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IN THE HIGH COURT OF SOUTH AFRICA,

FREE STATE DIVISION, BLOEMFONTEIN

Case number: 2644/2019

In the matter between:

DIARIA BOTES                                                                              1^st Applicant

DAWIE GROBBELAAR

t/a DG GROENVLEI BOERDERY                                                2^nd Applicant

and

OOS VRYSTAAT OPERATIONS LTD                                            Respondent

 

JUDGMENT BY: MHLAMBI J,

HEARD ON: 27 AUGUST 2020

DELIEVERED ON: 03 SEPTEMBER 2020

 

MHLAMBI, J

[1] On 14 February 2020 the applicants filed an application for the rescission and setting aside of an order granted by this court on 28 November 2019 and for the rescission and setting aside of the settlement agreement signed by the first and second applicants on 13 September 2019 and 8 October 2019 which was made an order of this court on 28 November 2019. Costs were sought on an attorney and client scale. The application is opposed.

[2] On 22 June 2020, the applicants filed a notice of intention to amend the notice of motion filed on 14 February 2020, by the insertion of the following alternative prayer after prayer 2 in that notice of motion:

“2.1 In the alternative to prayer 2 above, that the following clauses and annexures as appears in the settlement agreement signed by the first and second applicants on 13 September 2019 at Bethlehem and signed by the respondent on 08 October 2019 at Ladybrand, be severed therefrom;

2.1.1 Clauses 4.2, 4.2.1, 4.2.2, 4.2.3;

2.1.2 Clause 6.3;

2.1.3 Clause 10;

2.1.4 Annexure “OVK11”.”

Background and common cause facts

[3] During the period of November 2017 to February 2018, the second applicant entered into various credit agreements, in particular production accounts 490092 and 490192 (more of the latter later) in order to raise capital for farming activities[1]. During November 2017, the first applicant entered into a written deed of suretyship in terms of which she bound herself as surety and co-principal debtor together with the second applicant in favour of the respondent for any amount that the second applicant owed to the respondent at that juncture, and in the future. The suretyship was limited to the amount of R 2 000 000.00.[2]

[4] On 12 January 2018 an indemnity bond was registered in the Deeds Office, Bloemfontein on behalf of the first applicant in favour of the respondent in terms of which the bond would serve as a continuing covering security for all the amounts payable by the first applicant to the respondent, at the time of the bond as well as debts thereafter arising out of any cause of action whatsoever[3]. A third bond was registered over the property known as the remainder of the farm Groenvlei 1015, district Bethlehem, Province Free State under the title deed number: T23949/2002[4].

[5] The second applicant defaulted on his obligations in terms of the credit agreements and approached the respondent to restructure his indebtedness, but without success.[5] On 13 June 2019, the respondent issued a summons against the applicants, the action premised on the four credit agreements concluded with the second applicant and in respect of which the first applicant concluded a suretyship agreement. This action did not include the claim in respect of the production account 490192 in the amount of R 1 019 723.96. This action was defended by the applicants through their attorney, Mr Willie Jordaan with the instruction “to defend the matter and to attempt to negotiate a postponement to enable Dawie and I to settle their indebtedness owing to the respondents.”[6]

[6] The chronological sequence thereafter is as follows:

6.1  On 6 August 2019, the first applicant provided, as per the email to a Mr Du Plessis of the respondent’s company, with the applicant’s proposal regarding the settlement of the outstanding indebtedness towards the respondents. On 07 August 2020 the first applicant was informed that the respondent was in the process of preparing a settlement agreement and that such agreement had to be made an order of court as the summons had already been issued[7].

6.2  A copy of a draft settlement agreement was forwarded to Mr Jordaan by the respondent’s attorneys setting out the terms and condition on which the respondent was prepared to settle the matter. The second applicant’s indebtedness in respect of account 490192 which arose from the application for the credit facility dated 2 November 2017, was due and was included in the draft settlement agreement.[8] Mr Jordaan responded in writing on 26 August 2019 to the draft settlement, enquiring about the inclusion of the account 490192 therein.

6.3 The draft settlement agreement was then amended by the inclusion of clause 6.5 and a copy provided to Mr Jordaan on 29 August 2019. Paragraph 6.5 stated that “it is specifically agreed to between the parties that annexure OVK11 to OVK14 may only be acted upon in an event of default” as stated in the deed of settlement.

6.4 The applicants signed the deed of settlement on 13 September 2019, having requested that it be kept in abeyance on 11 September 2019 as a result of the applicants’ family having been involved in a farm attack. The respondent signed the settlement agreement on 08 October 2019 and the applicants filed a notice of withdrawal of their defence to the main action on 21 October 2019.

6.5  The respondents delivered an application in terms of Rule 41(4) on 08 November 2019 enrolling the application for 28 November 2019 for the settlement agreement to be made an order of court. The settlement agreement was made an order of the court on that day. On 04 February 2020 the respondent received payment from the applicants in the amount of R 550 000.00 in terms of the settlement agreement, the applicants having requested “VKB” to assist them with the first payment of R 550 000.00 to be paid to the respondents in terms of the settlement agreement.

[7] On 04 February 2020, the applicants’ current attorneys informed Phatsoane Henney attorneys that the applicants intended to apply to the court for the rescission and setting aside of the order and the settlement agreement.

[8] Annexure ”OVK 11” referred to the Power of Attorney signed by the first applicant, instructing the respondent to be her duly authorised agent to sell the mortgaged and pledged property on her behalf. The respondent accepted the appointment on the conditions recorded in the agreement.[9]  Annexures “OVK 12-14” referred to the voluntary surrender of the movable assets: the Massey Ferguson Cab, Falcon Haymaker and Vicon Spreader and the Bean cutter 4[10].

 

The parties’ contentions

[9] The applicants contend that both the order and the settlement agreement should be set aside on the grounds of Justus error in that:

1. The settlement agreement was signed by the applicants as a result of the negligent of innocent misrepresentation by the applicants’ erstwhile attorney Mr Willie Jordaan, by failing to advise the applicants that they had a defence to the respondent’s action; and

2. The respondent’s alleged fraudulent or negligent misrepresentation to the effect that, if the applicants did not sign the settlement agreement, the respondent would take judgment against them without any further process and be granted an order in terms of which the first applicant’s farm would be declared specially executable.

[10] The respondent denied that the order and the settlement agreement stood to be rescinded and set aside, contending that the applicants voluntarily and wilfully concluded the settlement agreement and consented to the granting of the court order. 

 

Setting aside of the consent order

[11] It was submitted of behalf of the applicants that, and correctly so, before the court could consider the setting aside of the settlement, alternatively considering whether the offending clauses thereof could be severed from such settlement, the consent order of 30 November 2019 had to be set aside first. A consent order in defended proceedings could be rescinded either on the grounds of fraud or justus error[11]. A justus error is a good ground for the setting aside of a consent judgment and an agreement of compromise, provided that such an error vitiated true consent and did not merely relate to the motive or the merits of the dispute.[12]

[12] Applicant’s counsel relied on the following paragraph in the matter of KR Sibanyoni Transport Services CC and others vs. Sheriff, Transvaal High Court, and another[13], which reads as follows:

“There could be also be additional grounds at common law based on justice and fairness for the setting aside of a court order, and that where a judgment had been given by consent, consideration also had to be given to reasonableness of the explanation of the circumstances in which the consent was entered into, the bona fides of the application, and the bona fides of the defence on the merits”.

[13] It was the applicants’ case that when signing the settlement agreement, they were under the mistaken belief that they had no choice other than to sign the settlement, that they had no defence to the respondent’s claim and that, if they did not sign the settlement, the respondent would obtain judgment and simply be allowed to proceed with the selling of the farm.[14] The settlement proposal made by the applicants to the respondents on or about 07 August 2019, was in accordance with the respondent’s claim and for which it had issued summons.

[14] The respondent refused to accept this proposal but instead, was adamant that the additional amount of R 1 019 723.96, for which it had not issued summons, be included in the settlement. The first applicant objected to the inclusion thereof in the settlement and advised her attorney that it would not be possible to make payment of this additional amount on the terms as proposed by the respondent. The respondent on its own version had knowledge of the applicant’s objections to the inclusion of this additional amount.

[15] Had it not been for the innocent, alternatively, negligent misrepresentation by the applicant’s erstwhile attorney that the applicants did not have a defence in respect of the respondents’ claim, they would not have signed the settlement.[15]

[16] The applicants submitted that the respondent failed to inform the applicants that an application in terms of Rule 46A of the Uniform Rules of Court, was required before the farm could be declared specially executable, and that this failure constituted a misrepresentation on the part of the respondent, and had it not been for this misrepresentation, the applicants would not have signed the settlement agreement on the terms as presented to them by the respondent.[16]

[17] Mr Pienaar, on behalf of the respondent, pointed out that it was uncontentious that the applicants did not intend to defend the matter on the merits, but simply instructed Mr Jordaan to negotiate a postponement to settle the applicants’ outstanding indebtedness.[17] That intention, it was correctly argued, should have been dispositive of the applicants’ case, particularly when viewed from the point of the applicants’ allegations that they were not advised of their defences against the main action and that they concluded the settlement agreement in error. With reference to Moriatis Investments (Pty) Ltd and others vs. Montic Diary (Pty) Ltd[18] ,it was submitted that the Supreme Court of Appeal held that, apart from fraud, the only other bases recognised in our law as empowering a court to set aside its own order is justus error. Non- fraudulent misrepresentation was not a ground for setting aside a judgment and that its only relevance might be to explain how an alleged error came about, but did not provide a ground for the rescission of a judgment. The scope of error as a ground for vitiating a contract is narrow and the position is the same in regard to setting aside a court order. Cases of justus error were relatively rare and exceptional.[19]

[18] He argued that although the applicants raised their concerns regarding the inclusion of the livestock account in the settlement agreement before it was signed, the applicants thereafter signed the settlement agreement wilfully and voluntarily. It was therefore not the applicant’s case that they did not sign the settlement agreement or that they were not aware of the provisions contained in the deed of settlement when signing it, including the liability in respect of the livestock account. The applicants had acted upon the settlement agreement and the court order granted on 28 November 2019 in making the payment of the amount of R 550 000.00 on 04 February 2020.

[19] The respondent was therefore not to blame for the alleged mistake by the applicants in signing the settlement agreement and in consenting to the settlement agreement being made an order of the court. The respondent was neither to blame for any misrepresentations to the applicants nor fraudulently induced them to conclude the settlement agreement[20].

[20] As to the inclusion of the livestock account (account 49192), it was argued that the inclusion of the livestock account in the settlement agreement, related to agreements which formed the subject matter of the main action. The parties were entitled to include such account in the settlement agreement and the court was empowered to make the settlement agreement, including the agreement regarding the livestock account an order of the court. The court order was competent and proper as it related directly to a lis between the parties.[21]

 

Severance of offending clauses from settlement

[21] Applicants’ counsel submitted that the clauses contained in the alternative prayer were contrary to public policy as the respondent, notwithstanding having knowledge that the applicants would not be able to make payment of the additional amount in the terms as proposed by the respondent, insisted on the inclusion in the settlement agreement. The effect of the clauses was that, in the event that the applicants failed to make payment in full of the additional amount, the respondent could proceed to sell the first applicant’s farm on such terms and at such price as it deemed fit without any judicial oversight and without the respondent first exhausting the less drastic remedies it had in terms of the settlement.

[22] The provisions contained in the Power of Attorney had the effect of depriving the applicants of their right to housing as provided for in section 26 of the Constitution of the Republic of South Africa, Act 108 of 1996. They were there to circumvent the provisions of Rule 46A of the Uniform Rules of Court, by entitling the respondent to execute on the farm without the respondent having placed all the relevant facts before the court. The farm was the applicants’ primary residence and primary source of income.

[23] The respondent’s counsel submitted that the applicant had failed to make out a case for the alternative relief sought and that such a claim was without merit. Relying on the case of Business Partners Ltd vs. Mahamba,[22] a judgment by the full court of the Eastern Cape Division, it was submitted that the agreement did not constitute a parate executie and did not offend against public policy. The agreement regarding the sale of the property by the respondent was concluded after the applicants’ indebtedness arose and after the issuing of the summons by the respondent, in which it was also claimed an order for the execution of the property.

 

Conclusion

[24] Mr Pienaar pointed out that the applicants were, until 15 September 2020, not in default with their payments to the respondent in accordance with the deed of settlement. They had kept their monthly payments and obligations up to date as well as the major payments of 04 February 2020 in the amount R 550 000.00 and 30 June 2020 in the amount of R 400 000.00. The payment of the latter amount was confirmed by Mr Loibner during oral address when he was hard pressed to explain such payments in the light of the defences raised. He conceded and submitted that the applicants sought a breather of approximately six to eight months as stated in their founding papers to enable them to effect payment[23].

[25] In her replying affidavit, the first applicant stated that her current attorney was not able to contact her erstwhile attorney, Mr Willie Jordaan, and it therefore proved impossible to obtain any form of affidavit or other communication from him in support of the allegations made in the founding affidavit relating to him[24]. A confirmatory affidavit by the applicants’ current attorney was attached to the replying affidavit. This necessitated an application by the respondent to launch an application for leave to file a further answering affidavit to the applicants’ replying affidavit. The application was unopposed and was granted.

[26] In this affidavit, the respondent stated that the allegations made in paragraph 41 of the replying affidavit were not made in the founding affidavit and the respondent were not afforded the opportunity to respond to the allegation that the applicants could not obtain an affidavit from Mr Jordaan[25]. On the contrary, Mr Jordaan had no communication with the applicants or their legal representatives in relation to the current application and neither the applicants nor their attorney attempted to communicate with him for purposes of obtaining a confirmatory affidavit.

[27] It is therefore clear that the defences raised by the applicants are without substance and were merely raised for purposes of gaining time. Applicant’s counsel was at pains to explain the lack of a supporting affidavit or evidence by Mr Jordaan in support of the allegations by the applicants. It is evident that no consultation whatsoever took place between the applicants or their attorneys with their erstwhile attorney before the argument of this case as suggested[26]. There is nothing on the papers that shows that Mr Jordaan was in any way to blame whatsoever for his handling of the case, whether negligently or fraudulently, up to the stage which ultimately led to the conclusion of the settlement agreement.

[28] It is evident that the first applicant, of her own volition and without the assistance of her attorney, negotiated directly with the respondent the terms which were incorporated in the settlement agreement.[27] This is also borne out by the enquiries made by the applicants’ attorney to the respondent’s attorney on 15 August 2019 about the progress made in connection with the settlement agreement[28].

[29] I am therefore in agreement with the attitude displayed in Business Partners Limited[29]that where the respondent instituted an action before the court seeking an order declaring the property specially executable, the applicants’ right to access to courts and entitlement to solicit the court’s assistance was given effect to. The applicants elected not to avail themselves of such assistance, but instead consented to the respondent selling the property in the vent they were in default of payments in terms of the agreement to pay the debt. Consequently, the application must fail with costs.

[30] In the result I make I make the following order:

 

Order:

The application is dismissed with costs.

         ______________

JJ MHLAMBI, J

 

Counsel for the applicants: Adv. RP Loubner

Instructed by: Gous Vertue Attorneys 

12 Barnes Street

Westdene

Bloemfontein

Counsel for the respondent: Adv. CD Pienaar

Instructed by: Phatshoane Henney

35 Markgraaff Street

Bloemfontein

 

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