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[2011] ZALCJHB 169
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Ngema and Others v Screenex Wire Weaving registered as Screenex Manufacturing (Pty) Ltd and Others (JS 867/05) [2011] ZALCJHB 169; (2012) 33 ILJ 681 (LC) (19 October 2011)
Reportable
Of
interest to other judges
REPUBLIC OF SOUTH
AFRICA
THE LABOUR COURT OF
SOUTH AFRICA, JOHANNESBURG
JUDGMENT
Case: JS 867/05
In the matter between:
JAFTER NGEMA &
OTHERS
.........................................................................
Applicant
and
SCREENEX WIRE WEAVING
MANUFACTURERS
(PTY) LTD
...........................................................................................
First
Respondent
JOHNSONS SCREENEX
registered as
SCREENEX MANUFACTURING
(PTY) LTD
................................
Second
Respondent
INDIVIDUAL RESPONDENTS
APPEARING ON
ANNEXURES “B”
AND “C” TO THE FOUNDING
AFFIDAVIT
.................................................................
Third
and further Respondents
Heard:
7 December 2010
Delivered:
19 October 2011
JUDGMENT
LAGRANGE, J:
Introduction
This is an application
to substitute and replace the first respondent (‘Wire
Weaving’) with the second respondent
(‘Screenex
Manufacturing’) in an order of the Labour Appeal Court under
case number JA49/07.
1
The applicants also seek
to join the directors of the second respondent in the proceedings
and seek a declaratory order to the
effect that the directors of the
second respondent are in contempt of court following their failure
to comply with the order
of the LAC ordering the first respondent to
reinstate the individual applicants.
The second respondent
also objected to the
locus
standi
of
the first applicant to act on behalf of the other individual
applicants in initiating these proceedings. It appears that the
first applicant did not have authority at the time when the
proceedings were initiated to act on behalf of the remaining
applicants
and they did not sign powers of attorney authorising the
applicant’s attorneys of record to act on their behalf.
Strictly
speaking,
it
is only the first applicant who is before the court as an applicant
party, though I may refer to the applicants in the course
of this
judgment in the sense of them being parties to the earlier
proceedings in this Court and the LAC.
Background Facts
On 20 September 2005,
the applicants were retrenched by the first respondent.
On 22 September 2005,
the applicants referred the dispute to the CCMA alleging an unfair
dismissal. Following a failure to resolve
the matter amicably, the
matter was referred to the Labour Court.
During March 2006, the
first respondent’s business was sold as a going concern to
Taboo Trading 68 (Pty) Ltd within the
meaning of section 197 of the
Labour Relations Act
2
,
which led to a change of name to Screenex Manufacturing (Pty) Ltd.
No mention of this impending event was made in the first
respondent's answering statement filed on 21 February 2006.
Similarly, in the minutes of the pre-trial conference held on 17
March 2006 and filed on 30th of March 2006, no mention is made of
any other party that might not be an interested party in the
proceedings.
The matter was set down
for trial on 13 August 2007 and judgment was delivered on 20 August
2007 by the Honourable Justice Hendricks
AJ. He found the dismissal
of the applicants to be procedurally and substantively unfair and
ordered their reinstatement to 20
September 2005. There is no
mention in the judgment of the events of March 2006, nor any other
indication that the Court was
aware at the time the trial was
conducted, or when judgment was handed down, that another employer
had taken transfer of the
business, even though the first respondent
must have been aware of at the time.
The first respondent
appealed against the judgment of the court
a
quo
,
but did not cite the second respondent as an interested party in the
proceedings. It appears that the appeal proceedings took
place on 29
May 2009 and judgment in the matter was handed down on 2 September
2009.
According to a letter
dated 9 June 2009, written by the first respondent's attorneys to
the registrar, when the Court reserved
judgment, the legal
representatives of the parties were instructed to engage in
consultation regarding the practicality of the
possible
reinstatement of the individual applicants. The letter also states
that the legal representatives were instructed to
address the Court
through the Registrar by 10 June 2009 on the outcome of such
consultations. Failing any agreement being reached
in those
consultations, it appears that the LAC had advised that it would
proceed to hand down judgment in the matter.
The letter goes on to
state:
’
With
regard to the possibility of reinstatement of the company, it is our
instructions that Mr Catsicas, who acts on behalf of the
previous
owners of Screenex Wire Weaving Manufacturing (Pty) Ltd ie the
appellant in this matter, had discussions with Mr Griessel,
as well
as the current owners of Johnson's Screenex, with regard to the
possibility and the practicality of the reinstatement of
the
respondents.
It
is our instructions that during the aforementioned discussions
between the parties the following became apparent:
1.)
Screenex Wire Weaving Manufacturing (Pty) Ltd was sold as a going
concern during or about November 2007 by the original owners,
Messrs.
Feissle and Rosenbuch.
2.)
The company was subsequently sold to an American company and is now
known as Johnson Screenex.’
The letter then explains
that according to information about the financial position of the
company now known as Johnson Screenex
(the second respondent),
reinstatement of the
individual applicants was not a feasible option. It goes on to
advise that in the circumstances,
the
parties agreed to abide the judgment of the Court. At this juncture,
it must be mentioned
that in the second respondent's answering affidavit,
the sequence of the
transactions appears in a different order. At paragraphs 8 and 10 of
the answering affidavit,
the
second respondent claims that in March 2006,
the
business was sold as a going concern and it was only in September
2007 that the company itself was sold to an American company,
Weatherford Global Products Ltd. It appears that the parties in this
application agree on this sequence of events.
At paragraph [28] of the
unanimous judgment of the LAC,
Judge
Zondo, JP noted on the question of relief that the appellant
attacked the decision of the Court below for ordering the
reinstatement of the individual respondents, as reinstatement was
not reasonably practicable, among other reasons, because the
appellant company's business had been sold to a different entity.
The LAC addressed this argument as follows: ‘The argument
that
the appellant's business was sold presents no difficulty because in
fact what had happened is that the appellant remained
the employer
but its shareholders sold their shares’.
3
The learned judge
continued: ‘It was also pointed out to us that since the sale
of shares referred to above, there had been
a further change of
hands in the business. However, this seems to have happened after
the judgment of the Labour Court had been
handed down’. It
appears that the learned judge must have been referring to the
information regarding the 2007 transfer
of the business in 2007. He
addressed this point as follows:
’
[30]
When this Court decides on appeal from a judgment of the Labour Court
, it is required to decide the matter in the same way
as the Labour
Court ought to have decided it at the time it did and on the basis of
what was before the Labour Court in. This is
the general rule.
Accordingly in an appeal a court cannot, generally speaking, take
into account events that occurred after the
Labour Court had given
its judgement. This court cannot make an order which the Labour Court
could not have given at the time it
handed down its judgement. That
being the case, it seems to me that the order which I propose to make
is the correct order to be
made.’
From the above, it
appears that the LAC did not consider the separate question whether
or not, in the light of subsequent information,
the second
respondent should have been joined in the proceedings.
Evaluation
The first observation
that must be made is that it was only with the transfer of the
business in March 2006 that a change in the
corporate identity of
the employer was involved. It is trite law that the sale of a
controlling interest in the business resulting
in a change in the
majority shareholders in the business does not change the corporate
identity of the registered company, which
is sold.
4
The second point, which
is also trite law, is that the employer which receives transfer of a
business as a going concern in terms
of the provisions of section
197 of the LRA, for most intents and purposes assumes the legal
identity of the transferring employer
vis-a-vis
the former
employees of the transferring employer who were engaged in the
business that was transferred. Not only is the continuity
of
employment of existing employees maintained between one employer and
the next, but unfair dismissals by the former employer
are deemed to
be done by employer who receives the transferred business. Section
197(2)
(c)
states:
“
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
In
Anglo Office
Supplies (Pty) Ltd v Lotz
(2008) 29
ILJ
953 (LAC)
the LAC summarised the
position as follows:
’
[18] The
predecessor to s 197(2)
(c)
,
which is the old s 197(2)
(a)
before s 197 was substituted by s 49 of Labour Relations Amendment
Act
A
12
of 2002, read as follows:
”
If
a business, trade or undertaking is transferred in the circumstances
referred to in subsection (1)
(a)
,
unless otherwise agreed, all the rights and obligations between the
old employer and each employee at the time of the transfer
continue
in force as if they had been rights and obligations between the new
employer and each employee and, anything done before
the transfer by
or in relation to the employer will be considered to have been done
by or in relation to the new employer.”
[19] In
his minority judgment in
National
Education Health & Allied Workers Union v University of Cape Town
& others
(2002)
23 ILJ 306 (LAC)
;
C
[2002]
4 BLLR 311
(LAC) Zondo JP, interpreting the provisions of the old s
197(2)
(a)
,
laid down the principle as follows at 347D-F para 92 -
”
When
a business is transferred by one employer to another as a going
concern in solvent circumstances, neither the consent of the
employees nor that of the business transferor and business transferee
is required, before the contracts of employment of the employees
become contracts between each employee and the new employer unless
there is agreement with the workers or their representatives
to the
contrary, the new employer assumes liability for all the actions done
by the old employer in relation to each employee and
also acquires
any rights that the old employer may have had in relation to each
employee; for all intents and purposes the business
transferee takes
the position of the transferor.’
[20] The
above principle was unanimously approved by the Constitutional Court
on appeal in
National
Education Health & Allied Workers Union v University of Cape Town
& others
(2003)
24 ILJ 95 (CC)
at
122C para 64 where it was held:
”
Reading
the section as a whole, and, in particular, having regard to the fact
that
all rights and obligations flowing from employment with the
transferring employer are transferred to the new employer in the
case
of a solvent business; that in the case of an insolvent business the
contracts of employment are transferred; that the transfer
of
business does not interrupt the workers' continuity of employment;
the inference that the transferee employer takes over
the
workers and that the transferee employer is, by operation of law,
substituted in the place of the transferor employer is irresistible.
It follows by necessary implication.”
[21] The
Constitutional Court held further that, if there was any doubt about
the principle referred to above,
the new s 197 puts matters beyond
doubt by providing that the “new employer is automatically
substituted in the place of
the old employer in respect of all
contracts of employment.”
[22] The
legal position enunciated in the above authorities makes it clear
that the new employer steps into the
shoes of the old employer by
operation of law. Unless there is an agreement with the employees or
their representatives to the
contrary, the new employer assumes
liability for all the actions done by the old employer in relation to
each employee. This means
that if an employee is dismissed before the
transfer of a business or the relevant part of the business, the new
employer is liable
for such dismissal even though it is the old
employer who actually dismissed the employee. Indeed, all the rights
that the dismissed
employee had against the old employer
at
the time of the transfer of the business, including the right to
institute or pursue legal proceedings in a dismissal dispute,
become
a right that he has against the new employer’.
6
Consequently, if the
former employer is found to have unfairly dismissed an employee, the
employer to which the business is transferred
is held to have
unfairly dismissed the employee. What the applicants seek to do in
this instance is to give effect to the judgments
of the Labour Court
and the LAC and to the relief granted therein by substituting the
second respondent for the first respondent
in the judgment.
There seems to be no
basis in law for the second respondent to argue that the finding of
the Court on the unfair dismissal of
the applicants is not, in
effect, a finding that it unfairly dismissed them in terms of the
provisions of section 189(2)(c).
The only issue is whether the
applicants or the first respondent should have joined the second
respondent in the proceedings
before the Labour Appeal Court, once
it became known that there had been a transfer of the business in
March 2006.
In so far as the second
respondent ought to have been joined in the LAC proceedings, it must
also be asked if it waived its right
to be joined. This possibility
arose when it did not apply to join the proceedings between the date
of the hearing in the LAC
and before judgment was handed down. It
was during this interval that the second respondent was approached
by the first respondent
to obtain its views on whether it would be
able to give effect to a possible order of reinstatement being
contemplated by the
LAC.
In
Lotz,
the LAC
made it clear that the new employer’s automatic liability for
the wrongs of the first employer also means that
if a transfer has
occurred, the aggrieved employees must pursue their claims against
the new employer and not against the old
employer:
“
Accordingly
such an employee must, where he has instituted proceedings against
the old employer, pursue those proceedings against
the new employer
instead
of
the old employer. The result would be that if the dismissal is found,
after the transfer of the business, to have been unfair,
any order of
reinstatement would probably have to be made against the new
employer. See
Transport
Fleet Maintenance (Pty) Ltd & another v National Union
Metalworkers of SA & others
(2004)
25 ILJ 104 (LAC)
at
114H-115B; ...
National
Education Health & Allied Workers Union v University of Cape Town
& others
(LAC)
at 343G-344A paras 80 and 81.”
7
In this matter, the
transfer occurred after the dismissals but before the matter was
heard by the court
a quo.
When the matter was argued and the
question of relief was debated in the Labour Appeal Court, it is
apparent that by then the
individual applicants had been made aware
of the transfer which had taken place. At that point, even though it
was at the appeal
stage, they ought to have applied for the second
respondent to be joined in these proceedings, but they did not. For
the reasons
mentioned above, the LAC did not seem to think it was
necessary for it to address the joinder question
mero motu
either. So, even though it was aware of the subsequent transfer
of business, the LAC confined itself to the question of whether
the
relief granted by the Labour Court had been correct. The applicants
have not appealed against the LAC’s finding in
this regard.
In
Amalgamated
Engineering Union v Minister of Labour,
8
the Appellate Division
recognised that joinder of an interested third party even at the
appeal stage was not inappropriate and
could be ordered
mero
motu
by
the appeal court. It must be emphasised that the court in that case
was addressing the question of joinder occurring
before
judgment was passed. It
is not correct as the applicants submit that joinder may take place
after judgment has been handed down.
The case of
Mokoena
and Others v Motor Component Industry (Pty) Limited and Others
(J1112/1999)
[2005] ZALC 55
(25 February 2005) cited by the applicants does not
support their argument,
because
that case concerned an application for joinder of parties who had
not participated in conciliation proceedings.
The core principles
underlying the requirement of joinder were summarised in the
AEU
judgment as follows:
’
Indeed
it seems clear to me that the Court has consistently refrained from
dealing with issues in which a third party may have a
direct and
substantial interest without either having that party joined in the
suit or, if the circumstances of the case admit
of such a course,
taking other adequate steps to ensure that its judgment will not
prejudicially affect that party's interests
.'
9
Even if the second
respondent could not have disputed the fairness of the dismissals,
it ought to have been heard on the question
of relief, which after
all is something that could directly affect it and not merely in a
financial sense.
It was argued on behalf
of the individual applicants that the second respondent could not
rely on its non-joinder by either or
both of the original parties to
the proceedings because it must be taken to have waived its right to
rely on non-joinder. In
the
AEU
case, Fagan, AJA had this to
say about a waiver of the right to be joined:
“
There
may also, of course, be cases in which the Court can be satisfied
with the third party's waiver of his right to be joined,
e.g. if the
Court is prepared, under all the circumstances of the case, to accept
an intimation from him that he disclaims any
interest or that he
submits to judgment. It must be borne in mind, however, that even on
the allegation that a party has waived
his rights, that party is
entitled to be heard; for he may, if given the opportunity, dispute
either the facts which are said to
prove his waiver, or the
conclusion of law to be drawn from them, or both.
Mere
non-intervention by an interested party who has knowledge of the
proceedings does not make the judgment binding on him as
res
judicata
.
There may be further circumstances present which would support an
allegation of waiver or estoppel against him, but that is another
matter
.”
10
In the case of
Road
Accident Fund v Mothupi
,
11
the
SCA held that: ‘Waiver is first and foremost a matter of
intention’ ; and ‘the knowledge and appreciation
of the
party alleged to have waived is furthermore an
axiomatic
aspect
of waiver’
The evidence in support
of a waiver of the right to be joined lies in the letter of the
first respondent to registrar, and the
second respondent’s
acknowledgment that there were some informal discussions between it
and the first respondent along
the lines sketched in the letter. On
the basis of this evidence alone, I am not persuaded on a balance of
probabilities that
the second respondent most probably knew an order
could be made against it,
even
though it was not a party to the litigation,
and
that despite that knowledge it decided not to do anything about it.
The limited
evidence of waiver in this case is distinguishable from the facts of
a case such as
Success
Panelbeaters
in
which a party expressly elected not to participate in pending
proceedings on the basis that it had been indemnified by the
previous owner of the business.
12
Conclusions
In light of the analysis
above, I am not satisfied that I can simply substitute the second
respondent for the first respondent
in the judgment of the Labour
Appeal Court, if indeed the Labour Court has the power to do so.
Secondly, insofar as the
second respondent and its directors ought to have been joined in the
proceedings, that is a matter which
should have been raised and
considered in the LAC proceedings, as the court which was seized
with the matter and not after judgment
was handed down.
Further, it follows that
if I cannot substitute the second respondent for the first in the
Labour Appeal Court judgment, then
I cannot entertain an application
for contempt against any directors of the second respondent for not
implementing the order
made against the first respondent.
The result is far from
satisfactory since the applicants do have a judgment in their
favour, but that does not allow this Court
to simply ignore the
principles of joinder and the case authority in terms of which the
new employer needs to be cited as a respondent
in litigation where a
transfer of a business as a going concern has taken place after a
dismissal.. In so far as the applicants
might have had a remedy that
remedy does not lie in dealing with the matter by way of a
substitution of parties ordered by the
Labour Court after the LAC
proceedings have been concluded. Rather, it would appear to lie in
whether the joinder issue was properly
addressed in the LAC
proceedings.
On the question of
costs, I believe that the applicant was not unreasonable in
believing that this Court would be compelled to
give effect to the
LAC judgment favour of himself and the other applicants, by
compelling the second respondent to comply with
it. I also accept
that the applicant was
bona fide
in bringing this application
and it would be inequitable to make them pay the second respondent’s
costs in this instance.
Accordingly, no cost order is made.
Regarding the
in
limine
objection that the first applicant was not properly
authorised to act on behalf of all the individual applicants in the
absence
of confirmatory affidavits to that effect at the time the
proceedings were launched, I agree that the second and further
applicants
were not properly before the Court.
Order
Accordingly,
The application to
substitute the second respondent for the first respondent in the
judgment of the Labour Appeal Court in case
number JA49/07 handed
down on 2 September 2009 is dismissed.
The application to join
the third and further respondents as judgment debtors in the
aforesaid judgment is dismissed.
The application to hold
the third and further respondents in contempt of the aforesaid
judgment is dismissed.
No order is made as to
costs.
R LAGRANGE, J
JUDGE OF THE LABOUR COURT
APPEARANCES
:
FOR THE APPLICANT
:
Nalane instructed by Maserumule Inc
.
FOR THE SECOND
RESPONDENT
:
A Redding, SC assisted by G Fourie instructed by
Glyn Marais
.
1
Screenex
Wire Wearing Manufacturing (Pty) Ltd v Jafter Ngema and Others .
2
66
of 1995.
3
At
page 16, paragraph [29] of the unreported judgment.
4
See,
for example,
Long v Prism Holdings Ltd & Another
(2010)
31 ILJ 2110 (LC) at 2116, paras [30] – [34]
5
See
Success
Panel Beaters & Service Centre CC v NUMSA & Another
[2000]
6 BLLR 635
(LAC)
at
637, in which Willis JA held in respect of section 197(2)(a), which
was the predecessor of section 189(2)(c),: “ Moreover,
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
second respondent by Score will be considered to have been
effected
by the appellant.”
6
Anglo
Office Supplies (Pty) Ltd v Lotz
at 961-2.
7
Anglo
Office Supplies (Pty) Ltd v Lotz
at 962,para [22]
8
1949
SA (3) 637 (A).
9
Amalgamated
Engineering Union v Minister of Labour
at 659.
10
Amalgamated
Engineering Union v Minister of Labour
at 659-660.
11
2000
(4) SA 38
(SCA) at 49E-F and .at 50B-C.
12
Success
Panel Beaters & Service Centre CC v NUMSA & Another
at 638.
15