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[2011] ZALCCT 6
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Meyer v Horizon Carpet Manufacturers CC and Others (C352/07) [2011] ZALCCT 6; [2011] 8 BLLR 746 (LC) (11 March 2011)

Reportable
Of interest to other judges
IN
THE LABOUR COURT OF SOUTH AFRICA
HELD
AT CAPE TOWN
CASE
NO: C 352 / 07
In the matter between:
DENNIS
MEYER
….........................................................................
APPLICANT
AND
HORIZON
CARPET MANUFACTURERS CC
…............
FIRST
RESPONDENT
VALUWAYS
SEVEN CC
….......................................
SECOND
RESPONDENT
FUAD
WEPENER
…......................................................
THIRD
RESPONDENT
judgment
STEENKAMP J:
Introduction
Does the Labour Court have jurisdiction to pronounce on a claim in
respect of sections 64 and 65 of the Close Corporations Act
1
?
This jurisdictional issue arose in the context of an application for
amendment.
background
The main dispute in this matter concerns the alleged failure of the
respondents to pay the applicant leave pay, arrear remuneration
and
notice pay after his dismissal. The applicant also claims that the
respondents have failed to pay over statutory UIF contributions
and
PAYE; and that the respondents have not provided him with IRP5
income tax certificates for the tax years 2002 to 2006.
The applicant was employed by the first respondent, Horizon Carpet
Manufacturers CC, a close corporation registered as such.
He was
also appointed to act as a salesperson for the second respondent,
Valuways Seven CC. After he had been dismissed for operational

requirements, he was reinstated to those positions in August 2004.
At the time, first and second respondents were represented
by the
third respondent, Fuad Wepner. Wepner is the described as “the
sole member and owner” of Horizon and Valuways.
2
The employee’s employment was terminated again on 28 November
2006.
the cause of action
The applicant founds his cause of action mainly in section 77(3) of
the Basic Conditions of Employment Act
3
(BCEA). He alleges that the dispute concerns his contract of
employment.
That subsection provides the following:
“
The
Labour Court has concurrent jurisdiction with the civil courts to
hear and determine any matter concerning a contract of employment,

irrespective of whether any basic condition of employment constitutes
a term of that contract.”
The applicant then claims
4
that:
“
It is
also a matter in terms of which the Honourable Court has jurisdiction
in terms of
sections 64(1)
and
65
of the
Close Corporations Act 69 of
1984
. The matter has been referred to the above Honourable Court by
the applicant by virtue of the allegation that the respondent has

failed to make payment of remuneration in terms of the provisions of
the aforesaid Act and/or the terms of the applicant’s
contract
of employment.”
This paragraph is not clearly drafted. The applicant does not state
whether he is referring to one, two, or all three of the

respondents. Neither is it clear if the “aforesaid Act”
refers to the
Close Corporations Act or
the BCEA.
It becomes somewhat clearer when regard is had to the basis upon
which the applicant seeks to hold the third respondent (Wepner)

personally liable. He says in his statement of claim
5
:
“
Applicant
furthermore respectfully contends that by virtue of the provisions of
s 63(4)
and
64
(1) of the
Close Corporations Act 69 of 1984
that [
sic
]
the third respondent is and should be held to be jointly and
personally liable responsible [
sic
]
for the debts and liabilities referred to in 4.17, 4.24, 4.26, 4.27,
4.33 and 4.36 above.
6
Applicant contends that the
third respondent has joint and personally [
sic
] liability by
virtue of amongst others knowingly and intentionally failing and
refusing to appoint an accounting officer as contemplated
by
section
63(1)(h).
In addition applicant contends
that the third respondent in his capacity as sole and managing member
carried on the business of
first and second respondent recklessly,
negligently and fraudulently as contemplated by
section 64(1).
”
The relevant sections of the
Close Corporations Act that
the
applicant relies upon, are the following:
“
64
.
Liability
for reckless or fraudulent carrying-on of business of corporation.
–
(1) If it at any time appears that any business of a corporation was
is being carried on recklessly, with gross negligence
or with intent
to defraud any person or for any fraudulent purpose, a Court may on
the application of the master, or any creditor,
member or liquidator
of the Corporation, declare that any person who was knowingly a party
to the carrying on of the business in
any such manner, shall be
personally liable for all or any of such debts or other liabilities
of the Corporation as the court may
direct, and the court may give
such further orders as it considers proper for the purpose of giving
effect to the declaration and
enforcing that liability.
65. Powers of court in case
of abuse of separate juristic personality of corporation.
–
Whenever a Court on application by an interested person, or in any
proceedings in which a corporation is involved, finds
that the
incorporation of, or any act by or on behalf of, or any use of, that
corporation, constitutes a gross abuse of the juristic
personality of
the corporation as a separate entity, the Court may declare that the
corporation is to be deemed not to be a juristic
person in respect of
such rights, obligations or liabilities of the corporation, or of
such member or members thereof, or of such
other person or persons,
as are specified in the declaration, and the Court may give such
further order or orders as it may deem
fit in order to give effect to
such declaration."
the amendment
The respondents filed a response in terms of
rule 6(3)
7
anc" HREF="#sdfootnote7sym">
7
on 6 August 2007. In that response, they did not take issue with the
averment in paragraph 5.3 of the applicant’s statement
of
claim that this court has jurisdiction to decide on the claim in
terms of
ss 64(1)
and
65
of the
Close Corporations Act. In
fact,
they noted that “the contents hereof are not in dispute”.
The respondents subsequently appointed new attorneys, who are now on
record for them. On 7 October 2010, the new attorneys filed
a notice
of intention to amend the response. They do not take issue with this
court’s jurisdiction in terms of
s 77(3)
of the BCEA. However,
they wish to amend the response as follows:
“
The
contents of sub-paragraph 5.3 of the statement of claim are denied.
In particular, respondents deny that this Court has jurisdiction
in
respect of the applicant’s claims in terms of
sections 63
,
64
and/or 65 of the Close Corporations Act 69 of 1984 (as set out
inter
alia
in paragraphs 4.53 to 4.56 of the statement of claim).”
The applicant (i.e. the employee) opposes the application for
amendment. He contends, firstly, that the respondents had already

admitted the jurisdictional question and cannot now amend that
admission; and secondly, that the proposed amendment is bad in
law.
The parties were
ad idem
that the point of law – ie
whether this court has jurisdiction in terms of the disputed
paragraph – should be determined
at the same time as the
application to amend.
Application to amend: The legal principles
Generally, a court will allow an amendment if the following
requirements are satisfied:
8
The amendment must not be sought in bad faith;
The amendment must not cause prejudice to the other party that
cannot be corrected by way of a postponement, if necessary,
and an
appropriate costs order against the applicant for amendment.
It does not appear to me that the present amendment is sought in bad
faith. The respondents were under a duty to raise the jurisdictional

point as soon as they became aware of it in order to avoid the
possibility of wasting the court’s time or the parties’

resources.
9
The respondents’ previous legal representatives were not alive
to the jurisdictional point. Their previous attorney, Luke
Brodziak,
confirms that on affidavit. They only became aware of the point when
their present counsel raised it in consultation
with the new
attorneys on 7 September 2010.
The potential prejudice to the employee depends upon the validity of
the legal point raised. If it is upheld, and the amendment

accordingly granted, it would render the statement of claim
excipiable in respect of that claim (dealing with Wepner’s

liability in terms of the
Close Corporations Act). That
would
evidently prejudice the employee. Hence the necessity to determine
the point of law in order to determine whether the amendment
should
be allowed.
Previous admission
It is so that the respondents admitted to this court’s
jurisdiction in their response and in the pre-trial minute. But
the
admission is not a factual one. It is a legal point going to the
jurisdiction of this court to entertain the claim in terms
of the
Close Corporations Act. There
is no bar to amending pleadings with
the consequence that an admission in the original statement of claim
is withdrawn. The party
seeking the amendment is merely required to
furnish an explanation as to why the admission was made, and the
reasons for not
seeking to withdraw it. The explanation in this case
is clear: the respondents’ previous attorneys were not alive
to the
jurisdictional point, and they have now received advice from
their new legal representatives that they should raise it.
I would therefore not refuse the amendment on this ground.
Is the proposed amendment good in law?
Generally, an amendment is not allowed where its introduction will
result in the pleading being excipiable.
10
I think it is fair to say that this is the crux of the objection to
the proposed amendment.
Mr
Leslie,
who appeared for the respondents, submitted that
the jurisdiction of this court was a simple matter of interpretation
of the
Close Corporations Act.
In
that Act, “Court” is somewhat circuitously defined to
mean, in relation to any close corporation, “any court
having
jurisdiction in terms of section 7.”
Section 7
of the
Close Corporations Act, in
turn, reads as follows:
“
7.
Courts having jurisdiction in respect of corporations.
–
For the purposes of this Act
any
High Court
and
any magistrate's court, within whose area of jurisdiction the
registered office or the main place of business of the corporation
is
situated, shall have jurisdiction. "
That is how the section reads at present, after it had been
substituted by section 1 of Act 64 of 1988 and by section 2 of Act

26 of 1997.
The Labour Relations Act
11
came into force on 11 November 1996. Section 157 deals with
jurisdiction. It provides as follows:
“
(1)
Subject to the Constitution and section 173, and except where this
Act provides otherwise, the Labour Court has exclusive jurisdiction

in respect of all matters that elsewhere in terms of this Act or in
terms of any other law are to be determined by the Labour Court.
(2) The Labour Court has
concurrent jurisdiction with the High Court in respect of any alleged
or threatened violation of any fundamental
right entrenched in
Chapter 2 of the Constitution of the Republic of South Africa, 1996,
and arising from –
(a) employment and from labour
relations;
(b) any dispute over the
constitutionality of any executive or administrative act or conduct,
or any threatened executive or administrative
act or conduct, by the
State in its capacity as an employer; and
(c) the application of any law
for the administration of which the Minister
12
is responsible."
Section 151(2) of the LRA is also relevant. It provides that:
“
The
Labour Court is a superior court that has authority, inherent powers
and standing, in relation to matters under its jurisdiction,
equal to
that which a court of a provincial division of the Supreme Court has
in relation to matters under its jurisdiction.”
Mr
Leslie
submits that s 157 of the LRA confers no
jurisdiction on the Labour Court in respect of claims under ss 64
and 65 of the CC Act.
The language of that Act, he says, is clear:
only the High Court (or the magistrate’s court, where
applicable) has jurisdiction
in respect of this claim. And it is
trite, he says, that the Labour Court is not the High Court.
Mr Leslie referred me to the decision in
Sethobsa v Kya-Sands
Service Centre
13
where it was held that:
“
[T]he
Labour Court is not a division of the Supreme Court. Nor is it a High
Court.”
But there is a danger in quoting somewhat selectively from a
judgment. Landman J went on to say in that
dictum:
“
Although
s 151 of the Labour Relations Act 66 0f 1995 (LRA) stipulates that
the Labour Court is a superior court with authority,
powers and
standing equal to a provincial division of the Supreme Court, it is
not a division of the latter court.
Nevertheless
the Labour Court approximates so closely to a High Court, albeit as a
distant cousin, that I am of the opinion that
the reference in
section 8 of the Attorneys Act of 1979 to a Supreme Court extends to
the Labour Court.
14
In any event the Labour Court is undoubtedly a superior court.”
In the present context, I tend to agree with Landman J. Although
this court would not generally entertain a dispute in terms
of the
Close Corporations Act, the
cause of action relates to a claim in
terms of the BCEA. The claim in terms of the CC Act is incidental to
that claim, arising
from the contract of employment, in the context
where the employee seeks to hold Wepner – the sole member of
the CC –
personally liable.
The BCEA, in s 77(3), provides:
“
The
Labour Court has concurrent jurisdiction with the civil courts to
hear and determine any
matter concerning a contract of employment
,
15
irrespective of whether any basic condition of employment constitutes
a term of that contract.”
The applicant’s main cause of action is undoubtedly a matter
concerning his contract of employment. The claim in terms
of the CC
Act, it appears to me, is incidental to that claim, in order to hold
Wepner personally liable.
In the recent case of
SAMSA v McKenzie
16
Wallis AJA considered the question of the jurisdiction of the Labour
Court – albeit in a different context – in some
detail.
At the outset, he reminded us that a jurisdictional challenge must
be considered in the light of the pleaded claim:
17
“[T]he question in such cases is whether the court has
jurisdiction over the pleaded claim, and not whether it has
jurisdiction
over some other claim that has not been pleaded but
could possibly arise from the same facts.”
This court has often considered whether to pierce the corporate veil
and the potential personal liability of a member of a CC.
18
In
Footwear Trading CC v Mdlalose
19
Nicholson JA reviewed a number of those judgments. He also
remarked:
20
“
I do
not believe it is unkind to stigmatise the juristic machinations of
the appellant in the above scenario as corporate ducks
and drakes. I
am aware that situations may arise where an employer is 'an empty
legal shell stripped of its assets' while the real
power of decision
making and the ability to pay wages rests with another company or
person.… Under such circumstances a
foreign academic has
argued that 'the company or other person or persons who (have)
control of the undertaking in which the worker
is employed' should be
regarded as the employer. (See Hepple ‘The Crisis in EEC Labour
Law (1987) 16
ILJ
(UK) 77 more especially at 113).”
He went on to say:
21
“
The
abuse of juristic personality occurs too frequently for comfort and
many epithets have been used to describe the use against
which the
courts have tried to protect third parties, namely puppets, shams,
masks and
alter
ego.
However, the general principle underlying this aspect of the law of
lifting the veil is that, when the corporation is the mere
alter ego
or business conduit of a person, it may be disregarded. The lifting
of the veil is normally reserved for instances where
the shareholders
or individuals hiding behind the corporate veil of sought to be
responsible. I do not see why it should not also
apply where
companies and close corporations are juggled around like puppets to
do the bidding of the puppet master."
I am not suggesting that it has been shown that a similar scenario
exists here. That is for the trial court to decide. However,
at this
amendment stage, I must consider the possibility that the employee
will be able to show that the sole member, Wepner,
is personally
liable.
Mr
Leslie
points out, though, that in cases such as
Footwear
Trading
the court did not address
sections 64
and
65
of the
Close Corporations Act directly
. It lifted the corporate veil
without reference to those sections.
In
Million-Air
22
Francis J did lift the corporate veil in order to establish joint
liability. A jurisdictional question was raised with regard
to the
applicability of the CC Act. It was contended that the court could
not grant the relief sought because it was not a court
as defined in
s 7 of that Act. But, on the facts of that case, Francis J found
that
ss 64
and
65
of the
Close Corporations Act were
not applicable.
But in
Veress v Granard CC t/a G2 Clothing
23
Pillay J did consider the applicability of
s 65
of the
Close
Corporations Act. The
case pleaded was that the member of the CC
grossly abused its juristic personality. Pillay J remarked: “This
is a requirement
of
section 65
of the
Close Corporations Act if
Veress were to succeed in piercing the corporate veil.” In
that context, therefore, she assumed that the Labour Court does
have
jurisdiction. That
dictum
was followed in
Group 6 Security
v Moletsane
24
.
More recently, I had to consider similar principles in
Zeman v
Quickelberge.
25
Although the application was unopposed and the jurisdictional
question was not raised, I had regard to the provisions if
ss 64
and
65
of the
Close Corporations Act in
coming to the conclusion that
the member of the CC in that case abused the juristic personality of
the CC, thus acting as the
puppet master; and that, in those
circumstances, the corporate veil should be lifted. I also found
that the business of the CC
had been carried on fraudulently or
recklessly, and that the member should be held personally liable for
its debts.
I have considered that judgment again, and I am not persuaded that I
was wrong in having consideration to those sections in that

context.
26
The context, in that case and in the cases cited therein, as in the
present case, seems to me to be important. In the present
matter,
the relief sought in terms of the
Close Corporations Act is
an
adjunct to the main pleaded claim in terms of
s 77(3)
of the BCEA.
To hold that this court should determine the claim in terms of the
BCEA, but the employee should bring a separate
claim in the
provincial division of the High Court for that portion of his claim
that falls under the
Close Corporations Act, would
, in my view, lead
to an unnecessary duplication of costs and delays that the
legislature could not have intended.
Mr
Leslie
submits that the language of the Act is clear. It
must be read, though, with the provisions of s 77(3) of the BCEA.
And, insofar
as it is required, a purposive approach is called for.
One of the purposes of the LRA is to promote the
effective
resolution of labour disputes.
27
And in interpreting the Act, this court “
must
interpret
its provisions to give effect to its primary objects.”
28
This must be read together with the BCEA that has as one of its
objects, “to give effect to ... the right to fair labour

practices conferred by section 23(1) of the Constitution.”
29
In
Fish Hoek Primary School v GW
30
the Supreme Court of Appeal referred with approval to the
dictum
of Stratford JA in
Bhyat v Commissioner for Immigration
31
where it was held that ‘the cardinal rule of construction of a
statute’ –
“
is the
endeavour to arrive at the intention of the lawgiver from the
language employed in the enactment… In construing a
provision
of an Act of Parliament the plain meaning of its language must be
adopted unless it leads to some absurdity, inconsistency,
hardship or
anomaly which from the consideration of the act and as a whole a
court of law is satisfied the legislature could not
have intended."
The SCA further referred to
Poswa v MEC for Economic Affairs,
Environment and Tourism, Eastern Cape
32
where Schutz JA held that the effect of that formulation –
“
is
that the court does not impose its notion of what is absurd on the
legislature’s judgement as to what is fitting, but uses

absurdity as a means of defining what the legislature could not have
intended and therefore did not intend, thus arriving at what
it did
actually intend."
A stringent and literal interpretation of the term “
any
High Court” in s 7 of the CC Act, when applied in the context
of what is primarily a dispute arising from the contract
of
employment, would, in my view, lead to an absurdity or anomaly. It
would have unjust consequences and cause a proliferation
of actions
that the legislature could not have intended.
conclusion
In the context of this case, I am not persuaded that the Labour
Court does not have jurisdiction to consider the applicability
of
ss
64
and
65
of the
Close Corporations Act. It
follows that the
proposed amendment is not good in law and should be refused.
The application for amendment is dismissed. Costs are to be costs in
the cause of the main referral.
_________________________________
STEENKAMP J
Date of hearing:
22 February 2011
Date of judgment:
11 March 2011
For the applicant:
Mr G Marinus
Werksmans Inc
For the respondents:
Adv GA Leslie
Instructed by Parker attorneys
1
Act
69 of 1984
2
For
ease of reference, I will continue to refer to the respondents in
the main dispute – who are the applicants in the application

to amend – as “the respondents”. I will refer to
the applicant in the main dispute as “the applicant”
or
“the employee”.
3
Act
75 of 1997.
4
In
para 5.3 of his statement of claim
5
i.e.
the referral in terms of rule 6(1), in para 4 of the statement of
claim.
6
Those
claims relate to remuneration; commissions payable; leave pay; and
notice pay.
7
Erroneously
headed : “Respondents’ reply”
8
Moolman
v Estate Moolman
1927 CPD 27
at 29.
9
Rauff
v Standard Bank Properties
2002 (6) SA
693 (W) 702 I.
10
Krischke
v Road Accident Fund
2004 (4) SA 358
(W) 363B.
11
Act
66 0f 1995
12
Defined
as the Minister of Labour
13
[2001]
7 BLLR 838
(LC) para [3]
14
My
underlining.
15
My
underlining
16
[2010]
3 All SA 1
(SCA)
17
At
para [7]
18
See,
for example:
Camdons Realty (Pty) Ltd v
Hart
1993 (14)
ILJ
1008 (LAC);
PPWAWU
v Lane NO
(1993) 14
ILJ
1366 (IC);
Esterhuizen
v Million-Air Services CC (in liquidation)
(2007)
28
ILJ
1251
(LC).
19
[2005]
5 BLLR 452
(LAC)
20
At
para [27]
21
At
para [34]
22
supra
at para [12]
23
[2004]
3 BLLR 283
(LC) at para [24]
24
[2005]
11 BLLR 1072
(LC) para [53]
25
[2010]
ZALC 122
26
There
has been no application for leave to appeal against the judgment.
27
LRA
s 1(d)(iv)
28
LRA
s 3(a)
29
BCEA
s 2(a)
30
2010
(2) SA 141
(SCA) para [6]; referred to by Van Niekerk J in
NUMSA
v Bell Equipment Company SA (Pty) Ltd
(D
753/09, 27 May 2010)
31
1932
AD 125
at 129
32
2001
(3) SA 582
(SCA) para [11], referred to in para [7] of the
Fish
Hoek
case.