National Union of Metalworkers of South Africa (NUMSA) obo Members and Others v South African Airways (SOC) Ltd and Others (J38/2021) [2021] ZALCJHB 6; (2021) 42 ILJ 1256 (LC); [2021] 6 BLLR 627 (LC); 2021 (4) SA 575 (LC) (8 February 2021)

IN THE LABOUR COURT OF SOUTH AFRICA

Held at Johannesburg

Case No: J38/2021

Reportable

In the matter between-

NATIONAL UNION OF METALWORKERS

OF SOUTH AFRICA (NUMSA) obo Members

First Applicant

SOUTH AFRICAN CABIN CREW ASSOCIATION

(SACCA) obo Members

Second Applicant

and

SOUTH AFRICAN AIRWAYS (SOC) LTD

in Business Rescue

First Responden

LES MATUSON N.O.

Second Respondent

SIVIWE DONGWANA N.O.

Third Respondent

Application heard: 1 February 2021

Judgment delivered: 8 February 2021. This judgment was handed down electronically by circulation to the parties’ representatives

by email.

JUDGMENT

VAN NIEKERK J

[1] SAA was placed in business rescue in December 2019. Business operations continued until restrictions introduced consequent on the Covid-19 pandemic prevented the airline from operating its business on account from March 2020 to 31 May 2020. After flights were permitted to resume, SAA’s operations have been limited to cargo and repatriation flights. Since 29 September 2020, SAA’s business has been mothballed. For these and other reasons, most of SAA’s employees have not been paid since June 2020.

[2] After the adoption of a business rescue plan in July 2020 and funding being made available by government during October 2020, the department of public enterprises, in its capacity as the representative of the sole shareholder (being the government of the Republic of South Africa), convened a number of meetings with representatives of SAA’s employees and made proposals regarding the payment of arrear remuneration. A settlement was ultimately proposed on the basis that employees would be paid for the months of June, July and August 2020 (plus certain benefits), on the basis that the payment was in full and final settlement of the employees’ deferred salaries. In other words, employees who accepted the settlement proposal compromised their claims to the full remuneration due to them in terms of their employment contracts. Most employees (either directly or through the agency of a trade union) accepted the proposal, and were paid the three months’ remuneration during December 2020. SAA does not dispute that those employees who have not accepted the settlement offer (and in particular the members of the applicant unions), remain entitled to claim their outstanding remuneration in full, and that their right to do so has not been prejudiced or otherwise affected by the settlement agreement.

[3] In these proceedings, the applicants seek the following relief:

2. That it be declared that the First, Second and Third Respondents’ refusal to pay the Applicants’ members an amount comprising of three months’ arrear remuneration, a lump sum in respect of a 5.9% increase backdated to April 2020 and their pro-rata savings towards 1/13 cheque (the Payment), in circumstances where such payment is due and payable and where same was made to other employees, is unlawful and/unfair.

3. Directing the First, Second and Third respondents to effect such payment to the Applicants’ members within seven (7) days.

[4] The founding affidavit does not articulate the basis of the applicants’ claim in the clearest of terms, but in effect, they demand the same three-month package that was paid to those employees who settled their claims by entering into the settlement agreement, but without the compromise of a waiver of any claim to the balance of their remuneration.

[5] At the hearing, the unions’ representative, Mr Niehaus, did not pursue the issue of the fairness of SAA’s conduct in making the offer of settlement, nor the fairness of the payments made to those employees who agreed to accept them. The union’s claim is first that SAA, the employer of its members, acted unlawfully by contravening section 32 of the Basic Conditions of Employment Act (BCEA), which requires an employer to pay remuneration to an employee not later than seven days after the completion of the period for which the remuneration is payable (see section 32 (3) (a)). Secondly,

the applicants claim that section 135 of the Companies Act requires that if remuneration becomes due and payable during business rescue proceedings but is not paid to the employee, all claims to that remuneration must be treated equally, and in accordance with the preference established by section 135 (3)(a). In essence the applicant unions contend that SAA has failed to treat their members equally with other employees, and that their members are entitled to the payment of the same package received by those who accepted the settlement offer. They further contend that the fact that their members are not prepared to waive their rights to the balance of the remuneration owed to them cannot impact on their right to equal treatment. Thirdly, the applicant unions contend that SAA is guilty of a blatant abuse of power (which they say amounts to unlawful extortion) and a clear breach of section 79 of the BCEA, which prohibits any person from discriminating against or prejudicing an employee for exercising a right in terms of the Act. While the applicants’ claim is not easy to articulate, they appear to contend that those of SAA’s employees who have rejected the settlement offer are nonetheless entitled to payment of the same package paid to those employees who elected to accept the offer. In other words, the applicants want the money without the condition of compromise attached. While they remain entitled to payment of all of their arrear remuneration (this is not disputed by SAA) they limit their claim for present purposes to 3 months’ remuneration, because that would see them treated equally with those employees who accepted the settlement, and because they contend that funds are available to meet that claim.

[6] I deal first with the application by the minister of public enterprises to intervene and be joined as a fourth respondent. The minister records that the government of the Republic of South Africa is SAA’s sole shareholder, and that the department of public enterprises is the shareholder representative. After funding was allocated through national treasury, decisions were made to address immediate priorities, in a manner that would ensure SAA’s sustainability. The second and third respondents agreed that the department engage in negotiations with employees on how an allocated amount of R 600 million would be distributed. The agreement ultimately reached with unions and employee representatives, but for the applicant unions and the pilot’s union. A total of 3599 employees out of a total of 4597 have either individually or through their trade unions accepted the settlement offer of three months’ salary, arrear back pay of a 5.9% increase as a lump sum and a bonus payment for the 13th cheque, in full and final settlement.

[7] The department avers that as sole shareholder, it has a direct and substantial interest in the outcome of these proceedings. It has provided substantial post-commencement funding in order to ensure the success of the business rescue proceedings and the rehabilitation of SAA. The department contends that the declaratory order sought by the applicant unions will adversely affect the business rescue proceedings.

[8] The applicant unions oppose the application to intervene, primarily on the basis that it would be untenable to permit a shareholder to intervene merely on the basis that they have a substantial interest in matters concerning the entity under business rescue. In particular, the applicant unions deny that the department’s interests will be prejudiced should the court grant the relief sought by the applicant unions.

[9] What the applicant union’s submissions overlook are the provisions of section 146 of the Companies Act, which extend to each holder of any issued security of the company the right to notice of any court proceeding, and to participate in any court proceedings arising during the business rescue proceedings (section 146 (b)). (See also Registrar of Banks v Regal Treasury Private Bank Ltd (under curatorship) & Another (Regal Treasury Bank Holdings Ltd intervening) 2004 3 SA 560 (W) at 573 B-D; Helderberg Laboratories CC and Others v Sola Technologies (Pty) Ltd 2008 (2) SA 627 (C), where the intervention by a shareholder was permitted without reference to any additional requirement to show sufficient interest or prejudice.) The provisions of section 146 entitle the intervening party to be joined to these proceedings as of right, and it is accordingly ordered that the intervening party be joined as a fourth respondent.

[10] SAA raise three points in limine. The second and third point are also raised by the fourth respondent. The first point is that in the absence of exceptional circumstances, the application is not urgent being as it is, a claim sounding in money. Secondly, SAA and the fourth respondent submit that the court has no jurisdiction to entertain the application which in truth, so it contends, is a claim to set aside what is alleged to be the preferential treatment of other creditors. In terms of section 128 of the Companies Act, this is a matter that must be dealt with by the High Court. Thirdly, SAA and the fourth respondent contend that section 133 of the Companies Act imposes a moratorium on legal proceedings during business rescue, except with the written consent of the business rescue practitioner or with the leave of the High Court. Neither has been sought or granted.

[11] I deal first with the question of urgency. The applicant unions became aware by at least 24 December 2020 that their members were to be excluded from payment in terms of the settlement agreement. The application was filed on 15 January 2020. In my view, the application was filed within a reasonable time (especially having regard to the restraints imposed by the festive season) after knowledge of the payments, and this is not a case of self-created urgency. In so far as SAA contends that the claim is one sounding in money, while it is correct that as a general rule, claims sounding in money are not regarded as urgent, the rule is not absolute (see Harley v Bacarac Trading 39 (Pty) Ltd (2009) 30 ILJ 2085 (LC)). The factor that weighs most heavily in favour of the applicants is that relief will not be readily available to them in the ordinary course. The backlog in the opposed motion court is such that it is not likely that the parties will obtain a date for hearing until the third quarter of 2022. This is manifestly not a matter that ought to be delayed for that period. For these reasons, I am satisfied that the application is urgent.

[12] I turn next to the moratorium on legal proceedings against a company in business rescue, and whether that moratorium applies to claims such as the present. Section 133 (1) states:

133 General moratorium on legal proceedings against company.

(1) During business rescue proceedings, no legal proceeding, including enforcement action, against the company, or in relation to any property belonging to the company, or lawfully in its possession, may be commenced or proceeded with in any forum, except —

(a) with the written consent of the practitioner;

(b) with the leave of the court and in accordance with any terms the court considers suitable;

(c) as a set-off against any claim made by the company in any legal proceedings, irrespective of whether those proceedings commenced

before or after the business rescue proceedings began;

(d) criminal proceedings against the company or any of its directors or officers;

(e) proceedings concerning any property or right over which the company exercises the powers of a trustee; or

(f) proceedings by a regulatory authority in the execution of its duties after written notification to the business rescue practitioner.

[13] Section 133 must necessarily be read with section 128 (1) (e) which defines ‘court’ as follows:

…depending on the context, means, either –

(i) the High Court that has jurisdiction over the matter; or

(ii) either –

(aa) a designated judge of the High Court that has jurisdiction over the matter, if the Judge President has designated any judges in terms of subsection (3); or

(bb) a judge of the High Court that has jurisdiction over the matter, as assigned by the Judge President to hear the particular matter, if the Judge President has not designated any judges in terms of subsection (3)

Section 128(3) states that ‘[f]or the purposes contemplated in subsection (1) (e) or in any other law, the Judge President of a High Court may designate any judge of that court generally as a specialist to determine issues relating to commercial matters, commercial insolvencies and business rescue.’

[14] These provisions have been the subject of a number of decisions by this court. In a previous matter involving the same parties, (see National Union of Metalworkers of SA on behalf of Members & Others v SA Airways (Soc) Ltd (In Business Rescue) & Others (2020) 41 ILJ 1402 (LC), the same point had been obliquely raised in the papers, but not during argument. On appeal (see SA Airways (Soc) Ltd (In Business Rescue) & Others v National Union of Metalworkers of SA on behalf of Members & Others (2020) 41 ILJ 2113 (LAC), the Labour Appeal Court held that SAA had participated in proceedings in this court in circumstances where the point had not been fully ventilated, and that it was thus not open to SAA to raise it on appeal. (In the not unrelated matter of Airline Pilots Association of SA v SA Airways Soc Ltd (unreported, J 1507/2020, 29 December 2020), the business rescue practitioners filed their written consent to the institution of the proceedings.) In contrast, in the present instance, the point has been raised on the papers and was fully argued.

[15] In the present instance, the business rescue practitioners have not been approached for consent to uplift the moratorium imposed by section 133, nor has the High Court granted leave to this effect. Further, the applicants do not in the notice of motion seek any order uplifting the moratorium. In Marques and Others v Group Five Construction (Pty) Ltd and Others (2020) 41 ILJ 677 (LC), this court held that the weight of authority was against the court assuming the mantle of the High Court to uplift the moratorium on legal proceedings imposed by section 133 (1). In Marques, the court made reference to a number of prior decisions upholding the same principle, including Burba v Integcomm (Pty) Ltd (JS 539/12, 29 November 2013); Marais & Others v Shiva Uranium (Pty) Ltd (in business rescue) & others (2019) 40 ILJ 177 (LC) and Sondamase & another v Ellerine Holdings Ltd & another (C669/2014, [2016] ZALCCT 53 (22 April 2016)). The effect of these rulings was summarised by my colleague Nkuta-Nkotwana J in Marais. In that judgment, she made reference to Ellerine, where the purpose of business rescue (‘as a means to create some breathing space for the business to be rescued and thus to put all legal proceedings on hold until the company may be brought back on track to continue with its business’) was explained. She held further that the provisions of the Companies Act, and especially chapter 6, ‘specifically constitutes a set of carefully crafted rules to provide for efficient business rescue proceedings and central to that object is the moratorium in terms of s 133 (1). Therefore, the High Court has exclusive jurisdiction.

[16] The weight of authority thus suggests that a party seeking to initiate proceedings that concern an employment-related claim against a company and business rescue, over which this court has jurisdiction, must secure the written consent of the business rescue practitioner or obtain the leave of the High Court to institute those proceedings, even if this court has exclusive jurisdiction to entertain the merits of the claim. To the extent that the applicants rely on NUMSA v Motheo Steel (J 271/2014 7 February 2014) where the court held that section 133 (1) of the Companies Act did not preclude a party from bringing an application in the Labour Court, that is not a position that has been followed; indeed, the same judge decided Marques, which as indicated above, takes a contrary view. I am not persuaded that, as the applicants submit, all of these cases were wrongly decided.

[17] In the replying affidavit, the applicants aver that it is ‘quite untenable ‘for the respondents to contend that the Labour Court has no jurisdiction, in circumstances where in prior litigation between the same parties before this court, there was no objection to the dispute being heard in this court in the absence of either the written consent of the business rescue practitioners or with the leave of the High Court. Of course, the fact that the point was not pursued in prior litigation is of no consequence. The fact of the matter is that the applicants have pertinently raised the point in these proceedings and aver that the second and third respondents consent has not been sought an order given, and that the High Court has not granted leave for the filing of the application. In these circumstances, I fail to appreciate on what basis it can be said that the second and third respondents in these proceedings are somehow estopped from raising the objection to jurisdiction that they do. The applicants contend that in any event, the issue in dispute lies within the employment sphere given that the primary cause of action is located in section 32 of the BCEA (with the remaining causes of action, including the reliance on section 135 of the Companies Act) being secondary. While it is correct that section 77 (1) of the BCEA provides that this court has exclusive jurisdiction in respect of all matters in terms of the BCEA, it does not necessarily follow that this court, even as a court with equal standing and status of the High Court, is empowered to lift the moratorium on legal proceedings against the company in business rescue as contemplated by section 133 of the Companies Act. The definition in section 128 makes a clear and specific reference to the High Court and to designated or assigned judges of that court. Chapter 6 of the Companies Act makes clear that the supervision of business rescue proceedings falls within the jurisdiction of the High Court. Had the legislature intended that in an employment-related matter involving a company in business rescue this court was empowered to lift the moratorium by granting leave for the institution of proceedings, this court would have been so empowered. The demarcation established by Chapter 6 recognises that business rescue proceedings affects the rights of a number of parties beyond the employment relationship, and in particular shareholders and other creditors. The High Court is best placed to balance the rights and interest of all the relevant parties in any application for leave to commence legal proceedings or enforcement action against a company in business rescue. Contrary to what the applicants submit, Chapter 6 of the Companies Act does not insulate labour-related matters and claims, to be treated as if the provisions of the chapter relating to business rescue and its management do not apply. The chapter should be read in harmony with labour legislation, so as to best achieve both the purposes of business rescue and the primary objects of labour legislation.

[18] Insofar as the applicants rely on section 144 (1) (a) (ii) to contend that the consent of the business rescue practitioners and the leave of the High Court is not necessary to enforce a statutory right in terms of the BCEA, that section regulates the rights of employees during business rescue proceedings. But only to the extent of the exercise of any rights set out in chapter 6. This provision does no more than guarantee trade union members the right to be represented by the registered trade union which they are when any rights set out in chapter 6 is exercised. Section 144 (2) provides that to the extent that any remuneration becomes due and payable to an employee that any time before the beginning of a company’s business rescue proceedings and had not been paid to that employee immediately before the beginning of those proceedings, the employee is a preferred unsecured creditor of the company for the purposes of the chapter. None of these provisions trump the general moratorium on legal proceedings against a company in business rescue nor do they dispense with the exceptions to that moratorium in the form of written consent of the business rescue practitioner or the leave of the High Court. To the extent that the applicants appeal to section

210 of the LRA, that section does no more than provide that where there is a conflict relating to matters dealt with in the LRA and any other law (save the Constitution and any Act expressly amending the LRA), the LRA will prevail. In my view, there is no conflict between the Companies Act and the LRA that would bring this provision into play. Chapter 6 of the Companies Act does not oust the jurisdiction of this court where this court has jurisdiction in respect of claim arising under the LRA or the BCEA; it does no more than impose a general moratorium on legal proceedings against a company and business rescue and to establish a number of exceptions to that moratorium, in particular, circumstances where the business rescue practitioner has granted his or her written consent or where the High Court has granted leave. In other words, employees remain at liberty to institute proceedings in this court against an employer that has been placed in business rescue and in respect of which this court has jurisdiction, but they must do so subject to section 133 of the Companies Act.

[19] In any event, I am not persuaded that the court has jurisdiction over significant elements of the applicants’ claims. The claims relate both to the conduct of the business rescue practitioners in their capacity as such, and the conduct of SAA as an employer. In the former case, this court has no jurisdiction to consider the lawfulness of the actions of the business rescue practitioners, only because they have not taken these actions as an employer. The Companies Act regulates the entitlement of employees to remuneration during business rescue. First, the relevant stakeholders include creditors, employees engaged in the business, and the company’s shareholders. In business rescue, the company concerned may obtain financing from a lender, as SAA has in the present instance. When post-commencement funding is made available, the Companies Act establishes a clear ranking in the form of first, the payment of the business rescue practitioner’s expenses and the cost of the business rescue; secondly, the repayment to a lender who provided finance to the company and business rescue (referred to as post commencement financing); and thirdly, the employee’s claims for remuneration. The department of public enterprises is such a lender; it is provided post- commencement financing with the proviso that it is used only to pay those employees who compromise their claims to payment of their remuneration in full. Whether by making the settlement proposal the business rescue practitioners have breached

the requirement in section 135 (3) by failing to treat all claims contemplated by section 135 (1) equally, or whether they have abused their positions and seek to ‘extort’ a compromise from the unions and the members (as the applicants allege), is not a matter that falls to be regulated by the LRA, the BCEA or any other employment-related legislation. In short, given this court’s limited statutory jurisdictional footprint in terms of section 157 (1) of the LRA, any claim that the business rescue practitioners have acted unlawfully, either by failing to follow the business rescue plan, or by failing to comply with section 135 (3) (a) of the Companies Act, is not for this court to determine.

[20] Even if this court was empowered to entertain that part of the applicant’s claim which relates to the alleged breach of section 32(3) of the BCEA (a claim over which by virtue of the provisions of section 77 (1) of the BCEA this court manifestly has jurisdiction), it does not seem to me that SAA, in its capacity as employer, has acted unlawfully. Section 32 (3) requires an employer to pay remuneration not later than seven days after the completion of the period for which the remuneration is payable. The section does no more than establish the minimum period within which remuneration must be paid; it does not create the substantive application to make payment of remuneration against a tender of services. In other words, remuneration must be paid when it is owing within the stipulated seven-day period. The rights of employees employed by a company and the business rescue to remuneration, reimbursement for expenses and any other amount of money relating to employment that becomes due and payable during business rescue proceedings but is not paid to the employee is to be regulated, as I have indicated above, in terms of section 135 of the Companies Act. In short, the section envisages that the company and the business rescue may not be in a position to make payment of remuneration that has fallen due and it establishes an order of preference as between employees and other creditors. I fail to appreciate how given these provisions, an employee of a company under business rescue is entitled to rely on section 32 (3) of the BCEA to enforce the payment of remuneration due, either in whole or as in the present case, in part. The reference to ‘discrimination’ in section 79 of the BCEA is clearly an element of the protection against victimisation that is established by that section. The offer to settle a claim for some seven months’ remuneration by accepting payment of three months in full and final settlement was an offer made to all affected employees; I fail to appreciate how in these circumstances it can be said that there is any discrimination against those employees who had refused to compromise their claims. They remain in a position to enforce their claims in due course to the full amount of the arrear salaries owing to them, subject of course to the provisions of chapter 6 of the Companies Act. Finally, section 79 specifically contemplates that an employer and employee may conclude an agreement to settle the dispute over remuneration. There is nothing improper or unlawful about any agreement to compromise a claim for remuneration.

[21] For all of these reasons, the application stands to be dismissed.

[22] Insofar as costs are concerned, the intervening party sought an order for costs. This court has a broad discretion in terms of section 162 of the LRA to make orders for costs according to the requirements of the law and fairness. In my view, the intervening party ought to have been cited as a fourth respondent from the outset, given the provisions of section 146 of the Companies Act and its clear and a significant interest in these proceedings. The opposition to the application to intervene was nothing less than misguided, bordering on the frivolous. In the circumstances, the requirements of the law and fairness are best met by an order for costs in favour of the fourth respondent, such costs to include the costs of two counsel. I fail to appreciate why the taxpayer should ultimately to be saddled with the costs of the application to intervene.

I make the following order:

1. The application is dismissed.

2. The applicants are to pay the costs of the application to intervene, jointly and severally, the one absolving the other, such costs to include the costs of two counsel where so engaged.

André van Niekerk

Judge of the Labour Court of South Africa

APPEARANCES

For the applicants: Mr M Niehaus, Minnaar Niehaus Attorneys

For the 1st to 3rd respondents: Adv AIS Redding SC, with him Adv V Mndebele, instructed by ENS Africa.

For the intervening party: Adv DT Skoshana SC, with him Adv T Lupuwana, instructed by the state attorney.