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[2015] ZALCJHB 69
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Wallejee and Another v FCSA Organisation Service (Pty) Ltd and Another (J262/2010) [2015] ZALCJHB 69; (2015) 36 ILJ 1943 (LC) (5 March 2015)
REPUBLIC
OF SOUTH AFRICA
THE LABOUR COURT,
JOHANNESBURG
JUDGMENT
Case
No: J262/2010
DATE:
05 MARCH 2015
Reportable
In
the matter between:
CAROL
WALLEJEE
.......................................................................................................
First
Applicant
MTSHWENI
JOHANNA
....................................................................................................................
Second
Applicant
And
FCSA
ORGANISATION SERVICE (PTY)
LTD
......................................................
First
Respondent
TALWIN
CONSULTING CC
T/A
FRANKLIN COVEY
SA
...............................................................................................................................
Second
Respondent
Heard:
29 August 2015
Delivered:
05 March 2015
Summary:
Joinder application. Applying for joinder after judgment. Waiver of
right to join the interested party. Interested party
has right to be
heard. Application of section 197 of the LRA to joinder after
judgment. Joinder not automatic in terms of the provisions
of section
197 of the LRA. Party to be joined has right to be heard.
JUDGMENT
MOLAHLEHI, J
Introduction
[1]
This is an application to join the second
respondent, Talwin Consulting CC (“Talwin”) as a party to
an order issued
by this Court against the first respondent, FCSA, on
21 May 2012. The applicant also seeks to substitute and replace
the
first respondent with Talwin in the same order.
[2]
The applicant instituted these proceedings
subsequent to a default judgment which was made in her favour by this
Court. In terms
of that order the Court found her dismissal to have
been both procedurally and substantively unfair and ordered that she
be reinstated.
[3]
The second respondent has applied for
condonation for the late filing of its statement of defence. In my
view considering that the
delay was only for 5 days and the
explanation proffered is reasonable, there is no reason not to grant
condonation. The joinder
application is opposed by Talwin based on
the following grounds:
‘
4.1
Joinder may not be sought after judgment has been delivered.
4.2 The applicant
waived her right to join Talwin as a party to this matter as she was
at all times aware of the facts which form
the basis of this
application but elected to proceed with the matter without joining
Talwin.
4.3 There is no
transfer of business from the FCSA to Talwin, let alone a transfer as
a going concern.’
Background
facts
[4]
Talwin is a training and development
company which conducts the business of assisting companies with a
variety of learning and training
programmes aimed at effectiveness
and productivity.
[5]
The case of Talwin is that in September
2011, it entered into a franchise agreement with Franklin Covey, an
American Company which
provides productivity tools and assessment
services. It was through this agreement that Talwin acquired a
license to use Franklin
Covey’s programmes as part of its
portfolio in South Africa, Swaziland and Lesotho.
[6]
The acquisition of the licence was preceded
by a payment of an initial fee to Franklin Covey. Furthermore, Talwin
continues to pay
on-going royalty fees for such licence. Talwin,
however, does not receive any consideration or revenue from Franklin
Covey. It
also does not receive clients from Franklin Covey or FCSA
as a result of the acquisition of the licence.
[7]
It is common cause that the applicant was prior to her dismissal
employed by FCSA as a partner and facilitator. She was retrenched
by
FACSA on 31 October 2009.
[8]
The applicant was unhappy with her dismissal and it was for that
reason that she referred a dispute concerning an alleged unfair
dismissal to the CCMA for conciliation. The matter was then filed
with this Court for adjudication after conciliation failed.
[9]
The first respondent having failed to file a statement of opposition
the applicant applied for a default judgment. The application
was
successful in that the Court found her dismissal to have been unfair.
[10]
Thereafter
the applicant was unsuccessful in seeking to enforce the order
against FACSA and it was for that reason, that she resorted
to
enforce it against Talwin. In this respect the applicant contended
that Talwin was liable because FACSA had transferred its
business to
it as a going concern and in terms of section 197 of the Labour
Relations Act (the LRA).
[1]
[11]
In seeking to have the default judgment enforced against Talwin the
applicant filed the present application which as indicated
earlier is
opposed.
[12]
On 13 February 2014, the applicant brought an
application seeking to have the matter referred for oral evidence as
a result of various
disputes of facts pertaining to amongst others
whether there was transfer of business from FCSA to Talwin in terms
of section 197
of the LRA. That application was dismissed by
Tlhotlhalemaje AJ on 20 March 2014. The order dismissing the
application reads
as follows:
“
i.
The application to refer the matter to oral evidence is dismissed.
ii.
The Registrar of the Court is directed to set the matter down for the
hearing of the main application [the joinder application].
iii.
Costs are to be in the costs.”
[13]
As indicated earlier in this judgment the
applicant obtained an order in her favour against FCSA. She now seeks
an order declaring
that; that judgment to be executable against
Talwin alternatively to have Talwin joined as a party to the
proceedings that had
already concluded. The substitution argument is
based on the contention that there was a transfer of business as a
going concern
and that the provisions of section 197 of the LRA are
applicable.
Legal
Principle
[14]
It is
trite that the test to apply in considering whether a party should be
joined in proceedings is whether the party sought to
be joined has
“substantial interest in the subject matter of the proceedings.
The test was explained in
Gordon
v Department of Health: Kwazulu-Natal
[2]
in the following terms:
“…
The
issue in our matter… is whether the party sought to be joined
has a direct and substantial interest in the matter. The
test is
whether a party, who is alleged to be a necessary party, has a legal
interest in the subject matter, which may be affected
prejudicially
by the judgment of the court in the proceedings concerned. In the
Amalgamated Engineering Union
case,
supra
, it
was found that “the question of joinder should not depend on
the nature of the subject matter but on the manner in which,
and the
extent to which, the court’s order may affect the interests of
third parties”.
[15]
Before dealing with the merits of whether
transfer as a going concern has taken place, I will deal firstly with
the preliminary
point raised by Talwin, which is that the judgment in
question cannot be enforced against it because it was not cited as a
party
in the proceedings which led to the granting of the order. It
is argued in this regard that Talwin was not afforded the opportunity
to be heard in relation to its potential liability to the applicant.
[16]
In
failing to timeously joining Talwin, the applicant, according to
Talwin waived its right to join it once the order of the court
was
made. In this respect Talwin relies on the judgment of
Ngema
and Others v Screenex Wire Weaving Manufacturers (Pty) Limited and
others
,
[3]
where the Court in dealing with facts very similar to the present
held that:
“
It
is not correct as the applicants submitted that joinder may take
place after judgment has been handed down.”
[17]
The Court further held that:
“
In
this case, the second respondent must, save if there is an express
exclusion of its rights in terms of the LRA, enjoy the same
rights to
be heard . . . There is no express exclusion in the LRA
that an interested party, such as second respondent,
should not be
afforded an opportunity to be heard in a matter where it has a direct
and substantial interest. In this case, the
dispute was no longer
about whether the appellants had been unfairly dismissed. That issue
had been disposed of by this Court in
the judgment of Zondo JP who
dismissed an appeal against the judgment and order of Hendricks AJ to
the effect that the dismissal
of the appellants was both procedurally
and substantially unfair. That did not mean that the second
respondent did not have right
to be heard with regard to the question
of the appropriate remedy.”
[18]
Another important point made by the LAC, in
that case, is that the second respondent, (being the party which the
applicant sought
to join after the order was made) was at the least,
entitled to be heard on the specific question of the relief. The
court also
found that the second respondent ought to have been joined
as it had a direct or substantial interest in the
determination
particular in relation to the appropriate relief.
[19]
In the present matter although the
applicant is seeking to have the court come to her assistance, she
does not however take it into
her confidence. She deals very
peripherally with the issue as to when did she become aware that the
transfer has taken place. The
version of Talwin, which I accept as
being more probable based on the facts put forward by it, is that the
applicant became aware
during the middle of November 2011 through the
email which was from the second applicant addressed to Mr Roets, the
relevant part
for the purpose of this judgment reads as follows:
“
Dear
John
Herewith the new
address for FCSA, as requested, I am also attaching a letter
notification of change of ownership that they had
send to me. “
[20]
There has been an excessive delay in
seeking to join Talwin considering the time between the applicant
instituting the proceedings
against FACSA to the time when the
current proceedings were instituted. Despite being aware of the
alleged transfer of the business,
the applicant did nothing to ensure
that Talwin was joined in the proceedings.
[21]
In light of the above I am inclined to
agree with Talwin that the applicant has waived her right to join it
in those proceedings.
Accordingly, the preliminary point raised by
Talwin stands to succeed and thus the applicant’s application
to join or substitute
Talwin stands to fail on this basis alone.
[22]
In my view, the applicant’s claim
would still be unsustainable even if the preliminary point was not
dispositive of the matter.
The application would still be
unsustainable when the facts relating to allegation that there has
been a transfer of business as
a going concern are objectively
considered.
[23]
In
seeking to join Talwin and have the order made against FACSA enforced
also against it, the applicant relies on the provisions
of section
197 of the LRA. The purpose of section 197 of the LRA, is stated
in
Ngema v Screenex Wire Waving Manufacturing (PTY) LTD and Others
[4]
by Davis in the following terms:
“
[7]
As the decisions make it clear, the very purpose of s 197 is to
ensure an automatic transfer of employment contracts from the
old to
the new employer, in which the transfer of the business as a going
concern takes place and existing workers are protected
against a loss
of employment when the business is so transferred.
[8] It must follow,
pursuant to this provision, that the employees who were dismissed
before a transfer of the business took place
may enforce their claims
against the new employer.
Section 197 of the
LRA reads as follows:
‘
197
Transfer of contract of employment-
(1)
In this
section and in section 197A-
(a)
business”
includes the whole or a part of any business, trade, undertaking or
service; and
(b)
“
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.
(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
practice or act of unfair discrimination, is considered to have been
done in 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.”
[24]
The
question of whether the transfer of business as a going concern
between FACSA and Talwin took place in terms of section 197
of the
LRA is a matter to be determined objectively from the facts as
appears on the papers before this court. It was in this respect
that
the court in
Schutte
v Powerplus Performance (Pty) Ltd
,
[5]
held that the proper approach when dealing with the issue of “whether
transfer as a going concern has taken place is to examine
substance
and not form.” The same approach was adopted in
Aviation
Union of South African v SA Airways (Pty) Ltd.
[6]
where
the court held that the question of whether the provisions of section
197 of the LRA have been triggered entails an objective
assessment of
the facts of each case.
The
meaning and the factors to take into account when assessing whether
“transfer as a going concern” has taken place
is
summarised by Tlaletsi JA, in
Hydro
Colour Inks (Pty) Ltd v CCEPAWU
,
[7]
as
follows:
‘
(i) Since the
phrase “going concern” is not defined in the Act, it must
be given its ordinary meaning unless the context
indicates otherwise;
(ii) What is
transferred must be a business in operation so that the business
remains the same but in different hands;
(iii) A
determination of whether a business has been transferred as a going
concern is a matter of objective determination in the
light of the
circumstances of each transaction;
(iv) In deciding
whether a business has been transferred as a going concern, regard
must be had to the substance and not the form
of the transaction,
(v) There are a
number of factors that are relevant in determining whether or not a
business has been transferred as going concern,
such as, but not
limited to: what will happen to the goodwill of the business,
stock-in-trade, the premises of the business, contracts
with clients
or customers, the workforce, the assets of the business, the debts of
the business, whether there has been interruption
of the operation of
the business and if so, the duration thereof, whether same or similar
activities are continued after the transfer
or not.
(vi) All the factors
referred to above are not exhaustive and none of them is decisive
individually.
(vii) These factors
must all be considered in the overall assessment and should therefore
not be considered in isolation.’
[25]
The case of the applicant in contending
that there was a transfer of business as a going concern from FACSA
to Talwin, is summarised
in its heads of argument in the following:
‘
6.1
on the papers, it is common cause that FCSA is no longer the license
holder for the provision of Franklin
Covey services
in South Africa and that Talwin is now the license holder for such;
6.2
despite Talwin's of this fact, on the papers, it is clear that the
Franklin Covey license is exclusively issued to a single
entity in
any region and that, in respect of Southern and Eastern Africa Region
[particularly, in South Africa], the license has
been exclusively
issued to Talwin;
6.3
it is common cause that, after the termination of the license
agreement between FCSA and Franklin Covey and subsequent awarding
of
that license to Talwin, some of the employees of the former FCSA,
commenced employment for Talwin;
6.4
it is common cause that subsequent to the awarding of the Franklin
Covey license to Talwin, Talwin commenced servicing some
of the
former clients of FCSA;
6.5
it is common cause that the nature of the Franklin Covey
services now provided by Talwin remain exactly the same as those
previously provided by FCSA;
6.6
finally, it is common cause that, without having obtained the
Franklin Covey license, Talwin could not provide Franklin Covey
services and solutions to any client.’
[26]
The
issue of whether Talwin should be joined in this matter depends on
whether the facts support the proposition that FACSA’s
business
was transferred as a going concern to Talwin. In the first instance
there is a dispute of fact as to the transfer of business
between the
two entities. Applying the test in
Plascon-Evans
Paints Ltd v Van Riebeeck Paints (Pty) Ltd
[8]
case,
I am of the view that the probability supports strongly the
contention of Talwin that there was never a transfer of business
as a
going concern to it.
[27]
In my view, even the basic facts based on
the applicant’s own papers, do not support the proposition that
business was transferred
from FACSA to Talwin. The relationship
between the parties and Franklin Covey, the American Company was that
of franchiser and
franchisee. The parties concluded their agreement
in as far as the productivity training was concerned respectively
with Franklin
Covey. The business of both FACSA and Talwin was based
on the licence issued to them. It is common cause that when the
period of
the trade licence which was held by FACSA came to an end,
Talwin successfully tendered for the license. The version of Talwin,
which as I have indicated earlier has to be accepted or on the basis
of the principle in
Plascon Evans
is
that it independently applied for the licence and was successful in
securing the licence..
[28]
As concerning the fact that some of the
employees of FSCSA were employed by Talwin, the facts indicate that
they were employed in
the ordinary course and not as part of a
transfer.
[29]
It is clear from the above that the only
conclusion to reach is that there was no transfer of business from
FACSA to Talwin. It
cannot therefore be said that Talwin had any
interest in the outcome of the applicant’s claim. As a result
the applicant’s
claim stands to fail.
[30]
The second respondent has argued that costs
should follow the result. In my view, instituting these proceedings
the applicant acted
in an unreasonable and thus forcing the Talwin to
incur unnecessary costs. In the circumstances, I see no reason why
costs should
not follow the result.
Order
[31]
In the premises, the applicant’s
application is dismissed with costs.
E,
Molahlehi
Judge
of the Labour Court, Johannesburg
Appearances
For the
Applicant: Mr B. Masuku of Taback Attorneys
For the
Respondent: Advocate K. Iles.
Instructed
by: Bowman Gilfillan
[1]
Act 66 of 1995.
[2]
[2008] ZASCA 99
;
2008 (6) SA 522
(SCA);
2009 (1) BCLR 44
(SCA) at para 9.
[3]
(2012)
33
ILJ
681 (LC).
[4]
(2013)
34
ILJ
1470 (LAC).
[5]
[1999] 2 BLLR (LC).
[6]
[2012] 2 BCLR 117 (CC).
[7]
[2011]
7 BLLR 637
(LAC) at para 12. This is a summary of the principles
set-out in both
the minority judgment of Zondo JP in
National
Education Health and Allied Workers Union v University of Cape Town
and Others 2002 23
ILJ
306 (LAC), and the Constitutional Court on appeal in the same
matter,
National
Education Health and Allied Workers Union v University of Cape Town
Others
(2003)
24
ILJ
95
(CC).
[8]
1984 (3) SA 620
(A) at 634H-I where Corbett JA stated that ‘…where
in proceedings on notice of motion disputes of fact have arisen
on
the affidavits, a final order, whether it be an interdict or some
other form of relief, 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.’