THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Not reportable

Case No: 1129/2016

In the matter between:

EH HASSIM HARDWARE (PTY) LTD
APPELLANT

and

FAB TANKS CC
RESPONDENT

Neutral Citation: Hassim Hardware v Fab Tanks (1129/2016) [2017]
ZASCA 145 (13 October 2017)

Coram:
Shongwe AP and Molemela and Fourie AJJA
Heard:
22 August 2017
Delivered:
13 October 2017
Summary:
Rescission of default judgment –– Uniform Rules of Court
31(2)(a) and (b) –court of appeal may only interfere if power not properly
exercised – court a quo erred - bona fide defence – carries prima facie
reasonable prospects of success – appeal succeeds with costs.

______________________________________________________________

ORDER
______________________________________________________________

On appeal from Gauteng Division of the High Court Pretoria (Siwendu AJ
sitting as court of first instance):

The appeal succeeds with costs.
The order of the court a quo is set aside and replaced with the
following order:
‘The application for rescission of judgment is granted. Costs to be costs in the
cause.’
The appellant is directed to file its Notice of Intention to Defend within 7
(SEVEN) days from the date of this order.

______________________________________________________________

JUDGMENT
______________________________________________________________

Molemela AJA (Shongwe AP and Fourie AJA concurring):

[1] This appeal concerns a refusal by a single Judge of the Gauteng
Division of the High Court, Pretoria (Siwendu AJ) to rescind a default
judgment obtained against the appellant by the respondent arising from the
appellant’s failure to file a Notice of Intention to defend.

[2] The appellant is a supplier of building materials and related products to
various builders in the construction industry and its operations are based in
Limpopo Province. The respondent is a registered company involved in the
supply of water tanks.

[3] The salient facts and circumstances which gave rise to the application
for rescission of judgment in the court a quo are as follows. On 25 September
2013, the respondent submitted a quotation to Segabokeng Construction

(principal contractor) for the manufacture, delivery and erection of a tank
which was to be installed at Malipsdrift SAPS as part of the building project of
the Department of Public Works. The quotation in question embodied the
terms and conditions for the supply and installation of the tank and indicated
the estimated and/or expected delivery period of five to seven weeks.

[4] On 11 October 2013, the appellant was replaced as the purchaser of
the tank and therefore became a sub-contractor of the principal contractor.
The appellant requested the respondent to send a pro forma invoice in
accordance with a quotation it had initially sent to the principal contractor. The
respondent duly forwarded the pro forma invoice to the appellant. On
acceptance of the terms, the appellant paid to the respondent a deposit in the
amount of R484 585.50 which constituted 50 per cent of the contract price.
The payment terms entailed, inter alia, that the appellant pay to the
respondent 40 per cent of the price on delivery of the material, 5 per cent
after the erection of the tank and a further 5 per cent after the testing or three
months after the erection of the tank.

[5] It was common cause between the parties that delivery was effected in
April 2014 and thus outside the delivery period of five to seven weeks. The
respondent conceded the late delivery and attributed it to a larger than
expected number of orders. A review of the correspondence exchanged
between the parties reflects that the appellant had consistently registered its
unequivocal dissatisfaction with the delay but did not cancel the contract.
Prior to delivery and installation of the tank, the respondent had issued the
appellant with an invoice dated 31 March 2014 in respect of the balance of
the contract price. Further invoices were subsequently issued. It is also
common cause that subsequent to the payment of the 50 per cent deposit,
the appellant did not make any further payments to the respondent. The
balance owing subsequently became the subject of the default judgment
obtained against the appellant.

[6] It is clear that prior to the launch of the action proceedings instituted by
the respondent against the appellant in the court a quo, the appellant and the

respondent were embroiled in a dispute about the outstanding balance of the
contract price. The appellant was initially represented by Bresler Becker
Attorneys. Due to the closure of that firm, the appellant’s files were
transferred to Mr Oberholzer of the firm De Bruin Oberholzer Attorneys.
Pursuant to Mr Oberholzer’s involvement in the matter as the appellant’s legal
representative, the appellant persisted in the denial of liability on account of
the late delivery of the tank and certain defects subsequently found on it.
When the respondent’s attorneys threatened to take legal action against the
appellant, Mr Oberholzer apprised them that the appellant would defend any
action they intended bringing and requested them to serve any court
processes intended for the appellant at his firm. It is common cause that
summons commencing action against the appellant was served at Mr
Oberholzer’s firm on 23 April 2015.

[7] In the intervening period Mr Oberholzer took ill from 25 March 2015
and was hospitalised in intensive care on 8 April 2015 for a month. He was
only able to return to work on 11 May 2015. Mr Oberholzer deposed to an
affidavit in support of the application for rescission of the judgment, confirming
that he was hospitalised. He averred that during his absence the
administration of the affairs of his office were entrusted to Mrs Mariaan
Bresler, the erstwhile attorney of the appellant, as well as a professional
assistant in his office and an article clerk. The erstwhile attorney was to
supervise the appellant’s files. It was only after a call by the appellant’s
deponent on 20 May 2015 enquiring about the appellant’s adverse credit
listing that Mr Oberholzer became aware of the service of summons by the
respondent. He filed a notice of intention to defend on the same day. He later
learnt that default judgment had been granted the day before he filed the
appearance to defend. The respondent’s attorneys refused to consent to the
rescission of the judgment. The appellant then launched a substantive
application for rescission of judgment, which the respondent opposed.

[8] Although the court a quo found that the appellant was not in wilful
default of entering an appearance to defend the action, it concluded that the
appellant had not shown a bona fide defence. Curiously, having

acknowledged that the triable issues relied upon by the appellant flow from
the alleged breach of the contract on which the respondent’s claim is based,
the court a quo found that those issues ‘are not necessarily germane to the
claim the applicant [appellant] may have against the respondent in respect of
the counterclaim’. It further found as follows:-
‘Stated conversely, the facts giving rise to the counterclaim which is in its nature
contractual damages, can and does constitute a separate cause of action. In this
sense, it cannot be construed to constitute a defence that goes to the heart of the
respondent’s claim. In my view, the requirement of a bona fide defence means a
defence that provides the kind of answer that addresses the heart and merits of the
respondent’s claim.’
The court a quo concluded that the appellant had not satisfied the
requirements for the granting of rescission of judgment and dismissed the
appellant’s application with costs. Aggrieved by that decision, the appellant
applied for leave to appeal against the whole judgment of the court a quo.
This appeal is with leave of that court.

[9] The central issue to be determined in this appeal is whether the
appellant satisfied the requirements for the granting of rescission of judgment
as contemplated in rule 31(2)(b) of the Uniform Rules of Court. An ancillary
issue is whether the counterclaim raised in respect of the penalties
constituted a bona fide defence to the respondent’s claim.

[10] Before this Court, the appellant contended that it had shown that it had
a bona fide defence against the respondent’s claim. It contended that it had
demonstrated that it had a counterclaim that served to extinguish the
respondent’s claim and this accordingly constituted a bona fide defence
against the respondent’s claim. The appellant also asserted that the court a
quo’s finding that the appellant was not in wilful default falls outside the
purview of the appeal, since it had not attacked that finding in its Notice of
Appeal. It is the appellant’s case that the respondent was aware of the fact
that, should it act in breach of the agreed delivery times, the appellant would
suffer damages as it would be exposed to payment of penalties raised against
the main contractor. The appellant further submitted that since it had to pay

another supplier for the remedying of the respondent’s defective performance,
the amount paid to that supplier ought to have been deducted from the
amount reflected in the respondent’s invoice for the supply and assembly of
the tank. According to the appellant, the court a quo erred insofar as it granted
default judgment on the full amount claimed by the respondent. The appellant
further contended that since the principal contractor had levied the penalties
on it for the late delivery of the tank, it had a counterclaim against the
respondent in respect of the penalties charged. The basis for that
counterclaim, so it was argued, was the contractual damages in respect of the
penalties levied, which fell within the contemplation of the parties.

[11] The respondent conceded that the court a quo considered the
explanation proffered on behalf of the appellant to be reasonable and
accordingly found that there was no wilful default on its part. The respondent,
however, contended that since this appeal is directed against the whole
judgment of the court a quo, this Court will have to make its own
determination as to whether the appellant’s explanation for the default is
reasonable. The respondent further argued that none of the requirements for
the granting of a rescission of judgment had been satisfied. It further pointed
out that there was no merit to the appellant’s counterclaim as there was no
agreement that penalties would be levied. It further averred that there was no
legal basis for the counterclaim, as the appellant relied on an unliquidated
claim that was not capable of set-off.

[12] Rule 31(2)(b) of the Uniform Rules of Court provides that a party
against whom default judgment has been granted may, within 20 days after
he or she has knowledge of that default judgment, apply to court to set it
aside. The court may, on good cause shown, set that judgment aside. It is
established law that the courts generally require an applicant for rescission of
judgment to show good cause by (a) giving a reasonable explanation for the
default; (b) showing that his/her/its application for rescission is made bona
fide and not made merely with the intention to delay the plaintiff’s claim; (c)
showing that he/she/it has a bona fide defence to the plaintiff's claim which

prima facie has some prospect of success.1 Regarding the last-mentioned
requirement, it is trite law that an applicant for rescission of judgment is not
required to illustrate a probability of success, but rather the existence of an
issue fit for trial.2

[13] Equally trite is the principle that even when all the requirements set out
above have been met, it is still within the discretion of the court whether or not
to rescind the judgment. That discretion must be exercised judicially in light of
all the facts and circumstances of the case.

[14] As regards the requirement pertaining to the explanation proffered for
the default, it is not in dispute that the appellant’s attorney, Mr Oberholzer had
been hospitalized for some time. It is also not disputed that he had personally
arranged with the respondent’s attorneys to serve any processes and
pleadings intended for the appellant on his firm. It is common cause that the
summons issued by the respondent against the appellant was served on Mr
Oberholzer’s firm while he was hospitalised. Mr Oberholzer’s assertion
regarding the arrangement that he had made with Mrs Besler pertaining to the
supervision of the appellants’ files was confirmed by the latter. As stated
before, it was only when the appellant’s deponent personally contacted Mr
Oberholzer, after the latter’s return to the office, that Mr Oberholzer
discovered that summons instituting action against the appellant had been
served on his firm and that default judgment had also been granted against
the appellant.

[15] I am satisfied that Mr Oberholzer put enough measures in place to look
after the appellant’s interests in his absence and therefore disagree with the
respondent’s contention that Mr Oberholzer’s firm’s failure to file a notice of
intention to defend constituted negligence that should be imputed to the
appellant. I am of the view that the circumstances of this case do not warrant
that the appellant be penalised for the shortcomings of the staff members of

1 Colyn v Tiger Food Industries Ltd t/a Meadow Feed Mills (Cape) 2003 (6) SA 1 (SCA) at
9E–F.
2 Sanderson Technitool (Pty) Ltd v Intermenua (Pty) Ltd 1980 (4) SA 573 (W) at 575H–576A.

its legal representative’s firm. It must be borne in mind that it was at the
instance of Mr Oberholzer that summons was served at the latter’s firm and
not on the appellant. The appellant was not aware of the service of the
summons and only learnt about it after default judgment had already been
granted against it. Under these circumstances, the respondent’s assertion that
the appellant failed to make any enquiries regarding the progress of its case
or showed disinterest in how its legal representative was conducting its case
is devoid of any merit. I am satisfied that the appellant’s explanation of the
default is satisfactory.

[16] It is evident from the bulk of correspondence exchanged between the
parties that the appellant has unequivocally displayed a firm intention to
defend any court action instituted by the respondent in relation to this matter. I
am therefore satisfied that the appellant’s application for rescission of
judgment was bona fide and not merely intended as a delaying tactic.

[17] What remains for consideration is whether the appellant has sufficiently
succeeded to make out a bona fide defence which has prospects of success.
As correctly contended by the respondent, for the appellant to be successful
in its application for rescission of judgment, it needs to set out averments
which, if established at the trial, would entitle it to the relief asked for. It need
not deal fully with the merits of the case and produce evidence that shows
that the probabilities are actually in its favour.

[18] The papers reveal sufficiently detailed allegations of fact pertaining to
the late and defective delivery of the tank. With regards to defective
performance, the appellant averred that leaks were found on the tank
subsequent to its installation and that the respondent refused to cure these
defects, as a result of which it commissioned another supplier to remedy the
defects. The respondent contended that the appellant had not stated the basis
on which the leakages were being attributed to it. Significantly, the
correspondence exchanged between the parties revealed that at the time
when the respondent was notified about the leakages and warned that the
appellant would resort to engaging the services of another contractor for the

necessary repairs if the respondent did not do so, the latter did not dispute the
defects on the tank but merely stated that it would attend to such defects only
if its invoice was settled. The appellant duly appended the invoice presented
to it by the contractor who attended to the repairs on the tank to its founding
affidavit.

[19] With regards to the penalties, the appellant claimed that it was being
held liable for payment of penalties due to the late delivery of the tank having
impacted on all water-dependant construction, which in turn delayed the
finalisation of the entire project. The progress-payment form and the
Reconciliation Statement dated 13 April 2015 and presented to the appellant
by the principal contractor formed part of the appellant’s papers. These two
documents reflected an amount of R446 978.00 as ‘penalties for late
completion’. I am satisfied that the allegations made by the appellants are
substantiated and evince the existence of triable issues.

[20] It is undisputed that at the time of the hearing of the rescission
application, the appellant had not yet issued any summons against the
respondent in respect of the costs of repairs of the tank or the penalties. The
appellant indicated that its counterclaim pertaining to that claim would be filed
simultaneously with the plea as soon as the judgment of the court a quo has
been rescinded.

[21] The respondent’s assertion that the essence of the appellant’s
counterclaim is that of damages which are unliquidated and that such
damages cannot be set off against a liquid claim seems to have found favour
with the court a quo. In my view, this assertion simply fails to take into account
that first, rule 31(2)(a) and (b) specifically cater for the setting aside of a
default judgment in respect of a claim that is ‘not for a debt or liquidated
demand’. Secondly, it is permissible for a defendant, by way of a plea, to raise
the existence of an unliquidated counterclaim as a defence.3 Brand JA in Soil

3 Stassen v Stoffberg 1973 (3) SA 725 (C) at 729A-C.

Fumigation Services v Chemfit Technical Products4 endorsed the principle
that if it is permissible for a defendant in its plea to raise the existence of an
unliquidated counterclaim as a defence to the plaintiff’s claim, then similarly, it
should be equally permissible to raise that defence by way of affidavit in
summary judgment proceedings.

[22] In response to the appellant’s submission that there is no reason why
the same reasoning cannot be adopted in the context of an application for
rescission of judgment, the court a quo stated as follows:-
‘Unlike in a case of a defence to a summary judgment, the procedure envisaged in
Rule 22(4) does not apply to cases where a judgment already exists. Thus, an
applicant faced with a rescission of default judgment cannot apply for a rescission of
a default judgment to enable it to deliver a counterclaim. . . Materially, an assessment
of the bona fides of a defence in an application for summary judgment occurs prior to
the granting of judgment thereof. Nevertheless, one of the time honoured principles
which applies to the furtherance of the administration of justice is that there must be
finality to litigation.’

[23] It is evident from the provisions of rule 22(4) that the pari passu
determination of a claim in convention and a counterclaim cannot be claimed
as of right. The court has a discretion whether or not to postpone the claim in
convention so that both the claim and the counterclaim are heard
simultaneously. In making a general statement that rule 22(4) does not apply
in cases where a judgment already exists, the court a quo failed to consider
that even though the court’s discretionary power to rescind a judgment is
sparingly exercised in the interests of having finality in litigation,5 that general
discretion is, in appropriate circumstances, exercised in favour of the party
seeking rescission of judgment. Appropriate circumstances would be where
the facts and circumstances of the matter cry for the exercise of the discretion
in favour of the applicant. Thus, the mere fact that a default judgment has
already been granted should not, without more, preclude the determination

4 Soil Fumigation Services Lowveld CC v Chemfit Technical Products 2004 (6) SA 29 (SCA)
at 34E-F.
5 Firestone South Africa (Pty) Ltd v Gentiruco AG 1977 (4) SA 298 (A).

whether a counterclaim may be accepted as a bona fide defence in an
application for rescission of a default judgment in appropriate circumstances.

[24] Where a counterclaim is raised as a defence, rule 22(4) becomes part
of the broader consideration of good cause and one of the questions that
occupies the court’s mind is whether the claim in convention and reconvention
ought to be adjudicated upon in the same hearing. Without in any way limiting
the wide discretion allowed to a court when considering rule 22(4), the
following remarks made by the court in Vaughan & Co Ltd v Delagoa Bay
Engineering Co Ltd6 are apposite:-
‘Of course there are cases, such as for instance, where, in answer to a bill of
exchange, the defendant sets up a libel action, having nothing to do with it, in which
the magistrate would exercise his discretion in not refusing to stay the action, but, in
a case like the present, where the claim in reconvention, the counterclaim, arises out
of the very contract on which the claims in convention are based, it does seem to me
it would be unjust to require those matters to be debated in two separate actions in
two separate Courts.’

[25] In Soil Fumigation7 this Court, having endorsed the principle that a
counterclaim can constitute a defence in a summary judgment application,
went on to consider whether that counterclaim was bona fide. It, however,
warned that a court should be less inclined to exercise its discretion in favour
of a defendant where the answer to the plaintiff’s claim is raised in the form of
a counterclaim as opposed to a plea. It pointed out that a court can only
exercise its discretion in favour of a defendant on the basis of the material
placed before it. I can find no reason that precludes a similar approach in an
application for rescission of judgment in appropriate circumstances.

[26] In the present matter, the averments made, which have already been
discussed earlier in this judgment, prima facie suggest some malperformance
on the part of the respondent. It is also clear that the alleged delayed and
defective performance are, in essence, allegations of a breach of the very

6Vaughan & Co Ltd v Delagoa Bay Engineering Co Ltd 1919 TPD 165 at 171.
7 Soil Fumigation fn 4 at 34E-F.

contract which forms the basis of the respondent’s claim. This inter-
connectedness counts heavily in favour of the simultaneous hearing of the
claim in convention together with the appellant’s counterclaim, instead of a
piecemeal consideration of a multiplicity of claims. Although the amount the
appellant had to pay in respect of the respondent’s defective performance
accounts for a small percentage of the respondent’s claim, the claim in
respect of the penalties resulting from delayed performance accounts for the
balance of the respondent’s claim. The counterclaim, if proven, could
therefore
extinguish
the
respondent’s
entire
claim.
Under
these
circumstances, a judicial exercise of the court a quo’s discretion should have
leaned in favour of hearing the respondent’s claim and the appellant’s
counterclaim in the same proceedings.

[27] Instead, the court a quo found that the issues raised by the appellant in
respect of the respondent’s alleged defective and delayed performance were
not germane to the action brought by the respondent against the appellant. It
concluded that such issues gave rise to a counterclaim based on contractual
damages that did not go to the heart of the respondent’s claim and constituted
a separate cause of action. Those findings are not supported by the facts
alluded to earlier in this judgment and are therefore erroneous.

[28] It is trite law that an applicant in an application for rescission of
judgment need only make out a prima facie defence in the sense of setting
out averments which, if established at trial, would entitle her or him to the
relief asked for. Such an applicant need not deal fully with the merits of the
case and produce evidence that shows that the probabilities are in its favour.8
That is the business of the trial court. The object of rescinding a judgment is to
restore the opportunity for a real dispute to be ventilated.9 I am satisfied that
the appellant raised triable issues and sufficiently disclosed the nature and the
grounds of its counterclaim. It has also shown that these triable issues have
reasonable prospects of success. The appellant has also shown that its

8 Erasmus, Superior Court Practice, (looseleaf) D1-365 – D1-370.
9 Lazarus & another v Nedcor Bank Ltd, Lazarus & another v ABSA Bank Ltd 1999 (2) SA
782 (W).

counterclaim is bona fide. All the requirements for the granting of rescission of
judgment have been satisfied.

[29] Considering all the material placed before the court a quo, it ought to
have exercised its discretion in favour of granting an order rescinding the
judgment. Its failure to do so was on account of a wrong appreciation of the
facts and legal principles. Its discretion was therefore not judicially
exercised.10 It follows that the appeal must succeed.

[30] I therefore grant the following order:
The appeal succeeds with costs.
The order of the court a quo is set aside and replaced with the
following order:
‘The application for rescission of judgment is granted. Costs to be costs in the
cause.’
The appellant is directed to file its Notice of Intention to Defend within 7
(SEVEN) days from the date of this order.

___________________
M B Molemela
Acting Judge of Appeal

10 Trencon Construction (Pty) Limited v Industrial Development Corporation of South Africa
Limited & another [2015] ZACC 22; 2015 (5) SA 245 (CC) para 88.

Appearances
For the Appellant:
S G Gouws (with him L W De Beer)

Instructed by:

De Bruin Oberholzer Attorneys, Pretoria

Symington & De Kok Attorneys, Bloemfontein

For the Respondent:
M Basslian SC

Instructed by:
Hogan Lovells (South Africa) Inc, Pretoria

McIntyre Van der Post, Bloemfontein