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[2018] ZAGPPHC 81
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Kruger v ABSA BANK Limited (16/25398) [2018] ZAGPPHC 81 (15 March 2018)
REPUBLIC
OF SOUTH AFRICA
THE
HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, PRETORIA
CASE
NO: 16/25398
NOT
REPORTABLE
NOT
OF INTEREST TO OTHER JUDGES
DATE
15 MARCH 2018
In
the matter between:
KRUGER,
PETRUS
UYS
Applicant
and
ABSA
BANK LIMITED
Respondent
JUDGMENT
SHANGISA
AJ:
Introduction
1
In this application, the applicant seeks rescission of judgment of
this court granted against him on 12
May 2016.
2
It is common cause that the applicant brought the present application
more than two months after he had
acquired knowledge of the default
judgment. Later I will return to deal with the significance of the
latter aspect. In the main,
the applicant disavows any reliance on
rule 31(2)(b) because he contends that the aforementioned rule only
pertains to rescissions
of default judgments where the claim was not
one of a liquidated debt. Consequently, the applicant asserts that
his application
rests solely on common law grounds.
3
The respondent opposes the application on two grounds. Firstly, it
contends that the applicant has failed
to establish that he has a
bona fide
defence to the claim. Secondly, the respondent
contends that the applicant delayed in bringing the rescission
application, and that
accordingly, he was in willful default of the
time constraints imposed by rule 31(2)(b) of the uniform rules of
court. In
any event, so the respondent's argument goes, even at
common law grounds, the applicant has woefully failed to give a
reasonable
explanation for his default. That being the case, the
respondent argues that the applicant has failed to show good cause
why his
non-compliance with rule 31(2)(b) and common law grounds for
rescission should be condoned.
Factual
Background
4
At the outset, I consider it important to sketch a brief factual
background of the matter. On 12 May 2016
the respondent obtained a
default judgement against the applicant for the sum of R347, 000.00
plus interest and costs. The latter
judgment has its genesis in the
written loan agreement entered into between the respondent, ABSA, and
an entity called Port Ferry
Properties 92 (Pty) Ltd (the principal
debtor) in October 2000.
5
On the same day the aforementioned written loan agreement was entered
into, the applicant executed a written
suretyship agreement in terms
of which he bound himself as surety and co-principal debtor to ABSA
for the principal debtor's liability.
It is common cause that the
applicant's liability in terms of the principal debt was limited to
R374, 000.00.
6
Subsequent to the loan agreement, the principal debtor further
obtained a second loan in 2007 of R1 296 167.94
from ABSA. The
respondent extended the second loan to the principal debtor on the
basis that it was covered by the suretyship agreement.
7
It is common cause that two mortgage bonds were registered over the
property of the principal debtor as security
for both the original
and second loans obtained in 2000 and 2007, respectively.
8
Pursuant to the principal debtor's default, on 24 July 2012 ABSA sued
and obtained default judgment against
the principal debtor for the
sum of R1 329 377.05, including an order declaring its property
specially executable.
9 The
property was duly attached and sold in execution, resulting in an
amount of R959, 946.35 being credited
against the principal debtor's
indebtedness to ASSA. However, there still remained a shortfall of
R568, 288.04.
10
On 31 March 2016, some four years after the sale in execution, the
respondent issued summons. Soon thereafter,
on 12 May 2016, the
respondent obtained default judgement against the applicant as a
co-principal debtor for payment of the sum
of R374 400.00. The latter
was the amount for which the applicant had bound himself as surety
and co-principal debtor in terms
of the suretyship agreement.
11
It is common cause that prescription does not arise since the debt
was secured by mortgage bond and the
current debt is now a judgement
debt which prescribes after 30 years.
12
The applicant contends that he did not defend the action because he
did not receive the summons. In that
connection, he contends that the
summons was served on his previous address on which he had last lived
in 2008.
The
Applicant's case
13
The applicant argues that had he received the summons he would have
defended the action because he believes
that he has a bona fide
defence to the respondent's claim. Although the application for
default judgement was granted on 12 May
2016, the applicant avers
that it only came to his knowledge on 2 August 2016 when he was
notified by an email from the attorneys
of the respondent.
14
The applicant claims he was taken aback as he had previously advised
the respondent telephonically when
the second bond was registered
that he would not be held accountable for any further debts incurred
by the principal debtor or
its members.
15
On 15 August 2016 the applicant's attorneys directed a letter to the
respondent in which they denied liability and
demanded consent for a
rescission of the judgement. On 22 September 2016 the applicant says
he approached his current attorneys
of record and instructed them to
apply for a rescission of judgement. In his papers, the
applicant avers that his attorneys
of record deemed it prudent to
instruct counsel to render an opinion on the merits of the
application. On 5 October 2016 counsel
rendered his opinion the
consequence of which resulted in the current application for
rescission.
16
On 12 October 2016 the applicant asserts that his attorneys settled
the founding affidavit in the current application
which was served on
the respondent on 20 October 2016. The applicant was clearly out of
time in bringing the application for rescission.
In my view, he falls
foul of the timeframes set out in rule 31(2)(b). Accordingly, later I
consider whether he has made out a case
for rescission based on
common law grounds he purports to be relying upon.
17
The aforegoing being the case, the applicant contends that it was not
in willful default and that he has accordingly
satisfied the
requirements of rule 31(2)(b). In the alternative, the applicant
contends that even if he falls short of the requirements
of the rule,
he has satisfied the common law grounds for rescission.
Respondent's
defence
18
For its part, the respondent contends that the applicant has failed
to make out a case for rescission as contemplated
both at common law
and in the rules. I turn to consider the respondent's response to the
application.
19
The respondent contends that t e explanation proffered by the
applicant for the delay in bringing the rescission
application lacks
particularity.
20
The respondent points out that the applicant admits service of the
summons on 21 March 2016, and that he had expressly
bound himself as
a co-principal debtor and surety in terms of the suretyship agreement
he signed in 2000.
21
The respondent refutes the applicant's contention that he did not
receive the summons because he has
not lived at the address since
2008. In that regard, the respondent points out that the
suretyship
agreement expressly required all parties to the
agreement to notify the other parties in writing of any change of
their chosen
address. However, the applicant failed to notify the
respondent in writing of his change of address. Worse still, the
applicant
does not allege in his founding papers that he had complied
with clause 12 of the agreement which required that such change of
address be communicated in writing.
Legal
position on service on the party's domicilium
22
In the matter of
Shepard v Emmerich
2015 (3) SA 309
(GJ)
at para 4, the court enunciated the trite principle that service of
process contractually agreed upon must be strictly followed.
Consequently, the respondent in this matter was obliged in terms of
the suretyship agreement to serve the summons at the applicant's
chosen
domicilium.
23
It is not sufficient for the applicant to rely on his failure to
notify the respondent of his change
of address. (See
De Wet and
Others v Western Bank Ltd
1979 (2) SA 1031
(A) at 1044 A-8)).
24
It follows therefore that the fact that the applicant claims not to
have received summons in circumstances where
he had failed to notify
the respondent of the change of his domicilium in writing cannot
avail the applicant.
25
It is worth noting that the applicant was reminded of the outstanding
debt during 2012 and 2013. On his own
version, the applicant was
aware that the respondent sought to recover the debt. He sought to
ensure that the principal debt was
reduced. What is more, in his
founding and replying affidavits the applicant does not dispute the
claim that he sought to effect
renovations to the property with a
view to achieving a reduction of his principal debt as a surety. The
fact that the applicant
does not dispute that he participated in the
process leading to the sale in execution amply demonstrates that he
was aware of the
summons.
26
The aforegoing constitutes common cause facts that are either
admitted or not denied by the applicant in his
papers. That being so,
it follows then that the applicant's assertion that she was unaware
of his obligations to the respondent
in terms of the suretyship
agreement cannot be correct. In my view, the latter further casts
doubt that the applicant has brought
this application on the basis of
a
bona fide case.
Merits
of the Applicant's defence
27
The applicant's defence on the merits rests on the fact that,
contrary to
ABSA's
claim in its particulars of claim, the
applicant denies liability for the second loan. In that regard, the
applicant contends that
the agreement itself stands disputed because
it was neither a written agreement nor was it signed by either ABSA
or the principal
debtor.
28
The applicant alleges that the second mortgage loan agreement is
invalid for lack of signature by the
principal debtor. It is
significant that the applicant admits the second mortgage loan
agreement in paragraph 18 of his founding
affidavit. Furthermore, in
paragraph 19 of his founding affidavit the applicant admits the
registration of both mortgage bonds
which he describe as:
as
security for the original loan in 2000 and the second loan in 2007".
29
The other ground on which the applicant contends that he has a
bona
fide
defence is the fact that he alleges that the suretyship
agreement falls to be rectified. The applicant accordingly asserts
that
he bound himself as surety only for the original loan of October
2000. He avers, without referring to any specific clause in the
agreement, that it was never contemplated in the suretyship agreement
that the principal debtor would be entitled to borrow further
sums of
money and thus expose the applicant to ongoing liability.
30
The obvious hurdle to the applicant's aforementioned contention is
that the suretyship agreement
contained the clause which
categorically stated that the applicant had bound himself not only
for the original loan of October
2000, but also for all other future
debts incurred by the principal debtor. To overcome this hurdle the
applicant contends that
the suretyship document does not accurately
reflect his contentions concerning the agreement because it is
clearly a pro forma
suretyship document which incorporates liability
for any sum which the principal debtor may subsequently owe for any
reason whatsoever.
31
Simply put, the applicant seeks to escape the consequences of the
suretyship agreement by claiming that
the suretyship agreement does
not say what he thought it said when he signed it. In any event, the
applicant does not dispute that
he read, signed and agreed to be
bound by the terms of the suretyship agreement.
32
That the applicant read the agreement is all the more apparent from
the fact that he initialed all its
pages and this provides further
proof that he understood the terms of the agreement. By way of
example, the applicant deleted certain
clauses which he thought were
either not applicable, or he did not agreed to. The signed suretyship
agreement in which the applicant
bound himself as surety and co
principal debtor is replete with the applicant's deletions, initialed
and signed pages.
33
There is an obligation on the parties to the suretyship agreement to
honour and be bound by the terms of such an
agreement. The principles
underlying the doctrine of
pacta servanda sund
are trite, and
consequently, I do not deem it necessary to rehash them here. It
suffices merely to mention that for our present
purposes the
applicant does not suggest that he was in anyway misled by the
respondent to sign the suretyship agreement.
34
Contrary to his latter position towards the suretyship agreement, the
applicant had initially expressed himself bound
by the agreement and
even assisted with the sale in execution of the principal debtor's
property. He only raised concerns with
the agreement when there was a
shortfall and the respondent sought to recover it from him.
35
In my view, the defence raised by the applicant has no merit. It is
clear from the applicant's own version that he
clearly misconceived
his legal obligationsas a surety and co-principal debtor. At any
rate, the applicant seems to have misconstrued
the terms of the
suretyship agreement.
36
Properly construed, the applicant's obligation as surety extended
beyond the initial amount of the original
loan in the suretyship
agreement
"to all amounts owing in future arising for
whatever reasorl'.
The suretyship agreement uses the latter
phrase and terminology several times and throughout the document.
37
It is untenable for the applicant to assert that he did not notice
the fact that the suretyship agreement he
signed bound him for future
debts incurred by the principal debtor. In my view, it cannot assist
the applicant to contend that
he was not aware of the true import and
effect of the suretyship agreement that he signed. That is not a
valid and competent defence
in law.
38
The aforegoing being the case, it therefore seems to me that the
applicant has not raised any bona fide defence
or issue that may
possibly avail him in escaping from the terms of the suretyship
agreement.
39 In
any event, the validity of the second loan agreement is in law
irrelevant. That is the case because the suretyship
agreement
expressly provided that the applicant was bound as a surety and a
co-principal debtor for all future debts of the principal
debtor,
however arising, including a court order.
40
The applicant belatedly purported to raise a constitutional objection
to the clause in the suretyship agreement which
saddled him with
liability for the principal debtor's future debts. The obvious
difficulty with the applicant's constitutional
point is that it was
never pleaded in its founding or replying affidavits. It was only
raised for the first time by counsel during
argument. In my view, it
therefore goes without saying that the unpleaded constitutional point
stands to be dismissed without more.
41
The applicant's liabilities are further evidenced by a certificate as
envisaged in clause 14 of the suretyship agreement
in terms of which
the applicant agreed to be bound by such certificate. The applicant
contended that the proceeds of the property
ought to have been used
by the respondent to satisfy the original debt of the loan of October
2000. However, contrary to the latter
contention, the suretyship
gives the respondent a discretion as to how it chooses to realize the
proceeds from the sale of the
property. Again, I can conceive of no
basis in law warranting interference with the respondent's discretion
as to how it chooses
to realize the proceeds of the property.
42
The applicant fails in my view to make out a case for rectification
of the suretyship agreement. In any event,
it seems to me that the
applicant also fails to disclose a possible basis for the
rectification of the suretyship agreement. I
have already pointed out
that the suretyship agreement provided for future debts and that
these were binding on the applicant as
the surety. It seems to me
that the defence of rectification is premised on the applicant's
failure to appreciate the true import
and the legal nature of the
suretyship agreement.
43
When one has regard to the admitted facts, including those facts
which are common cause between the parties and are
not disputed by
the applicant, it becomes crystal clear that the applicant has failed
to establish that his application was made
bona fide and that he has
a bona fide defence which
prima facie
carries some prospects
of success.
Conclusion
44
To sum
up, I have already mentioned the basis on which the applicant's
contention regarding the issue of service on his domicilium
have no
merit. It suffices merely to emphasise that the undisputed and common
cause facts of this matter indicate that the applicant
was well aware
of the proceedings instituted by the respondent against the principal
debtor. In that regard, the applicant had
gone to the extent of
effecting renovations to the property with a view to appreciating its
value and to ensure that its sale in
execution satisfied the entire
debt of the principal debt owed the principal debtor. It remains
common cause that there was a shortfall.
In my view, the applicant as
surety was bound in law by the debts of the principal debtor arising
from the suretyship agreement.
45
Indeed, it was only when there was a shortfall in the sale in
execution that the applicant belatedly raised the defence
that he had
not received summons since they were served on his previous
domicilium. Needless to say, the latter defence does not
avail the
applicant for reasons that I have already fully set out above. I have
also dealt with the significance of the renovations
and improvements
that the applicant effected on the property before the sale in
execution. The latter remains common cause since
it was never
disputed by the applicant in its founding and replying affidavits.
46
Consequently the applicant has failed to furnish a reasonable
explanation that accounts for his default, and has
not disclosed a
bona fide defence that
prima facie
carries some prospect of
success or merit.
47
In the result I therefore find that the applicant has failed to show
sufficient cause for the rescission of judgement.
Costs
48
The applicant bound himself to a suretyship agreement that provided
for any future debts incurred by the principal debtor.
The agreement
also made provision for costs on an attorney and client scale. It
seems to me that the applicant belatedly raised
the defences
mentioned in this judgment as a result of the shortfall in the sale
in execution of the property. Until that stage,
the common cause
facts amply demonstrated that the applicant was aware of the extent
of the principal debtor's debt as set out
in the summons, and had
even attempted to effect the improvements on the property so that the
entire.debt could be satisfied when
it was sold in execution.
49
When the pplicant realizedthat there was a shortfall, he belatedly
claimed to have never received the summons. He
also raised
unmeritorious defences that could not possibly avail him in law and
were at odds with the express terms of the suretyship
agreement and
the common cause facts.
50
In my view, the conduct of the applicant warrants that he be saddled
with the punitive costs order.
Order
51
In the result the following order is made:
1.
The application for rescission is dismissed.
2.
The applicant is ordered to pay the respondent's costs on an attorney
and client scale.
SHANGISA
AJ
Acting
Judge of the High Court,
Gauteng
Division, Pretoria
DATE
OF JUDGMENT: 15 March 2018
APPEARANCES:
COUNSEL
FOR THE APPLICANT:
Adv. A. WILLIAMSON
INSTRUCTED
BY: OLIEVIER AND MALAN ATTORNEYS
COUNSEL
FOR THE RESPONDENT: Adv. H. VORSTER
INSTRUCTED
BY: SMIT SEWGOOLAM INCORPORATED