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[2017] ZALAC 20
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High Rustenberg Estate (Pty) Ltd v NEHAWU obo Cornelius and Others (CA11/2016) [2017] ZALAC 20; (2017) 38 ILJ 1758 (LAC) (23 March 2017)

IN
THE LABOUR APPEAL COURT OF SOUTH AFRICA, CAPE TOWN
Reportable
Case no: CA 11/2016
In the matter between:
HIGH RUSTENBURG ESTATE (PTY)
LTD

Appellant
and
NEHAWU OBO J CORNELIUS AND 17
OTHERS

First Respondent
HIGH RUSTENBURG HYDRO (PTY)
LTD

Second Respondent
Heard:
02 March 2017
Delivered:
23 March 2017
JUDGMENT
DAVIS JA
Introduction
[1]
This
is an appeal against the following order of the Labour Court on 10
February 2016:
‘
The
rights which the claimants had, following their unfair dismissal by
Hydro, were rights which were transferred to appellant by
virtue of s
197 of the Labour Relations Act 66 of 1995 (“the LRA”).
The
writ of execution under case number C459/04 issued by the respondent,
on behalf of the said members, was lawfully issued and
the assets
attached pursuant to such writ “
may be sold in order to
satisfy the claimants of the appellant’s members
”.’
[2]
This
case has a regrettably long history. Briefly, first respondent,
acting on behalf of 18 individual employees who were dismissed
by the
second respondent, High Rustenburg Hydro (Pty) Ltd t/a High
Rustenburg Hydro (“HRH”), instituted proceedings
in the
CCMA against HRH on the basis that the dismissal of the 18 employees
was unfair. When the proceedings before the CCMA were
unsuccessful,
the first respondent proceeded to apply for a review of the award
before the Labour Court. The review application
was issued on 12
November 2004. For a range of reasons, which were set out by Gush AJ
(as he then was) in a judgment of 29 January
2008, the case took an
extremely long time to be heard. Nonetheless the first respondent was
successful before the Labour Court
and Gush AJ ordered HRH to pay
compensation to the dismissed employees in an amount equivalent to
twelve months’ remuneration.
While the review proceedings were
pending, HRH (Pty) Ltd sold the business of HRH as a going concern to
iProp (Pty) Ltd (“iProp”)
in terms of a sale agreement of
17 May 2006. It appeared that iProp purchased 100% of the shares in
the appellant, namely High
Rustenburg Estate (Pty) Ltd, and then sold
the HRH business as a going concern to appellant in which it held
100% of the shares.
Hence, by the time that Gush AJ delivered
judgment, the appellant had become the proprietor of HRH.
[3]
Following
the judgment of Gush AJ, the Sheriff attached property at HRH in
execution of the judgment of the Labour Court. Appellant
challenged
the validity of this attachment in the Labour Court, which held that
it was appropriate to apply interpleader proceedings
in terms of High
Court Rule 58 to this situation and further held that, by reason of s
197 of the LRA, the first respondent was
entitled to enforce its
claim against the appellant. On appeal to this Court, it was held
that the appellant had not been afforded
an opportunity of opposing
the application which led to the attachment of its property.
Therefore, it held that the matter should
be referred back to the
Labour Court on the basis of a stated case. In this judgment the
Labour Appeal Court summarised its finding
thus:
‘‘
In
the present dispute, the significant question for resolution is
whether s 197 of the Act can be invoked against appellant, in

circumstance where, it is common cause, it had no notice of the
proceedings which gave rise to the application of this section
and
which were then used against it to its detriment by this issue of a
writ against its property.
In
my view, once interpleader proceedings are initiated, and an issue is
raised as to the applicability thereof.  Rule 58 provides
a
basis by which to deal with this kind of dispute, particularly as
appellant had not been joined in the proceedings which gave
rise to
the attachment of its property.  Thus, appellant had not been
afforded an opportunity to oppose the application of
s 197 of the
Act.  Accordingly, in terms of Rule 58 (6) (c) of the Uniform
Rules of the High Court, this dispute should be
resolved in terms of
a stated case to be brought before the Labour Court in which the
question of the automatic application of
s 197 is determined with the
benefit of argument from all affected parties.’
[4]
The
stated case was heard by Rabin-Naicker J in the Labour Court. The
learned Judge found that s 197 (5) of the LRA applies to an

arbitration award which was reversed and then substituted by the
Labour Court only after the transfer of the relevant undertaking
has
taken place. It is against this finding that the present appeal was
lodged.
Appellant’s case
[5]
Mr
Joubert, who appeared on behalf of the appellant, correctly noted
that the issue for determination both before the court
a
quo
and this Court was “whether s 197 (5) of the LRA applies to an
arbitration award which is reversed by the Labour Court but
only
after the transfer of the relevant undertaking had taken place”.
Mr Joubert firstly referred to the previous judgment
of this Court,
to which I have already made reference, and contended that this Court
had already made two critical findings, namely,
that a writ cannot be
issued against the property of a person against whom there is no
judgment, and further that the new employer
would not have had an
opportunity to oppose the application of s 197 nor would it have been
able to join other parties that might
be liable for an award made in
terms of the judgment. He further contended that the old employer
should have informed the Court
to which the review application had
been made that an agreement of sale had been concluded.
[6]
On
this basis, Mr Joubert submitted that by making these findings this
Court had already, in effect, held that s 197 (5) of the
LRA cannot
apply to the circumstances of this case.
[7]
Mr
Joubert referred to the decision in
Anglo
Office Supplies (Pty) Ltd v Roger Lotz
(2008) 29 ILJ 953 (LAC) and submitted that this decision had made
clear that since the rights that an employee holds against the
old
employer become rights against the new employer, in cases where the
employee has instituted proceedings against the old employer,
these
proceedings must be pursued against the new employer instead of the
old employer. In short, as the LAC had held in that case:
‘
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
have to be made against the new employer.’ (para 22)
He
further referred to the judgment in
Ngema and others v Screenex
Wire Waring Manufacturers (Pty) Ltd and another
(2013) 34 ILJ
1470 (LAC) (
Ngema
) where it was held that the new employer
could not be substituted as judgment debtor in a case where the
business was transferred
prior to a reinstatement order made against
the old employer by the Labour Court due to the fact that the new
employer had not
been joined in those proceedings.
[8]
In
particular, Mr Joubert emphasised the following passages from the
judgment in
Ngema
at paras 13-14:
‘
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.
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 the right to be
heard with regard to the question
of the appropriate remedy.’
[9]
In
short, the submission of Mr Joubert was to the effect that a new
employer can and must be joined to the proceedings and an order

obtained against an old employer cannot simply be executed against a
new employer, even less so when the new employer was not made
a party
to the proceedings.
[10]
Mr
Joubert further sought recourse for this submission in the provision
of s 197 (5) of the LRA. It provides:
‘
(
5)
(a) For the purposes of this subsection, the collective agreements
and arbitration awards referred to in paragraph (b) and agreements

and awards that bound the old employer in respect of the employees to
be transferred, immediately before the date of transfer.
(b)
Unless otherwise agreed in terms of subsection (6), the new employer
is bound
(i.)
any
arbitration award made in terms of this Act, the common law or any
other law;
(ii.)
any
collective agreement binding in terms of section 23; and
(iii.)
any
collective agreement binding in terms of section 32 unless a
commissioner acting in terms of section 62 decides otherwise.’
[11]
Mr
Joubert submitted that this provision, by referring to arbitration
awards which bound the old employer before the transfer of
the
business, meant that the legislature had made it clear that a
favourable award subsequently set aside on review was not to
be
included. In his view, this was not the intention of the legislature
as s 197 (5) of the LRA could simply have provided that
a new
employer is bound by arbitration awards adverse to the old employer.
Adverse awards made pre the transfer as well as favourable
awards set
aside on review post the transfer would then be effected by s 197 (5)
of the LRA. In order to guard against a breach
of the
audi
alteram partem
principle, the legislature had limited the operation of s 197 (5) of
the LRA to awards that bound an old employer before the transfer
of
the business.
Evaluation
[12]
As Mr
Oosthuizen, who appeared together Ms Tsegarie on behalf of
respondents noted, s 197 (5) of the LRA needs to be read in the

context of the provision as a whole. In particular s 197 (2) provides
thus:
‘
(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.’
[13]
As
Ngcobo J (as he then was) said in
Nehawu
v University of Cape Town and Others
2003
(24) ILJ 95 (CC) at paras 46-53:
‘
That
an important purpose of s 197 is to protect the workers against the
loss of employment in the event of a transfer of a business
cannot be
gainsaid.  This conclusion is fortified not only by the effect
of the section, but also by the very fact that the
section was
inserted in a chapter that deals with unfair dismissal.  As
pointed out earlier, at the core of this chapter is
the right of the
workers not to be dismissed unfairly…
The
section aims at minimizing the tension and the resultant labour
disputes that often arise from the sales of business and impact,

negatively on economic development and labour peace.  In this
sense, s 197 has a dual purpose, it facilitates the commercial

transactions while at the same time protecting the works against
unfair job losses.’
[14]
It is
clear that the purpose of the section was intended to ensure that all
rights and obligations between the employer selling
the business and
each employee at the time of the transfer to the purchaser continue
in force as if they were rights and obligations
between the
purchaser, being the new employer, and each employee. It is the
former who then bears a duty to fulfil the relevant
obligations.
[15]
The
question which arises is whether a decision by the Labour Court to
set aside an award and substitute it with a finding that
an unfair
dismissal had occurred, which would justify the payment of
compensation, takes place at the time of the breach or, at
least, at
the time of the finding of the arbitrator which has now been set
aside.   If that is the case, then clearly
the arbitration
award would be binding on the old employer in respect of employees to
be transferred and accordingly would be binding
upon the new
employer.
[16]
As
noted Mr Joubert contended that this Court has already decided the
question for determination by this Court in
Ngema
.
In that case, the facts were briefly as follows.  In July and
August 2005 the old employer embarked on a retrenchment
process with
employees.  In December 2005 the old employer dismissed the
employees for operational requirements.  This
gave rise to a
dispute with the old employer which was heard in the Labour Court.
Some months later in March 2006, the business
of the old employer was
sold as a going concern to the new employer. In August 2007 the
Labour Court ordered that the employees
be reinstated by the old
employer. A month later in September 2007 the shareholding in the new
employer was sold to a third party.
From that time on, the new
employer traded in a form of a new company. In September 2009 this
Court dismissed an appeal by the
old employer against the
reinstatement order which had been made by the Labour Court. A year
later in May 2010 the employees brought
an application in which they
sought to substitute the new employer as judgment creditor in the
reinstatement order.
[17]
Two
questions were raised, namely whether the effect of s 197 of the LRA
automatically gives rise to a joinder or a substitution
of the new
employer as a judgment debtor in relief obtained against the old
employer and, further, whether s 197 has an effect
of trumping
established principles relating to joinder.   Critical to
the finding in
Ngema
that the new employer had to be joined to the proceedings was that,
in
Ngema,
the disputed issue related to reinstatement based on s 193 (2) of the
LRA which provides for circumstances where a court may refuse
to
reinstate or reemploy the employees in question. This Court found
that the new employer, at the very least, was entitled to
be heard on
the specific question of relief. Thus, “the appellants proper
cause of action should therefore be to ensure that
the second
respondent (new employer) 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”. (para 15)
[18]
In my
view, this case is distinguishable from the present dispute.
The present dispute turns on a different question,
namely whether a
substitution of an arbitration award made after the transfer of the
business from an old employer to a new employer
binds the new
employer in that the award is deemed to have taken effect at the very
least from the date on which it was made, albeit
incorrectly, given
the successful review decision by the Labour Court which substituted
the correct order for the incorrect one.
[19]
It
cannot be that the right which the employees hold over a new
employer, pursuant to a transfer of an undertaking as a going
concern,
depends on the stage of the appeal or review at which the
litigation finds itself at the point of transfer. The wording of the
section is clear, an arbitration award that can bind the old employer
immediately before the date of transfer in respect of the
employees
to be transferred binds the new employer.
[20]
The
arbitration award must bind the old employer in the circumstances of
this dispute because all that has occurred is that the
Labour Court
substituted a correct award, in its view, for the incorrect award
which had previously been made. That the Labour
Court has substituted
the award does not detract from the conclusion that this was an award
which bound the old employer immediately
before the date of transfer
because the substituted award must be deemed to take effect from that
date.
[21]
Mr
Joubert made much of the argument that the new employer, being the
appellant, had to be joined to proceedings certainly before
the
attachment of its property to be effected. This was the basis of the
previous decision of this Court to which I have made reference.

The purpose of the initial order of this Court, was that because the
new employer had not been heard, a stated case should be decided
by
the court
a
quo
in circumstances where the appellant, being the new employer, would
have an opportunity to present its case. If an attachment of
property
takes place, it does appear that the new employer has to be joined to
such proceedings.  However, the question of
joinder cannot on
its own trump the wording of s 197 (5) of the LRA, read in terms of
its purpose, namely that if an award is binding
on the old employer
it is deemed to be binding on the new employer. The fact that the
Labour Court substitutes the formulation
of the award for the one
which is set aside cannot detract from this conclusion, for, if it
did, it would ultimately damage the
very purpose of s 197, namely to
protect employee rights in the context of a sale of a business as a
going concern. These rights
flowed from an arbitration award, albeit
one that required substitution by the Labour Court.
[22]
As
the order or the Labour Court was that s 197 (5) applies to an
arbitration award which was reversed by the Labour Court but only

after the transfer of the relevant undertaking had taken place, it is
that order which is the subject of this appeal.
That
order and not the issue of non joinder constituted the scope of the
stated case.
[23]
For
the reasons that I have set out, there is no basis by which this
finding can be held to be incorrect and accordingly the appeal
is
dismissed with costs, including the costs of two counsel.
__________________
Davis JA
Hlophe
and Kathree-Setiloane AJJA concurred.
APPEARANCES:
FOR THE APPELLANT:
Adv Con Joubert
SC
Instructed by
Werksmans Attorneys
FOR THE RESPONDENTS:
Adv C Oosthuizen SC
Instructed by
Thaanwane Attorneys