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[2008] ZALCJHB 52
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Kopeledi (Pty) Ltd v Madontsela and Others (JR429/07) [2008] ZALCJHB 52 (27 June 2008)
IN
THE LABOUR COURT OF SOUTH AFRICA
HELD
AT JOHANNESBURG
CASE
NO. JR 429/07
REPORTABLE
In
the matter between:
KOPELEDI
(PTY) LTD
Applicant
and
ELIAS MADONTSELA
AND
20 OTHERS
1
st
Respondents
THE COMMISSION FOR
CONCILIATION,
MEDIATION
AND
ARBITRATION
2
nd
Respondent
THE
COMMISSIONER, NORMAN
MBELENGWA
3
rd
Respondent
HEARD
ON:
23 MAY 2008
JUDGMENT
BY:
C.J. MUSI, AJ
DELIVERED
ON:
27 JUNE 2008
Introduction
1.
This is an application to review and set
aside an arbitration award rendered by the third respondent (the
Commissioner) under the
auspices of the second respondent (the CCMA).
Background
2.
The
applicant specializes in,
inter
alia
the development and management of sectional title townhouse units.
As part of its operations it had different business units.
The
Kopeledi Homes (plaster division) which was established in 2004 was
one such unit. This division was responsible
for plastering
newly built homes. The first and other respondents (first
respondents)
[1]
employed by the
applicant, were attached to the plastering division. The
applicant disputes that Mr A Zita, one of the first
respondents, was
ever employed by it. This aspect is, for the purpose of this
judgment, of no moment.
3.
During August 2006 the applicant decided to
sell the plastering division as a going concern. On 15
September 2006 a written
agreement was concluded between the
applicant and Mr
Mesiya
Velaphi
Nhlapo (Nhlapo). The relevant parts of the contract reads as
follows:
“
2.
RECITAL
2.1
The SELLER carries on business under the
style of
KOPELEDI HOMES (PLASTER
DIVISION) (“the BUSINESS”)
carried on at RUIMSIG COUNTRY ESTATE (“the PREMISES”)
2.2
The SELLER has agreed to sell to the
PURCHASER who has agreed to purchase the said BUSINESS, its goodwill,
its staff compliment
and its fixed assets as a going concern on the
terms and conditions hereinafter set forth.
3.
DEFINITIONS
In
this agreement unless the context otherwise requires:-
“
the
EFFECTIVE DATE” shall mean, notwithstanding the date of
signature
hereof, the commencement of business on the 18
SEPTEMBER
2006
“
the
BUSINESS” shall mean the business conducted by the SELLER
under
the name of KOPELEDI HOMES (PLASTER DIVISION) and
shall
include, but shall not be restricted to:
3.3.1
the goodwill thereof;
3.3.2
the trained staff compliment thereof;
3.3.3
all fixed assets thereof as at the
EFFECTIVE DATE listed in Annexure “A” hereto;
3.3.4
all intellectual property belonging to and
of the BUSINESS;
3.4
The singular shall where appropriate
include the plural and vise-versa.
3.5
For the purpose of this agreement, the
fixtures, fittings and equipment referred to in Clause 3.2 are
collectively referred to as
“the FIXED ASSETS” which
assets are hereby sold voetstoots and which are listed on the
Annexure attached hereto marked
Annexure “A”.
3.6
Clause headings are inserted for the
purpose of convenience only, and shall not be taken into account in
the interpretation of the
provisions of this agreement.
4.
SALE
With
effect from the EFFECTIVE DATE, the SELLER hereby sells to
the
PURCHASER who hereby purchases the BUSINESS from the
SELLER.
The
sale herein recorded is indivisible the BUSINESS: its goodwill, its
staff compliment and fixed assets.It is further recorded
that
the BUSINESS will be an income earning activity as at the EFFECTIVE
DATE. It is recorded that it is the intention of the PURCHASER
to
continue with the BUSINESS after the EFFECTIVE DATE. It is recorded
that it is the intention of the PURCHASER to retain all
staff
employed by the BUSINESS after the EFFECTIVE DATE.
5.
PURCHASE
PRICE
The
purchase price payable by the PURCHASER to the SELLER in respect of
the sale herein recorded shall be the sum of R110 000 (ONE
HUNDRED
AND TEN THOUSAND RAND), which amount includes value-added tax at a
14% rate, the sale herein being lock, stock and barrel.
6.
VALUATION
IN TERMS OF
SECTION 197
OF THE
LABOUR RELATIONS ACT 1995
It is
agreed that the PURCHASER is automatically substituted in the place
of the SELLER in respect of all contracts of employment
in existence
immediately before the effective date and the following conditions
will apply;all the rights and obligations between
the SELLER and an
employee
at the time of the transfer continue in force as if they had been
rights an obligations between the PURCHASER and the employee;anything
done before the transfer by or in relation to the SELLER, 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 PURCHASER; and the transfer does not interrupt an
employee’s continuity of employment, and an employee’s
contract of employment continues with the PURCHASER as if with the
SELLER.
All
employment terms and conditions are on the whole not less
favourable to the employees than those on which
they were employed by the SELLER.
Although
the SELLER is not aware of any leave pay, severance pay or any
other pay due to an employee, the SELLER will make
provision for any
contingent claim arising from an employee after the effective date.
The provision will be an amount as calculated
in Annexure B attached
to this agreement.
the
PURCHASER will be liable for any or all claims by an employee as the
SELLER has made ample provision for any possible
claim that
might arise from a labour dispute prior to the effective date.the
PURCHASER acknowledge that the provision as per 6.5
is adequate
for any obligation on the PURCHASER that may arise
7.
PAYMENT
Payment
of the purchase price of R110 000 aforesaid less the Labour
Contingency Provision as per paragraph 6 shall be made by the
PURCHASER to the SELLER as follows:
R
2000.00 (TWO THOUSAND RAND) per month until the balance of the
purchase price is repaid, 1
st
payment commencing on the EFFECTIVE DATE.
8.
HAND-OVER
Provided
that the PURCHASER has complied with the payment obligations
contained herein, possession and occupation of the BUSINESS
shall be
given to the PURCHASER on the EFFECTIVE DATE.
Upon
the BUSINESS being so handed over, the BUSINESS shall be at the sole
risk of the PURCHASER who shall then be entitled to all
income and be
liable for all expenditure of the BUSINESS.
9.
RESERVATION OF OWNERSHIP OF THE FIXED
ASSETS AND
GOODWILL
Notwithstanding
anything to the contrary herein contained, the ownership and goodwill
of the BUSINESS and the ownership of the fixed
assets shall not pass
to, vest in or become the property of the PURCHASER, but shall remain
vested in the SELLER until such time
as the whole of the purchase
price payable in terms of this agreement shall have been paid to the
SELLER
The
first respondents were all given a copy of the agreement and they
were informed in writing that they were to report to Nhlapo.
Evidence
4.
Mr Elias Phasha testified that he was employed by the applicant as a
plasterer. He earned R1 500.00 per fortnights. The
workers had
a meeting with the applicant’s project manager, Mr Pieter
Oosthuizen. During this meeting the first respondents
complained about the applicant’s failure to give them leave
pay. They also enquired whether they are registered for UIF purposes.
They were informed that they are.
5.
On Friday, 15 September 2006, Oosthuizen gave them a copy of the sale
agreement and told them that they will henceforth be working
for
Nhlapo because Nhlapo bought the company. They worked for
Nhlapo for two days and then asked him whether he would be
responsible for paying their UIF and benefits. Nhlapo
informed them that the applicant is responsible for that and
that he
regarded them as new employees. Nhlapo told them that they
would be too expensive for him. They went back to
the applicant
and were told that Nhlapo is their employer. The applicant paid them
for the two days that they worked for Nhlapo.
6.
Mr Rapheal Moyane confirmed that Oosthuizen told them on 15 September
2006 that they will be working for Nhlapo from Monday,
18 September
2006. They objected to the short notice that the applicant gave
them in relation to the change of their status.
They worked for
Nhlapo. On the Thursday Nhlapo said they should not continue working.
They asked him why and he told them
that they do not understand
the “
thing”
between him and the applicant. They went back to the
applicant. They spoke to Le Roux who advised them to register
as sub – contractors. They told him that if he wants them
to sub contract he should first give them their severance
pay.
He refused.
7.
Mr Jopie Le Roux, the general manager of the applicant testified that
during June / July 2006 he approached two employees Elias
Madontsela
and Raymond Sithole, who are part of the first respondents, to work
on a sub – contract basis. They refused.
8.
During September 2006, when they had three houses left to built and
plaster at their development he approached Nhlapo, a tiling
sub –
contractor to purchase the plastering division. He agreed. The
agreement referred to above was entered
into. They further agreed
that the respondent would supply Nhlapo with enough work that would
last him two years.
9.
On 15 September 2006 the employees (first respondents) were paid and
informed about the agreement between the applicant and Nhlapo.
They
were told that their terms and conditions of employment will remain
the same but they will be paid by Nhlapo.
10.
On Monday, 18 September 2006, he was requested by Oosthuizen to go to
the site. On arrival he noticed that the first
respondents were
not working. He asked them what the problem was and Elias informed
him that they refused to work for Nhlapo because
they were concerned
that he would not pay them. He assured them that Nhlapo would
pay them. They still refused and
went to the Department of
Labour. On the Monday afternoon he had a meeting with
Madontsela and Sithole whereat he explained
to them that they are
Nhlapo’s employees. They understood. On 19
September 2006 they started working for Nhlapo.
On 20 and 21
September 2006 Nhlapo complained that the workers were on a go slow
and they refused to listen to him or accept
his authority.
11.
On 21 September 2006, he was called to the site. When he got there
he spoke to Sithole and Nhlapo. He called Madontsela
on his
cellphone and suggested again, that they sub –contract.
Madontsela told him that they can discuss that issue
on the
next day. The next day the employees refused to work.
12.
During cross examination it was put to him that the employees worked
for Nhlapo for two days and then Nhlapo told them
that he does not
want to work with them. His response was that he was not
at the meeting where Nhlapo told them that.
Ruling
13.
The third respondent made the following finding:
“
I
find that the agreement entered into between the respondent and
Nhlapo falls short of a business transaction that could be classified
as a going concern. The manner in which the agreement was (conclude)
was not in line with the provisions of the section. The fact
that the
respondent paid the applicants for the two days they worked for Mr
Nhlapo gives the impression that the respondent regarded
the
applicants as its employees. I am of the view that the respondent
should have accepted the applicants back and commence with
a
consultation process. A process that should have been inclusive of
all affected employees instead of only two as it was previously
done.
I find
that the applicants have discharged the onus of proving the existence
of a dismissal. The dismissal of the applicants was
not for a valid
reason and it was not in accordance with a fair procedure….”
Argument
14.
The third respondent’s finding is attacked on various grounds.
The applicant alleges,
inter alia
that the third respondent erred in:
·
Finding that there was a duty on the
applicant to consult with the effected employees;
·
Finding that the plastering division of the
applicant was not sold as a going concern;
·
Finding that there was a duty on the
applicant to accept the first respondents back into its employ;
·
Finding that the applicant was the employer
of the first respondents after 18 September 2006;
·
Finding that the applicant dismissed the
first respondents;
·
Finding that the applicant should reinstate
the first respondents.
Issues
15.
The first question to consider is whether the third respondent’s
finding that the first respondents were employees
of the applicant
is, on the evidence, tenable. The fact whether the plastering
division was sold as a going concern is inextricably
linked to that
question. The other issue is whether the finding that the first
respondents were dismissed by the applicant
is a finding that a
reasonable commissioner could make.
Law
16.
Section 197 of the Labour Relations Act, 66 of 1995 (the Act) deals
with the transfer of a business as a going concern.
It reads as
follows:
“
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 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…”
It
is common cause that there was no agreement in terms of section
197(6) of the Act.
17.
In
Van der Velde v Business and
Design Software (Pty) Ltd and Another
(2006) 27 ILJ 1225 LC at paragraph 19 Van Niekerk AJ stated that:
“
As
a general rule, s197 must be purposively applied, so as to give
effect to the Constitution and in particular, to the right to
fair
labour practices. Consistent with the concept of fair labour
practices, s197 attempts to strike a balance between employer
and
employee interests. The section does so by protecting security of
employment and employers rights when a business id transferred
by
permitting transfers of contracts of employment without employee
consent. The section also avoids retrenchments and the obligation
to
pay severance pay in circumstances of business transfers.”
I agree.
Van
Niekerk AJ also, correctly in my view, points out in
Van
der
Velde
supra
paragraph 22 that section 197 creates a statutory exception to the
common law in that if a business is transferred as a going concern
one employer is
ex lege
substituted
for another irrespective of the consent of the employee.
18.
Whether a business was in fact transferred as a going concern must be
determined objectively in the light of the unique
facts and
circumstances of each case with due regard to the substance and not
the form of the transaction. See
National
Education Health and Allied Workers Union v University of Cape Town
and Others
(2003) 24 ILJ 95 (CC) at
paragraph 56. See also the minority judgment in
National
Education Health
and
Allied Workers Union v University of Cape Town and Others
(2002) 23 ILJ 306 (LAC) for a thorough
and detailed discussion of the legal position in South Africa and
other jurisdictions in
relation to transfers of businesses as going
concerns.
19.
Part of the objective factors to consider is the underlying
agreement. If the underlying agreement in relation to the
transfer of
the business is subject to a suspensive condition it must first be
determined whether that condition has been fulfilled.
Evaluation
20.
In clause (7) of the agreement it is stipulated that the purchase
price of R110 000.00 must be paid at a rate of R 2000.00
per month,
the first (1
st
)
payment commencing on the effective date. The effective date was 18
September 2006, according to clause 3.1. Clause 8.1 stipulates
that
provided that the purchaser has complied with the payment obligations
contained therein, possession and occupation of the
business shall be
given to the purchaser on the effective date.
21. The applicant
relied on a contract that is subject to a suspensive condition. It
was incumbent upon him to prove
that the condition precedent has been
fulfilled. In
Resisto Diary v Auto Protection
Insurance Co
1963 (1) SA 632
A at 644 G Hoexter JA said the
following:
“
In
our law the fulfilment of a true suspensive condition must be pleaded
and proved by the person who is relying on the contract…”
22.
It is clear from the unambiguous wording of Clause 8.1 read with 8.2
that the condition in relation to the 1
st
payment had to be fulfilled before the agreement became effective.
Clause 8.1 created a suspensive condition. In
Tamarillo
(Pty) Ltd v B N Aitken (Pty) Ltd
1982 (1) SA 398
A at 432 C it was stated that:
“
A
true suspensive condition in a contract has the effect of postponing
the operation of the contract until the happening of some
future
uncertain event”
There
was no evidence, before the third respondent, that indicates whether
the condition in relation to the first payment was fulfilled
or not.
The operation of the contract governing the transfer was
suspended until clause 8.1 was fulfilled.
23.
The evidence in this matter indicates that the business was handed
over from the putative transferor employer to the putative
transferee
employer on 18 September 2006. The employees were informed in
writing that Nhlapo would be their new employer.
A copy of the
contract in terms of which it was done was also given to the
employees. The employees reported to Nhlapo on
18 September 2006
albeit under protest. Nhlapo was going to operate the same
business with the same workforce. All
these factors point to a
proper transfer. The crucial question however is still
whether 18 September 2006 was the date
on which Nhlapo took final and
unconditional control and responsibility for the transferred
enterprise or business,
vide
Van
der Velde
supra
,
paragraph 20. In a sale subject to a suspensive condition delivery of
the
merx
before
the fulfilment of the condition does not pass ownership to the buyer.
The risk remains with the seller. See
Christe
RH,
The law of Contract in South
Africa
, 5
th
Edition at page 141 and the authorities cited therein. In
my view and in the light of the absence of any evidence that
the
suspensive condition has been fulfilled this question cannot be
answered definitively.
24.
It is not clear what the third respondent meant when he said
“
The
manner in which the agreement was (conclude) was not in line with the
provisions of the section.”
Section
197 does not prescribe the manner or form that a transfer agreement
should adhere to. The agreement underlying the transfer
may be an
oral agreement or a written agreement. The importance of section 197
is that after the transfer certain consequences
follow
ex
lege
. If no transfer has taken
place, then it follow that the consequences contemplated in section
197 may not follow. It
is only when an agreement in terms
of section 197 (6) to vary or exclude the legal consequences of a
transfer is entered into that
it must be in writing. As
stated above no such agreement was entered into between the parties
in this matter. In
as far as the third respondent was of the
view that section 197 prescribes a certain manner in which transfer
agreements should
be concluded he totally misconstrued the law and
thereby committed a gross irregularity.
Dismissal
25. It was common
cause between the first respondents, or at least Moyane, and the
applicant that Nhlapo actually dismissed
the first respondents. The
third respondent did not categorically find that the first
respondents were dismissed by the applicant.
He makes a vague and
unsubstantiated assertion that,
“
I
find that the applicants have discharged the onus of proving the
existence of a dismissal…”
There
is no finding as to who dismissed the applicants. In terms of section
192(1) the employee must establish the existence of
the dismissal by
the employer. It must be remembered that dismissal
as defined in section 186 (1) (f)
“
means
that an employee terminated a contract of employment with or without
notice because the new employer, after a transfer in
terms of section
197 or section 197A, provided the employee with conditions or
circumstances at work that are substantially less
favourable to the
employee than those provided by the old employer.”
It
is clear that a dismissal in terms of section 186(1) (f) can only
occur after a transfer in terms of section 197 or 197A. If
it
is found that there was such transfer then the new employer should or
must be held liable for any unfair dismissal. See
also
section 197(2) (c) referred to above. The evidence shows that
the putative transferee employer dismissed the first respondents
and
not the applicant. The third respondent’s finding to the
contrary is a finding which a reasonable decision maker could
not
reach.
Non
Joinder
26.
During argument I raised,
mero motu
,
the question whether the third respondent should not have joined
Nhlapo in these proceedings. Mr Van der Merwe on
behalf
of the applicant was constrained to agree.
27.
Section 115 (2A)(d) of the Act empowers the second respondent to make
rules regulating the joinder of any person having
an interest in the
dispute in any conciliation and arbitration proceedings. Rule
26 of the second respondent’s rules
reads as follows:
“
(1)
The Commission or a Commissioner may join any number of persons as
parties in proceedings if their right to relief depends
on
substantially the same question of law or fact.
a.
The Commissioner may make an order joining any person as a party in
the proceedings
if the party to be joined has a substantial interest
in the subject matter of the proceedings
b.
A Commissioner may make an order in terms of subrule (2)-
i.
of its own accord
ii.
on application by a party; or
iii.
……
(4)
…….
(5)
When making an order in terms of subrule (2), a Commissioner may-
(a)
give appropriate directions as to the further procedure in the
proceedings;…”
28.
In
Khumalo v Wilkins and Another
1972 (4) SA 470
(N) at 475 A – B, Milne J said the following:
“
In
my view, once it is shown that a party is a necessary party in the
sense that he is directly and substantially interested in
the issues
raised in the proceedings before the court and that his rights may be
affected by the judgment of the court, the court
will not deal with
those issues without such joinder being effected and no question of
discretion nor of convenience arises.”
See also Public Servants
Association v Department of Justice and Others (2004) 25 ILJ 692
(LAC) at paragraphs 25 to 29.
29.
It should have been clear to the Commissioner that Nhlapo had a
direct and substantial interest in this matter. It became
clear
during the evidence of the first witness that Nhlapo is alleged to
have bought the business, that there was a dispute as
to whether
Nhlapo knew that he became,
ex lege
,
the first respondents new employer and that all the rights and
obligations between the old employer and the employees continued
to
be in force as if they had been rights and obligations between him
and the employees. The order in this matter, logically,
means
that Nhlapo has been divested of his “
business”
.
In terms of section 197(9) of the Act the old and new
employer are jointly and severally liable in respect of any
claim
concerning any term or condition of employment that arose prior to
the transfer. The Commissioner was in my view in
light of the
evidence before him obliged of his own accord to order the joinder of
Nhlapo. Generally in section 197
disputes, depending on
the nature of the dispute and the facts, it is advisable to join the
old and the new employer or the old
employer and putative transferee
employer as the case may be.
Conclusion
30.
In conclusion, to sum up, the Commissioner committed a gross
irregularity by finding that the applicant had to engage
in a
“
consultation process”
with the first respondents before the transfer. His finding
that the manner in which the agreement was concluded was not
in line
with the provisions of section 197 is also a gross irregularity.
Likewise his finding that the applicant dismissed
the first
respondents is, based on the evidence before him, untenable. There
was, as mentioned above, no evidence or indication
as to whether
there was compliance or not, with the suspensive condition in
relation to the first payment. In my view the
decision of the
third respondent is a decision that a reasonable decision maker could
not reach.
See Sidumo v
Rustenberg Platinum Mines
[2007] ZACC 22
;
2008 (2)
BCLR 158
(CC) paragraph 110.
Ruling
31.
The award of the third respondent ought to be set aside. The
matter ought to be remitted to the second respondent
for hearing. It
is best that the matter be heard by another Commissioner.
Costs
32.
Mr Van der Merwe on behalf of the applicant requested me to make a
costs order in favour of the applicant. The issue
in relation
to the suspensive condition and joinder was not raised by the
applicant. I am of the opinion that having
regard to the
facts and circumstances of the case the most equitable and fair order
would be to make no costs order.
Order
33.
I accordingly make the following order.
1. The
arbitration award made by the third respondent dated 22 January 2007
is set aside.
2.
This matter is remitted to the second respondent for rehearing before
a Commissioner other than the third respondent.
3.
No order as to costs is made.
_______________
C.J.
MUSI, AJ
On
behalf of the Applicant:
Adv H A Van der Merwe
Instructed
by:
Senekal
Simmonds Inc.
On
behalf of the Respondents: H Kgotleng
Kgotleng
Attorneys
[1]
The
21 employees were cited as the First Respondents. I propose for
pragmatic reasons
also
to refer to all the employees as the First Respondents.