CASE LAW UPDATE

Facts: Nedbank is a creditor of Cinlo, pursuant to Nedbank having advanced a loan and overdraft facilities to Cinlo. Cinlo was indebted to Nedbank in the tune of R45,054,244.86, being in respect of the outstanding loan, overdraft facility and interest thereon. The Trust, as the sole member of Cinlo, through the Trustees, stood surety for the debts of the company to the tune of R36,809,000. Having defaulted on its obligations towards Nedbank, Cinlo was unable to pay its debts. By special resolution, Cinlo filed for voluntary liquidation with the Master of the High Court. Cinlo is the owner of two farms. As at 2019, the alleged “true” market value of the Farms combined was R49,700,000. This allegation is strenuously disputed by the liquidators and Nedbank. Given the fact that Cinlo was in a liquidation process, the appointed liquidators sold the farms for an amount of R25,000,000. Nedbank consented to the sale of the farms.

Application: The attorneys of the Trustees, in a rather lengthy missive, bemoaning the negligence on the part of Nedbank, requested the liquidators to institute, on behalf of Cinlo, an action against Nedbank for payment of damages allegedly suffered by Cinlo because of the sale of the farms for an amount far below their “true” market value. Displeased by the decision of the liquidators of not being willing to institute legal action against Nedbank, the Trustees launched the present application. The Trustees seek an order to be granted leave to institute an action on behalf of Cinlo (in liquidation) against Nedbank for damages.

Discussion: The Trustees are not actually seeking a derivative action in its truest form on behalf of Cinlo. When a company is in liquidation, a derivative action does not lie. The simple reason for this principle is that when a company is liquidated, there is no longer directors or shareholders’ meetings, which, in a sense, controls the activities of a company. The rule is that if a wrong is done to the company, the company is to be the proper plaintiff and only the company may sue and an individual shareholder or a group of shareholders may not sue. An applicant must show that there is a serious question to be tried with reference to the infringement of some legal right or the commission of some legal wrong. The Trustees are obliged to at least provide the court with sufficient evidence and material to enable it to determine whether there is a serious question to be tried. The Trustees failed to provide court with sufficient and material evidence to support an allegation that the true value, which was obtainable at the time of the sale of the farms, was what the 2019 and 2022 valuations alleged the value to be.

Findings: Instituting legal action has attached to it the risk of attracting legal costs. The liquidator would be litigating in the name of a company if so compelled and such opens a limping company to further haemorrhage. Similarly, if the court affords the Trustees a right to sue, they will proceed in the name of the company, and in turn will attract legal costs for a moribund company. Unwillingness to expose an ailing company to further haemorrhage cannot be seen as a mala fide and unreasonable act. The liquidators averred, and these averments remain unchallenged, that they did not (a) act in dereliction of any of their statutory duty; (b) they had received various offers to purchase; (c) they had taken control of the farms and protected them; and (d) they were instructed by the sole creditor of the liquidated estate, Nedbank, to accept the best offer at the time. When these averments, together with the admitted facts, are considered, an order granting the final relief sought by the Trustees is not justified. A contention that the farms should have been sold through a public auction does not suggest that a valid cause of action in law may magically emerge against Nedbank. All of this is speculative and unhelpful to support any best interests of the company.

Order: The application is dismissed.

MOSHOANA J

Facts: Mr and Mrs E became romantically involved in 2018 and moved in together and in 2019, a girl child, A, was born in Limpopo. The parties got married in community of property in 2020. They resided with A in Lephalale as Mr E was employed at Medupi Power Station. They agreed that Mrs E would be a full-time stay-at-home mother to look after A whom she breastfed. A started attending the creche in the mornings from the age of 15 months. During 2021 the marriage relationship irretrievably broke down and Mr E removed A from the common home to his parental home in Gauteng, without Mrs E’s consent. He permanently relocated to Vanderbijlpark, leaving Mrs E who remained in Lephalale.

Appeal: The parties signed a settlement agreement, providing, amongst other things, that the primary residence and care of A would vest with Mr E. The matter served in the unopposed divorce court in 2022. On that day Mrs E protested against the settlement agreement and informed the High Court that she was coerced into signing it, without any legal representation. After hearing short oral evidence from both parties, the High Court referred the matter to a special trial. This is an application for leave to appeal against the judgment of the High Court, which refused to endorse the divorce settlement agreement. The court granted the primary residence and care of A to Mrs E. It further awarded costs against Mr E, to be paid from his share of the communal estate.

Discussion: The reports received from the Family Advocate indicated that A had strong relationships with both parents and a recommendation was made that the status quo be maintained and that A remain in the care of Mr E, with Mrs E exercising contact rights. The Family Advocate concluded that Mrs E’s circumstances were too uncertain and unpredictable for the primary care of A to be awarded to her. The High Court rejected the Family Advocate’s recommendation and found that, on the facts before it, Mr E was not A’s primary caregiver in the past and was not her primary caregiver at the time the matter was heard. On the other hand, the facts and probabilities supported Mrs E’s version that she was A’s primary caregiver from birth, until the child was removed from her care and residence by Mr E. The court also found that the evidence revealed that Mr E had purchased expensive gaming equipment. He was the author of Mrs E’s financial “instability” as he had cut her off financially.

Findings: Whilst the parties’ right to contract should be respected, in matters dealing with minor children, the court has a duty to enquire whether any arrangement by the parties would serve the best interests of A. Even though Mrs E had initially bound herself to the settlement agreement, the High Court, as upper guardian of A, had a duty to interrogate the facts and the arrangements made in the agreement insofar as they related to the best interests of A. The court had to be satisfied that the provisions made for the welfare of A were satisfactory and in her interest. The High Court concluded that the primary care of A be awarded to Mrs E, based largely on favourable credibility findings in her favour and adverse credibility findings against Mr E. The High Court was mindful not to give one factor, that of maintaining the status quo of the past nine months, pre-eminence over other factors. The High Court exercised its discretion judicially in rejecting the settlement agreement and the recommendations by the Family Advocate.

Order: The application for leave to appeal is refused.

MOLEFE JA (MABINDLA-BOQWANA JA, KEIGHTLEY JA, BAARTMAN AJA and DOLAMO AJA concurring)

Facts: The applicant conducts its business in the road logistics sector and operates a fleet of trucks transporting goods. The employee was employed as a truck driver and was dismissed after having been found guilty of gross negligence. It was alleged that the employee caused damage to the vehicle's foot brake lines pursuant to his alleged excessive braking whilst driving the vehicle. The cost of the damage was just over R4,000. Unhappy with his dismissal, the employee referred a dispute to the bargaining council. The only issue before the arbitrator was whether the employee’s dismissal was substantively fair.

Application: The applicant seeks to review and set aside an award delivered by the arbitrator wherein the dismissal of the employee was found to be substantively unfair, following which the applicant was directed to reinstate the employee retrospectively.

Discussion: In an inspection conducted before the employee commenced his duties, there was no proof that the foot brakes had been checked. The mechanic’s report offers no proof that the employee’s complaint in respect of the vehicle’s foot brakes was attended to. The mechanic failed to record any action he had taken in respect of the issues raised in relation to the vehicle’s foot brakes. Mr Du Preez raised the point that at arbitration, submissions were made that sometime the very same vehicle did not pass a roadworthy test following a finding that its axel brakes did not conform to the regulatory norm. None of the applicant’s witnesses were able to confirm whether that particular problem had since been resolved. The arbitrator found that there was insufficient evidence to accept the version that the complaint raised by the employee in respect of the foot brakes was attended to when the vehicle was inspected.

Findings: There was no admissible evidence to support the version that the concerns raised in that report had since been addressed and repaired. The arbitrator’s findings cannot be faulted. There is nothing before the court to conclude the arbitrator’s findings were unreasonable in light of the evidence before him. The inference or probabilities that the employee caused the damage to the brake lines was not there for the simple taking. Nor, on the facts accepted by the arbitrator, did the applicant establish a prima facie case of misconduct whereby there was a shifting the evidentiary burden to the employee to provide a reasonably alternate explanation. The applicant fails to set out the facts, which had he considered such, would have rendered reinstatement impractical or intolerable. The allegation of the employee’s lack of remorse or a breakdown in trust does not come to the applicant’s aid. The arbitrator did not find the employee guilty of the offence he was dismissed for.

Order: The review application is dismissed.

NAIDOO AJ

Facts: The first respondent (council) is a bargaining council registered for the road freight and logistics industry. The first appellant (Innovative Staffing Solutions) describes itself as an operational outsourcing and consulting business. The second and third appellants are two of its clients. The business model adopted by the first appellant is one in which the first appellant takes transfer of its clients’ employees, thus becoming the employer of those employees. In the course of providing services to its clients, the first appellant places the services of the transferred employees at the disposal of the client. The first appellant contends that in these circumstances, where the business of the client resorts under the scope and jurisdiction of the council, its business does not. On this basis, the first appellant submits that despite the extension of the council’s agreements to non-parties who fall within the council’s registered scope, the agreements are not binding on it.

Appeal: This state of affairs led to a dispute, a demarcation award by the CCMA and the first appellant being interdicted from representing to its clients that it and its clients were not obliged to comply with the council’s main agreement. The council initiated enforcement proceedings against the first appellant and its clients. All of the proceedings concerned an alleged failure by the appellants to comply with the council’s main agreement. The first appellant filed a notice of objection against the arbitrator appointed by the council and sought an undertaking from the council that the matter be referred to the CCMA and further, that the appointed arbitrator have no affiliation with the council whatsoever. In the absence of the undertaking sought, the appellants filed an urgent application in the Labour Court. This is an appeal against the ensuing judgment of the Labour Court.

Discussion: The appeal raises a crisp question – if in any enforcement proceedings, a non-party to a bargaining council objects to the appointment of an arbitrator appointed by the council and the CCMA then appoints an arbitrator in terms of section 33A(4)(b) of the Labour Relations Act 66 of 1995, can the CCMA appoint an arbitrator who is also a member of a panel of accredited arbitrators appointed by the council to arbitrate disputes that arise within its jurisdiction? The court found that section 33A(4) did not make provision for any requirement that arbitrators appointed by the CCMA must be entirely independent from the bargaining council itself. It could not be assumed that an arbitrator appointed by the CCMA to preside over any enforcement proceedings in which the appellant and its clients are involved would necessarily be biased simply because the arbitrator is affiliated with the council in the form of membership of a panel of arbitrators appointed by the council to discharge dispute resolution functions for which the council was accredited.

Findings: It does not necessarily follow that because a particular arbitrator may serve as a CCMA commissioner and an arbitrator on one or more panels of conciliators and arbitrators established by one or more bargaining councils that, as a general proposition, there is a failure of the right to a fair hearing should such an arbitrator be appointed by the CCMA in terms of section 33A(4)(b). To the extent that the appellants sought to introduce evidence of what they allege to be bias on the part of particular arbitrators in particular cases, the appellants seek to elevate the particular to the general. If the appellant harbours allegations of bias or other grievances against a particular arbitrator, it has remedies at its disposal, such as a review or to seek the recusal of the arbitrator. It thus cannot be said that in these circumstances every appointment by the CCMA acting in terms of section 33A(4)(b) of an arbitrator who happens to be both a CCMA commissioner and a member of the appellant’s panel of arbitrators necessarily gives rise to institutional bias.

Order: The appeal is dismissed.

VAN NIEKERK JA (MOLAHLEHI JP and SAVAGE ADJP concurring)