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[2017] ZALCJHB 198
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Tasima (Pty) Ltd v Road Traffic Management Corporation and Others (J890/17) [2017] ZALCJHB 198; (2017) 38 ILJ 2385 (LC) (25 May 2017)
REPUBLIC
OF SOUTH AFRICA
Reportable
Of
interest to other judges
THE
LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG
JUDGMENT
C
ase
no: J 890/17
In
the matter between:
TASIMA
(PTY) LTD
First applicant
and
ROAD
TRAFFIC MANAGEMENT
CORPORATION
First respondent
DEPARTMENT
OF TRANSPORT
DIRECTOR
GENERAL:
DEPARTMENT
OF TRANSPORT
MINISTER
OF TRANSPORT
EMPLOYEES LISTED IN ANNEX “A”
Second respondent
Third
respondent
Fourth
respondent
Fifth
to 84
th
respondents
Heard
:
16 May 2017
Delivered:
25 May 2017
SUMMARY:
Urgent application – LRA s 197 –
whether employees transferred automatically from Tasima to RTMC
pursuant to Constitutional
Court order.
JUDGMENT
STEENKAMP
J
Introduction
[1]
Tasima (Pty) Limited developed,
managed and maintained the electronic National Transport Information
System (eNaTIS) for the Department
of Transport in terms of an
agreement with the State. After a long history of litigation
pertaining to extensions of the agreement,
the Constitutional Court
ordered Tasima “to hand over the services and the electronic
National Traffic Information System
to the Road Traffic Management
Corporation.”
[1]
[2]
Up until a few months ago, the
Road Traffic Management Corporation (RTMC) and its attorney of record
consistently accepted that
this handover would be a transfer of a
business as a going concern in terms of s 197 of the Labour Relations
Act
[2]
and that all Tasima’s employees would automatically be
transferred to the RTMC. On 5 April 2017 the RTMC forcibly took
occupation
of Tasima’s offices and took control of eNaTIS. But
it now refuses to take over the employees, saying in its answering
affidavit
in this application – for the first time – that
s 197 does not apply.
[3]
The RTMC’s takeover of Tasima’s offices without taking
over the employees necessitated an urgent application to
this Court
by Tasima. It seeks an order in terms of s 197 that the employment
contracts of some 80 of its employees transferred
automatically to
the RTMC with effect from 5 April 2017 (or 23 December 2016).
[4]
The application was heard as an urgent one on 16 May 2017. The
applicant requested a judgment to be handed down by 25 May, being
the
date of the next payroll run affecting the employees. The pleadings
comprised 943 pages and the heads of argument – involving
five
counsel, including three silks, and their instructing attorneys –
more than another 100 pages. This judgment has therefore
been drafted
in some haste (amidst a full urgent court roll) and without all the
details and discussion that it justifies. Both
parties accept that
the application is indeed urgent.
Background
facts
[5]
The eNaTIS is a nationwide
system that was developed in accordance with the National Road
Traffic Act
[3]
to record, administer and maintain information and perform functions
pertaining to road traffic management, such as issuing motor
vehicle
and drivers’ licenses, administering traffic fines,
roadworthiness of vehicles etc. It administers over R14 billion
in
road traffic revenue annually; has more than 2 400 sites nationwide;
manages more than 11 million vehicles; and generates more
than R440
million per year in transaction fees. It acts as the interface among
the Department of Transport, all licensing institutions
and
municipalities, the public and a variety of institutional users
(including SAPS, motor vehicle manufacturers and banks).
[6]
The Department of Transport
[DoT] entered into an agreement with Tasima in 2001 to develop,
operate, manage and maintain eNaTIS.
It was meant to be a five year
project but in 2010 it was extended until 2015. That gave rise to
extensive and acrimonious litigation.
It ended up before the
Constitutional Court on 24 May 2016. Six months later, on 9 November
2016, that Court made the following
order:
[4]
“
1. Within 30 days of this
order, Tasima is to hand over the services and the electronic
National Traffic Information System to the
Road Traffic Management
Corporation.
2. Unless an alternative transfer
management plan is agreed to by the parties within 10 days of this
order, the handover is to be
conducted in terms of the Migration Plan
set out in schedule 18 of the Turnkey Agreement.”
[7]
Much correspondence ensued. Tasima and the RTMC held meetings to
agree to a “transfer management plan”. At a meeting
on 18
November 2016 everyone agreed that s 197 applied to all of Tasima’s
staff members. That was recorded and confirmed
in subsequent
correspondence. For example:
7.1 On
28 November 2016 the RTMC’s attorney of record, Mr Selepe,
wrote:
“
Considering that the RTMC has
agreed on the transfer of staff directly engaged on the system in
terms of section 197 of the Labour
Relations Act (LRA), the handover
plan under discussion is still the best way to implement the handover
expeditiously, with the
minimum amount of risk to the System.”
7.2 On 5
December 2016 Mr Selepe reiterated:
“…
This is despite the
clear terms of the [CC order] and our client’s commitment to
take over your client’s employees in
terms of
section 197
of
the
Labour Relations Act, 1995
. It ought to be borne in mind that
these are the very same employees running the eNaTIS system to be
transferred…The takeover
of your current employees in terms of
section 197
of the LRA and the experience of your ex-employees
permits for an expeditious handover and obviates a lengthy period of
handover
advocated by your clients.”
7.3 On
27 February 2017 – a mere three months ago – Mr Selepe
reiterated that his client,
the RTMC, wanted to start with “the
section 197
transfer” and continued:
“
In November 2016, and again on
23 February 2017, in meetings attended by both your client and our
client, our clients agreed that
section 197
applies and our client
was ready to receive the transferred employees on the same terms and
conditions of their current employment…
Insofar as your letter of 26 February
2017 is concerned our client again places on record that it will
honour the provisions of
section 197
as contained in [
sic
] the
Labour Relations Act…”
[8
]
And on 1 March 2017 – less than two months before this
application was launched – Mr Selepe once again confirmed:
“
Our client has agreed
without
any reservations
[5]
to take over
all
your client’s employees
in terms of the provisions of
s 197
of the LRA.”
[9]
Given this clear understanding, Tasima sent the RTMC an employee
transfer agreement on 9 March 2017 in order to give effect
to RTMC’s
undertakings (through its own officials and its attorney) to give
effect to
s 197.
But that never happened.
[10]
On 16 March 2017 the RTMC, the Department of Transport and the
Minister of Transport launched an urgent application in the
High
Court seeking clarity on their interpretation of the Constitutional
Court order. On 3 April 2017 Tuchten J granted the following
order:
“
1. [Tasima and its officers]
are hereby directed forthwith:
1.1
to vacate the premises located at 13 Howic Close, Waterfall Park,
Bekker
Road, Midrand (the premises) from which [Tasima] operates the
electronic National Traffic Information System (eNaTIS); and
1.2
to hand over control of the eNaTIS system to [the RTMC]; and
1.3
to hand over to the RTMC all access codes, keys, source codes and
data
necessary to access such premises and to operate the eNaTIS.
2.
If [Tasima and its officers] fail to comply with this order, the
Sheriff is authorised
and directed to evict such respondents from the
premises and to take all steps necessary, including using the
services of specialist
or expert service providers, to give effect to
this order.”
[11]
On 5 April 2017 Tuchten J declined Tasima’s application for
leave to appeal. On the same day, officials and security
guards of
the RTMC – accompanied by the Sheriff – broke the lock to
the gate to Tasima’s premises, took over
control of its
premises and systems, evicted its employees, and told them not to
return.
[12]
Tasima then launched this application. In its answering affidavit,
the RTMC – still represented by the same attorney
– now
says that, contrary to its earlier assurances,
s 197
does not apply.
RTMC’s
new position
[13]
The RTMC now says that
s 197
does not apply, for the following
reasons:
13.1 The RTMC and the
Department of Transport (DoT) are creatures of statute and public
bodies exercising a public power
for the public benefit. They do not
run a “business” and do not make a profit. The RTMC is
therefore not a “business”
as contemplated by
s 197
and
cannot receive a trading business (i.e. Tasima) as a going concern.
13.2 The undertaking
transferred from Tasima is not an “economic entity” that
can be transferred from one
undertaking to another. It is not an
economic entity because the system is one for the public benefit and
it does not involve commercial
exploitation for profit.
13.3 The transfer is that
of a “service” only, and not a “business”.
Tasima’s business,
which provides the eNaTIS service, is not
being transferred.
[14]
The RTMC also now argues that the underlying contract does not
trigger
s 197.
Evaluation
[15]
The interpretation and application of
s 197
has led to much
litigation. To recap, the relevant part reads as follows:
“
Section 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 (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 practice 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.
(3) (a) The new employer complies with
subsection (2) if that employer employs transferred employees on
terms and conditions that
are on the whole not less favourable to the
employees than those on which they were employed by the old employer.
The
applicable legal principles
[16]
Section 197
applies when a “business” is transferred by
the old employer to the old employer as a going concern. Once that
happens,
the employees’ contracts of employment are
automatically transferred to the new employer.
[17]
A “business” is
broadly defined to include “the whole
or
a part
of
any
business, trade,
undertaking
or service
”.
[6]
The Constitutional Court has affirmed that the aim of the
definition is to cast the net as widely as possible.
[7]
And in
Harsco
[8]
Van Niekerk J remarked that “it is difficult to conceive …
of an economic entity that would not be capable of transfer
in terms
of the section”.
[18]
As Mr
Franklin
submitted, it is telling that the Constitutional Court, in applying
s
197
on a number of occasions, has not adopted the English and
European law in interpreting and applying the section. In the recent
decision of
Rural
Maintenance (Pty) Ltd v Maluti-A-Phufong Local Municipality
[9]
that Court pointed out that in English and European jurisprudence
different tests applied to the transfer of a business or undertaking,
on the one hand, and to a “service provision change” on
the other hand. The inclusion of the term “service”
in
the definition of “business” in the LRA was enacted in
2002, before the 2006 TUPE regulations. Froneman J cautioned:
“
[24] The use of terms or
concepts not found in the wording of
section 197
to determine whether
a transaction falls under the terms of
section 197(1)
and (2) may be
misleading and has the potential to bring about an incorrect
result. As Yacoob J remarked in
Aviation
Union
[10]
,
the evaluation of whether there has been a transfer of business as a
going concern under
section 197
“is complex enough without it
being burdened with questions about the ‘generation’ of
outsourcing”.
The same can be said about service
provision changes.
[25] In
NEHAWU
support was found for the Court’s reasoning on the purpose of
section 197
in “comparable foreign instruments and foreign case
law construing these instruments.” But this was
done
with acknowledgment of possible differences in language and
context. This Court has on many occasions warned that the
use of comparative law should be treated with due regard to different
contexts and language.
NEHAWU
is no authority for the wholesale and uncritical adoption of
jurisprudence under the Acquired Rights Directive adopted by the
European Commission
[11]
or the British TUPE Regulations.
…
“
[27] This Court has, in
NEHAWU,
Aviation Union
and
City
Power
,
[12]
consistently formulated the approach to be followed in determining
whether there has been a transfer of business as a going
concern
under section 197.
[28]
NEHAWU
was decided before
the amendment that included a “service” in the definition
of “business” was applicable,
but regarded the amendment
as a clarification of the conclusion it reached. Ngcobo J
formulated the approach as follows:
‘
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. 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.”
[29] Both the majority and minority
judgments in
Aviation Union
relied on and endorsed this
approach to the interpretation and application of section 197 of the
LRA. …
[30] Importantly, and helpfully, Jafta
J in the minority judgment also dealt with the inclusion of service
in the definition of
a business in section 197(1):
‘
Although the definition of
business in section 197(1) includes a service, it must be emphasised
that what is capable of being transferred
is the business that
supplies the service and not the service itself.’
[31]
City Power
too accepted
and built on the foundations of
NEHAWU
and
Aviation
Union
. It is important to note that
City Power
did not find that the mere termination of a service contract
triggered the application of section 197 of the LRA. It
followed
the approach in
NEHAWU
and
Aviation Union
and
determined the question on the facts:
‘
On the present facts, there is
no dispute that City Power took over the full business ‘as is’,
with all of the complex
network infrastructure, assets, know how, and
technology required to install and operate the prepaid electricity
system with the
clear intention of maintaining uninterrupted
electricity services to Alexandra Township. The project
continued after termination
of the service level agreements and
completion of the handover process. The business is
identifiable and it is discrete.
Ultimately a business of
providing a system of prepaid electricity to residents of Alexandra
continued, save that it was now conducted
by a different entity.’
[19]
It is against these principles that the factual and legal
circumstances around the transfer from Tasima to the RTMC must be
considered.
Public
bodies and economic entity
[20]
The RTMC argues that a service transferred to a public authority
which is of a regulatory nature is not an economic entity.
For this
it relies on English and European authorities.
[21]
Section 197(1)(a) defines a “business” to include the
“whole
or part
of
any
business, trade,
undertaking or service
.”
[22]
Despite this wide definition adopted by the legislature and adopted
by the South African courts – including the highest
court –
Mr
Redding
argued for a more restrictive interpretation when
dealing with a public body such as the RTMC. His starting point is
the dictionary
meaning of “business” in the
Oxford
English Dictionary
(2 ed 1989), viz “a commercial
enterprise regarded as a going concern; a commercial establishment
with all its trade liabilities
etc.”. And “trade”
is defined as “the practice of some occupation, business or
profession habitually carried
on, especially when practised as a
means of livelihood or game”; and “undertaking” as
“an action, work
etc. undertaken or attempted, an enterprise”.
He did not refer to the definition of “service”. The OED
defines
it,
inter alia
, as the “provision of a facility
to meet the needs or for the use of a person or thing”.
[23]
As the Constitutional Court
noted in
Rural Maintenance
,
s 197 was preceded by the Council Directive 77/187/EEC applicable to
the European Community. Effect was given to this directive
in the
United Kingdom through the Transfer of Undertakings (Protection of
Employment) Regulations (“TUPE”).
[13]
But Froneman J foreshadowed the cautious note he sounded recently in
Rural Maintenance
when sitting in an early case dealing with s 197 in the Labour Appeal
Court:
[14]
“
The usefulness of these
comparative provisions should not be overstated. The differences in
wording from section 197 are quite obvious,
as is the fact that they
find their applications in societies different in history and
development from our own. It would be unnecessarily
parochial,
though, not to enquire whether the treatment of these provisions in
these jurisdictions does not provide some insight
for the proper
interpretation and application of section 197 of the Act.”
[24]
To answer the question of what
a business or part of a business is, regard must be had to the
various elements that might comprise
a business. Todd, Du Toit &
Bosch
[15]
state
that a
business
could have “a variety of components: tangible or intangible
assets, goodwill, management staff, a workforce, premises, its
name,
contacts with particular clients, the activity it performs, its
operating methods etc.” The entity being transferred,
they
point out, will necessarily contain some or all of these features
“but it is not sufficient that an entity simply contains
these
things”. The various components of a business must be
sufficiently linked and structured “so as to be identifiable
as
an entity”. They say the various components must somehow “hang
together”. This line of reasoning has been
recognised by the
ECJ which has stated that an
economic
entity
for the purposes of
the Acquired Rights Directive constitutes “an organised
grouping of persons and assets facilitating the
exercise of an
economic activity which pursues a specific objective”.
[16]
[25]
Mr
Redding
pointed out that this
approach has also been adopted by this Court in
Harsco
:
[17]
“
Section 197 (1) defines a
‘business’ to include ‘the whole or any part of a
business, trade or undertaking, or
service. The definition is broad,
but it requires the court to subject the entity that is the subject
of a transfer to scrutiny.
In doing so, the courts have drawn on the
jurisprudence developed by the European Court of Justice in applying
EU Directives on
the Transfer of Undertakings, and adopted the
concept of an ‘economic entity’, defined as an organised
grouping of
persons and assets the exercise of an economic activity
which pursues a specific objective’.”
[26]
But Van Niekerk J didn’t
stop there in
Harsco.
He
continued:
[18]
“
Useful as these authorities
are, in South Africa, in relation to the definition of a ‘business’
for the purposes of
s 197, the judgment of the Labour Appeal Court in
SAMWU v Rand Airport
Management Co Ltd
[19]
remains the authority by which I am bound. In that case, the court
concluded that the outsourcing of gardening and security
functions at
an airport management by the employer were businesses capable of
being transferred in terms of s 197, despite that
fact that it did
not appear that any assets, goodwill, operational resources or
workforce were to be transferred. No distinction
was drawn
between a business that is largely employee-reliant, as opposed to an
asset-reliant business. Nor was it suggested that
in the former,
greater weight ought to be attached to the number of employees
transferring as opposed to the latter instance, in
which the number
of assets transferring might attract greater weight. If, as in that
case, a grouping of relatively unskilled employees
and the work they
perform, with no assets appearing to be the subject of any transfer,
comprises a ‘business’ for the
purposes of s 197, then it
is difficult to conceive, in the context of an outsourcing
transaction, of an economic entity that would
not be capable of
transfer in terms of the section.”
[27]
Mr
Redding
’s reliance on the English and European
jurisprudence must be evaluated in the light of those remarks of Van
Niekerk J. Like
him, I am bound by
Rand Airport
and, more
recently, by the Constitutional Court in
Rural Maintenance.
And
in that case, Froneman J once again cautioned against “the
wholesale and uncritical adoption of jurisprudence under the
Acquired
Rights Directive adopted by the European Commission or the
British TUPE Regulations.”
[28]
Nevertheless, Mr
Redding
valiantly sought solace in an English tax case.
[20]
The Institute of Chartered Accountants performed a regulatory
function and was not a commercial business. The court found that
it
was not engaged in an economic activity for the purposes of Value
Added Tax legislation:
“
From these cases I conclude
that the concept of an economic activity is an activity which
typically is performed for consideration
and is connected with
economic life in some way or another. But it is not an essential
characteristic that it should be carried
on with a view to profit or
for commercial reasons but it must be an activity which is analogous
to activities so carried on. An
activity which consists in the
performance of a public service to which the idea of commercial
exploitation with a view to profit
or gain is alien is not of an
economic nature particularly where the activity is one typically of a
public authority.
Applying these criteria to the
activities of the Institute I find that they are not activities of an
economic nature. There are
activities which Parliament has decreed
should be carried out for the protection of the public and are to be
regarded as the exercise
of public control over those who engage in
financial services, auditing and insolvency practice. The fact that
the Institute generates
revenue from the issue of licences,
certificates or maintenance of the register to cover overheads does
not of itself mean that
it is an economic activity. In carrying out
this activity the Institute is performing public services to which
the very idea of
commercial exploitation with a view to profit is
alien. Further they are typical of the activity of a public
authority. Though
connected with the activity of the profession of
accountancy, the activity of the Institute does not consist in the
supply of such
services for consideration but in ensuring that those
in the profession who provide such services do so in accordance with
the
law’s requirements.”
[29]
But it must be borne in mind
that the purpose of s 197 is to protect employees’ rights. When
interpreting the facts of this
case and the purpose of the
legislation, it must be interpreted in that context. As this Court
stated in
COSAWU v
Zikhethele Trade (Pty) Ltd
[21]
(even in the context of European law):
“
[T]he decisive criterion for
determining whether there has been a transfer of an undertaking (read
‘business’) is whether,
after the alleged transfer, the
undertaking has retained its identity, so that employment in the
undertaking is continued or resumed
in the different hands of the
transferee. In order to determine whether there has been a retention
of identity it is necessary
to examine all the facts relating both to
the identity of the undertaking and the relevant transaction and
assess their cumulative
effect, looking at the substance, not at the
form, of the arrangements. The mode or method of transfer is
immaterial. The emphasis
is on a comparison between the actual
activities of and actual employment situation in an undertaking
before and after the alleged
transfer.
Kelman v Care Contract
Services
[1995] ICR 260.
What seems to be critical is the
transfer of responsibility for the operation of the undertaking.
Mummery J’s conclusion
in
Kelman
offers a salutary
guideline. He said:
‘
The
theme running through all the recent cases is the necessity of
viewing the situation from an employment perspective, not from
a
perspective conditioned by principles of property, company or
insolvency law
. The crucial question is whether, taking a
realistic view of the activities in which the employees are employed,
there exists an
economic entity which, despite changes, remains
identifiable, though not necessarily identical, after the alleged
transfer’.”
[30]
Casting his net wider, Mr
Redding
then referred to
Henke v
Gemeinde Schierke (“Brocken”
)
[22]
,
where the ECJ considered the question of whether the transfer of
administrative services from a municipality to an administrative
entity which constituted an “administrative collectivity”
was a transfer of a business or undertaking in terms of the
acquired
rights directive. The ECJ concluded that the transfer carried out
between the municipality and the administrative connectivity
related
only to activities involving the exercise of public authority it
stated that “even if it is assumed that those activities
had
aspects of an economic nature, they could only be ancillary”.
[31]
But in South African law, no court – including the highest
court – has made this distinction. In
City Power
the
Constitutional Court specifically dealt with the question whether
section 187 applies to a municipal entity. It found that
it does. It
also applied s 197 to organs of state or public authorities in
Rural
Maintenance
and in
NEHAWU v UCT
. Interpreting the
legislation with its purpose in mind, I can see no reason to create
such a distinction now.
[32]
As Todd et al
[23]
state:
“’
Business’ and
‘trade’ could be taken to indicate a commercial
enterprise aimed at the generation of profit. But
‘undertaking’
and ‘service’ could also refer to entities of a
non-commercial nature.
The
fact that section 197 is not limited in its scope to commercial
ventures is reinforced by the fact that it applies to both private
and public sector transfers.”
[24]
“
[T]he section
cannot
be limited in its application to those entities that are aimed at
making a profit for the business. It is sufficient that
the relevant
entity facilitates the exercise of an economic activity
.
[25]
In addition, as mentioned above,
section
197 applies to both the private and public sector
.
There are unlikely to be many public sector entities, or parts
thereof, that are directed at making a profit. It can also not
be
required that the business actually be making a profit in order for
section 197 to find application. That much is apparent from
the fact
that section 197A regulates the consequences of transfers in
circumstances of insolvency.
[26]
”
[33]
I need not add anything more. I agree with the authors. I do not
agree with Mr Redding that s 197 does not apply to public
entities or
that the business being transferred needs to be a profit generating
economic entity.
Transfer
of a “service” or a “business as a going concern”?
[34]
The RTMC argues that, what has been transferred in this case, is not
a business or service “as a going concern”,
but “a
system together with the services related to it”. Thus, it
argues, s 197 does not apply.
[35]
I do not agree. It is quite apparent that the sole purpose of
Tasima’s business was the provision of the eNaTIS service.
Tasima performed no other business. That business has been
transferred to the RTMC in line with the order of the Constitutional
Court. The RTMC has taken control of the premises previously occupied
by Tasima, and it is using the assets, information and electoral
property previously used by Tasima to render the same services. It
liaises with the same service providers and makes the same payments.
[36]
The transfer of eNaTIS from
Tasima to the RTMC bears all the hallmarks of the following
statements by the Constitutional Court in
City
Power (Pty) Ltd v Grinpal Energy Management Services (Pty) Ltd
[27]
:
“
On the present facts, there is
no dispute that City Power took over the full business ‘as is’,
with all of the complex
network infrastructure, assets, know how, and
technology required to install and operate the prepaid electricity
system with the
clear intention of maintaining uninterrupted
electricity services to Alexandra Township. The project
continued after termination
of the service level agreements and
completion of the handover process. The business is
identifiable and it is discrete.
Ultimately a business of
providing a system of prepaid electricity to residents of Alexandra
Township continued, save that it was
now conducted by a different
entity.
It follows that there was a transfer
of business from Grinpal to City Power as a going concern; which
means that the contracts of
employment of Grinpal’s employees
were automatically transferred to City Power. “
[37]
One only needs to substitute “Grinpal” with “Tasima”,
“City Power” with “the RTMC”
and “the
prepaid electricity system” with eNaTIS to conclude that, on
the facts of this case, the handover ordered
by the Constitutional
Court is a transfer contemplated by s 197.
The
contract and the date of transfer
[38]
As set out in the
Constitutional Court judgment
[28]
,
the original contract was entered into in July 2001. It should have
terminated on 31 May 2007. It was then extended on a month
to month
basis until April 2010. Then it was extended for another five years,
from 12 May 2010 until April 2015. The Constitutional
Court found
that the May 2010 extension was unlawful. But, as Khampepe J
pointed out in the majority judgment:
[29]
“
[185] The expiry of the
extension is thus no justification for ignoring court orders.
Not only was the Corporation bound by
the orders that did not
expressly impose obligations on it, but the Fabricius J order
unambiguously interdicted it from ‘taking
steps which have the
effect of rerouting any of the work’ until the Mabuse J order
had run its course. The Corporation
was not permitted to assume
that once the extension period had expired, it was entitled to take
over the running of the system
immediately.
Until the
transfer management procedures have run their course, or the contract
is set aside, the High Court orders continued to
have effect
.
I therefore cannot agree with the first judgment’s conclusion
that ‘there are no facts on record showing that
by taking
preparatory steps at the beginning of 2015, the Department and the
Corporation were in contempt of various orders’.
For as long as the contract persisted, the High Court orders had to
be obeyed.”
[39]
Turning to an appropriate
remedy, Khampepe J held that, from 23 June 2015 – the date of
Hughes J’s order – the
extension no longer had any legal
effect and the interim interdicts issued by the High Court fell away.
Nevertheless, in the period
between the granting of the extension and
its setting aside, the applicants were constitutionally obliged to
comply with the various
court orders granted. The Court then crafted
a “just and equitable remedy” and took this into
account:
[30]
“
In the present matter, not only
was the extension of the contract between the Department and Tasima
unlawful, but it has now expired.
It can only be in the best
interests of the public that the hand-over of the services and the
eNaTIS to the Corporation happens
as expeditiously as possible.”
[40]
It is against that background that the Constitutional Court ordered
Tasima to hand over the services and the eNaTIS to the
RTMC within 30
days.
[41]
The RTMC now submits that the underlying contract dictating what is
to be transferred, is the original Turnkey Agreement concluded
in
2001. It argues that the subsequent extensions of that agreement are
invalid and void
ab initio
and that the original agreement
does not envisage a s 197 transfer.
[42]
The RTMC appears to accept the following statement in Tasima’s
replying affidavit :
“
Tasima did not simply develop a
system (with a staff complement focused only on development), which
it is now returning, as an isolated,
self-standing asset, to the
State. Tasima did indeed develop the eNaTIS system, which went live
in April 2007 (more than 10 years
ago). Since April 2007, however,
Tasima has operated, maintained, supported and managed the eNaTIS
system and services as well
as developing new functionalities and
modules as well as amending the system to take account of legislative
amendments as and when
required by the State. It has employed the
Tasima staff solely to discharge these functions and render the
eNaTIS system and services
to the Republic on behalf of the State and
the DoT, and these functions comprise the entirety of Tasima’s
business. At all
times relevant to this application, the State has
paid for all Tasima staff employed.”
[43]
But, argues the RTMC, Tasima’s business only expanded after the
Turnkey Agreement came to an end in 2007. The expansion,
it argues,
extended beyond the scope of the Turnkey Agreement and had its
origins in the extended contract. The extended contract
was declared
void
ab initio
by the Constitutional Court. Nothing after the
Turnkey Agreement remains. It has all been undone and set aside by
the Constitutional
Court. Tasima cannot locate its cause of action in
this section 197 application on a transaction that has been undone,
set aside,
and declared void
ab initio
.
[44]
That argument, it seems to me, is not sustainable on a reading of the
Constitutional Court order.
[45]
The Constitutional Court
[31]
,
in its judgment and order of 9 November 2016, found that the 2010
extension of the initial agreement (and not the agreement itself)
was
unlawful. But it proceeded to grant a “just and equitable order
in the circumstances” in terms of s 172 of the
Constitution. It
ordered no retrospective relief, but ordered Tasima to hand over the
services and the eNaTIS system to the RTMC
within 30 days. That order
clearly contemplated an existing system; it further provided that,
unless an alternative transfer management
plan was agreed to, it had
to be conducted in terms of the existing migration plan set out in
the existing Turnkey Agreement.
[46]
Before the Constitutional Court, as Mr
Franklin
pointed out in
his argument, the DoT and RTMC never requested that Tasima hand over
some 2007 version of the system and services.
On the contrary,
everyone was cognisant of the fact that the totality of the system
and services were to be handed over, and that
the handover would
include the operation, management, support and maintenance of the
system, and not just some final product. And
the RTMC has now, in
fact, on 5 April 2017, taken control and transfer of the entirety of
the eNaTIS system and services. That
is in line with the order of the
Constitutional Court; that order could not have envisaged that the
extended agreement had no legal
effect between 2007 and 2015.
[47]
It seems to me that the Constitutional Court did not set aside the
extension of the agreement from 2007 to 2010; and that it
set aside
the 2010 extension only prospectively after it had expired. And after
the judgment of Hughes J on 23 June 2015 until
the Constitutional
Court’s judgment of 9 November 2016 a series of High Court
orders bound the State, including the RTMC.
[48]
I agree with the applicant that the
causa
of the transfer that
took place on 5 April 2017 was the order of the Constitutional Court
of 9 November 2016, and not the original
2007 agreement.
[49]
Whether a transfer of a
business as a going concern within the meaning of the LRA occurred is
a question of fact, as the Constitutional
Court held in
NEHAWU
v UCT
[32]
:
“
The phrase “going
concern” is not defined in the LRA. It must therefore be given
its ordinary meaning unless the context
indicates otherwise. What is
transferred must be a business in operation ‘so that the
business remains the same but in different
hands.’ Whether that
has occurred is a matter of fact which must be determined objectively
in the light of the circumstances
of each transaction. 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.”
[50]
In this case the entire eNaTIS system and services (as they stood and
were being operated and performed) were transferred on
5 April 2017.
The RTMC has itself effected, by force, this complete transfer. I
agree with Tasima that it does not lie in its mouth
now to say that
for the purposes of section 197, this Court should create the fiction
that what was transferred was something else,
namely only the system
and services as they existed at May 2007.
[51]
The effective date is also clear from the provisions of s 197(2)
itself:
“
(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
practice 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.”
[52]
There is no doubt that the actual transfer took place on 5 April
2017, pursuant to the order of the Constitutional Court. That
is the
effective date, and that is the date on which the RTMC was
substituted in the place of the old employer (Tasima) in respect
of
all contracts of employment in existence immediately before the date
of transfer.
Estoppel
and waiver
[53]
Apart from an objective evaluation of the facts leading me to
conclude that the transfer is one envisaged by s 197, the RTMC
is
precluded from resiling from its earlier representations and
undertakings by the principle of estoppel. It has repeatedly, through
statements under oath by its officials and through correspondence
from its attorney, accepted that s 197 applied; that it would
take
transfer of all supplier and third party agreements, and that it
would,
without any reservations or conditions
, take over
Tasima’s employees in terms of s 197. Tasima has relied on
these representations and has acted accordingly.
[54]
I had the pleasure of reading a
judgment of the English Chancery Division dating from 1874, referred
to by Mr
Franklin
.
Remarkable for its brevity and clarity, the Court
a
quo
in
Eaglesfield
v Marquis of Londonderry
[33]
had this to say about a misrepresentation made due to the advice of
an attorney:
“
Of course, solicitors can give
wrong advice as well as other people… But does that make it a
misrepresentation of law? A
misrepresentation of law is this: when
you state the facts, and state a conclusion of law, so as to
distinguish between facts and
law. The man who knows the facts is
taken to know the law; but when you state that as a fact which no
doubt involves, as most facts
do, a conclusion of law, that it still
a statement of fact and not a statement of law.”
[55]
In this case, the RTMC’s representatives stated on numerous
occasions, often under oath, that the transfer of eNaTIS
from Tasima
to the RTMC was a s 197 transfer and the RTMC would automatically
take over all contracts of employment. That was a
statement of fact,
although it involved a conclusion of law – and in support of
that conclusion, they were advised throughout
by their attorney of
record, Mr Selepe. As the Court
a quo
stated in
Eaglesfield
:
“
It
is not the less a fact because that fact involves some knowledge or
relation of law.”
“
Is it in a Civil Court to be
said, that the man who either through carelessness or negligence so
misleads another as to induce him
to part with valuable property, is
not to be liable? Is he not to be liable, because he was misled by
the advice of his solicitor?
In all transactions in which men are
liable they must choose their agents, whether legal or otherwise;
and, having chosen them,
they are responsible for their acts”.
And:
“
Here the defendants say, and
say with truth, that what they did they did on the advice of their
solicitor. I am not going to say
a word that will annoy them, or
injure them as regards their position in the world as honourable and
honest men. I have no doubt
that, as they say, they were ignorant,
and did what they did on the advice of their solicitor, and with no
intention to deceive
or defraud anybody. But I must nevertheless hold
them responsible to the same extent as if they had actually known
that what they
were stating was really, as it was in fact, untrue.”
[56]
That judgment was overturned on appeal; but, as explained by the Lord
Chief Justice, that was because he found that the plaintiffs
were
not, in fact, misled. As I read the appeal judgment, it did not
overturn the principles relating to misrepresentation –
even if
acting on the advice of a solicitor – set out by the court
a
quo
. And the passage I quoted above dealing with representations
of law and fact was quoted with approval by Wessels JA in
Sampson
v Union & Rhodesia Wholesale Ltd
1929 AD 468
at 479. And he
continued:
“
For a party to a contract to
say: ‘I put this meaning on that clause’ is a statement
of fact, and as far as he is concerned
it will bear that construction
even if A would have borne a different construction in law, had he
said nothing about it. It would
be most inequitable to allow the
party who induces the other party to sign by telling him what he
means by a clause in the contract
to turn around after the contract
has been signed and say: ‘You ought not to have been misled by
my assurance that I would
always give the same meaning to the
contract which I gave to it when I induced you to the contract; you
ought to have been more
vigilant and ascertained the true legal
meaning of the clause.’ If one contracting party gives an
assurance to the other
that he will read a clause in a particular way
and the latter trusts the former and believes his assurance, then he
cannot afterwards
turn around and say: ‘You ought to have known
the law of construction and not have accepted my assurance.’”
[57]
In this case, the RTMC chose its attorney. Acting on the advice of
that attorney, it represented to Tasima that the transfer
of eNaTIS
was one governed by s 197. They are still represented by their chosen
attorney. Tasima has throughout acted on that understanding,
until it
was surprised by the RTMC’s
volte face
in its answering
affidavit, when it submitted a case contrary to its earlier
assurances. The RTMC must be held to its earlier acts
and
representations.
Conclusion
[58]
I am satisfied that the handover of the services and the electronic
National Traffic Information System to the Road Traffic
Management
Corporation in terms of the order of the Constitutional Court of 9
November 2016 is a transfer of a business as contemplated
by s 197 of
the LRA. The consequence is that the new employer (the RTMC) is
automatically substituted in the place of the old employer
(Tasima)
in respect of all contracts of employment in existence immediately
before the transfer, i.e. on 5 April 2017.
[59]
I am also persuaded that the information pertaining to the monthly
salaries and cost to company remuneration of each of the
affected
employees should be kept confidential.
Costs
[60]
Tasima asked that the RTMC be ordered to pay punitive costs on the
scale as between attorney and own client. It also submitted
that
Messrs Kara-Vala (the RTMC’s divisional head and the deponent
to the answering affidavit) and Msibi (the RTMC’s
CEO) should
be ordered to show cause why they should not personally be held
liable for the cost of this application on the scale
as between
attorney and own client.
[61]
That submission was made on the basis that Messrs Kevin Kara-Vala and
Makhosini Msibi misled Tasima as to the RTMC’s
position; that,
unlike the defendants in
Eaglesfield
, they are not “honourable
and honest men” who mistakenly acted on the advice of their
attorney. But I am not persuaded
that it is the case, or that their
actions call for a possible
de bonis propriis
costs order. I
accept that their understanding may have changed only after taking
fresh legal advice, and that their stance now
is based on that
advice.
[62]
Nevertheless, Tasima has had to incur significant legal costs in
circumstances where it had been led to believe, until it had
sight of
the RTMC’s answering affidavit, that there was little reason to
approach this Court. The underlying issue was uncontentious:
Everyone
agreed that it was a s 197 transfer and that the RTMC would take over
all of Tasima’s employees. The RMTC’s
sudden
volte
face
gave rise to urgent and extensive litigation, involving many
reams of pleadings and a number of legal advisors. There is no reason
in law or fairness why the RTMC should not pay those costs; and,
given the urgency of the matter and the extensive drafting and
research it generated, two counsel were justified. The postponement
on 5 May 2017 was occasioned by the late delivery of the RTMC’s
answering affidavit. It should also pay those costs.
Order
[63]
I therefore make the following order:
63.1 It is declared that,
with effect from 5 April 2017, the contracts of employment of the 5
th
to 84
th
respondents transferred automatically from the
applicant (Tasima (Pty) Ltd) to the first respondent (the Road
Traffic Management
Corporation) in accordance with the provisions of
section 197
of the
Labour Relations Act (Act
66 of 1995).
63.2 The RTMC is directed
to pay the 5
th
to 84
th
respondents from 5 April
2017 to the date of the final determination of the order in
subparagraph 1 above:
63.2.1 on a monthly
basis on or before the 25
th
of each month, the amounts set
forth under the column headed “Monthly CTC excl 13
th
cheque, annual bonus, overtime, standby allowance, birthday voucher
and night shift allowance” as set out in Annexure “C”
to Annexure “FM 11.6” to the founding affidavit of Fannie
Lynen Mahlangu; and
63.2.2 on an annual
basis, any additional amounts making up the column headed “Annual
Total CTC” as
set forth in that schedule.
63.3 The confidentiality
regime set out in paragraph 107 of the founding affidavit applies.
63.4 The RTMC is ordered
to pay the costs of this application, including the costs of two
counsel, and including the
costs of 5 May 2017.
_______________________
Anton
J Steenkamp
Judge
of the Labour Court of South Africa
APPEARANCES
APPLICANT:
A E Franklin SC, JPV McNally SC and A
Rowan
Instructed
by
Webber
Wentzel.
FIRST
RESPONDENT: A Redding SC and K Hopkins
Instructed
by
Selepe attorneys.
[1]
Department
of Transport v Tasima (Pty) Ltd
2017 (2) SA
622 (SA).
[2]
Act 66 of
1995 (the LRA).
[3]
Act 93 of 1996.
[4]
The Court
handed won four separate judgments, that penned by Khampepe J being
the majority judgment. Zondo J and Froneman J handed
down separate
concurring judgments.
[5]
My
emphasis.
[6]
My
emphasis.
[7]
Aviation
Union of South Africa v South African Airways (Pty) Ltd
2012
(1) SA 321
(CC) [“
Aviation
Union
”]
par [45].
[8]
Harsco
Metals South Africa (Pty) Ltd v ArcelorMittal South Africa Ltd
(2012) 33
ILJ
901 (LC) par [27].
[9]
(2017) 38
ILJ
295
(CC);
[2017] 3 BLLR 258
(CC) [“
Rural
Maintenance”
].
[10]
Aviation Union of South
Africa v South African Airways (Pty) Ltd
[2011] ZACC 39
;
2012 (1) SA 321
(CC);
2012 (2) BCLR 117
(CC)
(
Aviation Union
)
at para 105.
[11]
Directive 77/187 EEC.
[12]
City Power (Pty) Ltd v
Grinpal Energy Management Services (Pty) Ltd
[2015] ZACC 8
; (2015) 36
ILJ
1423 (CC);
2015 (6) BCLR 660
(CC) (City Power).
[13]
SI
1981/1974.
[14]
Foodgro,
a division of Leisurenet Ltd v Keil
(1999) 20
ILJ
2521 (LAC) par 18.
[15]
Business
Transfers and Employment Rights in South Africa
(LexisNexis
2004) 33.
[16]
See
Suzen
v Zehnacker Gebaudereinigung GmbH Krankenhausservice
[1997]
IRLR 255
(ECJ) par 13 and
Allen
v Amalgamated Construction Co Ltd
(2000) IRLR 119
(ECJ) par 24.
[17]
Harsco
Metals (SA) Pty Ltd v ArcelorMittal SA Ltd
(2012)
33
ILJ
901 (LC);
[2012] 4 BLLR 385
(LC) par 25.
[18]
Par 27.
[19]
[2005] 3 BLLR 241 (LAC).
[20]
Institute
of Chartered Accountants in England and Wales v Customs and Excise
Commissioners
[1997]
STC 115 5 (CA) 116 c-f.
[21]
(2005) 26
ILJ
1056
(LC) paras 34-35 [per Murphy AJ, as he then was]. On appeal, only
the point of non-joinder was upheld.
[22]
[1996] IRLR
701
at par 17.
[23]
Todd, Du
Toit & Bosch
Business
Transfers and Employment Rights in South Africa
[2004]
pp 33 and 37.
[24]
My
underlining. The authors it is noteworthy that art1(c) of the
European Directive states that the directive applies to "public
and private undertakings engaged in economic activities whether or
not they are operating for gain". Undertakings do not
therefore
necessarily operate for gain. They point to the decisions of the ECJ
in
Dr
Sophie Redmond Stichting v Bartol
[1992]
IRLR 366
(ECJ);
Collino
and Chiappero v Telecom Italia SpA
[2000] IRLR 788
(ECJ); and
Godrich
v Public & Commercial Services Union
[2002] EWHC 1642
(Ch), where the English High Court held that trade
unions are ‘undertakings’ for the purposes of the TUPE
regulations,
despite the fact that they are not constituted for the
pursuit of some commercial benefit.
[25]
Suzen v
Zehnacker Gebaudereinigung GmbH Krankenhausservice
above para
13.
[26]
See also
Stofberg
v Ladybrand Ko-operatiewe Landbou Maatskappy Bpk
1970
(2) SA 57
(O) at 57 where the court held that an entity need not be
profit-generating in order to be regarded as a business. De Villiers
J stated (at 62F): “Die woord ‘besigheid’ kan meer
as een betekenis hê
en die maak
van ‘n wins is nie ‘n noodwendige vereiste nie.”
[27]
2015 (6) BCLR 660
(CC);
[2015] 8 BLLR 757
(CC); (2015) 36
ILJ
1423 (CC) [
City Power
]
paras 39-40.
[28]
Department
of Transport v Tasima (Pty) Ltd
2017
(2) SA 622 (CC).
[29]
At para 185
(my underlining).
[30]
At para
206.
[31]
in
Department
of Transport v Tasima (Pty) Ltd
2017
(2) SA 622 (CC).
[32]
2003 (3) SA
1
(CC) para 56.
[33]
(1876) IV
ChD 693 at 702-704.