(1) GONDO & ANOR v SYFRETS MERCHANT BANK LTD

(2) SANI TOILET SYSTEMS (PTY) LTD v SYFRETS MERCHANT BANK

(3) SYFRETS MERCHANT BANK v GONDO & ANOR
(4) SYFRETS MERCHANT BANK v SANI TOILET SYSTEMS (PVT) LTD
1997 (1) ZLR 201 (H)
Division: High Court, Harare
Judges: Devittie J
Subject Area: Civil application
Date: 12 February 1997
Judgment Number: HH-33-97

Practice and procedure — judgment by consent — rescission — error common to both

parties — subsequent case establishing rule of law which would have affected parties’
decision not to oppose judgment — r 449 of High Court Rules — application of — need
to establish that rule of law had in fact been broken — whether court should use common
law power to rescind its own judgment
Interest — rate — the in duplum rule — debtors not opposing judgment because unaware
of rule — seeking rescission of judgments on basis that would have defended claims had
they been aware of in duplum rule
Judgments had been obtained against the applicants in respect of certain debts owed by
them. The applicants decided not to oppose the proceedings because they did not at the
time think they had any defences to the claims. Subsequently, there had been a ruling by
the High Court (Commercial Bank of Zimbabwe Ltd v MM Builders & Suppliers (Pvt)
Ltd & Ors 1996 (2) ZLR 420), that had clearly established that the in duplum rule applied
in Zimbabwe. If they had been aware of this they would have defended the actions, at
least in respect of part of the claim. They applied for rescission of judgment.
Page 202 of 1997 (1) ZLR 201 (H)
Held, that in terms of r 449 of the Rules of the High Court the court could rescind a
judgment where the judgment was granted as a result of a common mistake of the parties.
However, in the present case, even assuming that the parties were labouring under a
common mistake, the applicants would have had to go further and prove that the amount
of the judgment debt breached the in duplum rule. On the papers before it, the court could
not be satisfied that the applicants had furnished the requisite proof that the judgment had
been granted in error. The judgments in fact reflected the true decision of the court on the
basis of the evidence presented.
Held, further, that although r 449 did not apply, the court also had a discretionary power
under the common law to rescind its own judgments. This power extended beyond, and
was not limited to, the grounds set out in the Rules of the High Court. In respect of the
first application, rescission would not be granted as the first applicant had not established
that he had a bona fide defence which carried some prospect of success as he had failed
to demonstrate that the in duplum rule had been breached in his case. On the other hand,
in respect of the second application, partial rescission of the judgment would be granted
as the second applicant may have had a bona fide defence to part of the claim.
Cases cited:
Bakoven Ltd v GJ Howes (Pty) Ltd 1992 (2) SA 466 (E)
Commercial Bank of Zimbabwe Ltd v MM Builders & Suppliers (Pvt) Ltd 1996 (2) ZLR
420 (H)
de Wet & Ors v Western Bank Ltd 1979 (2) SA 1031 (A)
Dzviti v Mutasa 1990 (1) ZLR 342 (H)
Firestone SA (Pvt) Ltd v Genticuro AG 1977 (4) SA 29 (A)
Maia v Total Namibia (Pvt) Ltd 1991 (2) SA 188 (Nm)
Standard Bank of SA v Oneanate Invstms (Pty) Ltd 1995 (4) SA 510 (C)
Terrace Auto Svcs Centre (Pvt) Ltd & Ors v First National Bank of SA 1996 (3) SA 209
(W)
Tshivhase Road Council & Anor v Tshivhase 1992 (4) SA 852 (A)
Statutes and regulations referred to:
High Court Rules 1971 (RGN 1047/1971), r 449
J C Andersen SC, for the applicants
A P de Bourbon SC, for the respondents
DEVITTIE J: In recent times, the money market in this country has been
Page 203 of 1997 (1) ZLR 201 (H)
characterised by high interest rates. This has had the consequence that where a debt
remained unserviced it took a relatively short period of time (in comparison to economies
with low interest rates) for a borrower’s liability in respect of interest to equal or exceed
the capital outstanding.
This situation generated considerable public debate particularly amongst borrowers who,
having defaulted on their loans, found cause to question whether there was cut off point
beyond which they were not liable for interest. The debate received impetus from the
judgment of SELIKOWITZ J in Standard Bank of South Africa v Oneanate Invstms 1954
(4) SA 510 (c), which applied what is now known as the in duplum rule.
It is against this background that four judges of this court seized the opportunity
presented in three chamber applications for default judgment to deal with the application
of the in duplum rule in this jurisdiction.
In Commercial Bank of Zimbabwe v MM Builders & Suppliers (Pvt) Ltd 1996 (2) ZLR
420 (H), this court held that the in duplum rule was part of our law. GILLESPIE J, after a
thorough review of the authorities, articulated the rule thus:
“It is a principle firmly entrenched in our law that interest, whether it accrues as simple or
as compound interest, ceases to accumulate upon any amount of capital owing, whether
the debt arises as a result of a financial loan or out of any contract whereby a capital sum
is payable together with interest thereon at a determined rate, once the accrued interest
attains the amount of capital outstanding. Upon judgment being given, interest on the full
amount of the judgment commences to run afresh but will once again cease to accrue
when it waxes to the amount of the judgment debt, being the capital and interest thereon
for which cause was instituted.”
An interesting sequel to the decision in the MM case concerns a debtor who having taken
a deliberate decision not to oppose a claim for capital and interest subsequently seeks to
set aside the judgment obtained on the grounds that the judgment debt contravenes the in
duplum rule and that had he been aware of the rule he would have defended the claim in
respect of which judgment was obtained. That is the contention advanced by the
applicants in the two applications for rescission before me.
The judgments to be set aside were granted against the applicants on 26 January 1994 and
28 February 1995. The first application is by Reuben and
Page 204 of 1997 (1) ZLR 201 (H)
Another HC-6612/96 and the second application is by Sani Toilet Systems (Pvt) Ltd HC-
6613/96. The respondent, in consequence of the judgments sought to be rescinded seeks
an order confirming the sequestration of the estates of Reuben Gondo & Anor (first
applicant) and an order placing Sani Toilet Systems (Pvt) Ltd (second applicant) in
liquidation. For reasons which will become apparent, it was convenient to hear all the
matters together.
Both applications for rescissions have their genesis in an action which respondent
instituted in September 1993 against Kamsoko Holdings (Pvt) Ltd and Reuben Gondo &
Another (the first applicant) in which it claimed payment of the sum of $1 407 760.45
with interest at 39.5% calculated from 1 October 1993. The applicant entered appearance
to defend whereupon the respondent applied for summary judgment. It is common
ground that the first applicants did not contest the application for summary judgment as
they considered that they had no defence to the claim. They state that they were not
aware that a defence was available to them under the in duplum rule. Accordingly, the
respondent obtained judgment on 26 January 1994 in the sum claimed.
After judgment was obtained, it appears that some efforts were made to settle the matter.
These efforts resulted in Sani Toilet Systems (Pvt) Ltd (the second applicant) giving an
unlimited guarantee in respect of the judgment debt.
As I understand the in duplum rule, interest on the full amount of the judgment debt
would have commenced to run afresh from the date of the judgment.
In January 1995, the respondent sought and obtained judgment against Sani Toilet
Systems (Pvt) Ltd for the judgment debt which had been guaranteed and remained
unsatisfied. In terms of the unlimited guarantee given by Sani Toilet Systems, the
respondent claimed interest at the rate of 40.5% with effect from January 1995 and
judgment was obtained in the sum of $2 490 751,56 on 28 February 1995. Sani Toilet
Systems (Pvt) Ltd did not defend the action for the same reason that first applicant gives.
The two judgments remained unsatisfied and on 21 December 1995, the respondent filed
an application for the liquidation of Sani Toilet Systems (Pvt) Ltd, and a separate
application for the sequestration of the personal estates the Gondos.
Thereafter, the applicant initiated further efforts to resolve the matters in contention. The
legal practitioner acting for both applicants requested details
Page 205 of 1997 (1) ZLR 201 (H)
of all monies lent and advanced to enable him to determine whether there had been a
breach of the in duplum rule. These details were provided. On 1 March 1996,
respondent’s legal practitioner wrote to applicants’ legal practitioners in the following
terms:
“Further to our letter of 23 February 1996, please note that without prejudice to its rights
and in an effort to reach agreement in this matter without further delay, our clients are
prepared to settle it on the basis of a payment by your client of the capital amount and
interest in an equivalent amount.”
The applicants were amenable to this suggestion and their legal practitioner undertook to
calculate the capital and interest. On 16 April 1996, the applicants’ legal practitioner
wrote to the respondent:
“The extent of our clients indebtedness is as follows:

(a) Account No. 946094-4

(i) capital $486 945,89
(ii) interest$486 945,89
(b) Account No. 9400763-4
(i) capital $596 284,13
(ii) interest$596 284,13
$2 166 460,04.”

The respondent agreed to accept that that the total amount owing to it in respect of each
judgment debts was $2 166 460,04. The applicants sought an indulgence in paying this
amount in installments but the respondent insisted on full payment. It is common ground
that to date no payment has been made to settle the amount admitted by the applicants.
The applicants have opposed the applications for the sequestration and liquidation of their
respective estates and they seek an order setting aside the judgments obtained on 26
January 1994 and 28 February 1995. If the applications for rescission succeed, then I
must discharge the provisional orders.
The judgments sought to be rescinded are default judgments. In terms of the rules of
court, an application for rescission of a default judgment, may, depending on the
circumstances, be brought in terms of r 63, r 449 or the common law.
Page 206 of 1997 (1) ZLR 201 (H)
The present applications for rescission are brought in terms of r 449 which provides that
the court may, in addition to another powers it may have, mero motu or upon application
of any party affected, rescind or vary:
“(a) an order or judgment erroneously sought or erroneously granted in the
absence of any party affected;
(b) an order or judgment in which there is an ambiguity or patent error or
omission, but only to the extent of such ambiguity, error, or omission;
(c) an order or judgment granted as the result of a mistake common to the
parties.”
Mr Andersen for the applicants submitted that the judgments ought to be set aside in
terms of r 449(1) as they were obtained as a result of an error common to the parties. In
support of his submission, he cited Tshivhase Road Council & Anor v Tshivhase 1992
(4) SA 852 (A) at 862 and Dzviti v Mutasa 1990 (1) ZLR 342 (H).
He submitted that both parties took the view that the in duplum rule “precluded interest in
excess of the capital amount or further interest on the judgment debt and reached
agreement that the amount due was $486 945,89 in respect of the capital sum and the
same amount in respect of the interest”. He submitted that but for the fact of a mistaken
belief held by each of the parties, the respondent would not have claimed the amount it
did in the first instance, and that the applicants would certainly have resisted any claim in
excess of the amount subsequently agreed.
Mr de Bourbon for the respondent submitted that no mistake had occurred because a
calculation of the capital and interest outstanding demonstrated no breach of the in
duplum rule. On that basis, he submitted, the court had no jurisdiction to invoke r 449(1)
(c).
The immediate question to be resolved is whether the judgments in respect of which
rescission is sought were granted as a result of “a mistake common to the parties” in
terms of r 449(1)(c).
In Tshivane Road Council v Tshivane supra NESTADT JA stated that the South African
equivalent of r 449 (which is worded in identical terms to our rule) is an exception to the
general principle that “a final order, correctly
Page 207 of 1997 (1) ZLR 201 (H)
expressing the true decision of the court cannot be altered. The judge is functus officio:
Firestone South Africa (Pvt) Ltd v Genticuro AG 1977 (4) SA 29 (A)”. The court stated
two broad requirements to be satisfied for r 499(1)(c) to be successfully invoked:
“One is that there must have been a ‘mistake common to the parties’. I conceive the
meaning of the expression to be what is termed, in the field of contract, a common
mistake; they are, in this regard, ad idem (see Christie Law of Contract in South Africa 2
ed at 382 and 397-8). A mistake of fact would be usual type relied on. Whether a mistake
of law and of motive must be reasonable are not questions which, on the facts of our
matter arise. Secondly, there must be a causative link between the mistake and the grant
of the order or judgment; the latter must have been as the result of the mistake. This
requires, in the words of ELOFF J in Seedat v Orai & Anor 1984 (2) SA 198 (T) at 201D,
that the mistake relate to and be based on something relevant to the question to be
decided by the court at the time. Other cases which illustrate this are Ex p Barclays Bank
1936 AD 481 and van Zyl v van der Merwe 1986 (2) SA 132 (NC). The principle is that
you cannot subsequently create a retrospective mistake by means of fresh evidence which
was not relevant to any issue which had to be determined when the original order was
made. The reason is obvious: the court would at that time have had before it no evidence
and thus no wrong evidence on the point; hence there would have been no mistake.
Contrast this with the case where the subsequent evidence is aimed at showing that the
factual material which led the court to make it’s original order was, contrary to the parties
assumption as to its correctness, incorrect. Here we would have the type of situation
envisaged by r 42(1)(c).”
In Bakoven Ltd v G J Howes (Pty) Ltd 1992 (2) SA 466 (E) it was held that the purpose
of the rule is to correct an obviously incorrect judgment or order.
In order for the rule to be invoked there must be a common mistake, in regard to which
the parties were ad idem. Even it is accepted that the parties laboured under a common
mistake as to the application of the in duplum rule, the applicant must go further and
prove that the amount of the judgment debt in fact breached the in duplum rule. In other
words, the mistake must be proved. I am not satisfied on the papers before me that the
applicant has furnished the requisite proof. In the absence of demonstrable proof that the
judgments sought to be impugned breached the in duplum rule I am unable to accept that
judgment was granted in error. Furthermore, in my opinion, the judgments
Page 208 of 1997 (1) ZLR 201 (H)
reflected the true decision of the court on the basis of the evidence presented. As
NESTADT JA stated in Tshivase’s case, “You cannot subsequently create a retrospective
mistake by fresh evidence which was not relevant to any issue to be decided at the time”.
I must now deal with Mr Andersen’s contention that the agreement which the parties
reached as to the sum owing judgment, and that on that basis it is proper that it be set
aside. Attractive though this submission may be, I do not consider that the respondent
abandoned the judgment which it obtained. In the first instance, no agreement was
reached, because the negotiations broke down over the terms of payment. There are many
instances in which, after judgment has been obtained, the parties enter into negotiations
in an effort to settle the amount claimed. I do not think that it would be fair to hold that if
the parties agree on a settlement figure then that amounts to an abandonment of the
judgment and disentitles the judgment creditor to rely on the judgment obtained in
circumstances where there is no agreement as to the terms of payment. To do so would be
to unnecessarily discourage the negotiations which take place after judgment has been
obtained and which are part and parcel of ordinary day commercial life.
Although I have found that the applicants are not entitled to invoke r 449, this court has
the jurisdiction at common law to rescind its own judgment and it is on the basis of the
common law principles that I propose to decide the applications for rescission. I must add
that I would not have considered it inappropriate had the application been brought in
terms of r 63.
In de Wet & Ors v Western Bank Ltd 1979 (2) SA 1031 (A) at 1043 TRENGOVE AJA,
after an extensive review of the authorities, stated that the court’s common law
discretionary power should not be unduly restricted:
“It follows from what I have said that the court’s discretion under the common law
extended beyond, and was not limited to, the grounds provided for in r 31 and 42(1), and
those specifically mentioned in the Childerley case. These grounds do not, for example,
cover the case of a litigant, or his legal representative, whose default is due to unforeseen
circumstances beyond his control, such as sudden illness, or some other such
misadventure.
In the result, I have come to the conclusion that the court of first instance erred in taking
too rigid a view of the ambit of the court’s discretionary power to rescind default
judgments. The test which it applied in deciding
Page 209 of 1997 (1) ZLR 201 (H)
whether to grant the applicants the indulgence sought was too stringent and not in
accordance with the principles of our common law. That being the position, it now
becomes necessary for this court to consider whether having regard to all the
circumstances of the case, including the applicant’s explanation for their default, this is a
proper case for the grant of indulgence.”
I am prepared to accept in the applicants’ favour that at the time they made what was a
deliberate decision not to oppose the proceedings they were not aware of the in duplum
rule and that, had they known of the rule, efforts would have been made to defend at least
part of the claim. I do not consider the explanation given for the applicants’ default to be
unsatisfactory, given the fact that this matter involves a rule which until recently was not
strictly adhered to.
In regard to the merits of the applicants’ defence, it must be stated at the outset that the
applicants conducted an exercise to determine the extent of their indebtedness and
admitted liability in a specific sum. I have not been apprised of the exact basis on which
they sought amongst other considerations to apply the in duplum rule. I am not satisfied
that, in respect of the first application for rescission, the applicant has shown a bona fide
defence which carries some prospect of success. The applicants have not demonstrated
the extent, if any, to which the rule was breached. It is not sufficient to simply make the
averment that the amount claimed in interest exceeds the capital outstanding. My own
assessment of the accounts does not lead me to the conclusion that the interest claimed
exceeded the capital outstanding at the time proceedings were instituted.
In respect of the second application for rescission, I am prepared to accept that the
applicant may have a bona fide defence to that part of the claim which exceeds the sum
admitted. I propose to grant judgment in the sum admitted. I am satisfied that it is
competent for me to grant what is in effect partial rescission.
In Terrace Auto Services Centre (Pvt) Ltd & Ors v First National Bank of South Africa
1996 (3) SA 209 (W) REUBEN AJ declined to grant partial rescission on the grounds
that —
“once a defendant in an application for rescission presents a reasonable and acceptable
explanation for his default, his default is purged. He is then entitled, provided he can
show in addition that he has a bona fide
Page 210 of 1997 (1) ZLR 201 (H)
defence to the plaintiff’s claim, to be put back in the position that he would have
occupied but for his default. I can see no reason why a defendant should not in those
circumstances be revested with the procedural advantages which the rules of court offer a
defendant in the ordinary case.”
REUBEN AJ recognised the court’s discretionary power at common law to order partial
rescission.
In Maia v Total Namibia (Pvt) Ltd 1991 (2) SA 188 (Nm) partial rescission was ordered
in an application not brought in terms of the common law but in terms of the rules of
court. O’LINN J stated that —
“It is self evident that it is unreasonable and absurd to set aside a judgment for the total
amount if only a bona fide defence against a small part of the claim is shown.”
I think that the above comment applies to the second application for rescission. In my
view, it would be inequitable not to order partial rescission. I therefore order as follows:
1. In case No. 6612/96, the application for rescission is dismissed with costs.
2. In case No. 6613/96, the application for rescission partially succeeds, in
that the applicant is given leave to defend the balance of the judgment debt only to the
extent that it exceeds the admitted sum of $2 166 460,04. The judgment is confirmed in
all other respects.
3. The applicant is to bear costs in respect of both applications.
I turn now to deal with the applications for the sequestration and liquidation of the
applicants’ respective estates. In the view of the orders I have made on the applications
for rescission, the conclusion that inevitably flows is that the provisional orders ought to
be confirmed.
The provisional orders in cases No. 9020/95 and 9019/95 are accordingly confirmed.
Kantor & Immerman, legal practitioners for the applicants
Gill, Godlonton & Gerrans, legal practitioners for respondent