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[2015] ZAFSHC 199
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Robertson N.O. and Others v Business Partner Ltd; In re: Business Partner Ltd v Robertson N.O. and Others (2198/2015) [2015] ZAFSHC 199 (29 October 2015)
IN
THE HIGH COURT OF SOUTH AFRICA
FREE
STATE DIVISION BLOEMFONTEIN
Case
No: 2198/2015
STANLEY
ROBERTSON N.O.
1
st
Applicant
THE
BEST TRUST COMPANY (WESTERN CAPE)
2
nd
Applicant
STANLEY
ROBERTSON
3
rd
Applicant
FOLLOW
THE STAR TRADING 576 (PTY) LTD
4
th
Applicant
and
BUSINESS
PARTNER LTD
Respondent
In
re
BUSINESS
PARTNERS LTD
Plaintiff
and
STANLEY
ROBERTSON N.O.
1
st
Defendant
THE
BEST TRUST COMPANY (WESTERN
CAPE)
2
nd
Defendant
STANLEY
ROBERTSON
3
rd
Defendant
FOLLOW
THE STAR TRADING 576 (PTY) LTD
4
th
Defendant
Heard:
15 October
2015
Delivered:
29 October 2015
MOCUMIE,
J
[1]
This is an application for rescission of the default judgment which
was granted against the 1
st
to the 4
th
applicants (the applicants/the defendants in the default judgment) in
favour of the respondent (the plaintiff in the default judgment)
under Case no 2198/2015 on 23 July 2015 (the default judgment).
[2]
The combined summons issued by the plaintiff against the defendants
was purportedly served on the defendants by a sheriff on
27 July 2015
at the defendants’ chosen
domicilium
citandi
by attaching same to the gate of the defendants’ premises. In
terms of the summons the plaintiff claimed payment of the amount
R
6 293 574.26 from the defendants. The first defendant
representing the defendants and the deponent to the affidavits on
behalf of all the defendants alleges that he only became aware of the
judgment and order when the plaintiff’s attorney called
him on
5 August 2015. His attorney thereafter consulted the plaintiff’s
attorney. The latter only provided the defendants
with all the
necessary documents on 12 August 2015. Consultation with counsel took
place on 13 August 2015. The matter was set
down within the
prescribed 20 days by notice supported by an affidavit. In the
application he asked for the default judgment to
be set aside, that
leave be granted to the defendants to file a plea within 20 days and
that each party pay its costs alternatively
costs be costs in the
main cause.
[3]
Mr Groenewald, on behalf of the defendants, submits that the
plaintiff and the defendants concluded two loan agreements (Claim
A
and B) and a property royalty agreement (Claim C). The loan
agreements have since been paid off in full and final settlement.
The
royalty agreement the parties concluded in addition to the loan
agreements in terms of which the defendants must pay the plaintiff
royalties totaling R 2 454 894 is now in dispute on the basis that
(a) such royalty agreement is a simulated agreement and (b)
that the
royalties are in actual fact interest in addition to the interest
that the defendants would pay on the loan agreements.
For his
submissions he relies on the unreported judgment of
Business
Partners Limited v Silver Stars Trading 245 CC and Another, North
Gauteng High Court, Pretoria
[1]
.
He submits further that in line with the
Silver
Stars
decision, the agreement is oppressive and harsh to the extent that it
undermines public policy because although the loans have
been repaid
royalties must still be paid over a period of almost ten years. This
means the investment will yield more or less 15,51%
interest even
when the loans upon which the royalty agreement is based have been
paid up. The agreement is clearly made up of the
capital loan amount
as well as interest,the latter was not expressly mentioned or
discussed with the defendants. The calculation
thereof is not even
provided by the plaintiff. On this basis, the defendants further
contend, the royalty agreement is
contra
bonis mores
,
against public policy and is unenforceable.
[4]
Mr Groenewald submits further that, the full bench decision on which
the plaintiff relies for its case,
Business
Partners Limited vs Silverstars Trading 245 CC and Another
[2]
is distinguishable from this case for a number of reasons. Inter alia
(i) the Full Bench found that the royalty agreement was valid
and
enforceable because the lender explained the royalty agreement and
its terms and conditions to the borrower and the latter
understood
them as such. He signed knowing what he was binding himself too. In
this case, this was not done. To the contrary, several
pages of
documents were handed to the defendants to sign. At that time that
they approached the plaintiff they had a serious cash
flow problem
and thus under financial stress and vulnerable. They just signed the
documents when they were told to do so without
reading the agreement.
Neither did the plaintiff give them any explanation that the
royalties will be 15,5% regardless of the fact
that the loans were
settled. This he contended is not the normal interest charged in loan
agreements on any outstanding balance;
(ii) There is no evidence that
the loans were high risk as the plaintiff claimed. The plaintiff
could not say that there was no
security. The defendants, combined,
had property worth over R6million; (iii) In
Silver
Stars
the
court had the benefit of detailed evidence led which enabled it to
make a finding on a balance of probabilities.
[5]
From the onset Mr Zietzman, on behalf of the plaintiff did not take
issue with the explanation for the default, but relies only
on the
fact that the defendants have not made out a case that they have a
bona
fide
defence to the plaintiff’s claim. Mr Zietzman submitted that a
bona
fide
defence,
although it only needs to be established prima facie, must still be a
defence in law.
[3]
Thus the main
ground of opposition of the plaintiff is that the defendants failed
to show good cause for setting aside the default
judgment. Mr
Zietzman submits further and on the strength of the Gauteng South
Full Bench decision of
Business
Partners Limited vs Silverstars Trading 245 CC and Another
[4]
that a royalty agreement is
per
se
not
void and invalid. ‘Authorities are clear that contracting
parties are well within their rights to arrange their affairs
in such
a way that they suit their circumstances; of importance is that the
other party is not defrauded, and or does not know
what the contract
entails.’
[6]
He contends that the decision of the court
a
quo
in
Silver
Star
Trading
matter was set aside by the full bench and cannot be relied on.
Inter
alia
the court
a
quo
found that the royalty agreement in the case was simulated because it
was contrary to the Usury Act
[5]
and the National Credit Act
[6]
.
In this case, the parties are
ad
idem
that both Acts are not applicable. Like in the
Silverstars
Trading
matter the defendants in this case are not uninformed and vulnerable
borrowers. They are business people. There is no evidence
that at the
time the parties entered into the agreement they were not on equal
footing. From the Acknowledgment of Debt Agreement
the defendants
signed it is clear that they knew all along that the royalty
agreement is a separate agreement in addition to the
loans advanced
to them. The defendants were aware of the terms and conditions
thereof as well as their rights to seek legal advice
before signing,
yet they signed the agreement without exercising the options
available to them. The defendants, he submitted will
not be able to
indicate how the agreement is
contra
bonis more
when
inter
alia
they bound themselves in the Acknowledgement of Debt. The fact that
the loans have been paid up does not absolve the defendants
from
their obligation in respect of the outstanding amount under the
royalty agreement. He argues that contrary to what the defendants
now
claim in hindsight that the plaintiff did not tell them about the
royalty agreement in detail, the defendants knew the terms
and
conditions at the time of appending their signatures. The plaintiff
concluded the royalty agreement with the defendants representing
the
Trust
in
lieu
of
becoming a partner or buying shares as it happens with it and other
businesses. It is the defendants that approached the
plaintiff
and not the other way around. The evidence before this court on the
affidavits is sufficient for this court to come to
a conclusion
whether the judgment and order should be rescind.
[7]
The main issue to determine is whether the defendant has shown good
cause for the judgment and order to be rescinded.
[8]
The test in applications of this nature is set out in Rule 31 (2) (b)
of the Rules of Practice which provides:
‘
A defendant may within twenty
days after he or she has knowledge of such judgment apply to court
upon notice to the plaintiff to
set aside such judgment and the court
may, upon good cause shown, set aside the default judgment on such
terms as to it seems meet.’
[9]
Rescission of a default judgment generally includes at least both a
reasonable and acceptable explanation for the default and
a
bona
fide
defence on the merits which prima facie carries some prospects of
success.
[7]
But the courts
have consistently refrained from attempting to frame an exhaustive
definition of what ‘good cause’
for such attempt would
hamper the exercise of the wide discretion of the courts.
[8]
Many and varied factors need to be considered and each case must be
decided on its own facts and circumstances.
[9]
The fundamental reason behind rule 31
[10]
is that there is a presumption that a judgment granted is correct.
The purpose of the rule is to correct expeditiously an obviously
wrong judgment or order.
[11]
[10]
A indicated earlier, Mr Zietzman, on behalf of the plaintiff did not
take issue with the explanation for the default which
the defendants
provided. The defendants explained that their business premises were
open for the day until 17h30. The sheriff who
allegedly served the
summons by attaching same to the gate of the premises did not attach
the summons on their gate. The unrefuted
description of the premises
of the defendants is such that it is highly improbable that the
sheriff could have attached the summons
to the gate of the correct
premises. In
Greef
v First Rand Bank Limited
[12]
the court stated:
‘
[10]
The provisions of s36 (2) of the Supreme Court Act
[13]
are to the effect that a return of service will constitute prima
facie proof of the contents thereof. It follows that such evidence
may be challenged.’
In
other words, the plaintiff ought to have called the sheriff to
testify under oath to refute the defendants’ allegations
of
lack of service of the summons because without such evidence, the
version of the defendants has to be accepted as correct. Consequently
it cannot be found that the summons had indeed been served in
accordance with the provisions applicable to service at a domicilium
citandi.
[14]
It
suffices to state the obvious that the judgment and order was granted
without proper notice to the defendants. I am satisfied
that the
defendants were not aware of the judgment against them until the
plaintiff’s attorney called them some days later
when an
execution was attempted. It is clear that the defendants were in no
willful default in failing to defend the action.
Bona
fides
[11]
There is no suggestion that this is not a
bona
fide
application.
Defence
[12]
The defendants stated that the royalty agreement is a simulated
agreement which is
contra
bonis mores
and against public policy. In order to show good cause as the court
in
Grant
v Plumbers
above stated decades ago, all the defendants had to do in this regard
was to make out a case that they had a defence which they
could raise
at the trial and which could
prima
facie
succeed. This differs from the test to be applied in considering
whether the royalty agreement in issue is
contra
bonis mores
and against public policy or not. In such a scenario the defendants
would be burdened with an
onus
to prove on a balance of probabilities that the royalty agreement is
indeed a simulated transaction and additional interest to
the loans
already paid up. This then means in order for a court to make such
determination evidence must be led and based on credibility
findings
that court will make on the facts presented the court may come to the
conclusion whether the transaction was simulated
and
contra
bonis mores.
Facts
to be presented included that although neither the Usury Act
[15]
nor the National Credit Act
[16]
applied to the transaction, the transaction fell to be determined in
terms of common law as the court held in
African
Dawn Finance (Pty) Ltd v Dreams Travel & Tours CC
.
[17]
A determination based on
bonis
mores
is depended upon a full enquiry based on credibility findings by a
court. Such enquiry is untenable in motion proceedings particularly
when the parties are so at odds on what was conveyed to the
defendants and what was not with regard to the royalty agreement.
[13]
In my view, the defendants have
prima
facie
raised an issue which, if decided in their favour, would mean that in
the circumstances of their case, the royalty agreement was
a
simulated transaction and
contra
bonis mores
.
Thus not enforceable between the parties, because as is trite each
case is judged on its own facts, the trial court may find it
distinguishable from
Silver
Stars
[18]
or even
African Dawn
Finance
[19]
above.
Costs
[14]
On the issue of costs, it is trite that when an applicant seeks
indulgence from the court in circumstances such as these, (s)
he must
bear the costs.
[20]
But from
the unrefuted evidence of the defendants on the non-service of the
summons, it is abundantly clear that this is not the
ordinary
rescission application in which the defendant was well aware of the
summons but chose not to oppose the action. It can
simply not be
expected of the defendants to bear the costs for approaching this
court to redress what they believe is a decision
that could not have
been taken had they been in court. It will be unfair to the
defendants and also not in the interest of justice
to slavishly apply
the general rule applicable in these cases regardless of the
prevailing circumstances.
In
this instance the plaintiff would be justly expected to bear the
costs. But for its concession right from the onset, costs of
this
application should be costs in the main action.
[15]
In the result, the following order is granted.
ORDER
1.
The default judgement granted
on 23 July 2015 in case No 2198/2015 is set aside;
2.
The defendant is granted leave
to deliver a plea within 20 days from date of this judgment;
3.
Costs to be costs in the main
action.’
________________
B.
C. MOCUMIE, J
On
behalf of the applicants:
Adv. Groenewald
Instructed
by:
Symington & De Kok
BLOEMFONTEIN
On
behalf of the respondent:
Adv.P Zietzman SC
Instructed
by:
McIntyre Van der Post
BLOEMFONTEIN
[1]
Business Partners Limited v Silver
Stars Trading 245 CC and Another, North Gauteng High Court,
Pretoria
case number 14408/2008 (delivered 15/05/2012).
[2]
Business Partners Limited v Silver
Stars Trading 245 CC and Another, North Gauteng High Court, Pretoria
case number 14408/2008
(delivered 15/05/2012).
[3]
Harms B-206(2); B-222(1).
[4]
Silver Stars Trading
above.
[5]
Usury Act 73 of
1986.
[6]
National Credit
Act 34 of 2005
.
[7]
Grant v Plumbers (Pty) Ltd
1949 (2) SA 470
(O) at 476-477; Chetty v Law Society Transvaal
1985
(2) SA 756
(AD) at 764J;
Madinda
v Minister of Safety & Security
[2008] ZASCA 34
;
[2008] 3 ALL SA 143
(SCA); Coetzee and Another v Nedbank Ltd
2011 (2) SA 372
(KZD) at 376G-I.
[8]
See unreported judgment of the Free
State High court Case No 703/2012 delivered on 24 July 2014
RP
Jansen Van Vuuren vs HR Reinecke
.
[9]
Colyn v Tiger Food Industries
Limited t/a Meadow Feed Mills (Cape)
2003
(6) SA 1
(SCA) para 11.
[10]
Uniform Court
Rule
31.
[11]
Bakoven Ltd v G J Howes (Pty) Ltd
1992 (2) SA 466
(E) at
471E.
[12]
Greef v Firstrand Bank Limited
2012(3) SA 157 (NC) at 160D.
[13]
59 of 1959.
[14]
Greef
above at 161A.
[15]
Usury Act 73 of
1968.
[16]
National Credit
Act 34 of 2005
.
[17]
African Dawn Finance Pty Ltd. V
Dreams Travel & Tours CC
2011 (3) SA 511 (SCA).
[18]
Silver Stars Trading
above.
[19]
African Dawn
above.
[20]
Farlam et al Erasmus: Superior
Court Practice
at
A1-95;
Phillips t/a Southern
Cross Optical v SA Vision Care (Pty)Ltd
2000 (2) SA 1007
(C) at 1015G-H.