Brief Summary

Execution — Rescission of judgment — Application for rescission of default judgment — Appellants sought to rescind a judgment granted in favor of the first respondent following their failure to file a plea to a counterclaim — The court a quo dismissed the application for rescission, leading to an appeal — The appellants argued that they were not properly placed under bar and that they had a bona fide defense to the counterclaim — The appeal court held that the appellants failed to demonstrate sufficient grounds for rescission as required by Rule 31(2)(b) of the Uniform Rules of Court.

Comprehensive Summary

Summary of Judgment

1. Introduction

The proceedings concerned an appeal to a full bench of the Gauteng Division, Pretoria against a judgment of the court a quo dismissing an application for the rescission of a default judgment. The default judgment had been granted by the Registrar under Uniform Rule 31(5)(a) after the appellants failed to deliver a plea to a counterclaim following service of notices of bar.

The appellants were Hossein Rezaei N.O., Nasrin Rezaei N.O., Reza Rezaei N.O., and The Best Trust Company JHB (Pty) Ltd N.O., cited in their capacities as trustees of the Neda Property Trust. The first respondent was Michele Adinolfi (the seller under the sale agreement and the plaintiff in reconvention). The second and third respondents were the Registrar of Deeds, Pretoria and ABSA Bank Ltd, respectively, as parties cited in the main action.

Procedurally, the first respondent obtained default judgment on 28 September 2012 on her counterclaim for R830 000 plus interest and costs after the appellants did not plead to the counterclaim. A writ of execution was later issued and served, and the Trust’s immovable property was attached. The appellants then launched rescission proceedings on 29 October 2014, which were dismissed by the court a quo on 25 October 2018. Leave to appeal was refused by the court a quo, but the Supreme Court of Appeal granted leave to appeal to a full bench of this division on 11 November 2019.

The general subject matter arose from a broader dispute about a sale of immovable property, an associated loan recorded in an addendum, and litigation in which the Trust sought to impugn the underlying sale documentation, while the first respondent pursued repayment of the loan via a counterclaim. In the appeal, however, the decisive controversy narrowed to whether the default judgment had been procedurally competent and therefore whether it was susceptible to rescission under Rule 42(1)(a).

2. Material Facts

On 15 August 2008 the Neda Property Trust (through the first appellant) made a written offer to purchase immovable property from the first respondent, which the first respondent accepted in writing, forming a written sale agreement. On 15 September 2008 the parties concluded a written addendum to the sale agreement, again signed by the first appellant on behalf of the Trust and by the first respondent.

Under the addendum the first respondent granted the Trust a loan of R830 000, and the parties agreed that the suspensive condition in the original sale agreement would be deemed fulfilled. On 8 October 2008 the trustees adopted resolutions (signed by all four appellants) confirming the signature of the offer to purchase and authorising the first appellant to sign all documents necessary to effect transfer. Transfer was registered into the Trust’s name on 8 December 2008.

In the main action (instituted 26 October 2010), the appellants sought, in various alternative forms, orders declaring the offer to purchase and resulting sale agreement void or unenforceable and directing retransfer to the first respondent. Their pleaded basis included allegations that the trust deed required two trustees’ signatures, alternatively that the first appellant acted as an agent without written authority, and that the sale agreement therefore did not comply with sections 2(1) and 28(2) of the Alienation of Land Act. They also pleaded, in a further alternative, inducement by misrepresentation and sought cancellation.

The first respondent delivered a plea and, on 13 May 2011, instituted a counterclaim for payment of R830 000 in respect of the loan recorded in the addendum. The appellants failed to deliver a plea to the counterclaim within the time limits in the Uniform Rules.

Notices of bar were served during June and July 2011, calling upon the trustees to deliver a plea within five days. For purposes of the appeal judgment, it was accepted that the Trust was properly placed under bar and that service was properly effected. Despite the bar, no plea was delivered to the counterclaim.

On 4 July 2012 the first respondent applied for default judgment in terms of Rule 31(5), and on 28 September 2012 the Registrar granted judgment against the appellants on the counterclaim for R830 000, interest, and costs. A writ of execution against immovable property followed and was served on 17 October 2014. The rescission application was launched on 29 October 2014, after attachment.

A critical fact for the appeal was that the first respondent did not give the appellants at least five days’ notice of the intention to apply for default judgment when the default relied upon was a failure to deliver a plea. This non-compliance with the proviso to Rule 31(5)(a) was conceded by counsel for the first respondent.

3. Legal Issues

The central legal question was whether the default judgment granted by the Registrar on 28 September 2012 was “erroneously sought or erroneously granted” in the absence of the affected party, such that it was rescindable under Uniform Rule 42(1)(a).

This was principally a dispute about procedural law and the application of procedural rules to largely common-cause facts, rather than a dispute about the substantive merits of the underlying sale, the loan, or the Trust’s defences. The key inquiry was whether the first respondent was procedurally entitled to obtain default judgment under Rule 31(5)(a) given the absence of the required five-day notice, and, if not, whether rescission followed under Rule 42(1)(a) without any need to prove “good cause”.

A secondary issue raised in argument was whether a court retains a discretion to refuse rescission under Rule 42(1)(a) on the basis of alleged abuse of process, notwithstanding a conceded procedural defect in obtaining the judgment. The court addressed this in the context of the scope of Rule 42(1)(a) and the nature of the “error” it targets.

4. Court’s Reasoning

The court located the rescission enquiry within the broader principle of finality of judgments, noting that courts are generally functus officio once a final order is granted, subject only to narrow exceptions created by the Uniform Rules or the common law. It explained that Rule 42 operates against the common-law background and is confined to defined circumstances, including rescission of an order erroneously sought or granted in the absence of an affected party.

Although the founding affidavit in the rescission application dealt with factors commonly associated with rescission under Rule 31(2)(b) (reasonable explanation for default, bona fides, and a defence), the appellants’ argument on appeal proceeded on Rule 42(1)(a). The court accepted that, when Rule 42(1)(a) applies, an applicant is not required to show “good cause” of the kind required by Rule 31(2)(b). The decisive requirement is that the judgment was erroneously sought or erroneously granted in the absence of the affected party.

The court then clarified the meaning of “erroneously granted” as relating to the procedure by which judgment was obtained in the absence of another party, not to the existence or later disclosure of a substantive defence. It reasoned that a judgment cannot be “erroneously granted” merely because a defence later emerges; rather, the error must arise in the process of seeking or granting judgment. Put differently, the question is whether the party who obtained judgment was procedurally entitled to it at the time.

Applying this framework, the court focused on the proviso to Rule 31(5)(a), which peremptorily requires that, where default judgment is sought due to a failure to deliver a plea, the plaintiff shall give the defendant not less than five days’ notice of the intention to apply for default judgment. The court treated this notice requirement as a procedural safeguard intended to warn a litigant of imminent default judgment and to provide an opportunity to avoid that result.

Because it was common cause (and expressly conceded) that the first respondent did not give this required notice, the court held that the first respondent was not procedurally entitled to seek default judgment from the Registrar. On this basis, the judgment was held to have been erroneously sought and erroneously granted within the meaning of Rule 42(1)(a).

In reinforcing this conclusion, the court referred to the statutory source of the Registrar’s power to grant default judgment, emphasising that the Registrar may grant such judgment only “in the circumstances prescribed in the Rules”. Since the Rule-based prerequisites were not met, the Registrar had no proper basis to grant judgment. The court also noted that the prior statutory regime (section 27A of the Supreme Court Act) was materially identical in relevant respects to the current section 23 of the Superior Courts Act.

Having found the procedural defect dispositive, the court held it unnecessary to determine further issues raised in the broader dispute, including arguments about the Registrar’s authority in relation to counterclaims, the potential interaction with the pari passu approach to claim and counterclaim, or the merits of any substantive defence (including the possible effect of section 28(2) of the Alienation of Land Act). The court thus confined itself to the narrow procedural basis for rescission.

On the first respondent’s contention that rescission should nonetheless be refused due to alleged abuse of process by the appellants, the court reasoned that its discretion under Rule 42(1)(a) could not properly be influenced by an abuse-of-process allegation unsupported by evidence before it, particularly where the first respondent had also failed to comply with the procedural safeguards of Rule 31(5). The court further observed that the first respondent had received correspondence enquiring whether judgment had been sought, yet proceeded months later to apply for default judgment without giving the required notice, and that the application for default judgment was brought more than a year after the notices of bar were served. These considerations supported the conclusion that the lack of notice was a material procedural failure that rendered the default judgment rescindable.

5. Outcome and Relief

The appeal against the dismissal of the rescission application was upheld. The full bench rescinded the Registrar’s default judgment granted on 28 September 2012. It also set aside the writ of execution issued pursuant to that default judgment.

The first respondent was ordered to pay the costs of the rescission application and the costs of the appeal.

Cases Cited

Colyn v Tiger Food Industries Ltd t/a Meadow Feed Mills (Cape) 2003 (6) SA 1 (SCA)

Freedom Stationary (Pty) Ltd and Others v Hassam and Others 2019 (4) SA 459 (SCA)

Kgomo v Standard Bank 2016 (2) SA 184 (GD)

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

Wahl v Prinswil Beleggings (Edms) Bpk 1984 (1) SA 457 (T)

Legislation Cited

Superior Courts Act 10 of 2013, section 23

Supreme Court Act 59 of 1959, section 27A

Alienation of Land Act 68 of 1981, sections 2(1) and 28(2)

Rules of Court Cited

Uniform Rule 31(5)(a)

Uniform Rule 31(2)(b)

Uniform Rule 31(6)

Uniform Rule 42(1)(a)

Held

The court held that the default judgment granted by the Registrar on the first respondent’s counterclaim was erroneously sought and erroneously granted for purposes of Uniform Rule 42(1)(a) because the first respondent failed to comply with the peremptory proviso to Rule 31(5)(a) requiring at least five days’ notice of the intention to apply for default judgment when the default is a failure to deliver a plea. As a result, the first respondent was not procedurally entitled to the judgment, and rescission followed under Rule 42(1)(a) without requiring the appellants to establish “good cause” as contemplated in Rule 31(2)(b).

LEGAL PRINCIPLES

A final judgment is generally not susceptible to alteration because the court becomes functus officio, subject to narrow exceptions created by the Uniform Rules or the common law, reflecting the importance of finality and legal certainty.

Uniform Rule 42(1)(a) provides a mechanism to rescind a judgment that was erroneously sought or erroneously granted in the absence of a party affected. The “error” contemplated is procedural in nature and concerns the correctness of the steps taken to obtain the judgment, rather than the later disclosure of a defence on the merits.

Where a party seeking default judgment was not procedurally entitled to obtain it because mandatory Rule-based prerequisites were not met, the judgment is regarded as erroneously granted within the meaning of Rule 42(1)(a). In such circumstances, an applicant for rescission under Rule 42(1)(a) is not required to show “good cause” of the kind required for rescission under Rule 31(2)(b).

Under Rule 31(5)(a), when default judgment is sought due to a failure to deliver a plea, the plaintiff must give the defendant not less than five days’ notice of the intention to apply for default judgment. Failure to comply with this peremptory notice requirement renders the subsequent default judgment procedurally defective and susceptible to rescission under Rule 42(1)(a).

The Registrar’s power to grant default judgment derives from statute and may be exercised only in the circumstances prescribed by the Rules; absent compliance with the Rules, a default judgment granted by the Registrar is procedurally incompetent and falls to be rescinded if Rule 42(1)(a) is engaged.

Hossein N.O and Others v Adinolfi and Others (A390/2019) [2022] ZAGPPHC 857 (8 November 2022)