What constitutes a bona fide defence in a Summary Judgment Application?

What exactly constitutes a bona fide defence when faced with a Summary Judgement Application? This is a question that has been debated about in many different circles of law but the case below will give a better insight as to what is expected from the Defendant/Respondent in such application.

On the 26th of February 2019 Acting Judge PA Myburgh handed down judgment in the High Court of the Western Cape Division, Cape Town in the matter between He and She Investments (Proprietary) Limited and Deon Hendrik Brand N.O., Meyer Goosen, Eclipse Systems and Brian Riley under case number 23198/2018 as well as He and She Investments (Proprietary) Limited’s matter against Deon Hendrik Brand N.O., Meyer Goosen, Tyremac Tyres and Tubes CC and Mogamad Firoz Abrahams under case number 23199/2018.

On the 18th of December 2018 He and She Investments (Proprietary) Limited (hereinafter referred to as He and She Investments) issued summons under the aforementioned case numbers against Deon Hendrik Brand (“Brand”) N.O., Meyer Goosen (“Goosen”) in both claims and Eclipse Systems (“Eclipse”) and Brian Riley (“Riley”) in the first claim and Tyremac Tyres and Tubes CC (“Tyremac”) and Mogamad Firoz Abrahams (“Abrahams”) in the second claim. All parties delivered their Notices of Intention to Defend whereafter He and She Investments applied for Summary Judgment in respect of both claims. Due to the similarity between the two claims, the applications were heard together.

He and She Investments operate a driving school, Brand is the executor of the Estate of the Late Johanna Elizabeth Goosen, who was a Director of the company and Goosen is an erstwhile employee of He and She Investments. Both claims arise out of the abuse of fleet management credit cards by Goosen.

These applications were brought in terms of Rule 32(1)(b), which allows the Plaintiff to apply for summary judgment for a liquidated amount of money, as is the case here. When faced with a summary judgment application a Defendant has two options to its disposal, namely:

(a) Security for costs and judgment debt to be paid to the Court or; (b) satisfy the Court by an affidavit that he has a bona fide defence to the action where such affidavit or evidence shall disclose fully the nature and grounds of the defence and the material facts relied upon, therefore.

The question of what constitutes a sufficient defence to ward off summary judgment has been the subject matter of many reported cases. If granted, summary judgment significantly abbreviates the judicial process by obviating the holding of a trial. Summary judgment is also open to abuse by both parties since it is sometimes utilised by the Plaintiff in order to force a Defendant to hastily go on affidavit even though the Plaintiff is aware that the Defendant has a defence that should be tested in a trial. This affidavit is then used for cross-examination purposes at the trial but it also does happen that the Defendants, well knowing that they do not have a sufficient defence, put together an affidavit in the hope, that by kicking up enough dust, this deficiency remains hidden for a while longer. It is therefore evident that one needs to re-visit the legal principles pertaining to summary judgment as well as the manner in which the principals are given context in their application to the fact.

Counsel for He and She Investments quoted the matter of Maharaj v Barclays National Bank Ltd where Acting Judge Corbett held that “a Court does not attempt to decide these issues or determine whether or not there is a balance of probabilities in favour of the one party or the other. All that the Court enquires into is: (a) whether the Defendant has “fully” disclosed the nature and grounds of his defence and the material facts upon which it is founded, and (b) whether on the facts so disclosed the Defendant appears to have, as to either the whole or part of the claim, a defence which is both bona fide and good in law. While the Defendant need not deal exhaustively with the facts and the evidence relied upon to substantiate them, he must at least disclose his defence and the material facts upon which it is based with sufficient particularity and completeness to enable the Court to decide whether the affidavit discloses a bona fide defence”.

In the Maharaj case, Barclays had paid out an amount on behalf of Maharaj and claimed repayment of that amount, along with interest. Maharaj, in an affidavit, explained that he had instructed the bank to stop the payments on which the claim was based and that he thereafter froze his account. Hence, as Maharaj said, in the absence of his instruction, he did not owe Barclays the money as the bank had advanced the money without a mandate. It is based on the aforesaid that Acting Judge Corbett found that the affidavit does indeed appear to raise a bona fide defence and that it has disclosed this defence and the material facts upon which it is founded with just-and only just-sufficient particularity and completeness in order to comply with Rule 32(3)(b). It is thus important to scrutinise the Defendants’ affidavit as a whole, the test being whether, despite its shortcomings, a defence is disclosed or not.

Furthermore, in the matter between Pansera Builders Suppliers (Pty) Ltd v Van der Merwe (t/a Van der Merwe’s Transport) the Court said that it should guard against speculation and conjecture and be astute not to substitute the information which is before the Court with actual information which has not been placed before it. Where there is an absence of the necessary allegations upon which a defence is founded, it would be contrary to the judicial approach to exercise discretion against the Plaintiff in favour of the Defendant.

In the aforesaid case, the Plaintiff, as the owner of a factory, claimed ejection. The Defendant relied on an option to remain in the factory for a further period of 12 months but failed to state that he had exercised such option. It was argued on his behalf that the Court should “imply that the Defendant exercised the option from the facts”. The Court said that a defence must be set out sufficiently and particularised as an imprecise setting out of a defence can be excused but, in the Court’s view, not an incomplete defence. The Court, therefore, found that the Defendant did not have a sufficient defence and granted summary judgment in favour of the Plaintiff.

In the first claim of this subject case, He and She Investments allege that the deceased, or Goosen, or both of them, colluded with Riley by utilising its fleet cards to misappropriate R4 034 706.47. This, it alleges, was done using the credit card facilities at Eclipse. The proceeds of the fraudulent scheme, less 20% commission that was retained by Eclipse, were then paid into Goosen’s personal bank account and so the He and She Investments were impoverished at the expense of Riley and Goosen. The merits in the second claim are similar but the difference being that instead of Riley, the other parties involved were Abrahams and Tyremac, and this claim was for R2 446 735.29.

Goosen, in his affidavit, admitted that there were certain transactions made with the fleet cards that were arranged by them, working with Riley/Eclipse, Abrahams/Tyremac and that the proceeds of these transactions, less the 20% commission retained by Riley/Eclipse and Abrahams/Tyremac, were paid into his personal bank account. He explains that at the time he did not realise that these transactions might have been fraudulent and that he was instructed by the deceased to do what he had done. The deceased also told him to do it and utilise the proceeds for the maintenance, repairs and upgrading of a family farm which he resided on. He further stated that the deceased requested him to do these transactions in order to improve the cash liquidity of the company.

It is important to note that Goosen did not provide any particularity at all regarding the use of the funds which was diverted to his account, despite this being relatively easy to do. Furthermore, one would have expected that, given that a critical part of his defence was that he gained no benefit from funds transferred into his account, he would have provided more information to show that this was indeed the case. His failure to do so is telling.

Furthermore, Goosen stated that, without much particularity, He and She Investments borrowed money from him and that this would form part of a counterclaim but he does not state where the loan was concluded, who represented He and She Investments or whether the loan agreement was oral or in writing. His lack of particularity is strange given that he was a party to the agreement and thus the information would surely be within his knowledge. Goosen’s defence, as discussed in the Pansera case, does not provide the skeleton of a defence and nor does he do so in respect of his counterclaim.

Riley/Eclipse and Abrahams/Tyremac’s defences were similar to each other with both confirming that they were approached by Goosen to use the credit card machine to process the transactions since He and She Investments “required cash liquidity” and that they would earn their 20% commission on each transaction. Neither parties provided bare bones of this agreement which founded their defence.

Both parties also stated that 80% of each transaction, after deduction of the commission, was paid into Goosen’s personal bank account. How this would assist He and She Investments in approving its cash liquidity, when, on the face of it, the opposite would be the case, neither party explains. They also said that they were not of the opinion that the transactions were fraudulent at the time.

It is quite evident that each transaction that was processed without there being an underlining supply of services or goods, was fraudulent for the reasons being that the scheme involved in misrepresentation, there was an abuse of the fleet cards, the transactions were paid into Goosen’s personal bank account and the retention of an exorbitant 20% commission in order to effect transactions that were ostensibly to finance He and She Investments without any services, simply does not make sense.

Whilst the parties alleged that the scheme was born out of an agreement which is highly questionable, in any event, it is unenforceable due to it being illegal. An agreement is illegal if it is against public policy and good morals and it follows that reliance on an illegal and hence unenforceable agreement does not constitute a valid defence in law.

Whilst taking the above into consideration, the Court held that none of the Defendants had a bona fide defence in law and as such granted summary judgment in favour of the Plaintiff in both claims.

The aforementioned cases provide us with good examples of what constitutes a proper defence in order to properly defend an application for summary judgment and what doesn’t.

It is important to note that the Minister of Justice recently amended Rule 32 regarding the summary judgment and more specifically Rule 32(2)(a) wherein it is stated that a Plaintiff may, within 15 days after the delivery of the plea, deliver a notice of application for summary judgment together with an affidavit made by the Plaintiff or by any other person who can swear positively to the facts. The Plaintiff shall, in the affidavit referred to sub-rule 2(a), verify the cause of action and the amount, if any, claimed and identify any point of law relied upon and the facts upon which the Plaintiff’s claim is based and explain briefly why the defence as pleaded does not raise any issue for trial.

By  Werner Cilliers
Associate Attorney