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National Potato Co-Operative v Price Waterhouse Coopers Inc and Others (33297/1999) [2009] ZAGPHC 38 (27 February 2009)

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IN THE HIGH COURT OF SOUTH AFRICA

(TRANSVAAL PROVINCIAL DIVISION)


DATE: 27 FEBRUARY 2009

CASE NO: 33297/1999

UNREPORTABLE







In the matter between:


NATIONAL POTATO CO-OPERATIVE PLAINTIFF


Vs


PRICE WATERHOUSE COOPERS INC FIRST DEFENDANT

HOEK & WIEHAHN SECOND DEFENDANT

WIEHAHN MEYERNEL THIRD DEFENDANT

PRICEWATERHOUSE MEYERNEL FOURTH DEFENDANT

PRICE WATERHOUSE FIFTH DEFENDANT


_____________________________________________________

JUDGMENT

_____________________________________________________


BOTHA J:


This is the judgment in two applications: a Rule 47(4) application and a Rule 27 application by the plaintiff, first for an extension of the time in which to furnish security, and later for condonation for the late furnishing of the security. These two applications relate to case 33297/1999. Also to be decided in this judgment is the wasted costs occasioned by the fact that case 33297/1999 could not proceed on 2 February 2009.

The Rule 47(4) application was launched on 19 November 2008. It was bought at a time when the plaintiff had failed to furnish further security in an amount of R1.788 million, determined in terms of Rule 47(6) by the taxing master on 3 November 2008, within a period of 10 days.


This case has a long history that has been recited in other judgments. I shall start with 6 December 2006 when I ordered the plaintiff to furnish security for the defendants’ costs. The plaintiff took my order on appeal. The appeal was heard on 21 November 2007 in the Supreme Court of Appeal and on 29 November 2007 it was dismissed.


In spite of the fact that the Supreme Court of Appeal was informed that the plaintiff would not be able to furnish security if the appeal was dismissed, it had in October 2007 concluded a written agreement with an Australian company, HLS, in terms of which HLS would finance the case and provide the necessary security “or any variation thereof or any further court order.”


The plaintiff informed the defendants of the agreement with HLS by way of a letter dated 4 January 2008 in which it asked an extension of the period in which security had to be provided.


On 29 January 2008 an order was made by agreement in terms of which the security had to be provided by not later than 31 March 2008.


The plaintiff did not meet that deadline and on 1 April 2008 the defendants launched an application for the dismissal of the plaintiff’s action. That application was never heard because on 14 May 2008 an acceptable bank guarantee for the amount of the security (R7.56 million) was furnished.


On 2 June 2008 I ruled that the case should resume on 2 February 2009. The matter was argued before me. The plaintiffs argued for the earliest possible date and the defendants suggested the third term of 2009 when their leading counsel, Mr van der Linde, would be available. It appeared that Mr van der Linde had been retained by the same clients for an arbitration that would be heard during the first half of 2009. I ruled that the defendants could make other arrangements and fixed the date for the resumption of the trial on 2 February 2009. The result was that Mr van der Linde dropped out of the case. His junior, Mr Barrie SC, became the defendant’s leading counsel, with a newcomer, Mr Bothma, as his junior.


I may mention at this stage that during the trial I made a ruling that the witness under cross-examination, Mr Collett, could be cross-examined by Mr van der Linde and Mr Barrie, on condition that Mr Barrie’s cross-examination remained confined to two topics: subsidiaries and debtors. When the trial was adjourned in November 2006, Mr Barrie had finished his cross-examination on subsidiaries and his cross-examination on debtors still had to begin.


I return to the chronology.

On 6 June 2008 the defendants launched an application (defendants’ review application) to review part of the determination made by the taxing master on 15 December 2006. Although the taxing master determined security in an amount of R7.56 million, he disallowed an item in the defendants’ draft bill of costs (item 12) in which the defendants claimed security of R5.456 million in respect of the cost of engaging forensic auditors in their preparation for the trial. This application was eventually heard on 28 November 2008 and on 1 December I dismissed it with costs. The defendants asked for leave to appeal which application was dismissed on 2 February 2009. It is enough to say that although I found that the taxing master’s reasons for disallowing item 12, were flawed, I dismissed the application because it was launched some 18 months after the taxing master’s determination.


In November 2008 there was some flurry of activity. On 3 November 2008 the taxing master, at the behest of the defendants, determined that the plaintiff had to furnish further security in an amount of R1.788 million. On 19 November 2008 the defendants launched the Rule 47(4) application in view of the plaintiff’s default in furnishing the additional security. At the same time, also on 19 November 2008, the plaintiff launched an application to review the taxing master’s determination that additional security in an amount of R1.788 million be furnished as well as an application that the suspension of the action be stayed.


In an application dated 7 January 2009 the plaintiff applied in terms of Rule 27 for an extension of the time in which the additional security had to be furnished.

The plaintiff’s review application was withdrawn on 23 January 2009. On 30 January 2009, when it was to be heard, only the issue of costs was argued. On 2 February 2009 I made an order in respect of the costs of that application. I ordered the plaintiff to pay the costs on a scale as between attorney and own client in view of suggestions made that there was a collusion between the defendant’s attorney, Mr Chappel, and the taxing master in the drafting of the taxing masters reasons.


The plaintiff’s review application was withdrawn on 23 January 2009. The plaintiff alleged that the new financier with whom it concluded a contract on 28 January 2009 insisted that it abandon the interlocutory application and concentrate on the main case. Apparently the security of the amount of R1.788 million was furnished in an acceptable form.


On 2 February 2009 this application was before me but is was not ripe for hearing. I laid down times for the exchange of affidavits and postponed it to 16 February 2009. The plaintiff’s Rule 27 application was also postponed to 16 February 2009. On 16 February 2009 the two applications were postponed to 19 February 2009 in view of a Rule 35(12) launched by the defendants on 16 February 2009.


Also on 2 February 2009 I heard argument as to the date of the resumption of the trial, that is of course, if the Rule 47(4) application were to fail. The issue of wasted costs was reserved.


I ruled that the case had to resume on 27 July 2009 which was the date suggested by the defendants.


Against this background I shall now refer to the papers, starting with the Rule 47(4) application.


In the founding affidavit the defendants’ attorney, Mr Chappel, referred to various letters exchanged between the parties. In a letter dated 10 November 2008 the plaintiff’s attorney stated that HLS was not prepared to furnish any additional security that might be required if the defendants’ review application was successful.


He referred to the fact that in its answering affidavit to the defendants’ review application, it was stated that the plaintiff would not be able to furnish security unless it found another investor.


In paragraph 19 of the founding affidavit he said that finality now had to be reached and that the plaintiff should not be allowed every now and again to go and seek a new batch of investors.


He then set out the history of the matter from 29 November 2007.


He referred to the agreement between the plaintiff and HLS and contended that on a proper interpretation of clause 4.1.1 HLS was obliged to provide any additional security.


He pointed out that HLS had taken over the entire funding of the plaintiff’s case and estimated that that would require payments of at least R1 million per month from January 2009. In the circumstances he regarded HLS’s unwillingness to provide further security with suspicion.


He then referred to the fact that the claim is funded by investors. He submitted that the few remaining members of the plaintiff who were members when the cause of action arose between 1984 and 1998 would hardly benefit from any judgment in favour of the plaintiff.


He submitted that the court should be slow to grant indulgences to the plaintiff and its funders where the defendants do not have security for their costs and their expenses run into tens of millions of rands.


He referred to previous deadlines that were not met. He submitted that the plaintiff used delaying tactics to gain extra time to furnish security and that the court should not allow it to gain further time.


He referred to the imminent trial date and the coming holiday season and submitted that an application for an extension of time would be time consuming and that it would interfere with the defendants’ preparation for the trial. If an extension is granted, he submitted that a punitive order for costs should be made against the plaintiff.


He referred to the plaintiff’s review application, of which an intimation was given in a letter dated 18 November 2008 and submitted that it would jeopardize the defendants’ preparation, which was costing more than R1 million per month.


In the plaintiff’s answering affidavit, dated 7 February 2009, Mr Perreira, referred to the plaintiff’s application to review the taxing master’s determination of 3 November 2008.


He also referred to the plaintiff’s application for an extension of time.


He submitted that the Rule 47(4) application should be heard after the plaintiff’s review application and reserved the right to supplement the affidavit.


On 27 January 2009 the defendants filed a lengthy supplementary affidavit.


In it the deponent, once again Mr Chappel, made the following points:

  1. that the plaintiff was in default of its obligation to furnish the security ordered on 3 November 2008.

  2. that the plaintiff did not have the means to provide the additional security.

  3. that the court should put an end to litigation that is an abuse and that is tyrannical.


He referred to the plaintiff’s delay in launching its review application in spite of the impending trial date. He submitted that the application was without merit and was simply launched to buy time.


He referred to the history and referred to the following:

  1. that in 2002, when the trial was set down for hearing before Hartzenberg J, the plaintif was insolvent;

  2. that the plaintiff in July 2002 conceded that it was obliged to furnish security, which was then determined by the taxing master;

  3. that the plaintiff obtained outside funding from Farmers Investment Fund (Pty) Ltd (FIF) in exchange for 45% of the proceeds of the claim. This led to a special plea of champerty which was dismissed by Hartzenberg J, whose judgment was upheld by the Supreme Court of Appeal on 1 June 2004;

  4. that Hartzenberg J recused himself from the trial at the request of the plaintiff’s counsel;

  5. that when the trial resumed before me in October 2005 the defendants did not insist on further security in view of the plaintiff’s attorney’s assurance, based on financial statements for the 2002-2003 year, that the plaintiff’s financial situation had been reversed as a result of a settlement with the Land Bank;

  6. that the trial re-started in October 2005 with an opening address of 4 days and the witness Collett testifying in chief for 54 days;

  7. that 13 files relating to various subjects were produced and 50 separate (turquoise) files relating to 50 debtors;

  8. that the pleadings comprised some 100 000 pages, discovered documents another 181444 pages and the transcript of Mr Collett’s evidence in chief 6761 pages;

  9. that during the trial the Northern Transvaal Co-Operative Ltd (NTK) withdrew as the main investor in the claim, a fact that was not revealed to the defendants;

  10. that the plaintiff exhausted its asset base to finance the case, a fact that was only revealed in November 2006 when the defendants launched an application for security;

  11. that it was stated in the answering affidavit to the application for security that the plaintiff would not be able to furnish security, as was also submitted in the Supreme Court of Appeal on 21 November 2007;

  12. that it transpired that the plaintiff had on 12 October 2007 concluded the agreement with HLS;

  13. that it appears from the agreement with HLS that the plaintiff’s legal representatives and case manger assisted in funding the case by means of contingency fees;

  14. that the plaintiff did not disclose the agreement with HLS when the defendants insisted on security after the dismissal of the appeal.


He gave a detailed account of the events that preceded my ruling that the matter should resume on 2 February 2009.

He explained that when the trial was postponed in January 2007 a substantial collapse fees had to be paid to the defendants’ counsel.


He gave details of the disruption caused by the fact that Mr van der Linde had to withdraw from the case. He estimated that that led to a loss of R1 million.


He referred to the defendants’ review application and to my judgment in the matter. He submitted that the importance that the matter should proceed was a strong motivation of the judgment.


He accused the plaintiff of delaying the hearing of its review application as well as the Rule 47(4) application and the plaintiff’s application for a stay and referred to his efforts to expedite the matter.


Only in papers served on the defendants on 7 January 2009, was it revealed that HLS had by way of a letter dated 8 December 2008, terminated the funding agreement on two months’ notice.


He submitted that the plaintiff did not play open cards in respect of its ability to provide security. He submitted that it was clear from the letter dated 8 December 2008 that the withdrawal of HLS did not come as a surprise.


He made the point that the action had been stayed since 18 November 2008, after the expiry of 10 days that ran from 3 November 2008.

He referred to researches on HLS’s website, which show that HLS is still exposed towards the plaintiff.


He alleged that the ruling that the case should proceed on 2 February 2009 cost the defendants R5 million which will not be recoverable.


He inferred that after the withdrawal of HLS it was unlikely that the plaintiff would find another funder and submitted that the interests of justice required that an end be put to the litigation.


He submitted that the plaintiff had made common cause with gamblers and that the plaintiff cannot distance itself from the conduct of the gamblers if they renege on their obligations.


He gave details of his discussions with his counsel. They were in agreement that the trial would take another year, perhaps two years, even three years.


He explained how a lot of his time and that of counsel was wasted by interlocutory applications such as this one. All that cost the defendants more then R2 million, of which very little, perhaps a quarter may be recoverable.


He sketched what would happen if the case could not proceed on 2 February 2009: collapse fees will have to be negotiated with counsel and counsel will have to be retained.


He explained the magnitude of the task of re-preparing for the case.


He submitted that even if the additional security was furnished, the probabilities are that in future the plaintiff will again run out of money.


He submitted that the claim is pursued principally for the benefit of the plaintiff’s legal team, its case manager and the investors.


He submitted in conclusion that the defendants had good defences to the plaintiffs claim such as:

  1. that the plaintiff’s losses were caused by its board’s decision to operate a number of subsidiaries outside its traditional field;

  2. the plaintiff always had a bad debt problem against which it was warned by the Land Bank and the defendants;

  3. the substantial debt of the debtor Coleman was the result of unforeseen climatic events.


He pointed out that the plaintiff’s expert, Mr Collett, lacked practical experience.


He submitted that the fact that the failure to furnish the additional security in time had the inevitable result that the trial could not resume on 2 February 2009 and that that was sufficient reason to dismiss the claim.

In a supplementary affidavit dated 6 February 2009, the plaintiff’s attorney, Mr Perreira submitted that the Rule 47(4) application started on a narrow basis and that a new case was made out in the supplementary founding affidavit.


He referred to the history of this application.


On 6 November 2008 he informed the defendants that he considered the taxing master’s determination of 3 November 2008 to be reviewable. He asked an extension of the time to furnish security. At that time HLS had already adopted the stance that they would not provide further security if the defendants’ review application succeeded. He still thought that if it came to the push and the defendants’ review application succeeded, HLS would not abandon their investment.


On receipt of the defendants’ letter of 7 November 2008 he did not consider it necessary to launch a hasty application. Ultimately he was advised to launch a review application and a Rule 27 application.


Because he was advised that his letter of 6 November 2008 might have created the impression that HLS would provide further security, he corrected the matter in his letter of 10 November 2009.


When the period for furnishing the additional security expired on 17 November 2008 he had no instructions and counsel were not available for consultation. On 18 November 2008 he informed the defendants that he had instructions to launch a review application. In spite of that the defendants brought the present application.


On 26 November 2008 HLS indicated that they would provide the further security of R1.788 million under protest. That was conveyed to the defendants in his letter of 28 November 2008.


After the dismissal of the defendants’ review application on 1 December 2008, at the request of HLS, steps were taken to provide a guarantee. On 4 December 2008, however, the defendants were informed that HLS had put the matter on hold and that they would send a memorandum to the plaintiff’s counsel.


The memorandum was received on 5 December 2008. On 5 December 2008 the plaintiff’s counsel sent a memorandum in reply to HLS.


Also on 5 December 2008 the defendants received a letter from the applicants in which it was stated that the defendants would cease all preparation until the further security was furnished.


On 8 December 2008 the plaintiff received HLS’s letter of cancellation. The letter came as a surprise. He pointed out that HLS remained liable to fulfil its obligations during the period of notice.


On 11 December 2008 the plaintiff’s case manager had a meeting with HLS. It transpired that HLS was motivated by the international financial crisis.

On 11 December 2008 a letter of demand was sent to HLS. HLS did not comply with the letter of demand or its obligations. On 19 December 20087 HLS sent a letter in which it denied being in breach of its obligations.


In view of the defendants cessation of preparation and the absence of counsel and the judge he left everything till counsel’s return early in January 2009.


When the defendants set down the plaintiff’s review application and their Rule 47(4) application for 8 January 2009 he reacted by pointing out that the set down was irregular.


I may interpose here to say that I did eventually find that the two applications were set down before they were ripe for hearing.


On 8 January 2008 the court was informed that negotiations with a new financier, IMF, were underway.


On 22 January 2009 IMF informed the plaintiff that it should not proceed with its review application and rather concentrate on the main action. That led to the withdrawal of the plaintiff’s review application on 23 January 2009. The defendants were also informed on that day that security would be furnished by 30 January 2009.


On 28 January 2009 a contract with IMF was concluded and on 29 January 2009 a guarantee for the amount of the additional security was provided.

He pointed out that the defendant’s supplementary affidavit was filed after the defendants had been notified that security would be provided by 30 January 2009.


He inferred that the voluminous supplementary affidavit, introducing a new case, was filed when it was realized that security would be furnished.


He submitted that the supplementary affidavit is replete with suggestions that the plaintiff’s legal team are dishonest and acting in their own interest.


He made the following submissions:

  1. that the financial demise of the plaintiff was brought about by the plaintiffs;

  2. that the plaintiff was forced to seek financial assistance;

  3. that the contingency fees charged by the plaintiff’s legal representatives are lawful;

  4. that the defendants are only defendants in name, the case being run by insurers and

  5. that the plaintiff and its shareholders have an interest of between 20% and 40% of the proceeds of the claim.


He accused the defendants of abuse of process and pointed out that they unsuccessfully raised the defence of champerty.


He once again raised complaints previously raised namely that the defendants refused to co-operate in order to curtail the proceedings. He pointed out that the plaintiff would be out of pocket in respect of the costs of the defendants’ review application.


The following points were made in answer to various paragraphs in the supplementary affidavit:

  1. that the period of 10 days within which to furnish security was unreasonable;

  2. that although a failure to provide security within a specified time has the effect that an action is stayed, it does not mean that an application for dismissal may be brought immediately;

  3. that at the time of the hearing in the Supreme Court of Appeal the due diligence study on which the agreement with HLS was conditional, had not been performed. Therefore there was at that time no binding funding contract;

  4. that the dispute between the plaintiff and HLS about the additional security of R5.5 million fell away when the defendants’ review application was dismissed;

  5. that it was the defendants’ breach of contract that forced the plaintiff to resort to outside funding;

  6. that the defendants could not rely on the plaintiff’s problems to get funding that were already canvassed in previous proceedings;

  7. that the plaintiff was keen to pursue its claim and could not benefit from delaying tactics;

  8. that daily security would only be due upon the resumption of the trial;

  9. that the plaintiff did not have its counsel on permanent stand-by;

  10. that the defendants were entitled to cease preparation when the stay set in;

  11. it was not necessary to bring an interim application to suspend the stay because HLS indicated that it would provide the additional security of R1.788 million under protest and because the court indicated that the plaintiff’s review application had to be finalized first;

  12. that the defendants could not rely on the events that led to the recusal of the previous trial judge;

  13. that there was no duty on the plaintiff to inform the defendants of the worsening of its financial position during the first half on 2006;

  14. that the trial had to stand down for two weeks because of the format of the defendants trial bundles;

  15. that the NTK was not an investor in the plaintiff’s claim, only its majority shareholder;

  16. that the plaintiff’s case manager, Labuschagne and Labuschagne, is not the successor of Mr Collett’s firm. A confirmatory affidavit of Mr Labuschagne was annexed to confirm it;

  17. that on 29 November 2007 HLS had not been secured as a funder and that the plaintiff was loath to disclose sensitive information that might lead to interference with the due diligence investigation;

  18. that the abortive plea of champerty led to a delay of three years;

  19. that the plaintiff could not be blamed for the fact that HLS reneged on its obligations, which resulted in the postponement of the trial;

  20. that the plaintiffs counsel, Mr Alberts SC, referred to HLS’s instruction to stall the issue of a guarantee when he told the judge in chambers on 5 December 2008 that there was an “oponthoud”. The plaintiff thought that the delay was temporary;

  21. that the suggestions that the plaintiffs counsel misled the court were defamatory and without merit;

  22. that the defendants were now moving the goal posts by suggesting that the trial may last another three years;

  23. that the fact that costs may be irrecoverable is a normal incident of litigation;

  24. that IMF had the financial strength to fund the plaintiffs case, as appears from its quarterly report for the last quarter of 2008, annexed as X15;

  25. that the evidence so far shows that the plaintiff had a prima facie case.


The defendants filed a 108 page replying affidavit in tis Rule 47(4) application.


Mr Chappel referred to the plaintiff’s review application and the attack launched on him and the taxing master. He questioned the launching on that application in view of the letter dated 1 December 2008 sent by the plaintiff’s attorney to HLS. In it it is stated that the plaintiff had to launch a review application to ward off the defendants’ application for the dismissal of its action. He submitted that this was an abuse of process.


He dealt extensively with allegations that he maligned the plaintiffs counsel and attorney. He pointed out that he had already in a letter dated 11 December 2007 pointed to the discrepancy between what was said in the Supreme Court of Appeal and the statement in Mr Perreira’s letter of 5 December 2007 that the plaintiff was in the process of negotiations for external funding.


He made it clear that although contingency fees are not lawful, he was of the view that the plaintiff’s legal team had lost their objectivity.


He referred to deadlines that were not met and said that he could not rely on Mr Perreira’s say so.


When he asked Mr Perreira for his authority to act he was presented with a document dated 25 May 2007, when the NTK was still administering the plaintiff.


He was given clear instructions to bring an end to the prejudice being suffered by the defendants.


The failure to furnish security in November 2008 remains the basis of the application. The evidence about the plaintiff’s conduct accentuates the tyranny of the litigation.


With relation to the allegation that he launched the Rule 47(4) application precipitately, he referred to an allegation in the defendant’s review application to the effect that in view of the stance of HLS it was unlikely that the plaintiff would fund a new investor within a year. In the circumstances he had a duty to his client to get finality in the case. The plaintiff’s failure to provide security under protest strengthened his suspicions.


The defendants’ supplementary affidavit was necessitated by supervening events.


He submitted that the Rule 27 application was based on the assumption that the plaintiff was per se entitled to be given time to fund an alternative investor and the assumption that the plaintiff was not be blamed for HLS’s default.

In dealing with specific paragraphs in the supplementary affidavits he made the following points:

  1. that the unavailability of counsel could not have been the reason for the delay in the launching of the Rule 27 application;

  2. that Mr Alberts seems to have been involved in matters that did not pertain to the function of an advocate;

  3. that the defendants had asked for copies of the memorandum exchanged between the plaintiff and HLS, but that none were provided. He had suggested that parts of the documents could have been blocked out;

  4. that the deadlines that were not kept had to be seen against the court’s attitude that the matter had to proceed on 9 February 2009;

  5. that the fact that champerty was allowed did not mean that a litigant should be given time over and over to find investors;

  6. that it is not correct that the plaintiff was ruined by the defendants’ breach of contract. After the settlement with the Land Bank the plaintiff was financially healthy;

  7. that contingency agreement should not be allowed to place a heavier burden on a defendant;

  8. that it was not correct that the defendants were defendants in name only. Some of their insurers are insolvent. The second layer of insurance is almost exhausted. In this layer the first defendant bears 12.4% of the costs. In the next layer it will bear 21% of the risk;

  9. that the shareholdings of shareholders who had shares in the plaintiff when the cause of action arose, is not more than 8%;

  10. that it appears from IMF’s standard agreement that its share of the proceeds of the case can very between 60% and 74%;

  11. that the alleged two week delay in the trial was in fact an adjournment 8 days earlier to enable Mr Collett to acquaint himself with the defendants’ rearranged bundles;

  12. that the champerty appeal was not an abuse of process because the Supreme Court of Appeal had not yet finally pronounced on the issue;

  13. that the Supreme Court of Appeal should have been told that a funding agreement had been signed;

  14. that the plaintiff should immediately have launched a Rule 27 application;

  15. that the explanation that the agreement with IMF could not be disclosed lest the due diligence investigation be jeopardised, is absurd in view of the fact that the agreement with HLS was disclosed;

  16. that the wasted costs incurred after the dismissal of the plaintiff’s appeal is of a magnitude seldom seen in litigation;

  17. that HLS was not a party to the case so as to be able to rely on privilege;

  18. that the plaintiff had to play open cards in respect of its funding arrangements;

  19. that the wasted costs incurred by the defendants were not a normal incident of litigation;

  20. that if Labuschange and Labuschange was not a perpetuation of Collett and Collett it at least performed the same case management function.

In the founding affidavit of the plaintiff’s application in terms of Rule 27, dated 7 January 2009, its attorney, Mr Pereira, referred to the correspondence relating to the additional security.


On 8 December 2008, out of the blue, he received a letter from HLS terminating the funding agreement on two months’ notice. In terms of clause 11.2 of that agreement HLS remained liable for continued funding until the date of termination. On 11 December 2008 he reacted with a letter demanding that HLS furnish the additional security of R1.78 million.

On 19 December 2008 HLS reacted by denying that it was in breach of contract. On 29 December 2008 he sent a further letter of demand to HLS.


He explained that it was as a result of HLS’s breach of contract that the additional security was not furnished under protest, as previously intimated by him.


In the mean time the plaintiff had entered into negotiations with another financier. The negotiations are sensitive. The new financier needs time to investigate the merits of the claim. In the circumstances the plaintiff needs an extension to the end of February 2009 to furnish the security.


In the answering affidavit to the Rule 27 application, Mr Chappel referred to the history of the matter and submitted that the plaintiff’s review application was launched to buy time. He referred to allegations concerning him and the taxing master that were made in that application.


He pointed out that the application was launched a month after the letter of 8 December 2008. He denied that HLS’s withdrawal could have been unexpected.


He submitted that the date of 2 February 2009 was determined at the plaintiff’s behest, and that a further postponement should not be allowed.


He once again gave a detailed background in which inter alia, the following points were made:

  1. that the plaintiff’s review application was an abuse of process;

  2. that the plaintiff’s counsel on 8 January 2009 revealed that HLS had also failed to fund the running costs of the case, thus making it impossible for the plaintiff to proceed on 2 February 2009. Accordingly the defendants also had to stop their preparation;

  3. that the plaintiff had also, despite demand, failed to furnish daily security of R34 500.00 per day as determined by the taxing master on 3 November 2008.

On 6 February 2009 the plaintiff filed a supplementary founding affidavit and replying affidavit.


Mr Perreira stated that he had thought that an application for extension was unnecessary if the plaintiff’s review application succeeded.


When the dismissal application was enrolled for 8 January 2009, he thought it prudent to launch the Rule 27 application.


He pointed out that the defendants’ answering affidavit was filed after the defendants had been informed that security would in all probability be provided by 30 January 2009.


Now that the security has been provided, the plaintiff did not need an extension of time, but condonation.

Logically the Rule 27 application has to be heard with the Rule 47(4) application because if condonation is granted, the basis of the Rule 47(4) application would fall away.


The review application was launched by the plaintiff on advice of counsel and not to buy time.


In reply to the answering affidavits he repeated that the obligation to provide daily security would only arise on the resumption of the trial.


He made the point that when he referred to an application to meet the consequences of a failure to timeously furnish the additional amount of security, he referred to an application to stay the operation of the taxing master’s determination.


On 15 February 2009 a replying affidavit in the Rule 27 application was filed.


Mr Perreira explained that he had not previously dealt with the letter of demand to HLS dated 11 and 29 December 2008. These documents were made available to the defendants on 12 February 2009. He referred HLS’s letter dated 19 December 2008 from which it appears that the plaintiff’s review application was launched. On 4 November 2008 the defendants were advised that the taxing master’s determination of additional security was wrong. The defendants were also told so on 6 November 2008.


Because of the defendants’ attitude it was decided to proceed with the review application. All this happened before the defendants refused to accede to an extension of time.


Where a review application had to be bought in any event, there was no point in pursuing the Rule 27 application.


Only when the defendants refused to consider an extension was it considered necessary to pursue the Rule 27 application.


In its letter of 8 December 2008 HLS did not deny that it would furnish the additional security under protest.


That concludes the summary of the contents of the two applications.


During argument Mr Barrie produced the agreement between the plaintiff and IMF that I ordered the plaintiff to make available to the defendants in terms of Rule 35(12). I ordered that any amounts that may reveal the limit of the funding may be blocked out. In terms of the agreement IMF had to furnish the amount of R1.788 million forthwith. In terms of clause 3 IMF will be entitled to investigate what is called the project and the plaintiff has to provide any information or documentation required for this purpose. In terms of clause 3.8 IMF may use information so obtained to review the continuation of its funding. In terms of clause 15 IMF is entitled, at its sole discretion, to terminate its obligations, other than accrued obligations, on 10 days written notice.


Rule 47(3) provides that if a party fails to furnish security within 10 days of a decision of the registrar the other party may apply to the court on notice that the security be given and that the proceedings be stayed until such order is complied with.


The parties agreed that the action was automatically stayed on 17 November 2008 when 10 days after the determination of the taxing master had expired. That was because the wording of the order of 5 December 2007 was such that it made it unnecessary for the defendants to have recourse to Rule 47(3) in order to stay the proceedings.


Rule 47(4) provides that if security is not given within a reasonable time the court may, amongst others, dismiss an action.


It seems to me that an application for the dismissal of an action may be brought in terms of Rule 47(4) regardless of whether the proceedings have been stayed or not.


I agree with Mr Maritz SC, who, with Mr Alberts SC and Mr N.C Maritz, appeared for the plaintiff, that the jurisdictional fact that is a prerequisite for an order dismissing an action in terms of Rule 47(4) is the expiry of a reasonable time. See Wallace NO v Commercial Union Insurance Co SA Ltd 1999(3) SA 804 (c) at 812 H-J. The defendants have not addressed the issue at all and to that extent the application is misconceived.


Where security has in fact been furnished I find it somewhat unreal to try to establish ex post facto whether it was furnished within a reasonable time. The normal situation is that an action can be dismissed if security is not furnished despite the effluxion of a reasonable time.


Seen from this perspective it would seem that the application cannot succeed as an application in terms of Rule 47(4).


I shall, however, assume that one can ex post facto, after security has been furnished, but furnished out of time, determine whether it was furnished within a reasonable time.


The additional security had to be furnished by 17 November 2008. It was furnished on 29 January 2009, some ten and a half weeks late. It was late because the plaintiff’s financier had withdrawn and a new one had to be found. The financier was found in Australia. Not only was it necessary to find a new financier who could immediately provide R1.788 million, but he also had to be prepared to commit himself in respect of the considerable amount that the funding of the case would require in future. If all these circumstances are taken into account I do not think that it can be said that the security was not furnished within a reasonable time. That certainly is so from the plaintiff’s perspective.


From the defendants’ perspective there was a trial date that had to be met and that would be compromised if security was not furnished in time.


Mr Barrie referred to my determination of the trial date, very much against the wishes of the defendants, and submitted that the date of 2 February 2009 was sacrosanct. Just as one should never say never, I do not think that a trial date should be considered to be cast in stone. If circumstances arise that make it impossible for a trial to proceed on a pre-determined day, it may become necessary to accept the inevitability of a postponement. I simply cannot accept that if the trial could not go on on 2 February 2009, it had to be terminated.


Although the plaintiff must accept responsibility for the withdrawal of HLS, it was an unforeseen event over which it had no control and that has to be taken into account when one considers whether security was furnished within a reasonable time.


If the matter is considered from all perspectives I am still of the view that, given the circumstances, security was furnished within a reasonable time.


Even if security was not furnished within a reasonable time, a court would still be loath to dismiss the action, especially where the security was in fact furnished. In Wallace NO v Commercial Union Insurance Co SA Ltd 1993(3) SA 804 (c) at 809J the court said the following of the dismissal of an action in terms of Rule 47(4):

“Such a decision is not, in my view, a matter of ordinary housekeeping or procedural running of the Court. This trial had not even started and it is trite that a court will be slow to adopt the extreme measure of dismissal of an action when another remedy is available”.


In this case the case has already run more than 110 days. The court should not lightly dismiss the action if other remedies are available. There are remedies that can alleviate the prejudice suffered by the defendants. One such remedy is a suitable order for costs.


For all these reasons I do not think that the court should dismiss the action in terms of Rule 47(4).


The application underwent a metamorphosis as it went along. Originally it was based simply on the failure to provide the additional security of R1.788 million with a prayer for the dismissal of the action, and an alternative prayer for punitive costs in the event of the court granting an extension.


After the withdrawal of the plaintiff’s review application, the defendants filed the supplementary founding affidavit in which reliance was placed on abuse of process and in general, the tyranny of litigation. The main and most recent complaint was that the plaintiff’s review application was used as a ploy to buy time, but the defendants also relied on the cumulative effect of what it perceived to be the tyranny of litigation.


The question of whether the plaintiff’s review application was launched without any belief in its merit, but simply to stave off the defendants Rule 47(4) application was debated at length.

In my view this court must consider the matter on the basis of the plaintiff’s version, as contended by Mr Maritz. On that version the application was launched on the advice of senior counsel and it was withdrawn on the instructions of IMF. That being so it cannot be considered to have been an abuse of process.


In any event, the plaintiff could have asked for an extension of time and had launched two applications that could have enabled it to ward off the defendants’ application for a dismissal of its action. If it could legitimately have asked for more time in which to furnish security, it did not necessarily act with a reprehensible aim in pursuing its review application. See Brummer v Gorfil Brothers Investments (Pty) Ltd & Other 1999(3) SA 389 (A) at 414 I and 415 D-E.


I do agree that it made no sense for the plaintiff pursue its review application and its Rule 27 application at the same time. If the review application succeeded, the Rule 27 application would have been redundant.


Accepting that the Rule 47(4) application had become a wider based application I shall now deal with the two additional grounds that emerged from the supplementary founding affidavit, namely (a) the failure to provide daily security and (b) abuse the process.


The daily security could not have become due before the 2nd February 2009. From then on it would be due on a daily basis. No doubt the parties would eventually have agreed on an arrangement to streamline the provision of daily security. In a letter dated 29 January 2009 Mr Pereira made such a proposal. Mr Barrie relied on that letter of proof that the plaintiff refused to provide the daily security for the 2nd February 2009.


In that letter the plaintiff indicated that it would be prepared to furnish daily security in advance in two monthly tranches.


I cannot see how that letter can be construed as a refusal to furnish daily security. In any event, on 29 January 2009 it was clear that the case was not going to proceed on 2 February 2009. Where the plaintiff would be liable for the wasted costs of that day, as is conceded in this matter, it would make no sense to dismiss its case for failing to provide daily security for a day in respect of which it will in any event have to pay the wasted costs.


The defendants’ main complaint of abuse of process is the plaintiff’s review application. They also relied on the history of the case, always stressing the fact that the plaintiff’s claim was being pursued mainly for the benefit of speculators.


I cannot see how the past history of the case can be invoked to prove abuse of process. The fact that the plaintiff’s case is funded by investors received the blessing of the Supreme Court of Appeal in Price Waterhouse Coopers Inc and Others v National Potato Co Operative Ltd 2004(6) 66 (SCA), something with which the defendants do not seem to have come to terms.


Mr Barrie relied on the following passage in SA Scottish Finance Corporation Ltd v Smit 1966(3) SA 629(T) at 634 EF:

“Generally, I do not think that the action ought to be dismissed unless

“the plaintiff has recklessly disregarded his obligations, or …. the case appears to be hopeless, or the Court is convinced that the plaintiff does not seriously intend to proceed”.

That was the test applied by GREENBERG, J. (as he then was), in Ford v South African Mine Workers’ Union, 1925 T.P.D. 405 at p. 406, in determining whether to grant absolution from the instance under the Supreme Court Rules against a plaintiff for not filing his declaration timeously, and I think that it is also a useful guide for Rule 58(2).”


He argued that the conduct of HLS was reckless in withdrawing from its obligations and that the conduct of HLS should be ascribed to the plaintiff. I do not agree that one can ascribe HLS’s conduct to the plaintiff where HLS withdrew from its contract with the plaintiff. Then one cannot say that the plaintiff’s case is hopeless and that the plaintiff does not seriously intend to proceed with the case.


Mr Barrie also relied on the following dictum in Golden International Navigation SA v Zeba Maritime 2008(3) SA 10(C) at 16 A-C:

“While everyone undoubtedly has the right to have any dispute decided in a fair public trial before a court, there are rules governing any public trial. One of the most fundamental principles in this regard is that it is in the public interest that litigation be finalised without undue delay: interest reipublicae ut sit finis litium, as it was stated by the Romans may years age. Indeed, Emperor Justinian, in Codex 3.1.11, decreed that civil suits shall not, after litis contestatio, be deferred longer than three years. The potential ‘tyranny of litigation’, aggravated by undue delay has also been recognised by our courts on many occasions and every system of civil procedures has rules to curb violation of the rules and abuse of its process.”


In a sense all litigation is an ordeal. It is an ordeal to be sued and it is an ordeal to be compelled to enforce one’s rights in the courts. But the courts are there to resolve disputes. It is only when a defendant is dragged through the courts by a plaintiff who has no case or where the inconvenience and prejudice caused by delay far outstrip the value of the res litigiosa that one can truly speak of the tyranny of litigation. I have never been able to say that of the plaintiff’s case. I made the point in my judgment when I ordered the plaintiff to furnish security.


The fact that the case is of a magnitude and complexity seldom encountered does not constitute tyranny of litigation. Professional negligence cases are notoriously difficult to prove and notoriously expensive to defend. Provided that there is a probabilis causa, a plaintiff cannot be non-suited on the basis that the proof of his case will amount to tyranny of litigation.


Nor do I think that an episode in a long drawn out case can be isolated and used to typify the whole proceedings as tyranny of litigation.


Here is a case with a long history, with long interruptions, that has already been in court for about 110 days.


If one looks at the facts dispassionately, it boils down to a situation where the fact that the plaintiff’s financier withdrew and had to be replaced, resulted in the pre-determined trial date not being viable anymore.


There can be no question that the plaintiff must bear the consequences of the withdrawal of his financier. The only question is whether the price it has to pay is to forfeit its claim.


In my view the answer is no.


For all these reasons I am of the view that the application for a dismissal of the plaintiff’s action cannot succeed.


It follows that if the application for a dismissal cannot succeed, the application for condonation of the late furnishing of the additional security should succeed.


All that remains is the issue of costs. In respect of the costs of the dismissal application Mr Maritz asked that a punitive order for costs made de bonis properis against Mr Chappel. He based it on certain allegations made in Mr Chappel’s affidavits, mainly the supplementary affidavit.


The allegations concern Mr Maritz, Mr Alberts, Mr Pereira and to an extent the plaintiff’s legal team in general. He described the allegations as scandalous, accusations of dishonesty, fraud, fabrication, conspiracy and greediness. In my view this summary is much overstated.


Mr Chappel did make the point that the plaintiff’s legal team had an interest in the case by reason of their contingency fee agreements and that that compromised their objectivity.


In respect of Mr Maritz the main complaint was that he questioned the fact that when the appeal against the order compelling the plaintiff to furnish security was argued in the Supreme Court of Appeal on 21 November 2007, Mr Maritz, when asked whether, if the appeal was dismissed, the plaintiff would be able to furnish security, answered no. That Mr Chappel contrasted with the fact that it later transpired that the plaintiff had already in October 2007 concluded its agreement with HLS. The explanation given by the plaintiff was that the answer was correct because the agreement with HLS was still conditional on a due diligence investigation that had to be performed. The matter is not so simple. The answer of Mr Maritz did not tell the whole story and I cannot fault Mr Chappel for raising the matter.


The same applies to the complaint relating to Mr Alberts. He said in my chambers on 5 December 2008, after HLS had put the issue of furnishing the additional security on hold, that there was no “oponthoud”. Mr Chappel suggested that that was not a full disclosure.


It must be remembered that on 8 December 2008 HLS cancelled its agreement. It must in my view be accepted that there will always be a difference of opinion between the plaintiff and the defendants as to the extent to which the defendants are obliged to disclose problems with funding. Between their respective views there is a grey area. Mr Chappel’s remarks in this regard can be considered as fair comment.


He was castigated for questioning statements made by Mr Pereira such as that the cancellation by HLS came out of the blue. I do not think that one necessarily imputes dishonesty if one considers it unlikely that a cancellation would have come without any prior warning.


In the end, of course, the version of the plaintiff has to be accepted as I have said previously. Mr Maritz in fact argued that on the basis of the plaintiff’s version I must find that all Mr Chappel’s suspicions and reservations were groundless. I cannot agree. Mr Chappel was entitled to scrutinise and question explanations emanating from Mr Pereira and it did not necessarily mean that by doing so he branded Mr Pereira a liar.


In the replying affidavit Mr Chappel made it clear that he did not question the honesty or propriety of the plaintiff’s legal representatives.

Even though there are a few instances where I think Mr Chappel raised his suspicions in an offensive way, I do not think that there is any reason to punish him or to make a punitive order for costs.


The defendants should pay the costs of the dismissal application on a scale as between party and party.


In respect of the Rule 27 application Mr Maritz, in terms of prayer 2 of the amended notice of motion, only asked that the plaintiff be ordered to pay the costs on an unopposed basis. Mr Barrie, in this event, argued that the opposition to the application was not unreasonable and that the plaintiff should pay the costs of opposition.


In view of the interconnectedness of the dismissal application and the Rule 27 application, I cannot see how I can order the defendants to pay the costs of the dismissal application and the plaintiffs to pay the costs of opposition in the Rule 27 application. Mr Maritz’s suggestion is fair.


That brings me to the wasted costs of what I shall call the postponement.


Mr Maritz readily accepted that the plaintiff was liable for the wasted costs of the postponement, but argued that there was no justification for costs on a scale higher than as between party and party. He submitted that a litigant who receives funding from investors is in no way different from any other litigant and that when he incurs a liability for costs, it should normally be ordered on a scale as between party and party.


As a general proposition Mr Maritz is correct. A litigant who is funded by investors acts lawfully and cannot be regarded as a lesser breed of litigant who must pay costs on a higher scale. If therefore in this case orders for costs are to be awarded against the plaintiff in interlocutory matters, they should, unless exceptional circumstances are present, be awarded on the normal scale as between party and party.


In this case there is, however, a difference. The postponement was brought about by a change of investors, one withdrawing and another having to be found. That is an inherent risk of the way in which the plaintiff is being funded. Hopefully it will never happen again and I will refrain from speculation as to what should happen when there is a recurrence. The fact is that the withdrawal of HLS and its replacement by IMF have resulted in a postponement that will cause prejudice to the defendants. That prejudice should be limited as far as possible. Even if the wasted costs are to be ordered on a higher scale, there will still be an irrecoverable loss. The question is whether I should not try to reduce the prejudice suffered by the defendants by awarding costs on a higher scale.


There is no basis to award the wasted costs as punitive costs. The motivation could only be to insure that the defendants are out of pocket as little as possible.


In the case of Price Waterhouse Coopers Inc supra at 79 I-J the following was said:

“In my view it must also be recognised that the civil justice system is strong enough to withstand the perceived abuses which could arise if civil litigation is made possible by financial support given by persons who provide such support in return for a share of the proceeds.”


In my view the prejudice suffered by a party who must submit to a postponement occasioned by a change of investors in midstream, can be regarded as an abuse.


It sometimes happens that postponements are granted on condition that the party requesting the postponement pay the wasted costs on a scale as between attorney and client. See Lakofski v O’Reilly 1933 WLD 126 and Tarry Co Ltd v Matatiele Municipality 1965(3) SA 131 (OK). In Van Dyk v Conradie and Another 1963(2) SA 413 (c) at 418 E-F the court pointed out that normally attorney and client costs (on a postponement) are only awarded when at least there is grave misconduct.


In Nel v Waterberg Landbouwers Ko-Operatieve Vereeniging 1946 AD at 607 the following was said:

“The true explanation of awards of attorney and client costs not expressly authorised by Statute seems to be that, by reason of special considerations arising either from the circumstances which give rise to the action or from the conduct of the losing party, the court in a particular case considers it just, by means of such an order, to ensure more effectually than it can do by means of a judgment for party and party costs that the successful party will not be out of pocket in respect of the expense caused by him by the litigation.”


That is applicable in this case. In my view it is unfair that the defendants should unnecessarily be out of pocket on account of the fact that a postponement was necessitated by a change in investors. It was of course not only a case of investors being changed, but security for costs was furnished more than 10 weeks late. For these reasons I shall order that the plaintiff’s pay the wasted costs of the postponement on a scale as between attorney and client.


In the result the following order is made:

  1. The defendants’ application for the dismissal of the plaintiff’s action is dismissed with costs which costs shall include the costs of three counsel.

  2. Prayers 1 and 2 of the plaintiff’s amended notice of motion in terms of Rule 27 dated 6 February 2009 are granted.

  3. The plaintiff must pay the wasted costs of the postponement of the trial on 2 February 2009 on a scale as between attorney and client, which costs shall include the costs of two counsel.





__________________________

C. BOTHA

JUDGE OF THE HIGH COURT