Unicorn Pharmaceuticals (Pty) Ltd v Edwards NO and Others (C118/17) [2018] ZALCCT 46 (20 February 2018)

IN

THE LABOUR COURT OF SOUTH AFRICA

HELD

AT CAPE TOWN

CASE NUMBER: C118/17

Reportable

In the matter between:

UNICORN PHARMACEUTICALS (PTY) LTD Applicant

and

ARBITRATOR

K EDWARDS N.O. First respondent

PAUL VAN DER HORST and 12 others Second and further respondents

Heard: 31 January 2018

Delivered: 20 February 2018

SUMMARY: Review – Arbitration Act 42 of 1965.

JUDGMENT

STEENKAMP J:

Introduction

[1] The applicant seeks to have an arbitration award reviewed and set aside. But this is not, as is usually the case in this Court, an application in terms of s 145 of the LRA[1]; instead, it is an application in terms of s 33 of the Arbitration Act[2] to review and set aside a private arbitration award.

Background

[2] The applicant was involved in the business of pharmaceutical distribution, primarily for the Clicks group, before it was renamed and repurposed. In 1990 it set up an “owner-driver” scheme whereby drivers would deliver pharmaceuticals on its behalf. The second to twelfth respondents, Messrs van der Horst and others, were owner drivers under this scheme. The applicant says they were engaged as independent contractors.

[3] The relationship was initially governed by “cartage agreements” that were replaced by individual “transportation agreements” in March 2006. All of the individual respondents signed transportation agreements on 20 March 2006, subject to the condition that they had to undergo polygraph tests within a specified period. The agreements also included an arbitration clause that required any dispute to be referred to private arbitration. It includes the following sub clause:[3]

“The arbitrator shall be any suitably qualified independent person agreed upon between the parties to the dispute, and failing agreement within 7 days, appointed on the application of either party by the chairman for the time being of the Association of Arbitrators.”

[4] The individual respondents continued driving in terms of the agreement but refused to undergo polygraph tests. The applicant terminated the transportation agreements with them on 23 October 2006.

[5] The individual respondents referred an unfair dismissal dispute to the CCMA.[4] The CCMA dismissed the referral because it lacked jurisdiction. Commissioner W F Maritz ruled:

“The CCMA does not have jurisdiction to consider either the validity of the agreement or whether the applicants, despite the apparent terms of the agreement, are nonetheless employees and not independent contractors.

The in limine objection is upheld and the application is dismissed.”

[6] On 20 April 2008 the individual respondents launched an application in the Western Cape High Court to compel the applicant to participate in private arbitration. Blignault J dismissed the application with costs on 1 July 2009. He held that the court does not have the power to compel a reluctant party to participate in arbitration.

[7] Over seven years later, on 13 December 2016, a private arbitrator, Ms Kim Edwards[5] handed down an arbitration award, following an arbitration that was held in the absence of the applicant. She found that the individual respondents were employees; that they were unfairly dismissed; and she ordered the applicant to pay each of them compensation equivalent to 12 months’ remuneration.

[8] The applicant says that the award was improperly obtained; that the arbitrator’s appointment was irregular; that it did not receive proper notice of the arbitration; and that the arbitrator did not apply her mind to the issues before her. It is for those reasons that it seeks to have the award reviewed and set aside. I shall consider each of those grounds of review separately.

Evaluation

[9] As I mentioned at the outset, this is an application in terms of s 33(1) of the Arbitration Act. That section reads:

“Where –

(a) any member of an arbitration tribunal has misconducted himself in relation to his duties as arbitrator or umpire; or

(b) an arbitration tribunal has committed any gross irregularity in the conduct of the arbitration proceedings or has exceeded its powers; or

(c) an award has been improperly obtained,

the court may, on the application of any party to the reference after due notice to the other party or parties, make an order setting the award aside.”

Irregular appointment?

[10] The parties did not agree to the appointment of an arbitrator. The respondents made much of the applicant’s recalcitrance to do so, and blamed it for the fact that, ten years after the dispute arose, it has not been finalised. But as a matter of fact, there is no evidence before me that the respondents tried to get the applicant’s agreement. Mr Chamisa, who represented the respondents in these proceedings, has done so from at least 2016. On 16 November 2016 he sent a fax to the applicant at its general fax number in Montague Gardens. It was addressed to no-one in particular, despite the fact that the respondents’ previous representative, one Bertram Albrecht (styled as a labour and HR practitioner with Nwekwezi Labour & HR Consultancy cc) had been in email correspondence with the applicant’s Head: Group Legal Counsel, Mr David Janks, about this very dispute. Janks had a different and dedicated fax number and email address. And as long ago as 14 February 2012 Janks wrote to Albrecht and said:

“You indicated in your letter to UPD dated 21 July 2011 that there is still a private arbitration pending with regards to the allegation of unfair dismissal. Please let me know what issues are being determined in such arbitration, who the parties are, and the arbitrator’s

details and contact information.”

[11] Chamisa’s letter of 16 November 2016 reads:[6]

“In re: Private arbitration re Paul van der Horst and 13 Others v New United Pharmaceutical Distributors Pty Ltd

1. Above has reference.

2. Please note that Paul van der Horst and 13 others will be proceeding with private arbitration after the lack of co-operation from Respondent in giving finality to the dispute that required private arbitration.

3. It is the position of the applicants that if the respondent had genuine concerns was to raise such in limine to be considered at private arbitration, however the lack of co-operation at all material times has left the applicants vis-à-vis the unreasonable period taken with no option but to proceed with private arbitration set for the 5th and 6th of December 2016.

4. It is imperative for the company to be informed that the process will be carried out without any further delay by the respondent.

Regards

Adv Dennis Jnr Chamisa.”

[12] The applicant says it was not aware of this fax. It had been sent to a general fax machine at a distribution centre at another company in the same group of companies. But be that as it may, it is apparent that it does not comply with the provisions of clause 50.4 of the arbitration agreement. Chamisa, on behalf of the respondents, did not ask the applicant to agree to the appointment of an arbitrator. He merely purported to inform it of an arbitration that had already been set down. And, failing any agreement to the appointment of an arbitrator, neither did the chairperson of the Association of Arbitrators appoint one.

[13] When asked about this in argument, Mr Chamisa conceded that the arbitrator was not appointed in terms of clause 50.4. The best he could do was to refer to email correspondence between him and the Association. But the arbitrator that the respondents unilaterally appointed, Ms Edwards, was appointed neither by agreement nor by the Association of Arbitrators.

[14] It follows that the appointment of the arbitrator was irregular and the award was improperly obtained. Her award must be reviewed and set aside for this reason alone.

Defective notice

[15] Also, and in any event, the arbitration notice did not comply with s 15(1) of the Arbitration Act:

[1] The Labour Relations Act 66 of 1995.

[2] Act 42 of 1965.

[3] Clause 50.4.

[4] The Commission for Conciliation, Mediation and Arbitration.

[5] The first respondent.

[6] Verbatim.

[7] 2005 (5) SA 200 (SCA) par 12.

[8] 2009 (6) BCLR 527 (CC); 2009 (4) SA 429 (CC) (footnotes omitted).

[9] Halcyon Hotels (Pty) Ltd t/a Baraza v CCMA [2001] 8 BLLR 911 (LC) par 14.