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HIGH COURT OF SOUTH AFRICA

(GAUTENG  DIVISION,  PRETORIA)

CASE NO: 48306/2011

Not reportable

Not of interest to other Judges

In the matter between:

HENDRICK DIEDERICK NAUDE                                                                    First Applicant

JOHANNA FREDERIKA NAUDE                                                               Second Applicant

and

JOHN  PETER WRIGHT                                                                                     Respondent

 

Heard: 19 June 2017

Order: 18 August 2017

Reasons: 22 August 2017

Summary: Rescission of an order - Rule 42 of the Uniform Rules of Court­ what constitutes ' erroneously' sought and granted order - if no irregularity  in the granting of the order, Rule 42 not applicable.

Rescission of 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 - no prospects of success in the main case - application dismissed.

JUDGMENT

MAKGOKA, J

Introduction

[1] This is an application for  rescission  of an order  granted  by this court on 12 December 2013. The application is linked to the one under case 38645/2015, between Crimson King Properties 21 (Pty) Ltd v John Peter Wright and Another. The two cases are determined essentially 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] As stated above, the applicants seek a rescission of an order granted in this court on 12 December 2013. It was granted only against the first applicant. The second applicant was not party to those proceedings. In terms of that order, the first applicant is to pay the respondent a sum of R1 400 000.00, plus interest and costs. I readily accept that by virtue of her marriage in community of property to the first applicant, the second applicant has sufficient interest and standing in this application, especially in view of one of the defences raised, which shall become apparent shortly. The application is opposed by the respondent.

Background facts

[3] The brief factual background is this. During December 2008 the first applicant concluded an oral agreement with the respondent  in terms of which the respondent loaned the first applicant a sum of Rl 400 000.00, with  interest  to be charged at l 0% per annum. The loan was to be repaid by no later than 11 December 2010. On 17 March 2009 the oral agreement between the parties was reduced to writing by the parties in the form of an acknowledgment of debt signed by the first applicant.

[4] The first applicant 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 against the first applicant for payment of  the monies lent and advanced to the first applicant. The return of service reflects  that the summons was served on the first applicant's domicilium  address  in terms of the agreement on 30 August 2011 by  ‘fixing to the principal  door’.  The first applicant did not deliver a notice of intention to defend.

[5] On  22 August 2013 the application  for default  judgment  was served  on the first applicant in a similar manner. Without any response from the first applicant, the respondent applied for, and was granted default judgment on 12 December 2013 in the terms reflected in para 2 above. On 24 November 2014 the sheriff, at the instance of the respondent,  served  a writ of execution  on    the first applicant. It is not seriously disputed that this was the first time the first applicant became aware of the legal proceedings against him. That is in brief, the factual background.

The applicants' contentions

[6] According to the applicants, the default judgment against  the  first applicant was erroneously sought and erroneously granted. Two grounds are relied on by the applicants for  this  proposition.  First, that the particulars  of claim do not disclose a cause of action. In this regard it is argued that agreement between the parties is subject to the National Credit Act 34 of 2005 (the NCA). That being the case, the respondent was enjoined to allege in his particulars of claim that he is a registered credit provider.  Absent  that  allegation,  the applicants contend, the particulars of claim do not disclose a cause of   action.

[7] In this regard, the applicants relied 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, exceeds R500 000. Second, that the agreement is null and void because: (a) it contravenes several sections of the NCA, and (b) the second applicant has not given her written consent to it in terms of s 15(2) of the Matrimonial Property Act 88 of 1984, it  being  common  cause  that  the applicants  are  married   in  community  of  property.  The  section  prohibits   the conclusion of a credit agreement by a spouse without the written consent of the other spouse.

Erroneously sought and granted?

[8] I shall first consider whether the impugned order can be rescinded in terms of rule 42 of the Uniform Rules of Court, on which the applicants  expressly rely. 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] 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 stated in  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.'

[10] The above observations are apt to the present case. What the applicants invite this court to do is to take an ex post facto view of the matter. That, as is clear from the authorities referred to above, is impermissible. The applicants placed reliance for their contentions, among others, on Marais v Standard  Credit Corporation Ltd 2002 (4) 892 (W). There, the court found that there was no cause of action because an essential averment was lacking in the particulars  of claim, and thus the judgment was without foundation.  With respect, I doubt the correctness of this judgment. As correctly pointed out in  Lodhi:

'[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 disclose d, cannot transform a validly obtained judgment into an erroneous judgment.'

See also Harms, Civil Procedure, para B42.3.

[11] In any event, the present case is distinguishable from Marais, in that, as at the date the impugned order was granted, there was direct authority justifying such an order. See Friend v Sendai 2015 (1) SA 395 (GP), which was delivered on 3 August 2012. Because of that judgment, the judge who considered the application for default judgment on 12 December 2013, would have been bound by it, and would not have regarded the lack of allegation of registration as a credit provider, as a defect in the particulars of claim.

[12] The remaining ground that the agreement is null and void because it contravenes certain sections of the NCA and s 15(2) of the Matrimonial Property Act can be dealt with summarily, and the short answer is this. These are not grounds on which reliance can be placed in considering an application in terms of rule 42. As explained in Colyn, 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.

[13] In the result I conclude that the order was not erroneously sought or granted.

Common law

[14] I tum now to consider whether, at common law, there is 'good cause' that the impugned order be rescinded (De Wet v Western Bank Ltd 1979 (2) SA 1031 (A) and Colyn Tiger Foods). Also, 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).

[15] As to what constitutes ' good cause' Smalberger J explained in HDS Construction (Pty) Ltd v Wait 1979 (2) SA 298 (E) at 300 in fine - 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 disc retion 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. As explained in Chetty v Law Society, Transvaal 1985 (2) SA 756 (A) at 765 B-C:

'[l]t is clear that in principle and in the longstanding 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

(ii)            that on the merit s such a party has a bona fide defence which prima facie carries some prospect of success.'

Reasonable and acceptable explanation

[17] The applicants' explanation for their default in not defending the matter is simply that neither the summons nor the application for default judgment came to the attention of the first applicant. The first applicant states that at that stage, he was no longer residing at the domicilium address at which the processes were served. This is not disputed. As a result, there is no difficulty in concluding that the applicants have given a reasonable and acceptable explanation for the first applicant's default. They thus satisfy the first element of sufficient cause.

Delays

[18] Closely connected to the above, must perforce, be the applicants' delay in bringing this application. The first applicant became aware of the order granted against him, on 24 November 2014. The applicants only launched this application in June 2016, which was served on the respondent on 6 June 2016. This is about 18 months (a year and six months) after being aware of the default judgment. The applicants neither proffer any explanation for the delay, nor seek condonation therefor. In his answering affidavit, the respondent pertinently, and  in very explicit terms, challenged the applicants on this, and indicated that he would seek the dismissal of the application on this lack of explanation for the delay. One would have expected the applicants to meet the challenge. They did not. Instead, the first applicant, who deposed to both the founding and replying affidavits, very deftly side-stepped the issue.

[19] Although the first applicant 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 is contained in paragraphs 3 and 4 of his answering affidavit. Glaringly, the replying affidavit selectively addresses certain paragraphs of the answering affidavit, totally ignoring the pertinent issue of delay. It is difficult, in the context of a rescission application, to conceive paragraphs that warrant a specific reply than those contained in paragraph 3 and 4 of the respondent' s answering affidavit, dealing with the issue of delay. The ineluctable conclusion of the applicants' silence on this aspect is that they do not have any reasonable and acceptable explanation for the delay.

[20] There are other unexplained delays in conducting the litigation. For example, the respondent' s answering affidavit was served on the applicant' s attorneys on 30 June 2016. In terms of rule 6(5)(e) of the uniform rules the applicants' replying affidavit 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 late, without any explanation. After having served its replying affidavit late, the applicants failed to file their 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 fell to the respondent to file his 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. The applicants only filed their 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 applicants.

[21] The cumulative effect of the conduct of the applicants outlined in the preceding paragraphs is that the applicants have failed in their obligation to bring the application for rescission within a reasonable time. They have also failed to explain the delays in the conduct of this litigation. The sum total is that doubt is cast upon the applicants ' bona tides, and an impression is created that this application is a stratagem to delay compliance with the court order granted against the first applicant. That borders on the abuse of the process of this court, which cannot be countenanced. The applicants should be non-suited on these considerations alone. Even if this conclusion is wrong, as I demonstrate below, even the prospects of success are poor.

Bona fide defence

[22] As stated earlier, the challenge is two-pronged. First, that the particulars of claim do not disclose a cause of action because of the respondent's failure to allege that it is a registered credit provider in terms of s 40 of the NCA (cause of action argument).  Second, that the agreement contravenes certain sections of the NCA and the Matrimonial Property Act and 1s accordingly void (the invalidity argument).

The law

[23] In Friend v Sendai 2015 (1) SA 395 (GP) a similar argument as raised by the applicants, was rejected by the Full Court of this Division, which held that a once-off lender in the position of the respondent does not have to register as credit provider.

[24] The applicants' counsel relied on two subsequent judgments of this Division: Van Heerden v Nolte 2014 (4) SA 584 (GP) and Potgieter v Olivier and another 2016 (6) SA 272 (GP)). In both these judgments, which are single­ judge decisions, doubt was expressed about the correctness of the Full Court's judgment in Friend. But that is irrelevant, in view of the stare decisis principle. If I grant rescission, the trial would proceed before a single judge in this Division, who would, on the basis of Friend, be constrained to reject the applicants' defence and uphold the respondent's claim. As the law as it stands, there is no defence disclosed.

[25] In saying this, I am not unmindful of the judgment of the Constitutional Court in National Credit Regulator v Opperman 2013 (3) SA 1 (CC). But there, the court was not confronted with the question whether  a once-off  lender   like the respondent, is obliged to register as a credit provider. It was common cause that the lender was obliged to register because there were three loan agreements  in excess of the threshold of R500 000. The central issue was whether s 89(5)(c)1[1] of the NCA is consistent with the right not to be arbitrarily deprived of property, recognised in section 25(1) of the Constitution.[2] The high court had found that it was not, because it denied an unregistered credit provider the right to restitution of money lent out, without affording a court the discretion to consider whether restitution would be just and equitable. The high court had declared the provision to be constitutionally invalid, which the Constitutional Court confirmed.

[26] Under the circumstances, Friend remains the authority on the question whether a once-off lender similarly placed in the position of the respondent is obliged to register as a credit provider. At the risk of repetition, the fact that the correctness of the conclusion reached by the Full Court has been doubted, does avail the applicants. That doubt has no bearing on the binding authority of the judgment in this Division, at any rate.

[27] In any event, and as correctly argued on behalf of the respondent, irrespective of whether the agreement is void for want of compliance with  any  of the sections of the NCA, the first applicant remains liable  to  repay  the  amount under the law of unjustified enrichment,  on the basis of the conclusion  by  the Constitutional Court  in Opperman.

The Matrimonial Property Act

[28] Lastly, I consider briefly, the other defence raised by the applicants based on s 15(2) of the Matrimonial Property Act.  This ground can  be summarily de  disposed of. The applicants allege no facts at all why the agreement falls foul of  s 15(2) of the Matrimonial Property Act.  The  reality  of the matter  is that only the first applicant can shed light on  the  circumstances  surrounding  the conclusion  of  the  loan  agreement,  as far  as  his  wife,  the second applicant, is concerned. He elected not to set out any facts, contending himself with bald conclusions of law that the transaction contravened s 15(2).

[29] In his replying affidavit, the first applicant simply states that the second applicant 'was aware' that he intended to obtain a loan. However, he continues, she ' was not aware of whom the parties to the agreement was nor the amount of the agreement.' This is confusing. Was the second applicant aware of the transaction or not? It seems she has acquiesce d. She elected not to depose to a substantive affidavit in support of this contention. Once again, and consistent with their attitude throughout this application, the applicants seem intent on furnishing as little information as possible to the court. This should be the end  of the matter as this ground is concerned. It should not detain me further.

[30] However, before I conclude, I consider this. Section 15(2) is  not applicable where the transaction was concluded as an act in the ordinary course of a spouse's profession, trade or business. It is clear from a consideration of the facts in both this case and those under case number 38645/2015 that the monies loaned and advanced to the first applicant by the respondent was for the purpose of a farm (or indebtedness of the farm and farming activities) which the first had interest in.  There is therefore every indication that the advancing of the loan by the respondent to the first applicant was a business transaction in the course of the first applicant' s trade as a businessman. The reader is referred to the judgment under case number 38645/2015 for the link between the first applicant and Crimson, a company whose sole director is the first applicant' s son. This is the company which provided surety for the first applicant's indebtedness to the respondent.

[31] What is more, s 15(9) of the Matrimonial Property Act reads:

'(9) When a spouse enters into a transact ion with a person contrary to the provisions  of subsection 2 . . . of this section . . ., and -

(a)    that person does not know and cannot reasonably know that the transaction is being entered into contrary to those provisions  or that  order,  it  is  deemed  that  the  transaction concerned has been entered into with the consent required in terms of the said subsect ion  (2)...,

(b)   that spouse knows or ought reasonably to know that he  will  probably  not  obtain  the consent required in terms of the said subsection (2) ... and the joint estate suffers a lo ss as a result of that transaction , an adjustment shall be effected  in favour of the other spouse  upon  the division of the joined estate.'

[32] In this regard, the respondent states in his answering affidavit that in negotiating the loan agreement, the second applicant was never present,  and he  did not know and could not reasonably know that the transaction was being entered  into contrary  to the provisions  of the Matrimonial  Property  Act.   This cannot be gainsaid by the applicants, especially in the light of what is stated in the preceding paragraphs.

[33] For all the above reasons I concluded that there is no good cause to rescind the order granted on 12 December 2013, and made the order referred to in para 2 above, which, for completeness' sake is repeated below:

1. The application falls to fail and it is dismissed with costs.

__________________________

TM Makgoka

Judge of the High Court

APPEARANCES:

For the Applicants:              JG Van der Westhuizen

                                                        Instructed by:

                                                        Van Graan & Van Der Wateren, Johannesburg

 

For Respondent:                  J Moorcroft

                                                        Instructed by:

                                                        Biccari Bolio & Mariano Inc., Pretoria

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