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IN THE LABOUR COURT OF SOUTH AFRICA, GQEBERHA
Not Reportable
CASE NO: PR188/23
In the matter between:
NELSON MANDELA BAY MUNICIPALITY Applicant
and
SOUTH AFRICAN ROAD PASSANGER
BARGAINING COUNCIL (SARPBAC) First Respondent
SPECTRUM ALERT ITS (PTY) LTD Second Respondent
SHERIFF WEST, GQEBERHA Third Respondent
Heard: 28 August 2025
Delivered: This judgment was handed down electronically by circulation to the
Applicant’s and the First and Second R espondent’s Legal
Representatives by email, publication on the Labour Court website
and release to SAFLII. The date and time for handing - down is
deemed to be 12H00 on 10 March 2026.
JUDGMENT
LALLIE J
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[1] Change is intrinsic to the employment relationship. One of the statutory
provisions which regulate the change is section 197 of the Labour Relations
Act1 (the LRA) . The applicant instituted these proceedings with the aim of
obtaining an order declaring that the second respondent was never
transferred to it as envisaged in section 197 of the LRA. It further seeks an
order directing the third respondent to release its busses form attachment and
an order reviewing and setting aside the attachment in execution of its busses
by the third respondent. In the event of a finding being made that a transfer in
terms of section 197 of the LRA did take place between the applicant and the
second respondent, the applicant sought an order reviewing and setting aside
the transfer based on the principle of legality. The application is opposed by
the first respondent.
[2] The second respondent initially filed a notice to abide the court’s judgment in
this matter. Submissions on behalf of the third respondent were later filed. I
accept in the applicant’s contention that in terms of the doctrine of peremption
the third respondent is not at liberty to act inconsistently with the notice to
abide. The decision it took is binding. It may not deviate from it particularly
without good cause.
[3] The factual background to this dispute is that the applicant entered into a
service level agreement (SLA) with the second respondent in terms of which
the second respondent would render the municipal public transport service on
behalf of the applicant on a designated route within the applicant’s municipal
area. The SLA provided that the second respondent would utilize existing
infrastructure and the applicant’s busses in providing the public transport
1 Act 66 of 1995, as amended.
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service. The applicant and the second respondent then entered into a contract
in terms of which the applicant leased its busses to the second respondent for
utilization in the public transport service. The second respondent used its own
staff including drivers to conduct the transport business.
[4] The second respondent fell within the jurisdiction and scope of the first
respondent’s main collective agreement. In February 2019, the first
respondent conducted a compliance inspection at the second respondent and
discovered non- compliance with the terms of the first respondent’s main
collective agreement. The first and second respondent resolved the issue of
the non- compliance by reaching an agreement which is embodied in an
arbitration award dated 29 April 2019 (the first arbitration award). The sal ient
terms of the first arbitration award were that the second respondent undertook
to comply with the terms of the main collective agreement with immediate
effect. The compliance included payment of across the board increments and
bonuses for 2018 in the amount of R4 469 217,84. The second respondent
undertook to pay the amount in equal instalments over 12 months from 1 June
2019. The parties agreed that in the event of the second respondent’s failure
to honour the agreement the full amount would become due and payable
immediately from the date of default. Owing to the second respondent’s non-
compliance with the first arbitration award and further non- compliance with
main collective agreement a second arbitration award was issued on 25
March 2022. In the arbitration award the second respondent was ordered to
pay the first respondent an amount of R9831 808,60 in 12 instalments from 7
April 2022 to 7 March 2023. The second respondent paid a portion of the
amount and in November 2022 a sum of R4 101 904,32 remained unpaid.
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The first respondent’s eff orts to obtain the outstanding payment were
unsuccessful. The second respondent directed it to the applicant on the basis
that the applicant was in control of the second respondent’s operations.
[5] The second respondent breached various clauses of the SLA and on 2
November 2022 the applicant brought the breaches to its attention and sought
an undertaking that they would be attended to within 14 days. The
undertaking was not given. In January 2023 the applicant was informed that
the second respondent’s bank account had been placed on hold by its
bankers owing to in-house dispute between board members. As a result of its
bank account being placed on hold, the second respondent committed further
breaches of the SLA including failure to render the continuous municipal
transport service.
[6] On 31 January 2023, the applicant reminded the second respondent that it
was acting in breach of the SLA and gave it 48 hours to submit a remedial
plan in terms of clause 27.3 of the SLA failing which it would take over the
operations of the public transport service. As no remedial plan was submitted
the applicant took over the operations, maintenance and administration of the
municipal public transport service with effect from 3 February 2023. On 8
February 2023, Ms Somjaliso (Somjaliso), the applicant ’s Executive Director:
Roads and Transport, sent a letter to the second respondent’s staff members
informing them that the applicant had invoked its rights in terms of clause 28
of the SLA. She further informed them that clause 28 allowed the applicant to
place the second respondent under administration with a management
structure to undertake full control of the second respondent.
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[7] The second respondent failed to pay the amounts due to the first respondent
in terms of the second arbitration award leading the latter to enforced the
second arbitration award by having a writ issued. As the value of the second
respondent’s assets was low, the first resp ondent caused several busses that
formed the subject of the lease to be attached. In April 2024 the second
respondent owed the first an amount of R7 189 745,96.
[8] Acting in terms of the conduct standard of 2023 issued by the Financial
Services Conduct Authority the first respondent sought to know from the
second respondent the name of the person who would be personally liable for
compliance with its obligations under the main collective agreement. In a letter
of 31 July 2023 the second respondent informed the first respondent to direct
the query to the applicant based on Somjaliso’s letter of 8 February 2023. It is
the first respondent’s case that a transfer as envisaged in section 197 of the
LRA occurred between the applicant and the second respondent from
February 2023.
[9] The facts of this matter are largely not in dispute. Amongst the points of
contention is the applicant’s allegation that in the letter of 8 February 2023,
Somjaliso mistakenly stated that clause 28 of the SLA which she invoked
permitted the applicant to place the second respondent under administration
with a management structure to undertake its full control. It was submitted on
behalf of the applicant that Somjaliso was mistaken, acted unlawfully and
without authority. Because of her unlawful conduct, so went the argument, the
contents of her letter were null and void. It was further submitted that none of
the applicant’s conduct falls within the realm of section 197 of the LRA and for
that reason a finding should be made that no transfer as contemplated in
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section 197 of the LRA occurred between the applicant and the second
respondent.
[10] The applicant and first respondent relied on the interpretation of the provisions
of section 197 of the LRA by this court, the Labour Appeal Court as well as
the Constitutional Court to batress their arguments. They have, in some
instances, relied on the same authorities. They were in agreement that what
triggers section 197 of the LRA is stated in Aviation Union of SA and Others v
SA Airways (Pty) Ltd and Others
2, a decision which was referred to with
approval in various subsequent Constitutional Court judgment s. In Aviation
Union of SA (Aviation Union) it was held that for section 197 of the LRA to be
triggered three conditions must be met. The first is the existence of a
business, the second is transfer and the third is as a going concern.
[11] The applicant denied that the transfer took place. Both parties correctly
argued, based on authorities that a transfer of business can occur in various
ways including a sale, exchange, merge, take- over or an exchange of assets
or a donation. The list is not closed. In support of its contention that there was
no transfer of business the applicant submitted that after the second
respondent had committed various breaches of the SLA it required it to submit
a remedial plan after which it would be entitled to carry on with the operations
and maintenance of the transport service in terms of the SLA.
[12] I have rejected the applicant’s contention that there was no transfer and
accepted the first respondent’s contradictory version. The reasons are that on
the applicant’s version, when the second respondent committed a number of
2 (2011) 32 ILJ 2861 (CC)
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breaches of the SLA it took over control of the public transport operation until
the second respondent had submitted an acceptable remedial plan which
would entitle it to carry on with the operations. The applicant had therefore
taken over the second respondent’s control of the operations.
[13] The applicant informed the second respondent through its attorney’s letter
dated 28 March 2023 in unequivocal terms that it had taken over the
operation of the public transport. In the same letter it informed the second
respondent not to commence with the municipal public transport services as
contained in the VOCA until it had submitted a written remedial program . The
following paragraphs of the letter express the applicant’s take over of the
municipal public transport service:
“3.2 Regard being had to your reply letter of 2 February 2023, in response
to our letter of 31 January 2023, pertaining the subject matter, your
client, Spectrum Alert, remains under an obligation in terms of the
VOCA to submit an acceptable written remedial program to the NMBM
before it can recommence with the administration, maintenance and
operations of the municipal public transport service;
3.3 In the absence of a written remedial program acceptable to the
NMBM, your client, Spectrum Alert, has no right or entitlement to
commence with any of the administration, maintenance and or
operations of the municipal public transport services which forms the
basis of the VOCA.”
[14] The following letter written by Somjaliso on 8 February 2023 to the second
respondent’s staff confirms that in February 2023 the applicant took over the
total control of the second respondent:
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“Communication protocols
This serves as notice to all Spectrum Alert staff that a Section 28 process, as
stipulated in the Vehicle Operating Company Agreement signed between the
NMBM and Spectrum Alert ITS has now been evoked by NMBM as of 3 rd
February 2023. Section 28 allows the NMBM to place Spectrum Alert under
administration in a situation where there is breach of contract or where the
NMBM deems that the operations are compromised.
As part of the process, the NMBM has put in place a management structure
to undertake full control of Spectrum Alert. The team structure is defined
below:…
Therefore, all communication to all staff will be centralized via the office of the
Acting Manager or the delegated official as per the management structure as
highlighted above. All approvals will be issued in writing by the Acting
Manager.
You are therefore obligated to abide by the above-mentioned resolutions.”
[15] The applicant took over the administration, maintenance and operations of its
municipal public transport services, put the second respondent under
administration and put a management structure to undertake full control of the
second respondent. No part of the municipal public transport which formed
the second respondent’s business was left under its control. Nothing
precluded the applicant from choosing a solution which permitted the second
respondent to retain its business while correcting its non- compliance with the
SLA. The applicant’s submission that the second respondent’s conduct of
preparing its employee’s pay slips supports its version that it is in control of its
business cannot assist it. The preparation is done on the instructions of the
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applicant who uses the second respondent’s drivers and pay their salaries. As
the second respondent did not submit the remedial plan the applicant sought
its business is still under the full control of the applicant. The total control of
the second respondent the applicant assumed unilaterally constituted a
transfer as envisaged in section 1987 of the LRA. The issue of the legality of
Somjaliso’s conduct will be dealt with later in this judgment to avoid repetion. I
took it into account in reaching the finding that a transfer occurred.
[16] The provisions of section 197 of the LRA are triggered when the transfer that
has taken place is a transfer of the whole or part of a business, trade,
undertaking or service. The applicant submitted that no business was
transferred from the second respondent. It relied on MTN and Others v CCI
SA and Other
3. In that case MTN entered into an exclusive agreement with
CCI SA (CCI) for the rendering of call centre services. A year later because of
the high call volumes the agreement stopped being exclusi ve as MTN had
acquired the services of two additional service providers. When MTN’s
contract with CCI expired, the call volumes the latter serviced were taken over
by the 2 additional service providers. In overturning the Labour Court
judgment that the provisions of section 197 of the LRA had been triggered the
LAC found that the call centre services the CCI provided constituted a
discrete contract. It further found that CCI’s major business was its contractual
entitlement to perf orm call centre service. Its secondary asset was the
physical tools of the trade of a call centre such as the office furniture. A further
asset of CCI was the labour intensive productive capacity of the persons
delivering the service. The LAC concluded that no contract, tools of trade or
3 [2023] 10 BLLR 1006 (LAC) 15 June 2023.
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labour had been transferred from CCI to the other 2 service providers and that
the transfer o f call volumes from CCI to them did not constitute a transfer of
CCI’s business as a going concern.
[17] The first respondent insisted that a business was transferred from the second
respondent to the applicant. It relied on Road Traffic Management
Corporation v Tasima (Pty) Limited; Tasima (Pty) Limited v Road Traffic
Management Corporation 4 where it was held that the definition of what
constitutes a business is not limited to a closed list . In determining the
business the integral parts of the entity must be sufficiently connected to form
an economic entity that is capable of being transferred. The first respondent
also relied on the definition of business in Harsco Metals SA (Pty) Limited v
Arcelormittal SA Limited5 (Harsco Metals) which was referred to with approval
in Tasima. In Harsco Metals business is given the following definition:
“The definition [of a business] is broad, but it requires the court to subject the
entity that is the subject of a transfer to scrutiny. In doing so, the courts have
… adopted the concept of an ‘economic entity’ defined as ‘an organized
grouping of persons and assets facilitating the exercise of an economic
activity which pursues a specific objective.”
[18] The applicant’s argument supported by the CCI judgment cannot succeed
because the circumstances in CCI are distinguishable from those of the case
before me. Each case is determined on its own merits. It is noteworthy that
nothing in the CCI judgment detracts from the interpretation and definition of
business in the authorities the first respondent relied on. The interpretation is
4 [2020] 12 BLLR 1173 (CC)
5 (2012) 33 ILJ 901 (LC) at para 25.
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consistent with the wide definition of ‘business’ in section 197 which includes
an undertaking or service. It is common cause that when the applicant took
total control of the second respondent it consisted of an organized group of
persons as it is a company with its own board. It is not in dispute that the
second respondent had assets which the third respondent found in its office
when he attempted to execute a writ. It is also not in dispute that when the
applicant and the second respondent concluded the SLA the second
respondent was exercising an economic activity which pursued a specific
objective of providing a municipal public transportation service on behalf of
the applicant. It is in that business entity that the applicant leased its busses
to with the view of facilitating the rendering of the service. The second
respondent had its own employees and complied although erratically, with the
provisions of the first respondent’s main collective agreement by making the
required payments. The second respondent’s employees, its assets, its board
and the applicant’s busses it hired formed an integral part of its business. I
must therefore accept that a business as defined in section 197 of the LRA
was transferred from the second respondent to the applicant.
[19] The applicant denied that there was a transfer of business as a going concern
from the second respondent. Amongst the authorities the applicant relied on is
NEHAWU v University of Cape Town
6and Rural Maintenance (Pty)n Ltd and
Another v Maluti - A- Phofung Local Municipality 7 where the Constitutional
Court held that the test to determine whether the business was transferred a s
a going concern is objective. It involves an overall assessment of the situation
6 [2003] 24 ILJ 95 (CC) 119F-120A.
7 2017 (1) BCLR 64 (CC).
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and with no single definitive factor. The applicant also relied on the following
dictum in Tasima8 (supra):
“[96] Where services are involved, this Court has held that what must be
transferred is the business that suppliers the services - not the service itself.
That being so, there mere termination of a service contract would not, without
more, constitute a transfer within the contemplation of section 197. There
must be other indicators, such as whether assets and customers were
transferred to the new owner and whether employees were taken over by the
new owner”
[20] The authorities the first respondent relied on include the NEHAWU judgment
the applicant relied upon. The first respondent, however, relied on paragraph
56 of the judgment which reads as follows:
“[56] The phrase “going concern” is not defined in the LRA. It must
therefore be given its ordinary meaning unless the context indicates
otherwise. What is transferred must be a business in operation “so that the
business remains the same but in different hands.” Whether that has occurred
is a matter of fact which must be determined objectively in the light of the
circumstances of each transaction. In deciding whether a business has been
transferred as a going concern, regard must be had to the substance and not
the form of the transaction. A number of factors will be relevant to the
question whether a transfer of a business as a going concern has occurred,
such as the transfer or otherwise of assets both tangible and intangible,
whether or not workers are taken over by the new employer, whether
customers are transferred and whether or not the same business is being
carried on by the new employer. What must be stressed is that this list of
8 At para [96].
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factors is not exhaustive and that none of them is decisive individually. They
must all be considered in the overall assessment and therefore should not be
considered in isolation.
[21] An overall assessment of the facts before me supports the conclusion that
what was transferred form the second respondent was a business as a going
concern. It is common cause that at the time the applicant took over the
second respondent’s municipal public transport business it was in operation. It
had its employees who were addressed by Somjaliso in the letter of 8
February 2023. The problems it encountered at the time did not extinguish its
existence. The business remained the same when it moved from the second
respondent to the applicant’s hands. The second respondent ’s employees
also fell under the control of the applicant which continued paying their
remuneration. The totality of the facts placed before me prove that the second
respondent’s municipal public transport business which it conducted on behalf
of the applicant was transferred to the latter as a going concern.
[22] The applicant’s alternative argument was that should it be found that its
conduct in dealing with the second respondent fell within the ambit of section
197 of the LRA, any control it might have had would be unlawful and irregular.
The applicant submitted that its powers are regulated by legislation and the
Constitution of the Republic of South Africa, 1996 (the Constitution) and that
any conduct inconsistent with the relevant pieces of legislation was unlawful.
It submitted that in terms of the Municipal Systems Act
9 (Systems Act) and the
Municipal Finance Management Act 10 (MFMA) it had no authority to control
the second respondent or put it under administration. A transfer of the second
9 Act 32 of 2000.
10 Act 56 of 2003.
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respondent to the applicant as a going concern would have unlawfully made it
a municipal entity. The applicant also relied on the interpretation of the
principle of legality provided in Affordable Medicines Trust and Others v
Minister of Health and Others
11. In that case it was held that public power may
not be exercised beyond that which it is conferred by law.
[23] The applicant’s argument based on the breach of the Systems Act and the
MFMA was refuted by the first respondent’s argument based on section 210
of the LRA which provides as follows:
“If any conflict, relating to the matters dealt with in this Act, arises between
this Act and the provisions of any other law save the Constitution or any Act
expressly amending this Act, the provisions of this Act will prevail.”
[24] The application of section 210 of the LRA in disputes based on the operation
of section 197 of the LRA is enunciated as follows in City Power (Pty) Ltd v
Grinpal Energy Management Services (Pty) Ltd and Others12:
“[27] The implications of sections 66 and 93 of the Municipal Systems Act
read with sections 152 and 160 of the Constitution are that
municipalities are obliged to conduct all matters affecting their
employees in terms of the Municipal Systems Act. A reading of those
provisions alone would suggest that section 197 of the LRA is not
applicable to employees of a municipal entity even if those employees
are eligible for automatic transfer. The consequence would be that all
municipal entities would be immune from section 197 of the LRA.
That was not the purpose of the legislation. A reading of both Acts
shows that the LRA supersedes the Municipal Systems Act.
11 2006 (3) SA 247 (CC) at para 49.
12 [2015] 8 BLLR 757 (CC) at para [27] and [28].
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[28] Section 66 is contained in Chapter 7 of the Municipal Systems Act.
Section 52 is also contained in the same Chapter and provides:
“In the event of any inconsistency between a provision of this
Chapter, including the Code of Conduct referred to in section
69, or a regulation made for the purposes of this Chapter, and
any applicable labour legislation, the labour legislation
prevails.”
A transfer as envisaged in section 197 of the LRA took place by operation of
the law. The applicant ’s argument that the finding is in conflict with the
Systems Act and the MFMA cannot assist it because in terms of section 210
of the LRA the finding that the transfer took place prevails over any finding on
the issue based on other pieces of legislation other than the constitution. The
finding that a transfer of the second respondent to the applicant took place by
operation of law cannot be vitiated by the fact that the applicant acted beyond
its powers.
[25] As a transfer in terms of section 197 of the LRA occurs by operation of law ,
the applicant’s argument and authorities regulating debts and writs of
execution between the first and second respondent are superceded by the
provisions of section 197 of the LRA. As the second respondent ’s municipal
public transport service business was transferred to the applicant as a going
concern, the applicant and the first respondent acquired all the rights and
obligations provided in section 197 of the LRA flowing from the transfer. There
was no need, contrary to the applicant’s view, for the second respondent to
allege of suggest that there was a transfer. As the first respondent did not
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base its case on a transfer by agreement the applicant’s argument that there
was non-compliance with the provisions of section 197(7) of the LRA cannot
assist it.
[26] The applicant did not act unreasonably in bringing this application. A costs
order against it will therefore not be appropriate.
[27] In the premises, the following order is made:
1. A transfer in terms of section 197 of the Labour Relations Act 66 of 1995 as
amended took place between the applicant and the second respondent.
2. The application is dismissed.
3. There is no order as to costs.
MZN Lallie
Judge of the Labour Court of South Africa
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Appearances:
For the Applicant: Advocate S. Patel
Instructed by Kuban Chetty Inc
For the First Respondent: Advocate F. Le Roux
Instructed by Ivings McFalane Attorneys
For the Second Respondent: Mr S. Nkontso of Nkontso Attorneys