IN THE HIGH COURT OF SOUTH AFRICA
WESTERN CAPE DIVISION, CAPE TOWN
Case Number: 21292/2023
In the matter between:
CAPE CASH AND CARRY (PTY) LTD First Applicant
MARYNA ESTELLE SYMES NO Second Applicant
ANDRE CHARL VAN HEEREN NO Third Applicant
KAGISO SURPISE DINAKO NO Fourth Applicant
and
XTREME WORKS (PTY) LTD First Respondent
DANIEL O’CONNOR Second Respondent
TYRONE WHITAKER Third Respondent
HILTON MER Fourth Respondent
MASTER OF THE HIGH COURT Fifth Respondent
JUDGMENT
JANISCH AJ:
Introduction
1. This is an application for security for costs in terms of Rule 47 of the Uniform
Rules.
2. The applicant for security is the Fourth Respondent.
3. To avoid confusion, I shall continue to refer to the parties as they are cited in
the main proceedings.
4. The Applicants, being respectively a company in liquidation and its three
appointed liquidators, launched motion proceedings against the Re spondents
on 21 November 2023. The Applicants’ claims against the First to Fourth
Respondents are, in overview, as follows:
4.1. As against the First to Third Respondents, they claim relief in terms
of section 341(2) of the Companies Act 61 of 1973 arising from
alleged dispositions of property by the First Applicant to the First to
Third Respondents after the commencement of the winding-up. They
seek the setting aside of a secur ity cession and the transfer of
movables by the First Applicant, the return of the movables or their
value, the setting aside of cash payments to the First to Third
Respondents and the repayment of such amounts, plus interest;
4.2. As against the Fourth Respond ent, they claim relief in terms of
section 29 of the Insolvency Act 24 of 1936 (read with section 339 of
the Companies Act 61 of 1973 ) arising from alleged dispositions of
property by the First Applicant to the Fourth Respondent within six
months of (i.e. prior to) the commencement of the winding -up. The
claim is for payment of R1,512,500, plus interest; and
4.3. The Applicants seek costs against all the Respondents jointly and
severally.
5. On 20 February 2024, the Fourth Respondent demanded from the Applicants
security for his costs in the application in the sum of R1,500,000. The grounds
upon which security was sought were stated as follows:
“1. the First [Applicant] is in final liquidation. It was wound -up by Order
of court on the grounds that it is commercially insolvent and unable
to pay its debts;
2. the Second, Third and Fourth Applicants are the First [Applicant’s]
joint liquidators. According to their report (at page 240 of the indexed
papers) there is a deficit in the First [Applicant’s] estate in the sum of
approximately R17.1 million;
3. the First, Second, Third and Fourth Applicants will be unable to
satisfy a costs order against them in this application;
4. the First, Second, Third and Fourth Applicants’ application against
Fourth Respondent is vexatious, reckless and amounts to an abuse
of process of the Court.”
6. On 4 March 2024, the Applicants delivered a response to the Fourth
Respondent’s demand, setting out their reasons for refusing to provide security.
7. The Fourth Respondent launched the present application for security on 8 April
2024. The Applicants filed answering papers and the Fourth Respondent filed a
reply.
8. Pending determination of the p resent application for security for costs, the
Fourth Respondent has not filed answering papers in the main application.
The test for security for costs
9. Rule 47 provides only the procedural framework for a party to demand security
for costs from the other . Whether a party is entitled to receive security from a
plaintiff or applicant that is an incola of South Africa (such as the Applicants in
this case) is a question of law.
10. Prior to the commencement of the Companies Act 71 of 2008, section 13 of the
Companies Act 61 of 1973 regulated the provision of security where the
applicant was a limited company. Section 13 was not replicated in the new Act.
Applications for security for costs against incola companies must now be
determined in the same manner as unde r the common law in relation to incola
natural persons ( Boost Sports Africa (Pty) Limited v South African
Breweries Limited 2015 (5) SA 38 (SCA) in para [16]).
11. A decision as to whether to order the provision of security involves the exercise
of a judicial discretion. But as the authorities show, the discretion is not
unfettered.
12. The starting point of any consideration of security for costs is the possibility that
the applicant or plaintiff may be unable to satisfy a costs order in favour of the
respondent or defendant if its claim fails. Accordingly, in each case the Court
will have regard to “ the nature of the claim; the financial position of the
company at the stage of the application for security; and its probable financial
position should it lose the action ” ( Boost Sports (supra) in para [14]). In
Fitchet v Fitchet 1987 (1) SA 450 (E) , it was held (at 454H) that “ the financial
ability of the plaintiff to comply with an order to pay the defendant’s costs of the
action should it prove to be unsuccessful is an obvious fact or which should be
taken into account”.
13. But these financial considerations are not dispositive of the right to security ,
particularly where the claimant is an incola. Courts are anxious not to close
their doors to incola claimants merely on the grounds of impecuniosity , for this
would be to limit access to justice based on wealth . Accordingly, it has been
held that mere inability by an incola to satisfy a potential costs order is
insufficient to justify an order for security: “something more is required ”
(Ramsamy NO v Maarman NO 2002 (6) SA 159 (C) at 172J -173A). That
“something more” is found in the nature of the main proceedings.
14. The authoritative statement of the law in this regard is as follows ( Boost
Sports (supra) in para [16]:
“[E]ven though there may be poor prospects of recovering costs, a court, in
its discretion, should only order the furnishing of security for such costs by
an incola company if it is satisfied that the contemplated main action (or
application) is vexatious or reckless or otherwise amounts to an abuse.”
15. This reflects the underlying rationale for a court’s power to order security,
namely the prevention of abuse of its own process (Ecker v Dean 1938 AD 102
at 111, MTN Service Provider (Pty) Ltd v Afro Call (Pty) Limited 2007 (6) SA
620 (SCA) in para [15]).
16. The security power is therefore not meant to be available in response to what
may be viewed as merely misguided, careless or ill -advised procedural steps in
litigation. It is more fundamental than that. This is reflected in the admonition in
Western Assurance Co v Caldwell’s Trustee 1918 AD 262 at 274 that the
power “ ought to be sparingly exercised and only in very exceptional
circumstances”.
17. The question as to whether the applicant or plaintiff i s likely to have the
financial means to settle a costs order if the respondent or defendant succeeds
is therefore not the central consideration when it comes to ordering security. In
Fitchet v Fitchet (supra), the defendant sought security in the face of what was
contended to be a vexatious claim. The Court found that it had not been shown
that the financial ability of the plaintiff was of such a nature that it should play
any significant role in deciding the issue. Indeed, the Court was unable to find
that the plaintiff would be unable to satisfy an adverse order of costs. But
notwithstanding that, it held that the application was “ vexatious in the sense
that that it is one standing outside the realm of probability altogether and is
therefore incapable of succeeding” (at 455A-C). The plaintiff was ordered to put
up security despite his apparent ability (or lack of proof of his inability) to settle
a costs order.
18. From these authorities I would conclude that while an incola claimant’s
probable inability to settle an adverse costs order may be a factor in the
exercise of the discretion, it is not the most important factor, let alone a decisive
one. Proof of an ability to pay will not necessarily save a claimant from such an
order if the proceedings are tainted in the respects envisaged in Boost Sports
(supra), while proof of a likely inability to pay will not be fatal to the claimant if
the proceedings which it launched are not open to criticism in one of the
identified respects.
19. The authorities provide guidance as to what is meant by proceedings that are
“vexatious” or “an abuse”.
20. In Boost Sports (supra) in paras [17] and [18] , the following dicta were
endorsed in relation to what is meant by “vexatious” or “abusive” proceedings:
20.1. “In its legal sense ‘vexatious’ means ‘frivolous, improper; instituted
without sufficient ground, to serve solely as an annoyance to the
defendant’ … Vexatious proceedings would also no doubt include
proceedings which, although properly instituted, are continued with the
sole purpose of causing annoyance to the defendant; ‘abuse’
constitutes a mis -use, an improper use, a use mala fide, a use for an
ulterior motive ” ( Fisheries Development Corporation of SA Ltd v
Jorgensen; Fisheries Development Corporati on of SA Ltd v AWJ
Investments (Pty) Limited 1979 (3) SA 1331 (W) at 1339E-F);
20.2. “An action is vexatious and an abuse of the process of court inter alia if
it is obviously unsustainable ” ( African Farms and Townships Ltd v
Cape Town Municipality 1963 (2) SA 555 (A) at 565D).
21. In Phillips v Botha 1999 (2) SA 555 (SCA), the question arose whether a
private prosecution was an abuse of the Court’s process. The Court had regard
to what is meant by abuse of civil process. It found the following definition
(drawn from the Australian case of Varawa v Howard Smith Co Ltd (1911) 13
CLR 35 at 91) “terse but useful”:
“…[T]he term ‘abuse of process’ connotes that the process is employed for
some purpose other than the attainment of the claim in the action. If the
proceedings are merely a stalking -horse to coerce the defendant in some
way entirely outside the ambit of the legal claim … they are regarded as an
abuse for this purpose…”
22. The Court in Phillips went on to say this (at 565H):
“Where the Court finds an attempt made to use for ulterior purposes
machinery devised for the better administration of justice it is the Court’s
duty to preven t such abuse. This power, however, is to be exercised with
great caution and only in a clear case.”
23. The judgment in Boost Sports does not elucidate the meaning of the term
“reckless,” and I have not found any authority that specifically interprets or
fleshes out the meaning of this word in the context of applications for security.
The term was used (but not expanded upon) in Ecker v Dean (supra at 111: “I
see no reason … why we should depart from the ordinary rule as to onus of
proof and throw on th e insolvent the burden of proving the negative proposition
that his action is not reckless or vexatious ”). It was also used in the
formulations of the test in Crest Enterprises (Pty) Limited v Barnett and
Schlosberg NNO 1986 (4) SA 19 (C) at 22C-D and Ramsamy NO v Maarman
NO (supra at 173G). Finally, it appeared in the dictum i n Boost Sports quoted
in paragraph 14 above.
24. The dictionary meaning of the word “reckless” is “without thought or care for the
consequences of an action ” (Concise Oxford English Dictionary). In Fisheries
Development Corporation of SA Ltd v Jorgensen; Fisheries Development
Corporation of SA Ltd v AWJ Investments (Pty) Limited 1980 (4) SA 156
(W) at 169A to 170D, the Court considered the meaning of the word in the
context of section 424 of the Companies Act 61 of 1973 (i.e. where “ any
business of the company was or is being carried on recklessly or with intent to
defraud the creditors of the company”). Margo J pointed out that in S v Van Zyl
1969 (1) SA 553 (A) Fagan J held that gross negligence met the requirement,
while Steyn CJ said that the ordinary meaning of the term incorporates “growwe
nalatigheid met of sonder risiko bewustheid ” (i.e. gross negligence with or
without awareness of the risks). Margo J concluded that it connotes at least
culpa lata.
25. It appears to me that the term when used in relation to security for costs must
be read in the context of the other circumstances with which it is associated,
namely vexatious proceedings or an abuse of process. So read, it would
connote, at least, a very high degree of negligence ; or a wanton disregard for
the legitimate interests of the other party; or an obviously inappropriate or
extraordinary harnessing of the process of litigation.
26. I therefore am of the view that mere incorrect, ill -advised or even negligent
procedural steps in pursuit of litigation relief will not be treated as vexatious,
reckless or an abuse of process, such as to warrant an order to furnish security
for costs.
27. Against that background, I turn to the basis upon which the Fourth Respondent
seeks the provision of security by the Applicants.
The relevant facts
28. The Fourth Respondent contends that security should be provided on two main
grounds:
28.1. First, that the First Applicant is insolvent and unable to pay its debts,
having been wound up on that basis, and therefore that it does not
have the ability to satisfy a poten tial costs order in his favour in the
main application; and
28.2. Second, that the main application, insofar as it relates to him, is
“vexatious, reckless and an abuse of the Court’s process”.
Financial position / impecuniosity
29. In relation to the first ground ( i.e. the financial position of the First Applicant), it
is true that the First Applicant is in the process of winding up on the basis that
its liabilities far exceed its assets. The Fourth Respondent contends that there
is no certainty that any costs order in his favour would be satisfied out of the
insolvent estate. He says that the costs pertaining to the application will
undoubtedly be substantial (pointing inter alia to the considerable volume of the
main application papers and their annexures).
30. In response to the demand for security, the Applicants stated that despite the
insolvent position of the company, the liquidators could settle litigation costs out
of the free residue in the winding -up process. They provided statements of the
insolvent est ate banking account which , as at 31 January 2024 , showed a
credit balance of some R3,7 million, and on that basis contended that they were
able to satisfy an adverse costs order.
31. In his founding papers in the application for security, t he Fourth Responden t
raised various concerns about th e bank account, including that it was unclear
whether there were secured or preferent creditors whose claims would rank
ahead of his, or what further costs (such as costs of the concluded insolvency
enquiry and liquidators ’ fees) needed to be paid out of that sum . He also
pointed out that there was no commitment to set aside or ring-fence any part of
these funds for costs, having regard to the possibility that a costs order may be
made months or even years hence.
32. In their answering papers, the Applicants provided a signed and lodged (but not
yet approved) liquidation and distribution account for the First Applicant , which
showed that there were no secured or preferred creditors, and provided for an
amount of R2 million from the free residue to be held back for “ future litigation,”
by which I understand was meant the main application against the
Respondents. It was also contended that there were substantial further sources
of funds still to be recovered by the Applicants , including the amounts claimed
from the First to Third Respondents in the main application , and that in any
event, by virtue of section 106(c) of the I nsolvency Act, if there was a shortfall,
the proven concurrent creditors would be obliged to contribute their pro rata
share of that shortfall.
33. The Fourth Respondent remained unsatisfied, stating in reply that it was still
unclear that the R2 million would be sufficient given the nature of the main
application and the number of parties and issues involve d in the litigation. He
contended that it was not certain that there would be any other recoveries to
the estate, and that it could not be said that the concurrent creditors would be
good for any shortfall that may arise. He continued to submit that the Applicants
would be unable to satisfy what he contended was the likely costs order in his
favour.
34. I have considered these competing facts and contentions with a view to
determining, as a factor in the exercise of my discretion, the Applicants’
probable financial position should the y be liable for the Fourth Respondent’s
costs in due course. On the facts before me, it does not appear that there i s a
preponderance of probability either way. On the one hand, litigation is
notoriously expensive and it is not certain that a sum of R2 million set aside for
both the Applicants’ own costs and any adverse costs order will suffice if the
main application g oes the distance . There is also no evidence as to the
financial position of the concurrent creditors should it be necessary to fall back
on them. On the other hand , the Applicants have made considerable provision
for litigation costs (about a third of the total value of recoveries to date ), and
there are prospects of making further recoveries . Moreover, a glance at the
names of the concurrent creditors does not immediately suggest that they are
unlikely to be able to contribute if there is a shortfall. For those reasons I also
cannot conclude that there are no (or even poor) prospects of a costs order
being satisfied.
35. The financial prospects are therefore balanced. But in any event, for reasons
set out above, the financial position of incolae applicants is not decisive. Even if
I were to rate the prospects of recovery as poor, I would have to be satisfied
that “something more” existed to warrant ordering security; and even if I thought
that there were reasonable prospects of recovery of costs , that would not be
enough by itself to ward off the application if I were to find that it constituted an
abuse or reckless or vexatious proceedings.
36. I therefore do not intend to delve any deeper into the probability of the
Applicants being able to fulfil any costs order in favour of the Fourth
Respondent. I will instead focus on whether it can be said, as the Fourth
Respondent contends, that the application is tainted in one of the identified
respects, namely that it is vexatious, reckless or an abuse of process.
The tainting elements
37. The Fourth Respondent contends that the application against him is vexatious
for four main reasons. I shall deal with them in turn.
A discrete claim that should have been brought by way of action
38. The first complaint in fact raises two separate issues. They are as follows:
38.1. First is the contention that the claim against the Fourth Respondent is
discrete and should not have been brought in one proceeding
together with the claims against the First to Third Respondents; and
38.2. Second is the contention that the claim against the Fourth
Respondent should not have been brought by way of application
proceedings when there were foreseeable disputes of fact , as a result
of which it will either be dismissed or referred to trial . It is contended
that the motion proceedings are “stillborn”.
39. As to the first of these complaints, I agree that the case against the Fourth
Respondent differs materially from th at against the other Respondents. They
are based on entirely different alleged dispositions, to different persons, which
occurred at different times (November/December 2021 in the case of the Fourth
Respondent as opposed to April to June 2022 in the case of the others ) and in
different factual circumstances. They invoke entirely diff erent statutory
provisions.
40. The Applicants seek to justify the inclusion of the two sets of claims in a single
proceeding on the basis of Uniform Rule 10(3), which provides as follows:
“Several defendants may be sued in one action either jointly, jointly and
severally, separately or in the alternative, whenever the question arising
between them or any of them and the plaintiff or any of the plaintiffs depends
upon the determination of substantially the same question of law or fact
which, if such de fendants were sued separately, would arise in each
separate action.”
41. In support of the ir contention, they point out that there are common factors
between the claims and what is needed to prove them : for example, each case
requires proof of the financial position of the company (under section 29 , the
question arises whether, immediately after the disposition, the debtor’s liabilities
exceeded his assets, while the section 341 (2) relief requires proof that the
company is unable to pay its debts ). They also sa y that a key aspect of the
section 29 claim is whether the disposition was in the ordinary course of
business, while one of the factors that a Court will consider in deciding whether
in its discretion to validate a post-commencement disposition under section 341
is whether it was the result of the bona fide operation of business.
42. I agree that there are some overlapping requirements. However, Rule 10(3)
requires the applications to “depend upon the determination of substantially the
same question of law or fact ”. This has been interpreted to mean that the
questions of law or fact must ” in the main ” or in their “ principal essentials” be
“essentially” the same (Dendy v University of the Witwatersrand 2005 (5) SA
357 (W) in para [71]).
43. In my view, the Fourth Respondent is justified in critici sing the decision to
incorporate the case against him in the same motion as that against the other
Respondents. The “principal essentials” of the cases are differe nt, being claims
based on different statutory provisions, against different peop le, and involving
different conduct. What is common from a factual perspective is really only the
general history of the First Applicant and its worsening financial position over
time. Moreover, t he vast bulk of the founding affidavit and its annexures
(including the transcript of the section 417/418 enquiry which I address below)
pertains to the claim against the First to Third Respondents, and has no or little
bearing on the claim against the Fourth Respondent (inde ed, counsel for the
Applicants conceded that there was nothing in the entire attached enquiry
transcript that they relied upon in their case against the Fourth Respondent).
The limited intersection between the legal tests applicable to the two cases also
does not cover the core issues on which they will each turn. I note that the high-
water mark of the Applicants’ argument in their heads is that “the issues are not
totally different”. While that is true, that is a far cry from establishing a positive
case of substantial similarity.
44. Accordingly, although I need not make a final finding in this regard, I do not
think that the Applicants have compelling arguments to have brought the two
applications together under Rule 10(3).
45. As regards the second part of th e first complaint, as I understand it the Fourth
Respondent’s contention is that the section 29 case against the Fourth
Respondent has no prospect of success, simply because it was brought by way
of application as opposed to action.
46. Application proceedings are an available route for the determination of most
legal disputes. Except in cases which must under statute occur by way of action
(such as divorces) , a claimant has the option in principle to proceed by way of
summons or motion.
47. However, proceeding by way of application for final relief comes with risks,
particularly when a matter becomes opposed. Application proceedings are not
suited to the resolution of disputes of fact , because an affidavit cannot be
cross-examined. For that reason, the well -established rule is that an applicant
can only obtain final relief on motion where the facts stated by the respondent,
read together with the facts stated by the applicant and admitted by the
respondent, justify such an order (Plascon-Evans Paints Ltd v Van Riebeeck
Paints (Pty) Ltd 1984 (3) SA 623 (A) . As stated by the SCA in Media 24
Books (Pty) Limited v Oxford University Press Southern Africa (Pty)
Limited 2017 (2) SA 1 (SCA) in para [36]:
“[In an application for final relief] the case could not be determined simply
on a weighing of the probabilities as they emerged from the affidavits. The
facts deposed to by [the respondent’s] witnesses had to be accepted,
unless they constituted bald or uncreditworthy denials or were palpably
implausible, far -fetched or so clearly untenable that they could safely be
rejected on the papers. A finding to that effect occurs infrequently because
courts are always alive to the potential for evidence and cross -examination
to alter its view of the facts and the plausibility of evidence.”
48. Where a dispute of fact that cannot be properly resolved on paper arises , it is
possible for the Court at the request of the applicant – who would otherwise be
unsuccessful on the Plascon-Evans approach – to refer tha t dispute to oral
evidence (or indeed to refer the whole matter to trial), but that is not necessarily
a course that the Court will agree to follow, particularly where the applicant
should have anticipated a material dispute of fact arising. In such a case , the
applicant would fail in its claim for final relief.
49. Turning to the present facts, as stated the claim against the Fourth Respondent
is based on section 29 of the Insolvency Act read with section 339 of the
Companies Act . This permits the setting asid e of “every disposition of his
property made by a debtor not more than six months before the [liquidation] of
his estate … if immediately after the making of such disposition the liabilities of
the debtor exceed ed the value of his assets .” If those requirements are
satisfied, the disposition will be voided “ unless the person in whose favour the
disposition was made proves that the dispositio n was made in the ordinary
course of business and that it was not intended thereby to prefer one creditor
above another”.
50. Thus the liquidators must establish the fact of a disposition, the date thereof
and the factual insolvency of the debtor at the time. The onus then lies on the
beneficiary to show that the disposition occurred in the ordinary course of
business and that there was no intention to prefer a creditor.
51. In my view, there is no reason to say that a liquidator cannot ever succeed with
a section 29 claim on motion. The respondent may well fail to put up facts that ,
even if accepted as true, could not discharge its onus. One will often not know
until answering affidavits are filed whether a material dispute of fact will arise s.
If it does, there may be a question as to whether the liquidator can be rescued
by a referral to oral evidence, or should (because the dispute was foreseeable)
be left to lie in the bed they made in deciding to proceed on application.
52. In the present case, again without deciding the point, my impression is that the
Applicants have prima facie established the preliminary requirements of section
29 against the Fourth Respondent. If the Fourth Respondent failed to file an
affidavit putting up facts in relation to the aspects on which he bears an onus,
the application on that basis would succeed. The Fourth Respondent has
however set out, in his affidavits in the present interlocutory proceedings, the
factual basis for his contention that the repayment of the loan was (objectively)
in the ordinary course of business and (subjectively) did not intend to prefer a
creditor. He will presumably repeat this in his answering affidavit in the main
application, and may well cho ose to file affidavits from other parties who may
shed light on th ose issues . The Applicants may then decide to move
(successfully or unsuccessfully) for a final order on those facts if they think that
they do not meet the legal test s; or they may apply (successfully or
unsuccessfully) for oral evidence or a referral to trial if they think that there are
disputes of fact that need to be resolved in their favour . All of this will have to
be dealt with in future.
53. The point is that it can not be said that merely because th e claim was launched
by way of motion proceedings, it can never succeed against the Fourth
Respondent. That will depend on the facts and factors highlighted above. The
Applicants may well come to rue having proceeded on motion and having
exposed themselves to the Plascon-Evans test, but that is not something that
can be determined now. I certainly cannot conclude , by reason of the elected
procedure, that the claim is vexatious in the sense that it is “ obviously
unsustainable”, or reckless in that i t exhibited wanton disregard for what was
required to obtain the relief, merely because it has been brought on motion.
Jurisdiction: the proceedings should have been launched in Gauteng
54. The second complaint is that the proceedings should have been launched in
Gauteng where the Fourth Respondent is domiciled.
55. It appears to be common cause that this Court does not have territorial
jurisdiction over the person of the Fourth Respondent. Nonetheless, the
Applicants contend that it does have jurisdiction over the application because of
section 21(2) of the Superior Courts Act 10 of 2013, read with Rules 10(3) and
6(14).
56. Section 21(2) of the Superior Courts Act provides as follows:
“A Division also has jurisdiction over any person residing or being outside its
area of jurisdiction who is joined as a party to any cause in relation to which
such court has jurisdiction or who in terms of a third party notice becomes a
party to such a cause, if the said person r esides or is within the area of
jurisdiction of any other Division.”
57. It is not disputed by the Fourth Respondent that this Court has jurisdiction in
respect of the claim against the First to Third Respondents. However, he
contends that section 21(2) does n ot apply to him because he has not been
“joined as a party to any cause in relation to which [this] court has jurisdiction”.
58. In my view, section 21(2) can only confer jurisdiction where the external party
has been validly joined as a party to an existing cause . This clearly envisages
the situation where the joinder is necessary , i.e. where the party has a direct
and substantial interest in the subject matter of the litigation (i.e. a legal interest
that may be affected prejudicially by the order of the court) . It would probably
also extend to joinders of convenience where a third party is joined in order to
ensure that all parties interested in the issue are before the court, so as to
avoid a multiplicity of actions and a waste of costs (see e.g. Ploughmann NO v
Pauw 2006 (6) SA 334 (C) at 341E-F).
59. In my view, section 21(2) is not wide enough to confer jurisdiction over a person
who is not joined as a party to the same claim in which jurisdiction exists .
Whatever the similarities betw een the two applications, the fact is that the
Fourth Respondent has no legal interest in the claim against the First to Third
Respondents that could be prejudicially affected by an order against them. Nor
do the Applicants seek to make out such a case. What has happened is that
two discrete applications have been brought in a single proceeding , and the
Fourth Respondent has not been joined to the other application as a party .
Section 21(2), on its plain language, does not apply in this context.
60. The Applicants rely on Rule 10(3) as the basis for their “ joinder” of the Fourth
Respondent to the application where jurisdiction is not in issue. In my view, the
provisions of that Rule (which I have already deal t with above) do not relate to
the joinder of parties (as envisaged in section 21(2)) but of actions. As stated in
Spier Estate v Die Bergkelder Bpk 1988 (1) SA 94 (C) at 10G-I, referring to
the predecessor of section 21(2), the statutory extension of jurisdiction
“presupposes a valid joinder … and furthermore the joinder must be to the
impending cause”.
61. If section 21(2) incorporated joinder of actions under Rule 10(3), the Court
would be in a position to assume jurisdiction over any person residing
anywhere outside the jurisdiction merely because the claim against them
depends on substantially the same question of fact or law as a claim that is
already before the Court between other parties . The section does not in my
view envisage such a significant extension of jurisdiction. Rule 10(3)
presupposes that the Court has jurisdiction over both causes.
62. I therefore consider that the Fourth Respondent has good reason to resist the
jurisdiction of this Court on the basis of section 21(2) of the Superior Courts
Act.
63. That, however, does not necessarily mean that the application against the
Fourth Respondent is bound to fail entirely for want of jurisdiction.
64. As a first point , although neither party raised this issue before me, there may
well be a basis to establish jurisdiction by reference to where the cause of
action against the Fourth Respondent arose. If it can be demonstrated that the
cause of action (the alleged disposition by the First Applicant , which resided in
Cape Town ) took place within this Court’s jurisdiction, then the fact that the
Fourth Respondent is domiciled elsewhere in the Republic is not a bar to
jurisdiction: i n terms of section 42(2) of the Superior Courts Act, “ the civil
process of a Division runs throughout the Republic and may be served or
executed within the jurisdiction of any Division ”. The Applicants may
conceivably seek to expand their case for jurisdiction in this regard.
65. Second, the mere commencement of proceedings in the wrong Division is not
necessarily fatal to the claim. Section 27(1) of the Superior Courts Act permits a
court, upon application by any party thereto, to o rder proceedings that should
have been instituted in another Division to be removed to that other Division. I
see no reason in principle why a single cause forming part of a wider
application involving discrete claims against other parties should not be capable
of being removed to another Division, with appropriate directions as to the
separation of the matters. This is effectively what is envisaged by Rule 10(5),
which permits the ordering of separate trials. Untangling the pleadings to
ensure that each matter only proceeds on what is relevant to it should not be
too burdensome an exercise.
66. I appreciate that having to take such steps to overcome a jurisdictional
objection may involve the parties in time -consuming and costly processes.
However, this can be ameliorated by an appropriate order as to costs, which
may be immediately executed upon. The significant point for present purposes
is that it is impossible to conclude, from the possibility that this Court may lack
jurisdiction, that the claim is so certain to fail that it may be considered
vexatious.
Inadmissibility of transcripts
67. The third complaint is that the transcripts of the section 417 enquiry into the
affairs of the First Applicant have been unlawfully attached to the founding
affidavit and constitute inadmissible hearsay evidence.
68. I do not view this as an issue that has a proper bearing on the present
application for security for costs. It seems to be common cause that the
Applicants do not rely for their cause of action against the Fourth Respondent
on any part of the transcript or the underlying evidence. While it is clearly
aggravating to the Fourth Respondent that he has been served with voluminous
papers, large portions of which are not directly relevant to the case against him,
the propriety of attaching them (without an application for the admission of
hearsay evidence under the Law of Evidence Amendment Act 45 of 1988) is a
matter between the Applicants and the First to Third Respondents. In my view,
it cannot be a factor in deciding whether the claim against the Fourth
Respondent was vexatious, reckless or an abuse of process.
69. To the extent that the main application proceeds as a single matter , the Fourth
Respondent can apply for the unnecessary documents to be struck out in
respect of the case against him, with a costs order that again need not be held
in abeyance until the end of the case , or he can obtain the Applicants’ formal
confirmation that it is not necessary for him to address these facts in his
answering papers.
Excessive and unnecessary costs
70. The fourth complaint is that the Applicants’ decision to include the Fourth
Respondent’s case with the other cause of action has led, and will lead, to
“enormous” unnecessary costs for him , and that these costs “ [are] vexatious in
and of [themselves]”.
71. I have already expressed the view that the Fourth Respondent is justifiably
aggravated by being included as a further respondent together with a discrete
claim against others , in circumstances where there may be valid jurisdictional
complaints. I also accept that this has led, and will lead, to increased costs as
he seeks to ward off the claim against him, while having to be a spectator to the
other cause of action.
72. In my view, however, I do not think that exposing the Fourth Respondent to a
potentially higher costs burden through the form of proceedings adopted means
that the claim against the Fourth Respondent itself is vexatious, reckless or an
abuse of process in the sense understood in the authorities.
73. The Fourth Respondent is not without remedies, including bringing an
application to separate his matter from the other one under Rule 10(5), applying
to strike out irrelevant material , or seeking a ruling on jurisdiction. Success
would reduce his ongoing cost s burden, and would probably come with a n
immediately executable costs order in his favour.
Conclusion
74. The test for requiring an incola applicant to provide security for a respondent’s
costs is a difficult one to overcome. Such orders are only made in rare cases
where the conduct of the applicant meets the high threshold of vexatiousness,
recklessness or an abuse of process.
75. On an overview of the matter, and having regard to the various basis upon
which the Fourth Respondent relies, I am of the view that this is not one of
those cases where it would be appropriate to order security. Although I
consider that the inclusion of th e Fourth Applicant as a participant in a case
together with parties subject to a very different (and considerably more
voluminous) application is prejudicial to the Fourth Respondent, and that the
jurisdictional basis currently relied upon by the Applicant s appears to be
inapplicable, I cannot go so far as to say that the case against the Fourth
Respondent is vexatious (in the sense of being obviously unsustainable ),
reckless (in the sense of exhibiting a wanton disregard for the Fourth
Respondent’s interests) or an abuse of process (in the sense of pursuing an
ulterior motive). The Applicants are clearly attempting, as they are both entitled
and obliged to do, to recover amoun ts for the benefit of the insolvent estate,
and I cannot say , on the facts pleaded in relation to the Fourth Respondent,
that they have no or remote prospects of success in r elation to a section 29
cause of action. There is no suggestion that they are mer ely trying to annoy or
distract the Fourth Respondent through a hopeless case.
76. The apparent procedural or jurisdictional flaws that I have identified seem to me
to fall more into the category of ill -advised (but potentially remediable) litigation
steps, rather than vexatious, reckless or abusive ones. I also cannot say that
the Fourth Respondent will not, in responding to the litigation, be able to use
the machinery of the court to place the matter against him on a proper footing,
together with appropriate costs orders.
77. I am therefore of the view that the Fourth Respondent is not entitled to the
exercise of this Court’s power to direct that the Applicants should provide
security for his costs.
Costs of this application
78. The ordinary rule in thi s Court is that costs should follow the result. However, I
have a wide discretion in making costs orders , and am entitled to depart from
the general rule in appropriate circumstances.
79. Although I have concluded that the application for security should fail, I do not
think that the Fourth Respondent was unreasonable in launching it. In various
respects I have held that he is justifiably aggrieved by the manner in which the
litigation against him has been brought. The Applicants’ reliance on Rule 10(3)
and Section 21(2) to draw him into an extraneous dispute between other
parties, in a Court whic h may well lack jurisdiction over him, I have considered
to be misguided. While these facts are not enough in my view to overcome the
high hurdle to obtaining security, I consider it fair that the Fourth Respondent ,
who is already prejudiced in the above respects, should not carry the additional
burden of adverse costs in relation to his application.
ORDER
80. In the circumstances, I make the following order:
1. The application for security for costs is dismissed.
2. There is no order as to costs.
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M W JANISCH
Acting Judge of the High Court
Western Cape Division
APPEARANCES:
For the Applicant: Adv L Meintjes
Instructed by: Van Der Spuy & Vennote/Partners
For the Fourth Respondent: Adv L Choate
Instructed by: Assheton-Smith Ginsberg Inc
Date of hearing: 15 October 2024
Date of judgment: 21 October 2024