Vazladelis v Castle Bridge Primary School CC and Another (496/2005) [2006] ZAFSHC 3 (16 March 2006)

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[2006] ZAFSHC 3
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Vazladelis v Castle Bridge Primary School CC and Another (496/2005) [2006] ZAFSHC 3 (16 March 2006)

IN THE HIGH COURT
OF SOUTH AFRICA
(ORANGE FREE STATE
PROVINCIAL DIVISION)
Case No.: 496/2005
In
the case between:
MARIA
VAZLADELIS
Applicant
and
CASTLE
BRIDGE PRIMARY SCHOOL CC
1
st
Respondent
HAYDEN
LEWIS WROUGHTON
2
nd
Respondent
_____________________________________________________
JUDGEMENT:
HATTINGH, J
_____________________________________________________
HEARD ON:
16 MARCH 2006
_____________________________________________________
DELIVERED ON:
16 MARCH 2006
_____________________________________________________
A resumé
[1] The parties to this
application are
incolae
of this court. The respondents are
also the first and second plaintiffs in the principal action.
Applicant is a defendant in that
action. In the principal action
plaintiffs seek rectification of a Deed of Sale in order to
incorporate an alleged option in favour
of the second plaintiff
(second respondent) to purchase the property in question from the
defendant (applicant).
[2] Applicant is the
mother-in-law of second respondent and as such the mother of his
estranged wife with whom he is involved in protracted
divorce
proceedings.
[3] At all times prior to
the divorce proceedings the property in question was registered in
the name of first respondent and thereafter,
following the conclusion
of a written agreement of sale, transferred into the name of
applicant at a price equivalent to no more
than the then outstanding
balance in respect of the mortgage bond.
[4] The respondents
subsequently brought a successful urgent application to stay the
transfer of the property to a third party pending
the institution of
the present action for rectification of the agreement of sale.
[5] The present applicant
brought a similar application seeking security from both respondents
prior to the launching of the then
urgent application. (Application
nr. 3664/05)
[6] The application for
security was dismissed on the grounds,
inter alia
that second
respondent was for all practical purposes the alter ego of first
respondent and should the court order security in respect
of first
respondent this would effectively close the doors for the second
respondent.
[7] In light of further
information which has subsequently come to the applicant’s
attention, the application for the furnishing
of security is now
renewed in respect of the principal action.
The first
respondent
[8] Where the application
for security involves a Close Corporation the relevant provisions of
the Company’s Act will apply
mutatis mutandis
to the similar
provisions contained in the Close Corporations Act (see
section 8
of
the
Close Corporations Act 69 of 1984
and section 13 of the Companies
Act 61 of 1973).
[9] In terms of
section 8
of the
Close Corporations Act the
court may at any time during the
proceedings, if it appears that there is reason to believe that the
corporation will be unable to
pay the costs of the defendant or the
respondent if he is successful in his defence, require security to be
given for those costs
and may stay all proceedings until the security
is given.
[10] Once the court is
satisfied that such reason to believe exists, it has a discretion
whether or not to order the respondent to
furnish security; see
FRASER v LAMPERT, NO
1951 (4) SA 110
(T) at 115 A –
B.
[11] In exercising this
discretion:
(a) The court will lean
towards ordering security to be furnished;
(b) It will not deprive
the applicant of the benefit of this section unless special
circumstances are found to exist;
(c) The court will
consider what the respondent’s financial position is and what it
will be if and when it loses the action. In
this regard its present
financial position is relevant;
(d) The court will not
enquire fully into the merits of the action and form an opinion of
the applicant’s prospects of success,
but the nature of the claim
and the defence thereto are not irrelevant. The applicant ought to
specify her defence. (See
TRUST BANK VAN AFRIKA BPK v LIEF AND
ANOTHER
1963 (4) SA 752
(P) at 754H – 755B and
HENRY
v R E DESIGNS CC
1998 (2) SA 502
(CPD) at 508 A – D).
[12] Whether or not there
is an onus on the respondent to establish the existence of any
special circumstances on which it may rely,
is open to debate and
have not been decided:
(Cf.
COMETAL -
MONETAL SARL v CORLIANA ENTERPRISES (PTY) LTD
1981 (4) SA 662
(W) at 664 E – F.) As was done in
HENRY v R E DESIGNS CC
(
supra
) at 510 B, I shall assume in the respondents’ favour
that there is no such onus resting upon it. However, there is
authority that
the respondent must be able “at least to point to
such special circumstances as will justify this court in refusing the
present
application”.
[13] The first respondent
is as such a dormant Close Corporation, not earning any income. The
applicant bears the onus of establishing,
on a balance of
probability, that there is reason to believe that the respondents
will be unable to pay her costs if respondents
fail in their action
(
ROSEVILLE BUILDINGS (PTY) LTD v POWIS AND CO (1923) LTD
1942 NPD 94
at 96). If applicant fails to discharge this onus the
court will have no power to order security. However, that onus which
the
applicant bears is not to establish that the respondents will, as
a fact, be unable to pay her costs. All that she must show, is
that
there is reason to believe that they will be unable to do so. That
is in the nature of things much less difficult to establish
on the
probabilities (
HENRY v R E DESIGNS CC
(
supra)
at
510 H.)
[14] Mr. Fischer on
behalf of respondents contended that there are special circumstances
justifying the court not to order security
by first respondent in
favour of applicant even though, technically, first respondent might
very well be unable to pay applicant’s
costs should she be
successful. Those special circumstances are:
(a) Prior to the transfer
of the property into the name of applicant, the property was
registered in the name of first respondent;
(b) At all times the
first respondent was represented by its sole member, the present
second respondent;
(c) It is the case of
respondents that it was the intention of the parties that the
property would only be transferred into the name
of applicant until
such time as second respondent had resolved his own financial
problems;
(d) Support for this
contention is to be found in the following undisputed facts in the
papers under application number 3616/05:
(aa) At all times prior
to and subsequent to the transfer of the property into the name of
applicant, second respondent and thereafter
second respondent and his
new wife, stayed on the property.
(bb) Second respondent
paid all legal costs relating to the transfer of the property as well
as the registration of the subsequent
mortgage bond over it
notwithstanding the fact that it was registered in the name of
applicant.
(cc) Second respondent
and his now estranged wife continued to stay in the property and
effected numerous expensive alterations and
renovations thereto.
(dd) The property was
transferred in the name of the applicant at a totally unrealistic
price, namely the then outstanding mortgage
bond.
(e) The second
respondent, in seeking to amend the existing agreement of sale
concluded between first respondent and the present applicant,
has no
alternative but to cite the first respondent Close Corporation as a
party to these proceedings as such Close Corporation,
albeit
represented by second respondent, was as such the owner and
subsequent seller of the property in question.
[15] I am in agreement
with the submission advanced by Mr. Fischer that the fact that the
said Close Corporation (first respondent)
has subsequently become
dormant should not, in the circumstances, detract from its right, as
represented by second respondent, to
seek rectification of the
agreement of sale so as the record second respondent’s right
therein. In any event, second respondent
has at all material times
placed on record that he will be carrying the costs occasioned by the
necessary technical involvement of
first respondent.
[16] The question to be
determined is whether or not in the exercise of the discretion
conferred upon the court in terms of
section 8
of the
Close
Corporation’s Act 69 of 1984
the court should come to the relief of
the applicant. As stated by Greenberg J, in
HUDSON AND SON v
LONDON TRADING CO LTD
1930 W.L.D at 288:
“
The object of
section 216
is to
protect persons against liability for costs in regard to any action
instituted by bankrupt companies.”
(See now section
13 of the Companies Act 61 of 1973.)
I am of the opinion that
the applicant should not be deprived of this benefit unless special
circumstances exists. In the exercise
of the discretion regard
should be had to the nature of the claim and some enquiry should be
directed to the merits of the dispute.
[17] In
HIGHLANDS
NORTH INVESTMENT CO (PTY) LTD v LAND VALUES LTD
1931 W.L.D.
102
at 105 Tindall J said (with reference to
LUCERN ASBESTES
LTD v BECKER,
1928 WLD 168):
“
In that case it was quite clear
that if the action failed the company would be unable to pay the
costs and it was laid down that even
if it was plain that the
plaintiff’s claim was put forward
bona fide
, there was a
duty on the court to exercise its discretion in favour of the
applicant and to order security to be given. I do not
think that the
learned Judge in that case intended to lay down that the court is
bound to order security in every case where it is
plain that if the
action fails the company would be unable to pay the defendant’s
costs. In my opinion the court is entitled to
consider the nature of
the particular case. Of course it was not intended that in an
application for security the court should enquire
fully into the
merits and form an opinion of the plaintiff’s prospect of success,
but it seems to me that the nature of the claim
is not irrelevant.’”
(Cf.
FEDGEN
INSURANCE CO LTD v BORDER BAG MANUFACTURING (PTY) LTD AND ANOTHER
1995 (4) SA 355
(W)).
[18] The question of
security is one of practice and not of substantive law. (
MAGIDA
v MINISTER OF POLICE
1987 (1) SA 1
(A) 12 A – C). Having
regard to the relevant facts of the case and paying due regard to the
particular circumstances of the case
and considerations of equity and
fairness to both parties and in the exercise of my discretion, I do
not think it just to order that
security should be given as far as
first respondent is concerned.
The second
respondent
[19] In the case of
individual plaintiffs such as second respondent, the general rule of
our law prevails, namely that:
“
[N]o person, who is either
civis
municeps
or
incola
of this colony, can, as plaintiff, be
compelled to give security for costs, whether he be rich or poor,
solvent or insolvent….”
(See
WITHAM v
VENABLES
(1828) 1 Menz 291
and
HERBSTEIN AND VAN WINSEN:
THE CIVIL PRACTICE OF THE SUPREME COURT OF SOUTH AFRICA,
4
th
Edition, Page 321.)
[20] In
CREST
ENTERPRISES (PTY) LTD AND ANOTHER v BARNETT AND SCHLOSBERG NNO
1986 (4) SA 19
(C) Berman J, stated the general principle thus at 20
B – D:
“
The law, however, relating to the
provision by a plaintiff (or applicant) of security for the costs of
the opposing party is well-settled
in our law and may be succinctly
stated as follows, viz no hurdle should be permitted to stand in the
way of any person's access
to a court in seeking relief at its hands,
and no court should - in the case of an impecunious litigant - by
requiring him as plaintiff,
or applicant, to provide security for his
opponent's costs, lend support to the canard which likens its doors
to those of the Ritz
Hotel.”
[21] In
RAMSAMY NO
AND OTHERS v MAARMAN NO AND ANOTHER
2002 (6) SA 159
(C) at
172B Thring J, stated the general rule thus:
“…
mere inability of a plaintiff
or applicant, who was an incola, to satisfy a potential costs order
against him was insufficient in
itself to justify an order that he
furnish security for his opponent's costs. Something more was
required before this could be done.”
The learned Judge went
on to discuss what this “something” is and referring to
ECKER
v DEAN
1938 AD 102
at 110 held that the basis of granting an
order for security was that the action was “reckless and
vexatious”.
[22] Even on the
assumption that applicant may never be able to recover any part of
her costs if she succeeds in the action brought
against her by
respondents, that cannot in my view, outweigh the inalienable right
of an
incola
to call in aid the due process of the law
pursuing his claim and neither should he be effectively deprived of
the right to access
to this court (or have any impediment placed in
the way of the exercise of that right) upon the basis solely of an
inability to pay
the costs of the opposing party should he be
subsequently fail in the prospective proceedings (
ECKER v DEAN
(supra)
at 22 A – E). In
RAMSAMY NO AND OTHERS v
MAARMAN NO AND ANOTHER
(
supra)
at 173 it was held that
to furnish security for costs can only be ordered if the court is
satisfied that the principal action:
(a) is vexatious; or
(b) is reckless; or
(c) amounts to an abuse
of the process of the court.
I respectfully agree.
[23] An action is
vexatious if it is obviously unsustainable. While this must appear
as a certainty in an application to dismiss
or strike-out a claim, in
an application for the furnishing of security for costs the test is
less stringent and other factors, which
are irrelevant in an
application for the dismissal of a claim, should be taken into
consideration. However, the onus remains on
the applicant to satisfy
the court that the principle action is one of those mentioned in
paragraph 22 (a) or (b) or (c) (
FITCHET v FITCHET
1987
(1) SA 450
(E) at 454 F.)
[24] However, the court
has inherent jurisdiction to order a litigant to furnish security for
the costs of the other side when it
is satisfied that the litigation
is vexatious. The power of the court to order security for costs on
the basis of vexatiousness
is, however, exercised sparingly and only
in exceptional circumstances (cf.
WESTERN ASSURANCE COMPANY v
CALDWELL’S TRUSTEE
1918 AD 262
at 274.)
[25] Applicant has failed
on her own papers, alternatively those deposed to on her behalf, to
even suggest that the principal case
is vexatious or reckless or
amounts to an abuse of the process of court.
[26] The application is
dismissed with costs.
________________
G.A. HATTINGH, J
On behalf of the
applicant: Adv. A. Williams
Instructed by:
McIntyre & Van
der Post
BLOEMFONTEIN
On behalf of the
respondents: Adv. P.U. Fisher
Instructed by:
Bezuidenhout Inc.
BLOEMFONTEIN
/em