Staying The Enforcement Of An Arbitration Award Pending Interlocutory Applications

On 24 May 2022, the Labour Court delivered a judgment in an application to stay the enforcement of an arbitration award in the matter of Denel SOC LTD v NUMSA obo Petersen and 1 Other (J51/22).

Mr. Petersen (“Petersen”) is employed by Denel SOC LTD (“Denel”) and owing to allegations relating to the handling of an intellectual property rights transaction, on 21 October 2019, Petersen was placed on suspension.

Petersen alleged that he was not paid his full remuneration during the period of suspension, and accordingly referred an unfair suspension dispute to the CCMA, which could not be resolved at conciliation, and the CCMA was requested to arbitrate the dispute.

Denel failed to attend the arbitration proceedings on 29 October 2020, despite being notified of the proceedings via email, and the arbitration continued in Denel’s absence.

During early November 2020, a Default Arbitration Award was issued, in terms of which, the commissioner presiding over the arbitration proceedings, found the suspension of Petersen to be unfair, and ordered Denel to uplift the suspension and to pay Petersen the outstanding remuneration together with three months’ compensation.

Having only become aware of the Default Award on 12 November 2020, Denel, aggrieved by the award, filed an Application for Rescission of the Default Award on 27 November 2020.

The CCMA ruled that it lacked jurisdiction to entertain the Application for Rescission, considering that it was filed one day outside of the prescribed fourteen-day period, which prompted Denel to apply for the condonation of the late filing of its Application for Rescission.

At the time of the hearing of this matter in the Labour Court, the CCMA had not yet issued a ruling on the condonation application launched by Denel.

Petersen, in the meantime, applied to have the Default Arbitration Award certified, and which award was certified on 13 April 2022.  The sheriff attached goods belonging to Denel on 21 April 2022, despite attempts from Denel for the sheriff not to do so, pending the outcome of its interlocutory applications pending at the CCMA.

Denel then launched its application, on an urgent basis, to stay the enforcement of the Default Arbitration Award, pending the outcomes of its Application for Rescission and Application for Condonation.

In addressing the powers of the CCMA Director to certify awards, the Labour Court held that a Default Award is not an arbitration award, and accordingly is incapable of being certified or independently reviewed, and held further that certification can be compared to making an arbitration award an order of the Labour Court: i.e., after each of the two, execution follows.

It was the view of the Labour Court that, in order to deal with applications in terms of rule 40 of the Rules for the Conduct of Proceedings before the CCMA, the CCMA should determine whether the employer party is aware of the award, and not merely that the CCMA is satisfied that there is proof, on file, that the award was served on the employer party.  This is particularly so considering that in most instances, employers are not aware of Default Arbitration Awards.

Once made aware, employers should be advised of their options:

  1. Accept the award and comply with it.
  2. Apply to have the award rescinded.

It was the view of the Labour Court that, when employers elect the latter option (rescission application), it is ineffective to allow certification.

Insofar as the powers of the CCMA or Bargaining Councils to order a stay, the Labour Court held that:

“To my mind, a stay application happens as a result of the CCMA performing its arbitral functions.  In order to properly perform its arbitral functions, the CCMA should and is empowered, in my view, stay the operation of a default arbitration award whilst its decision over the default arbitration award pends.”

The Labour Court further held that, if its assessment of the legal position is correct, applications that seek to stay enforcement pending the CCMA or Bargaining Council’s decision may be brought on an urgent basis, which will lessen the burden of the Labour Court, and is not detrimental to the purpose of the LRA.

Turning to the urgency in the current the matter, the property of Denel was under judicial attachment, and Petersen was set on having same sold at auction, notwithstanding the fact that the CCMA had not yet ruled on the Application for Rescission, and the fact that Denel may be successful in its application, and the application was heard on an urgent basis.

In the matter of Tony Gois t/a Shakespeare’s Pub v Van Zyl and Others (2003) 11 BLLR 1176 (LC) (the latest judgment in this regard in the Labour court), in summarising the general principles for the granting of the stay, the court held that “the court is not concerned with the merits of the underlying dispute – the sole enquiry is simply whether the causa is in dispute”.

The Labour Court, in the matter of Denel, agreed that in a stay, it is not appropriate to explore the merits of the action in a stay application.

What is of importance is that there is an ongoing dispute between the parties with reference to the terms of the Default Arbitration Award.

Considering that there was a real and substantial risk that Denel may not recover the money from Petersen, if the rescission application is successful, which constitutes irreparable harm, and the requirements for a stay, as outlined in the matter of Gois where met, the Application to Stay an Enforcement of an Arbitration Ward was successful.