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[2017] ZAGPPHC 260
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De Beer v Agron Moosrivier (Pty) Ltd (25236/2015) [2017] ZAGPPHC 260 (21 April 2017)
IN
THE REPUBLIC OF SOUTH AFRICA
IN
THE
HIGH
COURT
OF
SOUTH
AFRICA
(GAUTENG
LOCAL
DIVISION,
PRETORIA)
CASE
NO: 25236/2015
DATE:
21/4/2017
REPORTABLE:
NO
OF
INTEREST TO OTHER JUDGES: NO
LAMBERTUS
NICOLAAS DE
BEER
APPLICANT
and
AGRON
MOOSRIVIER
(PTY)
LTD
RESPONDENT
JUDGMENT
KHUMALO
J
INTRODUCTION
[1]
This is an Application for rescission of the Judgement granted in
Default by this court on 23 July 2015 in favour of the Respondent
or
alternatively for the judgment to be suspended until the business
rescue procedure with regard to the close corporation, Koedoeskop
River Farms Alpha CC ("CC") has been finalised.
[2]
The Applicant is the sole director of the CC. The default Judgment
was obtained against him as surety on the debt owed by the
CC. The
following facts are common cause:
[2.1] On 14 July 2014 he
on behalf of the CC signed an acknowledgement of debt, acknowledging
the indebtedness of the CC to the
Respondent in an amount of R6 823
945.99 together with
interest in the amount of R48 905.00 in respect of goods sold and
delivered. In terms of the acknowledgment
of debt the CC undertook to
settle the debt amount in three instalments payable on certain
stipulated dates.
[2.2] The Applicant
signed a suretyship in his personal capacity binding himself as
surety and co-principal debtor with the CC for
the due payment of the
debt in terms of the acknowledgement of debt.
[2.3] The CC failed to
perform in accordance with the terms of its undertaking. As a result
the Respondent issued summons against
the Applicant as surety for
payment of an amount of R 5 027 667.50 that was outstanding at the
time.
The summons was to be
served
at
Applicant's
residence.
Applicant did
not enter an appearance to defend.
Default Judgment was granted
against him on 23 July 2015.
The Respondent proceeded to issue a
warrant of execution which was served by the sheriff
personally on the Applicant
on 5 August 2015. Upon being issued
with a nulla bona return, the Respondent served a s 65 Notice in
terms of Magistrate Court
Act which proceedings are presently
awaiting finalisation of this Application.
[3]
The Applicant's ground for the rescission of the default judgment is
that
he was not in
wilful
default
when he failed to enter an appearance to defend. He alleges that
he did not receive the Summons as they were served by attachment
at
his place of residence, although he received the Writ and the s
65 Notice that were served also at his place of
residence.
[4]
He is also applying for condonation of the late filing of his
application. He alleges that the first time he got knowledge of
the
judgment debt was on 5 August 2015 when the writ was served on him
and he immediately instructed his attorney to apply for
rescission.
His attorney was only able to obtain copies of the summons and the
ancillary documents on October 2015. His attorney
then immediately
instructed Counsel to draft the documents. The Counsel was not
forthcoming with the documents and his attorney
instructed another
Counsel in mid-January 2016. The new Counsel advised his attorney
that he had no case.
[5]
On 7 March 2016 his attorney advised him that he had studied the case
and was of the opinion that he has a bona fide defence
to the
Respondent's claim due to that his position is unique and is not
dealt with by the Companies Act. His attorney then drafted
the
documents which were then served on 15 April 2016. I would assume
that reference is being made to his attorney of record. The
attorney
however has not filed a confirmatory affidavit. The allegations
remain unconfirmed. So anything attributable to the attorney
is
hearsay evidence. The Applicant also does not indicate why the
attorney was only able to serve the Application in April 2016,
a
month after he decided Applicant has got a case when he spent nearly
two months studying the matter. The explanation given is
not
completely satisfactory and what might be slightly convincing is
unsubstantiated by a confirmatory affidavit. Consequently
the court
is not entirely convinced that a
proper case has been
made for
condonation.
Condonation
is therefore granted in the interest of justice and there being a
good reason for the Applicant to bear the costs.
[6]
Furthermore the Applicant did not indicate in terms of what provision
he seeks to have the judgment rescinded. In his heads
reference is
made to Rule 31 (2) (b), the common law . and s 42 (1) (a) without
specifying the intended rule. The submission made
are seemingly in
line with Rule 31 (2) (b).
[7]
Applicant submits that he has a bona fide defence to the Respondent's
claim on the basis that an order was made in
March 2015
placing
the
CC
under
provisional sequestration.
Following that, a business rescue
Application was served and filed. He argues that the placing of
the CC under business rescue
places a moratorium on the surety that
the company might have signed pending finalisation of the acceptance
of the business rescue
plan whilst his personal position is untenable
because he does not have the same protection.
[8]
Further that if the business rescue plan is adopted and the debt of
the Respondent is paid in full or a payment is made in full
and final
settlement thereof, the Respondent cannot proceed with his claim due
to the accessory nature of the surety agreement
and the principal
debt being discharged. On the other hand if the Respondent proceeds
with execution proceedings, the business
rescue procedure would have
been futile and the specific mechanism created by
the Companies Act nullified.
[9]
He acknowledged that the current position is that the statutory
moratorium afforded to the principal debtor is a defence
in
personam
and is not extended to the surety who has a recourse
against the principal debtor. He however argue that having regard to
the positon
of how his indebtedness arose, it is necessary that he
also obtain the same protection as the company. The application of s
133
of the Companies Act must be read to also include individuals who
have signed surety for the debts
of
a company under business
rescue to be afforded the same protection provided by the section
to
the company. An order that he pay the amount would force him into
sequestration which would be detrimental to the CC as he is its
sole
member and it would lead to the destruction of the company.
[10]
Section 133
of
the Companies Act sets a general moratorium on
legal proceedings against the company under business rescue and
reads:
(1)
During rescue proceedings, no legal proceedings, including
enforcement action, against the company, or in
relation to any
property belonging to the company, or lawfully in its possession, may
be commenced or proceeded with in any forum,
except-
(a)
With the written consent of the practitioner;
(b)
With the leave of the court and in accordance with any terms the
court considers suitable;
[c]
As a set off against any claim made by the company in any legal
proceedings, irrespective of whether the proceedings commenced
before
or after the business rescue proceedings began;
…
..
(2) During
business rescue proceeding, a guarantee or surety by a company in
favour of any other person may not be enforced
by any person against
the company except with leave of the court and in accordance with any
terms the court considers just and
equitable in the circumstances
[11]
The position of sureties under these circumstances has been clearly
outlined in
Business Partners v Tsakiroglou
2016
(4) SA 390
(WCC) with reference to
Investec Bank v Bruyns
2012
(S) SA 430 (WCC) albeit not in this Division. In Investec the
following remarks were made:
"'If the lawmaker
had intended to prohibit creditors from enforcing their claims
against sureties of companies undergoing business
rescue proceedings
it would have said so. Such a prohibition would be a drastic
interference with the rights of creditors and would
require clear
language. Here there is no language at all on which to rest the
supposed prohibition.''
[12]
On the start of the proceedings Counsel for both Applicant and
Respondent confirmed that the Application for the CC to be placed
under supervision was dismissed by this court on 30 March 2017,
therefore as of date of hearing of the Rescission Application neither
was the CC under business rescue nor was there a business rescue
application or proceedings pending except a submission by Counsel
that a Notice for leave to appeal the dismissal has been lodged.
Therefore there is no moratorium and no reason for the court to
consider the position of the Applicant visa vis the moratorium on the
debts of the CC arising from the provisions of s 133 which
is only in
the event of the company being placed under business rescue. The
moratorium argument consequently does not arise in
that context.
[13]
The Applicant insisted on proceeding with the rescission still on the
basis of the s 133 moratorium arguing that since a Notice
for leave
to appeal is pending which may or may not be granted the alleged
defence is still available.
[14]
It was therefore important to deal with the status of his defence in
the context of a rescission under Rule 31 (2) (b) and
or under common
law, whether or not the Application for business rescue by the CC has
a bearing on his bona fide defence as he
persists with the alleged
defence, bearing in mind that the Applicant has not denied that at
the time judgment was obtained the
amount was owing, due and payable
and is still owing to the Respondent. He therefore is not disputing
his indebtedness to the Respondent.
In essence he raises no defence
against his indebtedness except the argument about the significance
of the company's moratorium
to his indebtedness.
[15]
In an application for rescission the circumstances that are relevant
are those prevailing at the time when the judgment was
obtained; see
Markel v Absa Bank Bpk
1996 (1) SA 899.
The Applicant must
have had a bona fide defence to the Respondent's claim at the time
when judgement was granted. A possible defence
that presents itself
or only arises after judgment has been granted cannot constitute a
bona fide defence for rescission. The facts
which the Applicant is
reliant upon must have been in existence at the time judgment was
granted. The rules do not provide for
recognition of a defence that
only arises after the judgment has been granted. Also once it is
known that the judgment was correctly
granted, there is no reason to
falsify the past and make life easy for the Defendant;
Lazarus
v
Nedcar;
Lazarus
v
Absa
Bank
1999 (2) SA 782
(W). Even though a
judgment may affect one's creditworthiness, there is no reason for a
court to participate in granting a rescission
of a judgment correctly
granted to a party who does not wish to defend the claim for whatever
reason: see Erasmus Superior Court
Practice 2nd Ed, Van Loggerenberg
01 -369. The Applicant has indicated that he does not intend to
defend the claim but seeks to
be afforded a moratorium on the
enforcement of the debt. Not only is this not allowed but the
situation upon which he is reliant
has never been in existence.
[16]
Counsel was asked whether at the time when judgment was granted by
default whether the proceedings of applying for business
rescue had
started. It was indicated that according to the documentation the CC
was under provisional liquidation since March 2015
and the process of
applying for a business rescue had not started. Nevertheless, since
the CC was under provisional liquidation
the CC would have required a
court order for the provisional liquidation to be set aside and for
it to be placed under business
rescue. The case number under which
the Application was brought was issued in 2016, therefore for all
intents and purposes a fair
inference to be drawn is that the
Application was launched in 2016. At the time of the judgment the
alleged defence was not a possibility
as it was not available to the
Applicant. Besides the true facts are that the CC is under
liquidation and was never at any given
time under business rescue.
[17]
It is unnecessary to further deal with his defence reliant upon s
133, his only alleged bona fide defence.
[18]
The Applicant has furthermore argued that he was not in willful
default when he did not defend the action since he did not
receive
the summons. He disputes that the sheriff properly served the summons
at his residence alleging that it was by attachment
and it never came
to his attention.
[19]
The Respondent's answering affidavit deposed to by one Paul Cook, its
financial manager of the Respondent states that the summons
was
properly served upon the Applicant in accordance with the return of
the sheriff which indicates that on 11 May 2015 at 15:24,
the sheriff
served a copy of the combined summons on Mr J Moraka at the
Applicant's place of residence at Farm Rietvlei, Koedoeskop,
Thabazimbi, a person apparently not less than 16 years of age and in
charge of the premises at the time of service. Respondent
alleges
that it must have come to the attention of the Respondent as he
admitted the premises are his place of residence. The Applicant
did
not respond to these allegation, he did not file a Replying
Affidavit.
[20]
In a rescission application the onus of proof that the Applicant was
in willful default lies with the Respondent which in some
instances
he may prove by way of direct evidence if not by way of inference. He
has to prove that the Applicant was notified of
the action and has
knowingly elected not to enter an appearance; see
Mohomed Abdulha
v Chochan
1933 NPD 334
[21]
The Applicant has failed to file a reply in response to the
Respondent's allegation of direct evidence of the sheriff's service
of the combined summons upon the person that was in charge of his
place of residence. The onus is upon the Applicant to rebut the
evidence of service upon him in the manner that is indicated by the
sheriff since the sheriff's return is prima fade proof of service
unless otherwise proven. The assertion by the Respondent, unrebutted
would therefore stand against the Applicant.
[22]
The Applicant has failed to make a case for either the setting aside
or suspension of the default judgment granted by this
court:
Under
the circumstances I make the following order:
1.
The Application for Condonation is granted with Applicant to pay the
costs;
2.
The Application for rescission or suspension of the default judgment
granted on 23 July 2015 is dismissed with
costs.
______________________
NV
KHUMALO J
JUDGE
OF THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, PRETORIA
For
the
Applicant:
N DuTolt
Instructed
by:
HARTZENBERG INC
Ref: F Hartzenberg/LS/
001547
Tel: 012 362 8994
For
the
Respondent:
APBruwer
Instructed
by:
De Jager Kruger & Van Blerk
Ref: R Melntjes
/RDV/B3/D4740
Tel: 012 362 8990