ISSUE

Whether employees who have lodged a claim in the Labour Court against an employer that has gone into liquidation may proceed with their claim if they have not provided the liquidator with the requisite notice as required by South Africa’s company laws?

SUMMARY

It is a peremptory requirement that written notice be given to the liquidators within four weeks of the liquidator’s appointment if an employee wishes to proceed with a claim for unfair dismissal. Should the employee fail to give this notice then he/she will be deemed to have abandoned his/her claim. 

COURT’S DECISION

In Direct Channel KwaZulu Natal (Pty) Ltd (in Liquidation) v Naidu and Others LC (D879/10) [2015] ZALCD 52, the employer (“Direct Channel”) retrenched several of its employees. The employees were aggrieved by their dismissals and referred an unfair dismissal dispute to the Labour Court.

Direct Channel failed to respond to the employees’ statement of case. Direct Channel then launched an application in the High Court for its winding-up and it was placed under provisional liquidation. The employees’ union was advised of this.

Some three and a half years later the Labour Court application was set down for default judgment. It was only then that Direct Channel filed its response the employees’ claim.

The first question the Labour Court had to decide was which legislation governed the dispute. The Companies Act 61 of 1973 (“Old Act”) was repealed by the Companies Act 71 of 2008 (“Companies Act”) on 1 May 2011. However, in terms of the transitional arrangements of the Companies Act, any proceedings in any court under the Old Act must continue in terms of the Old Act. Furthermore, any court order in terms of the Old Act continues to have the same effect as if the Old Act had not been repealed. As the provisional liquidation order was granted on 9 November 2010, the Old Act applied to these proceedings.

Direct Channel argued that the Old Act required the employees to give the liquidator three weeks’ written notice that they intended to continue with their claim and that they should have done so within four weeks of the liquidator’s appointment. The employees had not done so and therefore, argued Direct Channel the employees had, in effect, abandoned their claim. The employees argued that the lateness of Direct Channel’s statement of response prevented it from raising this argument.

The Labour Court held that the Old Act required written notice be given to the liquidators. Should a party fail to give this notice then the party would be deemed to have abandoned its claim. The employees’ claim was dismissed with costs.

IMPORTANCE OF THIS CASE

The Old Act’s provisions dealing with the liquidation and winding up of companies continues to apply to all such proceedings regarding the liquidation and winding up of companies, despite the enactment of the Companies Act. If a company that is involved in a labour dispute (or any other dispute) is liquidated, notice must be given to the liquidators if a party wishes to continue with its claim against the company.