EH Hassim Hardware (Pty) Ltd v Fab Tanks CC

The appellant was a supplier of building materials that sub-contracted with the respondent for the manufacture, delivery and erection of a water tank for a building project. The appellant paid a 50% deposit (R484,585.50). The respondent delivered the tank late (April 2014, outside the agreed 5-7 week period) and the tank had defects/leaks. The appellant refused to pay the balance, citing late delivery, penalties imposed by the principal contractor, and costs of repairs by another supplier. The respondent sued for the balance. Summons was served on the appellant's attorney's firm (De Bruin Oberholzer Attorneys) on 23 April 2015 while the attorney, Mr Oberholzer, was hospitalized (from 25 March to 11 May 2015). Default judgment was granted on 19 May 2015. Mr Oberholzer only learned of the summons on 20 May 2015 when the appellant's deponent called about adverse credit listing. He filed a notice to defend on 20 May 2015 but judgment had already been granted. The respondent refused to consent to rescission, and the appellant applied for rescission of the default judgment.

• Whether the appellant provided a reasonable explanation for the default in filing a notice of intention to defend
• Whether the application for rescission was bona fide
• Whether the appellant had a bona fide defence with prima facie reasonable prospects of success
• Whether an unliquidated counterclaim can constitute a bona fide defence in an application for rescission of default judgment
• Whether the court a quo properly exercised its discretion in refusing to rescind the default judgment

1. The appeal succeeds with costs. 2. The order of the court a quo is set aside and replaced with: 'The application for rescission of judgment is granted. Costs to be costs in the cause.' 3. The appellant is directed to file its Notice of Intention to Defend within 7 days from the date of this order.

For rescission of default judgment under Rule 31(2)(b), an applicant must show: (a) reasonable explanation for default; (b) bona fide application not intended merely to delay; and (c) a bona fide defence with prima facie reasonable prospects of success. The applicant need only establish triable issues, not probability of success. An unliquidated counterclaim arising from the same contract as the plaintiff's claim can constitute a bona fide defence in rescission applications, particularly where the counterclaim could extinguish the claim and the issues are interconnected. The principle from summary judgment applications (that unliquidated counterclaims can be defences) applies equally to rescission applications in appropriate circumstances. A court must judicially exercise its discretion, and failure to do so based on wrong appreciation of facts or legal principles constitutes improper exercise of discretion justifying appellate interference. Where a counterclaim and the main claim arise from the same contract and are interconnected, judicial discretion should favor hearing them together to avoid piecemeal litigation.

The court noted that while courts are generally less inclined to exercise discretion in favor of a defendant where the answer is raised as a counterclaim rather than a plea, this caution applies but does not preclude such exercise in appropriate circumstances based on the material before the court. The court emphasized that the object of rescinding a judgment is to restore the opportunity for a real dispute to be ventilated. The court also observed that while Rule 22(4) (dealing with postponement of claims in convention when counterclaims are raised) provides discretion that cannot be claimed as of right, the mere fact that default judgment has been granted should not preclude determination of whether a counterclaim may be accepted as a bona fide defence in appropriate circumstances. The court distinguished cases where a counterclaim has nothing to do with the main claim (e.g., libel action in response to bill of exchange claim) from cases where the counterclaim arises from the very contract on which the main claim is based.

This case clarifies the requirements for rescission of default judgment under Uniform Rule 31(2)(b), particularly regarding: (1) what constitutes reasonable explanation when an attorney is incapacitated; (2) when an unliquidated counterclaim can constitute a bona fide defence in rescission applications; (3) the standard of proof required (triable issues with reasonable prospects, not probability of success); (4) the principle that claims arising from the same contract should preferably be heard together to avoid piecemeal litigation. The case extends the principle from Soil Fumigation Services v Chemfit Technical Products (that unliquidated counterclaims can be defences in summary judgment applications) to rescission applications. It emphasizes that courts should exercise discretion in favor of rescission where interconnected claims could be resolved in one hearing, promoting judicial economy and fairness.