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[2020] ZAGPJHC 430
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Mothlake v Industrial Development Corporation of South Africa and Others (25649/2019) [2020] ZAGPJHC 430 (9 November 2020)
IN THE HIGH COURT OF
SOUTH AFRICA
(GAUTENG DIVISION,
JOHANNESBURG)
Case Number:
25649/2019
REPORTABLE:
No
OF
INTEREST TO OTHER JUDGES: No
REVISED:
No
9
Nov 2020
ELRIDGE MATHLOGONOLOL
LEGODI
MOTHLAKE
Applicant
and
INDUSTRIAL DEVELOPMENT
CORPORATION
OF SOUTH AFRICA
First Respondent
EML ENGINEERING AND
CONSTRUCTION (PTY)
LIMITED
Second Respondent
THE SHERIFF:
WONDERBOOM
Third Respondent
JUDGMENT
COETZEE
AJ
[1]
This is an
application for rescission of a summary judgment granted in favour of
the first respondent against the applicant. The
first respondent
("the IDC") obtained judgment against the applicant for
payment of R 9 926 300 (nine million nine hundred
and twenty-six
thousand and three hundred Rand), interest thereon at prima rate and
other related relief. The applicant also applies
for condonation for
the late filing of his rescission application.
[2]
The judgment relates to loan agreements entered into between the IDC
and second respondent
("EML").
[3]
The loan agreements provided that in the event of EML breaching any
of the loan agreements,
all amounts owed by EML to IDC shall become
immediately payable without notice.
[4]
The applicant entered into a guarantee agreement with the IDC. In
accordance with
the guarantee agreement, applicant guaranteed on
behalf of the EML complete payment of all amounts owed by EML to the
IDC as a
result of the loans. The guarantee is a separate debt and
provides for the payment of costs as between attorney and own client
in respect of any legal proceedings in respect thereof.
[5]
On 15 July 2019, due
to being in financial distress EML declared and filed for business
rescue.
[6]
On
23 July 2019, the
IDC instituted legal action against applicant and EML claiming
payment of the amount of R 9 926 300 from EML and
applicant jointly
and severally, the one to pay the other to be absolved, together with
interest and legal costs.
[7]
Applicant's
erstwhile
attorneys delivered a plea. The IDC delivered an application for
summary judgment set down for hearing on 29 October 2019
.
[8]
The Court granted summary judgment in the absence of the applicant or
his legal representative
and an affidavit opposing the application.
[9]
This is an
application for rescission of the default summary judgment granted in
favour of the IDC against the applicant. The applicant
launched this
application seeking the following relief:
[9.1]
condonation for late filling of this application;
[9.2]
rescission of the summary judgment granted on 29 October 2019 against
the applicant;
[9.3]
alternatively, suspension of execution of the said order until the
business rescue procedure regarding EML has been finalized;
and
[9.4]
staying of the operation of the writ/warrant of execution or the sale
in execution, pending the finalisation of this
application or the
business rescue process.
The condonation
application
[10]
The
test for the granting of condonation in
Melane
v Santam insurance Co Ltd
[1]
balancing
primarily the degree of lateness, explanation therefore, prejudice
and prospects of success is trite law and is applied
by this Court as
a matter of course.
[11]
In terms of Rule
31(2)(b) a defendant may within twenty days after he or she has
knowledge of such judgment apply to court upon
notice lo the
plaintiff to set aside such judgment and the court may, upon good
cause shown, set aside the default judgment on
such terms as to it
seems meet.
[12]
The application was delivered on 5 March 2020 and should have been
delivered by the end of November
2019. It is approximately 3 months
late.
[13]
The applicant recorded that his then attorneys on an unspecified date
informed him of the judgment.
The applicant then terminated their
mandate and appointed new attorneys. He states that his new attorney
only informed him on 20
January 2020 of the judgment having perused
the Court file that day.
[14]
That means that the if the delay in bringing the application is
calculated from 20 January 2020,
it is not substantial. As appears
below the applicant's first set of attorneys must have informed him
prior to 14 January 2020
of the judgment as he appointed his current
attorneys who waited until they reopened their offices on 14 January
2020 before rendering
assistance.
The explanation for
the delay in launching the condonation application
[15]
The applicant did not attend the summary judgment proceedings. When
he was informed of the judgment,
he
instructed his current attorneys of record. When they re-opened their
offices on 14 January 2020, they attended at Court on 20
January 2020
to uplift the court file in this matter, as his previous attorneys of
record retained the contents of their file due
to outstanding legal
fees.
They informed him of the
judgment.
[16]
Given that all the
relevant documents relating to EML had been surrendered to the
business rescue practitioner, the applicant then
explains that he had
to request a meeting with the business rescue practitioner, which was
subsequently held on 24 January 2020
and he then furnished the
applicant with a progress report regarding the business rescue
including documents that were required
in support of this
application.
[17]
The IDC takes issue with the explanation for the delay. According to
them
the case for condonation is premised
on the applicant being required to obtain documents required to
launch this application from
the business rescue practitioners.
However, on his own version, his current attorneys accessed the court
file in the main action
on 20 January 2020. There is no reason in the
circumstances, why they did not obtain all necessary agreements and
the like at that
time. The applicant has attached to his founding
affidavit the agreements on which the first respondent relied in
obtaining judgment
but not any of the business rescue documents.
[18]
In my analysis the delay is not substantial. The applicant fails to
give any detailed acceptable
and reasonable explanation for the
failure to launch the application timeously. The prospects of success
of the rescission application
will determine whether condonation
should be granted. The prospects of success are discussed below.
The rescission
application
[19]
While the court retains a discretion whether to grant rescission,
after having properly considered
all relevant circumstances, the
legal requirements to be satisfied by the applicant under the common
law are that there must be
a reasonable explanation for the default,
the application must be made bona fide and there must be a bona fide
defence which prima
facie carries some prospects of success
[2]
.
Is there a reasonable
explanation for not opposing the application for summary judgment?
[20]
Applicant stated that
he is a businessman that travels abroad on a regular basis in order
to attend to his business interests and
as such he was not available
to give instructions to his legal team and to sign the relevant
affidavit resisting summary judgment.
In addition, given that EML was
in business rescue, he engaged with the business rescue practitioner
to determine as to how far
the process was and the likelihood of EML
being able to fully settle the debt owed to the IDC.
[21]
His erstwhile
attorneys advised him that in his absence they were unable to secure
the necessary funds required to brief counsel
and they were under the
impression that the matter would be resolved by the business rescue
practitioner making full payments to
the IDC.
[22]
His erstwhile
attorneys also refused to engage counsel and to continue assisting
him with the matter as he had not placed them in
funds to cover their
fees. They advised him that they would cease to do any further work
on this matter and subsequently, he then
decided to terminate their
mandate and to seek other lawyers to assist him.
[23]
It is,
the IDC
submits, that the explanation for the applicant's failure to have
opposed the summary judgment application is spurious at
best. The
applicant merely refers, in bald and sketchy allegations, to having
travelled and not having placed his former attorneys
in funds to
enable them to brief counsel or to file an affidavit resisting
summary judgment. He does not deny that he knew about
the
application.
[24]
According to the IDC
not
a single explanation was given as to why the applicant himself,
having, it would appear, known of the date on which the application
was to be heard, did not attend at court to state his case or request
a postponement.
[25]
The IDC further argues that
the
applicant has failed to attend court or instruct his attorneys or to
provide a reasonable explanation.
[26]
What the applicant
herein has done is to make generalized allegations as to his
difficulties in opposing the application, without
any supporting
evidence. This has the effect that the first respondent can only
baldly deny the allegations and point out the lack
of detail as being
yet another factor why, it submits, the applicant also is not
bona
fide
.
A
bona fides
application and
bona fides
defences
[27]
In his plea, the
applicant's defence to the first respondent's claim against him was
to the effect that the business rescue process
pertaining to EML
prohibits the IDC from taking any action against the applicant,
because "there exists a moratorium on legal
action pending the
finalization of the business rescue process".
[28]
In his founding affidavit in this rescission application, the
defences relied upon are the following:
[28.1]
The IDC ought to receive payment
in lieu
of the indebtedness
of EML out of the proceeds from the business rescue process; and/or
[28.2]
There exists a moratorium on legal action pending the finalization
of
the business rescue process.
[28.3]
The IDC is possessed of other security for EML's indebtedness,
notably the perfection order and certain cessions granted by EML in
the IDC's favour.
[29]
In
relation to the alleged bar the business rescue process has on the
IDC's claim against the applicant
qua
guarantor
,
the IDC is correct to say this ignores the fact that the guarantee
given is a primary obligation in itself. The SCA decision of
New
Port Finance Company (Pty) Ltd and Another v Nedbank Limited
[3]
which held that
section 154
of the
Companies Act 71 of 2008
does not
deal with the existence of the debt itself, but only with the
capability of a person to sue the principal debtor is against
the
applicant. The liability of a surety in business rescue proceedings
would be unaffected by any moratorium.
[30]
As to the defence
that there exists other means by which the IDC can allegedly claim
payment of the amount due to it there is no
obligation in law for the
IDC to await the outcome of the business rescue process before being
entitled to proceed against any
of its security. This is made clear
in clause 6.2 of the guarantee agreement.
[31]
Also
section 134(1)(c)
of the
Companies Act 71 of
2008
prevents any person from exercising any right in respect of any
property in lawful possession of the company in business rescue
(EML)
without the consent of the business rescue practitioner. This section
precludes the IDC from selling the property subject
to the perfection
order and from enforcing its rights under the cession agreements.
[32]
Even if the IDC was inclined to exercise its rights relative to other
security or to await the
outcome of the business rescue, prior to
taking steps against the applicant, the applicant has not put up one
fact indicating that
the business rescue process is likely to yield
any form of payment to the IDC.
[33]
The applicant has poor prospects of succeeding with any of his
defences in the main action. His
lack of a clear and detailed
explanation for his default coupled to a lack of defences add up to
the application not being
bona fides.
[34]
The absence of an adequate explanation for the applicant's default in
not opposing the summary
judgment application, the absence of an
adequate explanation for the delay in bring the condonation
explanation and the poor prospects
on the merits in the main
application means that
[34.1]
The application for condonation stands to be dismissed, and
[34.2]
The application for rescission of the judgment stands to
be
dismissed.
[35]
There is no reason why costs should not follow the result.
[36]
It is ordered that the application for condonation and the
application for rescission are dismissed
with costs on the tariff
that applies as between attorney and own client.
____________________
H S COETZEE
ACTING JUDGE OF THE
HIGH COURT
APPEARANCES
On
behalf of Applicant
:
Adv. G. Lebethe
Instructed
by
:
NTABENI ATTORNEYS
On
behalf of First Respondent
:
Adv Sandra Freese
Instructed
by
:
MNGADI ATTORNEYS INC
Date of
Hearing
: 9
November 2020
Date of
Judgment
: 9
November 2020
[1]
1962
(4) SA 531
(A) at 532 C-F)
[2]
De
Wet
v Western Bank Ltd
1979 (2) SA 1031
(A) at1042F-1043A and Government
of the Republic of Zimbabwe v Fick
2013 (5) SA 325
(CC) at para
350D.
[3]
2016
(5) SA 503
(SCA) at para 14