National Union of Metalworkers of South Africa and Others v Niclotte (Edms) Beperk and Others (JS66/2009) [2016] ZALCJHB 170 (4 May 2016)

THE LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG

JUDGMENT

Not reportable

Case no: JS 66/2009

In the matter between:

NATIONAL UNION OF METALWORKERS OF

SOUTH AFRICA

First Applicant

KAIZER MOFOKENG AND 12 OTHERS

Second and further Applicants

and

NICLOTTE (EDMS) BEPERK

First Respondent

ALLEGRO FILLING STATION Second Respondent

MICHIEL CHRISTOFFEL DIPPENAAR Third Respondent

Heard: 8 – 10 June 2015, 24 June 2015, 29 – 31 March 2016

Delivered: 4 May 2016

Summary: Unfair dismissal claim in terms of section 189 of the Labour Relations Act 66 of 1995. Transfer in terms of section 197 took place. Retrenchment unfair as no procedure followed and the business did not close down.

PRINSLOO J.

Introduction

[1] The matter was on trial for three days in June 2015 and the Applicants presented the testimony of three witnesses when they sought a postponement of the matter in order to join other entities or individuals to the principal matter pending between the Applicants and the Second Respondent.

[2] The First Respondent (‘Niclotte’) and the Third Respondent (‘Dippenaar’) were subsequently joined and the Applicants filed an amended statement of case and the Respondents filed a plea thereto. The trial was concluded in March 2016.

Background facts

[3] The First Applicant (‘NUMSA’) on behalf of the Second and further Applicants (‘the individual Applicants or employees’)

referred an unfair dismissal dispute to this Court, citing ‘Fountain Diensstasie BK’ (‘Fountain’) as the First Respondent and ‘Allegro Filling Station’(‘Allegro’) as the Second Respondent. The Applicants’ case is that the employees were unfairly dismissed as Fountain failed to consult them in accordance with the provisions of section 189 of the Labour Relations Act[1] (‘the Act’) prior to their retrenchment and the transfer that took place in terms of section 197 of the Act.

[4] Allegro is presumed to be the employer as a result of the section 197 transfer and the relief sought by the Applicants is an order declaring their retrenchment procedurally and substantively unfair and an order declaring the failure of Allegro to employ them as part of the ‘going concern’ to be unfair.

[5] Fountain was subsequently and before the commencement of the trial liquidated. The Applicant’s case against Fountain was withdrawn and the matter proceeded to trial with Allegro as the only entity remaining as a respondent before Court.

[6] Allegro pleaded and persisted during trial that it was not the correct respondent before Court as it never took over Fountain as a going concern and never traded as ’Fountain Diensstasie’. Mr Geldenhuys, on behalf of Allegro, conceded that a transfer of a going concern took place but disputed that Allegro was the correct respondent.

[7] The Applicants subsequently sought to join Niclotte (Edms) Bpk (‘Niclotte’) as the First Respondent and Christoffel Michael Dippenaar (‘Dippenaar’) as the Third Respondent to the pending proceedings.

[8] Niclotte and Dippenaar were subsequently joined.

The pleadings and pre-trial minute

[9] The legal issues and relief sought by the Applicants in their amended statement of case are substantially the same as those in the initial statement of case, except that the issues are now to be decided between the Applicants and the Respondents as they are after the joinder.

[10] The Applicants’ case is that their dismissal constituted an unfair retrenchment as the Respondents failed to consult them in accordance with the provisions of section 189 of the Act prior to their retrenchment, not only on the issues prescribed by section 189 of the Act, but also on the possibilities of the transfer as a going concern in terms of section 197 of the Act. It is further the Applicants’ case that the Respondents failed to comply with the provisions of section 197. The Respondents are presumed to be the employer as a result of the section 197 transfer.

[11] The Respondents filed an amended response to the amended statement of claim and denied that a transfer as contemplated by section 197 of the Act took place. The Respondents pleaded that the only dismissal that took effect was the dismissal effected by the Applicants’ employer, Fountain, and no employment relationship came into effect between the individual Applicants and the Respondents, hence there was also no dismissal.

[12] The relief sought by the Applicants is essentially an order declaring their retrenchment procedurally and substantively unfair and an order declaring the Respondents’ failure to employ them as part of the ‘going concern’ to be unfair.

[13] The individual Applicants seek retrospective re-instatement.

[14] The parties did not specifically agree on the issues the Court had to decide, but from the disputed facts and the relief sought, I am of the view that the following should be decided:

1. Was there an employment relationship that existed between the individual Applicants and the Respondents;

2. Was there a transfer in terms section 197;

3. Was the dismissal of the individual Applicants in breach of section 189 and 197 of the Act.

The evidence

[15] The Applicants called three witnesses.

[16] Mr Mofokeng (‘Mofokeng’) testified that he was employed by Fountain as a supervisor at the filling station. He was also a NUMSA shop steward. The owner of Fountain was Mr de Wet (‘de Wet’).

[17] During his testimony Mofokeng referred to extracts from his dairy. He explained that he used his diary to diarise meetings and to record what happened so that he could recall it later. The first extract he referred to was his handwritten notes recorded in his dairy on 20 May 2008. Mofokeng testified that on this day de Wet introduced the employees of Fountain to Dippenaar and his son, Hendrik Dippenaar (‘Hendrik’) as the new managers as he (de Wet) was leaving the business and was giving it over to

Dippenaar and Hendrik.

[18] Mofokeng recorded ‘going concern’, ‘197’ and ‘no changes at all’ in his dairy and he explained that during the meeting de Wet informed the employees that the business was taken over as a section 197 going concern by the new management and that no changes were going to take place as a result of the take over by the new management. During the meeting Mofokeng asked a question about job security and he recorded that he was told that no retrenchments were to take place as their jobs were secure.

[19] Mofokeng also recorded that Dippenaar and Hendrik are the new owners of Fountain and that de Wet was no longer in the driving seat, but would be around to assist Hendrik to show him how things are done. However, employees were instructed to ask Hendrik for anything they wanted as he was the new manager.

[20] The second extract which Mofokeng referred to from his dairy was that of 29 May 2008, where he recorded a meeting held subsequent to the meeting of 20 May 2008. He testified that the meeting of 29 May 2008 was called by Dippenaar and Hendrik and that Hendrik introduced the “prima smart’ policy which he wanted to apply in the running of the business. Hendrik explained the meaning of ‘prima smart’ to the employees as a 5-point service plan that management expected employees to adhere to. It appears that every letter represents a value or principle for instance ‘prima’ was explained a ‘p’ is ‘point direct customer’, ‘r’ is ‘receive, greet and introduce’, ‘i’ is implement offer to’, ‘m’ is ‘money and complete method of payment’ and so forth. The employees were told that it would take 30 days to implement the changes.

[21] Mofokeng testified that when de Wet was their employer, he paid their salaries into their bank accounts, but after Dippenaar took over and from June 2008 onwards, Dippenaar paid their salaries and they received their salaries by hand and no longer in their bank accounts.

[22] Under cross-examination Mofokeng testified that he recently visited the premises where he used to work and it still operates as a BP service station under the name ‘Fountain Diensstasie’.

[23] It is common cause that Mofokeng and the other individual Applicants received a letter on 30 September 2008 informing them that Fountain was closing down the business with immediate effect and that their services were no longer required. The letter was printed on a Fountain letterhead and was signed by de Wet for Fountain. Mofokeng’s testimony was that the dismissal notice was issued on behalf of Fountain by one Nicolene, who was working at the offices of Fountain, but they were indeed dismissed by Dippenaar and Fountain.

[24] Mofokeng testified that they were employed by Fountain and that Fountain had different owners. De Wet handed the business over to Dippenaar in May 2008 and to this day Dippennaar is still the owner and operating Fountain as a service station under the same name. Mofokeng testified that the business was transferred from de Wet to Dippenaar as a going concern, as provided for in section

197 of the Act.

[25] Mr Geldenhuys on behalf of the Respondents referred to a memorandum of agreement entered into between Fountain as represented by de Wet and Niclotte as represented by Dippenaar and signed on 31 May 2008. The document was a lease agreement for 30 days, which was subsequently extended and finally terminated at the end of September 2008. In terms of the agreement Fountain would make the services of the petrol attendants available to Niclotte, that would pay Fountain at the end of the month an amount of R11.31 per

hour worked by the petrol attendants.

[26] It was specifically agreed that Niclotte would lease the business as a going concern, but that the petrol attendants would remain the employees of Fountain and that their services are merely made available to Niclotte.

[27] Mr Geldenhuys also referred Mofokeng to a sale agreement, signed on 24 October 2008 by Dippenaar on behalf of Niclotte, purchasing the immovable property on which Fountain was situated. Mr Geldenhuys also referred to an offer to purchase the immovable property of Fountain signed on 5 December 2008 by Dippenaar on behalf of CHMC Eiendomme (Edms) Bpk (‘CHMC’).

[28] Mr Makhubo (‘Makhubo’) was the second witness called on behalf of the Applicants and he testified that he met Dippenaar and Hendrik on 20 May 2008 when there was a meeting and they were told that Dippenaar was the new employer.

[29] In cross-examination Mr Geldenhuys dealt with the Applicants before Court. The list of Applicants appended to the statement of case contained 13 names. Mr Geldenhuys put it to Makhubo that the following individuals were not dismissed but are in fact still employed by Fountain: Patrick Mngomezulu, Vusi Thabethe, David Radebe, John Mokoena, Dumisani Khumalo and Michael Maseko. Mpho Tsotetsi was dismissed for misconduct in 2014. This version was not disputed.

[30] The last witness called by the Applicants was Mr Siyenga (‘Siyenga’), a NUMSA local organiser. He testified that he was involved with this matter since May 2008 when Kaizer Mofokeng contacted him and told him that the employees had a meeting with de Wet where they discussed the fact that a new owner was taking over the business as a going concern, but no employee would be retrenched. Mofokeng informed him of the subsequent meeting that was held on 29 May 2008 where employees were told about the policy to serve customers.

[31] Siyenga testified that he requested a meeting with Hendrik as they were the new owners of Fountain and on 12 June 2008 Hendrik confirmed a meeting for 23 June 2008 at Fountain. Hendrik subsequently indicated that he was no longer available to meet with Siyenga on 23 June 2008, but Siyenga testified that the meeting indeed took place on another date in June 2008 and they discussed the issue of Sunday pay, cutting of tea time and the take-over of the business. Siyenga confirmed that the issues raised with Hendrik in respect of Sunday pay and tea time were rectified.

[32] Siyenga testified that Dippenaar told him that Hendrik was going to be full time at Fountain and that he was not going to change the name of the business.

[33] Siyenga conceded that the names of individuals who were not dismissed indeed appeared in the name list appended to the statement of case. He explained that on 30 September 2008 Mofokeng, in his capacity as a shop steward, phoned him and told him that the employees were given notices that they were dismissed. Siyenga requested Mofokeng to compile a list of names of the dismissed employees and this is the list that was compiled by Mofokeng.

[34] The Respondents called only one witness, namely Mr Hendrik Dippenaar (‘Hendrik’). He explained the importance and relevance of a retail licence issued in terms of the provisions of the Petroleum Products Act[2]. A retail licence must be applied for from the Department of Minerals and Energy and when issued to an entity, such entity may operate as a retailer of petrol and diesel. CHMC applied for a retail licence on 25 November 2008 and was issued with a temporary licence on 11 December 2008. CHMC could trade as a retailer of fuel and diesel whilst it was waiting for the permanent retail licence, which was finally issued in March 2011.

[35] Hendrik confirmed that CHMC applied for the temporary retail licence in November 2008 in order to trade as Fountain, it still trades as ‘Fountain Diensstasie’ at the same premises Fountain traded from in 2008. The site licence is issued to Niclotte, as the owner of the site situated at Erf 814, 26 Krogh street, Standerton, which is the premises Fountain trades from. CHMC leases the premises where it is trading as Fountain from Niclotte.

[36] Hendrik testified about the ‘monthly return reconciliation’ statements that were submitted to the Motor Industry Bargaining Council (MIBCO) shared services centre for the period 29 September 2008 until 26 April 2009. He confirmed that the employer was Fountain and that the payments to MIBCO was made by CHMC as it was trading as Fountain.

[37] Hendrik testified that the names of the individuals as they appear on the statement to MIBCO, were the individuals employed by CHMC and he conceded that some of them previously worked for Fountain, before it was liquidated, and remained employed by CHMC. Those individuals are J M Tsotetsi, V S Thabethe, P J Mokoena, D P Khumalo, D T Msimanga, M S Maseko and M M Khesembe.

[38] In cross examination Hendrik testified that he was not party to the lease agreement entered into between Fountain and Niclotte and signed in May 2008, but testified that since 29 May 2008 he was the manager of the leased business and he acted in that capacity on behalf of Niclotte for the period of the lease. He is still the manager at Fountain.

[39] Hendrik testified that Fountain was liquidated in September 2008. He based this knowledge of the liquidation on what his father, Dippenaar, told him after de Wet’s attorneys told his father that they advised de Wet to liquidate the business.

[40] Hendrik agreed that he expected the employees to work according to the ‘prima smart’ principles and he instructed them accordingly. He was remunerated by Niclotte for performing his duties as manager during the period May – September 2008.

[41] Mr Lengane pressed Hendrik to explain the relevance and the reason why he came to Court to testify about CHMC, whilst CHMC is not a party to the proceedings. Hendrik was asked why he placed documents before Court that relate to a non-party. Hendrik responded that that he did that to place all the facts before Court and the fact is that from 1 October 2008 CHMC was the retailer of fuel on the Fountain premises and was the entity that employed employees.

[42] Hendrik explained that CHMC made the application for a retail licence in November 2008 and the reason was because Fountain was liquidated and de Wet could no longer purchase or sell fuel. CHMC applied for a temporary retail licence whilst awaiting a permanent retail licence as it could not trade as a fuel and diesel retailer without a retail licence. Hendrik testified that de Wet’s licence expired by November 2008 due to the liquidation of Fountain and the reason to obtain the temporary licence was to ensure the continuation of the existing operation.

[43] Hendrik testified that the wrong entities or parties are before Court as de Wet and Fountain should be before Court because de Wet was the Applicants’ employer, as specifically agreed to in the lease agreement. Niclotte is not the employer, it merely leased the forecourt and staff from de Wet, Niclotte paid de Wet for the lease of the business and staff but it never became the employer of the Applicants. He disputed that a transfer of the business took place in terms of the lease agreement concluded in May 2008.

Closing arguments

[44] In closing arguments, Mr Lengane on behalf of the Applicants submitted that this Court has to make a finding on whether, when the lease agreement was entered into between Niclotte and Fountain on 31 May 2008, it constituted a transfer in terms of section 197 of the Act.

[45] Mr Lengane argued that there was indeed a transfer in terms of section 197 for mainly two reason. Firstly, Mr Geldenhuys conceded that there was a transfer as a going concern. This he did before Court and in his cross-examination of Mofokeng. Secondly, the terms of the lease agreement stated that it was a transfer as a going concern and effect should be given to the terms of the agreement.

[46] It was argued that this Court should make a negative inference from the fact that Dippenaar and Niclotte did not testify. The only witness called by the Respondent was Hendrik, who, on his own version, was not involved with Niclotte, and was not involved in or a party to the agreement concluded in May 2008.

[47] Mr Lengane referred to the matter of NEHAWU v University of Cape Town[3] and argued that whether there was an interruption of the service is an important factor this Court has to consider in deciding the question whether the transfer as a going concern indeed took place. Mr Lengane argued that there was no interruption in the business of the service station since it was transferred by de Wet to Niclotte and Dippenaar and the evidence shows that the same business that was operated by de Wet and transferred in May 2008, still operates on the same premises and under the same name. The business now belongs to CHMS, of which Dippenaar is also a director and the business remained the same, just in different hands.

[48] The dispute is who dismissed the employees. Mr Lengane submitted that the individual Applicants automatically transferred to Niclotte on 30 May 2008, when the transfer as going concern took place. They were dismissed on 30 September 2008, thus after the date of the transfer and the date they became employees of Niclotte and therefore they were dismissed by Niclotte.

[49] Mr Lengane argued that the retrenchment that happened on 30 September 2008 was unfair. No evidence was adduced to show that the retrenchment was fair and the Court has to find that no process was followed and no substantive reason was disclosed.

[50] The relief sought is re-instatement as the primary remedy, more so where no evidence was adduced to show that the employees cannot be reinstated.

[51] Mr Geldenhuys on behalf of the Respondents argued that the Court should give effect to the terms of the lease agreement. He argued that the heart of the dispute is the lease agreement concluded between de Wet and Dippenaar on behalf of Niclotte in May 2008. He submitted that there was a lease agreement to lease the premises, which lease was terminated when de Wet closed down Fountain.

[52] Mr Geldenhuys submitted that this case is unique as none of the other reported cases dealt with a lease agreement scenario and where the transfer is alleged to take place in terms of a lease agreement.

[53] Mr Geldenhuys argued that there was no evidence adduced that Niclotte dismissed the employees, they were dismissed by de Wet when Fountain closed down. Niclotte only leased the premises for a period of four months when de Wet terminated the lease and everything transferred back to de Wet. In my view this argument is certainly contradicted by the evidence of Hendrik, who testified that on 1 October 2008 they (be that Dippenaar, Niclotte or CHMS) carried on with the business and still do so today, he submitted the required information to MIBCO for the period from 29 September 2008 until April 2009 and even retained 7 of the employees. He never testified that after 30 September 2008 everything transferred back to de Wet. In fact, it seems that after 30 September

2008 everything transferred to CHMS.

[54] This Court raised certain pertinent questions with Mr Geldenhuys during his argument. Mr Geldenhuys said he would still get to answer those questions, but he never got there.

Analysis of the evidence and the issues this Court has to decide:

[55] The Applicants’ case is that their dismissal constituted an unfair retrenchment as provided for in the provisions of section 189 and that the Respondents failed to comply with the provisions of section 197 of the Act. The Respondents are to be presumed to be the employer as a result of the section 197 transfer that took place in May 2008.

[56] The Respondents denied that a transfer as contemplated by section 197 of the Act took place.

[57] Before I deal with the evidence and the issues I have to decide, I have to consider the fact that the Respondents called only one witness who, on his own version, was not involved with Niclotte and the agreement concluded in May 2008. Mr Lengane requested this Court to make a negative inference from the fact that Dippenaar and Niclotte did not testify.

[58] In Tshishonga v Minister of Justice and Constitutional Development and another[4] this Court found that where there is no explanation why a witness is not called to testify, the Court has to accept the applicant’s

evidence and has held that:

“The failure of a party to call a witness is excusable in certain circumstances, such as when the opposition fails to make out a prima facie case. But an adverse inference must be drawn if a party fails to testify or place evidence of a witness who is available and able to elucidate the facts as this failure leads naturally to the inference that he fears that such evidence will expose facts unfavourable to him or even damage his case. That inference is strengthened if the witnesses have a public duty to testify”.

[59] Mr Geldenhuys has not stated the reason why Dippenaar did not testify and he never suggested that Dippenaar was not available or able to testify. In fact, I observed Dippenaar being present in Court throughout the trial. Dippenaar sent his son to the proverbial lion’s den to testify about matters he has no involvement with or personal knowledge of. Dippenaar’s failure to testify resulted in a dearth of factual material on the side of the Respondents which makes it impossible to exercise any discretion in their favour.

[60] I cannot but draw a negative inference where Dippenaar failed to testify and I must therefore accept the evidence for the Applicants, qualified by its probative value.

[61] I will now deal with the issues to be decided. In my view the first issue to be decided is whether a transfer as contemplated in section 197 of the Act took place. Once that issue is decided, it has to be decided who was the employer of the individual Applicants and lastly the claim in terms of section 189 must be considered.

The principles relevant to the application of section 197

[62] Section 197 (1) and (2) of the Act reads as follows:

”(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.”

[63] The Constitutional Court in Aviation Union of SA and another v SA Airways (Pty) Ltd and others[5] (Aviation) held that section 197 must be interpreted against the background that its purpose is to preserve all contracts of employment between the workers and the owner of the business, which is transferred as a going concern. In this way, on the one hand, the workers' employment is safeguarded and, on the other a new owner is guaranteed a workforce to continue with the operation of the business.

[64] The question whether or not there has been a transfer of a business as a going concern entails an enquiry into (1) the existence of a business (is there an economic entity capable of being transferred) (2) whether there was a transfer of a business and (3) whether the business is transferred as a going concern (does the economic entity that is transferred retain its identity after the transfer?)[6].

[65] In summary, section 197 will apply if all conditions are met and will be triggered with reference to three requisites namely a business, transfer and going concern.

[66] Both parties argued that the Court should give effect to the terms of the lease agreement. Mr Lengane on the one hand wants the Court to accept that the parties agreed that the business would be leased as a going concern and Mr Geldenhuys on the other hand wants me to give effect to the agreement that Fountain would remain the employer and that the employees were not part of what was included in the ‘going concern’ agreement.

[67] The agreement between the parties can only be interpreted and given effect to with due consideration of the prescripts of the law

and in casu the lease agreement should be considered with the provisions of section 197 of the Act.

[68] It should be recalled that this Court has in the past not hesitated, on the facts, to recognize and give effect to an employment relationship, and specifically, to recognize a party as the true employer despite the labels that the parties have attached to their relationship, and despite the confines of any contracts between them. This is particularly so in relation to unfair dismissal claims, where employers have relied on a variety of agreements and constructions that seek to avoid designating a person contracted to provide services as an 'employee'. In these circumstances, the courts look beyond the label to the substantial relationship between the parties, and have always given effect to substance over form[7].

[69] I do not intend to take a different approach.

The existence of a business

[70] The first enquiry is whether there is a ‘business’ as defined in section 197(1)(a).

[71] The Courts have considered the question of what would constitute a business with reference to the concept of an autonomous economic entity capable of being transferred. The Courts found that a transfer of the same services in itself is not adequate to bring the transaction within the ambit of section 197. What is transferable in terms of the section is not a service itself but a business or entity that provided the service concerned. For a transfer to trigger the application of the section, it must constitute a transfer as a going concern.[8]

[72] The application of section 197 where there is a change in service provider in circumstances where there are no assets that pass to the transferee, but the transferee assumes control of the assets, equipment and infrastructure provided by the client and required for the services to be performed was considered in Unitrans Supply Chain Solutions (Pty) Ltd v Nampak Glass (Pty) Ltd[9] (Unitrans).

[73] The Court held that the warehousing service provided by Unitrans to Nampak constituted an economic activity or an organized grouping of resources, comprising of the contractual right to perform the service using the assets owned by Nampak. This economic entity

constitutes a service for purposes of section 197(1).

[74] The Labour Appeal Court upheld the judgment[10] and went further to endorse and confirm the approach adopted by the European Court of Justice. The Labour Appeal Court held that:

“The scope of these provisions is well illustrated in the decision in Abler and others v Sodexho MM Catering GmbH. In this case, a hospital had appointed a service provider to provide catering services to its patients and its staff. This service was to be provided by using the hospital's canteen premises and equipment. The termination of the old service provider and the appointment of a new service provider were held to constitute a transfer of the business as a going concern and the Transfers Directive was held to be applicable”.

[75] The business conducted by Fountain was that of a service station and it constitutes an autonomous economic entity and a business for purposes of section 197(1)(a).

Transfer as going concern

[76] Having found that Fountain is a business for purposes of section 197(1)(a), the next consideration is whether the business was transferred and if so, whether the transfer was as a going concern.

[77] In City Power (Pty) Ltd v Grinpal Energy Management Services (Pty) Ltd and others[11] (Grinpal) the Labour Appeal Court held that:

“In essence, the approach adopted in NEHAWU follows that of the European Court of Justice in the application of the Business Transfers Directive (2001/23/EC) which is applicable in the European Union, and dictates that a transfer must relate to an autonomous economic entity (defined to mean an organized group of persons and assets facilitating the pursuit of an economic activity that promotes a specific objective). In turn this involves a determination whether that entity retains its identity after the transfer; that is, the transferor must carry on the same or similar activities with the personnel and/or the business assets without substantial interruption”.

[78] In Grinpal the Court further held that:

“The question is whether the activities conducted by a party, such as first respondent, constitute a defined set of activities which

represents an identifiable business undertaking so that when a termination of an agreement between first respondent and appellant

takes place, it can be said that this set of activities, which constitutes a discrete business undertaking, has now been taken over by another party[12]”.

[79] In Unitrans the Court held that:

“To the extent that the contractual right to provide warehousing services now vests in TMS, the same assets are used to provide those services and the activities conducted at Nampak’s behest are substantially the same as those performed by the first applicant

prior to 1 February, the business performed by the first applicant has transferred as a going concern to TMS”.

[80] The Court in Unitrans accepted that a change in service providers triggered the application of section 197 in circumstances where the incoming contractor is permitted the right of use of infrastructural assets owned by the client necessary for the purpose of continuing the relevant service.

[81] As already indicated the Labour Appeal Court upheld the judgment[13] and held that the business was indeed transferred as a going concerns as the service provided was that of ‘warehousing’ and it was performed at the same site and fixed premises, using the same equipment and IT systems as well as other assets such as forklifts, a computer system and printers.

[82] In casu the following common cause facts are relevant:

78.1. A memorandum of agreement was entered into on 31 May 2008 between Fountain as represented by de Wet and Niclotte as represented by Dippenaar. It was a lease agreement for 30 days, that was subsequently extended and finally terminated at the end of September 2008.

78.2. It was specifically agreed that that Niclotte would lease the business as a going concern, but that the petrol attendants would remain the employees of Fountain and that their services are merely made available to Niclotte, who would pay Fountain at the end of the month an amount of R11.31 per hour worked by the petrol attendants.

78.3. Hendrik managed Fountain on behalf of Niclotte since the end of May 2008 and he was remunerated by Niclotte. He instructed the employees in his capacity as the manager and the employees viewed Dippenaar and Hendrik as the new owners or managers.

[83] In the present instance, it is not disputed that the individual Applicants were engaged by Niclotte for the sole purpose of providing services in terms of the agreement between Niclotte and Fountain. It is also not disputed that at all material times, they worked under the supervision and control of Hendrik, the appointed manager of Niclotte.

[84] The business of Fountain was, in terms of the agreement, leased as a going concern and included the forecourt, the sale of fuel, the offices etc. It included the services of the petrol attendants, but specifically stipulated that the petrol attendants remained employees of Fountain.

[85] Hendrik testified that the wrong entities or parties are before Court as de Wet and Fountain should be before Court because de Wet was the Applicants’ employer, as specifically agreed to in the lease agreement and Niclotte never became the employer of the Applicants.

[86] Apart from the fact that these are not facts that fall within the personal knowledge of Hendrik and he is not competent to testify

about the terms of the agreement, this Court cannot condone conduct where it seems that the purpose of the agreement and its specific

terms by including the services of the employees but excluding an employment relationship by paying their ‘employer’ for the services they render whilst the entire business is transferred as a going concern, was to circumvent the operation of section 197. If I were to adopt a rigid interpretation and apply the terms of the agreement as they are, the protections of section 197 might easily be avoided by the creation of distinct legal entities established for that purpose. Employers might simply ensure that employees are always employed by an entity different to the entity in which the assets and activities that form a particular business are housed. It seems to me that the identity of the 'old employer' for the purposes of s 197 ought to be determined in a manner that gives effect to substance rather than form, and that regards a de facto employer as the transferor or 'old employer'.

[87] For these reasons, the fact that Fountain and Niclotte agreed that the affected employees are employed by Fountain and not Niclotte

does not preclude the application of section 197 where there is a transfer of a business as between the said parties.

[88] Section 197 will be triggered if a business was transferred as a going concern. The sale of a business is not required by section

197 and in my view section 197 also applies where a business is leased as a going concern.

[89] If the transfer meets the criteria I already set out, the transferee is substituted automatically and by operation of law for the transferor as the employer of those of the transferor's employees engaged in the business on the date of the transfer. The

transfer occurs by operation of law and irrespective of the wishes or intentions of the parties.

Who is the employer

[90] In my view the section 197 applies in casu as the business of Fountain was transferred to Niclotte as a going concern on 30 May 2008. By operation of law, Niclotte substituted Fountain as the employer.

[91] It is common cause that Niclotte carried on the business as a service station on the same premises and under the same name ‘Fountain Diensstasie’. Until today, the business operates on the same premises and under the same name.

[92] The individual Applicants were dismissed on 30 September 2008 by way of a letter on the letterhead of Fountain. The Respondents case is that the letter was signed and issued by de Wet, who, per the lease agreement, remained the employer and he was the person and Fountain the entity that in fact dismissed the individual Applicants.

[93] In my view it matters not who signed the letter, the transfer occurred by operation of law and Niclotte became the employer and was the employer on the date of dismissal.

[94] To hold otherwise will not only constitute an incorrect application of the Act, but will also jeopardize the intended protection of section 197. I have already alluded to the fact that employers might simply ensure that employees are always employed by an entity different to the entity in which the assets and activities that form a particular business are housed to avoid the operation of the Act and this Court should apply the law to afford the protection it intended.

The section 189 claim

[95] The Applicants’ case is that their dismissal constituted an unfair retrenchment as the Respondents failed to consult them in accordance with the provisions of section 189 of the Act prior to their retrenchment, not only on the issues prescribed by section 189 of the Act, but also on the possibilities of the transfer as a going concern in terms of section 197 of the Act.

[96] Section 189 requires that an employer contemplating dismissal based on operational requirements must consult on the issues prescribed by the Act and must engage in a meaningful joint consensus-seeking process and should attempt to reach consensus on appropriate measures to avoid dismissal, selection criteria and severance pay.

[97] It is common cause that the individual Applicants were issued with letters on 30 September 2008 stating that Fountain decided to close down the business with immediate effect due to cash flow problems and their services were no longer required.

[98] There was no compliance with the provisions of section 189 of the Act. No consultation was held and no joint consensus-seeking process was engaged in. It follows that the individual Applicants’ dismissal for operational reasons was procedurally unfair.

[99] On the issue of substantive fairness, I have to consider whether Fountain had a good reason to retrench the employees and this requires a consideration of the merits and the reason for dismissal.

[100] The reason provided was that Fountain ‘has decided to close down its business with immediate effect.’

[101] Hendrik however testified that he managed Fountain as from May 2008 and still manages it today. He testified that CHMC, an entity of which Dippenaar is the owner / director, applied for the temporary retail licence in November 2008 in order to trade as Fountain and it still trades as ‘Fountain Diensstasie’ at the same premises. The site licence is issued to Niclotte, as the owner of the site where CHMC is trading from as Fountain.

[102] Hendrik explained that he submitted the ‘monthly return reconciliation’ statements to the MIBCO for the period 29 September 2008 until 26 April 2009. He confirmed that the employer was Fountain and that the payments to MIBCO was made by CHMC as it is trading as Fountain. Hendrik further testified that some of the names of the individuals as they appear on the statement to MIBCO, were the individuals previously employed by Fountain, before it was liquidated, and they remained employed by CHMC.

[103] Hendrik made it very clear that his intention was to place all the facts before Court and the fact is that from 1 October 2008 CHMC was the retailer of fuel on the Fountain premises and was the entity that employed employees and the main reason to obtain the temporary licence in order to sell fuel was to ensure the continuation of the existing operation.

[104] The facts as they were placed before me show that Fountain did not close down ‘with immediate effect’ on 30 September 2008. The facts show that it continued to trade and is still trading to this day. To make matters worse, it is undisputed that seven Fountain employees were not dismissed but remained employed after 30 September 2008.

[105] The reason for retrenchment was given as the closing down of the business, yet the facts before me show that the business never closed down and is still operating to this day. After the business was transferred to Niclotte in May 2008, it never closed down.

[106] The dismissal of the individual Applicant’s is therefore substantively unfair.

Relief

[107] Having found that the individual Applicants’ dismissal was procedurally and substantively unfair, the next question that needs to be dealt with is the relief that should be granted to the employees.

[108] The individual Applicants seek retrospective re-instatement.

[109] I first have to deal with the Applicants before Court. The list of Applicants appended to the statement of case contained 13 names. Mr Geldenhuys has throughout raised questions about the names on the list and requested that NUMSA and the attorneys provide a mandate to act on behalf of all those individuals. Such was never forthcoming and despite a request from this Court that the identity of the actual applicants be confirmed, this issue was never attended to. This is a simple issue that should have been attended to by the Applicants’ attorneys of record.

[110] In cross-examination, it was put to Makhubo that the following individuals were not dismissed but are in fact still employed by Fountain: Patrick Mngomezulu, Vusi Thabethe, David Radebe, John Mokoena, Dumisani Khumalo and Michael Maseko. Mpho Tsotetsi was dismissed for misconduct in 2014. This evidence was not disputed and I accept that these individuals were not dismissed on 30 September 2008 and cannot be Applicants before this Court. Whatever relief is granted, is not granted to Patrick Mngomezulu, Vusi Thabethe, David Radebe, John Mokoena, Dumisani Khumalo, Mpho Tsotetsi and Michael Maseko.

[111] Section 193(2) of the Act provides that the Labour Court 'must require the employer to reinstate or re-employ the employee' unless

one or more of the situations set out in paragraphs (a)-(d) of section 193(2) exists. Those situations are where:

(a) the employee does not wish to be reinstated or re-employed;

(b) the circumstances surrounding the dismissal are such that a continued employment relationship would be intolerable;

(c) it is not reasonably practicable for the employer to reinstate or re-employ the employee; or

(d) the dismissal is unfair only because the employer did not follow a fair procedure.

[112] In casu the individual Applicants seek re-instatement and no evidence was adduced regarding the fact that the relationship would be intolerable or reinstatement would not be practicable.

[113] The primary remedy is reinstatement and I can see no reason not to reinstate the individual Applicants. If Fountain was transferred again after 30 September 2008 to another entity, the provisions of section 197 would apply to such transfer and the transferee entity will remain liable to reinstate the employees, as it would have become the new employer by operation of law.

[114] An order for reinstatement does not automatically carry a retrospective payment of remuneration. I have to consider the long history of this matter in deciding the appropriate relief in respect of back pay.

[115] The Applicants’ statement of claim was filed in February 2009, citing Fountain Diensstasie as the First Respondent and Allegro

Filling Station as the Second Respondent. The Second Respondent, Allegro, filed a statement of response in March 2009. Instead of having a pre-trial conference and getting the matter ready for trial, the Applicants filed an application for the joinder of Allegro. This in my view was the most bizarre step as Allegro was already a respondent before Court. Be that as it may, this obviously derailed and delayed the matter. In between a Rule 11 application was filed and that application was dismissed on 13 August 2010, when this Court ordered the parties to hold a pre-trial conference within 14 days.

[116] A pre-trial conference was indeed held on 1 September 2010 and once again, instead of proceeding to trial, the parties once again

delayed finalizing the matter and persisted with the joinder application.

[117] The joinder application was set down for argument on 19 October 2012, when the Applicants were absent and the matter was postponed sine die. The joinder application was subsequently heard and on 26 July 2013 when this Court joined Allegro as respondent.

[118] The matter was set down for trial on 3 March 2014, when Mr Geldenhuys indicated that the matter was not ripe for trail as the joinder application was not finalized. On this occasion Mr Geldenhuys became aware of the order joining Allegro and requested a postponement in order to file a rescission application. The trial was postponed.

[119] Allegro subsequently and on 17 March 2014 filed an application for rescission of the order joining Allegro.

[120] On 16 January 2015 the application for rescission of the order of 26 July 2013 was granted.

[121] The Court made it clear that Allegro has been a party to the proceedings since the onset of the litigation and that the joinder application was not necessary. I share the same view.

[122] The application for joinder of a party who was a party to litigation, was not only completely unnecessary and bizarre, but caused a substantial delay in the finalization of this dispute. The opposing of the joinder application and the rescission application

that followed, was equally unnecessary and bizarre. I find it hard to believe that the parties were indeed represented by lawyers during those events.

[123] The applications filed (joinder and rescission) caused the matter to be delayed from the date the statement of case was filed in

February 2009 until the joinder and rescission applications were finally decided in January 2015. This is an incredible delay of

almost 6 years, caused solely by unnecessary and bizarre applications and resulted in nothing but prejudice for the individual Applicants.

[124] The matter was set down for trial in June 2015 and once again, it was not without delays and challenges. The matter was part heard

as the Applicants brought an application for joinder and amended their statement of claim.

[125] In my view the Respondents were also prejudiced by the delay in finalizing this matter and should not be burdened with back pay for the entire period since the employee’s dismissal. It is for this reason that back pay will be limited. The Respondents were not the sole cause of the delay and the employees’ representatives were instrumental in the initial cause of derail and delay. The employees cannot benefit unduly from what was purely an unnecessary delay.

[126] No evidence was adduced that Allegro was a party to the dispute before me and I do not intend to grant any relief against Allegro. Niclotte and Dippenaar are in fact the correct Respondents, who should not be unfairly burdened where the delay in finalizing the

matter was caused by the parties at a time when they were not even Respondents before Court.

Costs

[127] Costs should be considered against the provisions of section 162 of the Act and according to the requirements of the law and fairness.

[128] The requirement of law has been interpreted to mean that the costs would follow the result.

[129] In considering fairness, this Court has held that the conduct of the parties should be taken into account and that mala fide, unreasonableness and frivolousness are factors justifying the imposition of a costs order. Another factor to be considered is

whether there is an ongoing relationship that would survive after the dispute had been resolved by the Court. If so, a costs order may damage the ongoing relationship.

[130] In my view costs should not follow the result and this case does not warrant a cost order for a number of reasons. Firstly, the manner in which the Applicants conducted the case and the delays caused by that does not justify awarding costs where the matter spanned over a period of seven years. Even after the trial commenced, it was further delayed by an application for joinder. Secondly, the Respondents who are liable and who are to reinstate the employees, only became Respondents very late in the trial and after they were joined, the matter was finalised expeditiously and it would not be fair to burden them with costs for the entire lengthy period when they were not parties before Court. Allegro was a party from the onset, but no relief is granted against Allegro and certainly no cost order should be granted against it. Thirdly, in view of the order of reinstatement, there will be an ongoing relationship between the parties and such relationship should not commence with the adverse effect of a cost order.

Order

[131] In the premises, I make the following order:

131.1 The dismissal of Jabulane Elias Tshabalala, Samson Bongane Tshabalala, Lucas Bongani Sibeko, July Makhubo, Kaizer Mofokeng and Peter Gqwetana was procedurally and substantively unfair;

131.2 The First and Third Respondents are to reinstate Jabulane Elias Tshabalala, Samson Bongane Tshabalala, Lucas Bongani Sibeko, July Makhubo, Kaizer Mofokeng and Peter Gqwetana retrospectively on the same or similar terms and conditions as prior to their dismissal;

131.3 Jabulane Elias Tshabalala, Samson Bongane Tshabalala, Lucas Bongani Sibeko, July Makhubo, Kaizer Mofokeng and Peter Gqwetana are to report for duty at Fountain Diensstasie by no later than 9 May 2016;

131.4 The First and Third Respondents are ordered to pay Jabulane Elias Tshabalala, Samson Bongane Tshabalala, Lucas Bongani Sibeko, July Makhubo, Kaizer Mofokeng and Peter Gqwetana back pay equivalent to seven months remuneration the one paying the other to be absolved;

131.5 There is no order as to costs.

__________________

C Prinsloo

Judge of the Labour Court

Appearances:

For the Applicants : Advocate Lengane

Instructed by : Phungo Incorporated Attorneys

For the Respondents: Mr Geldenhuys of Geldenhuys @ Law Attorneys

[1] Act 66 of 1995.

[2] Act 120 of 1977.

[3] 2003 (3) SALR 1

[4] 2007 (4) SA 135 (LC); (2007) 28 ILJ 195 (LC).

[5] (2011) 32 ILJ 2861 (CC).

[6] See Franmann Services (Pty) Ltd v Simba (Pty) Ltd and another (2013) 34 ILJ 897 (LC). (‘Simba’)

[7] Unitrans (2014) 35 ILJ 2888 (LC).

[8]Aviation Union of SA and another v SA Airways (Pty) Ltd and others (Aviation) (2011) 32 ILJ 2861 (CC) at para 71.

[9] (2014) 35 ILJ 2888 (LC).

[10] TMS Group Industrial Services (Pty) Ltd v Unitrans Supply Chain Solutions (Pty) Ltd and others (2015) 36 ILJ 197 (LAC) at paras 25 and 26.

[11] (2014) 35 ILJ 2757 (LAC). (Grinpal). [11] TMS Group Industrial Services (Pty) Ltd v Unitrans Supply Chain Solutions (Pty

[11] (2014) 35 ILJ 2757 (LAC). (Grinpal).

[11] TMS Group Industrial Services (Pty) Ltd v Unitrans Supply Chain Solutions (Pty

[12] Grinpal at paragraph 24.

[13] TMS Group Industrial Services (Pty) Ltd v Unitrans Supply Chain Solutions (Pty) Ltd and others (2015) 36 ILJ 197 (LAC).