Skip to content

South Africa: Delays do not pay – defective review proceedings will still interrupt prescription  

21 June 2024
– 8 Minute Read

DOWNLOAD ARTICLE

Overview

  • The Labour Appeal Court (LAC) recently considered the ‘vexed’ issue of prescription of an arbitration award subsequent to the institution of (defective) review proceedings, and the interest payable in these circumstances.
  • In the judgment in the matter between Hudaco Trading (Pty) Ltd t/a Ambro Steel and Others v Ramothwala, handed down on 26 May 2024, the LAC confirmed that the prescription of an arbitration award is interrupted until the review proceedings and any related legal proceedings are concluded, and that any interest payable on an amount owing in terms of the award would be in terms of section 143(2) of the Labour Relations Act.

In the judgment in the matter between Hudaco Trading (Pty) Ltd t/a Ambro Steel and Others v Ramothwala, handed down on 26 May 2024, the Labour Appeal Court (LAC) confirmed that the prescription of an arbitration award is interrupted until the review proceedings and any related legal proceedings are concluded, even if those proceedings may have been defective.

Background

The respondent in the matter, Mr Khazamula Patrick Ramothwala (Mr Ramothwala), was employed by the first appellant, Hudaco Trading (Pty) Ltd t/a Ambro Steel (Hudaco) until his dismissal in June 2016 on charges of misconduct.

Having referred an unfair dismissal dispute, Mr Ramothwala obtained an arbitration award on 13 November 2017, declaring his dismissal to be substantively unfair and granting the relief of retrospective reinstatement with back-pay amounting to ZAR 154 016.92. The award indicated that the amount would attract interest at a rate of 15.5% per annum. Mr Ramothwala tendered his services on 3 December 2017, as directed, but was informed that Hudaco would be reviewing the arbitration award.

Hudaco launched an application in terms of section 145 of the Labour Relations Act, 1995 (LRA) to review and set aside the arbitration award. The review application was instituted outside of the prescribed six-week time period, without an accompanying condonation application, nor provision of security. Security was only later provided after Mr Ramothwala attempted to enforce the award.

The Labour Court ultimately dismissed Hudaco’s review application on the grounds that it lacked jurisdiction to entertain the review application owing to Hudaco’s omission to file a condonation application. Subsequently, Hudaco sought to appeal the decision of the Labour Court, but leave to appeal was dismissed.

Hudaco then petitioned the LAC for leave to appeal, which was struck off the roll on 8 November 2022.

Undeterred, Mr Ramothwala attempted to tender his services on each occasion Hudaco’s review application was unsuccessful. Each time he was turned away by Hudaco, who also disregarded his demand for the payment of the security monies held by Hudaco’s attorneys in trust, with interest.

Eventually, Hudaco’s attorneys took the view that the award had prescribed and that the matter was regarded as closed.

Mr Ramothwala’s application to the Labour Court  

Mr Ramothwala approached the Labour Court seeking, among other things, payment of the monies due to him by Hudaco. Hudaco maintained that the arbitration award had become prescribed. It also argued that the relief sought by Mr Ramothwala was not competent or appropriate as a means for the enforcement of the arbitration award, although it did not explain the basis for this claim in its papers.

The Labour Court considered whether the arbitration award had indeed prescribed. Hudaco provided various alternative scenarios and arguments for why the award had prescribed, including that since the review application was launched outside of the prescribed six weeks and without a condonation application, the review application was void ab initio; alternatively, that the application had been deemed withdrawn or had the consequence of having been dismissed for want of compliance with the Practice Manual.

In each of Hudaco’s scenarios prescription ran from different dates, the earliest being 13 November 2017, when the arbitration award was served and the latest being 12 February 2019, when the review application was deemed to be dismissed. Based on any scenario, the arbitration award had prescribed and was therefore unenforceable.

The Labour Court held that it would be a ‘travesty of justice to deny [Mr Ramothwala] relief in circumstances where [Hudaco] sought to rely on its own ineptitude (if not gross negligence) in the prosecution of the review application’. The Labour Court also held that where the review application is filed out of time and without a condonation application, it means no more than that unless and until any application for condonation is filed, the court has no jurisdiction (as opposed to the review application being void ab initio).

The Labour Court accepted that the same principle was applicable in respect of breaches of the Practice Manual. Accordingly, the Labour Court found that the arbitration award had not prescribed, and Hudaco was ordered, among others, to pay Mr Ramothwala the amount specified in the arbitration award with interest.

Aggrieved, Hudaco appealed the Labour Court’s judgment.

Appeal to the LAC

The LAC agreed with the Labour Court that whether a review application was outside of the six-week period was a jurisdictional issue to be determined by the Labour Court. Where the application is made outside of this period, the Court would have to determine whether good cause has been shown or not for it to exercise its discretion and grant condonation. Ultimately, the LAC confirmed that the launching of the review application, even outside of the prescribed six weeks, had interrupted prescription, and that the application for leave to appeal, further interrupted the running of prescription.

The LAC considered the judgment by the Constitutional Court in Myathaza v Johannesburg Metropolitan Bus Services (SOC) Ltd t/a Metrobus and Others which held, among others, that prescription under the Prescription Act is ‘interrupted by the service on the debtor of any process whereby the creditor claims payment of the debt. Once the judicial process commences it proceeds in terms of the court rules and any delays within that process do not affect the statutory interruption of prescription. Interruption lapses if, for whatever reason, the judgment is not pursued to become a ‘final judgment’. The interruption lasts until the ‘final’ judgment becomes executable. Pending an appeal the judgement is not usually executable in terms of court rules. […] the judgment only becomes final and executable when the appeal is finally disposed of.’

The LAC found that while the matter in casu was distinct from Mayathaza (which dealt with an arbitration award in terms of an arbitration agreement which was agreed to have the status of a court order with a 30-year prescription period) the principle in Mayathaza was still applicable in the matter.

To use the words of Van Niekerk J in the Labour Court, the ‘last word’ on the review application was spoken by the LAC on 8 November 2022 when it was struck off the roll. The arbitration award could not have prescribed until the proceedings were so concluded and therefore, the LAC held that it could not have been said that the arbitration award issued in favour of Mr Ramothwala had become prescribed.

With respect to the issue of interest accumulated, the LAC confirmed that section 143(2) of the LRA provides that the amount in arbitration awards earns interest from the date of the award at the same rate as stipulated in the Prescribed Rate of Interest Act, unless the arbitration award provides otherwise.

The LAC emphasised that section 143(2) of the LRA was designed to ensure that the employee is not financially prejudiced by review proceedings launched by the employer when the time finally comes for the employee to be paid in line with the arbitration award, which amount could be decreased by inflation over which the employee has no control. In the circumstances, the LAC found that in terms of section 143(2) of the LRA, Mr Ramothwala was entitled to the interest at the rate of 15.5% as specified in the arbitration award.

Notably, Hudaco and its attorneys were issued with a costs order for their conduct in protracting the matter. Both courts expressed their displeasure with these parties having sought to rely on their negligent prosecution of the review application. In this regard, the LAC found Hudaco and its attorneys’ conduct to be a complete miscarriage of justice.

Key takeaways

This case is an important addition to the growing body of jurisprudence that has developed on the issue of prescription of arbitration awards. It confirms that the failure to file an application to condone the late filing of a review application does not render same void ab initio. The prescription of an arbitration award in such circumstances will still be interrupted until the review proceedings and any related legal proceedings have been finalised by the court.

As for interest on the sum awarded, as per section 143(2) of the LRA, this will be payable to the employee at the prescribed rate, unless otherwise provided for in the arbitration award. Any interest on an amount held as security in an attorney’s trust account is a matter between that attorney and their client and is of no relevance to the arbitration creditor.

The judgment should also be taken as a warning for employers who attempt to thwart an employee’s enforcement of an arbitration award by way of protracted and negligent litigation.