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THE LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG

JUDGMENT

Case no: JS 710/2007

DATE: 8 SEPTEMBER 2016

Not reportable

In the matter between:

BEVERLEY DIANNE HARRIS..............................................................................................Applicant

And

M D SOLAR (PTY) LTD t/a SUNTANK....................................................................First Respondent

SWH ENGINEERING (PTY) LTD........................................................................Second Respondent

SUNTANK (PTY) LTD...............................................................................................Third Respondent

NERIEL HURWITZ.................................................................................................Fourth Respondent

YEHORAM GUR-ARIE.............................................................................................Fifth Respondent

Heard: 2 September 2016

Delivered: 8 September 2016

Summary: Joinder application. Piercing the corporate veil. No evidential basis to disregard entity’s separate personality. No joinder in completed proceedings.

JUDGMENT

PRINSLOO, J

Introduction

[1] The Applicant seeks to join the Second to Fifth Respondents and for them to be held liable for the judgment handed down in case number JS 710/2007. In order to join the said Respondents, the Applicant seeks to pierce the corporate veil on the basis that she had been deliberately frustrated in her attempts to enforce the order against the First Respondent, an entity that is effectively carrying on the same business as before, but has avoided liability in terms of the Court order granted in her favour in 2009.

[2] The Fourth and Fifth Respondents (the Respondents) opposed the application.

Background facts

[3] This application has a long and unfortunate history which could be summarised as follows:

[4] The First Respondent employed the Applicant in June 2006 in its human resources department and on 1 July 2007 she was dismissed for reasons related to operational requirements.

[5] The Applicant subsequently referred an unfair dismissal dispute and the matter was on trial between September and October 2008. Judgment was handed down on 27 July 2009 and the First Respondent was ordered to pay the Applicant an amount equivalent to 12 months’ remuneration as well as notice pay, severance pay and outstanding leave.

[6] The First Respondent applied for leave to appeal and when that was refused, launched a petition for leave to appeal to the Labour Appeal Court, which petition was dismissed on 17 June 2010.

[7] A writ of execution was issued on 17 December 2009 and on 15 January 2010 the sheriff attached the First Respondent’s property. On 26 January 2010 the Fourth Respondent (Hurwitz) filed an interpleader on behalf of the Second Respondent (SWH Engineering) in respect of the attached goods. The claim was that the attached goods did not belong to the First Respondent, but belonged to SWH Engineering.

[8] On 9 March 2011 the writ of execution was re-issued and on 11 March 2011 the sheriff once again attended to the execution of the First Respondents goods, upon which Hurwitz once again filed an interpleader affidavit on behalf of SWH Engineering.

[9] Hurwitz and the Fifth Respondent (Gur-Arie) were directors of the First Respondent and SWH Engineering.

[10] It is common cause that the First Respondent was deregistered and SWH Engineering liquidated. In argument before Court Mr Roode for the Applicant indicated that he no longer seeks to join SWH Engineering as a respondent and the Applicant was persisting with the relief she seeks only in respect of the Third, Fourth and Fifth Respondents.

[11] The Applicant’s complaint is that she is unable to recover the amount awarded to her by this Court in July 2009. It is for this reason that the Applicant filed an application to join the Respondents and to hold them liable in terms of the judgment.

[12] The Applicant is requesting this Court to pierce the corporate veil so that the Respondents would not escape liability.

[13] The Applicant has in her application made averments to show that the First and Second Respondents were conducting the same business and that the Second Respondent was used as a front to escape the First Respondent’s liabilities. As already indicated, Hurwitz and Gur-Arie were the directors of the two entities.

[14] The averments that SWH Engineering was used as a front to escape the First Respondent’s liabilities are denied by Hurwitz and Gur-Arie. They however conceded that the trading name ‘Suntank’ was utilised by both entities.

[15] Be that as it may, the First Respondent was deregistered in July 2010 and SWH Engineering liquidated and there is no longer a corporate veil capable of piercing and that is the end of the matter in respect of the First and Second Respondents.

[16] As already alluded to, Mr Roode indicated that the Applicant was persisting with the relief she seeks in respect of the Third, Fourth and Fifth Respondents.

Who is the Third Respondent?

[17] The Third Respondent (Suntank) was registered in 2008 and its registered address is no 17 Norma Jean Square, 244 Jean Avenue, Centurion. It appears from the CIPC report that Hurwitz and Gur-Arie were never directors of Suntank.

[18] Hurwitz and Gur-Arie confirm this in their opposing affidavit and emphasized that they were never shareholders, directors or owners of the Third Respondent, there was never a takeover by Suntank and there is no commercial nexus between them and Suntank.

[19] It is significant that the Applicant has not filed a replying affidavit to respond to the version presented by Hurwitz and Gur-Arie.

[20] I canvassed the conflicting versions with Mr Roode and the question whether this Court is in a position to decide the matter only on the papers as they are. Mr Roode did not ask for an opportunity to file a replying affidavit in order to put an answer to the version set out in the opposing affidavit before Court, nor did he request that the matter be referred for oral evidence, but instead he argued that this Court is in a position to and should determine the matter finally on the papers as they are.

Piercing the corporate veil

[21] The first issue to be decided is whether the Applicant has made out a case for the piercing of the corporate veil.

[22] In Bargaining Council for the Furniture Manufacturing Industry, KwaZulu-Natal v UKD Marketing CC and  others[1] the Labour Appeal Court held that:

“In Cape Pacific Ltd v Lubner Controlling Investments (Pty) Ltd Smalberger JA noted that: 'Over the years it has come to be accepted that fraud, dishonesty or improper conduct could provide grounds for piercing the corporate veil.' At 803G he warned that 'it is undoubtedly a salutary principle that our Courts should not lightly disregard a company's separate personality but should strive to give effect to and uphold it. To do otherwise would negate and undermine the policy and principles that underpin the concept of separate corporate personality and the legal consequences that attached to it'. At 803H the learned judge of appeal then went on to say that, where fraud, dishonesty or other improper conduct was to be found, then further considerations would influence the overall assessment as to whether the corporate veil should be pierced. In this connection, the court would proceed to examine the substance rather than the form of the adopted structure in order to determine whether there has been a misuse of corporate personality which would justify its being disregarded”.

[23] The Applicant was employed and dismissed by the First Respondent and she obtained a judgment against the First Respondent in July 2009 wherein the First Respondent was ordered to pay her compensation and other statutory monies.

[24] In casu the Applicant seeks to pierce the corporate veil in respect of Suntank for the following reasons:

24.1. Hurwitz describes his position on Linked-In as the marketing and business development director at Suntank Solar;

24.2. Gur-Arie is described as the director of Suntank on Linked-In;

24.3 Suntank’s website shows that it was established in 1994;

24.4 The Suntank letterhead remained the same, so has the logo that appears on the website and advertisements.

[25] The Applicant’s case is that these constitute sufficient grounds for joinder and for the Court to pierce the corporate veil.

[26] Hurwitz and Gur-Arie stated that Suntank is a separate legal entity with no nexus to them and there is no basis to disregard the separate legal entities.

[27] I have to consider whether there was a misuse of corporate personality that would justify it being disregarded.

[28] The evidence placed before me and relied upon by the Applicant to support her case, namely a misuse of corporate personality, is information on Linked-In and a website. Although I do not attach much weight to information shared on social media and related networks and websites, I considered the information as it formed the basis of the Applicant’s allegations. A closer perusal of the documents relied upon, showed that the Linked-In and website information attached to the Applicant’s founding affidavit, dates around March 2013. In March 2013 SWH Engineering was still operational and on Hurwitz and Gur-Arie’s own admission, it used the trading name ‘Suntank’. 

[29] SWH Engineering was placed in liquidation on 11 June 2013 and is no longer operational and the only veil remaining that could be pierced, is that of the Third Respondent.

[30] The website address the Applicant relies upon shows that ‘Suntank’ was established in 1994, whilst the CIPC report shows that the Third Respondent was established in 2008. It is seriously doubtful that the website refers to the entity of the Third Respondent. The Applicant failed to place any more recent evidence before this Court and what she relied upon to support her case, dates from 2013 when SWH Engineering operated and used the trading name ‘Suntank’.

[31] The Applicant’s case is that the word ‘Suntank’ is a common thread that runs through all three entities and it links them together ‘in some way or another’.

[32] This is however not enough.

[33] The CIPC report submitted in respect of the Third Respondent, shows that Hurwitz and Gur-Arie were never directors of that entity and on their own undisputed evidence, it is a separate legal entity with no connection to them. In the absence of a replying affidavit and applying the Plascon Evans rule, I have to accept that Hurwitz and Gur-Arie were never directors of the Third Respondent and that they have no connection with that entity.

[34] When the evidence before me is read and analysed holistically, it does not provide a sufficient basis for this Court to conclude that the various entities did not operate for their own account as separate entities and were created effectively and essentially to avoid or escape liability.

[35] The averments that the entities operated from the same premises and that there was an overlap in the business they conducted are not sufficient to establish fraud, dishonesty or improper conduct, not even on a prima facie basis. There are no allegations of fraud, dishonesty or improper conduct, apart from allegations that the Respondents are merely avoiding liability in terms of the judgment and the monies to be paid to the Applicant.

[36] I am not satisfied that the evidence the Applicant relies on and which she placed before this Court, including the Linked-In and website information, the logo and the addresses of the entities provide the evidential basis to disregard a company's separate personality. This is more so when the authorities I considered made it clear that this decision should only be taken in rare cases. In casu the Applicant did not make out a case and the corporate veil in respect of the Third Respondent cannot be lifted.

Joinder

[37] Rule 22 of the Rules of this Court provides for joinder as follows:

“(1) The court may join any number of persons, whether jointly, jointly and severally, separately, or in the alternative, as parties in proceedings, if the right to relief depends on the determination of substantially the same question of law or facts.

(2)(a) The court may, of its own motion or on application and on notice to every other party, make an order joining any person as a party in the proceedings if the party to be joined has a substantial interest in the subject matter of the proceedings.

(b) When making an order in terms of paragraph (a), the court may give such directions as to the further procedure in the proceedings as it deems fit, and may make an order as to costs”.

[38] Rule 22 prescribes that in order for a party to be joined as a party, there must firstly be proceedings before Court to which parties could be joined, the parties must have a direct and substantial legal interest in the matter such as to make them necessary parties to the proceedings. Only parties that would be directly affected by the court’s order or where the order cannot be sustained or carried into effect without prejudicing such a party are necessary parties to the proceedings.

[39] The Court may join parties where the right to relief depends on the determination of substantially the same question of law or facts.

[40] These are the principles this Court should apply in deciding the application for joinder.

[41] The application for joinder is premised on the submission that Hurwitz and Gur-Arie are directors of the Third Respondent and that they should be joined as parties against whom the Applicant may enforce the order of 27 July 2009.

[42] I have already accepted that there is no evidence placed before me to show that Hurwitz and Gur-Arie are directors of the Third Respondent.

[43] Be that as it may, the application is opposed inter alia because there are no proceedings before this Court to which the Respondents can be joined and in the absence of live proceedings, the Respondents had no opportunity to state their case.

[44] The issue to be decided is whether the Third, Fourth and Fifth Respondents could be joined as Respondents to the principal matter.

[45] In argument before Court the parties submitted that the Third Respondent was also in the process of being deregistered, which is a cause of grave concern as the deregistration of Suntank may render this entire application academic. Mr Roode however submitted that this is even more reason to join Hurwitz and Gur-Arie. In my view such an argument is not sustainable and can never form the basis to join parties. The principles applicable to joinder must be considered and applied and if a case is made out, parties should be joined because they have a direct and substantial legal interest in the matter or where the right to relief depends on the determination of substantially the same question of law or facts.

[46] Although I have sympathy for the Applicant, sympathy cannot compensate for the fundamental difficulties in the joinder application.

[47] Du Preez v LS Pressings CC and another[2] this Court has confirmed that joinder in terms of Rule 22 is in respect of proceedings before Court and that the purpose of a joinder is to allow participation in live proceedings.

[48] In casu there are no live proceedings between the Applicant and the Third, Fourth or Fifth Respondents to which they could be joined. There are no live proceedings in which any of the Respondents can participate and be afforded the opportunity to be heard.

[49] The Applicant has a Court order that was issued after trial proceedings were concluded. There is a final judgment and that per se precludes a joinder.

[50] It is well established that joinder cannot take place after a final judgment was handed down and the Applicant was ill-advised in filing this application where the principles are trite and the relief she seeks not sustainable in law.

[51] Mr Groenewald for Hurwitz and Gur-Arie referred to the matter of Intervalve (Pty) Ltd v NUMSA[3] where the Labour Appeal Court held that in the absence of conciliation a party is not entitled to refer a dispute for adjudication to the Labour Court and the Court would in any event not have jurisdiction to entertain the dispute, as the dispute was never referred in respect of or conciliated between the Applicant and the Respondents.

[52] In view of my findings as set out supra it is not necessary to decide this point.

[53] The Applicant has not made out a case for the joinder of the Respondents.

Costs

[54] Costs should be considered against the requirements of the law and fairness.

[55] The requirement of law has been interpreted to mean that the costs would follow the result.

[56] In considering fairness, the Court has held that the conduct of the parties should be taken into account and that mala fide, unreasonableness and frivolousness are factors justifying the imposition of a costs order.

[57] Mr Groenewald argued that the application should be dismissed with costs on an attorney and client scale, and in view of the fact that this application was ill-conceived, the Court should consider a de bonis propriis cost order.

[58] Mr Roode argued that the Applicant was treated so unfairly when she was dismissed, that this Court awarded her the maximum compensation. The Applicant was treated unfairly and till this day she has not seen justice and this was yet another attempt to enforce an order of this Court and she should not be punished with an order to pay costs.

[59] I have a wide discretion in respect of costs and in my view it would not be fair to order the Applicant to pay the costs. This is so because of the long and unfortunate history of this matter and the fact that although she obtained a Court order in her favour, her quest for justice is still ongoing.

[60] Having said that, let this be a warning to practitioners that this Court will not tolerate applications that are brought in disregard of the provisions of the Rules of the Court and the applicable case law and applications that are drafted in such a manner that the necessary averments are not made to support or sustain the relief sought. Such conduct may be met with a punitive or de bonis propriis cost order. However, in their opposing papers Hurwitz and Gur-Arie did not raise the issue of punitive or de bonis propriis costs, nor was it raised or motivated in the heads of argument and for that reason I am not inclined to grant such cost when it is only fully raised in argument before Court.

Order

[61] In the premises I make the following order:

1. The application for joinder is dismissed;

2. There is no order as to costs.

Connie Prinsloo

Judge of the Labour Court

Appearances:

For the Applicant : Advocate B Roode

Instructed by :Friedland Hart Solomon and Nicholson Attorneys

For the Fourth and Fifth Respondents: Advocate J H Groenewald

Instructed by: L Smit Attorneys

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