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26 May 2017
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In the recent past, the Labour Appeal Court and the Supreme Court of Appeal were required to pronounce on whether failure to comply with a settlement order amounts to contempt of court. The reasoning in the two judgements appears to be at odds. The question that lingers is, which judgement is correct or should be followed? This article attemps to shed some light of the topic.

Our courts exist to, inter alia, bring finality to disputes, and in this regard our courts give judgements and make orders. Concomitant with this is the important ability to enforce them.

Our law recognises that parties to a dispute may settle their dispute whilst the legal proceedings are pending. These parties may make such a settlement agreement an order of court.

Section 158(1)(c) of the Labour Relations Act (66 of 1995) enjoins the Labour Court to make settlement agreements orders of court. Section 158(1)(c) provides:
“(1) The Labour Court may –
(a) …
(b) …
(c) Make any arbitration award or any settlement agreement an order of the Court.”

Most employment law litigants take advantage of this provision, and bring about an end to employment disputes before the Labour Court by concluding settlement agreements and making them orders of court to enable enforcement.
The underlying reason is to enforce compliance or, put differently, to enable execution. In the main, compliance is enforced by contempt proceedings. The question is, when is an aggrieved party entitled to an order enforcing the terms of the agreement?

In the November 2014 case of The Public Servants Association of South Africa on behalf of its Members v TT Gwanya and Another [Case No. JA36/15], the Labour Court was asked to consider if the Respondent was in contempt when it was alleged that its members were in breach of a court order. In casu, during 2006 members of the Appellant went on strike. The Respondents, the Director General and the Minister of the Department of Rural Development and Land Reform, brought an urgent application to interdict the strike.

The urgent application was withdrawn in terms of a settlement agreement. The settlement agreement provided for inter alia “piecework and a production incentive scheme”. No specific time period was provided for the life of the scheme. During January 2009, the Respondents terminated the scheme on a month’s notice and the aggrieved Appellant brought contempt proceedings against the Respondents.

The Appellant was unsuccessful in the court a quo and appealed to the Labour Appeal Court. In its obiter observations, the Labour Appeal Court found that the terms of the settlement constituted a collective agreement, and that the court a quo was correct in arriving at that conclusion. Section 24 of the Labour Relations Act sets out the process to be followed in a collective agreement.

In its ratio the Labour court pronounced:
“Where the court is approached to make a contract between the parties an order of court, it must not readily do so even if the parties desire that the agreement be made an order of court because the court should not be, as stated above, in the judgment, be a recorder of contractual terms or a registry of duties and obligations agreed to by the parties.”

The judgement clearly suggests at least two things:

  • Not all settlement agreements are capable of being made orders of court; and
  • Lower courts must be wary of rubber stamping a settlement agreement by making them an order of court, even when parties are desirous to do so.

In an earlier judgement of the Labour Appeal Court, South African Post Office Limited v CWU obo Permanent Part-Time Employees [CA15/12], the Labour Appeal Court was also required to consider the question whether a settlement agreement could be made an order of court.  In its decision, the court reasoned that:
“… before the Labour Court will grant an order sought in terms of Section 158(1)(c) of the LRA it must be satisfied that, at the very least:
I. the agreement is one which meets the criteria set in s 158(1)(c) read with section 158(1A) of the of the LRA, […];
II. that the agreement or award is sufficiently clear to have enabled the defaulting party to know exactly what it is required to do in order to comply with the agreement or award; and
III. There has not been compliance by the defaulting party with the terms of the agreement or the award.”

Accordingly, s158(1)(c) must be read together ss(1A). Section 158(1A) essentially defines the types of settlement agreements that can be made orders of court.

Section 158(1A) provides:
“(1A) For the purposes of subsection (1)(c), a settlement agreement is a written agreement in settlement of a dispute that a party has the right to refer to arbitration or to the Labour Court, excluding a dispute that a party is only entitled to refer to arbitration in terms of section 22 (4), 74 (4) or 75 (7).”
The latter section sets out three critical components that must exist before a settlement agreement can be made an order of court, namely:

  • It must bring the dispute to an end;
  • The nature of the dispute is one that is capable of being referred to arbitration or to the labour court; and
  • Disputes contemplated under s22(4), s74(4) or s75(7) cannot be settled under s158(1).

In addition, the Labour Appeal Court in the South African Post Office matter stated that “most crucially it must be remembered that the purpose of making an agreement or award an order of the Labour Court is to compel its enforcement or enable its execution and not for some other purpose”. This is consistent with the provisions of s158(1A).

In a contrasting judgement in April, in the matter of Compensation Solutions (Pty) Ltd v/s The Compensation Commissioner and Others ZASCA 59, the Supreme Court of Appeal delivered a scathing message to public officials: comply with court orders or else. In that case, the Supreme Court of Appeal was required to pronounce on whether the Compensation Commissioner in his personal capacity was in contempt, if so, what sanction to impose against him.

The Appellant, Compensations Solutions, conducted a business in terms of which it acquired a right to submit claims to the Commissioner and to receive payment. For some time, the Appellant business went well until inordinate delays occurred in payments of claims by the Commissioner. Around June 2009, the Appellant instituted legal action against the Commissioner. The parties settled the dispute; the terms of their settlement agreement were made orders of court. Notably, the terms of the agreement imposed certain obligations on the Commissioner.

Following repeated failures by the Compensation Commissioner to comply with the settlement agreement, of which he was aware, the Appellant approached the court for contempt of court proceedings. The court a quo noted that the commissioner was fully aware of the settlement order and was a signatory thereto. It held, however, that there was no basis for the contempt proceedings because the settlement order did not impose obligations towards the court. This was so because, in making the parties’ agreement an order of court, it had merely noted a “contract between the parties in respect of the terms thereof” which did “not in any way place the court in the position of instructing or commanding the parties”. In the court a quo’s view, the commissioner’s non-compliance was neither wilful nor malafide because “the disobedience must be contemptuous of the court and not as between the parties”,  as was in that case. There could therefore “be no contempt towards the court as no obligation exists between the non-complir and the court”.

The Supreme Court of Appeal, however, relied with approval on the Constitutional Court judgement of Eke v Parsons [2015] ZACC 30; 2015 (11) BCLR 1319 (CC) which held:
“Once a settlement agreement has been made an order of court, it is an order like any other. It will be interpreted like all court orders. …

[Its] effect is to change the status of the rights and obligations between the parties. Save for litigation that may be consequent upon the nature of the particular order, the order brings finality to the lis between the parties; the lis becomes res judicata (literally, “a matter judged”). It changes the terms of a settlement agreement to an enforceable court order. The type of enforcement may be execution or contempt proceedings. Or it may take any other form permitted by the nature of the order.”

The Supreme Court of Appeal held that “the settlement order therefore had the full force of a court order and nothing precluded the appellant from seeking to enforce it through contempt proceedings as it has done”.

Given that both the Constitutional Court decision and the Supreme Court of Appeal decision were decided after the Labour Appeal Court decision, future Labour Appeal Court decision are likely to overturn the decision in the matter of The Public Servants Association of South Africa on behalf of its Members v TT Gwanya and Another.

Written by Nkosenhle Mzinyathi, Mncedisi Ndlovu and Sedumedi

Edited by: Creamer Media Reporter
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