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[2016] ZAGPPHC 1081
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Dodo Traders CC v Standard Bank of South Africa: Vehicle and Asset Finance Division (6540/2015) [2016] ZAGPPHC 1081 (14 December 2016)
REPUBLIC
OF SOUTH AFRICA
IN THE HIGH COURT OF
SOUTH AFRICA
GAUTENG DIVISION,
PRETORIA
DATE:
14/12/2016
CASE
NO:
6540/2015
Reportable:
No
Of
interest to other judges: No
Revised.
Dodo
Traders
CC
Applicant
and
Standard
Bank of South Africa:
Vehicle
and Asset Finance
Division
Respondent
JUDGMENT
AC
BASSON, J
[1]
This is an
opposed rescission application. The applicant (Dodo Traders CC) is
represented by its sole member Mr Van Zyl (“Van
Zyl”) and
is seeking to rescind a default judgment obtained by the respondent
(Standard Bank of South Africa: Vehicle and
Asset Finance Division –
“the bank”) on 15 April 2015.
[2]
The
applicant pursues the rescission application in terms of rule
31(2)(b) of the Rules, alternatively rule 42(1) of the Rules,
alternatively in terms of the common law.
[3]
It is
common cause that Van Zyl approached the bank with a view of
procuring asset acquisition finance in that the applicant wished
to
buy a tractor and a baler to use in pursuit of its baling enterprise.
[4]
To this
effect on 24 July 2013 Van Zyl negotiated with the bank (represented
by a certain Ms Buys) for finance for the purchase
of the baler.
According to Van Zyl he specifically presented to Buys that he had to
procure a tractor in the near future which
is required to pull the
baler which would then be used as one single indivisible unit in
pursuance of operating the applicant’s
baling enterprise.
[5]
The bank
considered the applicant’s financial statements and approved
the applicant’s application for the purchase of
the baler. The
instalment agreement was concluded shortly thereafter and it was
agreed that the bank would finance the applicant’s
purchase of
a 2013 Bigpack 12770 Baler (“the baler”).
[6]
The baler
was delivered to the applicant during September 2013. On 18 September
2013 the applicant applied for finance for the purchase
of the
tractor. After having considered the application, the bank rejected
the application for reasons not relevant to this application.
[7]
The
applicant claims that on 23 September 2013 he telephonically
cancelled the instalment agreement due to the bank’s refusal
to
finance to the tractor required to be used with the baler. According
to him he also requested the bank to collect the baler
from the
applicant’s premises. As a result of this conversation no
payments were made in terms of the instalment sale agreement
as,
according to the applicant, the instalment agreement was cancelled
and restitution was offered. According to the applicant,
the
respondent failed and/or refused to collect the baler from the
applicant’s premises where it has remained ever since.
[8]
The bank
maintains that because the applicant took delivery of the baler he
was thereafter required to pay the requisite 12 months’
instalments as provided in the instalment agreement. According
to the bank the applicant breached the agreement by failing
to pay
the monthly instalments.
[9]
A
certificate of balance as required was thereafter issued by the bank
and on 22 December 2014 the applicant was notified of its
breach of
the instalment agreement and was required to remedy the breach within
7 days of receipt of the breach notice. The applicant
was also
notified that the breach would entitle the respondent to cancel the
agreement. The breach notice was delivered to the
relevant Post
Office and the relevant SAPO Track and Trace report are attached to
the papers. Because the applicant failed to remedy
its breach of the
instalment agreement, the bank addressed a notice, by way of
registered post to the applicant in terms of which
the instalment
agreement was cancelled. The agreement was cancelled on 26 January
2015.
[10]
Pursuant to
the cancellation of the instalment agreement the bank instituted
action for an order cancelling the agreement and for
the return of
the baler. On 9 March 2015 the summons was served on the applicant’s
chosen
domicilium
citandi et executandi
by affixing a copy to the principal door. Judgment was granted
against the applicant on 15 April 2015 by the Registrar.
[11]
On 20 April
2015 the applicant’s attorneys served a Notice of Intention to
Defend on the respondent’s attorneys. However,
on 22 April 2015
the applicant’s attorneys were advised that default judgment
had already been granted by the Registrar on
15 April 2015.
Explanation
for the default
[12]
It is not
the applicant’s case that the summons was served at an
incorrect address. The deponent admits having received the
summons.
He states that he was absent from his place of residence and only
received the summons on or about 22 March 2015 upon
his return to his
place of residence. In support of his absence Van Zyl attached a copy
of the boat cruise’s inventory ticket
(13 – 20 March
2015). The applicant does not, however, explain why he did not
receive the summons on 9 March 2015.
[13]
Van Zyl
explained that when he received the summons he then instructed his
attorneys to defend the action. A Notice of Intention
to Defend was
thereafter served on the bank on 20 April 2015. Van Zyl admits that
the summons states that he had 30 days to respond
to the affidavit.
He explains, however, that he was under the impression that the 30
days referred to only commenced from the day
that he had found the
summons on his doorstep.
[14]
Despite
some reservations regarding the explanation tendered for the default
I am nonetheless persuaded that the applicant is not
in wilful
default. Although Van Zyl had mistakenly assumed the
dies
for the
Notice of Intention to Defend, the fact that such a notice had in
fact been served on 20 April 2015 (which is the date on
which the
assumed
dies
for the
Notice of Intention to Defend would have expired) is consistent with
his explanation for his default.
Defence
disclosed in the founding affidavit
[15]
In the
founding affidavit the main point raised by the applicant is the fact
that he (representing the applicant as the sole member)
and a certain
Mrs Buys had concluded an oral agreement, an instalment sale
agreement and an anticipated second financing agreement
for the
tractor. According to Van Zyl all three contracts formed one
indivisible transaction and submitted that the entire transaction
was
dependent and conditional upon the entering into of the two credit
agreements (one for the baler and one for the tractor).
[16]
According
to Van Zyl it was therefore an expressed, alternatively tacit term of
the oral agreement that the bank would finance the
applicant’s
acquisition of the baler and yet to be procured suitable tractor
respectively. In pursuance of the first financing
agreement and the
oral agreement the bank then purchased the baler on the applicant’s
behalf and delivered same to the applicant
during September 2013.
[17]
Shortly
thereafter and on 11 September 2013 the applicant located a suitable
tractor and approached the bank in order to procure
the requisite
finance and to enter into a second written financing agreement in
pursuance of the alleged oral agreement.
[18]
Van Zyl
then negotiated with a one Ms Shibaan as Buys was unavailable. It is
common cause that the financing application was rejected.
According
to Van Zyl this was done contrary to the oral agreement that he had
reached with Buys.
[19]
The bank
disputes that an oral agreement as alleged by Van Zyl had been
concluded and maintains that at all times there had to be
two
separate agreements – one for the baler and one for the tractor
and that each application would have been considered
on its own
merits. According to the bank it was therefore always the
understanding that the applicant’s application(s) for
finance
for the purchase of the baler and for the tractor were two separate
applications and that each application would be considered
on its own
merits. In this regard the bank referred to clause 2.2.6 of the
facility letter which states that each credit facility
schedule shall
be a separate and distinct agreement between the bank and the
customer (the applicant).
[20]
In respect
of the alleged oral agreement, the bank relied on an affidavit filed
on behalf of Buys in which she disputes that such
an oral agreement
had been concluded.
Further
defence disclosed in the replying affidavit
[21]
In the
replying affidavit the applicant raised an entirely new and further
defence which Van Zyl explains was only discovered after
the
answering affidavit was perused and after the documentation was
discovered pursuant to the applicant’s notice in terms
of Rule
25(12). It was only then that he realised that he had a further and
absolute defence to the action.
[22]
In this
regard the applicant referred to clause 1 of the Instalment Sale
Agreement which contains a condition precedent for the
granting of
credit by the bank to the applicant. In terms of this condition
precedent the granting of credit by the bank to an
applicant is
subject to the fulfilment of the following condition: The applicant
must provide the bank with written consent of
all the members which
shall be in the form and substance acceptable to the bank, of each of
the members of the closed corporation
providing collateral in respect
of the facility and confirming that - (i) immediately, subsequent to
the transaction the assets
of the applicant, fairly valued are equal
to or will exceed its liabilities (solvency test); immediately,
subsequently to the transaction
the closed corporation will be able
to pay its debts as they become due in the ordinary course of
business for a period of
12 months following the date on which
the solvency test is considered (liquidity test); the terms under
which the financial assistance
is given are fairly and reasonable to
the closed corporation; and all conditions or restrictions, if any,
in respect of the granting
of financial assistance set out in the
founding statement and/or association agreement of the closed
corporation have been satisfied.
[23]
The
applicant called upon the bank to provide it with a copy of the
written consent of all the members of the applicant as envisaged
by
the Instalment Sale Agreement. In response the bank stated that such
consent was not applicable in the case of the applicant’s
application and therefore no such documents were in the possession of
the respondent.
[24]
The
applicant, however, submitted that, because there was no compliance
with the suspension condition, the bank was therefore not
entitled to
enforce the agreement by way of legal action or by any means
whatsoever.
[25]
More in
particular, in the particulars of claim the cause of action is
premised on the existence of a valid contract in terms of
which valid
obligations arose and with which the applicant had to comply. The
applicant submits that it was incumbent on the respondents
to have
pleaded this condition precedent. In consequent, the particulars of
claim do not, according to the applicant, sustain a
cause of action
and therefore renders the judgment itself to be set aside pursuant to
Rule 42 as it was erroneously sought and
granted.
[26]
The
applicant also alleges that it did not breach the terms of the
instalment sale agreement by failing to pay the monthly instalments
thereof because the suspension condition precedent contained in the
agreement had not been fulfilled. Therefore the applicant could
not
have breached the agreement. Moreover, the applicant further alleges
that it had cancelled the credit facility on 23 September
2013 (which
is disputed by the bank).
[27]
In its
reply to the new defence raised in the replying affidavit, the bank
points out that the condition precedent relied upon by
the applicant
only applies when applicable and further that the relevant clause
specifically states that the condition precedent
is for the benefit
of the bank and that the bank may in writing on or before the date
for fulfilment of the conditions extend the
period for fulfilment or
waive any of the said conditions precedent in its sole discretion.
[28]
According
to the bank the applicant is clearly attempting to create a
bona
fide
defence
in circumstances where this condition precedent is not applicable to
the transaction between the applicant and the bank.
In this regard
Buys explains in her affidavit that Van Zyl was at all times the only
duly registered member of the applicant. She
further confirms that
the condition precedent is only applicable in circumstance where a
close corporation is an applicant for
finance and where there are
more than one member.
[29]
I do not
for purposes of this judgment intend to deal with all the submissions
advanced on behalf of the parties in detail. Suffice
to point out
that it is not necessary for an applicant in a rescission application
to fully deal with the merits of his defence.
The
question to be considered at this stage is whether the facts deposed
to by the applicant in his affidavit, if they were to be
properly
pleaded, can be said to disclose a defence to the respondent’s
(plaintiff's) action.
See
in this regard:
[zRPz]Sanderson
Technitool (Pty) Ltd v Intermenua (Pty) Ltd
:
[1]
“
In
Grant
v Plumbers (Pty) Ltd
1949
(2) SA 470
(O)
at
476 BRINK J summarised the effect of South African decisions. An
applicant who claims relief under this Rule, should comply with,
inter
alia
,
the following requirements. His application must be
bona
fide
and not made with the intention of merely delaying plaintiff's claim
and he must show that he has a
bona
fide
defence to plaintiff's claim. It is sufficient if he makes out a
prima
facie
defence in the sense of setting out averments,
which
if established at the trial
,
would entitle him to the relief asked for. He need not deal fully
with the merits of the case or produce evidence that the
probabilities
are actually in his favour. See also
Brown
v Chapman
1938 TPD 320
at 325.”
[30]
On the
papers I am persuaded that the applicant has shown that he has a
bona
fide
defence which
prima
facie
carries some prospects of success not only in respect of the alleged
oral agreement but also in respect of the defence raised in
the
replying affidavit. See in this regard:
[zRPz]
Chetty
v Law Society, Transvaal
[2]
“
In terms of the
common law, the Court has power to rescind a judgment obtained on
default of appearance provided sufficient cause
therefor has been
shown. The term "sufficient cause" defies precise or
comprehensive definition but it is clear that
in principle and in the
long-standing practice of our Courts two essential elements thereof
are: (1) that the party seeking relief
must present a reasonable and
acceptable explanation for his default and (2) that on the merits
such party has a
bona
fide
defence which,
prima
facie
,
carries some prospect of success. It is not sufficient if only one of
these requirements is met; for obvious reasons a party showing
no
prospect of success on the merits will fail in an application for
rescission of a default judgment granted against him, no matter
how
reasonable and convincing the explanation of his default. And ordered
judicial process would be negated if, on the other hand,
a party who
could offer no explanation of his default other than his disdain of
the Rules was nevertheless permitted to have a
judgment against him
rescinded on the ground that he had a reasonable prospect of success
on the merits. It may be that in certain
circumstances, when the
question of the sufficiency or otherwise of a defendant's explanation
for his being in default is finely
balanced, the circumstance that
his proposed defence carries reasonable or good prospects of success
on the merits might tip the
scale in his favour in the application
for rescission. But this is not to say that the stronger the
prospects of success the more
indulgently will the Court regard the
explanation of his default.”
[31]
Accordingly
the following order is made:
1.
The default judgment granted against the applicant on 15 April 2015
under case number 6540/2015 is rescinded and set aside.
2.
The applicant must file its plea within 15 days from the date of the
rescission of the judgment.
3.
The costs of this application are to stand over for later
determination by the Trail Court.
_________________________
AC
BASSON
JUDGE
OF THE HIGH COURT
Appearances:
For
the applicant:
Adv P Lourens
Instructed
by:
Tiaan Smuts Attorneys
For
the respondents:
Adv G Steyn
Instructed
by:
Lownes Dlamini Attorneys
[1]
1980 (4) SA 573
(W) at 575H –
576A.
[2]
1985 (2) SA 756
(A). Quoted from the
headnote.