IN THE LABOUR COURT OF SOUTH AFRICA
Held in Durban
Case No: D87/97
In the matter between :
TEKWINI SECURITY SERVICES CC. Applicant
and
Respondent
JUDGEMENT
ZONDO J :
Introduction :
[1] This is an application in which the applicant applies for the rescission
of an order which was granted by my Brother, Mlambo J, on the 14 th
May 1998 in a matter in which the respondent in this application
sought an order against the present applicant making a settlement
agreement previously concluded at the CCMA between the parties an
order of this Court in terms of sec 158(1)(c) of the Labour Relations
Act, 1995 ( “the Act” ). Before dealing with the issues, it is convenient
to first give the factual background to the matter. I give it here below.
Background:
[2] Up to about February or so in 1997 the respondent, one Mr Ndaba and
one David Robinson were employed by a close corporation called
Protector CC at 32 Powell Road, Umngeni, in Durban. Protector CC
conducted a security business. One Miss Logue was the sole member
of Protector CC. Mr Robinson had been employed by Protector CC
from 1990 as a manager. In 1994 Logue left for London and asked Mr
Robinson to manage the business in her absence.
[3] During 1995 and 1996 Robinson visited London on several occasions
to see Logue with regard to the business of Protector CC. It transpired
that, in going to London, Logue was fleeing from the Receiver of
Revenue who was conducting certain investigations against Protector
CC. When Robinson realised that Logue had no intention of returning
to South Africa to resolve the matter relating to the Receiver’s
investigations, Robinson and Mr Ndaba, decided to resign from
Protector CC and to start a security business.
[4] Robinson and Ndaba formed a close corporation which they called
Tekweni Security CC, the applicant in this application. Like Protector
CC, the applicant was to conduct a security business. Robinson and
Ndaba became the two members of the applicant. They approached
clients of Protector CC and asked them to transfer the contracts which
they had with Protector CC to the applicant “in order to maintain
continuity in their services” obviously because Protector CC would
stop operating as its only member was overseas with no intention of
returning and its manager had resigned. According to Robinson, the
applicant started trading in March 1997. It did so from the premises of
Protector CC which Robinson says he purchased from Logue.
[5] Robinson and Ndaba then called a meeting of all the staff of Protector
CC and gave them forms to sign in order to resign from Protector CC.
They also gave the staff of Protector CC forms to apply for
employment with the applicant. There seems to be a dispute between
the parties whether the employees were invited to join the applicant or
whether they were simply told that, from then onwards, they were
operating under the applicant and no longer under Protector CC. That
dispute is of no consequence as it is common cause that the employees
were given the forms I have referred to above.
[6] It would appear that most employees of Protector CC signed the
resignation forms to resign from Protector CC as well as the job
application forms to apply for employment with the applicant.
However, there is a dispute between the parties on whether the
respondent did sign the resignation forms as well as the job application
forms. It would appear from the papers that, according to the
applicant, by the time the present dispute arose the respondent had not
signed the necessary resignation forms to resign from Protector CC
nor had she signed the job application forms to apply for employment
with the applicant. The respondent says, although she refused to sign
the resignation forms to resign from Protector CC, she did sign the job
application forms to apply for employment with the applicant.
[7] The respondent says her stance was that she could not understand why
it was necessary for her to resign from a “nonexisting company”
that is Protector CC. The applicant says the respondent’s stance was
that she was not prepared to resign from Protector CC unless she was
paid a retrenchment package. Again the discrepancy in the two
versions is not material for purposes of this judgement.
[8] The applicant says the respondent was never employed by the
applicant. However, it says, the respondent worked only until the 20 th
March 1997. It further says the respondent was informed that she
could not be employed by the applicant while she was employed by
Protector CC. According to the applicant the respondent’s attitude was
that she was not interested in employment by the applicant. The
respondent has denied this allegation. The applicant says, in the light
of all this, it advised the respondent to stop working. This, the
applicant says, was on the 20 th March 1997. The respondent says the
date on which she was dismissed was the 1 st of April 1997. The date
when the respondent was told to leave is not of much significance in
this matter.
[9] Subsequent to being instructed to stop working, the respondent
referred a dismissal dispute to the Commission for Conciliation,
Mediation and Arbitration ( “the CCMA” ). Her complaint was that
she had been dismissed unfairly by the applicant. The applicant’s
stance was that it had never employed the respondent because, on its
version, she had not signed a job application form to apply for
employment with it.
[10] A settlement agreement was concluded between the applicant and the
respondent in full and final settlement of the unfair dismissal dispute
which the respondent had referred to the CCMA. It is that agreement
which the respondent asked this Court to make its order.
[11] The terms of the settlement agreement were the following :
“1 Without any admission of any liability, Tekwini Security Services
will perform the following for the employee :
(a) they will secure all outstanding monies and documents due to the
employee by Protector CC;
(b) she will be given the equivalent of 2 months salary.
(c) she will be given first preference for employment with Tekwini
CC. for a position for which she is qualified.
2.1 This being in full and final settlement of the said dispute.
2.2 No variation of this agreement will be legal and binding unless
reduced to writing”.
[12] In an attempt to discharge its obligations in terms of the settlement
agreement, the applicant subsequently paid the respondent an amount
of R1057,26 and gave her all the documents in its possession due
Protector CC including an unemployment Insurance Fund card. The
amount of R1057,26 was a salary for March 1997 including double
pay for Sunday work and leave pay. The respondent was also paid
R896,48 being her month’s salary for April 1997. This was done in
May 1997. In June 1997 the CCMA wrote to the applicant saying the
amount of R1057,26 could not be regarded as part of the settlement
agreement because it was money due to the employee anyway. The
CCMA said there was, therefore, still a month’s salary that the
respondent was entitled to in terms of the settlement agreement. The
applicant says she immediately telephoned the CCMA about their
letter and faxed through proof of compliance with the settlement
agreement.
[13] The applicant says after sending to the CCMA what it says was proof
of compliance with the settlement agreement, it heard nothing further
about the matter until on or about the 17 th June 1997. That is the date
on which it received a copy of the respondent’s application to make
the settlement agreement an order of this Court. In terms of the Notice
of Motion of that application at 12h00 on the same day an application
would be made to this Court to have the settlement agreement made an
order of Court, and, if the applicant wished to oppose the application,
it had to notify its intention to oppose by the 13 th June 1997 four days
earlier which was obviously impossible to do. The applicant received
the Notice of Motion at about 10h41.
[14] The applicant says it was due to the late notification that it could not
attend Court. However, Robinson says, soon after receiving the Notice
of Motion, he telephoned the Labour Court and spoke to Natasha who,
after hearing the whole explanation, asked him to fax through to the
Labour Court proof of payment. Robinson faxed through documents
showing payment of R2643,51. Thereafter he heard nothing further
about the matter until he received a copy of the judgement of this
Court on the 19 th June 1998 from the respondent’s attorneys.
[15] As soon as the applicant had received the judgement, it instructed its
attorneys to investigate the matter. The applicant says it has no
recollection of receiving the notice of set down. Robinson says if he
had, he would have taken the necessary steps to deal with the matter.
[16] It is common cause that Mlambo J’s judgement was given in the
absence of the applicant. The explanation for the applicant’s absence
in Court on that day is that it received short notice, in the first place,
but, secondly that, after Robinson had explained to Natasha in the
Labour Court (who asked him to fax through proof of payment) what
had happened, and had heard nothing further, he thought that the
matter had been laid to rest. It seems clear that the matter did not
proceed on the 17 th June. This is not surprising if one has regard to the
short notice that the applicant had been given. About a year lapsed
before the matter was heard a very long time.
[17] The matter came before Mlambo J on the 14 th May 1998 as an
unopposed matter. Mlambo J gave judgement in favour of the
respondent. In par 8 of that judgement, Mlambo J made the following
order :
“[1] The agreement of settlement dated 2 May 1997 is made an order
of this Court in terms of section 158(1)(c) [of Act 66 of 1995].
[2] The respondent is ordered to comply with this agreement of
settlement as follows :
[(a)] to employ the applicant with retrospective effect to 1 July 1997 in
any of the positions in which Nokuthula Ngidi and Nokulunga
Mdabe, that is of patrol security guards (sic), were employed.
(b) the respondent is also ordered to secure all outstanding monies
and documents as set out in the agreement of settlement and to be
handed over to the applicant within 10 days of her reporting for
work.
[3] There are no costs in this application”.
I now turn to consider the rescission application itself.
The rescission application
[18] It is true that, in a rescission application, an applicant is not required to
show that its defence in the main case will definetly be upheld nor is it
required to show that its defence has reasonable prospects of being
sustained. However, I also do not think that a Court should grant a
rescission without conducting an assessment of some kind of the
prospects of such defence being sustained in the main case. I think a
Court should conduct such an assessment and, in doing so, the Court
should bear in mind that it is for the Court dealing with the main
matter to decide the merits of such a defence. For that reason, even if
the court hearing the rescission application is of the prima facie
opinion that such a defence does not have reasonable prospects of
being sustained in the main case, it should not necessarily lean
towards denying the defendant the opportunity to defend the main case
because the Court dealing with the main case may well take a different
view.
[19] However, the above does not mean that, even if the Court hearing the
rescission application is satisfied that the defence which the defendant
seeks an opportunity of placing before the court in the main case has
no prospects whatsoever, it should still grant the defendant the
opportunity to defend the main case on the basis of such a defence. In
my view, in that event, the Court should not grant the rescission
application because it would only serve to unduly delay the bringing to
an end of the dispute between the parties in circumstances where the
same judgement that was arrived at in the absence of the defendant
will be arrived at in its presence but after a time consuming and
costly litigation process which could be avoided.
[20] In this case the application which was heard by Mlambo J in the
applicant’s absence was an application to make a settlement agreement
an order of Court. The settlement agreement was one which the
applicant had voluntarily concluded with the respondent. If the order
that Mlambo J made did no more than simply give such an agreement
the status of an order of Court, it would have been interesting to know
on what basis the applicant could have had a complaint about that,
because, if it intended to comply with the agreement, it ought not to
matter that the agreement has been made an order of Court. However,
the applicant’s complaint is not only that it had complied with the
agreement but, also, that the order made by Mlambo J went beyond
making the settlement agreement an order of Court.
[21] There are two obligations in respect of which the question arises
whether the applicant had or had not complied with the settlement
agreement. The first one is whether the amount of R1057,26 was or
was not part of the payment of two month’s salary contemplated in the
settlement agreement. The second is whether the applicant did or did
not discharge its obligations towards the respondent when it employed
another employee or two other employees. I deal first with the amount
of R1057,26.
[22] The applicant says R1057,26 was a months’ salary for the respondent
including double pay for Sunday work. However, the applicant says
the respondent never signed an application for employment with the
applicant which is what other employees did and that, in the light
thereof, the respondent was never in the employ of the applicant and,
therefore, it could not be said that the amount of R1057,26 is an
amount that was due to the respondent in any event. Therefore, says
the applicant, that, was part of the two months’ salary that the
applicant had undertaken to pay in terms of the settlement agreement.
As should be clear from what I say below, there is no merit in this
contention.
[23] Quite clearly the respondent worked for the benefit of the applicant in
March 1997 and did so at the request of or at the instance of, the
applicant. She has provided a payslip for March 1997 issued by the
applicant indicating the salary that the applicant, not Protector CC,
paid her for March 1997. The applicant seems to have operated on the
mistaken belief that, if the respondent did not sign the application
form for employment, there could be no employment relationship
between itself and the respondent. That is, of course, erroneous. A
contract of employment can be verbal and can be express or implied.
In this case the applicant itself says Protector CC had ceased trading.
So how could the respondent have been doing work for Protector CC?
[24] Apart from what I have said above which showed that the respondent
was working for the applicant and was being paid a salary by the
applicant, there are the provisions of sec 197(2)(a) of the Labour
Relations Act, 1995 ( “the Act” ) which are also relevant. Sec 197(2)
(a) must be read together with sec 197(1)(a). Sec 197(1)(a) and sec
197(2)(a) read thus :
“(1) A contract of employment may not be transferred from one
employer (referred to as 'the old employer') to another employer
(referred to as 'the new employer') without the employee's consent,
unless
(a) the whole or any part of a business, trade or undertaking is
transferred by the old employer as a going concern; or
(2) (a) If a business, trade or undertaking is transferred in the
circumstances referred to in subsection (1) (a), unless otherwise
agreed, all the rights and obligations between the old employer
and each employee at the time of the transfer continue in force as
if they were rights and obligations between the new employer and
each employee and, anything done before the transfer by or in
relation to the old employer will be considered to have been done
by or in relation to the new employer”.
[25] Sec 197 has its origins in the Transfer of Undertakings (Protection of
Employment) Regulations, 1981 of the UK which were themselves
promulgated in order to give effect to the EEC Council Directive
77/187 the Business Transfers Directive. The purpose of the EEC
directive as well as that of the UK Regulations has been said to be the
protection of employees’ rights in the event of a transfer of a business
or undertaking. ( Dr Sophie Redmond Stitching v Barlot & Others
[1992] IRLR 366 ). Although the wording of the directive is not
identical to that of the UK Regulations nor to that of sec 197 of our
LRA, it is crystal clear that sec 197 has the same purpose as well. In
those circumstances it is helpful to have regard to cases dealing with
the UK Regulations as well as cases decided by the European Court of
Justice dealing with matters of interpretation and application of the
EEC Council Directive.
[26] In this matter the applicant was, quite clearly, formed for the purpose
of taking over the business of Protector CC. In Porter and
Nananyakara v Queen’s Medical Centre (Nottingham University
Hospital) [1993] IRLR 486 the High Court held that a change in the
provider of a service may bring about a transfer of business. In Dr
Sophie Redmond Stiching v Bartol and Others [1992] IRLR 366
the European Court of Justice held that there was a transfer where, in
the context of contractual relations, there is a change in the legal or
natural person responsible for carrying on the business and who incurs
the obligation of the employer towards employees of the undertaking.
It also held that the fact that the relevant decision is taken unilaterally
by the public authority rather than by agreement did not mean that
there could be no transfer in those circumstances. The Court has also
held that a transfer of business may occur where the owner of a
business who had leased premises, decided to change the lessee. (See
also Ny Molle Kro 287/86 [1989] IRLR 37 ECJ; Daddy’s Dance
Hall 324/86 [1988] IRLR 315 ECJ).
[27] In Dr Sophie Redmond Stiching the European Court of Justice
referred to Spykers v Gebroeders Benedik Abattoir CV [1986]
CMLR 296 where the court had set out the circumstances which may
qualify as a transfer and said three points must be noted in that regard.
Two of these deserve mention. The first point was that the decisive
“criterion for establishing whether there was a transfer within the
meaning of the Directive is whether the business in question retains its
identity as would be indicated, in particular, by the fact that its
operation was actually continued or resumed. The second point was
that in order to determine whether those conditions are fulfilled, it is
necessary to consider all the factual circumstances characterising the
transaction in question. Such circumstances may include the type of
undertaking concerned, whether the business’ tangible assets are also
transferred, whether or not the majority of the employees are taken
over by the new employer, whether or not its customers are transferred
and the degree of similarity between the activities carried on before
and after the transfer as well as the period during which those
activities are interrupted. All those factors are not decisive in
themselves but are only guiding factors.
[28] In this matter the manager of Protector CC saw an opportunity for
business when he realised that Logue had no intention of returning to
South Africa for fear of the consequences of the investigations of the
Receiver of Revenue. He and Mr Ndaba then formed the applicant,
approached existing clients of Protector CC and persuaded them to
transfer the business contracts they had with Protector CC and
purchased from Protector CC the premises which Protector CC had
operated the business from, took over the whole workforce and
continued the same business which Protector CC had been operating
and did so from the same premises. In my view there can be no doubt
whatsoever that there was a transfer of business from Protector CC to
the applicant. The fact that there is no evidence that it was done
pursuant to an agreement between Logue and the members of the
applicant close corporation does not preclude this being a transfer of
business.
[29] I am unable to fault the approach of the European Court of Justice as
revealed above on when a transfer of a business can be said to have
occurred. I am mindful of the fact that the provisions of the
instruments being interpreted are not identical. However, that
notwithstanding, I am satisfied that the same approach is appropriate
for sec 197 of our Act. In those circumstances and, applying that
approach, I conclude that a transfer of business occurred in this case.
Such business was transferred from Protector CC to the applicant.
That being the case, it goes without saying therefore, that in terms of
sec 197(2)(a) of the Act the contract of employment which existed
between the respondent and Protector CC was transferred to the
applicant. It was therefore unnecessary for the respondent to have
signed a resignation letter in respect of her employment with Protector
CC nor was it necessary for her to have applied for employment with
the applicant before the applicant could be said to have employed her.
Accordingly, during March 1997 the respondent was employed by the
applicant and the amount of R1057,26 was her due and lawful salary
for that month and could not be part of two months’ payment
contemplated in the settlement agreement. The applicant still owed the
respondent a month’s salary at the time of her application before
Mlambo J and was therefore in breach of the settlement agreement.
The respondent was, therefore, on that ground alone, justified in
bringing the application to make the settlement agreement an order of
this Court.
[30] In the light of the above, it would serve no useful purpose for the
Court to rescind the first sentence of the order of Mlambo J in par 8 of
his judgement. The question that still remains is whether or not it
would serve any purpose to rescind the order contained in the second
sentence of par 8 of Mlambo J’s judgement. In terms of that part of the
order, the applicant was ordered to employ the respondent with
retrospective effect to 1 July 1997 in any one of two positions. The
one position was where one Nokuthula Ngidi is said to have been
employed. The second is where Nokulunga Mdabe was employed.
From par 7 of Mlambo J’s judgement it transpires that the reason why
Mlambo J made this order is that he concluded that the applicant had
flagrantly breached the settlement agreement in that it had failed to
give the respondent preference of employment.
[31] In so far as the applicant seeks an opportunity to show that no order
should be made against it to employ the respondent in any of the two
positions, the applicant had to show that it had a defence to put
forward in respect of this order.
[32] In the founding affidavit the applicant refers to its attempt to give
effect to part of the settlement agreement when a certain vacancy arose
and says it sent a letter to the respondent by registered mail and also
tried to telephone her but when she did come to the applicant in
response, someone else had been appointed. The applicant does not
say who the person was whom it appointed to that position.
Accordingly I do not know whether it was anyone of the two ladies
mentioned in Mlambo J’s order. In its replying affidavit the applicant
has sought to make out a case in relation to the second part of Mlambo
J’s order which it had not put up in the founding affidavit. It is not
entitled to do so. If I ignore the case which the applicant attempted to
make out in its reply, I would decline to rescind that part of Mlambo
J’s order which relates to the employment of the respondent. The basis
for that approach would be that, as the applicant only deals with one
position that was filled while the order refers to two position, it means
that there is a position which could have been filled by the re
employment of the respondent in respect of which the applicant has
not shown that it has a bona fide defence that it would pursue in the
main case if it was given an opportunity. If, however, I take into
account also what the applicant says for the first time in its replying
affidavit which it should have said in the founding affidavit in relation
to the filling of the positions, then I would conclude that the applicant
has a bona fide defence which it pursue if it is afforded an opportunity
to defend the main action. I have come to the conclusion that I should
consider what the applicant says in its replying affidavit about the
positions which were filled even though it should in fact have been
included in the founding affidavit. My reason for adopting this
approach is that the respondent had two options to deal with this
situation. The one is that the respondent could have applied to have
that material struck out from the replying affidavit on the basis that it
is material which should have been included in the founding affidavit.
The second is that the respondent could have sought leave to file a
further affidavit to deal with those matters in the reply which should
have been included in the founding affidavit. It chose neither and had
the matter argued on the papers as they stand.
[33] Adopting the above approach I conclude that that part of Mlambo J’s
order which requires the applicant to reemploy the respondent should
be rescinded because the applicant has made out a proper case for
rescission of that order. Accordingly the order I make is the
following :
(a) The applicant’s application for the rescission of that part of Mlambo
J’s order which made the settlement agreement an order of this Court
is hereby dismissed.
(b) That part of Mlambo J’s order which required the applicant to re
employ the respondent is hereby rescinded and the applicant is granted
leave to oppose the respondent’s application to make that part an order
of the Court and, in this regard, the applicant must file its opposing
affidavit to that application within seven calender days from the date
of this order.
(c) There is to be no order as to costs.
R. M. M. ZONDO
Judge in the Labour Court of South Africa
Date of Argument :4 February 1999
Date of Judgement :12 March 1999
For the Applicant :Mr Maeso
Instructed by : Shepston &Wylie
For the Respondent :Mr I. B. G. Ngcobo
Instructed by : I. B. G. Ngcobo & Partners