Zanokhanyo Trading CC and Another v ABSA Bank Limited

The first applicant, Zanokhanyo Trading CC, entered into an instalment sale agreement with the respondent on 4 February 2021 for the purchase of a Mercedes Benz motor vehicle, payable in 60 monthly instalments. The second applicant, the sole director of the first applicant, stood as surety and co-principal debtor. The first applicant failed to pay certain instalments. The respondent complied with section 129 of the National Credit Act 34 of 2005 by sending a notice on 29 June 2023 showing arrears of R87,528.66. Despite negotiations and partial payments, the arrears were not fully settled. Summons was issued on 8 November 2023. The summons was served by affixing to the principal door and main gate at the respective domicilia of the applicants. On 16 January 2024, Beshe J granted default judgment confirming cancellation of the agreement and ordering delivery of the vehicle. The applicants then applied for a stay of execution of the warrant of delivery and rescission of the default judgment, alleging they never received the summons.

• Whether the default judgment was erroneously granted under Rule 42(1)(a) of the Uniform Rules of Court
• Whether sufficient cause existed for rescission of the default judgment under common law
• Whether the applicants provided a reasonable explanation for their default in defending the action
• Whether the applicants had a bona fide defence with prospects of success

The application was dismissed with costs on Scale A.

A judgment is not erroneously granted under Rule 42(1)(a) where there are valid returns of service demonstrating proper service and the court was procedurally entitled to grant the judgment. For rescission of a default judgment at common law, an applicant must establish sufficient cause by showing both (i) a reasonable and acceptable explanation for the default, and (ii) a bona fide defence with prospects of success. An applicant who fails to engage with returns of service or explain why summons affixed to their premises would not have been seen does not provide a reasonable explanation for default. Where an applicant acknowledges arrears, makes partial payments that do not extinguish the arrears, and continues to be in arrears at the time of judgment, there is no bona fide defence to a claim for cancellation of an instalment sale agreement and delivery of the goods, regardless of the specific amount of arrears mentioned in the summons.

The court observed that while an unsatisfactory explanation for default may not be fatal if there is a bona fide defence with good prospects of success, the converse applies—even a marginally acceptable explanation will not succeed without a viable defence on the merits. The court also noted that it was 'somewhat disingenuous' for the second applicant to maintain that arrears had been settled and he did not concern himself further about arrears, when he failed to disclose fully the email correspondence showing his acknowledgement of substantially higher arrears and his offer to settle them. This suggests the court's expectation of utmost good faith and full disclosure in rescission applications.

This case reinforces the requirements for rescission of default judgments in South African law, both under Rule 42(1)(a) and at common law. It emphasizes that: (1) a judgment is not erroneously granted where proper service has been effected and the applicant was procedurally entitled to judgment; (2) applicants seeking rescission must provide adequate explanations for default and cannot simply deny service without engaging with returns of service; (3) full and frank disclosure is required in rescission applications; and (4) in instalment sale agreements, partial payments that do not extinguish arrears do not constitute a valid defence to claims for cancellation and delivery of goods. The case also clarifies that where the substantive relief sought is cancellation and delivery (rather than payment of a debt), the specific amount of arrears mentioned in the summons is not determinative—what matters is whether arrears existed justifying cancellation at the time of judgment.