Lucky Madi Auto Dealers and Another v Standard Bank of South Africa Limited (42798/2019) [2020] ZAGPJHC 375 (15 December 2020)

IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG DIVISION, JOHANNESBURG

(1) REPORTABLE: NO

(2) OF INTEREST TO OTHER JUDGES: NO

(3) REVISED

15/12/2020

CASE No. 42798/2019

In the matter of

LUCKY MADI AUTO DEALERS

First Applicant

HLENGIWE NGUBANE

Second Applicant

and

STANDARD BANK OF SOUTH AFRICA LIMITED

Respondent

JUDGMENT

MAHOMED, AJ

INTRODUCTION

1. The applicants apply for a recission of a judgment granted on 6

November 2019 under case number 42798/19. The respondent was granted default judgment in terms of R31(2)(a) and the order

included, inter alia, the return of a 2017 Lamborghini Huracan Spyder, motor vehicle. When the applicants failed to return

this vehicle, the respondent applied for and was granted an order for contempt of court. Following this, the applicants’ applied for leave to appeal this judgment. Leave to appeal was refused. Counsel for the applicants Ms Abrahams has advised the Court that an application is pending before the Supreme Court of Appeals for leave to appeal the contempt finding.

THE EVIDENCE

2. The first applicant is a motor dealership based in Benoni; the second applicant is Ms Hlengiwe Ngubane, an adult female. The applicants concluded two agreements for finance with the respondent.

3. The first was an instalment sale agreement for the purchase of the vehicle which I referred to above to the value of R6 465 385,00. The applicants paid in a sum of R3 239 192.50 toward the purchase price. The respondent financed the balance of the purchase price and the applicants were liable to pay the usual charges of interest and related banking costs. The repayments on this loan was set at monthly instalments of R60 112.34 payable over 71 months. This agreement commenced on 26 October 2017 and the loan was advanced on various terms and conditions.

4. The second agreement was for an overdraft facility for the operations of the car sales business. The second applicant signed as surety for this facility. In August 2019, the respondent cancelled this agreement on the grounds that it “noted a material deterioration” in the first applicant’s financial position, being a term of the agreement of loan. At the time the default notice was dispatched, the applicants owed the respondent approximately R611 400. On 8 November 2019, two days after the default judgment was granted, the applicants settled this overdraft facility, and the respondent has closed this account, on receipt of payment of R629 927.

5. The second applicant’s evidence is that she was aware that the applicants had not paid the instalment for several months although she could not remember how many months. She had requested statements from the respondent to determine how much was in arrears, but the respondent failed to send them to her. She had all along intended to pay the respondent.

6. The second applicant’s evidence is that on 4 November 2019, her husband assisted her with searching her email boxes for statements from the respondent and h “by chance” discovered the notices from the respondent in her “junk mail box”.

7. The applicants cannot explain how these notices arrived or were delivered in the junk box.

8. The applicants allege they never received any notices or any notification from their local post office to collect their mail. Her evidence is that she has had problems with postal services and therefor requested the respondent to communicate with her via email as well. She furnished the respondent with the email addresses for both herself and the first applicant.

9. Furthermore, the applicants’ evidence is they did not receive the application for default judgment which was served by the sheriff. They contend that had they received same they would have opposed the application.

10. Notwithstanding, they do confirm that the address on each of the notices, and the returns from the sheriff are correct, as being their chosen domicilium address.

11. However, the second applicant disputes the sheriff’s report, after the sheriff could not find anyone on her premises to serve the application, or that there was no response to his hooting at the gate. She contends that there are always employees at her home as well at the car sales business who could have accepted service if the sheriff did indeed serve the application papers on them.

12. The second applicant’s evidence is that when she noted that the agreements were cancelled, she immediately contacted the respondent’s attorney and expressed her full intention to pay off the arrears outstanding on the vehicle and to settle the overdraft facility.

13. On 4, 5 and 6 November 2019, the applicants’ attorney

contacted the respondent’s attorney when he attempted to negotiate a settlement of the outstanding amounts on the agreements.

14. The second applicant’s evidence is that during their

discussions, the respondent’s attorney failed to inform the applicants attorney of the pending application for default judgment

which was on the unopposed roll of 6 November 2019. The evidence is that the respondent’s attorney knew that the applicants offered to pay off the arrears on the vehicle and knew that they wanted to defend any matter pertaining to repossession of the vehicle.

15. I was referred to correspondences between the attorneys and they each hold opposing views on whether the applicants were notified of the pending application.

16. The second applicant contends that had her attorney known of this application he would have filed a notice to oppose. (The applicant’s attorney has filed a confirmatory affidavit in this regard). The applicants alleged that the respondent’s attorney deliberately omitted to mention the pending application for default judgment.

17. Counsel for the applicants submitted that had the court known of the defective service and their intention to oppose, it would not have granted the judgment.

18. Furthermore, the applicants submit that this court must also consider that on 8 November 2019 ,just 2 days after the judgment was granted, they settled the overdraft facility in the sum of R629 927 and paid R362 000 toward the arrears on the motor vehicle. The applicants contend that this must demonstrate that they always intended to pay their debt.

19. Based on the evidence set out above, the applicants apply for

recission of judgment, in terms of Rule 42(1) (a) of the Uniform Rules of court, they allege the judgment was erroneously granted,

alternatively, in terms of the common law.

THE DEFENSE

20. At paragraphs 28 and 29 of their founding affidavit the

applicants set out their defence as follows:

“28. If the first applicant and I had known of the respondent’s application, we would have denied the service of the default notices as well as the notices of termination based upon the reasons, we set out above. Therefore, we would have denied the lawful termination of the instalment sale agreement of the car and the overdraft facility.

29. However, the first applicant and I did not intend to deny the allegations of the respondent regarding the quantum of, the entitlement of the respondent to payment of the overdue debts, as we have already indicated above we fully intended to settle (and indeed now have settled) all outstanding and overdue amounts.”

21. At paragraph 14.2 of their replying papers the applicants state that they would have argued that “ the respondent’s cancellation of the instalment sale agreement, was unlawful because of the defective service of the default notices.”

22. Furthermore, the applicants apply for a stay of execution of the Order referred to earlier.

POINT IN LIMINE

23. At the commencement of the hearing of this matter the respondent’s

counsel addressed me on a point in limine. Essentially, he contended that this court should not hear this application, in view of the applicants being in contempt of a court order of 6 November 2019 for return of the vehicle to the respondent.

24. I considered the arguments presented by both counsel and in the light of the steps taken by the applicants after the order was granted i.e. settlement of arrears, and in the light of the dispute on whether or not the applicants’ attorney was advised of the application set down for 6 November 2019, I was of the view that it was in the interest of justice that the application be heard and the issues in dispute are fully ventilated. Furthermore, the applicants have not ignored the judgment per se as they seek to determine the validity of the judgment.

25. The applicants cannot be said to be in contempt when they continue to vigorously pursue a right to a hearing. It is their evidence that they were not aware of the application for default judgment, as they did not receive the application timeously. Furthermore, they alleged that the respondent attorneys failed to inform them of the hearing of the matter in discussions literally a day before the judgment was granted. The respondent attorney believed to the contrary.

26. It is not for this court to enter that debate, but it is incumbent on any court to ensure that matters are fully ventilated and the basic right to a hearing is available to all litigants. Moreover, the applicants had made a very sizeable investment in this vehicle and would obviously need to safeguard their interests, albeit that they fell into arrears with repayments. I am not satisfied that the respondents have established the applicants’ mala fides, they pursue their constitutional right to be heard and I am of the view that they must be allowed a hearing. Accordingly, the point in limine is dismissed.

27. The respondent submitted it is “procedurally entitled” to the judgment and consequently, the applicants are not entitled to rescission in terms of R42(1)(a) of the Uniform Rules of court. Mr Venter for the respondent referred me to the case of Lodhi 2 Properties Investments CC and Another v Bondev Developments (Pty) Ltd.[1]

28. He submitted further, that the applicants do not have a bona fide defence and therefore will not be entitled to a recission of judgment in terms of the common law, either.

29. He argued that the applicants breached the agreement when they fell into arrears and the respondent enforced its rights as it is entitled to do by the terms and conditions of the agreement.

30. He informed the court that notices of default and cancellation and the application papers were sent via the post office and the sheriff at the chosen domicillium address. He argued that the applicants did not deny that the notices and application was sent, they simply deny receiving them.

31. The respondent went further when it sent the notices to an alternate address as well, to notify the applicants of their breach.

32. Mr Venter directed me to the track and trace report stamped by the Benoni post office which confirmed that the notice was waiting for collection at that office.

33. He further informed the court that the respondent sent the notices to the email addresses as per the second applicant’s request and the fact that they were eventually discovered, confirms that the addresses were correct as per the applicants instructions.

34. I have had sight of the default notice dated 30 July 2019, which included, notice of the default/breach, a demand to remedy the breach within 10 days, a demand for proof of insurance on the vehicle, a demand for applicant’s to point out the location of the vehicle in order for respondent to carry out an inspection, and a demand for maintenance records for the vehicle.

35. The respondent’s evidence is that at the date of this hearing the applicants have not returned the vehicle nor have they complied with any of the above demands, which form part of the terms and conditions of the agreement and as ordered on 6 November 2019.

36. The notices of default were posted to the domicilium address and the relevant proof of posting and tracking, stamped by the post office in Benoni, is included in the papers. This notice was also sent to and received by the applicants, by email.

37. On 27 August 2019, in the absence of any response to the demands, the respondent terminated the instalment sale agreement and sent a written notification of the cancellation to the domicilium address and by email. In this notice the respondent demanded return of the vehicle. As at this date, the applicants were in arrears in the sum of R182 804.49. I had sight of the email cover page and noted that the respondent marked it “high” importance and the subject line included the agreement number and identified the document attached.

38. Mr Venter submitted that in terms of the agreement, upon cancellation, the full outstanding balance on the vehicle was due and payable and the respondent, as owner, is entitled to return of the vehicle. A certificate of balance is annexed to the pleadings and confirms the outstanding balance on the vehicle is R3 238 071.18 plus interest at 9.75 from 19 August 2019 to date of payment.

39. Counsel for the respondent advised me that the National Credit Act of 2005 does not apply to this transaction.

40. On 6 November 2019 respondent applied for and was granted default judgement.

41. Counsel for the respondent submitted that the instalment sale agreement was cancelled in August 2019, upon “successful delivery” of the notice of cancellation, which included a demand for the full outstanding balance and the return of the vehicle.

42. He further submitted that the respondent at all times complied with the requirements of posting and service of the documents and went further in that it sent the documents to an alternate address as well. He argued that the sheriff’s return is prima facie proof of service. Service by affixing is sufficient/good service in terms of the rules of court.

RECISSION OF A JUDGMENT

A. Rule R42(1)(a) Uniform Rules of Court

43. The rule provides that a Court may rescind or vary an order or judgment erroneously sought or erroneously granted in the absence of the party affected thereby.

44. In Rossiter & Others v Nedbank Limited[2] the SCA stated.

“if the default judgment was erroneously sought or granted, a court should without more, grant the order for recission, it is not necessary for the party to show good cause under the subrule.

45. The court, furthermore, held,

“Generally a judgment is erroneously granted if there existed at the time of its issue a fact which the court was unaware of, which would have precluded the granting of the judgment and which would have induced the court, if aware of it, not to grant the judgment.”

46. The applicants argue that if the court were aware of the “unlawful

cancellation due to the defective service of the notice, it would not have granted the judgment.

46.1. The applicants deny having received any notification to collect mail from the post office. They denied that they were properly notified of their default or of the termination/cancellation of the instalment sales agreement pertaining to the motor vehicle. They denied service of the application by the Sheriff.

47. In Rossouw and Another v FirstRand Bank 2010 (6) SA 439, the court held that (a) when registered post is the mode of delivery, despatch of the registered item is all that the credit provider need prove, and the fact that the letter does not reach the address (of the consumer) is of no consequence in the enquiry as to whether there has been compliance with s 129 of the National Credit Act, where registered post is properly employed, despatch on its own constitutes compliance.”

48. 45. Following on the above judgment, in Sebola v Standard Bank 2012 (5) SA 145 CC at [87], the court requires a credit provider to go further, “where the credit provider posts the notice, proof of registered despatch to the address of the consumer, together with proof that the notice reached the appropriate post office for delivery of the consumer, will in the absence of contrary indication constitute sufficient proof of delivery. If in contested proceedings, the consumer avers that the notice did not reach him or her, the court must establish the truth of the claim.”

49. I am aware that the National Credit Act does not apply in this matter, however it appears to be about the highest standard that can reasonably be expected from a credit provider.

50. Mr Venter pointed me to the main application and annexures in support of that application for default judgment, which is the proof of postage and a track and trace report from the post office in Benoni, reflecting the domicilium address of the applicants.

51. He submitted that the respondent was not obliged to go that far. Proof of postage by registered mail would suffice, but the respondent acceded to the applicants’ request and sent the notices via email, which were received.

52. The evidence is that as a further precaution, the respondent sent the application to another available address as well to ensure that the applicants were informed of their default.

53. Mr Venter submitted that the respondent complied with its obligations, both in terms of the agreement and the rules of court and that it was ‘procedurally entitled” to the judgment. In this regard he referred me to Lodhi 2 Properties Investments CC and Another v Bondev (Pty) Limited [3] and submitted that R42(1)(a) was not available to the applicant.

54. In the Lodhi Properties case at paragraph 27 the court held,

“… in a case where a plaintiff is procedurally entitled to judgment in the absence of the defendant the judgment if granted cannot be said to have been granted erroneously in the light of a subsequently disclosed defence. A court grants a 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 disclosed, cannot transform a validly obtained judgment into an erroneous judgment. (underlining added).

55. In Colyn v Tiger Food Industries Ltd t/a Meadow Feed Mills (Cape)[4], the court refused a rescission of judgment granted in the absence of the defendant, “notwithstanding the fact that it was accepted that the defendant wanted to defend the application but did not do so because the application had not been brought to the attention of his Bellville attorney.”

56. Based on the proofs of posting and service and the additional efforts (posting by email and to an additional address), the respondent followed the procedures in terms of the Rules when it obtained

default judgment in the absence of the applicants. Accordingly, the respondents can be said to be “procedurally entitled”

to the judgment and therefore in terms of the judgment in the Lodhi case above, the applicants cannot succeed in its application for rescission in terms of R42(1)(a). There was no error in the granting of the judgment. What remains, is a consideration of the application for recission in terms of the common law.

RESCISSION IN TERMS OF THE COMMON LAW

57. For a recission of a judgment in terms of the common law, the

applicants must show “sufficient cause”. The applicants must show:

57.1. they have a reasonable explanation for their default.

57.2. they are bona fide in this application for rescission and that they have not made the application merely with the intention of delaying or frustrating the respondent’s claim; and

57.3. they must show they have a bona fide defence to the respondent’s claim, which prima facie has some prospects of success.

58. As regards their explanation for their default, that they were not properly notified of the application even up to the day before the date of the application, which the respondent attorney denied, the decision in Colyn v Tiger Food Industries Ltd t/a Meadow Feed Mills Cape above, is instructive.

59. Mr Venter reminded me that the applicants’ disputed the

sheriff’s return and alleged that if indeed he did visit their premises as per his/her return, he would have found their employees there who would have accepted service. However, there is no confirmatory affidavit from any of their employees, in that regard, from either of the premises. I am of the view that all attempts at service had been exhausted, the respondent had gone beyond the “call of duty” in ensuring that the applicants were properly informed of their default and the application which followed.

60. Furthermore, I agree with Mr Venter, that the applicants do not allege that the notices and application was never sent, they only deny having received the notices and application.

61. The applicants chose a domicilium address for service. In United Building Society v Steinbach[5] the court confirmed that the domicilium citandi et executandi is inserted in contracts for the benefit of the server of process and not for the recipient. Furthermore, the applicants on their own accord provided the respondents with alternate physical addresses and email addresses. The applicants knew that their postal services were not reliable and provided the alternate contact information. The respondent used them all to inform the applicants of their default and the application for default judgment.

62. In Marques v Unibank[6], albeit that the court discusses service in terms of the Credit Agreements Act, the court held

“… it is the duty of every credit receiver to ensure that communications sent to him at the domicilium he has provided come to his attention. His failure to do so should not redound to the disadvantage of the credit grantor. It must be remembered that, where a letter is posted in terms of s11, the credit receiver is ex hypothesi in breach. The common law requires him to be aware of his obligations and puts the onus of fulfilling them timeously on him. If the second method prescribed for the giving of notice fails, despite the precautions which the Act prescribes, there is nothing unfair in visiting the consequences on the credit receiver. If the law were otherwise, namely that a letter sent by registered post has to be received by the credit receiver in order to be effective, the position would be wide open to abuse and would also place serious obstacles in the way of the credit grantor. …. It follows that in terms of s11 of the Act, a letter does not have to come to the attention of the credit receiver in order to be effective.”

63. The applicants confirmed that the addresses on the returns were correct and eventually, they did find the emails sent to them. The respondent has complied with procedure as per the agreement and the rules of court to inform the applicants of the default. The applicants ought to have exercised greater vigilance. They could have avoided the default given that they paid overdue and outstanding debt just two days after the judgment was granted. However, it appears to be a case of too little too late, in that upon cancellation, the respondent is entitled to claim the full balance outstanding on the instalment sale agreement. The payment of only an arrears amount, albeit a substantial sum of money, does not assist the applicants in casu.

64. The second requirement to satisfy a recission of judgment under the common law, is that the applicants must show that they are bona fide in making this application and that it is not brought to frustrate or delay the respondent’s claim. In Silverthorne v Simon[7] 1907 TS 123 at 124, Grant v Plumbers (Pty) Ltd[8] , Smith NO v Brummer NO[9] , it was stated that an applicant must be bona fide and not make the application with the intention of delaying the execution of the judgment.

65. The respondent’s counsel informed the court that to date the motor vehicle has not been returned, despite the court order and a contempt of court order.

66. Furthermore, the evidence is that the applicants have failed/refused

to, point out the location of the vehicle, furnish the respondent with proof of the comprehensive insurance cover for the vehicle and to furnish the respondent with a maintenance record on the vehicle.

67. The second applicant denied that her husband denied knowledge of the vehicle, on the sheriff’s inquiry, but alleged that he told the sheriff, “the vehicle was not on the premises.” It may well be that he knew where it was but was not willing to cooperate with the sheriff. The applicants deny “hiding”

the vehicle.

68. The applicants have on several occasions demanded an undertaking from the respondent that it will not execute the judgment, for fear that “they would sell the vehicle for far less than its value”. Counsel for the applicants informed me that her clients do not trust the respondents particularly in that” they deliberately failed to inform them of the pending application for default judgment on the day before judgment was granted”. However, this court cannot make any decision on the conflicting versions of the attorneys.

69. As per the instalment sale agreement the respondent remains the owner until the final instalment is paid. The default judgment granted included an order that the vehicle be returned to the respondent.

70. On an overall assessment of the evidence, and given the Order of 6 November 2019, the applicants appear to obstruct or prevent the finalisation of this matter. Apart from the prejudice to the respondents, of concern is that the applicants’ interest liability and any costs of repairs etc, is compounding.

71. The third requirement for a recission of judgment, is that the applicants would also have to show that they have a bona fide defence, which has prospects of success. For the applicants to be successful in the application, they need to set out averments which, if established at trial, would entitle them to the relief they seek. They are obliged to furnish this court with sufficient detail, to enable the court to assess that a triable issue exists and must be heard.

72. Earlier in this judgment, I quoted the applicants’ defence, in essence they allege the cancellation is unlawful by reason of a lack of timeous and proper notice.

73. An applicant is also required to furnish the Court with sufficient

particularity to enable a court to assess the triable point that has prospects of success. The applicants have not furnished this court with sufficient particulars to assess the triable issue that has prospects of success.

74. Moreover, the applicants admit the respondent was entitled to payment of overdue amounts as well as the quantum claimed.[10] This effectively is the very basis of the respondent’s claim.

75. Ms Abrahams mentioned from the Bar, not on the pleadings, that the cancellation should have been done by a court in terms of the agreement. I found that to be rather unusual in agreements of this nature. Courts do not cancel agreements.

76. I requested a more legible copy of the contract, through my registrar and read the clause, I do not read the clauses on cancellation to be reserved for a court as suggested. I disagree with counsel and confirm that the respondent was entitled to cancel the agreement in writing upon notification of default.

77. I am of the view the applicants have failed to set out a bona fide defence with prospects of success. Accordingly, they have failed to satisfy all the requirements for the application for recission under the common law.

Accordingly, I make the following order:

1. The application is dismissed with costs on an attorney and client scale.

2. It follows then that the application for stay of execution is dismissed with costs on an attorney and client scale.

S MAHOMED

ACTING JUDGE OF THE HIGH COURT

Delivered: This judgment was prepared and authored by the Judge whose name is reflected and is handed down electronically by circulation to the parties/their legal representatives by e mail and by uploading it to the electronic file of this matter on CaseLines. The date for hand-down is deemed to be 15 December 2020.

Date of hearing: 10 September 2020

Date of judgment: 15 December 2020

Appearances:

Appearance for Applicants:

Adv L Abrahams

Instructed by:

Bongani Jiyani Attorneys

Tel:

0634107747

Appearance for Respondent:

Adv AJ Venter

Instructed by:

Martins Weir-Smith Inc

Tel:

011 450 3054

[1] 2007 (6) SA 87 SCA paragraph 25.

[2] (96- 2014) [2015] ZASCA 196 [1 December 2015]

[3] 2007 (6) SA 87 (SCA) paragraph 25.

[4] 2003 (6) SA 1 SCA [[2003] 2 All SA 113 paragraphs 9-10

[5] 1942 WLD 3

[6] 2001 (1) SA 145 W (headnote)

[7] 1907 TS 123 at 124

[8][8] 1949 (2) SA 470 at 479

[9] 1954 (3) SA 352 O at 358A

[10] FA paragraph 29