Obscurity on the issue of filing security in review applications

March 1st, 2019

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By Vishal Ramruch

The Labour Relations Act 66 of 1995 (LRA) was amended to include subs (7) and (8) into s 145, with effect from 1 January 2015. These subsections require applicants in a review application to the Labour Court (LC) to file security in order to suspend the operation and execution of an arbitration award that is being subjected to review. Government, being an employer, is often confronted with review applications or initiating them. The focus of this article is the effect of aforementioned subsections on government/state departments, mindful that labour law litigation is a sui generis field.  

The issue at hand is whether government departments should be required to file security in order to suspend the operation of an arbitration award when it brings a review application in the LC. Previously, lodging a review application suspended the operation of an arbitration award.

Effect of arbitration awards

An arbitration award is akin to a court order. Section 143 of the LRA states that:

‘(1) An arbitration award issued by a commissioner is final and binding and it may be enforced as if it were an order of the Labour Court in respect of which a writ has been issued, unless it is an advisory arbitration award.

(4) If a party fails to comply with an arbitration award certified in terms of subsection (3) that orders the performance of an act, other than payment of an amount of money, any other party to the award may, without further order, enforce it by way of contempt proceedings instituted in the Labour Court.

(5) Despite subsection (1), an arbitration award in terms of which a party is required to pay an amount of money must be treated for the purpose of enforcing or executing that award as if it were an order of the Magistrate’s Court’ (my italics).

Failure to comply with it can resort in either contempt of court proceedings or a writ of execution against property.

Review application and security

Section 145(7) and (8) states as follows:

‘(7) The institution of review proceedings does not suspend the operation of an arbitration award, unless the applicant furnishes security to the satisfaction of the Court in accordance with subsection (8).

(8) Unless the Labour Court directs otherwise, the security furnished as contemplated in subsection (7) must –

(a) in the case of an order of reinstatement or re-employment, be equivalent to 24 months’ remuneration; or

(b) in the case of an order of compensation, be equivalent to the amount of compensation awarded’ (my italics).

The Act is clear – a review application does not suspend the operation of an arbitration award, unless the applicant files security to the satisfaction of the court.

In practice, while a review application is unfolding, the other process of certifying the award occurs from the employee side. The department is thereafter met with either contempt of court proceedings or a writ of execution. Both processes require departments and State Attorneys to act on an urgent basis. It requires the State Attorney to bring an urgent application to stay the enforcement of the arbitration award.

This in turn implies that for every review application brought by the State Attorney, there may very well be an urgent application to stay the enforcement of an award.

Some employees may opt to move via the contempt of court proceedings. A contempt of court application requires the receiver of same to act expeditiously as well. lack of resources and incurrence of legal costs seems to be at the fore in these applications.

Filing of security

The matter that seems to have first spoken directly on the issue is Free State Gambling and Liquor Authority v Commission for Conciliation, Mediation and Arbitration and Others Free State Liquor and Gambling Authority v Motake NO and Others (2015) 36 ILJ 2867 (LC). The applicant therein was a regulator of the gambling and liquor industries and was accountable to the responsible Member of the Executive Council (MEC) of the province. The applicant sought to stay the certification and/or enforcement of two arbitration awards pending the outcome of its review applications. The applicant went further and requested that it be absolved from furnishing security and alternatively, declaring that s 145(8) of the LRA is in conflict with the Public Finance Management Act 1 of 1999 (the Act), specifically s 66. It also requested the court to deal with the constitutionality of s 145(8) of the LRA as a further alternative; the court, however, did not entertain this aspect.

The court accepted the applicant’s argument and essentially ruled that to file security, to comply with s 66 of the Act and Treasury Regulations ‘would mean that a notice would have to be gazetted by the Minister of Finance each time such a “borrowing” is permitted. It is submitted that this is impractical. I would add that it is also unnecessary.’ The judge went further and stated that in applications such as these, where the applicant’s budget and financial management is governed by the Act and Treasury Regulations, and duly authorised averments are made to this effect, the object of providing security is satisfied. The application to stay the enforcement of the award was, therefore, granted.

The approach adopted by Rabkin-Naicker J appears to be one that is more understanding of government protocols.

This judgment demonstrates a measure of insight into the differences between a private applicant in a review application and that of a government department.

In National Department of Health v Pardesi and Another (LC) (unreported case no J1978/2016, 12-9-2016) (Van Niekerk J) delivered on 12 September 2016, there was an urgent application by the National Department of Health to stay the execution of a writ.

The applicant submitted that in terms of the Free State Gambling case, it was not required to furnish security. While van Niekerk J did not ‘express a view on the correctness or otherwise of the decision in Free State Gambling’, he pointed out that in terms of the Free State Gambling matter, the applicant ought to have made duly authorised and necessary averments in its papers to this effect – why it should be exempted from filing security. The judge went further in stating that the Free State Gambling matter is not authority for the proposition that all departments of state or other entities subjected to the Act do not have to furnish security and that facts must be before the court to enable the court to exercise a discretion as to whether security should be furnished or not. The application to stay the writ was refused.

Judgment was handed down in the matter of Rustenburg Local Municipality v South African Local Government Bargaining Council and Others [2017] JOL 39124 (LC). Once again, the facts were similar. The award was certified and the Sheriff appeared at the offices of the applicant. This prompted the applicant to bring an application to stay that writ, pending the outcome of the review application.

The applicant relied on the Local Government: Municipal Finance Management Act 56 of 2013 (MFMA) in that s 29 of the MFMA places an impediment on access to funding in respect of issues not budgeted for or approved in terms of the financial systems in place. It contended that payment of security is, therefore, not budgeted for and it could not provide same. The applicant, therefore, argued that it should be exonerated from filing security. The applicant also relied on the Free State Gambling matter.

The court, essentially, reasoned as follows:

  • A proper case must always be made out by the applicant in seeking to dispense with the requirement of providing security, which would form the basis on which such discretion might be exercised.
  • Insofar as the Free State Gambling case is concerned, to the effect that public service entities subject to the provisions of the Act or related legislation are exempt/exonerated from providing security under s 145(7) and (8), it is ‘clearly wrong’. There is no reason why all employers, whether in the public service or private sector, should not be subject to the same requirement.
  • Where there is a conflict between the Act and the MFMA, the LRA must prevail.
  • The provisions of the Act and MFMA cannot serve as a basis to exonerate any government departments from having to file security.

The judge drew no distinction between any type of employer. Equating a government department as a litigant to a private sector/individual litigate, with respect, may be problematic. Government departments operate on a different scale to that of a private litigant.

For a private litigant to file a review application, with security, will simply mean depositing the security amount into their legal practitioner’s trust account who can thereafter do the necessary to file the security. For a government department, however, this is not so simple. It must follow various processes in order to justify the amount needed, acquire the necessary official approvals and then make the security amount available. This process, although may seem bureaucratically challenged, is necessary. A government department is accountable to Parliament and the public. A private litigant is not; and if it is, not to the extent as which a government department is. By the time this process unfolds, it is possible that the six-week period to lodge the review application would have passed.

The Free State Gambling matter recognises the differences between a government department and the private sector. Government departments are, nonetheless, recognised in the legislature to operate in a different manner to that of private litigants. In, for example, the Institution of Legal Proceedings Against Certain Organs of State Act 40 of 2002, this Act recognises that, since an organ of state is different to that of a private litigant, certain procedures must be followed prior to instituting action against the state. If there is no proper compliance in terms of s 3 therein, the action becomes premature and dismissible. Another example of the recognition of government departments being treated differently is noting the dies required for it to act in response of a summons.

Government departments should not be treated the same as a private entity when it comes to filing security. To do so, would be contradictory to the purport and intent of legislation already in place. The problem, in my view, not only lies in the Rustenburg Local Municipality matter, but in the legislature. Perhaps the legislature should have gone further in either exempting government departments from filing security or placing a precondition (such as time limits) on it in filing a review application and/or how it deals with review applications.

I understand the rationale for the introduction of ss 145(7) and (8) – to prevent or discourage review applications that have little prospects of success. It is true that s 210 of the LRA states that ‘[i]f any conflict, relating to the matters dealt with in this Act, arises between this Act and the provisions of any other law save the Constitution or any Act expressly amending this Act, the provisions of this Act will prevail.’ On the other hand, I am of the view that ss 145(7) and (8) are in direct conflict with ch 13 of the Constitution, specifically ss 215 and 216 (National, provincial and municipal budgets and Treasury control). The Act is the core Act that speaks to these sections of the Constitution, and thus is in conflict with the LRA.

Sections 38(2), 66 and 70 do pose difficulties in complying with ss 145(7) and (8) of the LRA for any government department. Since these Acts are in conflict with each other, this conflict surely should not continue indefinitely. Sections 145(7) and (8) can not only discourage a government department in lodging review applications; it, in effect, can disable them. Thus, legislative or precedent setting intervention is required.

Vishal Ramruch LLB (UKZN) is a legal practitioner at the Office of the State Attorney in Pretoria.

This article was first published in De Rebus in 2019 (March) DR 13.

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