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[2004] ZALC 19
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KwaZulu Natal South Coast Accommodation Association v Bargaining Council for the Liquor, Catering And accommodation Trades and Others (D 85/04) [2004] ZALC 19; [2004] 8 BLLR 762 (LC); (2004) 25 ILJ 2211 (LC) (19 February 2004)
IN THE LABOUR COURT OF
SOUTH AFRICA
SITTING
IN DURBAN
REPORTABLE
CASE NO
D85/04
DATE HEARD:
2004/02/11
DATE DELIVERED:
2004/02/19
In the matter between:
KWAZULU-NATAL SOUTH COAST
ACCOMMODATION ASSOCIATION
Applicant
and
BARGAINING COUNCIL FOR THE
LIQUOR,
CATERING AND ACCOMMODATION
TRADES
First Respondent
HOSPITALITY INDUSTRIES AND
ALLIED
WORKERS UNION
Second
Respondent
REGISTRAR OF LABOUR
RELATIONS
Third Respondent
JUDGMENT
DELIVERED BY THE HONOURABLE MADAM JUSTICE PILLAY
ON 19 FEBRUARY 2004
ON BEHALF OF
APPLICANT
: MR M PILLEMER SC
ON BEHALF OF
RESPONDENTS
: MR T SEERY
TRANSCRIBER
SNELLER RECORDINGS (PROPRIETARY) LTD
-
DURBAN
JUDGMENT
19
FEBRUARY 2004
PILLAY J
[1] This is an urgent
application for the provisional winding up of the first respondent
and the appointment of a liquidator in
terms of
section 59(1)(b)
and
(3) of the
Labour Relations Act 66 of 1995
.
[2] The applicant is an
employer's association registered for the accommodation industry in
Durban and the South Coast of KwaZulu-Natal.
The first respondent is
the Bargaining Council for the Liquor, Catering and Accommodation
Trades, South Coast, KwaZulu-Natal.
Membership of the first
respondent is voluntary. The second respondent is the Hospitality
Industries and Allied Workers Union
(HIAWU), a registered trade
union. The third respondent is the Registrar for Labour Relations,
Pretoria.
[3] The first and second
respondents opposed the application. The third respondent indicated
to the other parties that it did not
intend to oppose the
application.
[4] The first respondent was
established in 1945. When it registered in terms of the Labour
Relations Act 66 of 1995 (the "LRA")
in 1996, it had two
employer organizations as parties to it, that is the Federation
Hospitality Association of South Africa
(FEDHASA) and the applicant.
FEDHASA withdrew as a member to the council. Although the
constitution of the first respondent
was not amended to reflect the
withdrawal, it is common cause that FEDHASA is no longer a member of
the council. The second
respondent is the only member remaining as
a trade union party to the council.
[5] In September 2003 the
applicant sought the assistance of the third respondent to
facilitate a meeting of the first respondent
to discuss the latter's
dissolution as, without an employer, the first respondent was no
longer functional.
[6] It further gave notice of
its intention to withdraw from the first respondent but to
participate only to effect its winding
up.
[7] The applicant decided to
withdraw from the first respondent because it was generally
dissatisfied with the manner in which
it operated. More
specifically, there appeared to be irregularities in the manner in
which money was handled. An audit revealed
that there were serious
administrative weaknesses and possible irregularities. The second
respondent did not support the applicant's
attempts to have the
secretary of the first respondent suspended. Further, a collective
agreement which was extended to non-parties
and which was concluded
in the first respondent, expired on 31 December 2003.
[8] Consequently, wages and
conditions of employment in the industry are currently regulated in
terms of the Basic Conditions
of Employment Act No 75 of 1997
(“BCEA”) and the LRA.
[9] Despite cancellation of the
collective agreement, the first respondent continues to collect
monies from the applicant's members.
For these reasons the
applicant withdrew from the first respondent and now applies to have
a provisional liquidator appointed
to safeguard the revenue and
assets of the first respondent.
[10] The first and second
respondents challenged the
locus standi
of the applicant.
Having withdrawn as a party to the first respondent, it could not,
in terms of section 59(1)(b) of the
LRA, apply for its winding
up, it was submitted. The applicant was not a nominal party to the
first respondent, because the
latter's constitution is silent about
the procedure for withdrawal by a member and does not prescribe any
amendment to the constitution
to reflect a withdrawal. FEDHASA,
which is no longer a member, remains reflected on the constitution.
Likewise, the Hotel Allied
Restaurant Workers Union (HARUSA) was
also so reflected on the constitution, despite having ceased to be a
member of the first
respondent. Therefore being named as a party in
the Constitution was not proof of membership of the first
respondent. The applicants
withdrawal was effective.
[11] For these reasons, it was
submitted for the first and second respondents, the applicant was
not a party to the first respondent
and therefore had no
locus
standi
to launch the application.
[12] Section 59(1)(b) provides:
"The Labour Court may
order a council to be wound up if -
....
(b) the registrar of labour
relations or any party to the council has applied to the Court and
the Court is satisfied that the
council is unable to continue to
function for any reason that cannot be remedied."
[13] By definition, a
bargaining council is established by one or more registered trade
unions and one or more registered employer
organizations. (Section
213, read with section 27 of the LRA.)
[14] If there is no employer
party then the bargaining council cannot continue to exist as it is
structurally dysfunctional.
[15] I accept Mr Pillemer’s
submission for the applicant that when it withdrew from the
bargaining council, it qualified
its withdrawal by indicating that
it would continue to participate only to effect the first
respondent's winding up. Its withdrawal
was therefore not complete
and final in September 2003 but would be so if and when the first
respondent is finally wound up.
[16] The constitution is no
longer proof that the parties reflected in it are members, as it is
common cause that FEDHASA and
HARUSA are no longer members of the
council. On the other hand, the reflection of the applicant as a
member is a correct statement
of the
de facto
situation. The
applicant remains a member until the first respondent is wound up.
[17] That the applicant did
nothing about winding up the first respondent itself after the
September letter to the third respondent
is no indication that it
believed it was no longer party to the first respondent. Quite
obviously, if the third respondent had
acted on the applicant's
request then the latter would not have had to launch this
litigation.
[18] I accordingly find that
the applicant is a member of the first respondent and has
locus
standi
to launch this application.
[19] Mr
Seery
for the
first and second respondents, challenged the urgency of the
application. The applicant was moved to launch this application
when it received notice of a meeting of the first respondent to be
held on 11 February 2004. On receipt of the notice it realised
that
the third respondent had not taken any steps to wind up the first
respondent, which continued to operate in certain respects.
Notice
of the meeting was faxed on 2 February 2004. The application
was only filed on 10 February 2004. The matter
was set down
for 11 February 2004.
[20] Mr
Seery
contended that the matter was not urgent, firstly, as the applicant
believed at least since September 2003 that there were
irregularities in the functioning of the first respondent.
Secondly, it had known of the meeting eight days before the filing
of the application. There was therefore no reason to give the
respondents barely 14 hours' notice of the application.
[21] Mr
Pillemer SC,
for the applicant, conceded that the respondents should have been
given better notice of the application. However, given the
circumstances in which the first respondent was functioning the
situation was serious and urgent.
[22] When the matter came
before me on 11 February 2004 I declined to grant any relief without
giving the respondents an opportunity
to deliver answering
affidavits.
[23] As the first respondent is
responsible for public funds, it is important that they are properly
managed and administered.
A
prima facie
case was made out
that the first respondent was neither properly constituted nor
managed. If the allegations were proved the
applicant had a clear
right to the remedy sought. Hence I considered the matter urgent.
[24] On the merits, Mr
Seery
submitted that the first respondent has performed a vital role in
the industry since its establishment and should be allowed
to
continue to do so. It continues to operate and perform most of its
functions and powers conferred on it by its constitution
and the
LRA. Such functions as it does not perform relate to the collective
agreements which expired on 31 December 2003. That
situation would
be remedied soon as FEDHASA and the United Democratic Employers
Association of South Africa (UDESA) have been
approached to join the
first respondent. UDESA would put it to the vote of its members at
its annual general meeting on 9 February
2002 whether it should join
the first respondent. UDESA's secretary, David Manthey, had said
that he would invite members of
the applicant who are still paying
levies to the first respondent to join UDESA. The applicant's
members continue to pay levies,
despite being informed by the
applicant not to do so. The applicant has accordingly not satisfied
the requirements of section 59(1)(b)
of the LRA, so it was
submitted for the first and second respondents.
[25] In reply, the applicant
disputed that the first and second respondents could remedy the
situation. Firstly, there is no
participating employer party to the
first respondent. Representivity of both employer and employee
parties was a problem as
the parties to the first respondent do not
represent the majority of employers and employees in the industry
within the jurisdiction
of the first respondent. Without an
employer party, the first respondent cannot function under its
constitution. It cannot
police the collective agreement as it was
terminated.
[26] Secondly, one Rodney Bunn,
of FEDHASA, who had enjoyed some level of indirect representation on
the first respondent, informed
the applicant that a meeting was
called and 12 members attended. None of them wished to
participate in the first respondent.
FEDHASA's view is that a
sectoral determination should be obtained.
[27] Thirdly, the applicant's
representative does not know of either UDESA or David Manthey.
UDESA is not listed in the telephone
directory. It is neither
representative of employers in the industry, nor does it muster the
kind of representivity required
by the constitution of the first
respondent, so it was submitted for the applicant.
[28] Section 59(1)(b) of the
LRA requires me to find, firstly, that the first respondent "is
unable to continue to function".
Secondly, the reason it cannot
function cannot be remedied.
[29] Unlike bargaining councils
in the public service, which are established by statute, (sections
35, 36 and 37 of the LRA),
bargaining councils in the liquor,
catering and accommodation industry are established by firstly
adopting a constitution that
complies with section 30 and by
obtaining registration of the bargaining council in terms of section
29 of the LRA (
Public Servants Association and Another v Public
Service Co-ordinating Bargaining Council
(2001) 7 BLLR 815
(LC).)
[30] As stated above, the
membership of an employer party is foundational to the existence of
a bargaining council. As a matter
of law a bargaining council
cannot continue to exist without an employer party. The employer
party also has to participate in
the activities of the bargaining
council in order for the latter to comply with its constitution.
[31] Turning to the
constitution of the first respondent, its powers and functions
include concluding collective agreements, preventing
and resolving
disputes, enforcing collective agreements, developing proposals for
submission to NEDLAC or other fora on policy
and legislation
affecting the sector, determining by collective agreements matters
which are not to be issues in dispute for
the purpose of a strike or
a lock-out and to consider and deal with any other matter that
affects the interests of the parties.
[32] Without an employer party
collective agreements can also not be concluded. By definition, a
collective agreement is concluded
by employer and employee parties.
[33] In the absence of an
employer party, the first respondent cannot legitimately claim to
consider and deal with the matters
that affect the interests of
employers. The first respondent's constitution requires that it be
constituted by five representatives
for the employer party. Without
any employer representatives, the first respondent is not properly
constituted.
[34] The first respondent is
obliged by its constitution to hold monthly meetings. Meetings are
quorate if 50% of the representatives
from the employer and
employees, respectively, attend. In the absence of participation by
any employer organization, the first
respondent cannot muster a
quorum. Decisions cannot be taken and monthly meetings, amongst
others, cannot serve the purpose
for which the first respondent was
constituted.
[35] Officials and employees
may attend to the daily functioning of the first respondent.
However, they do not constitute the
first respondent. They are
merely functionaries of the first respondent. The first respondent
is publicly accountable as the
entity responsible for the functions
performed on its behalf by officials and employees in terms of its
constitution. It is
the head of the organization. The officials
and employees constitute the body of the organization. Without the
head, the body
cannot function. The officials and employees would
have no one by whom they could be held accountable.
[36] In the absence of an
employer party first respondent cannot either legally or
legitimately continue to exist or administer
labour and industrial
relations in the industry.
[37] Can the situation be
remedied in the manner proposed by the first and second respondents?
The first respondent has to be
properly constituted in the first
place in order to consider the application for membership by
registered trade unions and employer
organizations. As the first
respondent is not properly constituted, no application for
membership by either FEDHASA or UDESA
can be considered.
[38] A party applying for
membership to the first respondent will have to show that it
represents at least 15% of the employees
in the sector. There is no
evidence that UDESA has or can muster such representivity.
[39] There is a dispute of fact
as to whether FEDHASA wants to rejoin the first respondent. If the
dispute is to be resolved on
the papers, then I must accept the
applicant's version that it does not want to rejoin the first
respondent as it is the latter
who makes this allegation.
(
Plascon-Evans Ltd v Van Riebeeck Paints (Pty) Ltd
2000 (4) SA
452
(NC)
.
[40] Having considered the
criteria for the winding up of the first respondent in section
59(1)(b) of the LRA, that is not the
end of the matter. Sub-section
(2) provides as follows:
"If there are any persons
not represented before the Labour Court whose interests may be
affected by an order in terms of
subsection (1), the Court must
-
(a) consider those interests
before deciding whether or not to grant the order; and
(b) if it grants the order,
include provisions in the order disposing of each of those
interests."
[41] The parties affected by an
order for the winding up of the first respondent would be, firstly,
the employees of the first
respondent. The order sought includes a
direction that the liquidator appointed consults with and proceeds
in terms of section 189
of the LRA, in so far as the
provisional order that is being sought may be made final.
[42] Another group of persons
who could have an interest in this order would be non-parties to the
bargaining council to whom
the agreement was extended. However, as
there is no longer an agreement, their interests are not affected by
this order.
[43] In considering the
interests of those who are not represented in this application, the
Court also notes that the first respondent
continues to receive and
manage public funds. It can only do so if it is legally authorised
by its constitution and the LRA.
[44] As I have found, in the
absence of an employer party the officials and employees of the
first respondent can obtain no mandates
in order to continue the
performance of their functions and duties. They continue to do so
is without mandate and proper authorization.
This state of affairs
cannot be allowed to continue in the public interest.
[45] Finally, the competence,
qualifications and experience of the liquidator, Mr Stuart
Monty O'Connell, was challenged
by the first and second respondents.
While they did not question his competence as a liquidator of
companies and as an attorney,
his ability to wind up a bargaining
council was put in issue. More specifically, it was submitted that
the proposed liquidator,
Mr O'Connell, was a "number
cruncher" and would not be alive to the dynamics and the
functioning of a bargaining
council. Mr
Pillemer
responded that it is precisely because Mr O'Connell was a
number cruncher that he was suitable for the position.
[46] In my view, as
Mr O'Connell has experience in liquidations and insolvencies, I
cannot see how the winding up of the
first respondent can be any
more difficult than that of a company, particularly as the
functioning of the first respondent is
closely regulated by
legislation. (See, for instance, section 53 of the LRA.)
[47] These, briefly, are the
reasons for the order that I made on 18 February 2004 granting
the provisional order of liquidation.
I may supplement these
reasons in due course.
[48] Subsequent to delivery of
the above reasons for the order the parties were directed to give
attention to the following matters
that are not covered by the LRA:
1. Publication of the order by
the parties by advertising in a newspaper in order that other
unidentified persons having an interest
may respond.
2. Supervision and approval of
the Liquidator’s accounts.
3. The question of security by
the Liquidator for the proper administration of the Bargaining
Council.
4. Appropriate orders of court
to give effect to the aforegoing.
___________
Pillay D, J
19 April 2004