Soil Fumigation Services Lowveld CC v Chemfit Technical Products (Pty) Ltd

The respondent (plaintiff) instituted action against the appellant (defendant) for payment of R1,260,829.18 for methyl bromide sold and delivered under a written credit agreement dated 9 May 2001. When the defendant entered appearance to defend, the plaintiff brought an application for summary judgment. In its opposing affidavit deposed to by Mr. Koppenol, the defendant did not dispute the material allegations in the particulars of claim. Instead, it resisted the claim by raising a counterclaim for unliquidated damages of 'at least' R590,492.50, alleging breach of a 'sole supplier agreement' by the plaintiff. The counterclaim comprised three parts: (1) R499,792.57 for alleged overcharges exceeding an agreed 9% mark-up; (2) R118,200 for lost sales commission when plaintiff sold directly to a customer; and (3) R22,500 for loss of profit. The High Court (Willis J) granted summary judgment for the full amount of the plaintiff's claim, holding that the defendant failed to establish a bona fide defence because it had not paid the balance between the counterclaim and the claim into court.

• Whether an unliquidated counterclaim for an amount less than the plaintiff's claim can constitute a bona fide defence in summary judgment proceedings
• Whether a defendant must pay the balance between a lesser counterclaim and the plaintiff's claim into court to establish bona fides
• Whether the defendant complied with the requirements of Rule 32(3)(b) to disclose fully the nature, grounds and material facts of its counterclaim
• Whether the court should exercise its discretion under Rule 32(5) to refuse summary judgment despite deficiencies in the opposing affidavit
• The proper interpretation of Rule 22(4) regarding counterclaims that would extinguish a claim in whole or in part

The appeal was dismissed with costs. The summary judgment granted by the High Court in favour of the plaintiff for the full amount of its claim was upheld.

An unliquidated counterclaim for an amount less than the plaintiff's claim can, as a matter of principle, constitute a bona fide defence to that part of the plaintiff's claim which the counterclaim, if successful, would extinguish. Payment into court of the balance between the counterclaim and the claim is not a requirement for establishing bona fides in summary judgment proceedings. However, the defendant must still comply with Rule 32(3)(b) by disclosing fully the nature and grounds of the counterclaim and the material facts relied upon. Even where a defendant fails to comply with Rule 32(3)(b), the court retains an overriding discretion under Rule 32(5) to refuse summary judgment, but should be less inclined to exercise this discretion in favour of a defendant where the answer is raised by way of counterclaim (as opposed to a plea), since the defendant is not finally shut out from pursuing the counterclaim in separate proceedings.

Brand JA observed that in summary judgment proceedings, the plaintiff is deprived of the procedural benefit that Rule 22(4) would otherwise enable it to seek (ie, earlier adjudication of the claim). The court can therefore, in exercising its discretion under Rule 32(5), have regard to the different considerations that arise when the defence is by way of counterclaim as opposed to a plea. The court also noted that the remedy of rectification is not one which easily lends itself to a fallback position by way of afterthought, and a party seeking rectification must prove that the written agreement does not correctly express the parties' common intention 'in the clearest and most satisfactory manner'. The court expressed the view that a dishonest defendant is even more likely to inflate an unliquidated counterclaim to exceed the plaintiff's claim, demonstrating that payment into court has nothing to do with bona fides.

This case clarifies important principles regarding summary judgment applications where the defendant raises an unliquidated counterclaim. It establishes that: (1) an unliquidated counterclaim for less than the plaintiff's claim can in principle constitute a bona fide defence to the corresponding portion of the claim; (2) payment into court of the balance is not a requirement for establishing bona fides, though it may be prudent; (3) the defendant must still comply with Rule 32(3)(b) disclosure requirements; (4) courts retain discretion under Rule 32(5) to refuse summary judgment but should be less inclined to exercise it where the answer is by counterclaim rather than plea, since the defendant can still pursue the counterclaim separately; and (5) the court clarifies the interplay between Rules 22(4) and 32 in summary judgment proceedings. The judgment provides important guidance on the stringency with which courts should apply summary judgment procedures and the extent of their discretion.