REPORTABLE
IN THE LABOUR COURT OF SOUTH AFRICA
HELD AT JOHANNESBURG
CASE NO: J 134/00
In the matter between:
CHEMICAL ENERGY PAPER PRINTING
WOOD AND ALLIED WORKERS’ UNION First Applicant
MABUNDA, ELIZABETH & 20 OTHERS Second to Twenty-First
Applicants
and
STRAT-CHEM (PROPRIETARY) LIMITED First Respondent
TECHNIDRYERS (PROPRIETARY) LIMITED Second Respondent
ABYX MARKETING CC Third Respondent
JUDGMENT
NTSEBEZA, AJ:
INTRODUCTION
[1] Between the 27 th and 29 th January 2003, I heard evidence from one
witness each for the Applicants and the Respondents. Mr Krook, ably led
by Mr Hiemstra, was the first witness to testify on behalf of the
Respondents. After cross-examination by Mr Orr, for the Applicants, and
further re-examination by Mr Hiemstra, the Respondents closed their case.
Mr Orr then called Petrus Petje, for the Applicants. Thereafter, the
Applicants also closed their case, and, at my instance, both parties asked
to go and prepare Heads of Argument. I consequently adjourned the
proceedings on the 29th January 2003 to 31st January 2003, for argument.
[2] I am extremely indebted to both Mr Hiemstra and Mr Orr for their very
helpful Heads of Argument. On the 31 st January 2003, having heard
argument, I advised both parties that it would be in the interests of justice
if I had the benefit of a transcript of the record of the trial proceedings on
the days I had listened to the evidence of, particularly, Mr Krook. I
indicated that it was critical, in giving judgment, that I satisfy myself that I
had more than just functional and general understanding of the evidence
led. For that reason, it was agreed that a transcript of the record be
obtained.
[3] Indeed, the obtainment of the transcript was expedited, and, that,
together with my notes, and the Heads of Argument, have made my very
difficult task of deciding the issues here lighter than what it would have
been had I not had the benefit of the transcript. That the delivery of this
judgment comes now is due to other constraints which it is not necessary
to deal with here.
BACKGROUND
[4] In his brief opening address, which he gave at the request of Mr Hiemstra
– Mr Hiemstra in terms of a filed pre-trial minute had the duty to
commence – Mr Orr stated that the case involved the three Respondents
and the retrenchment of a number of individual applicants, about twenty
of them, who were members of the Chemical Energy Paper Printing Wood
and Allied Workers’ Union, the First Applicant (CEPPWAWU). All the
individual employees were employed by Strat-Chem, a chemicals
manufacturing company. All the employees were retrenched in early
October 1999.
[5] Mr Orr stated that his clients are not clear what the role of the Second
Respondent (Technidryers) was. It appeared, though, that Technidryers
was manufacturing, on contract from Strat-Chem, some of Strat-Chem’s
products. What Mr Orr was emphatic about – he had earlier stated that
“the matter is not a straightforward one, unfortunately” – was that none of
the individual employees were ever employed by Technidryers. Mr Orr
contended that it was the Third Respondent rather – Abyx Marketing –
against whom his clients had an issue.
[6] His clients’ case was, firstly, that Strat-Chem’s retrenchment of the
employees was procedurally unfair, there having, essentially, been no
compliance with any sort of fair procedure in their retrenchment.
[7] Mr Orr stated that Strat-Chem would be shown by evidence to have paid
lip service to consultation, and that no attempt was made “ by the parties”
to reach consensus; that the dismissal was substantively unfair because it
was not for a fair reason based on Strat-Chem’s operational requirements;
that the economic difficulties faced by Strat-Chem were not such that the
employees had to be dismissed.
[8] The dismissal, it would be argued, was automatically unfair, not because
Strat-Chem faced operationally difficult problems, but because Strat-Chem
wanted to rid itself of CEPPWAWU. Strat-Chem wanted to have a
workforce on a contract basis and thereby evade the provisions of the
Labour Relations Act No 66 of 1995 (the LRA). It would further be
contended, went on Mr Orr, that because the activities of Strat-Chem and
Abyx Marketing were so intertwined, and because the individuals engaged
in management in the two entities were indistinguishable, what purported
to be a “ sale” of Strat-Chem to Abyx Marketing was in fact a transfer as
contemplated in Section 197 of the LRA.
[9] In any event, Mr Orr submitted, even if I did not, in terms, make a finding
[9] In any event, Mr Orr submitted, even if I did not, in terms, make a finding
that there had been the sort of transfer contemplated in Section 197 of
the LRA, I should nonetheless hold Abyx Marketing just as liable as Strat-
Chem for any relief I might care to award to the employees should I find
against Strat-Chem.
[10] Mr Hiemstra, in response, simply stated that Strat-Chem experienced so
many financial difficulties that it virtually collapsed, and had to be closed.
Mr Hiemstra told me that Mr Krook’s evidence would clearly show that the
closure had been for operational reasons, and that entities like Abyx
Marketing and Technidryers simply “ picked up some of the pieces after ”
Strat-Chem’s demise.
FACTUAL BACKGROUND FROM PLEADING, BUNDLES OF DOCUMENTS
AND EVIDENCE LED
[11] On the 4 th May 2001, the parties filed a pre-trial conference minute with
the Registrar of this Court. Facts that were common cause, among others,
were that:
Strat-Chem, in the business of (among other things)
manufacturing chemical products, employed all the workers in
this case until their retrenchment with effect from 4 October
1999.
Technidryers, also in the business (among other things) of
manufacturing chemical products, only engaged workers on a
contract basis. It had no permanent employees.
Over the years, Strat-Chem used to procure orders from its
clients and outsource the manufacturing of some of its products
to Technidryers.
[12] Abyx Marketing (Abyx), a close corporation, was incorporated on 23
September, shortly before the retrenchment of the workers. There is a
dispute about whether Abyx was also engaged in manufacturing products.
The workers alleged that it was. This was denied and, in the minute, the
Respondents allege that Abyx purchased raw materials, outsourced
manufacturing, and marketed the manufactured products. As a matter of
fact, the heart of the dispute was minuted as being premised on a
difference of view as to exactly what happened between the Applicants
and the Respondents. The Respondents have denied allegations made by
the Applicants, namely, that on or after 11 September 1999, Strat-Chem
transferred its business, or part thereof, in which the workers were
employed, as a going concern to Technidryers, or to Abyx, or to both
Technidryers and Abyx. Respondents allege that no part of Strat-Chem’s
business was transferred as a going concern.
[13] Apart from recording that all other factual disputes that are apparent from
the pleadings remain in dispute, the Respondents admitted a series of
facts in the pre-trial minute of the 4 th May 2001, among which were the
following:
Strat-Chem sold its assets and ceased trading on or about 11
September 1999. As at that date, the company had not been
liquidated or deregistered and existed still.
On 12 August 1999, Strat-Chem had sent a fax to Edward Moseri
(Moseri), a union official in the employ of CEPPWAWU, informing
him for the first time that Strat-Chem intended to rationalise its
operations due to “… the economic circumstances experienced
in this country…” which had had an “ adverse effect on the
operations of the company, resulting in “certain financial and
productivity difficulties”.
[14] The Company, the minute records, could not “ carry on indefinitely in this
matter”. Moseri was advised to attend a meeting with Strat-Chem
representatives on 18 August 1999. Items on the agenda to be discussed
were the following:
Reasons for the need to rationalise operations, and possible
alternatives to avoid any potential retrenchments;
The number and job categories of employees likely to be
affected by the rationalisation process;
The selection criteria for employees who need to be retrenched;
A timetable setting out the timing of the retrenchments;
Proposed severance pay;
Assistance to retrenched employees;
Possibilities for re-employment of retrenched employees.
[15] The meeting, so records the minute, took place, eventually, on 30 August
1999, attended by union officials and Management, including Mr Krook,
accompanied by Alta Bronkhorst (Bronkhorst), the financial manager in
the Company, and Mr Van Rensburg, representing the Confederation of
Employers of Southern Africa (COFESA) to which Strat-Chem is affiliated.
At this meeting, one of the reasons given for the need to rationalise was
that the workers were not meeting their production targets, and that,
according to the Company, was because the workers:
Always took extended toilet breaks;
Habitually arrived late at work;
Constantly took too much annual leave; and
Kept on losing materials.
[16] The union representatives are recorded to have promised to respond to
the Company’s productivity concerns by 4 September 1999. Strat-Chem
further told the workers that the Company was also losing money because
of high labour costs by way of pension and provident fund contributions,
union subscription fees, income tax and unemployment insurance
contributions, among others. Both parties record in the trial minute that
none of the issues on the agenda [see paragraph 14 supra] was
discussed at this meeting notwithstanding that it had been called for that
purpose, as was stated in the notice.
[17] Strat-Chem sent Moseri (in whose place at the 30 th August 1999 meeting
Petje had attended) a fax in which Strat-Chem stated that it had not yet
received any communication from the union. If there was none within the
following 24 hours, Strat-Chem, so advised the fax, might “ continue to act
in its own interest to finalise the issue ”. On 7 September 1999, Strat-
Chem sent a further fax to Moseri, informing him that the Company had
“decided to continue with rationalisation of the operations as discussed in
our meeting on the 30 th August 1999 with Mr Petje and the shop
stewards”.
[18] Moseri responded, addressing the alleged lack of worker productivity,
stating that this was due to a number of factors. Firstly, delay in
production was being caused by the Company’s failure to purchase
sufficient raw materials. Secondly, the quality control department, being
understaffed, resulted in long time-consuming queues of employees
waiting to consult with quality control staff. Thirdly, Strat-Chem itself
disrupted production by insisting on rotating workers between
workstations.
[19] The minute records that Strat-Chem rejected this workers’ input on Strat-
Chem’s decision to retrench the workers. In any event, Strat-Chem replied
that shortages of raw material were influenced by financial constraints
and in any event occurred in the first two days of each month. As for the
quality control query, only one person operated the batch mixing 8
maximum tests, which would therefore not account for any delay. Staff
were rotated because the union requested it in June 1999, so that workers
could learn additional skills. According to the Company these issues had
no influence on the production time.
[20] Taking the attitude the workers’ responses were “ too late” to influence its
decision to retrench them, Strat-Chem announced its intention to sell its
assets and stop operating; that because of labour costs, retrenchments
had become necessary; that the company had considered alternatives to
retrenchment such as a decrease in wages which it could not do without it
retrenchment such as a decrease in wages which it could not do without it
resulting in some workers earning less than the minimum wage.
Consequently, all the Strat-Chem employees would be retrenched from 4
October 1999. Strat-Chem had worked out a timetable in terms whereof,
on the 11 th September 1999, Strat-Chem told the workers that they had
been retrenched. They had been called on that day into a meeting with
management where Krook told them that Strat-Chem was to be closed
that same day; that they had been retrenched; that they would be paid
notice pay until 4 October 1999. They would not be required to tender
their services during the notice period.
[21] It was further recorded in the minute that before the workers left the
premises on the 11 th September 1999, Krook had told them that they
could sign on as contract workers with Technidryers if they so wished, an
option which some of them exercised; that Moseri had, in a fax to Strat-
Chem, stated that the Company had failed to hold proper consultations
with the workers as commanded by law – the Section 189 provisions of
the Labour Relations Act, No 66 of 1995, as amended (the LRA), which had
to be strictly adhered to, notwithstanding Strat-Chem’s allegation that the
union had failed to deliver, timeously, its response aforementioned.
[22] The employer’s reaction, through COFESA’s Van Rensburg, in a fax to
Moseri, was that the union intended to delay “ the matter as far as
possible”; that there was no unfairness in their dismissal since severance
packages had been paid after proper consultation with the union and its
members; that a “ different company” had taken “ over the manufacturing
of some of the products that Strat-Chem previously manufactured ”; and
that the retrenchments had already been concluded; that the union’s
reaction was belated. On 15 September 1999, the union had referred the
dispute about the fairness of the dismissals to the Commission for
Conciliation, Mediation and Arbitration (CCMA) for conciliation. The dispute
remained unresolved.
remained unresolved.
[23] The workers, in the minute, are recorded to be have stated that
Technidryers was formed in order to cut down on labour costs, and to
escape the provisions of the LRA in the process. The Respondents denied
that. Against these background facts, the minute recorded, this Court
would be required to decide whether there was a transfer of the whole or
part of Strat-Chem’s business as a going concern to Technidryers, or to
Abyx. I have to decide, further, whether there was a fair reason for the
workers’ dismissal based on operational requirements; whether Strat-
Chem complied with Section 189 of the LRA, and whether the dismissals
of the workers were effected with a fair procedure, and, if not, what relief,
if any, the workers are entitled to.
[24] The minute also records information that the Respondents furnished to
the Applicants “ in order to shorten the proceedings ”. Among others, the
Respondents stated that machines and equipment were sold to Mr L Sloan
on the 1st October for R127 600,00 (one hundred and twenty-seven
thousand six hundred rand), raw materials and packaging to Abyx on 1
October 1999 to Abyx for R2 198 992,35 (two million one hundred and
ninety-eight thousand nine hundred and ninety-two rand and thirty-five
cents). No assets were sold to Technidryers. Workers L Kumalo, A
Mkhabela, E Molope and S Nemadzihanani signed on as contract workers
with Technidryers. For their part, to questions put to them for their
comments by the Respondents, Applicants replied, inter alia, that all the
machinery used by Strat-Chem had been transferred to Technidryers and
that certain products that were previously manufactured by Strat-Chem
had been transferred to Technidryers.
Against the backdrop of these recorded, admitted and disputed facts
and allegations, I heard Krook and Petje testify.
TRIAL EVIDENCE – PROCEDURAL FAIRNESS
[25] Krook was the main witness. He confirmed that despite the intention
stated in his letter of 12 August 1999, not all the issues around which
parties are obliged to consult, were discussed at the meeting on 30
August 1999. Krook gave three versions for this failure. Though in his
pleadings the employer’s position had been that the union had refused to
deal with these issues when Krook allegedly attempted to raise them,
before me, Krook, in his evidence in chief, stated that the failure to
discuss the issues was because Petje was in a hurry. The meeting
therefore never got around to it. In re-examination, however, he stated
that he had no intention to raise these issues because it would have been
inopportune to do so. Petje, on the other hand, told me that the issues had
never been raised at all, the meeting having dealt only with financial and
productivity issues. Krook’s evidence is disturbingly conflictual in this
regard.
[26] Krook further conceded in his evidence that his letter of the 7 th
September 1999, indicating the need for the rationalisation of Strat-
Chem’s operations meant that the entire workforce would be retrenched .
(The significance of the underlined words will become clearer below here
in paragraph 38.) When he told the workers on 11 September 1999, that
contract jobs were available at Technidryers, Krook further conceded that
he had not discussed this in any amount of detail with Peinaar, the
Technidryers manager.
[27] The contention by the workers is that the absence of a consultative
process on the part of the Company was manifestly unfair; that the so-
called consultation process did not amount to an exhaustive joint problem
solving exercise, something which Mr Orr submitted, by reference to
decisions of this Court and the one above it, was critically important to
determine the fairness or otherwise of a consultation process.
[See: Hedley v Papergraphics Ltd (2001) 22 ILJ 6935 (LC) at 953 I-J;
Johnson & Johnson (Pty) Ltd v Chemical Workers Industrial
Union (1999) 20 ILJ (LAC) at 96 C-97 D; De Bruin v Sunnyside
Union (1999) 20 ILJ (LAC) at 96 C-97 D; De Bruin v Sunnyside
Locksmith Suppliers (Pty) Ltd (1999) 20 ILJ 1753 (LC) at 1759 D-I;
SA Chemical Workers Union & Others v Afrox Ltd (1999) 20 ILJ
1718 (LAC) at 1727 C; and Sikhosana & Others v Sasol Synthetic
Fuels (2000) 21 ILJ 649 (LC) at 655 C-G.]
[28] Mr Orr, in his argument, submitted that the authorities, particularly the
Johnson & Johnson case ( supra), emphasize that where a court is
confronted with a situation where a joint problem solving exercise has not
taken place – as is the case herein – the court ought to determine whether
this was due to a failure either on the part of the employer, or on the part
of the employee. If it was due to the workers’ failure, the dismissals that
ensue cannot be declared unfair. If, however, failure to embark on a joint
problem solving exercise is due to the employer, the resultant dismissals
are procedurally unfair.
[29] Mr Hiemstra, also relying on Johnson & Johnson (supra) submitted that
the proper approach to any investigation into whether Section 189 has
been complied with or not is to examine whether the process was
frustrated by either the employer or the employee. He further submitted
that in Visser v Sanlam (2001) 22 ILJ 666 (LAC), it was held that the
consultation process, in terms whereof parties must consult to achieve the
objectives of the section, involved a bilateral process in which both parties
must consult in good faith. He submitted that the company had attempted
to consult with the union regarding all the issues mentioned in Section
189; that in the 12 August 1999 letter, issues for consultations had been
spelt out, and that on the 30 th August 1999, Krook went into the meeting
with an open mind, and with a view to seeking consensus on means to
avoid closure and retrenchment. Mr Hiemstra told me the union failed
dismally to participate in such discussions.
[30] I have already stated, hereinabove, the three versions that Mr Krook gave
as reasons why the 30th August 1999 meeting failed to discuss the
Section 189 issues, including the reason that he did not raise these issues
Section 189 issues, including the reason that he did not raise these issues
because it would have been inopportune to do so. Mr Hiemstra’s
submission is therefore remarkable, particularly if one considers what
Krook had said in his evidence in chief. When he was asked exactly what
happened and the steps he took, he told me that, “ the initial process
was the attempted meetings with the unions to find a solution to
the situation, and when that failed, we then went on to the actual
retrenchment process. And amongst the procedures were notices
to the union”, whatever this means.
[31] Of course, these were wild claims by Krook, because we know from his
evidence that seven days after the 30 th August 1999 meeting, at which
no consultations on retrenchment took place, dismissal letters had gone
out; that he himself, on issues around retrenchments, had attended only
one meeting, the 30 th August 1999 meeting; that at that meeting he had
threatened to sell the business as a going concern; that the meeting
lasted “probably half an hour, if that”; that because he had not done it
before, he did not consider proceeding with the meeting, in the absence of
Petje (who he claimed had been in a hurry to go), with the shop stewards.
He admitted that he never asked the shop stewards if they wanted to
continue in Petje’s absence with the agenda items that were not only
critically important to deal with but which clearly had not been covered.
He also admitted that his claim that Petje just walked out of the meeting
was not reflected in the minutes. This admission calls into question the
veracity of that claim, which in any event, Petje denied. Mr Krook also told
me that in hindsight, he thought he was probably a bit in awe of the
union. I struggle to imagine how this can properly be proffered as a reason
for failing to consult.
[32] For all these reasons, I cannot accept, with respect, Mr Hiemstra’s
submission that the company at any stage ever attempted to consult with
the workers in the sense contemplated in Section 189. In my view, it is
disingenuous to claim that Krook “ went into the meeting with an open
mind”. Mr Hiemstra’s claim that Krook’s 30 th August 1999 meeting was
mind”. Mr Hiemstra’s claim that Krook’s 30 th August 1999 meeting was
just but the first step in the consultation process is contradicted by
Krook’s own concession, under cross-examination, that with regard to the
retrenchment process, that meeting was the first – (and the last) - which
he himself attended. Other than the letters going backwards and
forwards, which in my view do not take the consultative process on
retrenchment issues any further, the only evidence of any consultation
comes from Krook. It is that of the 30 th August meeting at which none of
the issues for discussion on retrenchment ever took place.
[33] If there ever was a case of paying lip service to a consultation process
that seeks to achieve the ends of solving a problem jointly, I cannot think
of a worse example than the farcical manoeuvres at Strat-Chem that
started, on 30 August 1999, with an admitted non-debate of agenda items
that the law commands must be discussed if a company seeks to dismiss
for operational reasons, and ended with a dismissal notice, without more,
about seven days later. This was no attempt by Strat-Chem to promote an
exercise at joint problem solving, let alone an exhaustive one, as dictated
by the Labour Appeal Court in the Johnson & Johnson case (supra).
[34] Nor can it be said that the exercise engaged upon by Krook and his
company was meant to serve either a pragmatic or a principled function
or both. Moreover, in a constitutional dispensation in which fair labour
practices enjoy entrenchment in the Constitution, it would be a manifest
caricature of workers’ rights guaranteed under that Constitution if I were
to hold, against the tenor of the evidence in this case, that the workers
were subjected to a fair process before they were retrenched.
[See: SA Clothing and Textile Workers and Others v Discreto, a
division of Trump and Springbok Holdings (1998) 19 ILJ 1451
(LAC) 1454 E - J; and Kotze v Rebel Discount Liquor Group (Pty)
Ltd (2000) 21 ILJ 129 (LAC) 132 E - H.]
I cannot, with a judicious mind and a rational evaluation of the facts,
I cannot, with a judicious mind and a rational evaluation of the facts,
hold that the employees in this case were responsible for the failure by
the parties to hold meaningful Section 189 consultations. I therefore
hold that the dismissal of these workers was procedurally unfair.
SUBSTANTIVE FAIRNESS
[35] Krook testified that Strat-Chem had to close due to compelling financial
reasons. Mr Hiemstra argued that despite Mr Orr’s “ thorough and able
cross-examination” of Krook, which was aimed at showing that the
losses suffered by Strat-Chem were artificial, the facts remained as
alleged by Krook, namely that whereas the company made a nett profit in
1997, it recorded a loss of R1 431 414,00 (one million four hundred and
thirty-one thousand four hundred and fourteen rand) in 1999. Mr Hiemstra
argued that Mr Orr’s endeavour to show that the loss of Strat-Chem was
off-set by the profit at Technidryers overlooked the graphs submitted in
evidence by Krook that demonstrated that Strat-Chem and Technidryers
made a nett loss of R754 212,00 (seven hundred and fifty-four thousand
two hundred and twelve rand). Further graphs showed that the reason for
Strat-Chem’s decline in fortune was as a result of a decline in sales from
R1 739 664,00 (one million seven hundred and thirty-nine thousand six
hundred and sixty-four rand) in January 1999 to R1 143 535,00 (one
million one hundred and forty-three thousand five hundred and thirty-five
rand) in August 1999.
[36] All of this, Krook attributed to problems with the labour force, which he
had tried to engage in discussions to improve productivity, to no avail.
The union had not co-operated, leaving him with no alternative but to
close the business. For confirmation of this failure to co-operate, Mr
Hiemstra, in argument, seemed to rely also on Mr Petje’s testimony which
Mr Hiemstra claims confirmed that the 30 th August meeting was devoted
to a discussion about productivity. Mr Hiemstra argued that in a week
from that date the union responded, two hours after Krook’s ultimatum
from that date the union responded, two hours after Krook’s ultimatum
that he would finalise the matter unilaterally, not by pledging workers’
support for productivity improvement, but by blaming the company for
the poor productivity. The company was left with no alternative but to
close down.
[37] Mr Hiemstra also rejected the argument by Mr Orr that the real reason for
the closure was not financial; that the closure had been designed to, and
had the effect of undermining the transfer of the workers’ contracts from
Strat-Chem to Technidryers, or to Abyx, or to both. His argument was that
if that were true, Krook would not have attempted to turn around the
company by engaging the union and the workers in attempts to improve
productivity.
[38] Mr Hiemstra’s eclectical argument overlooks critical elements of Krook’s
testimony. Krook told me that in early July, he was of the view that the
solution to Strat-Chem’s problems could be the retrenchment of some of
the workforce . This, he said, would allow Strat-Chem to place the
remaining workforce on full-time , resulting in increased productivity and
improved delivery times. He wanted to discuss this with the union. Under
cross-examination, he testified that had this plan been implemented, he
would have been able to speak to all major customers, within two days, to
place substantial orders on the basis that there were no problems
anymore at Strat-Chem. This would have created increased turnover that
was necessary to save Strat-Chem. The retrenchments (of some of the
workforce) would also have been some cost saving.
[39] Not only was this proposal never discussed with the union. It was also not
even implemented when Krook did in fact implement, unilaterally, his
retrenchment plan on 7 September 1999. Instead of retrenching some of
the workers, he retrenched all of them (my emphasis). Asked why he had
not unilaterally implemented the retrenchment of fewer workers, Krook
explained that he had lost faith in the union. I found this reply not only
cynical, but disgraceful. It is insulting to everyone’s intelligence who
listened to Krook’s testimony. It is disingenuous and does not succeed in
listened to Krook’s testimony. It is disingenuous and does not succeed in
persuading me that Krook’s decision to dismiss his entire workforce was
based on a genuine operational requirement. I reject it. I reject it, a
fortiori, when I consider that his evidence of how he attempted to discuss
with the union ways to improve productivity can only relate to the 30 th
August 1999 meeting, which he himself said, “ lasted for about a half an
hour, if that” – a meeting at which also by his own admission none of the
issues relevant to retrenchment were discussed.
[40] All in all, I can find no reasonable basis to exist upon which Krook’s
decision to dismiss the workers for operational requirements can be said
to be predicated. Furthermore, I cannot find anything to justify the
unacceptable manner in which he went on to implement his unilateral
decision. The reason he gave – and it does not have to be necessarily one
which I would have given - does not sustain scrutiny. It is grossly unfair.
[See: BMD Knitting Mills (Pty) Ltd v SACTWU [2001] 7 BLLR 705
(LAC).]
I therefore conclude that the dismissal of the workers was substantially
unfair.
TRANSFER OF STRAT-CHEM BUSINESS
[41] It was a bone of contention between the parties whether the evidence
justifies the conclusion that Strat-Chem or some parts of it, was/were
transferred to Technidryers or to Abyx, or to both, as a going concern. Mr
Hiemstra argued that the Applicants rely on one single factor in
contending that there was a transfer of the business as a going concern,
namely, that Technidryers manufactures some of the products previously
manufactured by Strat-Chem. He argued that in this case there was no
severable part of the business that can be said to have been transferred.
What had happened here was that another company had taken over the
manufacturing of a few products. In such a case, argued Mr Hiemstra,
there could be no question of there having been a transfer of the business
of Strat-Chem, or part of it, as a going concern. For this submission, he
relied on an English case, Melon and Others v Hector Powe Ltd [1981]
1 All ER 313 at 314, in which the House of Lords, inter alia, held that:
“ … a change in ownership of a part of a business will seldom occur
except when that part is to some extent separate and severable
from the rest of the business, either geographically or by reference
to the products in some other way.”
[42] Mr Hiemstra, I sensed, seemed to rely particularly on the following
averment of the House of Lords:
“ … the individual employees might continue to do the same work in
the same environment and might not appreciate that they were
working in a different business, but that would not affect the true
position if on consideration of the whole circumstances the new
operation was a different business”
(as per Lord Fraser of Tulleybelton referring, with approval, to Lord
Denning MR in Lloyd v Brassey [1969] 1 All ER 382 at 384, [1969] 2
QB 98 at 103.)
[43] Mr Hiemstra also argued that he had support for his submission that Strat-
Chem was not sold as a going concern in my brother Landman J’s decision
in SA Municipal Workers Union & Others v Rand Airport
Management Co (Pty) Ltd & Others (2002) 23 ILJ 2304 (LC) where, Mr
Hiemstra argued, the Court had held there had been no transfer of part of
the gardening services business as a going concern since the gardening
services were not an entity with a separate management structure, own
goals, own assets, own customers and own goodwill. Mr Hiemstra also
referred me to a number of cases, referred to in the Constitutional Court
judgment, Nehawu v University of Cape Town (UCT) & Others 2003
(3) SA 1 (CC) in which Ngcobo J, reading the unanimous decision of the
Court, had held that since the phrase “going concern” is not defined in the
LRA, it must be given its ordinary meaning unless the context otherwise
indicates. He held that what was transferred must be a business in
operation so that “ the business remains the same but in different hands ”
operation so that “ the business remains the same but in different hands ”
[at para 57].
[44] Mr Orr, on the other hand argued that on the facts – and on the law – my
conclusion should be inescapable that there was a transfer of the whole of
the business of Strat-Chem as a going concern to Abyx and Technidryers.
Mr Orr clearly did not rely on the “ one single factor ” identified by Mr
Hiemstra in anticipation of what his argument would be, namely, that
Technidryers manufactures some of the products previously manufactured
by Strat-Chem. On the contrary, Mr Orr catalogued a series of facts on the
basis of which he argued that Abyx, Technidryers and Strat-Chem were
virtually in the same business.
[45] Without exhausting the submissions made by Mr Orr, the following
evidence was referred to by him. Referring to several pages in the bundle
of documents that formed part of the evidence, Mr Orr argued that Abyx,
Technidryers and Strat-Chem were part of the same group; that Abyx
marketed the same products that Strat-Chem produced and marketed;
that Technidryers manufactured the same products Strat-Chem did; that
Abyx sold products to a large number of customers to which Strat-Chem
sold products, all of which in turn were produced for Abyx by
Technidryers.
[46] Mr Orr further submitted that Krook managed Strat-Chem and Abyx; that
with one exception, Abyx now employed all the former office staff of Strat-
Chem; that Krook had testified that the companies from which Abyx
sourced raw materials – for production by Technidryers – were the same
companies from which Strat-Chem sourced its materials. Mr Orr submitted
that Krook had further testified that the buildings in which Abyx and
Technidryers are housed are across the road from the building in which
Strat-Chem is housed; that Abyx and Technidryers have the same fax and
telephone numbers which Strat-Chem had; that Abyx and Technidryers
used the same software accounting packages licenced to Strat-Chem; that
used the same software accounting packages licenced to Strat-Chem; that
the bookkeeper at Abyx believed Strat-Chem had merely changed its
name to Abyx and that there was a very fluid flow of funds between Strat-
Chem and the other companies in which he, Krook, had an interest, a
position that persisted (as at the date of trial) with Abyx.
[47] Over and above this testimony from Krook, Mr Orr further submitted that
documentary evidence from the bundle showed that Abyx used the
trademarks held by Strat-Chem to market products manufactured by
Technidryers; that Abyx had represented to suppliers, customers and its
medical aid scheme that Abyx is merely Strat-Chem under a different
name. Consequently, suppliers were of the view that Strat-Chem and Abyx
were the same entity. Further, Strat-Chem had lent money to Sloan to buy
its assets, at a loss, which assets were then utilised by Abyx and
Technidryers.
[48] Notwithstanding the fact that Krook was not a member of Abyx, so
submitted Mr Orr, Abyx had nonetheless lent Krook R1,4 million rand,
interest free, in the same way that Strat-Chem had made such loans to
Krook in the past, albeit not for comparable amounts. The documents also
revealed that at the 30 th August meeting, Krook had indicated that a
possible restructuring method would be the selling of the business of
Strat-Chem as a going concern.
[49] We know, of course, that when this was put to Krook in cross-examination,
he testified that he had merely stated this as a threat to the union
members. What he could not explain is whether a “ threat” like that was
appropriate in consultations of that nature. I find no hesitation in rejecting
the facetiousness of Krook’s testimony that he was merely “ threatening”
the workers when he told them that he was contemplating selling the
business of Strat-Chem as a going concern.
[50] At any rate, Mr Orr further submitted that the documents in the bundle
indicated that Pienaar would be the purchasing manager of Abyx. In his
evidence, Krook testified that Pienaar was ostensibly only involved with
Technidryers, testimony which is inexplicably not borne out by
documentary evidence.
[51] At a structural level, Mr Orr submitted, it was remarkable that
notwithstanding the fact that there were material conflicts between Strat-
Chem, Abyx and Technidryers, they were nonetheless all represented by
the same legal team. Finally, documentary evidence, confirmed by
Krook’s testimony, revealed that the incorporation documents of Abyx
described Abyx’s principal business as buying, manufacturing and selling
of chemical products. Krook had testified that he had wanted to keep the
issue of manufacturing chemical products, in an undisclosed future, as a
possibility.
[52] Relying on the case Schutte and Others v Powerplus Performance
(Pty) Ltd and Another (1999) ILJ 655 (LC), Mr Orr submitted that a court
had to determine factually whether a transfer of a business, or part
thereof had taken place. When once that determination had been made, it
followed that the contracts of employment were automatically transferred
from the transferor to the transferee, a view which had been rejected by
Dijkhorst in Nehawu v University of Cape Town (UCT) and Others
(2002) 4 BLLR 311 (LAC), who had held that employee contracts would
only be transferred where the transferor and transferee had agreed that
this would be the case.
[53] In the Constitutional Court case – Nehawu (supra) – my brother Ngcobo J,
whose opinion was that of the apex Court as aforesaid, resisted Van
Dijkhorst AJA’s findings – who had been articulating a majority view in a 3
judge court – by firstly questioning the view of the majority in the LAC that
the purpose of Section 197 is to facilitate the sale of businesses as going
concerns by enabling the parties to the sale transaction to take over
employees as well as other assets. Ngcobo J felt that this view of what
Section 197 was all about looked only at the aspect of the legislative
purpose which concerns the interest of the employers. He held that the
purpose which concerns the interest of the employers. He held that the
purpose of the legislature, however, involved protecting the interests of
both the employers and the workers. In much the same way as employers
were at risk as far as severance pay was concerned, so also were
employees (workers) at risk in relation to their jobs.
[54] Ngcobo J, consequently, held that properly construed, Section 197 is for
the benefit of both employers and workers. Whilst it facilitates the transfer
of businesses, it at the same time protects workers against unfair job
losses, a balance that is consistent with fair labour practices [at para 70]. I
am in respectful agreement with the sentiments expressed by Ngcobo J,
and with his conclusion that upon a transfer of a business as a going
concern as contemplated in Section 197(1)(a), workers are transferred to
the new owner. I agree with him, too, that the fact that there was no
agreement to transfer the workforce, or part thereof between the
transferor and the transferee, cannot, as a matter of law, prevent a
finding that the transfer of the business was a transfer of such business as
a going concern [at para 71].
[55] Applying the law to the facts of the present case, I find that the evidence
overwhelmingly indicates that the entire business of Strat-Chem was
transferred as a going concern to Abyx and Technidryers. As Mr Orr
submitted, and I agree therewith, the marketing and selling functions of
Strat-Chem were transferred to Abyx, and the production functions were
transferred to Technidryers. The only aspects of Strat-Chem that were not
transferred to Abyx or Technidryers are the name “Strat-Chem”, and the
production workers by Strat-Chem. Thus, though not in form, yet in
substance, the whole of the business of Strat-Chem was transferred as a
going concern to Abyx and Technidryers, and I so hold.
[56] In the view that I have taken of this matter, I find it unnecessary to
consider the further casus belli, so to speak, between the parties,
namely, whether the dismissal of the workers was also automatically
unfair. In doing so, I leave open the question of whether the evidence of
unfair. In doing so, I leave open the question of whether the evidence of
the apparent hostility of COFESA to trade unions is something that can
necessarily also be imputed to Krook, given that there is evidence that
Strat-Chem had been unionised for many years and, on the face of it,
appears never at any time to have resisted unionisation. I also leave open
the argument by Mr Orr that Krook acted on the advice of COFESA and
showed an absolute disregard for the procedural rights of the workers,
and that the last minute offer of an independent contractor arrangement
with Technidryers was an additional indication that Krook’s objective was
to rid himself of a unionised workforce.
[57] I am satisfied, on the evidence, that the dismissal of these workers (the
individual employees) was both procedurally and substantively unfair. I
have not found that the Respondents have put forward any compelling
reasons as to why reinstatement is not the appropriate remedy. I also am
contended to hold that the business of Strat-Chem was transferred as a
going concern to Abyx and Technidryers and that the contracts of
employment of the individual applicants were transferred to Abyx and/or
Technidryers.
[58] Before I conclude, I find it necessary to remark about Mr Krook. He was
most unsatisfactory as a witness. He left me with a feeling of sadness
rather than of anger, to which he sometimes inevitably pushed me in the
manner in which he testified. He was evasive and self-contradictory in
many ways. He altered his evidence to suit the occasion, and thus
exposed himself to rigorous and relentless cross-examination which led
him further and further into the quicksand of mendacity which he had
unfortunately created for himself. He did not hesitate, oftentimes, to take
liberties with the truth. I was constrained, on occasion, to caution him to
answer questions which I considered were direct and called for direct
answers. He was a poor witness. The Respondent’s case rests on his sole
testimony. I have been constrained, therefore, to approach his evidence
with the appropriate caution that it warrants. I have found very little in his
evidence which is plausible, save only those aspects in it that have some
tangential support from the documents.
[59] In the result, I order as follows:
tangential support from the documents.
[59] In the result, I order as follows:
59.1 The dismissal of the Second to Twenty-First Applicants (the
individual applicants so called) by First Respondent
(“Strat-Chem”) was procedurally and substantively unfair.
59.2 The contracts of employment of the individual applicants were
transferred from Strat-Chem to Technidryers (Second
Respondent), alternatively to Abyx (Third Respondent), or
both.
59.3 The individual applicants are ordered to be reinstated, on terms
and conditions no less favourable to the terms and
conditions existent as at the date of their dismissal, to
the employ of Technidryers and/or Abyx.
59.4 The Respondents, jointly and severally, one paying the other to
be absolved, are ordered to pay costs of suit, such costs
to include all and any costs occasioned by interlocutory
applications.
[60] It is so ordered.
__________________________________________
D B NTSEBEZA
Acting Judge of the Labour Court of South Africa
Date of Hearing: 27 and 31 JANUARY 2003
Date of Judgment: ………………………………….
For the Applicants: MR ORR
Instructed by: CHEADLE, THOMPSON & HAYSOM
ATTORNEYS
JOHANNESBURG
For the First Respondents: MR HIEMSTRA
Instructed by: HANNELIE BASSON ATTORNEYS
PRETORIA