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[2016] ZAGPPHC 344
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McNaughton and Others v Absa Bank Limited (6058/13) [2016] ZAGPPHC 344 (20 May 2016)
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
GAUTENG DIVISION,
PRETORIA
20/5/2016
CASE
NUMBER 6058/13
Not
reportable
Not of
interest to other judges
Revised
In the matter between:
GARRY
GORDON
McNAUGHTON
1
ST
APPLICANT
GORDON
CLIVE
McNAUGHTON
2
ND
APPLICANT
GARRY
GORDON
McNAUGHTON
3
RD
APPLICANT
ELOIZE
McNAUGHTON
N.O.
4
TH
APPLICANT
and
ABSA
BANK
LIMITED
RESPONDENT
JUDGMENT
THULARE
AJ
[1]
The applicants seeks an order condoning their late filing of the
application, and a rescission of the judgment granted against
them on
3 May 2013; that they be allowed to file a plea and that the
respondent, in the case of opposition like the present, be
ordered to
pay the costs of the application on a scale as between attorney and
client on an opposed scale.
[2]
The applicants are joint trustees of Dyno Diesel Trust (the Trust),
and the first and second applicant applies in that capacity
as well
as in their personal capacity. The Trust is the only shareholder of
Global Automotive and Engineering Specialists (Pty)
Ltd which traded
as Gage Specialists (the company).
[3]
The Trust was the owner of two immovable properties, remaining extent
of erf [...] Phalaborwa Extension 6 and erf […]
Phalaborwa
Extension 5. The third applicant was the owner of portion 4 erf […]
Phalaborwa Extension 5. The company conducted
its business from the
properties. The company held a Momentum Investment Policy which
attracted a cancellation value in the region
of R5 702 700-00 to R6
737 900-00 at the end of 2012.
[4] The respondent was a
trade creditor of the company, which held amongst others credit
facilities, to wit
(a)
two term loans under account numbers 302... and 303... and
(b) an
overdraft facility under account number 405....
[5]
The company concluded a sale of business agreement Canton Trading 291
(Pty) Ltd (Canton) in terms of which the company sold
its engineering
business as a going concern to Canton for R45 million. The sale was
made subject to the conclusion of parallel
agreements in terms of
which the Trust and the second applicant were to sell the properties
to Epivert Investments (Pty) Ltd (Epivert).
On the same day, the
Trust and Epivert concluded a deed of sale in terms of which Epivert
purchased the two immovable properties
owned by the Trust for R9
million. And again on the same day, the second applicant and Epivert
concluded an agreement in terms
of which Epivert purchased the third
property earlier referred to, for R6 million.
[6]
The properties were encumbered with mortgage bonds registered in
favour of the respondent as security for moneys loaned and
advanced
by the respondent to the company. Conrad Kruger Attorneys were
appointed the conveyancers. The respondent appointed Cliffe
Dekker
Hofmeyer as their bond cancellation attorneys.
[7] In
terms of the deeds of sale the R9 million was payable as follows; a
deposit of R500 000-00 was to be paid to the conveyancers
on or
before the date of transfer and an acceptable bank guarantee for the
balance of R8,5 million was to be delivered to the conveyancers
within 30 days from the date of signature, securing payment thereof
on date of transfer. The R6 million was payable to the conveyancers
on date of transfer, for which amount Epivert would deliver an
acceptable bank guarantee within 30 days from date of signature.
[8]
The company held a Momentum Investment Policy which attracted a
cancellation value in the region of R5 702 700-00 to R6 737
900-00 at
the end of 2012. The company ceded the policy to the respondent as
security for moneys loaned and advanced by the respondent
to the
company. Notarial bonds were registered over the movable assets of
the company in favour of the respondent for money loaned
and advanced
by the respondent to the company.
[9]
Various disputes arose between the parties pursuant the sale of
business agreement, and the deeds of sale of the properties,
which
disputes were referred for arbitration and culminated into a written
settlement agreement, which award was also made an order
of court.
[10]
The respondent was not party to the disputes or the settlement
agreement which was made an order of court. The nature, scope
and
content of the involvement of the respondent contemporaneous with and
pursuant the settlement is in dispute.
[11]
The respondent issued summons against the company and the applicants
on 31 January 2013, wherein the respondent sought payment
from them
for the sums of R10 704 131-12, R5 456 521-41 and R3 278 101-93
plus interest and costs. These were the amounts
the respondent
claimed were the indebtedness of the company in respect of the
overdraft facility as well as the two term loan agreements.
The
summons were served on 11 February 2013 and default judgment was
granted on 3 May 2013.
[12]
The respondent issued an application for the winding up of the
company. The cause of action was the same as that which informed
the
summons, and that is, the indebtedness in terms of the overdraft
facility and the two term loans. A provisional order was granted
and
later a final order.
[13]
The respondent concedes that they received an amount of R3 200 000-00
in respect of the Momentum policy on or about 24 August
2012. The
respondent also concedes that two advance dividends of R3 500-000-00
plus R1 500 000-00 were received from the liquidators
of the company
on or about 11 October 2013. The respondent also concedes that they
received R10 500 000-00 from the proceeds of
the sale of the
immovable property on or about 24 August 2012. The respondent
acknowledges that at the time they applied for default
judgment, they
had already received an amount of R13 700 000-00. This amount
was received some 5 months before they issued
summons. Subsequent to
the judgment being granted, around 5 months later in October, they
received another R5 million from the
liquidators as earlier
mentioned.
[14]
In their opposition to the application, the respondent contends that
the amount received is less than the aggregate amount
for which
summons was issued, which was R19 438 754-46 and that is why the
applicants remain indebted to the respondent and that
further
interest has accrued to the outstanding amount. To that end, the
respondent argues that the applicants have no bona fide
defence
against the claim. The respondent’s view is that the applicants
remain liable to the respondent, limited to the amount
claimed, less
payments received, and thereon interest added.
[15] The applicant’s
case is further that Canton was wound up on 27 November 2012 and that
the movable assets of the company
which were transferred to Canton
were realized in an auction from which the Auctioneers raised
proceeds in the amount of R13 407
882-00. Plaintiff’s case is
that the bulk of the proceeds would and should have been paid to the
respondent pursuant to the
notarial bonds registered in favour of the
respondent over the movables concerned. The plaintiff avers that the
respondent should
clearly and concisely state what amounts it claimed
and received from the winding up of Canton. The respondent chose not
to set
out any facts hereon, opting for a bare denial in the face of
such serious allegations.
[16]
The respondent sought and was granted judgment in the sum of R19 438
754-46 together with interest and costs. The respondent
issued
summons for an amount of R13 700 000-00 more than it was entitled to
do, and knowingly thereafter applied for default judgment
for an
incorrect amount, at the time that to its knowledge its claim only
amounted to R5 738 754-46 at best.
[17]
The respondent concedes that the applicant’s indebtedness was
further reduced when it received payments received from
the proceeds
of the winding up of the company. The applicants dispute that the
respondent were correct in paying back an amount
of R818 987-88 to
the liquidators of the company. The respondent is silent on what
amount, if any, they received from the proceeds
of the winding up of
Canton, which, in my view, has the reasonable prospect to further
reduce the indebtedness of the applicants,
if not result in a surplus
due to them.
[18]
The applicants are also disputing the computation of the outstanding
amounts. It is applicant’s case that the respondent
debited
legal fees to the overdraft facility, which the applicants say it was
not entitled to do and for which no taxed bill exists.
The aggregate
sum debited to the overdraft account is given as an example.
[19]
It is against this background, of the conduct of the respondent, that
the conduct of the applicants should be approached when
they got to
know about the judgment against them in November 2014 when the
sheriff attempted to attach certain of the applicants’
assets.
[20]
The applicants became aware of the judgment against them around
November 2014, and only filed the application for rescission
of the
judgment against them in July 2015. In my view, in a condonation
application, the applicants must furnish an explanation
for the
delay in sufficient detail to enable the court to understand their
mental attitude towards the consequences of their delay,
and for the
court to be able to assess their conduct. The court must consider
whether, with the full knowledge of the consequences,
the applicants
deliberately chose not to approach the court for rescission. Simply
put, once aware, were they indifferent to the
judgment against them
and its consequences?
[21]
The applicants decided to engage with the Bank Ombudsman from January
2015 to 15 April 2015. The Ombudsman advised the applicants
in
writing that the respondent would contact them with a view to settle
the matter. Between April and May 2015 the applicants were
engaging
with the respondents with a view to settle the matter. It must be
mentioned that the respondent had sued the applicants
for monies
which at the time applicants believed were unaccounted for, in
respect of the sale of immovable property, when in fact
the
respondent had received such monies. Towards the end of May 2015, the
applicant issued summons against the respondent and thereafter
also
launched this application. I am unable to conclude that the
applicants were indifferent to the judgment and its consequences
to
them.
[22]
Their action manifested an intention to have the dispute resolved. In
my view, they cannot be faltered for having considered
other
available dispute resolution mechanisms, which are also effective and
efficient, and perhaps cost effective as compared to
civil litigation
in a High Court, until such remedies are exhausted. In my view, a
proper case has been made out for condonation
to be granted.
[23]
The legal position is set out in Colyn v Tiger Food Industries Ltd
t/a Meadow Feed Mills (Cape)
2003 (6) SA 1
(SCA) at 9 paragraph 11 by
Jones AJA as follows:
“
[11]
I turn now to the relief under common law. In order to succeed an
applicant for rescission of a judgment taken against him
by default
must show good cause (de Wet and others v Western Bank Ltd (supra).
The authorities emphasise that it is unwise to give
a precise meaning
to the term ‘good cause’. As Smalberger J put it in HDS
Construction (Pty) Ltd v Wait:
‘
When
dealing with words such as “good cause” and “sufficient
cause” in other Rules and enactments the Appellate
Division has
refrained from attempting an exhaustive definition of their meaning
in order not to abridge or fetter in any way the
wide discretion
implied by these words (Cairns’ Executors v Gaarn
1912 AD 181
at 186; Silber v Ozen Wholesalers (Pty) Ltd
1954 (2) SA 345
(A) at
352-3). The Court’s discretion must be exercised after a proper
consideration of all relevant circumstances.’
With
that as the underlying approach the Courts generally expect an
applicant to show good cause (a) by giving a reasonable explanation
of his default; (b) by showing that his application is made bona
fide; and (c) by showing that he has a bona fide defence to the
plaintiff’s claim which prima facie has some prospect of
success (Grant v Plumbers (Pty) Ltd, HDS Construction (Pty) Ltd
v
Wait supra, Chetty v Law Society, Transvaal).”
[24]
The summons was served at the erstwhile business premises of the
company. The premises were found unoccupied save for the guards
from
a security firm, who were, on the face of it, preventing vandalism to
the deserted property. The other address where service
was effected
was also unoccupied. These facts support, and do not gainsay, the
version of the applicants that they were not made
aware of the action
against them, before judgment was granted. I am satisfied that the
applicants have presented a reasonable and
acceptable explanation for
their default.
[25]
The applicants have an absolute defence to the amount of R13.7
million of the respondent’s claim. The amount had been
paid by
the applicants at the time that the judgment was sought and was
granted. The judgment in respect of that amount stands
to be
rescinded. (
Frenkel, Wise & Co. (Africa) (Pty) Ltd v
Consolidated Press of SA (Pty) Ltd
1947 (4) SA 234
(C). This
amount, for which judgment was erroneously sought, is the larger part
of the capital amount claimed.
[26]
When default judgment is sought, the court considers the facts set
out in the particulars of claim, and considers only those
facts and
accepts them as correct and as necessary for the determination of the
issues in favour of the applicant. The facts set
out in the
particulars of claim, for purposes of judgment by default, are
accepted for their evidential content as well as their
probative
value. The court determines the issues and averments in support of a
party’s case, only from the papers submitted
to court. An
applicant for judgment by default has a duty to the court to ensure
that all necessary and relevant facts are before
it. In its
particulars, the party defines the issues between the parties, for
the benefit of the other party as well as the court.
[27]
Where part of the amount claimed has been paid, fairness and
consistency require that the whole truth be disclosed to the court.
In my view, a party cannot be allowed to secure an advantage to
which, but for its non-disclosure, it would not have been entitled
to. In this instance, the respondent cannot be allowed to secure the
benefit of a judgment to which it was not in law entitled
to at the
time that judgment by default was sought. White J in
Nyingwa v
Moolman NO
1993 (2) SA 508
(Tk GD) at 510F-G expressed himself as
follows:
“
It
therefore seems that a judgment has been erroneously granted if there
existed at the time of its issue a fact of which the Judge
was
unaware, which would have precluded the granting of the judgment and
which would have induced the Judge, if he had been aware
of it, not
to grant the judgment.”
[28]
In this matter, when the respondent applied for judgment by default,
it is plain that not all the facts were before the court,
which facts
ought to have been before the court, to enable the court to determine
whether the applicant was entitled to the relief
it sought, with
specific reference to the amount it claimed. These facts were known
to the respondent at the time that the judgment
was applied for. It
is important that a court not only be placed in a position, but that
it must be placed in an informed position
in order to return a just
decision, in exercising its discretion whether or not to grant a
judgment by default.
[29]
On the facts available to it, in truth, it was impossible for the
court to give a just pronouncement informed by the true facts
as, in
my view, the applicants have shown that the respondents breached
their duty to be frank, candid and truthful with the court
when
judgment by default was applied for. The material facts and
circumstances were available to the respondent, but the respondent
failed to disclose them to the court. In my view, I am in no position
to exercise my discretion in favour of dismissing the application
for
default in part, as the respondent prays that I do. I find myself
unable to allow a judgment to stand, for an amount which,
on the
facts before me, may materially be conjecture, if not estimates, and
more still, based on factors and recalculations after
the fact, and
not on the true position as it prevailed as at the date default
judgment was granted.
[30]
The bare denial of the respondent on the Canton liquidation money as
alleged by the applicants is not helpful. In actual fact,
I do not
know how the respondent expects this court to interpret that bare
denial to ascertain what they mean. It is not only possible,
but most
probable, that the respondent received some satisfaction from the
proceeds of the sale of movable property of the company.
The
multi-faceted and inter-sectoral manner in which the respondent
meticulously sought to recover from any of its known possible
debtors, under the circumstances, makes it highly improbable that
they would have left out recovery from the proceeds of the company’s
movable assets.
[31]
Moreover, there are further facts set out, relating to whether the
mortgage bonds should have been cancelled or not. There
is also the
question whether Momentum paid out more than what the respondent
credited the applicants, and whether the payment of
R818 987-88 to
the liquidators should be explained. Furthermore, the applicants have
filed a claim for damages for amounts in excess
of the balance that
the respondent alleges they owe. These are disputes which can only be
ventilated through evidential material.
[32] The applicants are,
through this application, approaching the court to exercise its
discretion primarily to do justice between
the parties with the
object of restoring a chance to air the real dispute between the
parties. In my view, the applicants have
set out facts with
sufficient particularity which, if proved at trial, may stand as a
valid answer to the claim against them. The
applicants have
illustrated that they have a
bona fide
defence to the
respondent’s claim.
For
these reasons, I make the following order:
1.
The Court condones the applicants’
non-compliance with the Uniform Rules of Court with regards to the
time periods pertaining
to the prosecution of this application and
the Court authorizes the prosecution of this application for
rescission of judgment.
2.
The default judgment granted against the
applicants on 3 May 2013 is hereby rescinded.
3.
The Applicants are ordered to file their
plea in respect of the action instituted by the respondent in this
matter within 15 days
of the grant of this order.
4.
The respondents to pay the costs of this
application, including the costs of two counsel.
________________________
DM
THULARE
ACTING
JUDGE OF THE HIGH COURT