South Africa: Does Appealing A Default Judgment Amount To An Irregular Step?

In the case of Lee v Road Accident Fund, the Gauteng Division of the High Court held that default judgments are not appealable and that a party's application to seek leave to appeal a default judgment should be set aside as an irregular step.

Background

On 10 January 2019, Ms Lee, who was soon to commence her actuarial studies, was involved in a motor vehicle accident. Consequently, she suffered a brain injury which prevented her from pursuing her studies. She instituted an action against the Road Accident Fund ("RAF") in which she claimed damages arising from the motor vehicle accident.

The damages included general damages, past medical expenses and future earning capacity. In November 2020, the RAF accepted liability for Ms Lee's proven losses, and Ms Lee then proceeded with her action to determine the value of the losses she had suffered. The RAF, however, failed to deliver the notice of its intention to defend the action and also did not put anything on record that indicated that they were disputing the quantum of the loss claimed by Ms Lee. This led to Nel AJ directing the matter to proceed without the RAF's representative being present. In the absence of opposition by the RAF, Lenyai AJ granted Ms Lee damages in the amount of just under ZAR13 500 000.

The RAF failed to pay Ms Lee the damages awarded despite undertaking to make the payment. This led to Ms Lee instituting an application to compel the loading of the payment due to her onto the RAF's payment system. In response, eight months after the order was granted, the RAF advised Ms Lee that it would seek to rescind Lenyai AJ's order. As a result, Ms Lee then removed her application to compel payment from the roll in order to allow the RAF to bring its recission application. However, the rescission application was never instituted. Instead, the RAF filed an application for leave to appeal Lenyai AJ's order a year after the order was granted. Ms Lee was of the view, however, that the application for leave to appeal was an irregular step and thus applied to the court to set aside the application.

The critical question before the court was whether a default judgment is appealable or not.

Ms Lee, relying on the Supreme Court of Appeal's ("SCA") decision in Pitelli v Everton Gardens Projects, argued that "a court order is not appealable until it becomes final. A court order does not become final if it is rescindable. It follows that an order that can be rescinded is not appealable."

The court noted that it is hard to reconcile the decision of the SCA in the Piteli case with earlier decisions of the Appellate Division that contradict this decision. By way of an example, in Tshivhase Royal Council v Tshivhase, the Appellate Division held that an appeal against an erroneous order could be pursued simultaneously with a rescission application under Rule 42(1)(c), which deals with the rescission of orders granted as a result of a mistake common to the parties.
The court also ruled that the Pitelli case did not pose any precedent-related challenges. This was because, in contrast to the Tshivhase Royal Council case, the Piteli case dealt with default orders. The court further found it to be a reasonable approach for addressing challenges to orders granted when one party was absent.

However, a challenge with appealing such orders is that the argument the absent party would have made doesn't appear in the appeal record. It can only be presented to the appellate court, if at all, through an application to introduce new evidence.

The court determined that the idea of appealing a default judgment is at odds with the purpose of an appeal, which is to review cases that have been fully argued in the initial instance. This is because an appellate court, when asked to reevaluate a judgment granted against a party in their absence, faces a dilemma. It must choose between acting as a primary decision-maker or sending the case back to the initial court (which can be achieved through a rescission application).

The court emphasised that "A court of appeal ought generally only to intervene when the proceedings in the court below are complete. For so long as the court a quo can, in principle, alter or reconsider its order, an aggrieved party's remedy lies there. One exception to this rule is where it is in the interests of justice to entertain an appeal against an interim interdict that would cause irreparable harm to the party against whom it operates".

According to the High Court, the above principle was recognised in the Pitelli case. The court thus concluded that on the decision of Pitelli, Lenyai AJ's order that was granted in default is, therefore, not susceptible to an appeal. The order granted in the absence of the RAF is only rescindable. Therefore, as per the judgment of Pitelli, an attempt to appeal rather than to rescind amounted to an irregular step.

The court further noted that in the Gauteng Division case of Moyana v Body Corporate of Cottonwood that was relied upon by the RAF, Gautschi AJ held that it was not persuaded that the findings in the Pitelli case were correct and thus granted an order that was inconsistent with Pitelli. In response to Gautschi AJ's order, the Court asserted that the judgment of the Pitelli case was binding on the High Court (since it was decided by a higher court), and thus, it was not open to the court to depart from it simply because it thought that the judgment was wrong. Similarly, it is also not open to this court to depart from the Pitelli case.

It was also held that there is no real procedural advantage that justified the RAF appealing the default judgment as opposed to applying for a rescission. The court reasoned that even though appeal applications result in an automatic suspension of an order under appeal, a party can also ask a court to exercise its powers under Rule 45A to suspend the execution of the order while the rescission application is heard. This will generally be granted where its failure to do so would result in irreparable harm.

Conclusion

The court thus concluded that an order granted in a party's absence is not appealable but can be set aside by way of a rescission application. Where a party seeks leave to appeal a judgment granted against it in their default, such party's application constitutes an irregular step and falls to be set aside.

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