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[2015] ZAGPPHC 582
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Van Eyk and Another v Halton Boerdery Belange CC and Others (60356/2012, 60356/2C) [2015] ZAGPPHC 582 (31 July 2015)
REPUBLIC OF
SOUTH AFRICA
INTHE GAUTENG
DIVISION OF THE HIGH COURT, PRETORIA
JUDGMENT
Case
No: 60356/2012
Case
No: 60356/2C
DATE:
31 JULY 2015
In
the matter between:
LEONA VAN
EYK
...............................................................................................................
1
st
Applicant
PIETER
NAUDE VAN
EYK
..............................................................................................
2
nd
Applicant
And
HALTON
BOERDERY BELANGE
CC
........................................................................................
1
st
Respondent
LOUISA
MADALINA
PETRONELLA
.....................................................................................
2
nd
Respondent
JOHANNA
WESSELS
....................................................................................................
2
nd
Respondent
JUDGMENT
MNGQIBISA-THUSI,
J:
[1]
The
applicants (defendants in the main action) seek an order in terms of
Rule 47(1 )
[1]
of the Uniform Rules of Court, for the respondents (plaintiffs in the
main action) to provide security of costs for R 350 000.00.
[2]
The
second respondent is the sole member of the first respondent, a close
corporation.
[3]
The
applicants delivered a Rule 47(1) notice (the notice) the
respondents, demanding that respondents comply with it within 10
days, failing which they would have no alternative but to launch this
application. The respondents did not respond to the notice
leading to
the applicants filing this application. Even though the respondents
delivered a notice of intention to defend, they
did not file an
opposing affidavit to the Rule 47(1) application.
[4]
Despite
the fact that the respondents had not filed an opposing affidavit, at
the hearing of this application they were represented
by Mr van
Rensburg. Mr Van Rensburg submitted that it was unnecessary for the
respondents to file opposing papers, as the applicants
on their
papers have not provided any credible evidence in support of its
application.
[5]
It
is trite that an incola cannot be called on to give security for
costs unless the court is satisfied that the main application
is
vexatious or reckless or amounts to an abuse of the process of court.
In Vanda v Mbuqe and Mbuqe; Nomoyi v Mbuqe
[2]
the court stated that:
“[2] There are certain exceptions,
arising from both common and statutory law, to the principle that
incolae will not be called
upon to furnish security for costs. As the
exceptions are limited in number and only refer to a few specific
cases, they make virtually
no inroads on the general rule. An incola
who embarks on reckless or vexatious litigation, or an insolvent who
embarks on litigation,
other than that which he is empowered to
embark on by the
Insolvency Act 24 of 1936
, may be called upon to
furnish security - Ecker v Dean
1938 AD 102
at 110. If an incola who
is a man of straw litigates in a nominal capacity, or as a front of
another, he may be ordered to furnish
security - Mears v Brook’s
Executor and Mear’s Trustee
1906 TS 546
at 550. A limited
company which litigates as a plaintiff will be ordered to furnish
security for costs if there is reason to believe
that it, or the
liquidator of the company, will not be in a position to pay the
defendant’s costs ... Lastly, ... security
for costs can be
claimed in respect of certain applications pertaining to prescribed
claims."
[6]
Section
8 of the Close Corporation Act 69 of 1984 provides that:
“When
a corporation in any legal proceedings is a plaintiff or applicant or
brings a counterclaim or counter application,
the Court concerned may
at any time during the proceedings if it appears that there is reason
to believe that the corporation or,
if it 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.”
[7]
In
exercising its discretion whether or not to order a respondent to
furnish security for costs there is no need for the court to
necessarily inquire into the merits of the case. The court needs to
weigh the injustice to the applicant if no security is ordered
and
the respondent is not successful, at trial against the injustice to
the respondent if it is prevented from pursuing a valid
claim. The
onus to prove that the respondent will be unable to pay the
applicant’s costs if the respondent is not successful
in its
claim, lies with the applicant.
[8]
With
regard to the requirement that there is reasonable belief that the
respondent will be unable to satisfy a cost order against
it in Vumba
Intertrade CC v Geometric Intertrade CC
[3]
the court stated that;
“[8]
... Although the phrase ‘there is reason to believe’
places a much lighter burden of proof on an applicant
than, for
instance, ‘the court is satisfied, (Trust Bank van Afrika Bpk v
Lief and Another
1963
(4)
SA 752
(T); Agri Drip (Pty) Ltd v Fedgen
Insurance Co Ltd
1998 (1) SA 182
(W) at 186E), the ‘reason to
believe’ must be constituted by facts giving rise to such
belief (cf London Estates (Pty)
Ltd v Nair 1957
(3)
SA 591 (D) at 592F), and a blind belief,
or a belief based on such information or hearsay evidence as a
reasonable man ought or
could not give credence to, does not suffice
(cf Native Commissioner and Union Government v Nthako
1931 TPD 234
at
242).
In short, there must be facts before the
court on which the court can conclude that there is reason to believe
that a plaintiff
close corporation will be unable to satisfy an
adverse cost order; and the onus of adducing such facts rests on the
applicant.”
[9]
In
this matter, the court is required to embark on a two-stage inquiry.
Firstly, whether the applicants have adduced credible evidence
that,
if unsuccessful, the respondents will be unable to satisfy an order
for costs made against it. If the applicants do not succeed
in doing
so, that is the end of the matter. If the court is satisfied that the
applicants have made a case that the respondents
will not be able to
pay an adverse cost order if unsuccessful, the court has to exercise
its discretion whether or not it should
order the respondent entity
to furnish security.
[10]In brief, the following facts are common
cause:
10.1
during
September 2008, the respondents and the first applicant concluded a
contract of sale of land (the property). The property
was transferred
to the first applicant on 17 September 2008.
10.2
on 19 October 2012 the respondents
issued summons against the applicants in which they sought the
setting aside of the contract
of sale and the re-transfer of the
property into the name of the first respondent.
10.3
the
respondents signed as sureties and mortgaged the property in favour
of the applicants.
[11]
In the notice demanding security, the
applicants allege that the
respondents will not be in a position to pay
an adverse cost order if
made against because:
11.1
according
to a search done through CIPRO, the first respondent was
de-registered and therefore does not have locus standi to institute
the claim. The Applicants further called on the respondents to
provide a power of attorney, which was duly provided on 4 August
2014;
11.2
the
first respondent is dormant and has not traded for the past 5 years;
11.3
the
first respondent’s sole asset is the disputed property;
11.4
the
respondents’ action is not sustainable in that the claim has
prescribed.
11.5
the
second respondent is a pensioner and does not have any other means;
11.6
the
respondents’ action is reckless and/or vexatious and amounts to
an abuse of the court process.
[12]
In their founding affidavit in support
of their demand for the
respondents to furnish security for costs,
the applicants refer to the grounds as set out in the Rule 47(1)
notice in support of
their application and also contend that the
Respondents’ claim is vexatious and that the Respondents will
be unable to satisfy
an order of costs if the Applicants are
successful.
[13]Despite the fact that the respondents
had not filed an opposing affidavit, at the hearing of this
application they were represented
by Mr van Rensburg. Mr Van Rensburg
submitted that it was unnecessary for the respondents to file
opposing papers, as the applicants
on their papers have not provided
any credible evidence in support of its application.
[14]As indicated above, the onus is on the
applicants to show that there is reason to believe that the
Respondents will not be able
to satisfy an adverse cost order against
them. The founding affidavit does not contain any credible evidence
showing that the respondents
will not be able to satisfy an adverse
cost order except to rely on what is contained in their Rule 47(1)
notice. In order to make-up
for the founding affidavit which lacks
detail as to the respondents’ potential inability to meet an
adverse cost order, the
applicants filed, over and above their heads
of argument, two additional supplementary heads of argument in which
an attempt is
made to provide evidence that the Respondents will not
be able to pay security. It cannot be gainsaid that heads of argument
are
not evidence and counsel cannot in his submissions give evidence
from the bar. The applicants’ founding affidavit lacks any
credible evidence showing that the respondents will be unable to meet
an adverse cost order if unsuccessful at trial. Nothing turns
on the
fact that the respondents have not produced their financial
statements showing that they will be in a position to satisfy
an
adverse cost order. The applicants have not shown sufficient cause to
enable the court to exercise its discretion whether or
not to compel
the respondents to furnish security nor that the respondents’
claim is reckless and/or vexatious.
[15]In the premises, I am satisfied that the
applicants have not shown that there is reason to believe that the
respondents will
not be able to meet an adverse costs order.
[16]Accordingly, the following order is
made:
The
application is dismissed with costs.’
MNGGMBISA-THUSI
Judge of the High Court
Appearances:
For
Applicant: AdvVisser Instructed by: van Rensburg Jordaan &
Olivier For Respondent: Adv Van Rensburg Instructed by: LGR Inc.
[1]
Rule 47(1) 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.”
[2]
1993 (4) SA 93
(Tk GD).
[3]
2001 (2) SA 1068
(WLD).