Kunyuza v Ace Wholesalers (Pty) Ltd (JS27/12)  ZALCJHB 54 (24 February 2015)
LC summary: Application for joinder – applicability of Constitutional Court judgment in Intervalve considered in context of s 197 transfer.
Problems arise when businesses are transferred as going concerns. Employees are not sure who to involve in any legal proceedings and generally speaking all disputes with any such parties must be referred to conciliation before any further steps are taken. In this judgment justice Anton Steenkamp considers the implications of the recent constituional court judgment regarding joinder.
Heard: 6 February 2015 Delivered: 24 February 2015
 The applicants, Messrs Kunyuza and Maluleka — former employees of the first respondent (Ace Wholesalers) — wish to join the third respondent, Temba Big Save CC, to trial proceedings before this Court. That entity was not part of the failed conciliation proceedings before the CCMA before the applicants referred the dispute to this Court. The applicants say that the second and third respondents have a direct and substantial interest in the context of a transfer of the business of the employer as contemplated in s 197 of the LRA.
 The applicants also have to overcome a preliminary hurdle, and that is condonation for the late referral of their statement of claim. Their prospects of success in the joinder application and in the main referral will be a factor in the condonation application.
 At the hearing of this matter on 6 February 2015 I ruled that the answering affidavit is not properly before court in the absence of any application for condonation by the respondents. That constituted an irregular step and therefore Mr Gerber, for the second and third respondents, argued the applications for joinder and condonation on the applicants’ papers.
. . . .
 In conclusion, I believe that it is in the interests of justice, taking into account all of the factors outlined above, that condonation be granted for the late filing of the applicants’ statement of claim.
 The applicants seek to join the third respondent, Temba Big Save cc, to the proceedings because it joined the fray in the rescission application and it seems, according to the employees, that it had stepped into the shoes of the other respondents. It appears, say the applicants, that the third respondent is indeed their “new employer” in terms of s 197(9). The third respondent, therefore, has a direct and substantial interest in the proceedings, including the relief they seek, and should be joined.
 The third respondent relies inter alia on the Constitutional Court’s recent judgment in the matter of National Union of Metalworkers of South Africa v Intervalve (Pty) Ltd and Others, (“Intervalve”) for its opposition to the application to join it as a party.
 The Constitutional Court’s judgment in Intervalve held that conciliation is a precondition for the adjudication of any dispute by the Labour Court and that the effect of a failure to cite all employers in a referral to conciliation is that section 191 of the LRA has not been complied with. Therefore, an alleged employer who has not been part of conciliation proceedings with dismissed employees cannot be joined to an action in the Labour Court dealing with the alleged unfairness of a dismissal after conciliation.
 During argument, I raised the question with counsel that footnote 53 in the Constitutional Court’s judgment in Intervalve might indicate that the failure to cite a party in a referral to conciliation is not a bar to join such party to Labour Court proceedings when that party is the “new employer” after a section 197 takeover. I requested counsel to submit supplementary heads of argument on this issue.
 Mr Gerber, for the third respondent, argued in his supplementary submissions that footnote 53 or any other part of the judgment in Intervalve does not hold that it is not necessary to cite an alleged employer in a referral to conciliation before that alleged employer can be joined in unfair dismissal proceedings in this Court. He argued that the Constitutional Court held that a party cannot be joined to proceedings in this Court — under any conditions — unless that party was part of conciliation proceedings with the referring party and that there are no exceptions to this rule.
The Constitutional Court’s judgment in Intervalve:
 The Court in Intervalve was split 6-5. In paragraphs 26 to 40, Cameron J, writing for the majority, deals with the question of whether a referral for conciliation is a precondition to the Labour Court’s jurisdiction. In paragraph 40 he holds as follows:
‘ Referral for conciliation is indispensable. It is a precondition to the Labour Court’s jurisdiction over unfair dismissal disputes.’
Footnote 53 follows the above dictum.
Footnote 53 reads as follows:
‘53. The Labour Appeal Court was therefore right (at paras 15 – 22) to distinguish the factual circumstances in Mokoena and Selala (above n14) and to disapprove of the erroneous view, expressed in both those judgments, that the Labour Court has a discretion to condone non-compliance with the conciliation requirement. The Labour Appeal Court noted that the party joined in Mokoena was a transferee who had taken over the going concern of another business. Judgment against the old business was therefore effective against the transferee, who would be jointly and severally liable for any claim. The transferee therefore had an interest in the outcome of the dispute. The joined party in Selala also had an interest in the outcome of the case, as he was a co-employee currently employed in a position the applicant claimed should have been his. By contrast SACCAWU above, n14 at paragraph 10 rightly held that an applicant in the Labour Court “cannot rely on a joinder in terms of rule 22 to avoid its obligations to comply with section 191 of the LRA.’
 Reference to the Labour Appeal Court (“LAC”) is that Court’s judgment in Intervalve (Intervalve (Pty) Ltd and Another v National Union of Metalworkers of South Africa obo Members.
The Labour Appeal Court’s judgment in Intervalve:
 As is apparent from footnote 53 of the CC’s judgment, it agreed with the LAC in distinguishing the facts in Intervalve with those in Mokoena and Selela. The latter need not concern us any further. Mokoena, though, is important as it also deals with an alleged contravention of s 197.
 In paragraph 16 of the LAC judgment, Waglay JP stated (relating to Mokoena):
‘The party joined was a party that the Labour Court held had taken over the respondent’s business in circumstances that invoked s 197 of the LRA. In terms of this section, where a business is transferred as a going concern, it takes over the employment responsibilities of the transferor. The joinder was thus granted not on the basis of any exercise of a discretion of joining a party not taken to conciliation but because s 197(9) of the LRA places the new employer in the shoes of the old employer. In the circumstances, there was no need to refer both the new and the old employer to conciliation; any one would suffice as judgment against one was effective against the other. The party joined in Mokoena was in the same position as the respondent. In fact the Court in granting the joinder said:
“Section 197(9) of the Act stipulates that, in such a transfer situation, the old and new employer are jointly and severally liable in respect of any claim concerning any term or condition of employment that arose prior to the transfer. Section 197(2)(a) provides that 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. If the applicants, in the present matter, succeed in proving that they were unfairly dismissed, any reinstatement order or compensation order made in their favour would be enforceable against the transferee, the third respondent. In those circumstances the third respondent is an interested party. (Halgang Properties CC v Western Cape Workers’ Associations,  ZALAC 5;  10 BLLR 919 (LAC) at 927J – 928C) and should be joined to the proceedings.”’
 Exactly the same considerations apply in the case before me. As the Constitutional Court pointed out in Intervalve, that distinguishes it from the facts in that case. In these circumstances and in the context of s 197, the third respondent must be joined.
The various judgments in Halgang:
 In this matter, the employer (Halgang) dismissed two employees due to its operational requirements. The dismissals took place nine days before the transfer of Halgang’s business as a going concern to Wembley. The Labour Court held that the dismissals were both procedurally and substantively unfair and ordered Halgang to reinstate the two employees.
 Halgang appealed to the Labour Appeal Court, which granted the appeal on the basis that Halgang’s business had been transferred to Wembley as a going concern and that having regard to the provisions of section 193(2)(c) of the LRA, it was inappropriate for the Labour Court to have ordered reinstatement against Halgang. Halgang had disposed of its business and had no other business, and that it was therefore not reasonably practicable for Halgang to reinstate or re-employ the two employees. Wembley was not a party to the proceedings and the LAC rejected the “springboard” argument argued by the Union that a reinstatement order against Halgang could be used as a springboard in subsequent proceedings against Wembley. As there was no waiver of joinder by Wembley, no order of reinstatement would be binding on Wembley unless Wembley had been joined to the proceedings.
 The matter ended up before the Constitutional Court (Western Cape Workers Association v Halgang Properties CC, on an application for leave to appeal by the Union. The CC did not grant leave to appeal on the basis that it is no longer possible for Halgang to reinstate the two employees as Halgang’s business had been transferred to Wembley. The CC held that the Union had to join Wembley as a party in the proceedings if it was seeking an order for reinstatement that would be binding on Wembley.
 It seems clear, therefore, that in the current circumstances the third respondent – who, it seems at this stage, has stepped into the shoes of the old employer – must be joined to the proceedings.
 The same conclusion is apparent from the judgment of the LAC in Anglo Office Supplies (Pty) Ltd v Lotz:
‘The legal position enunciated in the above authorities [the LAC and CC judgments in Nehawu v UCT] makes it clear that the new employer steps into the shoes of the old employer by operation of law. Unless there is agreement with the employees or their representatives to the contrary, the new employer assumes liability for all the actions done by the old employer in relation to each employee. This means that if an employee is dismissed before the transfer of a business or the relevant part of the business, the new employer is liable for such dismissal even though it is the old employer who actually dismissed the employee. Indeed, all the rights that the dismissed employee had against the old employer at the time of the transfer of the business, including the right to institute or pursue legal proceedings in a dismissal dispute, becomes a right that he has against the new employer. Accordingly, such an employee must, where he has instituted proceedings against the old employer, pursue those proceedings against the new employer instead of the old employer. The result would be that if the dismissal is found, after the transfer of the business, to have been unfair, any order of reinstatement would probably have to be made against the new employer.’
 Having regard to these authorities, the facts in the present case are clearly distinguishable from those in Intervalve. Indeed, as the Constitutional Court pointed out in that judgment, in the context of an alleged s 197 transfer – such as the situation in Mokoena – a successful applicant would have to hold the transferee accountable. That transferee – such as the third respondent before this Court – has an interest in the outcome of the dispute.
 In these circumstances, the third respondent has a clear and substantial interest in the proceedings by virtue of the operation of s 197 of the LRA. It must be joined to the proceedings.
 Although the applicants have been successful and they may have won this battle, the war is far from over. Much of what is said in this judgment is premised on the applicants’ apparent prospects of success – based only on their own affidavits – in the ultimate trial and the question whether there has indeed been a transfer of the employer’s business in terms of s 197 of the LRA. It seems fair to me to order that the costs of both these applications should follow the order of costs, if any, in the ultimate trial.
 I therefore make the following order:
40.1 Condonation is granted for the late filing of the applicants’ statement of claim.
40.2 The third respondent, Temba Big Save cc, is joined as a party to these proceedings.
40.3 Costs of these applications are to be costs in the trial.