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[2012] ZAGPPHC 356
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Trigger Reaction Security Service v City of Tshwane Metropolitan Municipality (48493/12) [2012] ZAGPPHC 356 (11 December 2012)
NOT
REPORTABLE
IN
THE NORTH GAUTENG HIGH COURT,
PRETORIA
(REPUBLIC OF SOUTH AFRICA)
CASE
NUMBER: 48493/12
DATE:11/12/2012
In
the matter between:
TRIGGER
REACTION SECURITY
SERVICE
......................................
APPLICANT
(Registration
No. CK2007/252010/23)
and
CITY
OF TSHWANE
METROPOLITAN
.................................................
FIRST
RESPONDENT
MUNICIPALITY
GONDO
SECURITY SERVICES (PTY)
LTD
........................................
SECOND
RESPONDENT
JUDGMENT
TLHAPI
J
[1]
This judgement deals with two applications.
The
first application was launched on 12 October 2012 by the applicant in
terms of Rule 49(11) of the Rules of Court, that the first
respondent's application for leave to appeal to the Supreme Court of
Appeal, shall not suspend the operation or execution of the
interim
portion of the order made by me on 7 September 2012.
The
second application was launched by the first respondent in terms of
Rule 47(3) of the Rules of Court, for security for costs.
There was
indication by counsel for the first respondent that security for
costs would include security for costs in the contempt
application.
The contempt proceedings were not before me.
The
application was brought on extreme urgency to be heard before me on
the day I had set down the Rule 49(11) application to be
argued. The
practice manual relating to urgent applications had not been complied
with by the applicant. I nevertheless heard the
matter because it had
bearing on the application in terms of Rule 49 (11).
Both
applications were opposed.
[2]
The latter application was heard first and judgement was reserved.
The Rule 49 (11) application was then set down by me on 27
November
2012 and, on that day the application for security of costs was
dismissed with costs with reasons to be given in this
judgment.
REASONS
FOR JUDGMENT THE RULE 47(1) APPLICATION
[3]
This application was preceded by a notice in terms of Rule 47(1) for
security to be given in the amount of R300,000.00 and the
applicants
were notified that the entitlement to security for costs was
contested. Mr K S Ngobeni deposed to the founding affidavit
and
averred that:
“
4.2
In terms of
section 8
of the
Close Corporations Act of 1984
, and
where a dose corporation is an applicant such as in the aforesaid
contempt proceedings and the
Rule 49(11)
application, a Court could
at any stage order it to furnish security for costs if there is
reason to believe that the close corporation
would be una6/e to pay
costs of the respondent if the respondent (the applicant in this
case) is successful in its defence.
4.3
There is reason to believe that the first respondent would not be
able to pay the applicant’s costs if the applicant is
successful in opposing the aforesaid contempt proceedings and the
Rule 49(11)
application. This is based on the following:
4.3.1
in its replying and supplementary affidavits in the contempt
proceedings, the first respondent alleges that it is unable to
pay
salaries of its 276 employees. I attach as FA1 and FA2 copies of the
relevant extracts from the first respondent’s replying
and
supplementary affidavits in which the allegations are made.
4.3.2
in paragraphs 6.13 and 1.2 of the first respondent’s founding
affidavit in the
Rule 49(11)
application it is again alleged that the
first respondent is unable to pay the salaries of its 276
employee......................................
4.4
...... 1 respectfully submit that it is clear that the first
respondent is not in
a
sound financial position- it is insolvent or on the brink of
insolvency. At best, the contents of the first respondent’s
affidavits create a reasonable basis for the belief that the first
respondent should not be able to satisfy an adverse costs order
if
the applicant is successful in defending the aforesaid contempt
proceedings and the
Rule 49(11)
application. ”
[4]
In the answering affidavit Ms M L Mashimbye averred that:
“
3.1
This is an application brought in terms of
section 8
of the
Close
Corporations Act 69 of1984(as
amended) (“the
Close Corporations
Act),............................. I
am advised that with effect 1
May 2011 the Companies Act
61
of 1973 (“the old Companies Act”) was repealed and
replaced with the Companies Act 71 of 2008 (“the new
Companies
Act&rdquo
;). The new
Companies Act does
not contain a provision
similar to
section 13
of the old
Companies Act. Section
8 of the
Close Corporations Act is
now unconstitutional as its enforcement
would lead to inequality before the law. For this reason alone this
application should
be dismissed with costs.
3.2
The CTMM relies exclusively on an allegation in affidavits filed by
Trigger that as a result of the CTMM’s failure to
pay Trigger
for the guarding services rendered and to be rendered during the
months of August and September 2012 that it is unable
to pay its 276
employees. Trigger’s salary bill exceeds R1 million per month.
The only security contract which Trigger has
is the one which it
concluded with the CTMM. It is solely as a result of CTMM’s
failure to pay that Trigger cannot pay its
employees. I am advised
that a court will not order security to be provided when the
financial distress on the respondent in an
application for security
for costs is caused by the applicant."
3.3
This application has been brought as a matter of extreme urgency in
circumstances where an application for security for costs
can never
be urgent. Since the filing of Trigger's Founding affidavit in the
main application the CTMM has been aware of all the
facts upon which
it bases its current application.
3.6
Trigger has assets and means to satisfy an adverse costs order.
Trigger
has had insufficient time to provide any form of financial
documentation in order to substantiate this assertion.
3.7
Other that the allegation that Trigger alleges that it cannot pay its
276 employees who were specifically employed to render
services
provided for the SLA should the CTMM not make payment to it, there is
not one jot of evidence advanced by the CTMM that
trigger would be
unable to meet an adverse costs order. No allegations are made to the
extent of Trigger's assets and/or liabilities.
The application for
security for costs is part of the stratagem to financially ruin
Trigger and prevent Trigger from being heard.
”
[5]
In the unreported judgment of Mavundla J of this court, in the matter
of Tricor Signs SA (Pty) Ltd v Willco Manufacturing CC
and Others,
Case Number 24386/10, which was an application similar to the present
and where the applicant relied upon
s 8
of the
Close Corporations Act
No.69 of 1984
at paragraph 6 of that judgement he said:
"The
adjudication of this application must be seen in the backdrop of the
Constitution in the country, which through s34 guarantees
everyone
the right of access to have their disputes adjudicated by the courts
....there should be no obstacle placed before any
person ...due to
impecunious state or illiteracy or otherwise. However where there is
a legislation permitting the Court to debar
a person’s access
to court it requires the court, in my view, to be slow in barring
such access”.
Mavundla
J emphasized the need for credible information in engaging the two
stage enquiry. (my emphasis)
[6]
In the first stage of enquiry the applicant seeking security for
costs, bears the onus to satisfy the court that indeed there
was
reason to believe that the respondent may be unable to satisfy an
adverse costs order. If it fails to discharge the onus, that
should
be the end of the matter, the application is bound to be refused MTN
Service Provider (Pty) Ltd v Afro Call (Pty) Ltd
2007 (6) SA 620
(SCA) at 622 I. The second stage of the enquiry of the enquiry
involves the ‘balancing of factors and judicial discretion.
[7]
In Tricor Signs supra, the court referred to ‘the lighter
burden of onus to place credible evidence’ and considered
the
following:
-
‘the first respondent is becoming a shell entity without any
income or assets and or that it is not conducting any business
anymore;
-
the first respondent is no longer trading in its own name;
-
the first respondent’s business was now conducted by another
company;
-the
first respondent does not have regular income and does not have a tax
certificate from SARS as a result it is not attracting
work from
Government or parastatafs;
[8]
In MTN supra the financial statements revealed that Afro Call’s
liabilities exceeded its assets and that the business
was being run
at a substantial net loss.
[9]
In Talmera Trading CC v Aquandro NO and Others (14184/10)
[2010}
ZAWCHC 509
delivered 22 October 2010, Baartman J considered the
following factors:
-
the franchise had ceased trading
-
the applicants described their financial situation as ‘penurious’
-
the applicant owned no immovable property or assets
-
the applicant had two members who were not able to fund the
litigation
-
the applicant failed to provide financials to wit:
-applicant’s
tax returns for the years 2009 and 2010 -applicant’s bank
statements
-applicant’s
audited financial statements for the years 2009 and 2010
[10]
The approach in dealing with the second part of the enquiry was aptly
stated in Giddey NO v J C Barnard and Partners 2007 (5)
525 (CC)
paragraph “There can be no doubt that in exercising a
discretion in terms of s13 (and similarly s8) a court must
bear in
mind the provisions of s34 (of the Constitution) and weigh them in
the light of the other factors laid before it .....
On one side of
the scale must be weighed the potential injustice to the plaintiff or
the applicant if it is prevented from pursuing
a legitimate claim.
This incorporates a recognition of the importance of the right of
access to courts. On the other side of the
scale must be placed the
potential injustice to the defendant if it succeeds in its defence
but cannot recover its costs. Relevant
considerations in performing
this balancing exercise will include the likelihood that the effect
of an order to furnish security
will be to terminate the plaintiff’s
action; the attempts the plaintiff made to find financial assistance
from its shareholders
or creditors; the question whether it is the
conduct of the defendant that has caused the financial difficulties
of the plaintiff,
as well as the nature of the plaintiff's action.”
In
Waste-Tech (Pty) ltd v Van Zyl and Glanville NNO
2000 (2) SA 400
(SEC), it was stated that the court, in exercising its discretion
should consider equity and fairness to both parties, even in
circumstances where there was reason to believe that a party would be
unable to pay costs if unsuccessful. Furthermore the court
could
consider the conduct of the applicant in relation to the position in
which the respondent finds itself.
[11]
In Tricor supra the applicant had no reason to believe when the main
application was launched that the respondent would not
be in a
position to meet any adverse costs order, hence its late application,
which was mainly motivated by changed circumstances
in the
circumstances of the respondent. In addition to the factors mentioned
in paragraph 7 above, in Tricor supra Mavundla J in
paragraph [18] of
his judgement, had the added advantage of having considered the
financial position of the first respondent before
exercising his
discretion.
[12]
Unlike the cases mentioned in paragraphs [7], [8] and [9], the
applicant in this matter relies exclusively on an allegation
that the
respondent was unable to pay its 276 employees. In the words of the
respondent “there is not one jot of evidence
advanced by CTMM
....no allegations are made to the extent of Trigger’s assets
and/or liabilities”
In
my view, and on these allegations standing alone, it cannot be said
that the respondent was insolvent, or on the brink of insolvency.
I
am in agreement with the submission that this application should
never have been brought in circumstances of extreme urgency.
The
application by its nature entailed a different enquiry as already
alluded to in the cases above. The respondent was afforded
only two
and a half hours to oppose the application and 24 hours within which
to file an answering affidavit before the time set
down to hear the
Rule 49(11) application. According to the respondent it had assets
and the means to satisfy an adverse costs order
however as already
mentioned and I must agree, it was given very little time to
substantiate this claim.
[13]
Among the issues that were considered in ICC Car Importers (Pty) Ltd
v Harrodt SA (Pty) Ltd
2004 (4) SA 607
(WLD) was the considerable
delay in bringing the application for security for costs. The
respondent has always maintained that
as a result of the conduct of
the applicant’s in terminating the Service Level Agreement as
it did, it could not pay its
employees despite having tendered the
services and, lately despite the existence of an interim order. In my
view, the applicant
could have formulated a view or reasonable
suspicion from the time when the main and subsequent applications
were launched.
[14]
In considering dismissing this application I did not consider the
issue of whether section 8 of the Close Corporation Act was
unconstitutional because there were sufficient facts which enabled me
to consider the application by engaging the two stage enquiry
dealt
with in the authorities mentioned above. In Tricor and Giddey supra
reference is made to section 34 of the Constitution.
Section 13 of
the old
Companies Act and
section 8 of the Close Corporation Act
served one purpose. I therefore agree with the submission for the
respondent that the enforcement
of section 8 would severely lead to
inequality before the law, however as I already mentioned, this was
not the basis upon which
I dismissed the application.
RULE
49 (11)
[15]
I do not deem it necessary to summarize once more the facts in the
main application because they are common cause and they
are contained
in my judgement which had been annexed to the founding affidavit as
annexure “FA1. It is also common cause
that the respondent’s
leave to appeal this judgment was dismissed and that they have now
approached the Supreme Court of
Appeal for leave to appeal the whole
of my judgment of the 7 September 2007 despite the applicant’s
contention that the interim
part of that
order
was not appealable.
[16]
The purpose of the interim order was to retain the status quo ante in
that the applicant had rendered security services in
terms of the
Service Level Agreement for a period of almost two years prior to the
launch of the urgent applications in February
and August of 2012. I
gave reasons why I was satisfied that there were prima facie
prospects of success and these were also contained
in the judgement.
!t was also common cause that the applicant launched by way of
urgency contempt proceedings against the first
respondent seeking to
implement the interim order. These proceedings were preceded by
correspondence seeking compliance with the
order and the first
respondents failed to respond to such correspondence nor to an offer
for settlement communicated to them.
[17]
The Applicant averred that the conduct displayed was a stratagem to
financially ruin the, by causing 276 employees to loose
their jobs
and that they face labour unrest. Consequently it contended that the
relief claimed remained urgent. The applicant averred
that it had not
been paid for the security guarding services which it rendered in
terms of the Service Level Agreement since 1
August 2012, and that it
had failed to pay for the services rendered for the months of August
and September 2012.
The
first respondent was currently indebted to the Applicant in the sum
of R2 867 279.12 and that ‘the longer the first respondent
can
frustrate the operation of the interim order Order, the more likely
the first respondent is to succeed with this stratagem.’
[18]
The first respondent averred that the court was not in a position to
balance the competing interests of the applicant and first
respondent
because the applicant had failed to demonstrate that it stood to
suffer greater irreparable harm. Furthermore the first
respondent
contended that its right to have the whole dispute decided on appeal
would be rendered academic if leave to execute
was granted. According
to it the fact that applicant could not afford to pay its employees
did not justify the grant of the relief
contemplated in Rule 49(11)
[19]
The first respondent averred that the applicant had demonstrated it
inability to perform in the founding affidavit and that
unless it was
paid by the first respondent it could not render the required
services. The first respondent denied that it owed
the applicant
because no proof has been placed before the court. Furthermore it
contended that the applicant had other available
remedies; that the
applicant a right to claim damages, it had suffered as a result of
the first respondent’s conduct, so
far, the applicant had not
initiated any action against the first respondent. The applicant
could further invoke the provisions
of
section 189
of the
Labour
Relations Act 66 of 1995
to resolve any disputes that may arise with
its employees.
[20]
The court has a wide discretion ‘to grant or refuse the
application.’ In Airy v Cross-Border Road Transport Agency
2001
(1) SA 737
(T) at 741 I
Tuchten
AJ stated:
7
must do what is just and equitable in all circumstances, in this
regard the potentiality of harm or prejudice and the balance
of
convenience in regard to such harm or prejudice may, and usually will
carry considerable weight”
[21]
When an appeal is noted the execution of the judgment is suspended in
order to avoid irreparable damage to the intending appellant.
The
respondent posed a question: How was the court going to balance the
competing interests because it also would suffer irreparable
harm. In
determining this issue I am entitled to take into account once more
again the entire circumstances surrounding the case
and for
completeness sake I reiterate the facts considered and which
satisfied me that there were reasonable prospects for of success
for
the applicant in future proceedings:
1.
the first respondent participated in the service level agreement by
accepting security services rendered by the applicant and
also made
payment to the applicant since about August 2010;
2.
the first respondent continued to honour the arrangement after the
launch of an urgent application by the applicants in January
2012
until the first respondent purported to terminate the service level
agreement concluded with second respondent in the main
application;
[22]
The first respondent has held close to its chest information relating
to contracts entered into with new service providers
who replaced the
applicant. The answering affidavit lacked information on the duration
of such contracts; how much the first respondent
was presently paying
such service providers; when and how are those contracts are going to
terminate.
Furthermore
in relation to the applicant and them, why does the first respondent
believe it will suffer irreparable harm; what are
the financial
implications for the first respondent should the application be
granted. How am I supposed to do the balancing exercise
in the
absence of such information? According to the applicants, this was
the only security contract it had, it had employees who
had performed
a service for almost two years without interruption. Furthermore the
applicant had tendered its services and the
first respondent had
refused to accept such tender. It is my view that in as far as the
interim order was concerned there were
no prospects on appeal, and I
see no reason why this application should not be granted.
[23] In the result the following order
is given:
“
The
application as contained in paragraph 2 of the Notice of Motion is
granted with costs”
TLHAPI V.V
(JUDGE
OF THE HIGH COURT)
MATTER
HEARD ON: 27 NOVEMBER 2012
JUDGMENT
RESERVED ON: 27 NOVEMBER 2012
ATTORNEYS
FOR THE APPLICANT:T. G MOTSETO ATT.
ATTORNEYS
FOR THE RESPONDENT: GILDENHUYS
:MALATJl ATT.