IN THE HIGH COURT OF SOUTH AFRICA
WESTERN CAPE DIVISION, CAPE TOWN
Case number: 3706/2024
In the matter between:
MEYNELL INVESTMENTS LIMITED
Applicant
and
AZARENKA (PTY) LTD Respondent
Coram: Acting Justice P Farlam
Heard: 21 August 2024
Delivered electronically: 22 August 2024
JUDGMENT
FARLAM AJ:
Introduction
[1] The applicant ( Meynell) has applied to wind up the respondent ( Azarenka),
which it alleges is unable its debts, and more especially unable to make
payments due under a £4 million loan facility agreement concluded between
the parties in January 2018.
[2] The winding-up application is not yet ready to be heard, despite having been
set down for hearing on 21 August 2024 by virtue of an agreed order between
the parties back on 25 March 2024 , which also contained a timetable
regulating the delivery of affidavits and heads of argument to facilitate that
hearing. This is in part because of an interlocutory application brought by
Azarenka for discovery, security for costs and a postponement pending the
provision of security, and also because Azarenka anyway failed to comply
with the timetable and, more particularly, only delivered its answering affidavit
on 19 August (two days before the set -down date), instead of by 9 May, as
required by the court order.
[3] What accordingly falls to be considered at this stage is (i) Azarenka’s
interlocutory application and the appropriate costs order in respect thereof;
and (ii) the consequences of Azarenka’s non -compliance with the 25 March
court order. These issues will be addressed in turn.
Azarenka’s interlocutory application
[4] Azarenka’s interlocutory application, launched on 16 July 2024 , essentially
sought orders ( a) that Meynell, as a foreign peregrinus incorporated in the
Bahamas, provide security in the amount of R500,000 within ten days of the
court’s order; (b) that Meynell “properly respond” to Azarenka’s notice in terms
of Uniform Rules 35(12) and (14) within ten days; and ( c) that the winding-up
application set down for 21 August 2024 be postponed pending Meynell’s
compliance with the security and discovery orders.
[5] At the hearing of the matter, Azarenka’s counsel informed the court that
Azarenka was not persisting with its discovery applicatio n. The withdrawal of
that portion of the interlocutory application was understandable. For Azarenka
was not entitled to the documentation it sought – bank statements of Meynell
for an unspecified period – under either rule 35(12) or rule 35(14).
5.1. Rule 35(12) was not applicable because there was no suggestion that
Meynell had referred to, or relied upon, the requested bank statements
in its founding affidavit in the winding -up application, and rule 35(12) is
only potentially applicable when “reference is made to any document”
in a pleading or affidavit of the other party.1
5.2. Rule 35(14) could not be relied upon as: (i) it can only be utilised by
“any party to any action” [emphasis added], unless the court has made
the rule applicable in a particular application under rule 35(13), 2 and
Azarenka had not sought any such order under rule 35(13) , nor sought
to contend that this was an exceptional case in which discovery should
be ordered ;3 and (ii) rule 35(14) anyway only applies to “clearly
specified” documents which are needed “for purposes of pleading” 4
and in this case the requested bank statements were not only vaguely
described but could not plausibly be said to be required for Azarenka to
deliver its answering affidavit. Azarenka had earlier contended in this
regard that it should be allowed to inspect Meynell’ s bank statements
to ascertain whether they reflected repayments allegedly made by
Azarenka which were not recorded in the schedules attached to
Meynell’s founding affidavit. However, Azarenka plainly did not require
sight of the bank statements in order t o aver in answer, with reference
to its own records, that additional repayments had been made. That
was in fact demonstrated by Azarenka’s belated answering affidavit, as
well as its earlier replying affidavit in the interlocutory application, both
of which contained a list of the further payments which , according to
Azarenka, had been made between 2 August 2018 and 5 May 2023.
1 For a recent analysis of this requirement, see Democratic Alliance and Others v Mkhwebane and
Another 2021 (3) SA 403 (SCA) paras [24] to [37].
2 That is a peremptory requirement: see e.g., Loretz v MacKenzie 1999 (2) SA 72 (T) at 74B-75C.
3 It is well -established that an order in terms of rule 35(13), making discovery applicable to an
application, should not easily be granted: see e.g., Moulded Compo nents and Rotomoulding South
Africa (Pty) Ltd v Coucourakis 1979 (2) SA 457 (W) at 470D -E, Premier Freight (Pty) Ltd v Breathetex
Corporation (Pty) Ltd 2003 (6) SA 190 (SE) paras [9] to [13], The MV Urgup: Owners of the MV Urgup
v Western Bulk Carriers (Australia) (Pty) Ltd and others 1999 (3) SA 500 (C) at 513, and Lewis Group
Ltd v Woollam and others (2) [2017] 1 All SA 231 (WCC) paras [4] to [7].
4 Cullinan Holdings Limited v Mamelodi Stadsraad 1992 (1) SA 645 (T) at 647E -648G; Quayside Fish
Supplies CC v Irvin & Johnson Ltd 2000 (2) SA 529 (C) paras [11] to [ 16]; Business Partners Ltd v
Trustees, Riaan Botes Family Trust and Another 2013 (5) SA 514 (WCC) para 11. Cf., too, Capricorn
Makelaars (Edms) Bpk and others v EB Shelf Investment No. 79 (Pty) Ltd and others (ECJ 050/2005)
[2005] ZAECHC 25 (10 June 2005) paras [10] to [11], where the test was stated to involve an enqu iry
into what is “reasonably required in the circumstances”.
[6] Azarenka did however still press its claim for security for costs against
Meynell. It argued that Meynell, a foreign company, owns no property in South
Africa against which a costs order could be executed, 5 and Azarenka should
not have to seek to enforce any costs order in its favour in the Bahamas. It
also contend ed that there would be no real prejudice to Meynell in being
required to provide security, as it is not suggested that Meynell is impecunious
(and could thus not come up with the security demanded) and that a balance
of prejudice enquiry would consequently f avour Azarenka. The latter
contention was a departure from the stance taken in Azarenka’s replying
affidavit in the interlocutory application, where it was alleged that Meynell was
“an ‘entity’ of straw … not having the funds to satisfy any costs order” ; but the
new contention was clearly justified, given that Meynell had after all loaned
Azarenka £4 million and Azarenka had also earlier in its replying affidavit
stated that “Meynell is a boutique financial operations company”.
[7] Meynell raised various arguments in opposition to the security claim.
7.1. It pointed out at the outset that the court must investigate all
circumstances and consider whether equity and fairness to both
litigants dictate that security be ordered; 6 and that it would also be
wrong to approach the inquiry on the basis that a court should exercise
its discretion in favour of a peregrinus only sparingly.7
7.2. As to its grounds for opposing the security sought:
7.2.1. Meynell submitted that security had not been sought “as soon
as practicable after the commencement of the proceedings”, as
5 Echoing the basis on which security was demanded in Silvercraft Helicopters (Switzerland) Ltd and
Another v Zonnekus Mansions (Pty) Ltd, and two other cases 2009 (5) SA 602 (C) para [16].
6 Mystic River Investments 45 (Pty) Ltd and Another v Zayeed Paruk Inc. and Others 2023 (4) SA 500
(SCA) para [7].
7 Magida v Minister of Police 1987 (1) SA 1 (A) at 14E-G; Mystic River supra fn.6 paras [7], [13] to
[15].
required by rule 47(1) – the notice demanding security having
been sent on 25 June 2024, approximately three months after
the winding -up application had been launched – and that
Azarenka had moreover tak en a further step before requesting
security.
7.2.2. It also submitted that Azarenka could set off any costs order it
obtained against its principal indebtedness to Meynell, which
far exceeds the amount of security requested , and that
Azarenka was therefore otherwise protected.
7.2.3. Meynell argued, too, that it should not be unduly onerous for
Azarenka to enforce a costs order against Meynell in the
Bahamas under their Reciprocal Enforcement of Judgments
Act.
7.2.4. Finally, Meynell contended that t he amount of security sought
was unsubstantiated and excessive.
[8] It is true that Azarenka’s request for security could have been brought earlier
(albeit that security was sought prior to Azarenka doing anything other than
delivering its notice in terms of Rules 35(12) and (14)). It is however
unnecessary to consider whether Azarenka should be denied security on this
basis, or on some of the other grounds raised by Meynell, as an
unanswerable response to Azarenka’s security demand is that it could simply
set off any costs order granted in its favour against its substantial
indebtedness to Meynell and it therefore already enjoys sufficient protection
against the peregrine applicant.
[9] Under the common law, set -off (or compensatio) is possible where deb ts
owed by two entities are (i) of the same nature (e.g., in money), (ii) liquidated
(i.e., when the exact money value is certain); (iii) fully due; and (iv) payable by
and to the same persons in the same capacities (i.e., where two persons
reciprocally ow e each other something in their own right). 8 In the event of
Azarenka being possessed of a taxed or agreed costs order in its favour, all
the requirements for set off would be met, and Azarenka could consequently
set off the amount of that costs order against its next repayment to Meynell. It
was recognised more than a century ago in Bovenzer that an incola defendant
has sufficient security where it is liable for future monthly payments to the
plaintiff, and that a claim for security against a peregrine plaintiff should be
refused in such circumstances.9 In my view, this is another such case.
[10] Azarenka’s only response on affidavit to Meynell’s submission that Azarenka’s
interests were sufficiently protected by its common -law right to set off a
money debt owed by Meynell to Azarenka against Azarenka’s own payment
obligations to Meynell was that: “Sett [ sic] off is denied as no indebtedness is
admitted at all”. That was not however a good faith disputation. For it was
common cause on the papers – as correctly acknowledged by Azarenka’s
counsel in argume nt – that Azarenka still owed Meynell a considerable
amount of money under the loan facility agreement. The extent of the
payments still due by Azarenka is neatly illustrated by the letter from its
corporate attorneys, Covington , to Meynell’s attorneys, da ted 8 September
2023, in which Covington aver that a liquidation will prevent Azarenka from
“making payment of the next agreed payment [by Azarenka] of £339,063 … in
October 2023 or any other payments under the loan agreement for as long as
those proceedings are ongoing” and “could also … result in [Meynell] realising
a fraction of the outstanding Capital Amount [defined earlier in the letter as the
original loan amount of £4 million] upon liquidation”. It is apparent from the
various affidavits in the inte rlocutory and winding -up applications that
Azarenka did not make the payment of the £339,063 which on its own version
was due in October 2023. Even if that payment were to be made, there would
8 Du Bois (gen. ed) Wille’s Principles of South African Law 9ed pp 832-834; Pothier Traité du Contrat
(trans. Evans under the title A Treatise on the Law of Obligations or Contracts) §623-628.
9 Bovenzer v Bovenzer 1898 Cape Law Journal (CLJ) 203 (O). See, too, Cilliers, Loots, Nel Herbstein
& Van Winsen The Civil Practice of the High Courts and the Supreme Court of Appeal of South Africa
5ed Vol. 1 p 397.
anyway still be a significant portion of the loaned amount of £4 million (easily
more than £2.5 million) outstanding, and required to be repaid by Azarenka to
Meynell.
[11] Azarenka is consequently already sufficiently protected against its foreign
counterparty and does not need the security claimed. That also means that
there is no basis for a postponement of the winding -up application pending
the provision of security – which was the only basis on which Azarenka could
persist in seeking a postponement in the i nterlocutory application in the light
of its withdrawal of the rule 35 prayer . W hat remains of the interlocutory
application must therefore be dismissed.
The costs of the interlocutory application
[12] There can be no dispute as to whether Azarenka must pay the costs of the
interlocutory application. The rule 35 component thereof was without merit,
and was thus sensibly not persisted with;10 while the prayers seeking security
for costs and a postponement pending provision of security and the furnishing
of the documentation sought under rule 35 were also unsustainable and have
thus been dismissed . The only question can th erefore be the scale of the
costs order which should be granted in respect of the interlocutory application.
[13] Meynell’s counsel contended that the interlocutory application was an abuse,
designed to delay, and that Azarenka should accor dingly pay the costs of that
application on a punitive, attorney and client, scale. Alternatively, it was
submitted, at least the rule 35 component of the interlocutory application
warranted a punitive costs order as it was utterly without merit . Azarenka’ s
counsel, on the other hand, argued that it was within his client’s rights to seek
10 The general rule is that a party withdrawing a claim is liable for the costs of the withdrawn
proceedings ( Reuben R osenblum Family Investments (Pty) Ltd and Another v Marsubar (Pty) Ltd
2003 (5) SA 547 (C) at 550C -D; and Wildlife & Environmental Society of South Africa v MEC for
Economic Affairs , Environment and Tourism, Eastern Cape and Others 2005 (6) SA 123 (ECD) at
129E-130B; 131B-C); and there is absolutely no reason to depart from that principle in this instance
given that the rule 35 demand was evidently withdrawn because of a realisation that it had no
prospects of success.
documentation under rule 35, however ham -handed the request may have
been; and that it was also entitled to ask for security from the foreign
(Bahamas-incorporated) applicant.
[14] There are reasons to suspect that each of the components of the interlocutory
application, as well as that application itself, were designed to delay the
winding-up application. The rule 35 request was only made on or about 3 May
2024, less than a week before Azarenka’s answering affidavit was due; while
the security notice was only delivered in late June 2024, some three weeks
after the rule 35 demand had been rejected. The re was also a delay, albeit
slight, between the rejection of the request f or security and the bringing of the
interlocutory application, at a stage when time was of the essence given the
earlier set -down of the winding -up application. On the other hand, it is
perfectly possible that the timing of the request for security was attributable to
a belated realisation that Azarenka was entitled to ask for security for costs
under the common law, read with rule 47. Furthermore, while the request for
discovery under rules 35(12) and (14) was badly misconceived, this does not
mean that it was not genuinely pursued. It would, in any event, seem unwieldy
to grant a different, and more stringent, costs order in respect of only th at
component of the interloc utory application and prayer 2 of the notice of
application, as well as in respect of the costs pertaining to the initial set-down
of the interlocutory application on 7 August 2024, which were, in terms of the
court order made on that day, reserved for determination at the hearing on 21
August 2024 . Azarenka will accordingly be directed to pay the costs of the
interlocutory application on a party and party scale.
[15] As to the scale of counsel’s costs, under rule 67A, read with rule 69: Meynell
contended for scale C, in the event of the costs of the interlocutory application
being awarded on a party and party basis; while Azarenka submitted that the
interlocutory application was straightforward and warranted no more than
scale A. The rule 35 aspect of the interlocutory application was indeed
uncomplicated, but the security for costs component was arguably more
intricate. The main application itself is also of high value and not without
complexity. It is significant, too, that Azarenka has both on 7 August and
21 August 2024 briefed senior counsel . While I am not convinced that this
matter justifies granting counsel’s costs on the highest scale, it accordingly
seems appropriate to grant Meynell’s counsel’s costs on scale B.
The consequences of Azarenka’s breach of the 25 March court order
[16] As was common cause, Azarenka must also pay the wasted costs occasioned
by its late answering affidavit and heads of argument in the main application –
which were delivered on Monday, 19 August, well out of time .11 All that
remains to be considered in that regard is again the scale of the costs order.
[17] Had Azarenka’s answering affidavit in the winding -up application been
delivered timeously, Meynell could have replied well before the set-down date
of 21 August 2024 ; both parties’ heads of argument could have engaged with
the allegations as contained therein ; and the winding -up application could
have been heard immediately after the interlocu tory application. Instead ,
because of Azarenka’s non -compliance with the 25 March 2024 court order,
as well as the Uniform Rules and the Court’s Practice Directives, Meynell’s
heads of argument , filed in early August, could only motivate the case
advanced in the as -then-unanswered founding affidavit, Meynell was also
unable to deliver a replying affidavit before the winding -up application was
due to be heard, and the winding -up application could consequently not be
argued on 21 August 2024. As a result of i ts disregard of a court order,
Azarenka has thus obtained a postponement of the winding -up application ,
despite having had its interlocutory applicatio n, in which it inter alia sought a
postponement, dismissed. It hardly needs to be stated that this consti tutes
vexatious conduct and an abuse of process , which is worthy of censure by a
punitive costs order . Azarenka must accordingly pay the wasted costs
occasioned by its breaches of the court order on an attorney and client scale.
11 I was advised that Meynell was not opposing the admission of Azarenka’s late answering affidavit,
or thus disputing that Azarenka should be granted condonation for having filed it about three months’
late. It is accordingly unnecessary to evaluate the flim sy condonation motivation at the end of
Azarenka’s answering affidavit.
[18] While the prejudice caused to Meynell will to some extent be assuaged by the
punitive costs order, it will be further disadvantaged if the hearing of the
winding-up application were now to be delayed unduly. In case this may assist
with the finalisation of this matter, I accordingly record that, in my view, this is
a matter that could appropriately be allocated a preferential hearing date on
the semi -urgent roll, and that the applicant may advise the Acting Judge
President of this recordal should it consider it appropriate to do so.
Order
[19] I accordingly make the following order:
1. The interlocutory application of the respondent in the main
application (“Azarenka”) is dismissed with costs on a party and party
scale. Such costs include the costs of the postponement of the
interlocutory application on 7 August 2024 and the costs of cou nsel,
which are granted on scale B.
2. Azarenka is granted condonation for the late filing of its answering
affidavit in the main application (the “winding-up application”).
3. The winding-up application is postponed for hearing on a date on the
semi-urgent roll to be arranged by the parties with the Court.
4. Azarenka is to pay t he wasted costs occasioned by the late filing of
its answering affidavit and its heads of argument in the winding -up
application, and the resultant postponement o f the winding -up
application, on an attorney and client scale.
_________________________
ACTING JUDGE P FARLAM
For applicant: Adv H C Jansen van Rensburg
Instructed by: Garlicke & Bousfield Cape Inc., A Liebenberg
For respondent: Adv N Redman SC
Instructed by : Thompson Wilks Inc. (Johannesburg), John Hunter, c/o Thompson
Wilks Inc, (Cape Town)