SAFLII Note: Certain personal/private details of parties or witnesses have been redacted from this document in compliance with the law and SAFLII Policy	

IN THE HIGH COURT OF SOUTH AFRICA (GAUTENG DIVISION, PRETORIA)

CASE NUMBER 64660/2013
DATE: 8 JUNE 2017

In the matter between:	

PIERRE ZONDA	                                  APPLICANT

and	

NEDBANK LlMITED	RESPONDENT

JUDGMENT

TLHAPI J

INTRODUCTION

[1J	This is an application to rescind a default judgement granted against the Applicant. The application is opposed.

[2]	The applicant together with one Mr Johannes Petrus Nel (‘Mr Nel’) were directors in various companies and entities of which lnyanga Trading 444 (Pty) Ltd ('the company') was one such company. On 16 April 2007 the respondent entered an instalment sale agreement with the company for the purchase of a vehicle as described in the particulars of claim.

[3]	On 3 May 2007 the applicant and Mr Nel bound themselves to the respondent as sureties and co-principle debtors 'for the payment when due of all future debts of any kind of the company by signing a Deed of Suretyship. Furthermore, both 'would be liable to an unlimited amount plus interest and reasonable legal costs as between attorney and client. and a certificate signed by any of the respondent's managers would on mere production be sufficient proof of their liability unless the contrary was proved. The applicant and Mr Nel were later sued as sureties and as at paragraph 14 of the particulars of claim on 22 September 2013 they were indebted to the respondent in the amount of R91 893. 27 plus further interest thereon, at the rate of 10% per annum.

[4]	They chose their domicillium citandi at which the delivery or service of legal documents would be served. The NCA was complied with. The return of service of the summons described the applicant's chosen domicillium citandi, [...] L. R. M.
Park, Pretoria and reads that service was affected at such address on 5 November 2013 "upon Mr Marishane Security in charge of Erf 898 Menlo Park (Pty) Ltd, who received the documents on behalf of the applicant. Default Judgment was granted on 20 November 2013 and a Warrant of Execution against Movable Property on 30 June 2015.

BACKGROUND

[5]	The applicant averred that he sold his interest and shares in the company to Mr Nel and or his nominee. An agreement of sale was attached as annexure "B". In paragraph 3 thereof the said Mr Nel would arrange that he be released of all sureties signed by himself, which included the suretyship relating to the company and the respondent. Since 2008 he had not been involved in any of the entities whose shares he sold and had never been informed of any claims against him regarding these entities in particular the company.

[6]	It appeared that since the issue of the summons he was not released of his obligations with the respondent in terms of the suretyship. He never came to the knowledge of the litigation against him, he never received the notice in terms of section 129 of the National Credit Act and realized for the first time that judgment had been taken against him when the warrant of execution was served on him. He acknowledged that summons was served at his chosen domicillium which was in fact the address of the company and, that he had never used the address as his personal one and had also moved to Nelspruit during 2008. He contended that he was not in wilful default by failing to defend the action.

[7]	The applicant averred that he had a bona fide defence in that:

7.1	he believed that he had been released of his obligations and that since the sale of his interests to Mr Nel he had never received communication or a claim in respect of his indebtedness to the respondent; the claim had therefore prescribed;
7.2	as far as he may not be released of his obligations the instalment sale

Agreement was entered into on 16 April 2007 and the suretyships were signed on 3 May 2007;
7.3	Mr Nel's estate was sequestrated on 18 March 2013 and he has not been rehabilitated;
7.4	The account in respect of which the respondent had instituted action had

been in arrears on various occasions. On 3 December 2009 the company paid the last payment in respect of the debt with the respondent and a detailed statement was attached as annexure "D".
7.5	Subsequent to this last payment of R10 000.00 various debit orders marked 'RD' in the amount R3497.80 appeared on the statement. Prior to the last payment the company was substantially in arrears and no legal process had been instituted against the company in respect of the agreement with the

respondent;

7.6	the prescription in respect of the company commenced to run at the very latest being date of last payment on 3 December 2009 and from date of service of summons being 5 November 2013; more than 3 years had elapsed by the time summons was served; therefore the obligations of the sureties had prescribed; the application for default judgement was drafted in such a manner that no dates were mentioned and the court would not have granted the default judgement had it been aware of these facts;

7.7	No payments were made by him or Mr Nel or on behalf of the company after 3 December 2009 which, could be construed as an admission of liability in respect of the debt owed to the respondent;

7.8	the respondents claim his  increased substantially due to its own negligence in that:

7.8.1	He was informed by Mr Nel that the vehicle had been repossesed during December 2009 and collection costs had been levied against the account in the amounts R1850.00 and R2500.00 on 10 December 2009 and 25 February 2010 respectively as appears in annexure "D";
7.8.2	Annexure "B" to the particulars of claim gives a valuation on the vehicle on 16 March 2012 more that 2 years after repossession and the vehicle was subsequently sold on 14 April 2012;
7.8.3	the delay in the sale resulted in a devaluation of the vehicle and, the valuation report being annexure "B" to the summons states the bad condition which can be attributed to the vehicle being in storage for 2 years, therefore the sureties have suffered prejudice. The confirmatory affidavit of Mr Nel was attached.

[8]	The respondent averred that the section 129 Notice and the summons had been sent to the correct postal address (the track and trace record had not being disputed)  and that the summons was served.at the correct domicillium was prima facie proof of competent service. It could be reasonably assumed that applicant came to the knowledge of the action. The applicant as businessman and director had failed to observe the importance informing his creditors of his change of address. In reply the applicant contended that the reliance of a 'deemed' knowledge of service was misplaced and that he had no reason to change his domicillium in view of his agreement with Mr Nel. The respondent had failed to explain the lapse of time in instituting the action against the company and himself and the sale of the vehicle.

[9]	The respondent contended that the applicant had failed to give a reasonable explanation for his default to timeously defend the action. Furthermore he did not have a bona fide defence in the following respect:

1.	in as far as he believed that he had been released from his obligations under the suretyship, on the basis of the agreement entered into with Mr Nel or  alternatively, by raising the defence that the claim had prescribed when the summons was issued. In terms of clause 12 of the suretyship, the applicant could only be released from his obligations by a request in the form of a written notice to the respondent. In turn the respondent would terminate such obligations by written notice to the applicant confirming termination of his obligation under the suretyship.

2.	the respondent contended that the defence of prescription against the company and sureties was untenable. Contrary to the applicants belief that no legal

process had been issued against the company and that prescription had commenced to run at the very latest from the date of last payment on 3  December 2009, the respondent caused summons to be issued under case number 6458/2009, which was within a period of three years and served on the company on 31 October 2012. Default judgment was obtained on 29 May 2013 and the warrant of execution against movable property was issued on 3 June 2013. Subsequent to the return of non-service of the warrant of execution against the company the respondent was then entitled to proceed against the sureties   and summons was issued and served on the applicant on 5 November 2013.

The applicant contended that there was no indication that the order and warrant of execution related to the claim against himself and the company and that it was based on the suretyship. He questioned the difference of amounts claimed in the order and the summons issued against him and the different case numbers; that there was no proof that summons was served on the company on 31 October 2012. The applicant persisted with his defence of prescription.

3.	the defence that the claim had substantially been increased due to the respondent's own negligence was irrelevant. The applicant contended in reply that there was no correlation between the 'fair market value' and the selling price and the apparent devaluation cannot be dismissed as irrelevant. The valuation report refers to an engine conversion and he disputes that one was done on the vehicle before repossession. He maintains that the respondent wishes to recover from him an amount that is vastly inflated and not explained since the vehicle was fairly new when it was repossessed. He contended that the discrepancies
on the vehicle are triable issues.

THE LAW

[1 0]	Despite the agreement entered into with Mr Nel, there can be no doubt in the fact that the applicant was not released of his obligations under the suretyship as he was required to initiate, as provided in clause 12 of the suretyship agreement. The applicant has also indicated that he abandons his defence on prescription and in light of the decision in Jans v Nedcor Bank Ltd, 2003 (5) SA 646 (SCA).

[11]	Although not stated with much clarity in the founding affidavit, it appears from the papers that there is an understanding between the parties that the application was launched in terms of Rule 31 (2)(b) of the Uniform Rules of Court. Ms Pretorius however in her Heads of Argument also addressed rescission under the Common Law and in terms of Rule 42 of the Rules of Court. She concludes in all three scenarios that the application for rescission would not succeed.

[12]	In order to succeed it is trite that the applicant then bears the onus to establish good cause. The principles have been formulated as follows (Erasmus : Superior Court Practice D1-366)

(a)	the applicant must give a reasonable explanation for his default;

(b)	his application must be a bona fide defence and it is sufficient if such defence is a

prima facie one;

(c)	although the absence of wilful default is not a requirement of the rule it is trite that for good cause to be shown a litigant has to satisfy the court that he did not act in wilful default  of the processes and rules of the court;

[13]	In Riddles v Standard Bank of South Africa Ltd 2009 (3) SA 463(T) Murphy J at 466

paragraph [9] and [10] stated:

[9]	The requirement of good cause normally will be satisfied if there is evidence of the existence of a substantial defence, which the defendant intends to prosecute conscientiously in the event of the judgement being rescinded. The requirement that the applicant for rescission must show the existence of a substantial defence does   not mean that he must show a probability of success in the trial or principal motion: it suffices if he or she is able to show a prima facie case or, the existence of an issue
which is fit for trial. In other words, it will be adequate for the purpose of granting rescission if the applicant sets 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, 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, and that the application is not made merely for the purpose of harassing the respondent......the requirement for rescission is not that the applicant show the probability of success in the trial; it is enough that he point to an issue which is deserving of being tried."

[10]	......the applicant for rescission ....must furnish an explanation for his default sufficient to enable the court to understand how the default came about and to   assess whether his conduct and motives are reasonable. The wilful or negligent  nature of a defendant’s default is one of the various consideration  which a magistrate  is obliged to take into account in the exercise of his discretion to determine whether  or not good cause is  shown"

[14]	In Harris v Absa Bank Ltd t/a Volkskas 2006 (4) SA 527 (T) Moseneke J after considering the authorities dealing with wilful default ( Newman (Pvt) Ltd v Marks 1960 (2) SA 170 (SR) at 173A and Maujean t/a Audio Video Agencies v Standanrd Bank of SA Ltd 1994 (3) SA 801(C) at 803H-I) concluded at paragraph[8]  and [9]:
[11]	

"[8] Before an applicant in a rescission of judgment application can be said to be in 'wilful default' he must bear knowledge of the action brought against him or her and the steps required to avoid the default. Such an applicant must deliberately, being free to do so, fail or omit to take the step which would avoid the default and must appreciate the legal consequences of his or her actions.

[9] ...However, I do not agree that a once wilful default is shown the applicant is barred; that he or she is then never entitled to relief by way of rescission as he has acquiesced. The Court's discretion in deciding whether sufficient cause has been established must not be unduly restricted. In my view, the mental element of the default, whatever description it bears, should be one of the several elements which the court must weigh in determining whether sufficient or good cause has been shown to exist."

[15]	It is common cause that applicant failed to inform the respondent of his change of address. Ms Pretorius argued that the applicant as a businessman was expected to act as a reasonable consumer to ensure that the respondent was availed with the necessary information regarding his change of address. The section 129 Notice and summons would have reached him. She argued further that the respondent as credit provider had complied with its responsibilities to ensure that the notice and summons reached the applicant at the address provided. In this regard the applicant had himself to blame and that he accordingly acted to his detriment.

[16]	Having regard to the authorities above it must be shown that the default was wilful. There must be knowledge of the action and he must display such conduct indicative of a wilful default towards the processes and rules of the court. Although the applicant was not released of his obligation under the suretyship, he severed ties with the company during

2008 when he entered into an agreement with Mr Nel and he states that he moved to Nelspruit in that year.

[17]	Summons against the company was issued four years later and when summons was issued against him and Mr Nel, he was traced to Nelspruit during July of 2015 when the warrant of execution against property was served on him. This was almost seven years after the agreement with Mr Nel. As soon as he received the warrant of execution he took action. In my view it cannot be concluded from the above facts that the applicant was in wilful default. I am therefore satisfied that his explanation of not having been aware of the action was reasonable.

COMPUTATION OF THE CLAIM

[18]	Mr Brand makes the following submissions in his Heads of Argument.

1.	The repossession in December 2009 consisted of a voluntary hand over and the motor vehicle's original factory fitted engine was still intact;
2.	He queried collection costs added to the balance owing of R1850.00 and R2500.00 on 11 December 2009 and 25 February 2010 respectively that no contractual provision is made for such debits, that is, in as far as such amounts constituted damages, it should have been claimed in a separate action; this included the storage costs of R3 690.75 (11 December 2012) and R228.00 for towing costs (11 May 2012);
3.	That, had the vehicle been sold shortly after repossession it would have realized a higher price and that there was no explanation why it was sold nearly two and a half years after repossession. More disturbingly was the revelation that when it
was valued on 16 March 2012 the vehicle was not fitted with its original factory -

fitted Hyundai engine but with a Toyota engine and no engine number could be found. There was tampering with the engine which affected the valuation of the vehicle negatively.
4.	According to the valuation of 16 March 2012 the retail value stated was

R84 000.00. It is not known what the vehicle without alterations would have been worth in December 2009/January 2010, the certificate of balance was of no assistance;
5.	The debits of R3221.64 plus VAT AND ''Doc fee" of R1500.00 plus VAT levied by

Park Village was not justified and was unlawful;

6.	The respondent should not have instituted action in the High Court for an amount of R91 893.27

[19]	Ms Pretorius submitted that the respondent was entitled to levy collections costs which followed upon the respondent having issued summons against the company (principal debtor) and, that such costs were levied in terms of the principal agreement. Regarding issues raised with regard to the valuation of the vehicle in the replying affidavit and heads of argument, she argued that the issues raised amounted to speculation and that there was no 'substantiation of the allegations pertaining to the valuation. There was no evidence from the applicant to suggest the amount the vehicle could have been sold like a valuation or expert report She submitted that the certificate of balance constituted prima facie proof of indebtedness, which must serve as the only evidence before the court.

[20]	It is common cause that in May 2013 judgment was granted against the company, the principal debtor, for the amount R88 655.74 plus interest at the rate of 10% per annum, calculated from 31 October 2012 to date of payment and capitalised monthly, plus costs in the amount of R200.00. The warrant of execution confirmed the amount of
[17]	
12

indebtedness at that time of principal debtor. In terms of the particulars of claim issued against applicant, the vehicle was valued at R26 000.00 and sold for an amount of R59 850.00. The certificate of balance and the section 129 notice reflect an amount of R91 893. 27 plus interest and on 26 May 2014 the principal debtor was informed of the shortfall balance of R94 936.90 due for payment.

[21]	None of the parties annexed the original instalment sale agreement between the principal debtor and the respondent which could have shed light on the responsibilities of the respondent to the principal debtor regarding the resale of the repossessed vehicle, that is, what the contract provides regarding the vendor and consumer responsibilities on resale. My understanding of resale of repossessed property be it movables or immovables, which normally take place at auctions, is that there can be no guarantee to the principal debtor and the surety that the property would be sold at a profit or at its retail value at repossession.

[22]	However, can an affected party such as the applicant have a right to expect that the property be sold within a reasonable time after repossession and for an amount which is a fair market value or a reasonable commercial value so as to mitigate the shortfall? In this regard too there can be no guarantee that there would be advantage to the applicant. There is no information from the applicant as to what he could have considered as fair market value had the vehicle been sold within a reasonable time and had the vehicle not been left to deteriorate or be tempered with while in the custody of the respondent.

[23]	I am of the view that on the collection costs if these are costs in the principal agreement then the applicant is disentitled from disputing them.

Having said this, it is troubling to me that it took the respondent so many years after repossession to sell the vehicle and worse still that the vehicle was tempered with while in possession of the respondent to the extent that it reduced its value. This is evident from the

13

valuators notes in annexure 'B' "object vehicle is in usable order but shows wear and poor condition of the body and engine conversion affects value negatively".

[24]	The respondent has not refuted the version of the applicant that the vehicle was fairly new when it was repossessed and that it was left to be tempered with, to the extent that a different model engine was installed and there was no engine number. This in my view,
could have prejudice d the applicant in the computation of the claim. In Riddles supra, the

applicant need not show at this stage that his substantial defence has a probability of

success at trial, what needs to prevail is a ' prima facie case, or the existence of an issue which is fit for trial." It is my view that the applicant has satisfied this requirement and that it would be proper for the judgment to be set aside.

[25]	In the result the following order is given:

1.	The application for the rescission is granted with costs.

2.	The judgment of 2 November 2013 is set aside.

  ________
TLHAPI VV

(JUDGE OF THE HIGH COURT)

MATTER HEARD ON JUDGMENT RESERVED ON
ATTORNEYS FOR THE APPLICANTS

ATTORNEYS FOR THE RESPONDENTS

: 04 AUGUST 2016

: 04  AUGUST 2016 :VEZI & DE BEER INC.
: CHRISTO SMITH ATT.