Gaboeletswe v New Era Secondary School (IC. 386/2004) [2006] BWIC 14; [2006] BLR 1 639 (1 May 2006)
R
IN
THE INDUSTRIAL COURT OF BOTSWANA
HELD
AT GABORONE
CASE NO. IC. 386/2004
IN
THE DISPUTE BETWEEN
MOLEFE GABOELETSWE
………………………. APPLICANT
AND
NEW ERA SECONDARY SCHOOL ……………………….
RESPONDENT
CONSTITUTION
OF THE COURT
M.
EBRAHIM-CARSTENS INDUSTRIAL COURT JUDGE
P.V.
MOYO NOMINATED MEMBER
(BOCCIM)
T.
MAKUNGA NOMINATED MEMBER
(UNION)
FOR
THE APPLICANT
IN
PERSON
FOR
THE RESPONDENT
MRS.
B. ROWHANI
DIRECTOR
PLACE
AND DATE OF PROCEEDINGS
GABORONE
20TH
FEBRUARY 2006
Employee
engaged in construction of school class rooms- claim for
entitlements- respondent school denying liability and assigning
liability to construction company
-Lifting
of corporate veil- court has no general discretion to disregard a
company’s separate legal personality wherever it considers
it just
to do so- must
be special or exceptional circumstances –
Court
finding two companies intrinsically intertwined –that two companies
were in mind and management the same- employer attempting
to assign
liability to company of straw- employee who in strict law employee
of one company held in equity to be the responsibility
of the
other.
JUDGMENT
[1] The applicant says he was
employed by the respondent a private enterprise school, in November
2003 as a bricklayer at the rate
of P4.50 an hour. At the time of
his dismissal on 16th August 2004, he was a site foreman
earning P5.00 per hour working nine hours a day Monday to Friday. He
is claiming his alleged
entitlements including accrued leave and
notice pay, bonus, Paid Public Holidays and Bahai holidays. He also
wants a reference or
certificate of service.
[2] The respondent denies that
it is indebted at all to the applicant and claims it never employed
him. In a layman’s plea dated
11 November 2005 E. Ghodrati the
managing director of New Era Secondary School, the respondent states:
“This
is to inform you that Everest Consult, who was responsible for the
construction at New Era Secondary School, employed Mr.
Molefe
Gaboeletswe.
Mr.
Molefe Gaboeletswe was a casual worker, who was initially being paid
on a daily basis and later on he got paid weekly. Everest
Construction Company was paying the wages through the security
guard of New Era Secondary School.
According
to Everest Consult Mr. Molefe Gaboeletswe promoted himself to the
position of a foreman on site. On two occasions, he
has borrowed
P400.00 and P500.00 for the purchase of a cell phone and to run his
exhibition at the Fairgrounds and run his other
petty businesses
respectively, due to which he was not available at site very often.
Considering
the above information any claim should be kindly referred to
Everest Consult.
With
regards,
E.
Ghodrati
(Managing
Director)”
[3] I presume, the reference to
“Everest Consult” and “Everest Construction Company” above
refer to the one construction company
and not two separate entities.
I shall therefore refer to the two interchangeably. By letter
addressed to the Registrar also dated
11th
November 2005, Ghodrati also states “Further
we would like to bring your attention that as far as our knowledge
goes, Everest Consult is no longer operational due to
the recent
water crisis in Gaborone, which has made it unviable for them to
carry on with construction.”
[4] On the morning of the
hearing, following a telephone call from court staff, one of the
school directors and the design and technology
teacher, Ms. Boshra
Rowhani, and the caretaker Siphiwe Ngwenya, appeared on behalf of the
respondent. Ms. Rowhani said Mr. Ghodrati
the school’s managing
director was in South Africa and she was not sure if he was aware of
the proceedings. The court pointed
out that the Notice of Set down
despatched by registered post on 8th
December 2005 addressed to the “Managing
Director, New Era School”
had not been returned in the post. Ms. Rowhani said she was in a
position to represent the respondent and commence with the case.
[5] At the outset, I explained
the law relating to an employee’s entitlements to both parties. I
also explained in simple terms,
the law relating to corporate
liability in particular that relating to the debts and liabilities of
businesses incorporated with
limited liability. I explained that the
two alleged separate legal entities; the school and the construction
company; having their
own rights and liabilities in law, are
separate and distinct from one another and from their
members/shareholders and directors,
and that the debt of a company is
not a consequence visited upon its shareholders, directors or another
company. I also explained
that a court may be prepared to lift or
pierce this protective corporate veil in some circumstances, and to
hold that two entities
may well be “in mind and management the one
and the same”, and to find that the employees of the one company
were in equity the
responsibility of the other. – See my judgment
J695 in the case of Ivy
Marufu & 3 others vs. White Dove (Pty) Ltd
Case No. IC. 252/02 dated 31st
May 2002 (J695), and also Margaret
Bogosi vs. Price & Pride Case
No. IC. 65/98 dated 31st
March 1999 (J280).
[6] At the conclusion of my
explanation and directions, I asked Mrs. Rowhani if she wished to
contact Mr. Ghodrati to consider the
respondent’s position and
offered an adjournment. Mrs. Rowhani said she was prepared to
proceed with the case without the benefit
of an adjournment.
[7] I turn now to the evidence
in the case. It is common cause that the applicant was employed
without a written contract for the
construction of new class-rooms at
the site of the New Era School in Gaborone. The applicant testified
that when he was recruited
by Ghodrati, he was initially unaware who
his employer was. As time went on, he realized the school was doing
its own construction.
The architect on the building project Mrs.
Boshra Rowhani, was also the Design & Technology teacher at the
school. Ghodrati
was both the managing director of New Era and the
director of Everest Consult. The Applicant always consulted with the
school caretaker
Siphiwe Ngwenya who was in charge of the
construction site, and Mrs. Rowhani, when he had a query or needed
something. Mrs. Rowhani
came to the site often to look at the work.
Ngwenya recorded the workers’ hours, calculated them, submitted
them to the school
office, and paid them.
[8] The applicant testified
further that when he was required to go for his Trade Test C
Certificate at the Madirelo Training and
Testing Centre, he sought
and obtained permission from Rowhani. He said he only saw the name
Everest Consult on the drawings he
was given and had no reason to
believe this was his employer. The construction site tools were kept
in the school’s storeroom
and there was no other office on site
indicating a different company operating there. The school
Headmaster, a Mr. Mahoney, often
came to the site to complain that
there were too many workers on site and that many stood idle. At one
stage when they ran short
of materials, they were informed that the
Headmaster was refusing to release the money. The applicant
testified that when he was
dismissed for alleged impertinence to the
school’s gardener, Mahoney was present at the meeting although the
complainant himself
was not.
[9] In the applicant’s view
therefore, he was employed by New Era School and had no connection
whatsoever with Everest Consult.
He said the respondent is simply
trying to avoid payment of his lawful dues.
[10] The respondent’s
witnesses did not challenge much of the applicant’s evidence save
to insist that Everest Consult hired the
applicant. Rowhani said
Mahoney employed New Era staff whilst the construction employees were
employed by Ghodrati of Everest Consult.
She said Mahoney’s
involvement was simply a concern that there were construction workers
often sitting doing nothing. He was
also concerned with the over
fraternisation of the cleaning ladies with some of the construction
workers. Rowhani confirmed that
she drew up the plans but said she
did so prior to taking up her appointment at New Era in 2005 as a
teacher. She was the architect
on the project and supervised the
drawings. She explained that although she worked for New Era School
she often sorted things out
on site as Ghodrati was frequently in
Canada. She said Ghodrati operated the construction business from
the school and that Everest
Consult was still in operation, building
houses at Phakalane although the building works at the school had
ceased because of a possible
sale of the school. She said Ngwenya was
the overall supervisor for the school campus.
[11] This witness confirmed
that the directors of New Era School were Mr. and Mrs. Ghodrati,
herself and one Mr. Dinesh Sobhani; and
that Ghodrati was also
managing director of Everest Consult.
[12] Ngwenya’s evidence was
interesting. He testified that although he was employed by New Era
School as caretaker, he was only
helping out at the construction site
for no extra pay. He recorded and calculated the construction
workers’ hours and took them
to Rowhani for confirmation every
week. After her calculations, she would take them to the school
headmaster Mahoney. The school
bursar and driver would then be
despatched to the bank for the cash. The school’s accountant
Mantag, processed the wages and
Ngwenya would pay the workers in
one of the school’s class-rooms, as there was no site office. He
said “the money for the employees
was paid by New Era”.
[13] Under cross-examination,
Ngwenya confirmed that New Era stationery was used for the
construction project. He also confirmed
that New Era’s director
Dinesh Sobhani was also managing the Phakalane project for Everest
Consult; and that Mahoney was present
at the meeting when the
applicant was dismissed.
[14] The first issue to be
determined is whether the respondent as cited is responsible for the
applicant’s alleged entitlements.
I will deal firstly with the
applicable law.
Liability of a corporation:
The Law
[15] As a juristic person, a
company is an artificial person and a separate legal entity i.e. it
has a persona distinct and separate
from its members. Salomon
vs. Salomon & Co. Ltd
{1897} AC22 (HL) established that in law a registered company is a
legal entity quite separate and distinct from its members even
if one
member holds almost all the shares in the company. In some
instances, a court may be prepared to pierce or lift this corporate
veil:
[16] In Halsbury’s Law of
England 4th
Edition re-issue Volume 7 (1) at page 72 paragraph 90 the following
appears:
“Notwithstanding
the effect of a company’s incorporation, in some cases the court
will pierce the corporate veil in order to
enable it to do justice
by treating a particular company, for the purposes of the litigation
before it, as identical with the person
or persons who control it.
This will be done not only where there is fraud or improper conduct
but in all cases where the character
of the company or the nature of
the persons who control it, is relevant feature.”
[17] In Wallersteiner
v/s Moir (1974) I WLR
991; (1974)3 AER 217 (CA); per Lord Denning, Master of the Rolls, at
page 1013 onwards:
…“It is plain that Dr.
Wallersteiner used many companies, trusts or other legal entities
as if they belonged to him. He
was in control of them as much as
any “one – man company” is under the control of one man who
owns all the shares and is
chairman and managing director. He made
contracts of enormous magnitude on their behalf on a sheet of note
paper without reference
to anyone else ……. When he paid out
money on personal loans by himself, he drew the cheques on the
account in the name of
IFT Nassam ….
Counsel as amicus curiae
suggested that all these various concerns were used by Dr.
Wallersteiner as a facade, so that each could
be treated as his
alter ego. Each was in reality Dr. Wallersteiner wearing another
hat. Counsel for Dr. Wallersteiner repudiated
this suggestion. It
was quite wrong, he said, to pierce the corporate veil. The
principle enunciated in Salomon v/s Salomon and Co. Ltd
[1897] AC 22 (HL) [5] was sacrosanct. If we were to treat each of
these concerns as being Dr. Wallersteiner himself under another hat,
we should
not, he said, be lifting a corner of the corporate veil.
We should be sending it up in flames.
I am prepared to accept that
the English concerns – those governed by English company law or
its counterparts in Nassau or Nigeria
– were distinct legal
entities. I am not so sure about the Liechtenstein concerns –
such as the Rothschild Trust, the Cellpa
Trust or Stawa AG. There
was no evidence before us of Liechtenstein law. I will assume, too,
that they were distinct legal entities,
similar to an English
limited company. Even so, I am quite clear that they were just the
puppets of Dr. Wallersteiner. He controlled
their every
movement. Each danced to his
bidding. He pulled the strings. No one else got within reach of
them. Transformed into legal language
they were his agents to do as
he commanded. He was the principal behind them. I am of the
opinion that the court should pull
aside the corporate veil and
treat these concerns as being his creatures – for whose doings he
should be, and is, responsible.
At any rate, it was up to him to
show that any one else had a say in their affairs and he never did
so. …”
[18] The piercing of the
corporate veil is said to be “an exceptional procedure and should
not be embarked upon unless special
or exceptional circumstances
apply”- per Tebbutt JA in Silverstone & Another v Lobatse
Clay Works (Pty) Ltd [1996] BWCA 29; 1996 BLR 190 (CA).
[19] The general rule therefore
is that a corporate entity should be recognised and upheld; and that
a court has no general discretion
to lightly disregard a company’s
separate legal personality wherever it considers it just to do so-
(see at page 202 C-D of the
Silverstone case).
Generally in order to lift the
corporate veil an element of fraud, dishonesty or improper conduct
would have to be present in the
establishment, or use of the company
or the conduct of its affairs. In this regard courts have used the
words “device”, “stratagem”,
“cloak” and “sham”.
[20] In this case the respondent
is denying liability and passing the buck onto a company apparently
of straw, which Ghodrati avers;
“ as far as our knowledge goes,
Everest Consult is no longer operational due to the recent water
crisis in Gaborone which has made
it unviable for them to carry on
with construction.” The respondent witnesses said it was
operating. In the pleadings Ghodratic
gives the impression that he
and the respondent are distanced from and not linked to Everest, yet
it is clear he has more than a
fair knowledge of what goes on there.
The evidence of the respondent witnesses is that Ghodrati is director
and shareholder of both
entities. The court finds that the defence is
a strategem and attempt to frustrate the applicant’s claim.
Liability: Lifting the Veil
[21] Having asserted that it was
not responsible in law, the respondent bore the onus of proving that
it was wrongly cited. No documentary
evidence was placed before the
court in support of the respondent’s position. All that is
available to the court is the evidence
of the three witnesses. This
evidence shows the following.
– The management team and
workforce are the same; New Era School directors being; Ghodrati,
Mrs. Ghodrati, Rowhani (also Design and
Technology teacher), and
Dinesh Sobhani; whilst Everest Consult director is Mr. Ghodrati; the
architect is Ms. Rowhani; and Project
Manager is Dinesh Sobhani.
– The Managing Director of the
one is the Managing Director of the other, and the principle
shareholder.
– The two companies operate in
an intrinsically interrelated manner; conducting their businesses
from the same premises; using the
same stationery; and sharing
employees’ services, including Rowhani, Ngwenya, Mahoney, the
Bursar, the driver and accountant.
– Mahoney and Ghodrati were both
present at the disciplinary enquiry following which, the applicant
was dismissed. The School Head
was an integral part of the
disciplinary process.
– Mahoney took instructions from
Ghodrati regarding release of monies for materials for the site.
– The applicant consulted with
and took instructions from Rowhani and Ngwenya, both employees of
New Era.
– Ngwenya calculated the
workers’ hours which were checked by Rowhani and Mahoney who then
instructed school staff to collect the
wages from the bank.
– Whether one applies the
supervision and control test, or the dominant impression test to
ascertain whether an employment relationship
exists between the
parties [See Gladys Sigwele vs. Botswana Life Insurance case
No. IC. 100/99 dated 5th October 2000 (J468)]; on the
facts as set out above, there is no doubt that the applicant was an
employee of New Era School.
[22] I find therefore that the
evidence flies in the face of the respondent’s argument that it is
ill suited and that as an entity
in law it is not responsible for
applicant’s alleged dues.
[23] In the case of SA Allied
Workers Union & Others v Contract Installations (Pty) Ltd &
Another (1988) (ILJ 112 (IC) it was held that an umbrella company
of a group was responsible with the employer for the consequences of
unfair retrenchment, since
the two companies were in mind and
management the one and the same and the employees who were in strict
law the responsibility of
the one company only, were in equity the
responsibility of the “umbrella company”.
[24] I find on the facts in the
instant case, that in mind and management, the two entities were the
one and the same; and that even
if the construction site employees
were instinct law the responsibility of Everest Consult, they were in
equity the responsibility
of the respondent.
Nature of employment
relationship
[25] Having established that the
respondent is responsible in law and that the applicant was employed
by the school; the court must
now decide the status of the employment
relationship. The respondent asserts that the applicant was a casual
worker therefore he
is not entitled to any or most of his claims.
Section 36 (1) of the Employment Act requires that “Every
employer who employs casual employees shall keep a register of such
employees in such manner as may be prescribed.” The
respondent had no such register as required.
[26] A casual employee is
defined by Section 2 of the Employment Act as a “an
employee whose terms of contract are for a period of not more than 12
months, and which contains provisions limiting employment
to not more
than three days, or more than 22½
hours work per week.”
[27] It was not disputed that
the applicant worked 45 hours a week. He worked an ordinary five day
week although he was paid weekly.
The applicant was therefore not a
casual employee.
[28] Except in relation to
casual employees, a contract of employment may not fix any period of
less than one week for the payment
of wages. Section 74 of the
Employment Act states that:
“(1)
A contract of employment may fix periods (in this Act each of which
is referred to as a “wage period”) in respect of
which
wages earned shall be payable:
Provided
that—
(i) except
in relation to casual employees as defined by section
2,
no wage period shall be less than one week; and
(ii) no
wage period shall exceed one month.
(2)
Where the contract of employment is silent as to the wage period,
such period shall be deemed to be one month.”
[30] Section 2 (1) of the Act
defines “week”
as “any period of seven
consecutive days”. The
applicants “weekly”
wage period of five days was therefore contrary to the provisions of
Section 74 as he was not a casual employee. Section 37 of the
Employment Act provides that where a contract of employment, provides
for conditions of employment less favourable to the employee
than the
conditions of employment prescribed by the Act, “the contract shall
be null and void to the extent that it so provides.”
[31] The applicant’s contract
of employment was verbal, with an agreement for wages to be paid
weekly. Such agreement for “weekly”
wages being not only unlawful but less favourable and therefore null
and void between the parties, it means there is no provision
for the
wage period in the applicant’s contract. Such period is therefore,
in terms of Section 74 (2) of the Act, deemed to be
one month. In
terms of Section 95 (8) of the Employment Act, this computes to 22
days in a month.
The applicant’s
claims/entitlements
[32] The applicant did not
challenge the fairness of his dismissal. He simply prayed for
notice. This means he concedes that the
respondent had a valid
reason to terminate his employment. Where an employer terminates the
employee’s contract of employment
for good reason he must give the
applicant the prescribed minimum notice or pay him notice pay in
lieu. – Sections 18 and 19 of
the Employment Act and see the case
of Botswana Motsumi
vs. First National Bank of Botswana
Case No. IC. 36/95 dated 29th
September 1995 (J19). Where wages are payable in respect of any
period of not less than a week, notice shall be equal in length
to
that period – Section 18 (2) (b). The court has found that the
applicant’s wage period in law was one month. Therefore the
applicant is due a month’s notice in terms of Section 18 (2) (b) of
the Employment Act which equates to P990.00 (22 days x P45.00).
Paid Public Holidays and
Bahai Holidays
[33] The applicant worked from
November 2003 until August 2004. The applicable paid public holidays
pertaining to the applicant are
Christmas Day, New Year’s Day, Good
Friday, Easter Monday, President’s Day, and the day following
President’s Day – see the
Regulation of Wages (Building
Construction Exploration and Quarrying Industries) Order. The
respondent did not dispute this in its
papers or in court. The court
finds that the applicant is therefore due P270.00 (6 days x P45.00
per day).
[34] The applicant said although
he was willing to tender his services, he was not allowed to work and
he was not paid for some Bahai
holidays when construction was halted.
In terms of Section 16 of the Employment Act, an employer is under a
duty to provide an employee
with work for so long as the contract
subsists unless the employee is in breach or the contract is
impossible to perform. If he
fails to provide work, the employer
must pay wages at the same rate as if the employee had performed a
full day’s work. As the
applicant gave no evidence to substantiate
this aspect of his claim, the court makes no order.
Accrued leave pay
[35] An employee in the
construction industry is entitled to leave with basic pay at the rate
of not less than 1,25 days per month.
– Regulation 8 of the
applicable Regulation of Wages Order. The applicant says he took no
leave for the 9 months he was employed.
The respondent proffered no
evidence in rebuttal. It is customary for construction companies to
close and take their annual leave
at Xmas time. In response to
questions from the court, the applicant acknowledged that the site
closed down for some five weeks
over the Christmas period, but he
said he was not paid for this. Since the respondent produced no
evidence to the contrary, the
court finds that the applicant is due
11.25 days of leave at the daily rate of P 45.00. This means he is
due P506.25.
Bonus
[36] The applicant lead no
evidence to support his claim for bonus. It is accordingly
dismissed.
Determination
In all the circumstances of this
case, and on the court’s findings that the respondent is liable in
law for the applicant’s entitlements,
the court makes the following
determination:
1. In terms of Section 25 (1) of
the Trade Disputes Act as read with Sections 18, 19 and 74 of the
Employment Act, the respondent
is directed to pay to the applicant
the sum of P990.00 (P45.00 x 22) being notice pay in lieu of notice.
2. In terms of Section 25 (1) of
the Trade Disputes Act as read with the Regulation of Wages
(Building Construction Exploration and
Quarrying Industries Order),
the respondent is directed to pay the applicant the sum of P506.25
being accrued leave pay.
3. In terms of Section 25 (1) of
the Trade Disputes Act as read with the aforesaid Regulation of
Wages Order, the respondent is
directed to pay the applicant the sum
of P270.00 being entitlement to paid public holidays.
4. In terms of Section 24 (1) of
the Employment Act the respondent is to provide the applicant with
a Certificate of Service.
5. The applicant’s claims for
bonus pay and Bahai holidays are dismissed.
6. The respondent is further
directed to make payment of all the aforesaid sums, P1,766.25
in total, through the Registrar of the Industrial Court on or before
Friday 26th May 2006.
7. No order is made as to costs.
Dated
at Gaborone this day of May 2006.
……….…………………………..
M.
EBRAHIM-CARSTENS
INDUSTRIAL
COURT JUDGE
We
agree on the facts:
……………………………………………
P.V. MOYO
NOMINATED
MEMBER (BOCCIM)
……………………………………………
T. MAKUNGA
NOMINATED
MEMBER (UNION)