Bidvest International (BIL) and Others v Wallenius Wilhemsen Solutions (J 824/20) [2020] ZALCJHB 171 (31 August 2020)

In the Labour Court of South Africa, JOHANNESBURG

Not Reportable

case no: J 824/20

In the matter between:

BIDVEST INTERNATIONAL (“BIL”)

Applicant

BR CHAUKE AND OTHERS

Second to Further Applicants

and

WALLENIUS WILHEMSEN SOLUTIONS

Respondent

Heard: 27 August 2020 (Via Zoom)

Delivered: In view of the measures implemented as a result of the Covid-19 outbreak, this judgment was handed down electronically by circulation to the parties' representatives by email. The date for hand- down is deemed to be 31 August 2020.

JUDGMENT

MAHOSI.J

Introduction

[1] The first applicant, Bidvest International (“BIL”), approached this Court on urgent basis, seeking a declaratory order, inter alia, that there is a transfer of business unit as a going concern from it to the respondent as contemplated in section 197 of the Labour

Relations Act[1] (“LRA”).

[2] The applicant further seek the Court to order that it concludes a contract with the respondent which deals with the transfer of its employees, including the second to further applicants (“the applicant’s employees”) by 31 August 2020, failing which the natural consequences of section 197 of the LRA will apply.

[3] Nissan is not cited in this matter and no order is sought against it. Any reference to it is to contextualise the disputes in this matter.

[4] The first issue is whether the application is urgent.

Urgency

[5] The circumstances of this matter merited the efforts of the parties to engage and try to find an agreement between themselves. In doing that, the parties were locked in efforts to find common ground as it relates to the future of the applicant employees, although in vain. Having had regard to the submissions regarding the issue of urgency,

I am of the view that this matter is urgent and will, therefore, not spend any time on this issue for purposes of this judgment. I turn to deal with the merits of the application hereunder.

Background Facts and the Applicants’ case

[6] BIL was contracted to Nissan South Africa (Nissan) to provide the business of the management of its stockyard. The contract was for a fixed-term period of five years. After the expiry of five years, the period was extended on a month to month basis in order to allow Nissan to conclude its tender process.

[7] In 2019, Nissan put out a tender, on the same or similar contractual terms which it enjoyed with BIL. The respondent was the successful bidder and was awarded the tender. The contract between BIL and Nissan is set to come to an end on 31 August 2020, after which the new contract between the Respondent and Nissan will commence on 1 September 2020.

[8] The stockyard is regarded as the business unit of Nissan. It is a facility used by Nissan and many other motor vehicle manufacturers to store vehicles that have been fully built up and are ready for sale but have not yet being sold and dispatched to the dealerships. These motor vehicles are then stored and maintained in the stockyard until

they are dispatched to the dealer.

[9] The activities at the stockyard are managed by a system knows as European Vehicle Logistics system (EVL), which interfaces with BIL. The system belongs to Nissan and provides instructions on the EVL system to BIL, which instructions may range from the storage of the vehicles and details such as the need to take vehicles for different processes and fitment that is not standard on the vehicle.

[10] It is BIL’s case that in managing the stockyard, it provided some assets, which include office furniture, golf carts, scan guns and tablets. Further that, during the tenure of its management of the stockyard, it made some lease hold improvements to the stockyard which included a revamp of offices, generators, yard demarcation and security upgrades.

[11] In taking over the stockyard, the respondent will be the new outsourced contractor to Nissan and will provide the same business unit functions to Nissan. Thus constituting a discreet service, so submits the applicants. However, the Respondent denies this.

[12] To support its case, the applicants referred the Court to a document titled ‘Purchase specifications request for quotation’. It was submitted that this is the tender document, which proves the respondent’s takeover of the stockyard management as a

going concern. The salient parts are quoted and I deem it pertinent to set them out here too:

‘Overview

This request for services includes the procurement of the following Services here NSA.

SCM Department within NSA has a need to support the Sales team with a number of vital Services such as:

· Inbound CBU Logistics Services: Section 4.1

· Export and Rental Services Support: Section 4.2

· Government Services Support: Section 4.3

· Vehicle Enhancement Facility and PIO: Section 4.4

· EVL System Support: Section 4.5

· Logistics Engineering Services: Section 4.6

· Customs Services Support: Attachment G: Section 4.7

The above services are necessary to perform the specific functions required by SCM to support the Logistics processes to ensure vehicles are tracked, processed and delivered according to their individual additional accessory requirements, supporting the concept of the Right case and Right time.

The appointed service provider will be responsible for the management of these services on behalf of NSA.’

[13] The applicants submit that the entire matrix of the tender demonstrates that the respondent is taking over Nissan’s business unit as a going concern. Furthermore, that the true nature of the agreement is that the Respondent takes over the physical stockyard, EVL System, management of the stockyard, tracking and tracing of all vehicles and the movement of the vehicles upon the instructions of Nissan via the EVL System.

[14] The respondent will have to perform the same functions and secure similar assets for the provision of the stockyard management services. Even though the respondent will not be taking over the assets of BIL, the substance remains that similar assets will be used, so went the submission.

[15] Importantly, the argument is made that the first applicant’s employees are an organised group who are solely dedicated to the contract to Nissan. As matters stand, the respondent has advertised the positions of the applicant employees and four of BIL employees are to perform the same or similar tasks. The above factors, inter alia, calls for the protection of the employees with security of tenure.

The respondent’s case

[16] It is the respondent’s submission that it currently enjoys a strong global relationship with Nissan in that it provides similar solutions in North America for stockyard management and other services. Further that it operates its own business system that was developed locally by its dedicated developers and harbours no interest or need for acquiring anyone else’s business system to provide stockyard management services.

[17] The respondent disputes the categorisation of the contract as a transfer of business as a going concern. It submits that it provides similar services to most vehicle manufactures within South Africa and elsewhere in the world. This it does by using its own well-established proprietary business and computer based systems that it has developed, using its own assets and workforce and requiring nothing and having taken transfer of nothing from BIL.

[18] According to the respondent, in executing its stockyard management responsibilities, it uses its own developed proprietary computer system known as VMotion, which is currently implemented in group operations in countries such as the UAE, Europe and Australia. It consists of a variety of modules that work seamlessly with each other off the same data base and which are designed to integrate seamlessly into the proprietary systems of different motor vehicle manufacturers.

[19] The VMotion system’s unique features provide the respondent with competitive advantage in that it is able to provide superior services to the client, which is efficient, requires fewer people to operate and it is cheaper and effective. Added to this, the VMotion features proprietary modules which include a custom-built yard management system, a computer system used to provide full driver track and trace, full vehicle track and trace, stock visibility, predictive parking, quality holds, fitment tasks, vehicle preservation and key supply and management capabilities. It is further submitted that the VMotion is a highly customisable system to suit unique customer requirements in terms of flow, tasks, interface, dashboards, users and reports.

[20] The respondent operates using a paperless connected stockyard that allows electronic transmission of tasks directly to the device held by the person who has to perform that task. Overall, it is save to state that the respondent relies on its unique computer system.

The Status of the employment of the applicant employees

[21] Ultimately, the issue for determination is the status of the employment of the applicant employees. The Court is called to determine whether, based on the facts and the law, the contract between the respondent and Nissan in as far as the status of the applicant employees is one contemplated in section 197 of the LRA.

[22] BIL submitted that it employed 58 employees for purposes of its contract with Nissan. Of all the employees, 46 are fixed term employees and 12 are permanent. Before this Court are only nine applicant employees. In the founding affidavit, it is also alleged that four of BIL’s employees have now secured employment with the respondent. It is likely that more of the employees have secured employment with the respondent as it has put out advertisement for positions.

[23] The Respondent disputes the number of employees it employs and submits that the headcount at the commencement of the contract is in fact 41 including two junior logistics engineering posts that were created at the request of Nissan.

[24] It further submits that its organisational structure is different from the one used by BIL as the one it uses is particularly efficient hence the need for fewer employees. Further that the impact of the Covid-19 global pandemic has the potential of downsizing the staff component.

Legal Principles and analysis

[25] Section 197 and of the LRA regulates the employment related consequences of a transfer of the whole or part of a business. Section 197 requires that unless otherwise agreed, the transferee employer is substituted for the transferor as the employer of all employees engaged in the business being transferred. The relevant definitions in the section are important and read:

‘(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.’

[26] The respondent disputes the categorisation of its contract with Nissan as falling within the squares of section 197. That is, a transfer as a going concern. It submitted that the contract between itself and Nissan is nothing more than a request for quotation to provide a service to Nissan.

[27] The ultimate issue is whether the business of BIL was transferred to the respondent as a going concern. This is determinative of the other question that needs answering, that is whether the respondent substituted BIL as the employer of the applicant employees and thereby became the employer of the applicant employees.

[28] The issue of a transfer of a business as a going concern is no longer a novel question. It is now trite that for a transfer to fall within the squares of section 197 of the LRA, there has to be present, three elements which must be so present simultaneously and they are that: (a) a transfer by one employer to another; (b) the transferred entity must be the whole or part of the business or an economic entity capable of being transferred and (c), the business must be transferred as a going concern. Simply put, does the economic entity that is transferred retain its identity after the transfer.

[29] In National Education Health and Allied Workers Union v University of Cape Town[2], the Constitutional Court declared the words ‘going concern’ to mean

‘The phrase “going concern” is not defined in the LRA. It must therefore be given its ordinary meaning unless the context indicates otherwise. What is transferred must be a business in operation “so the business remains the same but in different hands”. Whether that has occurred is a matter of fact which must be determined objectively in the light of the circumstances of each transaction. In deciding whether a business has been transferred as a going concern, regard must be had to the substance and not the form of the transaction. A number of factors will be relevant to the question whether a transfer of a business as a going concern has occurred, such as the transfer or otherwise of assets both tangible and intangible, whether or not workers are taken over by the new employer, whether customers are transferred and whether or not the same business is being carried on by the new employer. What must be stressed is that this list of factors is not exhaustive and that none of them is decisive individually. They must all be considered in the overall assessment and therefore should not be considered in isolation.’

[30] In Rural Maintenancce (Pty) Ltd and Another v Maluti-A-Phofung Local Municipality[3] the Constitutional Court reminded us once again that the enquiry into whether there has been a transfer of a business as a going concern is a factual one. Importantly, that in evaluating the facts, attention must be paid to the substance and not the form of the transaction.

[31] Although in most instances the transfer of business occurs consequent to a sale of a business, the reach of section 197 extends beyond transfers taking place within this context. This principle was accepted into our jurisprudence from the European Court of Justice’s decision in Allen v Amalgamated Construction Co Ltd[4] where it was held that the directive is intended to cover any legal change in the person of the employer. The method of transfer has been held to be another important factor for consideration. This is apposite in the present instance where the transfer did not take place as a result of a sale.

[32] The primary purpose of section 197 of the LRA is the protection or safeguarding of the rights of employees whenever there is a transfer of a business as a going concern from one employer to another[5]

[33] The individual employees seek a declarator that the respondent is their employer and such order protecting their security of tenure. In their heads of argument, the applicants submit that the scope of work has not changed despite the difference in the interface system or lack of organizational structure.

[34] Much argument was made by the respondent, denying any employment relationship between itself and the applicant employees. Its core defense is that there was never a transfer of a business as a going concern between itself and BIL. The basis for its defense is that it does not use the system used by BIL, it does not use the assets of BIL and that its VMotion system is unique, efficient, used across the seas in overseas countries and needs little or less manpower. To support this, a very detailed breakdown of the system was provided to the Court and the Court had regard to it in deciding this matter.

[35] The nature of the business of the stockyard in my view is not as unique as the respondent makes it out to be. It is obvious that it is a common component of motor vehicle manufacturers worldwide. The VMotion system, might boast unique features, but in my view again a necessary system for purposes of providing service to the client, in this case Nissan.

[36] Regarding the nature of the transaction, the respondent sought to downplay it by constantly referring to it as a quotation. I find this disingenuous. An example is to be found in the letter dated 25 August 2020, from Nissan to the Respondent. The salient part reads:

‘Tender Stockyard Management

Dear Athol,

Thank you for your participation in the Stockyard Management tender.

After several negotiations and efforts to reduce the cost we want to thank you for your positive contribution and willingness to reduce prices. We can confirm that you have been successful in your efforts in meeting the requested reductions and assisting NSA in getting the sourcing finalized within budget.

Nissan South Africa therefore would like to confirm with this communication that the three-year contract for Stockyard management will be awarded to WWS and the contract start date will be effective 01 September 202 to 31 August 2023.

Our SCM and legal are in the process of prepping your contract for your final sign off.

Kind regards

Eric de Beer’

[37] The applicants further relied on the dictum in Imvula Quality Protection (Pty) Ltd and Others v University of South Africa[6] where the Court cautioned that the label attached to the transaction is irrelevant and that the terms such as in-or outsourcing are of no consequence.

[38] A further strange component in the respondent’s case is the allegation that it has employed four of BIL’s employees and maybe more. The Respondent was at pains in dealing with some of the applicant employees and why they do not fit into their business model. It would have been desirable to give detailed explanation, in the same vain, why the four or more deserved the nod and not the applicant employees. I have considered the provision of the stockyard management service and I am in agreement with the applicants that the substance remains that similar assets will be used and the respondent will provide same or similar service to Nissan..

[39] In its heads of argument, the respondent persisted with the submission that there was no transfer of business as a going concern. That BIL actually transferred nothing to the respondent. Should the Court find otherwise, this would cause significant prejudice to the respondent.

[40] Facts similar to those in this matter played out in the case of TMS Group Industrial Services (Pty) Ltd t/a Vericon v Unitrans Supply Chain Solutions (Pty) Ltd and Others[7]. In that matter, Unitrans and Nampak concluded a service agreement in terms of which Unitrans was to manage the warehousing,distribution

and planning functions of Nampak. Unitrans was to further provide inter alia, managers, logistics specialists, forklift operators and warehouse staff using Nampak infrastructure, assets and IT systems. On expiry of the contract, TMS took over the Nampak’s services. It disputed that it had taken over the employees of Unitrans and refused to take over the employees or any of Nampak’s assets in terms of its service agreement.

[41] The Court a quo had found that the termination of a warehousing agreement between the first and third respondents and the conclusion of an agreement for the provision of similar services between Unitrans and TMS constituted a transfer of an undertaking as contemplated in section 197 of the LRA. Having looked at the evidence that assumption of right of use of Nampak’s infrastructural assets by TMS where it would provide the same services from the same premises without interruption, constituted a transfer as a going concern.

[42] The matter served before the Labour Appeal Court (LAC) with leave from the Court a quo. TMS submitted on appeal that no business had been transferred within the meaning of section 197 of the LRA. It denied taking over any assets, goodwill or intellectual property from either Unitrans or Nampak and alleged that it had previously simply concluded an agreement for the provision of services with Nampak, which was insufficient to trigger section 197 of the LRA.

[43] The LAC held that the correct approach is not to apply section 197 in a literal and formalistic fashion, but rather to make an enquiry into the substance of the transactions in question. On the uncontested evidence in that matter, the facilities were handed over to TMS in a state in which it was able to carry on the very same activities previously conducted by Unitrans.

[44] In its analysis, the LAC held that the correct approach is not to apply section 197 of the LRA in a literal and formalistic fashion, but instead, to enquire into the substance of the transaction in question. Although the facts in this matter are slightly different, there is no reason why the principles outlined in TMS should not be applied herein.

Conclusion

[45] The respondent is appointed to perform stockyard and dispatch management services, which was previously rendered by BIL. The services are to be performed at the very same site and fixed premises as the services that were performed by BIL and although different interface will be use, the respondent (same as BIL) will be using Nissan’s EVL IT system. As such, the business unit will retain its identity and continue with the same or similar activities, save for the reduction of the headcount. Having had regard to this evidence, and in light of the authorities and the approach set out by both the LAC and the Constitutional Court, I am convinced that it justifies the conclusion that there was a transfer of a business as a going concern from the old employer to the new employer.

[46] Turning to the employees, the respondent submitted reasons why it could not take up some of them but employ some, although not convincing to this Court. Interestingly, it is not ready to accept that it is open to employ employees of BIL. I am in agreement with the applicants that the applicant employees deserve the protection of their security of tenure.

Costs

[47] This Court has a discretion in awarding costs. Taking into account the requirements of law and equity. The Constitutional Court has very recently confirmed that the rule of practice, that costs follow the result does not find application in this Court. But that cots orders should be made against the principles of fairness and equity.[8]

[48] In this matter, the applicants were forced to approach this Court on an urgent basis in circumstances where the respondent ought to have heeded the applicant’s attorneys advise and engaged the applicants in a consensus seeking exercise. Had the respondent took time to acquaint itself of the legal principles, scarce judicial resources would not have been used in bringing this application. Based on the findings that I have arrived at, I am inclined to award costs against the respondent.

[49] Accordingly, I make the following order:

Order

1. The first applicant and the respondent are to conclude a contract which deals with the transfer of the applicant employees which is to include the applicant employees as contemplated in section 197 of the Labour Relations Act, 66 of 1995 as amended.

2. Should the respondent fail to do as ordered in 1 above, the applicant employees will be deemed to be transferred to the respondent with effect from 1 September 2020 as contemplated in section 197 of the Labour Relations Act, 66 of 1995 as amended.

3. The respondent is to pay the applicants’ costs.

__________________

D. Mahosi

Judge of the Labour Court of South Africa

Appearances:

For the Applicants:

Advocate Lenette Pillay

Instructed by:

M.S Molebaloa Attorneys

For the Respondent: Advocate Maurice Pillemer SC

Instructed by:

Shepstone and Wylie Attorneys

[1] Act 66 of 1995 as amended.

[2] 2003 (3) SA 1 (CC).

[3] (2017) 38 ILJ 295 (CC).

[4] [200] IRLR 119 (ECJ).

[5] See: Rural Maintenance Supra n 3.

[6] (2019) 40 ILJ 104 (LAC).

[7] (2015) 36 ILJ 197 (LAC).

[8] See: Zungu v Premier of Kwazulu-Natal and Others (2018) 39 ILJ 523 (CC).