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2012
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[2012] ZAFSHC 234
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Buildon Construction (Pty) Ltd and Another v Rasdi CC (1891/2012) [2012] ZAFSHC 234 (13 December 2012)
FREE STATE HIGH
COURT, BLOEMFONTEIN
REPUBLIC OF SOUTH
AFRICA
Case No: 1891/2012
In
the matter between:-
BUILDON
CONSTRUCTION (PTY) LTD
.................................
1
st
Applicant
K P NOONAN
..........................................................................
2
nd
Applicant
and
RASDI CC
.................................................................................
Respondent
_________________________________________________________
JUDGMENT BY:
THAMAGE, AJ
_________________________________________________________
HEARD ON:
29 NOVEMBER 2012
_________________________________________________________
DELIVERED ON:
13 DECEMBER 2012
_________________________________________________________
[1] This is an
application to compel the respondent to furnish security in terms of
Rule 47 of the Uniform Court Rules.
[2] First applicant is
Buildon Construction (Pty) Ltd, a company with limited liability duly
registered in terms of the Laws of
South Africa and the first
defendant in the main case.
[3] Second applicant is
Kelly Patric Noonan, a major male and a director of the first
applicant, he is the second defendant in the
main case.
[4] Respondent is Rasdi
CC, a close corporation duly registered in terms of the Laws of South
Africa, he is the plaintiff in the
main case.
[5] Respondent issued
summons against the two applicants claiming the following:
“
1.
Delivery and debatement of all documentation, accounts and invoices
in respect of the joint venture;
2. Auditing of the
financial statements of the joint venture;
3. Payment of an amount
to be determined after delivery, debatement and auditing of the
account;
4. Costs on attorney and
client scale;”
[6] Applicants invoked
the provisions of Rule 47(1) and subsequently the provisions of Rule
47(3). Applicant brought the current
application and request the
following relief:
“
1.
Respondent is ordered to furnish security for the Applicants’
cost of suit in the main action under case no 1891/2012 in
the amount
R180 000,00 (ONE HUNDRED AND EIGHTY THOUSAND RAND) within such a
period of time as the honourable Court in its discretion
may direct.”
[7] It is common cause
that both first applicant and respondent entered into a joint venture
to secure a contract from Sasol Infrachem
for the erection of a
library, which contract was ultimately secured and the library was
erected. There is however a dispute on
the contract value as well as
whether the joint venture had made a profit or loss, hence the action
instituted by the respondent.
[8] Applicants
application is twofold, namely the provision of security for costs,
firstly based on section 8 of the Close Corporation
Act and secondly
on the basis that respondent’s litigation is vexatious.
Respondent contest that the litigation is not vexatious.
[9] The provisions of
section 8 of the Close Corporation Act, Act 69 of 1984 are as
follows:
“
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.”
(my
emphasis)
[10] According to the
applicants, the reason to believe that respondent will be unable to
pay their costs if successful was prompted
by the following:
10.1. that they know
respondent’s financial position because they have been using
respondent on various projects as a subcontractor;
10.2. respondent does not
own any assets;
10.3. respondent is not
credit worthy because he has been requesting applicants to get credit
at suppliers on his behalf;
10.4. and that on various
occasions respondent requested loans from the first applicant for the
purchasing of materials.
[11] Respondent denied
the averments as stated above and further stated that the close
corporation is continuously doing subcontracting
work with other
contractors and that with abatement of the accounts of the joint
venture between him and the first applicant, his
financial position
will improve.
[12] Section 8 of the
Close Corporation Act must be interpreted and applied in accordance
with principles and case law developed
over the years on section 13
(now repealed) of the Old Companies Act. See
HENRY v R E
DESIGNS CC
1998 (2) SA 502
(C).
[13] The applicants must
discharge the onus by adducing facts on which the court can conclude
that there is reason to belief that
the respondent would be unable to
satisfy the costs order if he is unsuccessful. In
KINI BAY
VILLAGE ASSOCIATION v NELSON MANDELA METROPOLITAN MUNICIPALITY AND
OTHERS
[2008] ZASCA 66
;
2009 (2) SA 166
(SCA) at line 5 (F) the court held as
follows:
“
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.” (my emphasis)
[14] The respondent,
although having not submitted a balance sheet or financial statement,
had indicated that the close corporation
is still operating as a
business, thus has source of income. Furthermore, the testimony by
the applicant that because he knows
the respondent and had prior
dealings with him in the past, hence respondent will be unable to pay
adverse costs order cannot be
regarded as credible testimony.
Respondent did not provide any financial statement and the reason for
not doing so, is that he
said he does not have any. It is now that he
had employed someone to do his bookkeeping.
[15] Coming now to the
second ground of the applicants’ application, namely that
respondent litigation is vexatious. Applicants’
submission in
this regard is as follows:
15.1. that respondent
action ought to have been referred to mediation and/or arbitration;
15.2. that the
respondent’s claim had prescribed;
15.3. that the attorney
(Mr M Khang), who allegedly signed respondent’s particulars of
claim, denies having instituted an
action against applicants and that
the second applicant is not linked to the litigation although cited.
[16] The last-mentioned
submission that second applicant is only cited but not linked to the
case, has been raised on applicants’
heads of argument and does
not appear anywhere in the founding affidavit nor the replying
affidavit. Litigants are supposed to
stand and fall by their papers
and thus I am not going to consider this aspect in my judgment as the
respondent was not afforded
an opportunity to respond on it.
[17]
In
KINI BAY VILLAGE ASSOCIATION v NELSON MANDELA
METROPOLITAN MUNICIPALITY AND OTHERS
,
supra
, the court
stated as follows at page 17 paragraph [10] referring to section 13
of the Old Companies Act:
“
These
provisions are intended to protect persons against liability
for costs relating to litigation instituted by impecunious
companies by deterring such companies from litigating
vexatiously or in circumstances where they have poor prospects of
success, thus exposing their opponents to unnecessary and
irrecoverable legal expenses.”
[18]
The factors raised by the applicants which allegedly intend to prove
vexatious litigation are technical legal points and do
not go to the
nature (and not merits) of the case. An action is vexatious if it is
obviously unsustainable. See
AFRICAN FARMS AND TOWNSHIPS
LTD v CAPE TOWN MUNICIPALITY
1963 (2) SA 555
(A) at 565D –
E.
[19] Respondent is
seeking full financial disclosure of the joint venture operations for
the erection of the library. He did, however
according to him, get
R30 000,00 out of the contract value of R10 million. Respondent did
exhibit through his papers filed of record
that the account done by
the first applicant is not up to standard and there are questionable
entries. Also stated that applicant
had all the contracts even the
money paid by Sasol and he never had a say in the financial
management of the joint venture. I am
of the view that the
respondent’s claim is neither vexatious nor an abuse of the
court processes, he is exercising his legitimate
right.
[20] Having considered
the previous section 8 of the Close Corporation Act and related
section 3 of the old Companies Act with its
case law and also taking
cognisance of the provisions of section 34 of the Constitution of the
Republic of South Africa Act, no
108 of 1996 which states as follows:
“
34.
Access to courts – Everyone has the right to have any dispute
that can be resolved by the application of law decided in
a fair
public hearing before a court or where appropriate, another
independent and impartial tribunal or forum.”
I am of the view that
applicants failed to satisfy the court that the respondent litigation
is vexatious.
[21] I therefore make the
following order:
21.1 Application is
dismissed with costs.
_________________
S. J. THAMAGE, AJ
On behalf of applicant: L
A le Roux
Instructed by:
Goodrick & Franklin
Inc.
BLOEMFONTEIN
On behalf of respondent:
Adv. R P Cronjé
Instructed by:
Mphafi Khang Attorneys
BLOEMFONTEIN
/eb