Despite developments in our law over the years, it seems that parties to an arbitration still have misconceptions on whether or not hearsay evidence is admissible in arbitration proceedings. The recent Labour Appeal Court (LAC) judgment in Exxaro Coal (Pty) Ltd v Chipana and Others provides clear guidance on the principles applicable when dealing with hearsay evidence.
The employee in this matter, Mr Gabriel Chipana, was charged with misconduct based on an allegation that he was guilty of “selling” jobs to a Ms Mange, a Ms Thobane and a Mr Nong. This involved Mr Chipana receiving moneys from them in exchange for him arranging their employment with Exxaro Coal. The investigation that led to the charges against Mr Chipana was conducted by an outside party, namely Ernst and Young. Mr Chipana was found guilty of both charges and dismissed. He referred an unfair dismissal dispute to the CCMA.
At the subsequent arbitration, Exxaro Coal presented the evidence of: Mr Steyn, a senior manager in Ernst and Young’s forensics auditing team; a colleague of his, Mr Claasen; and, Mr Nyaka, an employee of Exxaro Coal. Exxaro Coal relied on the evidence of Mr Steyn and Mr Claasen to justify the fairness of the dismissal. They, in turn, relied on documentary evidence and affidavits made by other parties to justify the dismissal. Most of this evidence was hearsay evidence. It appears that Exxaro was unable to call certain witnesses that could provide direct evidence to substantiate the disciplinary offence because they were being intimidated. Mr Chipana gave evidence to rebut Exarro’s evidence, but called no witnesses.
The parties made submissions in their closing arguments regarding the admission of the hearsay evidence tendered by Exxaro Coal during the arbitration. The commissioner made a ruling that the hearsay evidence could not be admitted in the absence of Mr Chipana’s consent to the admission of such evidence. It rejected the argument that there had been intimidation. This resulted in the commissioner making a finding that the only admissible evidence relating to the alleged disciplinary offence, was that of Mr Chipana and this did not establish his guilt. In light thereof, the commissioner made an award reinstating Mr Chipana retrospectively with back pay.
Exxaro Coal challenged the arbitration award by referring a review application to the Labour Court (LC), essentially on the ground that, by excluding the hearsay evidence in its entirety, the commissioner failed to apply his mind to the provisions of section 3 of the Law of Evidence Amendment Act 45 of 1988 (LEAA).
Section 3 provides that hearsay evidence is inadmissible in civil or criminal proceedings unless one of the circumstances set out in the section exist. One of these circumstances is where the court is of the view that the admission of the evidence would be in the interests of justice.
However, in determining whether the arbitration award was reviewable, the LC did not consider the review ground advanced by Exxaro Coal. Instead, the LC considered whether the commissioner’s failure to address the reasons proffered by Exxaro as to why certain witnesses had not been called, was a ground which rendered the award reviewable. The LC found that there was nothing to indicate that the “alleged intimidation was ongoing” and found that there was “no credible evidence” that the “alleged threat was imminent”. The evidence of Messrs Steyn and Claasen was of no value in proving the alleged misconduct. Therefore, the LC dismissed the review application.
Exxaro Coal lodged an appeal to the LAC on the basis that the commissioner and the LC had erred in their approach to the dispute and had failed to consider section 3 of the LEAA. The LAC upheld the appeal and set aside the commissioner’s award. It found that the commissioner had erred in not taking into account section 3 of the LEAA. Although the section refers to a “court” and to “civil or criminal proceedings” it may be adapted specifically for arbitration proceedings. In applying the section, the term “court” could readily be taken to refer to the commissioner or arbitrator and “criminal or civil proceedings” could be taken to refer to the arbitration proceedings.
Relying on the provisions of section 3, the LAC formulated the following guidelines with regard to the admission of hearsay evidence.
- The possibility that hearsay evidence can be admitted in terms of section 3(1)(c) of the LEAA, if this is in the interests of justice, is not a licence for the wholesale admission of hearsay evidence in the proceedings.
- In applying section 3(1)(c) the commissioner must be careful to ensure that fairness is not compromised.
- A commissioner must be alert to the introduction of hearsay evidence and ought not to remain passive in this regard.
- A party must, as early as possible in the proceedings, make known its intention to rely on hearsay evidence so that the other party is able to reasonably appreciate the evidentiary challenge that he/she or it is facing. To ensure compliance, a commissioner should at the outset require parties to indicate such an intention.
- The commissioner must explain to the parties the significance of the provisions of section 3 of the LEAA, or of an alternative, fair standard and procedure that will be adopted by the commissioner to consider the admission of the evidence.
- The commissioner must timeously rule on the admission of the hearsay evidence and the ruling on admissibility should not be made for the first time at the end of the arbitration, or in the closing argument, or in the award.
- The point at which a ruling on the admissibility of evidence is made is crucial to ensure fairness in a criminal trial. The same ought to be true for an arbitration conducted in an adversarial fashion because fairness to both parties is paramount.
The LAC found that the commissioner’s award was reviewable, primarily because the commissioner had erred in only addressing the issue of hearsay evidence during closing argument and in making a ruling in this regard in the award. This had been unfair to both Exxaro Coal and to Mr Chipana. The timing of the ruling and the commissioner’s passivity during the arbitration when the hearsay evidence was being adduced was not consonant with a commissioner’s duty to determine a dispute between parties fairly, or quickly.
It is clear from the decision that hearsay evidence should not be automatically admitted or rejected. When confronted with hearsay evidence the commissioner must cautiously apply the provisions of section 3 of the LEAA in determining the admission of such evidence.
Perhaps of most importance is the statement that a party who intends to adduce hearsay evidence must indicate such intention as early as possible and the commissioner is required to make a ruling on the admission of hearsay evidence as soon as possible. This will prevent any party being prejudiced in their case, as each party will know the case that they are required to meet and the limitations thereof.
The above judgment presents an interesting contrast to the judgment in Foschini Group v Maidi and Others where the LAC was somewhat opposed to the formalistic approach of applying section 3 of the LEAA in arbitration proceedings. The LAC accepted the approach adopted by the commissioner in admitting the investigation report of the employer’s national operations administrative manager. The LAC held that the report and documents relied upon by the investigation were, strictly speaking, hearsay. However, the LAC held that it was permissible for the commissioner to have relied on them in conjunction with the investigator’s testimony, provided the commissioner was satisfied that the evidence was reliable, which it was. Specifically, the commissioner’s ruling that the evidence of the investigator was reliable was eminently reasonable on the basis that the evidence could most conveniently and accurately be presented by a person who understands the systems and has personal knowledge of how they integrate with the practical operation of the employer’s business, and the investigator was such a person.