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[2013] ZAGPPHC 245
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SP Environmental - Amerex SA (Pty) Ltd v Silver Lake Trading 119 (Pty) Ltd (69945/11) [2013] ZAGPPHC 245 (15 August 2013)
NOT
REPORTABLE
IN
THE HIGH COURT OF SOUTH AFRICA (NORTH GAUTENG, PRETORIA)
CASE
NO: 69945/11
DATE:15/08/2013
In
the matter between:
SP
ENVIRONMENTAL - AMEREX SA (PTY)
LTD
.......................................
Applicant
and
SILVER
LAKE TRADING 119 (PTY)
LTD
.....................................................
Respondent
JUDGMENT
MAKGOKA.
J:
[1]
This is an application for rescission of an order of this court
granted on 31 January 2012 in terms of which the applicant was
ordered to pay R2 287 207.58 to the respondent. The order was granted
in default on an unopposed basis as the applicant had not
delivered
any notice of intention to oppose. The application is opposed by the
respondent.
[2]
The dispute between the parties originates from a contract concluded
in June 2008 between the applicant and Arcelor Mittal South
Africa
(Pty) Ltd (Arcelor Mittal) for the construction and installation of a
sinter gas treatment plant in Vanderbijlpark. In turn
the applicant
concluded an agreement with the respondent in terms of which the
respondent was employed to do certain specialist
work in the course
of construction of the plant, for the ultimate contract price of R19
189 317. Of this, R14 791 was paid by the
applicant, leaving a
balance of R4 397 760.
[3]
On 5 April 2011 the applicant offered in writing to pay R2 287 207.58
in full and final settlement of its indebtedness to the
respondent.
The offer was accepted by the respondent in writing on 7 April 2011,
resulting in the settlement agreement between
the parties,
constituted by the two letters. It was a condition of the settlement
agreement that payment would be made by the applicant
once it
received payment of ‘the major portion’ from Acelor
Mittal. During July 2011 Acelor Mittal paid R14 051 036.06
to the
applicant. Despite this, the applicant did not pay the respondent as
agreed.
[4]
On 18 August 2011 the respondent, through its attorneys, demanded
payment of R2 287 207.58 from the applicant. There was no
response to
the letter. On 7 December 2011 the respondent lodged an application
for payment of the amount. The application was
served on the
applicant’s principal place of business on 14 December 2011.
The applicant having not given notice to oppose,
judgment was sought,
and granted, in the unopposed motion court on 31 January 2012. It is
this order that the applicant seeks to
rescind in the present
application.
[5]
The respondent subsequently caused a writ of execution to be
authorised, which was served on 21 February 2012 at the applicant’s
then principal place of business on its manager, a Mr. Rossouw. The
deputy sheriff attached office furniture and equipment of the
applicant with an estimated value of R26 700. On 26 March 2012 the
respondent instructed the sheriff to remove and sell the attached
goods and proceeded to advertise the sale in execution.
[6]
The assets were removed by the deputy sheriff on 2 April 2012 and
sold in execution on 10 May 2012. The net amount of the sale
in
execution of the movable assets was R6 844.48. As a result, the
respondent instructed the sheriff to again serve the writ of
execution, which was done on 21 May 2012 at the applicant’s
then principal place of business on Mr. Pircon, the sole director
of
the applicant.
[7]
On enquiry from the deputy sheriff, Pircon declared that the
applicant had no money or disposable property to satisfy the writ
and
no disposable assets were pointed out to the deputy sheriff. Despite
a diligent search and enquiry by the deputy sheriff, no
such assets
could be found at the given address. Pircon was further requested to
declare whether the applicant owned any executable
immovable
property, to which he replied that the applicant owned no such
property. As a result, the deputy sheriff made a nulla
bona return.
[8]
In the meanwhile, a third party, Kentz (Pty) Ltd, another creditor of
the applicant, made application for the liquidation of
the applicant
in the High Court Johannesburg, which application was opposed by the
applicant. On 11 July 2012 the respondent made
an application to
intervene in the liquidation proceedings and to join as a
co-applicant for the liquidation of the applicant,
based on the nulla
bona return referred to above. On 17 September 2012 the applicant
lodged the present application.
[9]
So much of the factual background, and now to merits of the
application. I understand the basis of the application for
rescission,
to be two-fold, one primary and the other, secondary. The
primary ground is that the settlement agreement was concluded on a
mistaken
basis, for two reasons (which were discovered subsequently).
The first is that the respondent had breached the original agreement
as it went outside the contract between the parties and carried out
work directly with Arcelor Mittal, the applicant’s contracting
party.
[10]
The second primary contention is that the applicant was never
indebted to the respondent. The applicant contends that the variation
orders in respect of an engineering contract, on which the
respondent’s claim was based, were issued by one Michael Fell,
who had no authority to bind the applicant to any financial
obligation, as he was merely a site manager with no contractual
authority.
This resulted in an increase in the respondent’s
claim of approximately R3.7m, which was considerably greater than the
amount
of the offer.
[11]
The deponent to the applicant’s affidavit, Mr. Brian McMahon,
states that he made the above discoveries in the course
of
investigations that he conducted into the affairs of the applicant
pursuant to the opposition by the applicant to the intervening
application (referred to in para [8] above).
[12]
Secondarily, the applicant contends that that the respondent did not
make out a case for the relief it obtained as condition
of the
settlement agreement (payment from Acelor Mittal) had not been
fulfilled, as full payment had not been received.
[12]
On the basis of all of the above, it is contended that the order was
erroneously sought and granted. I turn now to consider
the
applicant’s contentions. By asserting that the order was
wrongly granted, the applicant locates its application in terms
of
rule 42 of the Uniform Rules of Court, which provides for rescission
or variation of an order or judgment erroneously sought
or granted in
the absence of any party affected thereby. The other instances for
rescission are where there is ambiguity or patent
error omission, or
the order or judgment having been granted as the result of a mistake
common to parties.
[13]
In the present case, the error that the applicant purports to rely on
consists of facts not before court when the order was
granted. It is
now well-settled that a subsequently disclosed defence, cannot lay
the foundation for an application for rescission
in terms of rule
42(1). The error as intended by rule 42(1) is not established if the
Judge at the time of granting the default
judgment was unaware of the
facts that the applicant for rescission relies on. In Lodhi II
Properties Investment CC v Bondef Developments
2007 (6) SA 87
(SCA)
the following was stated at 95E- F:
'...in
a case where the plaintiff is procedurally entitled to judgment in
the absence of the defendant the judgment granted cannot
be said to
have been granted erroneously in the light of a subsequent disclosed
defence ‘the 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.’
[14]
I therefore conclude that the applicant’s reliance on rule
42(1) is misplaced. It is quite clear from the facts of the
case that
the circumstances envisaged in rule 42 are not present. Another rule
which could possibly be applicable is rule 31(2),
in terms of which a
default judgment may be set aside upon ‘good cause’
shown. The time frame prescribed in rule 31(2)
is constricting to the
extent the application has to be brought within 20 days of becoming
aware of the judgment, which the applicant
has not. As a result, the
application cannot be considered in terms of rule 31(2), either.
[15]
I shall therefore consider the application at common law, in terms of
which a judgment can be set aside where it had been granted
by
default, provided the applicant shows ‘good cause’ (De
Wet v Western Bank Ltd
1979 (2) SA 1031
(A) and Colyn Tiger Foods
Industries Ltd t/a Meadow Feed Mills (Cape)
2003 (6) SA 1
(SCA)) and
the application is made within a reasonable time (Genticuro AG v
Firestones SA (Pty) Ltd
1972 (1) SA 589
(A); First National Bank of
SA Ltd v Van Rensburg NO & Others
1994 (1) SA 677
(T) at 681H).
[16]
The jurisdictional requirement of ‘good cause’, entails
two essential elements. First, a reasonable and acceptable
explanation for default, and second, a demonstration of a bona fide
defence. In Chetty v Law Society, Transvaal
1985 (2) SA 756
(A) at
765 B-C, the following was stated:
‘
But
it is clear that in principle and in the long standing practice of
our courts, two essential elements of “sufficient cause”
for rescission of a judgment by default are:
(i)
that the party seeking relief must present a reasonable and
acceptable explanation for his default; and
(ii)
that on the merits such a party has a bona fide defence which prima
facie carries some prospect of success.’
[17]
Having established the above approach, I turn now to consider the two
elements of ‘good cause’. The applicant fails
at the
first hurdle, as it does not proffer any explanation for its failure
to oppose the application. That is where it should
start, to satisfy
the first requirement of reasonable and acceptable explanation for
its default, as stated above. In principle
this should be the end of
the enquiry, and the application be dismissed on this basis alone, as
it is not sufficient if only one
of the above stated elements is
established - see Promedia Drukkers & Uitgewers (Edms) Bpk v
Kaimowitz and Others
1996 (4) SA 411
(C) at 418B. See also Grant v
Plumbers (Pty) Ltd
1949 (2) SA 470
(O) at 476 and HDS Construction
(Pty) Ltd v Wait
1979 (2) SA 298
(E) at 300F-301C; De Witts Auto Body
Repairs (Pty) Ltd v Fedgen Insurance Co Ltd
1994 (4) SA 705
(E) at
711 E-l.
[18]
There might be argument that in the light of the applicant’s
explanation that the facts relied on to rescind the order
became
known only after judgment was granted, it would be unfair to expect
the applicant to explain its default. But this is not
true of all its
grounds for rescission. As stated earlier, one of those grounds is
that the condition of the settlement agreement
had not been
fulfilled, as it had not received payment from Acelor Mittal. This
fact would have been known to the applicant when
it received the
application. There is no explanation why the application was not
opposed on that basis, at the very least.
[19]
Besides, the applicant is still expected to explain its inaction
after it became aware of the judgment. From the objective
facts, the
judgment would have come to the attention of the applicant on any of
the following three dates: on 21 February 2012
when the writ of
execution was served on its manager, Rossouw, or on 2 April 2102 when
its moveable assets were removed, or on
21 May 2012 when the writ of
execution was re-served on Pircon, the only director and controlling
mind of the applicant. Whichever
date, there is no explanation why
this application was not brought immediately after, or within a
reasonable time of the last of
those dates. The present application
was brought almost seven months after judgment was granted.
[20]
It has often been said that one of the considerations which the
courts will take into account in the exercise of their discretion
to
determine whether or not good cause is shown is whether a party’s
default was ‘wilful’. See for example, Harris
v
ABSA
Bank Ltd, above, at 530E. Before a party will be regarded as being in
wilful default, the following must be established: (i)
the person
must have knowledge of the fact that the action is being brought
against him/her; (ii) the person must have deliberately
refrained
from entering appearance to defend; and (iii) the person must have a
certain mental attitude towards the consequences
of the default
(Farlam and Others, Erasmus, Superior Court Practice, B1 -202).
[21]
The test for wilfulness is whether the default was deliberate. Where
the defendant to an action, with full knowledge of the
circumstances
as well as the risks of her/his default, makes the decision to
refrain from taking any steps to oppose the action
it will be
considered to be ‘wilful default’ (Maujean t/a Audio
Agencies v Standard Bank of SA Ltd
1994 (3) SA 801
(C) at 804C;
Harris v Absa Bank Ltd t/a Volkskas
2006 (4) SA 427
(T) paras [4] –
[6]).
[22]
From the factual background, it is clear that the applicant was
throughout aware of the nature of the respondent’s claim
for
payment, the judgment and its enforcement. In not opposing the
application, despite having a purported defence when the application
was served on it, and in acquiescing in the execution of the judgment
for almost nine months, the applicant was, in my view, clearly
wilful. Moreover, the period between the applicant acquiring
knowledge of the judgment against it and the launching of the
application
for rescission is such that the application cannot be
said to have been made within a reasonable time. There is no
explanation
at all for this lapse of time. The application falls to
be dismissed on these considerations.
[23]
If the above conclusion is wrong, I turn now to the applicant’s
defences, to determine whether they are ‘bona fide’.
McMahon states that he became aware that the variation orders were
placed by Fell only after the judgment had been granted. In
other
words, it is not in dispute that McMahon was aware of the variation
orders - only that he did not know that they had been
placed by an
unauthorised Fell. With respect, I do not see how this can affect the
respondent. Fell, as the site manager, had ostensible
authority to
bind the applicant. The reason why McMahon was unaware (assuming he
was) resulted from the applicant’s own weak
internal reporting
procedures, and had nothing to do with the respondent. It cannot,
therefore, serve as a basis to nullify legitimately
placed variation
orders.
[24]
McMahon however fails to clarify in the replying affidavit his
professed ignorance that the variation orders were placed by
Fell. He
does not state who he believed had placed or authorised the variation
orders. If this was so important for him at that
stage, surely he
would have ensured that the variation orders were placed by someone
with the necessary authority? If only he had
the authority, then
clearly he would have known already at that stage that they were not
authorised. On the probabilities, Fell
was authorised by Pircon. It
is revealing that Pircon has not deposed to an affidavit denying that
the he had not authorised Fell.
I therefore conclude that there is
simply no merit in this defence.
[25]
In any event, it is not open for the applicant to resile from a
validly concluded settlement agreement on the basis it purports
to.
The error that the applicant has to rely on to escape the settlement
agreement has to be a Justus error, which implies misrepresentation
by the other party. Therefore, in the absence of any
misrepresentation or other misconduct by the respondent inducing the
settlement
agreement, the applicant is not entitled, at law, to
resile from a binding agreement. (Hlobo v Multilateral Motor Vehicle
Accident
Fund
2001 (2) SA 59
(SCA) para 13.
[27]
I agree with the respondent’s counsel that, having regard to
the history of the matter, the applicant accepted the default
judgment and acquiesced in its execution - but only when the
liquidation application was lodged, did the applicant make this
application
for rescission. Counsel further argued that it was
inconceivable that the applicant’s staff and its functionaries,
including
Pircon and McMahon were unaware of the sheriff’s
removal of its furniture and assets. I agree. McMahon, both in his
founding
and replying affidavits, has not dealt with this issue at
all. That, in itself, casts serious doubt upon the bona fides of this
application.
[28]
I therefore conclude that on any of the above grounds, either
severally or cumulatively, the application for rescission has
to
fail. With regard to costs, Mr. Leeuwener, counsel for the
respondent, urged me to order the applicant to pay the costs on
attorney and client scale, contending that the applicant was spurious
in its application. Although I take a view that the application
was
hopelessly without merit, I do not deem that sufficient enough to
mulct the applicant in a punitive costs order. I have therefore
decided that costs shall be ordered on the normal scale.
[29]
In the result the following order is made:
1.
The application for rescission of the order of this court made on 31
January 2012 is dismissed with costs.
TM MAKGOKA
JUDGE
OF THE HIGH COURT
DATE
OF HEARING : 25 MAY 2013
JUDGMENT
DELIVERED : 15 AUGUST 2013
FOR
THE APPLICANT : MR. K.J. VAN HYUSSTEEN
INSTRUCTED
BY : FLUXMANS ATTORNEYS, JOHANNESBURG
FOR
THE RESPONDENT : ADV. P. G. LEEUWENER
INSTRUCTED
BY : A VAN TONDER ATTORNEY, JOHANNESBURG,
AND
JOHN CLAYTON ATTORNEY, HATFIELD, PRETORIA