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[2013] ZAFSHC 25
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Build on Construction (Pty) Ltd and Another v Rasdi CC (1891/2012) [2013] ZAFSHC 25 (8 March 2013)
FREE STATE HIGH
COURT, BLOEMFONTEIN
REPUBLIC OF SOUTH
AFRICA
Case No : 1891/2012
In
the matter between:-
BUILD ON
CONSTRUCTION (PTY) LTD
............................
1
st
Applicant
K
P NOONAN
......................................................................
2
nd
Applicant
and
RASDI
CC
.............................................................................
Respondent
_____________________________________________________
JUDGMENT BY:
DAFFUE, J
_____________________________________________________
DELIVERED ON:
8 MARCH 2013
_____________________________________________________
[1] This is an
application for leave to appeal against the judgment of Thamage, AJ
delivered on 13 December 2012, dismissing applicants’
application to compel respondent to furnish security.
[2] The application has
been referred to me by the Acting Judge President to deal with it as
Thamage, AJ’s acting stint has
come to an end.
[3] In considering
whether there is a reasonable possibility that another court may come
to a different conclusion I shall keep
the following
dictum
of
the Supreme Court of Appeal in mind:
“
And it must
be remembered that in adjudicating on whether to order security for
costs, a court exercises a narrow or strict discretion,
with which a
Court of Appeal will only interfere if the court below failed to
exercise such discretion judicially or did so on
an incorrect factual
finding or on the basis of wrong legal principles.”
Refer to
Exploitatie-
en Beleggingsmaatschappij Argonauten 11 BV and Another v Honig
2012 (1) SA 247
(SCA) at par [19] p 255D.
[4] In order to assist me
I requested both parties to provide me with written heads of argument
for which I thank them. I thereupon
considered the matter in chambers
with the approval of both parties in accordance with the procedure
adopted by Musi, JP in the
matter of
Michael Dlomo v The State
,
case no 129/2007 (unreported judgment of this court delivered on 8
December 2011). The previous Companies Act, 61 of 1973 was
to a large
extent repealed and replaced by the
Companies Act, 71 of 2008
.
Section 13 of the 1973 Act dealing with security for costs does not
have a corollary in the new Act. Whether this is due to an
oversight
or deliberate is uncertain.
Section 8
of the
Close Corporations Act,
69 of 1984
contains a provision similar to section 13 of the 1973
Act, except that it also makes provision for security to be given by
a plaintiff
or applicant in reconvention. Notwithstanding amendments
to the
Close Corporations Act and
the repeal of certain sections
thereof with the promulgation of the 2008
Companies Act, section
8
thereof remains intact. The main purpose of the repealed
section 13
was (and in my view of
section 8
of the
Close Corporations Act is
)
“
to ensure
that companies (and close corporations) who are unlikely to be able
to pay costs and are 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 expense”.
(Words in brackets added.)
Refer to
Giddey NO
v J C Barnard & Partners
[2006] ZACC 13
;
2007 (5) SA 525
(CC) at par
[7]
and
Kini Bay Village Association v Nelson Mandela Metropolitan
Municipality and Others
[2008] ZASCA 66
;
2009 (2) SA 166
(SCA) at par
[10]
p
171F – G and the following
dictum
by Maya JA, writing
for the Full Bench of the SCA at par [10] of the last-mentioned
judgment:
“
The
party seeking security must, however, first establish, by credible
testimony, that its opponent, if unsuccessful, will
be unable to meet
an adverse costs order.”
[5] An application for
security must be considered in two stages. The applicant for security
bears the onus to establish that there
is reason to believe that the
respondent close corporation, if unsuccessful, will be unable to pay
the applicant’s costs,
failing which the application will be
unsuccessful. Although it is generally accepted that a close
corporation resisting an application
under
section 8
should produce
its financial statements in support of an averment of its ability to
pay costs if so ordered in the main action,
it cannot be disregarded
that the overall onus to establish the first stage of the enquiry
remains on the applicant, who cannot
rely on speculation or vague
averments, but whose application must be supported by credible
testimony on affidavit. If the applicant
cannot discharge the onus,
that is the end of the enquiry, but once the applicant for security
discharges its onus, the court must
then exercise its discretion
whether in fact to order that security be furnished or not.
[6] Applicant relies on
six grounds of appeal. The first three deal with the alleged failure
by Thamage, AJ to consider the respondent’s
financial position.
The fourth ground relates to the failure to find that respondent’s
cause of action was unsustainable.
Grounds five and six deal with
Thamage, AJ’s reference to a party’s right of access to
court in accordance with section
34 of the Constitution. It is
alleged that he erred in finding that an order granting security
would violate respondent’s
right of access to court. This last
aspect may be dealt with immediately. Thamage, AJ never indicated
that the application was
dismissed on the basis that an order
granting security would violate respondent’s right of access to
court. He merely referred
to the provisions of section 34 in passing.
[7] It is applicants’
case that respondent has been working with them on a number of
projects as subcontractor, that it does
not possess any assets, that
it requested first applicant to make purchases on its accounts with
suppliers and that first applicant
on various occasions lent money to
respondent to purchase material. The last two averments are denied by
respondent, but it is
important to note that even on applicants’
version, respondent did not fail to comply with its contractual
obligations pertaining
to the alleged loans or the purchases on first
applicant’s account. If respondent was in default regarding
these, I would
have expected applicants to make an issue thereof.
These are therefore neutral aspects in the circumstances, but what is
clear
is that respondent has been a subcontractor for many years and
is still in business. Bearing in mind the lack of credible evidence
provided by applicants pertaining to the fears that respondent would
be unable to settle a costs order granted against it, I do
not
believe that another court may find that respondent’s failure
to make full and detailed discovery of its financial position
should
be held against it.
[8] First applicant and
respondent are members of a joint venture. This is akin to a
partnership between legal entities. It is clear
that applicants were
at all times hands-on regarding the project and in possession of all
relevant financial and other documentation
regarding it. Respondent
and its member on the other hand, were not at all involved in the
management and/or administration and/or
bookkeeping of the project.
Like all partners, respondent is fully entitled to delivery of all
relevant documentation, debatement
of accounts and invoices in
respect of the joint venture, auditing of its financial statements
and payment of any amount that might
be due to it as member of the
joint venture. The joint venture has not been dissolved and
liquidation has not taken place, alternatively
this has not taken
place more than three years prior to institution of action. There can
be no argument that respondent’s
claim has become prescribed.
Insofar as applicants rely on the defence that the matter should be
referred to arbitration, they
would be fully entitled to plead such a
special plea. However, such a plea can never be a plea in abatement,
but is merely a dilatory
plea insofar as the cause of action may be
postponed. In adjudicating such a plea, the court may decide against
an order staying
the proceedings subject to arbitration, but may
entertain the dispute. However it is not necessary for purposes
hereof to enquire
more fully into the merits of the main dispute,
save to state that no case has been made out that respondent embarked
upon vexatious
litigation.
[9] In conclusion I
therefore find that there is no reasonable possibility that another
court may come to a different conclusion
as that reached by Thamage,
AJ.
[10] The following order
do issue:
10.1 The application for
leave to appeal is dismissed with costs.
_____________
J.P. DAFFUE, J
On
behalf of applicants: Adv L.A. Roux
Instructed
by:
Goodrick
& Franklin Inc
BLOEMFONTEIN
On
behalf of respondent: Adv P.R. Cronje
Instructed
by:
Phatshoane
Henney Inc
BLOEMFONTEIN
/sp