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Williams v Trifecta 165 (Pty) Ltd and Others (13960/2009) [2011] ZAWCHC 335 (23 June 2011)

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The issue before me at this point turns purely on the question of security for costs. Mr Joubert, who appears together with Mr De Wet, for the plaintiff/respondent, submits that this application for security of costs is justified in that in particular there is more than an apprehension that, were the application for rescission to be dismissed, the plaintiff/respondent will not be able to secure an award which will be made to it pursuant to such a finding insofar as costs are concerned.

In my view there can be no doubt, that if one examines the founding papers in this regard, that is the affidavit deposed to by Mr Williams in support of this particular application, there is considerable merit in the approach which has been developed by Mr Joubert.

In particular, there is documented evidence of a spring of default judgments which have been granted against the defendants/applicants and accordingly there must be more than apprehension of the defendants' inability to pay its creditors and financial problems which are presently encountered.

There are also disturbing averments with regard to what are referred to in the founding papers as double dealing, or as Mr Joubert put it, rather colloquially but appositely, it may well be that the plaintiff/respondent has been taken "for a ride" in financial terms by the defendants/applicants. These issues are not for decision at this point and I say no more.

The essence of the opposition put up by Mr Van Riet, who
appears on behalf of defendants/applicants, turns on the
following: This particular proceeding which the defendants/applicants wishes to bring, concerns a reconsideration of an order which has been made by the Registrar in terms of Rule 31, and in particular Rule 31.5(d):

"Any party dissatisfied with the judgment granted or direction given by the registrar may, within 20 days after his acquired knowledge of such judgment or direction, set the matter down for reconsideration by the court."

Mr Van Riet's argument thus turns on the following: In circumstances where a defendant wishes to defend an action or an application, it cannot be suggested that security must be provided in order to so defend the action. He submits thus that no security will ever be ordered against the defendant, even where a defendant brings a claim in reconvention in the circumstances where the costs have been brought about by the defendant on reality brought about by its defence to the action in convention.

The first argument by Mr Van Riet is to the effect that, if the present set of proceedings can be classified insofar as his clients are concerned as no more than a defence, there is no basis by which security can be ordered against the defendants/applicants.

Mr Joubert sought to deal with this by reference to certain of the key cases which were referred to by counsel. In D-Jav Corporation CC v Investor Management Services 2000 (2) SA 755 (W), Wunsh, J found, in effect, that if a defendant brought a claim in reconvention, in such situation the party bringing such a claim in reconvention, could not be ordered to provide security for costs.

By contrast in a judgment by Nepgen, J in Kemp N.O. & Another Trustee for the time being of Erf 591, Riversbend Trust v Rollburn Properties (Ptv) Ltd & Other Related Cases [1999] 3 ALL SA 154 (SE), the learned judge dealt with the Jay case at 167 and said the following:

"Although the nature of a claim in reconvention (for example if it is essentially a defence to the action or arises from the same transaction without going any further) could be relevant when it comes to deciding how the court's discretion should be exercised, I can think of no reason in principle or in logic why a court should not have the power to order an impecunious company, which institutes a claim in reconvention from furnishing security for its opponent's costs if it should fail in its claim. It is frequently a matter of chance, which of two parties have competing claims against each other, institute action first. In addition the counterclaim is a separate action which (as is the case in the application with which I am now concerned) can have nothing to do with the action in convention. The claim in reconvention can be proceeded with, even if the claim in reconvention is settled or withdrawn."

In short, if the approach adopted by Nepgen, J is to be followed, and there is much to commend its logic, then there would be no reason to conclude that a court could not exercise a discretion insofar as the ordering of security for costs by a party which institutes a claim in reconvention is concerned.

However, Mr Van Riet's argument is based on a different principle which thus needs to be interrogated. It is therefore perhaps necessary to refer to the legal source in terms of which security can be ordered. Rule 47 of the Uniform Rules of the High Court provides that:

"A party entitled and desiring to demand security for costs from another shall as soon as possible after the commencement of proceedings, deliver a notice, setting forth the grounds upon which the security is claimed and the amount demanded."

The key words, of course, are "entitled and desiring to demand security for costs". The source of this entitlement is to be found in section 13 of the Companies Act 61 of 1973, which provides:

"Where a company or other body corporate is plaintiff or applicant in any legal proceedings, the court may at any stage, if it appears by credible testimony that there is reason to believe that the court or body corporate, or if it is being wound up, the liquidator thereof, will be unable to pay the costs of the defendant or respondent, if successful in his defence, require sufficient security to be given for those costs and may stay all proceedings till the security is given."

The question arises as to whether the first defendant/applicant is a plaintiff or an applicant in any legal proceedings. Were it to be so, then section 13, which is the ultimate source of the entitlement to demand security, would then justify the application.

For this reason it is necessary to interrogate precisely what these proceedings constitute. In Nedbank Limited v Mortinson [2005] ZAGPHC 85; 2005 (6) SA 462 (W), Joffe, J, on behalf of a Full Bench of the then WLD, said the following with regard to Rule 31(5)(d):

"Rule 31(5)(d) contains a valuable safeguard to protect, in particular, the debtor. It provides for the reconsideration by the court of a judgment or direction given by the registrar within 20 days after the party concerned has acquired knowledge of such judgment or direction. This would obviously include an order declaring specifically hypothecated immovable property executable. Other than in the case of S62 of the Magistrate's Court Act, the reconsideration does not cast any onus on the debtor, the court is required to consider the application for default judgment de novo without any onus on the debtor. Accordingly, any order made by the registrar declaring immovable property executable, is open to reconsideration by the court if brought to the attention of the court."

This dictum appears to classify this procedure as being nothing more than a rehearing of the matter by the court; that is that the entire matter is now heard by the court in substitution of a hearing that might have taken place in front of the Registrar (i.e. the determination by the Registrar).

In the circumstance, given the emphasis placed by Joffe, J on the point that there is no onus on the debtor, it would appear that the learned Judge had in mind the fact that these proceedings were proceedings ultimately brought by, in this case, the plaintiff/respondent.

In other words, what occurred was that the very same matter on the very same papers duly supplemented, would be considered by the court. The proceedings could not thus be classified as a claim in convention or a claim in reconvention, but as the very proceedings which had been brought pursuant to Rule 31. In terms of section 13 of the Act, a party requesting a reconsideration cannot be considered to be either a plaintiff or an applicant. If the party cannot be considered to be a plaintiff nor an applicant, then there is no legal authority to order security for costs.

Mr Joubert submitted that the application had been brought out of time, that is not within the 20 day period, and that it was based on the flimsiest of grounds in which no bona fide defence had been shown nor any evidence provided to a court to indicate that there was any conceivable by which the initial order by the registrar could be set aside and replaced by a court hearing the matter pursuant to Rule 31(5).

The difficulty with this submission, in my view, is that is this argument is not before this court. What is before this court is an application for security for costs. It may well be that there is no significant bona fide defence. It may well be that the application for condonation of a late application for reconsideration, is dismissed by a court, but, in this case, I am asked to deal with one issue: should security for costs be granted in circumstances, where it would appear that section 13 of the Act does not apply.

Can a court exercise a discretion, as is urged upon me by Mr Joubert, insofar as this matter is concerned, that is as the courts have so done in respect of, for example, a claim in reconvention. See, for example, the judgment in Compare SA (Ptv) Ltd v Global Chemical Co (Pty) Ltd 1985 (1) SA 532 (C) at 532-533. The answer is that as this is a sui generis proceeding, these cases are inapplicable. In my view, a reconsideration as envisaged under section 31(5) does not place the defendants in the position of applicants, which would be required for security to be granted in terms of section 13 of the Companies Act. Accordingly there is no legal basis by which security can be justified in this case.

For these reasons, therefore, THE APPLICATION FOR SECURITY OF COSTS IS DISMISSED WITH COSTS.

DAVIS, J