IN THE LABOUR COURT OF SOUTH AFRICA
HELD AT JOHANNESBURG
REPORTABLE
Case No. JR328/01
In the matter between:
GROUP 6 SECURITY SERVICES (PTY) LTD 1ST APPLICANT
ANDREW MASTERS 2 ND APPLICANT
and
MOLETSANE, R.N.O 1ST RESPONDENT
THE COMMISSION FOR CONCILIATION,
MEDIATION & ARBITRATION 2ND RESPONDENT
WELLER DEAN 3RD RESPONDENT
JUDGMENT DELIVERED BY
THE HONOURABLE ACTING JUSTICE NGCAMU
_______________________________________________________________
Ngcamu AJ,
Introduction
1. This is a review application brought by the two applicants against an
arbitration award issued by the first respondent. The application is opposed
by the third respondent.
2. This matter was initially heard by my brother Ndlovu AJ. After the argument
had been presented before Ndlovu AJ, it was postponed for further
argument. It became difficult for Ndlovu AJ to become available to finalise
the matter. It was then agreed that the matter start de novo before me.
3. During the argument, counsel for the respondent Adv van der Westhuisen
submitted that the applicant’s submissions and the approach to the case
took him by surprise and asked for a postponement. His submissions were
based on the fact that on the previous occasion when the matter was heard
before Ndlovu AJ the argument submitted on behalf of the applicants was
different. He had prepared his argument on the lines of the submissions
previously made by Mr Higgins who previously appeared for the applicants.
Adv Barrie who represented the applicants before me took a different
stance in his submissions.
4. Mr Barrie made concessions on certain findings made by the first
respondent. He correctly conceded that the commissioner’s findings as to
the date of dismissal and on the finding that the dismissal was procedurally
and substantively unfair is not reviewable on the evidence. This is the
approach not taken previously by Mr Higgins.
5. I refused to grant the postponement because I held the view that the
postponement was not in the interest of the parties. The respondent’s
counsel should have been prepared for the case despite the change of
focus. The application for a postponement was made on behalf of the
respondent when Mr van der Westhuisen had already commenced his
argument. A further postponement was likely to cause a further delay and
the matter was likely to be presented to a third judge. This matter was
postponed sine die in May 2003. The matter had to reach finality.
Background
6. The first applicant is a security company registered under the company
laws of the Republic of South Africa. The sole shareholder is the second
applicant. The second applicant is also the chairperson of the Board of
2
Directors. Its managing director is Mr Briscoe. The director of operations is
the third respondent. These three formed the Board of directors. They had
been involved with the company since 1990.
7. On 26 August 1999 a robbery occurred at Rosebank Mall. The third
respondent did not take steps to inform the centre manager of the robbery.
He assumed that the Senior Security officer would inform the centre
manager Mr Adamson. The centre manager complained to the second
applicant on 27 August 1999. The second applicant wanted to know from
the third respondent why Mr Adamson was not informed. The second
applicant was of the view that it was the third respondent’s responsibility to
inform Mr Adamson of the robbery. The third respondent did not want to
accept responsibility. As a result of this a heated argument started between
the second applicant and the third respondent. The parties went for each
other.
8. The second applicant demanded an apology from Mr Weller and Weller
refused to apologise. Mr Masters told Mr Weller he was suspended and
when Mr Weller wanted something in writing indicating why he was
suspended, Mr Masters told him he was fired.
9. Mr Weller went out and telephoned Mr Briscoe and advised him of the
position. He collected his belongings. He returned his keys and petrol card.
Mr Masters refused to pay him.
10. On 28 August 1999 in the evening Mr Weller went to Mr Master’s home to
get his money, the R310000 due to him. He pushed the gate and
damaged the intercom system. The gate was damaged as it fell over. Mr
Masters came out and fired a shot in the air. Mr Masters approached the
High Court for an interdict against Mr Weller. On 30 August 1999 the first
applicant sent Mr Weller a letter of dismissal. Mr Weller referred a dispute
3
of unfair dismissal to the CCMA. At the end of the arbitration hearing, the
Commissioner found that
(a) Mr Weller was dismissed on 27 August 1999 and not on 30 August
1999.
(b) The dismissal was procedurally and substantively unfair.
(c) The first and second applicants pay to the third respondent
compensation in the amount of R273 23904 being the amount
equivalent of 12 months’ remuneration.
(d) The compensation to be paid jointly and severally by the applicants.
(e) The applicants pay the third respondent’s costs on the attorney and
own client scale, including costs of counsel on the High Court scale.
(f) The applicants pay the CCMA costs of R600000.
Grounds for Review
11. The applicants grounds for the review as gleamed from the founding
affidavit are that the award is unjustifiable and grossly unreasonable on:
(a) The findings that the dismissal occurred on 27 August 1999.
(b) Whether the dismissal was procedurally and substantively unfair.
(c) Whether the company should pay compensation.
(d) Whether the applicants should pay attorney and client costs.
(e) Whether the applicants should pay the CCMA fees.
(f) Joint and several liability of Masters (the second applicant)
12. The applicant’s have conceded that the finding that the dismissal occurred
on 27 August 1999 and that such dismissal was procedurally and
substantively unfair cannot be said to be irrational and therefore not
reviewable. In the light of this concession I need not deal with these issues
it being accepted that such findings were rational and justifiable.
4
Is the order for compensation Reviewable?
13. The award was issued on 9 February 2001 before the amendment of
Section 194 of the Labour Relations Act 1995. Section 194 before it was
amended provided that:
“(1) If a dismissal is unfair only because the employer did not follow a
fair procedure, compensation must equal the remuneration that the
employee would have been paid between the date of dismissal and the
last day of the hearing of the arbitration or the adjudication, as the case
may be, calculated at the employee’s rate of remuneration on the date
of dismissal. Compensation may however not be awarded in respect of
any unreasonable period of delay that was caused by the employee in
initiating or prosecuting a claim.
(2) The compensation awarded to an employee whose dismissal is
found to be unfair because the employer did not prove that the reason
related to the employee’s conduct, capacity or based on the employer’s
operational requirements must be just and equitable in all the
circumstances, but not less than the amount specified in subsection (1),
and not more than the equivalent of 12 months remuneration calculated
at the employee’s rate of remuneration on the date of dismissal.”
14. In Johnson and Johnson (Pty) LTD v Chemical Workers Industrial Union
(1999) 20 ILJ 89 (LAC) p99 at para 40 Froneman DJP stated:
“If a dismissal is found to be unfair solely for want of compliance with a
proper procedure the Labour Court, or an arbitrator appointed under the
LRA, thus has a discretion whether to award compensation or not, if
compensation is awarded it must be in accordance with the formula set
out in Section 194 (1); nothing more, nothing less. The discretion not to
award compensation in the particular circumstances of a case must, of
course, also be exercised judicially.”
15. The commissioner is required to exercise his discretion on whether or not
to award compensation. In Johnson and Johnson (supra) paragraph 41 the
5
court went further to state that:
“The nature of an employee’s right to compensation under S 194(1) also
implies that the discretion not to award that compensation may be
exercised in circumstances where the employer has already provided
the employee with substantially the same kind of redress (always taking
into account the provisions of S 194(1), or where the employer’s ability
and willingness to make that redress is frustrated by the conduct of the
employee.”
16. In Johnson and Johnson’s case the court found that compensation should
not have been awarded because the employer offered to make good its
failure properly to discuss selection criteria was made barely four days after
communicating its final decision to retrench the employees to the union.
The union was also obstinate in discussing with the employer.
17. In Le Roux v Commission for Conciliation, Mediation and Artbitration and
Others (2000) 21 ILJ 1366 (LC) at p1369 para 111 Wallis AJ came to the
conclusion that “it is open to the Labour Court or an arbitrator to decide not
to make any order of compensation at all in the case of a dismissal which
has been found to be substantively unfair.”
18. Although the discretion applies both in circumstances where the dismissal
is substantively unfair and procedurally unfair, it must be borne in mind that
in Section 194(1) the court or the arbitrator is dealing with an employee
who is not supposed to be in the employ of the employer because a fair
reason to dismiss exists. In Section 194(2), the employer got the procedure
correct but has no good reason to dismiss. In the case where the employer
got the procedure wrong as well as have no good reason to dismiss, it is
difficult to exercise the discretion against awarding compensation to the
employee.
19. In an obiter Zondo JP in H.M Liebowitz (Pty) LTD t/a The Auto Industrial
6
Centre Group of Companies v Fernandes (2002) 23 ILJ 278 (LAC) at p283
para 11 stated:
This matter was argued on the basis that the court a quo had a
discretion to refuse to award compensation. I am prepared to deal with
the matter on that basis, too. In passing I mention that it seems to me
that it will be very difficult to find a case where, after finding a dismissal
to have been unfair both because there was no fair reason to dismiss
the employee and because the employer failed to follow a fair
procedure, the Court or an arbitrator would nevertheless consider it
appropriate to exercise its discretion against awarding the employee
compensation or reinstatement.”
20. In the minority judgment in H.M Liebowitz case Page AJA at p295 para 19
stated:
“It is abundantly clear in terms of the Johnson & Johnson case that the
learned judge a quo had no discretion to award compensation in a
lesser amount than that prescribed by the statute. Once he found that
the dismissal of the respondent was unfair within the ambit of S194(2)
he was obliged by law to award the full amount or to refuse any
compensation whatsoever in the exercise of his discretion. Counsel for
the appellant was accordingly constrained to argue on appeal that the
learned judge a quo should have refused to award any compensation at
all.”
21. The learned judge accepted that the following factors may be taken into
account in determining whether to award compensation or not. That is:
(a) Whether the employer has already provided the employee with
substantially the same kind of redress.
(b) Whether the employer’s ability and willingness to make that redress
is frustrated by the conduct of the employee.
(c) The degree that the employer deviated from the requirements of a
fair procedure.
(d) Whether the employer secured alternative employment for the
7
employee.
These factors are not meant to be exhaustive as it is not possible to list all
possible factors.
22. Mr Barrie argued that Mr Briscoe told Mr Weller that he would sort out the
situation. He further submitted that the problem could have been sorted out
the same day or on Monday. Mr Weller’s conduct frustrated the resolution
of the problem.
23. Mr Briscoe’s testimony was that on receipt of the telephone call from Mr
Weller, he advised Weller not to do anything until he arrived at the office.
He found Mr Weller sitting in his motorcar outside the premises. He advised
Mr Weller to come inside. Mr Weller was emotional and he was crying. He
advised him to go home and that he would resolve the matter when
tempers had cooled down.
24. Mr Briscoe proceeded to Mr Masters and got his version but did nothing
except telephoning Ms Gordon who advised him they would deal with the
matter on Monday. The position is that Mr Weller remained dismissed. He
was not advised how the matter was going to be resolved. He was not told
to return to work on Monday.
25. At p112 lines 7 to 10 of the record, Mr Briscoe was asked the following:
“Ms Gordon – In your mind at that time, had Dean’s services been
terminated?… I do not believe that I would have offered Dean the
opportunity to come back and try and sort it out and I do not believe that
his services had been terminated, under no circumstances.”
Mr Briscoe does not explain his belief. He stated that the matter could
have been resolved while saying that he did not believe he could have
offered Weller the opportunity to come back and try to resolve the issue.
It is hard to understand what resolution he was looking at if he could not
ask Mr Weller to return to work. In my view, this suggests that Mr Weller
8
had been fired by Mr Masters and Briscoe could not get him back. It
therefore cannot be said that Mr Weller frustrated attempts to resolve the
problem.
26. Mr Briscoe believed that Mr Weller’s services were not terminated because
the company procedures relating to the notification of hearing, the
presentation of charges as well as the hearing did not take place. This in
my view misses the point as the dismissal can take place without a hearing.
Section 186(a) define a dismissal as meaning that an employer has
terminated a contract of employment with or without notice. However, for
the dismissal to be fair there has to be a fair procedure and a reason for the
termination of services. It does not mean that because there is lack of
proper procedure, there is no termination of service.
27. Mr Briscoe based his belief that it was not going to be possible to hold a
disciplinary hearing on the events that occurred on the evening of 28
August 1999. That is after the dismissal. There is no evidence how Mr
Weller frustrated the holding of a disciplinary hearing. In my view as at the
evening of 28 August, Mr Weller was no longer an employee and owed no
allegiance to Mr Masters.
28. Mr Masters position is that all the problems could have been resolved on
Monday 30 August. Mr Masters accused Mr Weller without getting the facts
correct as to who was responsible for advising Mr Adamson. He was angry
because the contract was in serious jeopardy. Both Mr Weller and Masters
exchanged dirty words unbecoming of directors. Mr Masters suspended Mr
Weller and when Weller wanted to know the reason, he was advised they
were going to think about it. He was then told he was fired and had to leave
the keys and cell phone. Mr Masters instructed that the cell phone service
be suspended. He also refused to pay Weller’s money. In the light of this, I
cannot find any substance in the submission that Mr Weller was the author
9
of his own misfortune. There is also no merit in the submission that Mr
Weller made it impossible for the applicant to resolve the issues.
29. I hold the view that in the case where the dismissal is both procedurally and
substantively unfair, the court and the arbitrator is not entitled to exercise
his discretion against the awarding of compensation. It seems to me it
would be unfair to reinstate an employee who wishes to be reinstated but
refuse to award compensation to the employee who wants to be
compensated under the same circumstances.
30. In the light of this, I find that the award of compensation is not reviewable in
the circumstances.
Payment of attorney and client costs
31. The commissioner found that the arbitration hearing lasted four (4) days
and that the bulk of this time was taken by the applicant leading evidence
to establish that the dismissal took place on 30 August 1999 with the result
that the arbitration trial lasted for an unnecessary long time. It was for that
reason that punitive costs were awarded against the applicant.
32. The applicant’s submission is that this finding was not rational as the
company wanted to prove its case. I agree with Mr Barrie on this. It is unfair
to punish a litigant for taking time in leading evidence to prove his or her
case. The onus was on the applicant to prove its case. The date of the
dismissal was in dispute.
33. Mr van der Westhuizen submitted that the defence was based on
misleading information in that the dismissal had taken place on Friday, 27
August. It was therefore submitted that the arbitration would have been
short if it was only the right to compensation that was contested.
34. Section 138(10) of the Labour Relations Act provides that:
10
“The commissioner may not include an order for cost in the arbitration award
unless a party, or the person who represented that party in the arbitration
proceedings, acted in a frivolous or vexatious manner –
(a) by proceeding with or defending the dispute in the arbitration proceedings;
or
(b) In its conduct during the arbitration proceedings”
The section does not permit the arbitrator to make an order for costs
unless it is shown that the party, acted in a frivolous or vexatious
manner. The Commissioner did not make a finding that the evidence led
by the applicant in an attempt to prove its case was not relevant or that
the defence was vexatious.
35. The applicant’s based their defence on the letter sent to Mr Weller on 30
August 1999 stating that his services had been terminated. That is the date
on which, according to the applicants, Mr Weller was dismissed. I accept
that that version was rejected by the commissioner on the basis that Mr
Weller was told on 27 August that he was fired. Taking the evidence as a
whole and in particular, the fact that there had been some problems in the
past, the applicant had believed that the dismissal only took place when the
written notification was served on the employee.
36. The applicant was entitled to lead evidence to prove its defence. The fact
that, that prolonged the hearing cannot be a reason for saying that the
defence was frivolous and vexatious.
37. I agree with Mr Barrie that the award of punitive costs was irrational in the
circumstances and stands to be reviewed and set aside.
Costs of the Commission
38. Section140 (2) of the LRA provides that
“If in terms of Section 194 (1) the commissioner finds that the dismissal is
procedurally unfair, the commissioner may charge the employer an arbitration
11
fee.”
39. The reason for awarding the arbitration fees was that the CCMA had
incurred unnecessary expenses for what could have been an ordinary
dismissal. It was submitted on behalf of the applicants that the award of
costs was against the tenor of the Act. It was further submitted that the
Commissioner was wrong in holding that this was an ordinary case.
40. I agree with Mr Barrie that this was not an ordinary case. The facts of the
matter demonstrate that it was not that easy. Having said that, I do not
agree that the order for costs is reviewable and that it was against the tenor
of the Act.
41. The arbitrator has a discretion in terms of Section 140(2) to charge the
arbitration fees if the dismissal is procedurally unfair. The Commissioner
found that the dismissal was procedurally unfair. It does not matter that the
commissioner justified the charging of the arbitration fees on the grounds of
delay. It is my view that as the charge is justifiable on the grounds of
procedural unfairness of the dismissal in terms of Section 140(2), the
award should stand.
Piercing the Corporate Veil
42. The arbitrator found Mr Masters jointly, liable with the company on the
basis of the allegation that Masters told Weller that Group 6 was nothing
but a shell. The Commissioner found that there was a real possibility that
Masters has transferred most of the assets and business contracts held by
the first respondent to Isilulu another company operated by Mr Masters.
43. Mr Barrie submitted that the commissioner had no jurisdiction over Masters
because he was not an employer. It was never suggested that Mr Masters
was the real employer. Mr van der Westhuizen submitted,
12
Rule 26 of the CCMA Rules provides:
(1) The Commission or a Commissioner may join any
number of persons as parties in proceedings if their right
to relief depends on substantially the same question of
law or fact.
(2) A Commissioner may make an order joining any person
as a party in the proceedings if the party to be joined has
a substantial interest in the subject matter of the
proceedings.
(3) A Commissioner may make an order in terms of subrule
(2)
(a) of its own accord;
(b) on application by a party; or
(c) if a person entitled to join the proceedings applies at
anytime during the proceedings to intervene as a
party.
Rule 26 subrule (8) provides that a joinder or substitution in terms
of this rule does not affect any steps already taken in the
proceedings.
44. The Rules of the Labour Court contain similar but not identical provisions
relating to the joinder of parties. Rule 22 provides the following:
“(1)The court may join any number of persons, whether jointly,
jointly and severally, separately, or in the alternative, as parties in
proceedings, if the right to relief depends on the determination of
substantially the same question of law or facts.
(1) (a) The Court may, of its own motion or on notice to
every other party, make an order joining any person as
a party in the proceedings if the party to be joined has
a substantial interest in the subject matter of the
13
proceedings.”
Subrule (7) provides that no joinder or substitution in terms of this rule
will affect any prior step taken in the proceedings. Rule 22(7) of the
Rules of the Labour Court is similar to Rule 26 (8) of the CCMA Rules.
45. Both Rule 22 and Rule 26 of the CCMA rules allow the court and the
commissioner to join a party on its own motion. The only difference
between Rule 22(1) of the Rules of this Court and Rule 26(1) of the CCMA
Rules is that the court can join the parties jointly, jointly and severally,
separately or in the alternative. This is not the power given to the CCMA in
Rule 26(1).
46. Rule 10 of the High Court Rules puts the position of joinder in a clear
manner and sets out what the court could do at the end of the trial with
regard to the judgment and costs.
47. Rule 10(3) and 10(4) provide that:
“Several defendants may be sued in one action either jointly, jointly and
severally, separately or in the alternative, whenever the question arising
between them or any of them and the plaintiff or any of the plaintiffs depends
upon the determination of substantially the same question of law or fact which,
if such defendants were sued separately, would arise in each separate action.
(4) In any action in which any causes of action or parties have been joined in
accordance with this rule, the court at the conclusion of the trial shall give such
judgment in favour of such of the parties as shall be entitled to relief or grant
absolution from the instance, and shall make such order as to costs as shall to
it seem to be just, provided that without limiting the discretion of the court in any
way.”
48. The test is whether or not a party has a “direct and substantial interest” in
14
the subject matter of the action, that is, a legal interest in the subject matter
of the litigation which may be affected prejudicially by the judgment of the
court. (See Henri Viljoen (Pty) LTD v Awerbuch Brothers 1953 (2) SA 151
(O) at p168 – 170).
49. A party may be joined because he is a necessary party or because of
convenience, equity, the savings of costs and the avoidance of multiplicity
of actions. (See Rabinowitz and Another NNO v Ned Equity Insurance
1980 (3) SA 515 (W) at 419 E). The Rules permit the joinder of parties in
the same proceedings but do not direct the hearing of evidence as between
all defendants; so that the extent of liability is determined between all
parties. (See K & S Dry Cleaning Equipment v South African Eagle
Insurance 1998 (4) SA 456 at 462 BC.)
50. The Rules provide no time limits within which an application for joinder can
be made. Implicit in the Rules is that an application for the joinder of a party
can be made at any time. Such joinder does not affect the proceedings.
51. The Rules referred to demonstrate that the commissioner can join any
party in the proceedings without a formal application. Mr van der
Westhuisen referred me to the matter of Serfontein v Balmoral Central
Contractors (Pty) LTD (2000) 5 LLD 266 (CCMA). That case dealt with the
identification of the true employer. That was the position also in the matter
of Airlink Pilots Association SA v SA airlines (Pty) LTD and another (2001)
22 ILJ 1359 (LC). These cases are not relevant for the reason that it was
never an issue as to who was the true employer.
52. Mr Masters was not joined at conciliation. The Commissioner did not make
an order joining him as a coemployer with the first applicant at the
arbitration hearing. He was only made jointly liable for the purposes of
paying the compensation.
15
53. In Veress v Granard CC t/a G2 Clothing & another (2004) 3 BLLR 283
(LC), Pillay J dealt with the piercing of the corporate veil. At p 285 para 24
of the judgment, the learned Judge stated:
“Thirdly, the case pleaded against Chidoni is not that he grossly abused
the juristic personality of the first respondent. This is a requirement of
Section 65 of the Close Corporations Act if Veress were to succeed in
piercing the corporate veil.”
I agree with Pillay J, that there has to be evidence of the abuse of the juristic
personality before a party can be held jointly liable with a company.
54. In Shipping Corporation of India LTD v Evdomon Corporation & The
President of India 1994 (1)SA 550 (A) at 566 CG, the court held that the
only permissible deviation from the rule was in those rare cases where
circumstances justified “piercing of lifting the corporate veil”. It was held
further that those circumstances would include an element of fraud or other
improper conduct in the establishment or use of the company or in the
conduct of its affairs.
55. In Cape Pacific LTD v Lubner Controlling Investments (Pty) LTD & Others
1995 (4) SA 790 (A) , the court held that each case involves a process of
enquiring into the facts which, once determined, may be of decisive
importance.
56. It was further held that the Court has no general discretion simply to
disregard a company’s separate legal personality whenever it regards it as
just to do so. The court proceeded to mention that the grounds that may be
taken into account for piercing the corporate veil may be, fraud, dishonesty
and improper conduct.
16
57. There is no evidence of fraud except the allegation that Masters told Weller
that the Company was a shell. That is not sufficient for the purposes of
lifting the corporate veil. There is no evidence of dishonesty in the
operation of the business or any improper conduct. There is no evidence
on the award that the Commissioner ever considered the grounds to be
considered before lifting the corporate veil.
58. Mr Masters was never made a party before the arbitrator. He was present
as a witness for the company and not in his personal capacity. The award
cannot be made against a person simply because it is just to do so. There
has to be some fault on the part of the directors or shareholders to make
them jointly liable with the company. No such evidence of fault was led.
59. In the circumstances it was improper to make an award in which Mr
Masters is jointly liable. In the circumstances, this part of the award can not
stand.
60. I have been asked to make an order for the costs on the basis that the
costs follow the results. In the light of my findings on the review
applications, I have come to the conclusion that I make no order for costs
for the reason that the review only succeeded in part and failed in part.
61. The appropriate order is that of reviewing and correcting the award. The
order I make is the following:
(1)The award is reviewed and corrected to read:
(a) The dismissal of the applicant on 27 August 1999 was procedurally
and substantively unfair.
(b) The respondent (Group Security (Proprietary) Limited) is ordered to
pay to the applicant compensation equivalent to twelve (12) months
17
remuneration in the amount of R273 23904, calculated at the
employee’s rate of remuneration on the date of dismissal.
(c) Such compensation shall be paid to the applicant on or before 31
July 2005.
(d) The respondent is ordered to pay to the CCMA Gauteng Office four
days’ Commissioner’s fees as a reimbursement to the Commission,
which fees shall be calculated at
R150000 x 4 = R600000 on or before 31 July 2005.
(e) There is no order for costs.
__________
Ngcamu AJ
Date of Hearing: 25 May 2005
Date of Judgment: 21 July 2005
For the Applicant: Adv F.G Barrie
For the Respondent: Adv D.W. Van der Westhuizen
18
19