IN THE LABOUR COURT OF SOUTH AFRICA
HELD AT JOHANNESBURG CASE NO : J3341/98
In the matter between :
NATIONAL UNION OF METAL WORKERS
OF SOUTH AFRICA First Applicant
SHEZI, E C Second Applicant
and
SUCCESS PANELBEATERS AND SERVICE CENTRE CC
t/a SCORE PANELBEATERS AND SERVICE CENTRE
Respondent
_____________________________________________________________
_____
JUDGMENT
_____________________________________________________________
_____
JAJBHAY, A.J.
[1] The First Applicant in this matter is the National Union of
Metal Workers of South Africa, a registered trade union (the
Union). The Second Applicant is E C Shezi who is a member of
the Union. The Respondent is Success Panelbeaters and Service
Centre CC, a Close Corporation registered in terms of the Close
Corporations Act 69 of 1984 with its principal place of business at
38 Rosettenville Road, Village Main, Johannesburg.
[2] The material facts can be summarised as follows :
a. The Second Applicant was employed by a business known
as Score Panelbeaters and Service Centre. He was dismissed on
the 7th of March 1996. At the time of his dismissal, the business
was owned by a Close Corporation called Stescore CC.
b. A dispute concerning an unfair labour practice in respect of
the dismissal of the Second Applicant was referred to the
Industrial Court, and processed in terms of the provisions of
Section 46(9) of the Labour Relations Act of 1956 as amended
(the 1956 Act).
c. During or about January and February 1997, however by no
later than the 3rd of February 1997, the business referred to as
Score Panelbeaters and Service Centre, and owned by Stescore
CC was purchased by the Respondent in the present matter.
d. On the 19th of February 1997, the Industrial Court
determined that the dismissal of the Second Applicant
constituted an unfair labour practice in terms of the 1956 Labour
Relations Act and ordered that the Respondent in the Industrial
Court proceedings (i.e. the old employer) reinstate the Second
Applicant and pay to the Second Applicant compensation.
e. The old employer was a party to the proceedings in the
Industrial Court.
[3] In terms of the Notice of Application, the Applicants seek an
order in the following terms :
a. Declaring that an employer who accepted transfer of the
whole or any part of a business, trade or undertaking as a going
concern after the commencement of the Labour Relations Act 66
of 1995 (the 1995 Act) is bound by an order of the Industrial
Court in respect of a dismissal by the previous employer;
b. Declaring that Success Panelbeaters and Service Centre CC
having accepted transfer of business, Score Panelbeaters and
Service Centre, as a going concern after the commencement of
the Act, is bound by the order of the Industrial Court in respect of
the dismissal of Mr M C Shezi, the Second Applicant in this
application, by the previous owner of the business, Score
Panelbeaters and Service Centre, and is therefore required :
i. to reinstate the Second Applicant with effect from 19th of
February 1997 on terms and conditions no less favourable than
those that governed his employ prior to his dismissal on 7th
March 1996; and
ii. to pay the Second Applicant R24 200,00 as compensation
for his unfair dismissal.
c. Directing the Respondent to reinstate the Second Applicant
with effect from 19th February 1997 on terms and conditions no
less favourable than those that governed his employ prior to his
dismissal on 7th March 1996, and to pay the Second Applicant
R24 200,00 as compensation for his unfair dismissal;
d. Directing the Respondent to pay the costs of this
application.
[4] The issue that I have been asked to determine is whether a
new employer who accepted transfer of the whole or any part of
a business, trade or undertaking as a going concern after the
commencement of the 1995 Act, is bound by an order of the
Industrial Court pronounced in terms of the 1956 Act, regarding a
dismissal by the old employer.
[5] Section 197 of the 1995 Act which deals with the transfer of
contract of employment reads :
"(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
(b) the whole or a part of a business, trade or undertaking is
transferred as a going concern -
(i) ...
(ii) ...
(2)
(a) If a business, trade or undertaking is transferred in the
circumstances referred to in sub-section (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."
For the purposes of the present matter, it is important to
consider Schedule 7, Items 21(1) and Item 22(1).
Item 21(1):
"Any dispute contemplated in the Labour Relations laws that
arose before the commencement of this Act must be dealt
with as if those laws had not been repealed.
Item 22(1):
In any pending dispute in respect of which the Industrial
Court or the Agricultural Labour Court had jurisdiction and in
respect of which proceedings had not been instituted before
the commencement of this Act, proceedings must be
instituted in the Industrial Court or Agricultural Labour Court
(as the case may be) and dealt with as if the labour
relations laws had not been repealed. The Industrial Court
or the Agricultural Labour Court may perform or exercise
any of the functions and powers that it had in terms of the
Labour Relations laws when it determines the dispute."
[6] In the matter of Schutte and Others v Power Plus
Performance (Pty) Limited and Another (1999) 2 BLLR 169
LC Seady A.J. stated the following at paragraph 27 of the
judgment :
"Section 197 is the first of its kind to find its way into the
South African statute books. The section commences by
giving legislative effect to common law prohibition of
transferring a contract of employment from one employer to
another without the employee's consent. In the celebrated
terminology of the English Court of Appeal in Nokes v
Doncaster Amalgamated Collieries (1940) AC 1041, an
employee's right to choose her employer constitutes "the
main difference between a servant and a serf".
[7] A proper construction of the 1995 Act is determined by
having recourse to the explanatory memorandum that
accompanied the Draft Labour Relations Bill. The relevant
paragraph pertaining to the case on hand reads :
"The Draft Bill explicitly deals with the employer's rights and
obligations in the event of a transfer of an undertaking.
This resolves the common law requirement that existing
contracts must be terminated and new ones entered into,
which leads to the retrenching of employees, the paying of
severance benefits etc. and escalates costs in a way that
inhibits these commercial transactions. Provision is made in
the Draft Bill for the automatic transfer of contracts of
employment to the transferee provided that the employee's
consent to the transfer. All rights and obligations arising
from the contract of employment are transferred. In the
case of insolvency however ..."
[8] In Schutte's case supra, Seady, A.J. sets out in paragraph
30 that :
a. “The primary purpose of Section 197 is to protect the rights
of employees during certain processes of business restructuring.
Their continuity of employment is ensured if there is a change of
employer. This is an area of legal regulation where the tension
between commercial interests and social policy for employees is
at its highest. B Jordaan puts it in this way : At the heart of the
disputes over transfers and closure lies a clash between the
disputes over transfers and closure lies a clash between the
employer's interest in the efficiency or survival of the
undertaking and the employee's interest in job security; between
the employer's right to safeguard sensitive information and the
employees to be informed at the earliest possible opportunity of
changes in the structure and organisation of the enterprise; or
between the employer's right to transfer the undertaking and the
employee's right to freely choose his/her employer.”
(See Transfer, Closure and Insolvency of
Undertakings (1991) 12 ILJ at 935.)
Seady A.J. continues at paragraph 31 in the Schutte and
Others judgment supra :
"Given the fundamental conflict of interests addressed by
Section 197 it is regrettable that its provisions are so terse.
Perhaps this is inevitable since the section strikes at the
very heart of that conflict and the Act, in its final form, is a
product of a negotiated agreement between organised
labour and capital, the representatives of the conflicting
interests. The provisions of Section 197 are part of the Act's
mechanisms designed to provide security of employment in
times of change. They give effect to the Constitutional
right to fair labour practices in situations of business
restructuring and reorganisation of employment and
must be interpreted in this context." (Emphasis added).
[9] The Labour Appeal Court in the case of Edgars Stores
Limited v SACCAWU and Another (1998) 5 BLLR 447 (LAC) at
449 stated :
"In terms of Items 21(1) and 22(1) of Schedule 7 of the 1995
Act the Industrial Court is required to determine the dispute
if :
• the dispute was contemplated by the 1956 Act;
• the dispute arose prior to 11 November 1996;
• the Industrial Court had jurisdiction to determine the
dispute; and
• proceedings had not been instituted prior to 11 November
1996 to determine the dispute."
[10] On the 19th of February 1997, the Industrial Court had
made the following award :
"1. I am satisfied that the dismissal of the Applicant was
procedurally and substantially (sic) unfair and this
constitutes an unfair labour practice;
2. The Respondent is required to reinstate the Applicant on
terms and conditions no less favourable to him than those
that governed his employ prior to 7 March 1996;
3. The Respondent is further required to pay the Applicant as
compensation, an amount equal to R24 200,00 calculated at
R550,00 x 4 x 11, which amount shall be made payable
within 14 days from date of this order when the Applicant
reports for duty;
4. There is no order as to costs."
[11] It is not disputed in the present matter that Score
Panelbeaters and Service Centre were the Respondents in the
matter that was determined at the Industrial Court.
[12] Thereafter, an application was instituted in terms of Rule 30
of the Rules of the Industrial Court, for an order that the incorrect
party was cited as the Respondent. On the 12th of May 1997, the
Industrial Court in response to this application made the following
order :
"1. Having considered the representations and other
documentation placed before it, and having regard to the
specific circumstances of the various applications made by
the parties, the Court, after having carefully considered all
the aforegoing, deems it equitable and reasonable to order
that :
1.1 The Court lacks jurisdiction to consider the Applicant's
application in terms of Rule 30 of the Rules of this Court.
1.2 Equally, the Court lacks jurisdiction to consider the
Respondent's counter application in terms of Rule 15 of the
Rules of this Court.
1.3 A default judgment granted by the Court on 19 February
1997 under case number NH11/2/28336 stands unvaried.
1.4 The Applicant, Loyal Panelbeating CC t/a Score Panelbeaters
and Service Centre, may if it so wishes apply for a rescission
of the judgment mentioned in paragraph 3 above within 21
days from date of delivery of this order.
1.5 The Respondent may also, if it so wishes, and depending on
paragraph 4 above consider utilising provisions of Rule 11 of
the Rules of this Court.
1.6 There is no order as to costs."
[13] There has neither been an application for the rescission of
the judgment, nor has the Applicant attempted to execute his
rights in terms of the order of the Industrial Court.
[14] Upon a proper reading of the papers, it appears that the
Respondent has not applied for the rescission of the judgment of
the Industrial Court, because it was advised all along that the
incorrect party was cited as the Respondent. This point was
neither raised nor argued in the present matter, and
consequently I am not called upon to make an appropriate
finding.
[15] In my view, the provisions of Schedule 7, Items 21(1) and
22(1) do not apply in this particular application. The dispute
referred to in terms of the 1956 Act was determined by the
Industrial Court. This Court is not empowered with any residual
powers to interfere with the orders of the Industrial Court. An
appeal to the Labour Appeal Court regarding a decision of the
Industrial Court is a different matter and is specifically catered for
by the Rules of this Court. The dispute envisaged by Schedule 7,
Item 21(1) has been duly pronounced upon and a judgment or
order has been obtained. The dispute has been fully determined
and the subject-matter of the dispute has been finalised. If I were
to hold otherwise, in my view, I would be reopening a matter that
has already been determined by the Industrial Court. This Court
is not empowered to do that.
[16] The rights and obligations determined by the Industrial
Court may not be lost through a mere delay in enforcing it and no
reason exists for holding otherwise in this case where the
Applicant was anticipating an application to rescind the order
granted by the Industrial Court. The Applicant has attached
several letters to its founding affidavit which is conclusive proof
of this fact. In the absence of proper time constraints determined
by the presiding officer in the exercise of such order, in my view,
such rights in compliance of the order must be exercised within
reasonable time, it does not follow that a failure to exercise the
right within such time results ipso facto in its loss, (this is apart
from the law relating to prescription). In the light of the above, I
am not persuaded by Mr Landman's argument that the dispute
concerning the Second Applicant's "alleged unfair dismissal was
a dispute contemplated in the Labour Relations laws that arose
before the commencement of the 1995 Act, which therefore must
be dealt with as if those laws had not been repealed".
[17] Does Section 197 of the 1995 Act apply to the present
transaction? The uncontroverted evidence is that the Industrial
Court order was against a business known as Score Panelbeaters
and Security Centre which was owned by Stescore CC (the old
employer). The business was purchased by Loyal Panelbeaters
CC on or about the 3rd of February 1997, which subsequently
changed its name to Success Panelbeaters and Service Centre
(the new employer and the Respondent in the present
application).
[18] There is good reason to apprehend that in fact a transfer as
a going concern had been effected at this stage. The words :
"All 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 ...", in Section 197(2)(a) of the
1995 Act are enabling and empowering words. They confer
1995 Act are enabling and empowering words. They confer
a legislative right and power on the individuals referred to
(each employee). Conversely they create a duty on the
person against whom it is conferred (the new employer) to
exercise it.
[19] The enabling words are construed as compulsory whenever
the object of the power is to effectuate a legal right. In the
present matter, it is precisely these rights of the Applicant that
require the exercise of power. A proper approach in determining
whether Section 197 applies in the present matter is by
considering whether if it is not applied, it would impair existing
rights and obligations. An accrual of this right which was
acquired prior to the introduction of the 1995 Act is enforceable
in the circumstances of the present test. In the event of the non-
recognition of this right, the beneficiary of this right could in
terms of Section 158(1)(a)(iv) approach this Court for an
appropriate declarator. Kgethe and Others v LMK
Manufactures (Pty) Limited and Another (1998) 3 BLLR 248
(LAC) 37.
[20] In view of the above, Mr Landman's submission that this
Court does not have jurisdiction to grant the order prayed for in
terms of the Notice of Application cannot be sustained.
[21] The Respondents further contended that the Industrial
Court order is unenforceable because of the fact that the
Respondent cited at that forum was merely a trade name and
consequently a warrant of execution could not be issued against
the Respondent cited therein. This particular point was not
forcefully adopted, correctly in my view, when Mr Van der Riet
submitted that a trading name is merely an alias for the owner of
the business. He quoted the case of Mathoe v Auto Service
(Pty) Limited t/a Kwaggasrand Motors (1992) 13 ILJ 976
(LAC) as authority for this proposition. In the present matter, it
was not argued who the owner was after the transfer of the
business.
[22] The Industrial Court is not statutorily empowered to
pronounce on the provisions of the 1995 Act. Accordingly this
Court is the correct forum that can pronounce on the relief
sought by the Applicants. In the present matter, the substantive
rights and obligations pronounced by the Industrial Court remain
rights and obligations pronounced by the Industrial Court remain
unimpaired and are capable of enforcement by the invocation of
Section 197 of the 1995 Act. Therefore, in my view, there is no
reason to conclude that the provisions of Section 197 of the 1995
Act were not intended to apply to the present circumstances. If
this was not so, the Second Applicant would be deprived of a
vested right.
[23] The facts of the present matter indicate that the Industrial
Court had ordered on the 12th of May 1997 that it "lacks
jurisdiction to consider the Applicants' application in terms of
Rule 30 of the Rules of this Court". In addition, the presiding
member had advised the Respondent in that matter, that it could
apply for a rescission of the judgment within 21 days. However
this invitation was never taken up. The documents indicate that
from the 22nd of May 1997, initially the First Applicant, and
thereafter the legal representatives acting on behalf of the First
and Second Applicants requested on several occasions a date
from the labour consultant acting on behalf of the Respondent
setting out when the application for rescission will be made (the
Respondent referred to here is the old employer). I quote the
contents of a letter that was addressed to the First Applicant by a
Mr Martin Hennig who is cited as a labour relations consultant.
The letter is dated the 23rd of May 1997 and it is set out as
follows :
"Dear Sir
IN RE : M C SHEZI v SCORE PANELBEATERS
CASE NUMBER NH/11/2/28336
Your facsimile received by me on the 22nd of May 1997,
refers.
1. This letter serves to confirm our telephonic discussion of
this morning wherein you were advised on the following :
1.1 That the order given by the Industrial Court on the 12th of
May 1997 granted a period of 21 days for the Applicant
(Loyal Panelbeating CC) to apply for a rescission of the
default judgment of 19th February 1997;
1.2 That client is in the process of drafting documentation with
the intention of launching an application to the Industrial
Court before the expiry of the said 21 days;
1.3 That should your client (Mr M C Shezi) proceed to issue a
warrant of execution, same will be opposed together with
the request for a costs order on the basis of attorney and
client scale.
2. We hereby record, and once again reiterate, that should
your client obtain an attachment of Loyal Panelbeating CC's
assets, prior to the expiration of the 21 day period, then our
client will launch an application in the High Court to set
aside such attachment and this letter will be used in support
thereof.
Yours faithfully"
[24] On the 17th of July 1997, a letter was communicated on
behalf of the Applicants by their legal representatives Cheadle
Thompson and Haysom informing the labour consultant that :
"We note that no application for rescission of the Industrial
Court's order dated 19 February 1997 has been made.
Kindly advise when Mr M C Shezi may report for duty at your
client's premises."
In response to this letter, the labour consultant acting on
behalf of the old owner, affords an ingeniously thought and
lame explanation that arises for the first time along the
following lines :
"The default judgment mentioned in your letter was granted
against Score Panelbeaters, which was at all times a trading
name and not a legal entity. My client, now known as
Success Panelbeaters CC purchased the business from the
previous owner. At no stage, whatsoever, was there an
employment contract between my client and Mr Shezi and
therefore there is no obligation on my client to reinstate Mr
Shezi. Kindly seek the necessary recourse from the
previous owner of Score Panelbeaters."
This attitude clearly constituted an attempt to frustrate the
Applicants to exercise and enforce their rights determined in
terms of the Industrial Court order. There were several
subsequent communications between the attorneys acting
on behalf of the Applicants and the labour consultant who
acted on behalf of the old employer in a similar vein.
However the Applicants received no joy from the labour
consultant. Thus necessitating the present application.
[25] In the present matter the requirements of law and fairness
as envisaged in Section 162 of the 1995 Act require that a costs
order not be made. I do not know of a matter that has been
referred to this court on similar facts as the present one, neither
has one been referred to me. The matter is a complex one, and
in the circumstances I do not believe that the Respondent should
be made to pay the costs of the Applicants.
[26] In the result I make an order declaring :
a. That Success Panelbeaters and Service Centre CC having
accepted transfer of the business, Score Panelbeaters and
Service Centre, as a going concern after the commencement of
the Labour Relations Act 66 of 1995, is bound by the order of the
Industrial Court in respect of the dismissal of Mr E C Shezi, the
Second Applicant in this application, by the previous owner of the
business, Score Panelbeaters and Service Centre, and is therefore
required :
i. to reinstate the Second Applicant with effect from 19
February 1997 on terms and conditions no less favourable than
those that governed his employ prior to his dismissal on 7 March
1996; and
ii. to pay the Second Applicant R24 200,00 as compensation
for his unfair dismissal.
b. I make no order as to costs.
M JAJBHAY
Acting Judge of the Labour Court
of South Africa
DATE OF HEARING : 23rd of April 1999
DATE OF JUDGMENT : 7th of May 1999
FOR THE APPLICANTS : Advocate J G Van der Riet instructed by Cheadle
Thompson and Haysom
FOR THE RESPONDENT : Advocate A Landman instructed by J L Van der Walt