Global Aviation Investments Pty Limited and Others v Ingosstrakh (32049/2015) [2018] ZAGPJHC 477 (31 July 2018)

REPUBLIC OF SOUTH AFRICA

IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG LOCAL DIVISION, JOHANNESBURG

(1) REPORTABLE

(2) OF INTEREST TO OTHER JUDGES

(3) REVISED.

CASE NO: 32049/2015

31/7/2018

In the matter between:

Global Aviation Investments Pty Limited

First Applicant

Global Aviation Investments Group (BVI) Limited

Second Applicant

Global Aviation Operations Pty Limited

Third Applicant

and

Ingosstrakh Defendant

SUMMARY

Civil Procedure- practice application for default judgment- rule 31 (2) (a) of the Uniform Rules of Court- the defendant in default of filing a plea- the defendant barred in terms of rule 26- when default judgment should be granted-dispute of fact-default judgment

refused.

J U D G M E N T

MOSHIDI J:

INTRODUCTION

[1] This is an opposed application brought by the plaintiffs against the defendant in terms of rule 31(2) (a) of the Uniform Rules of Court, which provides as follows: “When in an action the claim or, if there is more than one claim, any of the claims is not for a debt or liquidated demand and a defendant is in default of delivery of notice of intention to defend or of a plea, the plaintiff may set the action down as provided in subrule (4) for default judgment and the court may after hearing evidence, grant judgment against the defendant or make such order as to it seems fit”.[1] As will be shown later below, the matter is not only somewhat complex, and heavily contested, but also has a long history of litigation, all of which are truly unnecessary to restate in full for present purposes.

THE ORIGIN OF PLAINTIFFS’ CLAIMS

[2] The plaintiffs’ claim against the defendant has its origin in an incident described in paragraphs 9 and 10 of the particulars of claim as follows: “On or about 13th November 2012 and whilst the policy was in full effect and as the pilot of the aircraft attempted to take off from OR Tambo International Airport, the aircraft suffered a rejected take off due to the pilot receiving a cockpit warning of a landing gear anomaly. Both engines of the aircraft ingested non-organic foreign matter while under full power causing severe damage to the aircraft and to

both its right-hand and left hand engines (“the incident”). The damage caused by the incident to the aircraft constituted a risk insured against in terms of the policy”.[2]

SOME COMMON CAUSE FACTS

[3] The ownership of the aircraft mentioned above which vests in the plaintiffs, one of which being a MD 82 aircraft with registration marks ZS-TOG aircraft, manufacturer serial number 49905 (“the aircraft”) is not in dispute. So is the incident. It is equally not disputed that during October 2012, at Johannesburg, the plaintiffs (and other associated companies of the plaintiffs) and a Russian Federation Insurance Company, the defendant, entered into the insurance policy mentioned above, namely, an airline Hull “ All Risks” insurance agreement, contract number AD231512, with unique market reference B0509AD231512 (“the policy”)[3]. The period of insurance was from 1 October 2012 to 1 October 2013. At the time of the incident, the insurance policy was in full force and effect. The aircraft was insured for the agreed sum of $2 500,000. This is the amount now claimed by the plaintiffs from the defendant as damages to the aircraft. The amount is contained in the particulars of claim as Claim A, whilst Claim B is not before the court.[4]

THE PLEADINGS

[5] I deal briefly with the pleadings that led to the instant application for default judgement. The application for default was

served and filed on the 5 October 2016, and the defendants’ answering affidavit was served and filed on the 21 October 2016. The plaintiffs filed a further answering affidavit on the 24 November 2016, as well as a supplementary affirmation on the 9 March 2017. The defendant served and filed a replying affidavit on the 7 June 2017.

[6] Prior to the exchange of the above affidavits, the summons had been issued on the 9 September 2015. On the 30 September 2015, the defendant through its Johannesburg attorneys of record, Clyde and Company, served and filed a notice of intention to defend. However, the defendant having failed to serve and file a plea, the plaintiffs served and filed a notice of bar in terms of rule 26 of the Uniform Rules of the Court on the 4 November 2015. Still there was no plea forthcoming.

PRIOR LITIGATION

[7] Prior to launching the present application, the plaintiffs launched an application in the motion Court. In that application,

which was opposed strenuously, the plaintiffs, alleged and claimed inter alia, payment of the above amount of US $2, 5 million in terms of the policy, as reflected in the present Claim A; that the aircraft suffered a total loss during the incident; and that the policy should be interpreted in a manner that allowed them to “self-declare” a total loss in the event of incident related damage. The matter came before Victor J on the 19 May 2015. On the 25 May 2015, Victor J dismissed the application with costs. (“the Victor J judgment”). In arriving at the finding, the Victor J judgment had to interpret, amongst others, the plaintiffs’ contentions relating to the proper interpretation of the terms of the policy, in particular, the contentious clause 3(b) thereof. The Victor J judgment also made a finding against the interpretation contended for by the plaintiffs. For the sake of brevity, and quite interestingly, the Victor J judgment also found that there was a material dispute of fact on the papers. The application for leave to appeal the Victor J judgment had not been finalised at the time of the hearing of the present application.

[8] In addition to the above litigation, the defendant, during November 2016, launched an application in which it sought relief, inter alia, that the notice of bar served by the plaintiffs in terms of rule 26 on the defendant on the 3 November 2015 be uplifted. The application was opposed. The matter came before Van Oosten J on the 29 August 2016. On the 3 September 2016 the application was dismissed with a punitive costs order[5] (“the Van Oosten J order”). The submissions of the parties in regard to the effect of both the Victor J judgment and Van Oosten J order were extremely divergent in closing argument before me. For example, it was conceded on behalf of the plaintiffs that, the Van Oosten J order authoritatively and conclusively dealt with the issue of the defendant being entitled to deliver a plea to the particulars of claim until at the time when it did so belatedly. Further, that the latter issue was therefore res judicata, especially in the light of no pending appeal against such an order. On the other hand, it was contended on behalf of the defendant, firstly, that the Van Oosten J order ought be revisited and corrected by me since it did not pronounce specifically on the merits of the application presented; that the issue of upliftment of the notice of bar against the defendant was not dealt with at all in the order; and that the Van Oosten J order lacks any reasoning at all in relation to the merits of the plaintiffs’ claim, and the lack of merit of the defendants’ defence; the defendants’ default; and whether the defendant’s failure to serve and file a plea was wilful in the context of the present application.[6]

[9] I have had due regard to both the Victor J judgment, and the Van Oosten J order. I am not convinced at all that, in the process of adjudicating the merits/demerits of the instant application, I have the requisite appellate/review jurisdiction to interfere therewith. It follows therefore in my view that, the defendant’s present counter-application, namely that for clarification of the Van Oosten J order, and condonation for the late filing of its plea, cannot be entertained by this court. The counter- application is not only misplaced but also lacks any basis therefor.

THE CRISP ISSUE

[10] Having sketched the above background, the crisp issue for determination is whether the plaintiffs are entitled to default

judgment in terms of rule 31(2), and on the basis contended by them. In other words, on the basis that the defendant has failed to serve and file a plea. It is not in dispute that the defendants eventually attached a copy of an unsigned plea in the answering affidavit to the instant application. The plea, which incorporated a special plea, was dated September 2016. I shall have no regard at all to the contents of this plea for present purposes.

[11] I am, however, enjoined to have regard to the contents of the answering affidavit itself, resisting

the current application. I shall also have regard to the Victor J judgment mainly since it is relied upon in the opposition to the present application. It also remained extant, at least until the hearing before me.

THE DEFENDANT’S DEFENCES

[12] The defendant raised several defences in the answering affidavits in opposing the granting of default judgment. In the light

of the view I take in the matter, it is not necessary to detail all such defences. Paragraphs 4.1 to 4.7 of the opposing affidavit

described the opposition as follows: “Prior to dealing with the bases for the defendant’s opposition to the default judgment application, I wish to make the following preliminary observations:

4.1 There has been protracted litigation between the parties.

4.2 The principle dispute relates to indemnification under insurance policy as a result of damage to an aircraft in which the plaintiffs allege that they have an insurable interest.

4.3 The extent of the damage, i.e. in simple terms whether the aircraft is a write off (a total loss) or whether it is capable of repair is one of the contested issues between the parties

4.4 If it is a write off the plaintiffs’ contend that they are entitled to payment of

the agreed sum of US 2, 5 million dollars. If it is not, the plaintiffs’ would have been entitled to repair of

the aircraft. It is the defendant’s standpoint that the aircraft should have been repaired.

4.5 The plaintiffs sought in terms of the application proceedings, payment of the US 2, 5 million dollars. The application was opposed by the defendant. The application was subsequently dismissed with a ruling in favour of the defendant

4.6. It is against this backdrop and the (unknown) dispute between the parties that the plaintiffs

now seek to press ahead with an application for default judgment.

4.7. Having regard to the history of the litigation, it is ineluctable that the defendant has a defence which it has persisted with (and intends persisting with).” [7]

The answering affidavit also alluded to the on-going and protracted litigation between the parties relating to the current dispute; that the point of disagreement between the parties relates to “the plaintiffs’ contention that the aircraft has a Constructive

Total Loss (CTL), which triggered when the value of the repairs to the aircraft would exceed 75 percent of the agreed value, and that the agreed value of the aircraft was not a CTL.[8] In regard to the Victor J judgment, which the defendant supported, the answering affidavit contended that it opposed the plaintiffs’

application strenuously, which was fully ventilated, and subsequently correctly dismissed on the 25 May 2015. Further that, on the 4 August 2015, the plaintiffs applied for leave to appeal the Victor J judgment and order, but that such appeal is still pending.[9]

[13] The answering affidavit, which also contained a counter-application, continued to allege that, “it is manifest that there exists triable issues between the parties and what is more is the defendant has previously been successful in its defence[10]. Towards the end, the affidavit alleged that the claim is of substance and in rand value terms equates to the sum of approximately R37 million; that it is of importance to the defendant; and precluding it from going to trial which inure irremediably to its prejudice; and that such prejudice outweighs any prejudice “that the plaintiffs will suffer”[11]. There was a replying and/or affirmation affidavit by the plaintiffs, which in essence alleged that the defendant has demonstrated no bona fide defence to the application[12].

SOME APPLICABLE LEGAL PRINCIPLES

[14] I deal with some applicable legal principles. The starting point are the provisions of rule 31(2)(a) quoted at the commencement of this judgment. Although the rule specifies under what circumstances an application for default judgment may be brought, it does not prescribe time limits within which such application should be brought (compare for example, applications for rescission of default judgments brought under rule 31(2) (b), or applications for summary judgment under rule 32(1) and (2). In this case, as mentioned above, the summons was served on the 10 September 2015; appearance to defend was served and filed on the 30 September 2015; and the present application for default judgment only launched on the 27 September 2016. This is nearly a year later. It appears to me that such extended time lapse should be taken into account by the Court in refusing the application. If the plaintiffs were so confident about the prospects of success of their claim, the proper procedure would have been to instead launch an application for summary judgment upon the service and filing of defendant’s notice of intention to defend on the 30 September 2015. This never occurred.

[15] Be that as it may, the trite principles in matters such as the present, and for the defendant to survive default judgment, are the following: the defendant to show good cause (a) by giving a reasonable explanation for its default; (b) by showing that its opposition is made bona fide; and (c) by showing that it has a bona fide defence to the plaintiffs’ claim which prima facie has some prospect of success. See for example, Grant v Plumbers Pty Ltd[13], and Chetty v Law Society, Transvaal,[14] and HDS Construction (Pty) Ltd v Wait[15]. In the present application and from the entirety of the answering affidavit, the main consideration is the question, not so much that of good cause, but rather whether the defendant has established a bona fide defence, which is triable, in respect of the default judgement application. (See Grant v Plumbers (Pty) Ltd, supra, in the context of rescission applications. In Vilvanathan and Another v Louw[16], and once more in the context of rescission applications, it was held, inter alia, that “The Appellate Division and the Supreme Court of Appeal have laid down that at common law ‘it is clear that in principle and in the long-standing practice of our courts’ that there are two ‘essential elements of “sufficient cause” for rescission of a judgment by default.’ These are:

(i) that the party seeking relief must present a reasonable and acceptable explanation for his default; and

(ii) that on the merits (i.e. of the action) such a party has a bona fide defence which, prima facie, carries some prospect of success” In Maharaj v Barclays National Bank Ltd [17], it was held, inter alia, that, “ All that the Court enquires into is: (a) whether the defendant has “fully” disclosed the nature and grounds of his defence and the material facts upon which it is founded, and (b) whether on the facts so disclosed the defendant appears to have, as to either the whole or part of the claim, a defence which is both bona fide and good in law. While the defendant need not deal exhaustively with the facts and evidence relied upon to substantiate them, he must at least describe his defence and the material facts upon which it is based with sufficient particularity and completeness to enable the Court to decide whether the affidavit discloses a bona fide defence”. See also Mowschenson and Mowschenson v Mercantile Acceptance Corporation of SA Ltd[18]. It appears to me that I am not even enjoined to determine the merits of a ‘bona fide defence’, at this stage. It also appears to me that the words, ‘bona fide defence’ in the context of rescission applications and summary judgments, on the one hand, and in the context of default judgments, on the other hand, may be used interchangeably.

APPLICATION OF LEGAL PRINCIPLES

[16] In applying the above legal principles to the facts of the present application, and purely from the answering affidavit, this is plainly a case in which default judgment ought not to be granted against the defendant. There are several manifest reasons. In the first place, and as alluded to above, it appears to me to be an unfair procedure to launch an application for default judgment, not only in the midst of protracted litigation between the parties, but also at such a late stage after the entry of appearance to defend. This is so, despite the provisions of rule 31 (2) (a) which appears to favour the plaintiffs. Secondly, it is plain that the disputed issues raised in the papers before me, are not only factually at extreme variance, but also complex and technical in nature. The proper resolution of these issues cannot dispense with expert testimony. These are clearly triable issues. See in this regard, Harris v Absa Bank Ltd t/a Volkskas.[19] The plaintiffs’ claims against the defendant are by far not insignificant. The recent election of the plaintiffs to now abandon

Claim B and separate it from Claim A, further compounded matters. These two claims are plainly interwoven, and therefore inseparable.

[17] An additional plain reason why the grant of default judgment is unsuitable is the following: all the issues and others in dispute in this application were the subject matter of the Victor J judgment. These issues were fully argued and ventilated there. Interestingly, in the Victor J judgement, the plaintiffs sought the same relief under Claim A which is now sought in the instant application. As mentioned earlier, the Victor J judgment ruled against the plaintiffs on their “self-declared” interpretation contention of the insurance policy. What is of significance for present purposes, is that the Victor J judgment also found that there exists a genuine dispute of fact in relation to the total loss issue in regard to the damage to aircraft and the plaintiffs’ claims. Thus, insofar as the present claim relates to the self-declared interpretation, the plaintiffs are precluded from relying thereon due to such issue being res judicata. The court ought not to countenance the plaintiffs’ attempt to circumvent and re-argue impermissibly the issues already traversed in the Victor J judgement. The latter judgment as is the Van Oosten J order, remains extant and unappealed successfully.

[18] CONCLUSION

For all the above reasons, I conclude that the present application for default judgment must be dismissed. This, based solely on the papers before me. I must emphasize that in arriving at this conclusion, I have not taken into account the defendants’ plea, for obvious reasons. The costs should follow the result. Both parties employed the services of Senior Counsel.

[19] ORDER

In the result the following order is made:

1. The application for default judgment is dismissed with costs.

2. The defendants’ counter application is dismissed with costs.

3. The costs above shall include the costs consequent upon the employment of two counsel.

D S S MOSHIDI

JUDGE OF THE HIGH COURT OF SOUTH AFRICA

GAUTENG LOCAL DIVISION, JOHANNESBURG

COUNSEL FOR THE APPLICANTS Nathan Segal SC (assisted by A Ramlaal Naresh)

INSTRUCTED BY

Cranko Karp Associates Inc.

COUNSEL FOR THE DEFENDANT Bruce Berridge SC (assisted by A Govender)

INSTRUCTED BY Clyde and Co.

DATE OF HEARING

26 April 2018

DATE OF JUDGMENT

31 July 2018

[1] In the present matter the defendant filed a notice of intention to defend timeously- but not a plea.

[2] See Core Bundle, pages 1 (a) to 10.

[3] See page 31, Core Bundle.

[4] See paragraphs 1 to 10 of particulars of claim, Core Bundle.

[5] See pages 36 to 41 Core Bundle

[6] See paragraph 7 the defendants’ heads of argument, pages 25 to 26.

[7] See pages 101 to 102-answering affidavit-paragraph 4.1 to 4.7.

[8] See paragraph 9 of answering affidavit page 103.

[9] See paragraphs 10.4 and 10.5 of answering affidavit, page 104.

[10] See paragraph 18, page 109 of answering affidavit.

[11] See paragraph 22, page 110 of answering affidavit.

[12] See paginated pages 138 to 153 of bundle.

[13] 1949 (2) SA 470(O) 476.

[14] 1985 (2) SA 756 (A) at 764I-

[15] 1979 (2) SA 298(E) at 300F.

[16] 2010(5) SA 17 (WCC).

[17] 1976 (1) SA 418 (A) at 426 A-B.

[18] 1959 (3) SA 362(W).

[19] 2006 (4) SA 527 (T) at paragraph 16.