Brief Summary

Costs — Urgent application — Costs order against non-opposing party — Applicant sought costs against First Respondent following successful urgent application — First Respondent contended that no costs order should have been made as there was no opposition — Court initially ordered costs against First Respondent, which was later amended to "costs to stand over for determination" — Legal issue concerned the appropriateness of a costs order against a party that did not oppose the application — Court held that the initial costs order was improper as it contravened the principle that costs should only be awarded against parties who oppose the application.

Comprehensive Summary

Summary of Judgment

1. Introduction

The proceedings concerned the determination of a costs dispute following an earlier urgent application in which the applicant had obtained a mandatory interdict. The urgent court order had compelled certain shareholders to attend and vote in favour of a specified special resolution at a shareholders’ meeting, with a mechanism authorising the sheriff to vote in their stead if they failed to do so.

The applicant was Glencore South Africa Oil Investments Proprietary Limited. The primary respondent for present purposes was the first respondent, Mashudu Elias Ramano, although the earlier urgent application had cited multiple respondents (first to tenth respondents), including other shareholders and African Legend Investments (Proprietary) Limited as the tenth respondent.

Procedurally, Glencore launched an urgent application on 19 March 2019, which resulted in an order granted by Dippenaar J on 2 April 2019. That order included a costs order against the first respondent. After the order, the first respondent protested that a costs order was improper because there had been no formal opposition and because the notice of motion contemplated costs only against opposing respondents. The parties then agreed to amend the order so that costs stood over for later determination. Because subsequent attempts to resolve costs failed, the matter was set down for a dedicated hearing to determine costs as between Glencore and the first respondent. This judgment by Levenberg AJ addresses only that costs question.

The general subject-matter underlying the urgent application was a high-value corporate transaction involving the acquisition and onward transfer of shares in the Caltex entities, and the enforcement of irrevocable undertakings given by shareholders to vote in favour of resolutions required under the Companies Act for the disposal of all or the greater part of a company’s assets or undertaking.

2. Material Facts

The court proceeded on the basis that the facts set out in the founding papers of the urgent application were undisputed, because no answering affidavits had been filed by any respondent. The judgment nevertheless noted that, although there was no formal opposition, correspondence sent on behalf of the first to eighth respondents to the judge responsible for the urgent roll raised points directed at undermining the matter proceeding as sought, which the court regarded as a form of opposition inconsistent with a claim of complete non-opposition.

Chronologically, the background facts accepted by the court were as follows. In 2015, an opportunity arose for Glencore to acquire from Chevron a 75% shareholding in Caltex SA (and indirectly interests relating to Caltex Botswana). The acquisition structure required that an entity, Off The Shelf Investments Fifty-Six (RF) (Proprietary) Limited (the ninth respondent, “OT56”), initially acquire the shares due to a pre-emption right, and then on-sell them to Glencore’s nominee. Glencore funded the initial acquisition by a loan of approximately US$1.165 billion, and the envisaged two-stage structure was that OT56 would then transfer the shares to Glencore’s nominee for a corresponding amount.

The controlling shareholder in OT56 was African Legend Investments (Proprietary) Limited (“ALI”). For the onward sale to proceed, it was necessary for ALI shareholders to approve the disposal of all or the greater part of the assets or undertaking, in terms of the Companies Act, through resolutions requiring shareholder approval. To secure that approval, Glencore obtained irrevocable undertakings from the first to eighth respondents (described as the “shareholder respondents”), including the first respondent who held a substantial interest in ALI. The undertakings included a commitment to vote in favour of the resolutions necessary to approve and/or implement the proposed transaction.

A shareholders’ meeting was convened for 30 November 2018 to pass the necessary resolution(s). The first respondent chaired that meeting. The resolution was not put to the vote and was deferred, with the first respondent indicating he would explore options relating to the transaction. Glencore later became aware of a further proposed shareholders’ meeting for 13 March 2019, the notice of which contemplated considering alternatives to the existing deal structure and options described in the notice. The court read this as conduct inconsistent with the prior undertakings and indicative of attempts to renegotiate or avoid compliance.

On 14 March 2019, ALI’s board issued notice convening a shareholders’ meeting for 4 April 2019 to consider and pass the special resolution required for the transfer. On the same day, Glencore sent letters to the shareholders who had provided undertakings (including the first respondent) requesting confirmation by 18 March 2019 that they would comply by attending and voting in favour, failing which urgent proceedings would be launched.

On 18 March 2019, the first respondent’s attorneys responded, indicating (in substance) that the first respondent and other shareholders were seeking legal advice and would respond later, while also asserting that no inference should be drawn against them at that stage. Glencore then launched the urgent application. No respondent filed a notice of intention to oppose, but correspondence to the urgent roll judge raised issues of non-joinder and standing, and suggested impediments to the relief sought.

The urgent court granted the order on 2 April 2019, directing that the meeting proceed, directing the first to eighth respondents to vote in favour of the special resolution, authorising the sheriff to vote if they did not, and initially ordering the first respondent to pay costs. The costs provision was later amended by agreement to stand over for determination, leading to the present judgment.

3. Legal Issues

The central legal question was whether, in the circumstances of this matter, the first respondent should be ordered to pay Glencore’s costs of the urgent application (including the costs occasioned by the later dedicated hearing on costs), notwithstanding that the urgent application was formally unopposed and notwithstanding the wording of the notice of motion relating to costs.

This required the court to determine issues that were predominantly the application of legal principles governing costs (including the general rule that costs follow the event and the scope of the court’s discretion) to the factual context of the litigation. It also required the court to make an evaluative assessment of whether there were “good reasons” to depart from the ordinary rule in costs, including whether the urgent application was necessary and whether it would be inequitable to mulct the first respondent in costs.

A further interpretive issue arose regarding the proper reading of the costs prayer in the notice of motion, and whether it limited costs liability only to respondents who opposed.

4. Court’s Reasoning

The court located its analysis within established South African costs principles. It emphasised that costs are within the discretion of the court, but that discretion is judicial and ordinarily exercised in accordance with principle, including the general rule that a party compelled to litigate and who obtains substantial success should ordinarily recover costs. The court relied on authority confirming that the successful party is generally entitled to costs unless the court, for good reason, deprives that party of costs.

A key part of the reasoning was that the urgent application had resulted in a final order (a mandatory interdict) granted by Dippenaar J. The court considered itself bound, in deciding the costs dispute, to treat Glencore as the successful party. It held that, absent rescission or appeal, the urgent order was final and could not be reopened, and the court was therefore obliged to accept that the relief granted had been found necessary and appropriate by the urgent court.

The court further indicated that even if it were permissible to revisit whether final interdict relief was justified, it considered that a proper case for a final interdict had been made out under the requirements described in Setlogelo v Setlogelo 1914 AD 221. In the court’s view, Glencore had a clear right derived from the irrevocable undertakings. It also had a reasonable apprehension of injury, grounded in the earlier deferral of voting, the content of the subsequent notice proposing alternatives, and the failure to give the requested confirmation that the undertakings would be honoured. The court considered the magnitude of the financial exposure as part of the context for apprehended harm. It further reasoned that there was an absence of adequate alternative remedies, noting the difficulties and uncertainties associated with a damages claim.

In addressing the first respondent’s argument that costs should not be awarded where there is a complete lack of opposition, the court considered a passage in Cilliers, Law of Costs and examined several cases cited in that context. The court did not accept a sweeping proposition that an unopposed matter generally requires no costs order. It distinguished instances where respondents were public bodies or were cited in an official capacity, in which policy considerations may support not awarding costs absent opposition. It also found that some of the cited cases were not examples of successful applicants being denied costs in unopposed proceedings. The court found further support in Nedbank Limited v Steyn 2016 (2) SA 416 (SCA) for the appropriateness of awarding costs, noting that default judgment relief included costs orders even where defendants did not oppose.

On the question of whether the urgent application was unnecessary or not urgent, the court rejected the contention that Glencore overreacted. It reasoned that, given the very large sum involved and the respondents’ conduct (including the deferral and the subsequent notice proposing alternatives), it was commercially reasonable for Glencore to seek reaffirmation of compliance and to resort to urgent relief when that reassurance was not provided. The court treated the necessity of the application, rather than a retrospective debate about urgency, as the important consideration for costs, and held that the application was necessary to secure performance of obligations.

As to the wording of the costs prayer in the notice of motion, the court rejected the first respondent’s interpretation that only opposing respondents would be liable. It held that the wording, properly read, contemplated that the first respondent would be liable for costs, together with any other respondents who might oppose. The court added that, even if ambiguity were assumed, the order had been amended to stand over costs and the first respondent had obtained an opportunity to argue the issue fully, so no prejudice arose from the initial position.

The court also rejected the contention that it was inequitable to “single out” the first respondent. It reasoned that the first respondent was a principal shareholder and the papers indicated that other shareholders followed his lead. It held that the fact that the applicant chose not to seek costs against others did not undermine the propriety of awarding costs against a party against whom costs were warranted.

Finally, the court characterised the first respondent’s conduct as tactical and as having forced Glencore to incur significant costs. The court considered that the first respondent had taken a risk in adopting that stance, and that, in the circumstances, the ordinary rule that costs follow the event should apply.

In relation to the scale and staffing of costs, the court held that the matter involved a significant amount of money and complex issues, and that costs of two counsel were warranted. It included both the costs of the urgent application proceedings culminating in the 2 April 2019 order (as amended) and the costs of the later hearing on costs.

5. Outcome and Relief

The court ordered that the first respondent must pay the costs of the urgent application, including all costs relating to the hearing and order obtained on 2 April 2019 (as amended), as well as the costs relating to the later hearing on 11 September 2019.

The court further ordered that the costs award included the costs of two counsel.

Cases Cited

Pelser v Levy 1905 TS 466.

Fripp v Gibbon & Co 1913 AD 354.

Pretoria Garrison Institutes v Danish Variety Products (Pty) Ltd 1948 (1) SA 839 (A).

Setlogelo v Setlogelo 1914 AD 221.

Groenewald v Mokgethi [2016] JOL 34589 (LC).

Shatterprufe (Pty) Ltd v Sesani NO [2016] JOL 35676 (LAC).

Nedbank Limited v Jones [2017] JOL 38025 (WCC).

Da Cruz v Cape Town City 2017 (4) SA 106 (WCC).

Nedbank Limited v Steyn 2016 (2) SA 416 (SCA).

Maccsand CC v Macassar Land Claims Committee [2005] 2 All SA 469 (SCA).

De Villiers v Kapela Holdings [2016] JOL 36191 (GJ).

Legislation Cited

Companies Act 71 of 2008, sections 112 and 115.

Labour Relations Act 66 of 1995, section 77(3).

Rules of Court Cited

No specific rules of court were cited in the judgment.

Held

The court held that Glencore, as the successful party in the urgent application, was entitled to its costs, and that there were no good reasons to depart from the general rule that costs follow the event, notwithstanding the absence of formal opposition.

It further held that the urgent application was necessary in the circumstances and that the costs prayer in the notice of motion, properly interpreted, contemplated a costs order against the first respondent. The court therefore ordered the first respondent to pay the costs of the urgent application and the subsequent costs hearing, including the costs of two counsel.

LEGAL PRINCIPLES

A costs order lies within the judicial discretion of the court, but that discretion must be exercised on principle and is constrained by the general rule that the successful party should ordinarily receive costs, absent good reason to depart from that rule.

In determining whether a successful party should be deprived of costs, the court may evaluate whether the litigation was necessary, including whether the respondent’s conduct compelled the applicant to approach court, even where the matter is formally unopposed.

A prior order granting substantive relief, if not set aside on appeal or rescission, is treated as final and binding for purposes of later determining costs arising from that litigation, and the court determining costs proceeds on the footing that the applicant was the successful party.

The requirements for a final interdict remain those stated in Setlogelo v Setlogelo 1914 AD 221, namely a clear right, injury committed or reasonably apprehended, and the absence of a suitable alternative remedy; where respondents file no answering affidavits, the applicant’s founding allegations may be treated as uncontested for purposes of assessing whether relief was justified.

Glencore South Africa Oil Investments Proprietary Limited v Ramano and Others (010321/2019) [2019] ZAGPJHC 538; [2020] 1 All SA 403 (GJ); 2020 (3) SA 419 (GJ) (30 September 2019)