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[2019] ZALCJHB 330
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Marques and Others v Group Five Construction (Pty) Ltd and Others (D1051/19) [2019] ZALCJHB 330; (2020) 41 ILJ 677 (LC) (25 July 2019)
THE
LABOUR COURT OF SOUTH AFRICA,
HELD
AT JOHANNESBURG
Case no: D1051/19
Reportable
JOSE
FILIPE PERREIRA DA SILVA CRISTELO MARQUES
First
Applicant
SOOBRAMONEY
RAMSAMY PILLAY
Second
Respondent
NGENANI
CAIPHUS NGUBO
Third Applicant
MSAWENKOSI
MUSA MHLONGO
Fourth Applicant
NOLAN
RAMSAROOP
Fifth
Applicant
ZESHA
RAMRATHAN
Sixth
Applicant
TERRY-LLOYD
ESTMENT
Seventh Applicant
and
GROUP FIVE
CONSTRUCTION (PTY) LTD
(under
supervision)
First Respondent
PETER
VAN DEN STEEN
N.O.
Second
Respondent
DAVE
LAKE
n.o.
Third
Respondent
Date
of hearing
: 24 July 2019
Date
of judgment
: 25 July 2019
Summary
:
(
urgent application for payment of
severance pay to employees retrenched during business rescue
proceedings- Labour Court having
no jurisdiction to uplift moratorium
on legal proceedings-power belongs to the High Court exclusively
)
JUDGMENT
[1]
LAGRANGE
J
Introduction
[1]
This is an application for the urgent payment of severance pay
brought by seven former employees
of the first respondent, Group Five
Construction (‘Group 5’). The business rescue
practitioners (BR practitioners),
being the second and third
respondents, opposed the application.
[2]
It is common cause between the parties that the severance pay is due
and owing to the applicants.
However, the BR practitioners contend
firstly that the application is not urgent and secondly that the
labour court does not have
the jurisdiction to entertain an
application of this nature in the absence of the written consent of
the practitioners or with
the leave of the High Court.
Urgency
[3]
The applicants were all retrenched on 30 April 2019. They have only
launched this application
on or about 10 July more than two months
later. They maintain that they were entitled to receive their
statutory severance payments
under section 41 of the Basic Conditions
of Employment Act 75 of 1997 (‘the BCEA’), upon
termination. Strictly speaking,
severance pay is not one of the items
mentioned as payable on termination in section 40, though section 41
stipulates it is payable
to persons who are dismissed for operational
reasons.
[4]
The applicants contend that the application is urgent because they
have been financially
prejudiced because the income had been
terminated and the BR practitioners have not advised them when they
will pay them. No indication
is given in the papers however of the
particular financial circumstances of the applicants and in the
absence of such information
the court cannot assume that their
predicament is more exceptional than any other person who has lost
their employment. Ordinarily,
non-payment of remuneration is not
considered a self-evident justification for launching urgent
proceedings to recover it.
[5]
In the circumstances, though the court is sympathetic to employees
who have lost their remuneration
through no fault of their own, the
applicants had not provided the court with grounds of exceptional
economic hardship that might
warrant the court deviating from the
normal rule. Consequently, I am not persuaded that the application is
urgent and accordingly
the matter would be struck off the roll for
lack of urgency, if this court had jurisdiction to entertain the
application. However,
in view of my conclusion below, it is not
competent for the court to consider the application in the first
place.
Jurisdiction of Labour
Court to Hear Application
[6]
The BR practitioners maintained that the court could not even hear
such an application are
the difficulties presented by
section 133
(1)
of the
Companies Act, 71 of 2008
, because it deals with the court’s
jurisdiction to even entertain such an application in the first
place.
Section 133
states:
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
proceedings, 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 or surety by a company in favour of
any other person may not be enforced 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 limit, the measurement
of that time must be
suspended during the company's business rescue proceedings.
[7]
The applicants argue that this provision has no application to their
claim because
section 136
(1)(b) of the
Companies Act provides
that:
(1) Despite any
provision of an agreement to the contrary-
(b) any
retrenchment of any such employees contemplated in the company's
business rescue plan is subject to section
189 and 189A of the Labour
Relations Act, 1995 (Act 66 of 1995), and other applicable employment
related legislation.
[8]
Reading this together with section 210 of the Labour Relations Act 66
of 1995 (‘the
LRA’), the applicants contend that this
subordinates the provisions of 133 (1) to the requirements of the
BCEA and to the
provisions of the LRA. As authority for this argument
they rely a number of submissions, which are dealt with below.
[9]
The
applicants cite a dictum in
National
Union of Metal Workers of South Africa obo Members v Motheo Steel
Engineering CC
[2]
,
in which the court held:
(1) In terms of
section 210
of the
Labour Relations Act, 66 of 1995
a matter dealt
with in that Act prevails over the provisions of any other law save
the Constitution or any Act expressly amending
it. I am satisfied
that
section 133(1)
of the
Companies Act 71 of 2008
does not
expressly amend the provisions of the LRA, and insofar as it might
otherwise prevent legal proceedings without the leave
of a court or
the relevant business rescue partner, it does not prevent the
applicant bringing this application.
[10]
This
principle was applied in the same dispute by an arbitrator
considering the referral of a claim of unfair dismissal for
operational
reasons to arbitration. The arbitrator found that the
referral did not amount to prohibited legal proceedings under
section
133
(1) of the
Companies Act.
[3
]
[11]
The
applicants also argue that because
section 136(2A)
exempts employment
contracts from the BR practitioners’ powers to suspend
obligations owed by Group 5 at the time of the
commencement of
business rescue proceedings, it follows that it could not have been
intended that if the BR practitioners have
an obligation to pay
employees of the company while still employed, they would have no
obligation to pay them their severance benefits
when they lose their
jobs. In support of this argument the applicants cite the case of
Solidarity
Obo BD Fourie & Others v Vanchem Vanadium Products (Pty) Ltd and
Others; In re: National Union of Metalworkers (NUMSA)
Obo Members v
Vanchem Vanadium Products (Pty) Ltd and Another
[4]
,
in which it was held:
(36)
Section 136(2)
permits a BRP to suspend obligations owed by the company at that time
business rescue proceedings commenced.
Section 136(2A)
exempts
employment contracts from this power of suspension. Once again, the
provisions deal with the suspension of obligations,
but are silent on
the question of the lawful termination of obligations. Considering
the section as a whole it seems the primary
object of the section was
to prevent the unilateral variation of company obligations by a BRP,
but to permit the BRP to suspend
the performance of certain
contractual obligations except those relating to employees. It does
not seem to be directed at preventing
the lawful termination of
obligations including employment contracts. Consequently, I am not
persuaded that the provisions of
section 136
effectively outlaws any
retrenchments taking place except in terms of an approved business
plan.
11.1
Section
136
(2) and (2A) of the
Companies Act read
:
(2) Subject to subsection
(2A), and despite any provision of an agreement to the contrary,
during business rescue proceedings, the
practitioner may-
(a)
entirely, partially or conditionally suspend, for the duration of the
business rescue proceedings, any obligation
of the company that-
(i)
arises under an agreement to which the company was a party at the
commencement of the business rescue proceedings;
and
(ii)
would otherwise become due during those proceedings; or
(b)
apply urgently to a court to entirely, partially or conditionally
cancel, on any terms that are just and reasonable
in the
circumstances, any obligation of the company contemplated in
paragraph (a).
(2A) When acting in
terms of subsection (2)-
(a)
a business rescue practitioner must not suspend any provision of-
(i)
an employment contract
; or
(ii)
an agreement to which section 35A or 35B of the Insolvency Act, 1936
(Act 24 or 1936), would have applied had the
company been liquidated;
(b)
a court may not cancel any provision of-
(i)
an employment contract, except as contemplated in subsection (1); or
(ii)
an agreement to which section 35A or 35B of the Insolvency Act, 1936
(Act 24 of 1936), would have applied had the
company been liquidated;
and
(c)
if a business practitioner suspends a provision of an agreement
relating to security granted by the company, that
provision
nevertheless continues to apply for the purpose of section 134, with
respect to any proposed disposal of property by
the company.
[Emphasis
added]
However,
what is notable about section 136 (2A) (a) (i) is that the
prohibition against the BR practitioners varying the employer’s
obligations to employees is confined to contractual obligations only.
It does not necessarily follow that the debts incurred in
respect of
statutory obligations towards employees are to be treated similarly.
If it were the case, then it begs the question
why the legislature
did not speak about a prohibition against the suspension of any or
all obligations owed by the employer to
employees. I am not persuaded
that this advances the applicant’s argument.
[12]
In
addition, the applicants contend that the moratorium in section 133
(1) cannot be imposed because it conflicts with the enforcement
of
rights emanating from the LRA and the BCEA. However, since the
decisions above which the applicants have relied on there had
been
other judicial pronouncements which do not support the dictum in
Motheo
.
Most importantly, in
Chetty
t/a Nationwide Electrical v Hart and Another NNO
[5]
,
the SCA held that, considered purposively, the reference to ‘
legal proceedings’ in s133(1) included arbitrations:
[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 wellbeing of the company and its
ability to regain its financial health. 25 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, 26 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 B 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 have a bearing on its
financial viability and of which the business rescue practitioner
must be cognisant.
[13]
The same
logic would be applicable to labour court proceedings, and was
applied by the labour court in
Fabrizio
Burba v Integcomm (Pty) Ltd
.
[6]
The court also went further and held that the only court which could
give permission to proceed against a company under business
rescue,
in the event that the BR practitioner does not consent to such
proceedings, is the High Court. Maenetje AJ, pointed out
that in the
definition of a ‘court’ in section 128 (e) of the
Companies Act, the
only court contemplated was a High Court.
[7]
[14]
I accept
that the SCA did not have to expressly consider the effect of
section
210
of the LRA, and neither was it considered in
Burba,
but in
Marais
and Others v Shiva Uranium (Pty) Ltd (In Business Rescue) and Others
[8]
Nkutha-Nkontwana
J considered in great detail whether the powers of the Labour Court
under
section 157(2)
of the LRA should not be read to extend to
matters where the High Court has been granted exclusive jurisdiction,
such as those
matters pertaining to business rescue in chapter 6 of
the
Companies Act.
[9
]
[15]
In
Sondamase
and Another v Ellerine Hodings Ltd and Another
[10]
, which was also cited
approvingly in
Shiva
Uranium,
Steenkamp
J endorsed the reasoning in Burda and found that there was no
conflict between
section 133(1)(a)
of the
Companies Act and
the
dispute resolution provisions of the LRA. He further went on to
observe that the judgment in
Chetty
settled
any doubt that might have arisen from conflicting judgments about the
application of
section 133
to disputes arising out of the LRA. The
judge concluded that:
[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 operations. That does not appear to me to
be in conflict with the provisions of
the LRA.
[16]
In the light of the decisions in
Chetty, Burda, Sondamase
and
Shiva Uranium
it seems that the weight of authority is against
this court assuming the mantle of the High Court to uplift the
moratorium on legal
proceedings imposed by
section 133
(1). That is
not to say that justified circumstances may exist for the High Court
to do so in instances where permission to uplift
the moratorium has
been refused by the business practitioner. But that is not a claim
that can be pursued in this court.
[17] In
conclusion, I am satisfied this court does not have the power to
order the payment of severance pay to
the applicants, which would
entail it implicitly uplifting the moratorium on legal proceedings. I
note in passing that in terms
of
s 41
of the BCEA the Labour Court is
not the statutorily designated forum that would deal with these
claims unless they arise in the
context of determining a dispute over
the unfair dismissal of employees for operational reasons. The
ordinary forum for pursuing
severance pay claims is in fact through
arbitration.
Costs
[18]
The respondents had pushed for costs on a punitive scale on the basis
that the applicants have no prospect
of success given the weight of
jurisprudence. I accept that the applicants might have been inclined
to be more circumspect about
proceeding after receiving the
correspondence from the respondents before the respondents filed
their answering affidavit. However,
the judgments in favour of the
respondents did not address any of the precedents pointing against
them, and the applicants’
case was not self-evidently
unarguable. In the circumstances the most equitable and appropriate
cost order will be to make the
parties bear their own costs.
Order
[19]
The application is dismissed.
[20]
No order is made as to costs.
_______________________
Lagrange
J
Judge
of the Labour Court of South Africa
Appearances
For
the applicants
I
Veerasamy & W N Shapiro instructed by McGregor Erasmus
Attorneys
For
the respondents
B
Pistorius & G Fourie SC instructed by Werksmans Attorneys.
[1]
Patent
grammatical
and typographical errors rectified on 28/11/19
[2]
[2014] JOL 32257 (LC)
[3]
National
Union of Metalworkers of South Africa obo four members v Motheo
Steel Engineering CC
[2014] JOL 32256
(MEIBC)
at para 4.1
[4]
1.1 (J385/16 & J393/16) [2016] ZALCJHB
106 (22 March 2016)
[5]
2015 (6) SA 424 (SCA)
[6]
JS539/12 (29 November 2013) unreported at paras [12] to [13]
[7]
At paras [14] –[16].
[8]
(2019) 40 ILJ 177 (LC); [2019] 5 BLLR 472 (LC)
[9]
At paras [18] – [20].
[10]
(C669/2014) [2016] ZALCCT 53 (22 April 2016)