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[2016] ZAWCHC 61
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Haffejee v Bytes Technology Group South Africa and Others (18439/13) [2016] ZAWCHC 61 (24 May 2016)
IN THE HIGH COURT
OF SOUTH AFRICA
(WESTERN CAPE DIVISION, CAPE
TOWN)
C
ASE
NO: 18439/13
DATE:
24 MAY 2016
REPORTABLE
In the matter between:
B
HAFFEJEE
...........................................................................................
Applicant/Second
Defendant
And
BYTES TECHNOLOGY GROUP SOUTH AFRICA
(PTY) LTD t/a BYTES DOCUMENT
SOLUTIONS
.................................
First
Respondent/Plaintiff
D DE
JAGER
................................................................................
Second
Respondent/First Defendant
E
JACOBS
.....................................................................................
Third
Respondent/Third Defendant
JUDGMENT
DELIVERED ON 24 MAY 2016
SHER, AJ:
[1] First respondent was
the plaintiff in an action which it instituted in November 2013
against applicant and second and third
respondents, in their capacity
as members of a partnership trading under the name and style of Neon
(Cape), which had its principal
place of business situated at
premises in Ndabeni, Cape Town.
[2] In its particulars of
claim first respondent alleged that during the period between May and
June 2013, it had entered into various
oral agreements with members
of the partnership, in terms of which it sold and delivered goods to
it to the value of R115547.37,
for which it was not paid.
[3] On 24 January 2014 the
Registrar granted judgment against all three defendants in default of
entry of appearance to defend,
in the amount claimed, together with
interest thereon at the rate of 15.5% per annum
a tempore morae
.
Applicant now makes application for rescission of such judgment, in
terms of Rule 31(5)(d) of the Uniform Rules.
[4] It is trite that
a default judgment may be set aside either under the provisions of
the common law or Rule 42. In addition,
Rule 31(2)(b) of the Uniform
Rules provides a third mechanism for setting aside a judgement where
it was granted by a court, and
Rule 31(5)(d) for where it was granted
by the Registrar.
[1]
[5] Given that the
provisions of sub-Rule (5)(d) are the subject of conflicting
judgments in relation to a court’s powers
under and in terms
thereof, it is appropriate to briefly restate the position as far as
the common law is concerned. In this regard,
in
De
Wet and Ors v Western Bank Ltd
,
[2]
Trengove AJA (as he then was), pointed out that in Roman-Dutch law
courts had a relatively wide discretion to rescind judgments
obtained
in default of appearance on “
sufficient”
cause shown, which went beyond the grounds provided for in Rule 31
and Rule 42.
[3]
The Appellate Division held that although no “
rigid
limits”
were set as to the
circumstances which constituted sufficient cause, the courts had
nevertheless laid down certain general principles
for themselves to
guide them in the exercise of their discretion. To this end,
and broadly speaking, the exercise of the
court’s discretionary
power was influenced by considerations of justice and fairness,
having regard to the facts and circumstances
in the particular matter
before it.
[6] As the court
further pointed out, these powers were wider than the statutory
powers afforded a court under the provisions of
Rule 31 and Rule 42,
as the grounds for rescission of a default judgment in terms of these
Rules did not cover the case of a litigant
who found himself in
default because of unforeseen circumstances beyond his control, such
as illness or “
some other
misadventure,”
and one could
envisage many other situations in which logic and common sense
dictated that a defaulting party should, as a matter
of justice and
fairness, be afforded relief at common law
[4]
.
[7] In a long line
of cases the courts have held that the requirement of “
sufficient
cause”
for rescission at common
law, is synonymous with the requirement of “
good
cause”
which is required in terms
of the provision of Rule 31(2)(b).
[5]
In this regard what an applicant is required to show, in essence, is
a reasonable explanation for his default (it has also
sometimes been
described as an “
acceptable”
explanation)
[6]
and a
bona fide
defence
to the plaintiff’s claim, which
prima
facie
has “
some
prospect of success”
.
[7]
[8] In contrast to the
powers of a court to set aside a default judgement in terms of the
common law, and in terms of the Rules
previously referred to, Rule
31(5)(d) provides that “
any party dissatisfied with a
judgment granted or direction given by the Registrar may, within 20
days after such party has acquired
knowledge of such judgment or
direction, set the matter down for reconsideration by the court”
.
[9] The powers of a
court to “
reconsider”
a judgment granted by default by the Registrar, must be contrasted
with the powers of a court to set aside a judgment granted
by
default by it. In this regard, the relevant sub-Rule
[8]
provides that a defendant may similarly, within 20 days after he or
she has acquired knowledge of such judgment, apply to the court
to
set aside such judgment, which the court may do upon “
good
cause”
being shown, and on such
terms as to it seems meet.
[10] In
Lourenco
and Ors v Ferela (Pty) Ltd and Ors (No. 1)
[9]
the court held, with reference to the ordinary grammatical meaning of
the word, that the power to “
reconsider
”
means the power to consider a decision for a second time with a view
to changing, amending, rescinding or altering it. Such
a power is
thus, by definition, a wider power than a power to set aside.
[11] In
Bloemfontein
Board Nominees Ltd v Benbrook
,
[10]
Hancke J remarked as follows in regard to the power of
reconsideration which a court has in respect of a judgement granted
by
default by the Registrar:
“
Die
“heroorweging” (die Engels lees “reconsideration”)
blyk volgens bogemelde subreël ‘n heroorweging
van ‘n
vonnis of voorskrif deur die griffier gegee en beteken, na my mening,
nie dat die hof nou sy diskresie in die plek
van die griffier s’n
sal stel nie, maar dat ‘n hof slegs sal inmeng met ‘n
vonnis of voorskrif deur die griffier
gegee indien dit van mening is
dat die griffier fouteer het”
.
[12] In
Pansolutions
Holdings Ltd v P&G General Dealers and Repairers CC
,
[11]
Swain J (as he then was) disagreed with Hancke J’s
interpretation of the Rule. In his view, the ambit of the
court’s
discretion as provided for in terms of the Rule, when
reconsidering a judgment granted by the Registrar, had been defined
too narrowly
therein.
[13] In arriving at
a determination of what the ambit of the court’s powers of
“
reconsideration”
included, he was of the view that guidance could be obtained from
decisions dealing with the ambit of the court’s discretion
in
terms of Rule 6(12)(c), to reconsider orders granted
ex
parte
in urgent applications. He
endorsed the view adopted by the court in
ISDN
Solutions (Pty) Ltd v CSDN Solutions CC and Ors
,
[12]
that the dominant purpose of the exercise in terms of that
Rule, was to afford an aggrieved party a mechanism to redress
“
imbalances in and injustices and
oppressions flowing from”
orders
granted as a matter of urgency in the absence of a respondent.
In
ISDN
the
court held that this reconsideration involved a wide discretion, in
the exercise of which a number of factors could be taken
into account
including the reasons for the respondent’s absence, the nature
of the order and relief granted and the period
during which it was to
remain operative, as well as “
questions
relating to whether an imbalance, oppression or injustice”
had resulted, and whether redress was available by means of
alternative remedies.
[13]
In the result, Swain J was of the view that when it came to a
reconsideration of a default judgment granted by the Registrar,
[14]
the “
underlying need for the grant
of such a power is equally the absence of the aggrieved party, at the
time the judgment was granted.
The object is equally to obtain
redress against an injustice, or an imbalance created by the
judgment”
[15]
and in carrying out such reconsideration, factors relating to the
reason for the absence of the aggrieved party as well as the
length
of time the judgment had been in force, were also relevant.
[14] Consequently,
he disagreed with the position adopted by the court in
Bloemfontein
Board Nominees
and was of the view that
the power accorded to the court in reconsidering a default judgment
was “
precisely that of
substituting its discretion for that of the Registrar”
.
[16]
[15] In my view, although
some guidance can be obtained by having regard for the meaning
afforded to a court’s power to “
reconsider”
a matter in terms of the provisions of sub-Rule 6(12)(c), a court
should be careful of transplanting interpretations pertaining
thereto, in regard to the “
reconsideration”
exercise which it must perform in terms of the provision of the
sub-Rule under discussion. I say that for the following
reasons.
[16] The
jurisdictional facts necessary for the exercise of a court’s
discretion in terms of sub-Rule 6(12)(c) when reconsidering
a matter
which has come before it by way of an application, are simply that an
order was granted in the absence of a party, in
urgent
proceedings.
[17]
The kinds of orders and the nature of the relief sought in
application proceedings in terms of Rule 6, are wide and
far-ranging. As a result, in order to afford some protection
against orders being taken in the absence of a party, there
is a
long-established principle in
ex parte
applications that an applicant is to adhere to the requirements of
uberrimae fides
ie should make a full and honest disclosure of all relevant material
facts and circumstances, even those which may not be in his
favour.
Where this principle is not adhered to, unless there are very cogent
reasons why the order obtained
ex parte
should not be rescinded the court will
invariably do so, if it was based on incomplete disclosure, even if
the very same relief
could be obtained on a subsequent application by
the same applicant.
[18]
[17] In addition, in the
nature of it, the court in an application will have before it the
affidavits enclosed in support of the
intial order which was
obtained, as well as those subsequently lodged against it, when
reconsidering it, in which a story will
be told from which the court
will be able to ascertain where the equities lie, and whether there
has been any unfairness.
[18] In contrast to
this, the nature of the orders which can be obtained and the relief
which can be sought in applications for
judgment by default before
the Registrar, are circumscribed. It is only in respect of a
monetary debt or a liquidated demand
(ie a claim for a “
fixed,
certain or ascertainable
” amount
or thing)
[19]
that the Registrar has power to grant judgment by default.
[20]
In considering whether or not to grant judgement the Registrar does
not have the power to hear evidence and will have before him
only the
summons and particulars of claim, and the application for default
judgement, and will thus have no idea of the background
facts and
circumstances which gave rise to the application which is before him.
The powers of the Registrar are circumscribed to
granting judgment in
respect of the amount (or thing) claimed as requested,
[21]
or in respect of part of the claim only
[22]
or on amended terms (ie in respect of a lower or lesser amount),
[23]
or he may refuse judgment
[24]
or make ancillary directions in regard to such powers.
[25]
Given these circumstances, as before the Registrar, considerations of
equity (ie justice and fairness) will surely rarely
come into play,
if at all, except in regard to the matters set out in the Rule where
the Registrar can exercise a discretion of
sorts, such as the grant
of a postponement, or a directive that submissions be made, or that
the matter be set down in open court.
[19] In
Vilvanathan
and Ano v Louw NO
,
[26]
a Full Bench of this Division held (per Thring J) that whereas the
court’s common law power to rescind its judgments and
orders,
in default of appearance and on sufficient cause shown, was a
discretionary power in which considerations of justice and
fairness
played a role, such considerations pertained to the requirement of
good cause and that the applicant present a reasonable
and acceptable
explanation for his/her default, and did not extend to a general
power to rescind a judgment, because in broad terms,
it could be said
to be hard on, or unfair to, a debtor. The court pointed out that
although it had an inherent power to control
the procedures before
it,
[27]
such power did not include a general right to interfere with the
well-established principle of finality of judgments, other than
in
circumstances specifically provided for in the Rules, or at common
law.
[28]
In the circumstances, the court held that the decision which was
taken in this division by Josman and Van Reenen JJ in
RFS
Catering Supplies v Bernard Bigara Enterprises CC
,
[29]
interfered with the principle of finality, was wrongly decided and
ought not to be followed.
[30]
[20] In
RFS
Catering Supplies
the court was seized
with an appeal against a magistrate’s refusal of an application
to rescind a judgment, after the judgment
debtor had satisfied the
judgment, and the judgment creditor had consented to its rescission.
The court held that in the
exercise of its powers to develop the
common law according to the changing needs of society, these facts
were sufficient to constitute
the good cause requirement that was
necessary in order to rescind the judgement, as these facts fell
within the ambit of considerations
of justice and fairness which lay
at the root of the good cause requirement.
[31]
[21] The decision in
Vilvanathan
followed
a long line of earlier cases in which courts in various divisions
refused to rescind default judgments that had been granted,
where
these judgments had been satisfied and the judgment creditors had not
opposed subsequent applications for rescission.
[32]
[22] Thring J
pointed out that as far as the rescission of default judgments was
concerned, there were two well-established elements
that needed to be
made out in order to show good or sufficient cause ie the party
seeking relief was to present a reasonable (and
as has sometimes been
said, “
acceptable”
)
explanation for his default and was required to show that on the
merits, he had a
bona fide
defence
which
prima facie
carried some prospect of success.
[33]
Consequently, in his view the court in
RFS
Catering
was not venturing into
terra
nova
and as such it was not at liberty
to depart from well-established principles which had been settled in
a long line of cases, by
the Appellate Division and the Supreme Court
of Appeal.
[34]
[23] In the circumstances,
care should be taken not to extend considerations of justice and
fairness (which are accepted considerations
to have regard for in
relation to whether or not good or sufficient cause has been made out
for rescission of a judgement), in
order to afford a court seized
with a reconsideration of a judgement which has been granted by
default by the Registrar, a general
discretionary power to set aside
such a judgment simply on the grounds that this would correct some
“
imbalance, oppression or injustice”
which may
have resulted, consequent to the judgment having been granted.
[24] In my view,
although considerations of justice and fairness must properly be had
regard for in respect of the elements which
an applicant needs to
make out in order to show good or sufficient cause for rescission (ie
an absence of wilful default, a reasonable
explanation for his
failure and a
prima facie
defence),
where a judgment has been granted by the Registrar “
regularly,
properly and competently”
[35]
it should ordinarily be upheld.
[25] In
Weare
v ABSA Bank Ltd
,
[36]
Meskin J pointed out that good and sufficient cause for the
rescission of a default judgment granted lawfully and regularly,
would
not exist, even though the judgment debt had been discharged
simply because the continued existence of the judgment was
prejudicial
to the judgment debtor’s business activities or his
commercial reputation:
“
The
suggestion that it would be just and equitable to rescind the
judgment is without substance. It is neither unjust nor
inequitable to the applicant that the judgment should continue to
exist where, as I have endeavoured to indicate, the fact that
it was
granted is to be attributed entirely to the applicant’s own
fault”
.
[26] Insofar as I may be
wrong in this regard, and insofar as considerations of justice and
fairness extend beyond the elements
of good or sufficient cause and
relate to a general discretionary power on the part of the court, it
should be borne in mind that
such considerations extend not only to
the interests of the judgment debtor, but also include the interests
of justice, and of
the general public. As Thring J put it in
Vilvanathan
:
“
Justice
and fairness must also be extended to members of the public other
than the judgment debtor including his or her potential
future
creditors”
.
[37]
[27] In my view, whereas
factors pertaining to balance, oppression and/or injustice thus very
properly constitute factors which
are applicable in terms of Rule
6(12)(c) in the reconsideration of an order granted
ex parte
in an application, such considerations, if adopted willy-nilly as
part of the exercise of reconsideration which a court must carry
out
in terms of an application for rescission of a judgment granted by
default by a Registrar, in terms of the provisions of Rule 31(5)(d),
may constitute unruly horses that will drive a hole through the
well-established principles pertaining to good and sufficient cause
carefully laid down over many years in decisions of the Appellate
Division and the Supreme Court of Appeal.
[28] I also do not,
with respect, agree with the view expressed in
Pansolutions
that the power afforded the court in
terms of Rule 31(5)(d) “
is
precisely that of substituting its discretion”
for that of the Registrar.
[38]
Insofar as this statement was based on a comment made by Hancke J in
Bloemfontein Board Nominees (supra)
,
it bears closer analysis.
[29] In that matter
the Registrar had granted default judgment in the sum of R60 000.00
plus interest and, because in his view
the matter fell within the
jurisdiction of the magistrate’s court, in terms of Rule
31(5)(e) he only granted costs in the
amount of R200.00 together with
Sheriff’s fees, and declined to award costs on an
attorney/client scale, as taxed.
The comments made by Hancke J
must be understood in the context of the well-accepted principle that
an award of costs lies within
the discretion of a presiding officer,
given that the rule provided for such lower award of costs. As
such, to my mind there
was nothing wrong in the statement by Hancke J
that, before a court was to interfere with the judgment of the
Registrar in this
regard, it needed to be satisfied that the
Registrar had erred. This was nothing more than a restatement of the
general principle
applicable to the reconsideration of a costs order
by a court on appeal or review. It gives effect to the judicial
deference
which an appellate or reviewing court is, of necessity,
required to show in regard to the exercise of a discretion
a
quo
.
[39]
In my view, Hancke J’s approach was correct and I do not agree
with the view expressed in
Pansolutions
[40]
that the power which a court exercises in a reconsideration of a
matter in terms of Rule 31(5)(d), “
is
precisely that of substituting its discretion”
for that of the Registrar.
[41]
In my view, the court in
Pansolutions
failed to distintinguish between the
powers a court has in its reconsideration of a direction made by the
Registrar in the exercise
of a discretion, versus the reconsideration
of a judgment granted by the Registrar, in terms of the Rule.
In this regard,
directions by the Registrar that the application be
postponed on such terms as he or she may consider just,
[42]
that written submissions be supplied,
[43]
or that the matter be set down for hearing in open court
[44]
would constitute directions made in the exercise of a discretion and,
as such, any court reconsidering the Registrar’s decision
on
any such aspects would ordinarily be required to show deference to
that exercise of discretion, provided that it was not arbitrary,
irrational, or capricious. The fact that the court may not have made
such a direction had it been seized of the matter would, in
my view,
not entitle it to interfere and to set it aside. The same would hold
good in respect of the exercise of the Registrar’s
discretion
in regard to costs, where a matter exceeded the jurisdiction of the
magistrate’s court and the application for
default judgement
required costs to be taxed, or the Registrar required the court to
pronounce on the issue of costs.
[45]
[30] On the other
hand, any judgment granted, as requested, in repect of a monetary
debt or liquidated demand
[46]
or for part of such a claim only,
[47]
or on amended terms (ie for a lesser capital amount or for a lesser
rate of interest),
[48]
or any judgment which was refused (wholly or in part),
[49]
would be subject to a different form of reconsideration by a court,
more akin to one that applies in the case of an appeal or a
review.
In such an inquiry, the court would have regard for the provisions of
the Rule in terms of which the judgment was
so granted or
refused,
[50]
and central to such a consideration would be factors such as whether
the judgment had been properly granted against the correct
party,
properly pertained to a monetary debt or a liquidated demand, whether
the defendant was in default of delivery of a notice
of intention to
defend or of a plea and whether the relevant time limits, forms and
Rules prescribed in this regard had been complied
with.
[51]
The central inquiry thus would be whether or not the judgment had
been granted or refused “
regularly,
properly and competently”
[52]
and would not be about whether a discretion had been properly
exercised, or should be substituted.
[31] In considering
whether it should rescind any such judgment, the court would, in my
view, thus not be busying itself with a
reconsideration of the
exercise of the Registrar’s discretion, nor would it be
substituting its discretion for that of the
Registrar.
[53]
Of course, as I have previously attempted to point out, where the
exercise of a discretionary power by the court would come
into play,
is in regard to its evaluation of the requirement that the applicant
had shown good or sufficient cause for the rescission
sought.
As set out above, the court would exercise its discretion in favour
of the applicant if it was of the view that he
had shown, on a
balance of probabilities, that he was not in wilful default of
appearance ie that he had a reasonable and acceptable
explanation
therefor and that
prima facie
he
had a
bona fide
defence
to the claim.
[32] To this end, I
agree, as the court held in
Pansolutions
,
[54]
that although a defendant against whom default judgment has been
granted by the Registrar is not, in terms of the wording of the
sub-Rule, required expressly to show good cause in order to succeed
in rescission proceedings (unlike a defendant who seeks to
set aside
a default judgment granted by a court),
[55]
such a requirement should be read therein, as applying equally to him
or her.
[33] Against that
background, I now turn to consider the case made out by the
applicant. As regards his explanation for being
in default of
an entry of appearance to defend, he pointed out that the Sheriff’s
return of service indicated that the summons
had been served on
14 November 2013 at the principal place of business of the
partnership ie at the address from which it
traded in Ndabeni in Cape
Town, and that such service was effected on a receptionist, and not
personally on him. He said that he
first became aware of the
judgement when the Sheriff attended on his home in Oaklands,
Johannesburg to execute a writ of execution
which was granted in
March 2014.
[34] He said that during
2012 he had indicated to his co-partners that he wished to exit the
partnership on account of “
misgivings”
he had with
its ‘administrative’ affairs. Consequently, he
arrived at an agreement with them in terms of which
he sold his 40%
interest in the partnership to the second respondent, and exited the
partnership with effect from 28 February 2013.
In terms of such
exit agreement, second respondent agreed, as purchasing partner, to
pay all outstanding debts of the partnership
and to assume and honour
all its obligations including “
all the covenants of the
leases”
of the partnership. He also undertook to continue
to perform all outstanding contracts and obligations as were required
to be performed
by the partnership, and to indemnify the applicant
against any claim that might arise by reason of any such debts,
obligations
or agreements.
[35] Applicant said that,
given the exit date was 28 February 2013, insofar as the first
respondent alleged in its particulars
of claim that during May –
June 2013 it had entered into various oral agreements with members of
the partnership, in terms
of which it sold and delivered goods to it,
he had not been party to any such agreements and could thus not be
held liable under
or in terms thereof. On the face of it
therefore, the applicant gave both a reasonable and acceptable
explanation for his
default in respect of entry of appearance to
defend and set out a
prima facie
and
bona fide
defence
in respect of the first respondent’s claim as it was
formulated.
[36] However, in response
thereto, first respondent contended that during or about July 2007
the partnership had made written application
to it for a credit
facility. In such application (which I may point out was
completed and signed by the second respondent
and was not signed by
the applicant or the remaining partner), it was provided that the
partnership would undertake to notify first
respondent forthwith of
any material change in respect of ownership, shareholding or status,
and it was further agreed that such
provision would apply as a
condition of sale to all contracts to be entered into between first
respondent and the partnership,
in terms of which the partnership
would purchase goods from first respondent. First respondent
contended that contrary to this
provision, it had not been informed,
prior to the launching of the rescission application that there had
been a change in the partnership,
or that the partnership had been
terminated or reconstituted. It averred that, had it been so
informed, it would have reassessed
whether or not it would have been
prepared to continue granting facilities to the new partnership and
in all likelihood, had it
done so, this would have been on terms
which would have been more favourable to it and which would have
reduced its exposure.
Consequently, first respondent submitted
that applicant was estopped, in law, from denying that he was a
member of the partnership
at the time when the agreements were
entered into and the goods were sold and delivered, as also at the
time when the judgment
was obtained.
[37] It is trite
that the dissolution of a partnership will only serve to operate
against third parties if they were informed thereof,
or otherwise
obtained knowledge of such dissolution. If due and proper
notice of the dissolution was not given to third parties,
an
erstwhile partner can still be held liable both in terms of the
common law as well as on the basis of the doctrine of estoppel,
to a
third party who continued transacting with the former partners or
with the new entity which replaced it.
[56]
[38] As far as
estoppel is concerned, in
Aris
Enterprises (Finance) (Pty) Ltd v Protea Assurance Co Ltd
[57]
Corbett CJ explained that:
“
The
essence of the doctrine of estoppel by representation is that a
person is precluded ie estopped, from denying the truth of a
representation previously made by him to another person if the
latter, believing in the truth of the representation, acted thereon
to his prejudice … The representation may be made in words ie
expressly, or it may be made by conduct, including silence
or
inaction ie tacitly … and in general it must relate to an
existing fact”
.
[58]
[39] Although a
partner may not have personally given notice of his exit from a
partnership and its resultant dissolution, the central
enquiry will
be whether in the circumstances of the matter, by doing so he/she
held himself/herself out as still being a partner
of the firm.
[59]
Before he or she will be held liable to a third party on the basis of
estoppel, the third party will need to show that it
was because of
such representation (whether it was constituted positively and
expressly by conduct or negatively by silence or
inaction), that the
third party was so induced to contract ie the necessary causal
connection between the former partner’s
representation and the
resultant loss will need to have been established.
[40] First
respondent pointed out that it had not been alleged by the applicant
that either he or any of his erstwhile partners
had given notice of
his exit from the partnership, or its resultant dissolution, to
creditors or third parties. Consequently,
it averred that on
the applicant’s own papers I should find that the requirements
for estoppel had been duly made out.
Inasmuch as I am
constrained to deal with such facts as have been set out in the
papers which are before me and have not heard
any
viva
voce
evidence, unlike the decision in
Koekemoer,
[60]
this is not an instance where all the relevant facts are before the
court and the law need only to be applied thereto.
[61]
[41] I have previously
pointed out that in setting out the basis for his application for
rescission, applicant dealt with the cause
of action as pleaded by
first respondent in its particulars of claim, and the facts it set
out therein in support thereof.
To this end, applicant dealt
with the allegation that first respondent had entered into various
oral agreements with members of
the erstwhile partnership in terms of
which it sold and delivered goods to it and he pointed out that at
the relevant time ie between
May and June 2013 he was no longer a
member of the partnership, and as he had not personally contracted
with first respondent could
thus not be held liable to it in terms of
any such alleged agreements. It was in response thereto that
first respondent alleged
that applicant was estopped from denying his
liability, on the basis that notice of dissolution of the partnership
had never been
given to it by the applicant.
[42] Perhaps because he
was alive to potential liability being suggested on the grounds of
estoppel (even though no basis for this
was pleaded by first
respondent in its particulars of claim), in paragraph 15 of his
affidavit the applicant did state, in passing,
that it could “
well
be”
that second or third respondent misrepresented to first
respondent that he was still a partner in Neon (Cape), or held out
that
they were acting as his agent. He pointed out that since
he had become aware of the judgment (after the Sheriff attended upon
his premises in order to effect service of a writ of execution),
third respondent had not taken a single telephone call from him
despite numerous attempts in this regard, and he suspected that third
respondent might have made such a misrepresentation to the
first
respondent.
[43] In
Stellenbosch
Farmers Winery Ltd v Vlachos t/a The Liquor Den
,
[62]
the respondent, who owned and operated a bottle store which traded
under the name of The Liquor Den, sold the business to a close
corporation without notifying the appellant, who was one of its
suppliers. The appellant continued to supply the business
with
goods on credit. At some stage however, a credit controller
employed by the appellant contacted the business to make
enquiries,
as she suspected that the business had changed hands. During a
telephone conversation which she had with the new
owner ie the member
of the CC, she was falsely reassured by him that no change in
ownership had taken place, and based on this
reassurance the
appellant continued to supply goods to the business on the same basis
as it had previously done. Eventually
however, certain of its
cheques were dishonoured and the sole member of the CC stripped the
premises and disappeared without trace.
The appellant then
looked to the respondent for payment. In response to the
respondent’s plea that the debt was not
his, the appellant
alleged that respondent had a duty to disclose that he had sold the
business and pleaded an estoppel. In this
regard it appears that in
applying for credit facilities with the appellant the respondent had
completed an application form in
which he undertook to inform it of
any change of ownership.
[44] The trial court found
that although the respondent had indeed been under a duty to disclose
that the business had been sold
and that he was thus no longer liable
for its debts, it was not his silence which had induced the further
transactions on which
the appellant had sued, but the deception of
the member of the CC in impersonating the former owner which had. In
the circumstances
the estoppel failed. The decision was upheld by the
Supreme Court of Appeal.
[45] First
respondent contended that, at best, applicant’s comments in
regard to a possible misrepresentation by third respondent
amounted
to no more than speculative conjecture, and did not meet the test
adopted by the court in
Pansolutions
viz that applicant needed to set out averments “
which
if established at the trial will entitle”
him to succeed.
[63]
[46] It is indeed so
that the court in
Pansolutions
framed the test in these terms, but, in my view this appears to have
been no more than an unfortunate turn of phrase, as immediately
after
this it pointed out that an applicant in proceedings such as these
was not “
obliged to deal fully
with the merits of the case
” and
was not required to produce evidence to show that the probabilities
were actually in his favour.
[64]
[47] Given that the
accepted and long-established test is that the applicant must simply
set out a defence, which
prima facie
has “
some
prospects of success
” in my view this must mean that as far
as rescission proceedings are concerned he is not required to prove
that this defence
will succeed in the main matter, on a balance of
probabilities.
[48] In support of
this I point out that in
Pansolutions
the court held that an application for
rescission was not the appropriate stage to decide issues of estoppel
and ratification and
in order to attempt to do so the applicant would
have to deal fully with the merits of the case and to produce
evidence that the
probabilities were actually in his favour, which he
was not obliged to do.
[65]
I agree with this approach. It may well be that first respondent may
prevail on the issue of estoppel at the trial of the matter,
but on
the papers before me the issue is not clear cut and I am not disposed
to closing the door in the applicant’s face,
on this basis.
[49] But there is a
further reason why, in my view, the judgement cannot stand, although
the point was only taken in argument and
was not raised in the
applicant’s founding affidavit. It is that,
notwithstanding that the applicant and his co-partners
were sued on
the basis that they were (ex)-partners in Neon (Cape), the judgment
which was granted by the Registrar was against
them in their personal
capacity, as was the writ which was subsequently issued, which was
also directed at them in their personal
capacity. It is common cause
that first respondent had not sought to first execute against the
former partnership’s assets
or to excuss the ex-partners in
respect of their share of such assets, before seeking to proceed
against them in their personal
capacity. First respondent’s
counsel rightly conceded that in the circumstances, the judgement was
assailable on that ground
alone,
[66]
but he submitted that this was merely a technicality and that there
was no doubt that first respondent would not have been able
to
satisfy the judgement from these sources, and would inevitably have
sought to execute against the ex-partners in their personal
capacity,
even had it gone through the motions of seeking to execute against
these sources first, as it was obliged to do. He may
well be right,
that ultimately, the judgement creditor will be knocking on the doors
of the ex-partners in their personal capacity,
but to my mind, that
is not something that should properly stand in the way of the
judgement being rescinded, if it was granted
incorrectly. Although
this would more properly have been grounds for seeking to rescind in
terms of Rule 42(1) (on the basis that
the judgement had been
erroneously sought or granted), to my mind the court is at liberty to
arrive at the same result by applying
the provisions of Rule
31(5)(d).
[50] As far as the
issue of costs is concerned, although the applicant is seeking an
indulgence,
[67]
in my view the fairest order to make is that this should stand over
for determination by the court at the hearing of the main matter.
[68]
It will be best placed to
decide on whether or not the riposte of estoppel will succeed, or
whether the applicant will prevail.
[51] In the result, I make
the following Order:
1) The judgement
which was granted by default by the Registrar in terms of Rule
31(5)(b) on 24 January 2014, in favour of first
respondent against
the applicant, is rescinded.
2) Costs of this
application shall stand over for determination by the trial court.
SHER AJ
[1]
In terms of Rule 31(5)(b)(i) and (ii).
[2]
1979 (2) SA 1031 (A).
[3]
Rule 42(1) deals with the powers of a court to
rescind a judgment erroneously sought or granted in the absence of
any party affected
thereby, or one granted as a result of a mistake
common to both parties, or in respect of which there was an
ambiguity or patent
error or omission.
[4]
At 1042H-1043A.
[5]
Silber v Ozen Wholesalers (Pty) Ltd
1954
(2) SA 345
(A) 352G;
HDS Construction
(Pty) Ltd v Wait
1979 (2) SA 298
(E)
300
in fine-301B; Chetty v Law Society,
Transvaal
1985 (2) SA 756
(A) 765A.
[6]
Some of the cases refer to this as not being in
“
wilful”
default.
[7]
Silber
352G;
Chetty
765A-D
;
Colyn v Tiger Food Industries
Ltd t/a Meadow Feed Mills (Cape)
2003
(6) SA 1
(SCA) para [11], 9E-F.
[8]
Rule 31(2)(b).
[9]
1998 (3) SA 281
(T) 290D-E.
[10]
1996 (1) SA 631 (OPD).
[11]
2011 (5) SA 608 (KZD).
[12]
1996 (4) SA 484
(W) 486I.
[13]
Id
at
487B-C
.
[14]
In terms of Rule 31(5)(d).
[15]
Pansolutions
n11
para [10] at 610F-G.
[16]
Id
p
ara [11] at 610H-I.
[17]
Sheriff Pretoria North-East v Flink
[2005]
3 All SA 492
(T) 498f-499F.
[18]
Schlesinger v Schlesinger
1979
(4) SA 342
(W) 350B-C cited with approval in
National
Director of Public Prosecutions v Braun
2007
(1) SA 189
(C) para [26] at 197F-G.
[19]
Erasmus
Superior
Court Practice
(2
nd
ed), D1-371 and the authorities referred to at ftnte 6 thereof.
[20]
Rule 31(5)(a).
[21]
Rule 31(5)(b)(i).
[22]
Rule 31(5)(b)(ii).
[23]
Id
.
[24]
R
ule 31(5)(b)(iii).
[25]
Thus, he may postpone the application on such
terms as he or she may consider just (Rule 31(5)(b)(iv));
request or receive
oral or written submissions (Rule 31(5)(b)(v)) or
require that the matter be set down for hearing in open court (Rule
31(5)(b)(vi)).
[26]
2010 (5) SA 17
(WCC).
[27]
This power is well recognized at
common law, and
in terms of s173 of the Constitution, which provides that the High
Court has the inherent power to protect and
regulate its own
process.
[28]
At 29A-C referring to
De
Wet and Ors v Western Bank
1977 (4) SA
770
(T) at 780H.
[29]
2002 (1) SA 896 (C).
[30]
Vilvanathan
n 26 at
27A.
[31]
Note 29 at
902E-G.
[32]
Weare v ABSA Bank Ltd
1997
(2) SA 212
(D) 215E-F, 216H;
Venter v
Standard Bank of South Africa
[1999] 3
All SA 278
(W) at 281
b-d
,
283
f-g
;
Saphula v Nedcor Bank Ltd
1999
(2) SA 76
(W) 79C-D;
Lazarus and Ano v
Nedcor Bank Ltd; Lazarus and Ano v ABSA Bank Ltd
1999
(2) SA 782
(W), 787D-E;
Swart v ABSA
Bank Ltd
2009 (5) SA 219 (C).
[33]
Vilvanathan
n 26
at 27B-C;
Chetty
n 5 at 765A-D;
Colyn
n
7 at 9E-F.
[34]
Vilvanathan
n 26
at 27E-F.
[35]
Vilvanathan
n 26
at 28C-D.
[36]
Note 32 at
216D-H.
[37]
Note 26 at
28I-J.
[38]
Note 11 p
ara [11] at 610H-I.
[39]
This judicial deference in regard to the exercise
of a discretion is well accepted, not only in relation to the issue
of costs,
but also in relation to other issues involving the
exercise of a tribunal’s discretion ie the imposition of a
suitable
and appropriate sentence in criminal proceedings.
[40]
Note 11
para [11] at
610H-I.
[41]
Id
.
[42]
Rule 31(5)(b)(iv).
[43]
Rule 31(5)(b)(v).
[44]
Rule 31(5)(b)(vi).
[45]
Rule 31(5)(e).
[46]
Rule 31(5)(b)(i).
[47]
Rule 31(5)(b)(ii).
[48]
In terms of Rule 31(5)(b)(ii).
[49]
Rule 31(5)(b)(iii).
[50]
Rule 31(5)(a) sets out the requirements in this
regard.
[51]
For example where the defendant is in default of
delivery of a plea, the plaintiff is required to give it not less
than 5 days’
notice of his or her intention to apply for
default judgment.
[52]
Vilvanathan
n 26
at 28C-D.
[53]
Pansolutions
n
11 para [11] at 610H-I.
[54]
Id
para [14] at 611F.
[55]
Compare Rule 31(2)(b) and 31(5)(a).
[56]
Koekemoer v Langeberg Stene BK
1999
(1) SA 361
(NCD), 368C-E, 369H.
[57]
1981 (3) SA 274
(A).
[58]
Id
at
291D-E.
[59]
Midlands Auctioneers (Pty) Ltd v Bowie
1975
(1) SA 773
(R) 775E-I.
[60]
Note 56.
[61]
Id
at
373D.
[62]
2001 (3) SA 597
(SCA).
[63]
Note 11 para [17] at 612A-B and para [21] at
612F.
[64]
Id
referring to
Colyn
n 3 at 9E-F.
[65]
Note 11 para [21] at 612F.
[66]
See ‘Partnership’ in
LAWSA
(2
nd
Ed), Vol 19 at paras 313 and 314 pp 279, 282-283 and the authorities
cited at ftnte 17, pp 284-285.
[67]
In
Phillips t/a Southern Cross Optical v SA Vision Care (Pty) Ltd
2000 (2) SA 1007
(C)
it was held that as such, the applicant
should be liable for the costs of the application if the
respondent’s opposition
was reasonable.
[68]
A similar order was made in
Pansolutions
n 11 para [24] at 612I.