THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Case No: 191/09

In the matter between:

FRANCESCO PITELLI
Appellant

and

EVERTON GARDENS PROJECTS CC
Respondent

Neutral citation: Pitelli v Everton Gardens Projects CC (191/09) [2010]
ZASCA 35 (29 March 2010)

Coram:
NUGENT, CLOETE, MLAMBO, TSHIQI JJA and
MAJIEDT AJA

Heard:
01 MARCH 2010

Delivered:
29 MARCH 2010

Summary:
Appealability of order taken by default – order capable of
being rescinded by court below – not appealable.

_______________________________________________________________________

ORDER
_______________________________________________________________________

On appeal from: North Gauteng High Court, Pretoria (Van der Merwe J
sitting as court of first instance)

The appeal is struck from the roll with costs.
_______________________________________________________________________

JUDGMENT
_______________________________________________________________________

NUGENT JA (CLOETE, MLAMBO, TSHIQI JJA and MAJIEDT AJA
concurring)

[1] The limited liability that is afforded to persons who conduct
business through the medium of a company is not there to protect them
against conduct that is reckless or that takes place with fraudulent intent.
Section 424(1) of the Companies Act 61 of 1973 protects creditors in
those circumstances. It provides that when it appears to a court that ‘any
business of [a] company was or is being carried on recklessly or with
intent to defraud creditors of the company’ the court may declare that
‘any person who was knowingly a party to the carrying on of the
business’ in that manner shall be ‘personally responsible ... for all or any
of the debts or other liabilities of the company ....’

[2] In this case the North Gauteng High Court at Pretoria (Van der
Merwe J) made such a declaration and ordered Mr Pitelli, the appellant,
to pay to Everton Gardens Projects CC, the respondent, the amounts of
R382 500 and R607 611, together with related relief. Those orders were

made on 22 June 2007 in proceedings from which Mr Pitelli pertinently
absented himself.

[3] Mr Pitelli now appeals against the orders with the leave of this
court. I deal later in this judgment with whether the appeal is competent.
First I set out the facts that gave rise to the application and with the
course that the proceedings took.

[4] The proceedings were brought on notice of motion. No answering
affidavit was filed by Mr Pitelli for reasons that will emerge presently.
The facts that I relate are thus drawn from the allegations in the founding
affidavit.

[5] The business of the respondent was the development of housing
estates, mainly for the purpose of the government’s Reconstruction and
Development Programme. One of its projects was a massive development
in an area known as Everton Gardens. It employed the services of Eldima
Construction (Pty) Ltd to install the water reticulation and sewerage
infrastructure. At the time that is now relevant Mr Pitelli was the sole
shareholder and director of the company.

[6] During the course of executing the project the respondent paid
Eldima Construction R382 500 on 26 February 1999 and R607 611 on 18
March 1999. Those payments were made in error because the relevant
accounts had already been paid. In June 2003 the respondent sued Eldima
Construction for the return of the moneys.

[7] In response to an application for summary judgment Mr Pitelli
deposed to an affidavit on 11 September 2003 in which he said that work

had indeed been done for the respondent for the sum of R990 111 but he
denied that any payment for that work was made before the payment of
R607 611 on 18 March 1999. As for the amount of R382 500 that was
paid on 26 February 1999 he denied that that payment was made at all.
He also alleged that the claim had prescribed. In due course a plea to
similar effect was filed together with a counterclaim in which Eldima
Construction alleged that it was owed the sum of R195 544 by the
respondent for goods and services that had been provided. The pleadings
closed in October 2004.

[8] The proceedings were set down for trial on 15 June 2006.
Meanwhile, on 30 May 2006 Mr Pitelli, who was then the sole member of
the company, purported to adopt a resolution authorizing the voluntary
winding up of the company. The Registrar of Companies declined to
accept the resolution for want of compliance with the Companies Act and
the proposed winding up did not proceed. I think the inference is
inescapable that Mr Pitelli hoped to commence the winding up so as to
avoid the consequences that would otherwise follow from a judgment
being entered against the company.

[9] At the proceedings on 15 June 2006 the company was not
represented and judgment was granted against it by default for the
amounts that had been claimed and the counterclaim was dismissed.
Needless to say, a writ of execution rendered a nulla bona return.

[10] The proceedings with which we are now concerned – for an order
declaring Mr Pitelli to be personally liable for the debts – were then
commenced. In support of the application an affidavit deposed to by Mr
de Luca was filed. Mr de Luca and Mr Pitteli were the sole members of

the company, in equal shares, and were its directors, at the time that the
erroneous payment was made. Mr Pitelli was in charge of its financial
affairs, and was assisted by his wife who was the bookkeeper. Mr de
Luca said in his affidavit that he and Mr and Mrs Pitelli were all aware
that the moneys I have referred to were an overpayment. Some three to
six months later Mr de Luca sold his shares to Mr Pitelli but he remained
with the company as an employee. He said that he did not know what
happened to the moneys that had been paid in error. On the basis of that
uncontroverted evidence it follows that Mr Pitelli perjured himself when
he resisted summary judgment and that he filed a dishonest plea.

[11] The basis of the claim, as it was stated in the founding affidavit,
was that the retention of the moneys by Mr Pitelli when he knew full well
that the company had been overpayed constituted conduct that occurred
with intent to defraud the respondent. To that was added in argument
before us that his conduct in protracting the proceedings that were
brought for recovery of the money, not least by perjuring himself in
resisting summary judgment, when those proceedings were bound to end
in favour of the respondent, and by resolving to wind up the company so
as to avoid the consequences of a judgment, constituted a course of
deceitful conduct directed at preventing the respondent from recovering
what Mr Pitelli knew to be due, which fell within the provisions of the
section.

[12] The proceedings were launched on 26 March 2007. Mr Pitelli and
the company were both cited but the company has no direct interest in the
matter and I refer hereafter only to Mr Pitelli. In April 2007 a notice of
opposition was filed. On 8 May 2007 Mr Pitelli’s attorney was given

notice that the application had been set down for hearing on 22 June
2007.

[13] On 18 May 2007 Mr Pitteli’s attorney wrote to the respondent’s
attorney, saying that he understood that settlement negotiations between
the parties had taken place but had come to nothing, and he enclosed a
notice under rule 35(12) to produce certain documents. The respondent’s
attorney replied on the same day, hotly denying that any settlement
negotiations had taken place, and pointing out that the time within which
the notice should have been filed had long passed.

[14] There was no response for a month. Four days before the matter
was to be heard, on 18 June 2007, Mr Pitelli’s attorney wrote to the
respondent’s attorney requesting him to ‘confirm that you will remove the
matter from the roll until such time as you have complied with our rule 35
notice’, failing which an application to stay the proceedings would be
launched. The respondent’s attorney declined to remove the matter from
the roll.

[15] The respondent nonetheless replied to the rule 35(3) notice, no
doubt out of caution, in an affidavit that was served on Mr Pitelli’s
attorneys on 19 June 2007. In that affidavit the deponent said that he had
been unable to locate one of the documents that had been called for, and
that the other documents were amongst the founding papers.

[16] On 21 June 2007 Mr Pitelli filed an application for an order
postponing the proceedings that had been set down for the following day.
The postponement was required, according to Mr Pitelli, to enable him to
secure the documents before proceeding. In support of that application

Mr Pitelli referred to the alleged settlement negotiations and said that ‘the
exchange of affidavits was suspended pending the outcome of the
settlement talks’. He said that he was thus entitled to require the
production of documents before he filed his affidavit and that an
application to compel production was ‘pending’. No reference was made
to the affidavit that had been served on his attorneys on 19 June 2007.
Neither was an explanation given for why the ‘settlement talks’
suspended the time for filing affidavits, because no agreement to that
effect was alleged. Nor was it said why the documents were necessary to
resist the claim.

[17] I have little doubt that the filing of the notice under rule 35 was no
more than a ploy to provide a basis for avoiding the impending hearing.
The documents that were sought had been mentioned in the founding
affidavit to sketch the background to the application but they were
otherwise irrelevant to the relief that was claimed. In any event, as the
deponent to the affidavit explained, all but one of the documents were
already amongst the papers.

[18] The following day the matter came before Van der Merwe J who
refused to postpone the matter. Mr Pitelli’s counsel thereupon withdrew
on the basis that he had no instructions to pursue the matter. The learned
judge then granted the orders that had been sought. While he gave full
reasons for refusing the postponement he gave no reasoned judgment for
granting the relief but that is not surprising.

[19] What then occurred was rather unusual. An application for leave to
appeal was filed on behalf of Mr Pitelli on the same day (which naturally
had the effect of suspending the operation of the order). Then on 27 July

2007 Mr Pitelli filed an application to rescind the order. It took some time
for the filing of affidavits in that application to be completed and the
record of those proceedings is not before us.

[20] The filing of both an application for leave to appeal and an
application to rescind the orders was contradictory. Because for an order
to be appealable it must have as one of its features that the order is final
in its effect, by which I mean that it is not susceptible to being revisited
by the court that granted it (Zweni v Minister of Law and Order).1 The
fact alone that it was thought fit to file an application for rescission
immediately raises the question whether the orders are appealable.

[21] Nonetheless, Van der Merwe J heard the application for leave to
appeal, and the application for rescission, simultaneously, and refused
both. Precisely when that took place does not appear from the record, but
the learned judge signed a reasoned judgment on 8 September 2008.
Upon petition this court granted Mr Pitelli leave to appeal against the
orders that were made on 22 June 2007.

[22] The terms in which the order was made by this court naturally
focused the attention of the parties and of this court on the underlying
merits of those orders. Yet the very consideration of the appeal has
brought some oddities to the fore. All the submissions that were presented
in this case turned around the allegation that Mr Pitelli knew full well that
the moneys had been overpaid. When asked whether we are to accept that
as an established fact counsel for Mr Pitelli was constrained to concede,
though he did so with considerable discomfort, that we must indeed
accept that as an established fact because the allegation has not been

1 1993 (1) SA 523 (A) at 532J.

answered. But of course the allegation has not been answered, in either
direction, only because Mr Pitelli walked out of the case without filing
answering affidavits. Which raises the question why this court is hearing
an appeal when the proceedings were abruptly ended before they had
reached their ordinary conclusion.

[23] That invites the further question what would have happened had
the proceedings been brought by way of summons and Mr Pitelli had
walked out before any evidence had been presented. A court could not
possibly have considered an appeal against orders that might then have
been made by default because there would then have been nothing to
form the basis for the appeal (unless, perhaps, if it had been contended
that the summons was excipiable, or that the court had no jurisdiction).

[24] What also strikes one as odd is that submissions on behalf of Mr
Pitelli should be made for the first time in this court, when they could
have been made to the court below before it made its orders, but were
deliberately withheld. This is not a court of first instance. It seems to me
that it would be most unfortunate for a court of first instance to find its
orders reversed only because the litigant chose not to tell that court why
the orders should not be made, and thought it better to make those
submissions to a court of appeal only after that had occurred.

[25] Those oddities arise because once the orders were made by the
court below the proceedings in that court were not complete,
notwithstanding that the orders took full effect. They were not complete
because the orders were still susceptible to being revisited and rescinded
by the court that granted them. Had the court rescinded the orders the

proceedings would then have proceeded to their ordinary completion by a
final judgment.

[26] On the other hand, had the court below refused to rescind its
orders, as it did, that would clearly have been appealable,2 because it
would have brought the proceedings to completion in the court of first
instance. And had this court then upheld the appeal the matter would have
been remitted to that court to bring the proceedings to completeness in the
manner I have described.

[27] An order is not final, for the purposes of an appeal, merely because
it takes effect unless it is set aside. It is final when the proceedings of the
court of first instance are complete and that court is not capable of
revisiting the order. That leads one ineluctably to the conclusion that an
order that is taken in the absence of a party is ordinarily not appealable
(perhaps there might be cases in which it is appealable but for the
moment I cannot think of one). It is not appealable because such an order
is capable of being rescinded by the court that granted it and it is thus not
final in its effect. In some cases an order that is granted in the absence of
a party might be rescindable under rule 42(1)(a), and if it is not covered
by that rule,3 as Van der Merwe J correctly found, it is in any event
capable of being rescinded under the common law.

2 De Wet v Western Bank Ltd 1979 (2) SA 1031 (A); Chetty v Law Society, Transvaal 1985 (2) SA 756
(A).
3 See in that regard Marais v Standard Credit Corporation Ltd 2002 (4) SA 892 (W) and Lodhi 2
Properties Investments CC v Bondev Developments (Pty) Ltd 2007 (6) SA 87 (SCA).

[28] That an order granted in the absence of a party is not appealable
was held as early as 1877 in Ross v Dramat,4 when De Villiers CJ said, in
respect of such an order that
‘the defendant is premature in applying to this Court [to appeal against the order] until
the Magistrate has been asked and has refused to re-open the case’.

[29] An order that was susceptible to being rescinded was also held not
to be appealable in Sparks v David Polliack & Co. (Pty) Ltd.5 In that case
the defendant applied for the postponement of a trial, and when the
postponement was refused his attorney withdrew, and judgment was
entered against him under rule 55(2) of the Magistrates’ Courts rules.

[30] In the course of his judgment, though it was not necessary for the
decision in that case,6 Trollip J said that such an order will become
appealable when it is ‘no longer rescindable’, which could occur ‘either
through lapse of time … or by the defendant’s waiving or perempting his
right to rescind, or both.’ He went on to say:
‘In practice, if the defendant considered that, because of the particular circumstances,
it would be preferable to appeal instead of trying to have the judgment rescinded by
the same magistrate or court that granted it, he could, in noting his appeal, expressly
waive or perempt his right of rescission, and that would, in my view, render the
default judgment final for appellate purposes.’7

[31] Reluctant as I am to question the view of so eminent a judge8 I
must respectfully do so in this case. I do not see how the question
whether an order is appealable can be dependant upon the choosing of the
litigant concerned, whether by action or inaction. It seems to me that the

4 1877 Buch. 132 at 133.
5 1963 (2) SA 491 (T).
6 At  496C-D.
7 At 496E-F.
8 A similar view was expressed in Dawood v C. & A. Friedlander 1913 CPD 291.

appealability of an order must be dependant on the nature of the order and
not upon what the litigant chooses to make of it.  An order made by
default is by its nature not final in its effect because it is capable of being
revisited, albeit that condonation might be required for the delay. It is true
that once rescission has been refused, and an appeal against that order has
been dismissed, the order is then not capable of being revisited. But that
order of the court of appeal brings the proceedings as a whole to an end
and it is not then open to a litigant to return to an order that was made
midway in the proceedings.

[32] The learned judge based his contrary view on analogy with orders
that are considered to be final for the purpose of founding a plea of res
judicata but I do not think that the questions that arise in that regard are
comparable. Nonetheless it is not strictly necessary in this case to
pronounce finally upon the view that was expressed in that case.

[33] Sparks was followed in De Freitas v Addisionele Landdros,
Heidelberg,9 and in Trustees for the time being of Ramvali Trust v UDC
Ltd.10 In both those cases the order that was taken by default was held not
to be appealable. Both cases appear to have adopted the view that I have
referred to but that was not necessary for the decisions in those cases.
There are also cases that appear to go in the other direction. I express no
view on the correctness of those decisions because they are
distinguishable on their particular facts.11

9 [1998] JOL 3645 (T).
10 [1998] JOL 2803 (ZS).
11 In Chimanzi v Mukange 1966 (2) SA 347 (RAD) the court found that the order was appealable
because, although it had granted in the absence of the defendant, it was nonetheless not susceptible to
rescission. In Van Graan v Smith’s Mills (Pty) Ltd 1962 (3) SA 170 (T) it was held that the order was
made in consequence of an irregularly in the proceedings.

[34] I am mindful of the considerable hurdle that would need to be
overcome by a litigant who seeks to have an order rescinded when he or
she deliberately allowed it to be taken by default, bearing in mind that in
order to succeed the litigant will need to provide a ‘reasonable and
convincing explanation’ for the default.12 But the appealability of the
order is dependant upon whether it is capable of being revisited and not
upon whether such an application will succeed. And if a litigant
deliberately chooses to permit an order to go by default then he or she can
hardly complain if a court refuses to allow the matter to be re-opened. A
litigant cannot expect to blow hot and cold depending upon which is most
advantageous at the time.

[35] The terms in which this court made its order naturally diverted
attention from the appealability of the order and the submissions that
were made by counsel were not directed to that question. We have
considered inviting the parties to make further submissions but we do not
think we should tempt the respondent to incur more costs than it has
already been put to. We have had the advantage of full argument on the
merits and we would in any event have dismissed the appeal. In view of
the conclusion to which I have come I do not think it is necessary or
appropriate to explain why we would have done so.

[36] The orders that were made in this case were clearly susceptible to
rescission.
In
those
circumstances
they
are
not
appealable,
notwithstanding that the application for rescission failed, and this court
ought not to have allowed the appeal. No doubt the refusal of rescission
was appealable, with the necessary leave, but that is another matter.

12 See Chetty, above, at 765A-D.

[37] Although the order refusing rescission is not before us I think I
would be remiss if I did not say something about it now that we have
heard all there is to say in this matter, in view of the course that the
proceedings against Mr Pitelli and his company have taken, which in my
view has clearly been dilatory from beginning to end. The court below
cannot be faulted for having refused to rescind its order on any basis and I
consider there to be no prospect that it might be reversed on appeal.
Needless to say, that view is not binding on this court should Mr Pitelli
nonetheless choose to seek leave to appeal against that order, albeit only
with condonation. But in that event he should not be surprised if he is
found to have acted vexatiously and he is penalised accordingly.

[38] The appeal is struck from the roll with costs.

___________________
R W NUGENT
JUDGE OF APPEAL

APPEARANCES:

For appellant:
R Stockwell SC

J F Pretorius

Instructed by Zwiegers C/o Sanet de Lange
Attorneys, Pretoria

Symington & De Kok, Bloemfontein

For respondent:
M C Erasmus SC

Instructed by Coetzee Attorneys, Pretoria

McIntyre & Van der Post, Bloemfontein