Article 51/2022

To what extent is a business rescue practitioner entitled to commence consultations regarding possible retrenchment without such process being contemplated in the company’s business rescue plan?  To what extent are business rescue practitioners prevented from issuing notices in terms of s189(3) of the LRA in the absence of business rescue plans catering for such procedure?


The relevant part of s136 of the Companies Act 71 of 2008, reads:

136  Effect of business rescue on employees and contracts:

(1) Despite any provision of an agreement to the contrary –

(a) during a company’s business rescue proceedings, employees of the company immediately before the beginning of those proceedings continue to be so employed on the same terms and conditions, except to the extent that –

(i) changes occur in the ordinary course of attrition; or

(ii) the employees and the company, in accordance with applicable labour laws, agree different terms and conditions; and

(b) any retrenchment of any such employees contemplated in the company’s business rescue plan is subject to s189 and 189A of the Labour Relations Act, 1995 (Act 66 of 1995), and other applicable employment related legislation.’

It would be wrong for courts to ignore the clear language of a statute under the guise of adopting a purposive interpretation, as doing so would be straying into the domain of the legislature (Smyth and Others v Investec Bank Ltd and Another 2018 (1) SA 494 (SCA), at 509, paragraph [45]). In Dadoo Ltd and Others v Krugersdorp Municipal Council 1920 AD 530 at 543, Innes CJ enunciated the principle in these terms:

‘Speaking generally, every statute embodies some policy or is designed to carry out some object. When the language employed admits of doubt, it falls to be interpreted by the court according to recognised rules of construction, paying regard, in the first place, to the ordinary meaning of the words used, but departing from such meaning under certain circumstances, if satisfied that such departure would give effect to the policy and object contemplated. I do not pause to discuss the question of the extent to which a departure from the ordinary meaning of the language is justified, because the construction of the statutory clauses before us is not in controversy. They are plain and unambiguous. But there must, of course, be a limit to such departure. A Judge has authority to interpret, but not to legislate, and he cannot do violence to the language of the lawgiver by placing upon it a meaning of which it is not reasonably capable, in order to give effect to what he may think to be the policy or object of the particular measure.’

In South African Airways (Soc) Ltd (in business rescue) and Others v National Union of Metalworkers of South Africa obo Members and Others (2020) 41 ILJ 2113 (LAC); (2020) 31 SALLR 144 (LAC), the following approach was adopted:

  • the recovery of a financially distressed company is to be achieved by balancing the rights and interests of all stakeholders – the rehabilitation of a company that is financially distressed is to be achieved by means of the following: (i) temporary supervision; (ii) temporary moratorium on rights of claimants; (iii) development and implementation, if approved, of a business rescue plan (that maximises the likelihood of a company continuing in existence on a solvent basis or, if not possible, results in a better return for creditors or shareholders than would have resulted from immediate liquidation of a company)
  • the primary aim is to preserve the whole corporate entity, including the preservation of jobs
  • the purpose of s136(1)(b) is to safeguard employees from being subjected to retrenchment without a business rescue plan – see, further, s150(2), which requires an indication of the effect of the business rescue plan on the number of employees and conditions of employment
  • if the business rescue plan contemplates retrenchments and has been approved, such retrenchments must be conducted in terms of the LRA with the business rescue practitioner (‘BRP’) assuming control over the process
  • the labour appeal court held that, where legislation has been enacted to give effect to a constitutional right, a party may not bypass that legislation and rely directly on the general provisions of constitutional right to fair labour practices in s23 or the equality clause in s9 of the Constitution (Safcor Freight (Pty) Ltd t/a Safcor Panalpina v SA Freight & Dock Workers Union (2013) 23 ILJ 335 (LAC), at paragraph [18]).  This is in conformity with the subsidiarity principle which provides that, where legislation was enacted to give effect to certain constitutional rights, reliance must first be placed on the provisions of the specific legislation, and challenged if they do not adequately give effect to the constitutional rights in question (Baron and Others v Claytile (Pty) Ltd and Another 2017 (5) SA 329 (CC), paragraph [10]). The constitutional right to fair labour practices finds legislative expression in the LRA. Its scope covers the interests of both employers and employees (AMCU and Others v Royal Bafokeng Platinum Ltd and Others (AMCU 2) 2020 (3) SA 1 (CC); 2020 (4) BCLR 373 (CC), paragraph [50])

With reference to Potgieter v Samancor Chrome Ltd t/a Tubatse Ferrochrome (2022) 33 SALLR 190 (LC) and Van Rensburg and Others v Department of Justice and Correctional Services and Others (2022) 33 SALLR 280 (LC); (2022) 43 ILJ 2110 (LC).

In what instances does the jurisdiction of the supreme court of appeal trump the jurisdiction of the labour appeal court?

Where an employer prematurely terminates a fixed-term contract and the employee challenges such termination as being unlawful and claims damages and not specific performance, the labour court has up to now ordered damages even though same is an unliquidated claim for damages.