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[2007] ZASCA 85
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Lodhi 2 Properties Investments CC v Bondev Developments (Pty) Ltd (128/06) [2007] ZASCA 85; [2007] SCA 85 (RSA) ; 2007 (6) SA 87 (SCA) (1 June 2007)
THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
Reportable
CASE NO: 128/06
In the matter between :
LODHI
2 PROPERTIES INVESTMENTS CC
...............................
First Appellant
LODHI 3 PROPERTIES INVESTMENTS
CC
...............................
Second Appellant
and
BONDEV
DEVELOPMENTS (PTY) LTD
...............................
Respondent
________________________________________________________________________
Before:
STREICHER,
LEWIS, PONNAN, MAYA JJA & SNYDERS AJA
Heard:
23
MAY 2007
Delivered:
1
JUNE 2007
Summary:
Rescission
of default judgments – Rule 42(1)(a) – default judgment
to which plaintiff procedurally entitled cannot be
said to have been
granted erroneously in the light of subsequently disclosed defence.
Neutral citation: This judgment
may be referred to as
Lodhi
2 Properties v Bondev
[2007] SCA 85 (RSA)
________________________________________________________________________
J U D G M E N T
________________________________________________________________________
STREICHER JA
STREICHER JA:
[1] The applicants apply for leave to appeal against a
judgment in the High Court, Johannesburg in terms of which that court
(the
court a quo) dismissed an application for the rescission of two
separate judgments in favour of the respondent, one against the first
applicant and the other against the second applicant.
[2] The applicants are close corporations with one
Muhammed Islam Lodhi as their sole member. The respondent is a
property developer.
On 30 March 2001 and in terms of a written
agreement of sale the first applicant purchased Erf 4052, Eldoraigne
Extension 40 (at
the time a proposed township) from the respondent
for a purchase price of R119 000. On the same day the second
applicant, in
terms of an agreement of sale with identical terms and
conditions, purchased Erf 4054, Eldoraigne Extension 40 for a
purchase price
of R129 000. Ten per cent of the purchase price
was payable upon signature of the agreement to attorneys Weavind and
Weavind
who had to hold the amount in an interest bearing trust
account. The interest was to accrue for the benefit of the
respondent. The
balance of the purchase price was to bear interest at
a rate equivalent to the prevailing prime overdraft rate charged by
the Absa
Bank as from the date of proclamation of the township. The
only evidence as to when proclamation took place is a statement by
the
respondent to the effect that proclamation took place ‘during
approximately April 2001’. Transfer of the properties was
effected on 1 May 2001. The applicants did not disclose when the
deposit was paid or what amount, if any, was paid in respect of
interest. In the result there is no evidence that any interest was
paid by any of the applicants or that any interest was received
by
the respondent.
[3] The agreements of sale provided that the purchaser
had to take occupation of the property sold on date of proclamation
of the
township and that the purchaser would from that date onwards
‘be liable for the payment of all rates and taxes, imposts, or
other municipal charges and Home Owners Association levies, levied
thereon.’ Again the applicants did not disclose what amount,
if
any, was paid in respect of such levies or rates and taxes and again
there is, in the result, no evidence that any amount was
paid in
respect of levies or rates and taxes.
[4] Clause 11 of the agreements of sale provides as
follows:
‘
BUILDING PERIOD
The purchaser undertakes to erect buildings on the PROPERTY to the
reasonable satisfaction of the SELLER within eighteen (18) months
of
date of proclamation, failing which the SELLER shall be entitled (but
not obliged) to claim that the PROPERTY be retransferred
to the
SELLER at the cost of the PURCHASER against repayment of the original
purchase price to the PURCHASER, interest free.’
[5] The applicants failed to erect any buildings on the
properties within 18 months of proclamation and for a period of two
years
thereafter. As a result the respondent on 4 March 2005 served
an application on each of the applicants at their registered address
in terms of which it claimed retransfer of the properties against
payment of the amount of R119 000 in the case of the first
applicant and R129 000 in the case of the second applicant.
[6] The registered address of the applicants where the
applications were served was the address of the applicants’
erstwhile
auditors E B Mayat & Associates. By the time that
service was effected the applicants had changed their auditors and
since September
2001 their auditors had been Moola & Associates.
However, due to an oversight, they had not changed their registered
address.
The applications only came to the knowledge of the
applicants on 24 March 2005 when default judgments for the relief
claimed by the
respondent had already been granted. The applicants
thereupon applied for the judgments to be set aside on the basis that
they had
been erroneously sought or granted. The court a quo
dismissed the application and also an application for leave to appeal
against
its judgments. The subsequent application to this court for
leave to appeal was referred for oral argument in terms of
s 21(3)(c)(ii)
of the Supreme Court Act 59 of 1959.
[7] Rule 42(1)(a) provides:
‘
The
court may, in addition to any other powers it may have,
mero
motu
or
upon the application of any party affected, rescind or vary:
An order or judgment erroneously sought or erroneously granted in
the absence of any party affected thereby;
. . . .’
[8] The applicants submit that the judgments were
granted erroneously for two reasons. The first error according to
them is that a
notice in terms of clause 8 of the agreements to
rectify the breaches of the agreement was required before retransfer
of the properties
could be claimed, alternatively that a notice
should in any event have preceded the launching of the applications.
Secondly they
contend that the judgments were granted erroneously
because certain facts of which the judge who granted the judgments
were unaware
would have precluded him from granting the judgments had
he been aware of such facts. In this regard they submit that as a
result
of the respondent’s withdrawal from the agreements, and
in terms of the agreements, they forfeited the right to restitution
of rates and taxes, levies and interest paid under the agreements.
They contend that the forfeiture is subject to moderation in terms
of
the Conventional Penalties Act 15 of 1962.
[9] None of these submissions were foreshadowed in the
affidavits filed by the applicants in support of their application
for rescission
of the default judgments. In any event there is no
merit in either of them.
[10] Clause 8 of the agreements provides as follows:
‘
If the PURCHASER breaches any of the
provisions of this Agreement, and fails to comply with a written
notice by the SELLER to rectify
such breach, within 7 (SEVEN) days,
calculated from the date on which the notice was handed to the
PURCHASER or sent to him by prepaid
registered post the SELLER shall
be entitled without prejudice to any of its rights which the SELLER
may have in law, to: . . . ’
[11] Clause 11, on
the other hand, specifically deals with the failure of the purchaser
to perform his obligation to erect buildings
on the property to the
reasonable satisfaction of the seller within 18 months of date of
proclamation and provides that the seller
would in those
circumstances be entitled to claim retransfer of the property against
payment of the purchase price. It is, therefore,
clear that in the
case of such a breach no notice is required. See in this regard
Consolidated
Employers Medical Aid Society v Leveton
1999 (2) SA
32
(SCA) at 41A-C where Schutz JA agreed with Prof Christie that
there is no reason why the maxim
generalia
specialibus non derogant
(general
words do not derogate from special ones) should not be used also in
interpreting contracts.
1
[12] The applicants failed to perform their obligations
to erect buildings on the properties within 18 months of proclamation
and
a period of two years thereafter whereupon the respondent became
entitled to claim retransfer of the properties against repayment
of
the purchase price. By serving the applications in terms of which it
claimed such retransfer at the registered address of the
applicants
the respondent did what it was entitled to do in terms of the
agreements. No other notice of its claim was required.
[13] The submission in regard to the second alleged
error amounts to saying that the applicants have a defence, which, if
it had come
to the knowledge of the judge who granted the default
judgments, would have precluded him from granting the default
judgments. The
defence, presumably in the form of a counterclaim, is
for the moderation of what the applicants now contend to be a
forfeiture provision
in the agreements of sale in respect of rates
and taxes, levies and interest paid in terms of the agreements of
sale.
[14] As stated above no mention of this ‘error’
is made in the affidavits filed in support of the application for
rescission
of the judgments. It is not even alleged that the
agreements contain a forfeiture clause in respect of rates and taxes,
levies and
interest, or that rates and taxes, levies and interest
were in fact paid by the applicants or that the applicants are
entitled to
repayment of an amount that had been paid in respect
thereof.
[15] The applicants allege in their founding affidavit
that clause 11 ‘may well be unenforceable for various reasons’
and that it is ‘vague in its wording and that for this reason
it is void and unenforceable’. They allege furthermore
that
clause 11 ‘is also silent on the question compensating a
Purchaser in respect of improvements to the Erf, rates and taxes
and
levies to the HOA and other expenses incurred in the time period
between transfer to such Purchaser and a retransfer to the
Respondent’.
To the respondent’s answer that this
allegation is irrelevant the applicants replied that it is definitely
of relevance in
that ‘Clause 11’s silence on the issue of
the various types of compensation raised, contributes to its
vagueness’.
It is only in the context of clause 11 being vague
and unenforceable that mention is made in the affidavits of levies,
rates and
taxes and it is the unenforceability of clause 11, due to
its vagueness, that would appear to be the basis for the allegation
in
the founding affidavit that the default judgments were erroneously
granted. The applicants did not, however, persist with the submission
that clause 11 is void and unenforceable.
[16] It follows that the applicants did not make out a
case that the judgments by default had been granted erroneously
however wide
a meaning is given to the word ‘erroneously’
as used in rule 42(1)(a).
[17] In any event, a
judgment granted against a party in his absence cannot be considered
to have been granted erroneously because
of the existence of a
defence on the merits which had not been disclosed to the judge who
granted the judgment. In support of their
contention to the contrary
the applicants relied on authorities such as
Nyingwa
v Moolman NO
1993 (2) SA
508
(Tk) and
Stander
v Absa Bank
1997 (4) SA
873
(E) to the effect that in an application for rescission of a
default judgment in terms of rule 42(1)(a) a court may in certain
circumstances
have regard to facts of which the judge who granted the
judgement was unaware in order to determine whether the judgment had
been
granted erroneously.
[18] In
Nyingwa
at 510F-G
White J relying on
Topol
v LS Group Management Services (Pty) Ltd
1988 (1) SA
639
(W);
Frenkel,
Wise & Co (Africa) (Pty) Ltd v Consolidated Press of SA (Pty) Ltd
1947 (4) SA
234
(C);
Holmes
Motor Co v SWA Mineral and Exploration Co
1949
(1) SA 155
(C) said:
‘
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.’
[19] In
Topol
an
application was dismissed in the absence of the applicants on the
basis that the respondent had given notice to the applicant of
the
setting down of the application and that the applicants despite their
knowledge of the hearing were in default.
2
The
application for rescission in terms of rule 42(1)(a) was successful.
White J, in
Nyingwa,
understood
the factual position in
Topol
to have been
that notice of the set down of the application had not been given to
the applicants and that the dismissal of the initial
application was
for that reason held to have been erroneous.
3
If that had
indeed been the factual position in
Topol
the
respondent in that matter would procedurally not have been entitled
to a judgment in its favour, the granting of the judgment
would for
that reason have been erroneous and there could have been no
objection in the rescission application to evidence to the
effect
that proper notice of set down had in fact not been given.
[20]
Frenkel
was a case in
which a default judgment was rescinded on the basis that it had been
granted under a misapprehension. The misapprehension
would seem to
have been that the legal representatives wrongly assumed that the
capital sum claimed had not been paid. It was, therefore,
not a case
of a judgment having been granted erroneously but a case of a
judgment having been sought erroneously. In
Holmes
the
rescission of a default judgment was not granted on the basis of the
judgment having been granted erroneously.
4
[21] Although not
altogether clear it would appear that White J misunderstood the
factual position in
Topol
.
It seems to me that notice of set down had been given in that case
but that the judge who granted default judgment was held to have
granted the judgment erroneously by reason of the subsequently
disclosed fact that the defaulting party had not been in wilful
default.
5
Erasmus J had
shortly before the judgment by White J in
Nyingwa
differed from
the finding in
Topol
and said that
in the light of the fact that the
Topol
matter had
been properly enrolled and that all the rules of court had been
complied with, the plaintiff was quite within its rights
to press for
judgment in terms of the rules (see
Bakoven
Ltd v G J Howes (Pty) Ltd
1992 (2) SA
466
(E) at 472D). Bakoven Ltd contended that judgment had erroneously
been granted against it in that although the matter had been properly
set down for trial it did not have knowledge of such set down.
6
Erasmus J
said:
7
‘
An
order or judgment is “erroneously granted” when the Court
commits an “error” in the sense of a “mistake
in a
matter of law appearing on the proceedings of a Court of record”
(
The
Shorter Oxford Dictionary
).
It follows that a Court in deciding whether a judgment was
“erroneously granted” is, like a Court of appeal,
confined
to the record of proceedings.’
He concluded that the judgment granted against Bakoven
Ltd in its absence could not be said to have been erroneously granted
‘in
the sense contemplated in Rule 42(1)(a), as applicant
cannot point to any error or irregularity appearing from the record
of proceedings’.
[22] In
Stander
Nepgen J held
that
Bakoven
‘
was
wrongly decided insofar as it was held that a Court, in deciding
whether a judgment was “erroneously granted”, is
confined
to the record of the proceedings’.
8
[23] The applicants
in
Stander
applied for
the rescission of an order of absolution from the instance which had
been granted against them when they failed to appear
at the trial of
an action which had been instituted by them, the trial having been
set down properly. Nepgen J held that it was clear
from the judgment
of Leach J, who granted the order of absolution from the instance,
that he had come to the conclusion, on the facts
placed before him,
that both the applicants were in deliberate default of appearance.
9
He concluded
that there could be no doubt that when Leach J made the order of
absolution from the instance ‘it was, on the basis
of the
information available to him at that stage, a proper and an
appropriate order to make’.
10
He was
however of the view that had Leach J been aware of the facts placed
before him in the application for rescission Leach J would
not have
concluded that the applicants were ‘in wilful and deliberate
default of appearance’
11
and that had
Leach J been approached in Chambers later that morning and had it
been explained to him what had transpired, the probabilities
were
that Leach J would have recalled his order.
12
Referring to
the above quoted dictum of White J, Nepgen J said:
13
‘
If it was intended to convey, by the use of
the word “precluded”, that the fact has to be of such a
nature that the granting
of the judgment would have been incompetent,
I am of the view that it goes too far. . . .
The conclusion to which I have come, therefore is that I am entitled
to have regard to facts, which do not appear from the record
of
proceedings and of which Leach J was unaware, in considering whether
the order he made was “erroneously granted” in
the sense
referred to in Rule 42(1)(a).’
[24] I agree that
Erasmus J in
Bakoven
adopted too
narrow an interpretation of the words ‘erroneously granted’.
Where notice of proceedings to a party is required
and judgment is
granted against such party in his absence without notice of the
proceedings having been given to him such judgment
is granted
erroneously. That is so not only if the absence of proper notice
appears from the record of the proceedings as it exists
when judgment
is granted but also if, contrary to what appears from such record,
proper notice of the proceedings has in fact not
been given. That
would be the case if the sheriff’s return of service wrongly
indicates that the relevant document has been
served as required by
the rules whereas there has for some or other reason not been service
of the document. In such a case, the
party in whose favour the
judgment is given is not entitled to judgment because of an error in
the proceedings. If, in these circumstances,
judgment is granted in
the absence of the party concerned the judgment is granted
erroneously.
14
See in this
regard
Fraind
v Nothmann
1991
(3) SA 837
(W) where judgment by default was granted on the strength
of a return of service which indicated that the summons had been
served
at the defendant’s residential address. In an
application for rescission the defendant alleged that the summons had
not been
served on him as the address at which service had been
effected had no longer been his residential address at the relevant
time.
The default judgment was rescinded on the basis that it had
been granted erroneously.
15
[25] However, a
judgment to which a party is procedurally entitled cannot be
considered to have been granted erroneously by reason
of facts of
which the judge who granted the judgment, as he was entitled to do,
was unaware, as was held to be the case by Nepgen
J in
Stander.
See in this
regard
Colyn
v Tiger Food Industries Ltd t/a Meadow Feed Mills (Cape)
2003 (6) SA 1
(SCA) paras 9 – 10 in which an application in terms of rule
42(1)(a) for rescission of a summary judgment granted in the absence
of the defendant was refused notwithstanding the fact that it was
accepted that the defendant wanted to defend the application but
did
not do so because the application had not been brought to the
attention of his Bellville attorney. This court held that no
procedural
irregularity or mistake in respect of the issue of the
order had been committed and that it was not possible to conclude
that the
order had erroneously been sought or had erroneously been
granted by the judge who granted the order.
16
[26] Nepgen J found
support for his conclusion in
Theron
NO v United Democratic Front (Western Cape Region)
1984 (2) SA
532
(C). In that case an order had been granted against Theron in his
absence after short notice of the application and although no papers
of any kind had been filed and no papers had been served on him.
17
The order was
nevertheless granted on the basis of an assumption on the part of the
judge that Theron had been given sufficient notice
and that he had
deliberately decided not to appear at the hearing of the application.
In the application for rescission Vivier J
found, on the facts placed
before him, that these assumptions were wrong
18
and that the
order had for that reason been granted erroneously. In my view the
judgment cannot be faulted. Regard was had to evidence
external to
the record of proceedings as it existed at the time the order was
granted in order to determine whether proper notice
had been given.
Whether Theron wanted to appear at the hearing was a relevant
consideration in determining whether sufficient notice
had been
given. Vivier J in effect found that proper notice had not been
given.
19
As a result
the UDF was procedurally not entitled to the order sought when it was
granted. The order was for that reason erroneously
granted. In
Stander
the
plaintiffs who obtained an order in their favour was, unlike the UDF
in
Theron,
procedurally
entitled to the order when it was granted and the fact that it
subsequently transpired that the defendants were not in
wilful
default could not transform that order, which had validly been
obtained, into an erroneous order.
[27] Similarly, in a case where a plaintiff is
procedurally entitled to judgment in the absence of the defendant the
judgment if granted
cannot be said to have been granted erroneously
in the light of a subsequently disclosed defence. A court which
grants a judgment
by default like the judgments we are presently
concerned with, does not grant the judgment on the basis that the
defendant does not
have a defence: it grants the judgment on the
basis that the defendant has been notified of the plaintiff’s
claim as required
by the rules, that the defendant, not having given
notice of an intention to defend, is not defending the matter and
that the plaintiff
is in terms of the rules entitled to the order
sought. The existence or non-existence of a defence on the merits is
an irrelevant
consideration and, if subsequently disclosed, cannot
transform a validly obtained judgment into an erroneous judgment.
[28] For these reasons the application for leave to
appeal is dismissed with costs.
_____________________
P E STREICHER
JUDGE OF APPEAL
CONCUR
:
LEWIS JA)
PONNAN JA)
MAYA JA)
SNYDERS AJA)
1
R
H Christie
The Law of Contract in South
Africa
5 ed p 223.
2
At
648B.
3
At
510E-F.
4
At
156.
5
At
648A-D.
6
At
467J and 470J.
7
At
471F-G.
8
At
882A-B.
9
At
876E.
10
At
880E-F.
11
At
880C-D.
12
At
880D-E.
13
At
884B-D.
14
Clegg
v Priestley
1985 (3) SA 950
(W)
954C-J.
Colyn v Tiger Food Industries
Ltd t/a Meadow Feed Mills (Cape)
2003
(6) SA 1
(SCA) paras 9-10.
15
At
839H-I.
16
Para
9.
17
At
533G-H and 534A.
18
At
536C.
19
At
535G and 536C.