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[2019] ZASCA 141
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Top Trailers (Pty) and Another v Kotze (1006/2018) [2019] ZASCA 141 (1 October 2019)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Not
reportable
Case
No: 1006/2018
In
the matter between:
TOP
TRAILERS (PTY)
LTD First
Appellant
SIPHO
SONO
NO Second
Appellant
and
JOHANNES
PETRUS
KOTZE Respondent
Neutral
citation:
Top Trailers (Pty) Ltd & another v Kotze
(1006/2018)
[2019] ZASCA 141
(1 October 2019)
Coram:
Ponnan, Zondi, Molemela and Plasket JJA
and Weiner AJA
Heard:
5 September 2019
Delivered:
1 October 2019
Summary:
Civil Procedure – default
judgment obtained without prior notice to opposite party after the
matter became opposed, may be
rescinded in terms of rule 42(1)
(a)
of the Uniform Rules of Court as a judgment that was erroneously
granted – applicant need not show bona fide defence.
ORDER
On
appeal from:
Gauteng Division of the
High Court, Pretoria (Phiyega AJ, sitting as court of first
instance):
1 The appeal succeeds
with costs, including the costs of two counsel.
2 The order of the high
court is set aside and replaced with the following order:
‘
(a)
The application succeeds.
(b)
The judgment granted by default by the high court on 27 June 2016 is
set aside.
(c) The respondent is
ordered to pay the costs of the application.’
JUDGMENT
Zondi
JA (Ponnan, Molemela and Plasket JJA and Weiner AJA concurring)
[1]
The issue in this appeal, with the leave of this court, is whether
the Gauteng Division of the High Court, Pretoria (high court)
(Phiyega AJ) erred in dismissing an application by the appellants for
the rescission of an order granted by default on 27 June
2016 by
Khumalo J. In terms of that order, Khumalo J set aside a resolution
of the board of the first appellant, Top Trailers (Pty)
Ltd (the
company), to begin business rescue proceedings and place the company
under supervision in terms of s 129 of the Companies
Act 71 of 2008
(the Act).
[2]
The issue arose in these circumstances. On 13 August 2014, the board
of directors of the company resolved that the company begin
business
rescue proceedings. On 18 August 2014, the notice of commencement of
business rescue proceedings was filed with the Companies
and
Intellectual Property Commission. The second appellant, Mr Sipho Sono
(Mr Sono) was appointed as the business rescue practitioner
on 22
August 2014. At that time, the company was allegedly indebted to the
respondent, Mr Johannes Petrus Kotze (Mr Kotze), in
the amount of
R1 842 050.28. Mr Kotze had claimed that amount in respect
of royalties owing to him under a licence agreement
that he had
concluded with the company.
[3]
Following his appointment and after consulting various stakeholders,
Mr Sono prepared a business rescue plan. The plan was considered
and
adopted by the company’s creditors at a meeting held on 11
February 2015.
[4]
It is common cause that Mr Kotze was not given proper notice of the
resolution placing the company under business rescue. He
only learnt
of its existence during the course of May 2015 when a business
colleague mentioned it to him. By that time Mr Kotze
had already
obtained a judgment by default against the company, inter alia, for
the payment of R1 842 050.28 pursuant
to the summons that
he had caused to be issued in the high court, on 16 January 2014.
[5]
On 12 May 2016, Mr Kotze applied to the high court for an order to
set aside the resolution commencing the business rescue.
The basis of
his application was that the company and the business rescue
practitioner had failed to provide him with any of the
required
publications or notifications in terms of s 129(3) and (4) of the
Act. Neither the business rescue practitioner’s
consent, nor
the court’s leave was sought and obtained by Mr Kotze to
institute the proceedings. It is common cause that
by the time Mr
Kotze sought to set aside the resolution, the business rescue plan
had been adopted and substantially implemented.
[6]
In the notice of motion, Mr Kotze informed the appellants that should
they intend to oppose the application they had to:
‘
(a) Notify [Mr
Kotze’s] attorney of record in writing of your intention so to
oppose within 5 days of receipt of the Notice
of Motion. In your
notice of intention to oppose, provide an address contemplated in
rule 6(5)(b) where you will accept the further
notices and delivery
of all documents in these proceedings;
(b) File your answering
affidavit, if any, within 15 days from date of filing your Notice of
Intention to Oppose;
Should the Respondents
fail
to file and serve their Notice of Intention to Oppose as well
as their Answering Affidavit within the time limits as set out herein
above
, [Mr Kotze] will proceed to set the matter down on the
unopposed roll for the
27
th
of June 2016
at 10h00
, or as soon thereafter as [Mr Kotze] may be heard.’
[7]
This application was served on the first and second appellants on 25
and 26 May 2016, respectively. The company thus had until
2 June 2016
to deliver its notice of intention to oppose. Correspondence was
thereafter exchanged between the appellants’
attorneys and Mr
Kotze’s attorneys.
[8]
On 1 June 2016 the appellants’ attorneys of record wrote to Mr
Kotze’s attorneys demanding that Mr Kotze withdraw
the
proceedings as they were instituted without the consent of the
business rescue practitioner. The letter reads:
‘
5. We would like
to place on record that your client has not requested consent from
our Client to institute these proceedings in
terms of
Section 133
(a)
of the
Companies Act 71 of 2008
, as amended (“the
Companies
Act&rdquo
;) and such consent is not granted. We confirm that this or
any other interaction with you and/or your client or the filing of a
notice of intention to oppose this application does not constitute
consent to continue with these proceedings.
6. We advise that the
business rescue plan, adopted on 11 February 2015 (“the Plan”),
has been substantially implemented
and as such the business rescue
proceedings are at the end stage. All that remains to be finalised is
the final dividend payment
to creditors, which payment has been
delayed by the pending litigation instituted by the directors of Top
Trailers.
7. In addition, the
business of Top Trailers has, as part of the Plan, been sold as a
going concern to CIMC Vehicles South Africa
Proprietary Limited. The
sale agreement is unconditional and the transaction is complete. Top
Trailers will be deregistered as
a company with the Companies and
Intellectual Property Commission in the coming months, thus the
objectives of your application
have no merit.
8. In light of the above,
your client’s application, bears little, if any, prospect of
success. Kindly confirm that you will
be withdrawing your application
before close of business on 3 June 2016.’
[9]
On 8 June 2016 and in response to the demand for the withdrawal of
the application, Mr Kotze’s attorneys wrote:
‘
1. You fail to
indicate in your letter whether our client’s claim has been
entertained by your client and if not, why? We
hereby record that
until date of this letter our client did not receive any notice of
the “Business Rescue” application
by your client, nor did
our client receive any proof that their claim formed part of the
Court order or any settlement.
2. You indicate that Top
Trailers (Pty) Ltd has been sold as a going concern, but does not
deal with our client’s intellectual
property, being the patent
on the “swingbin” trailer: We hereby record that our
client’s intellectual property
does not form part of Top
Trailer’s (Pty) Ltd property.
We hereby inform you that
our client does not consent to the use or sale of its intellectual
property by Top Trailers (Pty) Ltd,
or anyone else.
We hereby specifically
request that your client, as the appointed “Business Rescue”
practitioner, confirm in writing,
on or before close of business on
10 June 2016, that they did not sell our client’s patent as
part of the transaction with
CIMC Vehicles South Africa (Pty) Ltd.
3. We place on record
that it is our instructions that our client was never informed or
included in the “business rescue”
application as a
creditor, although legal proceedings against Top Trailers had already
been instituted on the 4
th
of December 2013 and summons
was properly served on 30 January 2015 by our client.
4. Your client was
informed in writing of most of the facts mentioned in the application
on 28 May 2015 and elected to ignore our
client’s claim against
Top Trailers (Pty) Ltd as well as the issue regarding the return of
the patented sketches and drawings.
. . .
It is therefore our
instructions to hereby inform you that should your client fail to
entertain our client’s claim and tender
the return of all our
client’s patented sketches with regard to the “swingbin”
patent, our client will proceed
with it’s application.’
[10]
This response prompted the appellants’ attorneys to file on 10
June 2016 a notice on behalf of the appellants to oppose
the
application. This was late because the company had until 2 June 2016
to deliver its notice of opposition. It is common cause
that the
appellants did not file their answering affidavit as required by the
Rules of Court. Without notice to the appellants’
attorneys, Mr
Kotze’s attorneys caused the application to be set down for
hearing on the unopposed roll on 27 June 2016.
The matter served
before Khumalo J. She granted the order which reads:
‘
1. the first
respondent’s resolution dated 13 August 2014 in terms of
section 129
of the
Companies Act 71 of 2008
, whereby the first
respondent was placed under business rescue, be set aside;
2. the applicant is
authorised to instruct the sheriff to proceed with the execution of
the Warrant of Execution against the first
respondent, under case
number 2842/2015;
3. the first and second
respondents are to pay the costs of the application de bonis propriis
jointly and severally, the one to
pay, the other to be absolved, on
an attorney and client scale.’
[11]
It is not disputed that the appellants only became aware of the
default order on 26 July 2016, whereupon the appellants’
attorneys telephoned Mr Kotze’s attorneys to request a copy of
the court order as they had instructions to have it rescinded
on an
urgent basis. Mr Kotze’s attorneys were also informed that CIMC
SA (CIMC), who had since purchased the company, had
located Mr
Kotze’s intellectual property and that the appellants were
prepared to return it to Mr Kotze subject to him agreeing
not to
enforce the court order and agreeing to its rescission. Mr Kotze
refused to give an undertaking. In consequence, on 1 November
2016,
the appellants applied to the high court for the rescission of the
order granted by default on 27 June 2016 by Khumalo J.
The appellants
sought the relief in terms of rule 42(1)
(a)
of the Uniform
Rules of Court, as also on two alternative bases that need not detain
us.
[12]
The appellants, in a founding affidavit deposed to by Mr Sono,
advanced various grounds on which they sought rescission of
the order
granted by Khumalo J. They, among others, contended that: (1) Mr
Kotze had not sought Mr Sono’s consent or leave
of the court
when he instituted proceedings against the company in terms of s 133
of the Act; (2) he failed to join the other affected
persons; (3) he
enrolled the matter on the unopposed roll when he was aware that the
appellants opposed the relief he sought; (4)
he prematurely enrolled
the matter before the lapse of the
dies
for the filing of the
answering affidavit; and (5) the business rescue proceedings in
respect of the company were at an advanced
stage and to undo
that would not only be a complicated and expensive exercise for the
company, but also to the detriment
of its employees and creditors. As
regards the merits, the appellants contended that they informed Mr
Kotze through his attorneys
that his intellectual property did not
form part of the sale to CIMC and they tendered to return it to him.
[13]
Mr Kotze opposed the application. He contended that he was entitled
to the order setting aside the resolution and the business
rescue
proceedings because the board of directors who passed a resolution
failed to inform him that the company was in business
rescue; and,
upon his appointment, the business rescue practitioner failed to
provide him with any notification that the company
was in business
rescue. Mr Kotze further contended that, procedurally he was entitled
to default judgment, because he followed
the correct procedure in
setting the matter down. He denied that the appellants were not aware
of the date of set down of the application.
Mr Kotze contended that
in his notice of motion he informed the appellants of the steps they
were required to take if they intended
to oppose the application. But
the appellants simply failed to comply with the time limits specified
in the notice of motion.
[14]
Rule 42(1)
(a)
provides:
‘
(1) The court may,
in addition to any other powers it may have,
mero motu
or upon
the application of any party affected, rescind or vary:
(a)
an order or judgment erroneously sought or erroneously granted in
the absence of any party affected thereby.’
[15]
Rule 6(5)
(f)
(i) of the Uniform Rules of Court provides:
‘
Where no answering
affidavit, or notice in terms of sub-paragraph (iii) of paragraph
(d)
, is delivered within the period referred to in
sub-paragraph (ii) of paragraph
(d)
the applicant may within
five days of the expiry thereof apply to the registrar to allocate a
date for the hearing of the application.’
[16]
Para 13.10 of Gauteng: Pretoria Practice Manual regulates the
enrolment of applications after a notice of intention to oppose
has
been filed. It provides:
‘
1. Where the
respondent has failed to deliver an answering affidavit and has not
given notice of an intention only to raise a question
of law (rule
6(5)
(d)
(iii)) or a point
in limine
, the application
must not be enrolled for hearing on the opposed roll.
2. Such an application
must be enrolled on the unopposed roll. In the event of such an
application thereafter becoming opposed (for
whatever reason), the
application will not be postponed as a matter of course. The judge
hearing the matter will give the necessary
directions for the future
conduct of the matter.
3. The notice of set down
of such an application must be served on the respondent’s
attorney of record.’
[17]
Mr Kotze’s attorneys were thus obliged to have given the
appellants’ attorneys notice that the application had
been set
down for hearing. This court in
Lodhi
[1]
considered the meaning of the phrase ‘erroneously granted’
and came to the following conclusion at para 24:
‘
Where notice of
proceedings to a party is required and judgment is granted against
such party in his absence without notice of the
proceedings having
been given to him such judgment is granted erroneously. That is so
not only if the absence of proper notice
appears from the record of
the proceedings as it exists when the judgment is granted but also
if, contrary to what appears from
such record, proper notice of the
proceedings has in fact not been given.’
It
follows, on the strength of
Lodhi
, that the judgment was
‘erroneously granted’ as contemplated by rule 42(1)
(a)
and ought therefore to have been rescinded.
[18]
In the result the following order is granted:
1 The appeal succeeds
with costs, including the costs of two counsel.
2 The order of the high
court is set aside and replaced with the following order:
‘
(a)
The application succeeds.
(b)
The judgment granted by default by the high court on 27 June 2016 is
set aside.
(c) The respondent is
ordered to pay the costs of the application.’
___________________
D
H Zondi
Judge
of Appeal
APPEARANCES
For
appellants: A Bham SC (with him J E Smit)
Instructed
by: Edward Nathan Sonnenbergs Inc
c/o
Jacobson & Levy Inc, Pretoria
Symington
De Kok, Bloemfontein
For
respondent: E L Theron SC (with him Z Schoeman)
Instructed
by: PWG Attorneys
c/o
Malan Nortjé Attorneys, Pretoria
Honey
Attorneys, Bloemfontein
[1]
Lodhi 2
Properties Investments CC & another v Bondev Developments (Pty)
Ltd
[2007]
ZASCA 85
;
2007 (6) SA 87
(SCA) para 24.