Brief Summary

Execution — Rescission of judgment — Application for rescission of default judgment granted in favour of a bank — Applicant contending that two summonses for the same debt invalidated the default judgment — Court finding that the existence of two summonses does not render either invalid and that the default judgment remains operative — Section 129 notice validly issued and applicable to both summonses — Debt review application prohibited due to enforcement steps taken by the credit provider.

Comprehensive Summary

Summary of Judgment

1. Introduction

The matter concerned an application for rescission of a default judgment granted in the South Gauteng High Court, Johannesburg. The default judgment had been granted in favour of ABSA Bank Limited (the first respondent) against Martha Maria Magdalena Starita (also known as Van Jaarsveld) (the applicant), and it included an order declaring certain immovable property specially executable.

The applicant was the mortgagor and consumer under a credit agreement to which the National Credit Act 34 of 2005 applied. The first respondent was the credit provider and mortgagee. The Sheriff of the Court, Brakpan was cited as the second respondent, but did not appear.

Procedurally, the first respondent had instituted action for enforcement of the credit agreement and, after the applicant failed to defend, obtained default judgment. The applicant then sought rescission of that default judgment. The dispute centred on the enforcement steps taken under the National Credit Act, the effect of the existence of two summonses for the same debt, the interaction between enforcement proceedings and the applicant’s subsequent debt review application, and whether compliance with section 129 required the consumer’s actual receipt of the statutory notice.

2. Material Facts

In mid-2005 the applicant obtained a loan from the first respondent to purchase immovable property. The loan was secured by a first mortgage bond registered over the property. The applicant later experienced financial difficulties and fell into default on her obligations to the first respondent and other creditors.

On 23 November 2007, the first respondent’s attorneys sent a section 129 notice under the National Credit Act to the applicant’s chosen domicilium citandi et executandi by registered mail. It was common cause that the National Credit Act applied to the agreement and that the content of the notice complied with section 129. It was also undisputed that the notice was duly posted by registered mail. The applicant, however, disputed that she received the notice and denied that it was delivered at her domicilium address, attributing non-receipt to the Post Office.

Thereafter the first respondent issued a first summons out of the High Court under case number 33019/2007, which was served on 8 January 2008 at the applicant’s domicilium address. The applicant did not dispute that service took place at that address, but alleged that she did not receive the summons. The applicant did not enter an appearance to defend, and the first respondent sought default judgment from the Registrar under Rule 31(5). For administrative reasons related to a duplicated case number, default judgment was not granted at that stage.

On 12 January 2009 the first respondent issued a second summons under case number 745/2009, without withdrawing the first summons. The second summons was served at the applicant’s domicilium on 14 January 2009. Again, the applicant did not dispute service at the domicilium, but alleged non-receipt, this time because the property was occupied by a tenant who allegedly did not inform her of the service. Default judgment was ultimately granted on 30 April 2009 on the basis of the second summons, including an order declaring the property executable.

In the interim, on 8 May 2008, the applicant applied for debt review under section 86(1) of the National Credit Act. The applicant asserted that she was at that time unaware of the issue and service of the first summons. By the time the rescission application was launched, the debt review process was pending in the Benoni Magistrates’ Court.

The applicant’s stated defences to the action were directed mainly at the consequences of there being two extant summonses for the same debt and the alleged effect this had on the validity and use of the section 129 notice, as well as the alleged non-receipt of that notice.

3. Legal Issues

The central legal questions the court was required to determine were whether the applicant had established a basis for rescission by showing a defence with prospects of success to the underlying claim, in circumstances where default judgment had been entered.

Within that enquiry, the judgment addressed several interrelated issues concerning the application of law to largely common-cause facts, together with a point of statutory interpretation. These included whether the existence of two pending actions (two summonses) for the same debt invalidated the default judgment granted in the second action, or merely raised a potential dilatory defence.

The court also had to determine whether a section 129 notice could validly be relied upon to found a second summons, including whether such a notice had an implied time limitation or “once-off” effect.

A further legal issue concerned the interaction between enforcement proceedings and debt review, namely whether the applicant’s debt review application was competent and applicable to the credit agreement in light of section 86(2), given that summons had already been issued in respect of that agreement.

Finally, the court considered whether compliance with section 129 required proof that the notice was actually received by the consumer, or whether it was sufficient that the notice was sent by registered post to the consumer’s chosen domicilium address in a manner contemplated by the statute.

4. Court’s Reasoning

The court first dealt with the applicant’s reliance on the fact that there were two extant summonses for the same debt. It accepted that this situation could give rise to a defence of lis alibi pendens, ordinarily raised by special plea, but characterised that defence as dilatory rather than dispositive. The court emphasised that if lis pendens is upheld, the usual consequence is a stay of one set of proceedings, and that the court retains a discretion whether to uphold the plea in an appropriate case. On this basis, the court rejected the proposition that the mere existence of two pending summonses rendered either summons invalid or inoperative. It followed that the existence of both actions at the time judgment was granted on the second summons did not, in itself, invalidate the default judgment.

The court then addressed the argument that the section 129 notice used as the platform for the first summons could not be used again for the second summons, either inherently or because of the lapse of time. The court examined sections 129 and 130 and held that the Act specifies certain minimum waiting periods before litigation may commence, but it does not prescribe any fixed period during which a section 129 notice remains valid, nor did the court consider that such a time limit could be implied as a general rule. The court reasoned that the ongoing validity of a section 129 notice depends on the factual context: if the arrears described in the notice were fully extinguished after the notice was given, the notice could not properly be used later should new arrears arise. Conversely, if the arrears were not extinguished, the Act did not require summons to be issued within a short or limited period after the notice, nor did it require a fresh notice merely because litigation was instituted more than once. The court therefore found no statutory impediment to reliance on the same section 129 notice for the second summons in the circumstances described.

The judgment then considered the effect of the applicant’s debt review application and the operation of section 86(2). The court construed section 86(2) as prohibiting a consumer from applying for debt review in respect of a particular credit agreement if the credit provider has proceeded to take the steps contemplated in section 129 to enforce the agreement. Although a literal reading might suggest that the giving of the section 129 notice itself could trigger the bar, the court rejected that interpretation because it would produce a “circuitous absurdity”, given that section 129(1)(a) itself proposes referral to a debt counsellor. To avoid that result, the court held that the relevant “steps” for purposes of section 86(2) are those taken after the section 129 notice, starting (at least) with the issue of summons.

The court further held that section 86(2) operates objectively: what matters is whether enforcement steps were in fact taken, and not whether the consumer knew about them. Thus, even accepting for purposes of the rescission application that the applicant was unaware of the first summons when she applied for debt review, the summons had nevertheless been issued and served. The court concluded that the debt review therefore could not apply to the particular credit agreement upon which the first respondent sued. The issuance of the second summons and the subsequent default judgment did not alter this, particularly because the first summons remained extant at the time of judgment. The court also expressed the view that even if the first summons had been withdrawn after the debt review application was made, the debt review would still not have applied to that credit agreement by virtue of section 86(2), and a fresh application would have been required if circumstances later permitted debt review.

Although the applicant had raised non-receipt of the section 129 notice in the affidavits, the point was not pursued in argument. The court nevertheless addressed it because, depending on which line of authority was followed, it could potentially amount to a defence. The court identified divided authority on whether actual receipt of a section 129 notice is required. It aligned itself with the approach in Munien (and cases following it) that actual receipt is not necessary, and declined to follow decisions suggesting the contrary.

In reaching that conclusion, the court accepted that the language of section 129 could appear to require receipt, but it held that the mechanism for how notice is properly brought to a consumer’s attention must be located in the statutory scheme, including sections 65 and 168, and the concept of delivery referred to in section 130(1)(a). The court reasoned that service or delivery can be satisfied by sending the notice by registered mail to the consumer’s address. It also analysed the relationship between provisions dealing with delivery and addressing of notices, including section 96(1), and concluded that it did not undermine the efficacy of a chosen domicilium in the credit agreement in the circumstances of the case. A significant consideration in the court’s reasoning was that a consumer’s selection of a domicilium citandi et executandi serves to relieve the sender of the burden of proving actual receipt, and that requiring proof of actual receipt would impose too heavy a burden on credit providers and was not mandated by the Act. The court reinforced this conclusion by analogy to the rules governing service of summons at a chosen domicilium under the Uniform Rules.

Having found that the section 129 notice was validly delivered by registered post to the chosen domicilium, that the two summonses did not invalidate the proceedings, and that the debt review did not apply to the agreement due to the prior issue of summons, the court concluded that the applicant had no substantive defence to the action. On that basis, it found that rescission could not succeed. Because the absence of a defence was decisive, the court considered it unnecessary to determine wilful default or delay, although it added that it would have accepted there was no wilful default on the applicant’s version and that the delay beyond the 20-day period in Rule 31(2)(b) would not necessarily have been fatal given the possibility of reliance on the common law.

5. Outcome and Relief

The application for rescission of the default judgment was dismissed. The court made an order that the rescission application was dismissed with costs. No relief was granted against the second respondent, who did not participate.

Cases Cited

Kuhne & Nagel (Pty) Ltd v Elias & Another 1979 (1) SA 131 (T).

Loader v Dursot Bros. (Pty) Ltd 1948 (3) SA 136 (T).

BMW Financial Services (South Africa) (Pty) Ltd v Dr MB Mulaudzi Inc 2009 (3) SA 348 (BPD).

Munien v BMW Financial Services (SA) (Pty) Ltd & Another 2010 (1) SA 549 (KZD).

First National Bank Ltd v Rossouw and Another (unreported, Gauteng North High Court, case number 30624/2009, judgment delivered 6 August 2009).

The Standard Bank of South Africa Ltd v Mellet & Another [2009] ZAFSHC 110 (30 October 2009).

The Standard Bank of South Africa Ltd v Rockhill & Another [2010] ZAGPJHC 10 (11 March 2010).

FirstRand Bank Ltd v Dhlamini (unreported, Gauteng North High Court, case number 50146/2009, judgment delivered 17 March 2010).

ABSA Bank Ltd v Prochaska t/a Bianca Cara Interiors 2009 (2) SA 512 (D&CLD).

Judson Timber Co (Pty) Ltd v Ronnie Bass & Co (Pty) Ltd & Another 1985 (4) SA 531 (W).

Loryan (Pty) Ltd v Solarsh Tea & Coffee (Pty) Ltd 1984 (3) SA 834 (W).

Legislation Cited

National Credit Act 34 of 2005, including sections 3, 65, 86(1), 86(2), 86(9), 86(10), 96(1), 127, 129, 130, 131, and 168.

Rules of Court Cited

Uniform Rules of Court, Rule 31(5).

Uniform Rules of Court, Rule 31(2)(b).

Uniform Rules of Court, Rule 4(1)(a)(iv).

Held

The court held that the existence of two extant summonses for the same debt did not invalidate the second action or the default judgment; at most it could have supported a lis alibi pendens defence, which is dilatory and discretionary and had not been raised.

It held that a section 129 notice does not have an inherent expiry period prescribed by the National Credit Act and, on the facts, could be relied upon for the second summons where the arrears had not been extinguished and statutory waiting periods had been satisfied.

It held that the applicant’s debt review application did not apply to the credit agreement because, on the court’s interpretation of section 86(2), the prior issue of summons constituted enforcement steps that barred debt review in respect of that agreement, irrespective of whether the applicant knew about the summons.

It held that actual receipt of a section 129 notice by the consumer is not required; it was sufficient that the notice was sent by registered post to the consumer’s chosen domicilium address in compliance with the statutory scheme.

On these findings, the court held that the applicant disclosed no bona fide defence to the claim, and rescission was therefore refused, with costs.

LEGAL PRINCIPLES

A plea of lis alibi pendens arising from concurrent actions for the same relief is generally dilatory, usually resulting in a stay rather than dismissal, and it does not render the underlying process invalid merely because two summonses exist simultaneously. The court retains a discretion whether to uphold the plea, and absent the plea being raised, a plaintiff is constrained only by the prohibition on obtaining judgment twice for the same debt.

The National Credit Act does not prescribe a fixed duration for the validity of a section 129 notice. The continued utility of such notice depends on the factual position, including whether the arrears referred to in the notice have been extinguished. Where arrears persist, the Act does not require a credit provider to issue summons within a short time after the notice, nor does it limit the notice to supporting only a single summons, provided the statutory prerequisites to litigation are met.

For purposes of section 86(2), the bar on debt review is triggered once the credit provider has proceeded with enforcement steps contemplated after the section 129 notice, which the court construed to include at least the issue of summons. This exclusion operates objectively: it turns on whether the steps were taken in fact, not on the consumer’s knowledge of them, and a debt review application made after such steps is ineffective in respect of the relevant credit agreement.

Compliance with section 129 does not require proof of actual receipt of the notice by the consumer. Proper delivery is satisfied where the credit provider can prove the notice was dispatched by registered post to the consumer’s chosen address (including a domicilium citandi et executandi). The selection of a domicilium serves to relieve the sender of the obligation to prove actual receipt, consistent with broader principles of notice and service and with the statutory balance between consumer protection and the operational requirements of credit enforcement.

Starita v Absa Bank Limited and Another (745/2009) [2010] ZAGPJHC 13; 2010 (3) SA 443 (GSJ) (26 March 2010)