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[2013] ZALCJHB 129
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Transport and Allied Workers Union of South Africa v Transnet (Pty) Ltd and Others (J175/2011) [2013] ZALCJHB 129; (2014) 35 ILJ 526 (LC) (20 June 2013)
REPUBLIC OF SOUTH AFRICA
THE
LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG)
JUDGMENT
Reportable
Case no: J175/2011
In the matter between:
TRANSPORT AND ALLIED WORKERS UNION
OF SOUTH AFRICA
.........................................................................................
Applicant
and
TRANSNET (PTY) LIMITED
................................................................
First
Respondent
ETHEKWINI METROPOLITAN MUNICIPALITY
...........................
Second
Respondent
MEC FOR TRANSPORT, COMMUNITY SAFETY
AND LIASION, KWA-ZULU NATAL
..................................................
Third
Respondent
Heard: 23 November 2013
Delivered: 20 June 2013
Summary: An application for a declarator that there
was a transfer of a business as a going concern in terms of section
197 of the
LRA in a public transport service arrangement involving a
municipality – effect of closing down of service before alleged
transfer.
_________________________________________________________________
JUDGMENT
_________________________________________________________________
CELE,
J
Introduction
[1] The issue that arises crispy for determination in
this matter is whether the decision by the third respondent to
appoint the
first respondent as a substitute bus operator to perform
public transport passenger services in the greater Durban area,
albeit
on a month-to-month basis, amounts to a transfer of a business
as a going concern, as envisaged by Section 197 of the Labour
Relations
Act
1
,
(“the Act”). The applicant seeks an affirmative answer to
the question as a consequence of which it seeks an order
in the
following terms:
Declaring that the bus service was and is the whole or
part of a business, undertaking or service as contemplated by
section
197 (1) (a) of the Act, accordingly a business for purposes
of section 197;
Declaring that each of the successive outsourcing
arrangements constitute a transfer of the second respondent’s
bus service
as a going concern, as contemplated by section 197 of
the Act;
Declaring that the applicant’s members who were
formally employed by the second respondent are deemed to have been
transferred
from one service provider to the next, on the same
terms and conditions of service as they enjoyed whilst employed by
the second
respondent;
Ordering the first respondent alternatively the second
respondent or any other party who has been appointed by the second
respondent
to allow the applicant’s members whose names are
appearing in annexure “ZM%” to resume their employment
in
the bus service;
Further and/or alternative relief.
[2] The first and second respondents opposed the
application by contending that the decision by the third respondent
to appoint
the first respondent as a substitute bus operator does not
amount to a transfer of a business as a going concern, as envisaged
by Section 197 and therefore that orders prayed for should be
dismissed.The third respondent chose to abide the decision of the
Court.
[3] The applicant sought condonation for the late filing
of its replying affidavit, filed some 275 days out of time, due to a
dispute
which arose between it and its erstwhile attorneys relating
to instructions in other matters given to those attorneys but,
according
to the applicant, not carried out. It also related to
payments that the applicant did not make to those attorneys for
assistance
in those other matters. The two respondents opposed this
application. The period of delay when seen against the period
required
for compliance is certainly inordinately long. In its own
explanation, the applicant contributed to the challenges it faced
with
its erstwhile attorneys. At best for the applicant, it was gross
negligent in its dealings with those attorneys and in waiting for
almost a year to sort things out for the filing of the replying
affidavit. While erstwhile attorneys held on to the file of this
matter, the current attorneys were able to source information for the
late filing of the replying affidavit. The explanation for
the delay
amounts to no explanation at all. Also, the applicant’s
prospects of success leave much to be desired.
Factual Background
[4] The second respondent had been providing public
passenger transport services in the greater Durban area prior to
2003. In order
to give effect to the provisions of the National Land
Transport Transition Act,
2
(the Transport Transition Act) the second respondent had to outsource
the provision of municipal public transport services. Extensive
negotiations were held by the second respondent with the employees’
collective bargaining representatives, being the South
African
Municipal Workers Union (SAMWU) and the Independent Municipal and
Allied Trade Union (IMATU).
[5] On 13 March 2003, an agreement was concluded between
the second respondent, SAMWU and IMATU which they called the Rob Roy
agreement.
In terms of the agreement, those employees listed in
annexure “Z5” to the founding affidavit were retrenched
by the
second respondent. In May 2003, the second and the third
respondents appointed a company known as Remant Alton Land Transport
(Pty)
Limited (“Remant”) to provide public passenger
transport services in the greater Durban area and the appointment was
subsequently extended to 30 September 2010. Remant engaged the
services of a number of the employees that were in the employ of
the
second respondent.
[6] On 1June 2009,Remant gave notice to the second
respondent of its intention to terminate the transport service
contract and agrees
to find an alternative operator but later failed
to find one. On 30 June 2009,Remant terminated the contract. Remant
retrenched
its employees and the provision of public transport was
halted for some time. The first respondent was subsequently appointed
by
the third respondent as a substitute bus operator in the greater
Durban area on a month-to-month basis, pending the appointment
of new
operator through a public tender.
Submissions by parties
1. Applicant’s submissions
[7] The applicant averred that after the termination of
the contract between the second respondent and Remant, the provision
of
public transport and the accompanying assets thereof were
transferred back to the second respondent or the third respondent. It
said that, similarly, the first respondent was making use of the same
employees that were in the employ of Remant prior to the
termination
of the contract between Remant and the second respondent. The first
respondent was said to be also presumably using
almost the same bus
infrastructure that was initially outsourced to Remant by the second
respondent.
[8] The applicant said that the appointment of Remant by
the second respondent was to be construed as “the first
generation
outsourcing” and the appointment of the first
respondent by the third respondent as the “second generation
outsourcing”.
The submission was that on the objective facts
the provision of the public passenger transport services was provided
by the first
respondent, and that therefore it was to be accepted
that the business had been transferred back to the third or second
respondent
by Remant, in respect of the first generation outsourcing.
Consequently, according to the submission, the third respondent in
cahoots
with the second respondent had subsequently transferred the
business to the first respondent amounting to a second generation
outsourcing.
Accordingly, it was said, any future, or fixed or
permanent transfer of the business to a third party would occur
within the meaning
of Section 197 of the Act.
[9] According to the submission, the conclusion was
therefore inescapable that the question posed in the introduction was
to be
answered in the affirmative. A negative answer to the question
posed in the introduction would make a mockery of the objects and
purpose of Section 197 of the LRA, as well as the interpretation
propounded by courts. Furthermore, an interpretation to the contrary
would sacrifice substance for legal form where the substance of
transactions should not the form of transactions. Court was asked
to
render aside the veil in which the transaction was wrapped and to
examine its true nature and substance. The outcome of such
examination, it was contended, would reveal that the transaction in
question amounted to a transfer of business as going concern
within
the meaning of section 197 of the Act.
2. Submissions by the respondents
[10] It was submitted on behalf of all three respondents
that:
the applicant was not entitled to the interdictory
relief sought in paragraph 4 of the notice of motion because the
applicant
did not make out a case for such relief;
On the applicant’s own papers, no case has been
made out for any relief. In terms of the Rob Roy agreement employees
agreed
to being either redeployed within the municipality or to be
retrenched;
the provision of a bus service was not “a
business” but rather the provision of a statutorily imposed
obligation,
undertaken by the first respondent on behalf of the
second respondent;
the bus service operated by Remant was not capable of a
transfer as “as going concern” as it was neither in
operation
nor making a profit at the time of the first respondent’s
appointment and
Remant would not have been able to transfer the
“business” to the second respondent as the second
respondent was statutorily
barred from operating it.
Evaluation
[11] For purposes of this application, the relevant and
essential part of Section 197 of the Act reads as follows:
‘
197
(1) In this section and in Section 197A-
business includes the whole
or part of any business, trade, undertaking or service and
transfer means the transfer
of a business by one employer (the old employer) to another
employer (the new employer) as a going
concern.
(2) If a transfer of a business
takes place, unless otherwise agreed in terms of subsection (6) –
(a) the new employer is
automatically substituted in the place of the old employer in respect
of all contracts of employment in
existence immediately before the
date of transfer,
(b) all the rights and
obligations between the old employer and an employee at the time of
the transfer continue in force as if
they had been rights and
obligations between the new employer and the employee,
(c) anything done before the
transfer by or in relation to the old employer, including the
dismissal of an employee or the commission
of an unfair labour
practise or act of unfair discrimination, is considered to have been
done by or in relation to the new employer,
and
(d) the transfer does not interrupt an employee’s
continuity of employment, and an employee’s contract of
employment
continues with the new employer as if with the old
employer.’
[12] Section 197 of the Act was the subject of
interpretation by the Constitutional Court in the case of
Aviation
Union of South Africa and South African Transport and Allied Workers
Union v South African Airways (Pty) Ltd and Others
3
(the
SAA
case),when the Court held that:
‘
At common law the acquisition and transfer
of a business that was in operation led to termination of contracts
of employment. If
the new owner wished to continue operating the
business with the same workers, it would have to conclude new
employment agreements
with them. Section 197 changed this by
providing that certain legal consequences would automatically flow
from a transfer of a
business as a going concern. One of these
consequences is the transfer of the workforce engaged in the
transferred business.’
[13]
In
National
Education Health and Workers Union v University of Cape Town and
Others
4
(the
NEHAWU
decision)
,
the
Constitutional Court explained the objectives of
section
197
as
follows:
‘
Its
purpose is to protect the employment of the workers and to facilitate
the sale of businesses as going concerns by enabling the
new employer
to take over the workers as well as other assets in certain
circumstances... In this sense,
s
197
has a dual purpose, it facilitates the commercial
transactions while at the same time protecting the workers against
unfair job
losses.’
[14]
The
test whether there was a transfer of a business as a going concern
was stated by the Constitutional Court in the
NEHAWU
decision
supra
as:
5
‘
A number of factors will be relevant to
the question whether a transfer of a business as a going concern has
occurred, such as the
transfer or otherwise of assets both tangible
and intangible, whether or not workers are taken over by the new
employer, whether
customers are transferred and whether or not the
same business is being carried on by the new employer. What must be
stressed is
that this list of factors is not exhaustive and that none
of them is decisive individually. They must all be considered in the
overall assessment and should therefore not be considered in
isolation.’
[15] In the the SAA case the Court further said that:
‘
[47] But whether a transfer as
contemplated in section 197 has occurred or will occur is a factual
question. It must be determined
with reference to the objective facts
of each case. Speaking generally, a termination of a service contract
and a subsequent award
of it to a third party does not, in itself,
constitute a transfer as envisaged in the section. In those
circumstances, the service
provider whose contract has been
terminated
loses the contract but
retains its business
(own
emphasis).The service provider would be free to offer the same
service to other clients with its workforce still intact.
[48] For a transfer to be established there must be components of the
original business which are passed on to the third party.
These may
be in the form of assets or the taking over of workers who are
assigned to provide the service….’
6
[16] Section 197 has altered the common law position
which provided that the acquisition and transfer of a business that
was in
operation led to termination of contracts of employment. If
the new owner wished to continue operating the business with the same
workers, it would have to conclude new employment agreements with
them. With the advent of section 197, certain legal consequences
would automatically flow from a transfer of a business as a going
concern one of which is the transfer of the workforce engaged
in the
transferred business. Whether a transfer as contemplated in section
197 has occurred remains a factual probe to be determined
with
reference to the objective facts of each case.
7
[17] It has thefore to be ascertained whether the
applicant succeded in showingby evidence that there has been a
transfer of a business
as a going concern from the second respondent
to Remant and from Remant to the first respondent.
[18] Annexure “ZM5” to the founding
affidavit reflects the identities of 1,183 employees who were
retrenched by Durban
Transport in 2003 and who were employed by
Remant. Despite the first respondent’s challenge on this issue,
the applicant
has annexed proof of the membership of only fourteen of
its members. As correctly submitted by the respondents, the applicant
has
failed to demonstrate which of the 1,183 people reflected on
annexure “ZM5” were still employed by Remant on 30 June
2009 and, the applicant has demonstrated merely that the fourteen
people reflected in annexure “ZM8” were members of
the
Applicant in 2005. This deficiency is a challange to the order as
prayed for in paragraph 4 of the notice of motion for the
affected
members of the applicant.
[19] The Applicant has said in paragraph 23 of the
founding affidavit that Remant terminated its contract with the
Municipality
on 30 June 2009 and “ceased operations”. The
Applicant has then alleged that the third respondent appointed the
first
respondent as a substitute bus operator. Again, and as
correctly contended by the respondents, the applicant has failed to
demonstrate
through its evidence thatthere was any transfer of “the
business” from Remant to the second respondent and that there
was any transfer of “the business” to the third
respondent at all. In the evidence of the applicant, there was no
longer any business running when Remant ceased its
operations.Therefore, neither eThekwini Municipality nor the second
or third
respondents were substituted as employer, as contemplated in
Section 197 (2) (a). In the event that Remant’s employees’
employment was terminated, there would be no contracts of employment
in existence immediately before the date of transfer of the
business.
[20] In any event, it was common cause that in terms of
section 156 of the Constitution of the Republic of South Africa Act
108
of 1996, the eThekwini Municipality was constitutionally obliged
to provide municipal public transport within the area of its
jurisdiction.
In terms of theTransport Transition Act, transport
authorities were established within municipalities and were obliged
to call
for tenders for public transport services to be operated, as
those services could not,at the time, be operated by the transport
authority itself. A municipality which was a party to a transport
authority could not conclude a contract with that authority to
render
public transport services. The National Land Transport Act
8
reaffirmed the Municipality’s responsibility to
provide municipal public transport and set the manner in which this
responsibility
was to be delegated to, and then executed by, public
transport operators, such as the first respondent. In this matter, I
find
that the first respondent is providing municipal public
transport services on behalf of the second respondent, which is
unable
to provide these services itself.
[21] Accordingly, the first respondent was acting as the
agent of the second respondent. The provision of a municipal bus
service
was therefore not “a business” as contemplated in
Section 197 of the Act but rather the exercise of a statutory
obligation
imposed on the second respondent and which had to be
undertaken regardless of the question of profit.
[22] In the absence of any business operation for a
public bus transport operated by Remant, it would have been
impossible for the
second or third respondents to then transfer
business to the first respondent, which Remant had ceased to operate.
Further, “the
business” could not have been transferred
by Remant“as a going concern” when Remant had ceased
operations prior
to such transfer.
[23] In the circumstances, I find that the question
posed at the beginning should be ansered in the negative, in which
instance
the orders sought by the applicant are not competent. Having
reflected on the application and the fairness to the aspect of costs,
I shall therefore issue an order in the following terms:
Condonation for the late filing of the replying
affidavit is not granted.
The application for orders sought is dismissed.
No costs order is made.
_____________
Cele, J
Judge of the Labour Court.
APPEARANCES:
For the applicant: Mr R M Mathaba
Instructed by: Medupi Lehong Incorp.
For the First Respondent: Mr Brassey with Mr W N Shapiro
Instructed by: Redfern and Findlay Attorneys.
For the Second Respondent: Mr van Niekerk
Instructed by: Shepstone and Wylie Attorneys.
1
Act
Number 66 of 1995.
2
Act
No 22 of 2000.
3
[2012]
3 BLLR 211
(CC) at para 3.
4
[2003]
2 BCLR 154
(CC), (2003) 24 ILJ 95 (CC) at para 53.
5
See
NEHAWU
at para 56.
6
SAA
case
supra
at 47-48.
7
See
SAA
decision at para 47.
8
Act
No 5 of 2009.