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[2015] ZALCJHB 66
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SATAWU obo Members v Command Security Services (Pty) Ltd and Others (JR437/01; J787/02) [2015] ZALCJHB 66 (2 March 2015)
REPUBLIC
OF SOUTH AFRICA
The
Labour Court of South Africa,
In
Johannesburg
Case
no: JR 437/01 & J787/02
DATE:
02 MARCH 2015
Not
Reportable
In
the matter Between:
SATAWU
obo 212
members
....................................................................................................
Applicants
And
Command
Security Services (Pty)
Ltd
.......................................................................
First
Respondent
Mohammed
Iqbal
Parker
.........................................................................................
Second
Respondent
Kalman
Gordon
Druker
.............................................................................................
Third
Respondent
Maurice
MUSA
MDLODLO
...................................................................................
Fourth
Respondent
Simon
Banda
.................................................................................................................
Fifth
Respondent
Wilson
Rich &
Associates
............................................................................................
Sixth
Respondent
Stephen
Van
Diggele
................................................................................................
Seventh
Respondent
Susanna
Hendrina
Rentzke
......................................................................................
Eighth
Respondent
Chagan
Jadav
Vaghela
................................................................................................
Ninth
Respondent
Marius
Potgieter
..........................................................................................................
Tenth
Respondent
Mohammed
Shaffie
Mowzer
.................................................................................
Eleventh
Respondent
Ixia
Trading 234 (Pty)
LTD
.....................................................................................
Twelfth
Respondent
Delivered:
02 March 2015
Summary:
(Contempt – effect of s 197 on transmissibility of liability -
referral to oral evidence)
RULING
LAGRANGE,
J
Introduction
[1]
This matter concerns an application for an
order finding the various respondents in contempt of an order of this
Court handed down
on 23 August 2003 in which an arbitration award
reinstating the individual applicants was made an order of Court. The
first to
ninth and eleventh respondents have opposed the matter. The
application was originally launched in August 2006 and the
respondents
in question only filed their answering affidavit a year
later. It was only in October 2013 that the applicants filed an
amended
notice of motion, the sole purpose of which was to include
the twelfth respondent, Ixia Trading 234 (Pty) Ltd (‘Ixia’).
However, the amended application did not include any director of Ixia
as a respondent.
[2]
The applicant parties to all intents and
purposes are based in Johannesburg or Witbank, whereas only the tenth
respondent, Mr M
Potgieter (‘Potgieter’), the first
respondent’s General Manager, is based in Witbank. All the
remaining individual
respondents save for the third respondent who
passed away in June 2013 and the fourth respondent, Mr M Mdlolo, who
has been out
of the country for the last four years, are resident in
Cape Town. The registered address of Ixia is in Menlo Park and
according
to a certificate issued by the Registrar of Companies and
Close Corporations on 12 November 2013, the sole director of Ixia who
has not been joined as a respondent in these proceedings, Mr G Gouws,
is also resident in Menlo Park.
[3]
For the sake of completeness it should be
mentioned that the sixth respondent, Alun Rich of Wilson Rich and
Associates was replaced
as the company secretary in March 2006 by
Dominique McLachlan of Coastal Corporate Registrations CC. The
seventh respondent, Mr
S Van Diggele resigned as a director of the
first respondent in October 2006 and the ninth respondent, Mr C J
Vaghela, similarly
resigned as a director in February 2006. The
opposing respondents denied that Potgieter was ever a director of the
first respondent.
Synopsis
[4]
On or about 07 November 2000, the
individual applicants were dismissed for alleged misconduct in the
course of unprotected strike
action. In 2001, they obtained an
arbitration award in their favour ordering their reinstatement by the
first respondent following
a finding that their dismissals were
substantively unfair. At the time of their dismissal and in all
subsequent court proceedings
the employer party was cited as Command
Security Services (Pty) Ltd, which is the first respondent. The first
respondent denies
that at any stage it employed any of the individual
applicants. The reasons for its denial become apparent in the balance
of the
synopsis.
[5]
In 1999, the businesses of Highveld
Security CC and Ithuba CC were sold as going concerns to Celtic
Holdings Inc. Mowzer claims
that Celtic Holdings in turn sold the
business to Seventy-Seven investments (Pty) Ltd (‘SSI’)
the same year. The latter
company, now in liquidation, then sold the
businesses to the first respondent in terms of an agreement having an
effective date
of 15 December 2000. This agreement was apparently
concluded in late November 2000 after the individual applicants had
been dismissed
on 7 November that year. Mowzer provides no
explanation for these successive sales. Shortly afterwards in January
2001, this commercial
version of the children’s game
‘pass-the-parcel’ came full circle.
[6]
In January 2001, it appears that the 12
th
respondent, Ixia, acquired from the first respondent the businesses
identified in the sale agreement as “the business of
providing
security and security related services including but not limited to
the provision of guarding services, asset and property
protection,
industrial and commercial guarding and armed security response
Security previously conducted by Highveldt Security
CC and Ithuba CC
and currently being conducted by the seller [first respondent] at its
Witbank and Pretoria branches respectively.”
Ixia is
allegedly controlled by a Mr M Niewoudt (‘Niewoudt’). So
the apparent nett effect of a series of sales
of the underlying
businesses between 1999 and 1 January 2001 is that ownership passed
from businesses controlled by Niewoudt to
three other entities, the
last of which was the first respondent, before passing to Ixia
allegedly also controlled by Niewoudt.
[7]
In terms of sale agreement between the
first respondent and Ixia, Ixia was entitled to trade under a name
including the word “Command”
for a period of 36 months
after the sale agreement became unconditional and was given an option
to continue to do so for 36 months
thereafter. Oddly, Mowzer claims
to know that Ixia never traded under the name “Command
Security” even though it was
entitled to. On the other hand,
apparently unbeknownst to him and his co-respondents, entities
controlled and managed by Potgieter
and Niewoudt did trade under that
name, creating the false impression that they were trading as the
first respondent.
[8]
The entities which Mowzer says were trading
fraudulently as ‘Command Security’ were Highveld Security
CC (‘Highveld’),
Ithuba CC (‘Ithuba’) and HS
Sekuriteitskonsultante (‘HS’). The businesses of the
first two entities mentioned
were the very ones that were sold to
Ixia. Mowzer claims that all the respondents except Potgieter were
unaware of this alleged
fraud perpetrated by Potgieter and Niewoudt
until the contempt application was initially launched in August 2006.
[9]
Mowzer further claims that the first
respondent had instructed its attorneys of record to investigate
“this state of affairs
and to take the necessary and
appropriate steps including claims for damages and reporting this
unlawful conduct of the relevant
authorities.” No indication is
provided in the answering affidavit attested to in August 2007, a
year later, what steps
had actually been taken by its attorneys of
record at that stage, nor did Mowzer and his correspondents seek to
file any supplementary
affidavit setting out what transpired in this
regard seven years later.
[10]
In August 2003, the first respondent’s
attempt to review the award was dismissed (under case number JR
437/01) and the Court
granted an application (under case number
J787/02) in terms of section 158 (1) (c) of the Labour Relations Act
66 of 1995 (‘the
LRA’). It appears that the order was
granted by default and that the first respondent had failed to
reconstruct the arbitration
record. It had also failed to oppose the
application brought by the applicants and blamed its erstwhile
attorneys for not making
it aware of the application to dismiss the
review and to make the award an order of court.
[11]
In February 2004, the first respondent
attempted to rescind the Court order of 26 August 2003. That
application was dismissed on
21 September 2004 by the Honourable
Justice Maya, AJ in a judgment which was highly critical of the way
in which the applicant
had conducted the review application and its
failure to oppose the counter application to dismiss it. Undeterred,
the first respondent
applied for leave to appeal against this
judgement, but the application was dismissed on 9 June 2005.
[12]
During the rest of 2005, SATAWU, on behalf
of the individual applicants, sought to reach agreement with the
first respondent on
the implementation of the order of reinstatement.
Some of the discussions concerned the identification of the 212
individual applicants
and how many had been contacted by the union
who were in a position to tender their services. One such meeting
between the union
and the first respondent took place on 7 July 2005.
Although the meeting was ostensibly conducted as a meeting between
the first
respondent, as represented by Potgieter and a certain Gary
Howard, a labour law consultant, Mowzer claimed that as far as
himself,
the first respondent and Howard were concerned the meeting
dealt with disputes between entities controlled by Niewoudt and some
of the union’s members which had nothing to do with the first
respondent. No confirmatory affidavit was attached by Howard
explaining how he could have been in a meeting on the face of it
representing the first respondent yet dealing with disputes which
did
not concern it. These ‘entities’ which Mowzer says
Niewoudt controlled I can only assume refer to Highveld, Ithuba
and
HS. Mr Potgieter declined to file an answering affidavit to explain
his role as the first respondent’s general manager
in all of
this, though Mowzer attaches an email in which Potgieter supposedly
acknowledged his part in the alleged fraud.
[13]
At this juncture it is important to mention
that in April the same year, before the above discussions commenced,
another agreement
had been concluded between Kommand Distribusie en
Sekerheid CC, Niewoudt Sekerheids Konsultante CC, Niewoudt, Quickvest
321 (Pty)
Ltd (‘Quickvest’) and Comwezi Security Services
(Pty) Ltd (‘Comwezi’) in terms of which the security,
armed
response, monitoring and any other related businesses of the
two closed corporations (jointly referred to as’ KDS’)
were sold as a going concern to Quickvest. Mowzer represented both
Quickvest and Comwezi in the transaction. A curious feature
of this
agreement is that even though Comwezi was a party to the agreement,
it acquired neither rights nor obligations to any other
party under
the agreement. Comwezi is a subsidiary of the first respondent.
[14]
On 05 December 2005 the regional secretary
of the union, Mr T Mahlangu, confirmed a discussion between himself
and the tenth respondent,
Mr M Potgieter (‘ Potgieter’)
and, recording
inter-alia
that:
“
The
company i.e. Command Security has been sold to new owners who were
not keen on taking back of members who are reinstated by
the labour
court the company is busy discussing a settlement proposal to the
union… The said settlement will include the
reinstatement of
some of the reinstatement of some for the individual applicants in
the above matter as well is a financial offer.”
(
sic
)
[15]
Potgieter never filed in the answering
affidavit and the other respondents were not in a position to dispute
the union’s interactions
with the first respondent except in
relation to the interactions SATAWU’s legal officer had with
the Chief Executive Officer
of the first respondent. Both Mowzer and
Potgieter were present in Court when this application was heard.
According to Mowzer,
he and his other co-respondents had no knowledge
of the preceding Labour Court proceedings prior to receiving the
contempt application.
He claims that all the devious proceedings were
managed by Niewoudt, Potgieter and Vijoen without the knowledge or
authority of
himself and his co-respondents. However, he admits he
was aware of a dispute with SATAWU as a rather modest provision was
made
for it in the Schedule of disputes attached to the sale
agreement of KDS signed in April 2005. It is somewhat difficult to
understand
how that could be the same dispute under consideration
given the amount involved and given that Mowzer claims that the
dispute
was between SATAWU members and Highveld, Ithuba and HS.
Further, in a letter dated 11 September 2006 written by Mowzer to the
union’s
legal officer, Mr R Mokgalabone, he stated amongst
other things:
“
An
associate company within the Command group (Comwezi Security Services
(Pty) Ltd) entered into a transaction to acquire the contracts
of
Kommand Distribusie Sekuriteit CC and Mr Niewoudt during April 2005.
In terms that are of Mr Niewoudt disclosed the action with
your union
and warranted payment in terms thereof.”
It
is difficult to understand that this could refer to anything other
than the preceding litigation, but it would appear that Mowzer
would
still argue that he was under the impression that this litigation did
not involve the first respondent but the entities Comwezi
was buying
from Niewoudt.
[16]
It would seem from this letter that the
first respondent through Comwezi was suggesting that the applicant’s
dispute lay with
Kommand Distribusie Sekuriteit CC whereas in the
answering affidavit Mowzer seems to rely on a representation by
Potgieter that
the individual applicants had been employed by
Highveld, Ithuba and HS. On the face of it therefore Mowzer has held
different views
on which entities employ the individual applicants.
[17]
Mowzer says that once he became aware of
the contempt application he engaged with the union and attempted to
conclude a settlement
agreement in the interests of all parties.
Although a draft agreement was under consideration in early July
2007, he claims that
the union brought matters to an abrupt end by
issuing a letter on 13 August 2007 to the effect that the union could
not reach any
settlement and would now proceed with contempt
proceedings against the first respondent. Mowzer says that he engaged
in settlement
discussions not because the first respondent accepted
any legal liability for the reinstatement of the individual
applicants, but
for humanitarian and practical reasons. The latter
related to avoiding the unnecessary incurral of legal costs and the
fact that
the first respondent’s group of companies was always
on the lookout for employing suitable candidates in its security
business.
[18]
In filing its answering affidavit in the
contempt application in August 2007, the first respondent also filed
a fresh application
in the form of a counter application to rescind
the portion of the default judgement of the Court order of 26 August
2003, which
made the arbitration award an order of Court. The first
respondent has not pressed this issue in these proceedings thus far.
Central
issues in dispute
[19]
Notwithstanding the response of Mowzer, the
applicants maintain that at all material times the first respondent
was their employer
and that it participated in the arbitration and
subsequent Court proceedings arising from their dismissal. It further
contends
that Niewoudt acted in his capacity as a director of the
first respondent and Potgieter as its human resources or general
manager
and that these two individuals represented in the course of
the proceedings and related interactions with the union.
[20]
The applicants also maintain that the
agreements on which the respondents rely to distance themselves from
the dispute were not
pleaded with sufficient particularity to enable
them to reply properly there to. Indeed, there are some inexplicable
omissions
of portions of some of the agreements attached to the
respondent’s answering affidavit.
[21]
On the face of the first two sale
agreements of the businesses of Ithuba and Highveld to Celtic those
businesses were transferred
as going concerns. The effective date of
the transfer of those businesses was 30 June 1999. The third sale
agreement also entailed
the sale of the same businesses to SSI.
Mowzer refers to annexure MSM4 as a copy of that sale agreement but
in fact it is simply
a letter making reference to the main agreement
dated 24 August 1999 and another amending document dated 20 October
1999. Neither
of these documents form part of the annexures to the
answering affidavit.
[22]
Mowzer further avers that the fourth
agreement in terms of which the first respondent allegedly acquired
the same businesses from
SSI was not set out in a separate document,
but he referred to annexure MSM5 as containing a record of that sale.
Clause 2.2.2.27
of that document contains the following definition:
“ “
the
sale of business agreement”
- the sale of business
agreement dated 8 December 1999 in terms of which the businesses of
Ithuba and HS were sold by SSI to Command
Security.”
Clause
13.1 of the same document speaks of the agreement not coming into
force “unless by 15/12/2000” which Mowzer claims
was the
effective date of the sale agreement. The effective date of the sale
of the businesses to Ixia was 1 January 2001.
[23]
If the chronology of sales alleged by the
opposing respondents is correct then it would appear the dismissal of
the individual applicants
took place when the businesses were owned
by SSI and that thereafter they were transferred successively to the
first respondent
and to Ixia.
The
effect of a sale of a business as a going concern
[24]
Central to the defence of the opposing
respondents is that, since the underlying businesses from which the
applicants had been dismissed
were not owned by it at the time the
Court order was issued in August 2003, but were owned by Ixia, it was
this latter entity which
acquired the obligation to comply with the
order by virtue of section 197(5)(b)(i) of the Labour Relations Act
66 of 1995 (‘the
LRA’). Insofar as Mowzer’s
averments about the success of transfers of the business may be
correct, the applicants
nevertheless dispute the implications of s
197(5)(b)(i) as argued for by the respondents. They contend on the
contrary that on
a proper interpretation of the section, since the
Ixia and the first respondent had “agreed otherwise” it
was the first
respondent, not Ixia, which was bound by the
arbitration award (and the subsequent order of court).
[25]
What the applicants are referring to when
saying that the first respondent and Ixia had “agreed
otherwise” is the underlined
portion of following clause in the
sale agreement between the two entities:
“
12.2
the purchaser shall assume all liabilities of the seller to employees
of the business in respect of the barrier is determined
by the
Sectoral Determination Number 3 and any amounts owed to employees of
the business as at the closing date as a result of
services rendered,
leave entitlements, commissions and bonuses shall be the liability of
the purchaser, and the purchaser indemnifies
the Seller against the
aforementioned liabilities.
This expressly exclude any liability
of the Seller to employees pursuant to or resulting from CCMA and/or
labour court actions with
effect from the effective date in the case
of the Witbank branch and 1 April 2000 in the case of the Pretoria
Branch
.”
(
sic
)
[26]
However, the term “unless otherwise
agreed” must be construed in terms of the provisions of section
197 (6) which clearly
confines the expression to an agreement between
the buying and selling employers and a party which an employer would
be obliged
to consult with over retrenchments. S 197(6)(a) reads:
“
An
agreement contemplated in subsection (2) must be in writing and
concluded between—
(i)
either the old employer, the new employer, or the old and new
employers acting jointly, on the one hand; and
(ii)
the appropriate person or body referred to in section 189(1), on the
other.”
[27]
In other words, it does not include a
bilateral agreement than simply between the seller and the buyer must
be a trilateral agreement
in which the third party represents the
interests of the affected employees. It is true that in this instance
any purported transfer
to Ixia in terms of section 197 took place
before the amendment of section 197 in 2002. Nevertheless, at that
stage the pertinent
provisions of section 197 read:
1)
A contract of employment may not be transferred from one employer
(referred to as ‘the old employer’) to another
employer
(referred to as ‘the new employer’) without the
employee’s consent, unless –
(a)
the whole or any part of a business, trade or undertaking is
transferred by the old employer as a going concern; or
(b)
the whole or a part of a business, trade or undertaking is
transferred as a going concern –
(i)
if the old employer is insolvent and being wound up or is being
sequestrated; or
(ii)
because a scheme of arrangement or compromise is being entered into
to avoid winding-up or sequestration for reasons of insolvency.
(2)(a)
If a business, trade or undertaking is transferred in the
circumstances referred to in subsection (1)(a), unless otherwise
agreed, all the rights and obligations between the old employer and
each employee at the time of the transfer continue in force
as if
they had been rights and obligations between the new employer and
each employee and, anything done before the transfer by
or in
relation to the old employer will be considered to have been done by
or in relation to the new employer.
(b)
If a business is transferred in the circumstances envisaged by
subsection (1)(b), unless otherwise agreed, the contracts of
all
employees that were in existence immediately before the old
employer’s winding-up or sequestration transfer automatically
to the new employer, but all the rights and obligations between the
old employer and each employee at the time of the transfer
remain
rights and obligations between the old employer and each employee and
anything done before the transfer by the old employer
in respect of
each employee will be considered to have been done by the old
employer.
(3)
An agreement contemplated in subsection (2) must be concluded with
the appropriate person or body referred to in section 189(1).”
[28]
In
the case of
Transport
Fleet Maintenance (Pty) Ltd v NUMSA
[1]
which was decided before the
amendment of the section, it was held that dismissed employees could
proceed against the new employer
after the transfer of the business:
“
It
can also be said that, because section 197 (2) (a) provides that
anything done by the business transferor in relation to an employee
before the transfer of the business must be regarded as having been
done by the business transferee, the business transferee is
regarded,
after the transfer of the business, as the one who dismiss the
employee and is, therefore the person against whom an
employee is
entitled to pursue arbitration or legal proceedings to enforce his
right not to be dismissed unfairly.”
[2]
[29]
I am in agreement with the respondent’s
submissions in this regard that it could never be intended that the
agreement referred
to in section 197 could be one in terms of which
the two employers acting on their own could defeat the objects of the
section
by concluding a bilateral agreement.
Disputes
of fact
[30]
Although the legal effect of a transfer is
clear, on the evidence there is the unresolved issue of the alleged
fraudulent use of
the first respondent’s identity over a very
lengthy period of at least five years. On the one hand, the Court is
asked to
accept the opposing respondents’ complete ignorance of
dealings in the first respondent’s name with the applicants
over their dismissal. On the other, there is the evidence of a number
of sale of business transactions between the first respondent
or
companies within the Command Security group and entities allegedly
controlled by the very individual accused of fraudulently
masquerading as a representative of the first respondent. Then there
is the evidence of the applicants having been involved in
extensive
litigation and dealings with persons purporting to be acting for the
first respondent as the party against whom the arbitration
award and
subsequent Court order were enforceable. Further, the
incomplete written record of the successive sale agreements
concerning the transfers of the businesses coupled with the
fraudulent misrepresentation claim about the true identity of the
employer party engaged in the litigation with the applicants,
exacerbate the difficulty of determining the correct identity of the
employer liable for complying with the Court order. These disputes
are not possible to resolve on the affidavits and are not frivolous
ones.
[31]
Clearly oral evidence is needed to
supplement the incomplete details of the relevant sale agreements and
how the opposing respondents
could have remained so ignorant of the
allegedly fraudulent conduct of Niewoudt, and possibly Potgieter,
while having associated
businesses operating in the same locality and
despite concluding substantial sale of business agreements with
Niewoudt who supposedly
controlled the entities acting fraudulently.
How Potgieter, as the first respondent’s general manager, could
have become
embroiled in such an elaborate deception under Niewoudt’s
influence will also be able to be examined. If necessary, the parties
can then subpoena persons whose evidence would shed light on these
issues, apart from any oral evidence they can lead in this regard.
It
is regrettable that these proceedings were not brought and concluded
a long time ago, but the launching of the contempt proceedings
only
became feasible in 2006 because of the employer’s resistance to
giving effect to the award while it pursued all other
legal avenues
available to it. A further delay of a year was occasioned it seems by
settlement discussions, but there was a long
delay between the filing
of the answering affidavit in 2007 and the applicant’s replying
affidavit in 2010 and the still
later filing of an amended notice of
motion in 2013.However, it is also important that orders of Court are
not avoided by dilatory
legal stratagems. Seat of the court where
proceedings are to be conducted.
[32]
I am sympathetic to the situation of the
individual respondents opposing the contempt application who reside
in Cape Town, being
summonsed to appear in Johannesburg. On the other
hand, the order which the applicants seek to enforce and which was
not complied
with would be given effect to in Witbank and the failure
to give effect to it is likewise manifested by the failure to
reinstate
them in the businesses located there. The concrete
manifestation of the alleged act of contempt is thus to be found in
the failure
to give effect to the order in Witbank, even if it is
possible the subjective elements of the offence might have occurred
elsewhere.
Consequently, it is not inappropriate that the proceedings
should take place at the seat of the Court closest to Witbank from
which
the various judgments leading to the contempt application also
emanated. Though not an overriding consideration, it will be also
be
easier for the far more numerous individual applicants who might wish
to attend the proceedings if the proceedings are conducted
in
Johannesburg. Further, in the event the respondents are successful,
the costs of their accommodation and travel could be recovered
from
the applicants. Although all the respondents were ordered to
attend Court when the contempt proceedings were enrolled,
the
applicants were amenable to relaxing the requirement that they be
present when the contempt application was originally argued.
I see no
reason why a similar arrangement accommodating their non-attendance
at least for part of the proceedings cannot be made
when oral
evidence is led, if they are content not to be present during all the
proceedings.
Order
[33]
In light of the above, the contempt
proceedings are adjourned to a date to be determined by the registrar
for the hearing of oral
evidence on the following issues in dispute:
33.1
The true identity of the employer liable
for complying with the order of this Court issued on 23 August 2003.
33.2
Insofar as the first respondent might be
the employer party liable for complying with said order, whether or
not the respondents
who are or were directors of the first respondent
knew of the said order before being served with the contempt
application in 2013.
[34]
The third respondent is no longer a party
to the proceedings.
[35]
Costs are reserved.
R
LAGRANGE, J
Judge
of the Labour Court of South Africa
APPEARANCES
For
the Applicants: F S Nalane instructed by Cheadle, Thompson
For
the Respondents: R Stelzner, SC instructed by T Erasmus &
Associates c/o Goldberg Attorneys
[1]
(2004) 25 ILJ 104 (LAC)
[2]
At para [25].