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[2012] ZAKZDHC 61
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Vienings v Paint and Ladders (Pty) Ltd (12929/2009) [2012] ZAKZDHC 61 (30 October 2012)
IN
THE KWAZULU-NATAL HIGH COURT, DURBAN
REPUBLIC
OF SOUTH AFRICA
CASE
NO:12929/2009
In
the matter between:
BERNARD
KEITH
VIENINGS
.............................................................
Applicant/
Defendant
and
PAINT
AND LADDERS (PTY) LIMITED
.
........................................
Respondent/
Plaintiff
JUDGMENT
Delivered
30 October 2012
M
PILLEMER, AJ:
[1]
The Plaintiff is a registered company. It instituted action against
the Defendant in September 2009. That action is defended
and a
counterclaim has also been brought.
[2]
On 28 October 2011 the Defendant gave notice in terms of Rule 47(1)
that it required the Plaintiff to provide security for
its costs but
did no more than state that the Defendant had reason to believe that
the Plaintiff was not in a position to satisfy
an adverse order of
costs against it There was an objection to the first notice on the
grounds that it was vague. The Defendant
then delivered a second
revised notice on 21 November 2011 under the said rule in which it
amplified its grounds. The grounds
relied upon in the request were
that in related proceedings the Plaintiff had failed to pay a costs
order granted in April 2009,
putting the Defendant to considerable
effort and expense to try and execute without success, until
eventually the costs of some
R67,172.22 were settled, not by the
Plaintiff, but rather by another company, Xpanda Security (Pty)
Limited on 15 July 2011.
This company was a stranger to the
litigation.
[3]
The Plaintiff's response to the Rule 47(1) Notice was set out in a
letter. The bulk of the letter objects to the request and
then
states " We have advised and repeat this advice that our client
has sufficient by way of attachable assets, balance
sheet items,
funds on hand and resources to meet any costs order which might be
granted. After all it paid your costs order."
The delay in
making the request was also alluded to. The letter ended by
recording " your notice calling for security lacks
verisimilitude."
[4]
To this the Defendant's attorney reacted by pointing out that the
previous costs were paid not by the plaintiff but rather
by an
entity not related to the litigation and, that being so, asked for
proof to show that the Plaintiff owns the assets mentioned
in
extract from the letter which is quoted above.
[5]
There was no response from the Plaintiff's attorney to this request
for proof.
[6]
This ted to the present application before me in which the Defendant
seeks an order that the Plaintiff be directed to furnish
security
for costs to the satisfaction of the registrar in the amount of
R150,000 within ten days of the grant of the order and
that the
proceedings in the action be stayed until such order is complied
with and, if it is not complied with, for leave to
apply on the same
papers supplemented as necessary for the dismissal of the action,
[7]
!n the answering affidavit the Plaintiff again, this time though the
mouth of a director, Marc Peter Allen, relies upon the
delay in
bringing the application as a basis for its opposition. With regard
to its ability to pay the costs the Plaintiff intentionally
elects
not to put up evidence in support of its ability to pay, and simply
contents itself by averring: " it is not necessary
for the
Respondent to make available to the Applicant a list of its assets.
The Applicant was formerly a franchisee of the Respondent
and is
fully aware of the infrastructure of the company, in that the
company is a wholly owned subsidiary of the Argent Steel
Group (Pty)
Ltd, which is owned by Argent Industrial Limited, a public company
which is listed on the JSE. It would be preposterous
for the
applicant to suggest that the Respondent would not be in a position
to meet any adverse costs order". It is not
explained why it is
not necessary to make available a list of assets, or provide the
balance sheet or some other tangible evidence.
In argument Mr De
Beer SC, who appeared for the Plaintiff, contended that because
there was no case to meet there was no need
to provide evidence as
to the Plaintiff's ability to pay the costs. He placed reliance on
Vumba
Intertrade CC v Geometric Intertrade CC
2001
(2) SA 1068
(W) at paragraphs 9-11 where the court held where the
allegation that the plaintiff in those proceedings would not be able
the
pay the defendant's costs if successful in its defence had no
foundation in fact and, that being so, no inference could be drawn
from a failure to produce its balance sheet in answer to the case
for security. The court held that each case has to be assessed
on
its merits.
[8]
In the replying affidavit the point is made that the Plaintiff has
still not furnished any details of the "attachable
assets,
balance sheet items, funds on hand and resources to meet any costs
order which might be granted" that were mentioned
in the
initial response to the request for security and in respect of which
proof was sought. It also points out that it is admitted
that
another company made payment of the previous costs order and that
the Plaintiff has provided no explanation for that. It
is also
pointed out that Plaintiff has not asserted that it would be unable
to furnish security or that being required to do
so would create any
undue hardship for the Plaintiff at all. Indeed on the contrary the
tone of the response is that the Plaintiff
is well able to pay the
costs and the reason security is not being provided is because it is
regarded as an insult to have requested
it.
[9]
The replying affidavit deals with the issue of the delay and
explains that in response to the action the Defendant launched
an
application to obtain the release of some stock held by the
plaintiff. He was successful, but the Plaintiff lodged an appeal
with the application for leave to appeal only being heard some nine
months later when it was dismissed. Then followed the difficulties
in executing on the costs order, which were eventually paid by a
company that had no part in the litigation, one that is part
of the
same group of companies. It explains why two notices were issued and
why the present application was only brought in February
2012. The
payment by Xtrata Security was made in July 2011, the first Rule
47(1) Notice was delivered in October 2011 and the
second in
November of that year. The deponent makes the point that little
happens over the December/January year end period and
the
application was launched in February, The affidavit also makes the
submission that the delay occasioned no prejudice to the
Plaintiff
and none is complained of.
[10]
So what emerges from the aforegoing is that the Defendant has a
legitimate anxiety that if he is successful he may not be
able to
recover his costs from the Plaintiff, based on what occurred in
relation to the costs order he had difficulty getting
settled, with
the strange feature that the costs were not paid by the plaintiff
but by another company and no explanation is
given. Absent an
explanation the inference to be drawn is that the Plaintiff was
itself unable to pay the costs and called upon
another company in
the group to do so on its behalf. The Plaintiff has chosen not to
put up evidence to show that it is able
to meet the costs that may
be awarded other than vigorously asserting that it will be able to
do so.
[11]
At the date the summons was issued the Companies Act of 1973 was in
force and had not yet been repealed, but by the time
the Rule 47 (1)
Notice was issued that Act had been repealed and replaced by the
Companies Act 71 of 2008
. Of significance for present purposes is
the fact that s13 of the 1973 Act is not replicated in the
2008 Act.
S13
is the section that confers the right to seek security for costs
against a company or corporation. The bar that has to be achieved
by
the party seeking security is much more easily met under s13, than
under the common law under which the test is much more
stringent.
The court has an inherent power to order security in relation to
unnecessary or vexatious proceedings by impecunious
plaintiffs. It
has also been held to have the power if it is in the interests of
justice to make such an order in relation to
vexatious, reckless and
unmeritorious litigation bearing in mind the right of every litigant
to have any dispute settled in a
court of law (see
Haitas
& Others v Port Wild Props 12 (Pty) Ltd
2011
(5) SA 562
(ESJ) at 533H. It is therefore important to decide
whether s13 applies to these proceedings or not to determine the
appropriate
test to be applied in exercising the discretion to grant
or refuse an order for security for costs. It is clear that if s13
is
not of application a case under the common law has not been made
out.
[12]
S13 confers the power on a court to require sufficient security to
be given by a Plaintiff for the costs of the Defendant
if successful
in its defence in any legal proceedings if it appears by credible
testimony that there is reason to believe at
any stage that the
company will be unable to pay those costs. It is implicit in the
provision that a party to the litigation
against a company may
approach the court under s13 at any stage of the proceedings for an
order for security and for a stay until
such security is given.
[13]
Schedule 5(11) of the 2008
Companies Act preserves
any right or
entitlement enjoyed by or obligation imposed on any person in terms
of any provision of the 1973 Act which is a
valid right or
entitlement of or obligation imposed on that person in terms of any
comparable provision of the 2008 Act as from
the date that right or
entitlement first arose subject to the provisions of the 2008 Act.
As mentioned earlier s13 does not have
a comparable provision in the
2008 Act. The schedule is therefore of no assistance in determining
whether s13 relief is available
after the repeal of the 1973 Act
since there is no comparable provision in the 2008 Act.
[14]
The answer is to be found in s12(2)(c) of the Interpretation Act,
1957, which reads:
"(12)(2)
Where a law repeals any other law, then unless the contrary
intention
appears the repeal shall not -
(c)
affect any right, privilege, obligation or liability acquired,
accrued or incurred under any law so repealed."
[15]
in
Chairman
of the Board on Tariffs and Trade v Volkswagen of South Africa (Pty)
Ltd and another
[2001]
1 All SA 519
(A) the Appellate Division considered s12(2)(c) of the
Interpretation Act. It explained that "the provision, like many
others
in the Interpretation Act, is in conformity with the common
law (cf
Bartman
v Dempers
1952
(2) SA 577
(A) at 582B-C). Repeal legislation is for the most part
directed at matters future rather than matters past. Pre-repeal
business
must generally speaking be dealt with, unless a contrary
legislative intention is apparent, as if no repeal had been enacted
(cf
National
Iranian Tanker Co v MV Pericles GC
1995
(1) SA 475
(A) at 483I-J;
Minister
of Safety and Security v Moiutsi and another
1996
(4) SA 72
(A) at 88D; 97G-98B;
Unitrans
Passenger (Pty) Ltd t/a Greyhound Coach Lines v Chairman, National
Transport Commission, and others
1999
(4) SA 1
(A) at 7A-E).
[16]
S 12(2)(c) uses the phrase "acquired, accrued or incurred under
any law so repealed" to qualify the right that
remains
unaffected by the repeal. The court in the
Volkswagen
case
supra in paragraph 13 of the judgment deals with this and explains
how to interpret and apply the section in the following
terms:
"[13]
The interpretation Act speaks of "accrue" and of
"acquire". Different words in a statute when juxtaposed
would normally connote different concepts. "Accrue" has
been held to bear a narrower meaning than "acquire"
(Mahomed
NO v Union Government (Minister of interior)
1911
AD 1
at 11). A right "accrues" when all the conditions for
its existence in relation to the particular beneficiary are met
(cf
Transnet
Ltd v Ngcezuta
[1994] ZASCA 192
;
1995
(3) SA 538
(A) at 551 E~F; 552E-G); a right is "acquired"
when ail the conditions for its existence are met and the particular
beneficiary in addition avails himself of the statutory provision
concerned by some individual action or effort on his part
(Mahomed
NO v Union Government (supra),
at
9-11;
Rustenburg
Platinum Mines Ltd v Motletlegi NO and another
1954
(2) SA 597
(T) at 603C-H;
Dys
v Dys
1979
(3) SA 1170
(O) at 1173H-1175A);
Minister
of Public Works v Haffejee
A/03
[1996] ZASCA 17
;
1996 (3) SA 745
(A) at 754D-G). The section envisages a prior
entitlement which was specific and not general, actual and not
abstract, live and
not hypothetical."
[17]
At the time when the summons was served on the defendant the company
became the plaintiff in legal proceedings as contemplated
by s13 of
the 1973
Companies Act. From
that date a court could at any stage in
the proceedings require sufficient security to be given for the
costs of the defendant
if he is successful in his defence, if it
appears by credible testimony that there is reason to believe that
the plaintiff company
will not be able to pay those costs. It is
implicit that the defendant in the action has the right to approach
the court for
relief under
s13
at any stage of the proceedings..
[18]
Applying the distinction between the words acquire and accrue as
explained above, the defendant only acquires the right to
demand
security once it has provided credible testimony, but the right to
be able to provide credible testimony at any stage
of the
proceedings accrued once the summons was served. All the conditions
for this right were met simply by service of the summons.
[19]
It is this accrued right is that is preserved under s12(2){c) of the
Interpretation Act and, that being so, I consider that
the
application has to be dealt with in terms of the repealed s13 of the
1973
Companies Act.
[20
]
After the matter was argued I received an email from counsel for the
Defendant drawing to my attention the case of
Kings
Rest Container Park (Pty) Limited v Nzenga Junction (Pty) Limited
Case
No. 2168/2010. He had been informed that Van Zyi J had delivered an
ex
tempore
judgment
in which he had held that s13 of the 1973 Act had not survived its
repeal in a factual situation identical to the one
before me. The
judgment has not been transcribed. I managed to locate the court
file and I have had an opportunity of listening
to the judgment. The
facts are similar and the court did find that s13 could not be
relied upon following the repeal of the section
in the 2008 Act in
May 2011. Unfortunately the court was not referred to and did not
consider the Interpretation Act at all.
The judgment was based upon
the interpretation of schedule 5(10) and 5(11) of the 2008
Companies
Act, which
were found to be not applicable and of no assistance to
the applicant before him. I agree with van Zyi J on that score, but
find
that s12(2)(c) of the Interpretation Act produces a different
result to the one he came to. Since the Interpretation Act was not
considered by Van Zyi J, I am not bound by his judgment, and I
respectfully disagree with the conclusion to which he came.
[21]
In exercising my discretion under s13 of the 1973 Act I have weighed
the following:
(a)
The Defendant was given the run around in relation to an earlier
costs order eventually paid by another company, a stranger
to the
litigation, which is in the same group of companies. This prima
facie at least is credible evidence that there is reason
to believe
that the Defendant will not be able to recover its costs from the
Plaintiff if its defence succeeds.
(b)
The Plaintiff in answer to this evidence relies strongly on the fact
that it is a company in a group of companies where the
holding
company is a public company listed on the JSE. This is cold comfort
to a defendant with a costs order against the plaintiff
and not the
other companies in the group since it cannot look to them or the
holding company for payment of its costs, but it
does show that the
Plaintiff is able to look to the group so should have no difficulty
providing security.
(c)
The Plaintiff has put up no proof at all of its assets and has not
even provided a balance sheet. It did not respond to the
request for
proof of the assets and funds it said it had in response to the
original notice under Rule 47(1). In
Exploitatie-en
Belegginsmaatschappij v Honig
2012
(1) SA 247
(SCA) at 254H-255A: the court said the following in
relation to an application for additional security: "If their
financial
status was relevant to the question of security it was
incumbent upon them to take the court into their confidence and make
sufficient
disclosure of their assets and liabilities to enable the
court to make a proper assessment thereof in the exercise of its
discretion.
In the case of the first appellant, a' private company,
this is generally done by disclosing its current balance sheet."
See also
Henry
v RE Designs CC
1998
(2) SA 502
(C) at 512 E-F and the very recently reported case of
Joytech
v Tetrafui
2012
(5) SA215 (KZN).
(d)
The Plaintiff has not taken the court into its confidence and all
that it has provided is its say-so that it has sufficient
assets to
meet an adverse costs order.
(e)
There is no suggestion let alone evidence that the Plaintiff will
suffer any hardship if security is ordered or that it will
not be in
a position by reason of its relationship within the group of
companies to provide such security.
[21]
There has been a considerable delay and the question that arises is
whether the delay is such that relief should be denied
on that
ground. S 13 makes no mention of delay and allows for the court to
require security to be provided "at any stage".
Against
that Rule 47(1) provides that a party entitled to and desiring to
demand security for costs from another shall as soon
as practicable
after the commencement of the proceedings deliver a notice setting
forth the grounds upon which security is claimed
and the amount
demanded.
[22]
The conflict between the Act and Rule 47(1) is dealt with in the
judgment of
Agro
Drip (Pty) Limited v Fedgen insurance Co Ltd
1998
(1) SA 182
(W) at 189F-190C. The court held that the rule does not
deprive a party who in terms of s13 is entitled to security of its
entitlement
to security if the application is not brought as soon as
practicable. Delay and any prejudice caused by the delay will be one
of the factors weighed in the exercise of the discretion. The
Plaintiff does not rely upon any prejudice caused by the delay.
[23]
Mr Boulle, who appeared for the Defendant, relied strongly on the
recently reported case of
Joytech
SA (Pty) Limited v Tetrafu! 1060 CC
2012
(5) SA 215
(KZD), where in similar circumstances, namely difficulty
in having an existing costs order paid ( in that case it was unpaid
at the time of the hearing) and a failure to put up some sort of
financial records to support the contention that the Plaintiff
was
able to pay the costs if it proved to unsuccessful in the action
were held to be enough for the court to exercise its discretion
in
requiring security to be given.
[24]
The nature of the discretion is explained in the case of
Shepstone
& Wylie and Others v Geyser NO
1998
(3) SA 1036
(SCA) at paragraph 8. The court must decide each case
upon a consideration of all the relevant features, without adopting
a predisposition
either in favour of or against granting security.
It is a balancing exercise. On the one hand it must weigh the
injustice to
the plaintiff if prevented from pursuing a proper claim
by an order for security. Against that it must weigh the injustice
to
the defendant if no security is ordered and at the trial the
plaintiffs claim is unsuccessful. One must also bear in mind the
considerations of equity and fairness that would apply in relation
to an application for security for costs against a perigrinus
and
these are also applicable in an application under s13.
[25]
The balance in my assessment is firmly in favour of granting the
order rather than refusing it. There is credible evidence
that the
Plaintiff itself did not pay the costs order against it for some
considerable time and eventually when under pressure
the amount was
paid by another company in the group of companies and the reason why
this occurred is not explained. In the absence
of an explanation
there was a case to answer and in electing not to do that and rely
on bluster and hyperbole I gained the impression
that there is
indeed reason to believe that unless it has the assistance of other
companies in the group the plaintiff will not
be able to pay the
costs. If this was not so, why not place information before the
court and take it into its confidence and
why refer to the group and
the group structure as an answer as to why it will be able to pay.
The whole tone of the plaintiff's
response to the application
suggests strongly that by reason of its position in the group of
companies it will be able to provide
security so it is not as if a
meritorious claim would not be able to be pursued because the
plaintiff was unable to provide security
and would be shut out of
court. There is no aspect of equity or fairness which militates
against ordering security. The delay
was not such that it caused
prejudice and was adequately explained.
[26]
In the result the Defendant is entitled to the relief it seeks,
apart from the amount of the security which is customarily
fixed by
the registrar and in any event insufficient information was placed
before the court for it to determine what amount
of security would
be fair and appropriate.
[27]
I make the following order:
(a)
The Plaintiff is required to give security for the costs of the
Defendant if successful in its defence of the action, in a
form and
amount as determined by the registrar of this court.
(b)
The proceedings in the action are stayed till the security is given.
(c)
The Plaintiff is ordered to pay the Defendant's costs of the
application for security for costs.
M
PILLEMER, AJ
Counsel
for the Defendant/Applicant:
A
J Boulle
Defendant's/Applicant's
Attorneys:
Garlicke
and Bousfield
Counsel
for the Plaintiff/ Respondent:
H
A De Beer SC
Plaintiff's/Respondent's
Attorneys:
John
Dua Attorneys
Date
of hearing
26
October 2012
Date
of Judgment: 30 October 2012