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[2014] ZAGPJHC 100
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Air Traffic Navigation Services Company Limited v Diversified Properties Services Company Limited (12/15125) [2014] ZAGPJHC 100 (24 April 2014)
REPUBLIC OF SOUTH
AFRICA
SOUTH GAUTENG
HIGH COURT JOHANNESBURG
CASE
NO: 12/15125
DATE:
24 APRIL 2014
In the matter
between:
AIR TRAFFIC
NAVIGATION SERVICES COMPANY
LIMITED
......................................
Applicant
And
DIVERSIFIED
PROPERTIES SERVICES COMPANY
LIMITED
.................................
Respondent
J U
D G M E N T
WEINER J:
Notice of set
down
[1] Subsequent to
the hearing of this matter and when the parties were informed that
judgment would be handed down on the 24th of
April 2014, my Registrar
received correspondence from the Respondent’s attorney. In
Summary, they contend that:-
1. Two stamped
Notices of Set Down were served on them on the 10th of March 2014 at
10h58. A computerised copy stating that the
matter would be heard on
the 10th of March at 10h00 and the other stating that it would be
heard on the 14th of March at 10h00.
2. They did not
appear on the 10th of March as the Notice of Set Down was only served
on that day at 10h58.
3. There was
previous correspondence in which the Respondent was willing to
consent to the rescission but that the Applicant had
made certain
allegations in the Founding Affidavit, which the Respondent required
the Applicant to retract.
[2] None of these
allegations and correspondence was brought to the court’s
attention by the Applicant’s counsel at
the time of the hearing
on the 14th of March. The stamped Notice of Set Down for the 10th of
March was amended to the 14th of March
as it was only filed on the
10th of March. The copy served on the Respondent has not been amended
(this appears from the copy attached
to the correspondence received
on the 23rd of April). As stated above, another stamped Notice of Set
Down for the 14th of March
was served on the Respondent on the 10th
of March 2014. This was not a computerised copy. There was no
appearance for the Respondent
at the hearing on the 14th of March.
[3] However, the
court mero motu raised the question of whether the Applicant could
obtain rescission without setting out a bona
fide defence as required
in terms of the Uniform Rules of Court. Argument was provided by the
Applicant’s counsel in this
regard and my judgment is based
upon such submissions.
[4] As a result of
the decision at which I have arrived, the Respondent’s
procedural concerns, although legitimate, do not
require further
adjudication.
Background
[5] The Applicant
seeks an order in terms of the common law for the rescission of a
default judgment granted against them on 26
July 2012.
Business of the
Applicant
[6] The Applicant
provides air traffic and navigation services for the air traffic
management community, primarily in South Africa,
as well as the rest
of Africa and the Indian Ocean region. The Applicant is obliged to
raise funds from time to time. Accordingly,
the Applicant approaches
financial institutions and applies for credit facilities.
The lease
agreement
[7] On 3 November
2008, the Applicant and the Respondent concluded a written lease
agreement. The Applicant leased from the Respondent
certain premises
for a period of four years commencing on 1 October 2008 and
terminating on 30 September 2012.
[8] On 26 July 2012
the Respondent obtained default judgment against the Applicant for a
total amount of R3 746 437.39 on three
claims arising from the breach
of the lease agreement.
The settlement
agreement
[9] On 11 September
2012, the Applicant launched an application to rescind the default
judgment on the basis that the summons did
not come to the
Applicant’s attention. However, this application was not
pursued further as the parties subsequently agreed
to the settlement
of the default judgment. This settlement agreement was signed by the
Applicant and the Respondent on the 3rd
and 4th of October 2013
respectively. It was agreed that the Applicant would pay the
Respondent an amount of R3 352 581.82 (“the
settlement amount”)
in full and final settlement of the default judgment obtained by the
Respondent.
[10] It was further
agreed that upon payment of the settlement amount by the Applicant,
the Respondent would immediately provide
the Applicant with written
consent to the rescission of the default judgment granted against the
Applicant.
[11] On 5 October
2013 the Applicant paid the settlement amount to the Respondent.
However the Respondent has failed to provide
the Applicant with
written consent to the rescission of judgment.
[12] The Applicant
contends that, on the basis that the Applicant has settled the
judgment debt to the satisfaction of the Respondent,
the Applicant
should have the judgment against it rescinded. The judgment currently
prevents the Applicant from accessing credit,
which is essential to
the Applicant’s continued operations.
Rescission –
applicable principles
[13] The question is
whether a default judgment of the High Court can be set aside simply
because it has been satisfied in full
by the judgment debtor, with no
prejudice to the judgment creditor. The Applicant contends that there
is sufficient cause for the
rescission on the basis of justice and
fairness. It is noted that even if the Respondent did consent, the
same question would arise
by virtue of the authorities cited below.
[14] In terms of
Rule 31(2)(b) of the Uniform Rules of Court, “good cause”
must be shown for an application for rescission
to succeed. This
requires, inter alia, that there is a bona fide defence to the
plaintiff’s claim and that he was not in
wilful default. The
mere subsequent settlement of judgment debt is not in itself a cause
for setting aside a default judgment.
See 31.11 of the Uniform Rules
of Court.
[15] The Magistrate
Court Rules differ in this regard, permitting rescission where there
is a subsequent settlement of the judgment
debt. See Rule 49(5) of
the Magistrates’ Court Rules.
Rescission in
terms of the common law
[16] The Rules are
not the only mechanisms by which a judgment can be set aside. The
common law provides an alternative basis on
which an application for
rescission can be brought, and it was on this basis that the
application in casu was brought.
[17] To rescind a
judgment under the common law, “sufficient cause” must be
shown. Miller JA in Chetty v Law Society,
Transvaal
1985 (2) SA 756
described “sufficient cause” as having two essential
elements. Miller JA at 764 I – 765 E said:-
“(i) that the
party seeking relief must present a reasonable and acceptable
explanation for his default; and
(ii) that on the
merits such party has a bona fide defence which, prima facie, carries
some prospect of success.”
[18] The above was
emphasised in the SCA in Colyn v Tiger Food Industries Ltd. t/a
Meadow Feed Mills (Cape)
2003 (6) SA 1
(SCA) where Jones AJA stated
at 11:-
“In order to
succeed an applicant for rescission of a judgment taken against him
by default must show good cause.”
[19] Flemming DJP in
Saphula Necor Bank Ltd
1999 (2) SA 76
(W) refused an application for
rescission on the basis that the applicant failed to establish a bona
fide defence to plaintiff’s
claim. He stated at 79:-
“The object of
rescinding judgment is to restore a chance to air a real dispute…It
has always been the hallmark of
what lawyers call a bona fide defence
(which has to be established before rescission is granted), that a
defendant honestly intends
to pursue before a Court a set of facts
which, if true, will constitute a defence”.
[20] In RFS
Catering Supplies v Bernard Bigara Enterprises C.C.
2002 (1) SA 896
(C) the court departed from Saphula. In this case there was a
subsequent settlement of the judgment debt and the judgment creditor
had consented to rescission. On appeal, Josman J held that the
concept of “good cause” was sufficiently wide and
flexible
so as to include the case at hand, since such circumstances
fell within the ambit of “justice and fairness” which
lies
at the root of the “good cause” requirement. At 902
E-G. Thus, the court took it upon itself to promote the development
of the common law so as to enable rescission on the basis of the
settlement of the judgment debt and consent on the part of the
creditor.
[21] This approach
was followed by Binns-Ward AJ in Damon and Another v Nedcor Bank
Limited
2006 JOL 18550
(C) He held at 8:-
“There is no
equivalent of rule 49(5) in the High Court rules of procedure, but it
seems to me that if I am bound by the judgment
in RFS Catering
Supplies to accept that there is no inconsonance between the remedy
which was there held to be available in terms
of rule 49(5) and the
common law, I am equally bound to recognise the existence of an
equivalent remedy in this jurisdiction notwithstanding
the absence of
any equivalent rule of court. In RFS Catering Supplies, Josman J
(Van Reenen J concurring) expressed the view,
contrary to the
opinions expressed by learned judges in the Witwatersrand Local
Division, that it was preferable for the common
law to develop to
cater for the difficulties posed by default judgments to applicants
for credit than for the problem to be addressed
by legislation.”
[22] In Vilvanathan
and Another v Louw NO
2010 (5) SA 17
(WCC) Thring J however disagreed
with the findings in RFS Catering Supplies (supra). Thring J held at
340 that at common law, the
two essential elements must both be met
for rescission of a default judgment to be granted. Implicit in the
requirement of a bona
fide defence, “the circumstance which are
relied on as a ground for setting aside the final judgment must have
existed at
the date of the judgment, and not have arisen
subsequently”. See also Swadif (Pty.) Ltd. v. Dyke, N.O.
1978
(1) SA 928
(AD) at 939 E.
Thring further
stated at 340:-
“It is my
respectful view that where, as here, certain principles have been
clearly laid down by the Appellate Division or
the Supreme Court of
Appeal it is not for a Provincial or Local Division of this Court to
depart from them in the name of development
or adaption of the law so
as to meet altered social circumstances, no matter how unpalatable or
outdated such a Division may find
those principles: in such
circumstances, it seems to me, with respect, to be the exclusive
prerogative of the Supreme Court of
Appeal or, perhaps, of the
Constituional Court, to bring about any development or adaption of
the law which may be called for”.
See also Whitehead v
Absa Bank Limited 2241/2010
[2011] ZAWCHC 87
(13 April 2011);
Kalikhan, Anoj t/a Tri-star Logistics v Firstrand Bank Ltd
(2011/31466) [2013] ZAGPJHC 133 (9 May 2013).
[23] It thus appears
that there is conflicting authority in the different divisions and
within such divisions of the various jurisdictions.
[24] The Applicant
submits that the Constitution of the Republic of South Africa Act 108
of 1996 expressly grants the High Courts
of South Africa the inherent
power to develop the common law. Section 173 states the following:-
“The
Constitutional Court, the Supreme Court of Appeal and the High Court
of South Africa each has the inherent power to protect
and regulate
their own process, and to develop the
common law, taking
into account the interests of justice.”
[25] It was held by
Ngcobo J in Barkhuizen v Napier
[2007] ZACC 5
;
2007 (5) SA 323
(SCA) at 35:-
“No law is
immune from constitutional control… And courts have a
constitutional obligation to develop common law, including
the
principles of the law of contract, so as to bring it in line with the
values that underlie our Constitution.”
Subsequent
Developments
The NCA
[26]
Section 71(2)
of the
National Credit Act 34 of 2005
provides that a debt counsellor
must issue a clearance certificate if the consumer has fully
satisfied all the obligations under
every credit agreement that was
subject to a debt-rearrangement or agreement, in accordance with that
order or agreement. Subsection
(5) states that upon receipt of a copy
of a clearance certificate issued by a debt counsellor, a credit
bureau, or the national
credit register, must expunge the fact that
the consumer was subject to the relevant debt re-arrangement order or
agreement, as
well as all information relating to any default by the
consumer from its records.
[27] This provision
thus provides a remedy for those consumers under a debt rearrangement
scheme, upon discharging their outstanding
financial obligation. In
casu the Applicant has submitted that the Legislature could not have
been intended to discriminate against
one class of consumers, while
giving benefits to another class; while they all fall under one
category of failing to honour their
contractual financial
obligations.
[28]
Section 71(6)
of the NCA states as follows:-
“Upon
receiving a copy of a court order rescinding any judgment, a credit
bureau must expunge from its records all information
relating to that
judgment”.
[29] The Applicant
submits that the provisions of
Section 71
of the NCA was not in
operation at the time of handing down judgment in Saphula (supra).
Accordingly, these provisions were not
considered.
[30]
Section 3
of
the NCA states its purpose to be to: -
“…promote
and advance the social and economic welfare of South Africans,
promote a fair, transparent, competitive,
sustainable, responsible,
efficient, effective and accessible credit market and industry, and
to protect consumers”.
[31] The Act’s
main objective is to protect consumers. However it is recognized that
an appropriate balance must be struck
between the protection of
consumers and the rights of credit providers. As was stated by Malan
J in the SCA decision of Nedbank
Ltd and Others v National Credit
Regulator and Another
2011 (3) SA 581
(SCA) at 2:-
“[t]he
interpretation of the NCA calls for a careful balancing of the
competing interests sought to be protected, and not
for a
consideration of only the interests of either the consumer or the
credit provider.”
[32] This view was
subsequently endorsed by Cameron J in Mashilo Shadrack Sebola and
Nombeko Daphne Sebola v Standard Bank of SA
Ltd
[2012] ZACC 11
at
40:-
“…the
Act aims to secure a credit market that is “competitive,
sustainable, responsible [and] efficient”.
And the means by
which it seeks to do this embrace “balancing the respective
rights and responsibilities of credit providers
and consumers”.
These provisions signal strongly that the legislation must be
interpreted without disregarding or minimising
the interests of
credit providers … I also agree that “whilst the main
object of the Act is to protect consumers,
the interests of creditors
must also be safeguarded and should not be overlooked”.
[33] In the early
Constitutional Court case of Coetzee v Government of the Republic of
South Africa, Matiso and Others v Commanding
Officer Port Elizabeth
Prison and Others
1995 (4) SA 63
the constitutionality of provisions
65A to 65M of the Magistrates’ Courts Act, which provided a
magistrate the ability to
issue an order to commit a judgment debtor
to prison for contempt of court for failure to pay the debt, were
declared unconstitutional.
Of relevance to the case at hand is the
dicta in a concurring judgment by Didcott J at 26:-
“The interests
of creditors are plainly relevant to any constitutional appraisal of
the provisions with those effects. Credit
plays an important part in
the modern management of commerce. The rights of creditors to recover
the debts that are owed to them
should command our respect, and the
enforcement of such rights is the legitimate business of our law. The
granting of credit would
otherwise be discouraged, with unfortunate
consequences to society as a whole, including those poorer members
who depend on its
support for a host of their ordinary requirements.
That does not mean, however, that the interests of creditors may be
allowed
to ride roughshod over the rights of debtors.”
[34] It was further
submitted by the Applicant that allowing unequal treatment of debtors
falling within Magistrate’s Court
jurisdiction and debtors
falling within the High Court’s jurisdiction would fall foul of
Section 9(1) of the Constitution.
This would apply equally to debtors
falling under Section 71(2) read with Section 71(5) of the NCA. This
argument is persuasive
as the distinction between debtors based on
jurisdiction or registration appears to be arbitrary.
[35] In Kalikhan
(supra) the applicant urged the court to develop the common law
meaning of the words “on good shown”
in Rule 31(2)(b) to
include a situation where the Respondent consents to a rescission.
The applicant relied on Section 9(1) of
the Constitution, which gives
every person the right to equal protection and benefit of the law. It
was submitted that, to allow
for rescission by consent in the
Magistrates Court and not in the High Court, is discriminatory. Miltz
AJ did agree that this was
iniquitous, but went on to state at 5:-
“It does not
mean however that the Court can rewrite the well-developed common law
relating to what constitutes good cause
for rescinding a default
judgment”
[36] In Lazarus and
Another v Nedcor Bank Ltd; Lazarus and Another v Absa Bank Ltd
1999
(2) SA 782
(W) Cloete J (as he then was) quoted the following dicta
by Melamet J in De Wet and Others v Western Bank Limited
1979 (2) SA
1031
(A) at 787:-
“A court
obviously has inherent power to control the procedure and proceedings
in its Court... This, in my view, does not
include the right to
interfere with the principle of the finality of judgments other than
in circumstances specifically provided
for in the Rules or at common
law”.
[37] In Kalikhan
(supra) Miltz AJ noted that at the time of the judgment of Lazarus
(supra), the Constitution had been promulgated,
and thus, due regard
had been given to Section 173 hereof. Miltz AJ further cautioned
against overstepping the Court’s mandate
and breaching the
separation of powers doctrine. At 9:-
“In amending
the rules of the Magistrate’s Court, the legislature enacted
laws in accordance with its legislature objectives.
Where the
development of the common law goes beyond what is required to give
full effect to the Bill of Rights in the Constitution,
the Court may
well be found to have usurped the constitutionally mandated powers of
the legislature unreasonably. This may amount
to a breach of the
doctrine of separation of powers.”
And further at 11:-
“The task of
achieving the legislative imperative of amending the Rules of Court
to ensure the equality of all litigants before
the law belongs to the
Legislature.”
[38] As is evident
in casu, default judgments pose significant difficulties to
applicants for credit. This has resulted in two significant
developments. Firstly, the National Credit Regulator (NCR) has
implemented, as from 1 April 2014, a Regulation that adverse credit
information must be removed by all credit bureaus when the capital
amount of the judgment has been settled. Secondly, the draft
Superior
Courts Amendment Bill 2014 takes into account the various decisions
in the different jurisdictions and notes that certain
judgments have
suggested the need for intervention of the Legislature to allow
rescission by consent or even in a situation where
the creditor has
not consented.
[39] Section 23A of
the Superior Courts Amendment Bill 2014 states as follows:
“(1) If a
plaintiff in whose favour a default judgment has been granted has
agreed in writing that the judgment be rescinded
or varied, a court
may rescind or vary such judgment on application by any person
affected by it.
(2) Except where a
judgment was obtained erroneously or fraudulently, the rescission of
a judgment referred to in subsection (1)
does not affect the rights
of third parties or parties to the case.
(3) Nothing
precludes a court from proceeding with the rescission or variation of
a judgment if there is proof that the judgment
debt has been settled
by the judgment debtor, where an agreement in writing that the
judgment be rescinded or varied cannot be
obtained from the judgment
creditor.”
[40] The right to
have such judgment rescinded would thus be in line with the stated
purposes of the NCA and the Regulation of the
NCR, applicable from 1
April 2014, referred to in paragraph [33] above.
[41] The Regulation
referred to in paragraph [33] above will adequately deal with the
Respondent’s problem in not being able
to procure credit
because of the adverse report of the Credit Bureau.
[42] The Legislation
will in due course, bring the law dealing with rescission of
judgments into line with the purposes of the NCA,
the credit
information amnesty implemented from 1 April 2014, and the equality
clause in the Constitution.
[43] For these and
the reasons stated above, it is not necessary nor advisable to
interfere in the realm of the Legislature.
[44] Accordingly,
the application is dismissed.
WEINER J
Counsel for the
Applicant: U. Mansingh
Applicant’s
Attorneys: Tshisevhe Gwina Ratshimbilani Inc.
Counsel for the
Respondent: (No appearance)
Respondent’s
Attorneys: Kokinis Incorporated (no appearance)
Date of Hearing:
14 March 2014
Date of Judgment:
24 April 2014