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[2021] ZASCA 10
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Fusion Properties 233 CC v Stellenbosch Municipality (932/2019) [2021] ZASCA 10 (29 January 2021)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Not
Reportable
Case
no: 932/2019
In
the matter between:
FUSION
PROPERTIES 233 CC
APPLICANT
and
STELLENBOSCH
MUNICIPALITY
RESPONDENT
Neutral
citation:
Fusion Properties 233 CC v Stellenbosch
Municipality
(932/2019)
[2021] ZASCA
10
(
29
January 2021)
Coram:
PETSE DP, SALDULKER and SCHIPPERS JJA
and MATOJANE and SUTHERLAND
AJJA
Heard
:
20 November 2020
Delivered
:
This judgment was handed down electronically by circulation to the
parties’ legal representatives by email,
publication on the
Supreme Court of Appeal website and release to SAFLII. The date and
time for hand-down is deemed to be 09H45
on
29
January 2021.
Summary:
Practice and procedure – application for leave to appeal –
referral for oral argument in terms of
s 17(2)
(d)
of the
Superior Courts Act 10 of 2013
– leave sought against order of
the high court directing applicant to provide security for costs in
terms of
s 8
of the
Close Corporations Act 69 of 1984
– demand
for security made under Uniform
rules 47
(1) and
47
(3) – high court exercising narrow discretion in
making order – powers of appellate court to interfere with
exercise
of such discretion circumscribed – no basis for
interference on appeal established.
ORDER
On
appeal from:
Western Cape Division of the High Court, Cape Town
(Allie J sitting as court of first instance):
The
application for leave to appeal is dismissed with costs, including
the costs of two counsel.
JUDGMENT
Petse
DP (Saldulker and Schippers JJA and Matojane and
Sutherland
AJJA
concurring):
Introduction
[1]
This is an application for leave to appeal against a judgment of the
Western Cape Division of the High
Court (the high court) brought by
Fusion Properties 233 CC (Fusion) which was referred for oral
argument in terms of
s 17(2)
(d)
[1]
of the Superior Courts Act 10 of 2013 (the
Superior Courts Act).
Fusion's
adversary is the Stellenbosch Municipality (the
municipality) which is an organ of state within the local government
sphere.
[2]
The application falls within the narrowest compass. By its very
nature it requires, for its determination,
full argument in relation
to the merits of the entire case as if the appeal itself were being
considered. For this reason, Fusion
was directed to file six copies
of the application for leave, as well as the full record in terms of
rule 8
of this Court's rules. In addition, the parties were
forewarned that they must be prepared, if called upon to do so, to
address
the court on the merits.
[2]
Factual
background
[3]
The facts are fairly straightforward, and are briefly as follows. The
legal skirmish between Fusion
and the municipality has had a somewhat
long and tortuous history. This is the third legal bout in which the
parties have locked
horns. The dispute has its genesis in an
invitation for proposals published by the municipality during 2005
for the purchase and
development of some eight erven that it owned.
[4]
Believing that the municipality's invitation presented it with
a lucrative opportunity for investment in property development,
Fusion
responded to the invitation
.
In
pursuit of its ultimate objective, it
commenced negotiations
with the municipality with a view to concluding a written agreement
of sale as a precursor to the proposed
development. For reasons that
are not necessary to canvass in this judgment, the intended sale fell
through. The municipality disputed
the existence of any valid
agreement between it and
F
usion. On the
other hand, Fusion sought to hold the municipality to its bargain,
asserting that the parties had concluded a valid
agreement of sale.
[5]
Determined not to yield to Fusion’s demands, the municipality
then resorted to litigation. It
applied to the high court for a
declarator that there was no contractual nexus between it and Fusion.
Fusion opposed the application.
Ultimately, the high court (Desai J)
dismissed the application and directed the parties ‘to
negotiate in good faith’
in order to resolve their differences.
However, the parties’ negotiations failed to bear fruit.
Instead, on 23 April 2014
and, after much toing and froing, the
municipality finally resolved not to proceed with the alienation of
the erven to Fusion.
[
6
]
On 5 November 2015
Fusion instituted legal
proceedings against the municipality in which it claimed damages for
breach of contract for some R32 million
and ancillary relief. The
legal foundation for the claim asserted by
F
usion
was that the municipality had, 'with the deliberate intention to
prevent the fulfilment of the conditions' of certain clauses
of the
alleged
agreement 'delayed the process and
failed to negotiate in good faith with [Fusion]'. The municipality is
resisting the claim which,
as
it
appears
from the record
, is now ripe for trial. It is common cause
that Fusion is an empty shell with no assets whatsoever. It is not
engaged and has never
engaged in any business activity. The
development of the municipality's erven that it had laid it sights on
was going to be its
business venture of note in Stellenbosch.
[
7
]
Realising that there was no
realistic
prospect of it recovering its litigation
costs against
F
usion
if it were successful in resisting the claim, on account of Fusion's
parlous financial state, the municipality invoked s 8
of the Close
Corporations Act 69 of 1984 (the
Close Corporations Act) and
, on 10
December 2018, delivered a notice in terms of rule 47(1) of the
Uniform Rules of Court. In this notice, the municipality
demanded
security for costs in the sum of R2 626 431.06. This amount was
alleged to represent 'estimated reasonable costs in defending
the
action'.
[3]
For its part, Fusion contested its obligation to give security for
costs in the amount required or any portion thereof.
[
8
]
Undaunted by Fusion's stance in contesting
its
liability to furnish security for costs, the municipality brought an
interlocutory application in terms of rule 47(3) read with
rule
6(11). It claimed an order directing Fusion to provide security for
costs in the sum of R2 626 431.06 and that the action
be stayed
until the security was furnished.
[
9
]
In pursuit of the application, the deponent to the municipality's
founding affidavit asserted, amongst
others, the following.
That
Fusion had not conducted business since 2007 and owned no
immovable or movable assets.
And that i
n
response to a notice in terms of rule 35(3) to make available for
inspection its audited financial statements and bank statements
from
2005 to 2019, Fusion had stated that these documents were not in its
possession and their whereabouts were unknown. It was
unclear whether
these documents even existed. T
hus, t
he
likelihood that Fusion was able to pay the municipality’s costs
was remote.
[10]
Explaining the delay in demanding security for costs, the
municipality's deponent alleged firstly, that the documents
discovered were voluminous, comprising approximately 250 lever arch
files. Secondly, it decided not to request security until it
was
certain that Fusion had the necessary authority to institute the
action: it could not challenge Fusion’s authority and
request
it to provide security for costs simultaneously. Thirdly, in a
pre-trial minute, the municipality had stated that it would
decide
whether to request security for costs upon inspection of the
documents requested in its rule 35(3) notice. Upon receipt
of
Fusion’s response to that notice, it was evident that Fusion
did not have financial statements and would not be able to
pay costs.
[
11
]
Fusion opposed the application for security for costs, essentially on
the following grounds. The application was not
brought as soon as
practicable after the commencement of proceedings, as contemplated in
rule 47(1) of the Uniform Rules of Court.
In terms of
s 8
of the
Close Corporations Act, a
court may at any time during proceedings
require a close corporation to furnish security for costs and may
stay proceedings until
the security is given, if there is reason to
believe that the corporation will be unable to pay the costs of the
opposing party
if it is successful in its defence. Had Fusion not
been a close corporation but a company, it would not be obliged to
put up security
for costs. This, so it was alleged, was because the
Companies Act 71 of 2008 (the 2008
Companies Act) abolished
s 13
of
the former Companies Act 61 of 1973, which provided for a company to
put up security for costs; and ‘having abolished
large portions
of the
Close Corporations Act&rsquo
;, the 2008 Companies Act ‘has
effectively abolished the concept of future close corporations’.
Fusion also alleged
that there was ‘no logical reason why a
corporation should be treated more onerously than a company with
limited liability
in respect of security for costs’. This, it
said, was inconsistent with the right of access to court in s 34 of
the Constitution,
because it ‘impacts on the corporation's
right of pursuing legitimate claims’.
[
12
]
Fusion also asserted that the municipality had delayed inordinately
in seeking security for costs. More specifically
,
there were delays from the date on which the action was instituted;
after the date on which the municipality’s discovery
affidavit
had been signed ie 17 November 2017; after Fusion had replied to the
rule 35(3) notice; and after it
s
refusal to
provide security. Fusion alleged that security was being sought in
circumstances where the pleadings had closed, discovery
had been
made, the case was ripe for hearing
,
and
significant expenses relating to printing and copying had been
incurred.
[
13
]
The application came before Allie J
,
who granted an order substantially in the terms prayed for in the
municipality's notice of motion.
[4]
After evaluating the facts and having had regard to the relevant
legal principles, the high court said the following:
'A court would have regard to the common law and any
applicable statute in deciding the grounds upon which security for
costs should
be ordered.
Section 13 of the old 1973 Companies Act provided that
in certain circumstances, namely when there is reason to believe that
the
company will be unable to pay the costs, a company could be
compelled to provide security for costs but that provision wasn't
included
in the new
Companies Act 71 of 2008
.
Section 8
of the
Close Corporations Act 69 of 1984
however contains a provision that Close Corporations may be ordered
to provide security for costs as follows:
"8. When a corporation in any legal proceedings is
a plaintiff or applicant or brings a counterclaim or
counterapplication,
the court concerned may at any time during the
proceedings if it appears that there is reason to believe that the
corporation or,
it if is being wound up, the liquidator thereof, will
be unable to pay the costs of the defendant or respondent, or the
defendant
or respondent in reconvention; if he is successful in his
defence, require security to be given for those costs, and may stay
all
proceedings till the security is given".'
[
14
]
Cognisant of the fact that an application of the nature with which it
was seized entailed the exercise of a discretion,
the high court
continued:
'A court has a discretion to order security for costs.
That discretion must be exercised after taking into consideration all
the
relevant facts as well as justice, equity and fairness.
Effectively the court has to embark on a weighing up
exercise which involves weighing the need of an applicant to obtain
certainty
that a respondent would be capable of satisfying an adverse
costs order against a respondent's need to have its case adjudicated
upon without being prohibited from doing so as a consequence of its
likely inability to pay costs in due course, if so ordered.
Under the common law, the inability of a plaintiff to
satisfy a potential costs order is insufficient grounds to justify an
order
of security for costs. Something more is required, such as
proof that the action was instituted vexatiously, recklessly or as an
abuse of the court's process or that the respondent's prospects of
success are not good.'
[
15
]
Insofar as the delay point raised by Fusion is concerned, the high
court stated:
'I remain cognisant of the fact that the main action was
instituted in 2015, although applicant launched an application to
cancel
the agreement in 2008. The delay in bringing this application
is adequately explained by applicant with reference to: a period of
negotiations spanning the period 2009 to 2014 ; the pleadings; the
Rule 37(8)
minute dated 24 October 2018 where applicant reserved its
right to bring this application after it had sight of documents
requested
in the
Rule 35(3)
Notice; the negotiations that took place
between Mr Africa, the attorney of applicant and Mr Schoeman, the
erstwhile attorney of
respondent in 2016 and again between their
respective attorneys in 2018 as recorded in the
Rule 37(8)
minute; as
well as the Reply to the
Rule 35
(3) Notice filed by respondent only
in November 2018.
It is therefore fallacious for respondent to allege that
because applicant knew of its impecuniosity since 2009. [I]t
improperly
waited from then until late 2018 to request security for
costs.'
[
16
]
The high court then concluded:
'Respondent is a special purpose vehicle that was
incorporated with the specific intent of tendering and contracting
with the applicant.
Applicant was aware of the impecunious nature of
the respondent when it negotiated and purported to contract with
respondent.
Applicant knew from the inception of its dealings with
respondent and on its own version, as early as 2009 and later in
2013, when
it received the Price Waterhouse Cooper report ostensibly
submitted after a due diligence investigation, that respondent had no
assets and no income.
Applicant's knowledge at the inception of its dealings
with respondent that at that stage it had no realisable assets and
funds,
doesn't mean that the financial standing of the respondent
couldn't have improved subsequently.
. .
.
The security for costs provision in
section 8
exists to
protect an opposing litigant against a corporation with no realisable
assets and which is unable to pay its costs.
There is no dispute that the respondent is currently
impecunious and unable to satisfy an adverse costs order against it.
'
[
17
]
Subsequently, on
31 July 2019
,
the high court dismissed Fusion's application for leave to appeal
with costs. Undeterred by this setback, Fusion applied for leave
to
appeal to this Court in terms of
s 17(2)
(b)
of the
Superior
Courts Act. As
already indicated, this application was referred for
oral argument, hence the present application now before us.
Discussion
[
18
]
Since the coming into operation of the Superior
C
ourts
Act, there
have
been a number of decisions
of our courts which dealt with the requirements that an applicant for
leave to appeal in terms of ss
17(1)
(a)
(i) and 17(1)
(a)
(ii)
must satisfy in order for leave to be granted. The applicable
principles have over time crystallised and are now well established.
Section 17(1) provides, in material part, that leave to appeal may
only be granted 'where the judge or judges concerned are of
the
opinion that-
'
(a)
(i)
the appeal would have a reasonable prospect of success; or
(ii) there is
some other compelling reason why the appeal should be heard. . . .'
It is manifest from the
text of
s
17(1)
(a)
that
an applicant seeking leave to
appeal must demonstrate that the envisaged appeal would either have a
reasonable prospect of success,
or, alternatively, that 'there is
some compelling reason why an appeal should be heard'. Accordingly,
if neither of these discrete
requirements is met,
there would
be no basis to grant leave. I shall revert to this aspect later.
[
19
]
As already mentioned, that Fusion has no assets whatsoever and indeed
is impecunious, is uncontentious in these proceedings.
And this is
precisely what prompted the municipality to demand security for costs
from Fusion by invoking
s 8
of the
Close Corporations Act.
Section
8 has already been quoted in paragraph 13 above.
[
20
]
The procedure for security and the powers of the court are regulated
by Uniform
rules 47(1)
and
47
(4), which provide:
'(1) A party
entitled and desiring to demand security for costs from another
shall, as soon
as practicable after the commencement of proceedings,
deliver a notice setting forth the grounds upon which such security
is claimed,
and the amount demanded.
. . .
(4) The court
may, if security be not given within a reasonable time, dismiss any
proceedings
instituted or strike out any pleadings filed by the party
in default, or make such other order as to it may seem meet.'
The high court rightly observed that
rules 47(1)
and
47
(4) cater for the procedure to be adopted whenever security for
costs is required and do not themselves deal with matters of
substance.
[5]
[
21
]
Section 8
of the Close Corporation
s
Act, in substance, mirrors s 13 of the Companies Act 61 of 1973.
[6]
Section 13 did not find its way into the 2008 Companies Act when the
1973 Companies Act was repealed and substituted by the former.
Nevertheless, counsel were agreed that the jurisprudence that had
developed over the years in regard to the interpretation of s
13
still offers useful guidance and insights in ascertaining the object
and purpose to which s 8 of the Close Corporation
s
Act is directed.
[
22
]
In
Giddey NO v J C Barnard and Others
[2006] ZACC 13
;
2007 (5) SA 525
(CC) the Constitutional Court noted that '. . . the
main purpose of s 13 is to ensure that companies, who are unlikely to
be able
to pay costs and therefore not effectively at risk of an
adverse costs order if unsuccessful, do not institute litigation
vexatiously
or in circumstances where they have no prospects of
success thus causing their opponents unnecessary and irrecoverable
legal expenses'.
[7]
In the same decision the Court stated that 'section 13 of the
Companies Act confers a discretion upon courts to order the payment
of security for costs by a plaintiff company if there is a reason to
believe that the company will be unable to pay the costs of
its
opponent'.
[8]
[
23
]
It is by now well-established that a court considering an application
for security exercises a narrow and unfettered
discretion. In the
words of Hefer JA in
Shepstone & Wylie and
Others v Geyser NO
1998 (3) SA 1036
(SCA)
([1998]
3 All SA 349)
, the court 'must decide each case upon a
consideration of all relevant features, without adopting a
predisposition either in favour
of or against granting security'.
[9]
[
24
]
Accordingly, there
are
at
least three principles to be derived from the excerpts from
Giddey
and
Shepstone & Wylie
quoted in paragraphs 8 and 9
above
. First, a court seized with an
application to compel a plaintiff or applicant to furnish security
for costs retains an unfettered
discretion. Second, the court needs
to 'balance the potential injustice to a plaintiff if it is prevented
from pursuing a legitimate
claim as a result of an order requiring it
to pay security for costs, on the one hand, against the potential
injustice to a defendant
who successfully defends the claim, and yet
may well have to pay all its costs in the litigation'.
[10]
Third, the salutary purpose of s 13 is 'to deter would-be plaintiffs
from instituting proceedings vexatiously or in circumstances
where
their prospects are poor'.
[11]
[
25
]
In this application, Fusion in effect seeks leave to appeal against
the high court's exercise of its unfettered discretion.
It is trite
that the power of an appellate court to interfere with the exercise
of such discretion is
circumscribed.
The
ambit of this limited power was explained by the Constitutional
C
ourt
thus:
'The ordinary rule is that the approach of an appellate
court to an appeal against the exercise of a discretion by another
court
will depend upon the nature of the discretion concerned. Where
the discretion contemplates that the Court may choose from a range
of
options, it is a discretion in the strict sense. The ordinary
approach on appeal to the exercise of a discretion in the strict
sense is that the appellate court will not consider whether the
decision reached by the court at first instance was correct, but
will
only interfere in limited circumstances; for example, if it is shown
that the discretion has not been exercised judicially
or has been
exercised based on a wrong appreciation of the facts or wrong
principles of law. Even where the discretion is not a
discretion in
the strict sense, there may still be considerations which would
result in an appellate court only interfering in
the exercise of such
a discretion in the limited circumstances mentioned above.'
[12]
[
26
]
In support of its reasoning in this regard, the Court went on to cite
with approval the decision in
Bookworks (Pty)
Ltd v Greater Johannesburg Transitional Metropolitan Council and
Another
1999 (4) SA 799
(W). There, Cloete J,
in analysing the nature of
a
discretion conferred on a court by s
13,
[13]
emphasised four factors. These were:
'(1) Section 13
is essentially concerned with costs – a matter invariably held
to
involve the exercise of a discretion in a narrow sense.
(2) When s
13 is combined with the provisions of Rule 47, as it must be to
give it practical effect, the court is regulating its own procedure
by deciding not only whether a litigant should be ordered to
provide
security for costs – a decision which may be made, in terms of
the section, “at any stage” of proceedings
(and
therefore
in medias res
) – but also, where it
grants such an order, whether the litigant should be allowed to
proceed until such security has been
provided. The regulation by a
court of its own procedure is also a matter usually held to involve a
discretion in the narrow sense.
(3) The
discretion requires in essence the exercise of a value judgment and
there may
well be a legitimate difference of opinion as to the
appropriate conclusion.
(4) Appeals against
the exercise of the discretion conferred by s 13 should be
discouraged in the absence
of some demonstrable blunder or
unjustifiable conclusion on the part of the trial court, otherwise
the decision on the merits of
a matter before the court would be
delayed by an appeal on an application which (to use the words of
Innes CJ in [
Warner
Reid and Others
1907
TS 306
at 310]) "marks no stage in the progress of the case, but
is quite outside and incidental to it".'
[14]
[
27
]
Most significantly, the Court emphasised that the court of first
instance is best placed to make the requisite assessment,
noting
that:
'. . . it would not be appropriate for an appellate
court to interfere with [the decision of the court of first instance]
as long
as it is judicially made, on the basis of the correct facts
and legal principles. If the court takes into account irrelevant
considerations,
or bases the exercise of its discretion on wrong
legal principles, its judgment may be overturned on appeal. Beyond
that, however,
the decision of the court of first instance will be
unassailable.'
[15]
[
28
]
In view of the fact that s 8 of the Close
C
orporations
Act is, for all intents and purposes, the functional equivalent of
the now repealed s 13 of the Companies Act, there
is no rational
basis in fact or principle why the principles discussed above in
relation to s 13 should not apply with equal force
to s 8.
[
29
]
I revert now to what lies at the heart of this application. It raises
the question whether, as already mentioned,
it can justifiably be
said that the high court did not exercise its discretion judicially.
Here, there is no dispute that the nature
of the discretion that the
high court enjoyed 'contemplated that it was open to the high court
to choose from a range of options'
in arriving at its decision having
regard to all the relevant facts before it. This is commonly known as
a discretion in the strict
sense.
[16]
I have already dealt above with the proper approach that an appellate
court is enjoined to adopt to an appeal against the exercise
of a
discretion of that kind.
In
this regard, it bears emphasis that we are not here called upon to
decide as to whether ‘the decision reached by the court
at
first instance was correct’. Rather, our task is to determine
whether the high court exercised its discretion judicially
or the
exercise was based on a wrong appreciation of the facts or wrong
principles of the law.
[
30
]
Before us, Fusion's principal attack on the decision of the high
court
was
essentially four-pronged. First,
it was contended that the
municipality’s
application for security should have been refused because the
municipality
failed to demand security for
costs 'as soon as practicable after the commencement of proceedings'
as required by rule 47(1). Second
ly
,
it
was submitted in Fusion's heads of argument that
having regard
to the fact that s 13 of the Companies Act 1973, was repealed by
the
2008 Companies
Act 'self-evidently
because the Legislature was mindful of the provisions of s 34 of the
Constitution, 1996, under which access
to courts is entrenched,
'
Close Corporations
too
ought to be treated
in the same way as all other corporate plaintiffs in relation to
applications for security for costs. Third,
bearing in mind that
F
usion's impecuniosity was brought about by
the municipality, it would be a grave injustice to require Fusion to
furnish security
for costs. In elaboration, it was submitted that as
Fusion would not be able to provide security at all, its claim would,
in consequence,
be dealt a death knell. Lastly, that Fusion's
underlying action is neither abusive nor vexatious, and to the extent
that the prospects
of success are relevant, such prospects are not
unfavourable.
[
31
]
I deal with these contentions in turn. Let it be said at the outset
that
,
in my view, none of them
is
sustainable. First, whilst it may be desirable that a party
entitled to demand security for costs must do so as soon as is
reasonably
practicable, failure to do so is not necessarily fatal.
Whether a delay should constitute a bar to the demand entails a
fact-based
enquiry in the light of the facts of a given case. Thus, a
court faced with an application to compel will, in exercising its
discretion,
undoubtedly have regard to this factor and weigh it up
together with other relevant factors. Therefore, delay in itself will
rarely
be an overriding and decisive consideration. It is as well to
remember that in this case the municipality derived its right to
demand security from
s 8
of the
Close Corporations Act. Notably, s
8
provides in
explicit
terms that the court
seized with an application for security 'may at any time during the
proceedings' require security to be given.
The words 'at any time
during the proceedings' could not be clearer. This must then mean
that when the municipality demanded security
at discovery stage, it
did so within the ambit of
s 8.
[
32
]
Insofar as
s 34
[17]
of the Constitution is concerned, it is true that the right of access
to court 'is a bulwark against vigilantism, and the chaos
and anarchy
which it causes'.
[18]
However, it must not be lost from sight that in this case the
constitutional validity of s 8 was not challenged, be it frontally
or
otherwise as required by the jurisprudence of our courts.
[19]
Nevertheless, cognisant of the fact that s 8 implicates the
constitutional right of access to court, it must be interpreted in
the manner decreed by s 39(2)
[20]
of the Constitution.
[
33
]
In
Boost Sports Africa (Pty) Ltd v South
African Breweries (Pty) Ltd
[2015] ZASCA 93;
2015 (5) SA 38 (SCA)
[21]
a similar argument was advanced and rejected by this Court. In
rejecting the argument, this Court stated that the argument
'[ignored]
the fact that a court was vested with a discretion in
terms of s 13 and that in exercising its discretion a court performs
a balancing
act. On the one hand it must weigh the injustice to the
plaintiff if prevented from pursuing a proper claim by an order for
security
,
as
against that it must weigh the injustice to the defendant if no
security is ordered and the plaintiff's claim fails and the
former
finds himself
or herself
unable to recover costs'.
[22]
Fusion's contention that s 8 should in effect be treated as
pro
non scripto
[23]
simply because its former counterpart in s 13 of the Companies Act
was repealed by the
2008
Companies
Act offends two fundamental
principles of our law. First, it pays no regard to an enduring
principle of statutory interpretation
that the legislature is
presumed to be aware of the existing law when it passes new
legislation. Thus, if
the
legislature was minded
to bring about
parity amongst corporate plaintiffs, whether companies or close
corporations, as contended by Fusion, no doubt the
legislature would
have also repealed s 8. Yet, it elected not to do so.
That
s 8 was not excised from the
Close Corporations Act but
, instead,
allowed to remain part of the
Close Corporations Act to
this very day
must therefore be taken to have been a deliberate decision by the
legislature.
Secondly,
and even most importantly,
to uphold
Fusion's submission in this regard would, in effect, be encroaching
on the exclusive domain of the legislature against
which the
Constitutional Court has sternly cautioned.
[24]
[
34
]
Furthermore
,
it must be stated
that
Fusion has failed to demonstrate that the order directing it to
furnish security dealt a death blow to its action. In any event,
that
an order for security might or will put an end to the litigation is
not in itself an overriding consideration or even a sufficient
reason
to refuse an application for security.
[25]
Fusion's demonstrable lack of candour to enlighten the high court as
to why those who had hitherto been funding its litigation
were
unwilling to continue doing so cannot redound to its benefit.
Fusion
conten
t
ed
itself with a bald assertion that its previous funders were no longer
willing to undertake risks associated with the pursuit
of its claim.
[
35
]
There is, to my mind, much to be said for the counter argument of the
municipality that Fusion 'seeks to have a free
pass to litigate
luxuriously without the risks of indemnifying the municipality
'
in the event that the latter is ultimately successful and awarded
costs.
On this score, the
pointed remark
s of Brand JA in
MTN
Service Provider (Pty) Ltd v Afro Call (Pty) Ltd
2007 (6) SA 620
(SCA) with reference to s 13 of the Companies Act
that: 'One of the very mischiefs s 13 is intended to curb, is that
those who
stand to benefit from successful litigation by a plaintiff
company will be prepared to finance the company's own litigation, but
will shield behind its corporate identity when it is ordered to pay
the successful defendant's costs. A plaintiff company that
seeks to
rely on the probability that a security order will exclude it from
the court, must therefore adduce evidence that it will
be unable to
furnish security, not only from its own resources, but also from
outside sources such as shareholders or creditors'
[26]
resonate with what obtains in this case. Accordingly, failure to give
due weight to this critical consideration is bound to lead
to a
warped decision that unduly favours Fusion without regard for the
interests of the municipality.
[
36
]
Insofar as the prospects of success of Fusion's action are concerned,
it must be said that in assessing the merits
of the plaintiff's case,
a court is not
required nor
expected
to undertake an in-depth analysis
as a trial court would at the
end
of
a
trial. It is sufficient that a court has a fair sense of the strength
and weakness of the antagonists' respective cases. For as
Streicher
JA explained in
Zietsman v Electronic Media
Network Ltd and Others
[2008] ZASCA 4
;
2008
(4) SA 1
(SCA) it is not expected that a court 'should in an
application for security attempt to resolve the dispute between the
parties.
Such a requirement would frustrate the purpose for which
security is sought. The extent to which it is practicable to make an
assessment
of a party's prospects of success would depend on the
nature of the dispute in each case'.
[27]
[
37
]
After
evaluating
Fusion's pleaded case
as
against the
municipality's plea as well as the common cause
facts, the high court concluded that Fusion's allegations in its
particulars of
claim did 'not set out with sufficient particularity,
the respects in which the [municipality] is alleged to have
frustrated the
fulfilment of the conditions precedent'. Consequently
the high court held that
'
the prospects of
success do not favour [Fusion]' on the pleadings as they then stood.
[
38
]
Accordingly, Fusion has not shown that the high court failed to
exercise its discretion judicially. That being so,
the conclusion to
which the high court came is immune from interference by this Court.
This Court, sitting as an appellate court,
is not at liberty to
decide the matter according to its own views of the merits of the
case.
[28]
This is because, as Cloete J
aptly observed in
Bookworks
(Pty) Ltd
above, a
discretion of the kind under consideration in this case, ‘requires
in essence the exercise of a value judgment and
there may well be a
legitimate difference of opinion as to the appropriate conclusion’.
Thus, as the requirements of s 17(1)
(a)
have not been satisfied, leave to appeal can not be granted.
[
39
]
In the result the following order is made:
The
application for leave to appeal is dismissed with costs, including
the costs of two counsel.
________________________
X
M PETSE
DEPUTY
PRESIDENT
SUPREME
COURT OF APPEAL
Appearances
For
Applicant:
M Osborne
Instructed
by:
Smith & De Jongh Attorneys,
Bellville
McIntyre van der Post, Bloemfontein
For
Respondent:
I Jamie SC (with him P S Van Zyl and A Nacerodien)
Instructed
by:
Webber Wentzel, Cape
Town
Matsepes
Inc., Bloemfontein
[1]
Section 17(2)
(d)
of the
Superior
Courts Act 10 of 2013
reads:
'The judges considering an application referred to in
paragraph
(b)
may dispose of the application without the
hearing of oral argument, but may, if they are of the opinion that
the circumstances
so require, order that it be argued before them at
a time and place appointed, and may, whether or not they have so
ordered,
grant or refuse the application or refer it to the court
for consideration.'
[2]
See order of this Court
granted on 29 October 2019. It reads:
'1.
The application for leave to appeal is referred for oral argument
in
terms of
s 17(2)
(d)
of the
Superior Courts Act 10 of 2013
.
2.
The parties must be prepared, if called upon to do so,
to address
the court on the merits.
3.
For this purpose the applicant is to file five additional
copies of
the application for leave to appeal within one month of the date of
this order and to comply with the rules of this
Court by filing the
record in terms of
rule 8
within three months of this order and both
parties are to comply with the remaining rules relating to the
prosecution of an appeal.
4.
If the applicant does not proceed with the application
the applicant
is to pay the costs relating to the application for leave to
appeal.'
[3]
Attached to the notice was a
draft bill of costs detailing how the amount required was computed.
[4]
The order reads thus:
'1. Respondent shall pay
security in an amount to be determined by the Registrar of this
Court, for Applicant's
costs in the pending action, in the form of
an interest bearing cash deposit with the Registrar, alternatively
by way of irrevocable
guarantee issued by a South African commercial
bank within 10 (ten) days of the amount being determined by the
Registrar;
2. All proceedings in the
Respondent's pending action against Applicant are hereby stayed,
pending
Respondent's compliance with paragraph 1 of this order;
3. Applicant is hereby
granted leave to re-enrol the application on the same papers, duly
supplemented,
if necessary, for an order in terms of
Rule 47(4)
that
Respondent's action be dismissed in the event that Respondent fail
to comply with paragraph 1 of this order;
4. Respondent shall pay
applicant's attorney and client costs in the application to strike
out;
5. Respondent shall pay
the costs of this application for security for costs on a party and
party
basis.'
[5]
See, in this regard:
D
F Scott (EP) (Pty) Ltd v Golden Valley Supermarket
2002
(6) SA 297
(SCA);
[2003] 3 All SA 1
(A) para 9.
[6]
Section 13 of the Companies
Act 61 of 1973 provided:
'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 company 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.'
[7]
Giddey NO v JC Barnard and Partners
[2006] ZACC 13
;
2007 (5) SA 525
(CC)
para 7.
[8]
Paragraph 6.
[9]
At 1045G-J. See too in this
regard:
MTN Service
Provider (Pty) Ltd v Afro Call (Pty) Ltd
2007 (6) 620 (SCA) para 16.
[10]
Giddey
para 8.
[11]
Idem para 7.
[12]
Giddey
para 19. See also in this
regard:
Benson v S
A Mutual Life Assurance Society
1986 (1) SA 776
(A) at 781I-782B and the cases therein cited.
[13]
Section 13 of the Companies
Act 61 of 1973.
[14]
At 807H-808C.
[15]
Giddey
para 22. See also:
Erf
One Six Seven Orchards CC v Greater Johannesburg Metropolitan
Council: Johannesburg Administration and Another
[1998] ZASCA 91
;
1999 (1) SA 104
(SCA) at 109A-B.
[16]
It is sometimes referred to
as a discretion in the narrow sense. See in this regard:
Media
Workers Association of South Africa and Others v Press Corporation
of South Africa Ltd ('Perskor')
[1992] ZASCA 149
;
1992 (4) SA 791
(A) at 800G-H.
[17]
Section 34 of the
Constitution which is headed: '
Access
to courts
'
provides:
'
Everyone
has the right to have any dispute that can be resolved by the
application of law decided in a fair public hearing before
a court
or, where appropriate, another independent and impartial tribunal or
forum.
'
[18]
See in this regard:
Lesapo
v North West Agricultural Bank and Another
[1999] ZACC 16
;
2000 (1) SA 409
(CC);
1999 (12) BCLR 1420
para 22.
[19]
See, for example,
Member of the Executive
Council for Development Planning and Local Government, Gauteng v
Democratic Party
and
Others
[1998] ZACC 9
;
1998 (4) SA
1157
(CC);
1998 (7) BCLR 855
(CC) paras 60-61. This decision was
most recently affirmed in
Public
Protector v Commissioner for the South African Revenue Service and
Others
[2020] ZACC
28.
[20]
Section 39(2) provides in
material part:
'When interpreting any legislation, . . ., every court,
tribunal or forum must promote the spirit, purport and objects of
the
Bill of Rights.'
[21]
Paragraph 13.
[22]
Idem para 13.
[23]
Loosely translated '
pro
non scripto
' means
treating something 'as though it is not written' and therefore does
not exist or form part of the
Close Corporations Act.
[24
]
See for example:
M
welase
and Others v
Director-General for the Department of Rural Development and Land
Reform and Another
[2019]
ZACC 30
;
2019 (6) SA 597
(CC);
2019 (11) BCLR 1358
(CC) para 50-53;
Doctors for Life
International v Speaker of the National Assembly
and Others
[2006] ZACC 11
;
[2006
(6) SA 416
(CC);
2006 (12) BCLR 1399
(CC) paras 37-38
;
National Treasury
and Others v Opposition to Urban Tolling Alliance and Others
[2012] ZACC 18
;
2012 (6) SA 223
(CC);
2012 (11) BCLR 1148
(CC) paras
44 and 72.
[25]
Shepstone & Wylie
paragraph 2
3
above at 1046 G-I.
[26]
Paragraph 20
.
[27]
Paragraph 21.
[28]
Compare:
HLX
Networking Technologies v System Publishers (Pty) Ltd and Another
[1996] ZASCA 107
;
1997 (1) SA 391
(A) at 401G-402C.