Business transfer writ: Status of execution

After nearly 13 years this dispute may be finally resolved after Rabkin-Naicker J decided that in terms of s197(5) of the LRA a new employer is bound by any arbitration award that was reversed by the Labour Court after a business transfer took place. There was no dispute about the old employer being bound by an award “immediately before” the transfer.

Nehawu obo Cornelius v High Rustenberg Estate (Pty) Ltd (C459/2004) [2016] ZALCCT 5 ; [2016] JOL 35183 (LC) (10 February 2016) per H Rabkin-Naicker J.

History

The employees were dismissed in 2003 and the CCMA found that the reason for the dismissals was not unfair – [2004] 9 BALR 1152; (2004) ILJ 1339 (CCMA).
High Rustenberg Hydro was sold as a going concern.
On 15 January 2008 Gush AJ reviewed and set aside the award and compensated each employee with 12 months’ remuneration. Nehawu v CCMA (2008) 29 ILJ 1720; [2008] JOL 21544 (LC).
Nehawu caused a writ of execution to be issued against the property, but there was a new owner.
The Sheriff of the High Court interpleaded and called on the two employers to sort out the competing claims.
The new employer denied liability and contended that the award had only been made against the old employer.
On 26 November 2010 Steenkamp J held that s197(5) of the LRA applied and that the new employer was bound by the award. Sheriff for the High Court, Stellenbosch v High Rustenberg Hydro (2011) 32 ILJ 1249; [2011] JOL 27123 (LC).
On 26 April 2012 in High Rustenberg Estate (Pty) Ltd v NEHAWU obo Cornelius and the Sheriff of the High Court Stellenbosch (CA 11/2010) the LAC upheld the appeal and set aside the judgment of Steenkamp J and ordered that the issue be determined as a special case ito rule 58(6)(i) of the Consolidated Rules of the High Court be dealt with by way of a special case to be heard in the Labour Court.

3 Comments

GilesFiles on February 20, 2016 at 5:57 pm

Prof Darcy du Toit discusses this case in the latest Weekly Comment: Section 197(5) of the LRA and the quest for social justice in IR Network published by LexisNexis [subscription required].

The question, however, was the status of the writ against the property of the old employer. Should the union have to seek a declaratory order substituting the new employer for the old employer before the writ could be executed? On this point Steenkamp J ruled as follows:

“At this interpleader stage, the new employer has entered the fray. It is well aware of its obligations towards the employees, even though it had not been joined in the review proceedings [because its existence had not been disclosed]. It seems highly formalistic and artificial – and indeed, contrary to the very purpose of s 197, ie to protect the workers – to now interpose a further costly and potentially lengthy court intervention before the employees can execute their claim against the new employer” (para 20).

. . . . .

And so, some five years after the judgment by Steenkamp J, the same issue served before Rabkin-Naicker J, who came to the same conclusion for virtually the same reasons. Section 197(5) provides that the new employer is bound by any arbitration award “that bound the old employer in respect of the employees to be transferred, immediately before the date of transfer”. It was not in dispute that the old employer had been bound by an award in its favour “immediately before” the transfer. This award, however, was thereafter substituted by one in favour of the employees. Rabkin-Naicker J formulated the issue as follows:

“Is an award that bound the old employer in terms of section 197(5) susceptible to review and does a new employer take on the risk of [such] an award (which serves its interests at date of transfer) … being substituted on review subsequent to transfer by an award that does not”? (para 6).

The answer, she found, had to be ‘yes’. An award binding on the old employer immediately before transfer “cannot be considered sui generis”, i.e., that it is “not susceptible to review”. As she went on to explain:

“It could not have been intended that a review judgment in respect of such an award could have no legal force and effect, if the award is reviewed and substituted subsequent to the transfer of the business” (para 9).

. . . . .

Is this the end of the matter, 13 years after the employees were unfairly dismissed, or will there be a further appeal? Significantly, both Steenkamp J and, particularly, Rabkin-Naicker J referred extensively to the purposes of section 197 which, in turn, are governed by the purposes of LRA. Prominent among these are the quest for social justice, fair labour practices and the protection of workers against unfair consequences of employers’ economic decisions. The employees in this matter may well wonder whether these purposes have been served – especially since their misfortune can be traced largely to the failure by the employer’s attorneys to inform the court of the business transfer when opposing the review application back in 2008.

GilesFiles on September 4, 2016 at 4:19 pm

Reported
[2016] JOL 35183; (2016) 37 ILJ 1183 (LC)

GilesFiles on April 3, 2017 at 9:01 am

Sale in execution of transferred business
Posted on March 23, 2017 by GilesFiles
The LAC disallowed the appeal and upheld the order of Rabkin-Naicker J in the LC. The order provided that the rights that the former employees had, following their unfair dismissal by Hydro, were transferred to High Rustenberg Estate (Pty) Ltd ito sec 197 of the Labour Relations Act 66 of 1995 (“the LRA”) and the writ of execution (case C459/04) issued by the trade union on their behalf was lawfully issued and the assets attached pursuant thereto may be sold to satisfy the claims of the former employees.

High Rustenberg Estate (Pty) Ltd v Nehawu obo Cornelius (CA11/2016) [2017] ZALAC 20 (23 March 2017) per DM Davis JA (Hlophe and Kathree-Setiloane AJJA concurring)

You must be logged in to post a comment.

Business transfer writ: Status of execution

3 Comments

Leave a reply