Horn and Others v LA Health Medical Scheme and Another (CCT97/14) [2015] ZACC 13; 2015 (7) BCLR 780 (CC) (14 May 2015)

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Horn and Others v LA Health Medical Scheme and Another (CCT97/14) [2015] ZACC 13; 2015 (7) BCLR 780 (CC) (14 May 2015)

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CONSTITUTIONAL
COURT OF SOUTH AFRICA
Case
CCT 97/14
In
the matter between:
JOHANNES
PETRUS LOUW
HORN
.............................................................................
First
Appellant
LYDIA
ADAMS
..............................................................................................................
Second
Appellant
LENA
DOUW
....................................................................................................................
Third
Appellant
KATHARINA
SUSANNA
HOLTZHAUZEN
..............................................................
Fourth
Appellant
BELINDA
KARSTEN
.......................................................................................................
Fifth
Appellant
BASIL
PAUL
RUGHUBAR
.............................................................................................
Sixth
Appellant
DIANA
THERON
.........................................................................................................
Seventh
Appellant
LOVINA
ELIZABETH
YOUNG
..................................................................................
Eighth
Appellant
and
LA
HEALTH MEDICAL
SCHEME
.............................................................................
First
Respondent
CAPE
JOINT RETIREMENT
FUND
......................................................................
Second
Respondent
Neutral
citation:
Horn and Others v LA
Health Medical Scheme and Another
[2015]
ZACC 13
Coram:
Mogoeng CJ, Cameron J, Froneman J, Khampepe J,
Leeuw AJ, Madlanga J, Nkabinde J, Tshiqi AJ, Van der Westhuizen J and
Zondo J.
Judgments:
Nkabinde J (majority): [1] to [37]
Zondo
J (concurring): [38] to [140]
Heard
on:
11 November 2014
Decided
on:
14 May 2015
Summary:
Leave to appeal granted on
misrepresentation
—
right to a fair
hearing
—
no constitutional issue
raised
—
appeal dismissed with costs
The
effect of
section 197(2)
of the
Labour Relations Act 66 of 1995
on
contracts of employment and rights and obligations concerning pension
benefits and redundancy benefits upon transfer of business
as a going
concern — employees’ right to redundancy benefit, if any,
before transfer is taken over by business transferee
ORDER
On
appeal from the Supreme Court of Appeal:
1.
Condonation is granted.
2.
The appeal is dismissed with costs.
JUDGMENT
NKABINDE
J (Cameron J, Froneman J, Khampepe J, Madlanga J, Tshiqi AJ and Van
der Westhuizen J concurring):
Introduction
[1]
This
is an appeal against a decision of the Supreme Court of Appeal
[1]
in terms of which the order granted by the Full Court of the Western
Cape Division of the High Court, Cape Town
[2]
(Full Court), upholding that of the High Court, per Erasmus J,
[3]
in favour of the appellants, was set aside.  The key question we
have been asked to determine is whether the appellants are
entitled
to an additional redundancy or retrenchment benefit specified under
the Pension Fund Rules (Rules).  Answering the
key question
involves the interpretation of rule 7.1A(1) of the Rules.
[4]
Also in question is whether the appellants’ rights to be heard
under section 34 of the Constitution were violated and
whether
section 197 of the Labour Relations Act
[5]
(LRA) finds application in resolving the key question.
Parties
[2]
The
first appellant, a former Senior Manager in the employ of the first
respondent, LA Health Medical Scheme (LA Health), represented
the
other appellants who are also former employees of LA Health.  LA
Health is a medical scheme registered in terms of the
Medical Aid
Schemes Act
[6]
which provides
medical aid to local authorities in the Western Cape, Northern Cape
and Eastern Cape.
[7]
As a
result of their employment with LA Health and its predecessor, the
Local Authorities Medical Aid Fund (LAMAF), the appellants
were
members of the second respondent, the Cape Joint Retirement Fund
[8]
(Fund), until 31 December 2004.  The Fund is a defined
contribution fund registered in terms of section 4 of the Pension
Funds Act.
[9]
It was
established for the purpose of benefiting employees of local
authorities.
Background
[3]
The
appellants were former employees of LAMAF, which changed its name to
LA Health with effect from 1 January 2005 when LA
Health
transferred the department in which the appellants were employed to
Discovery Health (Pty) Ltd (Discovery).  Before
1994, the Rules
permitted employees who were not employed by a “local
authority” within the meaning of the Income Tax
Act
[10]
to become members of the Fund.  Thus, although LAMAF was not a
“local authority” under the Income Tax Act,
[11]
its employees, including the appellants, were members of the Fund.
The Rules were amended in 1994 to prohibit persons not
employed by a
“local authority” from becoming members.  However
the Commissioner of Inland Revenue accepted that
all existing members
of the Fund, despite not being employees of a local authority, could
remain as members, and thus the appellants
were permitted to continue
with their membership of the Fund.
[12]
[4]
With
effect from 1 July 2000, the Rules were then amended further, and
rule 9.7(4) was added.  That rule relates to members
who
are transferred to a new employer or a local authority which is not
associated with the Fund.
[13]
This further amendment provides the transferred member with an option
to elect to transfer his or her member’s share
in the Fund to
the new employer or to leave that share in the Fund as a deferred
benefit and then be regarded as a deferred member
of the Fund.
This rule also lays down the benefits which the deferred members are
entitled to receive.  In addition
a new sub-rule was added to
the existing rule 7.2, to enable members to elect to become a
“DEFERRED MEMBER” of the
Fund.
[5]
On 31 May 2004, having caught wind of an
impending transfer of their department to Discovery, the affected
employees addressed a
letter to LAMAF (LA Health).  They
maintained that a case could be made out for retrenchment.
Consequently, they said
there was a “possibility of the
payment of a [redundancy or retrenchment] benefit in addition to the
relevant employees’
‘Member’s share’ as
provided for in the Rules”.
[6]
On
1 January 2005 LA Health transferred its administration division to
Discovery in terms of section 197(2)(a) of the LRA.
[14]
Discovery has not been a party to these proceedings at any point.
It is common cause that on being transferred to Discovery,
the
appellants fell within the language of rule 7.1A(1) of the Rules
because their employment positions had been abolished.
Further,
the Rules provided that payment of the benefit over and above the
member’s interest (to which all members were entitled)
was to
be funded by the local authority, which in this case would be
LA Health, and not the Fund.
[15]
[7]
It
is common cause that when the administration division was transferred
to Discovery under section 197(2) the appellants, who had
contributed
to the Fund in accordance with the terms of their employment,
reserved their rights to claim the redundancy or retrenchment
benefit
provided for in the Rules.
[16]
The Rules provided that if a member’s service is terminated
owing to a reduction or reorganisation of staff or by the
abolition
of his or her post in order to effect improvements in efficiency or
organisation or as a result of his or her post having
been declared
redundant or him or her having been retrenched, the member is
entitled to a redundancy benefit.
[17]
As the employer at the relevant time, LA Health was bound by the
Rules.
[18]
[8]
LA
Health and Discovery concluded a memorandum of understanding
[19]
(MOU) in terms of which the latter undertook to offer all employees
of LA Health affected by the administration agreement employment
on
terms and conditions not less favourable than those pertaining to
their employment with LA Health.
[20]
In June 2004 the members of the Fund were informed of the
following options available to them upon their transfer to
Discovery,
namely that—
(1)
their member’s share in the Fund could be transferred to
Discovery;
(2)
they could become deferred members of the Fund, thereby permitting
them to preserve their benefit in the Fund until normal retirement

age, without further contributions being made by the respective
member or local authority; or
(3)
they could transfer their member’s share to a preservation
fund, which was considered the best option in the light of
the
applicable tax legislation.
[9]
Under
this last option members had a once-off choice to withdraw a portion
or 100% of their member’s share.  The majority
of the
appellants opted for the latter, withdrawing their member’s
share after transfer to a preservation fund.
[21]
Those that did so withdrew their member’s share after it was
transferred to a preservation fund.  They then continued

employment with Discovery, from 1 January 2005.
High
Court
[10]
The
appellants instituted proceedings in the High Court against LA Health
and the Fund, claiming payment of the additional redundancy
or
retrenchment benefit under rule 7.1A(1)(b).
[22]
This claim was based on the alleged obligation of LA Health to
make payment to the Fund to finance the additional benefit
payable to
the individual appellants under rule 7.1A(1).  The appellants
said that the obligation arose “from the terms
and conditions
of their contracts of employment and because [LA Health] was an
employer participating in or associated with the
Pension Fund”.
They contended that in terms of the Rules and the conditions of
employment of the individual appellants,
the additional benefit, in
so far as it exceeded each of the individual appellants’
member’s share in the Fund, had
to be financed by LA Health.
[11]
The
appellants’ case thus rested on the interpretation of the
Rules, in particular the introductory words of rule 7.1A(1).

These read: “The member’s conditions of service provide
for an additional redundancy / retrenchment benefit to be paid
by the
Local Authority.”
[23]
The parties proffered different interpretations.
[12]
Basing
their claim under rule 7.1A(1) and the terms and conditions of their
contracts of employment with LA Health,
[24]
the appellants claimed that—
“
[a]
concomitant of employees’ compulsory membership of the Pension
Fund and the participation of [LA Health] with the Pension
Fund was
that [the employer] had bound [itself] towards [its] employees who
were members of the Pension Fund to perform the obligations

stipulated for participating local authorities in the rules of the
Pension Fund as they existed and were amended from time to time”.
[13]
The appellants claimed further that the
obligations LA Health was bound to perform were those that “arose
as necessary incidents
of LAMAF [/ LA Health] participating in and
associating [itself] with the [Fund]”.
[14]
In
its response to the appellants’ contention that they were
entitled to the additional redundancy or retrenchment benefit,
LA
Health asserted that it was not a local authority.  It contended
that the plain meaning of rule 7.1A(1) is that whether
an additional
redundancy or retrenchment benefit may be paid depends upon the
conditions of service applicable to the employment.
It said
that nowhere in the conditions of service is provision made for the
additional redundancy or retrenchment benefit,
[25]
save for what is provided for in the retrenchment policy regarding
dismissals.
[26]
The Fund
abided the decision of the Court.
[15]
In reply, the appellants contended that the
benefits need not be provided for in the conditions of service.
It is only those
additional benefits over and above those set out in
rule 7.1A(1) that must be provided for in the conditions of service
should
the employer wish to do so.
[16]
The
High Court, per Erasmus J, remarked that the appellants had accepted
the application of section 197, in particular that in having
been
transferred to Discovery under section 197, LA Health’s
employees had also been retrenched as defined by rule 7.1A.

The Court, however, noted LA Health’s contention that it was a
“‘non issue’ that the transfer brought about
a
termination of the [appellants’] employment with
[LA Health]”.
[27]
The High Court referred to the issue to be decided as follows:
“
[W]hether
the individual applicants are, in terms of the Pension Fund Rules,
entitled to receive the benefits stipulated in Rule
7.1A(1) of the
Pension Fund Rules.
The
conditions of service only became relevant insofar as it makes it
compulsory for the employee to belong to the [Fund].
The rules
then bind the employer and the employee.”
[28]
(Emphasis added.)
[17]
The
High Court, having had regard to
Telkom
[29]
and
IMATU
,
[30]
held that “the transfer of the individual [appellant’s]
service with [LA Health] with effect from 1 January 2005,
has
the effect that the individual [appellants] became entitled to the
benefits specified in the Rules” and that, consequently,
they
are entitled to the relief sought in the notice of motion.
[31]
The Court ordered the Fund to pay the appellants the additional
benefit upon receiving payment from LA Health plus interest.
[32]
It also ordered LA Health to pay costs.
[33]
[18]
However,
on the basis of the holding in
IMATU
2
,
[34]
where another judge of the High Court, Thring J, came to the opposite
conclusion on the same legal question, the High Court granted
LA
Health leave to appeal to the Full Court.
[35]
Full
Court
[19]
The
Full Court
[36]
also grappled
with the interpretation of rule 7.1A(1).
[37]
It ultimately confirmed the decision of the High Court.  It held
that the correct interpretation of “additional
benefit”
in the opening sentence of rule 7.1A(1) is that it serves as “no
more than a recordal of a factual situation”.
[38]
The “additional benefit”, the Full Court remarked, was
that which appeared in the policy documents.
[39]
Furthermore, the Court held that the phrasing of additional benefit
in the notice of motion and in the affidavit did not
lend support for
the interpretation contended for by LA Health.
[40]
The Court dismissed the appeal with costs.  It subsequently
dismissed the application for leave to appeal to the Supreme
Court of
Appeal with costs.  LA Health successfully petitioned the
Supreme Court of Appeal for special leave to appeal.
[41]
Supreme
Court of Appeal
[20]
LA
Health’s successful appeal rested also on the interpretation of
rule 7.1A(1).
[42]
Having dealt with the background context to this rule, the
Supreme Court of Appeal noted that “[o]ther than a
cryptic
provision that the employer ‘may provide’ that the
affected employee be retired in terms of the pension fund
rules,
which the employer in this case did not provide, there is no
reference to the benefit in rule 7.1A(1)”.
[43]
In relation to the introductory words of the rule, the Supreme Court
of Appeal held that the words “did not record
anything in
relation to the conditions of service of employees of
LA Health”.
[44]
The Court remarked that “[t]he introductory words only make
sense if they refer to the local authorities that had agreed
to
provide [the additional] benefits to their employees in terms of a
collective agreement”.
[45]
It found that, in that event, the terms of the collective agreement
would have been incorporated in the employees’
contracts of
employment by virtue of section 23(3) of the LRA.
[46]
[21]
The
Supreme Court of Appeal concluded that “when rule 7.1A(1) is
viewed in context, the references to the ‘local authority’

in that rule can only be construed as references to local authorities
properly so called and not to other employer members of the
fund
falling within the extended definition of that term in para (b) of
the definition of ‘local authority’”.
[47]
That being so, the Court said, the rule did not apply to LA Health
and its employees and the appellants were not entitled,
when they
were transferred to Discovery, to claim the additional redundancy or
retrenchment benefit under the rule.
[48]
[22]
In answer to the appellants’ argument
that the finding that the rule did not apply would leave employees of
LA Health (and
any other member of the Fund similarly situated)
empty-handed if they were retrenched, the Supreme Court of Appeal
found that those
employees and members would still be entitled to
their member’s share in terms of the rule.  It said:
“
The
structure of rule 7.1A(1), in all the forms it took over the years,
was that the retrenched member would receive their member’s

share plus the benefit provided by the local authority.  This is
the ‘additional’ benefit referred to in the introductory

words and it was so understood by the [appellants] who had all
received their member’s shares on withdrawal from the Fund.

The relief they sought in the notice of motion was payment of the
additional benefit provided under the rule, which payment was
to be
funded by LA Health.  Rule 7.1A(1) did not add anything to their
existing entitlement to the member’s share as
a withdrawal
benefit under rule 7.1(1), nor did the lack of entitlement to the
additional benefit detract from the entitlement
to the withdrawal
benefit.”
[49]
[23]
The appellants took issue with the manner
in which the Supreme Court of Appeal contextualised the background to
the genesis of the
rule.  They sought leave to appeal to this
Court.
In
this Court
[24]
Concurrently
with setting this matter down, this Court granted the appellants
leave to appeal.
[50]
They challenged the decision of the Supreme Court of Appeal on
various grounds.  They took issue with that Court’s

interpretation that the incorporation of the original rule into the
Rules was for the benefit of employees of local authorities
in the
strict sense (including only those local authorities as defined in
the Rules) and not in the extended sense (which would
include local
authorities that were no longer defined as such under the Rules but
had remained incorporated in the definition as
per the Commissioner’s
pronouncement).
[51]
The
appellants contended that the Supreme Court of Appeal had regard to
facts that did not form part of the evidence and
that they were not
afforded the opportunity to dispute the version of the genesis and
development of the rule that that Court relied
upon.
[52]
Issues
[25]
Leave to appeal having been granted, the
contentions by the parties raise the following questions:
(a)
Were the appellants’ section 34 rights
[53]
violated by the Supreme Court of Appeal (procedural ground)?
(b)
Are the appellants entitled to the payment of the benefit in terms of
rule 7.1A(1)?
(c)
Is section 197 applicable to the determination of whether the
appellants are entitled to the payment of the additional benefit
in
terms of rule 7.1A(1)?
[26]
Before I deal with the merits, I deal first
with a preliminary issue regarding condonation of the late filing of
the statement of
facts by the appellants.
Condonation
[27]
LA
Health was directed to file an agreed statement of facts by 27 August
2014.
[54]
If the parties
could not agree on a statement of facts, following the filing of LA
Health’s statement of factual findings
on or before 27 August
2014, the appellants were directed to file a statement setting out
the factual findings that were disputed
on 3 September 2014.  No
agreement was in fact reached, and thus the appellants’
statement of disputed factual findings
was to be filed by that date.
However, the appellants only properly filed their statement on
12 September 2014.
An electronic version was tendered to
the Court on 3 September 2014 but this, on its own, does
not constitute proper
filing according to this Court’s
Rules.
[55]
Their
statement was thus late by seven days; the explanation proffered for
the delay, which is reasonable, is that they only
became aware of the
fact that their statement had not been filed in accordance with the
rules on 9 September 2014 when
their correspondent
attorneys conveyed the Registrar’s message that their filing
had not complied with proper procedures.
LA Heath does not
oppose the condonation.  It is in the interests of justice to
condone the delayed filing of the statement.
Merits
[28]
The appellants contended that the Supreme
Court of Appeal decided the appeal on a ground of appeal not advanced
in the High Court
nor raised on appeal to it.  Using strong
language, they maintained that they were “ambushed” by
the judgment
because they were not afforded the opportunity to
dispute the version adopted by the Supreme Court of Appeal regarding
the genesis
and development of the rule.  LA Health
contended that the Supreme Court of Appeal judgment provided legal
certainty,
that that Court did not improperly take notice of facts
that did not form part of the evidence and that the appellants were
afforded
an opportunity to be heard on the issue of the genesis and
development of the rule upon which it relied.  Although LA
Health
conceded that the application raises a constitutional issue,
it contended that leave to appeal should have been refused.
[29]
The
Constitution guarantees everyone “the right to have any dispute
that can be resolved by application of the law decided
in a fair
public hearing before a court”.
[56]
In
Stopforth
[57]
this Court held that this right has substantive and procedural
components both of which need to be upheld.
[30]
The
pleaded procedural ground, implicating the appellants’ rights
to a fair hearing, indeed imbued this Court with jurisdiction.

This Court has held in
Gcaba
[58]
that in applications for leave to appeal “[j]urisdiction is
determined on the basis of the pleadings . . . and not the
substantive
merits of the case”.
[59]
It follows that, on what this Court was told in the pleadings when
the application was lodged, leave to appeal was properly
granted.
[31]
When
the record of the proceedings
a
quo
was subsequently lodged, it became apparent that the application for
leave to appeal was gravely misleading.  The claim that
the
Supreme Court of Appeal “ambushed” the appellants was
false.  The appellants had, as a matter of fact, been
afforded
an opportunity by the Supreme Court of Appeal, not once but twice, to
make submissions on the genesis and development
of rule 7.1A(1):
indeed, the appellants were expressly required by the Supreme Court
of Appeal to make submissions on the history
of rule 7.1A(1).
[60]
The assertion that the appellants were “ambushed” by the
judgment of the Supreme Court of Appeal is thus not
only ill-founded
and disingenuous but also borders on perjury.
[32]
Where
does that leave the appeal – leave to appeal having been
granted, on the basis of misleading averments?  The issue

regarding the entitlement to the redundancy or retrenchment benefit
requires a proper interpretation of the rule.  However,
it is
well established that matters involving the straight application of
law that do not raise a constitutional question about
the validity or
the proper interpretation of that law are not constitutional
issues.
[61]
The
interpretation of rule 7.1A(1) does not, in and of itself, raise a
constitutional issue.  Moreover, the appellants
have not shown
how any matter of constitutional import is implicated by either of
the interpretations contended for by the parties.
It is
therefore not necessary to determine whether the appellants are
entitled to the additional benefit under rule 7.1A(1).
In any
event, there is no merit in the attack on the interpretation of the
rule by the Supreme Court of Appeal, which was in all
respects
correct.
[33]
The
appeal must be dismissed on the ground that the facts and issues
before the Court do not invoke its jurisdiction.
[62]
The fact that leave to appeal is granted on the basis of what is
alleged in the pleadings does not mean that the appeal itself
cannot
be dismissed if it subsequently appears that those allegations are
not proven.
[34]
I
have had the benefit of reading the judgment of my brother, Zondo J,
in which he opines that the determination of the matter requires
the
interpretation and application of section 197 of the LRA.  It
bears emphasis that throughout this litigation, the question
of the
transfer under section 197 of the LRA was a non-issue.
[63]
It is common cause that the appellants reserved their rights to claim
the additional benefit in terms of the Rules of the
Fund.  The
determination of the interpretation and applicability of section 197
is, in my view, not dispositive of the key
question referred to
above.
[64]
Accordingly,
in the view I take of the matter, the interpretation and
applicability of section 197 is not an issue “which
ought to be
considered by [the] Court”.
[65]
[35]
In
addition, Discovery was never joined as a party.  To hold that
the obligation the appellants sought to enforce against LA
Health was
one that was taken over by Discovery by virtue of section 197 without
joinder of Discovery should not be done.
[66]
And to join Discovery at this late stage of the appeal process, in a
lost cause, would simply cause the parties unnecessary
trouble,
expense and delay.
[67]
[36]
Accordingly, the appeal should fail.
Order
[37]
The following order is made:
1.
Condonation is granted.
2.
The appeal is dismissed with costs.
ZONDO
J (Mogoeng CJ and Leeuw AJ concurring):
Introduction
[38]
The
question before us in this appeal is whether the Supreme Court of
Appeal was right in its judgment in holding that the appellants
were
not entitled to the payment of an additional redundancy benefit that
they sought to compel LA Health Medical Scheme (LA Health),
the first
respondent and their former employer, to pay to the Cape Joint
Retirement Fund (Fund), the second respondent, which in
turn was to
pay the benefit to the appellants.  The judgment is that of
Wallis JA in which Navsa JA, Maya JA, Saldulker
JA and Mathopo
AJA concurred.
[68]
The
Supreme Court of Appeal’s decision was based on an
interpretation of the Rules of the Fund.  In the view I
take of
the matter, before we can consider whether in terms of the Rules of
the Fund the appellants were entitled to the payment,
we need to
consider a prior question.  That is whether the obligation that
the appellants seek to enforce against LA Health
is not an
obligation that was taken over by Discovery Health (Pty) Ltd
(Discovery) when LA Health transferred its administrative
division to
Discovery as a going concern.  In this judgment I refer to this
question as the section 197 point.
[39]
If
the answer to the question is that the obligation was taken over by
Discovery, LA Health cannot be liable and the appeal should
be
dismissed.  If, however, the obligation was not taken over by
Discovery, then the Rules of the Fund should be examined
to determine
whether LA Health was indeed obliged to pay the additional redundancy
benefit in terms of the Rules of the Fund.
This question arises
because it is common cause that section 197 of the Labour Relations
Act
[69]
(LRA) applied to that
transfer of business and because of the provisions of section 197(2)
of the LRA.  Section 197(2)(b)
provides that, unless otherwise
agreed in terms of subsection (6), all the rights and obligations in
existence between the business
transferor and an employee at the time
of the transfer continue in force, after the transfer, as if they had
been rights and obligations
between the business transferee and the
employee.
[70]
Background
[40]
This appeal originates from a claim that
the appellants instituted against the first and second respondents by
way of motion proceedings
in the Western Cape Division of the High
Court.  Prior to, and, until 31 December 2004 the appellants
were employed by the
Local Authorities Medical Aid Fund (LAMAF) in
its administrative division.  LAMAF changed its name to LA
Health (Pty) Ltd
with effect from 1 January 2005.  During
their employment by LAMAF, the appellants were members of the Fund.
LAMAF
participated in the Fund as their employer.
[41]
It is common cause that the appellants and
LAMAF were bound by the Rules of the Fund.  The relevant part of
Rule 7.1A(1)(b)
of the Rules of the Fund reads:
“
REDUNDANCY
/ RETRENCHMENT BENEFIT FROM 1 MARCH 1999.
If
a MEMBER’S SERVICE is terminated owing to a reduction in, or
reorganisation of staff, or to the abolition of his [/ her]
post, or
in order to effect improvements in efficiency or organisation (which
includes termination of SERVICE in order to establish
equity in the
workplace or to implement affirmative action programmes) or as the
result of having been declared redundant or having
been retrenched,
on receipt of advice from the LOCAL AUTHORITY, he [/ she] shall be
entitled to:
(a)
the MEMBER’S SHARE;
PLUS
(b)
an amount payable by the LOCAL AUTHORITY concerned (and for which it
alone shall be liable to the member), being the lesser
of—
(aa)
the difference between the age of 65 years and his [/ her] age on his
[/ her] nearest birthday, multiplied by 8%, multiplied
by the
MEMBER’S SHARE.
OR
(bb)
100% of the MEMBER’S SHARE.
Provided
that the amount payable by the LOCAL AUTHORITY in terms of paragraph
(b) hereof, may be reduced if the MEMBER agrees thereto
in writing;
Provided further that the FUND shall only become liable to pay the
amount in terms of paragraph (b) hereof, if and
when the said amount
has been paid by the LOCAL AUTHORITY to the FUND, and there is and
shall be no obligation upon the FUND or
the TRUSTEES to take any
steps to enforce payment by the LOCAL AUTHORITY concerned of the said
amount; Provided still further that
if the LOCAL AUTHORITY concerned
fails to pay the said amount to the FUND within seven days after
termination of the MEMBER’S
SERVICE in terms of this
subsection, the FUND may nevertheless at its sole and exclusive
option and election, and notwithstanding
anything to the contrary
herein contained, pay the said amount to the MEMBER.”
[42]
The Fund was mainly for employees of local
authorities.  As a result, its Rules referred to local
authorities when they referred
to employers participating in the
Fund.  By some arrangement LAMAF had been allowed to participate
in the Fund even though
it was not a local authority.  One of
the questions which arises in the interpretation of Rule 7.1A(1) is
whether the reference
to local authority in that Rule is a reference
to a local authority proper or whether the reference also includes
LAMAF.
[43]
It is common cause that—
(a)
with effect from 1 January 2005 the administrative division of LAMAF
was transferred from LAMAF, the business transferor, to
Discovery,
the business transferee, as a going concern as contemplated in
section 197(1) of the LRA;
(b)
the administrative division formed a part of LAMAF’s business
until 31 December 2004;
(c)
upon the transfer of the administrative division as a going concern
from LAMAF to Discovery, Discovery was substituted in LAMAF’s

place as the employer of the appellants with effect from 1 January
2005 and it took over all the contracts of employment of the

appellants.
[44]
The appellants’ case is that the
transfer of the administrative division terminated their contracts of
employment with LAMAF
for redundancy or as part of retrenchment.
In this regard they contend that the posts that they occupied at
LAMAF ceased
to exist.  They say that this brought them within
the ambit of Rule 7.1A(1)(b) of the Rules of the Fund.  They
contend
that, as a result of the termination of their services, or,
as a result of that declaration of redundancy or as a result of
retrenchment,
with effect from 1 January 2005 an obligation arose for
LA Health to pay the additional redundancy benefit to the Fund so
that
the Fund could pay it over to them.  The appellants submit
that that obligation was part of their terms and conditions of
employment.  The dispute between LA Health and the appellants is
whether that obligation existed or exists.  LA Health
contends
that neither the conditions of service of the appellants nor the
Rules of the Fund made provision for that obligation.
The
appellants contend that Rule 7.1A(1)(b) provides for that obligation.
[45]
The Courts below decided the matter on the
basis of different interpretations of the Rules of the Fund without
any regard to section
197 of the LRA.  The judgment by my
Colleague, Nkabinde J, (main judgment), which I have had the
opportunity of reading, is
to the effect that there is no
constitutional issue in this matter and, therefore, this Court has no
jurisdiction.  It reaches
this conclusion after a discussion of
the Rules of the Fund and despite the fact that this matter raises
the interpretation of
section 197(2) of the LRA.  The main
judgment does not consider section 197.  It says that this is
because section 197
is “not material”, that the
appellants reserved their rights and that section 197 is not
dispositive of the matter.
I deal with these points one by one.
[46]
The statement in the main judgment that
section 197 is not material is not substantiated.  The statement
is difficult to understand
because it is common cause between the
parties that section 197 applied to the transfer of the
administrative division from LAMAF
/ LA Health to Discovery as a
going concern.  The affidavits, the correspondence between the
parties and the memorandum of
understanding signed between LAMAF and
Discovery reveal an acceptance by all concerned that section 197(2)
was applicable
in this case.  Section 197(2) sets out mandatory
consequences of a transfer of business as a going concern on
contracts of
employment and the employment relationships between, on
the one hand, the business transferor and the employees and, on the
other,
the business transferee and the employees.  I cannot see
how it can be said that a statutory provision that spells out
mandatory
consequences if a certain event occurs can be said to be
immaterial in a case where it is common cause that the event has
occurred
and the question is whether or not a certain consequence
falls within the ambit of the prescribed consequences.  The
statement
seems to suggest that, just because the point was not
raised by any of the parties, it cannot be raised
mero
motu
by the Court nor may it form the
basis of the Court’s decision.
[47]
In
suggesting so, the main judgment is incorrect.  The suggestion
is contrary to a well-known principle of our law that a court
may
raise a point of law
mero
motu
at any time and decide a matter on the basis of that point if to do
so would not involve any unfairness to any of the parties.
On
this I can do no better than refer to an articulation of this
principle by this Court in
CUSA
v Tao Ying Metal Industries and Others.
[71]
In that case this Court said:
“
Where
a point of law is apparent on the papers, but the common approach of
the parties proceeds on a wrong perception of what the
law is, a
court is not only entitled, but is in fact also obliged,
mero
motu
,
to raise the point of law and require the parties to deal therewith.
Otherwise, the result would be a decision premised
on an incorrect
application of the law.  That would infringe the principle of
legality.  Accordingly, the Supreme Court
of Appeal was entitled
mero
motu
to raise the issue of the Commissioner’s jurisdiction and to
require arguments thereon.”
[72]
(Footnotes omitted.)
[48]
That is what happened in this case.
The statements in the affidavits of both parties in the High Court
that the transfer of
the administrative division was a transfer of
business as a going concern and their acceptance that section 197
applied to that
transfer, made the section 197 point quite apparent.
The parties were invited to deal with the point and they did so.

All parties accepted that the Court was entitled to raise the section
197 point of its own accord in this case even at this stage
of the
litigation because that point is purely a point of law.
Furthermore, the section 197 point is not a point that would
have
made it necessary for any party to place any evidence before the
Court that had not been placed before the Court already.
None
of the parties indicated that there would be any unfairness to it if
the case was decided on the basis of the section 197
point.
Therefore, in terms of the decision of this Court in
CUSA
we were obliged to raise and deal with the section 197 point.
[49]
The main judgment points out that the
appellants reserved their rights before the transfer of business.
It seems to suggest
that that would have prevented Discovery from
taking over the rights and obligations of LAMAF / LA Health upon the
transfer of
business as a going concern in terms of section 197(2).
As a matter of law, the consequences that section 197(2) says flow

from a transfer of business as a going concern cannot be prevented by
a reservation of rights that falls outside of a subsection
(6)
agreement.  The appellants cannot contract out of section 197 or
avoid the consequences of section 197 in any way other
than by
resigning before the transfer of business or by concluding a
subsection (6) agreement.
[50]
The
European Court of Justice has taken the view that an employee cannot
waive his or her rights arising out of a transfer of business
under
Article 3 of the Council Directive 77/187/EEC of 14 February 1977 on
the approximation of the laws of the Member States relating
to the
safeguarding of employees’ rights in the event of transfers of
undertakings, businesses or parts of businesses
(1977
EEC Directive)
[73]
which I
discuss later in this judgment.  This is because of the public
policy on which Article 3 is based.
[74]
I think that, subject to subsection (6), the same would apply to an
employee’s rights under section 197.  If an
employee
cannot waive his or her section 197 rights outside of a
subsection (6) agreement, he or she can also not reserve
such rights
outside of a subsection (6) agreement.  The main judgment also
concludes that section 197 is not dispositive of
the matter.
That is not correct because, if the obligation to pay the additional
redundancy benefit was taken over by Discovery
upon the transfer of
business with effect from 1 January 2005, LA Health cannot be liable
for the payment of that benefit.
That conclusion, based on the
interpretation of section 197(2), would be dispositive of the
entire dispute.
[51]
The view I take of this matter is that,
since the administrative division in which the appellants were
employed by LAMAF was transferred
as a going concern with effect from
1 January 2005, there is a question that arises in regard to the
appellants’ claim even
before one can get to the question
whether the Rules of the Fund or the appellants’ conditions of
service contained the obligation
that the appellants seek to enforce
against LA Health.  That question is whether, if ever LAMAF had
such an obligation at
the time of the transfer, Discovery took it
over as a consequence of the transfer of business as a going concern
with the result
that the appellants should have sued Discovery and
not LA Health.  If the answer is that Discovery did not take
that obligation
over, then we can inquire into the correct
interpretation of the Rules of the Fund to determine the dispute.
However, if
the answer is that one of the consequences of the
transfer of the administrative division was that Discovery took over
that obligation,
that would be the end of the matter because it will
mean that the appellants sued a wrong party.
Jurisdiction
of this Court
[52]
We
granted the appellants leave to appeal against the judgment of the
Supreme Court of Appeal when this matter was set down.

During the hearing a question arose whether this Court had
jurisdiction in this matter and whether the decision to grant leave

was correct.  For this reason it is necessary to briefly state
why this Court has jurisdiction and why granting leave was
correct.
We could only grant leave to appeal if we were satisfied that this
Court had jurisdiction.  The main judgment
holds that this Court
does not have jurisdiction.  It says this within the context of
the interpretation of the Rules of the
Fund but overlooks the fact
that this matter raises the interpretation of section 197 of the LRA
which is legislation enacted to
give effect to section 23 of the
Constitution.  The determination of this matter requires the
interpretation and application
of section 197(2) of the LRA.  If
the obligation sought to be enforced by the appellants against LA
Health falls within the
ambit of section 197(2) of the LRA, then it
was taken over by Discovery upon the transfer of the division.
If it doesn’t
fall within the ambit of section 197(2)(b), then
it may have remained with LA Health.  Whether the obligation
falls within
section 197(2)(b) or not is a matter for the
construction of section 197 of the LRA.  As this Court has said
before,
the interpretation and application of the LRA is a
constitutional issue.
[75]
Accordingly, this Court has jurisdiction.
Leave
to appeal
[53]
With
regard to leave, there are also proper grounds to justify our
decision to grant leave to appeal.  Leave is granted if
it is in
the interests of justice to grant leave.  All the matters that
have come before this Court concerning section 197
of the LRA have
revolved around the question whether the transaction concerned
constituted a transfer of business as a going concern.
[76]
That in this case the transaction was a transfer of business as a
going concern is common cause.  The question that
arises is:
what is the effect of a transfer of business as a going concern on
obligations that the business transferor had before
the transfer
concerning employment benefits for employees employed in the business
that has been transferred?  In other words,
do they remain with
the business transferor or are they taken over by the business
transferee?  That is a question that requires
an interpretation
of section 197(2) of the LRA.  This Court has never made a
pronouncement on that question.  This case
gives this Court an
opportunity to make a pronouncement on the scope of section
197(2)(b).  In particular, it gives this Court
an opportunity to
pronounce on whether there are exceptions to section 197(2)(b) of the
LRA when there is a transfer of business
as a going concern.
[54]
The
question whether it is the business transferor or the business
transferee who is liable, after the transfer of business, for
the
performance of obligations that would have been the business
transferor’s before the transfer is an important question
that
deserves the attention of this Court.  There are reasonable
prospects of success for the appellants.  This matter
has
already been heard by a total of nine judges, four of whom found in
the appellants’ favour and five of whom found in
LA Health’s
favour.
[77]
In my view
it was in the interests of justice to grant leave to appeal in this
case.
The
appeal
[55]
It is important to point out that, although
the obligation that the appellants wish to enforce is said to be
contained in the Rules
of the Fund, the Fund is nothing more than a
conduit through which a benefit that an employer may be bound to
pay
its employees gets paid to the employees albeit via the Fund.
In terms of the Rules of the Fund, the Fund is not liable to
pay the
alleged additional redundancy benefit to the appellants until the
employer has paid the benefit to the Fund.  It would
only be
once the Fund has received the payment of the additional benefit that
it would be obliged to pay it over to the appellants
if they
qualified for payment in terms of the Rules of the Fund.
[56]
For the reasons that follow I am of the
view that any liability that LAMAF / LA Health may
have had arising out of
Rule 7.1A(1), if the appellants’
services were terminated for redundancy or if they were retrenched
and if there had been
no transfer of business as a going concern, was
taken over by Discovery with effect from 1 January 2005.
Accordingly, LA
Health cannot be liable for the payment of the
additional redundancy benefit claimed by the appellants.
[57]
As the determination of this matter
requires an interpretation of the provisions of section 197 of the
LRA, it is appropriate to
bear in mind certain constitutional and
statutory injunctions and factors required to be borne in mind in
interpreting legislation
in general and the LRA in particular.
Section 23(1) of the Constitution provides that “everyone has
the right to fair
labour practices”.  Section 39(2)
provides that, “when interpreting any legislation . . . every
court, tribunal
or forum must promote the spirit, purport and objects
of the Bill of Rights”.  Section 233 of the Constitution
provides
that “when interpreting any legislation, every court
must prefer any reasonable interpretation of the legislation that is

consistent with international law over any alternative interpretation
that is inconsistent with international law”.
[58]
It
is trite that purposive interpretation must be invoked in construing
the LRA.  Section 1 of the LRA states that the purpose
of the
LRA is “to advance economic development, social justice, labour
peace and the democratisation of the workplace”.
The LRA
seeks to achieve this purpose by fulfilling its primary objects.
[78]
Those primary objects include giving effect to and regulating the
fundamental rights conferred by section 23 of the Constitution
and
giving effect to international obligations incurred by the Republic
as a member state of the International Labour Organisation.
[79]
[59]
Before I go into an analysis and discussion
of section 197 of the LRA it is important to understand the
background to the section.
Before the enactment of section 197,
the position in our law was that, if an employer (the business
transferor) transferred its
business or part of its business as a
going concern to another person (the business transferee), that
was an acceptable reason
for the business transferor to terminate the
contracts of employment of the employees employed in the business.
That enabled
the business transferee to employ its own workforce in
that business after the transfer.  In employing its own
workforce in
the business, the business transferee was free to pick
and choose among the workforce of the business and offer employment
to those
it liked and not offer employment to those it did not like.
Therefore, the transfer of a business as a going concern meant
that
employees employed in the business lost employment, or, if they did
not lose employment, they lost their previous service
under the
business transferor and other benefits.  Section 197
changed all that.  Its primary purpose is to safeguard
the
rights of employees when there is a transfer of business as a going
concern and the business changes hands.
[60]
Section 197(1) and (2) reads:
“
Transfer
of contract of employment
(1)
In this section and in section 197A—
(a)
‘business’ includes the whole or a part of any business,
trade, undertaking or service; and
(b)
‘transfer’ means the transfer of a business by one
employer (‘the old employer’) to another employer
(‘the
new employer’) as a going concern.
(2)
If a transfer of a business takes place, unless otherwise agreed in
terms of subsection (6)—
(a)
the new employer is
automatically substituted in the place of the
old employer in respect of all contracts of employment in existence
immediately before
the date of transfer;
(b)
all the rights and obligations between the old employer and an
employee at the time of the transfer continue in force as if they
had
been rights and obligations between the new employer and the
employee;
(c)
anything done before the transfer by or in relation to the old
employer, including the dismissal of an employee or the commission
of
an unfair labour practice or act of unfair discrimination, is
considered to have been done by or in relation to the new employer;

and
(d)
the transfer does not interrupt an employee’s continuity of
employment, and an employee’s contract of employment continues

with the new employer as if with the old employer
.”
(Emphasis added.)
[61]
Certain features of section 197(2) need to
be highlighted.  These are that—
(a)
subsection (2) sets out specific consequences that flow from the
transfer of a business as a going concern but those consequences
only
follow if there is no agreement contemplated in subsection (6) to the
contrary.
[80]
This means
that it is important to enquire at an early stage whether in a
transfer of business as a going concern there is
a subsection (6)
agreement.  A subsection (6) agreement may ensure that any
consequence of a transfer of business as set out
in section 197(2) is
avoided.  However, where there is no subsection (6) agreement,
the consequences set out in subsection
(2) follow upon the transfer
of a business as a going concern.  In the case of pension rights
and obligations, in addition
to there being no subsection (6)
agreement, there should also be no transfer of members of the pension
fund to another pension
fund as contemplated in section 197(4) before
the consequences of a transfer of business as a going concern may
follow.  In
the present case there is no subsection (6)
agreement.  Nor was there a transfer of members to another
pension fund;
(b)
the consequence in paragraph (a) of subsection (2) is that the
business transferee takes over all the contracts of employment
in
existence “immediately before the transfer”.
Paragraph (a) is about the effect of a transfer of business on

contracts of employment;
(c)
the consequence in paragraph (b) of subsection (2) relates to:
(i)
all the rights and obligations contained in sources such as statutes,
common law or agreed rules as opposed to those contained
in contracts
of employment.  Obviously, any rights and obligations that are
contained in contracts of employment that attached
to the business
transferor before the transfer attach to the business transferee
after the transfer because the latter is substituted
in the place of
the business transferor in respect of all the contracts of employment
of the employees.  It stands to reason
that the rights and
obligations referred to in paragraph (b) are rights and obligations
that might not necessarily be contained
in the contracts of
employment.  These would be rights and obligations that existed
between the business transferor and each
employee at the time of the
transfer of business as a going concern which may be found in
statutes, agreed rules, common law and
subordinate legislation;
(ii)
the idea behind paragraph (b) of subsection (2) was to cover those
rights and obligations that may have existed between the
business
transferor and each employee at the time of the transfer that related
to the employment relationship but were not contained
in contracts of
employment.  To the extent that the alleged obligation that the
appellants seek to enforce may be found in
the Rules of the Fund, and
to the extent that the provisions of those Rules did not form part of
the contracts of employment, the
business transferor’s
obligation in question would fall under paragraph (b) of subsection
(2);
d)
paragraph (c) of subsection (2) covers liability, after the transfer,
that would have arisen from anything done by the business
transferor
before the transfer.  In the absence of paragraph (c), the
business transferor would have remained liable, after
the transfer of
business, for anything it had done before the transfer.  Without
paragraph (c) of subsection (2), the business
transferee would not be
liable for anything done by the transferor before the transfer;
(e)
paragraph (d) of subsection (2) deals with the continuity of
employment of the employees whose contracts of employment are taken

over by the business transferee; paragraph (d) makes it clear that
the transfer of business as a going concern does not itself
interrupt
an employee’s continuity of employment.
[62]
In the light of paragraphs (a) and (b) of
subsection (2) the answer to the question whether the alleged
obligation was not taken
over by Discovery upon the transfer of the
administrative division must be that it was.  If that obligation
was part of the
appellants’ contracts of employment, then it
was taken over by reason of paragraph (a) of subsection (2).  If
the alleged
obligation was not part of the contracts of employment
but was, nevertheless, an obligation affecting the employment
relationship,
then it was taken over by reason of paragraph (b) of
subsection (2).  The language used in paragraph (b) is very
wide.
The paragraph says that, if a business is transferred as
a going concern, unless otherwise agreed in terms of subsection (6)—
“
all
the rights and obligations between the old employer and an
employee
at the time of the transfer continue in force as if they had been
rights and obligations between the new employer and the
employee
.”
[63]
If the obligation was in existence at the
time of the transfer, it continued in force beyond the transfer but,
after the transfer,
it was borne by Discovery, the business
transferee.  If the obligation was not in existence at the time
of the transfer but
arose after the transfer, then that obligation
can only be enforced against the business transferee and not the
business transferor.
[64]
In my view paragraph (b) of subsection (2)
achieves two objectives.  The first objective is covered by the
first part of the
paragraph and the second objective by the second
part of the paragraph.  The first part of the paragraph ends
with the word
“force” just before the words “as
if”.  The second part of the paragraph starts with the
words “as
if” and continues up to the end of the
paragraph.  The first objective is the continuation in force of
all the rights
and obligations that were in existence between the
business transferor and every employee at the time of the transfer.
Without
the second part of the paragraph, that objective could have
been achieved by the first part of the paragraph.
[65]
The second part of paragraph (b) has the
same effect as a deeming provision.  This proposition is based
on the role of the
words “as if” in that paragraph and
the tense used in the second part of the paragraph.  The second
part is to
the effect that all the rights and obligations that
existed between the business transferor and an employee at the time
of the
transfer are to be treated “as if” they had been
rights and obligations between the transferee and the employees.

That is the same as to say that, after the transfer, those rights and
obligations are deemed to have been rights and obligations
between
the business transferee and each employee prior to the transfer even
though, as a matter of fact, before the transfer of
the business,
they existed between the business transferor and the employees.
The tense that is used in paragraph (b), namely,
the past participle
tense, underscores this effect of the second part of the paragraph.
[66]
It
will be noted that there is no provision in section 197 to the effect
that there are rights and obligations that are excluded
from the
rights and obligations to which reference is made in paragraph (b) of
subsection (2).  The 1977 EEC Directive made
an exception in
Article 3(3) to the provision that all rights and obligations of the
transferor transfer to the transferee upon
the transfer of business.
The Transfer of Undertakings (Protection of Employment) Regulations
(1981 TUPE Regulations)
[81]
also made an exception in Regulation 7(1) to the general rule that,
when there is a transfer of business as a going concern, all
the
rights and obligations that attached to the business transferor at
the time of the transfer are transferred to the business
transferee.
Apart from that, the language used in section 197(2)(b) is very wide
and is not qualified other than by the requirement
that the rights
and obligations be “between the old employer and an employee at
the time of the transfer”.  Other
than that,
section 197(2)(b) says that all the rights and obligations
between the business transferor and each employee at
the time of the
transfer continue in force as if they were rights and obligations
between the business transferee and each employee.
A suggestion
that the obligation that the appellants seek to enforce falls outside
the ambit of section 197(2)(b) would require
a justification as to
how that is possible in the light of the wide language used in
paragraph (b).  The appellants have failed
to proffer such a
justification.  In my view there is no exception provided for in
section 197(2)(b) and, therefore,
the obligation sought to be
enforced by the appellants falls within the ambit of section
197(2)(b).
[67]
It
is by now trite that section 197 was inspired by the provisions of
Article 3 of the 1977 EEC Directive
[82]
and by the 1981 TUPE Regulations.
[83]
It is also accepted that, although there are certain differences in
the language of Article 3 of the 1977 EEC Directive
and the 1981
TUPE Regulations, on the one hand and that of section 197, on
the other, there is much overlap in the points
that section 197 and
these instruments make.
[68]
What is covered by paragraphs (a) and (b)
of section 197(2) is covered in substance by Article 3(1) of the 1977
EEC Directive.
Article 3(1) reads:
“
The
transferor’s rights and obligations arising from a contract of
employment or from an employment relationship existing
on the date of
a transfer within the meaning of article 1(1) shall, by reason of
such transfer, be transferred to the transferee.”
[84]
[69]
Regulation 5(1) and (2) of the 1981 TUPE
Regulations covers paragraphs (a), (b) and (c) of section 197(2)
of the LRA.
Regulation 5(1) and (2) reads as follows:
“
(1)
A relevant transfer shall not operate so as to terminate the contract
of employment of any person employed by the transferor
in the
undertaking or part transferred but any such contract which would
otherwise have been terminated by the transfer shall have
effect
after the transfer as if originally made between the person so
employed and the transferee.
(2)
Without prejudice to paragraph (1) above . . . on completion of a
relevant transfer—
(a)
all the transferor’s rights, powers, duties and liabilities
under or in connection with such a contract, shall be transferred
by
virtue of this Regulation to the transferee; and
(b)
anything done before the transfer is completed by or in relation to
the transferor in respect of that contract or a person employed
in
that undertaking or part shall be deemed to have been done by or in
relation to the transferee.”
However,
both Article 3(3) of the 1977 EEC Directive and Regulation 7(1) and
(2) of the 1981 TUPE Regulations contained exceptions
to the general
rule that all the rights and obligations existing between the
business transferor and an employee at the time of
a transfer are, by
reason of such transfer, transferred to the transferee.
[70]
Article 3(3) read:
“
Paragraphs
1 and 2 shall not cover employees’ rights to old-age,
invalidity or survivors’ benefits under supplementary
company
or inter-company pension schemes outside the statutory social
security scheme in Member states.”
Regulation
7(1) and (2) of the 1981 TUPE Regulations read:
“
7
Exclusion of occupational pension
schemes
(1)
Regulations 5 and 6 above shall not apply—
(a)
to so much of a contract of employment or
collective agreement as relates to an occupational pension scheme
within the meaning of
the Social Security Pensions Act 1975(a) or the
Social Security Pensions (Northern Ireland) Order 1975(b); or
(b)
to any rights, powers, duties or
liabilities under or in connection with any such contract or
subsisting by virtue of any such agreement
and relating to such a
scheme or otherwise arising in connection with that person’s
employment and relating to such a scheme.
(2)
For the purposes of paragraph (1) above any
provisions of an occupational pension scheme which do not relate to
benefits for old
age, invalidity or survivor shall be treated as not
being part of the scheme.”
[71]
Regulation
7 of the 1981 TUPE Regulations dealt with the exclusion of rights and
obligations arising from or connected with occupational
pension
schemes from the transfer of rights and obligations from the business
transferor to the business transferee when there
was a transfer of
business as a going concern.  Very remarkably, section 197 does
not make any provision for the exclusion
of any rights and
obligations connected with pension schemes from being taken over by
the business transferee under either paragraph
(a) or (b) of section
197(2).  This is quite remarkable because the drafters of the
LRA must be taken to have been aware of
the fact that the 1977 EEC
Directive and the 1981 TUPE Regulations excluded rights and
obligations relating to certain pension
schemes from the rule that,
upon the transfer of a business as a going concern, the business
transferor’s rights and obligations
are taken over by, or, are
transferred to, the business transferee.  They must have
deliberately decided not to follow the
example of those instruments
on this point.  Instead, we have what appears to have been
intended as an escape route from the
consequences of paragraphs (a)
and (b) of section 197(2).  That is section 197(4).
[85]
[72]
It
seems to me that section 197(4) is, to section 197(2), what section
43(7)
[86]
of the Labour
Relations Act, 28 of 1956, as amended, (1956 LRA) was to
section 43(4)
[87]
of
that Act.  Section 197(4) means that, if employees are
transferred from the pension fund of which they were members before

the transfer to another fund as contemplated in that provision, the
business transferee does not have rights and obligations that
attach
to the pre-transfer pension fund.
[73]
The
conclusion that the obligation the appellants seek to enforce in this
case, if ever there was one at the time of the transfer
of business
as a going concern, was taken over by the business transferee and did
not remain with the business transferor is consistent
with the
statutory regime created by the LRA in sections 197 and 197A for the
protection of the rights of employees.  It cannot
be said that
the drafters of the LRA did not apply their minds to the question
whether there could be cases where certain obligations
should remain
with the business transferor and not be taken over by the business
transferee notwithstanding the fact that a transfer
of business as a
going concern has taken place.  This is because in section 197A
provision is made for the rights and obligations
in existence between
the business transferor and every employee at the time of the
transfer to remain with the business transferor
and each employee
where the transfer of business occurs in circumstances of
insolvency.  Therefore, a comparison of section
197 and section
197A
[88]
reveals that the
scheme that was created is one where it is in cases of the transfer
of a business under insolvent circumstances
that the LRA provides for
the rights and obligations existing between the business transferor
and the employees at the time of
a transfer to remain with the
business transferor and every employee.
[74]
To hold, therefore, that in a transfer of
business in non-insolvent circumstances i.e. under section 197 as
opposed to under section
197A and where no agreement contemplated in
subsection (6) exists, an obligation that existed between the
business transferor and
an employee at the time of the transfer of
business remains with the transferor and is not taken over by the
business transferee
would be to read into section 197(2) an exception
that is not in the statute.  There is no justification in law to
do that.
The wording of section 197(2) is very wide and
all-embracing.  In our law it is only in two situations that the
business transferor’s
rights and obligations existing between
the transferor and an employee at the time of the transfer of a
business as a going concern
are not taken over by the business
transferee.  The situations are—
(a)
where an agreement as contemplated in subsection (6) of section 197
has been concluded; and
(b)
where the transfer of a business as a going concern occurs in
circumstances of insolvency contemplated in section 197A(1) of
the
LRA.
Other
than in (a) and (b) above, there is no other situation where that
happens.
[75]
The interpretation of section 197 that I
have adopted in this case is in line with the jurisprudence of the
European Court of Justice
in regard to the interpretation of Article
3 of the 1977 EEC Directive.  Article 3(1) provided that the
transferor’s
“rights and obligations arising from a
contract of employment or from an employment relationship existing on
the date of
a transfer within the meaning of Article 1(1) shall, by
reason of such transfer, be transferred to the transferee”.

Article 3(3) provided in effect that that Article 3(1) and (2) would
not apply to employees’ rights to “old-age, invalidity
or
survivors’ benefits under supplementary company or
inter-company pension schemes outside the statutory social security

schemes in Member states”.
[76]
In
Beckmann
v Dynamco Wicheloe Macfarlane Ltd
,
[89]
Mrs Beckmann had been employed by the North West Regional Health
Authority (NWRHA) within the National Health Service (NHS) under
the
General Whitley Council (GWC) conditions of service.  The body
for which Mrs Beckmann worked was transferred as a going
concern to
Dynamco Wicheloe Macfarlane Ltd (DWM).  Upon that transfer of
business, Mrs Beckmann’s employment was also
transferred to
DWM.  This was in terms of Regulation 5 of the 1981 TUPE
Regulations.  Years later, Mrs Beckmann was dismissed
for
redundancy by DWM.  She was paid a certain lump sum under
section  45 of the GWC conditions of service but no payments

were made to her under section 46 of the GWC conditions of
service even though she met the conditions of that section.
The
benefits were part of the NHS Superannuation Scheme which was an
occupational pension scheme as defined in Regulation 7(1)
of the 1981
TUPE Regulations.  The contemplated benefits would initially be
paid by the relevant Secretary of State but the
employer would
ultimately refund the Secretary of State.  Mrs Beckmann
instituted legal proceedings to compel the payment
of those benefits.
[77]
One of the questions that the High Court of
Justice of England and Wales, Queen’s Bench Division, asked the
European Court
of Justice to decide in Mrs Beckmann’s case
was whether the contested benefits fell within the exception in
Article
3(3) of the 1977 EEC Directive.  The European Court of
Justice answered this question in the negative.  Another
question
that the European Court of Justice was asked to decide, if
the contested benefits did not fall within the exception in
Article 3(3),
was:
“
[I]s
there an obligation of the transferor arising from the contract of
employment, the employment relationship or the collective
agreement
within the meaning of Article 3(1) and / or 3(2) which transfers
by reason of the transfer of the undertaking and
renders the
transferee liable to pay the benefits to the employee upon
dismissal?”
[78]
The European Court of Justice had to answer
this question within the context of Article 3(1) and (2) of the 1977
EEC Directive.
I have quoted Article 3(1) above.  Article
3(2) reads:
“
Following
the transfer within the meaning of Article 1(1), the transferee shall
continue to observe the terms and conditions agreed
in any collective
agreement on the same terms applicable to the transferor under that
agreement, until the date of termination
or expiry of the collective
agreement or the entry into force or application of another
collective agreement.”
The
provisions of section 197(5)(a) and (b) of the LRA are to the same
effect as the provisions of Article 3(1) and (2).  So,
Article
3(1) finds its counterpart in section 197(2)(a) and (b) while
Article 3(2) finds its counterpart in section 197(5)(a)
and
(b).
[90]
[79]
The European Court of Justice held that,
apart from the exception in Article 3(3) of the 1977 EEC
Directive relating to the
rights to old-age, invalidity or survivors’
benefits, no other exceptions to the rules in Article 3(1) and 3(2)
were provided
for.  It said that—
“
.
. . the existence of such a specific clause leads to the conclusion
that Article 3(1) and (2)
relates
to all the rights of employees mentioned therein which are not
covered by those exceptions
.”
[91]
(Emphasis added and citation omitted.)
In
the South African context I would emphasise that, except for cases
where it has otherwise been agreed as contemplated in section
197(6)
or, in the case of a transfer of a business in insolvent
circumstances, under section 197A or where section 197(4) applies,

section 197(2)(b) covers all rights and obligations.
[80]
Having considered the provisions of Article
3(1) and (2) of the 1977 EEC Directive, the European Court of Justice
held that the
business transferor’s obligation to make the
contested payments had transferred to the business transferee upon
the transfer
of business.  It held that—
“
.
. . in order to decide whether Mrs Beckmann [could] require DWM, as
transferee, to pay the benefits in question, it is for the
referring
court, if necessary, to determine whether these benefits arose from
her contract of employment or her employment relationship
with the
transferor employer or from a collective agreement which bound the
transferor and would also bind the transferee under
Article 3(2) of
the Directive.”
[92]
The
European Court of Justice further said:
“
.
. . Article 3(1) and (2) of the Directive provides that the
transferee is bound by the rights and obligations arising from a
contract of employment or an employment relationship existing between
the employee and the transferor on the date of the transfer
of the
undertaking, and by the terms and conditions agreed in a collective
agreement on the same terms as are applicable to the
transferor under
that agreement.”
[93]
In
the South African context I would emphasise the terms of paragraph
(b) of section 197(2).
[81]
The European Court of Justice went on to
say that—
“
.
. . neither the fact that the rights and obligations arising from a
contract of employment, an employment relationship or a collective

agreement binding the transferor on the terms described in paragraph
37 of this judgment derive from statutory instruments or were

implemented by such instruments, nor the practical arrangements
adopted for such implementation can have the effect that such rights

or obligations are not transferred to the transferee.”
[94]
In
my view, the “practical arrangements adopted” for the
“implementation” of the rights and obligations
include
the use of an entity such as a pension fund as a conduit for the
implementation of the pension rights and obligations.
The
European Court of Justice concluded its judgment with the following
answer to the question:
“
The
answer to the second question must therefore be that, on a proper
construction of Article 3 of the Directive, the obligations

applicable in the event of the dismissal of an employee, arising from
a contract of employment, an employment relationship or a
collective
agreement binding the transferor as regards that employee, are
transferred to the transferee subject to the conditions
and
limitations laid down by that article, regardless of the fact that
those obligations derive from statutory instruments or are

implemented by such instruments and regardless of the practical
arrangements adopted for such implementation.”
[95]
[82]
After
examining a number of judgments of the European Court of Justice
interpreting Article 3 of the 1977 EEC Directive in
British
Fuel,
[96]
the House of Lords also gave its understanding of the jurisprudence
of the European Court of Justice on what happens to the rights
and
obligations existing between a business transferor and an employee at
the time of the transfer of business.  Through Lord
Slynn of
Hadley, the House of Lords in that case said:
“
In
my opinion, the overriding emphasis in the European Court’s
judgments is that the existing rights of employees are to be

safeguarded if there is a transfer.
That
means no more and no less than that the employee can look to the
transferee to perform those obligations which the employee
could have
enforced against the transferor
.”
[97]
(Emphasis
added.)
[83]
In
Martin
and Others v South Bank University
[98]
the European Court of Justice followed the approach it had taken in
Beckmann
.
One of the questions that the Court was asked to decide in
Martin
was whether rights contingent upon dismissal or the grant of early
retirement by agreement with the employer fell within the concept
of
rights and obligations within the meaning of Article 3(1) of the 1977
EEC Directive.  The European Court of Justice gave
an
affirmative answer to this question.  It said:
“
It
is clear from the wording of Article 3 of the directive that, except
in the cases mentioned in paragraph 3 thereof,
all
the transferor’s rights and obligations
arising from the contract of employment or employment relationship
with an employee fall within the scope of Article 3(1) and are

therefore transferred to the transferee, regardless of whether or not
their implementation is contingent upon the happening of
a particular
event, which may depend on the will of the employer.  Thus, if,
following the transfer, the transferee, like
the transferor before
him, has the power whether or not to adopt certain decisions in
respect of the employee, for example concerning
dismissal or the
grant of early retirement, once he adopts such a decision, he remains
bound, like the transferor before him, by
the rights and obligations
laid down as the consequence of such a decision by the contract of
employment or employment relationship
with the transferor as long as
the relevant terms thereof have not been lawfully varied.”
[99]
(Emphasis added.)
[84]
The Court also said in
Martin
:
“
Article
3 of
[the
1977 EEC Directive] is to be interpreted as meaning that obligations
arising upon the grant of such early retirement, arising
from a
contract of employment, an employment relationship or a collective
agreement binding the transferor as regards the employees
concerned,
are transferred to the transferee subject to the conditions and
limitations laid down by that Article, regardless of
the fact that
those obligations derive from statutory instruments or are
implemented by such instruments and regardless of the
practical
arrangements adopted for such implementation.”
[100]
In
my view the provision of section 197(2)(b) means what it says.
That is that the reference in section 197(2)(b) to “all
the
rights and obligations in existence at the time of the transfer
between the [business transferor] and each employee at the
time of
the transfer” is a reference, without exception, to all the
rights and obligations in existence at the time of the
transfer
between the business transferor and every employee and all those
rights and obligations continue after the transfer as
if they had
been rights and obligations between the business transferee and the
employee.  This interpretation is consistent
with the European
Court of Justice’s decisions in
Beckmann
and
Martin
.
[85]
The
appellants also relied upon the judgment of the Supreme Court of
Appeal by Jones AJA (with Harms JA, Cameron JA, Mthiyane JA
and
Mlambo AJA concurring) in
Telkom
[101]
for their contention that Discovery did not take over the obligation
they seek to enforce against LA Health.  In
Telkom
,
Telkom SA Limited (Telkom) transferred part of its business to Molapo
Technology (Pty) Limited (Molapo) as a going concern.
The
question was whether the employees of the business that was
transferred and whose contracts of employment had been taken over
by
Molapo were entitled to certain pension benefits in terms of the
Rules of the Telkom Pension Fund.  In that case the employees

argued that the Rules of the Telkom Pension Fund provided for the
payment to them of such benefits if their services were terminated
by
their employer for redundancy.  They argued that their services
had been terminated by Telkom for redundancy arising out
of the
transfer of the business as a going concern.  In that case the
Supreme Court of Appeal held that a transfer of business
terminated
the contracts of employment of the employees employed in the business
at the time of the transfer of business.
This raises the
question whether in our law it can be said that the transfer of a
business as a going concern terminates the contracts
of employment of
the employees of the business.  In my view, in our law it does
not do so.
[86]
It is true that, before the transfer of
business, the employees’ employer would have been the business
transferor and that,
after the transfer, their employer would be the
business transferee.  It is equally true that, before the
transfer, the employees
would have had contracts of employment with
the business transferor and that, after the transfer, they would no
longer have contracts
of employment with the business transferor but
would have them with the business transferee.
[87]
Section 197(2)(a) provides:
“
(2)
If a transfer of business takes place, unless otherwise agreed in
terms of subsection (6)—
(a)
the new employer is automatically substituted in the place of the old
employer in respect of all contracts of employment in
existence
immediately before the transfer.”
[88]
Section 197(2)(a) provides for the business
transferee to take over the contracts of employment from the business
transferor.
The business transferee steps into the shoes of the
business transferor in relation to the contracts of employment of the
employees
in existence immediately before the transfer of the
business.  The business transferee is substituted for the
business transferor
in respect of all the contracts of employment.
This occurs in a special statutory manner without the contracts of
employment
of the employees being terminated.  If this provision
was all that there was in section 197, it would have meant that the
business transferee would not, for example, be liable, after the
transfer, for the performance of any obligation not contained in
the
contracts of employment.
[89]
A question that arises is: why would it
have been necessary to provide in paragraph (a) that the business
transferee is substituted
in the place of the business transferor if
the transfer of business terminated the contracts of employment?
Why would it
have been necessary for paragraph (a) to say anything
other than that the business transferee must offer the employees of
the business
employment on the same terms and conditions of
employment as they had during their employment by the business
transferor?
Why invoke the concept of substitution?
Paragraph (a) must be read together with the other paragraphs and
subsections of
section 197 to get the true nature of a transfer of
business as a going concern and its effect on employment contracts or
the employment
relationship between the employees employed in the
business and either the business transferee or the business
transferor.
[90]
As already indicated earlier, section
197(2)(b) provides that, if a transfer of business as a going concern
takes place, “unless
otherwise agreed in terms of subsection
(6)”, “all the rights and obligations between the
[business transferor] and
an
employee
at the time of the transfer continue in force as if they had been
rights and obligations between the business transferee and the
employee
”.
There are three features in this paragraph that need to be
highlighted.  The first is that this provision is
inconsistent
with the notion that the contracts of employment of employees are
terminated by the transfer of business as a going
concern.  If a
transfer of business terminates the employees’ contracts of
employment, why would we have a provision
such as paragraph (b) of
section 197(2) that provides for the continuation of all the rights
and obligations in force as if they
had been the rights and
obligations between the transferee and the employee?  In my view
the presence of this paragraph in
section 197(2) underlines the
notion that the transfer of a business as a going concern does not
terminate any rights and
obligations that existed at the time of the
transfer of business.  If all those rights and obligations
continue in force,
as section 197(2)(b) says they do, it means that
they could not have been terminated at the time of the transfer of
business.
Anything that has been brought to an end cannot be
said to continue in force.
[91]
The second feature complements the first
one.  If I am right in saying, as I have said earlier, that the
words “as if”
coupled with the tense used in the second
part of paragraph (b) have the same effect as a “deeming
provision”, then
what paragraph (b) means is that not only will
all the rights and obligations that were in existence between the
business transferor
and each employee at the time of the transfer
continue in force after the transfer but also, from then onwards,
those rights and
obligations will be deemed to have been between the
business transferee and each employee even before the transfer of
business.
If this is so, those rights and obligations could not
possibly have been terminated by the transfer of business.
Section
197(2)(c) provides that “anything done before the
transfer by or in relation to the [business transferor], including
the
dismissal of an employee or the commission of an unfair labour
practice or of an act of unfair discrimination is considered to have

been done by or in relation to the [business transferee]”.
If a transfer of business as a going concern terminates
the contracts
of employment of the employees in the business, why would the
business transferee be made liable for the actions
of the business
transferor?  There appears to be no reason why there would be a
provision such as paragraph (c) in such a
case.  However, if one
says that the contracts of employment are not terminated but the
business transferee takes over the
contracts and the business
transferor’s rights and obligations, then it makes sense to
have a provision such as paragraph
(c).
[92]
Section 197(2)(d) provides that “the
transfer [of a business as a going concern] does not interrupt an
employee’s continuity
of employment and an employee’s
contract of employment continues with the [business transferee] as if
with the [business
transferor]”.  Together with paragraph
(a) of section 197(2), this provision attempts to capture Regulation
5(1) of
the 1981 TUPE Regulations.  Regulation 5(1) provided, in
so far as it is relevant, that “a relevant transfer shall not

operate so as to terminate the contract of employment of any person
employed by the transferor in the undertaking or part transferred
but
any such contract that would otherwise have been terminated by the
transfer shall have effect after the transfer as if originally
made
between the person so employed and the transferee”.
Regulation 5(1) made it clear that in English law the transfer
of a
business as a going concern does not have the effect of terminating
any contract of employment.  In my view, even though
the LRA
does not use identical words as Regulation 5(1), the words it uses in
section 197, the purpose of the section and the provisions
of section
187(1)(g) of the LRA, which I discuss below, drive one to the
conclusion that, in our law, too, the transfer of a business
as a
going concern does not terminate the contracts of employment of the
employees.
[93]
It is to be noted that in Regulation 5(1)
we find the phrase “as if” that we also find in both
paragraphs (b) and (d)
of section 197(2).  In my view paragraph
(d) makes it crystal clear that in our law a transfer of business as
a going concern
does not terminate the contracts of employment of the
employees.  That is because it explicitly says that a transfer
of business
does not interrupt the continuity of employment.  If
a transfer of business terminated contracts of employment, that would

interrupt the continuity of employment because there would be
contracts of employment that were terminated and new contracts of

employment that would be concluded after those.
[94]
An acceptance of the proposition that the
transfer of a business as a going concern terminates the contracts of
employment of the
employees of the business would mean that, after
the transfer of business, employees commence employment with the
business transferee
on new contracts of employment and they would be
new employees.  The contracts could be on the same terms and
conditions as
the contracts of employment they had with the business
transferor before the transfer.
[95]
The implication of this suggestion is that,
if the business transferee were later to terminate the employees’
contracts of
employment for operational requirements, it would be
entitled to calculate the employees’ length of service from the
day
they became its employees as opposed to from the day they were
employed by the business transferor.  That would be in conflict

with paragraph (d) of subsection (2) where there is no agreement to
the contrary under subsection (6).  It would mean that
the
business transferee could disregard the employees’ service with
the business transferor.  Having regard to the purpose
and terms
of section 197, that would be untenable.
[96]
In addition to the principle in our law
that a transfer of a business as a going concern does not terminate a
contract of employment,
there is also the principle captured in
section 187(1)(g) of the LRA.  That principle is that an
employer is neither permitted
to use the transfer of a business as a
going concern as a reason to dismiss an employee nor may it use a
reason related to the
transfer to dismiss an employee.  Section
187 provides:
“
187.
Automatically unfair dismissals
(1)
A dismissal is automatically unfair if the employer, in dismissing
the
employee
, acts contrary to section 5 or, if the
reason for the
dismissal
is—
.
. .
(
g)
a transfer, or a reason related to a transfer, contemplated in
section 197 or 197A.”
These
two principles form the cornerstone of the entire section 197.
It is upon them that the entire edifice of the provision
rests.
If one removes these principles from section 197, the whole purpose
of the section will be defeated.  These principles
replaced two
principles that were part of our law before the enactment of section
197.  The one was that the sale and transfer
of a business as a
going concern was an acceptable reason for the termination of
contracts of employment of employees employed
in the business.
The other was that the business transferee was free to offer or not
to offer employment to the employees
of the transferred business or
to pick and choose as he wished.  A conclusion that the transfer
of a business as a going concern
terminates the contracts of
employment of the employees employed in the business is a conclusion
that will destroy a very important
feature of the LRA which was
enacted to protect the rights of workers.  That conclusion will
resurrect a principle of the
common law that section 197 had buried.
[97]
If the law does not permit the transfer of
a business to be a reason for the dismissal of employees, it follows
that the transfer
cannot itself terminate a contract of employment.
It would be illogical to say that an employer may not rely upon the
transfer
of a business as a going concern to terminate the contracts
of employment of employees but the transfer will terminate them.

In my view, section 197 of the LRA creates a statutory dispensation
in terms of which the business transferor falls out of the
picture as
the employer without the termination of the employees’
contracts of employment.
[98]
In
Telkom
the Supreme Court of Appeal held that the result of what happens
under section 197 when there is a transfer of business as a going

concern “is similar to the situation where a new owner becomes
ex
lege
the substituted lessor of leased premises”.
[102]
It then quoted what Corbett CJ, writing for a unanimous Court, said
in
Genna-Wae
Properties (Pty) Ltd v Medio Tronics (Natal) (Pty) Ltd.
[103]
There, Corbett CJ said:
“
Accordingly,
I hold that in terms of our law the alienation of leased property
consisting of land or buildings in pursuance of a
contract of sale
does not bring the lease to an end.  The purchaser (new owner)
is substituted
ex
lege
for the original lessor and the latter falls out of the picture.
On being so substituted, the new owner acquires by operation
of law
all the rights of the original lessor under the lease.  At the
same time the new owner is obliged to recognise the
lessee and to
permit him to continue to occupy the leased premises in terms of the
lease, provided that he (the lessee) continues
to pay the rent and
otherwise to observe his obligations under the lease.  The
lessee, in turn, is also bound by the lease
and, provided that the
new owner recognises his rights, does not have any option, or right
of election, to resile from the contract.”
[104]
What
Corbett CJ said in this passage about the effect of a transfer of
leased property on an existing lease describes, with the
changes
required by the context, part of the effect of the transfer of a
business as a going concern on the contracts of employment
or the
employment relationship of employees employed in the business at the
time of the transfer.
[99]
The situation with which Corbett CJ was
dealing concerned the consequences of a transfer of ownership of a
leased property on a
lease, lessor and lessee.  The situation
with which we are dealing concerns the consequences of a transfer of
business as
a going concern on contracts of employment, employment
relationships, the business transferor, employees and the business
transferee.
It is important to highlight the similarities
between the situation in connection with which Corbett CJ made the
remarks in the
above passage and the situation in which there is a
transfer of business as a going concern in terms of section 197.
These
are that—
(a)
in the case of a transfer of ownership of a leased property, before
the transfer of property the owner of the property who was
also the
lessor, had a lease with the lessee in respect of the property; in
the case of a transfer of business, before the transfer
the owner of
the business, who was also the employer, had contracts of employment
with the employees employed in the business;
(b)
in the case of the transfer of property, there would have been a sale
and transfer of the leased property from the owner / lessor
to
another person, the purchaser / transferee; in the case of the
transfer of a business or part of a business as a going concern,

there would have been a sale and transfer of business from the owner
/ transferor to another person, the transferee;
(c)
in the case of a transfer of a leased property, the transferor of the
property / lessor of the leased property falls out of
the picture
upon the transfer of the property and is substituted by the
transferee of the property who then steps into the shoes
of the
lessor and becomes the lessor.  Corbett CJ explained the
situation thus: “The purchaser (new owner) is substituted
ex
lege
for the original lessor and the latter falls out of the
picture.”
[105]
Corbett CJ was not the first one to use the notion of the original
lessor falling out of the picture in this kind of situation.

Friedman AJA had also used that phrase in
Mignoel
Properties (Pty) Ltd v Kneebone.
[106]
In fact the notion of the purchaser stepping into the shoes of the
lessor had been used in other cases as well.
[107]
In the case of a transfer of business, the business transferor also
falls out of the picture upon the transfer of a business
as a going
concern and is substituted by the business transferee who then steps
into the business transferor’s shoes and
becomes the employer
of the employees who were employed by the business transferor; in
paragraph (a) of section 197(2) it is stated
that “the new
employer is automatically substituted in the place of the old
employer” and;
(d)
in the case of a transfer of a leased property, Corbett CJ said that
“on being so substituted the new owner acquires by
operation of
law all the rights of the original lessor under the lease.  At
the same time the new owner is obliged to recognise
the lessee and to
permit him to continue to occupy the leased premises in terms of the
lease. . . .”
[108]
In the case of a transfer of business as a going concern, section
197(2)(b) says “all the rights and obligations in
existence
between the [business transferor] and each employee at the time of
the transfer continue in force as if they were rights
and obligations
between the [business transferee] and each employee”.
These
similarities show that the two situations have a lot in common.
Therefore, it should come as no surprise that in both
situations the
contracts existing at the time of the transfer, whether it is the
contract of lease, in the case of the transfer
of property or the
contract of employment, in the case of the transfer of a business as
a going concern, are not terminated by
the transfer.
[100]
In
Telkom
the Supreme Court of Appeal accepted the above passage from Corbett
CJ’s judgment as correct.  It seems logical that
the
acceptance of that passage ought to have driven the Supreme Court of
Appeal to also accept that a transfer of business as a
going concern
does not terminate the contracts of employment.  However, the
Supreme Court of Appeal did not extend the principle
contained in
Corbett CJ’s passage to the transfer of a business as a going
concern and hold that a transfer of business as
a going concern also
does not terminate contracts of employment.  Instead, the
Supreme Court of Appeal said:
“
But
I do not agree that the assignment takes away the employees’
rights to receive pension benefits on the date of their entitlement

thereto in terms of the [R]ules of the Fund.”
[109]
The
Supreme Court of Appeal said this because it believed that a transfer
of business as a going concern terminated the contracts
of
employment.  In
Telkom
,
the Rules of the Telkom Pension Fund were to the effect that, if the
employees’ services were terminated by the employer,
the
employees would be entitled to certain benefits.
[110]
[101]
If a transfer of a business does not bring
about an end to the contracts of employment of the employees, the
services of the employees
cannot be said to have been terminated and,
therefore, the employees would not be entitled to those benefits upon
the transfer
of business.  They would carry the rights to those
benefits with them over to the other side of the transfer and, if
their
services were to be terminated for redundancy subsequent to the
transfer, they would be entitled to those benefits.  In effect

section 197(2)(b) implies that we should identify all rights and
obligations in existence between the business transferor and each

employee at the time of the transfer.  All those rights and
obligations survive the transfer and exist after the transfer
but at
that stage they are between the business transferee and each
employee.  However, we have to note that section 197(2)(b)
says
that, after the transfer, they exist as if they originally existed
between the business transferee and each employee.
Accordingly,
provided a particular right or obligation existed between the
business transferor and each employee at the time of
the transfer, it
survives the transfer of business and is effectively thereafter
deemed to have been between the business transferee
and the employee
even before the transfer.
[102]
The
reason why in
Telkom
the Court did not take Corbett CJ’s passage to its logical
conclusion in applying it to section 197 is that it thought that

applying that passage to section 197 would take away the employees’
rights to receive pension benefits on the date of their
entitlement
thereto in terms of the Rules of the Telkom Pension Fund.
[111]
In my view the Supreme Court of Appeal was in error in taking this
view.  That view is completely at odds with the primary
purpose
of section 197 and the principles on which section 197 is
based.  That purpose is the safeguarding of the rights
of
employees when a business changes hands.  That is what the
provisions of paragraphs (a), (b), (c) and (d) of subsection
(2) and
subsections (5) and (6) are all about.  In my view, if the Court
had appreciated this, it would have reached a different
conclusion.
[103]
In determining whether the transfer of
business as a going concern terminates contracts of employment, the
Supreme Court of Appeal
was required to construe the provisions of
section 197 but, it did not do so.  In effect it seems to have
interpreted the
Rules of the Telkom Pension Fund to reach the
conclusion that it reached.  In my respectful view, it is not
permissible in
law to determine the meaning of a statutory provision
by construing the Rules of a certain body instead of construing the
relevant
statutory provisions.
[104]
The
Supreme Court of Appeal’s conclusion in
Telkom
that a transfer of business as a going concern terminates the
contracts of employment should, if correct, mean that employees who

are aggrieved by that termination would have unfair dismissal claims
they can pursue.  However, there are no unfair dismissal
claims
that can arise out of the termination of a contract of employment
that is allegedly brought about by a transfer of business
per
se
.
That is because in that situation we are not dealing with a case
where the business transferor makes a decision to terminate
the
contracts of employment and conveys it to the employees or where the
business transferor gives employees notice of termination
of their
contracts of employment.  Once one accepts that this is the
position, then there can be no dismissal of employees
under the LRA.
This is because in terms of section 186(1)(a) of the LRA a
“[d]ismissal means that an employer has terminated
the contract
of employment with or without notice.”
[112]
[105]
In
order to try and overcome an argument that was based on the
definition of “dismissal” in section 186(1)(a) of the
LRA
in
Telkom
,
the Supreme Court of Appeal said that the transfer of business was a
sine
qua non
of the termination of the contracts of employment.  In saying
this, the Court overlooked the distinction that exists in our
law
between a termination of a contract of employment that occurs because
the employer makes a decision to terminate a contract
of employment
and conveys it to the employee and a termination that occurs by
operation of law.
[113]
The former is well known and occurs all the time.  The
latter only occurs in those cases where there is a statutory

provision to the effect, for example, that the employment of an
employee or officer shall be deemed to have come to an end if the

employee fails without permission or authorisation to report for duty
for a certain specified period.  In such a case, if
the employee
fails to report for duty for the specified period, his or her
employment is brought to an end by operation of law
and there is no
dismissal.
[106]
In
Phenithi
v Minister of Education & Others
[114]
it was held that, where a discharge from service occurs by operation
of law, there is no “decision” and no “administrative

act” capable of review and setting aside.  I agree.
In such a case there is no decision to dismiss.  The
Supreme
Court of Appeal’s approach in
Phenithi
was in line with the approach the Supreme Court of Appeal had taken
in
Louw
.
[115]
In
Grootboom
v National Prosecuting Authority and Another
[116]
we said that we could not fault reliance on the principle in
Phenithi
and
Louw
.
[117]
The result is that in
Telkom
the Supreme Court of Appeal created a dismissal for which there could
be no enforceable unfair dismissal claim under the LRA.
Indeed,
an employee who feels aggrieved by such “dismissal”
cannot sue the business transferor for reinstatement or
damages or
compensation for that “dismissal”.
[107]
In
Telkom
the Supreme Court of Appeal resurrected a principle of common law
that section 197 had sought to bury.  That principle is
that the
sale and transfer of a business from one person to another is an
acceptable reason for the termination of employees’
contracts
of employment.  As I have said, the main reason for the
enactment of section 197 was to change precisely that legal

position.  The Supreme Court of Appeal dealt with the
matter on the footing that the employees’ membership of the

Telkom Pension Fund was dependent upon or linked to the employees’
continued employment by Telkom with the result that, if
their
contracts of employment with Telkom were terminated, their membership
of the Telkom Pension Fund would also be terminated.
I have
said above that the employees’ contracts of employment are not
terminated by a transfer of business as a going concern.
It
seems that, if the position was that the appellants’ membership
of the Fund would terminate if their contracts of employment
with LA
Health terminated, it would follow that the appellants’
membership of the Fund would also not be terminated if the
employees’
contracts of employment were not terminated by the transfer of
business as a going concern.
[108]
Even if the employees’ membership of
the Pension Fund was not linked to the continuation of the employees’
contracts
of employment with the specific employer, their membership
of the Pension Fund would still not come to an end just because the
business is transferred as a going concern from the business
transferor to someone else.  That is the effect of the
provisions
of section 197(2).  It is, therefore, necessary to
deal with questions that arise from the conclusion that a transfer of
business
as a going concern does not terminate contracts of
employment.  These questions include the following: if the
contracts of
employment of the employees are not terminated by a
transfer of business as a going concern, what happens to the
employees’
membership of a pension fund or retirement fund
after the transfer?  Who is obliged to pay the employer
contributions after
the transfer?  What is the relationship,
after the transfer, between the business transferee and the pension
fund or retirement
fund of which the employees were members before
the transfer?
[109]
If, after the transfer of business and,
therefore, also after the transfer of the contracts of employment as
well, the employees
remained members of the Pension Fund of
which they were members before the transfer and their membership was
not terminated,
then one of the points relied upon by the Supreme
Court of Appeal in
Telkom
for the conclusion that it reached would get out of the way.
That Court held that, if the employees were no longer members
of the
Telkom Pension Fund, Molapo would no longer be able to perform the
obligation of contributing to the Telkom Pension
Fund for the
benefit of the employees.  In this regard the Court pointed out
that the Telkom Pension Fund had not been party
to the agreement
between Telkom and Molapo.  It also said that the Fund would be
under no obligation to accept contributions
from Molapo.
[110]
The Supreme Court of Appeal said that
“[l]iterally, the effect of section 197 in this case is to
transfer Telkom’s obligation
to contribute to the Telkom
Pension Fund for the benefit of each employee from Telkom to
Molapo”.  As I have said, Molapo
was the business
transferee in the
Telkom
case.  The Supreme Court of Appeal was right in this regard.
That obligation is no different from any other obligation
that is
governed by section 197(2)(b) except that there is a third party
involved, namely a pension fund.  That, however,
is no obstacle
to the obligation continuing in force but attached to the business
transferee.
[111]
Before a transfer of business, the business
transferor carries the obligation to make regular contributions to
the pension fund
for the benefit of the employees employed in the
business.  When the business is transferred as a going concern
from the business
transferor to the business transferee, that is one
of the obligations that, in the words of paragraph (b) of subsection
(2), “continue
in force as if they had been rights and
obligations between the new employer and the employee”.
[112]
If paragraph (b) had ended with the word
“force” in that paragraph, that would have been enough to
attach that obligation
to the business transferee.  However,
paragraph (b) does not end with the word “force”.
It goes on.
It must be assumed that there was a purpose that
the addition after the word “force” was meant to
achieve.  The
addition is to the effect that the rights and
obligations to which paragraph (b) refers do not just continue in
force but they
continue in force “as if they had been rights
and obligations between the new employer and the employee”.
There
is an implied “before the transfer” in that phrase
and one sees this from the tense used in that part of the paragraph.

Read properly, paragraph (b) of subsection (2) means that all the
rights and obligations that were in existence between the business

transferor and each employee prior to the transfer of business
continue in force after the transfer of business as if, even before

the transfer of business, they had been the rights and obligations
between the business transferee and the employee.
[113]
I
draw attention to the fact that in paragraphs (a), (b) and (c) of
subsection (2) there are different times specified.  In

paragraph (a) the time specified to describe the contracts of
employment to which the paragraph applies is “
immediately
before the date of transfer
”.
(Emphasis
added.)  Paragraph (a) relates to “all contracts of
employment in existence
immediately
before the date of transfer
”.
(Emphasis added.)  It follows from this that paragraph (a) does
not apply to a contract of employment that had
been in existence
between the business transferor and an employee long before the date
of transfer but was not in existence immediately
before the date of
transfer.  However, anybody falling into this last mentioned
category who is still challenging the fairness
or lawfulness of the
termination of his contract of employment through the courts or the
Commission for Conciliation, Mediation
and Arbitration (CCMA) or a
bargaining council or arbitration and obtains an order of
reinstatement or compensation would have
to be reinstated or paid by
the business transferee unless there is a subsection (6) agreement to
the contrary.
[118]
This would be because the business transferor’s obligations to
that employee were taken over by the business transferee
in terms of
paragraph (b) or because in terms of paragraph (c) the dismissal of
that employee that was effected by the business
transferor is
considered in terms of paragraph (c) to have been effected by the
business transferee.
[114]
Paragraph (b) of subsection (2) does not
specify that the rights and obligations must have been in existence
between the business
transferor and the employees “immediately
before the date of the transfer”.  It specifies “
at
the time of the transfer
”.
(Emphasis added.)  In describing the rights and obligations to
which the paragraph applies, paragraph (b) says
it is “all the
rights and obligations between the [business transferor] and an
employee
at the time of the transfer
”.
(Emphasis added.)  This distinction in time is important and can
make all the difference to a claim or dispute.
[115]
Then there is the time specified in
paragraph (c) of subsection (2).  It, too, is different from
both the time specified in
paragraph (a) and the time specified in
paragraph (b).  In paragraph (c) the time specified is given
simply as “before
the transfer”.  That time is
specified to describe the things done by or in relation to the
business transferor to which
the paragraph applies.  It says
that “anything done before the transfer by the [business
transferor] or in relation
to the [business transferor] . . . is
considered to have been done by or in relation to the [business
transferee]”.
[116]
The fact that in paragraph (c) the time is
not specified as “immediately before the date of transfer”
as was done in
paragraph (a) and was not specified as “at the
time of the transfer” as was done in paragraph (b) suggests
that the
decision to describe the time in paragraph (c) as simply
“before the transfer” was deliberate and well-thought
out.
The phrase “anything done before the transfer”
can mean anything done immediately before the transfer, anything done

days, weeks, or months before the transfer and, indeed, even anything
done many years before the transfer.  Paragraph (c)
says
that, after the transfer, anything done by or in relation to the
business transferor before the transfer is considered to
have been
done by the business transferee.  Paragraph (c) gives examples,
namely, dismissal, an unfair labour practice or
an act of unfair
discrimination.  The list is not exhaustive.
[117]
The contracts of employment to which
paragraph (a) of subsection (2) applies are obviously contracts of
employment between the business
transferor and every employee
employed in the business or part of the business that is being
transferred as a going concern.
So, although the phrase
“between the [business transferor] and an employee” does
not appear in paragraph (a), it is
necessarily implied.  In
paragraph (b) one finds the phrase “between the [business
transferor] and an employee”
describing the rights and
obligations that continue beyond the transfer.  In paragraph (c)
no comparable phrase appears.
In my view, once again this must
have been deliberate.  If that phrase had been included in
paragraph (c), the paragraph may
have referred only to those things
done by and between the business transferor and any employee.
However, the absence of
that phrase means that there is no
limitation.
[118]
The decision not to use the phrase “between
the [business transferor] and an employee” in paragraph (c)
when it had
just been used in paragraph (b) must also have been
deliberate.  The idea was to include things that had been done
by anyone
including an employee and any third party if that thing was
done in relation to the business transferor.  A third party
could
be a pension fund, a medical aid company, an insurance company
and so on.  However, it is necessarily implied in paragraph
(c)
that such a thing must concern the employment relationship between
the business transferor and an employee.  It cannot
be anything
that has nothing to do with the employment relationship.  What
does all this mean in regard to pension rights
and obligations that
may have been in existence between the business transferor and the
employees before the transfer of business?
[119]
In my view the implications of this
interpretation of paragraph (c) are that—
(a)
the decision that the business transferor may have taken some time
before the transfer of business as a going concern
and this
could be some years before the transfer   to participate in a
particular pension fund for the benefit of its employees
is, after
the transfer, considered in terms of paragraph (c) to have been made
by the business transferee for the benefit of the
employees;
(b)
the contributions that the business transferor paid to the pension
fund over whatever period before the transfer are, after
the
transfer, considered to have been paid by the business transferee for
the benefit of the employees;
(c)
in so far as the business transferor may have signed any documents
before the transfer in connection with the pension fund to
accept the
Rules of the pension fund or to ensure pension benefits for the
employees, after the transfer the documents and Rules
are considered
to have been signed by the business transferee;
(d)
whatever decisions the pension fund may have made before the transfer
in relation to the business transferor concerning pension
benefits
for the employees are considered, after the transfer, to have been
made in relation to the business transferee;
(e)
the pension fund’s acceptance of the contributions from the
business transferor before the transfer is considered, after
the
transfer, to have been an acceptance of contributions in relation to
the business transferee and;
(f)
whatever decision any employee may have made in relation to the
business transferor is considered to have been made in relation
to
the business transferee.
[120]
I now turn to paragraph (d) of subsection
(2).  The first part of paragraph (d) ends with the word
“employment”
just before the conjunctive word “and”.
The second part starts with the word “and” and goes up to

the end of the paragraph.  If paragraph (d) consisted of the
first part only, it would have been enough to make the point
that a
transfer of business as a going concern does not interrupt the
continuity of the employee’s employment and does not
terminate
the employee’s contract of employment.  The second part of
the paragraph was included for a purpose or for
a reason.  The
second part of paragraph (d) provides that “an employee’s
contract of employment continues with
the [business transferee] as if
with the [business transferor]”.  The phrase “as if
with the [business transferor]”
is particularly important.
This means that, after the transfer of business as a going concern,
unless otherwise agreed in
terms of subsection (6), an employee’s
contract of employment must be treated as if it is still continuing
with the business
transferor where this is necessary to achieve the
purpose of the section.
[121]
If, after the transfer of business as a
going concern, an employee’s contract of employment continues
as if it is still between
the employee and the business transferor,
nobody can use the fact that the employee is no longer employed by
the business transferor
to justify any adverse decision or conduct.
This would be particularly apposite in relation to the continuation
of the rights
and obligations relating to pension benefits.  The
second part of paragraph (d) means that, where necessary in order to
achieve
the purpose of the section, the employee’s contract of
employment is deemed to be still between the employee and the
business
transferor.
[122]
What section 197 does with regard to
pension rights and obligations when there is a transfer of business
as a going concern is that,
by operation of law, the business
transferee is imposed on the pension fund or retirement Fund as a
participating employer without
the consent of the pension or
retirement fund.  That is if no agreement to the contrary has
been concluded in terms of subsection
(6).  The imposition of
the business transferee upon the Pension or Retirement Fund without
the Fund’s consent is no
cause for surprise because section 197
also imposes the business transferee upon the employees as their new
employer without their
consent.  It also imposes the employees
on the business transferee without the latter’s consent unless
there is a subsection
(6) agreement to the contrary.  It
deprives the business transferor of the services of its employees in
the business even
if the business transferor wanted to retain them
unless there is a subsection (6) agreement or unless the employees
resign before
the transfer of business.
[123]
In
Telkom
the Supreme Court of Appeal said that, if, after the transfer, the
business transferee in that case tried to pay contributions
to the
Telkom Pension Fund for the benefit of the employees, the pension
fund would not have been under any obligation to accept
the
contributions from the business transferee.  I do not agree.
As I have said elsewhere in this judgment, section
197(2) provides
that anything done before the transfer by or in relation to the
business transferor is considered, after the transfer,
to have been
done by or in relation to the business transferee.  Before the
transfer the business transferor would have done
whatever needed to
be done and would have signed whatever documents needed to be signed
in order to participate in the pension
fund and paid contributions to
the Fund for the benefit of the employees.
[124]
After the transfer, the business transferee
is considered to have done all those things.  So, in paying
pension contributions
to the fund, the business transferee would be
continuing with something that in law it was deemed to have been
doing for some time
already.  The business transferee would be
considered to be participating in the fund by virtue of the fact that
whatever
the business transferor had done in order to participate in
the fund prior to the transfer is considered, after the transfer, to

have been done by the business transferee.  Whatever the pension
fund may have done in relation to the business transferor
to enable
the latter to participate in the fund, the fund is, after the
transfer, deemed to have done it in relation to the business

transferee.  The pension fund would have no grounds in law not
to accept the business transferee’s pension contributions
for
the employees.
[125]
The Supreme Court of Appeal’s view
that the Telkom Pension Fund would have been under no obligation to
accept contributions
from Molapo is also inconsistent with section
13A(1) and (3) of the Pension Funds Act.  Section 13A(1) reads:
“
Payment
of contributions and certain benefits to pension funds—
(1)
Notwithstanding any provision in the rules of a registered fund to
the contrary, the employer of any member
of such a fund shall pay
the following to the fund in full, namely—
(a)
any contribution which, in terms of the rules of the fund, is to be
deducted from the member’s remuneration; and
(b)
any contribution for which the employer is liable in terms of those
rules.”  (Emphasis added.)
Section
13A(1) places an obligation on “the employer” of a member
of a pension fund to pay to the fund any contribution
which in terms
of the rules of the fund is to be deducted from the member’s
remuneration and any contribution for which the
employer is liable in
terms of those rules.
[126]
Prior to the transfer of business as a
going concern, the employer of the members who are employed in the
business that is being
transferred is the business transferor.
After the transfer, the employer of those very same members is the
business transferee.
Therefore, prior to the transfer, the
section 13A(1) obligation would be on the business transferor but
upon the transfer that
obligation would attach to the business
transferee.  In the first place this change simply occurs
because there is a change
in the identity of the employer.  The
obligation would shift from one employer to the next employer even if
the change of
the identity of the employer was not brought about by a
transfer of business as a going concern.  However, when there is
a
transfer of business as a going concern the section 13A(1)
obligation shifts from the business transferor to the business
transferee
as well.  This is because a statutory obligation also
falls within the ambit of the phrase “all the rights and
obligations”
in section 197(2)(b) of the LRA which that
provision says continue, after the transfer of business, between the
business transferee
and each employee as if they had been rights and
obligations between the business transferor and each employee.
[127]
Since, in the
Telkom
case, after the transfer of business,
Molapo was the employer of the members of the Telkom Pension Fund
employed in the part of
the business that was transferred from Telkom
to Molapo, it had the obligation referred to in section 13A(1) and
the Telkom Pension
Fund was obliged to accept any contributions from
Molapo as the employer of those members.  In the present case,
after the
transfer, Discovery was the employer of the appellants and,
as such, it bore the section 13A(1) obligation and the Fund was
obliged
to accept any contributions paid by Discovery to it.
[128]
In so far as it is relevant, section
13A(3)(a) reads:
“
(3)
(a) Any contribution to a fund in terms of its rules, whether it be a
contribution contemplated in subsection (1), a contribution
for the
payment of which a member of the fund is responsible personally,
or
a contribution to be paid on a member’s behalf
—
(i)
shall be transmitted directly into the fund’s account with a
bank finally registered as such under the Banks Act, 1990
(Act No. 94
of 1990), not later than seven days after the end of the month for
which such a contribution is payable; or . . .”

(Emphasis added.)
[129]
This provision makes it clear that the
Pension Funds Act contemplates that payment of a contribution can be
made on behalf of a
member.  It has no restriction as to who can
pay contributions on behalf of a member.  Therefore, anybody is
permitted
to pay such contributions on behalf of a member.
This, therefore means that in the
Telkom
case, after the transfer, Molapo could have paid pension
contributions on behalf of the employees to the Telkom Pension Fund
and
the Telkom Pension Fund could not have had any grounds not to
accept those contributions.  In this case, too, if Discovery
had
paid contributions to the Fund on behalf of the appellants after the
transfer, the Fund could not have had any grounds not
to accept those
contributions.
[130]
Section
13 of the Pension Funds Act provides that the Rules of a registered
pension fund are “binding on the fund and the
members,
shareholders and officers thereof and, on any person who claims under
the Rules or whose claim is derived from a person
so claiming”.
[119]
While this is important, it is also important to bear in mind that
the LRA is legislation the provisions of which prevail
over the
provisions of even another Act of Parliament where the latter
contains provisions that are in conflict with provisions
of the LRA.
That is what section 210 of the LRA says.
[120]
[131]
Other
provisions of the Pension Funds Act are also important in regard to
what a pension fund may or may not do when, after a transfer
of
business as a going concern, the business transferee pays pension
contributions to it for the benefit of the employees.
In terms
of section 7A(1) of the Pension Funds Act every fund shall have a
board.
[121]
The powers
of a board are set out in the Rules of a pension fund.
[122]
The object of a board is to “direct, control and oversee the
operations of a fund in accordance with the applicable
laws and the
Rules of the fund”.  The applicable laws include, where
relevant, the LRA.
[132]
Section 7C(2)(a), (b), (c) and (d) reads—
“
(2)
In pursuing its object the board shall—
(a)
take all reasonable steps to ensure that
the interests of members in terms of the rules of the fund and the
provisions of this Act
are protected
at
all times
, especially in the event of
an amalgamation or transfer of any business contemplated in
section
14
, splitting of a fund, termination or
reduction of contributions to a fund by an employer, increase of
contributions of members
and withdrawal of an employer who
participates in a fund;
(b)
act with due care, diligence and good
faith;
(c)
avoid conflicts of interest;
(d)
act with impartiality in respect of al
members and beneficiaries.”  (Emphasis added.)
Section
7D(d) and (f) reads:
“
The
duties of a board shall be to—
.
. .
(d)
take all reasonable steps to ensure that contributions are paid
timeously to the fund in accordance with this Act;
.
. .
(f)
ensure that the rules and the operation and administration of the
fund comply with this
Act, the Financial Institutions (Protection
of Funds) Act, 2001 (Act No. 28 of 2001)
and all other applicable
laws
.”  (Emphasis added.)
Earlier
on, I made the point that the Fund could not in law have refused to
accept pension contributions that Discovery could have
paid to it in
respect of the appellants as members of the fund.  Not only is
this view supported by the provisions of section 197(2)
as
discussed earlier but also it is supported by the provisions of the
Pension Funds Act.  In particular it is supported
by
section 13A of the Pension Funds Act.  In this regard
section 7C(2)(a) requires the board of a fund to “take
all
reasonable steps to ensure that the interests of members in terms of
the rules of the fund and the provisions of this Act are
protected at
all times . . .”.  Section 7C(2)(b), (c) and (d)
requires the Board of a Fund to act with due care,
diligence and good
faith, to avoid conflicts of interests and to act with impartiality
in respect of all members and beneficiaries.
[133]
In
Telkom
the Supreme Court of Appeal said:
“
I
can see no merit in an interpretation which, first, compels the Fund
to disregard the [R]ules which it is by statute obliged to
obey, and,
second, which compels the [employees] to accept a situation for which
the [R]ules do not provide and they do not want.”
[123]
I
think that, in adopting this view, the Supreme Court of Appeal did
not appreciate the significance and effect of—
(a)
that part of paragraph (b) of section 197(2) that says that all the
rights and obligations referred to in paragraph (b) “continue

in force” after the transfer “as if”, even before
the transfer, “they had been rights and obligations between
the
[business transferee] and the employee”; as I have said
earlier, this means that, after the transfer, they are regarded,
if
necessary to achieve the purpose of section 197, as if they had been
rights and obligations between the business transferee
and the
employee;
(b)
that part of paragraph (c) of section 197(2) that says that “anything
done before the transfer by or in relation to the
[business
transferor] . . . is considered to have been done by or in relation
to the [business transferee]”;
(c)
that part of paragraph (d) of section 197(2) that says that an
employee’s contract of employment that was in existence
before
the transfer “continues with the [business transferee]”
after the transfer “as if with the [business transferor]”;

and
(d)
the fact that section 13A of the Pension Funds Act obliges the
employer to pay contributions to the Fund and allows anyone to
pay
pension contributions on behalf of a member of a pension fund.
[134]
Finally, in the present case the appellants
also contended that the obligation that they seek to enforce is not
of the type that
is taken over by the business transferee as
contemplated in section 197(2) of the LRA.  In support of this
contention the
appellants submitted that—
(a)
this is a once-off obligation;
(b)
the additional redundancy benefit they seek was “activated”
by the transfer of their employment from LAMAF / LA
Health to
Discovery and their becoming redundant;
(c)
they claimed their member’s share in terms of the Rules of the
Fund, Discovery could not have participated in the fund
because it
had not been constituted in 1995 which is the year when LAMAF joined
the Fund and it could never qualify as a local
authority for the
purposes of the Rules of the fund;
(e)
Discovery could not have made payment of the benefit to the Fund; and
(f)
the effect of section 197 cannot be to amend the provisions of the
Rules of the Fund which, they submitted, would be the case
if the
obligation imposed on LAMAF / LA Health was to be regarded as having
been transferred to Discovery.  In support of
this the
appellants refer to the following passage in
Telkom
:
“
I
can see no merit in an interpretation which, first, compels the Fund
to disregard the [R]ules which it is by statute obliged to
obey, and,
second, which compels the [employees] to accept a situation for which
the [R]ules do not provide and which they do not
want.”
[124]
[135]
All these points on which the appellants
rely for their contention are based upon a failure to appreciate
that, in the light of
section 197(2), a transfer of business as a
going concern does not terminate contracts of employment and upon a
failure to appreciate
the true import of paragraphs (a), (b), (c) and
(d) of section 197(2) as explained earlier in this judgment.  In
the light
of the language used in section 197(2)(b), the clear
provisions of paragraphs (a), (b), (c) and (d) of section 197(2)

as well as the primary purpose of section 197, the appellants’
submissions have no merit.
[136]
As
an alternative to their above contention, the appellants submitted
that LA Health is jointly and severally liable together
with
Discovery for the performance of the obligation they seek to
enforce.  They based this alternative submission on
section 197(9)
of the LRA.
[125]
This alternative submission falls to be rejected.  This is
because section 197(9) makes it clear that it relates to
claims that
arose prior to the transfer of business.  In the present case
the appellants made it clear in Mr Horn’s
founding affidavit in
the High Court that the obligation that they seek to enforce arose on
1 January 2005.  That was not
before the transfer of the
business.
[137]
I
see that in their work:
Business
Transfers and Employment Rights in South Africa
,
[126]
Todd
et
al
share the view that a transfer of business as a going concern does
not terminate contracts of employment.
[127]
They argue that “the transfer of a contract of employment
as contemplated in section 197 has the effect that the existing

contract of employment is preserved while the employer party to the
contract is substituted”.
[128]
In a balanced discussion of the topic the authors also set out
arguments that they consider may be used in support of the

proposition that new contracts of employment are “established”
between employees and the business transferee after
the transfer of a
business as a going concern but they reject those arguments.
[129]
The one argument relates to the effect of section 197(3)
[130]
of the LRA and the other refers to the reasoning of the Supreme Court
of Appeal in
Telkom
.
[131]
If section 197(3) is not considered in isolation but is considered
together with section 197(2) in the context of the primary
purpose of
section 197, the view that a transfer of business as a going concern
terminates employees’ contracts of employment
and that new
contracts are entered into with the business transferee cannot be
justified.  It follows from what I have said
in this judgment
that, in my view,
Telkom
was wrongly decided.
[138]
From all the above it follows that, having
regard to paragraphs (a), (b), (c) and (d) of subsection (2) of
section 197, whatever
rights and obligations the business transferor
had concerning pension benefits for its employees are taken over by
the business
transferee upon the transfer of business.  Whatever
rights and obligations any employee had before the transfer
concerning
his or her pension benefits continue after the transfer as
if the business transferee is the business transferor.  This,
therefore,
means that pension rights and obligations fall within the
ambit of the phrase “all the rights and obligations” in
paragraph
(b) of section 197(2) of the LRA and they do not constitute
an exception to section 197(2)(b).
[139]
I am of the view that section 197 makes all
the necessary provisions that could conceivably have been made to
ensure that, unless
otherwise agreed in terms of subsection (6) or
unless there is a section 197(4) arrangement concerning pension, the
business transferor’s
rights and obligations concerning its
employees’ pension benefits continue beyond the transfer of a
business and are taken
over by the business transferee.
Contrary to the view expressed by the Supreme Court of Appeal in
Telkom
that there is a
lacuna
in section 197 concerning the transfer of pension rights and
obligations, there is, in my view, no
lacuna
in section 197.
[140]
In conclusion I hold that, to the extent
that at the time of the transfer of business as a going concern,
LAMAF may have had an
obligation to pay an additional retrenchment
benefit to the Fund which the Fund had to pass on to the appellants
arising out of
an alleged retrenchment, that obligation fell within
the ambit of section 197(2)(b) of the LRA and was taken over by
Discovery
with effect from 1 January 2005.
Accordingly, the appellants sued a wrong party.  To the extent
that the obligation
that the appellants seek to enforce arose on or
after 1 January 2005, then again, it was borne by Discovery and not
by LA Health.
This would also mean that the appellants sued a
wrong party.  In the result, for the above reasons I agree that
the appeal
should be dismissed.  However, I would make no order
as to costs as this is a labour matter and, in my view,
considerations
of fairness and equity dictate that no costs order
should be made.
For
the Appellants: A L Heyns instructed by Kellerman Hendrikse Inc.
For
the First Respondent: R G Goodman SC instructed by Fairbridge Arderne
& Lawton Inc.
[1]
LA
Health Medical Scheme v Horn and Others
[2014] ZASCA 72
;
[2014] 3 All SA 421
(SCA) (Supreme Court of
Appeal judgment).
[2]
LA
Health Medical Scheme v Horn and Others
,
unreported judgment of the High Court of South Africa Western Cape
Division, Cape Town, Case No A221/2012 (25 January 2013)
(Full Court
judgment) at para 37.
[3]
Horn
and Others v Cape Joint Retirement Fund and Another
[2011] ZAWCHC 34
(1 March 2011) (High Court judgment).
[4]
Rule
7.1A(1) “Redundancy or Retrenchment” provides:
“
The
MEMBER’S conditions of SERVICE provide for an additional
redundancy / retrenchment benefit to be paid by the LOCAL AUTHORITY.
. .
.
REDUNDANCY
/ RETRENCHMENT BENEFIT FROM 1 MARCH 1999
If
a MEMBER’S SERVICE is terminated owing to a reduction in, or
reorganisation of staff, or to the abolition of his [/ her]
post, or
in order to effect improvements in efficiency or organisation (which
includes termination of SERVICE in order to establish
equity in the
workplace or to implement affirmative action programmes) or as the
result of having been declared redundant or
having been retrenched,
on receipt of advice from the LOCAL AUTHORITY, he [/ she] shall be
entitled to:
(a)
the MEMBER’S SHARE;
PLUS
(b)
an amount payable by the LOCAL AUTHORITY concerned (and for which
it
alone shall be liable to the member), being the lesser of—
(aa)
the difference between the age of 65 years and his [/ her] age on
his [/
her] nearest birthday, multiplied by 8%, multiplied by the
MEMBER’S SHARE.
OR
(bb)
100% of the MEMBER’S SHARE.
Provided
that the amount payable by the LOCAL AUTHORITY in terms of paragraph
(b) hereof, may be reduced if the MEMBER agrees
thereto in writing;
Provided further that the FUND shall only become liable to pay the
amount in terms of paragraph (b) hereof,
if and when the said amount
has been paid by the LOCAL AUTHORITY to the FUND, and there is and
shall be no obligation upon the
FUND or the TRUSTEES to take any
steps to enforce payment by the LOCAL AUTHORITY concerned of the
said amount; Provided still
further that if the LOCAL AUTHORITY
concerned fails to pay the said amount to the FUND within seven days
of termination of the
MEMBER’S SERVICE in terms of this
subsection, the FUND may nevertheless at its sole and exclusive
option and election,
and notwithstanding anything to the contrary
herein contained, pay the amount to the MEMBER and it and/or the
TRUSTEES may thereupon
charge interest at the PREVAILING RATE on the
said amount, calculated from the day on which payment thereof was
made by the FUND
to the MEMBER, up to and including the date on
which the payment is received by the FUND from the LOCAL AUTHORITY.
This
benefit will change if the LOCAL AUTHORITY’S redundancy /
retrenchment policy changes in terms of a collective bargaining

agreement.”
[5]
66
of 1995.
[6]
131
of 1998.
[7]
Its
predecessor, the Local Authorities Medical Aid Fund (Cape) was
established in terms of section 2(1) of the Local Authorities

(Medical Aid Fund) Ordinance 25 of 1967.
[8]
The
Cape Joint Retirement Fund was registered in terms of
section 4(7)
of the
Pension Funds Act 24 of 1956
.
[9]
Id.
At
its inception Cape Retirement Amalgamated Joint Pension Fund (the
current Fund’s predecessor) was established by the
Local
Authorities (Pension Fund) Ordinance 23 of 1969 section 3(1)(a).
Following a further iteration which like the Amalgamated
Joint
Pension Fund was a defined
benefit
fund, the current Retirement Fund, a defined
contribution
fund, was registered in 1996.
[10]
58
of 1962.
[11]
Id
at section 1(xiv).
[12]
In
addition to this, in terms of the Pension Fund Rules, “Local
Authority” refers to:
“
(a)
any other Local Government body including a District Council as
defined for
such purposes: and in relation to an EMPLOYEE or a
MEMBER, the LOCAL AUTHORITY in whose SERVICE such EMPLOYEE or MEMBER
is, provided
that joining the FUND will occur on conditions set by
the TRUSTEES.
(b)
Any other Local Government body or similar body constituted before

1995 and who is a participant of the FUND”.
[13]
Rule
9.7(4) provides:
“
MEMBERS
who are transferred to a new employer or LOCAL AUTHORITY, not
associated with the FUND, may be required, as a result of
their new
conditions of service, to terminate their membership of this FUND
and join a Fund that is associated with their new
Employer.
(a)
In such instance, the MEMBER will have the option to transfer his

MEMBER SHARE to the Fund of the new Employer.  The transfer of
the MEMBER SHARE will be subject to taxation as is applicable
at the
date of the transfer to the new Fund.
(b)
The MEMBER may elect to leave his MEMBER SHARE as at the date of

transfer, in the FUND, as a deferred benefit and he [/ she] will
then be regarded as a DEFERRED MEMBER of the FUND.”
The
rule then proceeds to set out the circumstances in which a deferred
member will be entitled to receive the benefit.
[14]
Section
197(2)(a) provides:
“
The
new employer complies with subsection (2) if that employer employs
transferred employees on terms and conditions that are
on the whole
not less favourable to the employees than those on which they were
employed by the old employer.”
[15]
See
above n 4.  In particular this provision stipulates: “Provided
further that the FUND shall only become liable to
pay the amount in
terms of paragraph (b) hereof, if and when the said amount has been
paid by the LOCAL AUTHORITY to the FUND”.
[16]
The
letter addressed to LAMAF (LA Health), in which the appellants
reserved their rights with regard to the redundancy benefit
provided
for in the Rules notwithstanding the section 197 transfer, is
instructive.  It reads:
“
Voortspruitend
uit die reёling wat LAMAF Mediese Skema met Discovery
aangegaan het en wat betrekking het op Artikel 197(2)
van die Wet op
Arbeidsverhoudige, Wet 66 van 1995,
oefen
die betrokkenes tans hul opsies uit met betrekking tot die
onttrekking van hulle fondse uit bogenoemde Aftreefonds
.
Die
betrokkenes wat hierdie dokument onderteken, oefen die onderhawige
opsies uit onderworpe aan die finalisering van die eis
wat teen
LAMAF ingestel is en wat betrekking het of Reёl 7.1A
(“Redundancy/Retirement”) van bogenoemde Aftreefonds.”

(Emphasis added.)
Loosely
translated, it reads:
“
Arising
from the arrangement made between LAMAF Medical Scheme and Discovery
and which has bearing on section 197(2) of the [LRA]
,
those involved are currently exercising their option with reference
to the withdrawal of funds from the abovementioned Retirement
fund.
Those
involved who have signed this document are exercising the option
concerned subject to the finalisation of the claim instituted

against LAMAF and which has bearing on Rule 7.1A
(“Redundancy/Retirement”) of abovementioned Retirement
Fund.”
(Emphasis added.)
[17]
Above
n 4.
[18]
Section
13 “Binding force of rules” of the
Pension Funds Act
above
n 8 provides:
“
Subject
to the provisions of this Act, the rules of a registered fund shall
be binding on the fund and the members, shareholders
and officers
thereof, and on any person who claims under the rules or whose claim
is derived from a person so claiming.”
[19]
The
relevant parts of the MOU read:
“
1.
Introduction
. . .
1.2
It is envisaged that the employees of LAMAF will be transferred to
Discovery
in terms of section 197(2) of the Labour Relations Act.
2.
Discussions with Employees
2.1
LAMAF shall as soon as possible . . . provide Discovery with a list

of employees detailing their current positions, employment history,
years of service, remuneration, outstanding leave pay and all
other
matters that may be applicable to the employees concerned;
2.2
Discovery will notify LAMAF . . . as to the employees of LAMAF with

whom it wishes to hold discussions;
2.3
The purpose of such discussions will be to clarify the key
performance
areas, the terms and conditions of such employees and to
establish how such employees can be transferred on terms and
conditions
that are on the whole no less favourable than those which
they presently enjoy.
2.4
Subject to 2.3 above and whether or not Discovery interviews the
employees
of LAMAF as envisaged in 2.2 above it is anticipated that
Discovery shall offer all employees of LAMAF affected by the
Administration
agreement, employment with Discovery on terms and
conditions on the whole not less favourable than those which pertain
to such
employees of LAMAF.
. .
.
4.
Due Diligence
4.1
Discovery shall, as soon as practically possible . . .  be
entitled
to conduct a due diligence exercise in respect of all
employees of LAMAF whom it is anticipated will be transferred to
Discovery.
4.2
In order to give effect to that due diligence exercise LAMAF
undertakes:
. . .
4.2.3
to make available to Discovery the current rules of any Provident
and/or Pension Fund
of which the employees are members;
4.2.4
to make available any recognition and/or collective agreements
between LAMAF and any
Trade Union;
4.2.5
to make available any copies of any documents in respect of any
litigation which is
threatened or has been instituted by any current
or ex employee of LAMAF in the CCMA, Labour Court or any other Court
of Law;
. . .
5.
General
. . .
5.2
This memorandum of understanding shall be binding upon the parties
hereto,
provided that the parties shall use their utmost endeavours
to enter into a formal agreement encapsulating the terms and
conditions
hereof, should the parties conclude the Administration
agreement.”
[20]
Id.
See specifically clause 2.4 of the MOU.
[21]
This
is borne out by the appellants’ respective banking details
pursuant to the option elected by them.  The amounts
ranged
from just under two hundred thousand rand (R196 965.82 in the
case of the third appellant) to well over one million
rand (R1 668
454.51 in the case of the first appellant).
[22]
The
relief sought in para 1 of the notice of motion was:
“
1.
Ordering the [Fund], upon receiving payment [from LA Health in terms

of para 2 of the notice of Motion] to pay each of the individual
[appellants] identified in Annexure (A) hereto:
1.1
The additional benefit specified in paragraph (b) under the heading,
“REDUNDANCY/RETRENCHMENT BENEFIT FROM 1 MARCH 1999” in
Rule 7.1A(1) of the Rules of the [Fund], calculated as at 1
January
2005 in respect of each of the respective individual [appellants].
1.2
Interest at the [Fund’s] ‘prevailing rate’ (as
defined
in Rule 1.7 of the Rules of the [Fund]) as was applicable
from time to time since 1 January 2005, alternatively at 15.5% per

year on the additional benefit payable to each of the respective
individual [appellants] from 1 January 2005.
2.
Ordering [LA Health] forthwith to make payment to the
[Fund] of [the
amounts listed in 1.1 and 1.2].”
[23]
In
support, they referred to a copy of LA Health’s “Conditions
of Service” and to a “Retrenchment / Redundancy
Policy”
which was attached to the LAMAF Staff Conditions.
[24]
While
the appellants referred only generally to the LAMAF Staff
Conditions, they placed special reliance on the “Retrenchment

/ Redundancy Policy”, by which they aimed to establish that
the Rules were incorporated by reference in section 7.
That
section reads:
“
7.2
LAMAF may provide that the employees concerned be retired in terms
of the Pension
Rules.
7.3
The employee will also receive all payments he / she is entitled to

in terms of his / her contract of employment i.e. leave pay, pro
rata share of bonus, notice pay, etc.”
They
did not attach their contracts of employment to the founding papers.
[25]
The
appellants did not take issue with this claim.
[26]
Para
7.5 of the policy stated:
“
LAMAF
will pay an employee who is dismissed for reasons based on the
employer’s operational requirements severance pay equal
to at
least
two
weeks remuneration for each completed year of continuous service
with LAMAF.  All subsidies normally received by an employee

must be included in the remuneration calculations.”
(Emphasis in original.)
[27]
High
Court judgment above n 3 at para 25.5.
[28]
Id
at para 26.
[29]
Telkom
SA Ltd and Others v Blom and Others
[2003] ZASCA 67
;
2005 (5) SA 532
(SCA) (
Telkom
).
[30]
Independent
Municipal & Allied Trade Union & Others v Cape Joint
Retirement Fund & Others
(2008) 29 ILJ 1687 (C) (
IMATU
).
[31]
High
Court judgment above n 3 at para 40.
[32]
Id
at para 41.
[33]
Id
at para 42.
[34]
Independent
Municipal and Allied Trade Union and Others v Cape Joint Retirement
Fund and Another
,
unreported judgment of the High Court Western Cape Division, Cape
Town, Case No 18743/2007 (24 November 2009) (
IMATU
2
).
[35]
LA
Health Medical Scheme v Horn and Others
,
unreported judgment of the High Court of South Africa Western Cape
Division, Cape Town, Case No 18886/2007 (25 May 2011).
The
costs of the application for leave to appeal were costs in the
appeal.
[36]
Saldanha
J, Baartman J and Louw J.
[37]
Full
Court judgment above n 2 at paras 6, 12, 18 and 24.
[38]
Id
at paras 18 and 37.
[39]
Id
at para 18.
[40]
Id.
[41]
On
24 April 2013 the Supreme Court of Appeal, per Lewis JA and Pillay
JA, granted special leave to appeal to that Court.
[42]
The
Supreme Court of Appeal upheld the appeal with costs and replaced
the order of the Full Court with the order: “The appeal
is
upheld with costs and the order of the court below is altered to one
dismissing the application with costs.”
[43]
Supreme
Court of Appeal judgment above n 1 at para 17.
[44]
Id
at para 18.
[45]
Id.
[46]
Id.
[47]
Id
at para 19.
[48]
Id.
[49]
Id
at para 20.
[50]
The
order dated 7 August 2014 reads:
“
The
Constitutional Court has considered this application for leave to
appeal.  It has concluded that leave to appeal should
be
granted.
Order:
1.
Leave to appeal is granted
2.
Costs will be in the appeal.”
[51]
Supreme
Court of Appeal judgment above n 1 at para 19.
[52]
Id
at paras 8-14.  For example, at para 9, the Supreme Court of
Appeal regarded as obvious that the original wording of the
Rule at
the time of its introduction in 1996 was inspired by the “massive
restructuring of local authorities then taking
place as a result of
the advent of democracy”.
[53]
Section
34 of the Constitution reads in full:
“
Everyone
has the right to have any dispute that can be resolved by the
application of law decided in a fair public hearing before
a court,
or where appropriate, another independent and impartial tribunal or
forum.”
[54]
The
directions issued by the Chief Justice, in relevant part, read:
“
2.
The respondents must, on or before 27 August 2014, file an agreed

statement of facts based on the factual findings of the High Court
and the Supreme Court of Appeal that are pertinent to the
issues.
If no agreement can be reached:
(a)
The applicants must, on or before 3
September 2014, file a statement setting out the factual findings of
the High Court and the
Supreme Court of Appeal that the applicants
dispute together with only those portions of the record that are
relevant to the
impugned findings.”
[55]
Rule
1(3) of this Court’s Rules.
[56]
See
above n 53 where the provision is set out in full.
[57]
Stopforth
Swanepoel & Brewis Incorporated v Royal Anthem Investments 129
(Pty) Ltd and Others
[2014]
ZACC 26
;
2015 (2) SA 539
(CC) (
Stopforth
)
at para 25.
[58]
Gcaba
v Minister for Safety and Security and Others
[2009] ZACC 26; 2010 (1) SA 238 (CC); 2010 (1) BCLR 35 (CC).
[59]
Id
at para 75.
[60]
The
record shows that on 9 April 2014 the parties were urgently
requested by the Registrar of the Supreme Court of Appeal to
“provide the Court with the history of rule 7.1A(1) as
reflected in the records of the Financial Services Board, in
particular
when it was introduced and / or amended.”The second
opportunity to be heard is evidenced in the cover letter to the
submissions
made by LA Health to the Supreme Court of Appeal wherein
it was said that in relation to the appeal “
the
Court requested Counsel to provide
,
preferably in electronic form,
a
copy of the full rules of the Cape Joint Retirement Fund
”
(emphasis added).
[61]
S
v Boesak
[2000] ZACC 25
;
2001 (1) SA 912
(CC);
2001 (1) BCLR 36
(CC) at para
15.
[62]
In
the United States, the Supreme Court sometimes dismisses a case
after granting
certiorari
for an oral hearing by announcing that the writ of
certiorari
is “dismissed as improvidently granted” (DIG);  for
a helpful analysis see Solimine and Gely “The Supreme
Court
and the DIG: An Empirical and Institutional Analysis” 2005
Wisconsin
Law Review
1421.  It seems to be a practical, flexible and appropriate
mechanism to respond to situations where, following the filing
of
the record, for instance, a different set of facts and issues emerge
that alter the Court's initial assessment of the facts
and issues.
[63]
High
Court judgment above n 3 at para 6.  In this regard see also
the Supreme Court of Appeal judgment above n 1 at para
5, where it
characterised the issue as involving the interpretation of rule
7.1A(1).
[64]
Section
197 would, in my view, aid only in determining
who
would be responsible for the payment of the alleged additional
benefit, not the crisp question on appeal which is
whether
the appellants are entitled to the benefit.
[65]
Section
167(3) of the Constitution provides:
“
The
Constitutional Court—
(a)
is the highest court of the Republic; and
(b)
may decide—
(i)
constitutional matters; and
(ii)
any other matter, if the Constitutional Court grants leave to appeal

on the grounds that the matter raises an arguable point of law of
general public importance
which ought to be considered by that
Court
; and
(c)
makes the final decision whether a matter is within its
jurisdiction.”
(Emphasis
added.)
This
aspect underscores the overall interest of justice criterion.
[66]
Amalgamated
Engineering Union v Minister of Labour
1949
(3) SA 637
(AD) at 663.
[67]
Id.
[68]
Supreme
Court of Appeal judgment above n 1.
[69]
Above
n 5.
[70]
Note
that in this judgment the terms “business transferor”
and “business transferee” are used even though
the Act
uses “old employer” and “new employer”.
[71]
CUSA
v Tao Ying Metal Industries and Others
[2008]
ZACC 15
;
2009 (2) SA 204
(CC);
2009 (1) BCLR 1
(CC) (
CUSA
).
[72]
Id
at para 68.
[73]
The
Acquired Rights Directive 77/187/EEC of the European Council of 14
February 1977
No
L 61/26 Official Journal of the European Communities
5.3.77.
[74]
Martin
and Others v South Bank University
[2004] IRLR 74
(
Martin
)
at para 40.
[75]
National
Education Health & Allied Workers Union v University of Cape
Town and Others
[2002]
ZACC 27
;
2003 (3) SA 1
(CC);
2003 (2) BCLR 154
(CC) (
NEHAWU
)
at paras 14-5.
[76]
Id
and see also
Aviation
Union of South Africa and Another v South African Airways (Pty) Ltd
and Others
[2011]
ZACC 39
;
2012 (1) SA 321
(CC);
2012 (2) BCLR 117
(CC) at para 33 and
City
Power (Pty) Ltd v Grinpal Energy Management Services (Pty) Ltd and
Others
[2015] ZACC 9
at para 1.
[77]
In
the Court of first instance the matter was heard by a single judge
who found in favour of the appellants.  In an appeal
to the
Full Bench, the matter was heard by three judges who unanimously
found for the appellants as well.  In the Supreme
Court of
Appeal the appeal was heard by five Judges who unanimously found for
LA Health.
[78]
See
section 3 of the LRA.
[79]
Id.
[80]
Section
197(6) of the LRA reads:
“
(a)
An agreement contemplated in subsection (2) must be in writing and
concluded
between—
(i)
either the old employer, the new employer, or the old and
new
employers acting jointly, on the one hand; and
(ii)
the appropriate person or body referred to in section 189(1), on
the
other.
(b)
In any negotiations to conclude an agreement contemplated by
paragraph
(a), the employer or employers contemplated in
subparagraph (i), must disclose to the person or body contemplated
in subparagraph
(ii), all relevant information that will allow it to
engage effectively in the negotiations.
(c)
Section 16(4) to (14) applies, read with the changes required by
the
context, to the disclosure of information in terms of paragraph
(b).”
[81]
1981
No 1794.
[82]
Since
the 1977 EEC Directive, there have been further directives issued.
These are the
Council
Directive 98/50/EC (an amendment to the 1977 EEC Directive) and
Business
Transfers Directive 2001/23/EC.
[83]
In
2006 new TUPE Regulations were issued and in January 2014 another
set was issued.  These are the Transfer of Undertakings

(Protection of Employment) Regulations 2006/246/EC and
The
Collective Redundancies and Transfer of Undertakings (Protection of
Employment) (Amendment) Regulations 2014/16/EC.
[84]
I
have left out the second part of Article 3(1) that permits member
states to provide for joint liability of the business transferor

together with the business transferee in respect of obligations that
arose from a contract of employment or employment obligations.
[85]
Section
197(4) of the LRA reads:
“
Subsection
(2) does not prevent an employee from being transferred to a
pension, provident, retirement or similar fund other than
the fund
to which the employee belonged prior to the transfer, if the
criteria in
section
14(1)(c) of the Pension Funds Act 1956 (Act No. 24 of 1956), are
satisfied.”
[86]
Section
43(4) of the 1956 LRA gave the Industrial Court the power to make an
interim order of reinstatement that entailed the
physical
reinstatement of a dismissed employee but section 43(7) provided
that, if an employer paid an employee his or her remuneration
during
the operation of such an interim reinstatement order, that
constituted compliance with the reinstatement order issued
in terms
of section 43(4).  Section 43(7) of the 1956 LRA read:
“
If
an order is made not to suspend or terminate the employment of any
employee, or if such suspension or termination has already
occurred,
to rescind the suspension or to reinstate an employee, an employer
who pays to an employee the remuneration which would
have been due
to the employee in respect of his normal hours of work had his
employment not been suspended or terminated or such
lesser
remuneration as the industrial court may determine taking cognisance
of any remuneration to which the employee has in
the meantime become
entitled by virtue of work performed by such employee, shall be
deemed to have complied with the order.”
[87]
Section
43(4) of the 1956 LRA read:
“
(a)
Unless the industrial court on good cause shown
decides otherwise, no order may be made under this subsection if the
relevant
application under subsection (2) was not made within 30
days of the date on which notice was given of the alleged unfair
labour
practice, or if no such notice was given, of the date on
which the alleged unfair labour practice was introduced.
(b)
After considering—
(i)
whether the applicant has complied with the relevant provisions
of
this section;
(ii)
the facts set out in the application and the affidavits as
contemplated
in subsection (3)(b);
(iii)
any oral representations or evidence allowed by the industrial
court;
(iv)
whether the applicant has in good faith endeavoured to settle the
dispute
by agreement or otherwise; and
(v)
whether it is expedient to grant an order in terms of this section,
the
industrial court may make such order as it deems reasonable in the
circumstances: Provided that no party may be ordered to
pay damages
of whatever nature and the court may at any time, on the application
of any party to the dispute, in respect of which
application the
provisions of subsection (3) shall apply, withdraw or vary any such
order.”
[88]
Section
197A(1), (2) and (3) reads:
“
(1)
This section applies to a transfer of a business—
(a)
if the old employer is insolvent; or
(b)
if a scheme of arrangement or compromise is being entered into to

avoid winding up or sequestration for reasons of insolvency.
(2)
Despite the Insolvency Act
,
1936 (Act No. 24 of 1936), if a
transfer of a business takes place in the circumstances contemplated
in subsection (1), unless
otherwise agreed in terms of
section
197(6)—
(a)
the new employer is automatically substituted in the place of the

old employer in all contracts of employment in existence immediately
before the old employer’s provisional winding up or

sequestration;
(b)
all the rights and obligations between the old employer and each

employee at the time of the transfer remain rights and obligations
between the old employer and each employee;
(c)
anything done before the transfer by the old employer in respect
of
each employee is considered to have been done by the old employer;
(d)
the transfer does not interrupt the employee’s continuity
of
employment and the employee’s contract of employment continues
with the new employer as if with the old employer.
(3)
Section 197(3), (4), (5) and (10) applies to a transfer in terms
of
this section any reference to an agreement in that section must be
read as a reference to an agreement contemplated in section
197(6).”
[89]
Beckmann
v Dynamco Wicheloe Macfarlane Ltd
[2002] EUECJ C-164/00
;
[2000] IRLR 578
(ECJ) (
Beckmann
).
[90]
Section
197(5) reads:
“
(a)
For the purposes of this subsection, the
collective
agreements
and arbitration awards
referred to in paragraph (b) are agreements and awards that bound
the old employer in respect of the
employees
to be transferred, immediately before the date of transfer.
(b)
Unless otherwise agreed in terms of subsection (6), the new employer

is bound by—
(i)
any arbitration award made in terms of this Act, the common
law or
any other law;
(ii)
any
collective agreement
binding in terms of section 23; and
(iii)
any
collective agreement
binding in terms of section 32,
unless a commissioner acting in terms of section 62 decides
otherwise.”
[91]
Beckmann
above n 89 at para 37.
[92]
Id
at para 39.
[93]
Id
at para 36.
[94]
Id
at para 38.
[95]
Id
at para 40.
[96]
British
Fuel Limited v Baxendale and Another; Wilson and Others v St Helens
Borough Council
[1998] 4 All ER 609 (HL).
[97]
Id
at 627D-E.
[98]
Martin
above
n 74.
[99]
Id
order 2 of the Court’s order.
[100]
Id
at para 35.
[101]
Telkom
above
n 29.
[102]
Telkom
above
n 29 at para 8.
[103]
Genna-Wae
Properties (Pty) Ltd v Medio Tronics (Natal) (Pty) Ltd
[1995] ZASCA 42
;
1995 (2) SA 926
(A);
[1995] 2 All SA 410
(A)
(
Genna-Wae
).
[104]
Id
at 939A-C.
[105]
Id
at 939A-B.
[106]
Mignoel
Properties (Pty) Ltd v Kneebone
1989 (4) SA 1042 (A).
[107]
Id
at 1050I-J.
[108]
Genna-Wae
above
n 103 at 939B.
[109]
Telkom
above n 29 at para 8.
[110]
Id
at para 12.
[111]
Id.
[112]
The
full definition of “dismissal” in section 186(1) of the
LRA reads:
“
(1)
“
Dismissal
”
means that—
(a)
an employer has terminated employment with or without notice;
(b)
an employee employed in terms of a fixed term contract of employment

reasonably expected the employer—
(i)
to renew a fixed term contract of employment on the same or
similar
terms but the employer offered to renew it on less favourable terms,
or did not renew it; or
(ii)
to retain the employee in employment on an indefinite basis but

otherwise on the same or similar terms as the fixed term contract,
but the employer offered to retain the employee on less favourable

terms, or did not offer to retain the employee.
(c)
an employer refused to allow an
employee
to resume work after
she—
(i)
took maternity leave in terms of any law,
collective agreement
or her contract of employment; or
(d)
an employer who dismissed a number of
employee
s for the same
or similar reasons has offered to re employ one or more of them
but has refused to re employ another;
or
(e)
an employee terminated employment with or without notice because
the
employer made continued employment intolerable for the employee; or
(f)
an employee terminated employment with or without notice because
the
new employer, after a transfer in terms of
section
197
or
section
197A
,
provided the employee with conditions or circumstances at work that
are substantially less favourable to the employee than those

provided by the old employer.”
[113]
See
Minister
van Onderwyse en Kultuur en ‘n Andere v Louw
[1994] ZASCA 160
;
1995 (4) SA 383
(A) (
Louw
)
at 388;
Grootboom
v National Prosecuting Authority
[2013]
ZACC 37
;
2014 (2) SA 68
(CC);
2014 (1) BCLR 65
(CC) (
Grootboom
)
at para 16.
[114]
Phenithi
v Minister of Education & Others
[2005] ZASCA 130
;
2008 (1) SA 420
(SCA) (
Phenithi
)
at para 10.
[115]
Louw
above n 113.
[116]
Grootboom
above n 113.
[117]
Phenithi
and
Louw
above
n 114 and 113.
[118]
See
Transport
Fleet Maintainence (Pty) Limited and Another v NUMSA and Others
[2003] 10 BLLR 975
(LAC) and Todd et al
Business
Transfers and Employment Rights in South Africa
(LexisNexis Butterworths, Durban 2004) at 182.
[119]
Section
13 reads:
“
Binding
force of rules
Subject
to the provisions of this Act, the rules of a registered fund shall
be binding on the fund and the members, shareholders
and officers
thereof, and on any person who claims under the rules or whose claim
is derived from a person so claiming.”
[120]
Section
210 reads:
“
Application
of Act when in conflict with other laws
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.”
[121]
Section
7A(1) reads:
“
Board
of fund
(1)
Notwithstanding the rules of a fund, every fund shall have a board

consisting of at least four board members, at least 50% of whom the
members of the fund shall have the right to elect.”
[122]
Section
7A(2).
[123]
See
Telkom
above n 29 at para 19.
[124]
Telkom
above n 29 at para 19.
[125]
Section
197(9) of the LRA reads:
“
The
old and new employers are jointly and severally liable in respect of
any claim concerning any term or condition of employment
that arose
prior to the transfer.”
[126]
Todd
et al above n 118.
[127]
Id
at 16-8 and 66-8.
[128]
Id.
[129]
Id.
[130]
Section
197(3) reads:
“
Subsection
(2) does not prevent an employee from being transferred to a
pension, provident, retirement or similar fund other than
the fund
to which the employee belonged prior to the transfer, if the
criteria in section 14(1)(c) of the
Pension Funds Act, 1956
(Act No. 24 of 1956), are satisfied.”
[131]
Todd
et al above n 118 at 66-8.  See also
Telkom
above n 29.