Astral Operations Ltd v Parry (2008) 29 ILJ 2668 (LAC)


The locality of the undertaking in which an employee is employed determines jurisdiction, and where an employee is employed outside South Africa the LRA does not apply and the Labour Court has no jurisdiction over disputes arising out of that employment relationship.


After he had been retrenched, an employee agreed to be employed by a subsidiary of the company and relocated to Malawi. After about 18 months the company decided to end its operations in Malawi and the employee was repatriated to South Africa, where he continued to wind up the Malawi operations. The employee's employment was terminated. The employee claimed for contractual damages, unfair retrenchment and non- or underpayment of various agreed or statutory amounts. The company raised the preliminary point that the court lacked jurisdiction to entertain any of the employee's claims because neither the LRA 1995 nor the BCEA applied in Malawi, the workplace of the employee.

The Labour Court did not deal separately with the point that it did not have jurisdiction, but considered the question of the proper law applicable to the adjudication of the employee's claims, and found that it was South African law. From this the court concluded that, as a South African court, the Labour Court had jurisdiction.

On appeal the Labour Appeal Court first dealt with whether the Labour Court had jurisdiction to entertain the employee's claims in the light of the fact that the LRA and BCEA had no extra-territorial application. Having considered the Appellate Division decision in Genrec Mei (Pty) Ltd v Industrial Council for the Iron, Steel, Engineering & Metallurgical Industry & others 1995 (1) SA 563 (A); (1995) 16 ILJ 51 (A), the court was of the view that the Appellate Division had decided the application or non-application of the LRA 1956 to the dispute in that case according to the locality of the undertaking carried out by the company in which its employees were employed. The court used the same criterion to decide the issue in this matter, although mindful that the AD had dealt with an industrial council's jurisdiction. The court was of the view that, when all the facts in the matter were considered and the question was asked where the undertaking in which the employee worked was carried on, the answer would be Malawi. The court accordingly concluded that the LRA did not apply to the company's operations in Malawi and that the Labour Court had no jurisdiction to entertain the employee's claims.

Extract from the judgment:

Zondo JP

[18]   Having considered the Genrec decision I am of the view that in that case the Appellate Division decided the application or non-application of the old Act to the dispute in the case according to the locality of the undertaking carried on by Genrec in which the respondent employees were employed (see what the Court a quo was reported to have said at 6D-E, 7C- 8B). I propose to use the same criterion to decide the issue in the present matter. I am mindful of the fact that in Genrec the Appellate Division was dealing with a case in which the locality of Genrec's undertaking where the respondent employees worked was of particular significance because in terms of the old Act the jurisdiction of the industrial council - which was in issue in that case - was linked to both the undertaking carried on as well as the area in respect of which the industrial council was registered. Nevertheless, I do not think that that factor should make a material difference because, even under the current Act, a similar issue could arise involving a bargaining council as under the current Act a bargaining council's jurisdiction in respect of an employer depends upon the type of undertaking which the employer runs and whether the area in which the employer conducts such undertaking falls within the territorial scope of the bargaining council. In such a case the Supreme Court of Appeal would probably follow the same approach in deciding whether the Act applied or whether the bargaining council has jurisdiction in respect of a similar dispute.

[19]   In a case where there was no bargaining council and the Commission for Conciliation, Mediation and Arbitration would have to be involved if the Act applied, the position would be that in terms of sec 115 of the Act the CCMA has jurisdiction in the whole Republic and, obviously, has no jurisdiction outside the Republic. It seems to me that in a case involving the CCMA the Court could also ask whether the employer's undertaking in which the employees work is carried on inside or outside the Republic. If it was carried on inside, the CCMA would then have jurisdiction and, if where it was carried on outside, the CCMA would not have jurisdiction.

[20]   In this matter the respondent terminated his contract of employment with Astral by agreement and took a severance package amounting to R 600 000,00 even though he was being offered another job. He then concluded a completely new contract of employment for his new job. That is his Malawian job. That was the position of General Manager: Africa Operations. He then relocated to Malawi. He was working for a Malawian subsidiary of the appellant. He made monthly reports to the Head Office in South Africa. The operation in Malawi was separate from the South African operation of the appellant. That is why he was able to sell that operation separately. Those of the respondent's duties that he performed outside Malawi were not performed inside South Africa. If he was to work in the South African undertaking of the appellant, he and the appellant would have needed to enter into a new contract of employment with the appellant. In my view when all the facts of this matter are considered and the question is asked as to where the undertaking was carried on in which the respondent worked, the answer would be an easy one, namely: Malawi! In fact when one has regard to the facts of the Genrec case and the facts of this case, one would realise that it would be very difficult to distinguish this case from the Genrec case. In both cases the employer had a business operated from the Republic. In both cases the employee was or employees was or were resident in the Republic. In both cases the employer had an operation outside South Africa. In both cases the employee or employees had entered into specific contracts of employment requiring them to work outside South Africa. In the light of all of this it was decided in Genrec that the Act did not apply prior to its amendment. In the light of all of this I am of the view that the Act did not apply to the appellant's operation in Malawi and that the Labour Court had no jurisdiction to entertain the respondent's claims.

[21]   In concluding that the Labour Court did not have jurisdiction to entertain the respondent's claims, I am mindful of the fact that some of the respondent's claims were based on the contract of employment and not on the BCEA or the Act. This would give rise to the argument that, based on the provisions of sec 77(3) of the BCEA, the Labour Court has the same jurisdiction as the High Court in respect of any matter concerning a contract of employment and that, even if the BCEA and the Act did not apply, the Labour Court would have jurisdiction to deal with such claims in the same way as the High Court would have had jurisdiction. In this regard it would be pointed out that both the plaintiff and the defendant in South Africa, the contract was concluded in South Africa and if the Court gave a monetary judgment in favour of the plaintiff, that money judgment would be executed in South Africa. While I do understand all of this, my difficulty is that the Labour Court can only derive jurisdiction to entertain such claims from sec 77(3) of the BCEA and, without that provision, it would not have such jurisdiction. If the BCEA did not apply to this case obviously sec 77(3) of the BCEA also did not apply.

[22]   The Court below reached the conclusion that the BCEA and the Act applied to this case. I have taken a different view. I wish to make two observations which in my view are responsible for the different outcome in the court below. The first is that it seems to me that, as Counsel for the appellant submitted, the Court a quo dealt first with the question of the proper choice of law and once it had concluded that the parties had chosen the South African law as the law that would apply, it seemed to it that it followed that the Labour Court had jurisdiction. In my view this did not follow. Parties are able to choose whatever law as the law that must be applied in resolving a dispute between themselves arising out of some agreement between them. That law may be invoked by a court in a foreign jurisdiction to adjudicate a dispute. In this case a Malawian court could have applied South African law including the BCEA and the Act in adjudicating the respondent's claims against the appellant.

[23]   The other observation is that it does not appear to me that the Court below sufficiently considered the question of what criterion was used in Genrec to determine whether the industrial council in that case had jurisdiction in that matter.

[24]   In the light of the conclusion I have reached on the appeal, the cross-appeal falls away. In the premises it seems to me that the appeal must succeed. I am of the view that the requirements of the law and fairness dictate that there should be no order as to costs.