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[2012] ZALCCT 53
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Van Zyl NO and Others v Commission for Conciliation, Mediation and Arbitration and Others (C212/2011) [2012] ZALCCT 53 (14 March 2012)
REPUBLIC OF SOUTH
AFRICA
IN THE LABOUR COURT OF
SOUTH AFRICA, CAPE
REPORTABLE
CASE NO: C212/2011
In the matter between:
CHRISTOPHER PETER
VAN ZYL N.O.
DANIEL TERBLANCHE
N.O.
First Applicant
Second Applicant
KEVIN TITUS N.O.
(in their capacity
as joint liquidators of Charles Potgieter Investments (Pty) Ltd
which was placed in provisional liquidation
on 5 October 2010)
Third Applicant
and
THE
COMMMISSION FOR CONCILIATION, MEDIATION AND ARBITRATION
First Respondent
MR DEREK AMERICA
N.O.
Second Respondent
ANDRE VAN DER
WESTHUIZEN
Third Respondent
Heard:
28 February 2012
Decided:
14 March 2012
Summary:
Review – application of s 38 of
Insolvency Act.
JUDGMENT
STEENKAMP, J
Introduction
[1]
This is an opposed application in terms of section 145 of the Labour
Relations Act
[1]
(“the
LRA”), for the reviewing and setting aside of the arbitration
award (“the award”) issued by the second
respondent (“the
arbitrator”), under the auspices of the first respondent (“the
CCMA”) under case number
WECT 18018-10.
[2] The first applicant,
together with the second and third applicants, are duly appointed
provisional liquidators of Charles Potgieter
Investments (Pty) Ltd
(“CPI”), the employer party in an unfair dismissal
dispute referred by the employee, the third
respondent, Mr André
van der Westhuizen (“Van der Westhuizen”), who was
employed by CPI at the time of his dismissal.
Background to the
unfair dismissal dispute
[3] CPI was placed under
provisional liquidation by order of the Western Cape High Court on 5
October 2010 (“the provisional
order”) and the applicants
were appointed as joint provisional liquidators of CPI by the Master
of the High Court with effect
from 8 October 2010.
[4] Although it is not
part of the papers before me, Mr
Ellis
informed me from the
bar that CPI was finally liquidated on 31 May 2012. Mr van der
Westhuizen agreed that this was common cause
and that I could take it
into account. There is no evidence on the papers before me, or on the
evidence that served before the
arbitrator, whether it was a
voluntary or compulsory liquidation.
[5] On 14 October 2010,
the applicants wrote to “all known creditors”, including
the employee, stating that:
‘
We
write to inform you that the above company was placed into
liquidation by order of the High Court of South Africa (Western Cape
High Court, Cape Town) on 5 October 2010. The return date has been
set down for hearing on 1 December 2010...
In order to assist us
with our investigations into the financial affairs of the above
company it would be appreciated if you could
complete the attached
affidavit for proof of claim and return it to our offices as soon as
possible.
Please
note that no claims will be submitted to proof in the event that
there is danger of a contribution being levied on creditors.
’
[2]
[6]
Section 38 of the Insolvency Act
[3]
provides
as follows:
’
38.
Effect of sequestration on contract of service
(1)
The contracts of service of employees whose employer has been
sequestrated are suspended
with effect from the date of the granting
of a sequestration order.
(2)
Without limiting subsection (1), during the period of suspension of a
contract of
service referred to in subsection (1)-
(a)
an employee whose contract is suspended is not
required to render services in terms of the contract and is not
entitled to any remuneration
in terms of the contract; and
(b)
no employment benefit accrues to an employee in
terms of the contract of service which is suspended.
(3)
An employee whose contract of service is suspended is entitled to
unemployment benefits
in terms of section 35 of the Unemployment
Insurance Act, 1966 (
Act
30 of 1966
),
from the date of such suspension, subject to the provisions of that
Act.
(4)
A trustee appointed in terms of section 56, or a liquidator appointed
in terms of
section
375
of
the Companies Act, 1973 (
Act
61 of 1973
),
or a liquidator who, in terms of
section
74
of
the Close Corporations Act, 1984 (
Act
69 of 1984
),
remains in office after the first meeting and a co-liquidator, if
any, appointed by the Master may terminate the contracts of
service
of employees, subject to subsections (5) and (7).
(5)
A trustee may not terminate a contract of service unless the trustee
has consulted
with-
(a)
any
person with whom the insolvent employer was required to consult,
immediately before the sequestration, in terms of a collective
agreement defined in
section
213
of
the Labour Relations Act, 1995 (
Act
66 of 1995
);
(b)
(i)
a workplace forum defined in
section 213
of the
Labour Relations Act,
1995
; and
(ii)
any registered trade union whose members are likely to be affected by
the termination
of the contract of service,
if there is no such
collective agreement that existed immediately prior to the
sequestration;
(c)
a registered trade union representing employees
whose contracts of service were suspended in terms of subsection (1)
and who are
likely to be affected by the termination of the contract
of service, if there is no such workplace forum; or
(d)
the employees whose contracts of service were
suspended in terms of subsection (1) and who are likely to be
affected by the termination
of the contract of service or their
representatives nominated for that purpose, if there is no such trade
union.
(6)
The consultation referred to in subsection (5) must be aimed at
reaching consensus
on appropriate measures to save or rescue the
whole or part of the business of the insolvent employer-
(a)
by the sale of the whole or part of the business
of the insolvent employer; or
(b)
by a transfer as contemplated in
section 197A
of
the
Labour Relations Act, 1995
; or
(c)
by a scheme or compromise referred to in section
311 of the Companies Act, 1973; or
(d)
in any other manner.
(7)
If any party referred to in subsection (5) wishes to make proposals
concerning any
matter contemplated in subsection (6), that party must
submit written proposals to the trustee or liquidator within 21 days
of
the appointment of the trustee in terms of section 56, or the
appointment of the liquidator in terms of section 375 of the
Companies
Act, 1973, or the appointment of a co-liquidator in terms
of
section 74
of the
Close Corporations Act, 1984
, or if a
co-liquidator is not appointed, the date of the conclusion of the
first meeting, unless the trustee or liquidator and
an employee agree
otherwise.
(8)
A creditor of the insolvent employer may, with the consent of the
trustee, participate
in any consultation contemplated in this
section.
(9)
Unless the trustee or liquidator and an employee have agreed on
continued employment
of the employee in view of measures contemplated
in subsection (6), all suspended contracts of service shall terminate
45 days
after-
(a)
the date of the appointment of a trustee in terms
of
section 56
; or
(b)
the date of the appointment of a liquidator in
terms of section 375 of the Companies Act, 1973; or
(c)
the date of the appointment of a co-liquidator in
terms of
section 74
of the
Close Corporations Act, 1984
, or if a
co-liquidator is not appointed, the date of the conclusion of the
first meeting.
(10)
An employee whose contract of service has been-
(a)
suspended in terms of subsection (1); or
(b)
terminated in terms of subsection (4) or (9),
is entitled to claim
compensation from the insolvent estate of his or her former employer
for loss suffered by reason of the suspension
or termination of a
contract of service prior to its expiration.
(11)
An employee whose contract of service terminates or has been
terminated in terms of this section
is entitled to claim severance
benefits from the estate of the insolvent employer in accordance with
section
41
of
the Basic Conditions of Employment Act, 1997 (
Act
75 of 1997
).”
[7] It is common cause
that no consultation in terms of s 38(5) took place. Neither was the
employee paid any severance pay, nor
did the employer advise its
employees of the application for liquidation, as it was compelled to
do in terms of s 197B of the LRA.
I will return to those aspects
later. Neither did the letter of 14 October 2010 refer to any
suspension of the employment contract;
in fact, the employee carried
on working.
[8]
The applicants say that, on 10 November 2010, Van der Westhuizen,
along with the other employees of CPI, were informed of the
provisional order and the fact that their contracts of employment had
therefore been suspended in terms of section 38 of the Insolvency
Act
with effect from 5 October 2010. He disputes that in his answering
papers; and no such evidence was led at the arbitration.
The
liquidators and the employer elected not to attend the arbitration
proceedings. The applicants did not file any replying papers.
In
terms of the well-known rule set out in
Plascon-Evans
Paints Ltd v Van Riebeeck Paints (Pty) Ltd:
[4]
‘
[W]here
in proceedings on notice of motion disputes of fact have arisen on
the affidavits, a final order ... may be granted if those
facts
averred in the applicant’s affidavits which have been admitted
by the respondent, together with the facts alleged by
the respondent,
justify such an order.’
On the basis of the
affidavits before me and the evidence led at arbitration, I must
accept that Van der Westhuizen was not informed
that his contract was
suspended on 10 November 2010. On the contrary, the CEO and sole
shareholder of CPI, Charles Potgieter, told
the employee on that day
that he would be dismissed on 12 November 2010.
[9] Van der Westhuizen
referred an unfair dismissal dispute to the CCMA on 12 December 2010.
In the referral form, he stated:
‘
I
was given notice on 10 November 2010 to finish my last shift on
Friday 12 November 2010 due to retrenchment liquidation. The company
was never liquidated.’
It is common cause that,
at that stage, only a provisional liquidation order had been granted;
and that the company was only finally
liquidated on 31 May 2011.
The arbitration
proceedings
[10]
Neither Potgieter nor the liquidators attended the arbitration to
dispute any of these averments. On 12 January 2011, after
receiving
the notice of set down for the arbitration, the first applicant sent
an email to the CCMA case manager who had been assigned
the dispute,
Fundiswa Matsha, in which he stated,
inter
alia,
that
as CPI was in provisional liquidation, all contracts of employment,
including that of Van der Westhuizen had been suspended
in terms of
the provisions of the Companies Act
[5]
together
with the Insolvency Act; and that van der Westhuizen should rather be
contacting the applicants in order to submit a claim
to prove any
arrear salaries or other payments due to him by CPI. He went on to
say:
‘
Given
the aforegoing we do not intend to be present or represented at any
hearings in this matter given what is recorded above.’
[11] The arbitration was
heard on 1 February 2011. The arbitrator issued the award on 11
February 2011, though it was apparently
only delivered to the
applicants on 16 February 2011.
[12] The arbitrator found
on the uncontested evidence before him that the employee had been
dismissed on 12 November 2010; that
his dismissal was both
procedurally and substantively unfair; and he awarded Van der
Westhuizen seven months’ salary as compensation.
[13] Van der Westhuizen
testified to the effect that, although Mr Charles Potgieter called
him in to his office on 10 November 2010
and advised him that CPI was
under liquidation and his services were to be terminated on 12
November 2010, he subsequently discovered
that CPI was in provisional
liquidation, and that the final liquidation application was to be
heard on 1 December 2010. In the
award, the arbitrator mentions that
no evidence was placed before him to show that CPI had been finally
liquidated and that the
only evidence on record was the provisional
order of 5 October 2010.
[14] The arbitrator thus
accepted the uncontested evidence that Potgieter dismissed the
employee with effect from 12 November 2010;
and that the dismissal
was not for a fair reason and the employer had not followed a fair
procedure.
Review grounds: the
legal framework
[15] Mr
Ellis
argued
that, due to the fact that CPI was under provisional liquidation at
this time, all of its employment contracts had been suspended
by
operation of law in terms of the Insolvency Act. It was thus not only
the applicants’ case that CPI did not dismiss van
der
Westhuizen at this time (or at any point subsequent thereto), but
that CPI simply could not dismiss him, or any of its other
employees
at this time, due to the effect of section 38 of the Insolvency Act.
[16] Once a company is in
provisional liquidation, Mr
Ellis
says, the Insolvency Act
provides that the only way an employee’s contract of service
may be terminated is in terms of section
38(4) or section 38(9)
thereof. But on the uncontested facts of this case, the employer
terminated the contract of employment;
even if it had been
suspended, it is not clear from the provisions of s 38 of the
Insolvency Act an employer is, as a matter of
law, unable to do so
(albeit unfairly) before a liquidator or trustee does so. And
the uncontested evidence is that Mr van
der Westhuizen continued
working, and was paid, until Potgieter dismissed him on 10 November
(with effect from 12 November) 2010.
It is also uncontested that he
did so without the peremptory provisions of s 38(5) of the Insolvency
Act having been followed.
[17]
Section 38 of the Insolvency Act was substituted
in
toto
by virtue of the Insolvency Amendment Act
[6]
with
effect from 1 January 2003 in order to provide more protection to
employees.
[18]
Mr
Ellis
referred to the
dictum
of
Conradie J in
SA
Agricultural Plantation and Allied Workers Union v H L Hall and Sons
(Group Services) Ltd and Others,
[7]
in
which he stated that 'the reach of the
Labour Relations Act 1995
halts once insolvency enters the picture'
[8]
.
But that judgment was delivered before the 2002 amendments to the
Insolvency Act that were designed to offer employees protection
after
provisional liquidation; and in any event, Zondo J considered that
dictum
to be
obiter
in
Ndima
and Others v Waverley Blankets Ltd.
[9]
[19] In terms of the
amended section 38(4), the liquidator, in this case the applicants
jointly, may terminate a contract of employment,
but then only after
they had engaged in a consultation process with employees in terms of
section 38(5) of the Insolvency Act.
That process is similar but not
identical to the process envisaged in section 189(3) of the LRA, in
terms of a dismissal due to
a company’s operational
requirements. But in this case, it is common cause that no such
consultation process took place.
In oral argument, Mr
Ellis
sought
to persuade me that the consultation process is not peremptory. I do
not agree. The provisions of s 38(5) of the Insolvency
Act are clear:
“
A
trustee
may
not
[10]
terminate
a contract of service
unless
the trustee has consulted with-
the
employees whose contracts of service were suspended in terms of
subsection (1) and who are likely to be affected by the termination
of the contract of service or their representatives nominated for
that purpose, if there is no such trade union.”
[20]
Insofar as any interpretation of this clear language is needed, the
authors in a helpful article in the
Industrial
Law Journal
state
it clearly:
[11]
‘
This
discretion may not be exercised unless the trustee has entered into
consultations with one or more employee parties specifically
referred
to in section 38(5) and before a time-limit has elapsed that gives
the affected parties the opportunity to respond.’
[21] In terms of section
38(9), contracts of service which are suspended due to the
provisional liquidation of a company automatically
terminate, by
operation of law, 45 days after the appointment of the liquidator
finally appointed as such, unless the parties have
agreed otherwise
after the consultation process prescribed by ss 38(5) and (6).
[22] In this case, the
liquidators did not enter into such a consultation process with the
employee; and, at the time of his dismissal
by Potgieter, the 45 days
contemplated by s 38(9) had not expired.
[23]
As Zondo J stated in
Waverley
Blankets:
[12]
‘
If
the legal position was that the granting of a provisional liquidation
order did not have the effect of terminating the contracts
of
employment of the applicants in this case but, maybe, instead only
suspended the same, subject to interim arrangements that
provisional
liquidators could make with the employees if so authorized, with a
view to such contracts only terminating if the provisional
order was
confirmed or the suspension was uplifted by operation of law upon the
discharge of the order, then the problem in this
matter would not
have arisen.’
[24]
The legal position after the 2002 amendments to s 38 is exactly as
Zondo J hypothetically described it. The contract of employment
was
not terminated, but only suspended, upon provisional liquidation. And
as the late Mr Justice
Meskin
and his co-authors state:
[13]
‘
The
contracts of service may ... be terminated by the trustee (or
liquidator) by giving notice to such effect in terms of section
38(4)
but any such termination may only ensue after the appointment of the
trustee (or liquidator) finally appointed as such and
after
consultation with the persons envisaged by section 38(5).’
[25] The arbitrator
himself comments in the award that the only evidence which was
properly before him was that at the time of Van
der Westhuizen’s
dismissal, CPI was in provisional liquidation.
[26] The applicants
submitted that the CCMA at no stage had the requisite jurisdiction to
arbitrate a dismissal dispute in the first
place, as no dismissal had
taken place. It should be clear from the above discussion that I do
not agree.
[27]
There is a further consideration. In
NULAW
v Barnard NO and Another,
[14]
Davis
JA considered the application of s 38 of the Insolvency Act as it
stood before the 2002 amendments that introduced the element
of
compulsory consultation with employees. Before the amendments, s 38
simply provided that:
‘
The
sequestration of the estate of an employer shall terminate the
contract of service to him and his employees but any employee
whose
contract of service has been so terminated shall be entitled to claim
compensation from the insolvent estate of his former
employer or any
loss which he may have suffered by the termination of his contract of
service prior to its expiration.’
[28] But even under that
regime, the court held that a voluntary winding-up is still an act by
the employer, and thus a dismissal.
In this case, neither the
employer nor the liquidator led any evidence before the arbitrator to
explain whether it was a voluntary
or compulsory liquidation. In
NULAW,
Davis JA went on to refer to the amendments to s 38 (at
that stage in Bill form), that were designed to “... cause
contracts
of employment to be suspended on the insolvency of an
employer and for a detailed process of consultation to take place in
an attempt
to reach consensus on the appropriate measures to save or
rescue the whole or part of the business of the insolvent employer.”
[29] In this case, no
such consultation process took place. The employer did not comply
with s 197B of the LRA, and the applicants
did not comply with s
38(5) of the Insolvency Act. The employee was not in a position to
explore the possibility of a transfer
of employment in terms of s
197A of the LRA, despite his evidence that the Charles Potgieter
Group comprised a number of legal
entities to which his contract of
employment could possibly have been transferred. Instead, Potgieter
dismissed him before the
expiry of the 45 days provided for in s
38(9) of the Insolvency Act and without any consultation process in
terms of ss 38(5) and
(6) of that Act.
Specific grounds of
review
[30] The applicants
submitted that the award is reviewable on the following grounds:
30.1the
arbitrator committed misconduct in that he misconstrued the legal
effect that an order of provisional liquidation has on
the employment
of employees employed in the company placed under provisional
liquidation;
30.2the
arbitrator committed misconduct in that he incorrectly found that CPI
dismissed, or could even have dismissed, Van der Westhuizen;
and
30.3
the arbitrator failed to consider the
provisions of section 38 of the Insolvency Act, despite having been
informed by Van der Westhuizen
during the arbitration that CPI was in
provisional liquidation.
[31] In my view, the
applicants have failed to establish any of these grounds. The
arbitrator properly took into account the uncontested
evidence before
him and, based on that evidence, came to the reasonable conclusion
that Potgieter dismissed the employee.
Conclusion
[35] The application for
review is dismissed. As Mr van der Westhuizen represented himself, I
make no order as to costs.
___________________________
Anton Steenkamp
JUDGE OF THE LABOUR
COURT
Appearances:
For the
applicants:
Edwin Ellis of Edward
Nathan Sonnenbergs.
Third Respondent:
André van der Westhuizen
(in person).
[1]
Act 66 of 1995
[2]
Bold and underlining as in original.
[3]
Act 24 of 1936 (as amended).
[4]
[1984] ZASCA 51
;
1984 (3) SA 623
(A) at 634 H-I.
[5]
Act 61 of 1973. At the time of dismissal, the provisions of the old
Companies Act dealing with Insolvency, and not those of Act
71 of
2008, applied to proceedings dealing with s 38 of the Insolvency
Act.
[6]
Act 33 of 2002.
[7]
(1999)
20
ILJ
399 (LC)
.
[8]
Id
at
para 22
.
[9]
(1999) 20
ILJ
1563 (LC) para 27.
[10]
My underlining.
[11]
A Boraine and S van Eck, “The New Insolvency and Labour
Legislative Package: How Successful was the Integration?”
(2003) 24
ILJ
1840 at 1848.
[12]
Supra
para
46.
[13]
Meskin et al,
Insolvency
Law and its operation in winding-up,
(LexisNexis 1990, Service Issue 37, November 2011) para 5.21.10.2.
[14]
[2001] 9 BLLR 1002
(LAC).