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[2019] ZAECPEHC 50
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Stadler and Others v Ciaravino (1558/2014) [2019] ZAECPEHC 50 (29 August 2019)
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IN
THE HIGH COURT OF SOUTH AFRICA
EASTERN
CAPE LOCAL DIVISION, PORT ELIZABETH
CASE
NO. 1558/2014
Date heard: 15 August
2019
Date delivered: 29 August
2019
In
the matter between:
DE
WITT STADLER
First
Applicant
WATTEC
(PTY) LTD
Second Applicant
ORAFLEX
TRADING (PTY) LTD
Third
Applicant
and
SANTO
CIARAVINO
Respondent
JUDGMENT
RUGUNANAN,
AJ
:
[1]
In a notice of motion issued on 26 October 2018 the applicants seek
rescission of
an order in terms of which the respondent (as
plaintiff) obtained a judgment by default against the applicants (as
defendants).
The background to the matter is set out below.
[2]
On 2 December 2014 this Court,
per
Gqamana AJ, granted the
respondent an order (“the order”) in the following terms:
“
1.
That the Defendants render a full account, supported by vouchers of
the business account
of the First Defendant with Absa Bank Limited
being account number 40[...].
2.
For a debatement of the said account.
3.
That payment to the Plaintiff of whatever amount appears to be due to
him upon
a debatement of the account from whichever of the Defendants
have been unduly benefited by receipt of monies otherwise due to the
plaintiff.
4.
That the Defendants be liable jointly and severally, the one paying
the other
to be absolved, for the payment of costs of suit, together
with interest thereon at the legal rate of 9% per annum payable as
from
date of taxation to date of payment.”
[3]
The order interceded in the absence of the applicants or their legal
representatives
and was granted by default on pain of a notice of bar
for failure to deliver a plea; the defendants alleging the failure
being
due to the fault of their attorneys based in Uitenhage. Without
repeating every averment made in the applicants’ founding
affidavit, the explanation for the failure put forward by the
deponent thereto is that he was provided with incorrect legal
guidance.
On this point there is a lack of sufficient material detail
to explain how the default came about. It is revealing that the
default
appears only to have been ascertained roundabout 10 October
2018 as can be gleaned from an emailed communication from the
applicants’
erstwhile Uitenhage attorneys to the applicants’
current attorneys based in Pretoria.
[1]
Although mindful that a court should be “
loath
to penalise a blameless litigant on account of the negligence of his
attorney,”
[2]
there is ample material in the papers before me indicating that the
applicants acquiesced to the order through substantial compliance.
This is dealt with later in this judgment.
[4]
The applicants seek rescission of the order solely in terms of rule
42(1)(a)
[3]
which provides as
follows:
“
42(1) The court
may in addition to any other powers it may have mero motu or upon the
application of any party affected rescind
or vary:
(a)
an order or
judgment erroneously sought or erroneously granted in the absence of
any party affected thereby.”
[5]
In the particulars of claim the second and third applicants are cited
as companies
with limited liability registered according to the
company laws of South Africa. The respondent’s cause of action
is founded
on an alleged oral agreement with the third applicant
represented by the first applicant, for the acquisition of a 50 %
shareholding
in the second applicant in respect of work on a
construction project secured by the second applicant. The work would
be undertaken
by the second applicant but would be subject to site
supervision by the respondent while the first applicant would deal
with administrative
matters attendant on the execution of the work.
In addition, the respondent and the third applicant would share
equally in the
profits made by the second applicant on the
construction project.
[6]
Mr Laubser who appeared for the applicants contended that the order
was erroneously
granted in that the respondent’s particulars of
claim were excipiable and could not sustain an application for
default judgment;
it being the applicants’ case that section 46
of the Companies Act
[4]
is
applicable. The section is headed “
Distributions
must be authorised by board”
and contains the following sub-sections (those considered irrelevant
are omitted):
“
(1)
A company must not make any proposed distribution unless-
(a)
the
distribution-
(i)
is pursuant to an existing legal obligation of the company, or
a court order; or
(ii)
the board of the company, by resolution, has authorised the
distribution;
(b)
it
reasonably appears that the company will satisfy the solvency and
liquidity test immediately after completing the proposed
distribution;
and
(c)
the
board of the company, by resolution, has acknowledged that it applied
the solvency test, as set out in section 4, and reasonably
concluded
that the company will satisfy the solvency and liquidity test
immediately after completing the proposed distribution.
(2) …
(3) …
(4) …
(5) …
(6) …”
[7]
Taken further, the argument advanced for the applicants is that
section 46 is in the
nature of a suspensive condition and that it was
incumbent on the respondent to have pleaded compliance failing which
the agreement
alleged in the particulars of claim is rendered
unenforceable. To this end, Mr Laubser placed reliance on the case of
Marais
v Standard Credit Corporation Ltd
.
[5]
In that matter, the court was required to consider an application for
the rescission of a default judgment under rule 42(1)(a).
The
plaintiff’s cause of action was founded on an instalment sale
agreement under the Credit Agreements Act
[6]
for payment of an amount of R23 796, 44 being the balance of the
purchase price of a motor vehicle sold to the defendant.
The
case for rescission was that judgment by default had been granted
erroneously because the summons was excipiable in that
it disclosed
no cause of action. The basis for this argument was that section 6(5)
of the Credit Agreements Act required as follows:
“
No credit
agreement shall be binding until the credit receiver has paid at
least the initial payment or initial rental prescribed
by
regulation.”
[8]
In upholding the excipiability argument the court in
Marias
found that it was essential for the plaintiff to have made the
averment that the initial payment was paid by a certain date from
which it followed that from thereon the contract was enforceable.
[7]
Failure to have done so permitted rescission of the judgment under
rule 42(1)(a) on the ground that it was erroneously granted
where no
cause of action was disclosed.
[9]
In this matter, an intrinsic feature of the respondent’s cause
of action in
the particulars of claim is the allegation of an
agreement concluded with the applicants for a shareholding and
distribution of
profits. The founding affidavit to which the first
applicant deposed, avers the existence of an agreement that excluded
shareholding
and distribution of profits. Relying on the reasoning
employed in
Marias
,
the applicants contend that section 46 should have been specifically
pleaded in the particulars of claim. On the other hand, it
is noted
that if recourse is had to the averments in the founding affidavit,
it would appear that section 46 could be relied upon
as a defence
(assuming it to be such). Whether the section was essential for the
particulars of claim to have disclosed a cause
of action or whether
it could be availed belatedly as a defence,
[8]
is insignificant in the light of the very substantial passage of time
that has lapsed since the order was granted which cannot
be viewed in
isolation from conduct offering indications of acquiescence by the
applicants. The applicants’ reliance on the
fault of their
attorney in failing to deliver a plea, whether due to negligence or
incapacity, does not as from what appears below
afford grounds for
rescission.
[9]
[10]
Mr Marais who appeared for the respondent argued that the present
application should be dismissed
by reason of the passage of time
since the date on which the order was granted and the launching of
this application. The application
was launched on 26 October 2018
almost 4 years after the order was granted.
[11]
Moreover, Mr Marias submitted that the applicants have acquiesced to
the order in a substantial
manner. They provided the plaintiff with
necessary documents in compliance with the order. These included bank
statements, trial
balances and proof of payments to the South African
Revenue Service as were needed for debatement of the ABSA Bank
account. In
addition, they made material and significant admissions
at a rule 37 conference prior to the matter being set down for trial
on
14 November 2017 to deal with the remaining issues stemming from
the order.
[10]
[12]
With the aforegoing in mind it is not clear what the applicants will
gain from having the order
rescinded and indeed what prejudice they
will suffer should the order not to be rescinded. As was said in
Bakoven
Ltd v G J Howes (Pty) Ltd
,
[11]
rule 42(1) was designed
“
to
correct expeditiously an obviously wrong judgment or order.”
[12]
It is in the interests of justice that finality in litigation be
preserved rather than eroded. A litigant in whose favour an order
has
been made should be entitled, once a reasonable time after its issue
has lapsed, to know that the last word has been spoken
on the
subject.
[13]
I consider that a
reasonable time in this case to be substantially less than 4 years.
[13]
The power created by rule 42(1) is discretionary and although one
might assume that the applicants
may have established that the order
was erroneously granted, I think it would be a proper exercise of
discretion to say that the
applicants should not be heard to complain
after the lapse of more than a reasonable period of time.
[14]
In the circumstances the application is dismissed with costs.
____________________________
S.
RUGUNANAN
ACTING
JUDGE OF THE HIGH COURT
Appearances:
For
the Applicants: Adv.
J. A. Loubser
Instructed
by FVS Attorneys
c/o
Annali Erasmus Inc.
Port
Elizabeth
For
the Respondent: Adv.
P. T. Marias
Instructed
by Rushmere Noach Inc.
Port
Elizabeth
[1]
Founding affidavit, Annexure I
[2]
Reinecke
v Incorporate General Insurance Ltd
1974 (2) SA 84
(AD) at 92F
[3]
Uniform Rules of Court
[4]
Act No. 71 of 2008, as amended
[5]
2002 (4) SA 892 (W)
[6]
Act No. 75 of 1980, now repealed.
[7]
At 896 D- 897 A
[8]
Kgomo v
Standard Bank of South Africa and Others
2016 (2) SA 184
(GP) at 187F-188C
[9]
Bristow
v Hill
1975 (2) SA 505
(N); De Wet v Western Bank Ltd
1979 (2) SA
1031
(AD);
Bakhoven
Ltd v GJ Howes (Pty) Ltd
1992 (2) SA 466 (E)
[10]
Opposing affidavit paragraph 18
et
seq
[11]
1992 (2) SA 466
(E) at 471E-F
[12]
See
also
Firestone South Africa (Pty) Ltd v Gentrico
AG
1977 (4) SA 298
(a) at 306H
[13]
First
National
Bank of South Africa Ltd v Van Rensburg NO and Others
1994 (1) SA 677
(TPD) at 681F