IN THE LABOUR COURT OF SOUTH AFRICA

HELD AT JOHANNESBURG						J2859/98

BEFORE Landman J

In the matter between

SOUTH AFRICAN AGRICULTURAL PLANTATION 
AND ALLIED WORKERS UNION 					Applicant

and

HL HALL AND SONS (GROUP SERVICES) LTD AND
OTHERS 									Respondents

___________________________________________________________________
JUDGMENT
___________________________________________________________________

[1]	The SAAPAWU urgently seeks a final interdict against HL Hall and Sons (Group Services) Ltd (the parent company); HL Hall and Sons (Nurseries) (Pty) Ltd (HL nurseries), HL Hall and Sons (Farms) (Pty) Ltd (HL Farms) and HL Hall and Sons (Timber) (Pty) Ltd  (HL timber) (I shall also refer to the last three as the other companies) interdicting them from  dismissing the union’s members who are involved in a protected strike except in terms of the law.

[2]	The approach which must be adopted to the facts is that set out in the well known case of Plascon Evans  Paints Ltd v Van Riebeeck Paints (Pty) Ltd 1984 (3) SA 623 (A) at 634-635.

[3]	The facts, on which I may rely, can be tabulated as follows:

1. HL Hall and Sons (Group Services) Ltd, HL Nurseries, HL Farms and HL Timbers are different legal personae.

2. In 1990 as a result of a strike the services of employees were terminated and  HL Nurseries, HL Farms and HL Timbers separately engaged labour including former employees of the parent company.

3. HL Nurseries, HL Farms and HL Timbers exist to engage labour to work on the parent company’s property. They received a fee for these services. They do not conduct any other business.

4. The parent company also employs some 97 employees.

5. The unions and its members who are employed by the respondents are engaged in a protected strike. They may not be dismissed for striking.

6. The strike has been a protracted one. There is no end in sight.

7. Next week the parent company is applying in the High Court for the liquidation of HL Nurseries, HL Farms and HL Timber on the grounds that these companies  are insolvent and unable to pay their debts. The companies have no income but have had expenses in connection with the accommodation and feeding of the strikers. See s 67(4) of the Labour Relations Act 66 of 1995.

8. The management of these companies have stated that when the High Court rules on their bankruptcy all jobs end.

[4]	An initial question to be decided is whether the union has shown that the parent company is the employer of its members on strike or, as was also contended, whether any of the other companies employ union members on strike. 

[5]	The facts on which I must rely point to all the respondents being employers. There is no overlap between them. This was a result of a definite plan to isolate the parent company (save for a few employees) from any  labour force. It may well be that if the matter were to come to trial the union may succeed in showing that the parent company and one of the other companies are to be regarded as a joint employer or it may show that some union members are employed by more than one employer. This fact has not been established on these papers.

[6]	I am satisfied that each company is an employer of some of the union’s members, as the respondents allege, and that there is a “threat” made by management that the services of the union’s members who work for the three companies will terminate on liquidation of the companies. This “threat” requires further investigation. It will be attempted below. 

[7]	The need for an interdict, assuming it is permissible to grant one,  can only arise once the liquidation of the three companies is granted. Whether the companies will be liquidated or not is for the High Court to decide. Until then there is no immanent danger of the strikers right to strike being endangered. None of the respondents have indicated any intention to dismissed the strikers engaged in the protected strike until then. Even then it will not be a management decision.

[8]	But if the companies are provisionally liquidated then, although the companies continue as the same legal persona, they function subject to a change in their status. 

[9]	What is the effect of liquidation on the companies and their employees? During the hearing Adv Rautenbach (with him Adv Nourse) for the applicant and Adv Cassim SC (with him Adv Van As) for the respondents were in agreement that the employment relationship continued even after liquidation. After reserving judgment I invited counsel to comment on the legal effect of s 339 of the Companies Act 61 of 1973 read with s 38 of the Insolvency Act 24 of 1936. Both sets of counsel stand their ground.

[10]	On behalf of the applicant reference is made to the powers of a liquidator in s 367 of the Companies Act. The point is made that various section of the Insolvency Act is made applicable but not s 38. It is also pointed out that should the liquidator decide to continue with the business of the company he or she would not be able to do so without a workforce. It is submitted that should the liquidator decide that the workforce should be dismissed this must be done in terms of s 189 of the Labour Relations Act.

[11]	The contention on behalf of the respondents are in similar vein. It is submitted that although the contract of employment terminates on the insolvency of a natural person, in the case of a company the power is vested in the liquidator to take a decision to carry on or discontinue any part of the business of the company insofar as it may be beneficial for the winding up of the company. The respondents agree, with the applicants, that if the liquidator wishes to terminate the services of the workforce he or she must comply with s 189 of the Labour Relations Act. 

[12]	The respondents nevertheless submit that the application is premature and can only be launched once the High Court has granted an order, a liquidator is appointed and the liquidator fails to comply with s 189 of the Act. In the alternative the respondents contend that if s 38 applies there is an alternative remedy. The employees may claim compensation in terms of s 189 of the Labour Relations Act. Because of this alternative remedy the other requirements for an interdict are not met.

[13]	Wallis Labour and Employment Law states in para 30 that the insolvency of the employer automatically terminates the contract of employment. See s 38 of the Insolvency Act of 1936. He adds: “The relevant provisions of the insolvency Act also apply where the employer is a company or close corporation which is wound up” and refers in a footnote  to s 339 of the Companies Act. The position in the text is too broadly stated. Section 339 provides:

In the winding-up of a company unable to pay its debts the provisions of the law relating to insolvency shall, in so far as they are applicable, be applied mutatis mutandis in respect of any matter not specifically provided for by this act.   

[14]	Allen Liversage “‘n Ondersoek na die toepassing van artikel 38 van die Insolvensie Wet 24 van 1936" 13 et seq (unpublished, LLM dissertation, Unisa, 1993) examines the effect of s 339 of the Companies Act  and finds that in the case of the winding-up of a company unable to pay its debts that s 38 of the Insolvency Act is applicable. He says at 23;

In gevalle waar die onvermoë van die maatskappy om sy skulde te betaal wel die oorsaak van likwidasie is, behoort artikel 339 van die Maatskappywet aanwending te vind, met die gevolg dat artikel 38 van die Insolvensiewet toegepas kan word. In so ‘n geval sal die dienskontrak automaties by die likwidasie deur die hof beëindig word en sal die werknemer oor ‘n eis vir skadevergoeding beskik weens die beëindiging van sy kontrak alvorens dit afgeloop het.

[15]	As to when it must be determined whether a company is unable to pay its debts see Taylor and Steyn NNO v Koekemoer 1982 (1) SA 374 (T) at 378B. 

[16]	Where, as here, the other companies may be wound-up and are unable to pay their debts the provisions of the Insolvency Act applies in so far as they are applicable. The Insolvency Act deals with contracts of lease in s 37 (contracts of service are, according to our common law, a special type of contract of lease or hire) and with contracts of service in s 38. It would therefore follow that the provisions of s 38 are made applicable by s 339.

[17]	If s 339 is not applicable (I think on the presents facts it would be) then s 37 applies as incorporated into the law of liquidation by virtue of s 367(4)(g) of the Companies Act of 1973. How should s 37 be read in this context? Liversage at 23 is of the view that the contract of service must be treated as a lease. It is unnecessary for me to decide this. 

[18]	On the facts of this case s 38 of the Insolvency Act will be applicable should the application for liquidation which is attached to the papers be granted. 

[19]	A further question now arises. Section 210 of the Labour Relations Act of 1995 provides:

If any conflict, relating to the matters dealt with in this Act, arises between this Act and the provisions of any other law save the Constitution or any Act expressly amending this Act, the provisions of this Act will prevail.

[20]	For the position regarding the industrial court acting in terms of the Labour Relations Act 28 of 1956 see Liversage at 41-49 and Wallis at para 30. However, as far as the present Labour Relations Act is concerned I do not think that there is any conflict between it and the Insolvency Act. The Labour Relations Act is silent on the termination of an employment contract on the grounds of insolvency. It does not deal with the fairness of such a termination. Cf English law which tends to regard a dismissal consequent upon a liquidation as fair. See Fox Bros (Clothes) Ltd v Bryant [1979] ICR 64, [1978] IRLR 485 (EAT) in Woods and Smith Industrial Law 4th ed at 197.

[21]	The liquidation of the other companieswill  terminate the contract of employment between them and their employees. The employees have a claim for damages but nothing more. This court cannot interdict the ipso jure termination of employment of employees. Moreover the “threat” is not a threat; on my view it is an accurate statement of the law.

[22]	In any event I am firmly of the view that the reach of the Labour Relations Act of 1995 halts once insolvency enters the picture. Thereafter the law of insolvency, administered in this instance, by the High Court, takes over. I do not believe that this court may make an order which will come into effect on the insolvency of an employer. 

[23]	In the premises the application is dismissed with costs including the costs of two counsel.

SIGNED AND DATED AT PRETORIA THIS 10TH DAY OF OCTOBER 1998.

A A Landman
Judge of the Labour Court

Date of hearing: 	7 October 1998

Date of judgment: 	10 October 1998

For the applicant: 		Adv Rautenbach (with him Adv Nourse) instructed by 				Ntuli Noble and Spoor

For the respondents: 	Adv Cassim SC (with him Adv Van As) instructed by  Leppan 				Beech Attorneys