Africa's Best 278 Ltd t/a Chinamart v Domeneck Montaner Investments CC and Another (35153/2006) [2007] ZAGPHC 292 (9 November 2007)

IN THE HIGH COURT OF SOUTH AFRICA /ES

(TRANSVAAL PROVINCIAL DIVISION)

CASE NO: 35153/2006

DATE: 09/11/2007

UNREPORTABLE

IN THE MATTER BETWEEN:

AFRICA'S BEST 278 LTD t/a CHINAMART APPLICANT

AND

DOMENECK MONTANER INVESTMENTS CC 1ST RESPONDENT

SHERIFF GERMISTON 2ND RESPONDENT

JUDGMENT

POSWA, J

BACKGROUND

[1] This is an application for rescission of a default judgment that was granted against the applicant in this court, on 2 August 2006. In that judgment, my brother, VAN DER MERWE, J made an order in the following terms:

"1. Rectifying paragraph 3 of the Memorandum of Agreement between the parties dated 15 and 16 August 2003 to read as follows:

'The construction cost to be calculated according to Construction cost summary made by Aura Developers (Pty) Ltd on 23rd June 2003, total 29 items, budget is R38 909 112.90 to build 126 full size and 2 smaller units of China Mart which would be the equivalent of one full size unit, average cost of unit is R306 370.97. It does not include those items listed in Exclusions, general information and list of variables, the VAT, municipality bulk contribution cost and application etc. In case quantity of units increase or decrease, the total building cost will be adjusted according to average cost of the unit, then to calculate actual saving money and distribute the benefit.

2. Payment of the amount of R1 256 452.60;

3. Payment of interest on the aforesaid amount a tempore morae;

4. Costs of suit.'"

I have quoted the order verbatim without improving any aspects I find needing improvement.

[2] The deponent to the applicant's affidavit in support of the application for rescission, one Mr Xiongsheng Shen, states that he is the "chairman [of] the Board of the applicant". In passing I mention that the replying affidavit is by one Weipung Gu, who is the director of the applicant. The applicant nowhere gives a history setting out the relationship between the applicant and the first respondent. The second respondent is joined merely on account of the fact that he as the sheriff, implemented the order obtained by default. According to prayer 2 of the notice of motion a cost order is sought only against a respondent who opposes the application, and that automatically excludes the second respondent.

[3] The applicant seeks rescission of the order by VAN DER MERWE, J referred to in the notice of motion, in paragraph [1] of this judgment. That order was made by default on 2 August 2006 and this application is being made on 25 May 2007. The respondent caused the applicant's bank accounts to be attached, in consequence of the default judgment. They were, therefore, frozen as from 0ctober 2006. It was only on 7 0ctober 2006 that the applicant became aware of the fact that the accounts were frozen on Saturday, 7 0ctober 2006. The deponent to the finding affidavit states that some of its sectional title holders could not make deposits into the accounts and informed him so that Saturday.

[4] Because it was a Saturday, Mr Shen could not make enquiries with the bank until Monday, 9 0ctober 2006 when he went to the bank. The bank manager made him a copy of the court order. The next day, Tuesday, 10 0ctober, he proceeded to the applicant or his attorneys, the current instructing attorneys. [No explanation for the entire day or why he did not see the attorneys on Monday 9th.] 0n Friday, 13 0ctober 2006 the attorneys were able to obtain copies of the court file. [No explanation for that. It is Thursday, 12th.] 0n 16 0ctober 2007 he proceeded to consult with [the] attorneys, when arrangements were made for him to consult with counsel on 17 0ctober 2006. It transpired, when he was with counsel, that further documentation was required. Consequently, he had further consultation with counsel (on 19 0ctober) in preparation of this application. (Par 17)

[5] The story ends there without an explanation as to why this application was served only on 6 November 2006 on the first respondent's attorneys. [Page 4] The notice bears the Registrar's stamp for 1 November 2006. There is no explanation for the period from 19 0ctober 2006 to, say, 1 November 2006, a total of twenty two days, including week-ends and public holidays. The next aspect the applicant deals with is urgency (in paragraph 44), as the application was to be brought before the urgent court. The notice of motion was signed on 25 0ctober 2006, with the application to be heard on 5 December 2006.

[6] The respondent does not dispute that the applicant left its old premises, as they are noted in the "agreement" to a new address in July 2005, without changing the registered address in Registrar's records. Whereas the applicant says the respondent knew about this change, the latter denies that. When the summons was served on 1 June 2006 the applicant was no longer at the premises.

THE MERITS

[7] The basis of the dispute is an alleged contract between the parties.

[8] In paragraph 30 of its founding affidavit the applicant states that "Mr Boswell was at all relevant times employed by the applicant as the project manager". Mr Boswell is the deponent to the answering affidavit. This appears to be inconsistent with Mr Boswell's assertion in paragraphs 1 and 2 of the affidavit, in support of the first respondent's application for default judgment, where he describes himself as being employed by the first respondent's close corporation, as a building project manager.

I was assured by the parties, however, that Mr Boswell was, indeed, receiving a salary from the applicant for his management of a certain business entity project between the parties. In that regard, the applicant refers to annexures "G4" and "H", respectively, the former being the applicant's salary register for the period 27 May 2003 to 25 0ctober 2004, which shows that Mr Boswell received a salary from the applicant, and the latter being a copy of the salary schedule for April 2004 and a cheque made to Yu Yao Bao, which is one of Mr Boswell's Chinese names. As at the time of the application for default judgment, Mr Boswell was no longer employed by the applicant, which explains his willingness to make an affidavit in support of an application for default judgment against the applicant, which he has done.

[9] Mr Boswell's services were, according to the applicant, terminated on 22 0ctober 2004, on which occasion he was paid R45 000,00. That, according to the applicant's version in paragraph 32 of its founding affidavit, was "when he (sic) services were terminated, after completion of the project".

[10] In paragraph 33 of his founding affidavit the applicant refers to a document marked "D" and says: "The agreement, ANNEXURE 'D', is null and void." There is no annexure "D" in the papers – not even in the index.

[11] In paragraph 10 of his heads of argument, Mr Muller, on behalf of the applicant, submits that: "The main defence of the applicant is that the contract was signed without been (sic) authorised by the board of directors." It is very difficult, in fact impossible, on the papers to establish what precisely is the agreement. This is more so as many documents are either not attached or not translated or wrongly numbered. For instance, the applicant refers to a document he says is marked "A" and attached to the summons. Neither the summons nor that annexure "A" are annexed to the papers. He alleges that the document "does not correctly record the agreement between the parties". It is, however, common cause that there is an agreement, somewhere, that reads in clause 2:

"2. If there is any cost saving from the budget of the development, both parties will share those savings equally and DMI [the first respondent] will be able to withdraw the managing service fees from the saving of the budget of the construction development and the ratio of such withdraw(al) from the costs saving will not exceed 50% of the total costs saving, if there is any costs saving."

(Emphasis added.)

In elaboration of this submission, it is stated that Mr Boswell was appointed by the applicant as a project manager, merely as an employee for that purpose and for no other purpose. He did not, therefore, have authority to enter into a contract or to sign on the applicant's behalf, as he purportedly did in signing the Memorandum of Agreement contained in "D1" and "D2". I should mention that "D1" and "D2" are pages 1 and 2 of the translated original agreement in Chinese. The applicant introduced the English version in an endeavour to demonstrate that, although the project manager appears in that document as a "Mr Jung Da Pao", according to annexure "B", that is attached to the particulars of claim (which particulars of claim are not before me), "Mr Pao" is referred to in that document as "Mr Boswell". As I have already stated, that seems to be a discrepancy of no consequence because it is agreed that "Jung Da Pao" and "Chih Po Huang" are all names referring to Mr Boswell. What is important in all this is that the applicant relies on the English version of the agreement in submitting, as I understood him to have been trying to say, that there was a discrepancy between the names as they appear in, on the one hand, the agreement in Chinese and, on the other hand, the agreement in English.

[12] The introduction of the "agreement" in English becomes significant when, as will later appear, reliance is placed by the first respondent on a document, written in Chinese, that was furnished to it by the applicant. That appears in paragraph 14 of the answering affidavit.

[13] The applicant, in paragraph 35 of the founding affidavit, refers to a non-existent annexure "G", which it alleges is "the agreement" – it is neither in the index nor in the papers - and states that, in terms thereof, "the first respondent will only become entitled to remuneration after completion of the construction, if there is a saving". What the applicant is evidently submitting is that there is no agreement based on annexure "D" and that it is annexure "G" that contains the agreement. I have already stated that there is no annexure "G" in the papers. There are annexures "G1" to "G4", which are not a contract but what the applicant refers to as a salary register for the period 27 May 2003 to 25 0ctober 2004, a document that is attached merely to demonstrate that Mr Boswell was only an employee and that he was not entitled to any payment other than his salary from the applicant.

[14] The applicant denies that the purported agreement, referred to in the particulars of claim, which have not been attached to the papers, is the true agreement. That "agreement", which is said to be referred to as annexure "A" in the particulars of claim is also omitted. Consequently there is neither annexure "D" or "G" to the founding affidavit, nor "A" to the mentioned particulars of claim. All the documents refer to the "agreement" that is the subject of dispute between the parties. The form in which the parties have presented their respective cases – more so the applicant – leaves a lot to be desired. Much more could be siad, with difficulty, to explain further the disputes between them about almost everything related to the "contract".

[15] In its response, the first defendant denies that its claim for R1 256 452,60 has no basis. It details the facts on which its claim exists. However, in the light of the decision I have reached in my judgment, I find it unnecessary to restate such facts.

[16] 0n the papers as they stand, the first respondent has its own difficulties, eg:

(a) In paragraph 14 of its answering affidavit, the first respondent avers that an amount given by it as being R38 909 112,90 should have been R38 909 113,19. It explains as the reason for the discrepancy "the fact that (it) relied on a statement supplied to (the first respondent's deponent to the answering affidavit) by the applicant, annexed hereto as 'B' (which turns out to be 'C'), in which it is reflected that the applicant admitted to a saving of R5 912 905,20".

(b) The said annexure "C" ("B") is a document inscribed in what, it is common cause between the parties, is Chinese language. It has not been translated. Although many of the figures that feature in the papers before me – such as R37 990 000,00; R306 370,97; R38 909 112,90; R5 912 905,20 – patently feature in this document, they are meaningless without a language that gives the context in which the figures are used.

(c) It transpired, during the course of Mr Coetsee's address, that he was also relying on documents that, according to him, the first respondent had filed subsequent to the last document in the index furnished to me … if such document is annexure "M", the Final Building cost, which is on p74 of the papers. Reliance was, therefore, placed on documents that were, procedurally, not part of the paginated papers, according to filed index.

[17] I now return to the question as to what should happen to the application for rescission of the default judgment. There is no doubt, as Mr Muller correctly conceded, that the applicant is seeking an indulgence in circumstances where there is evidence of negligence on its part. In that regard the Appellate Division, in James Brown & Hamer (Pty) Ltd v Simmons NO 1963 4 SA 656 (A), at 660E H, said the following:

"Where, as in the present case, an affidavit is tendered in motion proceedings both late and out of its ordinary sequence, the party tendering it is seeking, not a right, but an indulgence from the Court: he must both advance his explanation of why the affidavit is out of time and satisfy the Court that, although the affidavit is late, it should, having regard to all the circumstances of the case, nevertheless be received. Attempted definition of the ambit of a discretion is neither easy nor desirable. In any event, I do not find it necessary to enter upon any recital or evaluation of the various considerations which have guided Provincial Courts in exercising a discretion to admit or reject a late tendered affidavit (see e.g. authorities collated in Zarug v Parvathie, 1962 (3) SA 872 (N)). It is sufficient for the purposes of this appeal to say that, on any approach to the problem, the adequacy or otherwise of the explanation for the late tendering of the affidavit will always be an important factor in the enquiry."

(See also York Timbers Ltd v Minister of Water Affairs and Forestry and Another 2003 4 SA 477 (T); Standard Bank of SA Ltd v Supersadh and Another 2005 4 SA 148 (C) at 155A D.

Although, in Standard Bank of SA Ltd and Another v Supersadh and Another (supra), the affidavit sought to be admitted was a further one, after the traditional three, i.e. the founding, answering and replying affidavits, had been filed, the principle set out therein applies in my view also where the court is dealing with the late filing of a traditional affidavit as was the case in James Brown & Hamer (Pty) Ltd v Simmons NO (supra).

[18] The applicant's negligence relates to its failure to change its address, as appears in the agreement, which resulted in the summons and the particulars of claim being served at that address and, thus, not timeously reaching the applicant. The applicant was also negligent in failing to have a constant check for its correspondence at the previous address. It seems to me highly unlikely that, in the circumstances of this case, the applicant consciously and deliberately decided not to change the address and not to check on correspondence. It seems to me that that is a consequence of human error, sheer carelessness or inattentiveness.

APPLICABLE LAW

[19] There are three ways in which a judgment taken in the absence of one of the parties may be rescinded or set aside viz

(a) in terms of rule 31(2)(b); or

(b) in terms of rule 42(1); or

(c) at common law.

The applicant's notice does not state which of the three ways is relied on. As I shall later demonstrate, failure to make that election is not, per se, fatal to the application.

[20] Rule 31(2)(b) reads:

"(2) A defendant may, within twenty one days after he or she has knowledge of [a default judgment taken against him or her] apply to court, upon notice to the plaintiff, to set aside such judgment and the court may, on good cause shown, set aside the default judgment on such terms as to it seems meet."

Rule 42

Rule 42(2) provides that:

"(2) Any party desiring relief under this Rule [ie as provided in Rule 42(1)] shall make application therefor upon notice to all parties whose interests may be affected by any variation."

Rule 42(1) provides that:

"(1) The court may, in addition to any other powers it may have, mero motu, or upon the application of any party affected, rescind of vary

(a) an order or judgment erroneously sought or erroneously granted in the absence of any party affected thereby;

(b) …

(c) …"

Subparagraphs (b) and (c) are omitted because they are not applicable to the facts of this application. I do not thereby suggest that the applicant succeeds on the basis of rule 42(1)(a) but simply that subparagraphs (b) and (c) are not appropriate, in view of the facts of this case.

[21] At common law a judgment may be rescinded upon the applicant showing "sufficient cause" for it to be rescinded. (De Wet and 0thers v Western Bank Ltd 1979(2) SA 1031 (A) at 1042F.) In De Wet and 0thers (supra) TRENGOVE AJA said the following:

"Thus, under common law the courts of Holland were, generally speaking, empowered to rescind judgments obtained on default of appearance, on sufficient cause shown. The power was entrusted to the discretion of the courts. Although no rigid limits were set as to the circumstances which constituted sufficient cause the courts nevertheless laid down certain general principles for themselves to guide them in the exercise of their discretion. Broadly speaking the exercise of the court's discretionary power appears to have been influenced by considerations of justice and fairness, having regard to all the facts and circumstances of the particular case. The onus of showing the existence of sufficient cause for relief was on the applicant in each case, and he had to satisfy the court, inter alia, that there was a reasonably satisfactory explanation why the judgment was allowed to go by default. It follows from what I have said that the court's discretion under the common law extended beyond, and was not limited to, the grounds provided in rule 31 and 42(1) …" (Emphasis added.)

[22] In Nyingwa v Moolman NO 1993(2) SA 508, following and applying the dictum from De Wet and 0thers (supra), WHITE, J said: "If the merits [of the case] were not considered and the judgment was granted by default, the grounds for rescission are virtually unlimited and the only requisite is that 'sufficient cause' therefor must be shown". (511J 512A) (Emphasis added.)

In Chetty v Law Society, Transvaal 1985 2 SA 756 (A) at 765A, MILLER, JA said the following of "sufficient cause":

"The term 'sufficient cause' (or 'good cause') defies precise or comprehensive definition, for many and various factors require to be considered. But it is clear that in principle and on the long-standing 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 merits such party has a bona fide defence which, prima facie, carries some prospect of success."

[23] As can be seen from above quotation, "good cause", required under rule 31(2)(b), and "sufficient cause", in respect of common law, are synonymous. Rule 42(1)(a) requires neither good cause nor sufficient cause. These requirements are quite onerous. 0n the other hand, where the application is on the basis of rule 42(1)(a), "if the court holds that an order or judgment was erroneously granted in the absence of any party affected thereby, it should, without further enquiry rescind or vary the order." (Tshabalala and Another v Peer 1979 4 SA 27 (T).)

[24] In Bakoven Ltd v G J Howes (Pty) Ltd 1992(2) SA 466 (E) at 471E/F G, ERASMUS, J differed with the finding in the Topol and 0thers v L S Group Management Services (Pty) Ltd 1988(1) SA 639 (W) and De Sousa v Kerr 1978(3) SA 635 (W) at 638A, respectively, on the interpretation of "erroneously granted", in Rule 41(2)(a). In Topol and De Sousa, respectively, the court's unawareness, at the time of granting a judgment by default, that the party that is applying for rescission was not aware that he or she ought to have been in court when the case was heard, amounts to a judgment granted erroneously. In De Sousa the following is said at 638A:

"The question also arises in this matter as to whether the learned trial judge in any way erroneously granted the judgment which he did grant. As appears from De Wet and 0thers v Western Bank Ltd 1977 4 SA at 777, if the requisites of rule 42(1) are present, a court is empowered to grant the relief. As I understand the judgment this would include good cause in regard to default. If the learned trial judge granted the judgment on the basis that the defendant personally knew of the trial date and yet had not appeared, it might well be that the judgment was erroneously granted."

[25] ERASMUS, J expressed his disagreement thus in Bakoven Ltd (supra):

"An order or judgment is 'erroneously granted' when the court commits an 'error' in the sense of a 'mistake' in a matter of law appearing on the proceedings of a court of record. (The Shorter 0xford Dictionary.) It follows that a court, in deciding whether a judgment was erroneously granted is, like a court of appeal, confined to the record of the proceedings." (471E F/G)

[26] I am not convinced that the meaning given by the dictionary is sufficiently unambiguous to exclude the interpretation given in Topol (supra) and De Sousa (supra) respectively. To the extent that it is possible to interpret "erroneously granted" in two different ways, I add my weight on the Topol and De Sousa interpretation. If this interpretation is as acceptable as ERASMUS, J's, it has the advantage that, in most cases, an error that favours an applicant for rescission will, in my view, not be fatal to the outcome of the main action or appeal. Unlike a refusal of an application for rescission, which endorses the judgment, the granting of an application for rescission does not bring an end to the action or the main application. I, therefore, disagree with the approach adopted by ERASMUS, J in Bakoven (supra).

[27] Because the Rule 41(2)(a) route is less onerous to the applicant that any of the other two, (Rule 31(2)(b) and common law), I have dealt with this application as if it was made under Rule 41(2)(a). Although the applicant did not explain every step regarding its failure to defend the action, it did enough, in my view, to pass the test required by Rule 41(2)(b). There is nothing to contradict the fact that it did not receive the summons and the writ of execution. The explanation as to how it discovered the existence of a default judgment, viz the freezing of the bank accounts, is quite plausible.

[28] Although the applicant's presentation of the merits leaves a lot to be desired, it is clear that it contends that

(a) there is a contract between it and the respondent (the plaintiff) in terms whereof the respondent would be entitled to 50% of savings made in the project;

(b) the document on which the respondent relies – as containing the contract between the parties – is not the correct document;

(c) payment of 50% of any saving depends on there being, indeed, such a saving and there is a dispute as to whether a saving was indeed made and whether such saving is in the amount alleged by the respondent;

(d) the respondent concedes that its remuneration would be on the basis of an audited financial statement drawn by the applicant's auditors, Messrs Karolia Jeena Inc;

(e) the respondent appears to be conceding that the applicant's auditors had not finalised "audited financial statements" – the respondent got hold of some financial statements, which it believed to have been properly audited. The auditors write, on 18 0ctober 2006, more than two months after the first respondent had obtained default judgment:

"We are in the process of finalising our audit in respect of 2004 and 2005 financial statements. We have not commenced the 2006 audit of the financial statements and we anticipate commencing this as soon as the 2004 and 2005 audits have been finalised."

[29] Even if I am wrong about the interpretation of "erroneously granted" under Rule 42(1)(b), the application would, in my view, succeed under Rule 31(2)(b) or under common law. It appears that the applicant has a bona fide defence and that, therefore, it should be afforded opportunity to have it tested in court.

[30] The only outstanding question then is that of costs. Although the applicant asked that the first and second respondents be not ordered to pay costs unless they resist the application, Mr Muller somewhat conceded, later in his address, that that submission cannot be sustained. He did not, however, go as far as to concede that the applicant should pay costs of this application. I have no doubt that the applicant should pay the costs of the application.

[31] 0n the facts of this case, the first respondent was justified in resisting the application, in the light of the blatant error with regard to the applicant's failure to change its address. The first respondent's own conduct in the presentation of its defence, however, leaves a lot to be desired. It, for instance, numbered some of its annexures incorrectly, especially annexure "C", and also failed to give a translated version of annexure "C", whereas it clearly relies on that document for figures that are of importance to its case. Had the first respondent paid attention to the detailed account by the applicant, as to why it rejects the first respondent's calculations with regard to the amount claimed, it would, in my view, have realised that its claim is based on documents of doubtful origin or status. It might then have concentrated on the question of the applicant's omission to change the address. In that event, even if I had come to the conclusion that I have come to, regarding the need to condone that omission, the applicant would have had to pay the entire costs of this application for rescission. The Court would have been saved the trouble of sifting through the papers to determine whether the applicant has reasonable prospects of success.

[32] In the circumstances, I am of the view that the first respondent is not entitled to payment of its full costs by the applicant. Even though, according to the practice manual for this division a respondent that adds further documents after the completion of an index, ought to make it its responsibility to ensure that the applicant has amended the original index accordingly, after the additional pages have been paginated, the applicant remains, in my view, the party responsible for ensuring that pagination and the index are updated. It has failed to do so and it, rather than the respondent, is more to blame for the condition in which the papers are.

[33] I therefore make the following judgment:

(1) The application for rescission is granted.

(2) The order by VAN DER MERWE J, given on 2 August 2006, is rescinded in its entirety.

(3) The applicant is authorised to file its plea to the summons and the particulars of claim.

(4) The applicant is ordered to pay 80% of the costs of this application.

J N M POSWA

JUDGE OF THE HIGH COURT

35153-2006

HEARD ON:

FOR THE APPLICANT:

INSTRUCTED BY:

FOR THE RESPONDENTS: