South Africa: High Courts - Gauteng

CASE NO: A5014/04

In the matter between:



B & W INDUSTRIAL TECHNOLOGY
(PTY) LIMITED                                       First Appellant
(formerly B & W Electrical (Pty) Limited)        (Defendant and Second

Defendant in the court a quo)

CALABAN PROPERTIES (PTY) LIMITED                  Second Appellant

(First Defendant in court a quo)

T LOMBARD                                                                       Third Appellant
                                                      (Third Defendant in court a quo)

D S NEVAY                                                              Fourth Appellant
                                                      (Fourth Defendant in court a quo)

G W R SWANEPOEL                    Fifth Appellant
                                                      (Fifth Defendant in court a quo)

G M J BREEDT                                         Sixth Appellant
                                                      (Sixth Defendant in court a quo)



and



IOANNIS (JOHNNY) BAROUTSOS                         Respondent
                                                               (Plaintiff in court a quo)

MARAIS, J:

This is an appeal against a judgment by Goldblatt J in which he dismissed applications for security by the appellants. Leave to appeal was granted by Goldblatt J. Confusion reigns supreme in regard to who the appellants are. According to the heading contained on the binding of each volume of the appeal record there are five appellants. According to the heading to appellants’ heads of argument there are six appellants. According to the heading to the judgment on the application for leave to appeal (record 6/548) there is only one applicant for leave to appeal whereas there were six applicants according to the notice of application (6/538). The order of court mentions six applicants for leave to appeal and merely records that leave to appeal is granted to the full bench. The heads of argument filed on behalf of the respondent understandably follow the format of the covers to the appeal volumes and refer to five appellants.

There were six applicants for leave to appeal and it would appear that the application as brought was granted which would mean that leave to appeal was granted to the six applicants for leave. Be that as it may all six applicants for leave to appeal caused a notice of appeal (wrongly and confusingly) headed “Notice of Application for Leave to Appeal” (6/551/2) to be delivered and thereby made themselves parties to the appeal and thus liable for costs in the event of the appeal failing.

There are a number of actions pending between the parties. This appeal relates to:

(a)     

An unsuccessful application by the appellants for an order for security for costs of the claim of the respondent in the fourth action.

(b)      An unsuccessful application by the appellants for security for both the costs of counterclaims brought by the appellants in the first action and security for the potential value of the counterclaims should they succeed.

Security was sought by the appellants on the ground that the respondent is a peregrinus. The appellants sought security for costs in the fourth action (“the fourth action”) instituted by the respondent against the appellants. Security was also sought by the appellants where the appellants had counterclaimed against the respondent. In this instance security was sought for the costs resulting from the counterclaims and for the potential value of the counterclaims if successful.

Goldblatt J dismissed both applications primarily on the ground of very substantial delay by the appellants in bringing the applications. He was also of the view that in modern commercial actions it is undesirable and not generally in the interests of justice to order security of the nature sought in respect of the claims in reconvention (record 6/543).

A brief history of the matter is that on 18 February 1999 the respondent instituted three actions against the first appellant and a company associated with the first appellant which is not a party to this appeal. In these actions the respondent (plaintiff) cited himself as residing in Greece. Security for costs was sought on the ground that the respondent was a peregrinus. Such liability was not contested by the respondent and a figure for security was agreed.

In March 2000 the first appellant brought five counterclaims against respondent in case number 4405/99 which was the first action instituted by respondent. It is in that case that security for the costs and possible award on the counterclaims is sought.

On 19 June 2000 the respondent instituted the fourth action under case number 00/13621 and described himself as residing at Fourways in the district of Gauteng.

On 8 May 2001 all four actions were consolidated by an order of court.
In May 2000 the registrar heard an application for an increase in security in the first three actions and granted an increase. The respondent brought an application to review such order which was dismissed on 20 October 2001. A further appeal to the full court was dismissed on 14 June 2002.

The respondent did not provide security for costs in the amount directed by the registrar and on 27 June 2002 the first appellant and the company associated with the first appellant brought an application for dismissal of the claims in the first three actions (referred to by the parties as “the main application”). In that application the respondent brought a counter-application for a declaration that he was not a peregrinus and an order declaring that he was not liable to furnish security for costs.

While such application was pending the appellants on 31 July 2002 brought a second application (the subject of this appeal) for security for costs in the fourth action and security for costs on the counterclaims and the value of the counterclaims in the first action (4405/99).

The fourth action (case 13621/00) was instituted in June 2000. Only on 19 April 2001 did appellant’s attorneys serve the necessary notice in terms of Rule of Court 47(1), which governed these proceedings. The respondent had in correspondence by 11 April 2001 disputed his liability to provide security for costs but only on 31 July 2002 was the application to compel the provision of security for costs served, that is 25 months after the appellant had instituted action. The delay was even longer in relation to the security claim in respect of the counterclaims, which had been instituted in March 2000.

In addition to the normal requirements which an applicant for security has to demonstrate, on appeal the appellant had to show that the refusal of the court a quo to grant security was based on an exercise of the discretion conferred upon the court that was injudicious; that is that the court had exercised its discretion capriciously or upon a wrong principle, or that it had not brought an unbiased judgment to bear on the issue or had not acted for substantial reasons. It has been held that appeals in matters relating to security are to be discouraged in the absence of some demonstrable blunder or unjustifiable conclusion on the part of the court a quo.

Bookworks (Pty) Ltd v Greater Johannesburg TM Council 1999 (4) SA 799 (W).

In that full bench decision it was held (805G):

“It is difficult to discern a general principle underlying all cases in which a discretion conferred on a court of first instance has been categorised as narrow. What does seem clear is that where the court of first instance is in a better position than an appeal court to decide a question which involves the exercise of a value judgment, especially a question of procedure …, an appeal court will be reluctant to interfere. The approach of the Supreme Court of Appeal has been that in such cases ‘the presiding judge’ is the person best qualified to decide” (per Innes CJ in R v Roke 1915 AD 145 at 161).

This court should therefore be slow to interfere unless a clear case for interference is made out and should not interfere where the only ground for interference is that the court of appeal might have an opinion different to that of the court a quo or have made a different value judgment.

Delay as a ground for refusal

It was initially urged upon us by Mr Peter for the appellant that it is only delay amounting to a waiver or estoppel which would preclude the right of a litigant to seek security. I understood Mr Peter to concede that this proposition was too strongly put, which it clearly was.

The importance of bringing an application for security for costs promptly was emphasised by Baker J in Wallace NO v Rooibos Tea Control Board 1989 (1) SA 137 (C) and in ICC Car Importers (Pty) Ltd v A Hartrodt SA (Pty) Ltd 2004 (4) SA 607 (W).

In contending that delay in seeking security is relevant only where it amounts to a waiver or estoppel the appellants relied on Francis and Graham Ltd v East African Disposal Co Ltd 1950 (3) SA 502 (N). This reliance (which I did not understand to be persisted in) was misplaced because of the judgment of Joubert JA in Magida v Minister of Police 1987 (1) SA 1 (A) at 14E-G where he made it clear that the court had a discretion to absolve a peregrinus from being ordered to pay security before it applied the principle “that in proceedings initiated by a peregrinus the court is entitled to protect an incola to the fullest extent”.

In both the above cases delay per se was regarded “as having a most material effect in deciding whether security should be ordered” (ICC Car Importers at 617E-F). The effect of these judgments is that substantial delay in bringing applications for security may well cause a court to refuse the application without considering whether the delay amounts to waiver or estoppel. This court is in agreement with these decisions.

It was then contended that the issue of delay was not raised in the respondent’s answering affidavit.

Mr Snyckers demonstrated that this was factually incorrect and that the issue of delay had indeed been raised in relation to both applications. The respondent stated in a replying affidavit in the counter-application (and incorporated this statement in the answering affidavit in the second application):

“There is nothing convenient about such procedure which is calculated to prejudice the defences raised by me. What is significant, is the absence of any explanation as to why the latest application has been delayed so unconscionably.”

Mr Snyckers further pointed out that the issue of delay and the non-compliance with the requirement in Rule 47(1) that security be demanded “as soon as practicable after the commencement of proceedings” was fully canvassed in the court a quo without objection.

In my view the issue of delay was adequately raised and in any event should have been dealt with by the appellants as, without explanation, the delay was prima facie unreasonable and a potential bar to the ordering of security.

It was then contended that the summons issued by the respondent in the fourth action stated that the residence of the respondent was in South Africa. The argument is that in consequence of this the appellants were misled and only when the respondent filed an affidavit in the main proceedings in July 2002 did it become apparent that the respondent was indeed a peregrinus and/or not resident in South Africa. (record 1/62/5.18)

The first answer to this is that the appellants did not raise in their affidavits the suggestion that they were misled by the respondent in regard to his status as a resident or non-resident of South Africa. The conduct of the appellants is inconsistent with a belief that the respondent was an incola resident of South Africa as they filed a notice in the fourth action dated 12 April 2001 (record 6/503/paras 1-2) asserting that the plaintiff was a peregrinus and/or a non-resident of South Africa. Nothing is said which would explain why, if that was the belief of the appellants, they could not act thereon immediately after the service of summons in the fourth action, or to show that some event occurred between the service of summons and the issue of the notice which changed the mindset of the appellants.

Furthermore, during the relevant period the appellants proceeded with steps to obtain further security from the respondent on the basis that he was a peregrinus or non-resident of South Africa.

I am thus unable to find a blunder by the court a quo on this ground (that of delay) which would justify an interference with the exercise of its discretion.

It was then contended that there was an agreement to stay the issue of security pending the judicial review of the decision by the taxing master to increase the security to be furnished. In my view Mr Snyckers is correct when he argues that such agreement related only to the security sought in the first three actions and not the fourth action in which no security had been ordered or sought by way of application.

The next argument raised was that the court a quo concluded that the delay resulted in prejudice to the plaintiff in that he incurred costs in relation to the actions during the period of delay which he would not have incurred had there been no delay, without there being any factual basis for such conclusion.

This argument expects of the learned judge that he divorce himself from the reality of legal actions, known to any lawyer who has been in practice for a year or two and indeed probably to almost all articled clerks in an attorney’s office.

Prima facie the actions in question are complex and applications and appeals occurred during the period of delay. Pleadings were filed. Of course substantial costs were incurred and it is asking too much of a judge with a great deal of experience in practice and on the Bench to turn a blind eye to the known reality. Had one to ask any practitioner of even slight experience whether during the period in question substantial costs had been incurred his answer would surely have been “Of course. It is obvious”. I therefore cannot accept this as a valid criticism of the finding of the learned judge.

I therefore cannot find any ground upon which this court can interfere with the exercise of his discretion by Goldblatt J, although arguments raised by Mr Peter in regard to the conduct of the respondent, particularly in relation to his assets, did cause concern.

Security for the putative value of the counterclaims

Goldblatt J expressed serious doubt regarding the desirability of the practice laid down in older cases that an incola defendant may demand security for a counterclaim brought against a peregrine plaintiff, (record 6/542/11). Goldblatt J expressed this doubt despite the judgment by Hartzenberg J in South African Iron and Steel Corporation v Abdulnabi 1989 (2) SA 224 (T). In case this court should err in its approach to the delay it is appropriate to deal with this issue.

In the South African Iron and Steel Corporation case Hartzenberg J held that “there is no doubt that a peregrinus plaintiff can be ordered to give security for the costs of an incola defendant and also for the amount of the judgment which may be awarded against it on a claim in reconvention” (232H-233B). No question exists regarding the statement in the first half of the sentence.
In coming to his conclusion Hartzenberg J relied upon dicta by De Wet JA in Saker and Co Ltd v Grainger 1937 AD 223 at 226-7 where De Wet JA stated:

“It is also well-established practice that such plaintiff can be further called upon to give reasonable security for a claim in reconvention by the resident defendant.”

In his judgment De Wet JA stressed that the ordering of security was not a matter of substantive law but one of practice in which the court had a discretion.

In Magida v Minister of Police 1987 (1) SA 1 (A) Joubert JA dealt with the statement by De Wet JA that “the principle underlying this practice is that in proceedings initiated by a peregrinus the court is entitled to protect an incola to the fullest extent” by adding that this statement “should be read subject to the qualification that it is only applicable after the court, in the exercise of its judicial discretion in accordance with the principles hereinbefore stated, had come to the conclusion that a peregrinus should not be absolved from furnishing security for costs”. (My own underlining.)

The principles already stated by Joubert JA in Magida were firstly that a court should be more readily disposed to order security “where the non-domiciled foreigner is a vagabundus without a fixed residence and has no country of his own”. A second relevant consideration was whether the peregrinus resided “at a place where the court’s order cannot be executed” in which case the application for security would be granted more readily.

At 14E-F Joubert JA stated:

“Nor is there any justification for requiring the court to exercise its discretion in favour of a peregrinus only sparingly.”

Finally and not without significance, it should be noted that in Magida’s case Joubert JA was dealing purely with the question of a peregrinus being ordered to give security for costs of a claim brought by him against an incola.

The reasons why a court may exercise a discretion in favour of ordering security for costs where an incola is sued by a peregrine plaintiff are too well-known and readily understandable to require restatement. The reasons are based on a desire, in proper circumstances, to protect an incola. “Proper circumstances” include general considerations of equity and fairness to both parties.

The equity and fairness of directing security for costs where an incola is sued by a peregrine plaintiff is far more readily apparent than the equity and fairness of requiring a peregrine plaintiff to give security for the judgment likely to be obtained against him on a counterclaim by an incola. In the first instance the claim has been brought by the peregrinus; he has chosen to litigate against the incola. In the second case the claim for which security is sought is brought by the incola and not the peregrinus; it is the incola who has chosen to litigate insofar as his claim is concerned. Where the incola is a defendant in convention he is such involuntarily. He has no choice in the matter. In the case of a counterclaim the incola acts voluntarily and chooses to sue. Having done so he now turns to his peregrine opponent and requires that the latter secures the incola’s counterclaim.

For the purpose of this judgment I accept that there is a practice as stated obiter by De Wet JA in the Saker case that a court may order security for the judgment on the counterclaim but having regard to the considerations which I have mentioned it seems to me that a court should be slow to conclude that considerations of fairness and equity favour the granting of security, particularly in present day circumstances. Practice changes with the times (or should do so) and therefore practice (or the sensible application thereof) dictated by circumstances prevailing in long bygone centuries or in 1937 may differ radically from practice (or the sensible application thereof) in 2005 when intercontinental travel and communication has become infinitely swifter and more convenient. In the second half of the 20^th century the world shrunk with the advent of the Jet airliner and later with the revolution in methods of communication. Legal practice should not stand aloof from such changes but should recognise them and their impact. As it was put by Goldstone J in Elschint (Pty) Ltd v Mobile Medical Scanners 1986 (4) SA 552 (W) at 557H:

“Considerations of fairness and justice and the reality of modern international commerce and efficient means of travel and communication militate against treating foreign defendants who have submitted to the jurisdiction more harshly than incola defendants.”

The peregrine plaintiff in the present case is clearly “a foreigner who has submitted to jurisdiction”.

The cardinal point is that we are dealing with an action (whether brought in convention or reconvention) against a peregrinus, by an incola. When it comes to ordering security for the claim I can find no compelling reason to distinguish between the appropriate approach when the claim is made by an incola plaintiff in convention and the present situation where the claim is made by the incola defendant in reconvention. I am fortified in this view by my interpretation of the judgment by Milne J in Sandock Austral v Exploitation Ind. Et Com-Bretic 1974 (2) SA 280 (D&CLD) where at 285H-286E Milne J clearly approves the judgment by Miller J in Banks v Henshaw 1962 (3) SA 464 (D) when Miller J referred to previous judgments and said:

“In general a peregrinus will not be ordered to furnish security where he is the defendant but only where he claims against an incola, whether as plaintiff or claimant in reconvention, in which case he may be ordered to provide security to cover the costs of the incola.” (my own underlining)

Miller J went on to say:

“When however the applicant filed a counterclaim against the respondent he laid himself open to a claim for security but only for the costs of the action and no more.”

Milne J in the Sandock Austral case was dealing primarily with an incola plaintiff claiming security from a peregrine defendant for the plaintiff’s claim in convention.

Milne J points out the ease of suing in the peregrine’s own forum at 286H:

“It is not suggested that the French courts would not enforce the plaintiff’s claim and it does not seem to me a totally irrelevant consideration that international travel is a great deal easier and quicker nowadays and the task of following the peregrinus to his own forum is accordingly less arduous than before.”

For these reasons Milne J found:

“In my view there is no sound basis for requiring the defendant to furnish security for the plaintiff’s claim in this case.”

In the present case it is the appellant’s case that the respondent resides and/or is domiciled in Greece, a civilised country with a civilised legal system. There is nothing to prevent the appellants, given the present ease of travel and of communication from suing the respondent in Greece. The appellants chose to sue in South Africa. That they did of their own volition.

The respondent, so it would appear, owns substantial fixed property in Greece (record 4/321/2.3) and some R500 000,00 held by Investec within the jurisdiction of this court. (record 1/69/7.1)

These are all factors which militate against the exercise of the court’s discretion to order security.

My view that generally speaking security should not be ordered in respect of a claim by an incola in reconvention is in accordance with the sentiments expressed by Buchanan J in Schunke v Taylor and Symonds (1891) 8 SC 104 where he said:

“But while a defendant is sufficiently protected from being unduly harassed by unfounded claims by compelling a foreign plaintiff to give full security for costs, either expressly or by being possessed of property available in case of his failing in his action, to compel such a plaintiff who follows his debtor to such debtor’s domicile and sues him in his own forum, to give security for any amount of damages which such debtor alleges he intends to claim by way of reconvention, would open the way to a denial of justice.”

It is somewhat difficult to understand how Hartzenberg J in the South African Iron and Steel Corporation case at 233C understood this case to be “authority for the proposition that a peregrinus plaintiff can be ordered to give security for a claim in reconvention”.

I am of the view that insofar as a practice existed to permit a court to order security for the amount of a claim where an incola counterclaims against a peregrine plaintiff, it in present day circumstances should not be followed save perhaps in the most exceptional of circumstances. It is not in accordance with modern commercial needs nor is it just or equitable to impose such a burden on peregrine plaintiffs who chose to sue their alleged debtors in South African courts.

In exercising the discretion referred to by Joubert JA there can be no doubt for the reasons which I have given that delay (short of waiver or estoppel) is a factor to be considered.

Is the respondent a peregrinus?

In view of the conclusion to which I have come it is unnecessary to consider this hotly debated issue. For the purpose of this judgment I have assumed the respondent to be a peregrinus.




Conclusion

I therefore find no ground to interfere with the discretion exercised by Goldblatt J. The appeal is dismissed with costs to be paid jointly and severally by the parties listed as first to sixth applicants on the notice of appeal dated 26 March 2004 (record 551).

                                                      __________________________

                                                               D MARAIS
                                                      JUDGE OF THE HIGH COURT



         I agree:

                                                      _________________________

                                                               F R MALAN
                                                      JUDGE OF THE HIGH COURT


         I agree:

                                                      __________________________

                                             J P HORN
                                                      JUDGE OF THE HIGH COURT