South Africa: Labour Court

KwaZulu Natal South Coast Accommodation Association v Bargaining Council for the Liquor, Catering And accommodation Trades and Others (D 85/04) [2004] ZALC 19; [2004] 8 BLLR 762 (LC); (2004) 25 ILJ 2211 (LC) (19 February 2004)

SNELLER RECORDINGS (PROPRIETARY) LTD - DURBAN

[4] The first respondent was established in 1945. When it registered in terms of the Labour Relations Act 66 of 1995 (the "LRA") in 1996, it had two employer organizations as parties to it, that is the Federation Hospitality Association of South Africa (FEDHASA) and the applicant. FEDHASA withdrew as a member to the council. Although the constitution of the first respondent was not amended to reflect the withdrawal, it is common cause that FEDHASA is no longer a member of the council. The second respondent is the only member remaining as a trade union party to the council.

[5] In September 2003 the applicant sought the assistance of the third respondent to facilitate a meeting of the first respondent to discuss the latter's dissolution as, without an employer, the first respondent was no longer functional.

[6] It further gave notice of its intention to withdraw from the first respondent but to participate only to effect its winding up.

[7] The applicant decided to withdraw from the first respondent because it was generally dissatisfied with the manner in which it operated. More specifically, there appeared to be irregularities in the manner in which money was handled. An audit revealed that there were serious administrative weaknesses and possible irregularities. The second respondent did not support the applicant's attempts to have the secretary of the first respondent suspended. Further, a collective agreement which was extended to non-parties and which was concluded in the first respondent, expired on 31 December 2003.

[8] Consequently, wages and conditions of employment in the industry are currently regulated in terms of the Basic Conditions of Employment Act No 75 of 1997 (“BCEA”) and the LRA.

[9] Despite cancellation of the collective agreement, the first respondent continues to collect monies from the applicant's members. For these reasons the applicant withdrew from the first respondent and now applies to have a provisional liquidator appointed to safeguard the revenue and assets of the first respondent.

[10] The first and second respondents challenged the locus standi of the applicant. Having withdrawn as a party to the first respondent, it could not, in terms of section 59(1)(b) of the LRA, apply for its winding up, it was submitted. The applicant was not a nominal party to the first respondent, because the latter's constitution is silent about the procedure for withdrawal by a member and does not prescribe any amendment to the constitution to reflect a withdrawal. FEDHASA, which is no longer a member, remains reflected on the constitution. Likewise, the Hotel Allied Restaurant Workers Union (HARUSA) was also so reflected on the constitution, despite having ceased to be a member of the first respondent. Therefore being named as a party in the Constitution was not proof of membership of the first respondent. The applicants withdrawal was effective.

[11] For these reasons, it was submitted for the first and second respondents, the applicant was not a party to the first respondent and therefore had no locus standi to launch the application.

[12] Section 59(1)(b) provides:

"The Labour Court may order a council to be wound up if -

....

(b) the registrar of labour relations or any party to the council has applied to the Court and the Court is satisfied that the council is unable to continue to function for any reason that cannot be remedied."

[13] By definition, a bargaining council is established by one or more registered trade unions and one or more registered employer organizations. (Section 213, read with section 27 of the LRA.)

[14] If there is no employer party then the bargaining council cannot continue to exist as it is structurally dysfunctional.

[15] I accept Mr Pillemer’s submission for the applicant that when it withdrew from the bargaining council, it qualified its withdrawal by indicating that it would continue to participate only to effect the first respondent's winding up. Its withdrawal was therefore not complete and final in September 2003 but would be so if and when the first respondent is finally wound up.

[16] The constitution is no longer proof that the parties reflected in it are members, as it is common cause that FEDHASA and HARUSA are no longer members of the council. On the other hand, the reflection of the applicant as a member is a correct statement of the de facto situation. The applicant remains a member until the first respondent is wound up.

[17] That the applicant did nothing about winding up the first respondent itself after the September letter to the third respondent is no indication that it believed it was no longer party to the first respondent. Quite obviously, if the third respondent had acted on the applicant's request then the latter would not have had to launch this litigation.

[18] I accordingly find that the applicant is a member of the first respondent and has locus standi to launch this application.

[19] Mr Seery for the first and second respondents, challenged the urgency of the application. The applicant was moved to launch this application when it received notice of a meeting of the first respondent to be held on 11 February 2004. On receipt of the notice it realised that the third respondent had not taken any steps to wind up the first respondent, which continued to operate in certain respects. Notice of the meeting was faxed on 2 February 2004. The application was only filed on 10 February 2004. The matter was set down for 11 February 2004.

[20] Mr Seery contended that the matter was not urgent, firstly, as the applicant believed at least since September 2003 that there were irregularities in the functioning of the first respondent. Secondly, it had known of the meeting eight days before the filing of the application. There was therefore no reason to give the respondents barely 14 hours' notice of the application.

[21] Mr Pillemer SC, for the applicant, conceded that the respondents should have been given better notice of the application. However, given the circumstances in which the first respondent was functioning the situation was serious and urgent.

[22] When the matter came before me on 11 February 2004 I declined to grant any relief without giving the respondents an opportunity to deliver answering affidavits.

[23] As the first respondent is responsible for public funds, it is important that they are properly managed and administered. A prima facie case was made out that the first respondent was neither properly constituted nor managed. If the allegations were proved the applicant had a clear right to the remedy sought. Hence I considered the matter urgent.

[24] On the merits, Mr Seery submitted that the first respondent has performed a vital role in the industry since its establishment and should be allowed to continue to do so. It continues to operate and perform most of its functions and powers conferred on it by its constitution and the LRA. Such functions as it does not perform relate to the collective agreements which expired on 31 December 2003. That situation would be remedied soon as FEDHASA and the United Democratic Employers Association of South Africa (UDESA) have been approached to join the first respondent. UDESA would put it to the vote of its members at its annual general meeting on 9 February 2002 whether it should join the first respondent. UDESA's secretary, David Manthey, had said that he would invite members of the applicant who are still paying levies to the first respondent to join UDESA. The applicant's members continue to pay levies, despite being informed by the applicant not to do so. The applicant has accordingly not satisfied the requirements of section 59(1)(b) of the LRA, so it was submitted for the first and second respondents.

[25] In reply, the applicant disputed that the first and second respondents could remedy the situation. Firstly, there is no participating employer party to the first respondent. Representivity of both employer and employee parties was a problem as the parties to the first respondent do not represent the majority of employers and employees in the industry within the jurisdiction of the first respondent. Without an employer party, the first respondent cannot function under its constitution. It cannot police the collective agreement as it was terminated.

[26] Secondly, one Rodney Bunn, of FEDHASA, who had enjoyed some level of indirect representation on the first respondent, informed the applicant that a meeting was called and 12 members attended. None of them wished to participate in the first respondent. FEDHASA's view is that a sectoral determination should be obtained.

[27] Thirdly, the applicant's representative does not know of either UDESA or David Manthey. UDESA is not listed in the telephone directory. It is neither representative of employers in the industry, nor does it muster the kind of representivity required by the constitution of the first respondent, so it was submitted for the applicant.

[28] Section 59(1)(b) of the LRA requires me to find, firstly, that the first respondent "is unable to continue to function". Secondly, the reason it cannot function cannot be remedied.

[29] Unlike bargaining councils in the public service, which are established by statute, (sections 35, 36 and 37 of the LRA), bargaining councils in the liquor, catering and accommodation industry are established by firstly adopting a constitution that complies with section 30 and by obtaining registration of the bargaining council in terms of section 29 of the LRA (Public Servants Association and Another v Public Service Co-ordinating Bargaining Council (2001) 7 BLLR 815 (LC).)

[30] As stated above, the membership of an employer party is foundational to the existence of a bargaining council. As a matter of law a bargaining council cannot continue to exist without an employer party. The employer party also has to participate in the activities of the bargaining council in order for the latter to comply with its constitution.

[31] Turning to the constitution of the first respondent, its powers and functions include concluding collective agreements, preventing and resolving disputes, enforcing collective agreements, developing proposals for submission to NEDLAC or other fora on policy and legislation affecting the sector, determining by collective agreements matters which are not to be issues in dispute for the purpose of a strike or a lock-out and to consider and deal with any other matter that affects the interests of the parties.

[32] Without an employer party collective agreements can also not be concluded. By definition, a collective agreement is concluded by employer and employee parties.

[33] In the absence of an employer party, the first respondent cannot legitimately claim to consider and deal with the matters that affect the interests of employers. The first respondent's constitution requires that it be constituted by five representatives for the employer party. Without any employer representatives, the first respondent is not properly constituted.

[34] The first respondent is obliged by its constitution to hold monthly meetings. Meetings are quorate if 50% of the representatives from the employer and employees, respectively, attend. In the absence of participation by any employer organization, the first respondent cannot muster a quorum. Decisions cannot be taken and monthly meetings, amongst others, cannot serve the purpose for which the first respondent was constituted.

[35] Officials and employees may attend to the daily functioning of the first respondent. However, they do not constitute the first respondent. They are merely functionaries of the first respondent. The first respondent is publicly accountable as the entity responsible for the functions performed on its behalf by officials and employees in terms of its constitution. It is the head of the organization. The officials and employees constitute the body of the organization. Without the head, the body cannot function. The officials and employees would have no one by whom they could be held accountable.

[36] In the absence of an employer party first respondent cannot either legally or legitimately continue to exist or administer labour and industrial relations in the industry.

[37] Can the situation be remedied in the manner proposed by the first and second respondents? The first respondent has to be properly constituted in the first place in order to consider the application for membership by registered trade unions and employer organizations. As the first respondent is not properly constituted, no application for membership by either FEDHASA or UDESA can be considered.

[38] A party applying for membership to the first respondent will have to show that it represents at least 15% of the employees in the sector. There is no evidence that UDESA has or can muster such representivity.

[39] There is a dispute of fact as to whether FEDHASA wants to rejoin the first respondent. If the dispute is to be resolved on the papers, then I must accept the applicant's version that it does not want to rejoin the first respondent as it is the latter who makes this allegation. (Plascon-Evans Ltd v Van Riebeeck Paints (Pty) Ltd 2000 (4) SA 452 (NC).

[40] Having considered the criteria for the winding up of the first respondent in section 59(1)(b) of the LRA, that is not the end of the matter. Sub-section (2) provides as follows:

"If there are any persons not represented before the Labour Court whose interests may be affected by an order in terms of subsection (1), the Court must -

(a) consider those interests before deciding whether or not to grant the order; and

(b) if it grants the order, include provisions in the order disposing of each of those interests."

[41] The parties affected by an order for the winding up of the first respondent would be, firstly, the employees of the first respondent. The order sought includes a direction that the liquidator appointed consults with and proceeds in terms of section 189 of the LRA, in so far as the provisional order that is being sought may be made final.

[42] Another group of persons who could have an interest in this order would be non-parties to the bargaining council to whom the agreement was extended. However, as there is no longer an agreement, their interests are not affected by this order.

[43] In considering the interests of those who are not represented in this application, the Court also notes that the first respondent continues to receive and manage public funds. It can only do so if it is legally authorised by its constitution and the LRA.

[44] As I have found, in the absence of an employer party the officials and employees of the first respondent can obtain no mandates in order to continue the performance of their functions and duties. They continue to do so is without mandate and proper authorization. This state of affairs cannot be allowed to continue in the public interest.

[45] Finally, the competence, qualifications and experience of the liquidator, Mr Stuart Monty O'Connell, was challenged by the first and second respondents. While they did not question his competence as a liquidator of companies and as an attorney, his ability to wind up a bargaining council was put in issue. More specifically, it was submitted that the proposed liquidator, Mr O'Connell, was a "number cruncher" and would not be alive to the dynamics and the functioning of a bargaining council. Mr Pillemer responded that it is precisely because Mr O'Connell was a number cruncher that he was suitable for the position.

[46] In my view, as Mr O'Connell has experience in liquidations and insolvencies, I cannot see how the winding up of the first respondent can be any more difficult than that of a company, particularly as the functioning of the first respondent is closely regulated by legislation. (See, for instance, section 53 of the LRA.)

[47] These, briefly, are the reasons for the order that I made on 18 February 2004 granting the provisional order of liquidation. I may supplement these reasons in due course.

[48] Subsequent to delivery of the above reasons for the order the parties were directed to give attention to the following matters that are not covered by the LRA:

1. Publication of the order by the parties by advertising in a newspaper in order that other unidentified persons having an interest may respond.

2. Supervision and approval of the Liquidator’s accounts.

3. The question of security by the Liquidator for the proper administration of the Bargaining Council.

4. Appropriate orders of court to give effect to the aforegoing.

___________

Pillay D, J

19 April 2004