About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Western Cape High Court, Cape Town
SAFLII
>>
Databases
>>
South Africa: Western Cape High Court, Cape Town
>>
2018
>>
[2018] ZAWCHC 164
|
|
Good Hope Plasterers CC t/a Good Hope Construction v Aecom SA (Pty) Ltd (15454/2016) [2018] ZAWCHC 164 (6 December 2018)
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
CASE
NO: 15454/2016
In
the matter between:
GOOD
HOPE PLASTERERS CC t/a
GOOD
HOPE
CONSTRUCTION
Plaintiff/Applicant
and
AECOM
SA (PTY) LTD
Defendant/Respondent
Coram:
Justice J Cloete
Heard:
15 November 2018
Delivered:
6 December 2018
JUDGMENT
CLOETE
J
:
Introduction
[1]
This is an application by the plaintiff in the main action (“Good
Hope”) for an order declaring that the defendant
(“Aecom”)
is not entitled to approach the registrar to increase what Aecom
regards as security for costs of R25 000
in terms of an order
granted by agreement on 13 January 2017 (“the order”).
[2]
The order reads as follows:
‘
By
agreement between the parties, it is ordered that –
1.
Plaintiff’s attorneys of record will make payment to
Defendant’s attorneys of record in an amount not exceeding
R25,000.00 (Twenty-Five Thousand Rand), in the event of a costs order
being made against the Plaintiff in favour of the Defendant,
or upon
agreement between the parties in writing of the amount due to
Defendant in respect of any such cost order.
2.
Payment shall be made within 3 (three) days of the Taxing Master’s
allocatur or the date of the agreement.
3.
The application for security for costs is withdrawn, costs to be
costs in the cause.’
[3]
It is Good Hope’s case that the order, properly interpreted,
does not amount to one granted under uniform rule 47(3) which
provides that:
‘
(3)
If the party from whom security is demanded contests his liability to
give security or if he fails or refuses to furnish
security in the
amount demanded or the amount fixed by the registrar within ten days
of the demand or the registrar’s decision,
the other party may
apply to court on notice for an order that such security be given and
that the proceedings be stayed until
such order is complied with.’
[4]
On the other hand it is Aecom’s case that the terms of the
order fall squarely within the provisions of the subrule and
that its
approach to the registrar on 14 November 2017 for further
security for costs of R211 039 (alternatively in such
amount as
is determined by the registrar) is competent.
Background
[5]
Good Hope is a building contractor. Aecom provides professional
engineering, consulting and project management services for
infrastructure projects. The City of Cape Town concluded an agreement
with Aecom appointing it as implementing agent for certain
projects
involving the upgrading of rental stock units. Good Hope successfully
tendered for the works for the Man A project for
a contract price of
R59.6 million and was subsequently appointed to also complete the
works for the Man C project for a contract
price of R39.4 million
(after the successful tender applicant, CF Projects (Pty) Ltd trading
as Filcon Projects, was placed in
liquidation).
[6]
A dispute arose between the parties and on 26 August 2016 Good Hope
instituted the main action against Aecom for payment of
various
amounts allegedly owed under certain payment certificates totalling
R3.9 million together with an order directing Aecom
to take certain
steps including the furnishing of a final payment certificate as well
as payment in terms thereof. According to
Good Hope, the ultimate
total amount due would be in excess of R8 million.
[7]
Aecom entered appearance to defend and on 22 September 2016
delivered a request for security for costs in terms of uniform
rule
47 in the amount of R100 000 (alternatively as determined by the
registrar). The notice reflects that the request for
security was
based on the following grounds, namely that: (a) the action
instituted by Good Hope is vexatious, reckless and
‘
obviously
unsustainable’
; (b) there was a pending liquidation
application between the parties in the North Gauteng High Court;
and/or (c) Aecom had
reason to believe that Good Hope would be
unable to pay its costs should it succeed in its defence.
[8]
On 12 October 2016 Good Hope’s attorney responded that:
‘
1.
We confirm our client’s instruction as follows:
1.1
Our client disputes that Aecom is entitled to security for costs;
1.2
In the event that same is necessary, our client further disputes that
an amount of R100 000.00 in respect of such security
is
reasonable and appropriate under the circumstances;
2.
Be that as it may, and in order to avoid any unnecessary litigation,
our client will be prepared to furnish an amount of R25 000.00
as security in a form determined by the Registrar of the Court.
3.
Should your client disagree to this amount of security, we have
instruction to refer the matter to the Registrar of the Court
for
determination in terms of Rule 47(2).’
[9]
On 14 October 2016 Aecom’s attorney replied in relevant part as
follows:
‘
With
reference to your correspondence of 12 October 2016, we confirm that
our client accepts the plaintiff’s offer to furnish
security in
the amount of R25 000.00. We are happy to accept an undertaking,
or any other such acceptable form of security
(such as a bank
guarantee), from your firm to pay in the event of a costs order being
made in favour of the defendant. Please advise
of the form such
undertaking to pay will take…’
[10]
On 30 November 2016 Good Hope’s attorney confirmed that:
‘…
our
client paid R25 000.00 into our Trust account as security for
costs in this matter and that the aforesaid amount will be
held on
trust until the finalisation of the above matter…’
[11]
On 1 December 2016 Aecom’s attorney advised that this
undertaking was unacceptable and that:
‘
We
require a formal undertaking to pay to
[Aecom’s
attorneys]
the amount
held as security for costs in respect of a costs order being made
against your client. Such payment is to be made, say,
within 3 days
of the Taxing Master’s allocatur in favour of our client or
upon agreement in writing by your client of the
amount due to our
client in respect of any such costs order.
Kindly
be advised that we are now constrained to place you on terms to
provide proper security as you previously tendered to do
by
9 December 2016 failing which we will recommend to our client to
approach the High Court for relief.’
[12]
On 13 December 2016 Aecom launched an application in terms of uniform
rule 47(3) for
inter alia
an order directing Good Hope to put
up security for costs in the amount of R25 000 by way of an
irrevocable and unconditional
guarantee issued by a first class South
African commercial bank. In the founding affidavit Aecom’s
attorney explained that
the purpose of the application was for an
order directing Good Hope ‘
to put up proper security in the
amount of R25 000 as agreed between the parties’.
She
also asserted that an order was required because Good Hope ‘
has
not put up the security agreed in a form acceptable’
to
Aecom. The application was set down for hearing in motion court on
10 January 2017. Good Hope filed a notice of intention
to oppose
on 5 January 2017 but did not deliver an answering affidavit
because the parties then agreed to the terms of the
order.
[13]
Good Hope contends that
its attorneys
were ordered to make
payment to Aecom’s attorneys of an amount not exceeding R25 000
in the event of a costs order being
made against it in favour of
Aecom. Security for costs, by way of an irrevocable undertaking,
guarantee or otherwise, was therefore
never furnished by Good Hope to
Aecom; nor was there ever any order, as envisaged by uniform rule
47(3), to the effect that
Good Hope
was obliged to furnish
security to Aecom.
[14]
Emphasis was also placed on that portion of the order recording that
Aecom’s application for security for costs was withdrawn.
Good
Hope argues that this is not a case where, at any stage of the
proceedings, security has been provided by it to Aecom and/or
where
it did not at all relevant times contest its liability to furnish
such security.
[15]
On 14 August 2017 Aecom issued a final payment certificate reflecting
an amount due to Good Hope of R1 466 760.61.
On 14 November
2017 Aecom served a further request for security for costs (the
subject matter of this application) in the amount
of R211 039
(alternatively as determined by the registrar). The notice reads in
relevant part as follows:
‘
TAKE
FURTHER NOTICE THAT the original amount furnished as security for
costs is no longer sufficient and accordingly defendant’s
request for security is based on the balance of the amount due in
respect of the draft Bill of Costs attached hereto less R25 000.00
previously received from the plaintiff.
TAKE
FURTHER NOTICE that if plaintiff contests the amount of security
required, it may approach the Registrar to determine the amount
to be
given and his decision shall be final…’
[16]
On 16 November 2017 Good Hope’s attorney responded that:
‘
As
you are aware, our client has always been of the opinion that it is
not liable to furnish security for costs in this matter.
This
remains our client’s attitude.
Your
request for security is therefore declined.’
[17]
On 18 January 2018 Aecom delivered its plea and counterclaim. For
present purposes it is only necessary to quote certain paragraphs
thereof. In its plea Aecom alleged that:
‘
24.19
The plaintiff’s claim against the defendant in respect of the
amounts reflected in IPCs 12, 13, 15 and 16 and final
payment
certificate number 38, plus interest on such amounts, is for the
aggregate amount of R5,762,980.80 including VAT.
24.20
The defendant’s claim against the plaintiff in respect of the
amounts reflected in IPC 17, IPC 30 to IPC 37, and final
payment
certificate number 38, is for the aggregate amount of R14,802,635.33
including VAT.
24.21
In the circumstances, the plaintiff’s claim against the
defendant is extinguished by set-off.’
[18]
In the alternative, Aecom pleaded that Good Hope repudiated an
executory contract and cannot claim payment in terms of the
interim
payment certificates (IPCs). In its counterclaim, Aecom pleaded:
‘
3.
In the premises, the plaintiff is liable to the defendant in the sum
of R9,039,654.53 including VAT (R14,802,635.33 including
VAT as
pleaded in paragraph 24.20 of the defendant’s plea, less
R5,762,980.80 including VAT as pleaded in paragraph 24.19
of the
defendant’s plea).’
[19]
Good Hope thereafter delivered both a replication and plea to the
counterclaim. Good Hope interprets Aecom’s plea and
counterclaim to mean that the only issue remaining in respect of its
claim is whether Aecom owes it an amount in excess of R8 million
or
R1 466 760.61 or, put differently, whether at worst for
Good Hope, Aecom is indebted to it in the latter amount. This,
Good
Hope contends, is a change in circumstances which supports the
conclusion that its claim against Aecom can never be regarded
as
vexatious. As far as Aecom’s counterclaim is concerned, Good
Hope submits that it is absurd that it should put up security
for
what is essentially a claim that Aecom wishes to pursue against it.
This would defeat the object of security and enable unscrupulous
defendants to contrive to counterclaim large sums from a plaintiff
and claim security on the strength thereof.
Discussion
[20]
Good Hope’s interpretation of Aecom’s defence and
counterclaim is misconceived. Its proceeds from the premise that,
taking the counterclaim into account, Aecom admits being nonetheless
indebted to it in at least the sum of R1.4 million. But this
is not
Aecom’s case. Its pleadings reflect that Good Hope’s
claim is completely extinguished by set-off and that after
set-off
has been applied, Good Hope is nonetheless indebted to it in the
amount of R9 million including VAT. Moreover Aecom’s
defence of set-off arises from the factual matrix relied upon by Good
Hope and to this extent the two are inextricably linked.
[21]
Contrary to what Good Hope now contends, it is clear from its
attorney’s letter of 12 October 2016 that, although Good
Hope
disputed Aecom’s entitlement to security, it nonetheless
offered such security ‘
in order to avoid any unnecessary
litigation’
in the amount of R25 000 ‘
in a
form determined by the Registrar’.
If it was not consenting
to security at all, it is difficult to conceive why its attorney
pertinently went on to write that ‘
should your client
disagree to this amount of security we have instructions to refer the
matter to the Registrar of the Court for
determination in terms of
rule 47(2)’.
[22]
Uniform rule 47(2) provides in no uncertain terms that:
‘
(2)
If the amount of security only is contested the registrar shall
determine the amount to be given and his decision shall be final.’
[23]
It is clear from the correspondence that followed that Aecom accepted
the amount of R25 000 tendered as security and that
the only
remaining dispute was the form that the security should take. Uniform
rule 47(5) stipulates that:
‘
(5)
Any security for costs shall, unless the court otherwise directs, or
the parties otherwise agree, be given in the form, amount
and manner
directed by the registrar.’
[24]
It is also clear from Aecom’s application, which culminated in
the order, that Aecom approached the court not only to
order that
security be furnished (in the agreed sum of R25 000) but also to
determine the form and manner of such security.
[25]
To my mind, Good Hope’s assertion that the order imposed
liability for security on its attorneys, and not itself, is
contrived. There can be no dispute that by that stage Good Hope’s
attorney had confirmed (on 30 November 2016) that
Good Hope had
paid ‘
R25 000 into our trust account as security for
costs in this matter’
and that it would be held in trust
pending finalisation of the main action. There is also no suggestion
by Good Hope’s attorney
that his firm at any stage undertook to
furnish security for Good Hope’s costs independently of its
client, and it would
indeed have been quite extraordinary for it to
have done so in the knowledge of the potential risk to which it was
exposing itself.
[26]
Not only did the order determine that security be furnished, and its
amount, it also determined the form and manner thereof.
Nowhere in
the order is it recorded that Good Hope disputed its liability to
furnish security and was agreeing to the order without
conceding that
any amount or form of security should be provided, which it could
easily have done. Moreover its attorneys were
not a party to the
application. That the application was withdrawn, with costs to be
costs in the cause, is of no significance.
Litigants often include a
paragraph of this nature when a matter is settled, and it cannot
detract from the order itself which
exists despite such withdrawal.
[27]
I am thus persuaded that Aecom was entitled, pursuant to the order,
to approach the registrar to increase the amount of security
in terms
of rule 47(6) which provides that:
‘
(6)
The registrar may, upon the application of the party in whose favour
security is to be provided and on notice to interested
parties,
increase the amount thereof if he is satisfied that the amount
originally furnished is no longer sufficient; and his decision
shall
be final.’
[28]
Good Hope is not left without
any remedy. Although the subrule stipulates that the registrar’s
decision is final, the court
nonetheless has jurisdiction to review
such decision. In
Trakman NO
v Livshitz and Others
[1]
it was stated that:
‘
The
gist of the respondents’ argument, as I understood it, was
this: the review of the Registrar’s decision was merely
a
procedural step in the main proceedings; an order by a Judge to
furnish security for costs is not appealable (
Petz
Products (Pty) Ltd v Commercial Electrical Contractors (Pty) Ltd
1990
(4) SA 196
(C) at 211G-212E); by parity of reasoning the grant or
refusal of the review of the Registrar’s decision should also
not
be appealable.
In
my view this argument overlooks the essential nature of review
proceedings. The Registrar’s decision, being in the nature
of
an administrative act, was always susceptible of review provided the
necessary grounds for review existed (
Pharumela
and Others v St John’s Apostolic Faith Mission of SA and
Another
1975 (1) SA
311
(T) at 313A). Any application for review would be a substantive
one in its own right. The review proceedings were separate and
distinct – they were not merely an extension or ancillary part
of the main action. The Registrar, an indispensable party in
such
proceedings, was not a party to the main action. Roux J’s order
was intended to be definitive of the rights of all the
parties to the
review application, and to finally dispose of those proceedings in
the Court
a quo
.’
[29]
It was on this basis that the
Appellate Division held the court
a
quo
’s dismissal of
the review of the registrar’s decision to be appealable. In
addition, in
Legal &
General Assurance Society Limited v Lieberum NO and Another
[2]
it was held that a court may review a decision of the registrar, not
only where he has acted
mala
fide
or from improper
motives, has not applied his mind to the matter or exercised his
discretion at all, but also where it is satisfied
that the registrar
was clearly wrong in the amount he fixed; although it will interfere
on this latter ground only when it is in
the same or a better
position than the registrar (taxing master) to determine the point in
issue.
[3]
[30]
During argument
Mr
Engela
,
who appeared for Good Hope, also submitted that, if the order of 13
January 2017 was found to be one compelling Good Hope to furnish
security, then it was not properly granted, because the presiding
Judge was not called upon to exercise his discretion. He relied
on
Boost Sports Africa (Pty)
Ltd v The South African Breweries (Pty) Ltd
[4]
where the Supreme Court of Appeal considered whether, absent a
provision similar to the repealed s 13 of the Companies Act
61
of 1973, an
incola
company can be compelled to furnish security for costs:
‘
[16]
Absent s 13, there can no longer be any legitimate basis for
differentiating between an
incola
company and an
incola
natural person. And as
our superior courts have a residual discretion in a matter such as
this arising from their inherent power
to regulate their own
proceedings, it must follow that the former can at common law be
compelled to furnish security for costs.
Accordingly, even though
there may be poor prospects of recovering costs, a court, in its
discretion should only order the furnishing
of security for such
costs by an
incola
company if it is
satisfied that the contemplated main action (or application) is
vexatious or reckless or otherwise amounts to an
abuse.’
[31]
However in
Department
of Transport and Others v Tasima (Pty) Ltd
[5]
the Constitutional Court held that under s 165(5) of the
Constitution a court order is binding until set aside, irrespective
of whether it was validly granted. Orders wrongly granted are not
nullities but exist in fact and may have legal consequences.
In the
present matter, Good Hope has not sought to impugn the order on this
basis, it therefore continues to exist, and this is
not an issue
which I am required to determine.
[32]
Mr Engela
also relied on
Cooper v
Mutual and Federal Versekeringsmaatskappy Bpk
,
a decision of the former Orange Free State Provincial Division.
[6]
As the judgment itself is in Afrikaans, I will for convenience only
quote from the headnote:
‘
Rule
47(3) is also applicable to applications for increased security in
terms of Rule 47(6). One of the reasons is that, although
a party may
be liable and may admit liability for the initial provision of
security, circumstances may change, so that he is no
longer so
liable, and he or she may deny liability when increased security is
requested. Liability for the provision of security
is not established
once and for all, and does not obtain unassailably in the future,
upon the initial furnishing of security, but
must be determined
afresh with every application for the provision of security or
increased security. This means that where, during
an application in
terms of Rule 47(6), there is a denial of liability to furnish
increased security, the Registrar is not authorised
to determine that
dispute and to order an increase in security. In such circumstances
the party who requires security is obliged
to apply to the Court for
an order.’
[33]
In
Cooper
the court did not however refer to either
Trakman
or
Legal & General
(
supra
). If it is indeed
incumbent upon a litigant, wherever a dispute arises under uniform
rule 47(6) to first approach court for an
order, then there would
seem to be no purpose in the review and subsequent appeal procedures
set out in
Trakman
, and neither would there be any purpose in
the court of review having the wide powers which it does when
considering the registrar’s
decision.
[34]
I respectfully disagree with
what was held in
Cooper
and
rather concur with the finding in
Petz
Products (Pty) Ltd v Commercial Electrical Contractors (Pty) Ltd
,
[7]
a decision of this division, where it was held that:
‘
In
my view it is quite clear that the Registrar may in the circumstances
set out in Rule 47(6) order an increase in security for
costs without
a preceding order of Court authorising him to do so… It seem
immaterial to the authority of the Registrar
to order an increase in
the amount of security whether the security provided by a party in
terms of Rule of Court 47 was provided
on an uncontested basis and by
consent of the party in compliance with a notice demanding security
under Rule 47, or was provided
pursuant to an order of Court
compelling the party to furnish security. In both cases liability for
security has been established…’
[8]
[35]
As pointed out by
Ms Reynolds
who appeared for Aecom, there is
also nothing in the order of 13 January 2017 to suggest that the
amount of R25 000 is a final
one. She also submitted, correctly
in my view, that it was open to Good Hope to have applied for
rescission of the order which
it has not done. Obviously, any such
application would have to be determined separately on its merits.
[36]
Given that the registrar is obliged to provide notice to interested
parties (which it is common cause he did in the present
matter) Good
Hope is at liberty to make submissions before him for the purpose of
enabling him to be satisfied that the amount
originally furnished is
no longer sufficient or otherwise.
[37]
In
Banks
v Henshaw
[9]
it was held that in determining a fair and reasonable amount of
security, a court is entitled and obliged to take into account
the
nature of the claim and counterclaim and the circumstances in which
those claims arise. There is no reason why the registrar
should be
relieved of the same obligation.
[38]
Further, in
Trakman
No v Livschitz: In Re Livschitz v Trakman NO
[10]
it was stated that:
‘
The
notional bills are far from skeletons. In any event the reason why
the determination of the amount of security is referred to
the
Registrar is that the personnel in the Taxing Master’s office
should have had considerable experience in the taxation
of bills of
costs and the determination of the amount of security in terms of
Rule 47(2); at any rate, those who would be entrusted
with the
function of carrying out the Court’s direction would have such
experience. From this experience they should be able
to make a
reliable estimate of the costs which will be involved up to the first
day of a trial with reference to the issues appearing
from the
pleadings, the number of counsel which the case seems to warrant and
the amount involved. The parties should be able to
bring to the
Taxing Master’s attention any unusual or extraordinary features
which would increase or decrease his or her
prima
facie
estimate of the
costs. The determination of the amount for which security is to be
furnished should, insofar as possible, be entrusted
to Taxing Masters
who have sufficient previous experience in the quantification of
costs.’
[39]
In the result the following order is made:
‘
The application is
dismissed with costs, including any reserved costs orders.’
_________________
J I CLOETE
[1]
1995 (1) SA 282
(AD) at 289E-H.
[2]
1968 (1) SA 473
(AD) at 478.
[3]
At 478A-H.
[4]
2015 (5) SA 38 (SCA).
[5]
2017 (2) SA 622
(CC) at paras [180], [182] and [198].
[6]
2002 (2) SA 863 (OPA).
[7]
1990 (4) SA 196 (CPD).
[8]
At 207I-208D.
[9]
1962 (3) SA 464
(D&CLD) at 467C.
[10]
1996 (2) SA 384
(WLD) at 389H-390A.