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[2015] ZASCA 196
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Rossitter & Others v Nedbank Ltd (96/2014) [2015] ZASCA 196 (1 December 2015)
THE SUPREME COURT OF
APPEAL OF SOUTH AFRICA
JUDGMENT
Not
Reportable
Case No:
96/2014
In the matter
between:
TERENCE JOHN
ROSSITTER
FIRST APPELLANT
TERENCE JOHN
ROSSITTER
NO
SECOND APPELLANT
GAIL WINGROVE
ROSSITER
NO
THIRD APPELLANT
and
NEDBANK
LTD
RESPONDENT
Neutral citation:
Rossitter & others v Nedbank Ltd
(96/2014) ZASCA 196 (1 December 2015)
Coram:
Navsa, Shongwe, Mbha and Mathopo JJA
and Baartman AJA
Heard:
17 November 2015
Delivered:
1 December 2015
Summary
:
Civil Procedure – application
of Uniform rule 42(1)
(a)
in terms of which a court is empowered
to set aside a default judgment erroneously sought and granted in the
absence of a party
affected thereby.
ORDER
On appeal from
:
KwaZulu-Natal Division of the High
Court, Pietermaritzburg (D Pillay J, sitting as court of first
instance):
1. The appeal is upheld with costs.
2. The order of the court a quo is set
aside and is substituted with the following order:
‘(a) The application for the
rescission of the default judgment granted by the Registrar of the
High Court on 30 May 2014
is granted and the default judgment is set
aside.
(b) The respondent is ordered to pay the
costs of the application.’
JUDGMENT
Mbha JA (Navsa,
Shongwe and Mathopo JJA and Baartman AJA concurring):
[1] The issue for determination in this
appeal is whether the KwaZulu-Natal Division of the High Court,
Pietermaritzburg (D Pillay
J), was correct in refusing an application
for the rescission of a default judgment that was granted by the
registrar of that court
on 30 May 2012. It is common cause that the
application was brought under Uniform rule 42(1)
(a),
on the
basis that the default judgment had erroneously been sought and
granted in the absence of the appellants. The appeal is with
the
leave of the court a quo.
[2] The background is as follows. On 31
March 2008 the Rossitter Family Trust (the trust) represented by the
first appellant in
his capacity as a trustee, and BOE Private Bank,
the respondent’s predecessor in title, concluded a written loan
agreement
(the first loan agreement), in terms of which the
respondent advanced to the trust, the amounts of R13.5 million and
R9.77 million,
repayable with interest in instalments over a period
of 240 months. Subsequently, the parties, on various occasions, made
written
variations to the terms of the first loan agreement, more
particularly concerning the trust’s repayment obligations –
timeframes were changed. In the last such variation in respect of the
loan agreement of R 13.5 million concluded on 15 March 2010,
the
parties agreed that the capitalised loan amount payable by the trust
was R14.65 million which together with additional amounts
(not
capitalised) would amount to R15 233 273.79 being repayable,
plus interest at a rate equal to respondent’s prime
rate plus 1
per cent.
[3] Importantly, the varied agreement
provided that the full outstanding amount would be payable in one
single ‘bullet repayment’
which meant that the entire
principal loan and interest was due at the end of the loan term which
fell due on 1 June 2010. In respect
of the loan of R9.77 million
loan, the last written amended agreement was concluded on 10 March
2010, in terms of which the parties
agreed that the capitalised loan
amount payable by the trust was R10.6 million and that, together with
additional amounts (not
capitalised), the amount that would be
payable was R11 012 885.76 plus interest. This amount and the
amount at the end of
the preceding paragraph was also payable in one
single bullet repayment on or before the final repayment date, namely
1 June 2010.
The amounts due were secured by mortgage bonds
registered in favour of the respondent over various immovable
properties registered
in title to the trust namely Erf 30 Winston
Park, Erf 1692 Umhlanga Rocks and Erf 210 Port Zimbali. In addition,
the first appellant
signed two suretyships in favour of the
respondent.
[4] It is common cause that the trust
defaulted in its repayment obligations. As a result, on 14 October
2010 the respondent issued
summons against all the appellants for
payment of the amounts of R13 975 793.17 and R10 686
943.68, being outstanding
balances due after payment of certain
instalments, plus interest on the two loans. A notice of intention to
defend the matter was
served on 5 November 2010. On the same day the
parties concluded yet a further agreement varying the payment terms
of the loans.
This variation agreement incorporated a confession of
claim valid for 12 months in terms of which the appellants confessed
to the
amounts owed to the respondent, less any payments that had
been made. Accordingly, the appellants did not dispute their
liability
for the principal debts.
[5] Initially the appellants made
payments in terms of the variation agreements but defaulted soon
thereafter. A letter of demand,
enclosing a notice of breach dated 8
March 2008, calling upon the appellants to bring the arrears on the
respective amounts up
to date on or before 15 March 2012, failing
which further legal action would be pursued, did not yield any
results. As a consequence,
a notice of bar was served upon the
appellants’ attorney on the 29 March 2012, some 16 months after
the notice of intention
to defend had been served. The notice of bar
required the appellants to file their plea within five days after its
delivery.
[6] It is common cause that no plea was
delivered within the five days as requested. Instead, on 13 April
2012, the appellants’
attorney telephoned the respondent’s
attorneys requesting an indulgence for the late filing of the plea.
The respondent’s
attorneys refused to accede to the request and
advised that they were proceeding to apply for default judgment.
[7] The application for default judgment
was lodged with the registrar, purportedly in terms of Uniform rule
31(5)
(a)
and served on the appellants’ attorney on 17
May 2012. Default judgment was granted on 30 May 2012, in terms of
which the
appellants were held to be indebted jointly and severally,
to the respondent in the sums of R11 313 793.17 and R9 309
656.59, respectively. In addition, the trust’s immovable
property was declared immediately executable.
[8] It is not disputed that the first
appellant became aware of the judgment on 9 July 2012, whereupon he
instructed his attorney
to make application for the rescission
thereof. Such application was ultimately brought on 14 August 2012.
In his affidavit supporting
the application, the applicant’s
attorney confirmed having received the notice of bar. His reason for
not timeously delivering
a plea was that he had been too busy with
other matters and that at some point he was indisposed. He also
placed the blame on his
support staff for not timeously attending to
the appellants’ matter. This explanation is far from
satisfactory. It is however,
not an issue on which this appeal turns.
The court below ignored the procedural shortcomings, which I will
deal with in due course
and went on to consider and reject the
substantive defences raised by the appellants. Pillay J consequently
refused the application
for rescission of judgment brought in terms
of rule 42(1)
(a)
. It is against that conclusion that the
present appeal is directed.
[9] The appellants contended that the
default judgment had been erroneously sought and granted because of
non-compliance by the
respondent with Uniform rule 31(5)
(a)
read
with para 2.3 of the Practice Manual of the KZN Division of the High
Court GN 535,
GG
26180, 2 April 2004 (practice manual). The
issue that must be determined and which is dispositive is whether the
default judgment
had been erroneously sought and granted within the
prescripts of rule 42(1)
(a).
[10] However, before considering this
aspect, I deem it necessary to deal briefly with two other issues.
First, the appellants sought
condonation for the late delivery of the
appeal record, and the respondent similarly sought condonation for
the late delivery of
its heads of argument and a supplementary volume
of the record. By agreement between the parties, condonation was
granted to each
as requested, with each party having to bear its own
costs. Second, in support of the contention that the appellants’
appeal
has become perempted, the respondent averred that the
appellants had conducted themselves in a manner inconsistent with an
intention
to pursue the appeal and from which the only conclusion
that can be drawn is that they acquiesced in the default judgment
that
had been granted against them.
[1]
The respondent submitted that after the court had dismissed the
application for rescission on 27 February 2013 and after leave
to
appeal to this court was granted on 24 May 2013, the appellants did
not resist the respondent’s applications to execute
the
judgment against the appellants’ movable and immovable
properties and the subsequent transfer of the various immovable
properties to the respondent. Examples provided were that the
appellants did not resist the transfer on 19 February 2014 of the
Winston Park property mortgaged in favour of the respondent and did
not oppose the application brought by the respondent on 13
August
2014 to have the Umhlanga property declared specially executable.
Thus the argument was that by their conduct, the appellants
clearly
and unconditionally decided to abide by the default judgment and that
they are now precluded from continuing with the appeal.
[11] This latter argument cannot
succeed. I have considered the history of this matter and in
particular the relevant correspondence
exchanged between the parties,
and that which emanated from the office of the registrar of this
court in relation to the prosecution
of the appeal. Importantly, the
appellants lodged the appeal record, albeit incomplete, with the
registrar of this court on 17
December 2013, coupled with an
application for the condonation for the late delivery thereof. It
accordingly cannot justifiably
be contended that the appellants had
conducted themselves in a manner inconsistent with an intention to
prosecute and finalise
the appeal. On the contrary, the appellants
had lodged the appeal record in December 2013 signifying a clear
intention to proceed
with the appeal. I find it disturbing that the
respondent still saw fit to thereafter proceed to transfer in
execution of judgment
the Winston Park property on 19 February 2014
and to have the Umhlanga property declared specially executable on 13
August 2014.
To add insult to injury, the respondent contended that
since the properties that served as security for the loans had
already been
transferred, that rendered the appeal moot. This
submission for obvious reasons is unsustainable. In any event the
properties were
transferred in the face of a pending appeal and the
respondent transferred them into its name. That process can be easily
undone.
[12] I now return to consider Uniform
rule 42(1)
(a)
, which provides:
‘
The
court may, in addition to any 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’.
[13] Uniform rule 31(5)
(a)
provides:
‘
Whenever
a defendant is in default of delivery of notice of intention to
defend or of a plea, the plaintiff, if he or she wished
to obtain
judgment by default shall . . . file with the registrar a written
application for judgment against such defendant. Provided
that when a
defendant is in default of delivery of a plea, the plaintiff shall
give such defendant not less than five days’
notice of his or
her intention to apply for default judgment’
.
[14] Paragraph 2.3 of the relevant
practice manual provides as follows:
‘
Where
an application for default judgment is made six months after the date
of service of the summons it is both the practice of
the registrar’s
office and the Court to require that a notice of set down be served
on the defendant informing him/her that
such default judgment will be
sought on a given date and time. Such date and time being not less
than five dates from the Notice’.
[15] It is common cause that the notice
of intention to apply for default judgment does not comply with
the prescripts of
rule 31(5)
(a)
read in conjunction with para
2.3 of the practice manual. The notice did not provide a time and
date on which default judgment would
be sought – the summons
had been served more than six months before the application for
default judgment was made thus the
requirements of para 2.3
had
to be complied with. The respondent’s notice was therefore
lacking. Simply put, it was procedurally defective. I pause to
mention that a practice manual or directive duly promulgated by the
Judge President of a division of the High Court, has the same
force
and effect as the Uniform rules.
[2]
[16] The law governing an application
for rescission under Uniform rule 42(1)
(a)
is trite. The
applicant must show that the default judgment or order had been
erroneously sought or erroneously granted. If the
default judgment
was erroneously sought or granted, a court should, without more,
grant the order for rescission.
[3]
It is not necessary for a party to show good cause under the
subrule.
[4]
Generally a judgment is erroneously granted if there existed at the
time of its issue a fact which the court was unaware of, which
would
have precluded the granting of the judgment and which would have
induced the court, if aware of it, not to grant the judgment.
[5]
There can be no doubt that if the registrar had been made aware of
the procedural defect in the rule 31(5)(a) notice, default judgment
would not have been granted. In
Lodhi 2 Properties
Investments CC v Bondev Development (Pty) Ltd
2007 (6) SA 87
(SCA), Streicher JA held that if notice of proceedings to a party was
required but was lacking and judgment was given against that
party
such judgment would have been erroneously granted. The following
appears in para 24:
‘
Where
notice of proceedings to a party is required and judgment is granted
against such party in his absence without notice of the
proceedings
having been given to him such judgment is granted erroneously. That
is so not only if the absence of proper notice
appears from the
record of the proceedings as it exists when judgment is granted but
also if, contrary to what appears from such
record, proper notice of
the proceedings has in fact not been given. . . .
’
It follows that the default judgment in
the present case had been erroneously granted and that the appellants
were entitled to have
it rescinded. The court below accordingly
erred in dismissing the application for rescission of judgment.
[17] In view of what is set out above it
is not necessary to consider the various defences raised on the
merits by the appellants,
for example that the summons was defective
because the third trustee namely, Patrick Claude Rivalland was
neither cited nor served
with the summons. The appellants had also
denied that the trust had entered into valid loan agreements with the
respondent and
that the mortgage bonds were valid. These defences do
not fall for consideration in this court.
[18] I make the following order:
1. The appeal is upheld with costs.
2. The order of the court a quo is set
aside and is substituted with the following order:
‘(a) The application for the
rescission of the default judgment granted by the Registrar of the
High Court on 30 May 2014
is granted and the default judgment is set
aside.
(b) The respondent is ordered to pay the
costs of the application.’
________________
B H Mbha
Judge of
Appeal
APPEARANCES:
For
Appellant:
T N Aboobaker SC
Instructed
by:
Theyagaraj Chetty Attorneys, Durban
Honey
Attorneys, Bloemfontein
For
Respondents:
P J Combrinck
Instructed
by:
Lynn & Main Attorneys, Pietermaritzburg
Rosendorff
Reitz Barry, Bloemfontein
[1]
Qoboshiane NO & others v Avusa Publishing
Eastern Cape (Pty) Ltd & others
2013
(3) SA 315
(SCA) para 3.
[2]
National Pride Trading 452 v Media 24 Ltd
2010 (6) SA 587
(ECP) para 31.
[3]
Bakoven Ltd v G J Howes (Pty) Ltd
1992 (2) SA 466
(E) at 471G.
[4]
National Pride Trading 452 (Pty) Ltd v Media
24 Ltd
2010 (6) SA (ECP) at 597I-598B.
[5]
Erasmus: Superior Court Practice
2
ed (Revision Service 1, 2015) Vol 2 at D1-567. See also
Naidoo
v Matlala NO
2012 (1) SA 143
(GNP) at
153C.