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[2019] ZALCD 11
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Medicare Healthcare Group (Pty) Ltd and Others v Dr F Budding & Associates and Others (D1233/19) [2019] ZALCD 11 (7 November 2019)
IN
THE LABOUR COURT OF SOUTH AFRICA, DURBAN
Not
Reportable
Case
no: D1233/19
In the matter between:
MEDICARE
HEALTHCARE GROUP (PTY) LTD First
Applicant
THE EMPLOYEES LISTED
IN ANNEXURE A Second
and further Applicants
And
Dr.
F BUDDING & ASSOCIATES No. 158 Inc First
Respondent
EXP
CONSULTING GROUP HOLDINGS (PTY) LTD Second
Respondent
THE
EMPLOYEES LISTED IN ANNEXURE B Third
to Eight Respondents
EXP
HEALTHCARE SOLUTIONS (PTY) LTD
Ninth Respondent
ICEBREAKERS
EQUIPMENT (PTY) LTD
Tenth Respondent
Heard:
17 October 2019
Delivered:
7 November 2019
Summary:
Urgent Application: Transfer as a going concern-
Section 197
of the
Labour Relations Act 66 of 1995
considered.
JUDGMENT
GUSH,
J
[1]
This is an urgent application brought by
the first applicant seeking an order declaring that the effect of the
termination of the
Administration Agreement entered into between the
first applicant and the first respondent was that the “whole or
part of
the services under the Administration Agreement” was
transferred to the first respondent as a going concern.
[2]
In
addition to this order, the applicant sought a further order that the
employment contracts of the employees (the second and further
applicants) be automatically transferred to the first respondent in
terms of section 197 of the Labour Relations Act
[1]
(LRA) on terms and conditions no less favourable than those they
enjoyed during their employment by the applicant.
[3]
Despite the multiplicity of parties to this
application, the issue is straightforward: Did the cancellation of
the Administration
Agreement entered into between the first applicant
and the first respondent by the first respondent result in a transfer
as a “going
concern” of the services rendered to the
first respondent by the first applicant in accordance with that
agreement.
[4]
The first applicant, the first respondent
and the second respondent challenged in their opposing papers, the
issue of urgency and
non-joinder. The first respondent in addition
seeks an order striking out certain sections of the applicant’s
affidavits.
[5]
At the outset, the parties agreed (and in
so far as it was necessary I ordered) that:
5.1 All
the parties had had adequate time to file their pleadings;
5.2
The applications for joinder be granted (not opposed);
5.3 The
strike out application would not be pursued and accordingly be
dismissed;
5.4 The
matter be heard as a matter of urgency; and
5.5 The
matter would proceed based only on whether there had been a section
197 transfer.
[6]
In
its founding affidavit the applicant describes its function as
“
providing
infrastructure and an established multidisciplinary medical centre
network to medical and dental practices … [and]
administers …
medical or dental practices, allowing the medical or dental
practitioners to focus on treating patients
.”
[2]
[7]
It is clear from the papers that the first
respondent is but one of the practices for whom the first applicant
renders services.
[8]
The
nature and the extent of the services provided by the first applicant
to the first respondent is set out in an Administration
Agreement
(entered into between the first applicant and the first respondent)..
Specifically, the parties recorded the “Functions,
Services and
Duties” which the first applicant would provide to the first
respondent in an annexure to the Agreement.
[3]
[9]
In terms of the administration agreement,
the first applicant provided the first respondent with certain
infrastructure and equipment.
The infrastructure included the
premises, (which the first respondent will continue to occupy). The
equipment falls into two categories:
9.1
Firstly, the equipment leased by the first
applicant for the use of the first respondent; and
9.2
Secondly, the equipment that belonged to
the first applicant and would remain the property of the first
applicant on termination
of the agreement.
[10]
The equipment referred to
supra
was leased from the tenth respondent in terms of a lease agreement.
The parties were
ad idem
that the lease agreement for the equipment would terminate
simultaneously with the Administration Agreement. The essential
effect
of this is that the first applicant’s obligations both
with regard to the leasing of the equipment and any obligation to
supply the equipment to the first respondent, fell away on
cancellation of the Administration Agreement.
[11]
Somewhat surprisingly, it was the first
applicants case, at least initially, that this amounted to the
transfer of equipment from
the first applicant to the first
respondent. There is nothing in the papers to justify this
conclusion. It is abundantly clear
that the cancellation of the
Administration Agreement did not result in the transfer of any
equipment whatsoever.
[12]
In
fact, the only equipment that may have been transferred following the
cancellation, should there have been a transfer of the
business as a
going concern, is that which was listed in annexure CH3
[4]
.
The Administration Agreement however expressly provided that the
equipment specifically would be returned to the first applicant
on
cancellation of the Administrative Agreement.
[13]
The
first applicant in its founding affidavit makes the startling
submission, in support of its averment that the cancellation of
the
Administration Agreement amounts to a section 197 of the LRA
transfer, is that “
96%
of the assets will transfer to the [first respondent] on termination
of the Administration Agreement”
[5]
.
This
is simply not correct. It is clear from the first applicant’s
replying affidavit that it regards the transfer of equipment
as the
determining factor in ascertaining whether there has been a section
197 of the LRA transfer
[6]
.
[14]
Turning
to the employees, it is clear from the Administration Agreement that
all the employees, listed as applicants or respondents
in this
matter, were prior to the cancellation of the Administration
Agreement, all employed by the first applicant. Their contracts
of
employment all appear to provide that their employment is based on
the first applicant’s business that comprises
inter
alia,
rendering of services by the first applicant to its medical and
dental practice clients in general and not specifically as employees
dedicated to one or any specific practice.
[7]
[15]
The fact that the first respondent has
offered some of the first applicants employees employment does not
indicate that a transfer
of employment has or should follow the
cancellation of the Administration Agreement, let alone a transfer of
a business or part
thereof. It is apparent that all the employees
employed by the first applicant were employed for the purpose of
rendering the service
that the first applicant offers to various
medical and dental practices as part of its business.
[16]
The
test applied in determining whether there has been a section 197 of
the LRA transfer was set out by the Constitutional Court
in the
matter of
National
Education Health and Allied Workers Union (NEHAWU) v University of
Cape Town and Others
[8]
and in
Aviation
Union of SA and Another v SAA (Pty) Ltd and Others
[9]
.
This
test has consistently been applied in section 197 of the LRA
determinations. There are as many decisions that conclude that
there
has not been a transfer as there are decisions that conclude that
there has been. The essence of the test is that the facts
of each
matter will determine the answer.
[17]
Apposite
to this matter in
Aviation
Union
[10]
the Constitutional Court said:
“
[
47]
…a termination of a service contract and a subsequent award of
it to a third party does not, in itself, constitute a
transfer as
envisaged in the section. In those circumstances, the service
provider whose contract has been terminated loses the
contract but
retains its business. The service provider would be free to offer the
same service to other clients with its workforce
still intact.
[48] For a transfer
to be established there must be components of the original business
which are passed on to the third party.
These may be in the form of
assets or the taking-over of workers who were assigned to provide the
service. The taking-over of workers
may be occasioned by the fact
that the transferred workers possess particular skills and expertise
necessary for providing the
service or the new owner may require the
workers simply because it did not have the workforce to do the work.
Without the protection
afforded by s 197, the new owner with no
workers may be exposed to catastrophic consequences, in the event of
the workers declining
its offer of employment.
[52]
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
.
Were it to be otherwise, a termination of a
service contract by one party and its subsequent appointment of
another service provider
would constitute a transfer within the
contemplation of this section. That this is not what the
section was designed to achieve
is apparent from its scheme,
historical context and purpose’.
[18]
As
already stated above. the facts in this matter are straightforward:
The first applicant provided a service to the first
respondent. The
first applicant’s business,
inter
alia
,
involves, in its own words “
providing
infrastructure and an established multi-disciplinary medical centre
network to medical and dental practices
.”
[11]
This service is not provided exclusively to the first respondent but
to a number of medical and dental practices at a number of
its
“Medicross” facilities within South Africa.
[19]
The service it provides does not, (in the
words of the Constitutional Court in
Aviation
),
constitute “
the business that supplies the service”.
Applying the rationale set out in the Aviation
case it is clear that there has been no transfer of a business or
part thereof as
a going concern.
[20]
I
am not persuaded that the first applicant has established on the
facts before this Court that the cancellation of the Administration
Agreement by the first respondent has the effect of or has resulted
in the transfer of a business “or part” thereof
as a
“going
concern”.
[12]
Costs
[21]
This
Court has a wide discretion in awarding costs. I have taken into
account the decision in
Member
of the Executive Council for Finance, KwaZulu-Natal v Wentworth
Dorkin N.O
[13]
.
I have had regard to the prevailing relationship between the first
applicant and the first respondent, and I can find no reason
in law
or in fairness why costs should not follow the result. The same
applies to the second and ninth respondents. As for the
second and
further applicants, they merely signed confirmatory affidavits and
there is no reason in fairness why they should be
mulcted in costs.
The first applicant sought no relief against the third to eighth and
tenth respondents and accordingly there
is no reason why the first
applicant should pay their costs.
[22]
For the reasons set out above I make the
following order:
Order
1.
The first applicant’s application is
dismissed;
2.
The first applicant is ordered to pay the
first, second and ninth respondents’ costs.
________________________
D H Gush
Judge
of the Labour Court of South Africa
Appearances:
For the First
Applicant: Advocate
F Boda SC
Instructed
by: Norton
Rose Attorneys
For the First
Respondent: Advocate
L Frank SC
Instructed by
Mashabane
Liebenberg Sebola Attorneys
For the Second and Ninth
Respondents Advocate
W Nicholson
Instructed by:
Laurie
Wright and Partners
For
The Employees Advocate
Z Ploos van Amstel
[1]
Act
66 of 1995 as amended.
[2]
Founding affidavit para 13 at page 11.
[3]
Annexure B to the Administration Agreement pleadings at page 44.
[4]
Pleadings at page 57.
[5]
Founding affidavit at para 24.2 pleadings page 17.
[6]
First applicants replying affidavit pleadings at pages 305 –
313.
[7]
Founding affidavit at paras 13 – 18 pages 11 – 13.
[8]
(CCT2/02)
[2002] ZACC 27
;
2003 (2) BCLR 154
;
2003 (3) SA 1
(CC).
[9]
2012
(1) SA 321 (CC)
[10]
Id
n 9.
[11]
Founding affidavit para13 at page 11.
[12]
Section 197 (1) of the LRA.
[13]
(2008) 29 ILJ 1707 (LAC). See also:
Zungu
v Premier of the Province of KwaZulu-Natal and Others
[2018] ZACC 1
; (2018) 39 ILJ 523 (CC);
[2018] 4 BLLR 323
(CC);
2018
(6) BCLR 686
(CC).