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Hunt v ICC Car Importers Services Company (Pty) Ltd (J992/97) [1998] ZALC 96 (30 October 1998)

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Case Number: J992/97

In the matter between

N Hunt Applicant


ICC Car Importers Services Company (Pty) Ltd Respondent



[1] Noeleene Hunt was offered a position as an accountant with ICC Car Importers Service Company (Pty) Ltd (“ICC”). The terms of the agreement were that she would assist the financial manager. Part of her function was to supervise other staff members. She was to commence work on 22 January 1996, work at ICC’s premises from 08:15 until 17:00 Mondays to Fridays, and be on probation for a period of three months. Her commencement salary according to the letter “re conditions of employment” which, as it was put, “serves to confirm your conditions of employment as agreed to by both parties” was R7 500.00 (per month) but was to be reviewed after the probationary period had expired. She was entitled to 15 working days leave per year. There was no pension or medical aid fund.

[2] All this is unremarkable. It reflects the normal terms and conditions applicable to a contract of employment. There was one snag. Ms Hunt wanted to be paid R8 500.00 nett. ICC felt that it could not pay this as it would have to pay her about R14 000.00 gross and deduct PAYE and pay it over to the Receiver of Revenue. So Mr Tee of ICC suggested, with the concurrence of Mr Sayers and Mr Fisher (the directors), that she find a company willing to provide them with a tax invoice. They would pay her R7 500.00 for the first three months and increase her salary to R8 500.00 thereafter. Ms Hunt talked to Mr Michael Taylor, the sole member of Michael Taylor and Associates CC (“the CC”). He was willing to go along with the plan.

[3] In the result, the CC provided invoices in the wording suggested by Mr Tee, namely for “Financial Consulting Services”. The invoices included VAT. The CC was paid the amount due i.e. R8 500.00 plus VAT. Sometimes the cheque was deposited into the CC’s account and the R8 500.00 was paid to Ms Hunt. At other times she deposited the cheque and paid the VAT to the CC. Ms Hunt submitted a return to the Receiver of Revenue, drawn up by Mr Dick Shear, which reflected that she operated a business. Certain deductions, in the amount of R18 749.00, were made from the proceeds of this business as reflected on an income statement. Ms Hunt said that these deductions were fictitious and that she did not operate a business.

[4] Prima facie, the dominant impression is that ICC employed Ms Hunt as an employee, but in order to pay her what she wanted they devised this scheme, which is a fraud on the Receiver of Revenue, to avoid paying the tax which would be due. The invoice scheme, intended to give the impression that she was an independent contractor, was fraudulent. It was not intended to be the true contract. It was a sham. This distinguishes it from the position in CMS Support Services (Pty) Ltd v Briggs (1998) 19 ILJ 271 (LAC), and the reasoning there is thus not applicable here. The true contract was an employment contract.

[5] Ms Hunt became pregnant. Three months unpaid maternity leave was agreed upon. She gave premature birth on 13 September 1996. This disrupted ICC’s planning and it resulted in their terminating the relationship. ICC alleged, but led no evidence, that the real contract was between it and the CC and stated that this had been terminated. This cannot succeed. I have found that the contract was a sham known to all involved. Ms Hunt’s services as ICC’s employee was terminated. The most probable reason for this termination emerging from the uncontested evidence presented for Ms Hunt was that her confinement and the consequences following from it were inconvenient to ICC. I am satisfied that the contract was terminated for reasons related to her pregnancy. This makes the dismissal an automatically unfair dismissal, in terms of s187(e) of the Labour Relations Act 66 of 1995.

[6] Ms Hunt does not wish to be re-instated in her employment with ICC. She seeks compensation. I have a discretion to award her compensation or not (See Johnson & Johnson (Pty) Ltd v CWIU, an unreported decision of the LAC, Case Number PA15/97).

[7] Ms Hunt resumed work at about the end of January 1997 for another employer with remuneration on an hourly basis. She later entered into a contract of some kind with this employer. Ms Hunt was very casual and unhelpful about what she was earning. She produced no pay slips or statements. She did not provide a tally of the hours she worked. She conceded that she earned between R7 000.00 and R8 000.00 per month initially and currently earns about R11 000.00 per month. In my opinion her patrimonial loss must be confined to the period following the three month expiry of her maternity leave and the date she commenced working for her new employer i.e. a period of about six weeks.

[8] She must also be awarded a solatium for the harm she suffered. She was shocked to have lost her employment. It happened at a stage when she had to cope with a premature baby. It left her without a prospect of income. Mr Taylor attested to the loss of self esteem and confidence which it occasioned. I am of the view that a solatium equivalent to six months compensation would be just and reasonable in the circumstances.

[9] Of course there is the difficulty that applicants should not be allowed to avoid the tax laws when it suits them and then revert to the status of an employee when it is advantageous to do so. This court should not encourage such behaviour. I intend to follow the solution proposed in Young and Woods Ltd v West [1980] EWCA Civ 6; [1980] IRLR 201 CA (see Smith and Thomas Smith and Woods Industrial Law 6th Edition, at 15) and inform the Commissioner for Inland Revenue and thus invite an investigation and a reassessment. As it has been put by Smith and Thomas (at 15) “knowledge that this is a possibility could be a considerable disincentive to the person who is thinking of trying to alter his status at this late stage”.

[10] In the premises I award the applicant compensation in the amount of R63 750.00. There is no reason at all why costs should not follow the result. The respondent is ordered to pay the applicant’s costs of suit. I direct the Registrar to forward a copy of this judgment to the Commissioner for Inland Revenue.

A A Landman

Judge of the Labour Court


DATE OF HEARING: 28 October 1998

DATE OF JUDGMENT: 30 October 1998

For the Applicant: Ms. A Vatalidis of Pienaar Swart & Nkaiseng Attorneys

For the Respondent: Adv Ress

Instructed by: Howard Lang & Partners