IN THE LABOUR COURT OF SOUTH AFRICA
	Before Landman J 					CaseNumber: C240/97

     In the matter between:

SACWU							Applicant

and

ENGEN PETROLEUM LTD				1st Respondent
COLAS INTERNATIONAL (PTY) LTD			2nd Respondent

ON BEHALF OF APPLICANT:
Adv N Arendse instructed by Chennells Albertyn Attorneys

ON BEHALF OF RESPONDENT:
Adv Rogers instructed by Perrot, Van Niekerk & Woodhouse Inc.

DATE OF PROCEEDINGS:
25 June 1998

PLACE OF PROCEEDINGS:
CAPE TOWN

JUDGMENT

	1.	The South African Chemical Workers’ Union (the Union) seeks a declaratory order concerning some of its members and the respondents, Engen Petroleum Ltd (the old employer) and Colas International (Pty) Ltd (the new employer), a subsidiary of Must Holdings (Pty) Ltd, in the following terms:

“1. Declaring that those members of the applicant currently employed by the second respondent (a subsidiary of Must Holdings (Pty) Ltd) who were transferred to the second respondent in terms of an agreement reached between inter alia the first respondent and the second respondent on 14 December 1996, are entitled to the same redundancy benefits which formed part of their conditions of employment whilst they were employed by Vialit (Pty) Ltd, a division of the first respondent prior to the transfer of the business to the second respondent pursuant to s 197(1)(a) of the Act which transfer was effected on 31 January 1997.

2.....

3. Costs”

	2.	The first question is whether this court has jurisdiction in terms of the Labour Relations Act 66 of 1995 to make a declaratory order regarding the subject matter set out in the prayers.  Mr Rogers, for the respondents, submitted that I do not have the jurisdiction to do this.

	3.	Undoubtedly this court has the power to make a declaratory order in appropriate circumstances. See s 158(1)(a)(iv) of the Act. This power can only be exercised if this court has jurisdiction over the subject matter. The Act makes a clear distinction between adjudication and arbitration. See s 157 of the Act. This court may not, unless it is expedient to do so, and, with the consent of the parties, arbitrate a dispute. See s 158(2) of the Act. There is at least one exception.  A dispute which is purely about severance (redundancy) pay must be arbitrated by a bargaining council having jurisdiction or, where there is no council, by the Commissioner for Conciliation, Mediation and Arbitration (the CCMA). But if the Labour Court is adjudicating a matter concerning dismissal for operational requirements and the issue of severance pay arises, the court may adjudicate on it. See s 196(10) of the Act.

	4.	The Labour Court, according to the decision of the Labour Appeal Court in Kgethe & others v LMK Manufacturing (Pty) Ltd & another (1998) 19  ILJ 522 (LAC) is empowered to grant a declaratory order where the parties are in dispute regarding information required to determine whether s 197 applies to a particular situation.

	5.	I am prepared to assume, without deciding, that the LMK decision applies in the instant case. I must however point out that it was conceded, correctly, by Mr Arendse, who appeared for the union, that if a dispute purely about severance pay should arise today, the CCMA would be obliged to determine the dispute and not the Labour Court. In doing so the CCMA would be obliged to answer the question which the union has posed to this court.

	6.	I turn now to the facts. The respondents have filed an answering affidavit. The union has not replied. I set out, briefly, the common cause facts and the facts contained in the respondents’ papers:

(a) The union was the recognised collective bargaining agent of the affected employees.

(b) The old employer retrenched employees for the first time in 1993. It retrenched employees belonging to the affected bargaining unit in 1995. At this time the employees were represented by another union, the CWIU.

(c) Some of the union’s members who were employed by the old employer are now employed by the new employer.

(d) Severance benefits were not a term and condition of the employment contracts of the employees employed by the old employer. Letters of appointment make no reference to redundancy benefits. There is no documentation which refers to such benefits. (The union alleges that the old employer provided redundancy benefits to the employees “as part of their terms and conditions of employment”.)

(e) In 1996 the old employer proposed selling its Vialit business. A dispute arose between the union and, at least, the old employer regarding the proposed sale of business. 

(f) An advisory arbitration award was sought from the CCMA. It was delivered on 22 November 1996. The commissioner advised that the old employer could transfer the contracts of employment without the consent of the affected employees. After the transfer, unless otherwise agreed, the new employer would be “responsible for the maintenance of the existing terms and conditions of the said employees.”

(g) The old employer sold, on 17 January and transferred, on 31 January 1997, its Vialit business to the new employer as a going concern.

(h) All the affected employees consented to their transfer to the  new employer.

(i) The respondent alleges (as a conclusion of law) that the effected employees became subject to the new employer’s terms and conditions of employment.

(j) The redundancy benefits payable by the new employer, in the event of redundancy, are less favourable than the redundancy benefits which the old employer “historically” paid. That payment was not in terms of an employment contract.

(k) At the end of January 1997 the affected employees entered into an agreement described as a compromise and were paid a once-off payment.

	7.	The union contends that the redundancy benefits conferred upon its members by the old employer form part of their contracts of employment and that these rights ought properly to have been transferred on the sale of Vialit to the new employer.   Put differently the new employer is contractually obliged to give effect to the rights of the union’s members vis-a-vis the old employer prior to the transfer as contemplated by s 197(2)(a) of the Act. 

	8.	Section 197(2) reads:

“(2) If a business, trade or undertaking is transferred in the circumstances referred to in subsection (1) unless otherwise agreed, all the rights and obligations between the old employer and each employee at the time of the transfer continue in force as if they were rights and obligations between the new employer and each employee and, anything done before the transfer by or in relation to the old employer will be considered to have been done by or in relation to the new employer.”

	9.	I will assume that s 197(1) of the Act applies to this case even though a transfer of the contracts of employment took place with the consent of the affected employees. 

	10.	Mr Arendse argued, correctly, that s 196 of the Act provides for severance pay as a right.   An employer does not have to offer a better severance package or benefits than that stipulated in the Act.  However, it was contended, that when more favourable benefits are offered, they become part of the terms and conditions of every individual contract of employment. 

	11.	I do not think that an employer, by offering employees about to be retrenched severance benefits in excess of that provided by the Act, necessarily intends to add to or vary their terms and conditions of employment. The employer and employees may well enter into separate contracts. However, even if I am wrong, it is the contracts of employment of employees who are retrenched that would be amended. It cannot be said that the contracts of employment of those that remain are amended. Of course an employer could do this.  But, in this case, the facts do not show that this was done.

	12.	Section 197(2) of the Act deals with “rights and obligations” of the old employer which are transferred to the new employer in the circumstances contemplated in s 197(1) of the Act. These rights and duties can have their origin in statute. Severance pay may be considered a right although the extent or the quantum of the right may vary between nil and one week. See s 196 of the Act.

	13.	However for the union to succeed in this application it must show that a right to a redundancy benefit, in the event of future redundancies, accrued contractually  to each affected employee. It is not enough to show that it was available by operation of law or that it was offered to the union and accepted. If a contract came into existence between the old employer and the union, or another union, the parties could have intended that the benefit be accepted by the employees ie the parties may have intended the stipulatio alteri to apply. There is no allegation to this effect in this case.

	14.	In the result the declaration cannot be granted. This makes it unnecessary to explore whether any rights which may have existed have been compromised. A fortiori I have found there to have been no rights which could be compromised.

	15.	The union sought a cost order in its notice of motion but did not insist on it at the hearing. It was also submitted that if the application be refused the union should not be ordered to pay costs. The union initiated litigation on the basis that the respondents should be ordered to pay the costs and only resiled from this approach at the hearing. The respondents where therefore obliged and compelled to defend the matter.  Although there is an ongoing relationship it seems to me that this is a case where law and fairness require that costs should follow the result. Consequently the union should pay the costs.

	16.	In the premises the application is dismissed and the applicant union is ordered to pay the respondents’ cost.

SIGNED AND DATED AT JOHANNESBURG THIS 1ST DAY JULY 1998.

........................
A A Landman
Judge of the Labour Court