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[2019] ZAECPEHC 20
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Van Wyk v ABSA Bank Limited; In re:ABSA Bank Limited v Van Wyk and Another (304/2018) [2019] ZAECPEHC 20 (26 March 2019)
SAFLII
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Certain
personal/private details of parties or witnesses have been
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IN
THE HIGH COURT OF SOUTH AFRICA, EASTERN CAPE LOCAL DIVISION, PORT
ELIZABETH
CASE
NO: 304/2018
In
the matter between:
TANYA
VAN
WYK
Applicant
(Identity
Number: 69…)
and
ABSA
BANK LIMITED
Respondent
(Registration
Number: 1986/ 04794/ 06)
In
re:
ABSA
BANK
LIMITED
Plaintiff
(Registration
Number: 1986/ 04794/ 06)
HENNING
JACOBUS VAN
WYK
First
Defendant
(Identity
Number: 66…)
TANYA
CHANTAL VAN WYK
(Identity
Number: 6…)
Second Defendant
JUDGMENT
Poswa-Lerotholi,
AJ
Introduction
1.
The applicant, Tanya Van Wyk seeks the
rescission of a default judgment handed down by this court on 28
March 2018 in favour of
the respondent, Absa Bank Limited. Absa
opposes the application.
2.
The applicant and her ex-husband, Henning
Jacobus Van Wyk (“Mr Henning”) bound themselves as surety
and co-principal
debtor with the principal debtor, Galvaspin CC in
favour of the respondent for the repayment on demand of any sums of
money which
is the principal debtor owed to the respondent. In terms
of the deed of suretyship, the extent of the liability of the
applicant
was R400,000.00. The principal debtor was placed under
voluntary liquidation on 21 September 2017. Relying on the deed of
suretyship,
the respondent then sought repayment of the outstanding
amount from the applicant and Mr Henning on 2 February 2018.
3.
The applicant did not enter an appearance
to defend, as a result, the respondent sought and was granted
judgment by default. The
applicant contends that she never received
the summons and suspects that, due to gale force winds on the day in
question, the summons
and its attachments were blown away.
The Applicant’s
Submissions
4.
It is common cause that on 6 February 2018,
the summons was served by affixing a copy of the summons to the front
gate of applicant’s
property as reflected on the return of
service. The applicant asserts that she was not in wilful default and
it was always her
intention to defend the respondent’s action.
In support of her contentions, she outlines the following significant
events.
5.
On 05 March 2018, responding to the
respondent’s letter of demand, disclosed her defence to the
respondent’s legal representatives.
In response thereto, on 13
March 2018, the respondent’s attorney replies directly to the
issues raised by the applicant and
then goes on to record that –
“
Our
instructions are to continue legal proceedings against your client
and Judgment is being pursued against the sureties of Galvaspin”
6.
The applicant laments the fact that the
respondent did not inform the applicant that process had been issued,
it merely stated that
the legal proceedings will continue. At this
stage, the applicant was unaware that summons had been issued and
there was no mention
of a default judgment. The response from the
applicant makes no mention of the summons issued, neither does the
respondent’s
attorney mention the application for judgment by
default had been lodged the day before on 12 March 2018.
7.
During this period, the parties were
engaged in a separate litigation, wherein the applicant lodged an
urgent application to compel
the respondent to effect the sale and
transfer of applicant’s property. Evidently, the parties were
in contact during this
crucial period. According to the applicant, if
the respondent had been litigating in good faith, it would have
disclosed the action
to the applicant. It was during the course of
this application, on 20 March 2018, that the applicant heard for the
first time,
that the respondent had actually issued summons against
the applicant.
8.
The applicant explains that following this
revelation, she took steps to inquire on the elusive summons.
Before 27 March 2018,
she approached the respondent directly and was
advised to speak to the applicant’s attorney. In a telephonic
conversation
with the respondent’s attorney, the same inquiry
was made. However, on 28 March 2018, the very next day, the
respondent wrongfully
pursued the default judgment, well-knowing that
the applicant had not received the summons and therefore was not in
wilful default.
9.
In demonstrating a bona fide defence, the
applicant presented three main defences. Firstly, the applicant
contends that when Galvaspin
(Pty) Ltd was converted from a company
to a close corporation, Galvaspin CC in January 2006, the applicant
did not sign surety
for Galvaspin CC.
10.
Secondly, the applicant accuses the
respondent of reckless lending. According to the applicant, at all
material times, the respondent
was the sole banker of Galvaspin CC.
As a result, the respondent had intimate knowledge of the financial
affairs of the principal
debtor. Consequently, at the time further
credit of R250 000.00 was extended to the respondent it was apparent
that Galvaspin CC
could not repay the loan. The fact that Galvaspin
went into voluntary liquidation two months later supports the
applicant’s
contention. The respondent’s failure to
properly assess the ability of Galvaspin to service the debt has
caused prejudice
to the applicant as surety.
11.
Thirdly, the applicant submits that the
respondent neglected to carry out the instruction of Mr Henning to
release the applicant
as surety. On 19 June 2014, the applicant and
Mr Henning divorced. The divorce order explicitly stipulated that the
applicant will
be released as surety
.
Accordingly, on 19 July 2013, Mr Henning informed his attorneys that
he had requested, Ms Danielle Smith (“Ms Smith”),
an
employee of the respondent to release the applicant as surety. The
respondent explains five years later that, according to Ms
Smith, the
applicant could not be released from the suretyship because there was
a dispute between the co-sureties. The applicant
contends that there
was no such dispute. The applicant submits that, the circumstances
around the failure to release her from the
suretyship, can only be
fully ventilated in a trial where the respondent furnishes the
applicant with the relevant documents and
the conflicting versions
are tested in open court.
12.
The applicant maintained that the proper
forum for her to prove her defence was a trial court where, she will
be afforded the opportunity
to invoke Rules 35(12) and 35(4) to
discover the documents relevant to her defence. By way of
illustration, the applicant chronicled
a list of documents she would
require from the respondent in order to prove her case.
13.
Finally, the applicant argued that the
respondent was underhanded in its dealings with the applicant. In the
face of the evidence
of an explicit request having been made
timeously for the release of the applicant as surety, the respondent
persisted in its opposition
of this application, refusing to rescind
the order. In the circumstances, the applicant asked this court to
make a punitive costs
order against the respondent.
The Respondent’s
Submissions
14.
In resisting the application, the
respondent submitted that the applicant’s explanation is
without merit. The respondent asserts
that the summons was served on
the applicant on 6 February 2018, the applicant did not file a notice
to defend thus the respondent
sought the default judgment. In
argument, the respondent did not challenge the applicant’s
assertion that she had not received
the summons.
15.
As to the accusation that the respondent
deliberately concealed the action from the applicant. The respondent
averred that in the
correspondence between the applicant and its
attorneys, it had made reference to the action. Specifically, in the
e-mail dated
13 March 2018, to the Applicant’s attorneys,
reference was made to Case no. 304/2018 in the subject heading.
Furthermore,
a confirmation of instructions to proceed with the legal
action against the applicant was made coupled with advice that
judgment
had been sought in the action. Additionally, reference is
made to the legal proceedings on 19 March 2018 and clearly stated
that
judgment by default has been sought. The Order of Court dated 22
March 2018 mentions the impending action between the parties. In
any
event, by 20 March 2018, the applicant was aware of the action. With
the default judgment having been awarded on 28 March 2018,
a week
elapsed without the applicant taking any action towards defending the
matter. In the circumstances, the applicant failed
to discharge the
onus of wilful default.
16.
The respondent averred that the applicant
also did not prove a
bona fide
defence. The change of name of the company does not affect her
obligations as surety. The applicant signed as surety in terms of
section 27 of the Close Corporation Act No. 69 of 1984.
17.
Similarly, the claim of reckless lending is
misplaced. As reflected in the particulars of claim, the action
concerned two accounts
the principal debtor had with the respondent.
The amount claimed was R 740 343.94 in respect of the cheque
account and R
255 849.81 in respect of the term account.
Consequently, judgment was in respect of both the cheque account and
the term loan,
the exposure of the respondent would have been the
same regardless. The respondent denied that it had in anyway
prejudiced the
applicant as surety. Moreover, if there was any
prejudice suffered by the applicant, same did not arise from the deed
of suretyship.
18.
With regard to
the alleged failure by the respondent to release the applicant as
surety. The respondent submitted that i
t
is incorrect to blame the respondent for the failure to release the
applicant as surety.
The
respondent argued that the onus is on the applicant to show that the
creditor had the legal duty or obligation to do so. The
applicant did
not prove such obligation on the part of the respondent. The
applicant’s contention that the respondent forgot
to release
the applicant from the surety is unfounded. According to the
correspondence dated 19 July 2013, it is clear that Mr
Henning was
obligated to release the applicant, as surety, not the respondent.
19.
Moreover,
Clause 11 of the deed of suretyship, stipulates two ways in which the
applicant can be released from the suretyship: the
applicant must
furnish the respondent with a notice of release or the debt has been
paid in full. The applicant has not fully complied
with Clause 11. In
any event, the release is within the discretion of the respondent,
where there is non-compliance with the deed
of suretyship, the
respondent was under no obligation to conduct the release.
20.
As to the
alleged failure by the respondent to oppose the liquidation
application, by the principal debtor. The respondent
stated it
had conducted a financial assessment and it was found that the
principal debtor was indeed in financial distress, therefore
it could
not oppose the application.
21.
Conclusively,
the respondent maintains that the applicant has failed to prove a
bona fide
defence, there is no reasonable explanation for the delay and no
justification for a punitive costs order.
The
Law
22.
The
defendant must show good cause for the rescission of judgment.
It
is settled in our law that ‘good cause’ means that the
applicant must
(a)
give a reasonable explanation for the default;
(b)
show that the application for rescission is
bona
fide
;
and
(c)
show that he or she has a
bona
fide
defence, including a
prima
facie
case on the merits.
[1]
A
reasonable explanation for the default
23.
A
reasonable explanation for the default means that the applicant must
show that she is not in wilful default, as espoused by King
J in
Maujean
t/a Audio Video Agencies v Standard Bank of SA
Limited-
[2]
“
More
specifically in the context of a default judgment “
wilful”
connotes deliberateness in the sense of knowledge of the action and
its consequences ie legal consequences and a conscious,
freely taken
decision to refrain from giving notice of intention to defend,
whatever the motivation for this conduct might be.”
24.
The applicant explains that she was not in
wilful default. There was no proper service. Moreover, the respondent
deliberately hid
the action from her with the intention of obtaining
a default judgment against her. The manner in which the respondent
conducted
itself in obtaining the default judgment should be frowned
upon by the Court. The respondent denies the applicant’s
assertion
and contends that it informed the applicant about the
impending action. I am in agreement with the applicant’s
contention.
The respondent was aware that the summons was merely
affixed to the gate of the applicant’s residence, therefore
there was
a chance that the applicant did not receive the summons.
Moreover, due to a separate application between the parties,
throughout
this period the parties were in contact.
25.
The e-mail dated 13 March 2018 from the
respondent to the applicant bears mention. Instead of the
respondent pointedly informing
the applicant that it shall seek a
default judgment, the respondent makes a perfunctory reference to a
case number and simply states
“
Our
instructions are to continue legal proceedings against your client in
the above matter and Judgment is being requested in the
Action
against the Sureties for Galvaspin.”
The respondent had already filed the application for default judgment
on 12 March 2018, the applicant and its legal representatives
were
entitled to assume that the summons were yet to be served.
26.
Considering the context within which
the e-mail is sent, I find the content of the e-mail to be
insufficient to alert an opponent
of an impending default judgment.
To the contrary, having learnt for the first time on 20 March 2018
that the respondent had issued
summons against her, the applicant
then took the initiative to obtain the summons from the respondent
and respondent’s attorneys
respectively. This coupled with the
explanation for the default demonstrates that the applicant was not
in wilful default. I am
satisfied that the applicant has given a
reasonable explanation for the default.
The application for
rescission is bona fide
27.
There is nothing in the conduct of the
applicant that demonstrates signs of mala fides, or an attempt to
evade the responsibility
she has towards the first respondent. In
fact, none was alleged by the respondent.
A bona fide defence
in the main action.
28.
The
threshold to be met by the applicant when demonstrating a
bona
fide
defence is merely that there is a
prima
facie
defence to the respondent’s claim in the main action. The
applicant will succeed if she can demonstrate a triable issue for
determination by the court if the application for rescission were to
succeed. The defence must have existed at the time the default
judgment was handed down. In
EH
Hassim Hardware (Pty) Ltd v Fab Tanks CC (“EH Hassim”)
[3]
the
Supreme Court of Appeal held that-
“
It
is trite law that an applicant in an application for rescission of
judgment need only make out a prima facie defence in the sense
of
setting out averments which, if established at trial, would entitle
her or him to the relief asked for. Such an applicant need
not deal
fully with the merits of the case and produce evidence that shows
that the probabilities are in its favour. That
is the business
of the trial court
.”
29.
The applicant avers that the rescission
application is
bona fide
,
furthermore, she asserts that she has a
bona
fide
defence in the main action. She
has tabulated the form and nature of her defence to the claim of the
respondent. The applicant
challenges the respondent’s claim on
at least two fronts. The respondent’s reckless lending,
which compromised
the applicant as surety. And, the failure by the
respondent to release the applicant as surety when requested to do
so.
30.
In
resisting the application, the respondent referred me to the dicta of
Bozalek
J in Absa Bank v Expectra
[4]
(“
Expectra
”)–
“…
the
general rule [is] that our law does not recognise an unbounded
‘prejudice principle’
to
the effect that, if a creditor should do anything in its dealings
with the principal debtor which has the effect of prejudicing
the
surety, the surety is released.”
31.
The
thrust of the principle in our law as stated by Bozalek J is that a
surety will not be automatically released from his obligations
if the
surety suffers prejudice as a result of the conduct of the creditor.
The surety can only be released if, the prejudice caused
to the
surety is as a consequence of a breach of a term of the deed of
suretyship, or a breach of a legal or contractual obligation.
[5]
For reasons that will become more apparent hereunder, I find that
there is prima facie evidence that the respondent was in breach
of
its legal obligation.
32.
Relying on the common-law principle which
postulates that if reckless lending is proved against the creditor,
then the surety can
be released. The basis of her claim is that
during July 2017, the respondent granted Galvaspin CC, a further loan
in the
amount of R255 849.81 under account number 3046…. A
mere two months later, Galvaspin CC instituted an application for
voluntary
liquidation. The applicant avers that the respondent
managed the bank account of Galvaspin CC and was aware of its dire
financial
position. Therefore, the extension
of
such credit was reckless in that at all material times the respondent
knew or ought to have known the incapability of
Galvaspin
CC
to
make the re-payment.
The
respondent had an obligation to manage the accounts of Galvaspin CC
so as not to prejudice the applicant as surety. In the circumstances,
the applicant has been prejudiced by the conduct of the respondent
and should be released from the suretyship.
33.
The respondent denies that it recklessly
extended credit to the close corporation. It maintains that the loan
of R250 000.00 advanced
to Galvaspin CC concerned a separate account.
In any event, the exposure of the applicant is limited to R400 000.00
only and would
not be affected by the alleged reckless lending.
34.
Citing
the case of
Di
Giulio v First National Bank of SA Ltd
[6]
the respondent further
argued that the applicant has not met the very stringent threshold
which requires the surety to prove the
prejudice was substantial,
unreasonable or undue burden. The
Di
Giulio
case is distinguishable from this matter in that the test van Zyl J
referred to would be applicable at the trial stage, not in
an
application for the rescission of judgment.
35.
T
here
can be no doubt the respondent has a legal obligation not to grant
credit recklessly. I
t
is not necessary for me to make any finding as to the legal validity
of the defence raised by the applicant. It is sufficient
that the
applicant proves a
bona
fide
defence which is
prima
facie
based on reasonable grounds.
[7]
T
he
legitimacy of the applicant’s claim will be proved at trial.
36.
A further defence raised by the applicant
is that the respondent neglected to release her from the suretyship
when explicitly requested
to do so. The explanation by Smith clearly
supports the applicant’s claim that Mr Henning had requested
that she be released
from the suretyship. It was only on 23
July 2018, more than 5 years later, that the respondent reacted
claiming that Ms Smith
explained that the applicant had not been
released as surety due to a dispute between the applicant and Mr
Henning. It is noteworthy
that this explanation had been elicited by
the applicant’s attorney from the respondent. It is
questionable that a specific
request is made by Mr Henning to the
respondent and simply ignored and only addressed in litigation, five
years down the line.
This uncertainty raises a triable issue and
proves prima facie, that the applicant has a
bona
fide
defence.
37.
It
must be emphasised that, an application for rescission of judgment is
not concerned with whether a party should be punished for
failure to
abide by the court rules.
It
is primarily designed to enable courts to do justice between the
parties.
The
paramount consideration is whether the explanation for the delay
gives rise to a
bona
fide
defence in the main action
.
[8]
[9]
This
court is required to exercise its discretion in light of all the
facts and circumstances of the case.
[10]
38.
It is evident from the two versions that
there are triable issues. The issue of reckless lending for example,
raises questions of
whether the respondent conducted a proper risk
assessment, at the time credit was extended to Galvaspin CC. In order
to do so,
the applicant must have access to the relevant
documentation. Similarly, the question as to whether there was
compliance with the
terms of the deed of suretyship, in requesting
the release of the applicant from the suretyship, the role played by
Ms Smith in
the process and the relevant documentation.
39.
In
all the circumstances, mindful that the object of rescinding a
judgment is to restore the opportunity for a real dispute to be
ventilated.
[11]
All
the above issues clearly raise triable issues and serve to
demonstrate that the applicant has a
bona
fide
defence.
The
applicant has also shown that these triable issues have reasonable
prospects of success. I am satisfied that the applicant met
all the
requirements for rescission of judgment.
40.
I now turn to deal
with the question of costs. The applicant prayed for punitive costs
against the respondent due to the manner
in which the respondent
conducted itself before the default judgment coupled with the
unwarranted defence of this application.
I am not persuaded that the
conduct of the respondent attracts punitive costs.
41.
I find that the
default judgment must be set aside.
42.
The following order is granted: -
(a)
The judgment
by default in case no. 304/2018, dated 28 March 2018, is rescinded
and set aside.
(b)
The applicant
is granted leave to file her plea and counterclaim (if any) within 20
days from the date of the rescission of judgement
being granted.
(c)
The respondent
be ordered to pay the costs of this application.
____________________________
S
POSWA-LEROTHOLI
ACTING JUDGE OF THE
HIGH COURT OF SOUTH AFRICA
EASTERN
CAPE DIVISION, PORT ELIZABETH
Appearances:
Heard
on
: 14
February 2019
Delivered
on:
26 March
2019
For
the Applicant:
Adv.
Veldsman
Instructed by:
Joyzel obbes Inc.
6 Mackay Street
Richmond Hill
Port Elizabeth
Tel: (041) 585 –
4090
E-mail: joyzel@joyzelaw
.co.za
(Ref:
Miss Obbes/hr/T.Van Wyk )
For
the respondent:
Adv I Bands
Instructed
by
:
Mc Williams & Elliot
Inc.
152 Cape Road
Mill Park
Port Elizabeth
Tel: (041) 582-1250
Fax: (041) 373-0407
E-mail:
ed@mcwiliiams.co.za
(Ref:
Ed Murray/as/W78433)
[1]
Colyn
v Tiger Food Industries Ltd t/a Meadow Feed Mills
(Cape)
2003 (6) SA 1
(SCA)
at
page
9E-F.
[2]
1994
(3) SA 801
(C)
at 803H-I cited with approval in
Scholtz
and Another v Merryweather
and
Others
2014 (6) SA 90
(WCC)
at paragraph [66].
[3]
(1129/2016)
[2017] ZASCA 145
(unreported)
at
paragraph [28]
[4]
2017
(1) SA 81
(WCC) at paragraph [42]
[5]
Expectra
at
paragraph [42];
Absa
Bank Ltd v Davidson
2000
(1) SA 1117
at
paragraph [19]
[6]
2002
(6) SA 281
(C) at paragraph [40]
[7]
Investec
Bank Ltd v Lewis
2002 (2) SA 111(C)
at 119E/F-H.
[8]
Sanderson
Technitool (Pty) Ltd v Intermenua (Pty) Ltd
1980
(4) SA 573
(W)
at page 575H–
576A.
[9]
Riddles
v Standard Bank South Africa
[2009]
2 All SA 407
at paragraph [15]
[10]
EH
Hassim
at
paragraph [13]
[11]
Lazarus
& another v Nedcor Bank Ltd, Lazarus & another v ABSA Bank
Ltd
1999
(2) SA 782
(W) at