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[2012] ZAECELLC 9
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Ndema v Absa Bank Ltd and Others (EL: 283/2010, ECD: 583/2010) [2012] ZAECELLC 9 (18 May 2012)
15
IN THE HIGH COURT OF
SOUTH AFRICA
EASTERN CAPE
DIVISION- EAST LONDON
Case no: EL: 283/2010
ECD: 583/2010
Date Heard: 15/05/2012
Date
Delivered: 18/05/2012
In the matter between:
LETTITIA MOMAFAKU
NDEMA
…............................................
APPLICANT
And
ABSA BANK LIMITED
…...............................................
1
ST
RESPONDENT
THE SHERIFF OF THE
HIGH COURT,
EAST LONDON
….........................................................
2
ND
RESPONDENT
REGISTRAR OF DEEDS,
KING WILLIAMS TOWN
….......
3
RD
RESPONDENT
DAVID BARKER
…........................................................
4
TH
RESPONDENT
ELSJE ELLIOT
…...........................................................
5
TH
RESPONDENT
JUDGMENT
SMITH J:
Introduction
[1] On 23 September
2010 the Registrar of this Court granted default judgment against the
Applicant in favour of the First Respondent
in terms whereof:
(i) The Applicant was
ordered to pay to the First Respondent an amount of R3 032 793.23;
and
(ii) Immovable property
described as “
Remainder of Erf 1098, East London“
was
declared executable.
[2] The aforesaid
property was owned by the Applicant and mortgaged in favour of the
First Respondent as security for a loan granted
by the First
Respondent to the Applicant.
[3] The property was
subsequently sold in execution to the Fourth and Fifth Respondents
jointly.
[4] The Applicant now
seeks an order rescinding the aforesaid default judgment and setting
aside the sale of the immovable property
to the Fourth and Fifth
Respondents. Mr
Nzondo,
who appeared for the Applicant, has
for the first time during his argument in court stated that the
Applicant also requires the
court to reconsider the matter in terms
of Rule 31 (5) (d) of the Uniform Rules of Court. In terms of that
sub-rule any party who
is dissatisfied with a judgment granted by the
Registrar may, within twenty days after he or she has become aware of
the judgment,
request the court to reconsider the matter. He
submitted that where a court is called upon to exercise its
jurisdiction in terms
of this sub-rule, an applicant does not have to
establish the usual legal requirements for the rescission of a
default judgment.
[5] The Fourth and
Fifth Respondents purported to file a “
Contingent
Counter-Application
” against the First Respondent in the
event of the Applicant being successful. While the said application
appears to be of
doubtful validity, in the light of my findings below
it is not necessary for me to rule thereon.
[6] The application
rests on the following contentions:
(i) that the default
judgment granted by the Registrar was
void ab origine.
In this
regard the Applicant relies on the fact that the Constitutional Court
has declared the practice in terms whereof Registrars
granted default
judgments declaring immovable property executable, as being
unconstitutional. (See:
Gundwana v Steko Developments CC and
others
2011 (3) SA 608
(CC)
);
(ii) that the Applicant
has provided a reasonable explanation for the delay in bringing the
application for rescission, she has
established that she was not in
wilful default and that she has a
bona fide
defence to the
First Respondent’s claim; and
(ii) the sale in
execution was contrary to the provisions of
s. 5
of the
Insolvency
Act, 24 of 1936
(“the
Insolvency Act&rdquo
;), in that it had
proceeded despite the fact that the Applicant had published a notice
of the voluntary sequestration of her estate
on the 20
th
of October 2011.
I now turn to deal with
these points
seriatum.
Was the default
judgment void
ab origine
?
[7] I agree with Mr
Beyleveld SC
, who appeared for the First Respondent, that the
Applicant’s contention that the default judgment granted by the
Registrar
was
void ab origine
is founded on a fundamental
misconstruction of the ratio in the
Gundwana
case (supra).
[8] The court in that
matter was at pains to state that the finding of constitutional
invalidity did not automatically visit invalidity
on all default
judgments granted by Registrars prior to the ruling.
[9] The court stated in
terms that the aggrieved debtors will be required to apply for
rescission of the default judgments in the
ordinary course and in
doing so will have to set out
bona fide
defences to the claims
against them.
[10] An additional
burden was placed on aggrieved debtors wishing to challenge default
judgments on the basis of the
Gundwana
decision
(supra)
.
Froneman J held that only deserving cases should benefit from the
declaration of unconstitutionality and stated the following
(at
paragraph 59):
“
I
consider that this balance may best be achieved by requiring that
aggrieved debtors who seek to set aside past default judgments
and
execution orders granted against them by the Registrar must also
show, in addition to the normal requirements for rescission,
that a
court, with full knowledge of all the relevant facts existing at the
time of granting default judgment, would nevertheless
have refused
leave to execute against specially hypothecated property that is the
debtor’s home”
[11] The Applicant’s
purported reliance on
Rule 31
(5) (b) is in my view ill-conceived. It
is trite law that this rule does not entitle a court to substitute
its own discretion for
that of the Registrar unless the latter has
erred.
(Bloemfontein Board Nominees Ltd v Benbrook
1996 (1) SA 631
(OPD)).
Apart from the fact that the Applicant’s notice of
motion clearly seeks a rescission of the default judgment and does
not
purport to request a reconsideration of the matter in terms of
the aforesaid sub-rule, the Applicant is in the event not exempted
from establishing the abovementioned requirements enunciated in the
Gundwana
case
(supra).
The Applicant has not alleged
that the Registrar has erred but relies on the declaration of
constitutional invalidity in that case.
I am therefore of the view
that the Applicant’s contention in this regard cannot be upheld
and that it is incumbent on her
to establish the usual legal
requisites for rescission.
Rescission of the
default judgment
[12] These being motion
proceedings, I am constrained to resolve whatever factual disputes
there are in accordance with the legal
principles enunciated in
Plascon –Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd
[1984] ZASCA 51
;
1984 (3) SA 623
(A).
I am therefore constrained to decide the
matter on the basis of the facts alleged by the Respondents together
with the admitted
facts put up by the Applicant.
[13] The summons was
served on the Applicant on 19 May 2010 by affixing a copy to the main
entrance of her chosen
domicilum citandi executandi,
being 48
Irvine Road, Bonnie Doon, East London. The default judgment was
granted by the Registrar on the 23
rd
of September 2010 on
the basis that the Applicant had failed to enter appearance to defend
within the time period prescribed by
the rules of court.
[14] The Applicant has
alleged that she never received the summons and that she only became
aware of the impending sale in execution
of her property on the 7
th
of October 2011 when she was advised by a friend from Cape Town that
the property had been advertised for sale in the Government
Gazette.
Her friend also advised her to enlist the assistance of a firm called
Consumer Guardian Services. It was with the assistance
of this firm
that she eventually became aware of the default judgment. She then
instructed the aforesaid firm to take the necessary
steps for the
setting aside of the default judgment and to stop the sale in
execution. She also state “
in passing
” that the
application would have been brought much earlier if it had not been
for the fact that the First Respondent’s
Attorneys (and the
Second Respondent) unnecessarily delayed in providing certain legal
documents, including the conditions of the
sale in execution of the
immovable property. She states that these documents were eventually
uplifted by her attorney, Mr Godongwana,
from the court file after a
request had been directed to the Registrar in Grahamstown.
[15] Regarding her
defence to the First Respondent’s claim, she states that she
would have defended the matter if she had
received the summons
because she has had a longstanding dispute with the First Respondent
regarding the outstanding amount and
calculation of interest on her
bond repayments. She had as a result instructed Consumer Guardians
Services to conduct a forensic
audit on her bond account because she
suspected that she had been overcharged. She had also instructed them
to apply for the voluntary
sequestration of her estate as she was
unable to pay creditors and it would have been to the advantage of
all her creditors if
her estate were sequestrated.
[16] She alleges
further that the results of the forensic audit by Consumer Guardian
Services established that, during the period
20 October 2009 to 21
July 2011, she had been overcharged by the First Respondent in the
amount of R28 989. 89. The report compiled
by Consumer Guardian
Services - which is annexed to her affidavit - is a one page document
that states only that the audits were
based on bank statements and
information supplied to them. There is no indication as to how that
amount was calculated and on what
basis they had concluded that the
Applicant had been overcharged. It is on this basis that the
Applicant asserts that she has a
bona fide
defence to the
First Respondent’s claim.
[17] It is trite law
that a court may rescind a default judgment if the applicant has
provided a reasonable explanation for his
or her default and
successfully established that the default was not wilful or due to
gross negligence.
[18] It is also
incumbent on the applicant to show that he or she has a
bona fide
defence and that the application is not merely brought in order
to delay the plaintiff’s claim. Although it is not necessary
for an applicant to deal with the details of his or her claim, he or
she is required to set out such averments which, if proven
at a trial
in due course, would constitute a comprehensive defence to the
plaintiff’s claim. (
Grant v Plumbers (Pty) Ltd
1949 (2) SA
470
(OPD),
at page 476 to 477.)
[19] The Applicant has
in my view dismally failed to establish any one of the
above-mentioned legal requisites. Mr
Beyleveld
has correctly
submitted that the Applicant has failed to explain the reasons for
the delay in bringing the application for rescission
after she had
allegedly become aware of the sale in execution during October 2011.
The application for rescission was launched
only during February
2012. The Applicant’s attempt to explain the delay of more than
five months within the space of a few
perfunctory and broad sweeping
sentences is, at best, unconvincing and at worst, draws one to the
irresistible conclusion that
the true reasons for the delay have been
deliberately obfuscated. It is instructive though that her attorney
was able to source
the documents, which she allegedly required to
launch the application, from court files. There is no explanation as
to why this
was not done immediately. The Applicant’s
difficulties in this regard is further exacerbated by the fact that
her attorneys,
Messrs Appoles Attorneys, wrote to the First
Respondent’s attorneys and the Second Respondent on 24 March
2011 informing
them of the publication of the notice of voluntary
surrender and demanding that the sale scheduled for 25 March 2011 be
cancelled.
The Applicant’s assertion that she only became aware
of the default judgment during October 2011 is therefore simply
untrue.
[20] The Applicant
however faces another insurmountable hurdle in this regard. It
appears that she had, rather disingenuously, omitted
to state in her
founding affidavit that she had approached the First Respondent’s
attorneys with settlement proposals a day
after the summons was
served.
[21] The Applicant has
attempted to explain her way around this difficulty by averring that
her visit to the offices of the First
Respondent’s attorneys
was in consequence of the notice issued in terms s. 129 of the
National Credit Act, 34 of 2005 (“the
National Credit Act&rdquo
;).
That letter was however dated 25 January 2010 and had been dispatched
by registered mail on the 27
th
of January 2010. It is
therefore unlikely that the Applicant would have been spurred on by
this letter to seek a resolution of
the matter more than nine months
after she had received it. It is more probable that the attempts by
the Applicant to have the
matter resolved on the 21
st
of
October 2010 were precipitated by the summons which had been served
at her chosen
domicilium
the day before. The inference is
therefore ineluctable that she had already been aware of the summons
at that stage.
[22] The Applicant has
in my view also failed to establish any semblance of a defence to the
First Respondent’s claim. The
original summons was issued on
the basis of an averment that the Applicant had failed to pay the
mortgage bond instalments on the
due dates. Nowhere in her papers has
the Applicant averred that she was not in arrears and that the First
Respondent was therefore
not entitled to invoke the acceleration
clause and to claim the full outstanding balance together with
interest thereon.
[23] Although I am in
agreement with Mr
Beyleveld’s
submission that the
certificate provided by Consumer Guardian Services has no evidentiary
value because it amounts to hearsay, I
am in the event of the view
that this document does not in any manner assist the Applicant in
establishing a
bona fide
defence to the First Respondent’s
claim. Firstly, the document is extremely vague regarding the basis
on which the so-called
“
over-charged”
amount of
R28 989.89 had been calculated and secondly, there is no indication
that this amount exceeded the amount of arrears and
that the
Applicant was therefore effectively not in arrears. In fact the terms
of the settlement offer which was made by the Applicant
to the First
Respondent’s attorneys during October 2010 suggests that the
arrears were substantial indeed. The Applicant
states that she had
offered to make an initial payment of R100 000.00.
[24] I am also of the
view that the Applicant has not been able to put up any additional
facts which can convince me that a court,
having been aware of all
these facts at the time of the granting of the default judgment,
would have refused to sanction the execution
of the immovable
property. She has, on the contrary, averred that she is unable to pay
her debts and have not proffered any reason
why, in the light of this
financial disability, the First Respondent would not have been
allowed to perfect its security. In addition,
apart from the fact
that she owns other properties, she has also not explained why she
has not pursued any of the remedies available
in terms of the
National Credit Act.
Validity
of the
sale in execution
[25] The argument which
was advanced on behalf of the Applicant in this regard is that the
sale was unlawful by virtue of the provisions
of
s. 5
of the
Insolvency Act. That
section provides as follows:
“
After
the publication of a notice of surrender in the Government Gazette in
terms of section four it shall not be lawful to sell
any property of
the estate in question, which has been attached under writ of
execution or other process, unless the person charged
for the
execution of the writ or other process could not have known of the
publication; provided that the Master...”
[26] Mr
Beyleveld
has convincingly argued that the Applicant has disingenuously
used the provisions of this section as a stratagem to frustrate the
First Respondent’s attempts to have the property sold in
execution.
[27] In this regard it
is instructive that the Applicant has failed to disclose in her
founding papers that the sale in execution
was delayed on a previous
occasion as a result of the publication of a similar notice of
surrender. It appears that on that occasion
the voluntary surrender
of the Applicant’s estate was withdrawn after the sale in
execution was cancelled. The Applicant’s
explanation as to why
she had not proceeded with the voluntary surrender on the second
occasion after the sale in execution, is
also revealing. In this
regard she has stated;
“
When
I realised that the 2
nd
respondent had gone ahead with the sale in execution without no
explanation whatsoever from the 1
st
respondent’s attorneys, we abandoned the application as it
would have been a futile exercise to proceed with it when my house
had been sold to a third party.”
[28] The ineluctable
inference in my view is that the publication of the notice of
voluntary surrender of her estate was merely
a stratagem designed to
frustrate the sale in execution of the property. Once this objective
had been accomplished, there was no
need for her to proceed with the
surrender.
[29] The fact that the
sale had been made subject to the suspensive condition that the
Applicant would be unsuccessful or not proceed
with the application
for voluntary surrender, casts further suspicion on the Applicant’s
stated reasons.
[30] Mr
Beyleveld
has in my view correctly submitted that if she had successfully
proceeded with the voluntary surrender, the sale would not have come
into existence in any event. Her stated reasons for the withdrawal of
the application for voluntary surrender therefore do not
make any
sense. Despite my strong reservations about the bona fides of the
Applicant in this regard, I am of the view that the
First and Second
Respondents would not have been entitled to simply ignore the notice
for these reasons and that they would have
been constrained to apply
to court for an order setting the notice aside before proceeding with
the sale of the property. It is
however clear from the First
Respondent’s papers that the Second Respondent did not proceed
with the sale in execution on
this basis. The First Respondent was
clearly of the view that the inclusion of the abovementioned
suspensive condition had effectively
put the sale on hold pending the
fulfilment thereof and that the transaction did therefore not
constitute a sale of the property
as envisaged in
s.5
of the
Insolvency Act.
[31
] Mr
Ndzondo
has
submitted that the condition to the effect that the sale was subject
to the Applicant being unsuccessful or not proceeding with
the
intended application for a voluntary surrender was a resolutive
condition, which meant that the contract came into existence
immediately and that the agreement would therefore have fallen foul
of the aforementioned statutory provision.
[32] I do not agree
with this submission. The condition was pertinently stated by the
parties to be a suspensive one and had therefore
effectively
suspended the operation of the contract pending fulfilment thereof,
in the sense that the parties’ respective
contractual
obligations were put on hold. This meant that the seller could
therefore not have insisted on payment of the purchase
price and the
Fourth and Fifth Respondents were not entitled to demand transfer of
the property prior to the fulfilment of the
condition. In this sense
therefore the condition was a typical suspensive one and no sale
would therefore have come in existence
prior to the fulfilment
thereof. Mr
Beyleveld
has correctly pointed out that the
Applicant herself has on numerous occasions in her founding affidavit
referred to the aforesaid
term as being a suspensive condition. I am
accordingly in agreement with Mr
Beyleveld’s
submission
that the transaction did therefore not constitute a “
sale
”
in legal parlance and the provisions of
s. 5
of the
Insolvency Act
were
for these reasons not applicable.
See:
Geue and
Another v Van der Lith and Another
[2003] ZASCA 118
;
2004 (3) SA 333
(SCA)
at 339B.
[33]
There are several
other difficulties with this argument. The notice was published on
the same day as the sale in execution. It
is however not clear from
the papers whether or not it was indeed published before the sale or
that either the First or Second
Respondents had known about it at the
time of the sale. The notice was never published in a newspaper as is
required in terms of
s. 4
of the
Insolvency Act and
would also for
this reason have been invalid in any event.
Costs
[34] While there can be
no doubt that the First, Fourth and Fifth Respondents are entitled to
their costs, I cannot agree with Mr
Cole’s submission that the
Applicant and the First Respondent should be jointly and severally
liable for the Fourth and Fifth
Respondents’ costs. There is in
my view simply no legal basis on which the First Respondent could be
held liable for costs.
Order
[35] In the result I am
of the view that the application must fail and the following order
shall therefore issue:
(a) The application is
dismissed;
(b) The Applicant is
ordered to pay the First, Fourth and Fifth Respondents’ costs,
together with interest on such costs,
at the legal rate from a date
14 days after the date of the Taxing Master’s
allocatur
to the date of payment.
_________________________
J.E SMITH
JUDGE OF THE HIGH
COURT
Appearances
Counsel for the Applicant : Advocate
Ndzondo
Attorney for the Applicant :
Godongwana Ngonyama Attorneys
280 Oxford Street
Southernwood
EAST LONDON
Ref: Mr L Godongwana/xm/NDE1
Counsel for the 1
st
Respondent : Advocate Beyleveld, SC
Attorney for the 1
st
Respondent : Russell Incorporated
10 Rochester Street
Vincent
EAST LONDON
Ref: Mr C Breytenbach
Counsel for 4
th
and 5
th
Respondent : Advocate Cole
Attorney for 4
th
and 5
th
Respondent : Cooper Conroy Bell Richards Inc.
4 Epsom Road
Stirling
EAST LONDON
Ref: GSB/Jan/BB7709
Date Heard : 15 May 2012
Date Delivered : 18 May 2012