Summary of Judgment

1. Introduction

The proceedings took the form of an application for rescission or variation of portions of an earlier court order, brought in the Gauteng Local Division, Johannesburg. The applicant was the Metal Industries Provident Fund (the Fund). The principal respondent was Consolidated Steel Industries (Pty) Limited t/a Stalcor (the employer/plaintiff in the main action). Riba, Cliffard (a former employee) and Metal Industries Benefit Funds Administrators (the administrator) were also cited as respondents in the rescission application, reflecting their roles in the underlying dispute.

Procedurally, the order targeted by the application had been granted on 23 June 2020 under case number 41472/2018. The applicant contended that it had not been cited in those proceedings and had not been served with the relevant papers, but that a draft order ultimately included it and imposed obligations directly affecting it. The applicant stated further that the order was only signed and stamped by the registrar on 11 February 2021, served on the administrator on 15 February 2021, and that the applicant only became aware of it on 15 February 2021 when the administrator drew it to its attention. The first respondent initially raised a point in limine relating to alleged late filing, but this point was withdrawn at the commencement of the hearing.

The subject-matter of the dispute concerned whether an order could properly be obtained against the Fund (and affecting its assets and benefit-payment obligations) where the Fund had not been a party to the underlying proceedings and had not been served, and whether rescission was competent under Uniform Rule 42(1)(a) in these circumstances.

2. Material Facts

It was common cause that the second respondent had been employed by the first respondent until 8 August 2018, when his employment was terminated. On 7 November 2018, the first respondent issued summons and instituted action proceedings against the second and third respondents. In that action, the first respondent alleged that the second respondent had breached obligations owed to it and, among other things, had misappropriated its property and made misrepresentations in overtime claims. The relief sought included restraining the third respondent (the administrator) from making pension payments to the second respondent pending finalisation of the matter. When the second respondent did not defend the action, the first respondent obtained default judgment.

It was also common cause that no action was brought against the applicant Fund, and no summons was served on the Fund. The first respondent expressly conceded in its answering affidavit that, on the pleadings and in the relevant notice of motion, the cited “second defendant” was Metal Industries Benefit Funds Administrators (the administrator) and not the applicant Fund itself. Notwithstanding this, the applicant’s complaint was that the eventual order included the Fund’s name and imposed obligations affecting its assets and operations.

The parties’ joint practice note framed the central factual-procedural feature relied upon by the court: the applicant’s name was added to the draft court order “right at the tail end of the matter”, with the effect that an order was issued that operated against the applicant despite its non-joinder and absence from the proceedings. The applicant emphasised that the operative portions of the order directed the administrator to take steps impacting the Fund’s assets, and to stop payments of benefits in terms of the Fund’s rules, thereby affecting the Fund’s administration and its ability to comply with its obligations.

The applicant further relied on the practical implications of the order as framed. It pointed to the order’s direction that an amount equivalent to the plaintiff’s “total damages” (including interest and costs) be deducted “from the Fund” and paid to the first respondent, and contrasted this with the amount that the second respondent allegedly had in the Fund at the relevant time. The first respondent did not dispute that the order, as formulated, had the potential effect alleged by the applicant, but maintained that it was unnecessary to cite and serve the Fund because the administrator acted as the Fund’s agent.

3. Legal Issues

The central legal questions the court was required to determine were whether the applicant had standing as a “party affected” for purposes of Uniform Rule 42(1)(a), and whether the impugned order (insofar as it bound the applicant) had been erroneously sought or erroneously granted in the applicant’s absence.

More specifically, the dispute turned on whether service upon and participation by the Fund’s administrator could be treated as sufficient to obtain relief against the Fund itself, despite the Fund not being cited or served, and despite its name appearing only at the stage of the draft order. This required the court to evaluate the application of the legal rules governing joinder, notice to affected parties, and rescission for an order erroneously granted.

The determination was primarily an issue of law and the application of legal principles to largely common-cause procedural facts, rather than the resolution of factual disputes on the merits of the underlying damages claim.

4. Court’s Reasoning

The court approached the matter through the framework of Uniform Rule 42(1)(a), which empowers a court to rescind or vary an order “erroneously sought or erroneously granted in the absence of any party affected thereby.” The court treated the rescission enquiry as requiring, first, that the applicant demonstrate locus standi by showing a direct and substantial interest in the order, and second, that the order in issue was erroneously and irregularly granted against it in its absence.

On standing, the court relied on the Supreme Court of Appeal’s articulation of the test for a direct and substantial interest, focusing on whether the applicant had a legal interest in the subject-matter that could be prejudicially affected by the order. The court accepted the Fund’s contention that it had such an interest because the impugned order purported to authorise deductions “from the Fund” and required cessation of benefit payments under the Fund’s rules. On the court’s reasoning, these consequences directly engaged the Fund’s ownership and control of its assets and its obligations in administering benefits. The court held that the Fund’s interest was not remote or indirect; rather, the order imposed “onerous obligations” on the Fund and was already causing challenges in the Fund’s administration by directing that benefit payments be stopped.

In addressing whether the order had been erroneously and irregularly granted, the court treated it as significant that the Fund had not been cited and had not received notice of the relevant proceedings, yet was included in the order at the end of the process. It considered this inclusion procedurally irregular, because it introduced a party into the operative effect of an order without the procedural safeguards of citation, service, and the opportunity to be heard.

The court invoked authority explaining that Rule 42(1)(a) is directed at the expeditious correction of an obviously wrong order, including where there has been an irregularity in the proceedings. It also applied the principle that where notice is required and judgment is granted against a party in their absence without proper notice, the judgment is “erroneously granted,” including where the lack of notice may not be apparent from the record. Against that background, the court concluded that a judgment granted against the Fund in circumstances where it had not been notified and was not a party was, in its view, erroneously and irregularly granted.

The first respondent’s contention that the Fund’s remedy lay in appeal rather than rescission was rejected. The court considered Rule 42(1)(a) appropriate on the basis that it exists to correct an obviously wrong order and that, once the court had found the relevant portions of the order to have been erroneously and irregularly granted against a non-joined affected party, rescission was competent.

5. Outcome and Relief

The court granted rescission in terms of Uniform Rule 42(1)(a). It rescinded and set aside paragraphs 7 and 8 of the order handed down on 23 June 2020 under case number 41472/2018.

The first respondent was ordered to pay the costs of the application, including the costs of two counsel.

Cases Cited

De Villiers v GJN Trust 2019 (1) SA 120 (SCA)

Bowring NO v Vrededorp Properties CC and Another 2007 (5) SA 391 (SCA)

Promedia Drukkers & Uitgewers (Edms) Bpk v Kaimowitz 1996 (4) SA 411 (C)

Lodhi 2 Properties Investments CC v Bondev Developments (Pty) Ltd 2007 (6) SA 87 (SCA)

Legislation Cited

No legislation was cited in the judgment beyond the reliance on the Uniform Rules of Court as procedural law.

Rules of Court Cited

Uniform Rules of Court, Rule 42(1)(a)

Held

The court held that the applicant Fund had established locus standi under Rule 42(1)(a) because it possessed a direct and substantial interest in the impugned portions of the earlier order. The order purported to operate against the Fund by directing deductions from the Fund and by stopping benefit payments, thereby affecting the Fund’s assets and administration and potentially prejudicing its legal interests.

The court further held that it was procedurally irregular to include the Fund in the operative terms of a final order where it had not been cited or served and was effectively introduced only at the stage of the draft order. Because the Fund was not given notice and judgment was granted against it in its absence, the impugned order (insofar as it bound the Fund) was erroneously and irregularly granted for purposes of Rule 42(1)(a).

On that basis, paragraphs 7 and 8 of the 23 June 2020 order were rescinded and set aside, and costs (including two counsel) were awarded against the first respondent.

LEGAL PRINCIPLES

A litigant seeking rescission under Uniform Rule 42(1)(a) must demonstrate that it is a party affected by the order, which requires proof of a direct and substantial interest in the order or the subject-matter such that the order may prejudicially affect the applicant’s legal interests.

A party with a direct and substantial interest in litigation and its outcome is, as a matter of procedural law, a party that ought to be joined. An order granted in proceedings where such a party was not joined and where the party’s interests are directly burdened engages principles of procedural regularity and audi alteram partem.

Rule 42(1)(a) operates as a procedural mechanism to correct an order that was erroneously sought or erroneously granted in the absence of an affected party. Where notice to a party is required and an order is granted against that party without proper notice, the order is considered to have been erroneously granted for purposes of rescission, including where the lack of notice may not be apparent from the face of the record.

Where a draft order is framed so as to impose obligations on a person or entity that was not cited or served and was not a party to the proceedings, the inclusion of that party at the end stage of proceedings is an irregularity, supporting rescission in terms of Rule 42(1)(a) rather than requiring the affected party to pursue an appeal.