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[2008] ZAWCHC 174
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Le Roux v Absa Bank Limited (10638/2006) [2008] ZAWCHC 174 (16 April 2008)
JUDGMENT
IN
THE HIGH COURT OF SOUTH-AFRECA
(
CAPE
OF GOOD HOPE PROVINCIAL DIVISION)
DATE:
16
APRIL 2008
CASE
NUMBER: 10638/2006
In
the matter between:
DANIEL
JOSHUA LE ROUX Applicant
And
ABSA
BANK LIMITED Respondent
JUDGMENT
DAVIS,
J
:
This
is an application for a rescission of the judgment granted by
default against applicant in favour of respondent on 5 December
2006.
The
respondent had instituted action against applicant, the principal
debtors and co-sureties with applicant for the payment for
the sum
of R1 603 008.37 in terms of the loan agreement concluded between
respondent and the principal debtor and suretyships
signed by
applicant and various co-sureties who had bound themselves as
sureties and co-principal debtors in
solidum
for
the indebtedness of the principal debtor to respondent in
respect of the loan agreement. Summons was served
during
October 2006. Default judgment was granted as no appearance to
defend was entered into by applicant on the 5 December
2006.
It
is common cause that, in this particular case, the application for
rescission of judgment requires the following requirements
to be met
before such an application can be successful:
Applicant
must give a reasonable explanation for default.
On
the merits, applicant must have a
bona
fide
defence
which
prima
facie
carries
some prospects of success, see
Colvn
v Tiger Foods Industries Ltd t/a Meadow Feed Mills Cape
2003(6) SA 1 (SCA) at 9F.
Ms
Watson, who appeared on behalf of the applicant, referred with
regard to the question of the explanation to the founding papers
in
which the following is stated.
"In
October 2006 Plaintiff instituted proceedings against myself and
various other parties in the above Honourable Court...
for payment
in the sum of R1 603 008.37 in terms of the suretyship agreement he
concluded with myself and the various parties
who bound and
interposed ourselves as surety and co-principal debtors in
soiidum
for
the indebtedness of the first defendant in respect of the loan
advanced to it for the purchase consideration in Evening Star
referred to above.
The
summons in this matter was served on my wife... on or about October
2006. When I received the aforesaid summons from my wife
I
immediately contacted the second defendant again who advised me that
he had spoken to his attorney, Mr Marais, and was advised
that the
summons was defective and that the respondent had instituted similar
proceedings was in the Witwatersrand Local Division
under case
number 10638/2006 and that the proceedings in the Cape High Court
amounts to a duplication of proceedings...
In
addition, they invited me to travel to Johannesburg in order to
oppose the matter in that court. I was unfortunately not in
the
financial position to do so, but believed that given their reactions
I would not be required to appoint my own attorney to
oppose the
matter as I was the fifth defendant and also included as a surety. I
was also advised by the second defendant that
as regards my
suretyship the first defendant that its defence is also availed to
me. I requested that the second defendant instruct
his attorneys to
act on my behalf which he undertook to do. Accordingly, 1 was left
under the impression that any proceedings
pertaining to the
plaintiffs claim would be dealt with by second defendants attorneys
and that I would be included in such defences.
The
reason for my failure to defend the action instituted against me is
accordingly that I at all times believed that the action
having been
opposed by the second defendant's attorneys that I would
automatically included in their defence especially bearing
in mind
the advice that the same defence is availed to me at first. I was
also under the mistaken belief that the attorneys acting
for the
second and third defendant would deal with any demands made against
me and would do whatever was necessary to protect
my interests as I
had consulted with the second and third defendants and their
attorneys in this regard prior to the plaintiff
instituting
proceedings and the second defendant undertook to instruct these
attorneys to act on my behalf.
Unfortunately,
the attorneys acting for the second and third defendants did not
oppose the action on my behalf as I now understand
that they had
been instructed by the second and third defendants.
On
or about 18 January 2007 the plaintiff caused the default judgment
to be granted against me"
So
much for the narrative as set out in the founding papers. Ms Watson
submitted, on the basis of this account, that the applicant
had not
wilfully failed to take action to defend the claim. He was under a
mistaken impression that action would indeed be taken.
Furthermore,
he had never previously served with a summons and was unaware of the
process involved in both instructing attorneys
to enter an
appearance to defend or the requirements necessary to launch an
application for rescission of judgment. He assumed
such action would
indeed have been taken on his behalf. He therefore showed a clear
intention to defend the action because he
had a
bona
fide
defence
to respondent's claim.
Mr
Manca, who appeared on behalf of the respondent, characterised, in
my view correctly, this explanation as somewhat weak. On
this basis,
he referred to the approach which the Appellate Division (and now
the Supreme Court of
Appeal)
have adopted with regard to these matters, ft is thus necessary to
refer thereto.
In
De
Wet and others v Western Bank Ltd
1979(2) SA 1031 (A) at 1043 the Court examined an explanation as to
why the applicants (appellants in that case) should be granted
the
kind of indulgence sought in this particular case.
The
court at 1043(H - 1044A) per
Trenoove,
AJA
(as he then was) said:
"The
appellant's predicament was not solely due to the attorney's
negligence or ineptitude. According to the affidavits the
appellants
have not been in direct touch with Lebos at any stage of the
proceedings. Coligionis was representing them, they left
the conduct
of the case in hrs hands entirely and although they were supposed to
look after the interests, he also let them down...
They appeared to
have manifested a complete disinterest in the conduct of the case
after the interim settlement... And they have
not proferred any
acceptable explanation for their failure to keep in touch with
Coligionis or with Lebos for that matter as
to the progress of the
proceedings during the 3 and a half year period subsequent to the
interim settlement"
Mr
Manca correctly submitted there is considerable similarity between
the approach adopted in
De
Wet's
case and the facts In the present dispute where it appears that
after contacting second and third defendant, the applicant did
little to appraise himself of the progress of a defence which he
assumed was being conducted in his name.
Similarly,
in
Colyn
supra
at
9-10
Jones.
AJA
said:
"While
the courts are slow to penalise a litigant for his attorney's inept
conduct of litigation there comes a point where
there is no
alternative but to make the client bear the consequences of the
negligence of his attorneys... Even if one takes
a benign view the
inadequacy of the explanation may well justify refusal of rescission
on their account unless perhaps the weak
explanation is cancelled
out by the defendant enable to put up a
bona
fide
defence
which is not merely some prospect, but a good prospect of success."
Mr
Manca submitted that, in this particular matter, the latter test
certainly could not trump the manifest absence of adequate
compliance with the first requirement for rescission.
This
submission compels an evaluation of the case concerning a
bona
fide
defence.
Ms Watson submitted that a
bona
fide
defence
had been be raised by the applicant. Leaving aside the question of
the duplication of an action instituted against applicant
in WLD, of
which no more, Ms Watson also submitted that the respondent had not
performed its obligations in terms of the loan
agreement. It had
paid the loan amount to a third party (Evening Star) without the
proper authorisation of the principal debtor.
The principal debtor
therefore never received the loan amount. Accordingly respondent
could not appty for repayment of the amount
it claimed, as it had
not legally discharged its obligation under the loan agreement. It
followed that, as a surety has any defence
to a claim that is
available to the principal debtor, the applicant could raise a
similar defence. Mr Manca contended that the
respondent had acted on
the instructions of a director of the principal debtor in which case
the so called
Turquand
rule
applied to bind the principal debtor.
However,
on the papers, the high watermark of respondents riposte to
applicant is the following paragraph in defendant's affidavit
opposing summary judgment where respondent refers
to
the following passage:
â
l
have been advised that on 3 November 2005 Syster was requested by
Haupt to sign a debit authority on behalf of the plaintiff
purporting to authorise plaintiff to pay the fuU loan amount to
Evening Star. I was not aware of this at the time and I if had
been
aware of it I
would
never have allowed it to happen"
But
as Ms Watson submitted, it was clear that Syster though he may have
been a director of Evening Star, and may also have been
a member of
the principal debtor he was not a director of the principal debtor,
hence the
Turquand
rule
was inapplicable to this case.
There
is nothing on the papers which suggests that applicant may not have
raised a good defence, to the effect that payment by
respondent was
not made to the principal debtor. To the extent that there was a
dispute in court, the answer must be that respondent
as the lending
bank should, at least, know whether any legal authority was granted
to it by the principal debtor to pay the debt
to a third party,
being Evening Star. That, of course, is not for this court to
determine: it is a matter which will be decided
at a trial.
There
is one further issue to canvass. Jt appears to be common cause that
the other sureties are in the process of contesting
the claims which
have been made against them by the respondent, and that this matter
will proceed to trial. It is this fact coupled
with the argument of
a
bona
fide
defence
that persuades me in favour of granting this application.
To
recapitulate:
Jones,
AJA
said at para [12] of the judgment
in
Colyn
that:
"A
weak explanation is cancelled out by the defendant being able to put
up a
bona
fide
defence
which is not merely some prospect, but a good prospect of success"
A
further qualification should be added to this
dictum,
depending
on the circumstances of a case, such as the particular facts of this
case: where a refusal to grant the application
in an egregious
fashion would offend a courts sense of justice, the application may
be granted, even if there is a weak explanation
regarding the
failure to oppose the application forjudgment.
In
this case, were the application for rescission not to be granted and
were a trial to succeed for the other sureties, the applicant
would
be placed in a most unfair situation of being liable for an amount
which, in law, he was not liable to pay.
Furthermore,
he was never given an opportunity to bring his case to court, which,
in such a case, may offend section 34 of the
Constitution Act
108/1996
r
that is, the right of access to court or appropriate forum for
disputes to be resolved.
For
these reasons, the application must be granted. There is one further
issue: the question of costs. The only dispute was whether
costs can
stand over for the trial or whether they should be born by
applicant. In my view, applicant was dilitory in the extreme
and the
only basis by which the order has been granted is because of a
prospect of success on the merits coupled with the principle
that I
have added, namely that a refusal would offend the interests of
justice. Respondent was entitled, on the existing law,
to oppose
this application and, in my view, applicant has been granted a
considerable indulgence.
For
these reasons, an order is made that the judgment granted against
the applicant on 5 December 2006 is rescinded. Applicant
is granted
leave to defend the action. Applicant is to pay the costs of the
respondent in opposing this application.
DAVIS,
J