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[2019] ZALCCT 11
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Prinsloo v Expidor 163 CC t/a The League of Gentlemen and Another (C 482/17) [2019] ZALCCT 11; (2019) 40 ILJ 2113 (LC) (9 May 2019)
IN
THE LABOUR COURT OF SOUTH AFRICA, CAPE TOWN
Not
Reportable
Case
no: C 482/17
In
the matter between:
SEAN
PRINSLOO
Applicant
And
EXPIDOR
163 CC t/a THE LEAGUE
OF
GENTLEMEN
First Respondent
J.S
WILSON
Second
Respondent
Heard:
1 August 2018
Delivered:
9 May 2019
JUDGMENT
TLHOTLHALEMAJE,
J:
Introduction
and background:
[1]
Following his dismissal by the first respondent (Expidor 163 CC t/a
the
League of Gentlemen) (Incorrectly referred to as ‘
Explorer
163 CC t/a The League of Gentlemen’ in the arbitration
award (and herein referred to as Expidor)), the applicant, Sean
Prinsloo
referred an unfair dismissal dispute to the Commission for
Conciliation, Mediation and Arbitration (The CCMA). Prinsloo
subsequently
obtained a default award in his favour in the absence
Expidor. The second respondent, (JS Wilson) is registered as
Expidor’s
sole member, which is a close corporation.
[2]
In a default award issued on 22 February 2016, Commissioner
Verhoog of the CCMA found that the dismissal of Prinsloo on the
grounds of Expidor’s operational requirements was procedurally
and substantively unfair. Prinsloo was awarded an amount of
R165 669.52, inclusive of compensation equivalent to three
months’
remuneration, and other outstanding statutory payments.
[3]
On
20 January 2017, the default arbitration award was made an
order of this Court under case number J935/16 in accordance
with the
provisions of section 158(1)(c) of the Labour Relations Act (LRA).
[1]
On 21 February 2017, Prinsloo with the assistance of the
Sheriff of the Court attempted to execute the Court order. Wilson
had
initiated
interpleader
proceedings,
claiming sole ownership of all the movables contained in the
inventory of goods which the Sheriff sought to attach.
The Sheriff
returned with a certificate
nulla
bona
.
[4]
It is against the above background that Prinsloo approached this
Court
to seek an order in the following terms:
a)
That Wilson be joined as a party to these proceedings;
b)
That it be the ordered that the Wilson was his true employer;
c)
That Wilson is jointly and severally liable with the Expidor
for
obligations arising from the employment relationship between him and
the Expidor;
d)
That the Wilson is jointly and severally liable with the Expidor
to
comply with arbitration award issued in his favour on
22 February 2016 case number WECT 15946/16
[5]
Wilson opposed the joinder application on various grounds, including
that
Prinsloo had failed to demonstrate that a joinder was
permissible and regular in the circumstances. He submitted that he
would
suffer substantial prejudice if the joinder was allowed. He
further contended that Prinsloo had failed to comply with the
requirements
of section 64 read with section 65 of the Close
Corporations Act in demonstrating there was an abuse of the juristic
persona
of Expidor, which necessitated the apportioning of
liability to him as a member of the corporation.
[6]
In his founding affidavit, Prinsloo in support of the application
averred
the following;
6.1.
He was employed on 4 March 2014 as Marketing Manager for
Expidor until 16 October 2016,
which was then known as ‘The
League of Gentlemen’ (‘LOG’). LOG was an upmarket
shuttle service provider,
catering for businesses and other entities.
6.2.
His employment followed upon an interview with the then Operations
Manager of LOG, the
late Derrick Stewart, and its owner Wilson. His
letter of appointment confirmed his appointment by LOG, which he had
signed. Steward
signed on behalf of LOG. Whilst employed by LOG, he
resided at Wilson’s property like all other employees employed
by him.
6.3.
On 6 July 2015, Stewart passed away, and he (Prinsloo)
subsequently held a meeting
with Wilson, who had informed him that he
intended to close down LOG with immediate effect as he had been
supporting Stewart to
run it for over a long period without any
returns.
6.4.
Wilson however proceeded to offer LOG as a business to him for a sum
of R297.000.00. The
offer came with LOG’s clients’ data
base, all bookings already made, cellular phone and e-mail address.
Despite numerous
attempts, Prinsloo failed to secure the necessary
funding to acquire the business, and after the deadline set by Wilson
came and
went, the deal collapsed. He did not hear from Wilson
thereafter despite staying on his property.
6.5.
On 15 September 2015 and subsequent the intervention of his
union (Solidarity),
Wilson’s attorneys of record in
correspondence to Solidarity advised that LOG was the trading name of
Expidor 163 CC, and
that Prinsloo was employed by the latter entity.
6.6.
On 23 September 2015, Prinsloo with the assistance of
Solidarity then referred
an unfair labour practice dispute to the
CCMA. Wilson had attended the conciliation proceedings, and advised
the CCMA conciliating
Commissioner that LOG was insolvent, and
confirmed that Prinsloo was dismissed.
6.7.
Upon the advice of the CCMA Conciliating Commissioner, Solidarity
referred another dispute
(unfair dismissal) on or about
19 October 2015, citing Wilson and Expidor 163 t/a The
League of Gentlemen as the respondents.
Wilson had attended the
second conciliation hearing convened on 9 November 2015,
and when the dispute could not be resolved,
it was referred for
arbitration.
6.8.
Wilson however failed to attend the arbitration proceedings,
resulting in the default arbitration
award, which was subsequently
made an order of Court.
6.9.
Prinsloo averred that he only became aware that Expidor existed when
LOG contemplated his
dismissal during August 2015. Prior to that
period, he had held the view that the LOG was his employer and that
Wilson was
its Sole Proprietor.
The
issues for determination:
[7]
Two principal intertwined issues are up for consideration in this
case.
The first pertains to whether Wilson should be joined as a
party in circumstances where Prinsloo is in possession of a
favourable
arbitration award, and aligned to that is whether this
Court should pierce the corporate veil for the purposes of finding
Wilson
liable in terms of that arbitration award.
Application
for a joinder:
[8]
Prinsloo is of the firm belief that Wilson ought to be joined for the
purposes of liability on the following grounds;
8.1
The address at which the luxury vehicles of LOG were stored is
essentially the
same premises the personal vehicles of Wilson were
also stored and/or repaired.
8.2
The restoration of all the vehicles at this address were done by
Wilson and
four other employees, and his premises also served as
business and/or operating offices.
8.3
Wilson had indicated that Expidor was conceptualised for the benefit
of his
friend, Stewart, and Wilson had consistently directed finances
to Expidor, which was running at a loss during that period.
8.4
Wilson had offered to sell LOG, together with its website and
personal vehicles
to him. He was also the provider of tools and
infrastructure for the operation of the business, his personal
vehicles were utilised
to operate the business, and he had paid his
remuneration during his employment.
8.5
Wilson assumed responsibility for the statutory amounts owing to him,
and that
concession accordingly was inconsistent with Wilson’s
defence that Expidor was the true employer. The acknowledgment of
debt
was further indicative of an admission that Wilson was the true
employer, or that both legal personalities were indistinguishable
for
the purpose of the operation of the business.
[9]
In opposing
the application for a joinder, Wilson relied on
Riding
for Disabled v Regional Land Claims Commissioner & Others
[2]
for the proposition that it was desirable for the affected party to
be afforded an opportunity to be heard in proceedings that
culminated
in the judgment debt. Wilson argues that should he be joined to the
proceedings at this point, he may be substantially
prejudiced on the
basis that he would have played no role in the proceedings that
resulted in an outcome that shall affect him
personally in view of
the fact that the unfair dismissal proceedings have been concluded in
the CCMA. In the result, he contends
that his right to a fair trial
(
i.e.
the
right to be heard) would be unjustifiably infringed and a joinder in
circumstances where it might cause prejudice is impermissible.
[10]
The test to
apply in considering whether a party should be joined in proceedings
is whether the party sought to be joined has “substantial
interest in the subject matter of the proceedings
[3]
.
Central to this dispute however is whether a joinder is permissible
where it is only sought for the purposes of executing a court
order.
[11]
The
approach of our courts has been that a party may not be joined to
proceedings if that party had not been a party to the conciliation
process, and further that a joinder may not take place after judgment
has been handed down
[4]
. The
reasoning behind this approach is that any party should be afforded
an opportunity to be heard in a matter where it has a
direct and
substantial interest
[5]
. A
further important factor is that a party sought to be joined is
entitled to be heard on the specific question of the relief
[6]
.
[12]
The question of whether Wilson should be joined in these proceedings
is in my view moot.
Inasmuch as the legal principles relied upon in
regard to the question of joinder are irrefutable, the facts and
circumstances
of this case however indicate that it is not even
necessary to get to that point. My reasons in this regard are as
follows;
12.1
From the
annexures to the founding affidavit, a second referral
[7]
was launched at the CCMA on 19 October 2015, with Wilson
being cited as a party.
12.2
In the referral form, Prinsloo or Solidarity had on his behalf under
paragraph 2 (‘
Details of the other party (Party with whom
you are in dispute’
)), cited both Expidor and Wilson.
Wilson’s denials that he was not cited are thus patently
untrue, as the referral form indicates
otherwise.
12.3
Having been cited, Wilson had attended the conciliation meeting. His
contention that he had elected
not to participate in the proceedings
before the CCMA as at the time he did not run any risk of liability
does not avail him. The
risks were always there that such liability
may arise, and he was aware of them as he had sought to mitigate them
when he attended
the first and second conciliation proceedings. To
that end, any prejudice he may have suffered as a consequence of that
election
is clearly self-inflicted.
12.4
It is true from a reading of the arbitration award that the
Commissioner may not have specifically
made an order against Wilson.
That however is not the point in that an award was made against
Expidor, giving rise to questions
surrounding his liability. However,
to the extent that he was cited and had failed to attend the
arbitration proceedings even though
he had attended the conciliation
proceedings, it cannot be argued that he was not afforded an
opportunity to be heard prior to
the default award. He had
effectively waived his right to be heard.
[13]
In the light of the above, it is apparent that the application for a
joinder was not necessary
in the first place, as Wilson was properly
cited in the CCMA referral.
[14]
Inasmuch as
Wilson seeks to deny liability, he nonetheless sought to attack the
award on a variety of grounds, which attacks are
in any event
belated. If he was aggrieved by the outcome of the award as he
appears to suggest in his answering affidavit
[8]
,
it was up to him to pursue rescission proceedings. It can further not
be correct as he had suggested, that he would not have had
locus
standi
to seek a rescission. As already indicated, he was cited, and thus a
party to the proceedings before the CCMA,. To this end, any
averments
made and objections raised by Wilson in regards to the arbitration
award are immaterial to this application as correctly
pointed out on
behalf of Prinsloo.
Piercing
the Corporate veil:
[15]
The only issue for consideration to the extent that the arbitration
award does not specify
Wilson’s liability is whether facts have
been placed before the Court for the piercing of the corporate veil,
in order for
a conclusion to be reached that Wilson was Prinsloo’s
employer and therefore liable for the payments arising from the
arbitration
award.
[16]
When the
veil of incorporation is pierced or lifted, the consequences thereof
are that the protective covering of the limited liability
presented
by the company structure is stripped away
[9]
.
It is trite that courts do not enjoy a general discretion to
disregard the separate juristic personality of a legal entity, and
that the piercing of the corporate veil is ‘an exceptional
procedure’.
[17]
Exceptional
circumstances permitting the piercing of the corporate veil will
ordinarily include instances where there is fraud,
dishonesty or
other improper conduct in the establishment or use of the corporation
or the conduct of its affairs
[10]
.
These principles were considered in detail in
Airport
Cold Storage (Pty) Ltd V Ebrahim and Others
[11]
,
where the Court held as follows;
9.
“Whatever form it takes, veil piercing is an 'exceptional
procedure', and, as pointed out by Scott JA
in
Hülse-Reutter
and Others v Gödde
, a court has no general discretion simply
to disregard the existence of a separate corporate identity whenever
it considers it
just or convenient to do so. However, the
circumstances in which a court will disregard the distinction between
a corporate entity
and those who control it are 'far from settled':
“
Much
will depend on a close analysis of the facts of each case,
considerations of policy and judicial judgment. Nonetheless what
is,
I think, clear is that as a matter of principle in a case such as the
present there must at least be some misuse or abuse of
the
distinction between the corporate entity and those who control it
which results in an unfair advantage being afforded to the
latter.”
10.
In
The Shipping Corporation of India Ltd v Evdomon Corporation and
Another
Corbett CJ required proof of 'an element of fraud or
other improper conduct in the establishment or use of the company or
the conduct
of its affairs' before a court can pierce the corporate
veil.
11.
This requirement of fraud or other improper conduct finds resonance
in the provisions of s 65 of the Act, where the legislature,
with
regard to close corporations, has created a statutory remedy 'which
is equivalent to (the court's) jurisdiction at common
law to ''pierce
the corporate veil'' in relation to a company'. Liability under this
section depends on a finding of 'gross abuse
of the juristic
personality of the corporation as a separate entity'. However, no
attempt has been made in the section to indicate
the facts or
circumstances that would qualify as a gross abuse of the juristic
personality of the corporation as a separate entity.
The courts are
required, in other words, to give content to the open-ended concept
of 'gross abuse', based on the facts of each
particular case. This
exercise does not take place in a vacuum, however, and it is
axiomatic that the principles and categories
developed with regard to
piercing the corporate veil in the context of company law will serve
as useful guidelines in this context.
12.
The starting point is that veil piercing will be employed 'only where
special circumstances exist indicating that it [i.e.
the company or
close corporation] is a mere façade concealing the true
facts'. Fraud will obviously be such a special circumstance,
but it
is not essential. In certain circumstances the corporate veil will
also be pierced 'where the controlling shareholders do
not treat the
company as a separate entity, but instead treat it as their ''alter
ego'' or ''instrumentality'' to promote their
private, extracorporate
interests': Although the form is that of a separate entity carrying
on business to promote its stated objects,
in truth the company is a
mere instrumentality or business
conduit
for promoting, not
its own business or affairs, but those of its controlling
shareholders. For all practical purposes the two concerns
are in
truth one. In these cases there is usually no intention to defraud
although there is always abuse of the company's separate
existence
(an attempt to obtain the advantages of the separate personality of
the company without in fact treating it as a separate
entity).
13.
Against
this background, I turn to consider whether the plaintiff has
established that the defendants have in fact abused the separate
juristic personality of the close corporation in question.”
[12]
(Citations omitted)
[18]
Prinsloo seeks to have the corporate veil pierced and for an order to
be made that would
allow him to recover the amounts due to him by
virtue of the arbitration award from Wilson. In this regard, he
submitted that;
18.1
Once a
corporation is nothing but an alter ego of its members, then there
was nothing in law that would preclude a party from seeking
relief
from its members who are shown to have acted improperly
[13]
.
18.2
In matters
where the piercing of the corporate veil must occur, the courts will
consider the corporate’s scope of operation,
the members’
role and their function and powers, the amount of debt, the extent of
the financial hardship, the prospect of
recovery and the extent of
the harm caused by the members’ conduct
[14]
.
18.3
In this case, Wilson misused and abused the principal corporate
personality of Expidor, to improperly
avoid liability for obligations
incurred as a result of his unfair dismissal from his employ, and
therefore, the need to preserve
the separate corporate identity would
have to be disregarded in the light of considerations which arise in
favour of piercing the
corporate veil.
18.4
He was never aware of the existence of Expidor, and was never advised
that he was employed by
Expidor and not Wilson until the timing of
his dismissal. He had however reported directly to Wilson or Stewart,
and Wilson had
acted as his employer at all times. To this end,
Wilson and Expidor were inseparable as far as his employment with LOG
was concerned.
[19]
Wilson in opposing the application made the following submissions;
19.1.
He and Stewart conceived an idea of a business of an up-market
shuttle service. At the time, he was a sole
member of a Close
Corporation (Expidor) and owned luxury vehicles which he earmarked
for the business venture (operating the shuttle
service). The shuttle
business would utilise his luxury vehicles in a form of a loan to
operate and earn an income for Stewart
and his family.
19.2.
Wilson further bought (on behalf of the Expidor), the same business
idea for a third party for an amount
of R100 000, which included
a motor vehicle, a client book and secured bookings. The idea
resulted in the birth of LOG.
19.3.
Expidor operated the business of LOG which had its own banking
account, an accountant, and was operated
on day-to-day basis by
Stewart and his wife. In the end, Expidor owed him loans in an amount
equivalent to R347 962.00.
19.4.
He further averred that he had no personal involvement in the
day-to-day operations of LOG, and that his
role was limited to
bankrolling the business when the need arose.
19.5.
He further denied that he had interviewed Prinsloo for the position
of Marketing Manager and contended that
that his role in the
appointment was limited to approving Prinsloo as a candidate, as he
was the financial sponsor of the business.
19.6.
The relief sought by Prinsloo when holistically viewed was tantamount
to that as contemplated in the provisions
of section 65 of the Close
Corporations Act and in the circumstances, Prinsloo ought to have
sought an order declaring that Expidor
was not a separate juristic
persona
and his claim lay with Wilson.
19.7.
Prinsloo according to Wilson had failed to meet stringent
requirements for a successful claim for piercing
of the corporate
veil, and the Court did not have a general discretion to pierce the
corporate veil for the purposes of attributing
liability to the
individual member.
19.8.
For a successful claim for piercing the corporate veil, Prinsloo had
to prove fraud and/or improper conduct
in the running of the
corporation’s affairs. Thus the burden of proving that Expidor
was ran in a fraudulent or improper
manner with the intent of
avoiding its obligations was on Prinsloo.
19.9.
Considering these factors, Wilson contends that the inability of the
corporation to satisfy the judgment
debt does not constitute improper
conduct that may justify the piercing of the corporate veil, nor did
it justify the holding of
its members liable for the corporation’s
obligations and liabilities.
19.10. Prinsloo had not
revealed any improper conduct except to erroneously allege that he
only became aware during August 2015
of the existence of
Expidor. In view of the fact that Prinsloo was provided with
documents in respect of the proposed sale of the
business, it is
inconceivable that the he only became aware of Expidor in
August 2015.
[20]
Wilson
contends that what Prinsloo seeks as can be gleaned from the prayers
in the Notice of Motion is an order in terms of section
65 of the
Close Corporation Act
[15]
, and
under those circumstances, he ought to have sought an order declaring
Expidor not to be a juristic person in respect of the
right he seeks
to enforce against him. It was further contended that absent such
relief being sought and granted, the separate
corporate personality
of Expidor must be recognised, and any of its obligations remains its
own only.
[21]
The difficulty however with the above argument is that nowhere in his
pleadings does Prinsloo
make any reference to the provisions of
section 65 of the Close Corporation Act. His main contention was that
what needs to be
determined is whether upon the piercing of the
corporate veil, Wilson should be found to be the true employer. There
can therefore
be no merit on the reliance of the provisions of
section 65 of the Close Corporation Act, when Prinsloo’s case
is not grounded
on those provisions.
[22]
What
Prinsloo seeks is an order declaring that Wilson was his true
employer for the purposes of joint and several liability in respect
of obligations arising from his employment relationship with Expidor.
In any event, it was held in
L
& P Plant Hire BK v Bosch
[16]
that the provisions of section 64
[17]
should not be applied where the corporation was in a position to meet
the debt in question, and that it should be of no concern
to the
creditor if the person who acted on behalf of the close corporation
has been reckless or even fraudulent, as the creditor’s
only
interest is to recover the debt owed to him
[18]
.
[23]
In this case, it was Prinsloo’s contentions that his claim
against Expidor qualified
him as a creditor in any liquidation
proceedings that may have been initiated by or against Expidor. He
had submitted that he had
not however been approached or advised of
any liquidation proceedings. To that end, and to the extent that
Wilson in the pleadings
had not responded to his contentions that
Expidor had not been liquidated, it should be concluded that it was
not.
[24]
To the
extent that it was Prinsloo’s contentions that Wilson was the
only member of the Close Corporation and in effect the
same person as
the corporation wearing different hats, it is accepted that in
certain cases the Court has disregarded the company’s
separate
legal personality and focused on the natural person or persons
‘behind’ the company as if there were no dichotomy
between such person or persons and the company
[19]
.
In this regard, it is further accepted
that
in certain instances, the corporate veil ought to be pierced where
the business of a close corporation was so enmeshed with
that of the
respondent company that the respondent could be regarded as the real
employer of the applicant. In some instances,
it has also been held
that
i
t
was not even necessary for the purposes of establishing an employment
relationship formally, to pierce the corporate veil
[20]
.
[25]
Prinsloo in substantiation of his claim that the corporation was the
mere
alter ego
or
business conduit
of Wilson, averred
that the LOG was effectively Wilson’s operation based on the
following:
25.1
Wilson did not disclose the existence of Expidor or true identity of
the corporation until his
contemplated dismissal;
25.2
Wilson was effectively involved in the day-to-day operations of the
business, and the appointment
of employees. Furthermore, all the
financials of the corporation were vested in him;
25.3
Wilson had at all material times acted as his employer and the sole
proprietor of Expidor and
in the result, the juristic
persona
of Expidor and Wilson were inseparable and indistinguishable.
25.4
Almost all the assets including the means of operations (the
vehicles) were owned by Wilson in
his personal capacity, and the
business address and the storage facility was under the control of
Wilson.
25.5
Wilson had accepted liability for the retrenchment package (severance
pay), he was entitled to
in terms of legislation;
25.6
The employees were at all material times were under the impression
that Wilson was the owner
of the LOG.
25.7
The identity of Expidor was withheld and misused in order to avoid
the obligations arising from
the employment relationship and in
particular the unfair dismissal claim.
[26]
Wilson disputed the above contentions and submitted that in view of
the dispute of facts,
the application ought to be dismissed. The
disputed facts raised by Wilson are as follows;
26.1
He was effectively not involved in the employment of Prinsloo, had
not interviewed him or provided
him with a letter of appointment, or
entered into any agreement with him in regards to the terms of his
employment. He denied having
provided him with accommodation as part
of his employment agreement.
26.2
Wilson disputed that he exercised any form of authority over
Prinsloo, and further disputes that
he paid him his salary, including
an amount of R12 225.00 per month as he had alleged at the CCMA.
26.3
Despite Prinsloo being informed in July 2015 after the death of
Stewart that Expidor would
cease trading with immediate effect, he
informed the CCMA that he only got to know of his retrenchment in
October 2015.
[27]
It is trite
that in motion proceedings, disputes of fact arising from the
pleadings where a final order is sought are resolved by
the
application of the principles enunciated in
Plascon-Evans
Plaints (TVL) Ltd v van Riebeck Plaints (Pty) Ltd
[21]
.
These
principles were further explained in
National
Director of Public Prosecutions v Zuma
[22]
as
follows;
“
Motion
proceedings, unless concerned with interim relief, are all about the
resolution of legal issues based on common cause facts.
Unless the
circumstances are special they cannot be used to resolve factual
issues because they are not designed to determine probabilities.
It
is well established under the Plascon-Evans rule that where in motion
proceedings disputes of fact arise on the affidavits,
a final order
can be granted only if the facts averred in the applicant's (Mr
Zuma’s) affidavits, which have been admitted
by the respondent
(the NDPP), together with the facts alleged by the latter, justify
such order. It may be different if the
respondent’s
version
consists of bald or
uncreditworthy denials, raises fictitious disputes of fact, is
palpably implausible, far-fetched or so clearly
untenable that the
court is justified in rejecting them merely on the papers...”
[28]
In applying
the above principles to the facts of this case, it ought to be
concluded that based on the observations as shall be
illustrated
below, Prinsloo’s claim should succeed on the basis that
Wilson’s denials are not genuine dispute of facts
that could
necessitate the dismissal of the claim or a referral of this dispute
for oral evidence
[23]
. Further
emanating from the pleadings, the Court is of the view that Wilson’s
allegations and denials are clearly fictitious,
palpably implausible,
far-fetched and/or so clearly untenable that they ought to be
rejected merely on the papers. My conclusions
in this regard are
based on the following;
28.1
Wilson did not dispute that on Stewart’s advice, a
pre-employment meeting with Prinsloo
was convened to assess his
suitability for the position of marketing manager. Wilson attended
that meeting and in his answering
affidavit, he merely disputed the
purpose of that meeting, contending that he attended it as a ‘favour’
to Stewart,
who may have wanted his approval as the financial muscle
of the operations.
28.2
Wilson had admitted discussing the operations of the LOG in that
meeting, with a view of adopting
a turnaround strategy, and had from
that meeting, formed a view that Prinsloo was competent and suitable
for the position of marketing
manager. His contentions that he merely
discussed the business in broad terms without interviewing him seems
to be far-fetched.
28.3
Wilson met Prinsloo at the commencement of his employment, and
however denied that he had instructed
Steward to present him
(Prinsloo) with a letter of appointment.
28.4
According to Prinsloo, his salary was paid by Wilson in cash and he
stayed on his property during
the period of his employment. Wilson’s
contentions are that Prinsloo stayed on his property as he did him a
favour as he
was struggling to sort out his accommodation.
28.5
Although Wilson denied being responsible for the day-to-day running
of the operations, he nonetheless
admitted that he was the sole
member of the corporation, which was revived with the sole purposes
of operating the LOG. He had
further admitted that he provided
periodic financial injection to the operations, regularly attended at
the premises of the business
and that the assets of the corporation
were stored and maintained under the same roof. He conceded that
‘notionally, he owned’
the business, even though he never
traded through it other than to assist Stewart to operate the LOG.
28.6
Wilson
admitted that he conceived the business, provided it with
infrastructure and finances. He held ownership of the vehicles
which
were the core of the operations of the Expidor’s business, and
the vehicles were retained in his name,
albeit
he contended that this was done in order to mitigate against any loss
that the business may suffer and in order to protect his
investments,
and for the luxury vehicles to serve as security for the loans
granted in favour of Expidor.
[24]
28.7
Wilson contended that the LOG was conceived for the purpose of
assisting Steward in generating
an income after his previous business
venture collapsed. Even if those factors were relevant for the
consideration of personal
liability, in line with what was stated in
Cape Pacific Ltd v Lubner Controlling Investments,
it was
immaterial whether the corporation was established for a legitimate
purpose in circumstances were fraud, dishonestly or
improper purposes
has been shown.
28.8
Wilson admitted that he had advised Prinsloo of his dismissal and
offered to pay him a retrenchment
package in respect of his
contemplated dismissal on account of Expidor’s operational
requirements. He however denies that
he had offered the severance
package in his personal capacity. At the time that the offer of a
severance package was mentioned,
it was disclosed that LOG was a
close corporation, something that was never brought to Prinsloo’s
attention at the time of
his employment
28.9
Wilson had
offered to sell LOG, its website, bookings, and vehicles to Prinsloo.
On his version, when Stewart’s health started
to deteriorate,
he had the vehicles and administration of the business moved to his
own smallholding, as he was ‘concerned
with the welfare of
Stewart’. The question that needs to be asked in these
circumstances is why Wilson would want to sell
assets that did not
belong to him, even if he had financially supported the business. If
the business was insolvent upon the death
of Stewart, the issue is
how he could have on his own wished to dispose of those assets
without any legal proceedings having been
instituted insofar as other
creditors, if any, were concerned. It is apparent from the attempted
sale of the assets, that Wilson
made not distinction between himself
and Expidor, a corporation of which he was the sole member.
[25]
[29]
In the light of the above observations, and further having examined
the substance rather
than the form of the business of Expidor, it is
my view that Prinsloo has discharged
the
evidential basis to disregard a company's separate personality, and a
case has been made out as to why the corporate veil in
respect of
Wilson should be lifted. Furthermore, the facts and circumstances of
this case are such that
the business of
Expidor was so enmeshed with that of Wilson that Prinsloo’s
impression that he (Wilson) was indeed his true
employer was
reasonable under the circumstances.
[30]
It is apparent that the affairs of Expidor were conducted in the
manner that they were
indistinguishable from those of Wilson in his
personal capacity, and clearly
the corporate personality of Expidor was misused and
abused as a facade by Wilson, resulting in an unfair advantage to him
as an
individual controlling Expidor. In this regard, it is worth
repeating that Wilson was the sole member of Expidor, owned all the
vehicles used by Expidor, provided Expidor with all financing,
premises, and vehicles to conduct its business. He provided
operational
capital and had assumed all responsibility of Expidor’s
debts after the death of Stewart, and further sought to sell
Expidor’s
assets. Other considerations are that Wilson’s
personal luxury vehicles were stored and maintained in the same
premises in
which those of LOG were stored and maintained by the same
employees. In the absence of any formalised arrangements in respect
of
the maintenance and storage of the vehicles, the invariable
conclusion to be reached is that indeed the assets were considered as
one for all purposes.
[31]
A further worrisome consideration is that the true identity of the
business was only revealed
after the death of Stewart and when a
dismissal was to take place. In my view, it is irrelevant whether
Prinsloo got to know the
true identity of the business in July or
October 2015, in that this ought to have been made clear and
disclosed to him when
he joined the business in March 2014. To
this end, the only inference to be drawn is that Wilson made the
disclosure at the
point that he did, with the improper intention of
avoiding his obligations and liabilities in relation to any steps
that may have
been taken against Expidor, with the intention to place
Prinsloo or any other creditor in a disadvantaged position.
[26]
In the light of the above conclusions, it follows that Prinsloo’s
claim ought to
succeed. I have further had regards to the
requirements of law and fairness, and I am of the view that a costs
order is not warranted
in this case.
[27]
In the premises, the following order is made;
Order:
1. The
Second Respondent (J.S Wilson) is liable for the obligations arising
from the employment relationship between
the Applicant and the First
Respondent (Expidor 163 CC t/a the League of Gentlemen).
2. The
Second Respondent is liable to comply with the arbitration award
issued in favour of the Applicant
dated 22 February 2016
under case number WECT 15946/15, which award was made an order of
this Court on 20 January 2017
under case number J935/16.
3. There is no
order as to costs.
____________________
Edwin Tlhotlhalemaje
Judge
of the Labour Court of South Africa
Appearances:
For
the Applicant:
Mr W. Jacobs of Willem
Jacobs & Associates
For
the Respondents:
Adv. T. Möller, instructed by Johan Venter &
Associates
[1]
Act
66 of 1995 (as amended)
[2]
2017 (5) SA 1
(CC) at 10
[3]
See
Gordon
v Department of Health: Kwazulu-Nata
l
[2008] ZASCA 99
;
2008 (6) SA 522
(SCA);
2009 (1) BCLR 44
(SCA) at para 9, where the
court said:
“…
The
issue in our matter… is whether the party sought to be joined
has a direct and substantial interest in the matter.
The test is
whether a party, who is alleged to be a necessary party, has a legal
interest in the subject matter, which may be
affected prejudicially
by the judgment of the court in the proceedings concerned. In the
Amalgamated Engineering Union case,
supra, it was found that “the
question of joinder should not depend on the nature of the subject
matter but on the manner
in which, and the extent to which, the
court’s order may affect the interests of third parties”.
See
also
Rule 22 of the Rules of this Court which
provides that:
‘
(1)
The court may join any
number of persons, whether jointly, jointly and severally,
separately, or in the alternative, as parties in proceedings, if the
right to relief depends on the determination of substantially
the
same question of law or facts.
(2)
(a) The court may, of its
own motion or on application
and on notice to every
other party, make an
order joining any person as a party in the proceedings if the party
to be joined has a substantial interest
in the subject matter of the
proceedings.
(b)
When making an order in terms of paragraph
(a)
, the court may
give such directions as to the further procedure in the proceedings
as it deems fit, and may make an order as
to costs’.
[4]
See
Temba
Big Save CC v Kunyuza and Others
[2016] ZALAC 36
;
[2016] 10 BLLR 1016
(LAC); (2016) 37 (ILJ) 2633
(LAC);
Ngema
and Others v Screenex Wire Weaving Manufacturers (Pty) Limited and
others
(2012) 33 ILJ 681 (LC) at para 22 ;
National
Union of Mineworkers of South Africa v Intervalve (Pty) Ltd and
Others
[2015] 2 BCLR 182 (CC).
[5]
See
Snyders
and Others v de Jager
[2016] ZACC 54
at para 9, where it was held that;
“
A
person has a direct and substantial interest in an order that is
sought in proceedings if the order would directly affect such
a
person’s rights or interest. In that case the person should be
joined in the proceedings. If the person is not joined
in
circumstances in which his or her rights or interests will be
prejudicially affected by the ultimate judgment that may result
from
the proceedings, then that will mean that a judgment affecting that
person’s rights or interests has been given without
affording
that person an opportunity to be heard. That goes against one of the
most fundamental principles of our legal system.
That is that, as a
general rule, no court may make an order against anyone without
giving that person the opportunity to be heard”
[6]
Ngema
and Others v Screenex Wire Waring Manufactures
at para 14
[7]
Annexure
‘SP6’ to the Founding Affidavit
[8]
Paragraphs
62 - 67 of the Answering Affidavit
[9]
See
Footwear
Trading CC vs Mdlalose
[2005]
5 BLLR 452 (LAC)
[10]
See
The
Shipping Cooperation of India Ltd v Evdoman Corporation and Another
[1993] ZASCA 167
;
1994
(1) SA 550
[A] at 566C-F
;
Bargaining
Council for the Furniture Manufacturing Industry, Kwazulu- Natal v
UKD Marketing CC and
Others
[2013]
2 BLLR 119
(LAC); (2013) 34 ILJ 96 (LAC) at para 21;
Cape
Pacific Ltd v Lubner Controlling Investments (Pty) Ltd and
Others
[1995] ZASCA 53
;
1995
(4) SA 790
(A);
Knoop
NO and Others v Birkenstock Properties (Pty) Ltd and Others
(FB)
(unreported case no 7095/2008, 4-6-2009)
[11]
[2007] ZAWCHC 25
;
2008 (2) SA 303
[C]
[12]
Airport
Cold Storage (Pty) Ltd V Ebrahim and Others
supra
At
pages 307 -308; See also
Hülse–Reutter
and Others v Gödde
2001 (4) SA 1336
(SCA) at para 20, where it was held that the test
as to whether it would be appropriate to pierce the corporate veil
involves
a consideration at least, of some misuse or abuse of the
distinction between the corporate entity and those who control it
which
results in an unfair advantage afforded to the latter.
[13]
In
reference to
Footwear
Trading CC v Mdlalose
(2005) 26 ILJ 443 (LAC) at para 34
[14]
In
reference to
Ebrahim
and another v Airport Cold Storage
[15]
Act
69 of 1984, which provides that;
“
Powers of
Court in case of abuse of separate juristic personality of
corporation.
Whenever
a Court on application by an interested person, or in any
proceedings in which a corporation is involved, finds that
the
incorporation of, or any act by or on behalf of, or any use of, that
corporation, constitutes a gross abuse of the juristic
personality
of the corporation as a separate entity, the Court may declare that
the corporation is to be deemed not to be a juristic
person in
respect of such rights, obligations or liabilities of the
corporation, or of such member or members thereof, or of
such other
person or persons, as are specified in the declaration, and the
Court may give such further order or orders as it
may deem fit in
order to give effect to such declaration.”
[16]
2002 (2) SA 662
(SCA)
[17]
“
Section
64. Liability for reckless or fraudulent carrying-on of business of
corporation
(1)
If it at any time appears that any business of
a corporation was or
is being carried on recklessly, with gross negligence or with intent
to defraud any person or for any fraudulent
purpose, a Court may on
the application of the Master, or any creditor, member or liquidator
of the corporation, declare that
any person who was knowingly a
party to the carrying on of the business in any such manner, shall
be personally liable for all
or any of such debts or other
liabilities of the corporation as the Court may direct, and the
Court may give such further orders
as it considers proper for the
purpose of giving effect to the declaration and enforcing that
liability.
(2)
Without prejudice to any other criminal liability incurred where any
business of a corporation is carried on in any manner contemplated
in subsection (1), every person who is knowingly a party to
the
carrying on of the business in any such manner, shall be guilty of
an offence.
[as substituted by S 224(2) of Act 71 of 2008]”
[18]
See also
Saincic
and Others v Industro-Clean (Pty) Ltd and Another
[2006] ZASCA 83
; [2006] SCA 77 (RSA);
2009 (1) SA 538
(SCA) at para
13, where it was held that;
“
The
L
& P Plant Hire
case dealt with s 64 of the Close
Corporation Act 69 of 1984 the section which may be regarded
as the counterpart of s 424.
This court held that it had to be
interpreted restrictively as far as creditors were concerned and
that it could not be relied
on by a creditor where the corporation,
in spite of the fact that its business had been conducted in a
reckless or grossly negligent
manner, was still able to meet the
creditor’s claim. The first reason given (at 677E-F) was that
a creditor whose claim
the corporation was able to discharge had no
interest in the manner in which the corporation’s business is
conducted. The
second reason given (at 677I-678A) was that it was
not the intention of s 64 to provide creditors of a corporation
whose
business had been conducted recklessly or grossly negligently
with co-debtors of the corporation against whom they might proceed.
The court, however, left it open (at 677J) whether the position
might not be different where the corporation’s business
had
been conducted fraudulently.”
[19]
Henochsberg (Delport et al) n 16 p 85
[20]
See
Board
of Executors Ltd v McCafferty
[1997]
7 BLLR 835
(LAC)
[21]
Plascon-Evans
Plaints (TVL) Ltd v van Riebeck Plaints (Pty) Ltd
[1984]
ZASCA 51
;
[1984] 2 All SA 366
(A);
1984 (3) SA 623
;
1984 (3) SA 620
at H-I where it was held that;
“…
It
is correct that, where in proceedings on notice of motion
disputes
of fact have arisen on the affidavits, a final order, whether it be
an interdict or some other form of relief, may be
granted if those
facts averred in the applicant's affidavits which have been admitted
by the respondent, together with the facts
alleged by the
respondent, justify such an order. The power of the court to give
such final relief on the papers before it is,
however, not confined
to such a situation. In certain instances the denial by respondent
of a fact alleged by the applicant may
not be such as to raise a
real, genuine or bona fide dispute of fact (see in this
regard Room Hire Co. (Pty) Ltd
v Jeppe Street Mansions (Pty)
Ltd,
1949 (3) SA 1155
(T), at pp 1163-5; Da Mata v Otto,
NO,
1972 (3) SA 585
(A), at p 882 D - H).
If
in such a case the respondent has not availed himself of his right
to apply for the deponents concerned to be called for
cross-examination under Rule 6(5)(g) of the Uniform Rules of Court
(cf. Petersen v Cuthbert & Co Ltd
1945 AD 420
, at p
428; Room Hire case, supra, at p 1164) and the court is
satisfied as to the inherent credibility of the
applicant's factual
averment, it may proceed on the basis of the correctness thereof and
include this fact among those upon which
it determines whether the
applicant is entitled to the final relief which he seeks (see
e.g. Rikhoto v East Rand Administration
Board, 1983 (4) SA
(W), at p 283 E - H). Moreover, there may be exceptions to this
general rule, as, for example, where
the allegations or denials of
the respondent are so far-fetched or clearly untenable that the
Court is justified in rejecting
them merely on the papers (see the
remarks of BOTHA AJA in the Associated South African
Bakeries case, supra, at p
924 A).”
[22]
[2009] ZASCA 1
;
2009 (2) SA 277
(SCA) ;
2009 (1) SACR 361
(SCA) ;
2009 (4) BCLR 393
(SCA) ;
[2009] 2 All SA 243
(SCA) at para 26
[23]
See
Wightman
t/a J W Construction v Headfour (Pty) Ltd and Another
[2008] ZASCA 6
;
[2008] 2 All SA 512
(SCA);
2008 (3) SA 371
(SCA) at
para 13, where it was held that;
“
A
real, genuine and bona fide dispute of fact can exist only where the
court is satisfied that the party who purports to raise
the dispute
has in his affidavit seriously and unambiguously addressed the fact
said to be disputed. There will of course be
instances where a bare
denial meets the requirement because there is no other way open to
the disputed party and nothing more
can therefore be expected of
him. But even that may not be sufficient if the fact averred lies
purely within the knowledge of
the averring party and no basis is
laid for disputing the veracity or accuracy of the averment. When
the facts averred are such
that the disputing party must necessarily
possess knowledge of them and be able to provide an answer (or
countervailing evidence)
if they be not true or accurate but,
instead of doing so, rests his case on a bare or ambiguous denial
the court will generally
have difficulty in finding that the test is
satisfied. I say ‘generally’ because factual averments
seldom stand apart
from a broader matrix of circumstances all of
which needs to be borne in mind when arriving at a decision. A
litigant may not
necessarily recognise or understand the nuances of
a bare or general denial as against a real attempt to grapple with
all relevant
factual allegations made by the other party. But when
he signs the answering affidavit, he commits himself to its
contents, inadequate
as they may be, and will only in exceptional
circumstances be permitted to disavow them. There is thus a serious
duty imposed
upon a legal adviser who settles an answering affidavit
to ascertain and engage with facts which his client disputes and to
reflect
such disputes fully and accurately in the answering
affidavit. If 28
[2008] ZASCA 6
;
2008 (3) SA 371
(SCA). 49 that does not happen it
should come as no surprise that the court takes a robust view of the
matter.”
See
also Erasmus: Superior Court Practice Van Loggerenberg Erasmus:
Superior Court Practice (Vol 2) 2nd edition Service 4, 2017
D1-74,
where it is stated that;
“
A
bare denial of the applicant’s allegations in his affidavits
will not in general be sufficient to generate a genuine or
real
dispute of fact. It has been said that the court must take ‘a
robust, common-sense approach’ to a dispute on
motion and not
hesitate to decide an issue on affidavit merely because it may be
difficult to do so. This approach must, however,
be adopted with
caution and the court should not be tempted to settle disputes of
fact solely on the probabilities emerging from
the affidavits
without giving due consideration to the advantages of viva voce
evidence.”
[24]
Para 26 of answering affidavit
[25]
Page 54 - 55 index to pleadings