NRZ v Bruno Enterprises (Pvt) Ltd. (HC 9179 of 2014; Ref HC 3785 of 2014) [2016] ZWHHC 23 (13 January 2016)

1 HH 23-16 HC 9179/14 Ref Case No. HC 3785/14 NATIONAL RAILWAYS OF ZIMBABWE versus BRUNO ENTERPRISES (PRIVATE) LIMITED HARARE HIGH COURT TSANGA J HARARE, 26 November 2015 & 13 January 2016 Opposed application A Muchadehama, for the applicant M Hashiti, for the respondent TSANGA J: This is an application for rescission of default judgment. It is opposed by the respondent on the basis that it is erroneous, frivolous and an abuse of court process. The default judgment was granted upon failure to enter appearance to defend by the applicant upon service of the summons and declaration. The applicant denies that it was in wilful default on the basis that the summons were served at an address where it is not located and upon a person named Mrs E Alleck who is not one of its employees. The applicant says it became aware of the application when its goods were attached in execution. The premises upon which the summons were served were No. 2 Kenneth Kaunda Street /2nd Street Harare and the applicant says it does not own any premises at that address. The applicant also says that it has a full proof defence to the respondent’s claim. The facts upon which summons were issued were these. The applicant was engaged by respondent to carry coal from Hwange to RioZim in Kadoma. Between October and December 2009, the respondent says it paid US$137 533.59 to the applicant for transportation of the said coal which was going to RioZim. For reasons that the applicant says it is not privy to, RioZim refused to pay the respondent for the coal that was delivered. The respondent issued summons on the basis that RioZim had subsequently paid the applicant for the transportation of the same coal. It is this alleged payment by RioZim that is vehemently denied by the applicant. Furthermore, the applicant points out that the summons were issued on 9 May 2014 and served on 30 June 2014 and that the matter by that time had long since prescribed. HH 23-16 HC 9179/14 Ref Case No. HC 3785/14 The respondent challenges the authority of the deponent, the applicant’s area manager, to swear to the founding affidavit in this application on the grounds that he has not shown any basis for the authorisation that he purports to have, to swear to the affidavit in question. It is argued that there is no board resolution. In the absence of such proof, it is argued that there is no application before this court. In its heads of argument, applicant relied on the case of Banc ABC v PWC Motors (Private Limited) & Ors HH 123/13 for the argument that the issue of attachment of a company resolution has been blown out of proportion and that unless there is firm evidence that the deponent lacks authority to depose he should not be disbelieved. The respondent on the other hand relied on cases such as Manyami Fishing and TSPT Co-Operative Society v Director General Park and Wildlife 2011 (1) ZLR 553 for the need for evidence of authority. Furthermore, the respondent states that it is inconceivable that the applicant could not locate its own employee Mrs Alleck or that the summons were not served on the applicant. The respondent further denies that the matter has prescribed on the basis that as recently as 2014, the applicant acknowledged that the respondent had indeed paid the applicant for the transportation of the coal. Reliance is placed on correspondence from RioZim which the respondent says indicates that RioZim was invoiced for the coal in question and that it paid NRZ. The respondent also argues that as the company is under judicial management, and proceedings against it were stayed by the order of the court, the current proceedings could not proceed without the leave of the court. An issue is also raised by the respondents regarding the failure to cite the respondent as being under judicial management. The applicant’s explanation is that it was not aware at the time of the proceedings that the company was under judicial management. An application to amend the citation of the respondent to reflect this reality was therefore made at the hearing with reliance being placed on r 4C. In my view, the explanation rendered justifies the granting of the application as it is not an issue that can be said to merit vitiating these proceedings. In answer to the respondent’s standpoints, applicant maintains that there was no service of the summons. It also explains that no double payment was ever made as the amount paid by the respondent was simply credited to the RioZim account as its customer. It is also argued that the crediting was a financial posting as opposed to an affirmation of who HH 23-16 HC 9179/14 Ref Case No. HC 3785/14 had paid. It denies the relevance of the letter in question in which RioZim says it paid applicant on the basis that the letter referred to, related to a refund to a totally different company and that it was not privy to the discussion. The applicant therefore maintains that there is no cause of action against it and insists that there is a need for a full enquiry to determine what happened. Regarding the issue of the area manager’s power to depose to the resolution, I lean in favour of the applicant’s argument that as General Manager, he does have the Board’s general authority to represent the company. His averment that he so acts must be accepted, unless it can be shown that that he could not possibly have acted on the strength of a board resolution. Turning to the issue of the need for authority to bring proceedings against a company that is under judicial management, the meaning of “stay of proceedings” was discussed in the case of ZFC Ltd v KM Financial Solutions (Pvt) Ltd & Anor HH-47-15 per Zhou J. It was held in that case that words “be stayed” mean that the section applies to actions, proceedings, writs, summonses and other processes already in existence at the time that the provisional order is granted. It was stated in that case that it does not, however, prohibit the institution of proceedings against the company, in contra-distinction to the provisions of ss 209 and 213 of the Companies Act [Chapter 24:13], which provide that where a company is being wound up, no action may be commenced against the company without the leave of the court. The applicant’s argument is that it was only responding to a claim that had been instituted by the respondent itself whilst it was already under judicial management. If the summons where issued when the respondent was already under judicial management, then indeed this is not an instance where the concept of ‘stay of proceedings’ would apply given that the discretionary stay of proceedings by the court relates to those matters and actions that were alive at the time of the granting of the provisional order. It is such proceedings that are stayed. On the basis of this reasoning this application is properly before this court. On the main issue of rescission, the applicant‘s core argument is that it satisfies the grounds for rescission of judgment in terms of r 63 (2) of the High Court Rules, 1971. In terms of this rule, the court may set aside a default judgment on good and sufficient cause being shown. The cases of Stockhill v Griffiths 1992 (1) ZLR 172 (S) at 173 D-F; Deweras Farm (Private) Limited & Ors v Zimbabwe Banking Corporation 1998 (1) ZLR 238 (S) at 369 are relied on by the applicant. From case law, whether good and sufficient cause has been HH 23-16 HC 9179/14 Ref Case No. HC 3785/14 shown is dependent conjunctively on the explanation for the default; the bonafides of the application and the prima facie strength of the case. In essence, a default judgement is clearly not set aside simply because a party requests relief. Key to whether it will be set aside is the explanation that is provided for the default and whether such default is excusable. Also key is whether there is meritorious defence to the claim. A defence is considered meritorious when the defendant shows a prima facie valid defence to the claim. As such, it is necessary to point out that applicant’s assertion that the matter has prescribed is a technical rather than a meritorious defence and as such is not of relevance to the grounds for setting aside of a default judgment. Whilst bearing in mind that the factors to be taken into account are examined holistically, failure to show a sufficiently meritorious defence to the claim, renders the issue of excusable neglect immaterial. In other words, if one has no valid defence to the claim, then it matters not what excuse is provided for the default as the application to set aside the default judgment will be denied. Ultimately, whether the facts show good cause or not is in the discretion of the court to determine. Key in making such a determination is also the reality that courts lean in favour of hearing matters on merits. This is because a default judgment is one where the merits of the case will not have been heard. In casu the judgment that the respondent holds is one brought about as a result of what the rules provide for procedurally where no appearance to defend has been entered. Applicant relies on the element of surprise as the basis of excusable neglect in its failure to respond to the summons since it was only on being notified of attachment of its property that it says it became aware of the default judgment against it. The case of Zimbank v Masendeke 1995 (2) ZLR 400 (S) was thus relied upon to argue that there was no wilful default in the sense of full knowledge of the service and thereafter refraining from responding on the basis of such full knowledge. The applicant acted promptly after discovering the default. It is in my view of significance that upon learning of the default judgment, the applicant immediately took action to have it set aside. This is important as a court will generally not react favourably towards an applicant who shows disrespect for the legal system and merely brings an application for the purposes of delay. Regarding the excusability of the default, there is indeed no evidence that the premises so described house the applicant. There is also no evidence that any prior correspondence had ever been served at that address. The applicant’s own correspondence to HH 23-16 HC 9179/14 Ref Case No. HC 3785/14 the respondent which the latter pointed to in its argument against prescription was from its head office in Bulawayo. The applicant also drew attention to r 39 (2) (d) (i) of the High Court Rules which states that in the case of body corporate, process must be served on a responsible person at the place of business or registered office or if not possible to a director, or to the secretary or public officer of the body corporate. Materially, where service is faulty, then a default judgment is improperly taken and it is essentially void. There is no need for the applicant under such circumstances to show that it has a meritorious defence since there would not have been proper service of process. See Banda v Pitluk 1993 (2) ZLR 60 at p 65; Stircrazy Investments (Pvt) Ltd v Lucky Brand & Anor HH 194-12; Joshua Nyamhuka & Anor v Abigail Mapingure HH 425/14 at p8. Thus although this application for rescission has been made in terms of r 63, it certainly appears to be more in line with r 449 (1) (a) which deals with setting aside a judgment granted in error. This judgment falls within the ambit of this rule in so far as the arguments presented by the applicant show that it was granted “in the absence of any party affected thereby.” There is no reason why the application should not be granted where the court is able to assess from the arguments presented, the applicable rule which should be applied to the rescission sought, more so given the precarious nature of a default judgement. In any event, even if the application were to be considered in terms of r 63, the applicant does have a meritorious defence with prospects of success in so far as it explains that the amount paid by the respondent was merely credited to the account of RioZim and that at all times its contract was with the respondent. The applicant has a point that if there is any grievance regarding it being paid twice, it is RioZim who should be complaining. Accordingly, it is hereby ordered that: 1. The application for rescission of judgment entered into on the 23rd day of September 2014 in Case No. HC 3785/14 in favour of the respondent and against the applicant be and is hereby rescinded. 2. The respondent shall pay the costs of this application. Mbidzo, Muchadehama and Makoni, applicant’s legal practitioners Mugomeza & Mazhindu, respondent’s legal practitioners