South Africa: Labour Court

IN THE LABOUR COURT OF SOUTH AFRICA
HELD AT BRAAMFONTIEN

CASE NO J 2178/09

In the matter between:

UNITED PEOPLE’S UNION OF SOUTH AFRICA Applicant

and

REGISTRAR OF LABOUR RELATIONS Respondent


JUDGMENT

VAN NIEKERK J

Introduction

[1] The applicant, to which I shall refer as “UPUSA”, brought an application yesterday, as a matter of urgency, seeking interim relief in respect of a decision made by the respondent (“the Registrar”) on 2 October 2009 to deregister UPUSA.

[2] The application comprises two parts. In terms of Part A of the Notice of Motion, UPUSA seeks urgent interim relief pending the outcome of the proceedings initiated by Part B, effectively an appeal against the Registrar’s decision, lodged in terms of section 111 (3) of the Labour Relations Act, 1995. The particular relief sought in these proceedings is an interim order setting aside the Registrar’s decision, and interdicting the Registrar from publishing a notice of cancellation in the Government Gazette to be published on 16 October 2009.

The facts

[3] The facts giving rise to this application are largely a matter of common cause. On 9 June 2009, the Registrar wrote to UPUSA stating that in terms of section 106 (2B) of the LRA, a notice would be published in the Government Gazette on 19 June 2009, giving notice of the Registrar’s intention to cancel UPUSA’s registration, for the following reasons:
(i) UPUSA had ceased to function in terms of its constitution;

(ii) UPUSA had not complied with sections 98, 99 and 100 of the LRA; ^[1]and
UPUSA had ceased to operate as a genuine trade union.

In terms of the notice, which was published on 19 June 2009, interested parties were invited to make representations within 60 days as to why UPUSA’s registration should not be cancelled.

[4] UPUSA made representations in response to the Registrar’s letter. The representations read as follows:

“We, the undersigned, submit that our trade union (UNITED PEOPLES UNION OF SOUTH AFRICA) should not be deregistered based on the following submissions:

UPUSA has promoted and protected the rights and interests of its members:

UPUSA has strived for just standards of living, social security and fair conditions of work for its members and workers in general:

UPUSA is the only union to comment on, advance or oppose any law, action or policy of authority or institution affecting the interests of its members and workers in general:

UPUSA has afforded its members legal and other assistance and undertook the institution or defense of legal proceedings affecting members interests:

UPUSA has proved to be the only union acting on behalf of its members truthfully and honestly and has done so in terms of the provisions of its constitution.

We, therefore, submit to the Registrar that UPUSA will comply with the provisions of section 98, 99 and 100 of the Act [section 196 (2A) (b)] within the prescribed period of 60 days. Our auditors are busy preparing our financial records and audits and we are confident that the Registrar will receive these records before or on 19 August 2009. Further we submit that we would suffer a lot if the Registrar and the Labour Court could support deregistration of UPUSA.”

[5] The Registrar denies having received these representations. This is of no consequence in these proceedings however, since UPUSA’s representations manifestly fail to address the Registrar’s recorded reasons for the intended deregistration of UPUSA. In any event, the expansive promise to submit the required records was not fulfilled. On 18 August 2009, UPUSA lodged only its annual financial statements for the year ending February 2007 and February 2008 respectively with the Registrar. The annual financial statements for the year ending February 2007 were signed by the auditors on 17 August 2009, and those for the year ending February 2008 on 18 August 2009.

[6] Both audit reports are qualified, and because of the significance of the issues referred to in the qualifications, the auditors express no opinion on the annual financial statements. The qualification in the audit report for the year ending February 2007 reads as follows:

“Qualification

We were unable to satisfy ourselves as to the accuracy and completeness of employee costs and related statutory obligations. In these circumstances we were unable to perform audit procedure or obtain all the information and explanations we considered necessary to satisfy ourselves that proper accounting records have been maintained with respect to employee costs. The union also did not have a fived assets register.

A major part of the union’s income comprises of subscription fees received from members. The was no system control over such fees on which we could rely upon for the purpose of our audit and there was no satisfactory auditing procedures that we could perform to obtain reasonable assurance that all fees received were properly recorded. Consequently, we were unable to satisfy ourselves as to the complete and accuracy of the accounting records relating to the fees received.

Opinion

Because of the significance of the matters discussed in the preceding paragraph, we do not express an opinion on the annual financial statements.”

The audit report for the year ending February 2008 reads as follows:

“Qualification

We were unable to satisfy ourselves as to the accuracy and completeness of employee costs and related statutory obligations. In these circumstances we were unable to perform audit procedure or obtain all the information and explanations we considered necessary to satisfy ourselves that proper accounting records have been maintained with respect to employee costs. The union also did not have a fixed assets register.

A major part of the union’s income comprises of subscription fees received from members. The was no system control over such fees on which we could rely upon for the purpose of our audit and there was no satisfactory auditing procedures that we could perform to obtain reasonable assurance that all fees received were properly recorded. Consequently, we were unable to satisfy ourselves as to the complete and accuracy of the accounting records relating to the fees received.

As of 01 September 2007 to 29 February 2009 we could not verify the income and expenditure for the Kwazulu Natal region due to none availability of the accounting records, bank statements and supporting documentation for the above mentioned period. We therefore could not perform any audit procedures considered necessary to verify the completeness, accuracy and occurrence of the income ad expenditure for the Kwazulu Natal Region.

Opinion

Because of the significance of the matters discussed in the preceding paragraph, we do not express an opinion on the annual financial statements.”

The test to be applied

[7] In applications of this nature, this Court has consistently applied the test established in Eriksen Motors (Welkom) Ltd v Protea Motors, Warrenton & another 1973 (3) SA 685 (A). An applicant for interim relief must prima facie establish the right that forms the subject matter of the main action even though open to some doubt, a well-grounded apprehension of irreparable harm to the applicant if the interim relief is not granted, a balance of convenience in favour of the granting of interim relief, and the absence of any other satisfactory remedy. The threshold requirement is a prima facie right though open to some doubt.

[8] Mr. Gwala, who appeared for the Registrar, did not seriously contend that the application was not urgent. Turning then to the applicable requirements, UPUSA seeks interim relief pending an appeal in terms of section 111 of the LRA. In this sense, UPUSA does not assert a legal right in its claim for the interim relief that it seeks. Rather, it relies on the fact of an appeal against the Registrar’s decision having been lodged and the prejudice that UPUSA will suffer should interim relief not be granted. In my view, it is incumbent on an applicant in circumstances such as these to place facts before the Court to establish in these proceedings, at least on a prima facie basis, that there is some prospect that the appeal will succeed. This is not to suggest that it is necessary to show that the appeal will succeed, nor is it to suggest that the threshold is so low that not much more than the exercise of a right to appeal is required to sustain interim relief. The nature of interim relief is such that some preliminary assessment of the merits of the applicant’s case is essential. In my view, an applicant must at least lay a factual foundation that is sufficient for the Court to be satisfied that if the facts deposed to in the founding affidavit and the undisputed facts alleged by the respondent were to be established in an appeal hearing, there is at least a reasonable possibility that the appeal will succeed.

Analysis
[9] The deponent to the founding affidavit, Mr. Luthuli, avers that in response to the Registrar’s letter dated 9 June 2009, UPUSA’s auditors finalised the financial statements and recorded the matters contemplated by section 98 of the LRA, and that UPUSA lodged these statements with the Registrar. In consequence, he avers, it “was not correct” for the Registrar to decide to cancel UPUSA’s registration. There is little else by way of the merits of the appeal against the Registrar’s decision to be found in Mr. Luthuli’s affidavit – his affidavit addresses in the main the consequences of that decision in the absence of any interim relief. The only substantive evidence to indicate any prospects of success on appeal; in effect, is an averment that the shortcomings identified by the Registrar have been addressed. On the papers before me, this is clearly not so. As I have already indicated, on UPUSA’s own version, on 9 June 2009, the Registrar gave notice of a failure to comply with sections 98, 99 and 100, and alerted UPUSA to the consequences of a failure to address these issues within a 60 day period. UPUSA responded by addressing representations to the Registrar, not one of which addressed the merits of the Registrar’s complaints. The financial statements lodged in August 2009 contain qualifications by the auditors that are nothing less than damning indictments on UPUSA’s refusal and/or inability to comply with basic statutory requirements. In particular, the auditor’s inability to be satisfied as to the accuracy of the accounting for membership subscriptions received on account of there being no system control over such fees raises fundamental concerns. Even if it were to be accepted that the financial statements had been provided within the 30 day period contemplated by section 100 (b), there is no escaping the fact that the auditors found themselves unable, for two consecutive years, to express an opinion on those statements. None of this augurs well for the appeal hearing, nor does UPUSA’s continued failure to file certified statements recording the number of union members as required by section 100.

[10] Mr. Lengane, who appeared for UPUSA, made much of the consequences that a refusal to grant interim relief would visit on UPUSA. Indeed, those consequences have already manifested themselves in the form of the withdrawal of recognition and organisational rights by a number of employers following on the Registrar’s decision. This may be so, but UPUSA has only itself to blame. Trade unions are public institutions, not private businesses. The act of registration confers many benefits on those trade unions that seek to be registered. But these benefits come at the price of submission to the reporting requirements established by section 100 of the LRA, all of the requirements that are intended to provide a guarantee to union members that their membership subscriptions have been utilised to further their interests. A failure by a registered trade union to comply with section 100 and to keep books of account and records to the standard required by section 98 undermines this statutory guarantee. Ultimately, it is the Registrar who is the underwriter of this warranty, and like all underwriters, the Registrar must protect the general interest at the expense of the particular when this is necessary. The Registrar is accountable to the public as a whole should a registered trade union (or employers’ organisation, for that matter) fail to implement the required financial and administrative controls, and a degree of due diligence by the Registrar in enforcing the relevant requirements of the Act is therefore necessary.

[11] For these reasons, on the papers before me, UPUSA has failed to satisfy the threshold requirement of a reasonable possibility that an appeal against the Registrar’s decision might succeed. The application must accordingly fail. There is no reason why costs should not follow the result.

I make the following order:

1. The application is dismissed, with costs.

ANDRE VAN NIEKERK
JUDGE OF THE LABOUR COURT

Date of hearing: 14 October 2009
Date of Judgment: 15 October 2009

Appearances:

For the Applicant: Mr. Lengane
Instructed by: Maserumule Inc. Attorneys

For the respondent: Mr. Gwala
Instructed by: The State Attorney

^[1] Section 98 requires inter alia that a registered trade union must keep books of account and records to the standards of generally accepted accounting practice, principles and procedures, and that books and records of account and its financial statements be audited annually. Section 99 obliges a registered trade union to keep certain records, including a list of members and minutes of meetings. Section 100 requires a registered trade union to provide to the Registrar by 31 March each year, a statement showing the list of members as at 31 December of the previous year, and within 30 days of receipt of its auditor’s report, a copy of that report and of the financial statements.