South African Transport and Allied Workers Union v South African Securitisation Programme (RF) Ltd and Others (2020/ A5066) [2022] ZAGPJHC 66 (7 February 2022)

78 Reportability

Contract Law

Brief Summary

Execution — Sale in execution — Appeal against dismissal of application for return of money seized under writ — Respondents claimed set-off based on alleged agreement and admitted indebtedness — Court found that the respondents were legally obligated to return the money following rescission of the default judgment — Set-off claim upheld due to established agreement and acknowledgment of debt — Appeal dismissed with costs.

Comprehensive Summary

Summary of Judgment

1. Introduction

The proceedings were an appeal to the Gauteng Local Division, Johannesburg, against an order dismissing an application for the repayment of money that had been taken from the appellant’s bank account pursuant to a writ of execution. The application for repayment followed the subsequent rescission of the default judgment on which the writ had been based.

The appellant was the South African Transport and Allied Workers Union (SATAWU). The first respondent was South African Securitisation Programme (RF) Ltd, and the second respondent was Sasfin Bank Limited. The third respondent, the Sheriff Johannesburg Central, was cited but did not participate in the appeal. The judgment was delivered by Sutherland DJP, with Twala J and Opperman J concurring.

Procedurally, the dispute originated in action proceedings in which the respondents sued SATAWU for amounts allegedly due in respect of the lease/financing of office equipment. A default judgment for R12,731,774.08 was granted on 8 August 2018. SATAWU unsuccessfully sought to interdict execution pending rescission, and execution proceeded, resulting in R10,171,748.06 being attached and paid over to the respondents. The default judgment was later rescinded on 17 May 2019. SATAWU then brought a motion application for the return of the executed funds, which McAslin AJ dismissed on 15 October 2019. The present proceedings were SATAWU’s appeal against that dismissal.

The general subject-matter of the dispute was whether, after rescission of the underlying judgment, the respondents were nonetheless entitled to retain the money received under the writ by relying on set-off, based on a separate settlement agreement or, at minimum, an admitted indebtedness.

2. Material Facts

It was common cause that the respondents obtained a default judgment against SATAWU, that a writ issued on the strength of that judgment, and that the sheriff executed the writ by attaching R10,171,748.06 from SATAWU’s bank account and paying it over to the respondents. It was further common cause that the default judgment was subsequently rescinded (17 May 2019), after which SATAWU demanded repayment of the executed funds and the respondents refused.

The court treated it as effectively undisputed, at least for purposes of the appeal, that once the judgment underpinning the writ had been rescinded, the respondents were in principle under a legal obligation to return the money obtained through execution. The dispute did not turn on whether restitution would ordinarily follow rescission; rather, it turned on whether the respondents could defeat the repayment claim by raising set-off.

The critical facts relied upon for the set-off defence were contained in correspondence that was common cause on the papers. On 26 September 2018, SATAWU (through its general secretary) wrote to Sasfin confirming acceptance of Sasfin’s counter-proposal and recording that the parties had agreed to a once-off payment of R10,250,000.00 in “full and final settlement of the capital, interest and legal costs” by 31 October 2018, with further terms addressing confirmation of settlement and ownership of financed hardware. The court regarded this letter as documenting a concluded agreement, rather than a mere offer.

On 29 October 2018, SATAWU (through an acting representative) communicated by email that SATAWU could not settle “as per agreement” and asked to meet to discuss repayment, indicating willingness to make a substantial payment and then negotiate repayment of the balance. The court treated this as an inability to perform according to the agreed date and an invitation to renegotiate payment terms, not a cancellation of the earlier settlement.

The court also had regard to further email exchanges on 30 October 2018, which it did not interpret as abandoning the 26 September settlement, and to an attorney letter of 29 November 2018 which, on the court’s reading, contained an unequivocal acknowledgement of indebtedness and an offer to pay by instalments.

An additional contextual fact regarded as significant for interpretation was that the 26 September 2018 settlement was concluded at a time when, on SATAWU’s own version, it was unaware that a default judgment already existed against it. The court used this to support the view that the settlement stood independently of the judgment later rescinded.

3. Legal Issues

The central legal question was whether, in circumstances where money was obtained by the respondents under a writ issued on the basis of a judgment later rescinded, the respondents could lawfully refuse restitution by invoking set-off on the basis of a separate settlement agreement or, alternatively, an admitted indebtedness at least equal to the amount received.

The dispute primarily concerned the application of law to facts. The governing legal doctrine (set-off and its requirements) was not treated as controversial; the controversy was whether the facts established on the papers satisfied those requirements, including whether there was a concluded settlement agreement and whether reciprocal, liquidated, due debts existed to permit set-off.

A further issue arose incidentally concerning condonation for non-compliance with the time-periods in Uniform Rule 49(6)(a). That issue required a discretionary assessment of the explanation for delay and prejudice.

The court also identified, but expressly did not decide, a broader public policy concern regarding whether a litigant who has received money under a writ later undermined by rescission should be permitted to retain that money to the strategic disadvantage of the opposing party, even where a lawful counterclaim exists. Because it was not raised on the papers or argued, it was not determined.

4. Court’s Reasoning

On the procedural point of condonation, the court applied the general approach that condonation is not automatic and depends on an adequate explanation and the interests of justice, including the presence or absence of prejudice. It accepted the explanation advanced by SATAWU’s attorneys for the periods of delay, including disruptions caused by a burglary and subsequent reconstruction of records, and later personal circumstances relating to the attorney responsible for the matter. The court also considered that there was no or little prejudice and that the respondents wished the appeal to be heard. On that basis, the court condoned non-compliance with Uniform Rule 49(6)(a) and proceeded to determine the merits.

On the merits, the court framed the key enquiry as whether the respondents’ set-off defence was established. The respondents’ case was that SATAWU was indebted to them in an amount at least equal to the executed funds and that the set-off arose from (i) a settlement agreement for R10,250,000.00, or alternatively (ii) an unequivocal admission of indebtedness.

The court interpreted the 26 September 2018 letter as recording a concluded settlement agreement, not a mere offer. It relied on the letter’s express formulation that it “serves to confirm acceptance” of Sasfin’s counter-proposal, together with the detailed performance terms and the stated consequence of “full and final settlement.” The court rejected SATAWU’s contention that the settlement was only an offer later withdrawn, holding that such a reading was inconsistent with the language and structure of the correspondence.

The court further held that the 29 October 2018 email did not cancel the agreement. Rather, it was a communication that SATAWU could not perform as agreed and sought to renegotiate payment arrangements. The court reasoned that the agreement could not be unilaterally cancelled by SATAWU. It also considered the later 30 October 2018 exchange and concluded that it did not support an inference that the respondents abandoned the settlement; at most it showed openness to receiving a further proposal without relinquishing rights under the existing agreement.

An important component of the court’s reasoning was the conclusion that the settlement agreement and the acknowledged indebtedness were independent of the default judgment that was later rescinded. Because the settlement was not founded on the judgment, its existence and enforceability were not affected by the rescission. The rescission therefore did not eliminate the respondents’ entitlement to rely on the settlement (or, at minimum, the admitted indebtedness) as the basis for set-off.

The court also dealt with the manner in which the issue was litigated on the papers. The founding affidavit in the restitution application did not address the settlement correspondence, and when set-off was raised in answer, SATAWU’s reply did not meaningfully engage with it. The court considered that SATAWU failed to use the opportunity to refute the factual basis of set-off, and that certain allegations in reply were misleading insofar as they conflated different communications and did not undermine the earlier settlement.

Applying the requirements for set-off, the court held that they were satisfied, namely that there were reciprocal debts between the parties which were liquidated and due. In support of the applicable legal standard, the court referred to the authority it cited for the requirements of set-off. On the established facts, the respondents were entitled to set-off the amount owed by them (the restitutionary obligation arising from rescission and execution) against the amount owed to them by SATAWU (arising from the settlement/admitted indebtedness).

Finally, while the court expressed concern about a potentially broader policy question—whether retention of money after rescission, via set-off, could create unfair strategic advantage—it declined to make any finding because the issue was not pleaded or argued. It stated that, on the present law and record, the respondents had not acted unlawfully or unethically, and that the policy issue should await proper ventilation in a future case.

5. Outcome and Relief

The court granted condonation for SATAWU’s non-compliance with Uniform Rule 49(6)(a) and reinstated the appeal for hearing.

On the merits, the court dismissed the appeal, thereby confirming the dismissal of SATAWU’s application for repayment of the executed funds.

The court ordered SATAWU to pay the respondents’ costs of appeal, including the costs of two counsel, which it considered appropriate given the amount at stake and the significance of the matter.

Cases Cited

Blakes Maphanga v Outsurance 2010 (4) SA 232 (SCA).

Legislation Cited

No legislation was cited in the judgment.

Rules of Court Cited

Uniform Rules of Court, Rule 49(6)(a).

Held

The court held that, although rescission of the default judgment meant that the respondents were in principle obliged to restore the money obtained under the writ, the respondents established a valid defence of set-off. On the papers, a settlement agreement (or at minimum an unequivocal admission of indebtedness) existed independently of the rescinded judgment, and the requirements for set-off—reciprocal, liquidated, due debts—were met. The appeal against the dismissal of the repayment application therefore failed, and SATAWU was ordered to pay costs, including the costs of two counsel.

LEGAL PRINCIPLES

Set-off operates where there are reciprocal debts between the same parties which are liquidated and due, entitling one party to extinguish or reduce its obligation by setting it against the countervailing obligation owed to it, provided the requirements are satisfied on the facts.

A settlement agreement evidenced in clear written terms, recording acceptance of a counter-proposal and prescribing performance with “full and final settlement” effect, is treated as a concluded agreement rather than a mere offer, and cannot be unilaterally cancelled merely because one party later communicates an inability to perform and seeks renegotiation.

Where a settlement agreement or admitted indebtedness arises independently of a judgment that is later rescinded, the rescission does not necessarily undermine the independent basis for a set-off defence against a restitutionary claim following execution under the rescinded judgment.

Condonation for non-compliance with procedural time-limits under the Uniform Rules depends on the adequacy of the explanation, the interests of justice, and considerations of prejudice, and is not granted as of right.