THE
HIGH COURT OF SWAZILAND
D.D.M.
ESTATES (PTY) LIMITED
1st
Applicant
DANIEL
DIKA MAMBA
2nd
Applicant
And
STANDARD
BANK SWAZILAND LIMITED
1st
Respondent
ROBINSON
BERTRAM
2nd
Respondent
Civil
Case No. 3151/2001
Coram S.B.
MAPHALALA - J
For
the Applicants MR. A. SHABANGU
For
the Respondents MR. K. MOTSA
JUDGMENT
(26/11/2002)
2
Introduction.
This
is an application for a rescission of a judgment granted by default
by this court. The applicant prays for an order inter alia that the
default judgment granted on January, 2002 be rescinded or set-aside;
that the respondent pays the costs of this application; and further
and/or alternative relief.
The
founding affidavit of the 2nd applicant is filed in support thereto
with pertinent other supporting documents.
The
respondents oppose this application and the answering affidavit of
one Hezron Veli Dlamini who is the acting Recovery Manager of the 1st
respondent is filed in opposition. The respondents also annexes
pertinent documents.
The
Applicant's Case.
The
applicants avers that on or about 20th March 2002, the Board of
Directors became aware of the fact that a default judgment was
obtained against the applicant when writs of execution and a Notice
of attachment issued by the Registrar of this court were brought to
their attention by the second applicant. The Directors of the first
applicant had previously been unaware of any proceedings against the
applicant.
The
Directors of the first applicant as reflected at the office of the
Registrar of Companies are as at 30th June 1997:
i) Busisiwe
M. Makhubu
ii) Gugu
Mamba
iii) Masebenza
Mamba
iv) Mduduzi
Mamba
v) Daniel
D. Mamba.
The
Directors of the 1st applicant are also shareholders of the 1st
applicant with Busisiwe Makhubu being at present the majority
shareholder holding one hundred
3
shares
and all the other shareholders holding one share each except for the
2nd applicant who holds ten shares.
The
Board of Directors decided on the 26th March 2002 to institute the
present proceedings for the rescission and/or setting aside of the
judgment dated 25th January 2002.
The
1st applicant's present attorney has advised the Board of Directors
that he has discovered from a perusal of the court file in the main
action that the return of the Deputy Sheriff shows that service of
the combined summons was effected on one Busisiwe Mamba at an alleged
domicilhim citandi et executandi of the first applicant on the 5th
December 2001.
The
second applicant avers that he has ascertained this himself, that a
perusal of the document which is annexure "A" of the
combined summons does not reflect the address at which the Deputy
Sheriff allegedly served the summons (that is, portion 116 (a Portion
of Portion 86 of Farm No. 1117 Mbabane, district of Hhohho) as the
chosen domicilium citandi et executandi of the first applicant.
Further annexure "A" to the combined summons does not
reflect the aforementioned address described by the Deputy Sheriff as
the domicilium citandi et executandi as the principal place of
business of the first applicant. Indeed the principal place of
business of the first applicant is that which is stated by the
respondent in annexure "A" of the combined summons and not
that upon which the Deputy Sheriff served the combined summons.
The
second applicant avers further that as far as he is concerned he was
never served with the combined summons and there is no return of
service reflecting that he was served with the combined summons.
The
first applicant avers that it has a good and bona fide defence to the
respondent's claim in that:
14.1
the first applicant denies the allegation made by the respondent at
paragraph 5.2 of the Particulars of Claim, namely, that:
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"the
loan would be repayable on demand over a thirty six (36) months at
the rate of E2, 778 (two thousand seven hundred and seventy eight)".
14.2 Indeed
the provisions of annexure "A" reflect only that the first
applicant had thirty six (36) months to pay the instalments in thirty
six (36) equal monthly instalment of E2, 778-00 (two thousand seven
hundred and seventy eight emalangeni) with effect from the first
month following draw down of the facility.
14.3 However,
it was a further term of the agreement embodied in annexure "A"
that in the event of any of the occurrences listed in Clause eleven
(11) thereof, including inter alia default in payment on due date of
amounts due under the loan agreement and if remedial action to the
satisfaction of the respondent is not undertaken within fourteen (14)
days of written notice, the loan facility would at the sole option
and discretion of respondent be repayable on demand.
14.4 The
respondent's Particulars of Claim do not allege the said written
notice referred to above and in paragraph eleven (11) of the loan
agreement.
14.5 I
am advised and verily belief that the resolution annexed to the
respondents' Particulars of Claim purportedly authorizing me to
accept the loan facility on behalf of the first applicant company and
purportedly as a resolution of the first applicant authorizing the
arranging of the loan is invalid and not in accordance with the
Articles of Association paragraph 78 which provide;
"
a resolution in writing signed by every member of the Board of
Directors shall have the same effect and validity as a resolution of
the Board duly passed at a meeting of the Board properly convened and
constituted".
14.6 In
the premises what purports to be a resolution of the first applicant
is in fact not a resolution of the first applicant and I am therefore
advised and verily believe that the applicant never incurred any
liability for a debt due to the respondent at all from the first
applicant.
14.7 I
am further advised and verily believe that in terms of Clause 43 and
70 (f) of the Articles of Association that the applicant's powers to
borrow or raise money for the purposes of the company can only be
exercised on behalf of the applicant company by the Board of
Directors.
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14.8
I am further advised that even though in terms of Clauses 71 and 72
of the Articles of Association "... the directors may from time
to time entrust to or confer upon a Managing Director of Manager for
the time being such of the powers and authorities vested in them as
they may think fit", such powers and authorities as they may
delegate in terms of these Clauses do not include the power to borrow
money. I humbly refer the Honourable Court to Clause 72 of the
Articles of Association".
The
physical address given in the suretyship agreement to the respondent
bank as in its records as my address is Portion 296 (a Portion of
portion B) of Farm Dalriach, number 188 Hhohho, Mbabane, and not the
address at which the Deputy Sheriff allegedly served the Combined
Summons.
Further,
and in any event the continuing Covering Mortgage Board number 614/97
is for a total amount of E87, 500-00 (eight seven thousand five
hundred emalangeni).
It
was a term of the Covering Bond which is annexed to the respondent's
Combined Summons contained in Clause 17 (seventeen) thereof.
"If
the whole or any portion of the property is expropriated or taken for
road widening purposes or any other purpose whatsoever under the
provisions of any law, or bye law by any competent authority, the
Mortgagor appoints the bank irrevocably and in rem suam to receive
all compensation monies payable in respect thereof and also to make
all claims and sign all such documents in regard thereto as may be
necessary or desirable and the bank shall account to the mortgagor in
respect of each such amount received after deduction of all sums
secured in respect of this bond and the costs incurred by the bank in
regard to such expropriation or other deprivation".
The
land which is the subject of the continuing Covering Bond has been
expropriated by Government for road widening purposes under the law
and the respondent is aware of this fact from a communication I sent
to them.
A
portion of property has indeed been expropriated by Government and
the respondent has its rights in terms of Clause 17 (seventeen) of
the Mortgage Bond.
6
In
the premises the applicants requests the court to rescind the
judgment obtained against the two applicant's on the basis that the
judgment was erroneously sought and granted as contemplated in Rule
42, alternatively in terms of Rule 31 of the rules of this court on
the basis that sufficient cause has been shown for the rescission
thereof. No prejudice will be suffered by the respondent if the court
would grant an order staying the process of execution pending the
final determination of this application for rescission.
The
Respondent's Case.
The
respondent's opposition is on a number of points. These are outlined
in the answering affidavit of Hezron Veli Dlamini who is its acting
Recovery Manager. The first point taken is that the first respondent
was entitled to obtain default judgment since it served on the
domicilium citandi. Applicants' response is that the Deputy Sheriff
should have served at the principal place of business not domicilium
citandi. Respondent contended that this has no merits as:
a) In
terms of Clause 4 of annexure "C" of first respondent was
entitled to serve on the domicilium citandi being property not the
principal place of business;
b) The
court is also referred to the summons where the issue of domicilium
citandi is raised;
c) In
law if a person has chosen or by agreement particular premises the
question of residence or principal business does not arise and
service at that place will be good. (see Gerber vs Stolze and others
1951 (2) S.A. 166(1));
d) The
service of domicilium is not left just on open veld, but was left
with second applicant's wife Busisiwe Mamba (nee Makhubu);
e) The
same service for first applicant was left with Busisiwe Mamba (nee
Makhubu) who the second applicant is on oath to say that she holds
100% share in the company, hence she knew the objective of the
summons;
f) Applicants
have not stated in their founding papers that the said Busisiwe Mamba
never received the summons nor has she put an affidavit to deny such.
7
Therefore,
the respondents submitted that no reasonable explanation has been
offered by the applicants. The applicants were aware of the process
and for two months decided not to do anything.
The
second ground for the respondents' opposition is that the applicants
have no defence. Applicant failed to service the loan. The applicants
in reply at page 55 of the Book of Pleadings have failed to repay its
monthly instalments and annexure "S2" confirms same.
Therefore, in terms of Clause 11 of annexure "A" (loan
facility) the respondent was entitled to call up the loan. Besides it
is trite law that an overdraft is payable on demand (see Will's Nigel
Banking in South African Law 1981 Juta at page 141 and Trust Bank of
Africa Ltd vs Senekal 1977 (2) S.A. 582 (A) at 601).
The
third prong in respondent opposition is reflected in paragraph
12.1,12.1.1, 12.1.2, and 12.1.3. It is contended that by operation of
the rule of estoppel the second applicant represented to the first
respondent that he was the Managing Director of the first applicant
and presented a resolution of the company to this effect. Therefore,
applicants are estopped from denying that second applicant was not
authorised as first respondent acted.
On
this representation and to its prejudice (see Rabire P.J. The Law of
Estoppel in South Africa (1992) page 18 and Freeman vs Lockeyern
Buckhurst Park Property (Maga) Ltd 1964 (1) ALL.E.R.630 CCA).
Furthermore, first respondent submitted that on the basis of the
Turquand Rule, there was no obligation on it to enquire that the
internal formalities of the first applicant had been complied with
hence, paragraph 14.4 to 14.8 of the applicant's founding affidavit
have no substance and merit (see Royal British Bank vs Turquand 1956
(6) ESB page 326 and Cilliers H.S. Corporate Law (2nd ED).
The
fourth point in opposition concerns the suretyship clause. That the
surety and the mortgagor is the same person. So to allege that the
address in the suretyship is different from the mortgage bond is
insignificant. In terms of Clause 4 of annexure "C" page 88
of the summons, service of process may be served on the property and
this was done correctly and left with responsible persons being 2nd
applicant's wife.
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Further,
it is contended that what the applicant refers to is the first CCMB
for E70, 000-00 but the loan agreement refers to another second CCMB
over the same property and cession of a policy. Therefore this does
not take the applicants case any further.
The
fifth point put forth by the respondent is that of expropriation that
failure to exercise its right to the purported benefits of
expropriation does not operate as a waiver.
Lastly,
the respondent contended that on the grounds stated in Rule 42 are
not applicable in this case. The application be dismissed with costs
at attorney and client scale.
I
have considered the issues in this case. I shall proceed to consider
the matter under a number of heads, firstly, under which head does
the application for rescission fall, secondly, whether applicants
have advanced a reasonable explanation, thirdly, whether applicants
have a defence, fourthly, the effect of the turquad rule and estoppel
on this matter, fifthly, the suretyship clause and sixthly, the issue
of expropriation.
I
shall proceed to determine the issues listed above ad seriatim.
1. Under
which head does the present application fall under?
The
applicants purport to apply for rescission of the default judgement
under Rule 31 (3) (b); the common law, and also under Rule 42 of the
High Court rules. It appears to me though that the applicant has not
satisfied any requirement under these heads.
Rescission
under Rule 31 (3) (b) and the common law.
Rescission
under Rule 31 (3) (B) and the common law has not been met. According
to the dicta in the case of Leornard Dlamini vs Lucky Dlamini - Civil
Case No.
9
1644/1997
(unreported) it was held that an applicant under the common law must:
a) present a reasonable and acceptable explanation for his defence;
and b) show that he has, on the merits, a bona fide defence which
prima facie carries some prospects of success. These requirements
also apply even in Rule 31 (3) (b).
My
considered view, in the circumstances is that the applicant has no
reasonable explanation. The 1st respondent was entitled to obtain
default judgement since it served on the domicilium citandi being the
property. The applicants contention was that the Deputy Sheriff
should have served at the principal place of business not domicilium
citandi has no merit on a number of grounds. Firstly, in terms of
Clause 4 of annexure "C". The first respondent was entitled
to serve process on the domicilium citandi being the property not the
principal place of business. Annexure "C" being a
continuing covering mortgage bond between the 2nd applicant and the
1st respondent reads as follows:
4. Domicilium
Citandi et Executandi
For
the purpose of this Bond and for any proceedings which may be
instituted in respect of this Bond, and of the service of any notice,
domicilium citandi et executandi is hereby chosen by the Mortgagor at
the address recorded in the Bank's records as the Mortgagor's last
postal address, or at the option of the Bank or failing the recording
of any address, at the property and if more than one property is
mortgaged, at any one of them. Any notice given by the Bank in
respect of this Bond may, at the Bank's option be addressed to the
Mortgagor at the domicilium referred to in this clause or the
Mortgagor's last postal address recorded with the Bank and may be
served by prepaid post. Notices so posted shall be deemed to have
been received by the Mortgagor 3 (three) days after posting. A
certificate signed on behalf of the Bank, stating that a notice has
been given, shall be sufficient and satisfactory proof thereof, and
the authority of the signatory and validity of the signature need not
be proved.
Secondly,
in law if a person has chosen or by agreement particular premises the
question of residence or principal business does not arise and
service at that place will be good (see Gerber vs Stolze and others
(supra)). In the instant case the service of the domicilium citandi
was not left just on open veld but was left with second applicant's
wife Busisiwe Mamba (nee Makhubu) who also happens to be a majority
10
shareholder
of the 1st applicant holding a hundred shares. Thirdly, the
applicants have not stated in their founding papers that the said
Busisiwe Mamba never received the summons nor has she placed before
court an affidavit denying such. Therefore no reasonable explanation
has been offered by the applicants.
2. Whether
Applicants have a Defence.
My
considered view, based on the facts presented by the applicants have
failed to prove a defence. Applicants failed to service the loan. As
stated in paragraph 9 of reply (at page 55 of the Book of Pleadings)
the applicants have failed to repay its monthly instalments and
annexure "S2" confirms this state of affairs. Therefore in
terms of Clause 11 of annexure "A" (loan facility) the
respondent was entitled to call up the loan. Clause 11 reads in part
as follows:
"11. Default
conditions.
The
loan facility shall, at our sole option and discretion, be repayable
on demand, or we shall be entitled to re-negotiate its terms if, in
the bank's opinion, any of the following events occur, and if
remedial action to our satisfaction is not undertaken within 14 days
of such written notice from ourselves..."
Besides
the above it is trite law that an overdraft is payable on demand (see
Will's Nigel Banking in South African Law 1981 Juta at page 141 and
the case of Trust Bank of Africa Ltd vs Senekal 1977 (2) S.A. 582 (A)
at page 601).
For
the afore-going reasons it is clear that applicant have no defence.
Rescission under Rule 42 Rule 42 of the High Court Rules provides as
follows:
(1) The
court may, in addition to nay other powers it may have, mero motu or
upon the application of any party affected, rescind, or vary:
a) An
order or judgment erroneously sought or erroneously granted in the
absence of any party affected thereby;
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b) An
order or judgment in which there is an ambiguity, or a patent error
or omission, but only to the extent of such ambiguity, error or
omission;
c) An
order or judgment granted as the result of a mistake common to the
parties.
(2) Any
party desiring any relief under this Rule shall make application
therefore upon notice to all parties whose interests may be affected
by any variation sought.
(3) The
court shall not make any order rescinding or varying any order or
judgment unless satisfied that all parties whose interests may be
affected have notice of the order proposed.
There
is a plethora of legal authorities as to the circumstances under
which the said Rule is to operate. (see Bakovan G.J. Howes (Pty) Ltd
1992 (2) S.A. 466 at page 471; Hans C Weinard vs Michelle Sheilla
-Civil Case No. 3032/2000 page 4 - 5; and Herbstein et al, The Civil
Practice of the Supreme Court of South Africa, (4th ED) at 697).
After
considering the facts of the present application I have come to a
conclusion that the grounds stated in Rule 42 and the established
dicta extracted from the above-mentioned legal authorities do not
exist in the case in casu.
3. The
Effect of the Turquad Rule and estoppel on this matter.
In
paragraphs 14.5 and 14.8 of the founding papers at page 6 the second
applicant avers that he had no authority to seek loans. In this
regard I am in total agreement with the submissions made by Mr. Motsa
that the second applicant represented to the first respondent that he
was the Managing Director of the first respondent and he presented a
resolution of the company to this effect (see annexure "A").
Therefore, applicants are estopped from denying that second applicant
was not authorised as first respondent acted on this representation
and to its prejudice, (see Rabire P.J. The Law of Estoppel in South
Africa, 1992 Butterworths at page 18 and also the case of Freeman vs
Lockeyern Buckhurst Park Property (MA GA) Ltd 1964 (1) E.R. 620 CCA).
12
My
considered view is that, first respondent on the basis of the turquad
rule, there was no obligation on it to enquire that the internal
formalities of first applicant had been complied with (see Royal
British Bank vs Turquad 1956 E and B page 326; Cilliers H.S.
Corporate Law 2nd Butterworths page 185 - 186 and Gibson, Merchantile
and Company Law (6th ED) at page 326, 346). According to the rule all
acts of internal management or organization on which the exercise of
such authority is dependent may, in terms of same, be assumed by a
boa fide third party to have been properly and duly performed.
4. The
Suretyship Clause.
The
surety and the mortgage is the same person. The allegation by the
applicants that the address in the suretyship is different from the
mortgage bond is insignificant. In terms of Clause 4 of annexure "C"
at page 88, service of the process may be served on the property and
this was done correctly, in my view and left with responsible persons
being 2nd applicant's wife who happened to be a majority shareholder
of the 1st applicant.
5. Expropriation.
The
applicants have not appointed the 1st respondent to receive all
monies payable to it in terms of Clause 17. Applicants were in any
event receiving the expropriation compensation but not paying it with
1st respondent. The 1st respondent is in terms of Clause 18 entitled
to fore-clause the bond, and as such was not obliged to wait for
expropriation payments.
In
the result, this application is dismissed with costs on the ordinary
scale.
S.B.
MAPHALALA
JUDGE
