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REID J
Introduction
[1] This is an application for rescission of a default judgment that was
granted against the applicant in favour of the respondent, Standard
Bank ("the Bank") . The default judgment related to monies lent to a
company known as Mendi Trading Investments ("the company").
[2] The applicant was one of 3 directors of the company.
[3] The default judgment was granted on 13 April 2023 and a writ of
execution was issued on 24 April 2023. This application seeks to have
the default judgment and the writ set aside.
Condonation
[4] The applicant seeks condonation for the late filing of this application
and for filing the replying affidavit out of time.
[5] The respondent does not oppose either application for condonation.
[6] As grounds for condonation , the applicant states that the property on
which service was effected is a property that he owns but was not living
in since 2017. He became aware of the summons when he received a
call from the Sheriff on 17 May 2023 informing him that there is a writ of
attachment against his property. The applicant had difficulty in
obtaining sufficient funds to afford an attorney and counsel. The
rescission application was instituted as soon as affordable legal
counsel could be obtained.
[7] The applicable amount is R 3,096,975.66 (Three Million and Ninety Six
Thousand Nine Hundred and Seventy Five Rand and Sixty Six Cents).
[8] Having regards to the substantive amount as well as the fact that the
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application for condonation is not opposed, I view it to be in the interest
of justice to grant condonation for the late filing of the application and
the late filing of the replying affidavit.
[9] Condonation for the late institution of the application, as well as the late
filing of the replying affidavit, is consequently granted.
Background
[10] The two other directors of the company are married in community of
property.
[11] The company entered into two separate trade loan agreements with the
Bank on 12 April 2021 and 21 April 2021 ("the agreements").
[12] The applicant and one other director, Mrs Ramodibedi, signed as
sureties/guarantors of the monies owed by the company in relation to
the agreements.
[13] The company fell into financial troubles . The parties dispute what the
cause of the financial troubles were. For purposes of this judgment,
the cause of the financial troubles is irrelevant.
[14] The applicant made a proposal to the company to amicably part ways,
which did not realise . On 4 February 2022 the applicant was
suspended from the operations of the company . The applicant was
removed as a director of the company on 6 October 2022. No
disciplinary or criminal charges were instituted against the applicant.
[15] Subsequent to the suspension from the operations of the company and
removal of the applicant as a director, the company seized payments to
the Bank in terms of the loan agreements.
[16] The Bank then served letters of demand in October 2022 (to the
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applicant’s @gmail address) and August 202 3 (to the companies
physical and e-mail address).
[17] The applicant states that he requested meetings with the Bank to deal
with the issues of non -payment to the Bank during his directorship. He
states that he was unaware that the company was not paying the loan
agreements, after his removal as a director and removal from the
operations of the company.
[18] The meeting with the Bank was held on 8 November 2022 after which
the Bank followed up with an email on 5 December 2022. The applicant
responded to the email and informed the Bank's attorneys that his
attorney, Mr Selomo whose contact details were attached will deal with
the matter. The respondent's attorney again followed up on instructions
from Mr Selomo on 10 January 2023.
[19] Summons was issued on 9 February 2023 and served on 13 March
2023 by affixing on the domicilium citandi et executandi of the
applicant. Effective service of the summons is disputed. The return of
service shows that service was attempted on 8 and 9 March 2023 but
that the property was locked and the address was vacant. The return of
service further indicates that "The Combined Summons and Plaintiff's
Notice to Oppose mediation in terms of uniform Rule 41(A) was served
by affixing to the principal door. After a diligent search and enquiry at
the given address no other manner of service was possible. Rule
4(1)(a)(iv)."
[20] The applicant states that i t was not correct that there was no other
manner of service , since the Bank's attorneys were aware thereof that
the applicant was represented by Mr Selomo. The Bank also knew that
even though he was suspended from the company, he had a personal
email address.
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[21] In terms of clause 6.1.1 of the guarantee, the guarantors (including the
applicant) renounced the benefits of all otherwise applicable legal
immunities, defences and exceptions to the extent that they would be
applicable in the absence of such renunciation, including the defences
and exceptions of "cession of actions", "excussion", "division", " de
duobus vel plurlbus rels debend i” (i.e. that all guarantors must be
joined in any action, each for his/her proportionate share of the debt)
and "revision of accounts", the meaning and effect of which they
declared themselves to be fully acquainted with.
[22] Default judgment was granted against the applicant on 13 April 2023
and a writ issued on 24 April 2023.
Issues to determine
[23] To my mind, the determination of this application for rescission will turn
on the following scores:
23.1. Whether there was sufficient service of the summons; and
23.2. Whether the applicant has a bona fide defence.
Legal principles
[24] Rule 31 allows a party to apply for default judgment where the other
party is in default for filing a notice to defend or plea. A party against
whom such default judgment has been granted, may, 20 days after
acquiring knowledge, bring an application to set aside the default
judgment.
[25] The law on the rescission of default judgments is trite. The applicant
must, in order to succeed with the application, deal with the reasons for
the default and show good cause for the default judgment to be
rescinded.
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[26] To succeed in a rescission on common law grounds or in terms of Rule
31, an applicant must show good or sufficient cause. In Chetty v Law
Society 1985 (2) SA 756 (A) the Appellate Division held that the
essential elements of sufficient cause for rescission of a judgment by
default are:
26.1. that the party seeking relief must present a reasonable and
acceptable explanation for his default;
26.2. that on the merits such party has a bona fide defence which,
prima facie, carries some prospect of success; and
26.3. an application for rescission must be made bona fide.
Service
[27] The provisions of Rule 4(vi) provides that service may be effected as
follows:
“(iv) if the person to be served has chosen a domicilium citandi,
by delivering a copy thereof to a person apparently not less than
sixteen years of age at the domicilium so chosen: Provided that
if no person is present at the domicilium, the sheriff may leave a
copy at the aforesaid domicilium".
[28] In Absa Bank v Mare and Others , 2021 (2) SA 151 the Full Court
found that delivery of a summons in terms of Rule 4((1)(a)(iv) still had
to be in a manner that the process would have come to the attention of
the recipient. That:
"[26] The manner in which a process may be delivered or
left at a domicilium in terms of rule 4(1)(a)(iv) is not
prescribed and depends on the prevailing circumstances.
The relevant provisions of the loan agreement in question
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(clause 37) also do not prescribe the manner of delivery
or of acceptance at Ms Mare's chosen domicilium
address. The duty upon a sheriff is to serve a notice or
process of court at a domicilium citandi by delivering or
leaving the notice or process in a manner by which in the
ordinary course the notice or process would come to the
attention and be received by the intended recipient, and
to report to the court how the process was served and
why it was served in that manner. The delivery
requirement at a domicilium citandi , as was said by
Margo J in Loryan (Pty) Ltd v Solarsh Tea -Box ....
Coffee (Pty) Ltd 1984 (3) SA 834 (W) at 849A - B –
'presupposes delivery in any manner by which in
the ordinary course the notice would come to the
attention of and be received by the lessor. The
obvious method would be by handing the notice to
a responsible employee, or by pushing it under the
front door, or by placing it in the mailbox.'
[27] Leaving the summons on the grass where it can be blown
away, taken away or be invisible, was not an appropriate place
for delivery in the particular circumstances. Where delivery of a
notice or process is to be effected at a residence chosen as a
domicilium citandi , it would equally not have been enough
merely to drop the process over a perimeter fence or to put it
into a hedge (see Loryan at 847H - I). Ms Mare's chosen
domicilium citandi is not a vacant piece of land, but a
smallholding with a dwelling on it, which is her private residence.
The obvious method of delivery by which in the ordinary course
the summons would have come to her attention and received by
her, and which the sheriff in casu was required to do in order to
comply with the method of service prescribed in terms of
R4(1)(a)(iv), was to hand a copy of the summons to Ms Mare
personally (I accept her evidence that she was present at the
time of service of the summons), to a responsible employee, if
there was someone present, by slipping it under or affixing it to
there was someone present, by slipping it under or affixing it to
the front door of her home, or even by placing it in a post box, if
there was one.”
[29] Further, in Hamze Trading (Pty) Ltd v Alf's Tippers CC [2024] 3 All
SA 248 (GJ) (6 May 2024) at para 65, the court found that the mere
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fact that a domicilium citandi et executandi has been chosen does not
preclude effective service through one of the other methods prescribed
in Rule 4 of the Uniform Rules of Court.
[30] In Hamze Trading (Pty) Ltd it was held that:
"[68] The general tenor of the language is peremptory. The
sheriff must use one or other of the methods set out in rule
4(1)(a). But that is hardly determinative of this question. As I
observe above, rule 4(1)(a)(iv) provides that service at a chosen
domicilium address is one of "the following manners". The
drafters of the rules constructed rule 4(1)(a) “to facilitate
effective service on a defendant or respondent. The various
alternative modes of service, some applicable only to specific
cases, were set in place so that the likelihood of effective service
....... a defendant was increased."
[31] In casu, the Bank's attorneys were aware thereof that the applicant was
represented by attorney, Mr Selomo and in fact had addressed
communication to him. Rule 4(1)(aA) provides that:
"(aA) Where the person to be served with any document
initiating application proceedings is already represented by an
attorney of record, such document may be served upon such
attorney by the party initiating such proceedings."
[32] The applicant claims that even though the summons was served on his
nominated domicillium address, he did not receive the application as he
vacated the property in 2017.
[33] The respondent states that the applicant fails to provide any acceptable
explanation defending the action, for a number of reasons, namely:
33.1. The applicant was made aware of the fact that legal action was
imminent yet showed a complete lack of interest in resolving the
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matter. In this regard, the applicant has not been truthful by
denying receipt of the letter of demand dated 17 August 2022, to
which letter he in fact responded to on 26 August 2022.
33.2. Now that a lawful judgment has been granted against the
applicant, he attempts to pass the buck to his former attorney of
record, Mr Selomo. The Court is entitled to refuse an application
for rescission even if the default is that of the applicant's attorney
(which is not admitted).
33.3. The combined summons was served on the applicant's chosen
domicilium citandi et executandi , which the applicant admits is a
property that is owned by him.
33.4. The relevant service address was nominated in terms of the
applicant's written guarantee which was signed by hi m on 21 April
2021.
33.5. The applicant fails to explain why he would have elected the
relevant address as his nominated service address in 2021 if he
had allegedly already vacated the property as far back as 2017.
33.6. Service at the relevant address constituted valid service of the
combined summons at the time of service, irrespective of whether
or not the applicant still resided there.
[34] The respondent relies on the matter of Amcoal Collieries Ltd v Truter
1990 (1) SA 1 (A) in which the Appellate Division held that:
“service on the domicilium address would be proper even if the
person to be served was nowhere to be found" and "It is a
matter of f requent occurrence that a domicilium it e xcutandii
chosen in a contract by one or more of the parties to it.
Translated, this expression means a home for the purpose of
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serving summons and levying execution. (If a man chooses
domicilium citandi , he chooses is taken to be his place of
abode.”
[35] In application of the above legal principles, the purpose of e ffective
service in terms of the Rules of Court is that the institution of legal
proceedings should come to the attention of the person being served.
[36] In casu, service was done by affixing the summons to the chosen
domicilum address in terms of Rule 4(1)(a)(iv).
[37] Further, on the basis that the applicant has elected the address as his
domicilium in 2021, despite the fact that he vacated the property in
2017 (on his own version), I find that service was duly effected.
[38] I am satisfied that service of the summons was duly effected and came
to the attention of the applicant, alternatively aught to have reasonably
come to the attention of the applicant.
Bona fide defence
[39] The applicant states that he intends to plea that the clause in the
agreement that allows the bank to pursue him even when the company
is profitable and trading, is contrary to public policy. This plea is
underscored specifically when the Bank has an agreement with the
remaining directors for the settlement of the outstanding amounts.
Alternatively the applicant intends to plea that the Bank must first
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approach the company for payment.
[40] It has been held in RGS Properties (Pty) Ltd v Ethekwini
Municipality 2010 (6) SA 572 (KZD) at para 10 to 12 that the Court is
not seized with the duty to evaluate the merits of the defence raised as
a bona fide defence.
[41] At the time that the default judgment was granted in September 2023,
the amount was no longer R3,096,975.66 but R704 095.48 as Mr and
Mrs Ramodibedi (the other 2 directors) paid the difference.
[42] However, the Bank pursued the applicant alone at the time [the
application against Mr and Mrs Ramodibedi was only brought on 28
March 2024 after they defaulted on the settlement agreement]. This is
even though the applicant was at pains to show to the Bank that the
company was profitable and still trading. The Bank holds the view that
the second agreement is a guarantee as opposed to a surety and as
such it is entitled to do so.
[43] With regards to a defence on public policy, the following from the
Constitutional Court's judgment in Beadica 231 CC and Others v
Trustees, Oregon Trust and Others 2020 (5) SA 247 (CC) requires
mentioning.
[44] The Constitutional Court referred to its earlier judgment in Barkhuizen
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v Napier 2007 (5) SA 323 (CC) and confirmed that:
"[35] The majority judgment further explained that public policy,
as informed by the Constitution, imports 'notions of fairness,
justice and reasonableness', takes account of the need to do
'simple justice between individuals' and is informed by the
concept of ubuntu. The majority recognised that public policy, in
general, requires parties to honour contractual obligations that
have been freely and voluntarily undertaken. This is because the
principle of pacta sunt servanda is a 'profoundly moral principle,
on which the coherence of any society relies'. The majority
further stated that this principle - 'gives effect to the central
constitutional values of freedom and dignity. Self -autonomy, or
the ability to regulate one's own affairs. even to one's own
detriment, is the very essence of freedom and a vital part of
dignity."
[36] The majority judgment held that determining fai rness in this
context involves a two-stage enquiry ...
[37] The first stage involves a consideration of the clause itself.
The question is whether the clause is so unreasonable, on its
face, as to be contrary to public policy. If the answer is in the
affirmative, the court will strike down the clause. If, on the other
hand, the clause is found to be reasonable, then the second
stage of the enquiry will be embarked upon. The second stage
involves an inquiry whether, in all the circumstances of the
particular case, it would be contrary to public policy to enforce
the clause. The onus is on the party seeking to avoid the
enforcement of the clause to 'demonstrate why its enforcement
would be unfair and unreasonable in the given circumstances'.
The majority emphasised that particular regard must be had to
the reason for non-compliance with the clause."
[45] The Constitutional Court in Beadica went on and added the following:
“5.1. Equity (encompassing the notions of good faith, fairness
and reasonableness) is a factor in assessing the terms and the
and reasonableness) is a factor in assessing the terms and the
enforcement of contracts. Nevertheless: (a) A court may not
refuse to enforce contractual terms on the basis that the
enforcement would, in its subjective view, be unfair,
unreasonable or unduly harsh; and (b) The enforcement of
contractual terms does not depend on an individual judge's
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sense of what fairness, reasonableness and justice require. To
hold otherwise would: (i) Amount to making the enforcement of
contractual terms dependent on the "idiosyncratic inferences of
a few judicial minds"; and
(ii) Introduce an unacceptable degree of uncertainty into our law
of contract. The resultant uncertainty would be inimical to the
rule of law;..”
[46] The legal principle of pacta sunt servanda should not be privileged over
other constitutional rights and values. Where a number of constitutional
rights and values are implicated, a careful balancing exercise is
required to determine whether enforcement of the contractual terms
would be contrary to public policy in the circumstances.
[47] It is argued on behalf of the respondent that the documentary evidence
shows that:
47.1. The company remains in debt and fails to pay the respondent.
47.2. The applicant was placed on suspension from the company.
47.3. The applicant intends pursuing Mendi Trading in a separate action
for his "illegal removal as member and director".
[48] The respondent argues that public policy, inclusive of the principles of
equity and pacta sunt servanda , requires that the guarantee must be
honoured by the applicant.
Analysis
[49] The applicant cannot rely on a defence that was not available to him at
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the time that the default judgment against him was granted. It was
found by the Supreme Court of Appeal in Lodhi 2 Properties
Investments CC and Another v Bondev Developments (Pty) Ltd
2007 (6) SA 87 (SCA) that:
“[27] Similarly, in a case where a plaintiff is procedurally entitled
to judgment in the absence of the defendant the judgment if
granted cannot be said to have been granted erroneously in the
light of a subsequently disclosed defence. A Court which grants
a judgment by default like the judgments we are presently
concerned with, does not grant the judgment on the basis that
the defendant does not have a defence: it grants the judgment
on the basis that the defendant has been notified of the plaintiff's
claim as required by the Rules, that the defendant, not having
given notice of an intention to defend, is not defending the
matter and that the plaintiff is in terms of the Rules entitled to the
order sought. The existence or non -existence of a defence on
the merits is an irrelevant consideration and, if subsequently
disclosed, cannot transform a validly obtained judgment
into an erroneous judgment.”
(own emphasis)
[50] The fact that the other two directors paid a substantial amount of the
debt when the default judgment was granted, does not establish a bona
fide defence to the applicant.
[51] When the applicant signed as guarantor, he was well aware of the
implications should the principal debtor fail to honour the payments. In
this regard the prin cipal pacta sunt servanda (scriptor beware) is
applicable.
[52] In my view, t he applicant did not show a bona fide defence against the
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Bank. It is not for this Court to evaluate the merits of a possible bona
fide defence, only to determine whether a bona fide defence existed or
not.
Findings
[53] I have found, for the reasons set out above, that the applicant did
become aware of the summons and that service of the summons was
duly effected.
[54] I have also found that the applicant did not have a bona fide defence at
the time that the action was instituted and proceeded against him.
[55] As such, it follows that the application for rescission must fail.
Costs
[56] The general principle is that the successful party is entitled to its costs.
[57] I find no reason to deviate from the principle.
[58] The applicant should pay the cost of the respondent.
Order
The following order is made:
i) The application is dismissed.