IN THE HIGH COURT OF SOUTH AFRICA
(WESTERN CAPE DIVISION, CAPE TOWN)
Before:
The Hon M s Justice C M Fortuin
The Hon Mr Justice L G Nuku
The Hon Mr Justice D S Kusevitsky
Case No: A 107/2024
In the matter between:
GAIL FRANCIS BUECHEL Appellant
and
SOUTH AFRICAN SECURIT ISATION
PROGRAMME (RF) LTD First Respondent
SASFIN BANK LTD Second Respondent
SUNLYN (PTY) LTD Third Respondent
Date of hearing : 21 January 2025
Date of Judgment : 26 February 2025
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JUDGMENT
NUKU, J ( FORTUIN J concurring):
Introduction
[1] This appeal concerns the dismissal of an application for rescission of a default
judgment granted by this court against the appellant on 4 August 2022. The appellant
had brought the said application in terms of Rule 31 (2) (b) of the Uniform Rules of
Court. The appeal is with the leave of the court that dismissed the application (the court
a quo ).
[2] In dismissing the application the court a quo reasoned that whilst the appellant
was not in wilful default , she had failed to establish a bona fide defence to the
respondents’ claims against her and that is the narrow issue that we must decide in this
appeal. Before doing so it is necessary to give a factual backg round which I briefly set
out below .
Factual background
[3] The dispute in this matter emanates from 3 (three) rental agreements concluded
by Dragood Investments Proprietary Limited ( Dragood ) and the third respondent in
respect of 6 (six) printing machines that Dragood leased from the third respondent
during August 2020 . The third respondent ceded its right, title and interest in the said
rental agreements to the second respondent immediately upon their conclusion. The
second respondent, in t urn, ceded its right, title and interest in the said rental
agreements to the first respondent on 20 October 2020.
3
[4] During August 2020, t he appellant concluded a written guarantee in terms of
which she bound herself as guarantor in writing jointly and severally as co -principal
debtor for the primary continuing obligation for the proper and punctual payment by
Dragood of all amounts due and payable to t he third respondent or its cessionary /ies in
the event of a cessi on in terms of the rental agreements arising out of or incidental to
the rental agreements . The terms of the guarantee were, inter alia , that (a) a certificate
signed by any manager of the third respondent or other authorised person, certifying the
amount due by the appellant will on the face of it , be proof of the amount of the
appellant’s indebtedness, it shall not be necessary to prove the appointment of the
person signing the certificate, and (b) the appellant agreed to pay costs on the scale as
between an attorney and own client.
[5] Dragood breached the terms and conditions of the rental agreements in that it
failed to maintain regular monthly payment s. The rental agreements were cancelled,
and the respondents took possession of the printing machines which were sold for an
amount that was less than the cost of sale. Thereafter, the respondents institut ed an
action agains t the appellant for the payment of the sums that would have been due for
the duration of the period of the lease agreement. Summons that was served at the
appellant’s chosen domicilium citandi et executandi did not come to the appellant’s
attention , and sh e having failed to deliver her notice of intention to defend, the
respondents obtained default judgment against her.
[6] Upon becoming aware of the default judgment, the appellant brought the
application for rescission which is the subject of this appeal. She dealt with her bona
fide defence s to the respondents’ claims in paragraphs 14 to 16 of her founding
affidavit . She has since abandoned some of the defences that she had rais ed and as
such I only set out the defences that she persisted with.
[7] The first defence she raise d is that she was fraudulently induced into providing
the guarantees (the fraud defence ). She pleaded th e fraud defence as follows in the
founding affidavit, namely :
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’14.1 I was fraudulently induced by Willem Koegelenberg (a convicted fraudster,
now deceased ) (Koegelenberg ) to provide the Guarantees upon which the
Plaintiffs rely ’.
[8] The appellant made the follow ing factual allegations to substantiate the fraud
defence:
‘15.1 In July 2020 , South Africa was in the midst of the COVID Epidemic, and I
was caring for my late husband, who was suffering from advanced
dementia and was in isolation, given his co -morbidities (Regretfully,
despite my efforts, he died on 8 January 2021 ). I was also ca ring for other
elderly patients at the Helen Zille Unit and at Palm Gardens Retreat. In
this regard, the following should be noted:
15.1.1 Dragood was the developer of both Palm Gardens Retreat
Sectional Title Scheme and Palm Gardens Retreat (Helen
Zille Wing), as separate Sectional Title Scheme;
15.1.2 Dragood, which owned the bulk of the Units in the Helen
Zille Wing, conducted a step -down care facility from Units in
the Helen Zille Wing;
15.1.3 a sister company of Dragood, Palm Gardens Retreat
Managem ent Services ( PGRM ), managed both Sectional
Title Schemes, which shared facilities and costs, which were
reconciled monthly to ensure that each Sectional Title
Scheme paid its correct pro rata share of such costs. In this
context, both Sectional Title Sche mes often procured goods
and services through Dragood;
5
15.1.4 this came to an end when both Dragood and PGRM were
placed in Business Rescue.
15.2 Given my late husband’s condition and the emotional and physical
pressure which I was under, I was persuaded to allow Koegelenberg to
attend to the running of Dragood’s daily affairs. In this context, he advised
me that Dragood had to obtain printers for its use, as well as the use of
the Palm Gardens Body Corporate ( PGBC ) and that PGBC would be
paying for such printers as a shared cost, as they had done in previous
years.
15.3 Sunlyn’s sales representative in respect of the agreements relied upon by
the plaintiffs, was a friend of Koegelenberg and unbeknown to me at the
time, the leasing charges were exorbitant and completely out of kilter with
leasing charges for similar equipment.
15.4 PGBC never required printers and refused to pay for same. They
discovered Koegelenberg’s criminal past and terminated their relationship
with him.
15.5 Needles s to say, had I known firstly, that the printers were not needed,
secondly, that PGBC would not be paying for them, thirdly, that the leasing
charges were exorbitant; and fourthly, that Koegelenberg was setting me
up to take the fall, I would never have si gned either the agreements, nor
the guarantees upon which the plaintiffs rely .’
[9] The second defence raised by the appellant relates to the Conventional Penalties
Act 15 of 1962 ( the Conventional Penalties Act defence ) and she pleaded it as
follows in the founding affidavit:
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‘14.5 the cancellation of the Agreements relied upon by the plaintiffs was
effective from 1 October 2020 , as more fully appears from paragraphs 5.2
of Annexure “ FA2” hereto;
14.6 the equipment was collected by the plaintiffs’’ duly authorised
representatives in June 2021 , as per Annexure “ FA6” hereto, after
repeated requests that same be collected, had been ignored;
14.7 the amounts claimed by the plaintiffs constitute penalties as contemplate d
in terms of the Conventional Penalties Act No 15 of 1962. In this regard ,
the plaintiffs made no reasonable effort to collect and re -let the equipment
timeously . Further and given the aforegoing, the amounts claimed by the
plaintiffs are out of all proportion to the damages allegedly suffered by
them .’
[10] Notably, the appellant did not set out any factual averments to substantiate the
Conventional Penalties Defence as she had done with the fraud defence. All she s tated
was “ I repeat the contents of paragraphs 14.1 to 14.7 above and pray t hat same may be
incorporated herein mutatis mutandis .”
[11] The application was opposed by all three respondents who explained that their
representatives were not involved in the process of the procurement of the print ing
machines . According to the respondents, Dragood procured the printing machines from
the manufacturers , Custom Cut It Solutions (Pty) Ltd ( Custom Cut ). The respondents
also explained that their involvement is only at the stage of financing the acquisition of
the printing machines and in this inst ance Mr Gary Kalt ( Mr Kalt), the third respondent’s
Asset Finance Regional Manager for Cape Town recalled having dealt with the
application for the financing of the print ing machines which was initially declined by the
second respondent but approved subsequent to an appeal with a condition that required
the provision of a guarantee.
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[12] The respondents explained further that Mr Kal t, having gone through the
application by Dragood for the financing of the print ing machines, noted that M r Jan Nel
(Mr Nel ) who was employed by Custom Cut at the time of the acquisition of the printers
witnessed the appellant’s signature to all the agreem ents. The respondents su rmised
that the appellant was mistaking Mr Nel as the second respondent’s sales
representative.
[13] In reply, the appellant pinned her colours to the mast in so far as the fraud
defence is concerned and stated that she was defrauded by Koegelenberg and Mr Nel .
She went on to state that Mr Nel, as a professional, must have known that Dragood and
PGBC didn’t require the printers as ‘ No doubt, he would have ask ed for some detail
before quoting and had he been aware of the actual volume required, he would have
never suggested 6 (six) printers .’
[14] In an attemp t to draw the third respondent into a fraudulent scheme , the
appellant went on the state that:
‘Mr Kalt, who according to the respondents has been in the business for 25
years, must surely have been aware of the true value of the machines and of
what Custom Cut and Jan Nel were seeking to do to Dragood (and to me). Yet,
he not only facilitated this, but compounded by asking that I provide a guarantee
for 3 (three deals) which should never have been allowed to happen in the first
place. As far as I am concerned , these 3 (three) deals amount to nothing more
than fraud and/ or theft and I have been advis ed that fraud trumps all ….’
[15] The respondents, in their answering affidavit, had pointed out that the appellant
‘baldly alleges that the leasing charges were exorbitant and completely out of kilter with
leasing charges for similar equipment’ , an allegation which they denied. The
respondents also denied that the Conventional Penalties Defence has any merits with
the d eponent to the answering affidavit stating that:
8
‘I am advised that the defence that the Conventional Penalties Act 15 of 1962 is
applicable is misplaced, particularly in circumstances where, in an effort to
mitigate their losses through the sale of the equipment, which the plaintiffs were
required to do by reason of the plaintiff’s termination of the rental agreements,
the plaintiffs incurred costs in relation to the recovery and sale of the equipment
in excess of the sale proceed s of the equipment .’
The findings of the court a quo
[16] The court a quo, in dealing with the fraud defence , found that fraud that involves
Koegelenberg and Mr Nel, both of whom have no association with any of the
respondents , could be no basis for setting aside the guarantee and as such it is no bona
fide defence to the respondents’ claims.
[17] The c ourt a quo then proceeded to consider the possible involvement of Mr Kalt ,
an employee of the third respondent, in the fraudulent scheme . In this regard it
observed that ‘On the evidence in the founding papers, there is no basis to conclude
that Kalt was involve d… and that Kalt is only linked to the fraud in reply, and not by
evidence but by inference … that he must have known of the fraud , and therefore been
complicit in it, because the charges were exorbitant .’
[18] Having made the above observation, the court a quo pointed to the obvious
problem with the appellant’s case , namely that of raising an issue for the first time in
reply , in light of the general rule to the effect that applicants “must stand and fall by their
founding papers .” It concluded that this is not one of those cases which justifies the
relaxation of the general rule because this would deprive t he respondents and Mr Kalt of
an opportunity to deal with the new allegations .
[19] Turning to the Conventional Penal ties defence, it was contended on behalf of the
appellant that the penalty is out of proportion with the respondents’ loss. Before dealing
with this submission, the court a quo reminded itself that it is not its call to determine
9
whether the penalty is indeed out of proportion with the respondents’ loss and that its
role is limited to determining whether there is a triable issu e. In order to determine
whether there is a triable issue, the court a quo proceeded, it was important to know
where the onus to show disproportionality between the penalty and prejudice lies, and
its view was that the onus is on the appellant.
[20] The court a quo was of the view that the real issue in relation to the Conventional
Penalties defence was the respondents’ failure to relet the printing machines . It held
that the Conventional Penalties defence based on the respondents’ failure to relet the
printing machines is bad i n law because, on the authority of Corner Savings1, the
respondents – who are financiers not suppliers – are not required to rehire the
equipment.
[21] The court a quo also considered a further defence that the appellant had raised
in reply , that is whether the respondents should have realised value from the sale of the
equipment , and whether their failure to do so would justify the reduction in the penalty.
In this regard it found that the appe llant’s failure to plead the facts in her founding
affidavit was fatal . The result was the court a quo’s finding that the appellant had not
established a bona fide defence to the respondents’ claims.
Applicable legal principles
[22] The requirements for an applicatio n for rescission under subrule 31 (2) (b) have
been stated to be as follows:2
‘(a) He (i.e. the applicant) must give a reasonable explanation of his default. If
it appears that his default was wilful or that it was due to his gross
negli gence the Court should not come to his assistance.
1 Absa Technologies Finance Solutions (Pty) Ltd v Leon Hatting t/a Corner Savings Supermarket [2009]
ZAGPPHC 37
2 Grant v Plumbers (Pty) Ltd 1949 (2) SA 470 (O) at 476 -7
10
(b) His application must be bona fide and not made with the intention of
merely delaying plaintiff's claim .
(c) He must show that he has a bona fide defence to plaintiff’s claim . It is
sufficient if he makes out a prima 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 p robabilities are actually in his favour .’
[23] As already stated, the reason why the applicant’s application for rescission failed
was because of the court a quo’s finding that she had failed to establish a bona fide
defence to the respondents’ claims. In order to make out a prima facie defence to a
claim an applicant mus t set out averments which, if established at the trial, would entitle
him or her to the relief asked for.3 It suffices if the applicant shows a prima facie case or
the existence of an issue which is fit for trial.4 The applicant is not required to deal fully
with the merits of the case but the grounds of defence must be set forth with sufficient
detail to enable the court to conclude that there is a bona fide defence .5
Appellant’s submissions in this Court
[24] It was submitted on behalf of the appellant that the court a quo misconstrued the
test of establishing a bona fide defence for the purposes of a rescission application , set
the bar too high in respect thereof and failed to have regard to the fact that:
24.1 the appellant was being sued as a guarantor;
24.2 the agreements giving rise to the respondents’ claims arose after
she had signed as guarantor;
3 Erasmus Superior Court Practice 2nd ed Vol 2 at p D1-366
4 Brown v Chapman 1928 TPD 32 0 at 328
5 Brown v Chapman supra
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24.3 the appellant was not a party to, no r privy to the negotiation s giving
rise to the conclusion of these agreements; and
24.4 the appellant was only provided with a clear picture of the facts,
when she received the answering affidavit and accordingly
addressed same in rebuttal in reply.
[25] It was further submitted t hat the court a quo erred in finding that the appellant
had impermissibly sought to make out her case in reply and that the rule should not be
relaxed, given the nature of the application , the fact that the appellant was not involved
in the neg otiations pr eceding the conclusion of the rental agreements as well as the fact
that she only obtained a clear picture of facts after receipt of the answering affidavit .
[26] The court a quo was criticised for stating “ Precisely when and ho w it (Dragood)
failed is unclear …” in circumstances where it was clear that agreements were
concluded in August 2020 and Dragood was placed in business rescue a few weeks
later on 25 September 2020. It was further criticized for failing to take cogni sance of the
following in para 14.5 of the founding affidavit “the cancellation of the agreements relied
upon by the plaintiffs was effective from 1 October 2020, as more fully appears from
paragraph 5.2 of Annexure “FA2” hereto ” and a point being made was that the dates
referred to in para 13 of the judgment are not the correct dates to apply and the earlier
date of 20 October 2020 impacts on the date that the equipment was finally collected.
[27] The court a quo was further critici sed for its analysis of the fraud defence dealt
with in paras 29 to 35 of the judgment and it was submitted that it erred in not taking
cognisance of the fact that , but for the role of Kalt, the fraud could not have been
perpetrated by Koegelenberg and Nel as Kalt’s role was critical in 2 respects, firstly, in
insisting on the appellant signing as guarantor and secondly, in approving the
transaction, which saw the printing machines being financed for astronomical amounts,
which were paid to Nel, with no justification and which the respondents the n sought to
recover from Dragood and from the appellant.
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[28] It was further submitted that h aving found that the appellant had laid the
foundation for exorbitant rental charges in her founding affidavit , the court a quo erred in
finding that the respondents were permitted to merely respond with a bare denial. The
court a quo, it was submitted, ought t o have found that it was incumbent on the
respondents, at the very least, to show that the rates charged were consistent with the
rates charged for similar agreements, involving similar machines as these are issues for
trial. To this should be added the al legation that new printing machines that cost
R121 494 as per annexures “RA1”, “RA2” and “RA3” could be sold less than 11 months
later, after only having been used at the most , for a number of weeks, for 1% of their
value, as alleged in paragraph 66 of the respondents’ answering affidavit. There is no
allegation that same were damaged in any way and there is no explanation as to why it
was necessary to sell them , at all as opposed to renting them out again, since same
were barely used. This should be fully ventilated at trial.
[29] It was further submitted that the court a quo impermissibly addressed the
probabilities , in paras 39 and 40 of the judgment when this was the function of the trial
court and ought not to have played a role in determining whether a bona fide defence
had been established for purposes of a rescission application. With regard to para 41 of
the judgment, it was submitted that the court a quo failed to take cognisance of t he
following:
29.1 In Combined Developers v Arun Holdings and Two Others 2015 (3)
SA 215 (WCC) (Arun ), the Court (Davis J) refused to allow the appellant
to use a trivial default to trigger the acceleration clause, to gain a
commercial advantage over the respondent. This is of application in the
present case, where Dragood was placed in business rescue on 25
Septemb er 2020, only weeks after concluding the agreements. However,
despite cancellation by the BRP effective from 1 October 2020, the
respondents delayed an inordinate period of time in collecting the
machines.
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29.2 In reaching such conclusion, Davis J had reg ard to section 39 (2) of the
Constitution and to Sasfin (Pty) Ltd v Beukes 1988 (1) SA 1 (A)
(Beukes ). He came to the conclusion that the spirit, purport and objects of
the Constitution must be upheld alongside the values of Ubuntu. Davis J
also had regard to Juglal v Shoprite Checkers (Pty) Ltd 2004 (5) SA
248 (SCA), where it was held that no party can give effect to the
provisions of a contract in a manner that the court deems unconscionable ,
illegal or immoral. This should also be seen in the context of Everfresh
Market Virginia (Pty) Ltd v Shoprite Checkers (Pty) Ltd 2012 (1) SA
256 (CC), where, insofar as bargaining power is concerned, the court
placed a burden on the more powerful party t o act in good faith , when
enforcing a claim.
29.3 In Barkhuizen v Napier 2007 (5) SA 323 (CC), the Court held that a
contract or a provision/ term will be enforced provided that giving effect
thereto, will not be unreasonable. In the present instance , to hold the
appellant to the provisions of the guarantee in the present circumstances
was clearly unreasonable . As the Constitutional Court held in Mohlomi v
Minister of Defence 1997 (1) SA 124 (CC), the reasonableness of a
clause in a contract must be assessed by taking into account the
circumstances surrounding the contract including the financial capability of
the parties ( Barkhuizen para 64 ).
29.4 In Botha v Rich 2014 (4) SA 124 (CC), the Court restat ed the position
that contractual relationships are subject to the values of good faith,
fairness and other values that underlie the Constitution (at paras 45 -46).
This was re inforced in Beadica 231 CC v Trustees for the time being of
the Oregon Trust 2020 (5) SA 247 (CC) (Beadica ). Public Policy takes
into account the “necessity to do simple justice between individuals and is
informed by the concept of Ubuntu” (at p ara 175 ). Accordingly , the
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respondents’ somewhat simplist ic reliance on pactum sunt servanda , is
with respect, misplaced (at paras 86 -87). Contractual freedom and
autonomy must be balanced with constitutional fairness in a manner that
“ensures objectiv ity, reasonable practicality and certainty ” (at para 108 ).
[30] Finally it was submitted that ap plying the principles enunciated above to the facts
of this case, the Court in its discretion, judiciously exercised, ought to have granted the
application for the rescission of the default judgment and to have allowed the matter to
proceed to trial . Regarding the court a quo’s finding in para 52 of the judgment, it was
submitted that the court erred in placing reliance on a single sentence “ the costs in
relation to the sale of the goods exceeded the value of which the goods were sold for ”
as no details were provided as to what the costs were and what the goods were sold for
and these figures were first made available in the answering affidavit and were properly
and correctly rebutted in reply. As these were almost brand new and almost unused
machines which were sold for 1% of their value , it was submitted that the court a quo
ought to have taken same into account as es tablishing a triable issue .
Respondent s’ submissions in this Court
[31] The respondents’ answer to the appellant’s fraud defence was that i n order to
establish a defence premised on fraud, the appellant is required to allege and prove6 (a)
a representation by the representor to the representee, (b) fraud, i.e. that the
representor knew the representation to be false , (c) causation, (d) and if damages are
claimed, it must be alleged that the representee suffered damages. It was submitted
that the appellant failed to make any of the required averments when one has regard to
paragraph 15.5 of the founding affidavit .
[32] It was further submitted that it is important to note that the appellant , in the
founding affidavit and even in the replying affidavit, does not allege any involvement of
any employee of the plaintiffs (agency or a representation of agency) as far as the
6 Amler’s Precedents of Pleadings, Harms, Ninth Edition, page 204
15
alleged fraud was concerned. Instead, she relies on an alleged fraud comm itted on her
by her own employee, Koegelenberg and Nel, the supplier of the equipment.
[33] The respondents’ answer to the appellant’s Conventional Penalties Defence was
that “ the founding affidavit contains a single allegation (a conclusion of fact) that the
charges are exorbitant ” and that the “application contains no allegation s in support of
the claim for a reduction.”
[34] It was further submitted on behalf of the respondents that the first respondent
carried no obligation to mitigate its damages because the buying and selling of printing
machines does not fall within the scope of its main business. In support of this
proposition, this court was referred to Absa Technology Finance Solutions7 (Absa
Technology Finance Solutions ) where Murphy J stated that “A financier normally
should not be expected to become a dealer in second -hand equipment .”
Discussion
[35] I have set out the averments made by the appellant in her founding affidavit as
well as the submissions made on her behalf in her heads of argument. What is readily
apparent in her founding affidavit is that she feels that she was hard done by Mr
Koegelenberg who had stepped into her shoes at a time when she had to attend to her
family affairs. It is als o clear that the appellant did not know about the involvement of Mr
Kalt in the negotiations leading up to the acquisition and financing of the printing
machines. This explain s why she could not make any averment pointing to the
involvement of Mr Kalt in the fraudulent scheme that she believes was being
perpetrated by Mr Koegelenberg. The appellant can thus not complain about being
criticised that she has not made any averments pointing to the involvement of any of the
respondents in the fraudulent scheme.
7 Absa Technology Finance Solutions (Pty) Ltd v Leon Hatting t/a Corner Savings Supermarket
(Unreported judgment of the North Gauteng High Court, Pretoria, Case No. 5580/06 delivered on 29 April
2009) at para 33
16
[36] The appellant is then left with the averments in her replying affidavit and in
respect of which she suggests the court a quo erred in not taking them into account in
assessing whether she has established a bona fide defence. As submitted on behalf of
the respondents, in order for the appellant to succeed with her defence based on fraud
she is required to allege (a) a representation by the representor to the representee, (b)
fraud, i.e. that the representor knew the representation to be false, and (c) causation .
[37] The appellant mentions Mr Kalt only once in her replying affi davit and even then,
she does not even allege that he made any representations , thus failing to establish the
very first requirement for a defence based on fraud. The closest she gets to implicating
Mr Kalt is that he must have known about the fraudulent scheme, and he compounded it
by insisting that the appellant provides a guarantee. This , in my view, falls far too short
of what the appellant is required to set out in her affidavit for her defence b ased on
fraud to succeed. Even accepting momentarily that the court a quo erred , a finding I d o
not make, in not taking into account the averments in the replying affidavit, such error
has no bearing on the outcome. The appellant has failed to set out ave rments which, if
established at trial, would entitle her to the relief. There is, in my view, no basis to
interfere with the court a quo’s finding that the fraud defence is bad in law.
[38] Turning to th e Conventional Penalties Act defence, the appellant’s first difficulty
is her failure to set out the averments , which if established at trial, would entitle her to
the relief. To add to that , on the authority of Absa Technology Finance Solutions , the
indicat ions are that the Conventional Penalties Act defence is the one that is available
as against the suppliers of goods and not necessarily the financiers. As none of the
respondents are suppliers of goods, the Conventional Penalties Act defence may very
well be unavailable to the appellant and thus there would be no triable issue as against
the respondents. It must follow, in my view that there is no basis to interfere with the
court a quo’s finding on this score.
[39] The appellant referred to a number of authorities dealing with some issues that
were not foreshadowed in the papers. These include using trivial defaults to trigger the
17
acceleration clause (Arun ), that the spirit, purport and objects of the Constitution must
be upheld alongside the values of Ubuntu (Beukes ), and good faith, fairness and other
values that underlie the Constitution ( Beadica ). These authorities cannot come to the
assistance of the appellant absent the e ssential averments that the appellant is required
to set out in her application.
[40] What is required of an applicant is to set out the averments , which if proved at
trial, would entitle him or her to the relief. The court, in assessing whether a bona f ide
defence has been established, has to accept the averments set out by the applicant and
ask itself whether the averments are such that they, if proved during trial, would entitle
the app licant to the relief he or she seeks. This requires of legal practi tioners to pay
attention when drafting affidavits in support of applications for rescission of judgment to
ensure that primary facts are pleaded as that places the court in a good position to
assess whether the facts pleaded are such that they would entitl e the applicant to the
relief he or she seeks, if proven at trial. It is insufficient to plead conclusions without
pleading facts on the basis of which these conclusions are made. For all the above
reasons I am of the view that the appeal must fail.
Costs
[41] The respondents have been successful and in my view the costs should follow
the result. The guarantee that is at the centre of this appeal entitles the respondents to
costs on an attorney and client scale and no sufficient justification has been provided
from deviating from the parties’ agreement as embodied in the guarantee. Costs will
thus be awarded on an attorney and client scale including the costs relating to the
application for leave to appeal.
Order
[42] In the result I propose the follow ing order:
18
The appeal is dismissed with costs on an attorney and client scale including the
costs of the application for leave to appeal .
__________________ _____ _______
L G NUKU
JUDGE OF THE HIGH COURT
I agree and it is so ordered
___________________ _____ ________
C M J FORTUIN
JUDGE OF THE HIGH COURT
KUSEVITSKY J (dissenting)
[43] I have read the judgment of Nuku J (“the main judgment”) and I am unfortunately
not able to agree with the conclusion thereof for reasons that follow. The requirements
for an application of a rescission of judgment, as stated in the main judgment, is trite .
More particularly, having regard to the seminal dicta in Grant v Plumbers8 all an
applicant need s to demonstrate, inter alia is that they have a bona fide defence, which
prima facie , if established at the trial, would entitle them to the relief sought. The use of
the word ‘ prima facie’ is key. This phrase denotes a position at first sight9, or ‘on the
face of it.’ This means that without more, an applicant need not deal with the merits of
the case and produce evidence that the probabilities are actually in her favour - it is
sufficient that the averments made, if established, would entitle them to the said relief.
The threshold in my view is low for a reason – it prevents a duplication of proceedings.
In short, the court hearing an application for rescis sion is not the trial court, should not
8 supra
9 Concise Oxford English Dictionary
19
demand evidence , nor engage with the subject matter and merits as if it were the trial
court. To do so would be a misdirection.
[44] Two defences feature in this appeal . I agree with the main judgment that no case
has been made in respect of the first defence of fraud. I am however of the view that the
Appellant has prima facie made out a case in respect of the defence raised in relation to
the Conventional Penalties Act , 15 of 1 962.
[45] In the judgment a quo , the court noted that by relying on the acceleration clause
in the rental agreements, the Respondents were enforcing a penalty as defined in the
Conventional Penalties Act. It ostensibly dismissed this defence on two groun ds, the
first that the Appellant did not make out a case in her founding affidavit and more
particularly, her failure to deal with the price for which the goods were sold , in her
founding affidavit10, and second and in any event, that this defence did not raise a
triable issue and as a result, no bona fide defence had been established.
[46] From the pleadings, the following is apparent: Three rental agreements were
entered into, the first agreement on 7 August 2020 and the second and third
agreements on 11 August 2020 respectively11. The equipment was delivered on 24 July
2020. On 25 September 2020, the principal debtor went into a voluntary business
rescue. On 8 March 2021, the business rescue practitioner sent an email to the Second
Respondent (“Sasfin ”), requesting a consensual cancellation of the three rental
agreements; that if accepted the cancellation would be effective from 1 October 2020
and furthermore advised them of their duty to mitigate their damages. It is further
evident that the b usiness restructuring practitioner12 sent an email on the 26 March
2021 to Sasfin to collect the printers. On 11 April 2021, Sasfin advised that they would
collect the equipment. The printers were collected by Sasfin three months later on 2
June 2021. The four printers were later sold on auction on 8 July 2021 for the sum total
10 paragraph 55 of the judg ment a quo
11 Claims A, B and C in the Particulars of claim
12 Gragood Development (Pty) Ltd was placed into business rescue by way of voluntary resolution on 25
September 2020. In terms of an amended business rescue plan adopted on 9 March 2021, approval was
granted for the disposal of company assets in terms of sec tion 152 of the Companies Act 71 of 2008.
20
of R 1 495.00, having incurred additional costs of R 3 450 for removal costs and R 650
for storage costs.
[47] At the hearing of the matter a quo , the parties acknowledged that considering the
decision in Plumbago Financial Services (Pty) Ltd t/a Toshiba Rentals v Janap
Josephs13, that the damages granted in the default judgment constituted a ‘penalty’ for
the purposes of the Conventional Penalties Act. This approach is of course correct. The
Conventional Penalties Act is generally triggered where a penalty stipulation is imposed
in a contract, usually couched in terms such as an acceleration clause upon breach. On
this point , I am unable to agree w ith the finding in the main judgment, relying on the
authority of Absa Technology Finance Solutions14 that the Conventional Penalties Act
may not be available as a defence to the Appellant since such a remedy is only
available as against suppliers and not financiers. Generally, most goods or assets of
substantial value procured from suppliers, unless subject to rental agreements, are
financed through finance houses such as the First and Second Respondents .
[48] Section 1(2) of the Conventional Penalties Act defines a “penalty” as “any sum of
money for the payment of which or anything for the delivery or performance of which a
person may ……become liable”. A “penalty stipulation” is a stipulation
“whereby it is p rovided that any person shall, in respect of an act or omission in
conflict with the contractual obligation be liable to pay a sum of money or to
deliver or perform anything for the benefit of any other person… either by way of
a penalty or as liquidated d amages”.
Such a penalty stipulation is capable of being enforced in any competent court but a
creditor is not entitled to recover both a penalty and damages. Furthermore s 3(1) of the
Conventional Penalties Act prohibits the recovery of a penalty which is out of proportion
13 2008 (3) SA 47 (C) at 52H -I
14 Absa Technologies Finance Solutions (Pty) Ltd v Leon Hatting t/a Corner Savings Supermarket [2009]
ZAGPPHC 37
21
to the prejudice suffered by the creditor. In that instance , the court may, if the penalty is
excessive, reduce it to such extent as may be equitable in the circumstances.15
[49] Plumbago similarly dealt with the leasing of photocopy m achines and a
subsequent claim for arrear and future rentals. Bozalek J in the evaluation as to whether
or not an acceleration clause constituted a penalty for purposes of the Act considered
the dicta in Caude Neon Lights SA Ltd v Schlemmer16 where Leon J stated as follows:
“What was there accelerated were several debts which had never previously
been owing by the lessee to the lessor and which were reciprocal to the
performance by the lessor of its obligations in terms of the lease. Any
acce leration of payments not yet due gives an advantage to the lessor over and
above what would be his normal remedy for the breach, namely cancellation and
ejectment, or, in the case of a lease of movables, repossession . A right given to a
lessor to require t he lessee to pay, in accelerated form, the rent up to the
terminal date of the lease being something additional to, and over and above, the
normal remedy of a lessor might well be regarded as being in terrorem the
lessee”.17 (”own emphasis”)
[50] Thus, it is the provisions in the agreement which would constitute a penalty in the
event of a breach which would invoke the Conventional Penalties Act and the status of
the contracting parties are of no moment. I am also of the view that the obiter remark s in
Absa Technology does not find application since in any event, the obligation rests on a
creditor to mitigate its loss and more often than not, where the leasing or purchasing of
goods are at issue, it would be the ultimate re -letting or realisation of those goods the
value of which would determine whether or not prejudice ha s been suffered by the
creditor for purposes of the Act.
15 Plumbago at para 23
16 1974 (1) SA 143 (N) at 147C -E
17 at 628C -E; Plumbago para 28, at 56A-C
22
[51] When one has regard to the judgment a quo , I am of the view that the court
firstly misdirected itself by evaluating the merits of the matter when, in fact, it was
cognisant of the fact that it was only called upon to decide whether the issue was
triable.18 The court dealt with the onus and opined that the onus rested on the Appellant
to show the Respondents’ actual prejudice and then show that the penalty is out of
proportion to the prejudice. In Smit v Bester19, the Appellate Court held that in the case
where a court is concerned with a penalty under section 3 of the Conventional Penalties
Act, the onus is on the debtor to show that the penalty is disproportionate to the
prejudice suffered by the creditor and th at it should thus be reduced and to what extent.
This was reiterated in Plumbago where the court found the debtor had the onus to prove
that the penalty is disproportionate relative to the prejudice suffered by the creditor.20
However, when the debtor prima facie proves that the penalty should be reduced, then
there is an onus on the creditor to rebut, so as to refute the prima facie case of the
debtor. In my view, the court a quo failed to acknowledge this leg of the enquiry.
[52] The court then proceede d in paragraphs 45 to 54 of the judgment to evaluate the
probabilities of the Appellant’s defence when it was not called upon to do so – that
being the function of the trial court in due course after the hearing of oral evidence. The
court a quo went beyon d that which it was tasked to do, which was simply to have
identified a prima facie defen ce and once established, grant the rescission so that the
Appellant would be given the opportunity to ventilate same. This in my view constitutes
a misdirection.
[53] Furthermore, the court a quo held that the Appellant impermissibly made her
case out in reply, and suggested that she should have made out her case in her
founding affidavit. The court opined that the Appellant was sufficiently apprised of the
fact that ‘ the costs in relation to the sale of the goods exceeded the value which the
goods were sold for’ , this phrase having been mentioned in a letter dated 19 January
2023 that she herself attached to her founding affidavit and which was pleaded in the
18 paragraph 44 of the judgment a quo
19 Smit v Bester 1977 (4) SA 937 (A) at 942D -G
20 Plumbago Financial Services v Janap Joseph 2008 (3) SA 47 (C) at 52H -I
23
particula rs of claim. Based on this, the court reasoned, the Appellant ‘therefore knew
when she brought the application for rescission, that the sale of the printers realised
R0.’
[54] However, if one has regard to the pleadings, it is evident that this was not t he
case. In the summons, the only averment that is pleaded in support of a claim against
the principal debtor and the Appellant is the following averment:
“The plaintiffs have taken possession of the rented goods and sold same,
however the cost of sale of the goods exceeded the amount the goods were sold
for, as such the plaintiffs are claiming all outstanding rentals as pre -estimated
liquid damages including legal costs on the attorney and own client scale.”21
[55] The Appellant did not know the extent t o which the printers were disposed of, the
details thereof were only made known to her in paragraph 66 of the answering affidavit
and the attendant auctioneers statement22 which reflected the breakdown of the sale
and attendant costs. It was only on receipt of this information that the Appellant could
amplify her defence by noting the perplexing situation whereby printing machines that
had been purchased for R 121 494.00 , could be sold less than 11 months later, without
damage or much use, for barely 1% of its value. The Appellant also contended the duty
on the Respondents to have mitigated their damages by failing to collect the printers
timeously.
[56] Further evidence t hat the Appellant did not have the particularity of the costs ,
contrary to what was found in the judgment a quo , is evident from the founding affidavit
in a letter dated 20 December 2022 directed to the attorneys of record for the
Respondents in which the Appellant’s legal representative, having informed of their
intention to file an application for rescission of judgment, requested “ whether there are
any further relevant documents other than those attached to the summons? If there are
21 paragraph 25 of the Particulars of claim
22 Annexure AA14 to the answering affidavit
24
any such relevant do cuments, please will you provide us with copies thereof?” In
response on 12 January 2023, the Respondents attorney of record advised that it was
impossible for them to properly respond to exactly what documents were needed other
than those attached to the summons ‘without a clear indication as to what further
documents were sought ’. They again merely reiterated in a letter dated 19 January
2023 that “ unfortunately, the costs in relation to the sale of the goods exceeded the
value which the goods were sold for.”
[57] It is therefore clear that the Respondents failed to advise the Appellant of the
exact costs of the sale of the printers and that it was only after this information was
disclosed in the answering affidavit that the Appellant could make the aver ment that the
selling of the printers at 1% of its value and the subsequent claim constitutes penalties
as contemplated in the Conventional Penalties Act and that consequently the amounts
claimed are out of proportion to the damages allegedly suffered by t hem. As I have
indicated, the evaluation of merits in the above -mentioned paragraphs constituted a
misdirection, but even if I am wrong on this score, the evaluation itself was based on
incorrect facts not supported by the evidence in the pleadings. This t oo is a
misdirection.
[58] Finally, if one has regard to the obiter remarks in the judgment a quo , it is
apparent that the court recognized that the Respondents appeared to achieve a
massive windfall23; that the rentals did seem high and the fai lure to realise any value
from the printers after they were repossessed compounded the unfairness24. In
Plumbago , the facts which eerily mirror this case, the parties in that matter did not raise
the defence of or applicability of the Conventional Penalties Ac t. Bozalek J held the
following:
“[18] In the present matter the issue was not raised on the pleadings. To my
mind this is no bar to it being raised by the Court in the circumstances of the
23 paragraph 55 of the judgment a quo
24 paragraph 58 of the judgment a quo
25
present case. Although it was suggested in Bank of Lisbon International Ltd that
the Court should not consider a reduction of a penalty in an opposed matter
unless it has been alleged and approved , a more flexible approach was
advocated in Courtis Rutherford and Sons CC and others v Sasfin (Pty) Ltd , a full
bench decision of this division . Van Zyl J observed that it is, and remains, the
court’s primary function to ensure that justice is done on the basis of what is just
fair and reasonable under all circumstances. By implication, he expressed
approval of a co urt dealing with the question of an excessive penalty even where
that was not formally pleaded, subject to it being fully canvassed in evidence and
argument. ” (“own emphasis”)
On this basis alone, the court a quo based on its own observation of the prejud ice and
unfairness to the Appellant of the penalty, ought to have granted the rescission of
judgment and a failure to do so was a further misdirection.
[59] For these reasons, I would have upheld the appeal and granted the Appellant the
rescission of judgment .
___________________ _____ ________
D KUSEVITSKY
JUDGE OF THE HIGH COURT
APPEARANCES :
For the Appellant : Adv. M No witz
Instructed by : STBB – Smith Tabata Buchanan Boye s, Claremont
C/O : STBB – Smith Tabata Buchanan Boyes, Cape Town
For the Respondent s : Adv. S Auc amp
26
Instructed by : Smit Jones & Pratt Inc , Johannesburg
C/O : Jeff Gowar Inc, Cape Town