Protectors Workers Union v Registrar of Labour Relations, Department of Labour and Another (J1028/13) [2014] ZALCJHB 289 (30 July 2014)

REPUBLIC OF SOUTH AFRICA

THE LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG

JUDGMENT

Not Reportable

Case no: J1028/13

PROTECTORS WORKERS UNION Appellant

and

THE REGISTRAR OF LABOUR RELATIONS,

DEPARTMENT OF LABOUR First

Respondent

THE MINISTER OF LABOUR Second

Respondent

Heard: 6 September 2013

Delivered: 30 July 2014

TLHOTLHALEMAJE, AJ

Introduction:

[1] The Appellant (Union) approached the Court to appeal against the First Respondent’s (Registrar) decision to cancel its registration on 14 May 2012. The appeal is brought in terms of section 111(3) of the Labour Relations Act (The LRA). The Union initially approached the court on an urgent basis under case number J854/2013 to stay the cancellation of its registration pending this appeal. The matter initially came before the Honourable Prinsloo AJ on 9 May 2013 and was postponed. It then came before the Honourable Molahlehi J on 16 May 2013, who had issued a consent order in terms of which there was an agreement to shorten the time frames, the uplifting of the suspension pending this appeal, the filing of further documents, and pagination and indexing. On 21 June 2013 the matter again came before Molahlehi J and was postponed.

Background:

[2] The Union was registered on 7 May 2001 under registration number LR2/6/2/928. In his founding affidavit, the Union’s General Secretary, Stanley Netshishivhe, whose locus standi the Registrar had placed in dispute, alleged that the Union has about 4749 members in the security, cleaning, logistics, retail,

commercial, hospitality and construction industries. The section 106 (2) (B) notice was served on the Union on 24 May 2012 informing the Union of the intention to cancel its registration. The basis of the intended cancellation was that firstly, the Union had not complied with the provisions of sections 98, 99 and 100 of the LRA, and secondly, that it had ceased to function as a trade union as envisaged in the LRA.

[3] The Notice was gazetted in May 2012. Cancellation was effected on 7 February 2012, and was published in the Government Gazette on 15 February 2013. The Union was furnished with the full reasons for the cancellation on 15 April 2013. The Union’s contention is that the Registrar acted arbitrarily when he decided to cancel its registration, and did not respond to its representations made in terms of section 106 (2B) of the Act.

The legal framework:

[4] The Registrar has the power to deregister a trade union or employer’s organisation by virtue of the provisions of section 106 (2A) and/or (2B) of the Act which provide that:

‘(2A) The registrar may cancel the registration of a trade union or employers’ organisation by removing its name from the appropriate register if the registrar—

(a) is satisfied that the trade union or employers‘ organisation is not, or has ceased to function as, a genuine trade union or employers‘ organisation, as the case may be; or

(b) has issued a written notice requiring the trade union or employers‘ organisation to comply with sections 98, 99 and 100 within a period of 60 days of the notice and the trade union or employers‘ organisation has, despite the notice, not complied with those sections.’

‘(2B) The registrar may not act in terms of subsection (2A) unless the registrar has published a notice in the Government Gazette at least 60 days prior to such action—

(a) giving notice of the registrar‘s intention to cancel the registration of the trade union or employers’ organisation; and

(b) inviting the trade union or employers‘ organisation or any other interested parties to make written representations as to why the registration should not be cancelled.’

[5] A registered union is obliged to comply with the peremptory provisions of section 98 relating to inter alia, the keeping of books and records of its income, expenditure, assets and liabilities to the standards of generally accepted accounting

practices.

[6] Section 99 of the LRA obliges a union to keep a list of its members, minutes of its meetings in an original or reproduced form for a period of three years from the end of the financial year to which they relate and the ballot papers for a period of three years from the date of every ballot.

[7] Section 100 of the LRA obliges a union to provide the Registrar with information relating to a statement certified by the secretary that it accords with the records showing the number of members as at 31 December of the previous year and any other information required by the Registrar. This information must be provided by 31 March of each year. The union must also provide a certified auditor’s report within 30 days of receipt of that report; an explanation of anything

related the statement of membership, financial statements; and the names of and particulars of its office bearers after their election.

[8] Section 111 of the LRA in terms of which this appeal was brought provides that:

‘(1) Within 30 days of the written notice of a decision of the registrar, any person who is aggrieved by the decision may demand in writing that the registrar provide written reasons for the decision.

(2) The registrar must give the applicant written reasons for the decision within 30 days of receiving a demand in terms of subsection (1).

(3) Any person who is aggrieved by a decision of the registrar may appeal to the Labour Court against that decision, within 60 days of –

(a) the date of the registrar’s decision; or

(b) if written reasons for the decision are demanded, the date of those reasons.

(4) The Labour Court, on good cause shown, may extend the period within which a person may note an appeal against a decision of the registrar.’

[9] The nature of the appeal lodged in terms of section 111 (3) of the LRA was considered by the Labour Appeal Court in Staff Association for the Motor and Related Industries v Motor Industry Staff Association and others[1]. Ngcobo AJP (as he then was) held as follows;

“In my view the absence of the record, the lack of procedure for lodging objections with the second respondent, the absence of power on the part of the second respondent to reconsider the decision in the light of objections, and the lack of discretion on the part of the second respondent, show that the appeal contemplated in section 111(3) is an appeal in the wide sense. It is a complete rehearing and adjudication of the merits with or without additional evidence or information. This procedure allows the objectors who were not parties before the second respondent to present such evidence or information as they may wish to place before the Labour Court in support of their objections”[2]

[10] The provisions of sections 98, 99 and 100 of the LRA are set out in clear terms and do not pose serious difficulties of interpretation. The provisions of section 106 (2A) (a) however pose a difficulty in that the Act does not define when a trade union or employers’ organisation ‘is not, or has ceased to function as, a genuine trade union or employers’ organisation’. The Minister of Labour has in terms of section 96(8) of the LRA, in consultation with NEDLAC by notice in the Government Gazette,

published guidelines to be applied by the Registrar in determining whether an applicant is a genuine trade union or a genuine employer’s

organisation[3]. These however remain guidelines and are open to various interpretations. It is in the light of the difficulties posed by the wide interpretation of what constitutes a genuine or bona fide union, that a wider definition of an appeal is even more apposite. Furthermore, since a union’s non-compliance with the provisions

of sections 98, 99 and 100 of the LRA is by necessity followed with an act of de-registration, a wider appeal enables the Court to consider all material before it and the entire merits of the case including new evidence. It is only through the means of this wider approach that a Court can come to its own conclusions as to whether the decision of the Registrar was justifiable or not.

[11] The submissions therefore made on behalf of the Registrar during arguments that it is not correct to accept that the appeal is an appeal in the wide sense do not find support in the light of the Labour Appeal Court decision in Staff Association for the Motor and Related Industries v Motor Industry Staff Association and others. The mere fact that the Registrar is granted the power in terms of section 106 (2A) to cancel registration of a trade union does not in my view give him unfettered discretion to do so, more particularly as the section provides that the ‘registrar may’ (my emphasis). Thus the Court, on appeal, must determine whether the decision to deregister was correct and not merely to ascertain whether the

Registrar exercised his discretion honestly and properly[4]. As it was also correctly pointed out in CCMA v Registrar of Labour Relations & Others[5]

‘…It further cannot be denied that there exists a possibility that the Registrar in arriving at the decision to de-register a trade union may be based on an incorrect interpretation of facts before him or her or other invalid reasons which may ultimately result in the decision being overturned on appeal.’

The grounds of appeal and submissions:

(a) Is the section 106 (2A) (b) notice defective?

[12] In seeking to set aside the cancellation of its registration, the Union contended that it was not provided with written reasons in the notice of intention to cancel; that it had complied with its statutory obligations; that it had an action plan in place to remedy whatever difficulties it may have had in regard to accountability and non-compliance; and that the Registrar failed to consider its written submissions.

[13] Before to dealing with the above grounds, one of the complaints raised by the Union was that prior to the decision to cancel its registration, it had filed its submissions as to why it should not be de-registered. Although the Registrar had disputed that the submissions were filed within 60 days as provided in section 106 (2B), it had nevertheless received them. In this regard, the Union contended that the section 106 (2A) and (2B) notice was defective, as it merely regurgitates that which is captured in section (2A) (a) and (b) of the Act.

[14] It is my view that a section 106 (2A) and (2B) notice cannot be defective merely on the basis that it regurgitates what is captured in those provisions. Even more pertinent in this case in that the Union was well aware of the concerns of the Registrar since 2002 in regard to its non-compliance with its statutory obligations and the way it conducted its affairs over time. (This issue will further be elaborated upon in the course of this judgment). What is relevant however is whether those reasons have been substantiated, and whether the union was afforded an opportunity of 60 days within which to either comply or show that it had complied with the provisions of sections 98, 99 and 100 of the Act, and further that it remained a genuine trade union. In this case, I am satisfied that the Registrar complied with these requirements.

(b) Alleged failure to give reasons:

[15] Linked to the above was that the Registrar has not given the reasons or an explanation for the allegation that the Union has not complied with these relevant provisions. To this end it was contended that the section 106 notice was void. It contended that a notice in terms of section 106(2B) of the Act dated 14 May 2012 was received on 24 May 2012 by telefacsimile. The Union contends that the notice was only received on the day preceding the date on which it was to be published. The notice afforded the Union an opportunity to within 60 days, make representations as to why its registration should not be cancelled. The Union had made written submission and delivered same on 25 July 2012 setting out reasons why it should not be deregistered. It contends that it never received a response from the Registrar.

[16] When no response was received the Union had then directed a letter to the Registrar on 25 January 2013 requesting a meeting with regard to all the latter’s intention to cancel the registration and further to enquire whether or not the Registrar was satisfied with the written representations. Again no response was received in this regard.

[17] The Union contends that it had accepted that the explanation and the submissions provided satisfied that Registrar since seven months had elapsed without any further correspondence or communication from the Registrar. However, on 12 February 2013 the Union had received a notice in terms of section 106(2B) of the Act dated 7 February 2013 informing it that the cancellation of its registration was to be published in the Government Gazette. In this regard the Union holds the view that the Registrar did not have any regard to its written submissions as well as the documents which accompanied the submissions, and had merely proceeded to cancel the registration. It had then on 26 February 2013 requested the Registrar for written reasons for the cancellation of registration.

[18] On 26 March 2013 the Registrar had replied and indicated that he was not in a position to submit the reasons within 30 days. As at 9 April 2013 the Registrar had not responded and the Union had again requested the reasons for cancellation of the registration. The Union had also indicated in its correspondence that the Registrar had failed to comply with the provisions of section 111(2) of the Act, and had further requested that the de-registration be stayed pending the outcome of an appeal to be launched. When no such consent was forthcoming the Union had then approached the Court on an urgent basis on 29 March 2013. On 15 April 2013 the Registrar had furnished the Union with the reasons for the cancellation of its registration.

[19] The Registrar’s contention was that when the Union made its representations on 25 July 2012, it did not allege that it needed comprehensive reasons. Nevertheless, he had considered those representations and exercised his discretion and cancelled registration of the Union. In this regard, reference was made to pp1 – 14 of the appeal record, in which the Registrar had in his correspondence of 17 October 2011, alluded to its concerns in regard to the Union’s operations in terms of its Constitution. The nub of the Registrar’s contention in this regard is that there is no duty on him to provide comprehensive reasons with the notice of intention to cancel especially where there is non-compliance with the provisions of sections 98, 99 and 100 of the Act. He contended that the LRA does not require comprehensive reasons to be provided, and that there was no reason for him to explain what the requirements of the relevant sections were.

[20] It is accepted that there are no guidelines provided in the Act as to the nature of the notice to be issued by the Registrar in terms of section 106 (2A) (b). In the absence of such guidelines, the issue is whether a notice merely informing the union of its non-compliance with the provisions of sections 98, 99 and 100 is sufficient, or whether more is required.

[21] It is my view that where an allegation is made that there was non-compliance with the provisions of sections 98, 99 and 100 of the Act, at the very least, some detail must be given by the Registrar to show in what material respects it is alleged that there was non-compliance. It is accepted that these provisions are clear and peremptory, and all registered unions should be familiar with them. However, in order to assist the Union and for it to be clear in terms of what the Registrar’s complaint is, it is my view that such a notice must at least lay the basis for the allegations, even if it is not in detailed terms, moreso since the Registrar still has to provide the union with written reasons for the decision within 30 days of receiving a demand in terms of section 111 (1) of the LRA.

[22] The above conclusions are even more apposite in circumstances where an allegation is made that the Union has ceased to function or operate as a genuine trade union. On their own, these allegations are clearly broad, and open to different interpretation. To this end, some detail is required in the notice in regards to in what material respects this allegation was made.

[23] The above conclusions will however not be applicable in each and every case, more particularly in this case, when regard is taken of the first notice issued on 14 May 2012. This notice goes to ten pages and was detailed in form and substance. It specified in what material respects the reason for the cancellation was contemplated and I fail to appreciate the reason the Union contends that it was unable to comprehend that notice for the purposes of making its submissions. The notice issued on 7 February 2013 informing the Union of the cancellation of its registration was merely part of the process that was initiated with the earlier notice of 14 May 2012. Subsequent to that notice, it had made its representations in July 2012.

[24] The argument that the notice issued on 7 February 2013 informing the Union of the cancellation was void because it did not contain reasons is without merit in the light of the nature of the notice issued on 14 May 2012, and further in view of the detailed reasons that had followed after a request was made. The Union can therefore not contend that it was unaware of the reasons for its cancellation and to this end, the submission that the section 106 (2A) (b) notice was void is rejected.

(c) Alleged non-compliance with the provisions of sections 98, 99 and 100 of the Act and evaluation:

[25] The Registrar’s contention was that the de-registration of the Union came about due to its non-compliance with sections 98, 99 and 100 of the LRA. The basis for this contention was as follows;

25.1 The Union had provided the Registrar with what it purported to be audited financial statements for the years ending December 2002, 2003, 2004, 2005 and 2006. These audits were done at the same time and were all signed on 5 October 2007 by the same auditor. In this regard it was contended that the Union had failed to comply with its obligations for five years, and that the financial statements were only submitted after numerous letters were sent to it with threats to cancel its registration.

25.2 These audited financial statements were rejected as the auditor did not express an opinion on them, and further that the audited opinion did not comply with the provisions of section 92(2) (b) (i) and (ii) of the LRA in that it did not express whether the Union had complied with its constitution and agency shop agreement. It was contended that the Union had failed to address these concerns in its representations.

25.3 The Union’s contention that the Registrar had waived the right to cancel registration as he had previously not done so was opportunistic in that the Registrar could never have waived the right to implement the Union’s duty to comply with the provisions of the LRA.

[26] The Union’s response in this regard was as follows:

26.1 It conceded that it had provided the Registrar with its financials for the years 2002 to 2006 during or about 2008, but contended that it had adhered to the provisions of sections 98, 99 and 100 of the LRA, as well as the request or demands from the registrar to submit documentation requested. Because it had preserved its books of account and supporting documents its editors were able to draw financial statements.

26.2 The Registrar had intended to cancel the registration due to the non-filing of these statements but had abandoned the cancellation having received those statements. It was contended that an inference should be drawn that the Registrar was satisfied with these statements otherwise he would have proceeded with the cancellation in 2008.

26.4 The Union further submitted that the fact that the statements were qualified did not warrant its cancellation, as the Act did not require unqualified audits.

[27] In regards to the above, it is my view that the Union’s contention that the Registrar had waived his rights to seek compliance with the provisions of sections 98, 99 and 100 of the LRA for the period 2002 to 2006 is clearly misplaced. The Registrar is appointed in terms of section 108 of the LRA, to perform those functions defined in section 109 of the Act, and has no authority to waive his right to enforce compliance with the provisions of the Act. At most, where the Registrar does not sanction a Union for non-compliance with the provisions of the act, it is more out of negligence and failure to perform his or her duties statutory duties rather than a waiver of those duties.

[28] In this case, it was common cause that the Union had not complied with its statutory obligations between 2002 and 2006, and that a case for cancellation of registration was opened and abandoned in 2008 after it had submitted its statements. The basis for cancelling the case was that the Union had complied with the legal requirements of the Act by submitting all the outstanding documentation[6]. In my view, the acceptance of the financial statements belatedly submitted by the Union and the cancellation of the case against it did not imply that it had necessarily complied with its statutory obligations contrary to the view of the Registrar when the

cancellation case was abandoned. The provisions of section 98 of the Act require more than mere submission of financial statements. Such statements must meet certain standards and criteria. Where the Registrar had decided not to pursue the cancellation case, he had merely exercised his prerogative to do so rather than waive his statutory obligation to seek compliance from the Union.

[29] The only question to be answered is whether having accepted the financial statements and electing not to pursue the cancellation, the Registrar was correct in further relying on the Union’s non-compliance with its obligations during 2002 and 2006 for the purposes of cancellation in 2013. In my view, the Registrar was justified and within his rights to raise these issues again due to the peremptory nature of sections 98, 99 and 100 of the LRA. This is even more material in the light of the problems pointed out in respect of the statements submitted for the period in question. The Union’s non-compliance over the years cannot be ignored on account of belated ‘compliance’, more particularly in the light of the purpose of these statutory provisions.

[30] In further submitting that the Union had not complied with these provisions, the Registrar had contended that:

30.1 The Union had also submitted audited financial statements for the years ending December 2007 and 2008 on 30 June 2010. Again this was after several letters were sent to it threatening to cancel its registration. The statements for both years were audited at the same time and signed and dated on 30 June 2010, and the same qualification was provided. These statements again did not comply with the provisions of the Act and were rejected. The statements also failed to comply with the provisions of section 98 (2) (b) (i) and (ii) of the LRA as the auditor did not express an opinion.

30.2 The audited financial statements for the year ending 2009 were signed by auditors on 2 December 2011. These were submitted only after threats by the Registrar to cancel registration, and the statements followed the same pattern as the previous ones and were accordingly rejected. The Union was given a Disclaimer, which included the same opinion given by the auditors in the previous audits for the past 7 years regarding subscription fees and expenses. The Registrar had further pointed out that the Union in its representations had submitted a management report dated 7 October 2011 from the auditors with recommendations of steps the Union should take to address the issues raised in the audit opinion for the year ended December 2009. Furthermore, the financial statements for the year ended December 2009 had no comparative figure as required in terms of ISA.

30.3 The audited financial statements for the years ending December 2010 and December 2011 were only provided after the notice to cancel registration was issued in May 2012. These were only signed on 12 July 2012 and 11 September 2012 respectively and were only forwarded to the Registrar after threats to cancel registration. These were submitted with the same disclaimer, and showed that the Union could not account for R1.4m.

30.4 The Registrar contends that the Union was clearly in contravention of the provisions of the LRA and its fiduciary duties to its members. Even though the Union had submitted an action plan, the Registrar held the view that after 9 years, an action plan was inadequate to escape the consequences of the Union’s repeated disregard and breach of the provisions of the LRA. This plan was viewed by the Registrar as an attempt to appease his office and avoid cancellation yet again.

30.5 The Union has never put measures in place to address its financial problems and had failed to account for its membership monies. It had not been accountable to its membership, and from the audit, it was apparent that for the years ended December 2009 to 2011, the situation got worse than the previous years.

30.6 The Registrar further contended that the General Secretary of the Union had not complied with its constitution which provides for him to comply with the provisions of sections 98, 99 and 100 of the LRA. On the whole, the Union has since its registration in 2001, failed to act responsibly by accounting for its membership monies.

30.7 The Union’s auditors according to the Registrar had confirmed that since the first audit was done for the year ended 2002 and into 2011 that there has been no proper accounting controls in the Union to deal with its funds. The auditors were unable to satisfy themselves as to the completeness and accuracy of the accounting records relating to subscription fees. This lack of supporting documentation and systems of control over expenditure meant that there was no accountability in the union towards its members.

[31] In response to the above, the Union had submitted that:

31.1 The reasons the allegations raised by the Registrar were not dealt with in the representations were that the union was not aware of them. The Registrar had in June 2010 received the Union’s financial statements for the years ended 2007 and 2008 and it was not aware that the Registrar was not satisfied with those statements.

31.2 The Union was further not aware that the financial statements for the year ending 2009 were rejected and it was never given reasons in that regard. Since June 2012 the Union has taken steps to put it in place new control processes to keep proper control of its records. Should this appeal succeed the Union undertakes to take the necessary steps in order to appoint new auditors to assist with its financials.

31.3 The Union disputed the contention that R1.4 million was unaccounted for, as its appointed chartered accountant had stated that the financials for 2010 and 2011 had presented its financial position and that the previous disclaimers were not justified.

31.4 It had further submitted that it had complied with the provisions of section 98 of the LRA in that it had kept the books and records of his income, expenditure, assets and liabilities; within six months of the financial year end it had prepared statements of income and expenditure for the previous financial year together with the balance sheet showing its assets and liabilities and financial position as at the end the end of the year 2012; annual audits of its books and records of account and financial statements have been conducted and reported in line with its constitution; it was not at any time subject to an agency shop agreement; its financial statements and auditor’s report have always been made available for its members’ inspection, and further that it had kept its books for three years.

31.5 The delays in submitting the financial statements for the years 2010 and 2011 were due to its involvement in two Labour Court applications, and that as early as June 2012, the Union had taken steps to put in place new control processes to keep proper track of its records.

[32] In considering the above submissions, it is important to note that the notice issued on 14 May 2012 had highlighted the areas in which the Union had failed to comply with the provisions of sections 98, 99 and 100 dating back to 2002 as indicated above. At that stage the audited financial statements for the year ended December 2010 were still outstanding, whilst problems were highlighted in respect of the statements submitted in respect of 2007, 2008 and 2009. In my view, taking these factors into account, it cannot be inferred that simply because the Union had submitted these statements it must imply that they were acceptable for the purposes of compliance with the relevant provisions of the LRA. Again, in the absence of anything to the

contrary, those statements fell short of the criteria and conditions set out in section 98 of the LRA, and the Union ought to have known what was required of it in terms of the provisions of the LRA. It was not for the Registrar to remind it of the nature of financial statements and audits required, moreso in the light of its history of non-compliance and numerous correspondence sent to it as illustrated below.

[33] On 17 October 2011 the office of the Registrar had already informed the Union of its concerns following a meeting held between the parties on 20 September 2011. These included issues surrounding the Union’s non-compliance with its constitution, the problems with membership figures that did not tally with the income reflected in the financial statements; and outstanding audited financial statements from 2009.

[34] On 28 September 2011 the Union was again reminded that it had not complied with the legal requirements pertaining to certified copies of its auditor’s report, statement of income and expenditure for the financial years 2007 and 2009. This was one of the various letters sent to the Union containing threats of cancellation if there was non-compliance. Pages 14 to 69 (the appeal record, Volume 1) are various letters dating back to 28 August 2002, reminding the Union of its statutory obligations and what was required of it.

[35] The provisions of sections 98, 99 and 100, being peremptory, it is my view that all that the Registrar needed to show is that the Union has not complied with these provisions, and it is thereafter for the Union to prove that it had indeed complied. Based on the material before the Court, and further taking into account the historical background of this matter and the decision arrived at by the Registrar in the light of the representations before him, I am not satisfied that the Union has indeed shown that it had complied with the said provisions. These conclusions are further fortified by the following:

35.1 Even on the basis of the statements and audits submitted on the Union’s behalf, as late as 12 July 2012 (bearing in mind that the notice was issued in February 2012), a report of its independent auditors (AGAPE Chartered Accountants Inc) and statement for the year ended 31 December 2010 painted a bleak picture of its affairs[7]. In this regard the auditors could not provide a basis for an audit opinion; had established that the Union’s accounts for

subscription was on a cash basis in contravention of accounting practices; that there were no systems control over such fees; that

there were no satisfactory auditing procedures that they could perform to obtain assurance that all subscription fees were properly

recorded, and that they could not satisfy themselves of the completeness and accuracy of accounting records relating to subscription fees. It was further discovered that the Union could not provide sufficient appropriate audit evidence to support general expenses of certain amounts and expenses in the amount of R782 978.00.

35.2 A report from the same auditors in respect of the year ending 31 December 2011 produced on 11 September 2012 painted the same picture as above and highlighted the same problems, and also gave a Disclaimer opinion. The Union’s contention has always been that it had complied with the relevant statutory provisions. Reliance in this regard was placed on the submissions and representations made through its attorneys on 23 July 2012 after the notice was issued in February 2012. Documents in respect of the alleged compliance with section 98 of the LRA included the financial statements and an audit report for 2009. A report in this regard was compiled by the same auditors in respect of the year ended December 2009. This report does not assist the Union’s case as it paints its affairs in negative light. In this regard, as with other reports already referred to, it was pointed out that the Union did not have proper control over its expenses; did not have contracts in respect of its leases or employees; invoices were missing; no proper accounting record system; bank reconciliation was not prepared monthly, and it did not comply with generally accepted accounting practices.

35.3 Despite submitting the above reports in its representations, the Union has since sought to rely on new developments and reports regarding its financial standing. Objections were raised by the Registrar that this information came after the fact, and after it had considered the submissions and representations made by the Union already. In the light of the fact that it has been concluded that this appeal should be treated as a wider appeal, with complete rehearing and adjudication of the merits, additional evidence or information which the Registrar may or may not have taken into account in coming to his own conclusions will for the purposes of this appeal, be properly taken into account for what it is worth.

35.4 In this regard, the Union’s contention was that having received the section 106 (2B) notice, the it had approached its auditors to discuss the disclaimers in previous reports, and these disclaimers were removed as evident from the audit report in respect of the year ending on 31 December 2011. This revised report was submitted around March 2012. Significantly, the Union alleged that it was not aware of the amended financials until it collected its files from these auditors. This in my view is far from the truth as the auditors could not have amended their reports without input from the Union. It would be highly irregular for auditors to take such measures on their own without a request from the Union.

35.5 Furthermore, after the receipt of the notice, the Union had also instructed a new chartered accountant to review its financial statements which the Registrar had rejected. This new accountant, De Wet, was specifically instructed to consider the disclaimers in the previous statements.

35.6 It was only on 23 April 2013, more than a year since the notice was issued, and also after threatening letters were sent by the Registrar that De Wit had submitted a report, which concluded that the Union’s financial statements were a true reflection of the Union’s position and that the disclaimers were not justified. This two-paged report[8] found nothing untoward except that the Union was not registered for PAYE with SARS. In the light of these new developments, the Union’s contention was to dispute that R1.4 million could not be accounted for as De Wit had stated that the financials for 2010 and 2011 presents the financial position of the Union and that the disclaimers were unjustified.

35.7 These new developments were attacked by the Registrar on a number of fronts and I am in agreement with his contentions that they do not take the Union’s case any further. Firstly, the revised report submitted by AGAPE was unsigned, and its correctness was placed in dispute in the absence of a confirmatory affidavit from that auditor. Other than the fact that the report is not signed, it is curious that AGAPE would suddenly after numerous audits done on behalf of the Union, find fault with its own reports and amend them on their own as already indicated.

35.8 Secondly, it was pointed out that the reliance by the Union on the report of an accountant, De Wit which stated that the opinion of the auditor was wrong cannot be of assistance to it in that there was no need to get an accountant’s opinion if the auditor had changed his opinion, and that the auditor could have simply confirmed the changes. Furthermore, De Wit’s opinion was not an auditor’s report as envisaged in the LRA. The Union further sought to rely on the De Wet’s report that R1.4 was unaccounted for. In my view, this report is meaningless, and does not extricate the Union from its failure to give a proper account of its finances, let alone an account in respect of that amount. Section 98 (2) requires an annual audit of the Union’s books and records of account and financial statements by an auditor. A report by an accountant, who had reviewed an auditors’ report does not meet this requirement.

[36] In the light of the above, it is apparent that the Union, notwithstanding attempts to damage control, has over the years, and as evident from its own auditor’s reports, completely failed to comply with the provisions of Section 98 of the LRA in numerous respects, including failure to adhere to standards of generally accepted accounting practice, principles and procedures as contemplated in subsection 1 (a) and (b). It failed to comply with the provisions of subsection (2) by failing to arrange for an annual audit of its books and records of account and its financial statements by an auditor. The reports submitted were indeed submitted outside the period prescribed in the Act, and the excuse that the delays were as a result of litigation before this Court in 2010 and 2011 is a lame one in that it is not shown in what material respects this litigation had affected compliance with statutory its obligations.

[37] Furthermore, the various auditors’ reports submitted had not expressed an opinion as to whether or not the Union had complied with the provisions of its constitution relating to financial matters as required by the provisions of section 98 (b) (i) of the Act. The Registrar in coming to his conclusion had correctly relied on the Union’s own auditors’ assessment of its financial position, which was portrayed as bleak.

[38] The financial statements and reports between 2008 and 2011 showed a state of affairs of an organisation that had no control processes in place and that had failed to heed its own auditor’s recommendations to put its house in order. Despite various attempts at action plans and undertakings by the Union that since June 2012 is had started to put measures in place, this is small comfort for its members who have been severely prejudiced by its non-compliance at least since its registration. Amongst issues highlighted was that there were no financial controls, monies were unaccounted for, the Union had no records of its lease agreements or contracts of employment with its employees. If the auditors had found that these legal documents did not exist, and all of a sudden they appear for the purposes of this leave application, then clearly there is something wrong. To this end, it is concluded that the Registrar did indeed have sufficient cause to find that the Union had not complied with its statutory obligations, and his decision in this regard was well considered and fair.

[39] In CCMA v Registrar of Labour Relations & Others, Molahlehi J had lamented the lack of accountability of the Union in the following strong terms:

‘The prejudice that a union may suffer as a result of de-registration and enforcing such, even pending appeal, should be weighed against the public interest of protecting the interests of union members in particular and that of ensuring that funds contributed are utilized for the purpose of benefiting union members. This simple accountability principle is founded on the notion that a union occupies a position of trust as concerning the management of the funds contributed by members. In short the provisions of s 106 of the LRA are protective in nature, intended to protect the vulnerable workers from abuse of their trust by unscrupulous union officials whose involvement in a union may be for no other reason but to advance their selfish business interest.’[9]

[40] In this case, and having had regard to the Union’s history of its failure to comply with its statutory obligations as contemplated in section 98 of the LRA in particular since its registration, it cannot be said that it had acted in the best interests of its members, and ensured that the subscription fees they had paid were properly accounted for. What is even more disconcerting in this case is that the Union has consistely failed to be accountable, and has not put in place control measures despite several advices from its own auditors over the years. It consistently required threats from the Registrar for the Union to make any attempts at compliance. Even more disconcerting are the Union’s attempts at damage control,

covering up, disputing its own financial statements, and submitting statements and reports after the fact, which make it look good when there is clearly rot at its core.

[41] Other than attempts at misleading the Registrar and this Court to believe that it had its house in order, and proferring lame excuses in these proceedings and making hollow undertakings, it is its very members who at the end have to suffer severe prejudice as a result of this lack of accountability.

[42] It is generally accepted that employees and members of unions in the security and cleaning industries in particular do not get remunerated much in comparison to other industries. To fail to account to such members who pay their hard earned money towards subscription fees cannot in my view be condoned, as they deserve better.

(d) The allegation that the Union has ceased to function as a genuine Trade Union and evaluation:

[43] Clause 3 of the Guidelines issued by the Minister as referred to elsewhere in this judgment state that in the case of an existing organisation, and in determining whether a union is a genuine trade union, attention will have to be paid to its actual activities and functioning. In evaluating whether a trade union or employer's organisation is genuine, the Registrar must take into account all relevant factors. In this regard, the Registrar submitted the following:

43.1 The Union had failed to comply with the provisions of its constitution regarding the holding of meetings of its different structures, including the holding of the National Congress, National Executive Committee and branch meetings. It had only provided the Registrar with a limited number of minutes of its NEC meetings held in 2008 and 2009, and no signed attendance registers were submitted.

43.2 The office of the Registrar had received complaints from individuals within the Union that confirmed that no meetings had taken place. Even though the Union had submitted minutes of a National Congress that allegedly took place on 23 to 25 September 2007, affidavits were submitted that no such meeting had taken place.

43.3 The Union had also submitted copies of minutes of the NEC of 2009 but with unsigned attendance registers. The Registrar contended that these minutes were fraudulent. In the absence of signed attendance registers and bona fide minutes of meetings, the Registrar was unable to accept that such NEC meetings did in fact take place.

43.4 The minutes of the NEC submitted until July 2012 indicate that the Union did not hold regular meetings in terms of its Constitution; the Fincom had decision making powers that were not provided in the Constitution. The Union had also submitted minutes of the NOBs, which was not a recognised structure as provided in terms of its constitution, which also indicated that this structure had decision making powers, which was highly irregular.

43.5 The local shop steward structure of the Union did not exist or was not operational, and that since this was the case, the Union was dysfunctional as it could not operate constitutionally. The congress and the NEC meetings were not properly constituted and no branch meetings were ever held. This meant that the Union was run by its NEC only, who are officials and expired office bearers.

43.6 Various individuals had made an unlawful request to the Department to amend the Union’s constitution which was never approved by its structures, and the Department in approving the amendment was misled into believing that a meeting of 13 March 2010 where the constitutional amendment was allegedly approved had taken place when this was not the case. This according to the Registrar showed that the Union was run on an ad-hoc basis by individuals for their own benefit, who disregarded the provisions of its constitution.

43.7 Various members of the Union including its General Secretary, officials and other office bearers have been involved in attempts to split and create another union. On various occasions (on 8 September 2009; 8 July 2011 and 24 June 2011) splinter groups had attempted to form and register different unions, and the Registrar had turned down applications in that regard. In the light of the individuals involved in attempts to create new unions, the Registrar held the view that this was out of character of union representatives, and was an indication that the Union had ceased to function as a genuine trade union. Furthermore, the General Secretary and Chief Financial Officer of the Union appear to be central to the daily operations of the Union, and according to the Registrar, they are running the Union for their own interest and not applying the constitution of the Union.

43.8 Whilst individuals within the Union have been stripped of leadership positions or dismissed, others such as its president who was elected at a national congress of 10 May 2011 was actually dismissed from his employment, and had lost his case at the CCMA. He had however remained president until February 2012 and was employed as a labour relations officer thereafter. At the NEC of 4 February 2012, the position of First Deputy President was created despite it not being provided in the Constitution, and the NEC held elections when it had no powers to do so.

43.9 There was friction and factions within the union which had resulted in litigation in February 2011. The papers filed in this Court under case number J167/2011 with Netshishivhe, the General Secretary as the applicant in that matter reflect that the meeting of the National Congress on 13 March 2010 did not take place as alleged. There were no elections of national office bearers as required in terms of clause 16 (5) of its Constitution in the national congress meeting that took place on 21 August 2010.

43.10 A court order issued by the Bhoola J was obtained in terms of which the shop stewards were ordered to call a meeting for the purposes of electing an interim committee to run the daily affairs of the Union and to cause the National Congress to be convened in terms of the Constitution. This according to the Registrar shows that the Union did not convene the National Congress meeting in terms of its Constitution, and did not have a valid NEC to run its affairs.

43.11 The Union had provided various different figures of its membership. This was further reflected in its urgent application where it alleged that its membership stood at 1845. In the founding affidavit however it stated that it had 4749 members, whilst in the appeal application the figures stood at 3778. There is no explanation for the drop in membership of over 1000 and the actual figure according to the Registrar is 1800, and not over 4000 members as alleged.

43.12 There were possible financial irregularities committed by the Union in that there are discrepancies and monies unaccounted for during the period 2002 to 2011 as a result of inaccurate reflection of the union members and subscription fees paid by those members during the period in question.

43.13 In terms of its constitution, the Union was to have established 18 branches in South Africa. Although the Union had also indicated that it had established a branch in Pietermaritzburg, a meeting to launch that branch was attended by four workers who had appointed themselves to different positions in the branch executive committee.

43.14 The Union despite requests, failed to submit a list of its current officials, their designations in different offices, and copies of their contracts of employment. Three copies of contracts of employment submitted in respect of three officials appeared to be fraudulent according to the Registrar.

[44] The Union’s responses to the above were as follows:

44.1 Its constitution was silent on whether or not the attendance Registrar had to be undersigned or not, and after the Registrar had raised the issue, subsequent attendance registers were undersigned and submitted. Attendance registers and minutes of meetings were frequently submitted to the Registrar as and when requested, and the Registrar could not use this factor to deregister it.

44.2 The complaints raised by some members by way of affidavits to the effect that regular meetings were not held by the Union were not verified or genuine as there was a dispute as to whether the signatures of the deponents to those affidavits were genuine or not. It labelled these individuals as vindictive and fraudsters, who sought to persist with attempts to discredit it so that it got deregistered. It contended that the Registrar chose to rely on misinformation from fraudsters that no meetings ever took place.

44.3 It was not clear in what material terms the Registrar had claimed that the Union had failed to adhere to its constitution as the Union had provided the Registrar with a list of its local office bearers, the NOBs and NEC in minutes of meetings with signed attendance registers.

44.4 The Registrar was furnished with copies of contracts of employment of its officials and their designations as requested.

44.5 It was denied that various individuals within the union including its General Secretary had applied to have various alternative trade unions registered.

44.6 The Union conceded that there was litigation brought before this Court as a result of irregularities surrounding the holding of the National Congress, and that it had approached the Court for an order to interdict and restrain the ex-members from acting in any official capacity of the Union until such time that proper elections were held. An order was obtained directing the shop stewards to hold a meeting within 10 days from the date of that order for the purpose of electing an interim committee to run the daily affairs of the union.

44.7 In argument, it was also submitted that during 2010 to 2011, perpetrators within the Union committed certain acts of fraud within its leadership, and these have since been disciplined or dismissed. Where fraud was perpetrated and discovered, these incidents were also reported to the Registrar.

44.8 The Registrar had in considering its representations, failed to take into account the amendments to the Union Constitution which it had approved, and that these had the effect that the NEC was vested with the management of the affairs of the Union as a whole.

[45] In considering the above submissions in determining whether the union is a genuine trade union, it is significant to point out that the allegation that the Union had ceased to operate as a genuine trade union had been made on several occasions by the Registrar prior to the decision to deregister it.

[46] On 17 October 2011, the office of the Registrar sent correspondence to the Union raising concerns about its operations in terms of its constitution. In this letter, the Registrar had raised concerns about the Union’s non-compliance with its constitution; the unlawful request to the Department to approve the amendment to the Union’s constitution; the creation of the position of “Executive Co-Founder” when the constitution provided for no such position; problems with membership income in the financial statements; outstanding audited financial statements; complaints received about the internal operations of the union; and destabilising factors within the union.

[47] Similar correspondence was sent to the Union on 7 September 2011, and in particular, concerns were raised and requests made in respect of the list of the leadership of the Union, the structures, the list of its officials, designations and local shop stewards; signed minutes of NOBC meetings and the finances. Further correspondence was sent on 27 May 2011 where similar concerns were raised. As far back as 19 February 2010, correspondence was also sent to the Union in terms of

which a request was made for it to submit total membership figures copies of auditor’s report, names of appointed and elected

officials etc. Further letters in regard to various requests were attached to the Registrar’s answering affidavit.

[48] Critical to the effective running of a union is adherence to the provisions of its own constitution. Where a Union fails to comply with the provisions of its constitution in the running of its affairs, it invariably ceases to function as a genuine trade union.

[49] On the basis of the concerns raised by the Registrar as summarised above, and further having had regard to the Union’s pleadings and representations it had made, I am satisfied that the conclusions of the Registrar that the Union had ceased to function as a genuine Union were informed and well considered.

[50] My conclusions are further based on the following:

50.1 In accordance with the Ministerial Guidelines, a trade union must be an association of employees, and indicators that a trade union is an association of employees are[10]:

a) the establishment and effective functioning of branches

b) the holding of regular meetings of members;

c) the election of shop stewards and other trade union representatives in the workplace, and

d) the election of members as office bearers.

50.2 In this case, the minutes of purported meetings held of the Union structures were susceptible to doubt as attendance registers in that regard were not signed. It is not sufficient for the Union to proffer an excuse that its constitution does not provide for a signed register. A signed register is testimony that a meeting did indeed take place on a particular date and by attaching their signatures, the attendees confirm that they had indeed attended such a meeting. A submission of signed attendance register after those meetings had purportedly taken place is not confirmation that those meetings did indeed take place. This is even more pertinent where the Union had in the past been warned of what was required in respect of those minutes or meetings.

50.3 The Registrar was in possession of sworn affidavits that meetings did not take place as alleged. The Union disputed the signatures of the deponents of affidavits in this regard. Amongst the seven deponents who had alleged that meetings were not regularly held was one M Jeffrey, who was a treasurer of the Union at the time. Despite disputing these signatures, there is no explanation from the Union as to the reason the Registrar would have these affidavits in his possession unless these individuals had approached it with legitimate complaints. Only one affidavit was secured from one of these individuals who refuted that the signature on his affidavit was not genuine, and it is inconceivable that the Registrar would make up these complaints. To further counter these allegations, the Union could only muster a conspiracy theory to the effect that there are vindictive individuals within the Union who approached the Registrar with complaints with the aim of getting the Union deregistered. This conspiracy theory appears lame and far-fetched.

50.4 The Union had conceded that irregularities had taken place surrounding the holding of one of its National Congresses. It had further conceded that an order was obtained in terms of which the shop stewards were ordered to call a meeting for the purposes of electing an interim committee to run the daily affairs of the Union and to cause the National Congress to be convened in terms of the Constitution. If matters had reached that point, where an order of Court had to be obtained in order to compel the Union to comply with its own constitution, it can only be inferred as correctly pointed out by the Registrar, that the Union did not convene the National Congress meeting in terms of its Constitution, and did not have a valid NEC to run its affairs.

50.5 The Union attempted to deny that there was internal strife and factions within its ranks. At the same time, Netshishivhe conceded in his replying affidavit that in November 2011, there was an urgent application brought in this court under case number J2582/2011, wherein certain individuals sought to remove him from office. That application was dismissed. This however does not imply that there were no internal squabbles within the Union. These court applications can only be testimony of a Union in a dysfunctional state.

50.6 Significant however is the issue surrounding the amendment to the Union Constitution, which the Registrar submitted was obtained by dubious means. The Union’s response was simply that the amendments were granted nevertheless. This however is not the point. Where a serious allegation is raised that the constitution, upon which the Union’s existence is found was amended through dubious means, a proper response other than a mere retort that the amendments were approved by the Registrar is not sufficient. Significant also was that in terms of these amendments, the NEC of the Union was given power to run its affairs. This implies that power was vested in a few individuals who ran the affairs of a Union as they saw fit. Once a union degenerates into that state where power is vested in the hands of the few, it automatically ceases to be an association of employees as contemplated in the Ministerial Guidelines, and most importantly, ceases to operate as a genuine union.

50.7 The allegations surrounding attempts by various individuals, including the Union’s Secretary, Netshishivhe to form splinter Unions is even more serious. In this regard, the Registrar had noted three applications made by various individuals on 8 September 2009; 8 July 2011 and 24 June 2011. Netshishivhe had denied that he had made any attempts to register a union called PRODUSA, or had attended any meeting where this new Union was discussed. The question to be asked then is whether it should be believed that the Registrar had manufactured these documents that prove that indeed there were such attempts. In my view, this would be far-fetched, and it is concluded that Netshishivhe’s denials in this regard are clearly bare. Other than strenously denying that he was involved in the formation of a splinter union, I did not understand it to be in dispute that two further attempts were made by other individuals to form another union. These events again reflect an organisation which its own leaders lack confidence in it, and one that is clearly no longer serving its purpose.

[51] Other than the factors highlighted, there were others relating to the Union having given different membership figures as opposed to what was accounted for; the issue surrounding the Union creating positions that were not provided for in its constitution, the running of the Union’s affairs by unrecognised structures; the non-existence of local structures etc. Based on these and other factors as already indicated above, and further having considered the reasons given by the Registrar for cancelling the Union’s registration, I am satisfied that the Registrar had considered the representations made by the Union, and correctly came to the decision that the Union had ceased to function as a genuine trade union.

[52] At the time that the Registrar issued his section 106 (2) (b) notice, and further at the time that he gave his full reasons for cancellation on 15 April 2013, he was satisfied that the Union had reached a dysfunctional state and had ceased to conduct its affairs as a genuine trade union should. Despite the Registrar’s leniency in respect of the Union’s non-compliance with its statutory obligations between 2002 and 2006, and his further tolerance subsequently thereafter, the Union has failed or refused to clean up its act. There is therefore no basis for a conclusion to be made that the decision of the Registrar was irrational, unlawful, or arbitrary. In the light of the history of non-compliance, the Registrar’s decision was fair and lawful, and was arrived at in a transparent and fair manner.

[53] The Union has failed to serve its members and be accountable to them. This Court will be failing in its duties if it allows the Union to continue to conduct its affairs as it has since its registration. As it was correctly pointed out in CCMA v Registrar of Labour Relations & Others[11], the provisions of section 106 of the LRA are protective in nature, and are intended to protect the vulnerable workers. They are not intended to advance and cushion the interests of a few individuals running that Union. Where a trade union fails in its obligations towards its members, and fails to be accountable to them in all material respects, including being financially accountable and adhering to the provisions of its own constitution, these provisions should by necessity be invoked to protect those members. To this end, the Union’s appeal should fail. Furthermore, having had regard to considerations of law and fairness, and further having had regard to the circumstances of this appeal, it is deemed appropriate to make a cost order.

Order.

The appeal is dismissed with costs.

Tlhotlhalemaje, AJ

Acting Judge of the Labour Court of South Africa

Appearances:

For the Appellant: Mr. M Hennig of Martin Hennig Attorneys

For the Respondent: Adv. L. Pillay.

Instructed by:

State Attorney

[1] (JA71/98) [1999] ZALAC 13 (3 August 1999)

[2] At para 24

[3] These were published in GNR942 in Government Gazette 23611 of 25 July 2002

[4] See Staff Association for the Motor and Related Industries v Motor Industry Staff Association and Others at para 22

[5] (Case No: J984/10) dated 27 July 2010 at para 35

[6] See pp11 -13 of the Appeal Record (Volume 1)

[7] P623-624 of Vol 6 of the Appeal Record

[8] Annexure ‘FA13’ as contained in Vol 4 of the Urgent application

[9] At para 36

[10] Clause 17 of the Guidelines

[11] At para 36