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[2011] ZAKZDHC 49
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K Govender Civils and Building Contractors CC and Others v Standard Bank of SA Ltd (654/2011) [2011] ZAKZDHC 49 (2 November 2011)
In
the KwaZulu-Natal High Court, Durban
Republic
of South Africa
Case
No : 654/2011
In
the matter between :
K
Govender Civils and Building Contractors CC
….......................................
1
st
Applicant
Kelvin
Govender
….......................................................................................
2
nd
Applicant
Gonasagree
Govender
….............................................................................
3
rd
Applicant
and
The
Standard Bank of SA Ltd
…....................................................................
Respondent
Judgment
Lopes J
[1] The applicants seek rescission, in
terms of the provisions of r 31(2)(b) of the Uniform Rules of this
Court, of a default judgment
obtained by the respondent against them
on the 7
th
April 2011.
[2] In order to succeed in an
application for rescission, the applicants are required to
demonstrate :-
a reasonable explanation for their
default;
that the application for rescission
is bona fide and not made with the intention to delay the
respondent’s claim; and
that they have a bona fide defence to
the respondent’s claim. In this regard they need to set out a
prima facie defence
by setting out averments which, if established
at the trial, would entitle them to the relief they seek. It is not
necessary
for them in that regard to deal fully with the merits of
the matter and produce evidence that the probabilities favour them.
See
Grant v Plumbers (Pty) Ltd
1949(2) SA 470 (O) at 476 – 7.
[3] The second applicant who is the
sole member of the first applicant and married in community of
property to the third applicant,
deposed to a founding affidavit in
which he purported to set out the defences relied upon by the
applicants.
[4] The respondent bank’s cause
of action was based upon an overdraft facility afforded by it to the
first applicant, which
it called up; a suretyship obligation on the
part of the second and third applicants; and the registration of a
continuing covering
mortgage bond over immovable property owned by
the first respondent. In addition the respondent called up what is
described as
a ‘Medium Term Loan Account’ also pertaining
to the first applicant.
[5] In view of the allegations in the
founding and opposing affidavits it is relevant for me to set out a
summary of the allegations
made by the second applicant. They are :-
during 2010 the applicants (although
it turns out in fact to be only the second and third applicants)
elected to register a mortgage
bond over the immovable property
situated at Erf 563 Sunford, Phoenix in favour of the bank in order
to enable them to pay the
first applicant’s indebtedness to
the bank in toto. The proposal was allegedly to consolidate the
first applicant’s
debt with the bank, and this was accepted by
the bank who caused a bond to be registered on the 2
nd
August 2010 over the property belonging to the second and third
applicants;
when the first applicant fell into
arrears with its instalments in respect of the overdraft facility
during or about August or
September of 2010, the second applicant
contacted a number of employees of the bank to enquire ‘about
why the proceeds
of the newly registered bond had not been paid over
to the Respondent and to make arrangements in the interim to pay off
the
arrear instalments should the Respondent require a little more
time to transfer out the proceeds of the new bond’;
the second applicant claims that he
was advised by employees of the bank that as the bond had already
been registered over his
private property it was an administrative
and accounting exercise to pay out the bond proceeds into the credit
facilities accorded
the first applicant;
despite promises by the employees of
the bank that they would revert to him, the second applicant
received no response until he
was served with the summons in the
present action (it is clear from the returns of service put up by
the bank’s attorney
that this occurred on the 21
st
January 2011);
the second applicant then contacted
the bank’s personal and business banking credit department,
and was informed by an employee
that the bank was still in the
process of making the necessary payments and adjustments and that
the summons had been issued
purely to protect the rights of the
bank;
the second applicant was told that as
the bond had already been registered it was merely a question of
waiting a period of time
for the necessary payment of the proceeds
to be made, to clear the first applicant’s indebtedness with
the bank;
during the period between January
2011 and March 2011 and whilst waiting for those funds to be
transferred, the second applicant
made payments totalling R76 000
into the account of the first applicant held with the bank;
from January to the second week in
April the second applicant was in constant communication with the
bank’s personal and
banking credit department, and as late as
April 2011 was advised that the bank would shortly make payment of
the proceeds of
the bond;
unbeknownst to the second applicant,
the bank took default judgment against all the applicants on the 7
th
April 2011, a fact of which the second applicant only became aware
when he saw a notice of attachment and writ on the 22
nd
August 2011;
as the bank had a registered bond
over the second and third applicants’ property for the sum of
R800 000 for which neither
of the applicants had received value, the
applicants would have entered an appearance to defend had they
realised that the bank
intended to obtain judgment;
the second applicant also maintained
that the agreement in respect of the overdraft facility was that the
bank was entitled to
call it up on reasonable demand, in which case
the applicants should have been placed on notice to bring up the
arrears within
a reasonable period of time. The bank failed to do
this;
with regard to the medium term loan
account which had also been called up, the second applicant disputed
the bank’s entitlement
unilaterally and unlawfully to call it
up.
[6] On the basis of the aforegoing the
second applicant claims that the applicants have a bona fide defence
to the bank’s
action which entitles them to recission of the
judgment.
[7] In the affidavit supporting the
bank’s opposition to rescission of the judgment, the bank’s
attorney sets out a
somewhat different picture. From his affidavit
the following emerges :-
that on the 18
th
November
2010 letters in terms of s 129 of the National Credit Act were
dispatched by registered mail to all three applicants;
summons was issued on the 19
th
January 2011 and served personally on the second applicant on the
21
st
January 2011;
on the 24
th
January 2011
the second applicant sent an email to the bank’s attorneys
recording that he was in the process of taking
out a bond on one of
his properties in order to pay his debts to the bank, but that in
the meantime he was prepared to make monthly
payments of R15 000 for
the next six months;
on the 1
st
February 2011
the second applicant was advised telephonically by the bank’s
attorneys that the bank required payment of
the sum of R15 000 per
month for three months, whereafter the position would be reviewed.
The demand was also that the first
payment was to be made
immediately, that the bank was to be kept informed and updated on
the matter of the registration of the
bond;
by the 4
th
March 2011 no
payments had been made by the second applicant and in response to an
advice to him that the bank’s attorneys
were instructed to
proceed, he recorded that he would be making a payment of R30 000 on
the 7
th
March 2011;
on the 14
th
March 2011
(the payment of R30 000 on the 7
th
March 2011 not having
been forthcoming), a representative of the first applicant advised
the bank’s attorney that R30 000
would be paid on the 25
th
March 2011;
that payment was not made either, and
on the 25
th
March 2011 the applicants’ attorney
addressed the bank’s attorneys acknowledging the applicants’
failure to
keep up with the repayment arrangements. Reference is
made to the fact that the immovable property owned by the first
applicant
was to be sold for the sum of R570 000 pursuant to a
purchase and sale agreement which was attached to the letter.
Reference
is also made to a first mortgage bond registered over the
same property which would have to have been cancelled in order for
the transfer of that property to take place. The bank’s
attorneys were requested to take instructions from the bank in that
regard;
On the 1
st
April 2011 the
bank’s attorney wrote to the applicants’ attorney
stating that the bank had instructed them not to
stay proceedings
and noted that the sale was subject to a bond to be granted within
30 days;
judgment was duly obtained on the 7
th
April 2011, and a writ issued on the 8
th
June 2011 which
was served on the 4
th
July 2011. On the 20
th
July 2011 the second applicant again addressed the bank’s
attorney stating that he wanted to make payment arrangements
until
he could find a suitable buyer for his office block, whereafter he
would be able to settle the amount outstanding in full;
on the 29
th
July 2011 the
bank’s attorneys notified the second applicant telephonically
that the sale was proceeding and he was given
the latest balance
outstanding;
on the 26
th
August 2011
new attorneys appointed by the applicants addressed the bank’s
attorneys raising for the first time the issue
of the possibility of
a rescission application and making certain proposals, presumably in
order to resolve the matter;
on the 1
st
September 2011
the bank’s attorneys advised the applicant that they would
proceed with the sale in execution of the property,
unless a
property guarantee in line with the bond could be provided.
[8] What is significant about the
second applicant’s founding affidavit is that he paints a
picture listing ongoing and continuing
negotiations with the bank’s
employees. These negotiations indicate a willingness on the part of
the bank to comply with
the second applicant’s demands. His
affidavit suggests that any delays were the fault of the bank’s
employees and that
the mortgage bond which had been registered on the
2
nd
August 2010, was one pursuant to which the first
applicant was entitled to receive funds. Those funds would be
received in due
course in order to be set off against the first
applicant’s indebtedness to the bank. The only mention of
communications
between attorneys arises out of the letter of 26
th
August 2011 written by the applicants’ new attorneys to the
bank’s attorneys.
[9] That picture which is painted by
the second applicant, is an entirely misleading one. I say this
because :-
(a) the mortgage bond to which the
second applicant makes reference is a continuing covering mortgage
bond registered over what
is apparently a residential property
belonging to the second and third applicants. That mortgage bond does
not record that it is
granted in consideration of a loan to be
advanced to the second and third applicants. Instead, it records that
it is a continuing
covering mortgage bond up to the sum R800 000
arising from ‘ existing, future and contingent indebtedness …’.
Continuing covering mortgage bonds are commonly registered by banks
in order to cover financial indebtedness which already exist
or which
may come into existence. Any loan which is advanced to the mortgagor
is the subject of separate documentation –
i.e. a loan,
overdraft facility, etc;
(b) although the second applicant
claims that he and the third applicant were entitled to be advanced
the sum of money referred
to in the continuing covering mortgage
bond, no basis is set out as to why that should be so. Indeed, no
such basis appears from
the continuing covering mortgage bond itself.
Had the bank agreed to loan the second and third applicants an amount
of money in
consideration for the passing of the continuing covering
mortgage bond, I would have expected the applicants to have said so.
They
could easily have set out the terms and conditions of such a
loan, the persons who concluded it on behalf of the bank, the
circumstances
thereof, and, almost certainly, written evidence
thereof. None of this was suggested or produced;
(c) indeed, the applicants raise no
defence to the overdraft and the ‘Medium Term Loan Account’
which were called up
by the bank, save to deny the bank’s
entitlement to have done so. The second applicant claims in respect
of the overdraft
facility that he was entitled to be accorded
reasonable notice. That was clearly what was done by the bank on the
18
th
November 2010 when notices in terms of s 129 were
addressed to the applicants by the bank. In addition, and up until at
least March
of 2011 (some four months later) the bank was still
prepared to entertain repayments made by the applicants provided they
accorded
with the repayment plan demanded by the bank. Despite having
agreed to comply with those payment requirements the applicants did
not do so. That the applicants were afforded a further reasonable
period within which to make payments and bring their affairs
into
order is clear from the correspondence exchanged between the parties’
attorneys;
(d) the exchange of correspondence
between the parties’ attorneys is revealing in what that
correspondence does not deal with.
I refer here to the defence raised
by the applicants that they were entitled to have been advanced
monies in respect of the continuing
covering mortgage bond registered
over the property belonging to the second and third applicants. Had
they been entitled to such
monies there is no doubt that the
applicants’ attorneys’ letter of the 25
th
March 2011 would have made reference to that fact. Instead the
applicants’ attorneys confess their failure to comply with
the
repayment arrangements, record the difficulties facing the
applicants, and refer to the sale of the immovable property
presumably
owned by the first applicant over which a continuing
covering mortgage bond had also been registered (this time on the
30
th
September 2009).
[10] In addition to the aforegoing, it
would seem that the second applicant’s statement that he had
only become aware that
judgment had been granted when he saw a notice
of attachment and writ on the 22
nd
August 2011, cannot be
correct. On the 29
th
July 2011 the bank’s attorney
notified the second applicant that the sale was proceeding. This is
confirmed in a telephone
note put up as an annexure to the opposing
affidavit, and confirmed by the attorney who wrote it. It seems
inconceivable that a
businessman such as the second applicant who had
concluded numerous financial arrangements with the bank and who had
communicated
with his attorneys regarding the matter, would not have
appreciated and understood that the property could not be sold unless
judgment
had already been obtained.
[11] In all the circumstances I do not
accept that the applicants have provided a bona fide defence to the
bank’s claim. The
complete lack of detail regarding the
arrangements claimed by the second applicant, coupled with his
unwillingness to place all
the negotiations and correspondence before
the court, leads me to the inevitable conclusion that the applicants’
defence
is not bona fide.
[12] The only other defence raised by
the applicants is the lack of authority of the bank’s attorney
to depose to the bank’s
opposing affidavit. In my view that
lack of authority was cured by an affidavit from the bank confirming
his authority. In my view
that point has no merit.
[13] In all the circumstances I make
the following order :-
the application for rescission is
refused;
the applicants are to pay the cost of
the rescission application, jointly and severally, the one paying
the other to be absolved.
Date of hearing : 28
th
October 2011
Date of hearing : 2
nd
November 2011
Counsel for the Applicants : D Sridutt
(instructed by (K Maharaj Incorporated)
Counsel for the Respondent : B S M
Bedderson (instructed by Goodrickes)