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[2013] ZAGPJHC 147
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Szabo v Star Contractors (Pty) Ltd (2009/52823) [2013] ZAGPJHC 147 (13 June 2013)
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REPUBLIC OF SOUTH
AFRICA
SOUTH GAUTENG HIGH
COURT
JOHANNESBURG
CASE NO:
2009/52823
In the matter between:
ISTVAN
SZABO
Applicant
and
STAR
CONTRACTORS (PTY) LTD
Respondent
JUDGMENT
RATSHIBVUMO
AJ
:
1.
Introduction
:
This is an application for a rescission of a
judgment that was granted by way of default. The said judgment that
was granted by
this court in favour of the current Respondent against
Bankok Wok Northriding CC (the CC) on 3 May 2010. This application is
based
on Rule 42 of the Uniform Rules of the High Court.
2.
Background:
A
default judgment was granted against the CC for the payment of R181
853.56; interests in the rate of 15.5 % per annum and costs.
The
Applicant was the sole member of the CC. The said CC was deregistered
on 14 February 2011. Armed with this judgment, the Respondent
was
able to obtain a judgement against the Applicant at the Kwazulu Natal
High Court, Durban on 21 November 2011 in the same amount
as the
judgment against the CC. The judgment against the Applicant was based
on the provisions of sec 26 (5) of the Close Corporation
Act, 69 of
1984 which provided for personal liability of members of the close
corporations over their debts at the time of deregistration.
The
judgment against the Applicant was also by way of default after he
decided not to oppose it for reasons that would be referred
to later.
Two issues are addressed in this judgment being the Applicant’s
locus standi
to bring this application and the requirements for a rescission of a
judgment based on Rule 42.
3.
Locus
Standi
:
The Respondent opposes the application citing amongst other reasons,
the lack of
locus
standi
on the part of the Applicant. Judgment was not granted against the
Applicant but against the CC of which he was a member. The Respondent
argues that it is the CC that should apply for the rescission of the
judgment if necessary. However the CC is not in a position
to do so
since it has since been deregistered and does not exist. It was also
argued for the Respondent that the test as to whether
the Applicant
is an “affected person” as provided in Rule 42 is whether
such a party has enough interests that would
qualify him to intervene
in the original application had he applied. So it was submitted that
the Applicant lacks locus standi
because even if the CC was still in
existence, him being its member would have lacked the right to be
joined as a party to the
original application.
[1]
4.
There is in light of this a need to revisit
Rule 42. Rule 42 provides,
“
(1)
The court may, in addition to any other powers it may have,
mero
motu
or upon the application of
any
party affected
, rescind or vary:
(a) An order or judgment
erroneously sought or erroneously granted in the absence of any party
affected thereby;
(b) an order or judgment
in which there is an ambiguity, or a patent error or omission, but
only to the extent of such ambiguity,
error or omission;
(c) an order or judgment
granted as the result of a mistake common to the parties…”
[Own Emphasis]
The
issue to be decided is whether the Applicant can be classified as
“any party affected” in view of the Rule 42 (1).
United
Watch and Diamond Co v Disa Hotels
[2]
was quoted by both the Applicant and the Respondent as an authority
allowing or barring the Applicant in using Rule 42 as a basis
to
apply for the rescission of judgment.
5.
The Applicant submitted that he has
locus standi
in that he demonstrated sufficient direct and substantial interest in
the subject matter of the judgment, entitling him to have
intervened
in the original application upon which the judgment was granted. He
further submitted his interest is legal or interest
in the right of,
the subject matter of the action which could be prejudicially
affected by the judgment. The Respondent in turn
contends that the
said interest need not be merely financial as it is the case in the
current application. In light of these submissions,
the court is
called upon to determine if the interest the Applicant has in this
application is “legal” or “mere
financial”
interest.
6.
The
Respondent approach is correct in submitting that the interest that a
party should have to qualify to bring the application
based on Rule
42 should be substantial enough to entitle him to have intervened in
the original application upon which the judgment
was granted.
[3]
The court would refuse the application for rescission of judgment
even if the Applicant is able to demonstrate that the judgment
may
have been erroneously granted, that is it should not have been
granted in the first place, unless it is shown that the Applicant
has
an interest in the judgment.
[4]
Financial interest alone is not sufficient to qualify one to apply
for a rescission of judgment based on Rule 42.
[5]
7.
The
Respondent relied on the
Foss
v Harbottle
rule in arguing that the Applicant would not have been able to be a
party to the original proceedings by virtue of his membership.
On
that basis, it was argued that he cannot be “the affected
person”. I am of the view that this argument does not
correctly
portray the rule enshrined in the
Foss
v Harbottle
.
The rule in
Foss
v Harbottle
is to the effect that
while
accepting the general principle that in order to redress a wrong done
to the company the action should
prima
facie
be brought by the company itself. It recognised that in certain
exceptional cases the courts will permit departures from that
principle and allow the individual shareholder to bring a derivative
action to enforce his company’s rights.
[6]
8.
In
Moti
v Moti & Hassim Moti Ltd
[7]
it was held that
the
exceptions to the rule in
Foss
v Harbottle
are
three, one of them being “where there is an absolute necessity
to waive the rule in order that there may not be a denial
of
justice.” In
McLelland
v Hulett
[8]
it was
held that there is no basis for saying that the rule in
Foss
v Harbottle
has
been received into our law without the exceptions together with which
it was framed, and hence our law recognises an exception
based on the
interests of justice where no other remedy remains. This dictum was
followed by this court in
Kalinko
v Nisbet and Others
.
[9]
In essence, the question should rather be whether in light of the
fact that the CC is now deregistered, the Applicant, being its
former
sole member, would he have been able to act on its behalf to have the
judgment rescinded if that judgment was erroneously
granted against
it. This would ultimately lead to a question as to whether this
failure to allow his intervention (based on the
Foss
v Harbottle
)
would result in a denial of justice and whether in the interests of
justice intervention has to be allowed since there is no other
remedy
available to the CC. I am convinced that in the circumstances, there
would have been an exception to the
Foss
v Harbottle
rule in favour of the Applicant joining the proceedings as envisaged
in
McLelland
v Hulett
.
[10]
9.
The Applicant in this matter being the
former sole member of the CC, he appears in my view to be the only
person who could institute
the proceedings in favour of the CC which
is now deregistered. He has similar interest that the CC would have
had in applying for
the rescission of the judgment. An argument to
the effect that the interest that the Applicant has in merely
financial suggests
that had the CC been in existence, its interests
would also be merely financial.
10.
Counsel for the Respondent argues that
since the CC is now deregistered, even if the Applicant’s
Founding Affidavit may not
be disputed (which is the case in this
matter) that the judgment was erroneously granted, the court would
not be able to do anything
because there would never be any person
with sufficient interest to allow the rescission of judgment. This
argument cannot be allowed
to stand especially in light of the
uncontested submissions to the effect that judgment was granted
against the wrong close corporation
simply because it had similar
names to those of corporation against whom the proceedings should
have been instituted. It is therefore
my finding that the Applicant
has legal interests which is more than mere financial interest in the
judgment that was granted.
The Applicant has as such
locus
standi
to bring this application.
11.
Judgment erroneously granted
.
Rule 42 further requires that the judgment or order should have been
granted erroneously in the absence of any party affected
thereby. It
is common cause that the summons was not served on the Applicant or
the CC and that judgment was granted by way of
default. The only
substantial issue is therefore the interpretation of the rule on what
would constitute erroneously granting of
a judgment.
12.
It
was submitted for the Respondent that in order to determine if an
order was erroneously granted, the court needs not consider
the
merits of the case since the “error” referred to in Rule
42 refers to procedural error. This argument is wrong
because
judgment can be erroneously granted if facts were concealed from the
court which if they were made known, judgment would
not have been
granted.
[11]
A
judgment is
therefore
erroneously
granted if there existed at the time of its issue a fact of which the
judge was unaware, which would have precluded
the granting of the
judgment and which would have induced the judge, if aware of it, not
to grant the judgment
.
[12]
13.
The Respondent in this case opted not to
file Answering Affidavit in response to the averments made by the
Applicant. It was argued
by both parties, that in the absence of any
Answering Affidavit, the court should take the facts averred by the
Applicant as uncontested
or as admitted. The Applicant alleges that
the summons was issued against Bankok Wok Northriding CC which came
into existence on
13 March 2008. The contract which formed the basis
of the claim against the CC was signed on 09 January 2007 between
Mimmos Franchising
CC trading as Bankok Wok and Slade Prop Services
(Pty) Ltd. The Applicant further avers that the Respondent should
have noticed
that the CC registration numbers show that it was not in
existence when the contract that formed the basis of the application
for
default judgment was signed, which should have informed it that
it had summons issued against the wrong defendant. Had these facts
been known to the judge who granted the judgment against the CC, he
would not have granted it.
14.
In short, the Applicant has shown that he
has a legal interest in the judgment granted against the CC and as
such, has the necessary
locus standi
to bring this application. The court is also satisfied that the
judgment was erroneously granted against the CC.
15.
For these reasons, I make the following
order
1.
Judgment granted on 3 May 2010 (case no.
2009/52823) is hereby rescinded.
2.
The Respondent is ordered to pay the costs
of this application.
T.V.
RATSHIBVUMO
ACTING
JUDGE OF THE HIGH COURT
Date Heard: 15 May
2013
Judgment
Delivered: 13 June 2013
For the Applicant:
Adv. RC Jansen Van Vuuren
Instructed by: Mooney
Ford Attorneys
Durban
c/o
Hardam & Associates
Johannesburg
For the Respondent:
Adv. HA Van der Merwe
Instructed by: Martins
Weir-Smith Inc
Sandton
[1]
This
would be in line with the
Foss
v Harbottle
Rule as applied in
Francis
George Hill Family Trust v South African Reserve Bank
1992 (3) SA 91
(A) at 97 B-C and 102 F-I.
[2]
1972
(4) SA 409 (C).
[3]
United
Watch and Diamond Co v Disa Hotels
1972
(4) SA 409
(C) at 416.
[4]
Parkview
Properties (Pty) Ltd v Haven Holdings (Pty) Ltd
1981
(2) SA 52
(T) at 55.
[5]
Brauer
v Cape Liquor Licencing Board
1953
(3) SA 752 (C).
[6]
Foss
v Harbottle
[1843] EngR 478
;
(1843) 2 Hare 461
;
67 ER 189.
[7]
1934
TPD 428
at 441.
[8]
1992 1 SA 456
(D) at 467
[9]
2002 (5) SA 766 (W).
[10]
Supra
.
[11]
See
Naidoo
and Another v Matlala NO and Others
2012 (1) SA 143
GNP paragraph 38.
[12]
see
Nyingwa
v Moolman NO
1993 (2) SA 508
(Tk) at 510D – G;
Herbstein
& Van Winsen
vol 1 at 931
,
Schlesinger
v Schlesinger
1979 (4) SA 342
(W) at 348C – 349E;
National
Director of Public Prosecutions v Basson
2002 (1) SA 419
(SCA)
.