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

20/5/2016
                                                                                                                               CASE NUMBER 6058/13

In the matter between:

GARRY GORDON McNAUGHTON                                                                                     1ST  APPLICANT
GORDON CLIVE McNAUGHTON                                                                                        2ND APPLICANT
GARRY GORDON McNAUGHTON                                                                                      3RD APPLICANT
ELOIZE McNAUGHTON N.O.                                                                                               4TH APPLICANT
DELETE WHICHEVER IS NOT APPLICABLE
(1)	REPORTABLE: YES/NO
(2)	OF INTEREST TO OTHERS JUDGES: YES/NO
(3)	REVISED

.............................    ..............................................
         DATE                           SIGNATURE	

					
and

ABSA BANK LIMITED                                                                                                              RESPONDENT 

______________________________________________________________________

                                                                        JUDGMENT 
______________________________________________________________________

THULARE AJ

[1] 	The applicants seeks an order condoning their late filing of the application, and a 	rescission of the judgment granted against them on 3 May 2013; that they be allowed to 	file a plea and that the respondent, in the case of opposition like the present, be 	ordered to pay the costs of the application on a scale as between attorney and client on 	an opposed scale.

[2] 	The applicants are joint trustees of Dyno Diesel Trust (the Trust), and the first and 	second applicant applies in that capacity as well as in their personal capacity. The Trust 	is the only shareholder of Global Automotive and Engineering Specialists (Pty) Ltd which 	traded as Gage Specialists (the company).

[3] 	The Trust was the owner of two immovable properties, remaining extent of erf […] 	Phalaborwa Extension 6 and erf […] Phalaborwa Extension 5. The third applicant was 	the owner of portion 4 erf […] Phalaborwa Extension 5. The company conducted its 	business from the properties. The company held a Momentum Investment Policy which 	attracted a cancellation value in the region of R5 702 700-00 to R6 737 900-00 at the 	end of 2012.

[4] 	The respondent was a trade creditor of the company, which held amongst others credit 	facilities, to wit
	(a)	 two term loans under account numbers 302… and 303… and
	(b)	 an overdraft facility under account number 405….

[5] 	The company concluded a sale of business agreement Canton Trading 291 (Pty) Ltd 	(Canton) in terms of which the company sold its engineering business as a going concern 	to Canton for R45 million. The sale was made subject to the conclusion of parallel 	agreements in terms of which the Trust and the second applicant were to sell the 	properties to Epivert Investments (Pty) Ltd (Epivert). On the same day, the Trust and 	Epivert concluded a deed of sale in terms of which Epivert purchased the two 	immovable properties owned by the Trust for R9 million. And again on the same day, 	the second applicant and Epivert concluded an agreement in terms of which Epivert 	purchased the third property earlier referred to, for R6 million.

[6] 	The properties were encumbered with mortgage bonds registered in favour of the 	respondent as security for moneys loaned and advanced by the respondent to the 	company. Conrad Kruger Attorneys were appointed the conveyancers. The respondent 	appointed Cliffe Dekker Hofmeyer as their bond cancellation attorneys.

[7]	 In terms of the deeds of sale the R9 million was payable as follows; a deposit of R500 	000-00 was to be paid to the conveyancers on or before the date of transfer and an 	acceptable bank guarantee for the balance of R8,5 million was to be delivered to the 	conveyancers within 30 days from the date of signature, securing payment thereof on 	date of transfer. The R6 million was payable to the conveyancers on date of transfer, for 	which amount Epivert would deliver an acceptable bank guarantee within 30 days from 	date of signature.

[8] 	The company held a Momentum Investment Policy which attracted a cancellation value 	in the region of R5 702 700-00 to R6 737 900-00 at the end of 2012. The company ceded 	the policy to the respondent as security for moneys loaned and advanced by the 	respondent to the company. Notarial bonds were registered over the movable assets of 	the company in favour of the respondent for money loaned and advanced by the 	respondent to the company.

[9] 	Various disputes arose between the parties pursuant the sale of business agreement, 	and the deeds of sale of the properties, which disputes were referred for arbitration and 	culminated into a written settlement agreement, which award was also made an order 	of court. 

[10] 	The respondent was not party to the disputes or the settlement agreement which was 	made an order of court. The nature, scope and content of the involvement of the 	respondent contemporaneous with and pursuant the settlement is in dispute.

[11]	 The respondent issued summons against the company and the applicants on 31 January 	2013, wherein the respondent sought payment from them for the sums of R10 704 131-	12, R5 456 521-41 and R3 278 101-93 plus interest and costs. These were the amounts 	the respondent claimed were the indebtedness of the company in respect of the 	overdraft facility as well as the two term loan agreements. The summons were served 	on 11 February 2013 and default judgment was granted on 3 May 2013.

[12] 	The respondent issued an application for the winding up of the company. The cause of 	action was the same as that which informed the summons, and that is, the indebtedness 	in terms of the overdraft facility and the two term loans. A provisional order was 	granted and later a final order.

[13]	 The respondent concedes that they received an amount of R3 200 000-00 in respect of 	the Momentum policy on or about 24 August 2012. The respondent also concedes that 	two advance dividends of R3 500-000-00 plus R1 500 000-00 were received from the 	liquidators of the company on or about 11 October 2013. The respondent also concedes 	that they received R10 500 000-00 from the proceeds of the sale of the immovable 	property on or about 24 August 2012. The respondent acknowledges that at the time 	they applied for default judgment, they had already received an amount of R13 700 000-	00. This amount was received some 5 months before they issued summons. Subsequent 	to the judgment being granted, around 5 months later in October, they received 	another R5 million from the liquidators as earlier mentioned.

[14] 	In their opposition to the application, the respondent contends that the amount 	received is less than the aggregate amount for which summons was issued, which was 	R19 438 754-46 and that is why the applicants remain indebted to the respondent and 	that further interest has accrued to the outstanding amount. To that end, the 	respondent argues that the applicants have no bona fide defence against the claim. The 	respondent’s view is that the applicants remain liable to the respondent, limited to the 	amount claimed, less payments received, and thereon interest added.

[15] 	The applicant’s case is further that Canton was wound up on 27 November 2012 and 	that the movable assets of the company which were transferred to Canton were 	realized in an auction from which the Auctioneers raised proceeds in the amount of R13 	407 882-00. Plaintiff’s case is that the bulk of the proceeds would and should have been 	paid to the respondent pursuant to the notarial bonds registered in favour of the 	respondent over the movables concerned. The plaintiff avers that the respondent 	should clearly and concisely state what amounts it claimed and received from the 	winding up of Canton. The respondent chose not to set out any facts hereon, opting for 	a bare denial in the face of such serious allegations.

 [16] 	The respondent sought and was granted judgment in the sum of R19 438 754-46 	together with interest and costs. The respondent issued summons for an amount of R13 	700 000-00 more than it was entitled to do, and knowingly thereafter applied for default 	judgment for an incorrect amount, at the time that to its knowledge its claim only 	amounted to R5 738 754-46 at best.  

[17] 	The respondent concedes that the applicant’s indebtedness was further reduced when 	it received payments received from the proceeds of the winding up of the company. The 	applicants dispute that the respondent were correct in paying back an amount of R818 	987-88 to the liquidators of the company. The respondent is silent on what amount, if 	any, they received from the proceeds of the winding up of Canton, which, in my view, 	has the reasonable prospect to further reduce the indebtedness of the applicants, if not 	result in a surplus due to them.

[18] 	The applicants are also disputing the computation of the outstanding amounts. It is 	applicant’s case that the respondent debited legal fees to the overdraft facility, which 	the applicants say it was not entitled to do and for which no taxed bill exists. The 	aggregate sum debited to the overdraft account is given as an example.

[19] 	It is against this background, of the conduct of the respondent, that the conduct of the 	applicants should be approached when they got to know about the judgment against 	them in November 2014 when the sheriff attempted to attach certain of the applicants’ 	assets.

[20] 	The applicants became aware of the judgment against them around November 2014, 	and only filed the application for rescission of the judgment against them in July 2015. In 	my view, in a condonation application, the applicants must furnish an explanation for 	the delay in sufficient detail to enable the court to understand their mental attitude 	towards the consequences of their delay, and for the court to be able to assess their 	conduct. The court must consider whether, with the full knowledge of the 	consequences, the applicants deliberately chose not to approach the court for 	rescission. Simply put, once aware, were they indifferent to the judgment against them 	and its consequences?

[21] 	The applicants decided to engage with the Bank Ombudsman from January 2015 to 15 	April 2015. The Ombudsman advised the applicants in writing that the respondent 	would contact them with a view to settle the matter. Between April and May 2015 the 	applicants were engaging with the respondents with a view to settle the matter. It must 	be mentioned that the respondent had sued the applicants for monies which at the time 	applicants believed were unaccounted for, in respect of the sale of immovable property, 	when in fact the respondent had received such monies. Towards the end of May 2015, 	the applicant issued summons against the respondent and thereafter also launched this 	application. I am unable to conclude that the applicants were indifferent to the 	judgment and its consequences to them. 

[22] 	Their action manifested an intention to have the dispute resolved. In my view, they 	cannot be faltered for having considered other available dispute resolution mechanisms, 	which are also effective and efficient, and perhaps cost effective as compared to civil 	litigation in a High Court, until such remedies are exhausted. In my view, a proper case 	has been made out for condonation to be granted.

[23] 	The legal position is set out in Colyn v Tiger Food Industries Ltd t/a Meadow Feed Mills 	(Cape) 2003 (6) SA 1 (SCA) at 9 paragraph 11 by Jones AJA as follows:

“[11] I turn now to the relief under common law. In order to succeed an applicant for rescission of a judgment taken against him by default must show good cause (de Wet and others v Western Bank Ltd (supra). The authorities emphasise that it is unwise to give a precise meaning to the term ‘good cause’. As Smalberger J put it in HDS Construction (Pty) Ltd v Wait:
‘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 relevant circumstances.’
With that as the underlying approach the Courts generally expect an applicant to show good cause (a) by giving a reasonable explanation of his default; (b) by showing that his application is made bona fide; and (c) by showing that he has a bona fide defence to the plaintiff’s claim which prima facie has some prospect of success (Grant v Plumbers (Pty) Ltd, HDS Construction (Pty) Ltd v Wait supra, Chetty v Law Society, Transvaal).”

[24] 	The summons was served at the erstwhile business premises of the company. The 	premises were found unoccupied save for the guards from a security firm, who were, on 	the face of it, preventing vandalism to the deserted property. The other address where 	service was effected was also unoccupied. These facts support, and do not gainsay, the 	version of the applicants that they were not made aware of the action against them, 	before judgment was granted. I am satisfied that the applicants have presented a 	reasonable and acceptable explanation for their default.

[25] 	The applicants have an absolute defence to the amount of R13.7 million of the 	respondent’s claim. The amount had been paid by the applicants at the time that the 	judgment was sought and was granted. The judgment in respect of that amount stands 	to be rescinded. (Frenkel, Wise & Co. (Africa) (Pty) Ltd v Consolidated Press of SA (Pty) 	Ltd 1947 (4) SA 234 (C). This amount, for which judgment was erroneously sought, is the 	larger part of the capital amount claimed.

[26]	When default judgment is sought, the court considers the facts set out in the particulars 	of claim, and considers only those facts and accepts them as correct and as necessary 	for the determination of the issues in favour of the applicant. The facts set out in the 	particulars of claim, for purposes of judgment by default, are accepted for their 	evidential content as well as their probative value. The court determines the issues and 	averments in support of a party’s case, only from the papers submitted to court. An 	applicant for judgment by default has a duty to the court to ensure that all necessary 	and relevant facts are before it. In its particulars, the party defines the issues between 	the parties, for the benefit of the other party as well as the court. 

[27] 	Where part of the amount claimed has been paid, fairness and consistency require that 	the whole truth be disclosed to the court. In my view, a party cannot be allowed to 	secure an advantage to which, but for its non-disclosure, it would not have been 	entitled to. In this instance, the respondent cannot be allowed to secure the benefit of a 	judgment to which it was not in law entitled to at the time that judgment by default was 	sought. White J in Nyingwa v Moolman NO 1993 (2) SA 508 (Tk GD) at 510F-G expressed 	himself as follows:

“It therefore seems that a judgment has been erroneously granted if there existed at the time of its issue a fact of which the Judge was unaware, which would have precluded the granting of the judgment and which would have induced the Judge, if he had been aware of it, not to grant the judgment.”

[28] 	In this matter, when the respondent applied for judgment by default, it is plain that not 	all the facts were before the court, which facts ought to have been before the court, to 	enable the court to determine whether the applicant was entitled to the relief it sought, 	with specific reference to the amount it claimed. These facts were known to the 	respondent at the time that the judgment was applied for. It is important that a court 	not only be placed in a position, but that it must be placed in an informed position in 	order to return a just decision, in exercising its discretion whether or not to grant a 	judgment by default. 

[29] 	On the facts available to it, in truth, it was impossible for the court to give a just 	pronouncement informed by the true facts as, in my view, the applicants have shown 	that the respondents breached their duty to be frank, candid and truthful with the court 	when judgment by default was applied for. The material facts and circumstances were 	available to the respondent, but the respondent failed to disclose them to the court. In 	my view, I am in no position to exercise my discretion in favour of dismissing the 	application for default in part, as the respondent prays that I do. I find myself unable to 	allow a judgment to stand, for an amount which, on the facts before me, may materially 	be conjecture, if not estimates, and more still, based on factors and recalculations after 	the fact, and not on the true position as it prevailed as at the date default judgment was 	granted. 

[30] 	The bare denial of the respondent on the Canton liquidation money as alleged by the 	applicants is not helpful. In actual fact, I do not know how the respondent expects this 	court to interpret that bare denial to ascertain what they mean. It is not only possible, 	but most probable, that the respondent received some satisfaction from the proceeds 	of the sale of movable property of the company. The multi-faceted and inter-sectoral 	manner in which the respondent meticulously sought to recover from any of its known 	possible debtors, under the circumstances, makes it highly improbable that they would 	have left out recovery from the proceeds of the company’s movable assets.  

[31] 	Moreover, there are further facts set out, relating to whether the mortgage bonds 	should have been cancelled or not. There is also the question whether Momentum paid 	out more than what the respondent credited the applicants, and whether the payment 	of R818 987-88 to the liquidators should be explained. Furthermore, the applicants have 	filed a claim for damages for amounts in excess of the balance that the respondent 	alleges they owe. These are disputes which can only be ventilated through evidential 	material.

[32] 	The applicants are, through this application, approaching the court to exercise its 	discretion primarily to do justice between the parties with the object of restoring a 	chance to air the real dispute between the parties. In my view, the applicants have set 	out facts with sufficient particularity which, if proved at trial, may stand as a valid 	answer to the claim against them. The applicants have illustrated that they have a bona 	fide defence to the respondent’s claim.

	For these reasons, I make the following order:

1.	The Court condones the applicants’ non-compliance with the Uniform Rules of Court with regards to the time periods pertaining to the prosecution of this application and the Court authorizes the prosecution of this application for rescission of judgment.
2.	The default judgment granted against the applicants on 3 May 2013 is hereby rescinded.
3.	The Applicants are ordered to file their plea in respect of the action instituted by the respondent in this matter within 15 days of the grant of this order.
4.	The respondents to pay the costs of this application, including the costs of two counsel.

                                                                               

                                                                                                                                                                                                      DM THULARE
ACTING JUDGE OF THE HIGH COURT