HIGH COURT OF SOUTH AFRICA (GAUTENG DIVISION, PRETORIA) In the matter between: CASE NO: 38645/2015 Not reportable Not of interest to other Judges CRIMSON KING PROPERTIES 21 (PTY) LTD Applicant and JOHN PETER WRIGHT SHERIFF THABAZIMBI First Respondent Second Respondent Heard: Order: Reasons: 19 June 2017 18 August 2017 22 August 2017 Summary: Rescission of an order - Rule 42 of the Uniform Rules of Courtwhat constitutes 'erroneously' sought and granted order - if no irregularity in the granting of the order, Rule 42 not applicable. Rescission of the order under common law - good cause - entails two elements of reasonable explanation for the delay and bona fide defence - applicants' defence based on single-judge judgments doubting the correctness of the judgment of the Full Court - that defence having no prospect of success at trial - application dismissed.
2 JUDGMENT MAKGOKA,J Introduction [I] This is an application for rescission of an order granted by this court on 13 July 2015 (the impugned order). The application is linked to the one under case 48306/2011, between Hendrick Naude and another v John Peter Wright. The two cases are determined on the same reasoning. Therefore, the reader's attention is drawn to the judgment in that case, which is delivered evenly with this one. [2] The applicant, Crimson King Properties (Pty) Ltd (Crimson) is a company with limited liability, whose sole director is Mr Jacobus Stephanus Naude (Naude Jnr). His parents, Mr Hendrick Diederick Naude (the principal debtor) and Mrs Johanna Frederika Naude, are the applicants under case number 48306/2011, in which they seek the rescission of an order granted on 13 December 2013 against the principal debtor (Naude Jnr's father) pursuant to a loan agreement concluded by the principal debtor and the first respondent, Mr John Peter Wright, a businessman.
3 [3] In terms of the impugned order, Crimson is to pay the respondent a sum of R2 350 553.31, interest and costs. Its property was declared specially executable. Crimson now seeks to rescind that order and to stay the sale in execution of its property. The basis of Crimson's case is that the order was erroneously sought and erroneously granted. The application is opposed by the first respondent. The second respondent, the sheriff, does not take any part in the proceedings. For the sake of convenience, I shall refer to the first respondent simply as 'the respondent'. Background facts [ 4] The brief factual background is this. During December 2008 the respondent concluded an oral agreement with the principal debtor in terms of which the respondent loaned the principal debtor a sum of Rl 400 000.00, with interest to be charged at 10% per annum. The loan was to be repaid by no later than 11 December 2010. On 17 March 2009 the oral agreement was reduced to writing by the parties in the form of an acknowledgment of debt signed by the principal debtor. [5] The principal debtor failed to honour the terms of the agreement by not repaying the loan on 11 December 2010. On 23 August 2011 the respondent instituted action in this court under case number 48306/2011 against the principal debtor for payment of the monies lent and advanced. The return of
4 service reflects that the summons was served on the principal debtor's domicilium address in terms of the agreement on 30 August 2011 by 'fixing to the principal door'. The principal debtor did not deliver a notice of intention to defend. [6] On 22 August 2013 the application for default judgment was served on the principal debtor in a similar manner stated in para 5 above. Without any response from the principal debtor, the respondent applied for, and was granted an order by default on 12 December 2013 in the terms reflected in para 3 above. On 24 November 2014 the sheriff, at the instance of the respondent, served a writ of execution on the principal debtor. Without any money or disposable property or assets to satisfy the warrant, the sheriff returned nulla bona. [7] Meanwhile, on 23 April 2012 Crimson had bound itself as surety and coprincipal debtor by way of surety bond for the due and proper payment of the amount of Rl 729 393.19 and a further additional amount of R345 878.63, as security for the contingent payment by the principal debtor. On 27 May 2015 the respondent issued an application out of this court in which he sought from Crimson, payment of a sum of R2 350 553.31, pursuant to the surety bond registered in its favour, referred to above. The application was served on 3 June 2017 at Crimson's registered address. It was received by the principal debtor. Without any notice of intention to oppose, on 13 July 2015 the respondent
5 obtained a default order against Crimson. Subsequently, the respondent caused to be issued a warrant of sale in execution of Crimson's property, a farm in Limpopo. It was served on Crimson on 20 April 2016. That, briefly, concludes the background facts. Order erroneously sought or granted? [8] I shall first consider whether the impugned order can be rescinded in terms of rule 42 of the uniform rules, on which Crimson expressly relies. Rule 42(1)(a) provides that the court may rescind or vary an order or judgment erroneously sought or erroneously granted in the absence of any party affected thereby. [9] A peculiar feature of the application is that Crimson does not directly attack the order granted against it on 13 July 2015. Instead, it seeks to impugn the order granted against the principal debtor under case number 48306/2011. It relies on the same basis as the principal debtor does there. [10] According to Crimson, the default judgment against the principal debtor was erroneously sought and erroneously granted. Essentially, it is argued that the particulars of claim against the principal debtor do not disclose a cause of action because the agreement between the respondent and the principal debtor is subject to the National Credit Act 34 of 2005 (the NCA), and the respondent
6 was enjoined to allege in his particulars of claim that he is a registered credit provider. Absent that allegation, Crimson contends, the particulars of claim did not disclose a cause of action. In this regard, Crimson rely on s 40(1) of the NCA in terms of which a person is required to register as a credit provider if the principal debt owed under all outstanding credit agreements, other than incidental credit agreements, exceed R500 OOO. As a result, so was the argument, the agreement must be declared null and void in terms of s 89(5) of the NCA, and consequently the surety, as an accessory obligation, is null and void, its validity depending on the existence of a valid principal obligation. [ 11] The law as to whether a judgment has been erroneously sought or erroneously granted within the meaning of rule 42 is well-settled. It is articulated by the Supreme Court of Appeal in two judgments: Colyn v Tiger Food Industries Ltd t/a Meadow Feed Mills (Cape) 2003 (6) 1 (SCA) and Lodhi 2 Properties Investments CC & another v Bondev Developments (Pty) Ltd 2007 (6) SA 87 (SCA). In Lodhi, the following was stated: '(25) However, a judgment to which a party is procedurally entitled cannot be considered to have been granted erroneously by reason of facts of which the Judge who granted the judgment as he was entitled to do, was unaware... This court (in Colyn) held that no procedural irregularity or mistake in respect of the issue of the order has been committed and that it was not possible to conclude that the order had erroneously been sought or had erroneously been granted by the Judge who granted the order.
7 '[27] A court which grants judgment by default... does not grant the judgment on the basis that the defendant does not have a defence: it grants 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 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.' See also Harms, Civil Procedure, para B42.3. [12) The above observations are apt to the present case, and demonstrate that there is no merit in the argument advanced on behalf of Crimson. The judge who granted the impugned order on 13 July 2013 (Rabie J) would have considered the cause of action against Crimson in the founding affidavit on behalf of the respondent. It was pursuant to a surety bond, in terms of which Crimson had bound itself as surety and co-principal debtor. The judge would have been satisfied that that the necessary allegations had been made; the bond of surety had been attached to the founding affidavit; that Crimson had been served on 3 June 2013; and that Crimson was in default. The learned judge would not have concerned himself with the summons under a different case number (which was not before him, in any event) as to whether the particulars of claim under case number 48306/2011 disclosed a cause of action. But, even if the judge had been placed in possession of the file under that case number, he would have accepted that another judge had granted judgment by default there.
8 [13] If Crimson's argument is taken to its logical conclusion, the judge should have ignored that default judgment against the principal debtor under case number 48306/2011 because, on Crimson's argument, it was wrongly granted for the reasons it now advances. Of course this is untenable for manifold and obvious reasons. What is more, as at the date the default order was granted against the principal debtor, there was direct authority for it by a Full Court of this Division. See Friend v Sendai 2015 (1) SA 395 (GP), which was delivered on 3 August 2012 in which the same argument advanced on behalf of Crimson was rejected by the Full Court. As a result, the judge who considered the application for default judgment against the principal debtor on 12 December 2013, was bound by Friend, and would not have regarded the lack of allegation of registration as a credit provider, to have the effect that the particulars of claim did not disclose a cause of action. [14] In all considerations, the respondent was procedurally entitled to the order by default under the circumstances outlined above. There is no room, by any stretch of imagination, for any argument that the order against Crimson was erroneously sought or granted. In the result I conclude it was not.
9 The common law [15] I tum now to consider whether, at common law, there is 'good cause' to rescind the impugned order (De Wet v Western Bank Ltd 1979 (2) SA 1031 (A) and Colyn Tiger Foods). In addition, the application must be made within a reasonable time (Genticuro AG v Firestone SA (Pty) Ltd 1972 (1) SA 589 (A); First National Bank of SA Ltd v Van Rensburg NO & Others 1994 (1) SA 677 (T) at 681H). As to what constitutes 'good cause' Smalberger J explained in HDS Construction (Pty) Ltdv Wait 1979 (2) SA 298 (E) at 300 infine-301b: 'When dealing with words such as "good cause" and "sufficient cause" in other Rules and enactments the Appellate Division has refrained from attempting an exhaustive definition of their meaning in order not to abridge or fetter in any way the wide discretion implied by these words (Cairns' Executors v Gaarn 1912 AD 181 at 186; Silber v Ozen Wholesalers (Pty) Ltd 1954 (2) SA 345 (A) at 352-3). The Court's discretion must be exercised after a proper consideration of all the relevant circumstances.' (16] The jurisdictional requirement of 'good cause' entails two essential elements. First, a reasonable and acceptable explanation for the default, and second, a demonstration of a bona fide defence. In Chetty v Law Society, Transvaal 1985 (2) SA 756 (A) at 765 B-C, the following was stated: '[T]t is clear that in principle and in the long standing practice of our courts, two essential elements of "sufficient cause" for rescission of a judgment by default are: (i) that the party seeking relief must present a reasonable and acceptable explanation for his default; and
10 (ii) that on the merits such a party has a bona tide defence which prima facie carries some prospect of success.' Reasonable and acceptable explanation fo r the defa ult l 17] As stated earlier, the impugned order against Crimson was granted after the application by the respondent was served on it on 3 June 2013. According to the return of service, the application was served personally on the principal debtor, who, as explained earlier, is the father of Naude Jnr, the sole director of Crimson. Naude Jnr deposed the founding affidavit on behalf Crimson. He does not proffer any explanation at all, why Crimson did not oppose the application. In his answering affidavit, the respondent pertinently, and in very explicit terms, challenged Crimson on this, and indicated that he would seek the dismissal of the application on this lack of explanation for the default. One would have expected Naude Jnr to meet the challenge. He did not. Instead, very deftly, he side-stepped the issue. [ 18] Although he prefaces his replying affidavit with a statement that he would deal with the answering affidavit seriatim, he does not. He further states that he would deal only with those allegations that warrant a specific reply' from him. The challenge by the respondent regarding lack of explanation for the default is contained in paragraphs 3-6 of his answering affidavit. Glaringly, the replying affidavit does deal with those paragraphs at all.
11 f 19] Naude Jnr only deals with the subsequent paragraphs (paragraphs 7 onwards), totally ignoring the pertinent issue of delay in paragraphs 3-6 as stated above. It is difficult, in the context of a rescission application, to conceive paragraphs that warrant a specific reply than those contained in paragraph 3-6 of the respondent's answering affidavit. The ineluctable conclusion for Crimson's silence on this aspect is that it does not have any reasonable and acceptable explanation for its default. Del ay s [20] Closely connected to the above, is Crimson' delay in bringing this application, and how it conducted the litigation. As stated earlier, the respondent's application was served on Crimson on 3 June 2015, according to the sheriff's return of service. Crimson only issued this application on 24 May 2016, almost a year later. There is no explanation for this inordinate delay. [21] According to the founding affidavit on its behalf, Crimson became aware of the judgement against it on 20 April 2016. Obviously this cannot be correct, in the light of what is stated above. But, even on this version, there is a delay of over a month, for which there is no explanation. Furthennore, Crimson's conduct in conducting the litigation reveals unexplained delays. For example, the respondent's answering affidavit was served on Crimson's attorneys on 30 June 2016. In tenns of rule 6(5)(e) of the unifonn rules, Crimson's replying
12 aflidavit was due on 14 July 2016 (10 court days after the answering affidavit was served). It was only served on 19 August 2016 - over a month later. Again, there is no explanation for the delay. [22] After having served its replying affidavit late, Crimson failed to file its brief heads of argument in terms of the Practice Manual of this Division, with the result that the matter could not be enrolled for hearing. It felj to the respondent to file heads of argument on 19 October 2016, and the registrar allocated the date of hearing for 19 June 2017. On 17 December 2016, the respondent served the notice of set-down for the week commencing 19 June 2016. Crimson only filed its heads of argument 31 May 2017, just over two weeks before the date of hearing. Again, there is no explanation for all these delays and inaction on the part of Crimson. (23] The cumulative effect of the conduct of Crimson detailed in the preceding paragraphs is that Crimson fails to get out of the proverbial starting block in its obligation to give a reasonable and acceptable explanation for its default. It also fails to explain the undue and inordinate delay in bringing this application. Furthermore, there are unexplained delays in conducting the litigation. Such conduct casts doubt upon Crimson's bona fides. It also borders on the abuse of the process of this court, which cannot be countenanced. Crimson should be non-suited on these considerations alone.
13 Bona fide defence f24] I am aware of the authorities to the effect that where an applicant has provided a poor explanation for its default, a good defence may compensate for such poor explanation. See Carolus v Saambou Bank Ltd; Smith v Saambou Bank Ltd 2002 (6) SA 346 (SE) at 249B-C and Creative Car Sound v Automobile Radio Dealers Association 1989 (Pty) Ltd 2007 (4) SA 546 (D) at 555 C-D. See also Melane v Sanlam Insurance Co Ltd 1962 (4) SA 531 (AD) 532 C-F. [25] In my view, these authorities do not avail Crimson. They are meant for applicants whose explanation is deemed 'poor' or 'weak' or 'insufficient', and not for applicants like Crimson, who offer no explanation at all. But, in any event. I have already demonstrated that the argument advanced by Crimson on the merits has no prospect of success at all, based on the judgment of the Full Court in Friend, as fully explained earlier. There is no bona fide defence at all. The application falls to fail. The general principle with regard to costs should apply. Costs follow the result. f26] For all these reasons, I made an order referred to in para 1 above, which, for the sake of completeness, I repeat below: 1. In the result the application is dismissed with costs.
Judge of the High Court 14
15 APPEARANCES: For Crimsons: JG Van der Westhuizen Instructed by: Van Graan & Van Der Wateren, Johannesburg For Respondent: J Moorcroft Instructed by: Biccari Bollo & Mariano Inc., Pretoria