Sinesipho Dlakavu and Otto Curnick Dlakavu v Mthatha Nine (Pty) Ltd

On 31 January 2018, the Second Applicant granted the Respondent a written option to lease property (erf 583 Ncise, Mthatha). Addenda were subsequently concluded on 3 July 2018 varying payment terms, granting additional time to transfer the property to a family trust, and extending the option period to 28 February 2019. The Respondent exercised the option on 29 January 2019 and entered into a sub-lease with Spar Group Limited and a construction contract with Nichol Projects (Pty) Ltd. When the Second Applicant refused to sign the notarial lease and give vacant occupation, the Respondent obtained a court order on 27 June 2019 declaring the option agreement valid and directing the Second Applicant to sign (or the sheriff would do so) and to vacate the property. The First Applicant, purporting to act as trustee of the Jwara Otto and Sons Trust (created after the June 2019 order), claimed the trustees were never informed about the lease arrangements. The Second Applicant alleged he was misled into signing documents and that his attorney acted improperly. The Applicants sought rescission of the 27 June 2019 judgment on grounds of fraud and removal of the matter to Mthatha High Court.

• Whether the First Applicant had locus standi to bring the rescission application as a trustee of a trust created after the judgment and without formal joinder
• Whether the Second Applicant satisfied the common law requirements for rescission of judgment on grounds of fraud
• Whether the applicants provided adequate notice to interested third parties (Spar Group Limited and Standard Bank) who would be affected by rescission
• Whether the matter should be removed to the High Court in Mthatha

The court ordered: (a) leave granted to Respondent to file supplementary affidavit dated 26 January 2022; (b) application for rescission of 27 June 2019 judgment dismissed; (c) application for removal to Mthatha dismissed; and (d) Second Applicant liable for costs of both applications on party-and-party scale, including reserved costs from 14 and 28 May 2020, but excluding costs of Respondent's application for leave.

1. For rescission of judgment on common law grounds of fraud, an applicant must prove: (a) the successful litigant was party to the fraud; (b) the evidence was incorrect; (c) it was made fraudulently with intent to mislead; and (d) it diverged from true facts such that the court would have decided differently (Schierhout v Union Government 1927 AD 94 applied). 2. A party seeking to intervene in proceedings must obtain leave under rule 12 and demonstrate a direct and substantial interest in the subject matter; lack of formal joinder prevents a party from being treated as a proper party to proceedings. 3. The notice requirement in rule 42(3) for rescission applications extends to common law rescission applications where third parties have legal interests that would be affected by the rescission (De Villiers v GJN Trust 2019 (1) SA 120 (SCA) applied). 4. Where allegations are so clearly untenable and palpably implausible, courts may reject them on the papers applying the Plascon-Evans test without needing to hear oral evidence.

The court observed that what likely occurred was that the trustees, upon creation of the trust, disagreed with the wisdom of the Second Applicant's commercial decisions regarding the property lease, but attempting to avoid consequences by alleging fraud requires considerably more compelling evidence than presented. The court remarked on the unsatisfactory condition of the court file, noting that the Second Applicant as dominus litis bears ultimate responsibility for ensuring papers are properly paginated and indexed before hearing. While the court acknowledged the application was badly deficient and may have been a source of great irritation to the Respondent, it declined to award punitive attorney-client costs, noting the Second Applicant was entitled to approach the court and was not directly responsible for earlier postponements or all deficiencies in the papers.

This case reinforces important principles in South African civil procedure regarding: (1) the stringent requirements for rescission of judgments on common law grounds of fraud, particularly the need to prove the successful party was complicit in fraud and that evidence was materially incorrect and fraudulent; (2) the application of locus standi principles where parties seek to intervene without proper joinder, especially where trusts are created after judgments affecting trust property; (3) the requirement to provide notice to interested third parties in rescission applications, extending rule 42(3) principles to common law rescission; and (4) the application of the Plascon-Evans test to reject implausible allegations on the papers. The judgment demonstrates courts' reluctance to overturn completed commercial transactions involving multiple parties based on unsubstantiated fraud allegations, particularly where the applicant was represented by legal professionals throughout negotiations.