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[2015] ZAGPJHC 267
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Mbelengwa CC and Another v Crossover Finance (Pty) Ltd (14/30906) [2015] ZAGPJHC 267 (11 November 2015)
REPUBLIC OF SOUTH
AFRICA
IN THE HIGH COURT OF
SOUTH AFRICA,
GAUTENG LOCAL DIVISION,
JOHANNESBURG
CASE NO: 14/30906
DATE: 11 NOVEMBER 2015
In the matter between:
MBELENGWA
CC
..........................................................................................................
First
Applicant
TSHILILO KENNETH
TSHITHATHAVHANA
......................................................
Second
Applicant
And
CROSSOVER FINANCE (PTY)
LTD
.................................................................................
Respondent
J U D G M E N T
MASHILE J:
[1] On 25 November 2014, this court per
Moshidi J, granted default judgment against the Applicants and Mecca
Power Construction
(Pty) Ltd in favour of the Respondent. Mecca Power
Construction (Pty) Ltd did not challenge the action against it and is
also not
seeking the rescission of the judgment that the Respondent
obtained against it on 25 November 2014.
[2] The background facts on which the
judgment was granted is that:
2.1 The Respondent issued summons
against the Applicants and Mecca Power Construction (Pty) Ltd on 21
August 2014 for the recovery
of:
CLAIM A
2.1.1 An amount of R1 386 077.33, which
the Respondent advanced to the First and the Second Applicants in
terms of a partly written
and partly verbal loan agreement.
CLAIM B
2.1.2 An amount of R72 000.00 being for
the project management services provided by the Respondent to the
First Applicant and Mecca
Power Construction (Pty) Ltd.
CLAIM C
2.1.3 The sum of R17 892.85 that
pertained to payroll management services, which the Respondent
provided to the First Applicant
and Mega Power Construction (Pty)
Ltd.
CLAIM D
2.1.4 An amount of R3500.00 for
administrative services rendered by the Respondent to the First
Applicant and Mecca Power Construction
(Pty) Ltd.
[3] The Second Applicant signed a
suretyship agreement wherein he bound himself as both a surety and
co-principal debtor with the
First Applicant and Mecca Power
Construction (Pty) Ltd for the due and punctual performance by the
First Applicant and Mecca Power
Construction (Pty) Ltd.
[4] According to the return of service,
the sheriff served the summons upon the First Applicant and Mecca
Power Construction (Pty)
Ltd at their joint domicilium address being
174 Gibson Drive, Springfield, Buccleuch as per the loan agreement on
25 August 2014.
On 22 August 2014 the sheriff attended upon the
address of the Second Applicant at 1821 Mogoai Street, Munsieville,
Krugersdorp
to serve the summons but was told by a neighbour that the
Second Applicant had left the given address a few months earlier.
[5] On 12 September 2014, the sheriff
served the summons upon the Second Applicant by handing it over to a
site manager, M Radebe,
at Driezek Extension 9, Kwekwezi Street,
Orange Farm, being the Second Applicant’s place of employment.
The Second Applicant
concedes that the summons came to his attention
during mid October 2014.
[6] None of the parties took steps to
defend the claim and the Second Applicant even lost the summons. He
completely forgot about
it until he received a copy of the default
judgment at the end of November 2014 or early December 2014. The
default judgment shows
that judgment was entered against the
Applicants and Mecca Power Construction (Pty) Ltd on 25 November
2014.
[7] The application for the rescission
of judgment is on the basis of Uniform Rule of Court 42(1)(a) or
common law. Rule 42(1)(a)
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.”
[8] The Applicants assert that they are
entitled to a rescission because had Moshidi J been aware that the
summons was not served
in accordance with the provisions of Uniform
Rule of Court 4(1)(a)(v) he would not have granted the judgment. The
Rule stipulates:
“Service of any process of the
court directed to the sheriff and subject to the provisions of
paragraph (aA) any document
initiating application proceedings shall
be effected by the sheriff in one or other of the following manners:
(v) in the case of a corporation or
company, by delivering a copy to a responsible employee thereof at
its registered office or
its principal place of business within the
court's jurisdiction, or if there be no such employee willing to
accept service, by
affixing a copy to the main door of such office or
place of business, or in any manner.”
[9] To the extent that such address was
neither the First Applicant’s registered nor principal place of
business , the service
was in breach of the provisions of Rule 4(1)
(a)(v) of the Uniform Rules of Court. Furthermore, service upon the
Second Applicant
should have been effected at the address of the
First Applicant because, so the argument continues, he was in the
employ of the
First Applicant.
[10] Accordingly, Moshidi J must have
labuored under the impression that the service of the process was
consistent with the provisions
of Uniform Rule of Court 4(1)(a)(v)
when he granted the judgment. Had he been conscious that the service
was defective for lack
of compliance with the Rule, he would not have
granted judgment against the Applicants and Mecca Power Construction
(Pty) Ltd.
In the circumstances, conclude the Applicants, the
judgment stands to be rescinded and the Applicants granted leave to
defend.
[11] Insofar as the common law
rescission is concerned, the Applicants argue that the court has a
discretion whether to grant it
or not. The Applicants submitted that
the court should always lean in favour of an applicant that seeks to
overturn a default
judgement where sufficient or good cause is
established. The justification for the adoption of that approach
being that default
judgment by its very nature is innately
unconstitutional and offends against the rules of natural justice in
particular, the audi
alteram partem.
[12] The Applicants believe that they
have shown good cause why the judgment should be rescinded under
common law. They maintain
that they have established such good cause
by showing that they have a bona fide defence and that they have a
good and reasonable
explanation for their default for not delivering
their Notice of Intention to Defend and thereafter their plea.
[13] The Applicants’ defence to
the claim appears to be that the amount claimed by the Respondent is
incorrect and that the
documents upon which the claim is based are
incorrect insofar as the Second Applicant denies having signed a
suretyship agreement
binding himself as surety and co-principal
debtor with the First Applicant and Mecca Power Construction (Pty)
Ltd for the due and
punctual performance by the First Applicant and
Mecca Power Construction (Pty) Ltd. The Second Applicant further
denies that while
he signed the loan agreement it is not binding on
him and the First Applicant because the document does not cite the
names of the
parties to the agreement.
[14] The Respondent on the other hand
has ardently contended that the evidence furnished by the Second
Applicant cannot sustain
a relief under Rule 42(1)(a) or the common
law. Against that backdrop, the issue to be decided is simply
whether the Applicants
are entitled to have the judgment against them
rescinded or not.
[15] The legal position concerning
rescission based on Uniform Rule of Court 42(1)(a) is that a party
wishing to rescind a judgment
must establish that the judgment was
erroneously sought and erroneously granted in the absence of the
affected party. See Hardroad
(Pty) Ltd v Oribi Motors (Pty) Ltd
1977
(2) SA 576
(W). Once a court pronounces as aforesaid, it will grant
or vary a judgment without the affected party being required to show
good
cause or giving reasonable explanation for the default in not
taking any steps to prevent the granting of judgment as is the
position
in the case of Uniform Rule of Court 31(2)(b) and common
law. See the Hardroad case supra and Topol and Others v LS Group
Management
Services (Pty) Ltd
1988 (1) SA 639
(W).
[16] For the purposes of common law, an
applicant must establish good cause. Good cause will consist in:
16.1 Demonstrating that it has a bona
fide defence;
16.2 proving that it has a good and
reasonable explanation for its default in not delivering a notice of
its intention to defend
or having been barred after the delivery of
such notice, failed to deliver a plea;
16.3 Satisfying the court that good
prospects exist that the main case will succeed.
[17] To turn then to the Applicant’s
first contention. A judgment will have been granted in error if a
court would not have
granted it had it been aware of the existence of
an irregularity in the papers. The First Applicant was served with
the summons
at its chosen domicilium address, as per the loan
agreement, being 174 Gibson Drive, Springfield, Buccleuch. An
attempt to serve
upon the Second Applicant was made at his address,
Munsieville, in Krugersdorp without success. The sheriff was told
that the Second
Applicant had vacated the address a few months
earlier.
[18] Faced with this difficulty, the
Respondent established that the Applicant was engaged in a project at
Orange Farm and instructed
the sheriff to serve the summons upon him
at that location. The Second Applicant admits in his answering
affidavit that he received
the summons. Having received it, he put
it away and completely forgot about it and was only reminded when he
received notice of
the default judgment the following month.
[19] The Applicants’ argument
pertaining to Rule 4(1)(a)(v) is misguided because the summons was
served on the domicilium
address of the First Respondent while the
other was served upon him at Orange Farm being a construction site of
the First Applicant
and besides, he confirms that he received it.
There cannot be any talk of a judgment granted in error under these
circumstances.
Moshidi J would have granted judgment against the
Applicants anyway had these facts been exposed to him, as they were.
Accordingly,
the Applicants’ reliance on Rule 42(1)(a) is
dismissed as devoid of any merit.
[20] Insofar as common law is
concerned, the Applicants claim that they have bona fide defences
which if proved at the trial are
likely to succeed. These defences
are:
20.1 The amount claimed is possibly
incorrect;
20.2 The Second Applicant did not sign
a suretyship agreement binding himself as surety and co-principal
debtor with the First Applicant
and Mecca Power Construction (Pty)
Ltd; and
20.3 The loan agreement is defective
insofar as it does not mention the parties to the agreement.
[21] The Second Applicant has
acknowledged his indebtedness to the Respondent and this is evident
from his own testimony set out
in the founding affidavit. After
becoming aware of the judgment, he sought to negotiate terms on which
he could liquidate his
indebtedness to the Respondent. Why would a
party seek to make arrangements to settle an amount if he does not
owe it? This ostensive
defence stands to be dismissed as not bona
fide whose main objective is to delay the Respondent from embarking
on execution.
[22] The Applicants’ second
defence is that while he concedes having signed the loan agreement,
he did not sign a suretyship
agreement the effect of which was to
bind him as surety and co-principal debtor with the First Applicant
and Mecca Power Construction
(Pty) Ltd for the due and punctual
performance by the First Applicant and Mecca Power Construction (Pty)
Ltd. On perusal of the
loan agreement, which the Second Applicant
admits having signed, the conclusion of a cession and suretyship
agreements are condition
precedents. As proof that the condition
precedents were complied with, the Respondent has attached copies of
both agreements to
the summons. The Second Applicant’s lack of
knowledge of the suretyship agreement must therefore be disregarded.
[23] The Applicants’ third
defence is that the loan agreement is defective insofar as it does
not make any reference to the
borrowers. It is true that there is no
mention of the borrowers in the loan agreement. However, the Second
Applicant signed the
loan agreement and initialled all the pages
including the annexures. The question is, why did he sign if he was
oblivious of the
parties to the loan agreement? The answer is, in my
opinion, simple. He knew who the parties are and that he was signing
on his
own behalf and on behalf of the other parties to the
agreement. Besides, why did he acknowledge indebtedness to the
Respondent
if he wished to make lack of reference to the parties an
issue?
[24] In the result, all the supposed
defences of the Applicants as described above are not bona fide and
their objective is palpably
to delay the Respondent executing the
writ against them. They are for that reason rejected.
[25] Turning to the furnishing of good
and reasonable explanation for the default in not delivering a notice
of their intention
to defend. On the Second Applicant’s own
version, he willfully ignored to defend the claim. He received the
summons in
October 2014 and did nothing about it until receipt of the
default judgment notice. One would have expected that a party that
has multiple defences to a claim, as the Second Applicant avers,
would have immediately upon receipt of the summons, have served
and
filed his notice of intention to defend alternatively, would have
contacted his attorneys for advice.
[26] As confirmation that the
Applicants did not have bona fide defences, the Second Applicant
embarked on negotiating suitable
payment arrangements with the
Respondent. His actions constitute an acknowledgment of his
indebtedness to the Respondent and explains
why he deliberately
ignored the summons. A party that puts away a summons and forgets
about it in this situation cannot claim
to have a good and reasonable
explanation for his or its failure to defend an action. The
conclusion that the Applicants willfully
failed to defend the action
is inescapable.
[27] A rescission of judgment at common
law must be brought within a reasonable period. The Respondent
obtained judgment on 25
November 2014. Knowledge of the default
judgment came to the Applicants shortly thereafter yet this
rescission application was
only launched in April this year. There
is no explanation of the inordinate delay in launching it. In the
absence of such explanation
this court finds that it was not brought
within a reasonable time.
[28] A further hurdle that the
Applicants must overcome is the presence of good prospects of success
if the court were to grant
him the relief that he seeks. On the
evidence put forward by the Second Applicant, prospects are extremely
poor that the Applicants
will succeed if they were to be given leave
to defend the main action. I have already shown that all their
defences are not bona
fide. How then will they succeed if they were
to be afforded an opportunity to defend the main case?
[29] In the premises, I make the
following order:
1. The application is dismissed with
costs.
B A MASHILE
JUDGE OF THE HIGH COURT OF SOUTH
AFRICA
GAUTENG LOCAL DIVISION, JOHANNESBURG
Counsel for the Applicant: Adv. N J
Zwane
Instructed by: Rasegote &
Associates Inc.
Counsel for the Respondent: Adv F J
Nalane
Instructed by: Tony tshivhase Inc.
Date of hearing: 30 October 2015
Date of delivery of Judgment: 11
NOVEMBER 2015