“ In Kleena Industries (Pty) Ltd v Senator Insurance Co Ltd 1982 2 SA 458 (W) Slomowitz AJ wens so far as to hold at 463 that: “where the Act refers to a sanctioned composition as being binding on all
creditors or on all members of a particular class of them, the word “all” must be qualified to mean no more than all
those whom the offeror intended, on proper construction of the offer, should be bound”. If this is correct then, whether or not a particular compromise is binding on creditors in respect only of those claims by virtue
of which they are, or claim to be, creditors will depend upon the correct construction to be upon the terms of that compromise”. (Emphasis added)
[20]
I also accept that it was competent for the third respondent challenged the applicability of the scheme
of arrangement to the 64 dismissed employees in the proceedings before the second respondent, as opposed to challenging the scheme
in the High Court itself. See Barclays National Bank Ltd v H.J. de Vos Boerdery 1980(4)SA 475(AD) at 484 A-B.
[21]
“Creditors” are not defined as such in the scheme of arrangement and they therefore must
be ascertained by a perusal of the other provisions of the scheme.
[22]
Clause 5.5 of the scheme of arrangement deals with the rights after sanction and provides that they “(save
for the excluded creditors) be confined to the right to claim payment from the receivers of his/its dividend in terms of clause 4.2.1
supra and no creditor (other than the excluded creditors) shall after the final date have any claim against the company”. The
excluded creditors are defined and include a number of banks, financial institutions and others. It is common cause that the third
respondent and 64 employees are not excluded creditors.
[23]
A “claim” is defined as “any claim of whatever nature and howsoever arising [including
claims] for payment or performance. A “contract” is defined to include a “contract of employment”. The plain
meaning of “claim” includes a claim for reinstatement, (which is a form of specific performance) or for compensation
and the definition of “contract” clearly implies that contracts of employment were always contemplated.
[24]
Mr Pillemer, who appeared for the third respondent, argued that the proper forum for a determination
of the merits of whether the dismissed employees’ claims survived the scheme of arrangement was the private arbitrator mentioned
in the collective agreement. There are two problems with this submission. The first is what could be termed a jurisdictional fact,
namely, whether, the scheme disposed of the dispute by novating or compromising it, there was a existing dispute to refer to private
arbitration. The second problem relates to the proper forum for resolving such a dispute; in other words, whether the arbitrator
should entertain such a claim, given that the scheme provided the High Court of the Eastern Province Local Division as the forum
for dispute about claims in terms of clause 5.1.6 read with the definition of “court”.
[25]
In order to proceed to private arbitration the third respondent had to show that there was an existing
claim by the dismissed workers for reinstatement. If the claim had been compromised by te scheme, then the right to proceed to arbitration
was extinguished. As I have already indicated, the claims for reinstatement fell into the wide definition of “claim”
and ceased to exist save in the context of enforcement against the receiver.
[26]
Where a party takes the view that impending arbitration proceedings will be invalid, a difficult question
arises on what such a party should do about such arbitration proceedings. The one option is for such party to approach a court of
competent jurisdiction and seek an appropriate order before such arbitration proceedings can commence. Another approach would be
to raise the objection in such arbitration proceedings, and, if the objection is dismissed, participate in the arbitration proceedings
under protest and only approach the court of competent jurisdiction for appropriate relief if such party is aggrieved by the outcome
of such proceedings. The third is for such party not to participate at all in the arbitration proceedings but to await the outcome
thereof and, approach the court of competent jurisdiction if such party gets aggrieved by the outcome. Botha J expressed preference
for the first approach in Inter Continental Finance and Leasing Corporation (Pty)Ltd v Stands 56 and 57 Industria Ltd 1979(3)SA 740(W)
at 754. In Fidelity Guards Holdings (Pty) Ltd v Epstein NO & others (2000) 21 ILJ 2382 (LAC) at par 20 this Court expressed doubt
that a hard and fast rule can be fixed in regard to such situations. In my view which of the routes is preferable is dictated to
a very large extent by the facts of each case and the circumstances surrounding it.
[27]
Mr Pillemer argued that the third respondent as a union had rights separate from the rights of the members
whose reinstatement it was seeking. It will be recalled that in the dispute referred for arbitration the third respondent sought
the following relief: “2. Determination that the employer is obliged to refer to arbitration under the said collective agreement
the dispute relating to the dismissal of union members for alleged (sic) various acts of misconduct”. The third respondent
sought no relief qua union.
[28]
It is also clear from the correspondence between the bargaining council and the appellant that the third
respondent was involved in a balancing act - which was indeed the laudable approach - of trying to secure as many existing jobs of
its members as possible. The third respondent presumably concluded that its best interest lay in supporting the scheme and therefore
preserving the jobs of the workers retained by the appellant.
[29]
Mr Tip argued that, when the offeror in the scheme of arrangement- Dacman - considered buying shares
in the appellant, it was only right and just that an accurate and clear picture was obtained as to the creditors that Dacman would
have to deal with. The excluded creditors were named and Dacman was aware that it would deal with those separately.
[30]
Insofar as the other creditors were concerned Dacman made an offer to them on the basis that there were
no claims unaccounted for. It is for that reason that “claim” definition was couched in a wide language to make sure
that no creditor could hide in the background and ambush the offeror - Dacman - with a claim which was not covered by the scheme
of arrangement. If the word “claim” excluded the rights of the dismissed employees to bring their dispute to a private
arbitration and claim reinstatement and backpay, Dacman faced the prospect of very expensive litigation in the first place and in
the second place the possibility of having to reinstate 64 employees and pay astronomical amounts of backpay if such were successful.
In addition Dacman would have to find jobs for the reinstated workers.
[31]
If the word “claim” excluded the dismissed workers’ rights to reinstatement and backpay,
the offeror might have thought might have thought twice about putting forward the scheme. Had Dacman backed out of the scheme the
appellant might well have been finally liquidated and the members of the third respondent, who were still working there, would probably
have also lost their jobs. Such a state of affairs would have been detrimental to all parties concerned. The correspondence reveals
close co-operation between the appellant and third respondent in backing the scheme on the basis that it was mutually beneficial,
certainly insofar as the members who had jobs were concerned.
[32]
Mr Pillemer referred us to a conflict, or potential conflict between s. 311 of the Companies Act ans
s. 24 of the Labour Relations Act, in which event the latter statute prevails. See s. 210. Section 24 requires every collective agreement
to contain certain conciliation and arbitration provisions. Such provisions are indeed to be found in the collective agreement in
the present appeal. In terms of subsection (2) disputes or alleged disputes about the interpretation or application of a collective
agreement may be referred to the CCMA if: “(b) the procedure provided for is not operative”. A dispute unresolved by
conciliation may be referred to arbitration. See subsection (5).
[33]
Turning to s.311 of the Companies Act, itself say nothing different. The scheme of arrangement, as sanctioned
by the High Court, provided for the dispute claims of creditors (i.e disputed by the receivers) to be determined by a different forum,
namely, the Eastern Cape Division of the High Court. This is not an uncommon stipulation in certain kinds of schemes of arrangement.
No doubt the learned Judge could have ordered otherwise, but I suspect that he was not asked to do so.
[34]
What then is or are the dispute(s) in the present matter? It is not the union’s case that the previously
dismissed workers have sought to prove claims in terms of the scheme of arrangement, which claims have been rejected by the receivers.
The union’s real case, however, is that the previously dismissed workers are not bound by the scheme of arrangement at all,
and that such of the workers who have good claims should be paid not a dividend out of some special fund, but in full. This is the
real question which the union presented for conciliation and arbitration. albeit in jurisdictional terms. Thus the union relied,
inter alia, on the revival of the collective agreement. For reasons which appear elsewhere in this judgment, the revival argument
must fail in relation to the previously dismissed workers.
[35]
I can see no fundamental conflict between s.311 of the Companies Act and the provisions of the Labour
Relations Act. Section 311 has been on the statute book for many years and it serves a useful purpose, especially when companies
run into trouble. That is demonstrated by the facts of the present case. It seems unlikely that Parliament, when enacting the Labour
Relations Act, intended to undermine s.311 whenever a company, being rescued from insolvency, has employee creditors and a collective
agreement, which is often the case. In the standard type of s.311 arrangement with the creditors, the employees will have a vote
as creditors, which they can exercise for or against the proposed scheme according to their best interests. I do not think that the
legislature intended to take that opportunity away from them or to preclude the opportunity for compromise afforded by s.311. In
this case it was open to the dismissed employees, as creditors to seek to persuade, first the majority in the creditors meeting,
and, secondly, the High Court, that disputes such as the dismissal disputes be referred to arbitration. They did not do so.
[36]
It is so that the provisions of a particular scheme of arrangement may offend against the Labour Relations
Act in a respect which escapes the attention of the Judge who sanctioned the scheme. That situation does not arise here in a material
way.
[37]
I am therefore of the opinion that the rights of the dismissed employees to bring reinstatement proceedings
for their dismissal fell within the definition of a “claim” in the scheme and that their rights to arbitrate such claims
were extinguished by the sanctioning of the scheme.
[38]
If the 64 dismissed employees had a claim then such had to be dealt with in terms of the scheme of arrangement.
In Serein Investments(Pty) Ltd v Myb (Pty) Ltd 1967 4 (SA) (C) 438, Diemont J said:
“Whereas previously a creditor had the right to sequestrate the company and look to the liquidator to pay him a dividend in due course,
he is obliged now to sit back and wait for the provisional liquidator or receiver to implement the terms of compromise. The compromise
is binding upon and unimpeachable - even if he did not vote for it - until such time as it has been set aside. If he disapproves
of the method of distribution as being in conflict with the terms of the compromise, he may have a remedy against the receiver. He
may even be entitled to ask the Court to set aside the compromise - this is an issue that was not argued and I express no final view
on it”.
[39]
Any claim they had lay against the receiver under the scheme and if there was a dispute such had to be
referred to the High Court as I have mentioned. For this additional reason the third respondent had no right to seek private arbitration.
The agreement concluded between appellant and the third respondent on 29 August providing for the taking over of the existing procedural
agreement, does not take the matter any further. That the recognition agreement was resurrected did not mean that the claims by the
dismissed workers were given new life. At best for the third respondent it provided for the same mechanisms to be available for workers
dismissed after that date.
[40]
It seems to me that the award of the commissioner is clearly reviewed on a number of grounds. The commissioner
found that a dismissed employee “should not be disbarred from establishing a claim for the purposes of enforcing it against
the insolvent estate of his employer by following the arbitration route”. Secondly he found that there was no indication in
the Companies Act or the scheme “that existing procedural rights contemplated in the [recognition] agreement to resolve dispute
of right through arbitration have been terminated”.
[41]
The commissioner focussed on the continued existence of the recognition agreement and failed to properly
appreciate the implications of the adoption of the scheme of arrangement. He failed to appreciate that the rights of the dismissed
employees fell within the definition of a claim in the scheme. For the reasons set above it is clear that those conclusions were
materially defective. The award was not justifiable as to the reasons given and there were material legal and factual errors in the
reasoning process that one must conclude that there was no fair trial of the issues and that a gross irregularity of the latent type
has taken place. See Toyota South Africa Motors (Pty) v Radebe and Others [2000] 3 BLLR 243 (LAC) at 250A-C and 257H-I. It can also be said that the award was not rationally related to the purpose for which the power was given
from an objective point of view. See Shoprite Checkers (Pty) Ltd v Ramdaw NO and Others 2001 (4) SA 1037 (LAC) para [26].
[42]
This appeal raised issues of some complexity and justified the employment of two counsel. Success for
the appellant must, therefore, include such costs.
[43]
In the result:
a.
the appeal is upheld with costs, including those consequent upon the employment of two counsel;
b.
the judgment of the court a quo is set aside and replaces with the following order:
(i) “the Award of the second respondent is hereby set aside.
(ii) The third respondent is ordered to pay the costs of this application”.
_________________
NICHOLSON JA
I agree.
________________
ZONDO JP
I agree.
__________________
COMRIE AJA
Appearances:
For Appellant:
Adv. S.K. Tip SC
with Adv. A.T. Myburg.
Instructed by:
Pierre Naude and Associates
For Respondent:
Adv. M. Pillemer SC
Instructed by:
Channels Albertyn and Tanner
Date of Hearing:
11 June 2002
Date of Judgment:
11 December 2002
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