Holand v Du Toit t/a Bee Consult and Another (JR1975/2012) [2016] ZALCJHB 516 (15 December 2016)

IN THE LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG

Not Reportable

Case No: JR1975/2012

In the matter between:

NADINE HOLAND Applicant And PIETER DU TOIT t/a BEE CONSULT BEE CONSULT (PTY) LTD First Respondent Second Respondent Heard: 13 July 2016 Delivery: 15 December 2016 Summary: Application to Join – transfer of business - Section 197 of LRA – lifting the corporate veil

JUDGMENT

HARKOO AJ,

Introduction

[1] This is an application, the applicant seeks to join the second respondent as a party to these proceedings. The second respondent opposes this application.

[2] The applicant was employed by the first respondent as a senior BEE consultant from 7 March 2012 until her dismissal on the 29 March 2012. She challenged both the procedural and substantive fairness of her dismissal and referred the dispute to the Commission for Conciliation, Mediation and Arbitration (CCMA) on the 15 May 2012 together with an application for the condonation of the late referral of the dispute.

[3] The matter was set down for a con/arb at the CCMA on 27 June 2012. The fourth respondent was represented by her attorney Mr P Mogashoa and the applicant was not present. The presiding Commissioner having satisfied herself that the first respondent was given adequate notice of the set down of the con/arb, issued a certificate of non-resolution, proceeded with the arbitration and issued a default award whereby the first respondent was ordered to pay the applicant the sum of R54, 000.00, calculated at three months’ salary.

[4] The first respondent then launched an application for the rescission of the default arbitration award which was set down for hearing on 3 August 2012 before another Commissioner; who, having found that there was no proper application for a postponement of the initial arbitration, that the notice of set down was properly served on the applicant, that the applicant was aware of the date of the arbitration hearing and that the notice of set down of the arbitration hearing ‘provides clearly for all eventualities and describes how to deal with them’, accordingly dismissed the application for the rescission of the default arbitration award.

[5] The first respondent then brought an application for the review of the default arbitration award as well as the rescission ruling by the second commissioner.

[6] The application for the review of the default arbitration award as well as the rescission ruling was filed on 16 August 2012. The review was set down for hearing on the 28 August 2014, some two years later. The first respondent’s legal representatives were not present and the application for the review was dismissed with costs.

[7] On 4 December 2014 the applicant obtained a warrant of execution issued out of this court against the first respondent. However, when the writ was served, the applicant’s legal representative was informed that the writ was served on the wrong entity being the second respondent, represented by its sole director, Marlene Snyman, which traded at the same address as the first respondent; this address being 603 Rita Street, Moreleta, Pretoria.

[8] It transpired that sometime during 2013 the first respondent ceased trading as a sole proprietor and the second respondent was formed with Marlene Snyman being its sole director and the first respondent being its employee.

[9] On the 14 February 2015 the first respondent brought an application for the rescission of the judgment granted by default on 28 August 2014 and the applicant launched this application on the 27 March 2015. Both matters were set down for hearing on the 13 July 2016.

[10] The order dismissing the application for rescission of the default judgment granted in favour of the applicant on the 13 July 2014 has already been handed down. This judgment now relates to the application to join the second respondent as a party to the proceedings.

[11] The applicant bases this application on two grounds; firstly, on the basis that the changes in the business entity were created with a deceptive and malicious intent, and seeks the uplifting of the ‘corporate veil’ and secondly, that the second respondent assumed the rights and responsibilities of the first respondent in circumstances where Section 197 of the Labour Relations Act[1] (LRA), applies.

[12] The applicant alleges that she became aware of the existence of the second respondent after the warrant of execution was served on it in February 2015. She was employed by the first respondent who traded as BEE CONSULT at the very same address being 603 Rita Street, Moreleta Street, Pretoria. At the time Marlene Snyman was employed as the personal assistant of the first respondent. At this point it needs to be noted that the second respondent, in its heads of argument, refers to a ‘personal relationship’ between the first respondent and Marlene Snyman.

[13] Sometime during 2013 the first respondent ceased trading and the second respondent was created. The first respondent has no attachable assets. The second respondent has a strikingly similar name as the first respondent’s trading name and conducts the very same business from the very same address, where Marlene Snyman stays; utilizing the very same office furniture and office equipment of the first respondent. Marlene Snyman was involved in the dispute between the applicant and the first respondent as the first respondent’s personal assistant, to the extent that she attended the rescission application hearing at the CCMA.

[14] The second respondent alleges that no employment relationship existed between it and the applicant; that it did not employ nor dismiss the applicant. It alleges further that the registration of the second respondent was brought about by ‘a change in legislation and more specifically the requirements of BBBEE.’

[15] The second respondent further alleges that there is no live dispute before this court to which the second respondent can be joined as a party; the applicant has not complied with the pre-requisites required for the resolution of the dispute in terms of Section 191 of the LRA, and even if she attempts to do so now, her claim would have prescribed.

[16] Section 20 (9) of the Companies Act [2] provides:

(a) ‘If, on application by an interested person or in any proceedings in which a company is involved, a court finds that the incorporation of the company, any use of the company, or any act by or on behalf of the company, constitutes an unconscionable abuse of the juristic personality of the company as a separate entity, the court may -

(a) declare that the company is to be deemed not to be a juristic person in respect of any right, obligation or liability of the company or of a shareholder of the company or, in the case of a non-profit company, a member of the company, or of another person specified in the declaration; and

(b) make any further order the court considers appropriate to give effect to a declaration contemplated in paragraph (a).’

[17] In Ex Parte Gore NO and Others,[3] Binns-Ward J, in quoting the English decision in Faiza Ben Hashem v Shayif and Another, noted the following in paragraph 22:[4]

‘In Ben Hashem,Munby J set out the following seven principles (at paras 159-164):

1. Ownership and control of a company are not of themselves sufficient to justify piercing the veil;

2. The court cannot pierce the veil, even when no unconnected third party is involved, merely because it is perceived that to do so is necessary in the interests of justice;

3. The corporate veil can only be pierced when there is some impropriety;

4. The company’s involvement in an impropriety will not by itself justify a piercing of its veil: [furthermore] the impropriety must be linked to use of the company structure to avoid or conceal liability;

5. It follows…. that if the court is to pierce the veil, it is necessary to show both control of the company by the wrongdoer and impropriety in the sense of a misuse of the company as a device or façade to conceal wrongdoing;

6. A company can be a façade for such purposes even though not incorporated with deceptive intent, the relevant question being whether it is being used as a façade at the time of the relevant transaction(s).

7. And the court will pierce the veil only as far as is necessary to provide a remedy for the particular wrong which those controlling the company have done. In other words, the fact that the court pierces the veil for one purpose does not mean that it will necessarily be pierced for all purposes.’…

[18] The applicant could not possibly have joined the second respondent as a party to the dispute at the time of her dismissal, as the second respondent did not exist at the time.

[19] At this stage, it is essential to point out the various inaccuracies and contradictions of the allegations made by the first respondent in the previous documents filed by him in the CCMA and in this court, which were mentioned in the previous judgment, these being:

‘(a) the applicant persisted with his argument that the second respondent did not possess the required jurisdiction to arbitrate this matter as the application for the condonation of the late referral of the dispute had not been determined; this fact appeared to be incorrect as the condonation ruling granting the condonation of the late referral of the dispute was made on 8 June 2012, a copy of the condonation ruling was filed by the fourth respondent,

(b) the applicant in his application for the rescission of the arbitration

award disputed that the fourth respondent was an employee and maintained that she was employed as a consultant on a contract basis; however he confirms both in the review papers as well as the rescission papers filed in this court that the fourth respondent was employed by him from 7 March 2012 to the 29 March 2012,

(c) the applicant disputed that the fourth respondent was employed on a

fixed salary basis and stated in his application for the decision of the arbitration award that the fourth respondent was employed on the basis of the job is completed, ie. R18, 000.00 per month, for six jobs completed, which was her target; in the papers filed in Court he states that the applicant’s remuneration was R18, 000.00 per month,

(d) he further stated that the fourth respondent failed to meet her target

and elected to terminate her business relationship with him, on her own free will; he later goes on to state that she was dismissed for gross misconduct and ‘gross dereliction of duties’,

(e) he also stated that the fourth respondent was still on probation,

however the ‘Offer of Employment’ makes no reference to a probationary period,

(f) the applicant does not disclose what the ‘gross misconduct’ was,

suffice to state that it brought his name into disrepute with a major client,

(g) he confirms that he was not present when the fourth respondent was

dismissed, this fact is consistent with the fourth respondent’s (the applicant’s) answering affidavit that she was dismissed by the applicant over the telephone; he subsequently states that she was dismissed after a meeting where she was unable to adequately explain a gross misconduct’.

[20] Having considered all the factors, I am satisfied that the business of the first respondent was transferred to the second respondent in circumstances where the second respondent assumed all the rights and obligations of the first respondent, and even if I am not correct on this ground, the use of the company, being the second respondent as a separate entity, clearly constitutes an unconscionable abuse of a juristic personality, whereby the second respondent evades its responsibility.

[21] I am of the view therefore that the second respondent should be joined as a party to these proceedings and I see no reason why an appropriate cost order shall not follow the result.

[22] I accordingly make the following order:

22.1 The application to join the second respondent as a party to this proceeding is granted, and

22.2 The second respondent is required to pay the applicant’s costs.

____________________________

Harkoo AJ

Acting Judge of the Labour Court of South Africa

APPEARANCES.

For the Applicant: Mr C J Geldenhuys

Instructed by:

Geldenhuys @ Law Inc

For the Respondent: Mr P Mogashoa

Instructed by:

P Mogashoa Attorneys

[1] Act 66 of 1995

[2] The Companies Act No 71 of 2008

[3] (18127/2012) [2013] ZAWCHC 21; [2013] 2 All SA 437 (WCC) (13 February 2013)

[4] [2009] 1 FLR 115, [2008] EWHC 1179 at 2380