Brief Summary

Rescission — Default judgment — Application for rescission of default judgment granted against applicant for unfair dismissal — Applicant unaware of statement of claim served by respondents — Applicant's explanation for default deemed weak but showed prima facie bona fide defence — Application made within 15 days of becoming aware of judgment — Application for rescission granted.

Comprehensive Summary

Summary of Judgment

1. Introduction

The proceedings were an application in the Labour Court for the rescission and setting aside of a default judgment previously granted in chambers. The applicant was Tirelo Emergency Medical Services (the employer). The respondents were Mashalane, Robert Tlau (first respondent) and Phalane, Paulina Manlokwane (second respondent) (employees).

The procedural history was that the respondents’ unfair dismissal dispute (arising from retrenchment) was conciliated at the Commission for Conciliation, Mediation and Arbitration (CCMA) without settlement, after which the respondents filed a statement of claim in the Labour Court. The applicant did not defend the claim, and default judgment was granted against it on 27 March 2015 by Voyi AJ. A writ of execution was later served at the applicant’s premises on 29 February 2016, following which the applicant launched the present rescission application on 16 March 2016. The rescission application became opposed and was removed from the unopposed roll on 3 May 2016.

The general subject-matter of the dispute concerned the fairness of the respondents’ dismissal for operational requirements (retrenchment) under section 189 of the Labour Relations Act 66 of 1995 (as amended), and, in the rescission proceedings, whether the Labour Court should set aside the default judgment on the basis contemplated by section 165 of the LRA read with Labour Court Rule 16A.

In addition, the respondents sought condonation for the late filing of their answering affidavit in the rescission application.

2. Material Facts

The respondents concluded employment contracts with the applicant in May 2012. Their duties were described as including patient assessment, treatment, management, and transportation in medical or trauma emergencies.

On 12 March 2013, the applicant consulted with the respondents regarding the company’s finances, reduced work (including a cancelled contract), and possible retrenchment. A further meeting was held with identified employees who might be retrenched on 16 April 2013; the first respondent was not present at that meeting.

On 18 June 2013, the respondents were issued with a letter headed “SECTION 189A. DISMISSAL BASED ON OPERATIONAL REQUIREMENT BY THE EMPLOYER (RETRENCHMENT)”. On 1 July 2013, both respondents were issued with a notice of termination of employment based on operational requirements (retrenchment), referencing section 189A of the LRA.

The dispute was conciliated at the CCMA on 26 August 2013. The applicant attended, but no settlement was reached, and a certificate of outcome was issued referring the dispute to the Labour Court.

The respondents’ statement of claim was served on the applicant by registered post (the judgment records service on 31 October 2013). The applicant did not defend the matter, and default judgment was granted on 27 March 2015, including compensation equivalent to 12 months’ salary for each respondent and an amount for severance pay.

A writ of execution was served at the applicant’s premises on 29 February 2016, after which the applicant brought the rescission application on 16 March 2016.

As to service and receipt, the court treated it as common cause that the statement of claim was duly served on the applicant. The applicant’s explanation for its default was framed as non-receipt in the sense that, although the document was received by an erstwhile employee (Mr Mvundlela), it was allegedly not brought to management’s attention. The applicant stated that it became aware of the matter only when the sheriff served the writ of execution. The applicant’s detailed account of these circumstances was provided in reply, rather than in the founding affidavit.

On the merits of the underlying dismissal dispute, the applicant contended that the retrenchment was procedurally and substantively fair and that the respondents were paid severance packages. The respondents disputed both alleged compliance with section 189 and the alleged severance payments.

Regarding the respondents’ answering affidavit in the rescission application, it was filed nine days late. The applicant did not serve a formal notice of objection as contemplated by the Practice Manual, but it raised a substantive objection in its replying affidavit.

3. Legal Issues

The central legal questions were whether the applicant had made out a proper basis for rescission under section 165 of the LRA read with Labour Court Rule 16A, and, specifically, whether the default judgment should be rescinded as:

a judgment erroneously sought or erroneously granted in the applicant’s absence (a ground that would not require “good cause”), or alternatively as a judgment granted in the applicant’s absence other than erroneously, requiring compliance with the 15-day time period and proof of good cause.

A further issue was whether the applicant had shown good cause for rescission in the form required in this context, namely a reasonable and acceptable explanation for the default together with a bona fide defence that prima facie carries some prospects of success.

In addition, the court had to determine whether condonation should be granted for the respondents’ late answering affidavit, taking into account the Practice Manual position on objections to late affidavits, as well as the interests of justice.

These issues involved the application of established legal tests to the facts (particularly the classification of the rescission ground and the evaluation of explanation and prospects), together with an evaluative judgment concerning condonation and costs.

4. Court’s Reasoning

The court approached the rescission application through section 165 of the LRA read with Labour Court Rule 16A, which regulate rescission and variation of Labour Court judgments. The judgment emphasised that Rule 16A draws a distinction between rescission where a judgment was erroneously granted (for example, where proper notice was not given) and rescission where judgment was granted in a party’s absence without error (for example, where notice was properly given but the party did not participate). The court relied on the distinction articulated in Bayete Security Holdings v Mokgadi.

On the “erroneously granted” category, the court reiterated that an order is erroneously made if, at the time it was granted, there existed a fact unknown to the court that would have precluded the order had it been known. In that situation, the applicant would not need to show “good cause” of the kind required under common-law rescission principles. However, the court concluded that the respondents were correct in contending that the default judgment was not erroneously made, particularly because the statement of claim was treated as having been duly served in accordance with the rules (the respondents referred to Rule 4(1)(a)(vii)).

Although the applicant’s papers did not clearly identify whether it relied on Rule 16A(1)(a) (erroneous grant) or Rule 16A(1)(b) (rescission of a judgment granted in the absence of a party), the court inferred from the content of the founding affidavit that the applicant was in substance relying on the good-cause rescission route. The applicant’s founding papers dealt with wilful default and a bona fide defence, rather than establishing the requirements for “erroneous grant”. The court therefore considered the application under Rule 16A(1)(b) read with Rule 16A(2)(b), noting also that the application was brought within 15 days of the applicant becoming aware of the judgment (as required in that route).

In applying the “good cause” test, the court accepted that rescission may be granted where the applicant provides a reasonable and acceptable explanation for the default and shows a bona fide defence that prima facie carries prospects of success. The court found the applicant’s explanation for default to be weak, primarily because the key details explaining non-receipt (in the sense of internal non-escalation) were provided in the replying affidavit. The court applied the principle that an applicant must make out its case in the founding papers and cannot remedy deficiencies by making out the case in reply, referencing authority to that effect.

Despite the weak explanation, the court assessed prospects of success and the existence of a bona fide defence by reference to the annexures and the pleaded defence. The applicant asserted compliance with section 189 procedures and asserted that severance payments had been made; the respondents disputed these assertions. The court noted that the applicant had attached documentation (including section 189 notices and proof of payment) supporting its version and concluded that the applicant had established a bona fide defence and, at least, a prima facie case on the merits sufficient to justify rescission so that the matter could proceed to trial.

The court further applied the evaluative approach that a good defence may compensate for a poor explanation for default. Although the court noted that an annexure supporting severance payment (annexure J1) was attached only to the replying affidavit and should ideally have been in the founding papers, it nonetheless considered that the founding affidavit had stated that the respondents were paid their packages, and it treated the defence (both on severance pay and compliance with section 189) as sufficient to satisfy the prospects component for rescission.

On condonation for the respondents’ late answering affidavit, the court referred to paragraph 11.4.2 of the Labour Court Practice Manual, which provides that condonation is not required for late filing unless a notice of objection is filed within the stipulated period. The applicant had not served such a notice of objection, but had raised a substantive objection in reply. The court nonetheless considered condonation on the merits, evaluating the degree of lateness, reasons for delay, prospects, and prejudice. It found that it was in the interests of justice to grant condonation so that the merits could be fully ventilated.

On costs, the court exercised the broad discretion conferred by section 162(1) and (2) of the LRA and, with reference to the approach in Zungu v Premier of the Province of Kwa-Zulu Natal and Others, declined to make a costs order against the respondents notwithstanding the applicant’s success.

5. Outcome and Relief

The court granted the respondents’ application for condonation for the late filing of their answering affidavit.

The court granted the applicant’s rescission application and rescinded the default judgment granted by Voyi AJ on 27 March 2015, with the consequence that the matter could proceed to be determined on the merits.

No order was made as to costs.

Cases Cited

Bayete Security Holdings v Mokgadi [2000] 9 BLLR 1020 (LC).

Bakeoven Ltd v GJ Howes (Pty) Ltd 1992 (2) SA 466 (E).

CAWU v Federale Stene (Pty) Ltd (1998) 19 ILJ 642 (LC).

Sarabande Electrical Construction v Guma [1999] 4 BLLR 387 (LC).

Chetty v Law Society, Transvaal 1985 (2) SA 756 (A).

Director of Hospital Services v Mistry 1979 (1) SA 629 (A).

Cqibitole v Pace Community College [2000] 6 BLLR 673 (LC).

Carolus v Saambou Bank Ltd; Smith v Saambou Bank Ltd 2002 (6) SA 346 (SE).

Zungu v Premier of the Province of Kwa-Zulu Natal and Others (2018) 39 ILJ 523 (CC).

Legislation Cited

Labour Relations Act 66 of 1995 (as amended), section 151.

Labour Relations Act 66 of 1995 (as amended), section 162(1) and section 162(2).

Labour Relations Act 66 of 1995 (as amended), section 165.

Labour Relations Act 66 of 1995 (as amended), section 189.

Labour Relations Act 66 of 1995 (as amended), section 189A.

Rules of Court Cited

Labour Court Rule 4(1)(a)(vii).

Labour Court Rule 16A(1)(a).

Labour Court Rule 16A(1)(b).

Labour Court Rule 16A(2)(b).

Labour Court Practice Manual, paragraph 11.4.2 (April 2013).

Held

The Labour Court held that the default judgment was not shown to have been erroneously granted in the sense contemplated by section 165(a) of the LRA and Rule 16A(1)(a), given that service of the statement of claim was treated as proper.

The court nevertheless held that the application could properly be determined under Rule 16A(1)(b) read with Rule 16A(2)(b), because the applicant sought rescission on the basis of absence, addressed wilful default and a bona fide defence, and brought the application within the prescribed period after becoming aware of the judgment.

Although the applicant’s explanation for default was weak (including because material explanation was advanced in reply), the court held that the applicant had established a bona fide defence with prima facie prospects of success, supported by annexed documentation relating to the retrenchment process and alleged severance payments. The court considered it equitable to grant rescission to permit the dispute to proceed to trial.

Condonation for the respondents’ late answering affidavit was granted in the interests of justice, and no costs order was made.

LEGAL PRINCIPLES

Section 165 of the Labour Relations Act 66 of 1995 and Labour Court Rule 16A provide distinct routes for rescission, separating cases where a judgment was erroneously sought or erroneously granted in a party’s absence from cases where the judgment was granted in a party’s absence other than erroneously. In the former category, “good cause” in the common-law sense is not required; in the latter, an application must be brought within the prescribed period and good cause must be shown.

An order is erroneously made where, at the time the order was granted, there existed a fact unknown to the court that would have precluded the order had it been known.

For rescission on the basis of good cause, the applicant must provide a reasonable and acceptable explanation for the default and demonstrate a bona fide defence that prima facie carries some prospects of success on the merits. The assessment is evaluative and involves balancing the quality of the explanation and the apparent strength of the defence.

A litigant is generally required to make out its case in its founding papers and cannot ordinarily cure material deficiencies by advancing the case for the first time in a replying affidavit.

In the rescission context applied in this matter, a stronger defence on the merits may compensate for a weaker explanation for default, where the overall interests of justice favour allowing the matter to proceed to trial.

In relation to costs in employment disputes, the Labour Court has a broad discretion under section 162 of the LRA and may decline to award costs even where a party is successful, consistent with the approach endorsed in constitutional jurisprudence.

Tirelo Emergency Medical Services v Tlau and Another (JS1035/13) [2019] ZALCJHB 289 (25 October 2019)