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THE LABOUR APPEAL COURT OF SOUTH AFRICA, JOHANNESBURG

 

Not Reportable

Case no: JA 145/2023

 

In the matter between:

 

MOBILE TELEPHONE NETWORKS (PTY) LTD           Appellant

 

and

 

M NJOKWENI & OTHERS                                             First and further Respondents

 

Heard:          27 May 2025

Delivered:    11 August 2025

Coram:        Van Niekerk JA, Tokota AJA et Basson AJA

 

JUDGMENT

 

VAN NIEKERK, JA

 

Introduction

 

[1]  This is an appeal against a judgment of the Labour Court delivered on 21 July 2023. In its judgment, the Labour Court dismissed a plea of prescription and upheld the respondents’ claim for remuneration for the period 1 December 2010 to 14 December 2017. The Court ordered that the quantum of the arrear remuneration be deferred to a hearing in due course. The appellant (MTN) appeals against that judgment with the leave of this Court.

 

Factual background

 

[2]  During 2000, MTN established a call centre in KwaZulu-Natal. In 2006, MTN concluded a service level agreement with Interaction Call Centre (Pty) Ltd (Interaction) in terms of which the latter would manage and administer the call centre on MTN’s behalf. The respondents were employed by Interaction for this purpose. On 30 November 2010, MTN cancelled the service level agreement with Interaction. The next day, 1 December 2010, MTN resumed control of the call centres previously operated by Interaction and with effect from the same date, Interaction terminated the respondents’ contracts of employment.

 

[3]  On 11 May 2011, some of Interaction’s erstwhile employees, represented by their trade union (CWU), filed an application in the Labour Court, Durban. CWU contended that in terms of section 197, consequent on the transfer of a business from Interaction to MTN, the contracts of employment of its members who had been employed by Interaction transferred to MTN. MTN disputed that section 197 applied to the transfer of the business from Interaction, and that any contracts of employment had transferred from Interaction to MTN in terms of that section. The Labour Court dismissed the application on the basis that section 197 did not apply to the cancellation of the service level agreement between Interaction and MTN and the resumption of control of the call centres by MTN. On 21 April 2015, this Court set aside that decision and declared that there had been a transfer of a business as a going concern for the purposes of section 197 of the Labour Relations Act[1] (LRA) from Interaction to MTN, and that with effect from 1 December 2010, CWU’s members were, in law, to be regarded as employees of MTN, with no loss of service. This judgment is referred to in the record as ‘MTN I’[2].

 

[4]  The respondents in the present instance were not party to MTN I.

 

[5]  On 12 October 2016, 18 months after the delivery of MTN I, the respondents sought to benefit from MTN I by way of an application filed in the Labour Court under case number D1135/16. Specifically, the respondents sought a declaratory order that they too became employees of MTN with effect from 1 December 2010 by virtue of the operation of section 197 of the LRA.

 

[6]  On 6 December 2017, the Labour Court (per Lagrange J) issued the following order (the Lagrange J order), with no order as to costs:

‘Consequent on the order of the Labour Appeal Court Communication Workers Union and others v Mobile Telephone Networks (Pty) Ltd and Another (DA 10/13 dated 21 April 2013) declaring that there was  a transfer of a business as a going concern by the second respondent [Interaction] to the first respondent [MTN] and that such transfer fell within the ambit of section 197 of the LRA, the first to sixth applicants are declared to be the employees of the first respondent effective from 1 December 2010 with no loss of service.’

 

[7]  MTN did not appeal against the Lagrange J order. On 12 December 2017, MTN instructed the respondents to report for duty at its head office in Johannesburg on 14 December 2017. On that date, only the first respondent reported for duty in Johannesburg. He was re-employed by MTN and remains so employed. The second to sixth respondents tendered their services in Durban and refused to report for duty.

 

[8]  During May 2018, MTN instituted disciplinary proceedings against the second to sixth respondents and ultimately dismissed them for unauthorised absence from work. They disputed the fairness of their dismissal and referred a dispute to the CCMA. On 11 March 2019, these disputes were settled on the basis that MTN acknowledged that the respondents were its employees by virtue of the operation of section 197, and that each employees’ employment effectively terminated by agreement against payment of what was described as a severance package.

 

[9]  On 25 April 2018, the respondents instituted proceedings against MTN by filing a statement of case in the Labour Court, Durban. The matter was subsequently transferred to the Labour Court in Johannesburg.

 

[10]  In the interim, in the separate dispute brought by CWU, despite MTN I, MTN had refused to pay the employees party to those proceedings their remuneration for the period 1 December 2010 to 21 April 2015. In a further application to the Labour Court, the employees sought an order directing MTN to comply with the order granted by this Court in MTN I, and that they be paid their remuneration for the period 1 December 2010 to 21 April 2015. MTN raised two defences – that the employees’ claim had prescribed, and that the employees had failed to tender their services and were thus not entitled, in law, to their remuneration for the period claimed. These defences were rejected by the Labour Court, which found in favour of the employees. On appeal to this Court, this Court dismissed the appeal. Regarding the issue of prescription, this Court held that obtaining a court order to the effect that MTN was their employer was an essential element of the employees’ claim, and thus effective in interrupting the running of prescription in respect of the claim for remuneration for the period 1 December 2010 up to and including 21 April 2015. This judgment, delivered on 5 April 2019, is referred to as MTN II.[3]

 

[11]  The dispute referred to the Labour Court by the respondents in the present instance proceeded ultimately by way of a stated case. The first respondent claimed payment of his remuneration for the period 1 December 2010 to 13 December 2017 (the date immediately prior to his re-employment by MTN); the second to sixth respondents claimed remuneration, including annual increments and bonuses, for the period 1 December 2010 to 11 March 2019, being the date of their retrenchment. MTN raised the same defences of a failure by the respondents to tender their services, and the prescription of their claim. The respondents contended, based on MTN I and II, that they were not required to tender their services in circumstances where their contracts of employment had been transferred automatically from Interaction to MTN. Further, since it was only on 6 December 2017 (being the date of the Lagrange J order) that they were declared to be employees of MTN, there was in any event no basis for MTN to contend that they had failed to tender their services prior to that date. That notwithstanding, the respondents averred that the referral of their dispute to the CCMA and the filing of their application in the Labour Court constituted proof of the tender of their services. Regarding prescription, the respondents contended that it was only on 6 December 2017 (the date of the Lagrange J order) that the identity of their debtor was established and that in those circumstances, prescription commenced to run from that date.

 

[12]  The Labour Court heard argument on a number of preliminary points raised by MTN. In respect of MTN’s defence that the respondents had not tendered their services during the periods for which they claimed remuneration, the Labour Court concluded that the respondents were not required to tender their services in circumstances where their employment contracts had been transferred, by operation of law, from Interaction to MTN. The Court considered that the declaratory order issued in MTN I was not akin to an order for reinstatement – it required the new employer (MTN) to permit the employee to work, and to pay any arrear remuneration due to them. The Labour Court concluded:

‘[16]  The upshot of this finding, in my view, is that the resistance by the new employer that section 197 transfer took place and the subsequent declaratory relief in favour of the employees does not interrupt or revive the employment relationship. Therefore, it is not required of the transferred employees to tender their services as the arrear remuneration for the period covered by the declaratory order, (i.e. from the effective date of the transfer to the date of the order), is due to them by the operation of the law as declared by the court order.

[17]  Likewise, the applicants in this instance were not required to tender their service from the period between 10 December 2010 to 14 December 2017. Accordingly, they are entitled to be paid their arrear remuneration for this period.’

 

[13]  In respect of the defence of prescription, the Labour Court held the following:

‘[19]  MTN’s prescription defence seems to be prompted by the fact that the applicants sought a declaratory relief after they, as contended, loafed around for six years after the effective date of the section 197 transfer. As such, it contended primarily, that the applicants’ claims prescribed on 1 December 2013, three years after the section 197 transfer. Alternatively, if prescription was interrupted by the applicants tendering their services on 14 December 2010 [sic -should read 2017], their claim for payment of their salaries for the period between 1 December 2010 and 14 December 2014 has prescribed.

[20]  The applicants, on the other hand, contend that it was only on 6 December 2017, upon the handing down of the judgment and order granted by Lagrange J, that their right as employees as envisaged in section 197 was confirmed. As such, the running of prescription commenced thereon. In any event, so they contend further, prescription could never have commenced running up until 6 December 2017 as MTN had been denying being the debtor. …’

 

[14]  The Court went on to refer to MTN II:

‘… To buttress this contention, reliance is placed on the Pillay II judgment where the LAC held:

‘[29]  The defence of prescription is, similarly, disingenuous for various reasons, the most obvious being that it fails to address the impact which the appellant’s resistance to the respondents’ claims, that it had become their employer, and the steps taken by the respondents in that regard, had on the running of prescription.

[30]  It was correctly submitted by the respondents’ counsel that the application for a declaratory order launched on 11 May 2011, effectively interrupted the running of prescription as contemplated in section 15 of the Prescription Act and that this interruption endured until this Court finally decided that application on 21 April 2015.

[31]  Section 15(1) of the Prescription Act provides that “the running of prescription shall, subject to the provisions of subsection (2), be interrupted by the service on the debtor of any process whereby the creditor claims payment of the debt”. The application for the declaratory order is process as contemplated in that section. It is for the enforcement, inter alia, of the very right the respondents have to the payment of remuneration, or for the substantial enforcement of that right. Unless the appellant was the employer of the respondents it would have no obligation to pay them a salary or wages as per their contracts of employment. Obtaining a declaratory order, that the appellant was indeed their employer, was essential and, thus, effective in interrupting the running of prescription in respect of their claims for remuneration for the period 1 December 2010 up to and including 21 April 2015. In those circumstances, the claims had not prescribed.’

 

[15]  The Court went on to conclude:

‘[21]    By parity of reasoning, section 12(3) of the Prescription Act finds application in this instance. Effectively, the applicant only established in law that MTN was indeed their debtor by the declaratory order granted by La Grange J on 6 December 2017 and prescription commenced to run consequent thereon. It follows that MTN’s prescription special plea is bad in law and must fail.’

 

[16]  Having dismissed the points raised by MTN, the court ordered the registrar to set the matter down for the determination and calculation of the quantum of remuneration due to the respondents.

 

Grounds for appeal

 

[17]  MTN initially raised three grounds of appeal. The first is that the Labour Court erred in finding that the respondents were not required to tender their services to claim their remuneration pursuant to a section 197 transfer. MTN submits that the Court should have found, in the absence of a tender of services, that the respondents were precluded in law from claiming their remuneration from the date of their transfer to MTN. Secondly, MTN contends that the Labour Court erred in finding that the respondents’ claim for remuneration had not prescribed because their entitlement to claim their remuneration had arisen only pursuant to the ruling by Lagrange J. MTN submits that the Court should have found that the respondents’ claim for remuneration had prescribed prior to the delivery of that judgment. Thirdly, MTN submits that the Labour Court erred in finding that the application launched on 11 May 2011 (and which ultimately served before Cele J) interrupted prescription and should instead have found that there was no such interruption of prescription because the respondents were not parties to that application.

 

[18]  Shortly before the hearing of the appeal, MTN filed a note on argument in which it contended that, in relation to the tender of services and the respondents’ reliance on MTN II, different to the employees who were party to MTN I, the respondents in the present instance did nothing between the end of November 2010 and the filing of their application for a declaratory order on 12 October 2016, choosing only then to piggy-back on MTN I. This period of inactivity extends over some six years. MTN accepts that, by filing the application for a declarator on 12 October 2016, the employees implicitly tendered their services and are thus entitled to be paid for the period 12 October 2016 to 14 December 2017, when they were called back to work. But MTN disputes that the employees are entitled to remuneration from 12 October 2016 backwards to 1 December 2010, because they never tendered their services and elected not to pursue their rights during those six years.

 

[19]  In the alternative, MTN pursues the special plea of prescription and contends that since the respondents claim payment of their remuneration on a monthly basis, in line with MTN II, prescription commenced running on 1 December 2010 and was interrupted by the filing of the respondents’ application for a declarator on 12 October 2016. By 12 October 2016, the employees’ claim between 1 December 2010 and 12 October 2013 had thus prescribed, with the result that the respondents are entitled to payment of their remuneration from 12 October 2013 to 14 December 2017.

 

Evaluation

Tender of services

 

[20]  The first issue that requires determination is the obligation, if any, of the respondents to tender their services after a transfer in terms of section 197. The starting point of that determination is the section itself. Section 197 (2) provides:

‘(2)  If a transfer of a business takes place, unless otherwise agreed in terms of subsection (6) –

(a)  The new employer is automatically substituted in the place of the old employer in respect of all contracts of employment in existence immediately before the date of transfer;

(b)  All the rights and obligations between the old employer and an employee at the time of the transfer continue in force as if they had been rights and obligations between the new employer and the employee…’

 

[21]  The model adopted by section 197 (2) is one of automatic substitution of the new employer for the old in respect of contracts of employment in existence (as between the old employer and its employees) immediately before the date of the transfer. This leaves no room for any affected employee to object to the transfer or its consequences. In essence, the new employer steps into the shoes of the old in respect of all employees’ terms and conditions of employment and other reciprocal obligations that arise from the employment relationship.[4] The construction of automatic substitution of the new employer for the old, regardless of the wishes of the affected employee, does not admit of any obligation by the employee to tender services to the new employer as a precondition of continued employment. On the contrary, section 197(2)(b) makes it clear that the employment of the affected employee continues uninterrupted after the date of the transfer, and that all rights and obligations between the old employer and the employee continue in force as between the employee and the new employer. There is no termination of employment, nor any interruption of the employment relationship, and thus no obligation on any employee whose contract is transferred from the old to the new employer to tender services to the new employer.

 

[22]  That being so, MTN became the respondents’ employer on 1 December 2010. The employment relationship between each of the respondents and MTN continued until MTN elected to terminate their employment contracts, as it did in March 2019, on the grounds of its operational requirements. (The sole exception is the first respondent, who, after MTN put the employees on terms to report to its Johannesburg office, commenced duty at that office, where he remains in MTN’s employ.) Although MTN complains that the respondents did nothing between 1 December 2010 and 12 October 2016 (when they filed their application for a declaratory order), it should be recalled that MTN, throughout this period, had denied being their employer. Indeed, in the case of the respondents, it was only after the Lagrange J order that MTN abandoned its contention that it was not their employer and took steps to enforce the respondents’ obligation to work by instituting disciplinary proceedings for abscondment and/or unauthorised absence from work.

 

[23]  The consequences of the application of section 197 to the transfer of a business were made clear by this Court in MTN II. The order granted on 21 April 2015 declared that the transfer in the present circumstances constituted a transfer that fell within the ambit of section 197, and that the respondents in that case were declared to be employees of MTN effective from 1 December 2010. This Court remarked that in these circumstances, the transfer was seamless, the respondents’ employment unbroken.[5] In particular, this Court noted:

‘[19]  Section 197 of the LRA spells out the position of the new employer and the employees, unless otherwise agreed by them, as contemplated in that subsection. The same terms and conditions that were applicable to the employees under the old employer “continue in force” under the new employer. The new employer “steps into the transferor’s shoes, and after the transfer is affected, simply employs the transferred employees as if they had always been on its payroll”. It is thus implicit in section 197 that the new employer, like the old employer, has a duty, inter alia, to pay the employees their wages as and when they fell and fall due in terms of their, respective, employment contracts.

[20]  Even though it is not a retrospective reinstatement order, this court’s order of 21 April 2015, not only implicitly declares that the new employer is to allow the employees to work, but also that it pays the arrear remuneration that is due to them in terms of their contracts of employment, at least up to the date of the order.’

This Court thus dismissed the submission by MTN that it was incumbent on an employee claiming remuneration in the circumstances to allege and prove having provided services, or a tender of those services.[6]

 

[24]  The present circumstances are no different. The Labour Court thus cannot be faulted for finding that the respondents in the present instance were under no obligation to tender their services to MTN as a precondition to their claim for remuneration for the period 1 December 2010 to 14 December 2017. To the extent that MTN relies in submission on its case regarding the absence of a tender being ‘in line with MTN II’ (in that by launching their application for a section 197 declarator on 12 October 2016, the respondents impliedly tendered their services with effect from that date), this is a misreading of MTN II. The judgment makes clear that there is no obligation on an employee to tender services to the new employer consequent on a section 197 transfer. The passage on which MTN relies is clearly prefaced by the qualification ‘In any event’,[7] signifying that the Court’s comments on the filing of legal proceedings as an implicit tender of services do not detract from the primary finding that, on the facts of the case, no tender was required.

 

Prescription

 

[25]  Section 12(3) of the Prescription Act[8] reads:

‘A debt shall not be deemed to be due until the creditor has knowledge of the identity of the debtor and of the facts from which the debt arises: Provided that a creditor shall be deemed to have such knowledge if he could have acquired it by exercising reasonable care.’

 

[26]  The Labour Court held, after reference to MTN II, that the respondents became aware of the identity of their employer only on 6 December 2017, and that prescription commenced running on that date. The Labour Court considered that, because this Court had held in MTN II that prescription only started running on the date that MTN I was delivered (21 April 2015), by parity of reasoning, prescription in the present case commenced running on the day that the Lagrange J order was delivered, i.e. 6 December 2017. This is not a finding that can be sustained. It does not necessarily follow, by way of parity of reasoning or otherwise, that because the respondents in MTN I discovered the identity of their employer on the date that judgment in that matter was delivered, the same conclusion should necessarily apply in the present instance.

 

[27]  The facts in the present case support a different conclusion. The respondents were certainly aware that MTN I had been delivered on 21 April 2015 and of its consequences for their employment. Paragraph 7 of the stated case records the following agreed facts:

‘On 21 April 2015, that Labour Appeal Court, in case no DA 10/13, set aside the court a quo’s decision and held that the cancellation of the service level agreement with Interaction and the in sourcing of the Call Centre by the respondent constituted a transfer of a business as a going concern, as contemplated in section 197 of the LRA, and that those employees formally (sic) employed with  Interaction ( in respect of the CWU members who were before the court herein after referred to as “CWU applicants”) were declared to be employees of the respondent with effect from one December 2010 with no loss of service.’ (“The First LAC Judgment”).

 

[28]  It was clearly on the strength of that judgment (i.e. MTN I) that the respondents filed their application on 12 October 2016 for a declarator to the effect that, in terms of section 197, they too were employed by MTN. That is ultimately the relief afforded to the respondents in the Lagrange J order, as the Court recognised when it stated that this Court had ‘already dealt with status of the transaction which affected the applicants in the same way it affected the applicants in the matter before the LAC’.

 

[29]  The Labour Court erred by finding that prescription only commenced running on the date of the Lagrange J order. For the purposes of section 15 of the Prescription Act, the respondents had sufficient certainty at the time that they initiated proceedings for a declaratory order as to the identity of their debtor. The respondents’ say-so is not determinative; the test to be applied is not a subjective one. In Eskom v Bojanala Platinum District Municipality,[9] Moseneke J (as he then was) said the following:

‘In my view, there is no merit in the contention advanced on behalf of the plaintiff that prescription began to run only on the date the judgment of the SCA was delivered. The essence of this submission is that a claim or debt does not become due when the facts from which it arose are known to the claimant, but only when such claimant has acquired certainty in regard to the law and attendant rights and obligations that might be applicable to such a debt. If such a construction were to be placed on the provisions of s 12 (3) grave absurdity would arise. These provisions regulating prescription of claims would be rendered nugatory and ineffectual. Prescriptive periods would be rendered elastic, open ended and contingent upon the claimant's subjective sense of legal certainty. On this contention, every claimant would be entitled to have legal certainty before the debt it seeks to enforce becomes or is deemed to be due. In my view, legal certainty does not constitute a fact from which a debt arises under s 12 (3). A claimant cannot blissfully await authoritative, final and binding judicial pronouncements before its debt becomes due, or before it is deemed to have knowledge of the facts from which the debt arises.’

The respondents did not need the Lagrange J order to know that MTN was their debtor. Their application for a declaratory order was frankly unnecessary. The respondents’ status as employees of MTN was a conclusion that followed axiomatically from MTN I, delivered on 21 April 2015.

 

[30]  It follows that, contrary to what the Labour Court held, prescription did not commence running only on 12 December 2017, the date of the Lagrange J order.

 

[31]  The question of the running and any interruption of prescription accordingly stands to be determined on an application of the relevant principles. In MTN II, this Court recalled that section 15 (1) of the Prescription Act provides that ‘the running of prescription shall, subject to the provisions of subsection (2), be interrupted by the service on the debtor of any process whereby the creditor claims payment of the debt’.[10] In that instance, the filing of the application for the declaratory order filed on 11 May 2011 was found to have interrupted prescription. Further, in relation to the remuneration claimed, this court noted that the remuneration ‘… was due on the dates fixed in the contracts of employment, read with the BCEA’. Specifically, ‘[W]hen the appellant failed to pay the remuneration as and when it fell due at the end of each month, in terms of those instruments, it was in mora (ex re)’.[11] What this Court held was that a claim for remuneration in circumstances such as the present is a claim that accrues on a monthly basis.

 

[32]  On this basis, the Labour Court ought to have found that, at best for the respondents, prescription commenced running on 1 December 2010 and was interrupted on 12 October 2016, when they filed their application for a declaratory order. On the basis that prescription was interrupted on 12 October 2016, the Labour Court ought to have found that the respondents’ claim for the period 1 December 2010 to 12 October 2013 had prescribed.

 

[33]  The appeal against the Labour Court’s finding on prescription thus stands to succeed in part.

 

Costs

 

[34]  Counsel for the respondents appeared pro bono, and the Court is indebted to her for her submissions. The requirements of the law and fairness are best served by each party bearing its own costs.

 

[35]  I make the following order:

 

Order

 

1.  The appeal is upheld in part.

2.  The order of the Labour Court is set aside and replaced by the following:

“1.  The respondent’s plea of prescription is upheld to the extent that it is declared that the applicants’ claim for remuneration for the period 1 December 2010 to 12 October 2013 has prescribed.

2.  The calculation of the quantum of the arrear remuneration is deferred for a hearing in due course.

3.  There is no order as to costs.”

3.  There is no order for costs in the appeal.

 

André van Niekerk

Judge of the Labour Appeal Court

 

APPEARANCES:

FOR THE APPELLANTS: AT Myburgh SC, with him M van As

Instructed by Mashiane Moodley & Monama Inc.

FOR THE RESPONDENTS: S Saunders, with her T Malungani (pro bono)

Instructed by Allardyce & Partners

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