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[2010] ZALCCT 2
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Sheriff For The High Court, Stellenbosch and Another v NEHAWU and Others (C594/04) [2010] ZALCCT 2 (26 November 2010)
IN
THE LABOUR COURT OF SOUTH AFRICA
HELD
AT CAPE TOWN
REPORTABLE
OF
INTEREST TO OTHER JUDGES
CASE
NO: C 594/04
In
the matter between:
SHERIFF
FOR THE HIGH COURT, STELLENBOSCH
APPLICANT
HIGH
RUSTENBURG HYDRO
RESPONDENT
AND
NEHAWU
EXECUTION
CREDITOR
J
CORNELIUS & 17 OTHERS
FIRST
CLAIMANT
HIGH
RUSTENBURG ESTATE (PTY) LTD
SECOND
CLAIMANT
JUDGMENT
STEENKAMP
J:
INTRODUCTION
[1]
This case concerns the application of
section 197 of the Labour Relations Act in the context of
interpleader proceedings.
THE BACKGROUND
[2]
J Cornelius and 17 other workers were
dismissed by High Rustenburg Hydro. They referred an unfair dismissal
dispute to arbitration
at the CCMA. The arbitrator, Adv Bill Maritz,
find that their dismissal was not unfair. Nehawu, the trade union
representing the
workers, took the matter on review to the Labour
Court. Gush J upheld the review; found that the dismissals were
unfair; and ordered
High Rustenburg Hydro to pay compensation to the
workers (cited as the first claimant in these interpleader
proceedings) equivalent
to 12 months’ remuneration.
[3]
At the time of the dismissal, High
Rustenburg Hydro was the trading name of High Rustenburg Hydro (Pty)
Ltd (“Hydro”).
After the arbitration and before the
hearing of the review application in the Labour Court, on 17 May
2006, sold the business Hydro
soldHydro sold the business as a going
concern to iProp (Pty) Ltd. On the same day, iProp in turn sold the
business as a going
concern to High Rustenburg Estate (Pty) Ltd
(“Estate”). Counsel for the second claimant accepted for
the purposes of
these proceedings that the sale of business could be
viewed as one from Hydro to Estate.
[4]
Gush J handed down judgement in the review
proceedings in January 2008. The respondent was cited as “High
Rustenburg Hydro”.
The attorneys for Hydro at the time, Carelse
attorneys of Table View, did not bother to inform the court or the
applicants (Nehawu
and the workers) that the business had been sold
to Estate.
[5]
Pursuant to the Labour Court order, Nehawu
instructed the Sheriff (the applicant in these proceedings) to attach
the property of
"High Rustenburg Hydro" as their claim
remained unpaid. The Sheriff duly attached movables to the value of R
840 024,
90 at the premises of the business.
[6]
It then became apparent that there were
competing claims pertaining to the attached property. The Sheriff
therefore issued an interpleader
summons calling upon the claimants
to deliver particulars of claim setting out their competing claims.
[7]
The second claimant ("Estate")
now contends that the attached property belongs to it and that the
court order was granted
against Hydro and not against Estate. The
execution creditor and first claimant (Nehawu and the workers) submit
that, due to the
provisions of section 197 of the LRA, the order
against Hydro can be executed against Estate.
[8]
Mr Con
Joubert
,
who appeared for the second claimant, did not dispute that the
business was sold to Estate as a going concern and that section
197
applied. He submitted, though, that Nehawu would have to obtain a
declaratory order, by way of separate legal proceedings,
declaring
Estate (the new employer) to be liable for the judgement debt, on the
strength of which Nehawu would only then be able
to execute against
Estate’s property.
[9]
In the agreement of sale, "the
business" is defined as "the wellness business carried on
by High Rustenburg Hydro
(Pty) Ltd as a going concern on the property
on the effective date under the name ‘the Hydro at
Stellenbosch". It is
specifically recorded that the business is
sold as a going concern. It is further recorded that the seller
indemnifies the purchaser
against all loss, liability, damage or
expense, which the purchaser may sustain as a result of any
liabilities or obligations of
whatsoever nature and howsoever arising
in respect of the business which was incurred or arose prior to the
effective date.
[10]
It was specifically recorded that, on the
effective date (ie 17 May 2006), "transfer of the employees
currently employed in
the business shall take place in terms of
section 197 of the Labour Relations Act". It was also recorded
that "the seller
hereby indemnifies the purchaser against
payment of all amounts which employees may be entitled to or
deductions which had to be
made from employees’ salaries in
respect of any period up to the effective date: provided that the
seller shall not be liable
for payment of any amounts which an
employee may become entitled to in terms of the LRA or any other Act
due to the termination
of his services by the purchaser
after
the effective date."
THE LAW
INTERPLEADER
[11]
Interpleader proceedings are not dealt with
in the LRA or in the rules of the Labour Court. In terms of rule
11(3):
“
If
a situation for which these rules do not provide arises in
proceedings or contemplated proceedings, the court may adopt any
procedure that it deems appropriate in the circumstances.”
[12]
The appropriate procedure to be adopted in
interpleader proceedings is that provided for in rule 58 of the High
Court rules.
TRANSFER OF A BUSINESS
AS A GOING CONCERN
[13]
The
purpose and effect of section 197 of the LRA has been the subject of
much debate in this court and has largely been clarified
by the
Constitutional Court in
Nehawu
v UCT.
[1]
[14]
The pertinent subsections for the purposes
of these proceedings are the following:
“
197(2)
If a transfer of 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 that time of the transfer continue in
force as it they
had been 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
“
(5)
(b) Unless otherwise in in terms of subsection (6), the new employer
is bound by –
(i)
any arbitration award made in terms of this
Act, the common law or any other law;".
[15]
In
Nehawu
v University of Cape Town
[2]
the Constitutional Court explained the objectives of section 197 as
follows:
"Its purpose is to
protect the employment of the workers and to facilitate the sale of
businesses as going concerns by enabling
the new employer to take
over the workers as well as other assets in certain circumstances…
In this sense, section 197 as
a dual purpose, it facilitates the
commercial transaction while at the same time protecting the workers
against unfair job losses."
[16]
Section 197 holds the new employer liable
for any obligations between the old employer and the employee at the
time of the transfer.
And subsection (5)(b) specifically provides
that the new employer is bound by any arbitration award made in terms
of the LRA. But
what about the situation such as this one, where the
initial arbitration award (before the sale of the business) was in
favour
of the old employer; but it was overturned on review
subsequent to the sale of the business?
[17]
In
Transport
Fleet Management v NUMSA
[3]
the
reinstatement of employees dismissed by the old employer prior to the
transfer of the business required the new employer to
give effect to
that order. Zondo JP held that it was consistent with the purpose of
the Act and the European Community Directive
77/187 that an
employment relationship continues, despite the dismissals, to enable
the dismissed employees to exercise their rights
against the new
owner of the business.
[18]
And
in
NUMSA
v Dorbyl Ltd
[4]
the
Labour Appeal Court confirmed that an order for compensation could be
made against the new employer.
[19]
I
also have regard to the judgement of the Labour Appeal Court in
Success
Panel Beaters & Service Centre v NUMSA
[5]
holding
that an order for reinstatement and payment of compensation to an
employee unfairly dismissed by the old employer was enforceable
against the new employer. Willis JA pointed out that the provisions
of section 197(2)(a) are plain enough. "They provide,
inter
alia, that 'anything done before transfer by… the old employer
will be considered to have been done by…the
new employer.' In
other words, the unfair dismissal of the [employee] by [the old
employer] will be considered to have been effected
by the [new
employer]”.
EFFECT OF THE
TRANSFER ON INTERPLEADER
[20]
It seems to me that it would be contrary to
the purpose of section 197 to hold that the employees in a situation
such as this one
would first have to obtain a declaratory order
before they could execute an order for compensation against the new
employer. The
sale agreement specifically recorded that the business
would be transferred as a going concern; that the employees fall
within
the ambit of section 17; and that the old employer remains
liable for all claims by "any trade unions relating to
conditions
of employment or other matters affecting the general body
of the company’s employees or any section thereof”. When
the court order was made in January 2008, "High Rustenburg
Hydro" was cited as the respondent. It was that business,
defined as “the HRH business”, that had been sold as a
going concern. At the time, unbeknownst to the court, the new
employer (Estate) had taken over the liabilities of the old employer
to its employees. Had the respondent’s attorneys at
the time
disclosed this fact to the court, I have no doubt that Estate would
have been joined as a respondent. At this interpleader
stage, the new
employer has entered the fray. It is well aware of its obligations
towards the employees, even though it had not
been joined in the
review proceedings. It seems highly formalistic and artificial –
and indeed, contrary to the very purpose
of s 197, ie to protect the
workers – to now interpose a further costly and potentially
lengthy court intervention before
the employees can execute their
claim against the new employer.
[21]
The judgement of the Labour Court upholding
Nehawu’s application for review of the arbitration award
substituted that arbitration
award. The arbitration award must then
be read to hold that the dismissal of the workers was unfair and that
the old employer had
to pay them compensation. That obligation was
transferred to the new employer in terms of section 197. The new
employer has stepped
into the shoes of the old employer. The
judgement substituting the arbitration award is, in my view,
enforceable against the new
employer without the need for another
step.
CONCLUSION
[22]
The first claimants [Nehawu and the
employees] are entitled to enforce the claim against the second
claimant [High Rustenburg Estate
(Pty) Ltd, the new employer].
[23]
The Sheriff is authorised to execute the
writ of execution and satisfy the claim of the execution creditor and
first claimant.
[24]
In the light of the ongoing relationship
between Nehawu and the new employer, there is no order as to costs.
_______________________
ANTON
STEENKAMP
JUDGE
OF THE LABOUR COURT
CAPE
TOWN
Date
of hearing:
12 November 2010
Date
of judgment:
26
November 2010
For
the second claimant:
Adv
Con Joubert
Instructed
by:
Werksmans
For
the execution creditor and first claimant:
Adv
Cecil Tsegarie
Instructed
by:
Marius Abrahams attorneys
[1]
Nehawu
v University of Cape Town
2003
(2) BCLR 154
(CC), (2003) 24
ILJ
95
(CC)
[2]
Supra
para
[53]
[3]
[2003] 10 BLLR 975
(LAC); followed in
Anglo
Office Supplies v Lotz
(2008)
29
ILJ
953
(LAC) para [21].
[4]
(2007) 28
ILJ
1585
(LAC)
[5]
[2000] 6 BLLR 635
(LAC) 637