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[2016] ZALCCT 53
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Sondamase and Another v Ellerine Hodings Ltd and Another (C669/2014) [2016] ZALCCT 53 (22 April 2016)
REPUBLIC
OF SOUTH AFRICA
THE
LABOUR COURT OF SOUTH AFRICA CAPE TOWN
JUDGMENT
Case
no: C 669
I
2014
Not
reportable
Of
interest other judges
In
the matter between:
Xolani
SONDAMASE
First Applicant
Themba
MRUQULI
Second Applicant
and
ELLERINE
HODINGS
LTD
First
Respondent
(in
business
rescue)
ELLERINE
FURNISHERS (PTY)
LTD
Second
Respondent
(in
business
rescue)
Heard:
18 March 2016
Delivered:
22 April 2016
Summary:
Special pleas
-
lack of
jurisdiction
over unfair labour practice claim;
legal
moratorium
on
proceedings
against
company
in
business rescue; prescription.
Companies Act 71 of 2008
s 133(1)
considered.
JUDGMENT
STEENKAMP
J
Introduction
[1]
The
two
applicants in
this
matter
are
former
employees
of
Ellerine
Furnishers
(Pty)
Ltd (the second
respondent).
They
referred
a
claim to
this
Court
alleging
:
1.1
Discrimination;
1.2
Unfair
labour
practice;
and
1.3
Victimisation.
[2]
Ellerine
Furnishers,
as
well
as
its
holding
company,
Ellerine
Holdings
Ltd
(the
first
respondent),
are
in
business
rescue.
Th
ey
have
raised
a
special
plea that,
in
terms
of
s 133(1)
of
the
Companies
Act
[1]
there
is
a
legal
Moratorium
on the commencement and continuation of legal proceedings against
the.
[3]
Ellerines
also
raise two
further
specia1
pleas:
3.1
This
Court
does not
have jurisdiction over
an
unfair
labour
practice
claim;
and
3.2
Insofar as
the employees' claim relates to
alleged
underpayments
between 2008 and
20
,
11,
this
portion
of their
plea
has
prescribed.
[4]
The third and fourth respondents have been joined to the proceedings
as the joint business rescue practitioners for Ellerines.
All the
respondents are represented by the same attorneys of record.
Background
facts
[5]
The two employees were dismissed for operational requirements in
November 2014. Prior to that, in June 2014, they had lodged
a
grievance alleging discrimination, victimisation and unfair labour
practices. They referred a dispute to the CCMA in July 2014.
It was
not resolved at conciliation. They referred their dispute to this
Court and delivered a statement of claim on
8
August 2014. On 7 August 2014
Ellerines Furnishers (EF) commenced business rescue
proceedings. On 21 August Ellerines Holdings (EH) followed suit.
[6]
After
an
interlocutory order
for
joinder
and
substation, the respondents raised
an
exception
.
The
employees
delivered
an
amended
statement
of claim in
June
2015
.
They
persisted
with
a claim of
discrimination;
and
further
alleged
an
unfair
labour
practice
in
terms
of
s
186(2)
of the
Labour
Relations Act.
[2]
[7]
The respondents
raised
the
three special pleas referred
to
above, and delivered a notice
to
the
employees to remove
various causes
of complaint
relating
to
the
particularity
of
their
claim
.
The
employees
-
now
represented
by
Salie
attorneys
-
delivered
a
second amended
statement of
claim
on
8
September
2015.
They
persisted
with
their
claims
of
discrimination
as
well
as
an
unfair
labour
p
ra
ct
i
ce
in
terms
of
s
186(2)
of
the LRA.
[8]
The
respondents
raised the
three
special
p
l
eas
referred to
above,
as
well as
a
fourth
plea
that
the
applicants had
del
i
vered
their
second
amended statement
of
claim
ten
days
late
and
had
not
applied
for
condonation. In argument
Mr
Masher,
for
the
respondents,
did
not
persist
with
that
plea.
I
granted
condonation
.
The
primary
s
pecial
plea: s
133
of the
Companies
Act
[9
]
It is common cause that Ellerines (both EF and EHL) were placed in
business rescue in August 2014.
[10]
Section
133
of the
Companies Act
provides
:
"
133.
General moratorium
on
legal proceedings against company
(1)
During
business
rescue
proceedings,
no legal proceeding, including
enforcement
action,
against
the
company
,
or
in relation to any property
belonging
to the
company
,
or
lawfully
in
its
possession
,
may
be
commenced
or
proceeded with
in any forum,
except-
(a)
with the written
consent
of
the
practitioner;
(b)
with the
leave of the
court and
in accordance
with
any
terms
the
court considers
suitable;
(c)
as a
set-off
against
any
claim
made
by the company
in
any
legal
proceeding
s
,
irrespective
of whether
those
proceedings
commenced
before
or
after the
business
rescue
proceedings
began;
(d)
criminal
proceedings
against the
company
or
any
of
its directors or officers
;
(e)
proceedings
concerning
any
property
or
right over which
the company
exercises
the
powers
of a trustee;
or
(f)
proceedings
by
a
regulatory
authority
in the
execution
of
its
duties
after
written
notification to the
business
rescue
practitioner
.
(2)
During
business
rescue
proceedings;
a guarantee
o
r surety
by a company
in favour
of any other
person ma
y
not
be
enfor
c
ed
by any person against
the
company
except with
leave
of
the
court
and
in
accordance
with
any terms the court considers just
and equitable
in the circumstances.
(3)
If
any
right
to
commence proceedings
or otherwise assert
a
claim
against
a
company
is
subject
to
a time
limi
t
,
the
measurement
of that
time must
be suspended
during
the
company's
business
rescue
proceedings.
"
[11]
In
this
case,
the
business practitioners have not
consented to
the legal proceedings against either
company proceeding during the business rescue
proceedings;
in fact,
they
actively
oppose
it.
It seems
clear
that,
in terms
of
s
133(1)
of
the
Companies
Act
,
the
applicant
cannot
proceed with the
claim at this stage
.
[12]
The aim of this provision is clear. It is to create some breathing
space for the business to be rescued and thus to put all
legal
proceedings on hold
until
the company
may
be
brought
back
on track
to
continue
with
its
business. Henochsberg
[3]
explains:
"
Section
133
makes provision for a general moratorium (in some jurisdictions
and moratorium is known as a
'
stay
'
9r
a
'
stay of
proceedings')
on
legal proceedings
...
against the company
...
while the company is subject to business rescue proceedings. The
moratorium granted by this section is designed to provide the
company
with a breathing space while
the
business
print
rescue
practitioner
attempts
to
rescue the company
by designing
and
implementing
a business
rescue
plan. This
is a crucial element
of any
corporate
rescue
mechanism,
as
it
allows
the
company sufficient
breathing
space to be able to find a solution
to
the financial problems
it
is experiencing
at
the time
.
"
[13]
Mr
Masher
drew
the
court's
attention
to
the
unreported
case
of
Fabrizio
Burda
v
lntegcomm
(Pty)
Ltd
[4]
where
this
extract
was
quoted
with
approval
in
this
Court
and the learned acting judge
went
on
to
say:
"The
words 'legal proceedings
... in any forum' [in
s 133(1)]
are wide
in their
scope.
They do not limit the type of legal proceedings nor the forum in
which they may be brought. Unfair
dismissal proceedings in this Court no
doubt constitute legal
proceedings. The current proceedings
before
this
court
for
reinstatement and/or compensation, i.e.
the payment of money.
The
purpose of the stay of legal proceedings is to afford business rescue
an opportunity to turn the fortunes of the company around."
"
In
the
circumstances,
the
unfair
dismissal proceedings
cannot
be
proceeded
with
except
with
the
written
consent
of the
business
rescue practitioner
or with the
leave of the
court.
"
[14]
I am in respectful agreement
with
this judgement.
I
do not agree with the interpretation
that
there
i
s
a conflict
between
the
Companies Act
and
the
LRA
in this
regard
and that
the
LRA
prevails -
a
reading
that would
hold
that
proceedings
in
this
court
in
terms
of
the
LRA
are not staye
d
.
[5]
[15]
It does
not
appear
to
me
that
there
is
any
conflict
between
s
133(1)(a)
of
the
Companies Act and
the
dispute
resolution provisions set
out in
the LRA.
And in
so
far as
there has
been
conflicting
jurisprudence
on
the
application of
s 133
of
the
Companies
Act
to
dispute
arising
out
of
the LRA, it
appears
to
have
been
settled
by
the
recent
decision
of
the
Supreme
Court
of
Appeal
in
Chetty
t/a
Nationwide
Electrical v
Hart
and
another NNO.
[6]
In
that
case,
the
SCA
interpreted
s133
to
place
a
moratorium,
not
only
on
legal
proceedings
in
court,
but
even
arbitration
proceedings
.
Cachalia
JA
took
a
purposive
approach:
"[26]
But the
question the
respondent
is unable to answer
is why
the
lawmaker
would
want
the
company
to
provide details
of all
proceedings, including
arbitration
proceedings,
to
a
practitioner,
but exclude
arbitrations from the ambit
of the
moratorium and the obligation to obtain
a practitioner's
consent
in
s
133(1)(a).
After
all
the outcome
of
an arbitration
by
way
of
award
is
usually that the losing
party
has to
pay
a sum of money,
which is the outcome of most court actions
involving commercial disputes. In my view the answer lies in properly
understanding the
purpose of these provisions as they apply to
business rescue proceedings and the consequences that flow from the
parties' contending
interpretations.
[27]
Section 5(1)
of the Act directs that its interpretation and
application must give effect to the purpose
s
tated
.
Section 7(k)
is relevant here
.
It says that one of these purposes is
to
:
'
. .
.
provide for the efficient
rescue
,
and recovery
of financially
distressed
companies,
in a
manner
that
balances
the
rights
and interests of
all
relevant stakeholders
. . .
'
[28]
Section
128(1)(b)
of
the
Act
defines
business
rescue
to
mean
proceedings
that facilitate
the
rehabilitation
of a financially
distressed company
by providing,
amongst
other things,
for the temporary
supervision and
moratorium
on the
rights of claimants,
and the
development
and implementation
of
a
plan to
rescue the
company
.
The
obvious
purpose of placing
a company
under
business
rescue
is
to give
it
breathing
space
so that
its
affairs
may
be assessed
and
restructured
in a
manner
that
allows
its return to financial
viability.
The
requirement for
the
practitioner's
consent to be obtained
is to give
him the
opportunity,
after
his
appointment,
to
consider the nature and validity of any existing or pending
claim and how it is to be dealt with, for example by settling it or
continuing with the litigation. In particular, the practitioner's
concern is directed at assessing how the claim will impact on
the
well-being of the company and its ability to regain its financial
health. A general moratorium on the rights of creditors
enforcing their rights against the company is therefore crucial to
achieving this objective. And given the ubiquitous use of
arbitrations
to resolve commercial disputes, an interpretation of
s
133(1)
that excludes them from the moratorium on legal proceedings
against financially distressed companies would significantly hinder
its attainment.
[29]
In my view once this purpose of business rescue - to give the
practitioner breathing space - is properly understood, it becomes
apparent that only an interpretation that includes arbitrations
within, instead of excluding them from, the meaning of legal
proceedings
in
s 133(1)
, allows this provision to be read
harmoniously with
s 142(3)(b).
Such a reading is in line with the
well-known canon of statutory construction, which is that if by any
reasonable construction
the two can be made to be compatible, not
contradictory, that is the interpretation that should be given. There
can be no reason
why
s 142(3)(b)
obliges the company to provide
details of arbitrations to the practitioner other than because they
are also legal proceedings -
as contemplated in
s 133(1)
- that may
nave a bearing on its financial viability and of which the business
rescue practitioner must be cognisant."
[16]
By suspending the legal proceedings in this case and giving the
respondents the breathing space contemplated by the
Companies Act,
the
employees are not deprived of their right to continue with their
claim against the company at a later stage. The claim is
only
suspended during the period of business rescue proceedings. That does
not appear to me to be in conflict with the provisions
of the LRA.
[17]
The first special plea is upheld. The remaining claims in this matter
are suspended until such time as the business rescue
proceedings are
finalised.
[18]
I refer to "the remaining claims" because this Court does
not have jurisdiction over the unfair labour practice claim;
and part
of the employees' claim has prescribed. I will now deal with
those aspects.
Second
special plea: jurisdiction
[19]
The
employees
persist
with
their
claim
of
an
unfair
labour
practice.
This
Court does
not
have
jurisdiction
over
unfair
labour
practice claims.
[7]
In
terms
of
s
191
of
the
LRA,
if
there
is
a
dispute
relating
to
an
unfair
labour
practic
e
,
the
employee
alleging
unfair
labour
practice
must
refer
the
dispute
to
the
CCMA
or
the
relevant bargaining council
for
conciliation;
and if conciliation
fails,
to arbitration
.
[20]
Before
its
amendment
that
came
into
effect
on
1
January
2015,
s
158(2)(b)
of the
LRA read:
"
(2)
If at any stage after a dispute has been referred to the Labour
Court, it becomes apparent that the dispute ought to have been
referred to arbitration
,
the Court may -
(a)
stay the proceedings and refer the
dispute to arbitration
;
or
(b)
with the consent of the parties and if
it is expedient to do
so
,
continue
with the proceedings with the Court
sitting as an arbitrator
,
in
which
case the Court may only make an order that a commissioner or
arbitrator would have been entitled to
make.
"
[21]
The amended subsection does not
apply
to
disputes
that
were
referred
before
1
January
2015. The amended subsection does away with the
requirement
of consent and states that,
if it i
s
expedient to do so, the Court
may continue
with the
proceedings
.
[22]
In this
case,
the
parties
have
not
agreed
for
the
Court
to
continue
with
the
proceedings
as
envisaged
by
s
158(2)(b)
before
its
amendment.
This
Court
does
not
have
jurisdiction
to
adjudicate the unfair labour practice
claim.
Th
i
r
d
spec
i
a
l
p
l
ea
:
presc
rip
t
ion
[23]
The employees allege that Ellerine Furnishers underpaid them from
2008 to 2014. They were paid in accordance with a collective
agreement between EF and the majority trade union, SACCAWU.
[24]
In
terms
of
s
11
of
the
Prescription
Act
[8]
,
a
debt
[9]
prescribes
after
three
years
from the date that the debt
is
due
.
[25]
In
Umgeni
Water
v Mshengu
[10]
the
SCA
held
that
in
his ordinary
meaning,
a
debt
is
due
when
it
is
immediately
claimable
by
the
creditor
and,
as
its
correlative,
it
is
immediately
payable by
the
debtor. In
other
words, the
debt
must
be
one
in
respect
of
which
the
debtor
is
under
an
obligation
to pay
immediately.
A
debt
can
only
be said
to
be
claimable
immediately
if a
creditor
has
the
right
to
institute
an
action
for
its
recovery.
In order
to
be able to
institute
an action for
the
recovery
of a debt,
a creditor
must
have a
complete
cause
of action
in respect
of it.
[26]
The
employees
claim
that
Ellerines
Furnishers
underpaid
their
commission
from
2008
to
2014.
Ellerines
would
have
been
required
to
pay
that
portion
of
the
remuneration
at
the
time
that
it
was
due
and
payable.
In
terms
of
s
32
of
the
Basic
Conditions
of
Employment
Act
[11]
an
employer
must
pay
an
employee
within
seven
days
after
the
completion
of
the
period
for
which
the
remuneration
is
payabl
e
.
In
this
case,
the
employees
were
paid
monthly.
A
new
cause
of
action
therefore
arose
ne
later
·
than
seven
days
after
the
end
of
each
month
in
which
they
were
allegedly
underpaid.
Part
of
their
claim
for
underpayment
has
prescribed
as
they
did
not
bring
any
claims in respect of
the
alleged
underpayment
for the periods 2008 to August
2011
within
three
years.
[27]
In any event, the employees seem to accept that they were paid in
accordance with a collective agreement between the company
and their
trade union, SACCAWU. If they are disputing the interpretation or
application of that collective agreement, they
should have referred a
dispute to the CCMA in terms of s 24 of the LRA. This Court does not
have jurisdiction over the interpretation
or application of a
collective agreement.
Conclusion
[28]
The respondents' special pleas are upheld. That does not leave the
employees without any remedies. The remaining claims before
this
Court are merely suspended pending the finalisation of the business
rescue proceedings. They could refer their unfair labour
practice
dispute to the CCMA, together with an application for condonation.
And they may decide to pursue their claim
for
short payment for the periods that
have not prescribed.
[29]
With
regard
to
costs,
I
take
into account
that
the
applicants
are
two individual employees
who
were
retrenched
after these
disputes
arose;
and
that
they
only
obtained
the
services
of
an attorney
after
some
tim
e
.
In law
and
fairness,
I
do
not
consider
a
costs order to be appropriate.
Order
[30]
I therefore make the following order:
30.1
The
respondents'
special
pleas are upheld.
30.2
The claims against the respondents
are suspended
until such time as
the
business rescue
proceedings
against
;
Ellerine
Furnishers
and
Ellerine Holdings are
finalised.
30.3
This
Court
does
not
have
jurisdiction to
adjudicate
the
applicants'
unfair labour practice claim.
30.4
The claims for
underpayment
from
2008 to 7
August
2011
have
prescribed.
_____________________
Anton
Steenkamp
Judge
of the Labour Court of South Africa
[1]
Act
71 of 2008
.
[2]
Act
66
of
1995
(the LRA)
.
[3]
Henochsberg
on the
Companies Act
>,
71
of 2008
(Vol
1) at 478
.
[4]
Case
no
JS
539/12
(29
November
2013)
[per
Maenetje
AJ]
paras12-13
.
[5]
See
NUMSA
v
Motheo
Steel
Engineering
(case
no
J 271/14),
unreported,
7
February
2014
.
[6]
2015
(6)
SA 424
(SCA)
paras
26-29
.
[7]
Cf
Du Tait et al
Labour
Relations Law: A Comprehensive Guide
(6
ed 2016 LexisNexis) at 189
.
[8]
Act
68 of 1969.
[9]
subject
to
certain
exceptions
that
are
not
applicable
here.
[10]
2010
(2)
All
SA
505
(SCA)
.
[11]
Act
75
of
1997
(BCEA).