Zanokhanyo Trading CC and Another v ABSA Bank Limited

The first applicant, Zanokhanyo Trading CC, entered into an instalment sale agreement with ABSA Bank Limited (respondent) on 4 February 2021 for the purchase of a Mercedes Benz motor vehicle, with payment to be made in sixty monthly instalments. The second applicant, the sole director of the first applicant, bound himself as surety and co-principal debtor. The first applicant failed to pay certain instalments. The respondent complied with s 129 of the National Credit Act 34 of 2005, notifying the applicants of arrears and their rights. The applicants failed to remedy the breach and the agreement was cancelled. Summons was issued on 8 November 2023 claiming arrears of R87,528.66. The respondent obtained a default judgment on 16 January 2024 from Beshe J confirming cancellation and ordering delivery of the vehicle. The applicants then applied for rescission of the default judgment and a stay of execution, claiming they never received the summons and that the arrears had been paid by the time summons was issued.

• Whether the default judgment was erroneously granted under Rule 42(1)(a) due to alleged non-service of summons
• Whether the applicants established sufficient cause for rescission of the default judgment under common law
• Whether the applicants provided a reasonable and acceptable explanation for their default
• Whether the applicants had a bona fide defence with prima facie prospects of success on the merits

The application was dismissed with costs on Scale A.

1. A judgment is not erroneously granted under Rule 42(1)(a) where returns of service demonstrate proper service at the chosen domicilium citandi et executandi and the court was procedurally entitled to grant the judgment. 2. For rescission of a default judgment under common law, an applicant must establish sufficient cause by providing both (i) a reasonable and acceptable explanation for the default, and (ii) a bona fide defence which prima facie carries some prospect of success (following Chetty v Law Society, Transvaal 1985 (2) SA 756 (AD)). 3. Where an applicant alleges non-receipt of summons but fails to engage with returns of service or explain why service would not have been effective, the explanation for default is deficient. 4. Partial payments that do not extinguish arrears under an instalment sale agreement do not constitute a defence to a claim for cancellation of the agreement and delivery of the vehicle where arrears continue to exist at the time of judgment.

The court observed that where there is a bona fide defence with a good prospect of success, one may not place too much emphasis on an unsatisfactory explanation for default. However, this principle did not assist the applicants as they failed to establish a bona fide defence. The court also noted that it was "somewhat disingenuous" for the second applicant to maintain that arrears had been settled when he failed to disclose the full email correspondence with the respondent's attorneys showing his acknowledgment of higher arrears and his payment proposals.

This case reinforces the requirements for rescission of default judgments in South African law, emphasizing that applicants must satisfy both limbs of the Chetty test: providing a reasonable explanation for default and demonstrating a bona fide defence with prima facie prospects of success. It illustrates that courts will scrutinize claims of non-service where returns of service exist, and applicants must engage meaningfully with such evidence. The judgment also demonstrates that in instalment sale agreements, partial payments that do not extinguish arrears do not constitute a defence to claims for cancellation and delivery of the vehicle. The case highlights the importance of full disclosure in affidavits, particularly where correspondence exists that contradicts the applicant's version.