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[2012] ZALCJHB 23
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Consolidated Association of Employers of Southern Africa Region v Register of Labour Relations (J1611/10) [2012] ZALCJHB 23; [2012] 7 BLLR 716 (LC); (2012) 33 ILJ 2085 (LC) (29 February 2012)
13
.
REPUBLIC OF SOUTH AFRICA
Reportable
THE LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG
JUDGMENT
Case no:
J1611/10
In the
matter between:
CONSOLIDATED
ASSOCIATION OF EMPLOYERS
OF
SOUTHERN AFRICA REGION
…..............................................................
Applicant
and
REGISTRAR
OF LABOUR RELATIONS
…................................................
Respondent
Heard
:
22 February 2012
Delivered
:
29 February 2012
Summary:
Appeal-cancelation of registration of the employer’s
organisation. Appeal upheld.
JUDGMENT
MOLAHLEHI
J
Introduction
This
is an appeal against the decision of the Registrar of in terms of
section 111 (3) of the Labour Relations Act 66 of 1995
(the LRA).
The appeal arises from the dissatisfaction of the Appellant
(“Caesar”) with the decision of the Registrar
to
deregister it as an employer’s organisation. The Registrar
cancelled the registration of the appellant because in his
view the
organisation was no longer operating as an employer’s
organisation but for gain.
Background
Facts
It is
common cause that until it’s deregistration the Appellant was
registered as an employer’s organisation in terms
of Section
96 (7) of the LRA. Its deregistration was set in motion by the
letter dated 13 July 2004, in which the Registrar required
it to
furnish the following information: the income statement, financial
statement for the period ending December 1999, income
statement,
names of all elected or approved executive committee members since
2001, minutes of general meetings, copies of attendance
register of
members who attended all meetings, copy of lease agreement, proof of
all paid up memberships since 2001, etc.
On 20
July 2007, the Registrar addressed a letter to the Appellant
informing it that he intends publishing a notice within seven
days
thereafter in the Government Gazette in terms of section 106 (2)(b)
of the LRA. In that letter the Registrar stated the
reasons for the
publication in the Government Gazette as follows:
“
In
view of the documentation before me, I am of the opinion that the
organisation is for gain of individuals and therefore is no
longer
functioning as a genuine employers’ organisation as envisaged
in the Act.”
In
response to the above mentioned letter the Appellant launched an
urgent application seeking to interdict and restrain the Registrar
from proceeding with his intention to place the notice in the
Government Gazette. The urgent application did not proceed further
as the parties concluded a settlement agreement in terms of which it
was agreed that the Registrar would furnish the Appellant
with
documents upon which his decision was based.
On 20
August 2007, the Registrar addressed a letter to the Appellant in
which he attached a list of the documents relied on in
arriving at
the decision to publish his intention to cancel the Appellant’s
registration in the Government Gazette. The
Appellant was unhappy
with the information provided by the Registrar and says it is for
this reason that it was not able to fully
address the concerns and
the issues raised by the Registrar.
The Appellant submitted its representations to the Registrar on 7
September 2007 in the form of a memorandum. In the memorandum
the
Appellant sought to answer to each of the concerns and or
allegations upon which the Registrar based his decision.
On 20
March 2009, the Registrar addressed a letter to Appellant concerning
the response to the issues he had raised. The said
letter reads as
follows:
“
Kindly
take note that despite the representations made in terms of the Court
Order and requested for intervention from the ILO,
I am still of the
opinion that the organization is an organization for gain and thus
not a genuine employer’s organization
as envisaged by the Act.
Kindly take note
that in terms of section 106 (2B), the attached notice will be
published in the Government Gazette on 29 May 2009.
As indicated in the
notice, you are invited to make written representations within 60
days of the date of the notice as to why the
registration should not
be cancelled, failing which the name of the organization will be
removed from the register of the employer’s
organizations.
Yours faithfully .”
The
Appellant made further submissions subsequent to the publication of
the notice of intention to cancel by the Registrar in
the Government
Gazette. The registration of Appellant as an employer’s
organisation was subsequently cancelled on 13 November
2009.
It
should be noted that although the LRA does not require reasons for
the intention to cancel registration to be provided by the
Registrar, in this instance reasons were provided in the letter
dated 30 July 2007. In that letter the Registrar indicated that
his
intention to cancel the registration of the appellant was not based
on the provisions of Section 98, 99 and 100 of the LRA,
but rather
on the guidelines published by the Minister in terms of Section 95
(8) of the LRA.
The
Registrar based his reasons for the cancellation of the Appellant on
essentially the following grounds:
The
relationship the Appellant had with COFESA.
Failure
to comply with clause 7(1) (a) of the constitution of the Appellant
in that instead electing it appointed certain of
its officials.
The
diverse sectors of the economy from which the Appellant drew its
members was suggestive of profit motive.
The chairperson
of the Appellant was not an employer.
In
brief and broadly speaking the response of the Appellant to the
Registrar’s concerns were as follows:
The
relationship with COFESA was not denied but contended that it was
not for any ulterior motive of profit making or serving
as a
retainer for purposes of representation at the CCMA.
The
membership of COFESA was taken in accordance with the provisions of
the constitution.
That
the Appellant and COFESA are separate legal entities, each with
clearly designed structures and functions. Each has its
own books
of accounts and records of income and expenditure which are kept in
accordance with the standards of generally accepted
accounting
practice.
The
appellant further says that:
“
4.1.6
Caesar and Cofesa furthermore have easy distinguishable structures
and functions. It is obvious that some functions may overlap
due to
the association of the two organisations; however care is taken that
duties, responsibilities and functions are kept separate
as far as
practicality possible.”
Legal
powers of the Registrar
It is
trite that the Registrar has powers to deregister a registered
employer’s organization in terms of section 106 of
the LRA.
The Registrar may deregister an employer’s organization on the
grounds of failure to comply with the provisions
of sections 98, 99
and 100 of the LRA. The Registrar has further powers to deregister
an employer’s organization in terms
of the guidelines
promulgated by the Minister in terms of section 95 (8) of the LRA.
In dealing with the purpose of deregistration
the guidelines
provides:
“In
addition, in terms of section 106(2A) of the LRA, the Registrar may
cancel the registration of a trade union or an employers’
organisation that is not, or has ceased to function as, a genuine
trade union or employers’ organisation, as the case may
be.”
I
n terms of clause 24 of the guidelines an
employer’s organization loses its rights and benefit of
remaining a registered
organization under the LRA when the employers
who are members stop associating as such and when they stop
associating for the
purposes regulating the relationship between
employers and trade unions.
In determining whether or not an employer’s
organization satisfy the requirements of clause 24, it is necessary
in terms
of clause 25 of the guidelines to examine the actual
process of forming an organization as well as its composition and
membership
including the activities it undertakes on behalf of its
members.
In determining whether an employer’s organisation satisfies
the requirements of associating for the purpose of regulating
the
relationship between its members and the trade unions the following
factors are in terms of the guidelines to be taken into
account:
“•
the number and/or size of the founding members who attended the
inaugural meeting to establish the employers’
organisation;the
means by which the constitution of the employers’ organisation
was drafted and adopted;
•
the election of executive committee or council members and the
election of office-bearers.”
It is important to note that whilst section 95(5)(b) of the LRA does
not require an employer’s organization to set out
the
qualifications for admission as a member of the employer’s
organization, the guidelines under clause 28 provides as
follows:
“However
the failure to place appropriate qualifications on membership may be
an indication,
together with other factors
which are discussed
below, that the employers’ organisation is not a genuine
employers’ organisation. Where an employers’
organisation
has extremely wide qualifications for membership, it is appropriate
to consider whether its members are in reality
associating with each
other for the purpose of regulating relations between themselves and
their employees or the trade unions.”
It is apparent from the reading of clause 28 that failure to provide
for qualification of membership on its own does not automatically
constitute a basis for the conclusion that the organization is not
operating as envisage by the LRA. There are other factors
to be
taken into account which includes in particular the question of
whether the organization is operating for gain.
In order to ensure that employers’ organization do not operate
as organizations for gain, section 95(5) of the LRA requires
that an
employer’s organisation must state in its constitution that it
is an association not for gain. In determining whether
an employer’s
organization is operating as an organisation for gain, the Registrar
is required to examine the organisation’s
actual financial
operation. The factors to consider in determining whether an
employer’s organization is operating for
gain of the
individuals are the following:
“(a)
Unrealistically high salaries or allowances are paid to the
officials, office-bearers or employees of the employers’
organisation.
(b)
Interest free or low interest loans are made to officials,
office-bearers or employees, and those loans are not repaid.
(c)
Family members of office-bearers or officials are employed by the
employers’ organisation.
(d)
Income earned by the employers’ organisation is not used for
the benefit of the organisation and its members but is paid
out to
officials, office-bearers or employees.
The other indicator that an employer’s organization is
operating for gain of individuals may be the arrangements made with
members to pay fees in respect of litigation in particular in cases
involving dismissal disputes.
Evaluation
The approach to adopt in appeals of this nature is set out in
Staff
Association for the Motor Related Industries v Motor Industry Staff
& Another
,
1
wherein it was held that the appeal envisaged in section 111 of the
LRA is wide, involving a complete rehearing with adjudication
on
merits with or without additional evidence or information. In other
words the powers of the court in considering the appeal
is not
limited to reviewing the decision of the Registrar.
In the present matter the reasons provided by the Registrar has to
be assessed in the context of what was stated in the government
gazette indicating the intention to deregister the Appellant. In a
sense the notice of the intention to deregister an organization
by
the Registrar serves almost as a “charge sheet” against
the affected organization. Thus the evaluation of the
reasons to
deregister an organization must be weighed against the background of
what was stated in the notice. As indicated earlier
the Registrar
indicated that he intended to cancel the registration of Appellant
as it no longer operated as a genuine employer’s
organization
but rather as an organization for gain.
In the present instance there is no legal issue as concerning
compliance with the requirement that the Appellant had to provide
in
its constitution that it is an organization not for gain. In
arriving at the conclusion that Appellant was not a genuine
employer’s organization but operated for gain, the Registrar
relied on the provisions of the guidelines promulgated in terms
of
section 95 (8) of the LRA and not in terms of section 98, 99 and 100
of the LRA.
It is undisputed that the Registrar has powers in terms of the
provisions of the guidelines to deregister either a trade union
or
an employer’s organization that falls foul of the law. In such
instances the Registrar in exercising his discretion
in terms of the
guidelines, can deregister such an organization particular where he
is of the view that it no longer operates
as a genuine employer’s
organization.
In the present instance the Registrar found that the Appellant was
not a genuine employer’s organization but one for gain
because
of its relationship with COFESA. As indicated earlier in this
judgment the Appellant does not dispute that it does have
a
relationship with COFESA but contends that the relationship is not
for ulterior motives but a relationship fundamentally based
on the
right to freely associate.
There is nothing in the guidelines that prohibits the two
organisations from associating with each other. The legal problem in
the relationship would arise if it was to be shown that the
relationship is for the purposes other than that provided for in
the
law i.e. the right to form an employer’s organisation is used
as a sham for profit making. At best the problem which
the Registrar
has with the relationship is based on suspicion based particularly
on the history of COFESA.
The Registrar says that by its nature the relationship between the
Appellant and COFESA is based on a “retainer”
in terms
of which the Appellant’s members appear on a fee at the CCMA
in the dispute process. The Appellant does not deny
that members who
require assistance at the CCMA are charged a fee by agreement
because its R20.00 (twenty rand) membership fee
per annum is
insufficient to cover all its running costs.
The only evidence which the Registrar relied on in relation to the
issue of the relationship between the two organizations which
suggest some profit making motive, is the arbitration award wherein
some individual appeared before the CCMA Commissioner and
claimed to
be representing both COFESA and the Appellant. In my view the
finding of the Commissioner in that award remained his
or her
opinion and could not be properly regarded as being definitive of
the nature relationship between the two organizations.
In a sense,
in my view, at best the Registrar should have regarded the contents
of the arbitration awards as nothing but an allegation
that required
further investigation on his part. The issue which the arbitrator
was confronted with during the arbitration proceedings
was not to
determine whether the relationship between the two organizations was
for the purposes of making a profit.
The evidence before the Registrar was therefore insufficient to
conclude that the relationship between the two organizations
was
such that it can on the basis of the arbitration award make the
Appellant not a genuine employer’s organization. The
same
applies to the report of the audit of Tsedo Commercial Investigator
(Pty) Ltd. In regard to that report the Registrar over
looked the
fact that it is stated amongst others in the report under the
heading; “Restriction and Limitation”, that:
“We were not required to and did not undertake an audit or a
review made in accordance with International Standards on
auditing
or International Standard on Review Engagements (or relevant
national standards or practices. Consequently, we do not
express any
audits.
The scope of our work was limited to a review and analysis of
documentation and information made available to us and specific
enquiries undertaken to pursue our mandate.
We have not have
verified the authenticity of validity of the documentation made
available to us.
(my underlining)
We have included information that we obtained verbally, in this
report.
We cannot verify that this information is credible or
truthful. (my underlining)
We have referred to various legal provisions in this report. As we
are not a legal practice, we refer you to your legal representative
to make any legal interpretations with respect to our findings.
Any recommendations made in this report should only be acted upon
after consultation with your legal advisors. We have not discussed
the contents of the report with the subject of the investigation.”
Similarly, failure to comply with the provisions of clause 7 (1) of
the Appellant’s constitution does not seem to constitute
a
proper basis upon which it could be concluded that the organization
was operating for a gain. The same applies to the issue
of
membership of the Appellant. The Registrar says that the Appellant
is an organization for gain because it has failed to place
appropriate qualifications on its membership. It seems to me, more
is required than a simple accusation that an organization
is profit
driven simply because of failure to state qualification for its
membership in its constitution.
As concerning the question of leadership of the Appellant the
Registrar relied on the allegation that Mr Moody was not an
employer.
Besides it being raised late in the process of
deregistration of the Appellant, it is not clear in what way can it
be said that
it is indicative of the fact that the Appellant is
disguised as an organization for gain. There is no evidence
indicating as
to how much Mr Moody was earning. There is also no
evidence as to whether the position he occupied was intended as a
disguised
to benefit someone else.
Turning to the issue of the financial statements of the Appellant it
is apparent that the organization recorded a nominal profit
over the
period between 1998 and 2008. The nominal profit made over that
period averages at R173 .12 per month. The question
that arises is
whether this nominal profit can be regarded as a “gain.”
The LRA does not define the word “gain.” I agree with
counsel for the Appellant that the literal meaning of the word
“gain” involves something more than a mere receipt of
payment. I have not been able to find any authority in labour
matters dealing with the concept “not for gain.” The
cases dealing with organisations “not for gain”
under
the old Companies Act of 1973 provide some inside into the concept.
The concept received attention in the Supreme Court
of Appeal (the
SCA) in the matter of
Cunninghame v First Ready Development 249
.
2
In dealing with the concept, “not for gain,” the Court
in that case quoted with approval what was said by
Nienaber
JA in
Mitchell's
Plain Town Centre Merchants Association v McCleod,
3
where it was
observed that:
"Gain" in the context in which it
appears in ss 30(1) and 31 means a commercial or material benefit or
advantage . . .
in contradistinction to the kind of benefit or result
which a charitable, benevolent, humanitarian, . . . or sporting
organisation,
for instance, seeks to achieve. The sections [ie 30(1)
and 31] are concerned with commercial enterprises and "gain"
must
be given a corresponding meaning.'
The SCA further quoted with
approval what was said in
South
African Flour Millers' Mutual Association v Rutowitz Flour Mills
Ltd
,
4
where in dealing with
the same issue the Court had the following to say:
'Now, if you come to the meaning of the word
"gain", it means acquisition. It has no other meaning that
I am aware of.
Gain is something obtained or acquired. . . . I take
the words as referring to a company which is formed to acquire
something,
or in which the individual members are to acquire
something, as distinguished from a company formed for spending
something, and
in which the individual members are simply to give
something away or to spend something, and not to gain something . . .
It seems
to me that the Act broadly means this: all commercial
undertakings shall be registered. It distinguishes . . . between
commercial
undertakings on the one hand . . . and what we may call
literary or charitable associations on the other hand, in which
persons
associate, not with a view to obtaining a personal advantage,
but for the purpose of promoting literature, science, art, charity
or
something of that kind.'
I understand the above authorities, to be saying that the making of
a “gain” is not necessarily a contravention of
the
object, “not for gain” as envisaged in the law. It seems
that what is determinative of the nature of the object
“not
for gain” is the manner in which the “gain” is
utilised or distributed. In other words the object
would be defeated
or undermined if the “gain” is distributed or used for
the purposes other than those of advancing
the interest of the
organisation and or its members. In other words the object of “not
for gain” would be defeated
if the “gain” is
shared amongst the officials of the organisation in the form of
bonuses or other terms of payment
to them.
In the present instance except for the finding that the Appellant
made a profit there is no indication as to why that constituted
contravention of the law. There is no evidence as to how the profit
was distributed or used.
In light of the above, I am of the view that Applicant’s
appeal stands succeed. I see no reason both in law and fairness
why
costs should not follow the results.
Order
In the premises the following order is made:
The appeal is upheld.
The decision of the Registrar to deregister the Appellant has no
basis in law, is wrong and accordingly stands to be set aside.
The Registrar is ordered to reinstate the registration of the
Appellant as an employer’s organisation.
The Registrar is to pay the costs on the Appellant.
_______________________
Molahlehi J
Judge of the Labour Court
EARANCESf
APPLICANT:
Appearances:
For the Applicant: Mr. Dirk Coetzee Instructed by: Dirk Coetzee
Attorneys
For the RESPONDENTS: Mr. Coetzee Instructed by: State Attorney
1
(1999)
20 ILJ 2552 (LAC).
2
2010
(5) SA 325
(SCA).
3
[1996]
ZASCA 67
;
1996
(4) SA 159
(A)
at 169.
4
1938
CPD 199
.