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[2023] ZAFSHC 11
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Smith v Parker Beusekom Partnership (773/2021) [2023] ZAFSHC 11 (23 January 2023)
IN
THE HIGH COURT OF SOUTH AFRICA,
FREE
STATE DIVISION, BLOEMFONTEIN
Case
No: 773/2021
Reportable:
NO
Of
Interest to other Judges: NO
Circulate
to Magistrates: NO
In
the matter between:
SHAUN
SMITH
Applicant
and
PARKER
BEUSEKOM
PARTNERSHIP
Respondent
HEARD
ON:
27 OCTOBER 2022
JUDGMENT
BY
:
MHLAMBI,
J
DELIVERED
ON:
This judgment was handed down
electronically by circulation to the parties’ legal
representatives by email and released to
SAFLI. The date and time for
the hand-down are deemed to be 12h30 on 23 January 2023.
[1]
This is an opposed application instituted by the applicant on 29
September 2022 seeking
an order that the respondent furnish security
for costs in the amount of R 500 000.00 or such amount, form and
manner as the
registrar may determine and that the proceedings be
stayed until such order is complied with together with costs of the
application.
[2]
The notice of demand for security costs in terms of Rule 47 of the
Uniform Rules of
Court was delivered on 19 September 2022 and was
based on the ground that the respondent was a peregrinus of the court
and the
applicant had a reasonable need for security of the costs.
[3]
The respondent opposed the application on the grounds that:
3.1 The
applicant failed to demand security for costs as soon as possible
after the commencement of the main action
and had therefore failed to
timeously pursue the application in terms of Rule 47;
3.2 The
applicant was sufficiently safeguarded in other ways;
3.3 The
application was manifestly
mala fide
;
3.4 The
respondent’s claim against the applicant had prospects of
success and was not viscous or
mala fide
;
3.5 The
applicant failed to make out a case for security for costs.
[4]
It is essential to give a brief background of the facts. The
applicant and the respondent
entered into a sale agreement for an
Apollo Aircraft on 05 October 2018. On 22 February 2021, the
respondent, having cancelled
the agreement, issued a summons against
the applicant for the repayment of the purchase price. The applicant
defended and the matter
proceeded on a defended basis. The applicant
filed a plea and a counterclaim on 21 April 2021 and on 17 May 2021
the respondent
filed a reply to the applicant’s plea and a plea
to the counterclaim. The applicant demanded security for costs in the
amount
of R 500 000.00 in terms of Rule 47 by delivering a
notice of demand for security costs on 23 February 2022. The
respondent
refused to furnish the security for the costs and dared
the applicant to proceed with an application in terms of Rule 47 (3).
[5]
On 19 September 2022, the applicant delivered a second notice of
demand for the security
for costs in the amount of R 500 000.00
on the same grounds as the previous notice. Once again the respondent
refused to furnish
the security for costs. The respondent amended his
particulars of claim on 14 June 2022 and amended his residential
address to
reflect that he was now resident in Israel.
[6]
In its founding affidavit, the applicant stated that it was informed
by its attorney
that the respondent was a peregrinus, legal
terminology to describe a foreigner. This conclusion was drawn by the
attorney from
the amendment of the applicant’s particulars of
claim on 1 July 2022. The amendment described the respondent as a
businessman
resident in Israel.
[1]
Before the amendment, the respondent was cited as a businessman
resident at Plettenberg Bay in South Africa. This was denied in
the
applicant’s plea as it pleaded that the respondent was
permanently resident in the United States of America as he had
emigrated thereto in 2020.
[2]
The
respondent’s summons was issued on 21 February 2021. The
applicant’s plea and counterclaim were served on 23 April
2021.
[7]
The application could not be brought earlier as it was not
established that the respondent was a peregrinus.
[3]
In the period between late 2020 and the beginning of 2021, the
applicant was under the impression that the respondent was no longer
residing in the United States but in South Africa, albeit with the
stated intention of emigrating to Israel.
[4]
Up until their amendment, the particulars of claim stated clearly
that the respondent was resident in South Africa.
[5]
The
applicant was under the impression during the latter part of 2020 and
up until June 2022 that the respondent was back in South
Africa and
no longer resident in the United States.
[6]
[8]
In argument, the applicant submitted that it had made out a proper
case for the relief
sort in the application. There was absolutely no
merit in the respondent’s allegation that the applicant failed
to act as
soon as possible after the commencement of the
proceedings.
[7]
Relying on the
case of
Silvercraft
Helicopters
(Switzerland)
Ltd and another
v Zoonekus Mansions (Pty) Ltd, and two other cases
[8]
,
the applicant submitted that the court will not in applications for
security, enquire into the merits of the dispute of the
bona
fides
of
the parties. Taking into account the manner in which the answering
affidavit was drafted, it was submitted that the only
mala
fides
present
in this matter was on the part of the respondent.
[9]
The applicant was entitled to be protected to the full in the
proceedings initiated by the respondent peregrinus. The respondent’s
reliance on the aircraft as security was misplaced as it was clear
from the replying affidavit that the aircraft was being dismantled
and was subjected to harsh coastal weather conditions. The value of
the aircraft appeared to be R 1 500 000.00 as an
offer for
such an amount was made by a prospective purchaser. This amount was
not even sufficient to cover the amount of the applicant’s
counter-claim.
[10]
[9]
Rule 47 (1) of the Uniform Rules of Court provides that 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. 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, 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.
[10]
In
Magida
v. Minister of Police,
[11]
it was held that:
“
Notwithstanding
the obsolescence of the cautio juratoria as security on oath we must
bear in mind that our common law principles
which underlie its
granting are still applicable in our modern practice when a
peregrinus in his answering affidavit deposes to
his inability to
furnish security for costs owing to his impecuniosity, since it must
be left to the judicial discretion of the
Court by having due regard
to the particular circumstances of the case as well as considerations
of equity and fairness to both
the incola and the peregrinus to
decide whether the latter should be compelled to furnish, or be
absolved from furnishing, security
for costs. Nor is there any
justification for requiring the Court to exercise its discretion in
favour of a peregrinus only sparingly.
It follows that the following
dictum in Saker & Co Ltd v Grainger
1937 AD 223
per De Wet JA at
227, viz: ‘The principle underlying this practice is that in
proceedings initiated by a peregrinus the Court
is entitled to
protect an incola to the fullest extent,' should be read subject to
the qualification that it is only applicable
after the Court, in the
exercise of its judicial discretion in accordance with the principles
hereinbefore stated, had come to
the conclusion that the peregrinus
should not be absolved from furnishing security for costs.”
[11]
Some of the guidelines that a court will take into account when
exercising its discretion are whether the plaintiff’s
claim is
made in good faith or whether it is mala fide, whether it can be
concluded that a plaintiff has a reasonable prospect
of success and
whether the application for security was used to stifle a genuine
claim.
[12]
In
Shepstone
and Wyle and Others vs. Geyser N.O
[13]
it was said that a court should not fetter its own discretion in any
manner and particularly not by adopting an approach which
brooks of
no departure except in special circumstances, it must decide each
case upon consideration of all the relevant features,
without
adopting a pre-disposition either in favour of or against granting
security. In
Fusion
Properties 233 CC v Stellenbosch Municipality 2021 JDR 0094 (SCA
),
it was stated that whilst it may be desirable that a party entitled
to demand security for costs must do so as soon as reasonably
practicable, failure to do so was not necessarily fatal. 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. Delay in itself will rarely be
an
overriding and decisive consideration.
[12]
In
Giddey
No v JC Barnard and Partners
[14]
,
it
was stated that:
“
The
Courts have accordingly recognised that in applying s 13, they need
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 own costs
in the litigation. To do this
balancing exercise correctly, a court needs to be apprised of all the
relevant information
.
An
applicant for security will therefore need to show that there is a
probability that the plaintiff company will be unable to pay
costs.
The respondent company, on the other hand, must establish that the
order for costs might well result in its being unable
to pursue the
litigation and should indicate the nature and importance of the
litigation to rebut a suggestion that it may be vexatious
or without
prospects of success. Equipped with this information, a court will
need to balance the interests of the plaintiff in
pursuing the
litigation against the risks to the defendant of an unrealisable
costs order
.”
[13]
The applicant’s version in its founding affidavit is that it
was informed by its attorney
that the respondent was a peregrinus
when the attorney drew such a conclusion from the plaintiff’s
amended particulars of
claim on 1 July 2022.
[15]
The applicant, as the defendant in the main action, pleaded
specifically that the plaintiff was not resident in South Africa but
had emigrated to the United States of America in 2020 where he was
permanently resident.
[16]
The
respondent submitted that the applicant failed to disclose the first
request for security in its founding papers and why it
did not apply
to the court for the security for the costs in February 2022 after
the demand for such security was made.
[17]
The applicant, instead of addressing this issue fully, fleetingly
mentioned in its affidavit that:
“
D
efendant’s
attorney’
s
notices
under Rule 47, calling for security, have been declined. The
plaintiff has not set up security and the defendant is accordingly
compelled to launch this application, which I have been advised, will
apparently be opposed.”
[18]
[14]
The respondent’s response to the demand for security was
contained in an email of 25 February
2022 which, for the sake of
background and clarity, is quoted near verbatim as follows:
“
3.
Our client denies to furnish security for costs,
as demanded or at all.
4.
We respectfully submit that your client is not entitled to such
security in the circumstances of this
action, for inter alia the
following reasons (this is not a closed list):
4.1
The sole reason your client advances to support its demand for
security
is that our client is a foreign peregrine. It is long
established that this is not by itself reason enough, something more
is required,
and the court always retains the overriding discretion;
4.2
Your client has known that our client emigrated, on its own version
per
its plea, since at least 23 April 2021. This is well over more
than 200 court days prior to your client’s demand under reply,
which is not “as soon as practicably after the commencement of
proceedings” [vide rule 47(1)] and on this ground alone
we
submit that any application for security is still born;
4.3
The amount of R500 000.00 is astronomical, and our client verily
believes the demand for security is, in this context, vexatious,
intended more to stifle his bona fide4 claim/s and/or dissuade
him
from the further pursuit of the matter and/or try to gamer some
leverage in settlement negotiations;
4.4
Your client has remained adamant throughout the dispute and the
litigation,
for going on three years this year, that, essentially,
“there is nothing at all wrong with the Apollo” and
therefore
on your client’s own version our client is the sole
registered owner of the aircraft worth at least R4 000 000.00,
which sits in Plettenberg Bay in South Africa; and/or
4.5
The merits of the matter prima facie favour our client, evidenced
inter
alia by the fact that no expert notice was ever filed following
your client’s own appointed expert Gerhard van Wyk inspecting
the Apollo circa June 2021, which speaks for itself.
5.
Should your client persist in its demands, then we await service of
their application per rule 47(3)
accordingly.
6. This letter will be
used to support our client’s prayer that our client, when its
application is dismissed, be liable for
our client’s attorney
and own client costs, a punitive order that we respectfully submit is
appropriate to the facts of the
matter to hand.
[15]
The applicant failed to either respond to this letter or launch any
application in terms of Rule 47(3) despite having been
instructed to
call for security for costs from the respondent. In an email dated 23
February 2022 addressed to the respondent’s
attorneys, the
applicant’s latest attorney, Mr Willem van Rensburg, advised
that he had properly consulted on the pleadings
and issues with
counsel and had received detailed information and instructions before
calling for security for costs and amending
the Plea and
Counterclaim.
[19]
A second
notice of demand for security costs was delivered to the respondent
on 19 September 2022.
[16]
The respondent valued the Apollo at between R4 200 000.00
and R5 200 000.00 which is ten times the amount
of security
required by the applicant. He was of no intention of removing it from
South Africa as he tendered to return it to the
applicant against its
payment to him of the amount claimed.
[20]
The applicant was adequately safeguarded in respect of security for
costs or judgment.
[21]
The
applicant did not contest these amounts but contended that the
aircraft was disassembled for shipment elsewhere at the instructions
of the respondent. However, there was interest to purchase the
aircraft at a price of approximately R1.5 million. This amount would
be insufficient security taking into account that the counterclaims
exceeded this amount and especially if litigation were to be
pursued
in Israel.
[22]
The aircraft,
being a movable item forming the subject matter of the main action
does not qualify as constituting acceptable security
for costs.
[23]
This proposition is misconceived.
[17]
In
Browns
the Diamond Store CC v Van Zyl,
[24]
Kathree-Setiloane
J opined as follows:
“
In
my view, there should be no fetter on a court’s discretion to
order security for costs. Central to the proper exercise of
its
discretion is whether the peregrine plaintiff has sufficient or
adequate assets to meet any order as to costs, which is available
for
satisfaction. That enquiry is not limited to the presence of
immovable property but must include an enquiry into all assets
–
including movable assets, both corporeal and incorporeal, if they
exist. The principal concern being that an incola defendant
should
not be left unprotected if ultimately successful in the main action.”
[18]
Having considered the circumstances of this case and in an endeavour
to strike a balance between the interests of the parties,
I am not
persuaded that the applicant has made out a case against the
respondent for the furnishing of security for costs. The
applicant
failed to furnish an explanation of his delay in bringing the
security application that is sufficiently full to enable
this court
to understand how it really came about and to assess the plaintiff’s
conduct and motives.
[25]
The
applicant was not candid in its founding affidavit and failed to
mention that he had issued a notice of demand for security
in
February 2022, giving the impression that the only notice delivered
was in September 2022. Neither a full explanation was given
why the
first notice of demand was not pursued to its logical end nor why the
second notice was not delivered as soon as practicable
after the
commencement of proceedings, setting forth the grounds upon which the
security was claimed
[19]
On the applicant’s own version,
[26]
the
respondent owns sufficient assets to satisfy a costs order as
interest was shown in purchasing the aircraft at a price of
approximately
R1.5 million which is in excess of the R500 000.00
required in the notice of demand. In these circumstances and contrary
to
the applicant’s submissions, it cannot be said that the
respondent’s conduct is vexatious or
mala
fide
.
[20] In the result, the
following order is made:
Order:
The application is
dismissed with costs.
MHLAMBI,
J
On
behalf of the applicant:
Adv. J Els
Instructed
by:
McIntyre Van der Post
12
Barnes Street
Westdene
Bloemfontein
On
behalf of the respondent:
Adv. CD Pienaar
Instructed
by:
Hendre Conradie INC
119
President Reitz Ave
Westdene
BLOEMFONTEIN
[1]
Paragraph 5 of the Applicant’s Founding Affidavit.
[2]
Paragraph 7 of the Applicant’s Founding Affidavit.
[3]
Paragraph 24 of the Applicant’s Founding Affidavit.
[4]
Paragraph 10 of the Applicant’s Founding Affidavit.
[5]
Paragraph 15 of the Applicant’s Founding Affidavit.
[6]
Paragraph 13 of the Applicant’s Affidavit.
[7]
Paragraph 7.4 of the Heads of Argument.
[8]
2009 (5) SA 602 (C).
[9]
Paragraph 8.1 of the Heads of Argument.
[10]
Paragraph
29 of the Replying Affidavit.
[11]
1987 (1) SA 1
(A) D-G.
[12]
Barker
v Bishops Diocesan College and Others 2019 (4) SA 1 (WCC).
[13]
1998 (3) SA 1036 (SCA).
[14]
2007
(5) SA 525 (CC).
[15]
Paragraph 5 of the applicant’s founding affidavit.
[16]
Paragraph 7 of the applicant’s founding affidavit.
[17]
Paragraph 56 of the respondent’s heads of argument.
[18]
Paragraph 24 of the applicant’s founding affidavit.
[19]
Annexure SFC2 to the Answering Affidavit.
[20]
Paragraphs 38-40 of the Answering Affidavit.
[21]
Paragraph 42 of the Answering Affidavit.
[22]
Paragraphs 29 and 30 of the Replying Affidavit.
[23]
Paragraph 4.10 of the applicant’s Heads of argument. Paragraph
13e of the Answering Affidavit.
[24]
2017 JDR 0583 (GJ) para 14.
[25]
Christoffel Botha t/a Tax Consulting SA v Renwick
[2021] JOL 50197
GJ para 52.
[26]
Paragraph 29 of the Replying affidavbit.