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[2013] ZALCJHB 255
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Davidson v Emvest Asset Management (Pty) Ltd (JS 306/2012) [2013] ZALCJHB 255; (2014) 35 ILJ 171 (LC) (28 May 2013)
REPUBLIC OF
SOUTH AFRICA
THE LABOUR COURT OF SOUTH AFRICA,
JOHANNESBURG
JUDGMENT
Reportable
Case no: JS 306/2012
In the matter between:
CHRIS DAVIDSON
.............................................................................................
Applicant
And
EMVEST ASSET MANAGEMENT (PTY) LTD
..............................................
Respondent
Heard:
25 and 26 April 2013
Delivered: 28 May 2013
Summary: Claim for salary and leave
in terms of
section 77(1)
of the
Basic Conditions of Employment Act
75 of 1997
.
JUDGMENT
PRINSLOO, AJ
Introduction
The
Applicant, Chris Davidson, approached this Court for a relief in
terms of the provisions of
section 77(1)
of the
Basic Conditions of
Employment Act
1
(BCEA
). His claim is for outstanding
remuneration and accrued leave.
The Respondent opposed the matter and
relied on the provisions of
section 34(1)(b)
of the BCEA, claiming
that
section 34(1)(b)
permits deductions if the deduction is
required or permitted in terms of a law. The Respondent stated that
it is obligated in
terms of the Income Tax Act to deduct and claim
outstanding taxes due and payable from the Applicant’s
outstanding remuneration
and to pay it over to the South African
Revenue Services (SARS).
Before turning to the merits of the
case, it is necessary to give a brief overview of the Applicant’s
employmentwiththe
Respondent.
Background
The Applicant commenced employment
with EMVEST Agricultural Corporation (Pty) Ltd in October 2008 and
he was paid remuneration
as agreed between the parties. In 2009 the
Applicant’s cost to company was split between EMVEST
Agricultural Corporation
(Pty) Ltd, a South African company and
EMVEST Agricultural Corporation (Mauritius) Limited, a Mauritian
company. As from June
2009 the monthly remuneration paid to the
Applicant by EMVEST Agricultural Corporation (Pty) Ltd was reduced
in accordance with
his agreement with the Mauritian company. The
Mauritian company paid the Applicant his agreed remuneration.
In October 2010 EMVEST Agricultural
Corporation (Pty) Ltd engaged in a process of restructuring and as
from November 2010 the
Applicant was employed by EMVEST Asset
Management (Pty) Ltd, the Respondent before this Court.
It is the Applicant’s case that
he had two separate employers with two separate contracts of
employment, one with the Respondent
in South Africa and the other
with EMVEST Agricultural Corporation (Mauritius) Limited, his
Mauritian employer.
The Applicant resigned on 9 January
2012 and he is claiming payment of his salary for the period 1 –
9 January 2012 and
accrued leave of 19.5 days.
The Applicant’s claim and the
Respondent’s defence:
The Applicant’s statement of
case sets out his claim as follows:
[8.1] The Applicant was employed as a
corporate director of the Respondent;
[8.2] He resigned on 9 January 2012;
[8.3] He was not paid any remuneration
for the days 1 – 9 January 2012;
[8.4] He was not paid for any accrued
leave amounting to 19.5 days;
[8.5] The Applicant claims R 17 775,
87 in respect of outstanding and unpaid remuneration and R 63 248, 73
in respect of accrued
leave. His total claim is for R 81 024, 60.
The Respondent opposes the claim and
its defence as it appears from the statement of defence is as
follows:
[9.1] The Applicant was remunerated in
South Africa as well as Mauritius and he was paid €97 944, 82
for a period from July
2009 until 1 September 2011 in respect of his
Mauritian remuneration;
[9.2] No tax was deducted from the
Applicant’s remuneration paid in Mauritius;
[9.3] The Income Tax Act provides that
income earned in Mauritius by a person who resides in South Africa
shall be taxed in South
Africa if that was not taxed in Mauritius;
[9.4] The Applicant is liable for
taxes on the €97 944.82 he earned in Mauritius and the
Respondent is liable to deduct
these taxes from the Applicant’s
remuneration;
[9.5] The Respondent is liable to pay
SARS an amount of R 500 000 in respect of the Applicant’s
‘pay as you earn’
(PAYE); and
[9.6] Section 34(1) (b) of the BCEA
permits deductions if the deduction is permitted in terms of a law.
It is common cause between the
parties that the Applicant was employed by the Respondent as
corporate director and that he has
resigned from the Respondent’s
employ on 9 January 2012. It is further common cause that the
Applicant was not paid for
outstanding remuneration and accrued
leave. It is however disputed that the Respondent is liable to pay
the amounts claimed by
the Applicant.
This Court has to decide whether the
Applicant is entitled to and the Respondent liable for payment of R
17 775, 87 in respect
of outstanding and unpaid remuneration and R
63 248, 73 in respect of accrued leave.
The evidence adduced
The Applicant testified that he was
employed as corporate director and he was responsible for the
management of assets. He explained
that the Respondent has
agricultural assets in a number of countries, including Zambia,
Zimbabwe and Swaziland.
The Applicant testified that he had
two employers namely the Respondent and EMVEST Agricultural
Corporation (Mauritius) Limited.
He has been employed by EMVEST
Agricultural Corporation (Mauritius) Limited since June 2009 and by
the Respondent since November
2010. The remuneration paid to the
Applicant was approximately R 70 000 per month paid by the
Respondent and 8 000 USD paid by
the Mauritian company.
Both employers paid him a monthly
remuneration and no issue was ever raised about that.
He was not paid his salary for
September until December 2011 and 1 – 9 January 2012 by EMVEST
Agricultural Corporation (Mauritius)
Limited and he instituted legal
proceedings in Mauritius for the payment of his arrear salary. The
Mauritian Court ruled in favour
of the Applicant and EMVEST
Agricultural Corporation (Mauritius) Limited paid him his arrear
salary in September 2012. According
to the Applicant, the claim he
lodged in Mauritius is separate and not related to the claim this
Court is called to adjudicate
upon, because the Mauritian claim was
for salary payable by a Mauritian entity in respect of a separate
contract of employment.
In respect of his leave entitlement
the Applicant testified that he had a global number of leave days,
namely two days per month
with a total of 24 days per year. The 24
days per year were for both employers and if he had taken leave his
credit would be
reduced in respect of both employers. His leave days
did not amount to 24 days per year per employer. The Applicant
testified
that he had 19,5 days leave credit and he was claiming
payment for those days in accordance with the value of his salary in
South
Africa.
The Respondent is withholding payment
of the Applicant’s salary for 1 – 9 January 2012 and his
19,5 leave day credit
because it views itself liable to pay SARS in
terms of the Income Tax Act and is therefore entitled to deduct
outstanding taxes
from the Applicant’s salary. The Respondent,
in its response to the Applicant’s statement of case stated
that no
tax was deducted from the Applicant’s remuneration
paid to him in Mauritius and the income he so earned in Mauritius,
shall
be taxed in South Africa if it was not taxed in Mauritius.
The Applicant presented an “ITA34”
document he received from SARS, wherein SARS referred to the
Applicant’s
income tax returns he submitted for 2012 and
informed him that his assessment had been concluded and reflects
that an amount
of R 17 166,12 was refundable to him. It is the
Applicant’s case that he does not owe SARS money and this is
supported
by the “ITA34” document dated 25 January 2013.
The Applicant called Ms Robyn-Marie
de Kock as an expert witness. She testified regarding the
Applicant’s tax residency
status and his tax obligations in
South Africa. According to her testimony the Applicant is a non
South African tax resident
and thus not liable to pay tax in South
Africa on income earned from Mauritius in respect of services
rendered to a non South
African company. The ‘Double Taxation
Agreement’ between South Africa and Mauritius does not apply
to non South African
tax residents.
Ms de Kock testified that the
Applicant is not a tax resident in South Africa and he is therefore
only liable to pay tax on income
generated from a South African
source. The Applicant received a tax clearance from SARS in January
2013, which is indicative
of the fact that he does not owe tax to
SARS.
Ms de Kock testified that even if she
was wrong and even if the Applicant was indeed a tax resident in
South Africa and has to
pay tax accordingly, the Respondent is not
legally entitled to deduct tax from the Applicant in respect of
income paid to the
Applicant by an employer that is not resident in
South Africa. The Mauritian company and the Respondent are different
and separate
legal entities and the Respondent cannot deduct tax in
respect of income paid by the Mauritian company. She made it clear
that
if the Applicant was indeed a tax resident in South Africa, the
payment of tax in respect of income earned in Mauritius, would
be an
issue between the Applicant and SARS and the Respondent has no
liability whatsoever to deduct tax on the income paid by
the
Mauritian company. The Applicant will be liable in his personal
capacity and it is his responsibility to declare the income
and pay
the tax to SARS.
Ms de Kock made it clear that the
Respondent was liable to deduct PAYE from the remuneration it paid
to the Applicant. A South
African employer company is responsible to
deduct tax for services rendered and payments made in South Africa.
Payments not made
by the South African company cannot become the
responsibility of the South African company – the
responsibility rests with
the individual.
Ms de Kock denied that the Respondent
has any basis to withhold payment to the Applicant as it has no
liability in respect of
tax on income that was paid by a different
entity outside South Africa.
The Respondent called Mr Daniel
Francois le Roux as its only witness. Mr le Roux is the Respondent’s
Human Capital Manager
since November 2008. He confirmed that in June
2009 the Applicant was given a contract with the Mauritian company
and after June
2009 the monthly amount paid to the Applicant as
remuneration from the South African employer’s side, was
reduced. He confirmed
that the Applicant had two different
employment contracts.
Mr le Roux conceded that the
Applicant’s claim for leave credit of 19.5 days was correct
and that the calculation was indeed
done by the Respondent and he
did not dispute the amount claimed by the Applicant as R 63 248, 73.
Mr le Roux agreed that the Respondent
and Mauritian company were two separate entities and that the one
entity would not have
locus standi
to claim payments on
behalf of the other. Mr le Roux conceded that he did not know of any
legal basis to withhold payment of
outstanding salary and accrued
leave to the Applicant. Section 34(1)(b) of the BCEA does not apply.
Mr le Roux confirmed that the
Respondent has paid PAYE in respect of the Applicant to SARS and
that SARS has not made any further
demands for the payment of tax.
The Respondent has to deduct and pay PAYE over to SARS only in
respect of income earned in South
Africa, all other income is the
individual’s duty to disclose to SARS. Mr le Roux could not
explain why the Respondent
was assuming responsibility to deduct and
pay tax to SARS in respect of money paid to the Applicant by a
different entity in
Mauritius.
In respect of Mr le Roux, I make the
following comment: he was an honest witness, placed in an extremely
difficult position to
defend a case and to testify on behalf of his
employer when the defence put up by the Respondent was almost not
defensible at
all.
The arguments:
In argument Mr Matyolo for the
Applicant submitted that the Applicant’s case has been
unassailed, the amounts claimed were
not disputed and the Applicant
was able to show that the amounts he claims are indeed owed and
there is no basis for withholding
payment. Once the Applicant has
proved his claim, the onus shifted to the Respondent to provide a
defence. The defence put up
by the Respondent is that it is entitled
to withhold payment on the basis of the provisions of sections
34(1)(b) of the BCEA
and the Income Tax Act. The Respondent could
not show that the Applicant owed tax and the defence put up cannot
succeed. The
Respondent’s conduct is an abuse as it is
withholding payment for no good reason. The Applicant seeks punitive
costs, including
the cost of counsel and the expert.
Ms van der Walt for the Respondent
submitted that the Applicant was a full time employee of the
Respondent and that this Court
has to find that the Applicant was
such full time employee of the Respondent. Ms van der Walt submitted
that it is trite that
a person could be a full time employee of only
one employer. She submitted that the Mauritian contract was disputed
and that
it was not possible that the Applicant was an employee of
the Mauritian company.
I
cannot agree with the submission that a person could be a full time
employee of only one employer. In
Footwear
Trading CC v Mdlalose
2
the
Labour Appeal Court accepted that it was possible for an employee to
have more than one employer.
The issues to be decided:
This Court has to decide two main
issues. Firstly whether the Applicant is entitled to payment of R 17
775,87 in respect of outstanding
and unpaid remuneration and R 63
248,73 in respect of accrued leave. Secondly whether the Respondent
is liable to pay the amounts
claimed or whether Respondent’s
defence should succeed as reason for not paying the Applicant.
It is common cause between the
parties that the Respondent employed the Applicant as corporate
director since 2010 and that he
has resigned from the Respondent’s
employ on 9 January 2012. It is further common cause that the
Applicant was not paid
for outstanding remuneration and accrued
leave upon his resignation.
The Respondent accepted that the 19.5
days leave credit claimed by the Applicant is correct. The
Respondent further accepted the
amounts as calculated and claimed by
the Applicant in respect of nine days remuneration and 19.5 days
leave credit as correct.
The Applicant was employed by the
Respondent and upon his resignation, he is entitled to be paid
pro
rata
remuneration and accrued leave. The Respondent did not
dispute this and I cannot but find that the Applicant is entitled to
payment
of R 17 775,87 in respect of outstanding and unpaid
remuneration and R 63 248,73in respect of accrued leave.
The Applicant was also employed by a
Mauritian entity and he instituted civil proceedings in a Mauritian
Court for payment of
outstanding salary. His claim was successful
and it is not related to the claim he instituted in this Court.
The second question to be considered
is whether the Respondent is liable to pay the amounts claimed or
whether Respondent’s
defence should succeed as reason for not
paying the Applicant.
The only defence put forward by the
Respondent for not paying the Applicant is that the Applicant earned
income in Mauritius and
was liable to pay tax on the income so
earned in South Africa in accordance with the Income Tax Act. No tax
was deducted and
hence the Respondent is liable to deduct these
taxes from the Applicant’s remuneration. Section 34(1)(b) of
the BCEA permits
deductions if the deduction is required or
permitted in terms of a law. The Respondent is obliged in terms of
the Income Tax
Act to deduct and claim the outstanding taxes from
the Applicant’s salary and to pay it over to SARS.
Section 34(1) of the BCEA reads as
follows:
Deductions
and other acts concerning remuneration
An
employer may not make any deduction from an employee's remuneration
unless-
subject
to subsection (2), the employee in writing agrees to the deduction
in respect of a debt specified in the agreement; or
(b)
the deduction is required or permitted in terms of a law,
collective agreement, court order or arbitration
award.
The Respondent’s case is that
it is entitled to withhold the Applicant’s money because it is
obliged in terms of the
Income Tax Act to deduct and claim the
outstanding taxes from the Applicant’s salary and to pay it
over to SARS.
The evidence before this Court
was:
[40.1] That the Respondent was liable
to deduct PAYE in respect of remuneration paid to the Applicant for
services he rendered in
South Africa and that was indeed done;
[40.2] The Respondent was not liable
for tax or PAYE in respect of income paid to the Applicant by a
Mauritian entity for services
rendered to that entity;
[40.3] The Applicant received a tax
clearance from SARS and there is no indication on that document that
he owes taxes to SARS;
[40.4] SARS has not made any demand
that the Respondent has to deduct and claim outstanding taxed and pay
such taxes over to SARS;
[40.5] If there is a tax liability and
money owed to SARS in respect of money earned in Mauritius, it is an
issue between the Applicant
and SARS;
[40.6] The Respondent has no liability
to pay tax and has no obligation towards SARS in respect of income it
did not pay the Applicant.
The Respondent has not showed this
Court the provision of the Income Tax Act that requires or permits
the Respondent to deduct
money from the Applicant’s
remuneration in respect of outstanding taxes on income paid to him
by a Mauritian entity.
The Respondent spent much time and
effort during trial to establish that the Applicant was indeed a
South African tax resident
for purposes of paying tax to SARS. It is
not for this Court to determine the Applicant’s status as tax
resident. However,
the evidence of Ms de Kock was that even if the
Applicant was a indeed tax resident, the payment of tax in respect
of income
earned in Mauritius, would be an issue between the
Applicant and SARS and the Respondent has no liability whatsoever to
deduct
tax on the income paid by the Mauritian company.
Mr le Roux could also not tender any
explanation why the Respondent is accepting liability to deduct
outstanding taxes on income
not paid by the Respondent.
The Respondent did not present any
evidence to show that the Applicant indeed owed taxes to SARS. The
Applicant on the other hand
submitted a recent tax clearance
obtained from SARS, showing the contrary.
This defence put forward by the
Respondent cannot be sustained.
I therefore find that the Respondent
is liable to pay the Applicant R 17 775,87 in respect of outstanding
and unpaid remuneration
and R 63 248,73 in respect of accrued leave.
Costs
Mr Matyolo on behalf of the Applicant
is seeking punitive costs, including the cost of counsel and the
expert. He submitted that
the Respondent could not show any basis
for withholding the Applicant’s remuneration and where a
litigant causes the other
party to lose in circumstances where it
was frivolous and vexatious, a punitive cost order would be
appropriate.
Ms van der Walt submitted that the
Respondent was not frivolous and vexatious in opposing the matter
and that the Applicant should
not be awarded costs on a punitive
scale. She further submitted that if the Court finds that the
Applicant is to be remunerated
double, taking into consideration the
payments made in Mauritius, each party has to pay its own costs. If
the Respondent does
not have to pay the tax to SARS, it has to pay
the Applicant and then cost should follow the cause.
I have to state that the finding that
the Respondent is liable to pay the Applicant outstanding
remuneration and accrued leave,
is not a finding that he should be
remunerated double. What the Applicant claimed in Mauritius and what
he was awarded there,
was in terms of his employment contract with
the Mauritian company and has nothing to do with his claim in
respect of his South
African employment.
Costs
should be considered against the provisions of section 162 of the
Labour Relations Act
3
and according to the requirements of
the law and fairness. The requirement of law has been interpreted to
mean that the costs
would follow the result.
In
considering fairness, this Court has held that the conduct of the
parties should be taken into account and that
mala
fide
, unreasonableness and
frivolousness are factors justifying the imposition of a costs
order. Another factor to be considered is
whether there is an
ongoing relationship that would survive after the dispute had been
resolved by the Court. If so, a costs
order may damage the ongoing
relationship.
The general accepted purpose of
awarding costs is to indemnify the successful litigant for the
expense he or she has been put
through by having been unjustly
compelled to initiate or defend litigation. In considering whether
costs should be awarded, the
requirements of law and fairness become
applicable.
In
Wallis v Thorpe and another
4
the
Court held:
‘
In
relation to costs, this court has a discretion in terms of s 162 to
make an order for costs according to the requirements of
the law and
fairness. The ordinary rule, ie that costs follow the result, is a
factor to be taken into account, but it is not a
determinative
factor. Mr.
Rossouw
submitted
that costs should be awarded on a punitive scale, since the
litigation initiated by the applicant was nothing less than
frivolous. While there is some merit to Mr
Rossouw's
submission
having regard particularly to the casual and careless attitude with
which the applicant has conducted these proceedings
since their
inception, I intend to make an order for costs only on the ordinary
scale. This litigation was ill-considered from
the start…’
…
Ultimately,
the applicant is the author of his own misfortune. This court
encounters many indigent and illiterate litigants who
seek to enforce
what they perceive to be their rights. The court is often wary of the
effect of a costs order on persons such as
these, who more often than
not sincerely but misguidedly institute ill-conceived proceedings.
The applicant in these proceedings
is neither indigent, nor is he
illiterate. On the contrary, he is an articulate, experienced
business person, who was quite capable
of considering the
consequences of his decision…’
In
Gois t/a
Shakespeare's Pub v Van Zyland others
5
it was held that
‘
Furthermore,
this court may make a punitive cost order such as costs on an
attorney and client scale where it believes it appropriate
to do so.
Factors to consider whether or not to grant such punitive costs
orders include where the conduct of the party -
(a)
is vexatious and amounts to an abuse of the legal process, even
though there is no intention to be vexatious;
(b)
evinces a lack of
bona fides
;
(c)
is reckless, malicious and unreasonable…’
It is evident that the Respondent’s
defence is without any merit, it is frivolous, vexatious and the
Respondent has not
approached this Court in good faith. The
Respondent adduced no evidence to support its defence. Instead by
refusing to pay the
Applicant his outstanding remuneration and
accrued leave without good reason, the Respondent compelled the
Applicant to approach
this Court and opposing this matter is nothing
but a gross abuse of process. This Court has to discourage
ill-conceived litigation,
especially where the Respondent had failed
to establish even a factual basis for its defence.
The Respondent was legally
represented and was to be advised of the consequences of defending
litigation in a court of law and
the risk of losing and paying
costs. In fact, after the first day of the trial, I encouraged the
parties to reconsider their
positions and to attempt to settle the
matter. The Respondent however was adamant to proceed with the
trial.
The Applicant had to institute civil
proceedings and had to proceed to trial in a case where the reason
for not paying and the
defence put forward was doubtful from the
onset and fairness dictates that the Applicant cannot be expected to
endure enormous
costs instituting litigation that ought not to have
been brought in the first place.
I further consider the fact that
there is no ongoing relationship between the parties.It would be
just and equitable if the Respondent
is ordered to pay the costs and
that on a punitive scale.
In the premises I make the following
order:
Order
The Respondent is to pay the
Applicant R 17 775,87 in respect of outstanding and unpaid
remuneration;
The Respondent is to pay the
Applicant R 63 248,73 in respect of accrued leave.
The Respondent is to pay the costs,
including the costs of the expert;
Cost to be paid on an attorney and
client scale.
______________
Prinsloo, AJ
Acting Judge of the Labour Court
Appearances:
For the Applicant: Adv X D Matyolo
Instructed by Perrot Van Niekerk
Woodhouse Matyolo Inc Attorneys
For the Respondent: Adv.Van der Walt
Instructed by OJ Le Roux Attorneys
1
75
of 1997.
2
[2005]
26 ILJ 443 (LAC).
3
66
of 1995
4
[2010]
31 ILJ 1254 (LC)
5
[
2011] (1) SA 148
(LC);(2003) 24 ILJ
2302 (LC) at para 43.