South Africa: North West High Court, Mafikeng

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Lebatlhabetse Syndicate (Pty) Ltd v Moleko (CA 5/2003) [2003] ZANWHC 47 (4 September 2003)

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NKABINDE J:

Introduction

[1] This is an appeal against the granting, by the Civil Magistrate for the district of Ga-Rankuwa, of default judgment which was applied for by the respondent in terms of rule 60 (3) of the Magistrate’s Court Rules(“the rules”). The appellant is the defendant in the court below and the respondent is the plaintiff. For the sake of convenience I shall refer to the parties as the defendant and the plaintiff, respectively. On 15 August 2003 and after argument was addressed to the Court, the appeal was allowed with costs and the default judgment granted on 22 February 2003 was set aside and substituted with the order refusing judgment by default. Reasons, which now follow, were reserved.

Factual Background

[2] The plaintiff instituted action against the defendant in the Magistrate’s Court Ga-Rankuwa for payment of R100 000.00 plus interest and costs. It does not appear from the particulars of claim whether the plaintiff’s claim was for restitution or for damages. The particulars of claim, in so far as relevant hereto, reflect the following:

“...

4. On or about the 10^th day of February 2000 at Mabopane, the Plaintiff and the Defendant entered into a business agreement and the material terms of the agreement was that:- 4.1. the Plaintiff shall become co-owner of the Defendant company which was a no-going concern at the time of joining the company.

4.2 in return of such co-owner (sic) of the Plaintiff will bring in his expertise and consideration that will ensure growth and success of the company.

4.3 the Plaintiff will be entitled to 50% ordinary shares in the company.

4. The Plaintiff complied with his obligations in terms of the aforesaid agreement by bringing in his expertise and a value consideration worth R105 574.00 to the company.

5. The Defendant partially complied with its obligations by allowing and or joining the Plaintiff as a co-owner in the company and breached the remainder of his obligations as follows:-

6.1 the Defendant unreasonable and wrongfully refused or denied the Plaintiff access to have a say in respect of administration and management issues.

6.2 the Defendant neglected to pay the Plaintiff remuneration in accordance with the Plaintiff’s shareholding in the company.

4. As a result of the aforesaid actions by Defendant the Plaintiff cancelled the agreement, since the Defendant makes impossible for the Plaintiff to co-owner of the company as agreed.

...”

(My underlining for emphasis).

[3] The defendant opposed the action. After filing notice of intention to defend and a plea the parties exchanged pre-trial notices. The defendant failed to comply with the plaintiff’s notices in terms of rule 23(1),(3) and (4) of the rules. In consequence of such failure the plaintiff launched an application in terms of rule 60 (2) to compel compliance. The order was granted. The defendant failed to comply with the order then the plaintiff, on 7 February 2003, brought an application in terms of rule 60(3) which application was postponed to 22 February 2003, by agreement. On 22 February 2003 the defendant’s attorneys of record withdrew in court as attorneys of record for the defendant. The plaintiff then forthwith applied for judgment by default in terms of the prayers as set out in the summons which judgment was granted. As might have been expected, an application to set aside the default judgment followed in due course. The application, which was opposed, was refused with costs and the court also ordered that the sale in execution be proceeded with.

The issues

[4] The issues for determination by this Court were the following:

(a) whether the defendant should have proceeded by way of review or appeal;

(c) whether the plaintiff’s claim was for an unliquidated amount in money or not; and

(b) whether the magistrate exercised his discretion injudiciously or not.

Submissions by counsel

[5] Mr Griessel, for the defendant, submitted that the plaintiff’s claim, being an unliquidated claim, should have been proved either by oral evidence or evidence by affidavit. He further submitted, correctly in my view, that where the claim is for an unliquidated amount the magistrate cannot exercise a proper discretion in the absence of evidence in respect of the quantum of the plaintiff’s claim and that the magistrate, in the instant case, was obliged to hear evidence in order to exercise his discretion in a proper manner. He submitted further that as the magistrate exercised his discretion injudiciously the defendant was entitled to proceed by way of appeal and that the Court should uphold the appeal and set the magistrate’s judgment aside.

[6] Mrs Gutta, for the plaintiff, contended that the defendant should have approached this Court by way of review proceedings. She further contented that the plaintiff’s claim was based on a liquidated amount in money which had been agreed upon in terms of the agreement referred to in the particulars of claim and that it was therefore not incumbent on the magistrate to hear evidence in respect of the quantum of the plaintiff’s claim. She requested that the defendant’s appeal be dismissed with costs.

The law

[7] The following provisions in the rules, among others, give the magistrate a discretion in relation to any request for default judgment which come before him:

7.1 Rule 32 (2) provides as follows:

“(2) If a defendant or respondent does not so appear, a judgment (not exceeding the relief claimed) may be given against him with costs.”.

7.2 Rule 60 (3) and (4) provides as follows:

“(3) Where any order so made is not fully complied with ..., the court may on application forthwith give judgment in the action against the party so in default or may adjourn the application and grant an extension of time for compliance with the order on such terms as to costs and otherwise as may be just.

(4) the court may on either such application order such stay of proceedings as may be necessary.”.

[8] Rule 12 (4) provides that:-

“(4) The clerk of the Court shall refer to the court any request for judgment for an unliquidated amount and the plaintiff shall furnish to the court evidence either oral or by affidavit of the nature and extent of the claim. The court shall thereupon assess the amount recoverable by the plaintiff and shall give an appropriate judgment.”.

[9] Where a claim is for an unliquidated amount in money, the magistrate cannot exercise a proper discretion in the absence of evidence in regard to the quantum of the plaintiff’s claim. He/she is obliged to hear evidence in order to enable him/her to exercise his/her discretion in a proper manner. (Jones and Buckle ‘The Civil Procedure of the Magistrates’ Courts in South Africa’ 9^th edition Vol II at 32-2; Pretoruis ‘Burgerlike Prosesreg’ Vol I 623).

[10] Where the magistrate has a discretion which he exercises, but wrongly, the defendant/respondent is entitled to proceed by way of appeal (Erasmus ‘Superior Court Practice’ A1-70). Trollip J, in Sparks v David Polliack & Co Pty Ltd 1963 (2) SA 491 (T) at 496D, remarked that a default judgment which is no longer rescindable is appealable.

Application of the law

[11] It is common cause that the defendant’s application to set aside the default judgment was refused with costs. The judgment was, therefore, no longer rescindable. Following the dictum in Sparks case, supra, and the principle as set out above the default judgment in the instant case was appealable.

[12] As to whether the amount recoverable was liquidated or not it is necessary to carefully consider the terms of the alleged agreement. These terms are referred to in paragraph 4 of the particulars of claim. As a general rule a claim for damages constitute an unliquidated claim (SA Fire and Accident Insurance Co. Ltd v Hickman 1955 (2) SA 131 (C)). But where the amount has been ascertained by agreement the claim is a liquidated one. As I have already pointed out, it does not appear from the particulars whether the plaintiff’s claim is for restitution or for damages. As correctly submitted by Mr Griessel, there is no allegation in the particulars of claim that the plaintiff suffered damages or that the defendant is liable to the plaintiff for payment of the amount claimed. The defendant’s non-compliance is set out in paragraph 6 of the particulars of claim, inter alia, that he denied plaintiff access to have a say in respect of administration and management issues and failed to pay plaintiff remuneration in accordance with the plaintiff’s shareholding. It is however clear, on a proper reading of the terms of such agreement, that there was no agreement either as to an amount for the ‘expertise and consideration’ which the plaintiff was to bring into the company business or the monetary value of the 50% ordinary shares he was allegedly entitled to. The amount referred to in paragraph 5 of the particulars of claim was not agreed upon. It is therefore manifest that there was no agreement pertaining to the amount as maintained by Mrs Gutta. Needless to say the plaintiff’s claim was clearly based on an unliquidated claim and that being the case, the magistrate was obliged to hear evidence to enable him to exercise his discretion in a proper manner: he failed to do so.

[13] I may also add that the magistrate, being conferred with a discretion in terms of rules 32 (2) and 60 (3) and (4), appears not to have addressed his mind to the other considerations including the fact that when the application for default judgment was made, the defendant’s attorneys of record had just withdrawn from the case, that the defendant was not in court and could not have known of such withdrawal and that the defendant had opposed the claim by filing a plea. In those circumstances and when regard is had to the fact that rules are not an end in themselves to be observed for their own sake, but are provided to secure the inexpensive and expeditious completion of litigation (Mthanthi v Pepler 1993 (4) SA 368 (D)) the magistrate should have, mero motu and in the exercise of his discretion in the best interest of the administration of justice, postponed the application and gave an extension of time for the defendant to comply (Federated Trust Ltd v Botha 1978 (3) SA 645 (AD)). He did not exercise such judicial discretion. Van Winsen AJA remarked as follows in Federated Trust Ltd, supra, at 654 F-H about the important factors to which regard must be had in the exercise of a discretion under the subrule:

“Rule 60 (3) confers a discretion on a magistrate where the order made by court has not been fully or timeously complied with, either to give judgment against the defaulting party or to grant an extension of time within which the defaulter will be allowed to comply with the order. The former course is clearly the more drastic of the two and in the case where the plaintiff is the defaulter the dismissal of his action will result both in delay from the necessity to start the action de novo as well as in wasted costs. Regard being had to the course taken up to the present by the litigation in issue both the delay and wasted costs will be appreciable. These are important factors to which regard must be had in the exercise of a discretion under Rule 60 (3).”.

[14] In Mthanthi case, supra, at 374B Hurt J remarked that since the magistrate-

“ ... is required to exercise such discretion with the object of achieving a just result, it follows, ... that a magistrate to whom a request for default judgment is referred should have careful regard to the principles set out in the Modesi case supra and should generally not grant the default judgment where there are documents in the court file (regardless of whether they have been lodged timeously) which indicate that the defendant intends to defend. The magistrate should, in those circumstances and in the proper exercise of his discretion, defer the granting of judgment until the defendant has been served with an appropriate order.”.

Hurt J remarked further at 374I that:-

“In my view, therefore, the magistrate to whom the request for default judgment was referred was required, in deciding whether to grant such judgment, to exercise a discretion which was not simply limited to the assessment of the proof of quantum. It would have included, for its proper exercise, a consideration of the question whether default judgment was ‘appropriate’ in the circumstances.”.

In the instant case the defendant had filed a plea which forms part of the record of the proceedings. Nevertheless the magistrate seem to have paid insufficient regard or no regard at all to the plea so filed.

Conclusion

[15] It follows from the above that this Court was entitled to uphold the appeal and substitute for the magistrate’s order one refusing the application for default judgment with costs.

B.E. NKABINDE

JUDGE OF THE HIGH COURT

I agree

M. M. LEEUW

JUDGE OF THE HIGH COURT

ATTORNEYS FOR THE APPELLANT : SMIT STANTON INC

ATTORNEYS FOR THE RESPONDENT : KGOMO, MOKHETLE & TLOU