Can an employee pursue an unfair dismissal arbitration against an employer that is under business rescue? And what happens when a commissioner relies on legal authority that does not support the proposition for which it is cited?
These questions were considered by the Labour Court in South Africa Post Office SOC Ltd and Others v Fakude N.O. and Others (2026/249228) [2026] ZALCJHB 395, delivered on 23 October 2026.
The judgment is significant for employers, human resources practitioners, labour relations specialists and legal practitioners for two important reasons.
First, it considers the application of the statutory moratorium under section 133(1) of the Companies Act 71 of 2008 to proceedings before the Commission for Conciliation, Mediation and Arbitration (CCMA). The Court confirmed that the moratorium can extend to unfair dismissal arbitration proceedings and that the necessary permission must be obtained before those proceedings can continue against a company under business rescue.
Second, the judgment delivers a strong warning about the use of artificial intelligence (AI) in legal research. It highlights the consequences of relying on an incorrect or irrelevant legal authority without checking the original judgment and confirming that it supports the legal argument being advanced.
The Court granted an urgent application staying the arbitration proceedings pending the final determination of a review application. The judgment reinforces the importance of statutory compliance, accurate legal research and prompt intervention where ongoing proceedings may be legally incompetent.
- The Facts
The South African Post Office SOC Ltd (SAPO) was placed under business rescue on 10 July 2023. Two business rescue practitioners (BRPs) were appointed to manage its affairs.
On 2 December 2025, six employees were dismissed for alleged misconduct. They referred unfair dismissal disputes to the CCMA on 9 December 2025. At the time, SAPO remained under business rescue.
The employees had not obtained the written consent of the BRPs or leave of the High Court to institute or pursue the proceedings against SAPO.
On 22 July 2026, SAPO raised two preliminary objections before the arbitrator:
- First, it argued that section 133(1) of the Companies Act prohibited the CCMA from proceeding with the unfair dismissal arbitration while SAPO remained under business rescue, in the absence of the required consent or court leave.
- Second, it argued that the BRPs had not been joined to the proceedings, despite their direct interest in SAPO’s affairs and the outcome of the dispute.
In a jurisdictional ruling dated 4 August 2026, the arbitrator concluded that business rescue did not prevent the unfair dismissal proceedings from continuing. The arbitrator directed that the matter proceed to arbitration but did not determine the objection relating to the non-joinder of the BRPs.
SAPO subsequently sought to challenge the ruling. It initially pursued a rescission application at the CCMA before launching a review application on 2 October 2026. When the individual respondents refused to agree to postpone the arbitration scheduled for 15 October 2026, SAPO approached the Labour Court urgently on 8 October 2026.
The urgent application sought an order staying the arbitration proceedings pending the final determination of the review application. The central question was whether the arbitration could lawfully continue while SAPO remained under business rescue and without the necessary permission contemplated by section 133(1).
- The Legal Framework
Section 133(1) of the Companies Act 71 of 2008
Section 133(1) establishes a moratorium on legal proceedings against a company during business rescue.
In relevant part, it provides that legal proceedings, including enforcement action, may not be commenced or continued against the company during business rescue, except with:
- The written consent of the business rescue practitioner; or
- Leave of the court, subject to any conditions the court considers appropriate.
The purpose of the moratorium is to provide the company and its BRPs with the necessary breathing space to assess and restructure the company’s affairs without the disruption and financial burden of ongoing proceedings.
Importantly, the moratorium is not limited to conventional court litigation. As confirmed in the SAPO judgment, it can also extend to arbitration proceedings, including unfair dismissal proceedings before the CCMA. This does not mean that employees’ claims are extinguished. Rather, the ability to pursue those claims is suspended while the company remains under business rescue, unless the necessary consent or court leave is obtained.
Section 133(3) is also relevant because it provides for the suspension of applicable time limits during business rescue where a right to commence proceedings or assert a claim is subject to a time limit. The distinction is important: the moratorium does not necessarily eliminate an employee’s underlying rights, but it can prevent the employee from pursuing the claim while the business rescue process remains in place.
Section 158(1B) of the Labour Relations Act
Section 158(1B) of the Labour Relations Act 66 of 1995 (LRA) generally discourages the review of rulings made during ongoing conciliation or arbitration proceedings before the dispute has been finally determined. The purpose is to prevent unnecessary interruptions and piecemeal litigation, allowing labour disputes to be resolved as expeditiously as possible.
However, the section permits the Labour Court to review an interlocutory ruling before the conclusion of the proceedings if it considers this to be just and equitable. The SAPO judgment highlights an important distinction between two related enquiries.
First: Is an early review competent?
The applicant must establish that it is just and equitable for the Labour Court to review the ruling before the arbitration has been concluded.
Second: Are there exceptional circumstances justifying a stay?
Even where an early review is competent, a separate enquiry arises when a party seeks to stop the ongoing arbitration. The applicant must establish exceptional circumstances warranting that intervention.
The existence of a pending review application does not automatically entitle a party to a stay. The Court must consider the circumstances of the case, the potential prejudice to the parties, whether substantial redress will remain available in due course and the interests of justice.
In SAPO’s case, the Court was satisfied that allowing the arbitration to continue would perpetuate proceedings that were legally incompetent under the Companies Act. The circumstances therefore justified urgent intervention.
Joinder of Necessary Parties
The judgment also addresses the importance of joining parties whose legal interests may be directly and substantially affected by proceedings.
A party should be joined where the outcome of the proceedings may affect its legal rights or obligations, or where the relief sought cannot properly be implemented without that party’s participation. In the SAPO matter, the BRPs were responsible for managing the company’s affairs during business rescue. Any outcome in the unfair dismissal proceedings could have had a direct impact on the company’s operations and financial position.
The Court found that the BRPs had a direct and substantial interest in the proceedings and that their non-joinder was material. The arbitrator’s failure to address the objection therefore compounded the procedural and jurisdictional difficulties surrounding the arbitration.
The Responsibility to Verify Legal Research
One of the most important aspects of the judgment concerns the use of AI in legal research.
The Court identified a purported Constitutional Court authority relied upon by the arbitrator in support of the conclusion that business rescue did not prevent the arbitration from proceeding.
The citation provided was 2023 ZACC 40. However, the Court’s research established that this citation belonged to Rayment and Others v Minister of Home Affairs and Others; Anderson and Others v Minister of Home Affairs and Others, a matter concerning immigration legislation and spousal visas.
It had nothing to do with business rescue or the right of employees to pursue unfair dismissal proceedings against a company under business rescue. The Court could not find the purported authority under the case name relied upon by the arbitrator.
This was not simply a minor citation error. The authority was central to the arbitrator’s reasoning, and it did not support the legal proposition for which it had been used. The Court emphasised that AI tools can produce responses that appear coherent and convincing while containing incorrect information, fabricated authorities or quotations that do not appear in the original source.
Anyone conducting legal research has a responsibility to verify the existence, citation and relevance of every authority before relying on it in professional work or legal decision-making. The responsibility does not disappear because the research was generated by an AI tool.
- What the Labour Court Decided
South Africa Post Office SOC Ltd and Others v Fakude N.O. and Others
In its judgment delivered on 23 October 2026, the Labour Court held that the moratorium under section 133(1) of the Companies Act applied to the unfair dismissal arbitration proceedings against SAPO.
The Court found that the arbitrator had materially erred in concluding that the CCMA could proceed despite the ongoing business rescue and the absence of the required permission.
The Court confirmed that the expression “legal proceedings” in section 133(1) is sufficiently broad to include arbitration proceedings. It does not matter that the dispute is being determined by the CCMA rather than a conventional court.
The Court also rejected the argument that the LRA displaced the moratorium. The statutory protection afforded by section 133(1) remains applicable, and the employees’ underlying claims are suspended rather than extinguished. The failure to join the BRPs was another material concern. Their direct and substantial interest in SAPO’s affairs meant that their participation was necessary.
A particularly serious aspect of the judgment concerned the arbitrator’s reliance on the purported Constitutional Court authority discussed above. The Court found that the authority did not exist under the case name relied upon and that the citation referred to an unrelated judgment. The failure to verify the authority, which formed an important part of the arbitrator’s reasoning, constituted a fundamental irregularity and misconduct warranting the Court’s intervention.
The Court was also satisfied that exceptional circumstances justified staying the arbitration pending the final determination of the review application. Allowing the arbitration to continue would have undermined the statutory moratorium and potentially resulted in proceedings that were legally incompetent.
The urgent application was accordingly granted, and the arbitration proceedings were stayed pending the final determination of the review application. No order as to costs was made.
Chetty t/a Nationwide Electrical v Hart and Another NNO 2015 (6) SA 424 (SCA)
The Supreme Court of Appeal judgment in Chetty t/a Nationwide Electrical v Hart and Another NNO was important to the Labour Court’s interpretation of section 133(1).
The judgment supports a broad interpretation of the expression “legal proceedings” under the Companies Act. The moratorium is not confined to litigation in a court and can extend to arbitration proceedings. Excluding arbitration from the moratorium would undermine the purpose of business rescue by allowing claims to proceed through alternative dispute-resolution mechanisms while the company is intended to receive statutory protection from ongoing proceedings.
The principle is therefore relevant to employers facing CCMA or other arbitration proceedings while under business rescue.
Moolman v Commission for Conciliation, Mediation and Arbitration and Others [2024] ZALCJHB 339
The judgment in Moolman v Commission for Conciliation, Mediation and Arbitration and Others addresses the general rule against premature intervention in incomplete labour proceedings.
Section 158(1B) of the LRA is intended to discourage unnecessary reviews of interlocutory rulings before the underlying dispute has been finalised. This promotes the expeditious resolution of labour disputes and prevents proceedings from being repeatedly interrupted by review applications.
However, early intervention is possible where the circumstances justify it. The SAPO judgment applied these principles but found that the circumstances warranted intervention. The jurisdiction of the CCMA was at stake, and allowing the arbitration to continue would have perpetuated proceedings that the Court considered unlawful under the Companies Act.
The distinction is important: employers should not assume that every unfavourable interlocutory ruling can be taken on review immediately. The statutory requirements must be satisfied, and the circumstances must justify early intervention.
- What Does the Judgment Mean for Employers?
The judgment has practical implications for employers facing financial distress, unfair dismissal disputes or other legal proceedings.
First, business rescue can affect the ability to pursue or defend legal proceedings.
Employers under business rescue must consider the moratorium before allowing proceedings against the company to continue. Section 133(1) is not limited to court litigation. It can also apply to arbitration and other legal proceedings.
The company’s status must therefore be established, and the employer must determine whether written consent from the BRPs or leave of the court is required.
Second, the role of business rescue practitioners must not be overlooked.
Where the company is under business rescue, the BRPs are responsible for managing its affairs. Their interests may be directly affected by proceedings involving the company, particularly where the relief sought could affect its financial position or operations.
Employers and their representatives should consider joinder requirements at the outset rather than waiting for a procedural objection to arise.
Third, legal research must be accurate and independently verified.
AI can assist with research, drafting and identifying potential legal authorities. However, it cannot replace the responsibility to verify the law. A convincing-looking citation does not establish that a judgment exists, that it has been correctly described or that it supports the proposition being advanced.
This is particularly important in labour disputes, where an incorrect legal argument can undermine an otherwise properly prepared case.
Fourth, employers should not assume that every interlocutory ruling can be reviewed immediately.
Section 158(1B) establishes a general rule against premature reviews. An applicant seeking early intervention must demonstrate that the review is just and equitable and that the circumstances justify departing from the ordinary approach of allowing the proceedings to run their course.
Where a stay is sought, the applicant must separately establish exceptional circumstances.
Finally, procedural irregularities must be addressed promptly.
In the SAPO matter, the Court considered the explanation for the delay, the steps taken to challenge the ruling, the approaching arbitration date and the absence of substantial redress in the ordinary course.
Although the Court accepted the urgency of the application, it criticised SAPO for initially pursuing what it considered to be the incorrect remedy. The lesson is clear: where a potentially material legal irregularity arises, employers should obtain appropriate advice and take the necessary steps without delay.
- Practical Steps for Employers
Employers can take the following steps to reduce procedural and legal risks:
- Confirm the company’s legal status.
- Consult the BRPs before proceedings continue.
- Raise jurisdictional objections promptly.
- Check joinder requirements.
- Verify every AI-generated citation.
- Distinguish between research assistance and legal authority.
- Assess whether an early review is justified.
- Keep a record of legal advice and procedural decisions.
- Do not assume that a stay is automatic.
- Obtain specialist advice where necessary.
- Conclusion
The judgment in South Africa Post Office SOC Ltd and Others v Fakude N.O. and Others provides an important reminder that labour dispute resolution must comply with applicable statutory requirements and that legal decision-making must be based on verified authority.
The Court confirmed that section 133(1) of the Companies Act extends to unfair dismissal arbitration proceedings against a company under business rescue, unless the necessary permission is obtained. It also highlighted the importance of joining the BRPs where their participation is necessary and confirmed that the Labour Court may intervene in ongoing arbitration where the requirements for early review and a stay are satisfied.
Most notably, the judgment warns against relying on AI-generated legal authorities without checking their accuracy. An incorrect or irrelevant citation can undermine legal reasoning and result in serious procedural consequences. For employers, verify the law, comply with statutory moratoriums, join the necessary parties and act promptly when a material irregularity arises.
AI can be a valuable research and drafting tool, but it cannot take responsibility for the accuracy of the legal arguments presented in your case. That responsibility remains with the person who relies on its output.
Article By Tammy Koekemoer
Dispute Resolution Official at Consolidated Employers Organisation (CEO SA)
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