The minutes do not bear out Fraser’s further averment that he stated that the second respondent was not prepared to take over
the appellants’ employment contracts in that it was not purchasing the business as a running concern.
[18]
Save as is set out in [20] and [21] below Fraser did not revert to NEWU in regard to the second respondent’s
attitude in respect of the continued employment of the employees, notwithstanding a further threat by NEWU, contained in a letter
dated 23 June and headed “Sale or Take-Over of LMK Manufacturing (Pty) Ltd”, that if the first demand referred to above
was not met, the court would be approached for appropriate relief.
[19]
A further dispute relating to the meeting of 23 June was the following. Fraser alleged that, as was recorded
in the minutes of the meeting, he offered to let Nomvela have sight of the agreement relating to the sale of the assets of the first
respondent’s business together with a list of its liabilities, subject to same remaining confidential, but that Nomvela declined
the offer with the comment that he was a unionist, not an economist. Nomvela denied that such an offer was made and averred that
the comment referred to was made in another context. He averred that Fraser had consistently refused to make the agreement available,
claiming that it was confidential. The fact remains that on either version Nomvula did not peruse the document in question.
[20]
On 23 June Fraser distributed a “Notice To All Staff Members” reading as follows:
“Please be advised that LMK Manufacturing (Pty) Ltd has been sold and we hereby give you one week’s notice.
LMK Manufacturing (Pty) Ltd was faced with the option of either liquidating the company or selling the company. With the sale of
the company we have been able to secure the employment of all permanent weekly paid staff. Should the company have been liquidated,
everybody would have lost.
Please be advised that the new owners will be taking over on the 1st July 1997.
We thank you for your service and loyalty during the period that you were employed by LMK Manufacturing (Pty) Ltd and wish you the
best for the future.”
[21]
On 25 June Fraser responded to NEWU’s letter of 23 June as follows:
“With reference to the above fax please take notice of the following points.
We have sold the assets of LMK Manufacturing (Pty) Ltd. It is not a takeover.
At the last meeting held at our offices on the 23/6/97, we gave you the opportunity to read the “Sale of Assets Agreement”
and a schedule of the liabilities of the company. From this you would have seen for yourself that LMK cannot continue to trade and
that there are not any funds available for severance packages.
We have done everything in our power to ensure that as many [employees] as possible are given employment with the new buyers.
All [employees] of LMK Manufacturing have been given a [week’s] notice on the 23/6/97. They will be paid this week’s
notice/severance plus all leave pay outstanding. This is in terms of the Labour Relations Act No 66 of 1995 which you refer to in
your fax of 21st June 1997.
We sincerely hope that you do not find it necessary to take this matter to the Labour Court in view of the above information, but
should you do so, we will defend the matter.”
[22]
The appellants thereupon, on 27 June, launched the proceedings in the Court a quo, on the basis of urgency, for relief in the form of a rule nisi together with an interim order. By agreement the matter was postponed to 1 July, presumably to allow certain answering and replying
papers to be filed, which was duly done.
[23]
At the time of the postponement, so Nomvela averred in his replying affidavit, “the respondents”
gave an undertaking to do nothing and not to allow anything to take place which would prejudice the applicants’ rights as envisaged
in the notice of motion.” The reference to “the respondents” did not include a reference to the present second
respondent, which did not oppose the proceedings in the Court a quo.
[24]
On 30 June the second respondent caused those employees whom it had “re-employed” to sign
contracts of employment effective as from 1 July, an example of which was annexed to Nomvela’s replying affidavit. The extent,
if at all, to which the terms and conditions of employment provided for in these contracts differed from those which obtained prior
to 1 July was not elucidated in the papers. Clause 1 of the contracts did, however, specifically provide that the employee
“understands and accepts that it is an express condition of this contract that no service with any previous employer, or any
obligations of any previous employer are transferred to this employment relationship.”
[25]
Certain of the relief contained in the appellant’s notice of motion was abandoned during the hearing
in the Court a quo. What remained thereof, as paraphrased by me, was relief in the form of an order that:
(1)
the first, second and third respondents (the latter two being Kriel and Fraser) forthwith make
disclosure to the applicants of:
(a)
a copy of the notice of the first respondent’s intention to alienate its business and/or
the assets thereof published by the first respondent as envisaged in section 34 of the Insolvency Act, No. 24 of 1936;
(b)
details of:
(I)
all its assets before the alleged sale;
(ii)
all the assets allegedly sold to the fourth respondent (the present second respondent);
(iii)
all its liabilities and creditors at the time of the alleged sale;
(2)
the fourth respondent forthwith make disclosure of the forenames or initials and surname of every
member of the fourth respondent reflected on any business letter bearing that respondent’s registered name;
(3)
all the respondents forthwith make disclosure to the applicants of the original of the alleged
agreement of sale and/or furnish the applicants with a certified copy thereof;
(4)
the first, second and third respondents be interdicted from carrying out the sale of the business
and the fourth respondent be interdicted from taking over the first respondent’s business and/or assets, alternatively, all
the respondents be interdicted from carrying out the alleged agreement of sale, until such time as written proof of the validity
of the agreement was produced to the Court and a certified copy thereof was furnished to the applicants, alternatively, until such
time as a valid agreement of sale was concluded between the first, second, third and fourth respondents.
(5)
all the respondents forthwith produce to the Court written proof (including but not limited to
what is sought in (1) above) of any alleged valid sale agreement and to furnish certified copies thereof to the applicants, alternatively,
in the event of no valid sale agreement having been concluded, that all the respondents renegotiate and conclude a valid sale agreement
in compliance with the provisions of section 189 of the Act;
(6)
the already implemented transfer of the contracts of employment and the already given offers of
new employment to some of the applicants be declared invalid and/or null and void;
(7)
all the respondents forthwith incorporate the statutory safeguards provided for in subsection (2)(a)
of section 197 of the Act in the valid sale agreement and further incorporate therein the following provision:
“The purchaser undertakes to retain all the employees of the seller on terms and conditions of employment not less favourable
than those applicable before the sale.”
(8)
all the respondents forthwith incorporate in such valid sale agreement the organisational rights
(but not limited to recognition rights) of the applicants’ trade union;
(9)
the costs of the application be borne by the first respondent provided that the costs of any opposition
thereto be paid by such respondents as oppose the application, jointly and severally.
[26]
In addition the applicants gave notice, via the replying affidavit deposed to by Nomvela, that a further order would be sought declaring the contracts of employment dated 30
June 1997, concluded between the then fourth respondent and those employees who were “re-employed” by it, to be invalid
and of no force and effect.
[27]
It merits mention that notwithstanding that it was Fraser’s contention that he had at one meeting
offered to permit Nomvela to peruse the sale agreement allegedly concluded between the two respondents and a schedule of the first
respondent’s liabilities, and despite the fact that it was common cause that no such perusal was in fact undertaken, Fraser
did not, on behalf of the first respondent, annex to his affidavit either of the said documents or any of the other documents disclosure
of which was sought by the appellants, nor did he tender to produce same. Instead, relying essentially on the allegation that the
agreement allegedly concluded between the two respondents embraced no more than a disposition of assets and did not constitute a
disposition of the first respondent’s business or any part thereof as a going concern, Fraser contested that the appellants
were entitled to any of the relief sought.
[28]
Similarly, the second respondent, which did not oppose the proceedings in the Court a quo, did not produce or tender any of the documentation disclosure of which was sought by the appellants.
[29]
LANDMAN AJ’s interpretation of the appellants’ papers in the Court a quo was that, as regards the disclosure of documentation, what was being sought was information which related, firstly, to the retrenchment
or termination of the services of the appellants and, secondly, to an alleged duty to comply with section 197 of the Act insofar
as there was a sale or transfer of the business of the first respondent.
[30]
Section 197, insofar as is relevant, provides as follows:
“(1)
A contract of employment may not be transferred from one employer (referred to as “the
old employer”) to another employer (referred to as “the new employer”) without the employee’s consent unless-
(a)
the whole or any part of a business, trade or undertaking is transferred by the old employer as
a going concern;
------------
(2)
(a)
If a business, trade or undertaking is transferred in the circumstances
referred to in subsection (1)(a), unless otherwise agreed, all the rights and obligations between the old employer and each employee
at the time of transfer continue in force as if they had been rights and obligations between the new employer and each employee,
and everything done before the transfer by or in relation to the old employer will be considered to have been done by or in relation
to the new employer.
------------
(4)
A transfer referred to in subsection (1) does not interrupt the employee’s continuity of
employment. That employment continues with the new employer as if with the old employer.
-------------”
[31]
The essential foundation of LANDMAN AJ’s refusal to order the disclosure of the documentation in
question was his finding that despite the use, at various stages during the discussions between Fraser and the shop stewards and/or
NEWU, of loose language, such as the references to “the sale of the company” or the “takeover” thereof, it
was in fact clear that neither the business of the first respondent nor any portion thereof had been transferred to the second respondent
as a going concern; what had occurred was the conclusion on 26 May 1997 of an agreement in terms of which portion of the assets of
the first respondent was sold to the second respondent.
[32]
Consequently, so it was held, section 197 was not of application and no entitlement to any information
bearing on an alleged non-compliance with the provisions of the section aimed to the appellants.
[33]
The further corollary of that finding, so LANDMAN AJ recorded, was that a contention on behalf of the
first respondent that it was obliged to terminate the services of the appellants with effect from 30 June 1997, was correct. In respect
of that termination (or retrenchment) it might well have been that the appellants were entitled, in terms of section 189, to the
disclosure of certain documents, but a dispute regarding such disclosure would, in terms of section 189(4) read with section 16,
have to be referred for conciliation by the Commission and, if there is no settlement, the Commission must arbitrate the dispute.
[34]
With respect, I am unable to endorse the above approach. Without the alleged agreement between the respondents
and certain of the other information sought by the appellants being placed before the Court a quo, it was not permissible for that Court to determine if and when an agreement was in fact concluded or what the effect of the agreement
was. The evidence relating to these aspects that was placed before the Court a quo was secondary evidence and, in the absence of an acceptable explanation for the non-production of the written agreement itself, was
inadmissible as not being the best evidence. The matter should accordingly have proceeded on the basis that the true nature of the
agreement had not been disclosed.
[35]
It should also be pointed out that whatever may have been said on behalf of the appellants in the papers
filed in the Court a quo concerning the purported retrenchments or dismissal of the employees by the first respondent, the appellants did not in fact seek
the disclosure of any information in connection therewith. The question whether an order for the disclosure of such information should
be made accordingly did not in fact arise.
[36]
A number of reasons were present why the appellants legitimately apprehended that the agreement concluded
between the first and second respondent might in fact have had the effect of a transfer of the business of the first respondent or
a part thereof as a going concern. Despite the clear statement by Fraser at times that the effect of the agreement was not such a
transfer, on a number of occasions various descriptions were applied to the agreement and its effect which were quite appropriate
if in fact a transfer as a going concern had been effected. At one stage NEWU was advised that not only was the second respondent
acquiring the assets of the first respondent but would also discharge its liabilities. The second respondent immediately commenced
business at the same premises where the first respondent had conducted operations and utilised the same telephone number. Finally,
although NEWU voiced concern regarding the appellants’ interests in safeguarding their continuity of service, and registered
the complaint that the agreement had not been made available for perusal, the first respondent, through Fraser, remained throughout
coy about disclosing the full terms of the agreement and information concerning its liabilities. Even it be accepted that Fraser
did on one occasion in fact offer perusal of the agreement and the schedule of the first respondent’s liabilities to Nomvela,
the response of the latter in effect conveyed that he would not be able to make head or tail thereof, and on Fraser’s own version
he would not have allowed Nomvela to take copies of the documents away with him. Even after proceedings had been instituted and production
of the agreement was demanded, neither of the respondents saw fit to comply such demand. One asks the question, why?
[37]
If in fact a transfer as a going concern had been effected, the appellants would be entitled to the
benefits accorded to them in terms of section 197, and they would be entitled to reject any other benefits which either of the respondents
sought to accord them in lieu thereof. In the event of non-recognition by the respondents of the entitlement to the firstmentioned benefits and an insistence that
the lastmentioned benefits be accepted the appellants could, in terms of section 158(1) (a) (iv), approach the Labour Court for an
appropriate declarator.
[38]
If on the other hand no transfer as a going concern was effected, but the effect of all that transpired
was a transfer of the contracts of employment of the appellants without their consent - and on the evidence that possibility cannot
be excluded - such transfer would have fallen foul of the provisions of section 197. Again, if need be, the appellants could approach
the Labour Court for the appropriate declarator.
[39]
As demonstrated above, there is good reason to apprehend that in fact a transfer as a going concern was
effected or, alternatively, that a transfer of employment contracts in contravention of section 197(1) had been effected, and that
the rights of the appellants are being infringed. In such circumstances and in order to enable the effective exercise of its jurisdiction
to issue the declarators referred to, the Labour Court has the power to order the disclosure of information bearing on the existence
or otherwise of those rights. Such an approach not only promotes fairness, but is also practical in that its facilitates the determination
of what rights exist and may have the effect of obviating unnecessary litigation. See, too, section 158(1)(j) of the Act which empowers
the Labour Court to deal with all matters necessary or incidental to performing its functions in terms of the Act or any other law.
[40]
Although at certain stages during the negotiations between NEWU and Fraser the latter adopted the stance
that certain of the information demanded was confidential, neither of the respondents raised the defence of confidentiality in the
Court a quo as a counter to the appellants’ application. That the information in question is in fact not confidential is borne out by Fraser’s
alleged offer to Nomvela to disclose same and the second respondent’s attempt informally to place portion of the alleged information
before this Court (as to which see [41] - [44] infra). Indeed, at the hearing of the appeal. Mr COETSEE, on behalf of the first respondent, pertinently stated that he had no objection
to the disclosure of the information in question.
[41]
After the noting of the appeal, and in response to the notice of set down sent to the second respondent,
that respondent (which, again, did not seek to oppose the appeal proceedings) addressed a letter to the Registrar of this Court reading
as follows:
“We refer to your fax dated the 16 October 1997 in connection with the above case, and enclose the following for your consideration.
(1)
The purchase and sale agreement between National Rubber Products cc and L.M.K. Manufacturing (Pty)
Ltd, with particular reference to page 4 paragraph 1.15.4 and page 5 paragraph 6, and the fact that only the assets of the business
were purchased.
(2)
A copy of the contract of employment signed by all employees with particular reference to Page
1 paragraph 1.”
[42]
In a subsequent letter the second respondent confirmed that it was not seeking to oppose the appeal
and stated that its intention in sending the documents to the Registrar was “purely to point out to the hearing the relevant
paragraphs pertaining to the case our point of view.”
[43]
It need hardly be stated that documents informally placed before this Court in this manner cannot be
taken into account. I would, however, en passant, mention the following: the heading of the sale agreement submitted does not correspond to that to which reference was made during
the discussions set out earlier in this judgment; the close corporation reflected in the agreement as the purchaser is not the second
respondent (although the registration number is the same as that reflected on the letterhead of the second respondent), and in this
regard it may be noted that the evidence was that on a date well after 26 May, the date on which the agreement submitted by the second
respondent was signed, a document was produced by Fraser which reflected the second respondent as the purchaser; contrary to what
Massprac conveyed to NEWU, as recorded earlier in this judgment, the alleged agreement provided that the first respondent would discharge
its liabilities to its creditors; neither the schedule setting out the assets purchased nor the schedule of liabilities referred
to in the agreement as annexures thereto, accompanied the document submitted by the second respondent.
[44]
In the circumstances this Court is not called upon to consider what the effect of the alleged agreement
as submitted by the second respondent,was, nor indeed would it be proper for it to do so.
[45]
I turn now to consider the relief sought by the appellants in the Court a quo.
[46]
As already indicated earlier in this judgment Kriel and Fraser had no legal interest in the proceedings,
no relief was claimable against them and they should not have been joined as parties. The remarks that follow are subject to this
comment.
[47]
For the purposes referred to earlier I consider that the following information should have been disclosed
by the first and/or the second respondent as the case may be:
(1)
a copy of the notice of intention to alienate its business and/or assets published by the first
respondent in terms of section 34 of the Insolvency Act, No. 24 of 1936 (if in fact there was such a publication);
(2)
details of all the first respondent’s assets and liabilities immediately prior to the alleged
sale concluded between the two respondents;
(3)
the original or a copy of the alleged agreement concluded between the two respondents together with
all annexures thereto (which would have disclosed details of the assets sold, information which the appellants sought separately).
[48]
I am not persuaded that there was any reason why the appellants should have been favoured with information
as to the forenames or initials and surnames of the members of the second respondent or with “written proof of any alleged
valid sale agreement” (whatever that may mean).
[49]
The appellants were not entitled to an order interdicting the respondents from carrying out any agreement
concluded between them or the second respondent from taking over the business or assets of the first respondent, whether on the basis
contended by the appellants as set out in [25 (4)] above or on any other basis. The rights of the appellants will be governed by
what, in the result, it transpires did occur in relation to and flowing from the agreement concluded between the respondents.
[50]
On the present papers the appellants were not entitled to any order that “the already implemented
transfer of the contracts of employment” be declared invalid and/or null and void. That there was such a transfer was not established
on the papers. If, on the disclosure of the information referred to above and on further investigation, it transpires that such a
transfer took place, the appellants may take such steps as they are advised to do.
[51]
There was no basis in law on which the Court a quo could have declared the “already given offers of employment” to some of the appellants to be invalid and/or null and
void.
[52]
The appellants were not entitled to an order that the “statutory safeguards provided for in section
197(2)(a)” be incorporated in the agreement concluded between the respondents or that the agreement incorporate a clause providing
that the purchaser retain all the employees of the seller on terms not less favourable than those applicable prior to the sale. The
rights of the appellants will be dependent on the precise nature and effect of the agreement concluded between the respondents read
with the applicable statutory provisions. When that has been determined the appellants may take such steps as they are advised to
do for the safeguard of their rights.
[53]
There was no basis in law on which the respondents could have been ordered to incorporate into their
agreement provision for the organisational rights of NEWU. Those rights either exist or they do not.
[54]
On the present papers there was no basis in law on which an order declaring the contracts of employment
concluded on 30 June 1997 between the second respondent and the employees which it “re-employed” to be invalid and of
no force and effect, could have been granted by the Court
a quo. If in due course it transpires that in fact these contracts fell foul of the provisions of section 197, it will be open to the appellants,
if so advised, to seek appropriate relief in that regard. Insofar as reliance was sought to be placed on the undertaking allegedly
given at the time the application in the Court
a quo was postponed, suffice it to say that the second respondent was not a party thereto.
[55]
The question of costs remains.
(1)
The appellants have achieved substantial success on appeal and, subject to what follows, are entitled
to the costs thereof as against the first respondent. The record on appeal contained a transcription of the oral argument presented
in the Court a quo. That transcription ran to 82 pages. Rule 5(12)(b) of this Court provides that, unless the merits of the appeal are affected thereby,
the record of oral argument in the court below must not be included in the record on appeal. The only portion of the record of oral
argument which was of assistance in the appeal was the 4 pages reflecting the amended relief being sought by the appellants. The
costs of appeal will accordingly not include the costs of 78 pages of the record of oral argument. The costs of appeal will also
not include the costs of the aspects referred to in [59] and [60] below.
(2)
Kriel and Fraser should not have been joined as parties in the Court a quo. On the other hand those two persons, while not raising a plea of misjoinder, actively opposed the application. In the circumstances
it would be fair that no costs order be made in respect of the suit between the appellants and them.
(3)
The effect of the order to be made on appeal is that the appellants should have been substantially
successful in the Court a quo. The appellants are accordingly entitled to the costs of those proceedings. An order to that effect can, however, only properly be
made against the first respondent. The appellants’ notice of motion in terms gave notice that only in the event of any of the
other respondents opposing the application would a costs order be sought against them. The second respondent was accordingly entitled
to sit back secure in the knowledge that whatever order was made on the merits of the application its failure to oppose the application
rendered it immune to a costs order against it.
[56]
Two further aspects require to be considered. The appellants failed timeously to deliver a power of
attorney authorising NEWU to prosecute the appeal on their behalf as required by Rule 6(1) of this Court. The point was taken in
the heads of argument filed on behalf of the first respondent, it being contended that the appeal was on that basis fatally defective.
In response thereto the appellants (per the first appellant) filed an affidavit confirming that in fact NEWU had been duly authorised
to prosecute the appeal on their behalf. The purpose of Rule 6(1) is to prevent appeals being prosecuted by a representative purportedly
on behalf of a litigant while that representative in fact has no mandate to do so. The affidavit referred to sufficiently establishes
the required authority on the part of NEWU and in fact constitutes a power of attorney. The explanation for the failure to file a
power of attorney timeously or, indeed, at all prior to receipt of the first respondent’s heads of argument - said to be due
to considerations of urgency and geographical distances - is in fact no explanation. Nevertheless, fairness dictates that the late
filing of the power of attorney be condoned.
The costs of the affidavit referred to cannot, however, be for the account of the first respondent.
[57]
It was also necessary for the appellants to seek an extension of the time within which to file the record
on appeal. The failure to file the record timeously was not due to the fault of any of the parties, but to an administrative error.
The costs of the application for the extension must accordingly lie where they fall.
[58]
In the result the following order will issue:
(1)
The appeal is upheld to the extent set out in paragraph (2).
(2)
The order of the Labour Court is set aside and for it is substituted the following:
“1.
The first respondent is ordered forthwith to furnish the appellants’ trade union,
National Entitled Workers’ Union, with
(a)
a copy of the notice of intention to alienate its business and/or assets to the fourth respondent
published by the first respondent in terms of section 34 of the Insolvency Act, No. 24 of 1936, alternatively, and in the event of
no such notice having been published, to advise the said trade union accordingly;
(b)
full details of all the first respondent’s assets and liabilities immediately prior to the
sale agreement concluded between the first and fourth respondents;
(2)
The first and fourth respondents are ordered forthwith to furnish the appellants’ said trade
union with the original or, alternatively, a copy of the, sale agreement concluded between the said respondents.
(3)
The applicants’ costs will be paid by the first respondent.”
(3)
The costs of the appeal will be paid by the first respondent; provided that such costs shall not
include:
(a)
the costs of the inclusion in the record on appeal of 78 pages of the oral argument in the Court
a quo;
(b)
the costs of the affidavit filed on behalf of the appellants relating to their failure to file
a power of attorney authorising NEWU to prosecute the appeal on their behalf;
(c )
the costs of the appellants’ application for an extension of time within which to file the record
on appeal.
____________
KROON JA
I agree
_____________
MYBURGH JP
I agree
_______________
FRONEMAN DJP
DATE OF HEARING:
11 February 1998
DATE JUDGMENT DELIVERED:
13 February 1998
FOR APPELLANTS:
M. D. Maluleke
FOR RESPONDENTS:
D. Coetsee
This judgment is available on the Internet at Website: www.law.wits.ac.za/labour crt.
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