High Court Debtors Beware

Nov 12, 2015 | 2015, News

If judgment has been granted against a debtor (a company, an individual), let’s call it a hypothetical XCo, in the Magistrate’s Court, the judgment may be rescinded once XCo has paid the debt and the creditor –let’s say, a bank – has consented to having the judgment rescinded (think set aside/ incinerated).

Those such as XCo who have High Court judgments against their names do not have it as easy. The Court’s view is simple – to allow judgments to be set aside after the debt has been settled –even if the bank has consented – would create the false impression that the there was never any adverse default. This would, say the Courts, prejudice potential future creditors. The fact that a judgment affects one’s creditworthiness is not a sufficient reason to grant the rescission. So how would one remove this black mark?  One of the possibilities is to show that that there was never ‘willful default’ in allowing judgment to be granted.  Next, one must show a substantial defence and ‘good cause’ to bring the application.

‘Good cause’ includes situations where an order or judgment was incorrectly sought or granted in the absence of any affected party; or, there is an ambiguity, patent error or omission to the extent of such ambiguity; or an order or judgment was granted as a result of a mistake common to the parties.

In short, unless XCo can prove that it did not act in willful default and that they have good cause to bring the application, an application for the rescission of judgment, even with the creditor’s consent, will not be successful in the High Court.