangible, whether or not workers are taken over by the
new
employer, whether customers are transferred and whether or not the
same business is being carried on by the new employer.
What
must be stressed is that this list of factors is not exhaustive and
that none of them is decisive individually. They must
all be
considered in the overall assessment and therefore should not be
considered in isolation.’
[19]
Applying these
dicta
to the facts of the present dispute, Mr Kennedy submitted that the
appellant had denied taking over, in any manner whatsoever,
any
assets of a fixed, movable corporeal or incorporeal, nature, goodwill
or intellectual property from either first or third respondent.
It
had asserted that it “engaged entirely with its own resources”
to perform the services which it rendered to third
respondent. No
assets “whether tangible or intangible machinery and implement,
computers and computer networks” had
been taken over from
either first or third respondent and it had no intention of so
doing.
[20]
In short, appellant’s case was that
it had simply concluded an agreement for the provision of services
with third respondent.
This was insufficient to trigger off the
consequences of s 197 of the LRA. In distinguishing between a
business and the provisions
of a service, the Constitutional Court in
Aviation Union SA
had
said:
‘
It
must be emphasised that what is capable of being transferred is the
business that supplies service and not the service itself.
Were
it to be otherwise, a termination of a service contract by one party
and its subsequent appointment of another service provider
would
constitute a transfer within the contemplation of the section that is
not what the section was designed to achieve as apparent
from its
scheme, historical context and its purpose.’
[3]
I
turn to evaluate this set of primary submissions made on behalf of
appellant.
Evaluation
[21]
Our courts have been influenced by and have
had regular regard to European law’s Business Transfers
Directive (2001/2003/EC)
and have employed the consequent
jurisprudence in the interpretation of s 197 of the LRA. See for
example
City Power (Pty) Ltd v Grinpal
Energy Management Services (Pty) Ltd and Others
:
(decision of the LAC: 29 May 2014).
[22]
In European law, a change in service
provision can give rise to a transfer of an undertaking. The
following summary from Wynn-Evans
The
Law of TUPE Transfers
(2013) at 60-61
is particularly instructive with regard to a service provision change
(‘SPC’):
‘
An
SPC occurs on a change (other than on a one-off or short term basis
or in relation to the supply of goods) to the identity of
the person
who has the conduct of activities to which an organised grouping of
employees has principally been dedicated for a particular
client.
According to the 2009 Guidance SPCs ‘concern relationships
between contractors and the clients who hire their
services’.
The Consultation Response indicated that the term describes
situations where a contract to provide
a business service to a client
is let, re-let or ended by bringing it in house’.
For
there to be an SPC certain other requirements must be
satisfied-first, there must be an organised group of employees
principally
dedicated to that contract or activity prior to the
transfer for there to be an SPC and, second, the contract award must
be on
an ongoing rather than on a one-off and short-term basis and
not relate to the supply of goods. This additional and alternative

concept of a relevant transfer was introduced with the objective of
ensuring clarity in the application of the transfer legislation
to
situation such as outsourcing, in-housing, and the rendering of
contracts from one contractor to another.
[23]
In
Metropolitan
Resources Ltd v Churchill Dulwich Ltd (in liquidation) and Others,
[4]
the purpose of the SPC regulations was further described thus:
‘
To
remove or at least alleviate the uncertainties and difficulties
created, in a variety of familiar commercial settings, by the
need
under TUPE 1981 to establish the transfer of a stable economic entity
which retained its identity in the hands of the alleged
transferee,
particularly in the case of the labour intensive operation.’
[24]
In summary, the SPC regulations, seek to
address the problem of outsourcing. Thus these regulations cover the
case where an activity
is not carried out by A on its own behalf but
is carried out instead by B on behalf of A. The activity which is
carried out then
ceases to be carried out by B on behalf of A and is
then carried out by C, the new contractor on behalf of A.
[25]
The
scope of these provisions is well illustrated in the decision in
Carlito
Abler v Sodhexo MN Catering Gesellshaft GmbH.
[5]
In this case, a hospital had appointed a service provider to provide
catering services to its patients and its staff. This service
was to
be provided by using the hospital’s canteen premises and
equipment. The termination of the old service provider and
the
appointment of a new service provider was held to constitute a
transfer of the business as a going concern and the Transfers

Directive was held to be applicable. Of particular relevance to the
present dispute is the following passage from the judgment
of the
Court:
‘
The
national court, in assessing the facts characterizing the transaction
in question, must take into account the type of undertaking
or
business concerned.  It follows that the degree of importance to
be attached to each criterion for determining whether
or not there
has been a transfer within the meaning of Directive 77/187 will
necessarily vary according to the activity carried
on, or indeed the
production or operating methods employed in the relevant undertaking,
business or part of a business (
Süzen
,
paragraph 18, and
Hidalgo
,
cited above, paragraph 31).
Catering
cannot be regarded as an activity based essentially on manpower since
it requires a significant amount of equipment.
In the main
proceedings, as the Commission points out, the tangible assets needed
for the activity in question – namely,
the premises, water and
energy and small  and large equipment (inter alia the appliances
needed for preparing the meals and
the dishwashers) – were
taken over by Sodexho.  Moreover, a defining feature of the
situation at issue in the main proceedings
is the express and
fundamental obligation to prepare the meals in the hospital kitchen
and thus to take over those tangible assets.
The
transfer of the premises and the equipment provided by the hospital,
which is indispensable for the preparation and distribution
of meals
to the hospital patients and staff is sufficient, in the
circumstances, to make this a transfer of an economic entity
.
It is moreover clear that, given their captive status, the new
contractor necessarily took on most of the customers of its

predecessor.’
[6]
(my
emphasis)
[26]
In
my view, the approach adopted by the European Court of Justice in
Sodhexo
,
supra
,
accords with the approach which has been adopted to s 197 by the
Constitutional Court, both in
Aviation
Union SA
,
supra
and in its earlier decision of
National
Education Health and Allied Workers Union v University of Cape Town
and Others
:
[7]
‘
In
deciding whether a business has been transferred as a going concern,
regard must be had to the substance and not the form of
the
transaction.  A number of factors will be relevant to the
question whether a transfer of a business as a going concern
has
occurred, such as the transfer or otherwise of assets both tangible
and intangible, whether or not workers are taken over by
the new
employee, whether customers are transferred and whether or not the
same business is being carried on by the new employer.
What
must be stressed is that this list of factors is not exhaustive and
that none of them is decisive individually.’
See
also
Aviation Union of SA
,
supra
at
para 50-51
[27]
The indicated approach is thus not to apply
s 197 section in a literal or formalistic fashion but rather to
enquire into the substance
of the transaction in question. For this
reason, Yacoob J in
Aviation Union of
SA
,
supra
dismissed an argument which in the present case proved to be one of
the major points pressed by Mr Kennedy on behalf of the appellant,

namely that appellant had not taken over any of the erstwhile
employees. To this Yacoob J said:
‘
If
all the employees involved in the transferred business were indeed
transferred to the new employer, the s 197 inquiry would become

irrelevant.  It only has application where, on a proper
construction of the transaction in issue, the business is transferred

as a going concern without the concomitant transfer of employees.
The evaluation whether s 197 applies to a particular transaction
will
ordinarily arise where it is contended that the business has been
transferred as a going concern but that, contrary to the
provisions
of s 197, the employees involved in the business have not been
transferred.’
[8]
See
also the judgment of this Court in
City
Power (Pty) Ltd,
supra
at para 25.
[28]
Mr Kennedy relied on an article by Malcolm
Wallis (“It’s not Bye-Bye to By: Some reflections on s
197 of the LRA”
2013 (34) ILJ 779) in support of his submission
that there had been no transfer from third respondent to appellant;
that is a transfer
from third respondent acting as “an old
employer” to appellant as “new employer” as had
occurred in
Aviation Union of SA
,
supra
. In
this connection Wallis writes as follows:
‘
I
venture to suggest the majority of, instances the new tender will be
let in advance of the expiry of the old and, if a new contractor
is
appointed, the transition from one to the other will be relatively
seamless.
Whilst the principal is
the agency by which that occurs, the principal is not the employer of
the affected workers and that employer
(the old employer for the
purposes of s 197) had not affected any transfer.  All that they
can do is withdraw from the scene.
In those circumstances the
position remains that the transfer has not been a transfer of the old
employer.   The principal
is the party that causes the
transfer of the business not the old employer.  The judgment of
the CC not only does not alter
that, it reinforced it.  That
conclusion should not be obscured by the outcome of the litigation,
which was driven by the
peculiar facts of that case.’ at 796
-797.
[29]
Yacoob J in
Aviation
Union of SA,
supra
at para 103-104 made it perfectly clear that the application of s 197
of the LRA was not dependent upon a static conception of
the concepts
of “old employer” and “new employer”. Thus,
in a case where transfer 1 is by A to B, A is
the old employer and B
is the new employer. If transfer 2 takes place from B to C, B is no
longer the new employer but the old
employer and C becomes the new
employer. As Yacoob J said: ‘the true enquiry is whether there
has been a transfer of the
business as a going concern by the old
employer to the new employer. That evaluation is complex enough
without it being burdened
with questions about the “generation
of outsourcing”. at para 105
[30]
In this case, the service which was
provided was that of warehousing. It was initially provided to third
respondent by first respondent.
As in the case of
Sodhexo
,
supra,
the
warehouse operation services constituted a discrete business. At the
date of the inception of its agreement with third respondent,

appellant assumed the right to use third respondent’s assets
and infrastructure in order to continue to provide the same
service
to third respondent as it had previously been provided by first
respondent. As Mr van Esch said in his answering affidavit,
the
warehouse services, which were presently performed by the appellant
can only be performed at the production facility of third
respondent.
Thus, the services are “performed at the very same site and
fixed premises as the services that were performed
by Unitrans in
terms of the Warehousing agreement.” Appellant was required to
make use of the same equipment and IT systems
that were previously
employed by first respondent including forklifts, computers,
printers, a computer system as well as other
assets such as
furniture.
[31]
This uncontested evidence provided the
basis by which to determine whether there has been a transfer of
business as a going concern
by an old employer to a new employer. The
concept of a going concern is not a novel concept within South
African law. For example,
s 11(1)(e) of the Value Added Tax Act of
1981 refers to an enterprise … “which is disposed as a
going concern”.
The term “going concern” is well
known in comparative value added tax jurisprudence. The New Zealand
High Court, in
interpreting the equivalent concept in New Zealand
legislation, which legislation formed the basis of the South African
Value Added
Tax Act, said the following about the meaning of going
concern:  “The activity must be one which is handed over
to the
transferee in such a state that it may be carried on by the
transferee if he so wishes.”
CIR v
Smith’s City Group Ltd
1992 (14)
NZTC 9
,140 at 9,143.
[32]
This
dictum
is particularly illuminating in the present case. The activity which
was carried on by first respondent flowed from the relationship

entered into between appellant and third respondent. The necessary
facilities were handed over to the appellant in a state in which

appellant was able to carry on the very same activity which had
previously been conducted by first respondent. It performed these

services on the premises of third respondent. It employed third
respondent’s computer systems and other equipment and carried

on the same activity of warehousing described in the evidence
provided by virtue of third respondent’s Mr van Esch. This

evidence justifies the conclusion that there was a transfer of a
business as a going concern from the old employer to a new employer.
[33]
This approach to s 197 is not novel. It
flows from the decisions of the Constitutional Court in
Nehawu
,
supra
and
Aviation Union of SA
,
supra
as
well as two recent decisions of this court,
City
Power,
supra
and
Hydro Color Inks (Pty) Ltd v
Chemical Energy Paper Printing Work and Allied Workers Union
(2011) 32 ILJ 2617 (LAC) at paras 12-13 and para 16.
[34]
Much of the argument of appellant appears
to be based, at least implicitly, on a complaint regarding the policy
which informs s
197. This policy seeks to protect workers in
situations involving a direct transfer of a whole or a part of a
business as a going
concern and thus the employment of those workers
by the other party, which takes over the whole or part of that
business.
[35]
Clearly the demarcation between those cases
which are deserving of protection under s 197 and those which fall
outside of the protected
scheme are dependent upon a comprehensive
engagement with the specific facts of each case. However, the
difficulty that may arise
regarding demarcation does not in itself
throw the policy into doubt. It may be argued that if the new
provider of a service does
not employ the affected workers, the
latter become redundant from the perspective of their current
employer and could well be retrenched.
Retrenchment, it could be
further argued, then arises from the economic circumstances of the
initial service provider’s business.
This situation is then no
different from a retrenchment which occurs, whether there is a down
turn in the market or a reduction
in the demand for the employer’s
services or products. Dismissal in effect then takes place for
operational requirements.
As Wallis notes at 805, to extend
protection to workers in this situation under the guise of ‘second
generation outsourcing’
or any similar label distorts the
statutory protection given to workers in the context of retrenchment
and provides a certain limited
class of workers with greater
protection than those similarly situated. But the section is clear:
where there is a direct transfer
of a whole or part of a business as
a going concern in which the employment of workers are employed,
these workers are afforded
particular statutory protection in terms
of s 197. That is the clear policy of the legislation and must be
sensibly applied, no
matter whether arguments about potential overlap
of relief may potentially be raised. The challenge is to engage fully
with the
particular facts.
[36]
In the present case, a business was
transferred as a going concern: that is the business of warehousing
products of third respondent.
For all reasons set out in this
judgment, the service provided by first applicant and now by
appellant in terms of the warehousing
agreement, which was entered
into between first and third respondent and the same service which is
now provided to third respondent
by the appellant, constitutes a
business sufficiently demarcated to justify the conclusion that when
this business was taken over
by appellant upon the conclusion of the
contract by way of the effluxion of time between the first and third
respondents, there
was a transfer of the business as going concern.
On the facts of this dispute, there is no basis by which to interfere
with this
conclusion reached by the court
a
quo
.
[37]
That leaves two further arguments for
consideration. As noted, Mr Kennedy attacked the findings of the
court
a quo
that first and second respondents ought, for the purposes of this
application, to be treated as a single entity. Mr Kennedy submitted

that the affected employees were employed by second respondent and
that the operation and functioning of the second respondent
was not
dependent upon the functions and operations of first respondent.
Thus, the affected workers could be retained and utilised
within the
independent operations of second respondent without any threat to
their job security.
[38]
That
submission, however, runs counter to the evidence which was given by
Mr van Esch. In his answering affidavit, he averred that
second
respondent was a wholly owned subsidiary of first respondent. He
averred further that second respondent was not a labour
broker nor
did it render labour broking services to other entities within the
Unitrans group. According to Mr van Esch, these employees
(fourth and
further respondents) worked exclusively on a contract entered into
with third respondent and were not assigned to other
contracts held
by first or second respondent. Mr van Esch’s affidavit makes it
clear that it was first respondent which was
the
de
facto
employee of the affected employees. Accordingly, this case fits
directly within the scope of the
dictum
of the European Court of Justice in
Albron
Catering BV v FNV Bondgentoten
:
[9]
‘
Within
a group of companies, there are two employers, one having contractual
relations with the employees of that group and the
other
non-contractual relations with them, it is also possible to regard as
a “transferor”, within the meaning of Directives
2001/23,
the employer responsible for the economic activity of the entity
transferred which, in that capacity, establishes working
relations
with the staff of that entity, despite the absence of contractual
relations with those staff.’
[39]
The undisputed evidence clearly indicates
that the real employer in this case, prior to the termination of the
agreement with third
respondent, was first respondent. Were Mr
Kennedy’s submission to be upheld, it would create a simple
escape device for employers
who wish to evade the legitimate scope of
s 197 by the creation of a group structure in which employees were
formally employed
by company B, albeit that it was company A for whom
they in reality performed exclusive services. Once more the finding
of the
court
a quo
is, in my view, unassailable.
[40]
There were some suggestions, albeit made
more softly by Mr Kennedy, concerning the absence of a written
agreement between the appellant
and third respondent. This harks back
to my tentative use of the word ‘relationship’ between
appellant and third respondent.
It was common cause that appellant
had performed the warehousing services previously conducted by first
respondent as from 1 February
2014. Further, as noted Mr Basson, in
an affidavit deposed to on behalf of appellant on 6 February 2014
‘TMS has entered
into an agreement with the first respondent
effective 1 February 2014 to render warehousing and auditing services
to the first
applicant.’ That averment is dispositive of the
argument that the absence of a final written agreement precluded the
application
of s 197 of the LRA to appellant.
[41]
In my view, the approach which was adopted
by the court
a quo
is consistent both with the decisions of the Constitutional Court as
analysed in this judgment and the jurisprudence of this Court,
in
particular
City Power
,
supra
and
Hydro Color Ink (Pty) Ltd,
supra
.
[42]
For all of these reasons therefore, the
appeal is dismissed with costs, including the costs of two counsel.
______________
Davis JA
I agree
_____________
Waglay
JP
I
agree
_____________
Tlaletsi
DJP
APPEARANCES:
FOR
THE APPELLANT:

Kennedy SC
Instructed
by Assenmacher Attorneys
FOR
THE FIRST AND SECOND
RESPONDENTS:

Myburgh SC and Adv GA Fourie
Instructed
by Bowman Gilfillan INC
[1]
[2012]
3 BLLR 211
(CC) at para 48.
[2]
2003
(2) BCLR 154
(CC) at para 56.
[3]
Aviation
Union SA
at
para 52.
[4]
[2009]
IRLR 190
(EAT) at para 27.
[5]
[2004]
IRLR 168 (ECJ).
[6]
Sodhexo
at
para 35-36.
[7]
2003
(3) SA 1
(CC) at para 56.
[8]
Aviation
Union of SA
at
para 112.
[9]
(2011)
IRLR 76
(ECJ) at para 31.