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[2016] ZAGPPHC 1008
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Sivubo Trading and Projects CC and Another v Massbuild (Pty) Ltd and Another (13123/15) [2016] ZAGPPHC 1008 (4 November 2016)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA,
GAUTENG
DIVISION, PRETORIA
CASE
NO: 13123/15
4/11/16
REPORTABLE:
NO
OF
INTEREST TO OTHER JUDGES: NO
REVISED.
In
the matter between:
SIVUBO
TRADING AND PROJECTS
CC
First
Applicant
DOMINIC
SKUMBUZO
DUBE
Second
Applicant
and
MASSBUILD
(PTY)
LTD
First
Respondent
TUSK
CONSTRUCTION SUPPORT
SERVICES
(PTY)
LTD
Second
Respondent
JUDGMENT
TEFFO,
J:
[1]
The applicants seek an order for the reconsideration of the
default judgments granted against them by the Registrar of this Court
on 26 March 2015 and 20 April 2015 respectively in terms of Uniform
Rule 31(5)(d) of this Court.
[2]
They contend that the Registrar erred in granting the
aforesaid default judgments against them in the face of fatal defects
and
omissions in the documents presented to him when the application
for default judgment against them was granted. It is further
contended
that good cause has been shown for the setting aside of the
default judgments as the applicants were not in wilful default when
the default judgments were obtained against them and that they have
substantial defences to the respondents' claims.
[3]
The first and second respondents oppose the application.
[4]
The following facts are common cause between the parties: The
first respondent and the first applicant concluded a written
agreement
in terms of which the first applicant applied for a credit
facility with the first respondent (the credit facility agreement).
In terms of the credit facility agreement the first respondent sold
and delivered building materials to the first applicant on credit.
The second applicant who represented the first applicant when the
agreement was entered into, bound himself as surety and co-principal
debtor for the obligations of the first applicant towards the first
respondent in terms of the credit facility agreement. The second
respondent together with the first applicant also concluded a written
construction support services agreement
("the services
agreement')
in terms of which the second respondent rendered
construction support and administration services to
the first
applicant. Simultaneously with the conclusion
of the services agreement the second applicant bound himself as
surety and
co-principal debtor with the first applicant towards the
second respondent for the due and punctual payment of all amounts
which
may be owing and payable or which may in the future become
owing, due and payable by the first applicant to the second
respondent.
[5]
In terms of clause 7.1 and 7.2 of the services agreement the
first applicant would pay the second respondent R15 000,00 exclusive
of VAT as a preparatory services fee and R2 500,00 exclusive of VAT
as a raising fee. In consideration for the administration and
support
services rendered by the second respondent in terms of clause 5.2 (of
the services agreement) the first applicant will
pay the second
respondent (as remuneration for the services rendered) an
administration and support fee of R81 000,00 (Eighty One
Thousand
Rand) exclusive of VAT (clause 7.3). This administration and support
fee shall be paid to the second respondent in the
following manner, a
minimum of R27 000,00 (Twenty Seven Thousand Rand) exclusive of VAT
per month, with the commencing date being
the date of signing the
clearance certificate by the legal director and thereafter on the
first day of each succeeding month for
the term of the project
(clause 7.3). Clause 7.3 further provides that should the first
applicant complete the project before the
term thereof, the full
balance of the total fee shall be due and payable to the second
respondent on the date of the practical
completion of the project as
stated in the third party agreement, or on the date that the first
applicant receives the full amount
owing in terms of the third party
agreement, whichever date is earlier.
[6]
Should material suppliers to which the second respondent gave
undertakings still be owed on this specific project, although the
project is completed, the second respondent shall be entitled to
continue to charge the administration and support fee as set out
in
paragraph 7.3 of the services agreement until full settlement (clause
7.4). Clause 7.5 provides that should materials suppliers
to which
the second respondent gave undertakings still be owed on this
specific project, although the project is completed, the
second
respondent shall be entitled to charge an additional fee of R1 500,00
per hour plus VAT to assist with the recovery of the
supplier's
exposure, where applicable. In terms of clause 7.7 should either the
employer or the first applicant terminate the third
party agreement
before the project is completed, the second respondent shall be
entitled to continue to charge the administration
and support fee as
set out in paragraph 7.3 of the services agreement until full
settlement. Clauses 8.1 and 8.2 provide that the
second respondent
shall provide the applicant with the supplementary services as
defined in annexure "B" and that the
fees charged for
administration and support services shall exclude fees for
supplementary services.
[7]
In terms of clause 11.4 of the services agreement the first
applicant chose the address 4 Quaran Road, Bryanston as its
domicilium
address which address is different from the address
used in the credit facility agreement on page 137, namely, 4 Quern
Road, Bryanston,
as the second applicant's chosen
domicilium
address whereas on page 132 of the bundle of documents, part B,
the registered business address of the first applicant is recorded
as
1st floor York Building, Epsoms Downs, Bryanston.
[8]
The first applicant and the Development Bank of Southern
Africa (DBSA) concluded a construction agreement for the construction
of
100 low cost houses in certain rural areas in Elliotdale at the
Eastern Cape (the third party agreement). This agreement was
eventually
terminated by DBSA.
[9]
According to the sheriff's return of service dated 3 March
2014 the summons was served on the first applicant at 1st floor York
Building, Epsom Downs Office Park, 13 Sloane Street, Bryanston being
the registered business address of the first applicant by affixing
copies thereof to the outer or principal door of the said premises.
[10]
The sheriff's return of service dated 24 March 2015 states that the
summons was served on the second applicant at 4 Quaran
Road,
Bryanston by affixing copies thereof to the outer or principal door
at the given address.
[11]
The second applicant is the sole member of the first
applicant.
[12]
The correct
domicilium
address of the second applicant
is 4 Quern Road, Bryanston.
The
applicant's contentions
[13]
Basically the granting of the default judgment against the
second applicant in favour of the first respondent is challenged on
the
ground that the registrar was not provided with an explanation as
to why the summons was not served at 4 Quorn Road, Bryanston which
address appears in the credit facility agreement. It is contended
that the registrar had erred in accepting that there had been
proper
service on the second applicant in terms of Rule 4(1)(a)(iv) of the
Uniform Rules of Court and therefore granting default
judgment
without proof of service on the second applicant at Quorn Road,
Bryanston.
[14]
As regards the claim by the second respondent, the applicants
also challenge the service of the summons at the second applicant's
incorrect
domicilium
address as discussed above. Although it
is conceded that the summons against the first applicant was served
at its registered place
of business, it is contended that the service
was done by affixing the documents to the outer or principal door,
such service was
not effective as the first applicant was recorded as
being unknown at the given address. The applicants contend that the
respondents
should have rectified the service agreement to reflect
their correct
domicilium
addresses before the default
judgments were obtained against them. It was also contended that the
sheriff should have amended the
returns of service to confirm that
the summons was served at 4 Quorn Road, Bryanston as opposed to 4
Quaran Road, Bryanston which
address did not exist. According to the
applicants, the respondents should have contacted their previous
attorneys of record at
the time and discussed their difficulties of
serving the summons on them and/or could have applied for leave to
serve the summons
by way of substituted service. It was pointed out
that the Registrar was precluded from applying his mind properly to
the second
respondent's application for default judgment as he relied
on facts that were shown to be false. Had he known the true state of
affairs, he would never have granted default judgment on the
documents presented to him.
[15]
It was further contended that the second respondent's claim against
the first applicant is not supported by the services agreement.
The
amount claimed exceeds the total fee of R81 000,00 to which the
second respondent was entitled under the services agreement
in
respect of administration and support services, so it was argued. It
was submitted that the services agreement does not permit
the second
respondent to rely on a signed certificate as
prima facie
proof
of the indebtedness to it and that any allegations made in the
particulars of claim in this regard, are false. It was further
pointed out that the services agreement was accompanied and secured
by an irrevocable instruction to the DBSA, the first applicant's
employer, to pay any payments due to the first applicant into a
project specific bank account which the first applicant did not
have
control of. The account was placed under the sole and absolute
control of the second respondent. The second respondent had
the sole
signing powers on the account. The second respondent has already paid
itself an amount of R205 600,00 from the account.
It has overpaid
itself an amount of at least R124 600,00. Accordingly the second
respondent's claim against the first and second
applicants as it
stood at the time of the default judgment should fail, so it was
argued.
[16]
As regards the claim by the first respondent against the
applicants it was contended that the second respondent undertook to
pay
the first respondent. It was argued that in granting default
judgment in favour of the first respondent, the registrar erred
because
although the credit facility agreement supports the first
respondent's claim against the applicants for payment in respect of
goods
sold without any set off or deduction, the parties varied the
payment terms contained in the credit facility agreement by signed
written payment undertakings in which the second respondent undertook
to secure all payments of materials delivered by the first
respondent
to the first applicant. Accordingly, the first respondent's claim
lies against the second respondent and not the applicants,
so it was
contended.
[17]
The respondents are also criticised for not bringing their
claims to the attention of the applicants' former attorneys at the
time
before they applied for default judgment against them. It was
pointed out that by appointing attorneys of record, the applicants
effectively changed their respective
domicilium citandi et
executandi
by way of written notice in compliance with both the
credit facility and the service agreements. It was submitted that if
the applicants
changed their respective
domicilium
addresses
by way of written notice, they were not in wilful default of
delivering their notices of intention to defend. The respondents
did
not properly serve the summons on them, so it was argued.
[18]
The issue for determination is whether the default judgments
granted by the registrar against the applicants should be
reconsidered
and therefore be set aside in terms of the provisions of
rule 31(5}(d) of the Uniform Rules of court or not.
[19]
Rule 31(5) provides as follows:
"(a) Whenever a
defendant is in default of delivery of a notice of intention to
defend or of a plea, the plaintiff, if he or
she wishes to obtain
judgment by default, shall where each of the claims is for a debt or
liquidated demand, file with the registrar
a written application for
judgment against such defendant: Provided that when a defendant is in
default of delivery of a plea,
the plaintiff shall give such
defendant not less than 5 days' notice of his or her intention to
apply for default judgment.
(b) The registrar may-
(i)
grant judgment as requested;
(ii)
grant judgment for part of the claim only
or on amended terms;
(iii)
refuse judgment wholly or in part;
(iv)
postpone the application for judgment on
such terms as he or she may consider just;
(v)
request or receive oral or written
submissions;
(vi)
require that the matter be set down for
hearing in open court:
Provided that if the
application is for an order declaring residential property especially
executable, the registrar must refer
such application to the court.
(c) The registrar shall record any
judgment granted or direction given by him or her.
(d) Any party dissatisfied with a
judgment granted or direction given by the registrar may, within 20
days after such party has
acquired knowledge of such judgment or
direction, set the matter down for reconsideration by the court."
[20]
The Full Bench of the WLD in
Nedbank Ltd v Martinson
[2005] ZAGPHC 85
;
2005
(6) SA 462
(W) held that good cause does not have to be shown by the
defendant in an application for reconsideration of the default
judgment
granted by the registrar and that there is no question of
onus.
Joffe J said the following at para [26] of the judgment:
"Furthermore, and
different to the Magistrate's Court, Rule 31(5)(d) contains a
valuable safeguard to protect, in particular,
the debtor. It provides
for the reconsideration by the court of a judgment or a direction
given by the registrar within 20 days
after the party concerned has
acquired knowledge of such judgment or direction. This would
obviously include an order declaring
specially hypothecated immovable
property executable other than in the case of s 62 of the
Magistrate's Court Act, the reconsideration
does not cast any onus on
the debtor (my emphasis). The court is required to consider the
application for a default judgment de
novo without any onus on the
debtor. Accordingly, any order made by the registrar declaring
immovable property executable, is open
to reconsideration by the
court, if brought to the attention of the court."
[21]
Davis Jin
Williams v Trifecta 165 (Pty) Ltd and Other[2011]
ZAWCHC 319 made the following remarks in an application for a
reconsideration of a default judgment granted by the registrar:
"It was on the
basis of this dictum that I found in the application for security of
costs that what was required of a court
in a case such as the
present, was to examine, on all of the facts available, whether
default judgment was justified. There is
no onus on either of the
parties. What is required is for the court to analyse the factual
matrix as would have been the case had
the dispute come to the court
initially and make the necessary determination.
This process
becomes important in assessing whether there
is any merit in the reconsideration of this default judgment.
Accordingly it is not
only relevant as to
whether
condonation should be granted, but whether the applicant has
a case for reconsideration under the factual
circumstances so presented."
[22]
In
Pansolutions Holdings Ltd v P
& G
General
Dealers
&
Repairers CC
2011 (5) SA 608
(KZD) Swain J
disagreed with the decision arrived at in
Bloemfontein Board
Nominees Ltd v Benbrook
1996 (1) SA 631
(0) that a
'reconsideration'
of a default judgment granted by registrar
in terms of rule 31(5) does not mean that the court substitutes its
discretion for that
of the registrar, and will only interfere with
the judgment if it is of the opinion that the registrar has erred. In
his view,
the power accorded to the court is precisely that of
substituting its discretion for that of the registrar. At paragraph
[11] of
the judgment he stated the following:
"I am fortified in this view by
the self-evident fact that at the stage when the court
is
asked to reconsider a default judgment granted by the
registrar, it will have before it the contentions of the aggrieved
party,
which in the nature of things, the registrar will have been
ignorant of. The registrar may not have erred in granting judgment,
on the information available to him at the time, but in the light of
the further information available to the court at the time
of
reconsideration of the judgment, it may be apparent that the judgment
cannot stand."
[23]
At paragraph [14] of the above judgment Swain J continued to
state that in his view, a court, in deciding whether to reconsider a
default judgment granted by the registrar in terms of rule 31(5)(d),
would cause no affront to the provisions of this rule, if
it applied
the criteria enunciated by the courts over many years, in determining
whether an applicant has established
'good cause'
for
the rescission of a default judgment by the court. In his view a wide
discretion is intended and factors relating to the reasons
for the
absence, the nature of the order granted and the period during which
it has remained operative, will have to be considered
in determining
whether a discretion should be exercised in favour of the aggrieved
party. In addition, questions relating to whether
an imbalance,
oppression or injustice has resulted, and if so, the nature and
extent thereof and whether redress is open to attainment,
by virtue
of the existence of other or alternative remedies, will have to be
considered.
Service
of summons on the applicants
[24]
It is common cause between the parties that the summons was
served on the first applicant at its registered place of business.
Service
thereof is challenged on the basis that it was affixed to the
outer or principal door of the premises where the first applicant
was
said to be unknown. Furthermore, there were other allegations that
the respondents should not have chosen a
domicilium
address
for the first applicant, which allegations I find irrelevant. The
registered business address of the first applicant is
also recorded
in the credit application (the credit facility agreement). There is
no evidence that this address was ever changed
by the first
applicant. I do not find merit in the contention that by appointing
attorneys to represent them, the applicants have
changed their
domicilium
address by notice. I have not seen any arrangement
or agreement by the parties that the summons should be served at the
business
addresses of each parties' attorneys of record.
[25]
Rule 4(1)(a) requires that service of any process of the court
shall be effected by the sheriff
(inter alia) "in one or
other of the following manners':
(iv)
if the person so
to be served has chosen a domicilium citandi, by delivering or
leaving a copy thereof at the domicilium so chosen;
or
(v)
in the case of a
corporation or company by delivering a copy to a responsible employee
thereof at its registered office or its principal
place of business
within the court's jurisdiction, or if there be no such employee
willing to accept service, by affixing a copy
to the main door of
such office or place of business, or in any manner provided by law.
[26]
The sheriff's return of service dated 23 March 2015 reads:
"On 3 March 2015
at 12:05 at 1st Floor York Building,
Epsoms
Downs Office Park, 13 Sloane Street,
Bryanston, being the registered address of the defendant Sivubo
Trading and Projects CC I duly
served a copy of the
summons
by affixing copies of the abovementioned
documents to the outer or principal door of the said premises. No
other services possible
after diligent search at the given address.
Rule 4(1)(a)(v).
Remarks
The first defendant
is
unknown at the given address. The following
companies were found:
1.
Asia Direct
2.
Carbon Track
3.
Contour Online
4.
Hand in hand
5.
lnnovert
6.
VBGD Town Planners
7.
KALL"
[27]
According to the above return of service the first applicant was not
found at the address. Only the companies or businesses
mentioned were
found. The summons was therefore affixed to the outer or principal
door at the address. It is not known at which
premises' door at the
address were the copies of the summons left as it appears from the
return that various companies were found
at the address. Even though
the address is the registered address of the first applicant, the
copies of the summons were not left
at the outer or principal door of
the first applicant's premises. The first applicant was not one of
the companies found at the
address. There can therefore not have been
proper service on the first applicant.
[28]
As regards service on the second applicant at 4 Quaran Road,
Bryanston, it is common cause between the parties that this address
does not exist. The correct address that is in existence and is the
domicilium
address of the second applicant is 4 Quern Road,
Bryanston. As alluded to in paragraph [7] above, the incorrect
address of 4 Quaran
Road, Bryanston has been recorded in clause 11.4
of the Services agreement, while the correct
domicilium
address
of the second applicant namely, 4 Quern Road, Bryanston appears in
the suretyship agreement. It is important to note that
the claim
against the second applicant is based on the suretyship agreement.
The address that should have been used for service
of the summons on
the second applicant is the one that appears in the suretyship
agreement. An affidavit from the sheriff dated
9 June 2015 together
with an amended return of service dated 8 June 2015 has been annexed
to the answering affidavit. In the affidavit
the sheriff states that
the summons was served on the second applicant on 24 March 2015 at 4
Quorn Road, Bryanston and not at Quaran
Road, Bryanston as previously
stated in the initial return of service of the summons. He further
states that Quorn Road is the
correct spelling of the street name.
The return of service has also been amended to reflect the correct
domicilium
address.
[29]
The applicants contend in their replying affidavit that as and when
the registrar granted default judgment, the return of service
stated
that the summons was served on the second applicant at the incorrect
address and that the sheriff's affidavit and the amended
return of
service, were not before the registrar at the time. I agree that as
and when the matter served before the registrar at
the time he
granted default judgment, the service of the summons on the second
applicant was not proper taking account that the
second applicant
averred that he did not receive the summons. The amendment thereof is
not of assistance to the respondents in
this regard.
The
second respondent's claim against the applicants
[30]
The second respondent contended that it was entitled to its claim in
terms of clause 7 of the services agreement in excess
of the amount
of R81000, 00 in respect of administration and support fees until
full settlement of outstanding claims where the
third party agreement
was terminated before the project was completed. On the other hand
the applicants contended that the claim
by the second respondent was
not supported by the services agreement in that the agreement does
not set out an express basis for
the relief sought by the second
respondent and that the particulars of claim does not place any
reliance on anything other than
clauses 5, 7 and 8 of the services
agreement in support of the relief sought by the second respondent
against the first applicant.
The issues raised are in my view issues
that should be properly dealt with by the trial court. It was also
contended that the second
respondent ignored the arbitration clause
by approaching this court and not referring the matter to
arbitration. It is clear from
the papers that the arbitration clause
is only applicable to the second respondent's claim. In terms of
clause 12 of the services
agreement any dispute arising from or in
connection with this contract shall be referred and finally resolved
by arbitration. I
agree with the contention by the respondents that
an arbitration agreement is no automatic bar to legal proceedings in
respect
of disputes covered by the agreement. A defendant seeking to
revoke an arbitration agreement must first enter appearance to defend
and file a special plea for a stay of the proceedings pending final
determination of the dispute by arbitration.
[31]
The respondents have filed a substantive answering affidavit and
heads opposing the application. In my view the issues raised
in the
application can be best dealt with by the trial court where evidence
will be led and the issues will be fully ventilated.
[32]
After careful consideration of all the facts before me I am of the
view that default judgment against the applicants was not
justified
and that there is merit in the reconsideration of the default
judgment granted by the Registrar.
[33]
The remaining issue is the costs of the application. The applicants
contended that in the light of the fatal defects in the
respondents'
application for default judgment, their failure to disclose critical
information and documentation to the registrar,
and their opposition
to the application, they should be ordered to pay costs on attorney
and client scale. The respondents also
asked for costs on attorney
and client scale on the basis of the allegations made against them by
the applicants in the papers.
In my view the costs of this
application should be reserved for decision by the trial court which
will be in a better position
to determine the validity of the defence
of the applicants to the respondents' claims.
[34]
In the result I make the following order:
34.1
The judgment granted by default by the registrar on 26 March
2015 against the first applicant in favour of the respondents, is set
aside;
34.2
The judgment granted by default by the registrar on 20 April
2015 against the second applicant in favour of the respondents, is
set aside;
34.3
The applicants are granted leave to tile a notice of intention
to defend within 10 days of this order;
34.4
The costs of this application are reserved tor decision by the
trial court.
APPEARANCES
For
the Applicants:
D Ehrich
Instructed
by:
Mbana Attorneys
For
the Respondents:
AP Ellis
Instructed
by:
Coetzer & Partners
Date
of Judgment:
4 November 2016