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2024
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[2024] ZALMPPHC 71
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Oerlemans v Strydom N.O and Others (45/2023) [2024] ZALMPPHC 71 (22 July 2024)
REPUBLIC OF SOUTH
AFRICA
IN THE HIGH COURT OF
SOUTH AFRICA
LIMPOPO DIVISION,
POLOKWANE
CASE NO: 45/2023
(1) REPORTABLE: YES/NO
(2) OF INTEREST TO THE
JUDGES: YES/NO
(3) REVISED
DATE:
SIGNATURE:
In the matter between:
BARTHOLD DRICUS
OERLEMANS
APPELLANT
And
PIETER HENDRIK STRYDOM
N.O.
FIRST
RESPONDENT
HARRON ABDOOL SATAR
MOOSA N.O.
SECOND RESPONDENT
DEON MARIUS BOTHA
N.O.
THIRD RESPONDENT
JUDGMENT
DEANE
AJ
Introduction
1.
This is an Appeal against the judgment and
order delivered by the Magistrates Court, Polokwane, on 30 May 2023,
wherein default
judgement was granted in favour of the First, Second
and Third Respondents (the Respondents).
2.
The Appeal is unopposed.
3.
Together with this application, the
Appellant filed a condonation application for the late filing of the
Appellant's Notice of Appeal
and the late furnishing of security in
terms of the stipulations of Rule 51(4) of the
Uniform
Rules of Court
.
4.
Having considered the application for
condonation and the applicable principles, this court granted
condonation as applied for.
5.
The
Appeal application is premised on the various grounds as listed in
the Notice of Appeal.
[1]
6.
To
summarise, it is an Appeal against the finding that the Appellants
application for rescission of judgment did not reveal a
bona
fide
defence against the claim in that the Magistrate erred
by
making the following rulings of fact and law:
[2]
6.1
“
By
finding in paragraph 5 of the written reasons provided in terms of
Rule 51(1) of the Magistrates Court Act, that the Appellant
approached Becker attorneys, to ask Becker attorneys to allow him to
contact their instructing attorneys, to inform them that the
payments
he received was
without
value
”
and that the Magistrate “
should
have found that the Appellant intended to communicate to the
instructing attorneys that he received the payments
for
value
”.
[3]
6.2
The
court erred in dismissing the application for rescission of
judgement, “
by
ruling, in effect, that the Appellant did not have a bona fide
defence against the claim of the Respondents, since the Appellant
failed to attach the documents that would prove that he did indeed
make payments in excess of the amounts received
”.
[4]
6.3
The
Appellant submits that the Magistrate should have found:
[5]
6.3.1
The Appellant had a conversation with Mr
Pieters Walters on the 16th of March 2022, in which he clearly
indicated that he paid an
amount of R380 000.00 to Choice, while
still in business whereas he received only payments of R106 400.00
back from them as
payments resulting in a loss of R273 600.00
”
.
6.3.2
Accordingly, “
the
court should have found that the payments that were received by the
Appellant where for value, and thus place the amount received
outside
the ambit of section 26 of the Insolvency Act
”.
6.3.3
It is further submitted that the court
“
should have further found that
the Appellant did in fact hand over “all the documents”,
that means inclusive payments
documents evidencing the R380 000.00
initial payment, relevant to the investment, to Becker attorneys, who
in turn forwarded the
documents to their instructing attorneys.
6.3.4
The Appellant further submits that “
the
court should have also found that the instructing attorneys did in
fact receive all the above-mentioned documentation
”.
6.3.5
Furthermore, that the “
court
should have also found that there was consequently an admission of
receipt of proof of the payment of the R 380 000.00,
to Choice
”.
6.3.6
Based on these submissions, the Appellant
states that the court should have found that the Appellant has placed
a
bona fide
defence before the court and that the court should have consequently
rescinded the judgement.
6.4
The
Appellant further submits that the court erred by requiring that the
Appellant should have attached proof of the payment made
to Choice,
despite finding that it was not necessary for the Appellant to prove,
on a balance of probabilities, the defence to
which the Appellant
would be entitled. The Appellant avers that all that is required in
terms of the authority in
Grant
v Plumbers (Pty) (Ltd)
1949 (2) SA 470
(O)
,
and which was cited by the magistrate, was for the Appellant to make
out a case that, should it be raised at the trial, could
prima
facie
succeed.
[6]
7.
The Appellants main contention herein is
that whilst the Magistrate had the correct appreciation of the legal
principles applicable
that was necessary to adjudicate the
application, she, however, erred in the application of the legal
principles to the application
before her.
Material Background
Facts
8.
The Respondents are all liquidators
practising as such.
9.
The
Respondents were duly appointed by the Master of the High Court as
the joint liquidators of Free Agape Enterprises Pty (Ltd)
(Free
Agape).
[7]
10.
On 22 March 2018 an application was brought
before the Western Cape Division, Cape Town for an order
inter
alia
to wind up Free Agape.
11.
Free
Agape was placed under final liquidation on 12 June 2018.
[8]
12.
On
13 August 2019, the High Court of South Africa, Western Cape Division
declared:
[9]
12.1
The investment scheme conducted
under the name and style of Free Agape and various other trading
names, including Choice Lifestyle
Change, to be illegal, unlawful and
void; and
12.2
All investment and related
agreements entered into between Free Agape and third parties as
investors, to be null and void.
13.
The
Respondents issued summons in the action on 17 February 2022.
[10]
14.
The
summons was served on the Appellant’s sister on 22nd February
2022.
[11]
15.
The Appellant failed to deliver his notice
of intention to defend. This resulted in the default judgement, in
terms of Rule 12(a)
of the
Magistrates
Court Rules
, being granted against the
Appellant on 19 September 2022.
16.
Default
judgment in the amount if R106 400.00 plus interest and legal
costs was granted against the Appellant.
[12]
17.
The
Respondents issued a Warrant of Execution on 6 October 2022,
[13]
but the Sheriff was unable to serve the Warrant of Execution on the
Appellant.
[14]
18.
The Appellant applied for the rescission of
the default judgment, on 1 November 2022.
19.
The Respondents opposed the application and
filed the necessary opposing affidavit.
20.
The Magistrate dismissed the application on
30
th
May 2023 and the Appellant subsequently filed a Notice of Appeal on
11 August 2023.
Analysis
21.
It is correct that in an application for
rescission of default judgment a court must determine if ‘good
cause’ exists
to set aside the default judgment. This would
include the court establishing whether an Applicant (Defendant) has a
bona fide
defence to the Plaintiff’s claim. However, the existence of a
bona fide
defence is merely one of several factors that a court must consider
when it adjudicates a rescission application; it is not the
primary
focus of the enquiry.
22.
In
Grant v
Plumbers
, Brink J held that the
following requirements should be complied with in order to show “good
cause”;
“
(a)
An Applicant must give a reasonable explanation of his default. If it
appears that his default was wilful or that it was due
to gross
negligence the court should not come to his assistance, (b) The
application must be bona fide and not made with the intention
of
merely delaying Plaintiff’s claim, and (c) The Applicant must
show that he has a bona fide defence to the Plaintiff’s
claim.
It is sufficient if he makes out a prime facie defence in the sense
of setting out averments which, if established at the
trial, would
entitle him to the relief asked for. He need not deal fully with the
merits of the case and produce evidence that
the probabilities are
actually in his favour
.”
23.
The
question is what then is a
bona
fide
defence. It means that
the
facts that are provided must be such that if proven at trial, they
will constitute an answer to the Plaintiff’s claim.
The court
must determine whether the Defendant has fully disclosed the nature
and grounds of his defence and the material facts
upon which it is
founded, and whether on the facts so disclosed the Defendant appears
to have, as to either the whole or part of
the claim, a defence which
is both
bona
fide
and good in law. Additionally, while the Defendant need not deal
exhaustively with the facts and the evidence relied upon to
substantiate
them, he must a least disclose his defence and the
material facts upon which it is based with sufficient particularity
and completeness
to enable to the court to decide whether the
affidavit discloses a
bona
fide
defence.
[15]
24.
If
the court has any doubt as to whether the Plaintiff’s case is
unanswerable at trial, such doubt should be exercised in
favour of
the party seeking an order for default judgment.
[16]
25.
The
Magistrate
in
casu
explains what must be considered in order to show that there is a
bona
fide
defence:
[17]
“
As
regards the bona fide defence raised by the applicant…………….it
is not necessary to decide whether
the applicant had shown on a
balance of probabilities that he has a bona fide defence………
What
must be considered, however, is whether the averments in the founding
affidavit
regarding what applicant
stated about his defences would satisfy the standard required for the
purpose of rescission of a default
judgement. Whether applicant made
out a case for a defence that would prima facie have succeeded to
defeat the respondents claim
at the time when default judgement was
granted
.”
26.
The
Magistrate went on to find that the “
Applicant
in
this case had failed to satisfy the Court that his defences are bona
fide to the Respondents claim
.”
[18]
27.
In analysing whether or not the Appellant
had a
bona fide
defence the Magistrate had stated that:
“……
as
far as the bona fide defence is concerned, it is the Applicant’s
version that he was advised by his attorneys of record
that the court
order dated 12 June 2018, granted by the Western Cape High Court,
implies that a final order for final liquidation
had still to be
granted as agreed between the parties, and as such, no final order
for liquidation of Free Agape was granted, as
the agreement between
the parties could not give rise to a liquidation of a company.
”
[19]
28.
The Magistrate further states that it is
the Applicant’s version that:
“……
it
is only a court that can grant an order for the final liquidation of
a company. Therefore, it is submitted that Plaintiff’s
summon
was issued prematurely, as the final order for liquidation of First
Respondent had not yet been granted by the Court. Secondly,
it is the
Applicants version that section 21 of the Insolvency Act is not
applicable, as he invested in good faith an amount of
R380 000.00
and he received payment in an amount of R 106 400.00, which is
less than the amount invested with Free Agape,
and the latter amount
is not the payment that exceeded the payments made by himself to Free
Agape, as claimed by the Respondent,
and Free Agape received
value.
”
[20]
29.
In response thereto, the Magistrate finds
that:
“…
.
as
regards the bona fide defence raised
by
the Applicant, in order to show good cause for rescission of the
default judgement, all Applicant had to do in this regard was
to make
out a case that he had a defence which he could raise at the trial,
and which could prima facie succeed…….
”
30.
The Magistrate in the judgment then
went on to state that:
“…
as
regards his first defence, this Court has no powers to review or set
aside an order granted by another court, especially the
High Court.
However, if one looks at the Annexure POC2 annexed to the
Respondents’ particulars of claim it states:
“
By
agreement between the parties, it is ordered that…”
Thereafter the court
recorded what the parties had agreed from paragraph 1 up to 14, and
at the end, it states:
“
by
order of court….”
And thereafter, the
signature of the registrar and the date stamp of the date wherein
such order was made…..
In
my view, one interprets it as a competent court order, whether it was
correct or incorrect………. Mr Meyer
also submitted
in his argument that they were intending to review the High Court
order for it to be set aside, and this also shows
that indeed, the
court order made by the Western Cape High Court is a competent court
order.
”
[21]
31.
It
is evident from the Western Cape Court Order of 12 June 2018,
[22]
that Free Agape was in Business Rescue.
32.
In terms of Section 141(2)(a)(ii),
of the
Companies Act
71 of 2008
(
Companies
Act
>
), the Business Rescue Practitioner
must apply to the court for an order discontinuing the Business
Rescue proceedings and placing
the company into Liquidation, should
there be no reasonable prospect of the company being rescued.
33.
Upon the Court granting that the Business
Rescue proceedings be discontinued Free Agape would be placed in
liquidation.
34.
Therefore, in terms of paragraph 2 of the
Court Order, the Final Order of Liquidation was granted on 12 June
2018.
35.
Upon proper consideration of the Court
Order, it would be noted that the Order does not refer to a
“Provisional Liquidation”
and accordingly a Final
Liquidation was granted. This is generally the practise applied by
courts in the case where Business Rescue
proceedings are converted to
liquidation proceedings.
36.
Furthermore, it is the Appellant’s
version that section 26(1)
of the
Insolvency Act
,
is not applicable, as he invested in good faith an amount of
R380 000.00 and received payment of R106 400.00 which is
less than the amount invested with Free Agape. Moreover, the latter
amount is not the payment that exceeded the payments made by
himself
to Free Agape as claimed by the Respondents and Free Agape received
value, and therefore the Respondents claim should be
dismissed.
37.
In response, the Magistrate in his judgment
stated the following:
“
As
regards the interpretation of Section 26, defence raised by
Applicant, I agree with the Respondent’s admission that
Applicant
should have placed his confidence before this Court by
attaching documents which he submitted to the Respondent to show that
indeed,
he received a lesser amount of R106 400.00 because he
invested an amount of R380 000.00 with Free Agape. There is no
explanation
why same was not done by the Applicant and the Respondent
had set out in their particulars of claim regarding how they comply
with
Section 26, and most of these requirements are not challenged or
disputed by the Applicant in his founding affidavit, except to
say
that the payment received by himself from Free Agape was of less
value, as he invested an amount of R380 000.00 with Free
Agape,
and that the disposition were made by Free Agape in the ordinary
course of business, not intended to prefer him over other
creditors.
”
[23]
38.
The
court went on to state that “
the
Applicant has failed to make a prima facie case that he has a bona
fide defence to support his version that the payment of R106
400.00
was made in the ordinary course of business, and as I have already
stated above, that he is also failed to attach the documentation
to
show that indeed, he has a prima facie case or he invested more than
what he received, or gained from Free Agape
.”
[24]
39.
Looking
at the documents before me, the Respondents set out in detail in
paragraphs 7 to 11 of the Particulars of Claim
[25]
of how they complied with section 26 of the
Insolvency
Act
.
During or about the
period 2017/10/18 to 2017/12/01, Free Agape effected payments to the
Defendant in a total amount of R106 400.00,
being the total
amount of the following payments:
2017/10/18
R28 000.00
2017/11/02
R25 200.00
2017/11/15
R28 000.00
2017/12/01
R25 200.00
Total
R106 400.00
40.
It is clear that the payments were made by
Free Agape to the Appellant less than two years before the effective
date of liquidation.
41.
During this period the Applicant paid R0.00
to Free Agape.
42.
It is also clear that the payments set out
in these paragraphs (7 to 11 of the Particulars of Claim) constituted
dispositions as
intended in section 26(1), read with section 2 of the
Insolvency Act
.
43.
Additionally, the Magistrate correctly
found that:
“…
..
based
on what I stated regarding Section 26 defence, and the fact that
there was a final liquidation order granted by the Western
Cape High
Court, there is no need for me to decide whether the alternative
claim should stand, as the default judgement was granted
in terms of
section 26 of the Insolvency Act and already found that the Applicant
has failed to show good cause that he has a bona
fide defence in
terms of Section 26
.”
[26]
44.
I am in agreement. Faced with the details
as provided by the Respondents herein regarding the payment, the
Appellant had to show
good cause why its version should be believed
and not merely aver that he was paid lesser. The Appellant should
have indicated
with sufficient particularity what his defence is
without necessarily getting into the details or merits of the case.
This is to
avoid a situation where a rescission application is only
made for the purpose of harassing the Respondent or frustrating him
in
the execution of an order. At the very least the
material
facts upon which the defence is based must be pleaded with sufficient
particularity and completeness to enable the court
to decide whether
the submissions made disclose a
bona fide
defence. In this
case the Magistrate required something more than a mere averment that
the Appellant was paid a lesser amount.
45.
Regarding the explanation for the
Appellant’s failure to defend the Respondents claim, the
Appellant submits that the Respondent’s
attorneys of record did
not revert to him after he submitted all the documentation to them to
show them that he never gained any
profit from Free Agape.
46.
The
Respondents admit that they received the said documentation but deny
having told the Applicant that they will revert to him
after
receiving the documents. The Respondents aver that “
the
Applicant only provided documentation and did not make any attempt to
approach the Respondents’ attorneys to settle or
defend the
matter
”.
[27]
47.
In
response the Appellants submit that if the Respondents received
the
documentation, and the documentation did not substantiate the
allegations that he indeed lost money, one would have expected
the
Respondents to deny the fact that the documentation substantiated the
allegations of the Appellant.
[28]
48.
Looking
at the record, the Respondents version that they deny telling the
Appellant that they will revert to him after being given
the said
documentation, was corroborated by Pieter Walters, the person with
whom the Appellant communicated with regarding the
documentation.
[29]
It is not disputed that Pieter Walters filed a confirmatory affidavit
to confirm the Respondent’s version.
49.
Accordingly, the onus is upon the Appellant
to satisfy the court that indeed the Respondent’s attorneys of
record told him
that they will revert to him after he provided them
with those documents.
50.
The Appellant, after providing the
documentation, did nothing for six months. There were no follow-ups
even when there was no response
by the Respondent’s attorneys.
51.
The Respondents proceeded with default
judgment against the Appellant, as is their right. The law is clear,
in that after receiving
summons the Appellant had an option to
consent to the judgment or defend the matter.
52.
There
are indeed two competing versions in terms of whether or not the
Appellant was told that he would be contacted after providing
the
requested documentation to the Respondent’s attorneys. However,
the Respondents filed a confirmatory affidavit of Pieter
Walters
confirming their version. The Magistrate consequently and correctly
found that faced with this evidence, it is the Respondent’s
version that must be accepted.
[30]
The conclusion of the Magistrate cannot be faulted herein.
53.
Furthermore, it was the Appellants version
that the parties were engaged in settlement negotiations but provided
no basis for this
submission.
54.
The
court
a
quo
concluded that the Appellant failed to satisfy the Court that he has
shown good cause that he gave a reasonable explanation for
his
default to defend the Respondents claim.
[31]
55.
The
onus rests on an Applicant for rescission to show good cause.
[32]
A Court has a wide discretion when determining whether good cause
exists which must be exercised after a proper consideration of
all
the relevant circumstances.
56.
Having carefully considered the guidelines
relevant to the rescission of judgments it is my view that the court
a quo
was
correct in finding that the Appellant failed to satisfactorily
establish the requirements for a rescission order.
57.
It is on the basis of all the foregoing
reasons that I find that the Appeal cannot stand. Consequently, the
following order is made:
ORDER:
1.
The Appeal is dismissed.
T
DEANE
ACTING JUDGE OF THE
HIGH COURT,
POLOKWANE; LIMPOPO
DIVISION
I AGREE
KGANYAGO
J
JUDGE OF THE HIGH
COURT OF SOUTH AFRICA,
LIMPOPO DIVISION,
POLOKWANE
APPEARANCES
FOR THE APPELLANT
: Adv GJ Diamond
INSTRUCTED BY
: Diamond
Inc.
Attorneys
FOR THE RESPONDENTS :
No Appearance
INSTRUCTED BY
:
DATE OF HEARING
: 17 May
2024
DATE OF JUDGEMENT
: 22
nd
July 2024
[1]
Document
Court Stamped 2023-10-02 and Appeal Record: pp 80-86.
[2]
Appeal
Record: pp 81-84.
[3]
Appeal
Record: p 81, para 1.
[4]
Appeal
Record: p 81, para 2.
[5]
Appeal
Record: pp 81-83.
[6]
Appeal
Record: p 83.
[7]
Appeal
Record: Annexure POC1, p 47.
[8]
Appeal
Record: Annexure POC2, pp 48-51.
[9]
Appeal
Record: Annexure POC3, p 52-53.
[10]
Appeal
Record: Annexure AA2, p 33.
[11]
Appeal
Record: Return of Service, p 54.
[12]
Appeal
Record: Annexure AA4, p 55.
[13]
Appeal
Record: Annexure AA5, p 58.
[14]
Appeal
Record: Annexure AA6, p 61.
[15]
Maharaj
v Barclays National Bank Ltd
1976 (1) SA 418
(A) at 425G-426E.
[16]
See
Fourlamel
(Pty) Ltd v Maddison
1977 (1) SA 333
(A) at 347H.
[17]
Record:
p 76-77, paras 28-29.
[18]
Record:
p 77, para 25, lines 6-7.
[19]
Judgment:
p 165, lines 4-12.
[20]
Judgment:
p 165, lines 18-25.
[21]
Judgment:
pp 173-174, lines 23-26 & 1-14.
[22]
Appeal
Record: Annexure POC2, pp 52-53.
[23]
Judgment:
p 175, lines
7-23.
[24]
Judgment:
p 176, lines 6-12.
[25]
Appeal
Record: pp 42-43.
[26]
Judgment:
p 176, lines 19-25 and p 177, line 1.
[27]
Appeal
Record: p 25, para 5.2.5.
[28]
Appellants
Heads of Argument: p 15, para 4.8.2.
[29]
Appeal
Record: p 76, para 22.
[30]
Appeal
Record: p 76, para 22, lines 18-19.
[31]
Appeal
Record: p 76, para 23, lines 24-25.
[32]
De
Wet v Western Bank Ltd
1979(2) SA 1031 (A) at 1042H.