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[2017] ZAGPPHC 213
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MTN Service Provider (Pty) Ltd v Brilliant Cellular Close Corporation (57607/14) [2017] ZAGPPHC 213 (16 March 2017)
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, PRETORIA
CASE NO: 57607/14
16/3/2017
Not
reportable
Not
of interest to other judges
In
the matter between:
MTN SERVICE PROVIDER
(PTY) LTD APPLICANT/DEFENDANT
And
BRILLIANT CELLULAR CLOSE
CORPORATION RESPONDENT/PLAINTIFF
JUDGMENT
RANCHOD
J:
Introduction
[1]
This is an application in which the applicant seeks an order
compelling the respondent to furnish security for applicant's costs.
In the notice in terms of Rule 47(1) R2 000 000.00 was demanded as
security for costs and that the action proceedings launched
by the
respondent be stayed until security is provided.
[2]
The respondent contests both its liability to give security and the
amount.
[3]
The applicant is the defendant and respondent the plaintiff in the
action. For the sake of convenience I will refer to the parties
as
the defendant and plaintiff respectively.
Background
[4]
The plaintiff has instituted an action against the defendant for
damages in the amount of R33 million based on an alleged repudiation
by the defendant of the franchise agreement concluded between the
parties on or about 30 September 2010. The plaintiff claims that
it
elected to cancel the franchise agreement on or about 13 November
2011 based on the defendant's alleged repudiation.
[5]
Prior to the institution of the current claim, and on 24 October
2011, the plaintiff had brought an urgent application under
case
number 2011/40453 in the High Court (Gauteng Local Division) seeking
an order declaring the defendant's cancellation of the
agreement to
be unlawful and of no force and effect. This application was
similarly based on the alleged repudiation of the agreement
by the
defendant.
[6]
That application was dismissed on 11 November 2011 on the grounds
that it was the plaintiff's conduct which constituted an irremediable
breach of the franchise agreement and further that the defendant was,
based on the plaintiff's repudiation of the agreement, entitled
to
cancel the agreement.
[7]
On 5 December 2011 the plaintiff's application for leave to appeal
was dismissed. Aggrieved with this outcome, the plaintiff
approached
the Supreme Court of Appeal for special leave against the judgment
and order of the High Court. The Supreme Court of
Appeal dismissed
the plaintiff's application for special leave to appeal with costs.
[8]
The plaintiff initially failed to pay the costs of the urgent
application, the application for leave to appeal and of the
application
for special leave to appeal in the Supreme Court of
Appeal. The defendant had writs of execution issued but the sheriff
rendered
nulla bona returns. The plaintiff eventually paid the costs
after about four years in April, 2016.
[9]
It is therefore hardly surprising that the defendant seeks security
for costs in the action that the plaintiff has instituted.
The
defendant says it seeks security for costs as there is serious doubt
that the plaintiff will be able to meet any adverse costs
order in
the action. The defendant says that the plaintiff has ceased trading
and it is also common cause that the plaintiff does
not have any
realisable assets.
[10]
The defendant further avers that the plaintiff lacks prospects of
success in the pending action and that the action constitutes
vexatious proceedings.
[11]
It is apparent from the papers that the plaintiff has raised vague
and bare denials to the factual grounds set out in the defendant's
application for security for costs and simply asserts that full legal
argument will be advanced during the hearing of the matter.
[12]
Under the Companies Act of 1973 provision for security by a company
was to be found in section 13. The new
Companies Act 71 of 2008
does
not contain an equivalent provision to
s13.
In
Boost Sports Africa
(Pty) Ltd v South African Breweries (Pty) Ltd
2015 (5)
SA
38
(SCA)
it was held (I quote the headnote):
'In terms of the common
law mere inability by an incola to satisfy a potential costs order
was insufficient to justify an order
for security. Something more was
required, namely that the action was reckless or vexatious. Absent
s
13
, there was no legitimate basis for differentiating between an
incola company and an incola natural person.
And
because our superior courts have a residual discretion arising from
their inherent power to regulate their own proceedings,
it must
follow that an incola company could 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 were satisfied that the contemplated main action
(or application) was vexatious or reckless or
otherwise amounted to
an abuse. (Paragraphs [15) - [16) at SOC - 51B.).'
[13]
The plaintiff is a close corporation. A similar provision for
security has been retained in
s8
of the
Close Corporations Act 69 of
1984
. However, the defendant does not rely on
s8
of the
Close
Corporations Act. Counsel
for the plaintiff submitted during oral
arguments that the plaintiff should therefore be treated as an
individual.
[14]
During oral submissions the parties were ad idem that this
application should be determined on the basis of the common law
as
the defendant is not relying on
s8
of the
Close Corporations Act and
the question to be determined is whether the plaintiff's action is
vexatious or reckless or otherwise amounts to an abuse of the
process
of court.
[15]
The plaintiff has simply made bare denials that it would not be able
to meet any adverse costs order. It has not been candid
with the
court as to how it would meet any adverse costs order if it did not
succeed in the action it has instituted against the
defendant. It has
no assets, is presently not trading and does not have any realizable
assets.
[16]
In addition, an important consideration is the prospects of success
of the action. Plaintiff's counsel submitted that the prospects
of
success is not relevant because if this court made a finding in that
regard it would pre-judge the trial court's finding. The
submission
is without merit. I have no doubt that the trial court would bring
its own independent reasoning to bear in the matter
and make a
finding accordingly.
[17]
I have already mentioned earlier that the plaintiff lost in the
urgent application for a declarator in the Gauteng Local Division
of
this court. The plaintiff s cause of action was based on an alleged
unlawful repudiation of the contract by the defendant. The
court, per
Hodes AJ, determined that the defendant was legally entitled to
terminate the contract based on the plaintiffs own material
breach
and repudiation of the contract. The plaintiff s claim in the pending
action in this court is also based on an alleged repudiation
of the
contract by the defendant. As I said earlier, an application by the
plaintiff for leave to appeal failed and so did a special
application
for leave to appeal in the Supreme Court of Appeal. In these
circumstances in my view the prospects of success are
poor in the
pending action.
[18]
It took several writs of execution where nula bona returns were
returned by the sheriff and about four years before the plaintiff
eventually paid defendant's costs in the urgent application and that
of the leave to appeal. The plaintiff also makes the startling
claim
that the truth of the plaintiffs allegations in the previous
application was not properly investigated. In effect the plaintiff
is
attempting to challenge the findings of that court in this court,
which is impermissible. This and all the other facts are,
in my view,
a clear indication that plaintiff is acting vexatiously, is abusing
the court process and seeks to annoy the defendant
whilst having poor
prospects of success in the action.
[19]
I make the following order:
1.
The plaintiff/respondent is ordered to give
security for defendant's/applicant's costs.
2.
The Registrar of this Court is to determine the
amount of the security to be provided by the plaintiff/respondent.
3.
The action proceedings are stayed until the
security for costs as determined by the Registrar is provided by the
plaintiff/respondent.
4.
The plaintiff/respondent is to pay the costs of
the application.
____________________
RANCHOD
J
JUDGE
OF THE HIGH COURT
Appearances:
Counsel
on behalf of Applicant
: Adv T.J.B Bokaba (SC)
: Adv K. Manyage
Instructed
by
: Macrobert Inc.
Counsel
on behalf of Respondent
: Adv A.B Rossouw (SC)
Instructed
by
: Van Zyl Le Roux Inc.
Date
heard
: 10 November 2016
Date
delivered
: 16 March 2017