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[2015] ZALCD 52
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Direct Channel KwaZulu-Natal (Pty) Ltd v Naidu and Others (D879/10) [2015] ZALCD 52; (2015) 36 ILJ 2611 (LC) (28 May 2015)
IN
THE LABOUR COURT OF SOUTH AFRICA
HELD
AT DURBAN
CASE
NO: D879/10
DATE:
28 MAY 2015
Reportable
In
the matter between:
DIRECT
CHANNEL KWAZULU-NATAL (PTY)
LTD
........................................................
Applicant
(IN
LIQUIDATION)
[Herein
represented by its joint liquidators, Leigh
William
Roering N.O. and Simangele Martha Maseko
N.O]
And
DENVER
NAIDU AND 7
OTHERS
...................................................................................
Respondents
Heard:
9 October 2014
Delivered:
28 May 2015
Summary:
Liquidation of a company - effect thereof to legal proceedings
already commenced in the Labour Court against such company,
as an
employer -
The provisions of section 359 of Act
Number 61 of 1973 are couched in peremptory terms in requiring the
giving of the written notice
to the appointed liquidators –
proceedings
considered to have been abandoned by the
respondents – default judgment dismissed.
JUDGMENT
CELE
J
Introduction
[1]
A default judgment sought by the respondents, who were dismissed in
terms of section 189A of the Labour Relations Act
[1]
,
is being resisted by the applicant who seeks for the stay or
dismissal thereof on the basis that such proceedings have been
abandoned
by the respondents. The respondents opposed the application
and ask that a default judgment be granted in their favour.
Factual
Background
[2]
The eight respondents were in the employment of the applicant in
various positions. They were members of the Banking Insurance,
Finance and Assurance Workers Union (BIFAWU), hereafter referred to
as the union. On 20 January 2010 the applicant issued a notice
in
terms of section 189 (3) and 189A of the Act to its employees,
simultaneously indicating that it would approach the Commission
for
Conciliation, Mediation and Arbitration (the CCMA) for the
appointment of a facilitating commissioner. In February 2010 a
consultation meeting facilitated by Commissioner Berlin Nayager of
the CCMA commenced in earnest. The union attended the consultation
meeting. Various other meetings were held and a number of challenges
were experienced by the parties. On 31 May 2010 the applicant
terminated the employment of the respondents. Some of the employees
accepted a voluntary retrenchment.
[3]
Aggrieved by their dismissals, the respondents referred an unfair
dismissal dispute to the CCMA for conciliation which failed
to
resolve the dispute. The applicants referred the dispute to this
court by means of a statement of case on 12 October 2010. The
applicant had 10 days to file a statement of response, in the event
it wanted to oppose the application.
[2]
[4]
On 28 October 2010 the applicant launched an application for its
winding-up and filed it with the Registrar of the South Gauteng
High
Court. It simultaneously served a notice thereof to the union which
acknowledged the receipt thereof on 31 October 2010. On
24 November
2010 the respondents asked for their unopposed matter to be set down
for trial. Nothing of note appears to have happened
in the matter
until on 5 March 2013 when the respondents filed an application for
default judgment. Attorneys of the joint liquidators
of the applicant
wrote a letter dated 4 February 2014 to attorneys of the respondent,
notifying them of various issues including
that:
·
The provisions of section 359 of the Company Act were applicable in
this matter and the implications thereof;
·
The winding up order was granted on 9 November 2010, placing the
applicant under provisional liquidation until 11 March
2014.
·
Liquidators were appointed on 31 October 2011.
·
A special meeting of creditors was scheduled for 5 March 2014 at the
Master’s Office in Johannesburg.
·
Messrs Shane Remiah and Zulfikaar Khan were made available by the
liquidators to assist claimants with the completion of
claim forms
during the period 11 February 2013 to 13 February 2013 at an
identified office in Commercial Road, Durban, to prove
any further
claims.
[5]
Again nothing happened until 11 March 2014 when the Registrar set
this matter down for hearing on 21 May 2014 as an unopposed
application, on notice to both parties. Then on 26 March 2014 the
applicant filed for the first time its ‘answering statement
of
case’. It then filed its condonation application for the late
filing of the statement of defense on 14 April 2014. On
20 May 2014
the applicant filed an affidavit seeking the dismissal of the default
judgment. On 21 May 2014 an order was issued
by this court per Gush
J, adjourning the matter to the opposed roll. On 6 June 2014 the
respondents filed their answering affidavit
to oppose the dismissal
of the default judgment.
Submissions
[6]
The applicant submitted that the union was aware of the application
for liquidation and yet has never served a notice as required
by law
to the liquidators of the applicant. It was submitted that, in terms
of section 359 (2) (b) of the Company Act, the proceedings
in this
matter ought to be considered to have been abandoned by the
respondents and therefore that the default judgment should
be
dismissed. The respondents contended, in opposition, that the
applicant’s defense was way out of time, having been entered
some three years late, making it an excessively long delay. A
contention made was that it made no sense for the applicant not to
oppose the respondents’ claim merely because the applicant had
brought up a winding-up application. According to the respondents,
their attorneys advised the applicant’s liquidators of the
current proceedings on 9 July 2013 which was an indication that
the
respondents’ claim was not abandoned. It was then averred that
the respondents’ claim was sound, logical and clearly
showed
that they were unfairly dismissed by the applicant thus entitling
them to the default judgment.
Evaluation
[7]
The application to dismiss the default judgment is premised on
section 359 of the Companies Act Number 61 of 1973. This Act
has been
repealed by the Companies Act Number 71 of 2008 which came into
operation on 1 May 2011 in terms of government gazette
number 34243
dated 20 April 2011. Schedule 5 of Act Number 71 of 2008 contains
transitional arrangements. Item 10 of schedule 5
provides for the
preservation and continuation of court proceedings by stating that:
(1)
“Any proceedings in any court in terms of the previous Act
immediately before the effective date are continued in terms
of that
Act, as if it had not been repealed.
(2)
Any order of a court in terms of the previous Act, and in force
immediately before the effective date, continue to have the
same
effect as if that Act had not been repealed, subject to any further
order of the court.”
[8]
The reference in item 10 to the previous Act is a clear reference to
Act Number 61 of 1973. The winding up order was granted
on 9 November
2010, placing the applicant under provisional liquidation. The Act
that was in operation and which continued to apply
in this matter is
then Act Number 61 of 1973.
[9]
Once
a winding-up order is granted by a Court, all civil proceedings
including judgments by or against the company in respect of
which the
order was sought, are suspended until the appointment of a
liquidator
[3]
.
Also, once a liquidator has been appointed, civil proceedings against
that company may only continue or commence provided a litigant,
intent on continuing or commencing such proceedings, within four
weeks of the liquidator’s appointment, gives such liquidator
at
least three weeks’ notice in writing, before continuing or
commencing with the proceedings.
[4]
[10]
It remained common cause that the respondents did not give the
liquidators in this matter any notice, within four weeks of
the
liquidators’ appointment, as envisaged by section 359. Yet it
remained common cause that the respondents had the requisite
knowledge of the appointment of the liquidators. A further
opportunity presented to the respondents was their receipt of the
letter
issued by attorneys instructed by the liquidators, calling on
them to file their claim. They did nothing to protect their
positions.
[11]
The provisions of section 359 of Act Number 61 of 1973 are couched in
peremptory terms in requiring the giving of the written
notice to the
appointed liquidators.
Should such notice not be given to the
liquidator within four weeks of such liquidator's appointment,
proceedings are considered
to be abandoned, unless the court directs
otherwise. The resistance by the respondents to the order sought by
the applicants is
essentially that the applicant delayed excessively
in filing its defense to the statement of case. The position taken by
the applicant,
in my view is akin to the lodging of a special plea or
exception which could be done without the filing of the statement of
defense.
Put differently, on the basis of the common cause facts, the
applicant would be entitled to walk into court, when a default
judgment
is considered, and argue a point of law based on the
provisions of section 359 of Act 61 of 1973, without filing opposing
papers.
[12]
On 28 October 2010 when the applicant launched an application for its
winding-up with the Registrar of the South Gauteng High
Court,
winding-up is deemed to have commenced.
[5]
Then, when on 9 November 2010 the South Gauteng High Court granted
the winding-up order, proceeding initiated by the respondents
in this
matter were suspended. They remained so suspended until a prescribed
written notice would be served to the liquidators.
No such service
materialized. I take the view that the Labour Court proceedings are
affected by the operation of the provisions
of Act Number 61 of 1973
dealing with liquidation. The clearer indication of this appears in
the repealing Act Number 71 of 2008.
Section 144 thereof reads:
(1)
“During a company’s business rescue proceedings any
employees of the company who are-
(a)
represented by a registered trade union may exercise any rights set
out in this Chapter-
(i)
collectively through their trade union; and
(ii)
in accordance with applicable labour law; or
(b)
not represented by a registered trade union may elect to exercise any
rights set out in this Chapter either directly, or by
proxy through
an employee organisation or representative.
(2)
To the extent that any remuneration, reimbursement for expenses or
other amount of money relating to employment became due and
payable
by a company to an employee at any time before the beginning of the
company’s business rescue proceedings, and had
not been paid to
that employee immediately before the beginning of those proceedings,
the employee is a preferred unsecured creditor
of the company for the
purposes of this Chapter.
(3)
During a company’s business rescue process, every registered
trade union representing any employees of the company, and
any
employee who is not so represented, is entitled to-
(a)
notice, which must be given in the prescribed manner and form to
employees at their workplace, and served at the head office
of the
relevant trade union, of each court proceeding, decision, meeting or
other relevant event concerning the business rescue
proceedings;
[Para.
(a) substituted by s. 94 of Act 3/2011]
(b)
participate in any court proceedings arising during the business
rescue proceedings;
(c)
form a committee of employees‟ representatives;
(d)
be consulted by the practitioner during the development of the
business rescue plan, and afforded sufficient opportunity to
review
any such plan and prepare a submission contemplated in section
152(1)(c);
(e)
be present and make a submission to the meeting of the holders of
voting interests before a vote is taken on any proposed business
rescue plan, as contemplated in section 152(1)(c);
(f)
vote with creditors on a motion to approve a proposed business plan,
to the extent that the employee is a creditor, as contemplated
in
subsection (2); and [Para. (f) substituted by s. 94 of Act 3/2011]
(g)
if the proposed business rescue plan is rejected, to-
(i)
propose the development of an alternative plan, in the manner
contemplated in section 153; or
(ii)
present an offer to acquire the interests of one or more affected
persons, in the manner contemplated in section 153.
(4)
A medical scheme, or a pension scheme including a provident scheme,
for the benefit of the past or present employees of a company
is an
unsecured creditor of the company for the purposes of this Chapter to
the extent of-
(a)
any amount that was due and payable by the company to the trustees of
the scheme at any time before the beginning of the company’s
business rescue proceedings, and that had not been paid immediately
before the beginning of those proceedings; and
(b)
in the case of a defined benefit pension scheme, the present value at
the commencement of the business rescue proceedings of
any unfunded
liability under that scheme.
(5) The rights
set out in this section are in addition to any other rights arising
or accruing in terms of any law, contract, collective
agreement,
shareholding, security or court order.”
[13]
Accordingly, the proceedings initiated by the respondents in this
matter are considered to have been abandoned by the respondents.
In
considering the costs order, it is to be observed that, had the
respondents not pursued this matter after the end of 2010, that
is,
after the appointment of liquidators and the expiry of prescribed
period of the giving of the written notice, that would have
saved
both parties further unnecessary costs.
[14]
The following order stands to be issued:
1.
The default judgment in this matter is dismissed.
2.
The respondents are to pay the costs hereof.
Cele
J
Judge
of the Labour Court of SouthAfrica.
APPEARANCES:
For
the Applicant: Mr. Z Luthuli instructed by A.P.Shangase and
Associates
For
the Respondent : Adv.C.Edy instructed by Cox Yeats
[1]
Act Number 66 of 1995.
[2]
See rule 6 (3) (c) of the rules for the proper conduct of
proceedings in the Labour Court.
[3]
Section 359(1)(a) of the Companies Act;
Richard
Keay Pollock N.O. v North Copper Wire (Pty) Ltd
[2002] 1 All SA 244 (T) 246
[4]
Section 359(2) of the Companies Act
[5]
See section 348 of Act 61 of 1973.