Deon Smith and Others v Sasfin Bank Ltd and Another

The first and third applicants (Mr Smith and Nadelei CC) entered into a written Master Agreement of Hire with Technofin on 18 November 2019 for equipment rental. Mr and Mrs Smith (first and second applicants) executed deeds of suretyship as co-principal debtors. Technofin ceded its rights to Sunlyn, which ceded them to Sasfin (first respondent). The CC breached payment obligations. Sasfin issued summons and obtained default judgments from the registrar on 30 July 2021 (against Mr Smith and the CC) and 5 August 2021 (against Mrs Smith jointly and severally with Mr Smith and the CC) for R515,623.78 plus interest and attorney-client costs. Service was effected on 3 June 2021 at the Smiths' residence and on a CC consultant. The applicants' attorney was informed of default judgments on 19 October 2021. The applicants launched rescission application on 21 April 2022, approximately 9 months after default judgments. They claimed they only learned of judgments on 22 March 2022. They alleged the Master Agreement was a simulated transaction (actually a refinance agreement). The high court dismissed the rescission application. Two judges refused petition for leave to appeal under s 17(2)(b). The President granted reconsideration under s 17(2)(f) of the Superior Courts Act.

• Whether the applicants met the threshold requirement for reconsideration under s 17(2)(f) of the Superior Courts Act (exceptional circumstances demonstrating grave failure of justice or bringing administration of justice into disrepute)
• Whether the applicants provided a reasonable and satisfactory explanation for their default in entering appearance to defend
• Whether the applicants demonstrated a bona fide defence with prima facie prospects of success
• Whether there was undue delay in bringing the rescission application
• Whether the defence of simulated transaction was substantiated

The reconsideration application in terms of section 17(2)(f) of the Superior Courts Act 10 of 2013 was struck from the roll with costs.

The binding legal principles established are: (1) For reconsideration under s 17(2)(f) of the Superior Courts Act, applicants must demonstrate as a jurisdictional fact that exceptional circumstances exist (grave failure of justice or bringing administration of justice into disrepute); if not established, the reconsideration application must fail without considering the underlying merits. (2) Section 17(2)(f) is not a mechanism for disappointed litigants to secure another appeal opportunity but a safeguard to avoid manifest injustice. (3) Merely because separate judicial officers arrive at different conclusions on the same or similar facts does not, without more, meet the exceptional circumstances threshold. (4) For rescission of default judgments under both rule 31(2)(b) and common law, applicants must: (a) give a reasonable and satisfactory explanation for default, and (b) show a bona fide defence which prima facie carries some prospect of success. (5) Unexplained delays, particularly where an applicant's attorney had knowledge of default judgments, defeat rescission applications. (6) Allegations of simulated transactions must be substantiated with detailed evidence and cannot rest on skeletal allegations.

The Court observed that the only real difference between rescission applications under rule 31(2)(b) and common law is the time period - rule 31(2)(b) prescribes 20 days while common law requires a reasonable time. The Court noted that while strong prospects of success on merits may excuse inadequate explanation for delay to a point, in this case the merits were so weak that the applicants were bound to fail regardless. The Court commented that the complaint about different effects of the two default judgment orders was without substance, noting the first order was actually beneficial to Mr Smith and the CC as it limited their joint liability to 50% each despite the terms of the underlying agreements.

This judgment reinforces important principles regarding reconsideration applications under s 17(2)(f) of the Superior Courts Act. It emphasizes the high threshold for reconsideration - exceptional circumstances must be established as a jurisdictional fact, and mere disagreement with judicial decisions is insufficient. The case clarifies that s 17(2)(f) is a safeguard against manifest injustice, not a mechanism for routine appeals. It also illustrates the application of rescission principles, requiring both a reasonable explanation for default and a bona fide defence with prima facie prospects of success. The judgment demonstrates how courts assess allegations of simulated transactions and the importance of substantiating defences with detailed evidence rather than skeletal allegations. It reinforces that unexplained delays by legal representatives are attributable to clients in rescission applications.