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[2011] ZAKZDHC 18
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RZT Zelpy 5073 (Pty) Ltd and Others v Mjono's Tours CC (16532/2008) [2011] ZAKZDHC 18 (9 March 2011)
13
IN THE KWAZULU-NATAL HIGH
COURT, DURBAN
REPUBLIC OF SOUTH AFRICA
Case No. 16532/2008
In the matter between:
RZT ZELPY 5073 (PTY) LTD
….........................................................
First
Applicant
THEMBINKOSI MANDLA LEONARD MALEVU
…......................
Second
Applicant
MALEVU INVESTMENTS CC
….......................................................
Third
Applicant
and
MJONO’S TOURS CC
…........................................................................
Respondent
______________________________________________________________
JUDGMENT
______________________________________________________________
GORVEN J:
The
respondent
launched an application in December 2008 against the applicants
(“the main application”). The second applicant
is a
director of the first applicant and the sole member of the third
applicant. An order was granted by default on 5 March 2009.
The
order granted was a joint and several one for payment by the
applicants to the respondent of R750 000.00 along with interest
and
costs. In August 2009, when his shareholding in certain companies
was attached pursuant to the order, the second applicant
became
aware of the order. In October 2009 an attempt was made by the
second applicant, without legal representation, to launch
an
application to rescind the order but he was informed by the court in
February 2010 that his papers were wholly defective and
the matter
was removed from the roll. Some time elapsed. The holding company of
the private companies whose shares had been attached,
known as
Miranda Holdings, became alarmed by the attachment. This was because
it was concerned that the sale of these shares
might affect its
rights under certain contracts since the second applicant’s
shareholding contributes Black Economic Empowerment
credentials
necessary for the contracts held by these companies. Miranda
Holdings accordingly assisted the applicants in funding
the present
application, which has been brought under Uniform rule 42(1)(a)
alternatively the common law, for rescission of that
order (“the
rescission application”). I shall refer to the parties by
their present designation and, where I quote
from the main
application papers, I shall insert their present designation in
square brackets in place of the designation in
the main application
so as to avoid confusion.
The issues in this application are
essentially twofold, namely:
Whether the order was
erroneously granted within the meaning of those words in
Uniform rule 42 (1)(a).
Whether the applicants have
shown sufficient cause for rescission under the common law.
I shall deal with the second of these
first.
An applicant for rescission must show
sufficient cause why the application should be granted. The two
essential elements under
the common law were said, in
Chetty
v Law Society, Transvaal
1
,
to be the following:
‘
(i)
that the party seeking relief must present a reasonable and
acceptable explanation for his default; and
(ii) that on the merits
such party has a
bona
fide
defence
which,
prima
facie,
carries
some prospect of success . . . .’
It is not
necessary to go into any great detail regarding the question of
wilful default. Mr
Hollis
SC, who appeared
for the respondent in the rescission application, indicated in
argument that he would not persist with any submissions
to the
effect that wilful default on the part of the applicants had been
shown. Suffice to say that the second applicant made
out a case that
the application did not come to his attention and further made out a
case that there had not been any proper
service on the first and
third applicants prior to the grant of the order. I agree with Mr
Hollis
in this regard.
This then leaves the second aspect of
a bona fide defence which, prima facie, carries some prospect of
success. In this regard,
the history of the matter is of some
consequence. The second applicant assembled a consortium of
individuals and corporate entities.
The consortium was formed to
provide transport under a proposed contract with Duvha Transport CC.
The first applicant was to
be utilised for the purpose of
contracting with Duvha Transport CC. The various members of the
consortium were to make available
vehicles to the first applicant
for the performance of the contract. Since many of the members of
the consortium did not have
such vehicles or the means to purchase
them, deposits were to be paid by them so that finance could be
obtained to purchase the
vehicles. It is common cause that the
deposits were placed in the bank account of the third applicant
purely for onward transmission.
There is some dispute as to the
basis of these payments. The applicants said that the deposits were
advanced to one Patricia
Royeppen pursuant to agreements concluded
between her and individual consortium members whereby she would
facilitate the purchase
of the vehicles for each consortium member.
The respondent said that the money was advanced to the first
applicant for this purpose
and that it was unaware of any contract
with or involvement of Royeppen. The respondent was a member of the
consortium.
The business venture failed. The
proposed contract between Duvha Transport CC and the consortium
never materialised. The applicants’
version is that the money
advanced to Royeppen were misappropriated, in all probability by the
person to whom she forwarded the
money. Quite understandably this
gave rise to significant unhappiness on the part of consortium
members who had advanced money.
The respondent had advanced R750
000.00 and the second applicant R880 000.00. Because the second
applicant had played a leading
role in the venture, members of the
consortium looked to him for an explanation and, in some cases, for
payment.
The case of the respondent contained
in the founding affidavit in the main application can be set out
briefly. It stated that
the second applicant had undertaken, on his
own behalf and on behalf of the first and third applicants, to repay
the deposits
paid by consortium members. It further said that a
letter dated 3 January 2008 was sent by the second applicant’s
attorney
to the respondent which, the respondent claimed “records
an admission by the First and Second [Applicants] of their liability
to make repayment of the amounts paid by the [Respondent]”. It
went on to refer to a further letter dated 23 July 2008,
signed by
the second applicant addressed to all consortium members which the
respondent claimed amounted to a personal undertaking
by the second
applicant to all consortium members to repay this money.
A court dealing
with a rescission application has a wide discretion as to what
constitutes sufficient cause. The following was
said by Trengove JA
in this regard:
2
‘
Thus,
under the common law, the Courts of Holland were, generally speaking,
empowered to rescind judgments obtained on default of
appearance, on
sufficient cause shown. This power was entrusted to the discretion of
the Courts. Although no rigid limits were
set as to the circumstances
which constituted sufficient cause (cf examples quoted by
Kersteman
(
op
cit
sv
defaillant))
the Courts nevertheless laid down certain general principles, for
themselves, to guide them in the exercise of their
discretion.
Broadly speaking, the exercise of the Court’s discretionary
power appears to have been influenced by considerations
of justice
and fairness, having regard to all the facts and circumstances of the
particular case. . . It follows from what I have
said that the
Court’s discretion under the common law extended beyond, and
was not limited to, the grounds provided for in
Rules 31 and 42(1) .
. . .’
The main issue
debated in argument before me was the question of the defence raised
by the applicants. Mr
Hollis
was unable to
submit that this was not the case in respect of the first and the
third applicants. I agree. On the applicants’
version, neither
was a party to the contract pursuant to which the respondent
advanced the money and neither undertook liability
to pay the moneys
to the respondent. If evidence to this effect is accepted by the
trial court, the defence raised would be good.
The second
applicant disavowed having made any undertaking but admitted sending
the letter of 23 July 2008. Mr
Gordon
SC, who appeared
for the applicants, submitted that this letter did not give rise to
any liability on the part of the second applicant.
The first point
to consider is the contention of the second applicant that the
letter was sent under duress in circumstances
which render any
contract concluded as a result of its being sent voidable.
The second
applicant stated in this regard that he was told by a consortium
member that a hit man had been hired to kill him.
In addition, he
stated that on several occasions individuals purporting to represent
consortium members went to his residence
and threatened his life. He
was not present when these incidents took place and put up an
affidavit by his step sister telling
of three such occasions. In the
first of these, during August 2007, men rang the doorbell and
demanded to see the second applicant
stating that they had come to
fetch ‘their money’. When they were told that he was not
present, they claimed that
he was in fact present and was avoiding
them. They thereafter discharged firearms before leaving. The second
occasion was similar
and took place during the same month. On the
third occasion, about one year later, some men rang the bell and
said that they
would kill the second applicant unless he gave them
‘their money’. The second applicant said that these and
other
incidents induced in him a fear for his life. This is why he
sent the letter of 23 July 2008 to all consortium members. As a
result of these threats he also started to sell his assets so as to
pay the most threatening consortium members portions of the
amounts
invested by them. The second applicant did not say whether he could
establish on whose behalf the persons who arrived
at his gate were
threatening him. It is also clear that, if the above evidence is
accepted by a trial court, the fear of the
second applicant was not
an unreasonable one and the threats were
contra
bonos mores
.
Our courts have
recognised that a contract concluded as a result of duress may be
rescinded in certain circumstances. De Villiers
CJ said the
following in this regard:
3
‘
Where
a man is forced by menaces to his person to make payments which he is
not legally bound to make, it cannot be said that there
is a total
absence of consent – but, inasmuch as his consent is forced and
not free, the payment is treated as involuntary,
and therefore
subject to restitution.’
The threat
emanated from third parties who the second applicant has not linked
to the respondent as its agents. It has not been
decided in our law
whether this gives rise to a right to rescind although Ramsbottom J,
obiter
,
said the following:
4
‘
It
seems probable that in our law a contract entered into through fear
induced by the duress of a third party is voidable, on the
principle
that there is no true consent: See Wessels on
Contract
(vol.
I. par. 1193); Pothier on
Obligations
(Part
I, ch. I, sec. 23); Story on
Contracts
(5
th
ed.,
par. 518); but in view of the allegations I have just quoted, it is
unnecessary to express an opinion on this point.’
The second
applicant said that the letter was sent as a result of duress and in
fear of his life even though he did not say in
the rescission
application that the member of the respondent or someone else acting
on behalf of the respondent was behind the
threats. (An averment was
contained in the plea which he sought to file in the main
application after the order had been granted
that he feared that the
respondent ‘and his hosts’ would shoot him and that all
the members of the consortium had
threatened him with acts of
violence). If that evidence is led and the respondent is found to
have made such a threat, this would,
of course, raise a defence to
the claim. Even if there is no such evidence, it is at least
arguable on the reasoning in
Broodryk
that, in the
remaining circumstances set out by the second applicant, a court
would not require him to demonstrate that the threats
were made by
persons connected to the respondent before setting aside the
undertaking relied on. The letter, sent as it was to
all the
consortium members, would have given rise to a number of individual
contracts as and when each consortium member accepted
the offer
contained in it. If sufficient facts are established, it may be
held, therefore, that the sending of the letter to
all members,
prompted as it was by duress, could not give rise to a valid offer
and that each such contract is subject to rescission.
There is
accordingly some prospect that all such contracts, including that
with the respondent, may be found to be subject to
rescission. I am
not in a position to go further than that and deliberately refrain
from making any such finding on the facts
before me at this stage
that the defence of duress is a good one.
Mr
Gordon
further submitted
that the main application did not make out a case for the relief
claimed. It is necessary to evaluate the founding
affidavit in the
main application for this purpose. He submitted that the underlying
causa
relied upon by the
respondent in the main application appears in the last sentence of
paragraph 15 thereof, to the following effect:
‘
The
Second [Applicant] on his own behalf and on behalf of the First and
Third [Applicants] undertook to immediately refund the payments
made
amounting to R750 000.00.’
This was followed by the following
averments concerning the attorney’s letter of 3 January 2008:
‘
The
letter records that the Second [Applicant] had applied to the
Industrial Development Corporation for a loan to refund money
paid by
the [Respondent] in respect of the failed coal transportation
business. The significance of this letter is that it records
an
admission by the First and Second [Applicants] of their liability to
make repayment of the amounts paid by the [Respondent].’
Paragraph 18 of that affidavit
continued:
‘
On
23 July 2008 the [Respondent] received a letter from the Second
[Applicant] A copy of this letter is attached hereto marked Annex
“
FA
5
”
.
In this correspondence the Second [Applicant] accepted personal
liability for all amounts contributed to the failed transportation
business venture and agreed to pay the said amount in cash or
otherwise to the respective individuals and/or companies.’
The respondent
then claimed that the applicants were jointly and severally liable
for repayment. In relation to the first and
third applicants, the
claim rests only upon the alleged undertaking of the second
applicant on his and their behalf referred
to in paragraph 15 of the
main application. Mr
Gordon
submitted that
this was insufficient to found a cause of action. The averments in
this paragraph amount to a bare assertion. In
applications it is
accepted that the affidavits must be regarded as both pleadings and
evidence.
5
In Uniform rule
18(6), it is required of a party who relies on a contract that he or
she ‘shall state whether the contract
is written or oral and
when, where and by whom it was concluded’. The underlying
rationale is clear. The basis of a contract
must be set out with
sufficient particularity to enable the other party to respond
meaningfully to it by way of a plea or, in
application proceedings,
an answering affidavit. For the same reason, that Uniform rule 18(4)
requires that the material facts
on which a party relies should be
pleaded. In the case of a contract, these would be the material
terms thereof. None of this
was done. There is an argument that this
is insufficient to found a cause of action but, in any action, it
would more properly
give rise to a complaint that the pleading was
vague and embarrassing rather than that it fails to disclose a cause
of action.
The baldness of the averment is a factor to be borne in
mind when weighing up whether the second applicant has shown
sufficient
cause. I do not consider it necessary or desirable to
make a finding on whether, on this basis, the order was erroneously
granted
and thus rescindable under Uniform rule 42(1)(a).
Mr
Gordon
further submitted
that, properly construed, the letter of 23 July 2008 did not amount
to the undertaking relied upon by the respondent.
It was necessary
for this purpose, he submitted, to construe the nature of the
undertaking that appears from the letter. Paragraph
18 echoed the
words of the letter where the undertaking was said to be to ‘pay
the said amount in cash
or
otherwise
’
(my
emphasis). He submitted that the election as to the means of
repayment, that is, whether it was to be cash ‘or otherwise’,
lay with the second applicant. The respondent could not, therefore,
obtain an order for specific performance for payment of cash.
The
‘or otherwise’ was spelled out by the second applicant
in some detail and involved a transfer of his shareholdings
in
certain companies to the company on whose letterhead he wrote the
letter and which had been formed for that purpose. The various
consortium members would obtain shares in that company as repayment.
Once again, this interpretation of the undertaking has some
prospect
of success but I refrain from going any further and making such a
finding at this stage.
Mr
Hollis
submitted that the
letter of 3 January 2008 corroborated an earlier undertaking by the
second applicant to pay the money. This
letter stated that the
second applicant had applied to the Industrial Development
Corporation for a loan to refund money paid
by the respondent. The
letter does not mention any prior undertaking. It may well not,
itself, amount to an undertaking. It is
not immediately apparent to
me how it could provide corroboration for an undertaking. It should
be recalled, in addition, that
the threatening visits to the second
applicant’s home had commenced in August 2007 which pre-dated
this letter and the
same issues may well arise as regards duress.
The letter is certainly not such as to immediately banish the
defences raised by
the second applicant to an extent requiring me to
find that the second applicant has not shown sufficient cause.
As a result of the conclusion that I
have come to, I do not find it necessary, for the purpose of the
rescission application,
to determine whether the order was
erroneously granted within the meaning of those words in Uniform
rule 42(1)(a). This was the
context in which the issues I have dealt
with in paragraphs 15 to 20 hereof were raised in argument. Taken as
a whole, the defences
relied upon by the second applicant seem to me
to carry some prospect of success. In the light of what I have said
above, I consider
that the interests of justice and fairness dictate
that the order against the second applicant should be rescinded in
that the
applicants have shown sufficient cause for rescission of
the order under the common law.
Mr
Hollis
submitted that my
discretion extends to granting any appropriate order. He submitted
that this includes an order interdicting
the dealings of the second
applicant in his shareholdings and he moved for such an order. He
based his submission on the words
in Uniform rule 31(2)(b) that the
court can grant rescission ‘on such terms as to it seems
meet’. Of course the application
was not brought under that
rule although it seems that, under the common law, a similar
discretion exists. It may well be that
a court has the discretion
contended for by the respondent. I consider the discretion to relate
primarily to matters of procedure
and costs rather than to such
matters. Even if a court had such a discretion, however, it would
need to be exercised judicially
on the basis of disclosed facts. In
the normal course of events, an interdict against dealing in one’s
property would only
lie if it can be shown that there is a
likelihood that such dealing would take place and that, in addition,
such dealing would
be done with the object of frustrating the claim
of the party seeking the interdict.
6
No such case has been made out by the
respondent. All that was raised was an averment of prejudice in the
respondent’s affidavit
if the second applicant should transfer
the shares on the basis envisaged in the letter of 23 July 2008.
There are at least two
answers to this averment. In the first place,
the second applicant has clearly repudiated that letter in this
application. He
is therefore unlikely to give effect to it.
Secondly, more than a year passed before the second applicant became
aware of the
order and there is no indication that, during that
time, he attempted to deal with the shares in any way prejudicial to
the respondent.
A rescinded order is a nullity. On the facts before
me I can see no basis for the respondent to be placed in a better
position
than it would have been in had no order ever been granted.
I am therefore not inclined to make the grant of an order for
rescission
subject to such an interdict.
In his heads of
argument Mr
Gordon
tendered
payment by Miranda Holdings of the costs of the application. He
reiterated this tender in argument indicating that he
would not be
able to submit that the opposition to the application was
unreasonable. Mr
Hollis
accepted the
tender and I agree that this would be an appropriate order as
regards costs.
In the result, I grant the following
order:
The order of this court, granted on 5
March 2009 under the above case number in favour of the respondent
against the applicants
jointly and severally, is rescinded.
The
notice of motion in the main application shall stand as a simple
summons in an action between the parties.
The
respondent is directed to deliver a declaration within twenty days of
the date of this order or such date as may be agreed between
the
parties.
The
further conduct of that action will be governed by the Uniform Rules
of Court.
Miranda
Holdings is directed to pay the costs of this application, including
the costs of opposition.
_______________________
GORVEN J
DATE OF HEARING : 25 February 2011
DATE
OF JUDGMENT : 9 March 2011
FOR
THE APPLICANTS’ : Adv D A Gordon, SC, instructed by
Shepstone
and Wylie Attorneys
FOR
THE RESPONDENT: Adv N D Hollis, SC, instructed by
Thomson Wilks Attorneys locally
represented by Mooney Ford Attorneys
1
1985
(2) SA 756
(A) at 764I-765C.
2
De
Wet & others v Western Bank Ltd
1979
(2) SA 1031
(A) at 1042F-H.
3
White
Bros v Treasurer-General
(1883)
2 SC 322
at 351.
4
Broodryk
v Smuts NO
1942
TPD 47
at 53.
5
Hart
v Pinetown Drive-In Cinema (Pty) Ltd
1972
(1) SA 464
(D) at 469D-E.
6
Knox
D’Arcy Ltd & others v Jamieson & others
1994
(3) SA 700
(W) at 706B-D.