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[2020] ZASCA 81
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Systems Applications Consultants (Pty) Ltd t/a Securinfo v Systems Applications Products AG and Others (1371/2018) [2020] ZASCA 81 (2 July 2020)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case no: 1371/2018
In
the matter between:
SYSTEMS
APPLICATIONS CONSULTANTS (PTY) LTD
t/a
SECURINFO APPELLANT
and
SYSTEMS
APPLICATIONS PRODUCTS AG FIRST
RESPONDENT
UNGANI
INVESTMENTS (PTY)
LTD SECOND
RESPONDENT
VHONANI
MUFAMADI THIRD
RESPONDENT
Neutral
citation:
Systems Applications
Consultants (Pty) Ltd t/a Securinfo v Systems Applications Products
AG and Others
(1371/2018)
[2020] ZASCA
81
(2 July 2020)
Coram:
WALLIS, MOLEMELA and MOKGOHLOA JJA and KOEN and
MABINDLA-BOQWANA AJJA
Heard
:
14 MAY 2020
Delivered
:
This judgment was handed down electronically by circulation to the
parties’ legal representatives by email, publication
on the
Supreme Court of Appeal website and release to SAFLII. The date and
time for hand-down is deemed to be 10h00 on 2 July 2020.
Summary:
Security for costs – s 13 of the
Companies Act 61 of 1973 - whether amount of security for costs
ordered by court can subsequently
be released on account of material
change in legal position and factual circumstances.
ORDER
On
appeal from:
Gauteng Local Division of
the High Court, Johannesburg (Weiner J, sitting as court of first
instance):
1. The respondent’s
application for the admission of new evidence on appeal is dismissed
with costs, including the costs occasioned
by the employment of two
counsel.
2. The appeal is
dismissed with costs, including the costs occasioned by the
employment of two counsel.
JUDGMENT
Molemela JA (Wallis
and Mokgohloa JJA and Koen and Mabindla-Boqwana AJJA concurring)
Introduction
[1] This appeal concerns
an interlocutory order for security for costs in relation to an
action instituted 12 years ago, presently
enrolled to be heard from
October to November 2020.
Background facts
[2]
The appellant, Systems Applications Consultants (Pty) Limited trading
as Securinfo, is a local software development company.
The first
respondent, Systems Applications Products AG, now renamed SAP SE, is
a German global software company involved in the
development and sale
of software systems application products (SAP). Since this appeal
relates only to the first respondent, it
will, for the sake of
convenience be referred to as ‘the respondent’.
[3]
Between 1997 and 2001, the appellant developed a software security
product designed specifically to secure and manage the authorisation
risks of users of SAP enterprise software (Securinfo for SAP). The
appellant had marketed and sold the product in South Africa
and
internationally. The appellant’s assertion, denied in general
terms by the respondent, is that it concluded an exclusive
distribution agreement with a German IT Consulting company named SAP
Systems Integration (SAPSI) in 2004. Subsequent thereto, the
respondent acquired a controlling share in SAPSI and an interest in a
competing security product known as VIRSA.
[4]
In 2008, the appellant, as plaintiff, instituted action proceedings
(the main action) against the respondent, as a second defendant,
for
damages in the amount of €609 803 145. The appellant
averred that it had suffered damages as a result of the
respondent’s
unlawful interference with the software distribution agreement it
(the appellant) had concluded with SAPSI.
The respondent filed
several special pleas and a plea denying the alleged conclusion of
the software distribution agreement between
the appellant and SAPSI.
It also denied having interfered with any software distribution
agreement and disputed liability for the
damages claimed.
[5]
On 7 May 2010, the respondent launched an application (the 2010
application) to the Gauteng Division of the High Court, Johannesburg,
on the strength of s 13 of the Companies Act 61 of 1973 (the 1973
Companies Act),
[1]
for an order
compelling the appellant to furnish security for the respondent’s
costs in the main action. The application
came before Satchwell J in
February 2011. In the intervening period following the launch of the
application, the 1973 Companies
Act was repealed and replaced by the
Companies Act 71 of 2008 (the 2008
Companies Act), which
came into
operation on 1 May 2011.
[2]
The
application, however, fell to be determined in terms of the
provisions of the 1973
Companies Act because
of the transitional
provisions contained in the 2008
Companies Act.
[3
]
On 27 May 2011, Satchwell J dismissed the application for security
for costs.
[6] On 26 July 2012, the
Full Court of the Gauteng Division of the High Court (per Claassen J)
set aside the order of Satchwell
J and granted an order in favour of
the respondent (the 2012 Order). The Full Court substituted the
following order for that previously
granted by Satchwell J:
‘
(1)
The plaintiff … is ordered to provide security for the
defendant’s … costs of the action in the amount of
R4
million within one month after the handing down of this judgment
and/or such further amount or amounts as the registrar may
direct;
(2)
The plaintiff … is precluded from continuing with the action
prior to the furnishing of the aforesaid security in a form
to the
satisfaction of the Registrar.’
[7]
The appellant’s application for leave to appeal against the
2012 Order was unsuccessful in both this Court and the Constitutional
Court. As a result, the appellant eventually furnished security in
the specified amount of R4 million as per the 2012 Order.
[8]
On 17 April 2018, the appellant applied to the Gauteng Division of
the High Court for an order that the amount of R4 million
held as
security for the respondent’s costs in the action be released.
As an alternative prayer, the appellant sought an
order declaring
that the respondent is not entitled to any security in addition to
the amount of R4 million. The appellant alleged
that there was a
material change in circumstances that had prevailed when the 2012
order was granted. It also averred that the
respondent was abusing
the court process with the aim of preventing the appellant from
proceeding with its claim.
[9]
On the same day and by prior arrangement, the respondent launched a
related application for orders confirming its entitlement
to approach
the Registrar to increase the amount of security lodged and joining a
company known as Ungani
[4]
and
its shareholder, Mr Vhonani Mufamadi
[5]
in his personal capacity in the main action. The appellant relied on
the grounds set out above to resist the respondent’s
application. The two applications came before Weiner J (the court a
quo) and were decided simultaneously.
[10]
The court a quo dismissed the appellant’s application on the
basis that the release of security would ignore the transitional
provisions embodied in item 10(1) of Schedule 5 to the 2008
Companies
Act
[6
]
read with the
Interpretation Act 33 of 1957 (the Interpretation Act), which the
court a quo considered to be indicative of the
intention of the
legislature to preclude the retroactive application of the 2008
Companies Act. It
found that the appellant’s contention that it
was in the interests of justice to discharge the 2012 Order was
misplaced.
As regards the assertion that the respondent was abusing
the court process so as to stifle the main action, the court a quo
held
that the trial court would be in a better position to consider
whether there was an ulterior motive underlying the manner in which
the respondent had conducted the litigation. It dismissed the
respondent’s application to join Mr Mufamadi, as a party in
the
proceedings in his personal capacity. The joinder of Ungani, which
was tendered, was granted by consent. The respondent’s
application seeking to assert the right to increase the amount of
security for costs was granted.
[11] The relevant parts
of the order made by the court a quo were couched as follows:
‘
1.
. . .
2. SAC’s [the
appellant’s] application that the amount of R 4 million lodged
in terms of the 2012 order as security
for SAP’s [the
respondent’s] costs in the action be released, or
alternatively, that it be declared that SAP [the respondent]
is not
entitled to any increase in the amount of security, is dismissed.
3. SAP’s [the
respondent’s] application
3.1 …
3.2 for an order
declaring that SAP [the appellant] is entitled to approach the
registrar to increase the amount of security lodged
in its favour in
terms of the 2012 order is granted.
4. …’
(It
is common cause that the order dismissing the relief sought in
paragraph 2 of the appellant’s notice motion is mirrored
in
paragraph 3.2 of the order granted by the court a quo.)
[12] Aggrieved by the
order granted by the court a quo, the appellant unsuccessfully asked
the court a quo for leave to appeal some
of its orders. Its
application for leave having been dismissed by the court a quo, the
appellant appeals with the leave of this
Court.
Issues to be decided
[13]
Despite the fact that the parties’ written heads of argument
evinced a dispute regarding the issues that required this
Court’s
determination, the exchange between counsel and the bench at the
commencement of the appeal hearing revealed that
the parties accepted
that leave to appeal was only sought and granted in relation to the
order in paragraph 1 of the notice of
application.
[7]
The upshot is that the sole issue that properly arises for
determination in this appeal is whether the security furnished, in
the amount of R4 million should be released on the grounds set out in
the papers the appellant filed in the court a quo.
The
consequences for the remainder of the 2012 Order of it being released
do not concern us in this appeal.
[14]
Three related issues that arise from the main issue are (1) whether
the court a quo had the power to reconsider the 2012 Order
by
ordering the release of the security; (2) assuming that the power
existed, whether the security should have been released and
(3)
whether there is an abuse of court process by the respondent.
[15]
It is common cause that the order granted by the court a quo is
appealable. However, a
substantial portion of
the parties’ written heads of argument was dedicated to the
susceptibility of the 2012 Order, as a
final order, for
reconsideration by the court a quo; the nature of the discretion
exercised by the court a quo in coming to its
decision; and
whether
this Court can interfere in the exercise of the discretion of the
court a quo.
Oral argument before us followed
the same trend.
Did the court a quo
have the power to reconsider the 2012 Order on account of a change of
circumstances?
[16]
The parties referred us to various authorities in support of their
submissions. They agreed that the issue in this appeal,
namely
whether the high court could vary the 2012 Order by reducing or
releasing security, has not been decided by prior authority.
Relying
on the following dictum of this Court in
Shepstone
and Wylie and Others v Geyser NO
[8]
(
Shepstone
and Wylie
),
the appellant submitted that
a
change in circumstances may entitle a court to reconsider an earlier
order despite its finality:
‘
It
may be that the court, having once refused an application, retains
the power to entertain a subsequent one. But any subsequent
application will obviously require new evidence. Even if such a power
does exist, it does not affect the finality of the order
in the first
application.’
[17]
Shepstone and Wylie
and all the other cases to which we were referred in the heads of
argument did not deal with the question that is central to the
present appeal, namely whether a court can reconsider an earlier
order and reduce or release the security previously ordered where
there has been a material change in circumstances.
Since those cases are
distinguishable and not dispositive of the issue raised in this
appeal, a discussion thereof has been omitted
so as to avoid
unnecessarily burdening this judgment.
[18]
The
appellant relied on the common law and s 173 of the Constitution for
its proposition that a court can reconsider and discharge
an order
that granted security for costs. It was held in
Swadif
(Pty) Ltd v Dyke NO
[9]
that ‘. . .at common law any cause of action, which is relied
on as a ground for setting aside a final judgment, must have
existed
at the date of the final judgment.’ No ground sought to be
advanced by the appellant as justifying the setting aside
of the 2012
order existed at the time that order was issued.
That
left only section 173 of the Constitution to consider. It provides:
'The
Constitutional Court, Supreme Court of Appeal and High Courts have
the inherent power to protect and regulate their own process,
and to
develop the common law, taking into account the interests of
justice.'
[19]
The appellant asserted that Rule 47
[10]
of the Uniform Rules of Court does not make express provision for the
reconsideration by the court of an earlier order on costs
in
materially changed circumstances, nor does it empower the court or
the registrar to decrease the amount of security.
[11]
The appellant argued that where there is a lacuna in the Rules of
Court, s 173 of the Constitution should be invoked so as to ensure
that proceedings are fair.
[20]
The respondent, on the other hand, submitted that s 173 of the
Constitution, on a proper interpretation, does not contemplate
the
regulation by the superior courts of their own process in a manner
which undermines the finality of its final orders, beyond
the
recognised remedies of appeal and review. Relying on the judgment of
the Constitutional Court in
Zondi
v Member of the Executive Council for Traditional and Local
Government Affairs and Others
,
[12]
the respondent submitted that in terms of the common law, a judge has
no authority to amend his or her own final order. It contended
that
allowing a generalized revisiting of final orders simply because
their underlying basis has supposedly changed was not in
the
interests of justice.
[21]
Section 173 recognises the inherent power that superior courts have
to regulate their own processes. The Constitutional Court
in
Molaudzi
v The State
[13]
stated as follows in relation to the application of s 173 of the
Constitution:
‘
.
. . This inherent power to regulate process does not apply to
substantive rights but rather to adjectival or procedural rights.
A
court may exercise inherent jurisdiction to regulate its own process
only when faced with inadequate procedures and rules in
the sense
that they do not provide a mechanism to deal with a particular
scenario. A court will, in appropriate cases, be entitled
to fashion
a remedy to enable it to do justice between the parties. . . .'
Although
the foregoing dicta were expressed in a criminal law context, they
are unquestionably equally apposite in the context of
civil
proceedings,
[14]
given that
the Constitution, as the supreme law, applies to all areas of the
law.
[15]
[22]
It is of significance that the Constitutional Court in
Giddey
NO v JC Barnard and Partners
(
Giddey
)
[16]
made an illuminating observation that ordering security for costs is
a procedural matter incidental to civil proceedings and that
when a
court makes an order for costs it exercises its power to regulate its
own process.
[17]
In
Boost
Sports Africa (Pty) Ltd v South African Breweries
[18]
(
Boost
)
this Court was called upon to consider, among others, whether the
court below had correctly ordered
Boost
to furnish security for costs based on the court’s discretion
to regulate its own proceedings as envisaged in s 173 of the
Constitution. Relying on
SABC
Ltd v National Director of Public Prosecutions
,
[19]
this Court recognised that a matter pertaining to a consideration of
whether or not security for costs should be granted against
a
vexatious litigant fell within the court’s discretion to
regulate their own proceedings.
[20]
[23]
Inasmuch as s
13
of the 1973
Companies Act granted
a substantive right, this does not
detract from the fact that granting an order for security for costs
has been held to be a procedural
matter.
[21]
Notably,
s 13
also
vested a court with a discretion to order security for costs
[22]
and did not, as a matter of course, entitle the plaintiff to the
furnishing of security.
[24]
In this matter, the appellants asserted that Rule 47 of the Uniform
Rules of Court is inadequate as it does not make express
provision
for the reconsideration by the court of an earlier order on costs in
materially changed circumstances, nor does it empower
the court or
the registrar to decrease the amount of security.
[23]
It is worth noting that in
Phillips
and Others v National Director of Public Prosecutions
,
[24]
the Constitutional Court recognised the possibility that the high
court could legitimately claim the inherent power of holding
the
scales of justice where no specific law provides for a given
situation ‘or where there is a need to supplement an otherwise
limited statutory procedure’. In
Molaudzi
,
the same court held that a court may regulate its own process when
faced with inadequate procedure and rules. That court also
cautioned
that courts should not impose inflexible requirements for the
application of s 173 of the Constitution.
[25]
Given the fact that the primary purpose for the exercise of the power
in s 173 is to ensure that proceedings before courts
are fair,
[25]
I am of the view that it is conceivable that in appropriate
circumstances, s 173 of the Constitution can be invoked in respect
of
an order relating to security for costs. What must be borne in mind
is that the invocation of s 173 must be determined on the
peculiar
facts of each case, mindful of the fact that the power granted by
that provision should be exercised only in exceptional
circumstances
to avoid legal uncertainty and potential chaos.
[26]
A fact-specific casuistic approach must therefore be adopted
.
[26]
Before considering the crucial question whether the appellant showed
that there were material changes that warranted releasing
the
security that was furnished, it is necessary to deal with another
submission made on behalf of the appellant. The appellant
asserted in
general terms and without presenting any plausible supporting facts,
that it would suffer greater injustice than the
respondent if the
security furnished was not released. The appellant contended,
somewhat obliquely, that its rights of access to
the courts,
entrenched in s 34 of the Constitution, would be adversely affected.
Section 34 of the
Constitution guarantees everyone the right to have a dispute that can
be resolved by the application of law decided
by a court or tribunal
in a fair public hearing.
[27]
In
Giddey
,
the court pointed out that courts considering an application for
security for costs are required to balance the potential injustice
to
a plaintiff if it is prevented from pursuing a legitimate claim as a
result of an order requiring it to pay security for costs,
on the one
hand, against the potential injustice to a defendant who successfully
defends the claim, and yet may well have to pay
all its own costs in
the litigation.
[27]
It
emphasised that courts
must
bear in mind the provisions of s 34 of the Constitution and weigh
them in the light of other factors laid before it.
[28]
[28]
This Court in
Boost
confirmed the applicability of the same approach notwithstanding that
the 2008
Companies Act does
not have a provision which is analogous
to s 13 of the 1973 Act. It considered it appropriate for a court to
shield a defendant
from the risk of litigation that results in it
facing an irrecoverable costs order, when this was in the interests
of justice.
[29]
Notably, in
this case, the appellant averred that its funder, Ungani, has
sufficient assets to satisfy an adverse costs order.
Thus, on the
appellant’s own version, there was no impecuniosity that posed
a threat to the continuation of its litigation.
Therefore, its right
of access to courts has accordingly not been impacted. As stated
before, the crisp question is whether the
appellant showed that there
were material changes that warranted releasing the security that was
furnished.
Material change in
circumstances
[29] The appellant’s
case is that there has been a material change in the circumstances
since the order for security for costs
was granted, as a result of
which there was no longer any need for the security lodged by the
appellant to remain in place. It
described the material changes as
being of a legal and factual nature. According to the appellant, the
repeal of the 1973
Companies Act and
the joinder of Ungani as a party
to the main action constituted a material change in the circumstances
warranting the release of
the money held as security. I deal with
these in turn.
Change in the law
[30]
Section 13 of the 1973
Companies Act empowered
a Court to order a
plaintiff company to lodge sufficient security for a defendant’s
costs where the Court was persuaded that
there was reason to believe
that the plaintiff company would be unable to meet an adverse costs
order. The relief granted in the
2012 Order was based on that
provision. The 1973
Companies Act was
repealed by the 2008
Companies
Act.
[30
]
The latter has no
provision analogous to s 13 of the 1973 Act. The appellant stressed
that while the 2010 application constituted
proceedings in terms of
the 1973
Companies Act, its
application before the court a quo was
governed by the 2008
Companies Act.
[31
]
Relying on this Court’s judgment in
Boost
,
the appellant submitted that a basis for granting an order for
security exists only if it has been shown that the proceedings
instituted are vexatious or reckless, or amount to an abuse of court
process.
[31]
It contended that
this new context ought to be taken into account in applications
determined after the coming into operation of
the 2008
Companies Act.
The
appellant contended that in so far as the court a quo had found
that
s 13
continued to apply to the application that served before
it, it erred. It pointed out that the respondent had not, in any of
its
papers, suggested that the claim pursued by the appellant was
‘vexatious or reckless or otherwise amounts to an abuse of
process’. The appellant also submitted that the artificial
preservation of the 1973
Companies Act by
virtue of the transitional
provisions did not prevent it from invoking s 173 of the Constitution
by applying to the court for a
reconsideration of the 2012 Order on
the basis of the material change in the law pertaining to liability
for security for costs
[32]
I am alive to the fact that the appellant brought its application
before the court a quo in a context, post the 1973
Companies Act, in
which the law only requires a plaintiff to provide security for costs
where it is shown that the proceedings are vexatious or an
abuse of
processes. As correctly cautioned by this Court in
Boost
,
courts must be mindful of the altered position of the law and ought
not, when considering issues pertaining to security for costs
after
the coming into operation of the 2008
Companies Act, approach
the
relevant enquiry as if
s 13
is still part of our law.
[32]
[33]
However, sight must not be lost of the fact that the remarks in
Boost
were made in relation to applications considered after the coming
into operation of the 2008 Companies Act. Although the 2010
application which culminated in the 2012 Order was argued prior to
the coming into operation of the provisions of the 2008
Companies
Act, by
the time the judgment was handed down, the 2008
Companies Act
had
already come into operation. The question that arises is whether
the coming into operation of the 2008
Companies Act had
any impact on
the matter. Item 10(1) of the transitional provisions embodied in
Schedule 5 of the 2008
Companies Act provides
unequivocally that any
proceedings instituted in any court in terms of the 1973
Companies
Act before
the coming into operation of the 2008
Companies Act on
1
May 2011 were to continue in terms of the provisions of the 1973
Companies Act as
if it had not been repealed. Inevitably, the
provisions of item 10(1) of Schedule 5 to the 2008
Companies Act
rendered
the provisions of the 2008
Companies Act inapplicable
to the
2010 application.
[34]
I am not oblivious that the injunction in item 10(1) of Schedule 5 to
the 2008
Companies Act has
the effect that two applications for
security for costs, two days apart might result in the one being
adjudicated in the light
of the provisions of
s 13
, and the other
without regard to that provision. Of significance is that the
constitutionality of item 10(1) was not raised as
an issue before the
court a quo. Accordingly, I must proceed on the acceptance that item
10(1) of Schedule 5 to the 2008
Companies Act is
constitutional.
[33]
For that matter, the Constitutional Court dismissed the appellant’s
application for leave to appeal against the 2012 Order
despite the
change in the statutory regime.
[35]
The provisions of s 12(2)
(e)
of the Interpretation Act, pertaining to the effect of the repeal of
laws, are also self-explanatory and require no elaboration.
That
section provides that where a law repeals any other law, then unless
the contrary intention appears, the repeal shall not
‘affect
any investigation, legal proceeding or remedy in respect of any such
right, privilege, obligation, liability, forfeiture
or punishment . .
. and any such investigation, legal proceeding or remedy may be
instituted, continued or enforced, and any such
penalty, forfeiture
or punishment may be imposed, as if the repealing law had not been
passed.’
[36] It is thus
self-evident from the provisions of item 10(1) of Schedule 5 to the
2008
Companies Act, read
with s 12(2)
(e)
of the Interpretation
Act, that the 2012 Order was correctly granted on the basis of the
1973
Companies Act. Court
orders, as a matter of legal policy, stand
and remain valid and enforceable unless and until successfully
challenged and set aside.
To my mind, to hold that the 2008
Companies
Act was
applicable to the 2012 Order would be contrary to the rule
against retrospectivity and to the transitional provisions of the
2008
Companies Act. Since
the change in the statutory regime in the
context which had occurred in this matter has expressly been catered
for in the aforesaid
statutory provisions, the coming into operation
of the 2008
Companies Act cannot
, in the same breath, rightly
constitute a material change in circumstances. It follows that the
appellant’s submissions pertaining
to the change in the law
cannot prevail.
Change in the facts
(Joinder of Ungani)
[37]
The material factual change contended for by the appellant was that
Ungani, had, by consent, been joined as a party in the
main action
and agreed to be held liable, jointly and severally with the
appellant for any adverse costs order that may be made
in the main
action. With the advent of the joinder of Ungani, the appellant
contended, the cumulative financial position of the
two entities (the
appellant and Ungani) was such that there were sufficient assets to
cover an adverse order of costs. Thus, it
was submitted, the need for
the respondent’s security for costs no longer existed.
[34]
[38]
In
MTN
Service Provider v Afro Call (Pty) Ltd
,
[35]
Brand JA pointed out that one of the very mischiefs
s 13
was intended
to curb, was that those who stand to benefit from successful
litigation by a plaintiff company will be prepared to
finance the
company’s own litigation, but will shield behind its corporate
identity when it is ordered to pay the successful
defendant’s
costs. Applying that dictum, this court in
Boost
held
that despite the obsolescence of
s 13
, that mischief remains.
[36]
That means that the financial position of Ungani still had to be
factored into the equation when deciding whether there was any
justification to keep the security previously furnished, in place.
Thus, the question whether the appellant had, as a matter of
fact,
demonstrated that Ungani’s financial standing was indeed
sufficiently sound, remained valid.
[39]
The onus was on the appellant to
establish with reference to credible evidence that its own net worth,
combined with that of Ungani,
would be sufficient to meet a potential
adverse costs order. All that the appellant annexed to its
application was an unsubstantiated
letter, purporting to be from the
auditors of Ungani, which set forth the latter’s assets and
liabilities. This was despite
the fact that the respondent in its
papers, had pertinently raised an issue about the fact that no
independent valuation of Ungani’s
net worth in the form of a
properly audited balance sheet had been furnished.
[40] While accepting that
Ungani was a newly formed company which, at that stage, had no
audited financial statements, one would
have expected the appellant,
in the face of the dispute around Ungani’s financial standing,
to procure objective proof of
its net worth, or, in the absence
thereof, to request its auditor to depose to a confirmatory
affidavit. Despite the queries raised,
no objective evidence relating
to Ungani’s financial status was submitted. The result was that
there was no objective evidence
demonstrating Ungani’s alleged
ability to meet an adverse costs order. Under the circumstances, I
agree with the submission
that in the absence of objective proof of
Ungani’s net worth, the contents of the unsubstantiated letter
could not be given
much weight. The mere existence of a funding
agreement between the appellant and Ungani cannot, without more,
amount to a new fact
that warrants the release of the security that
has already been furnished. On the papers, there was a clear
dispute of fact
over Ungani’s ability to meet any costs order
and Ungani failed to produce evidence that would enable the court to
determine
that dispute in its favour in accordance with the
Plascon-Evans
rule.
[41]
To sum up, I am of the view that the appellant has failed to show
that there were any new circumstances warranting the release
of the
amount lodged as security. Ordinarily, this finding would be
dispositive of the appeal. However, the appellant contended
that even
if this Court was not inclined to uphold the appeal on the basis that
there is a material change in circumstances warranting
the release of
the security lodged, it ought to uphold the appeal because of the
respondent’s abuse of court processes.
Whether
the respondent was abusing the court process
[42]
According to the appellant, the respondent ought to be deprived of
the benefit of the 2012 order because it had used that order
(and all
subsequent interlocutory applications), with the aim of exhausting
the appellant financially so as to stifle the finalisation
of the
main action. As authority for that proposition, the appellant relied
on the judgment of the Constitutional Court in
South
African Broadcasting Corp Ltd v National Director of Public
Prosecutions
,
[37]
in which it was stated that the power in s 173 of the Constitution
vests in the judiciary the authority to prevent any possible
abuse of
process.
[43]
The appellant cited four incidents as the basis for its contention
that the respondent had abused the court processes in order
to stifle
the finalisation of the main application. First, the appellant
brought an application for dismissal of the main action
within 14
days of the Constitutional Court dismissing the appellant’s
application for leave to appeal, the basis being that
the appellant
had not complied with the 2012 Order. Although the respondent’s
application was successful, in 2014, a full
court set aside that
order and reinstated the main action on the basis that the
application had been brought prematurely.
[44]
The second incident which the appellant relied on was the
respondent’s refusal to accept the tender of security on the
basis that it was paid late. Based on that stance, it had once again
tried to apply for the dismissal of the main action but was
unsuccessful. The third incident cited by the appellant was that the
respondent had approached the registrar seeking an increase
in the
amount of security for costs on the basis of a grossly inflated bill
of costs. What the appellant considered as the fourth
instance of
abuse of process was the fact that the respondent had insisted that
the shareholder of Ungani, Mr Mufamadi, be joined
as a party in the
main action in his personal capacity even though the appellant had
furnished documentation that showed that Ungani’s
assets could
satisfy an adverse costs order.
[45]
It has been held that an abuse of process occurs when provisions of
the Uniform Rules of Court are used to achieve an outcome
that is
tangential to the pursuit of the truth.
[38]
In
Brummer v Gorfil Brothers
Investments (Pty) Ltd en Andere
this Court held that the exploitation, in an improper manner or for
an improper purpose, of a particular Rule of Court which relates
to
the termination of the case, could qualify as an abuse of the court
process.
[39]
[46]
In my opinion, there is no basis for concluding that the
interlocutory applications brought by the respondent constituted an
abuse of court processes. The very fact that one of the courts of
first instance was prepared to dismiss the main action shows
that it
was persuaded by the respondent’s arguments, albeit wrongly,
and therefore dispels any notion of an abuse of process.
It must be
borne in mind that Rule 47(4) of the Uniform Rules of Court
specifically sanctions the dismissal of the relevant proceedings
where security is not furnished within a reasonable time. Given that
the respondent’s rights arose from a court order (the
2012
Order), the exercise of the rights emanating from that order could
not amount to an abuse of process.
[47]
As regards the allegedly inflated bill of costs, it bears noting that
the 2012 Order expressly stipulated that the appellant
pay security
of R4 million ‘
and/or
such further amount or amounts as the registrar may direct
’.
[40]
Notably, Rule 47(6) of the Uniform Rules of Court enunciates that the
Registrar may increase the amount lodged as security if he
or she is
satisfied that the amount furnished is no longer sufficient. The
disputed bill of costs was merely submitted for assessment
within the
ambit of that particular Rule of Court and within the contemplation
of the 2012 Order. Moreover, Rule 70 of the Uniform
Rules of Court,
entitled ‘Taxation and Tariff of Fees of Attorneys’,
stipulates that the submission of a bill of costs
departing from the
tariff is an aspect that is subject to approval by the taxing master
within his or her powers. The Registrar
is thus the officer of court
whose function it is to determine the amount, if any, of any further
security to be furnished. It
is thus open to the appellant to bring
any queries pertaining to the disputed bill of costs to the attention
of the Registrar.
[48]
Lastly, it was contended that the respondent’s failed attempt
in the court a quo to join Ungani’s shareholder,
Mr Mufamadi,
to the litigation was a further attestation to the respondent’s
abuse of court processes. I have already alluded
to the reasons
advanced by the respondent for its dissatisfaction with the documents
the appellant provided as proof of Ungani’s
financial position.
A relevant consideration is the common cause fact that Ungani was a
newly formed company with no audited financial
statements. Under the
circumstances, I am of the view that there is no clear evidence
suggesting that the application for the joinder
of Mr Mufamadi as a
party to the proceedings constituted an abuse of process.
[41]
[49]
It is evident from the foregoing paragraphs that the evidence placed
before the Court a quo did not justify the release of
security that
had already been furnished on the strength of the 2012 Order.
Boost
[42]
confirmed that Superior Courts have a residual discretion arising
from their power, derived from s 173 of the Constitution, to
regulate
their own proceedings. This remark was made in the context of an
application that was being considered on the strength
of the 2008
Companies Act. This
means that, regardless of the statutory lens from
which the appellant’s application was being considered by the
court a quo,
there can be no question that in coming to its decision,
it had exercised its residual discretion as contemplated in s 173 of
the
Constitution. T
he
ordinary rule is that the approach of an appellate court to an appeal
against the exercise of a discretion by another court will
depend
upon the nature of the discretion concerned.
[43]
The standard of
interference to be adopted by this Court on appeal
[50]
It
is well-established that m
atters
pertaining to costs are invariably held to involve the exercise of a
discretion in a narrow sense.
[44]
Equally trite is that
when
a
lower court exercises a discretion in the narrow sense, it would
ordinarily be inappropriate for an appellate court to interfere
unless it is satisfied that this discretion was not exercised
judicially, or that it had been influenced by wrong principles or
a
misdirection on the facts, or that it had reached a decision which
could not reasonably have been made by a court properly directing
itself to all the relevant facts and principles
.
[45]
It follows that t
he
appellant was required to demonstrate on appeal to this Court that
the court a quo did not act judicially, or that it acted on
a
misapprehension of the facts or on wrong principles.
[51]
The appellant’s submission that the court a quo exercised its
discretion on a wrong principle insofar as it found that
the
appellant’s reliance on s 173 of the Constitution was
‘misplaced’, is without merit. It is clear from the
whole
tenor of the judgment of the court a quo that it was alive to the
fact that the provisions of s 173 of the Constitution empower
superior courts to address an injustice. However, based on what was
alleged in the appellant’s papers, it was simply not
persuaded
that there was a just cause for reconsidering the 2012 order, and
rightly so. Its finding that there was no change
in
circumstances warranting a variation of the 2012 Order to release the
security furnished, cannot, on the facts placed before
it, be
faulted. In the result, there is no justification for interfering on
appeal with the discretion exercised by the court a
quo.
[52]
Before I conclude, I must briefly mention that a few days before the
date of the hearing of the appeal, the respondent filed
an
application, in terms of
s 19
(b)
of the
Superior Courts Act 10 of 2013
, urging this court to accept
new evidence on appeal
[46]
regarding the expected duration of the trial, among others. This
application was launched too late, added nothing to the matter
and
the evidence was, in any event, not incontrovertible. It therefore
falls to be dismissed with costs.
Costs
[53]
The Court a quo did not make an order of costs, save in relation to
the dismissal of the respondent’s application for
the joinder
of Mr Mufamadi. There was no cross-appeal directed at that costs
order. In this court, the respondent urged us to order
the
unsuccessful party to pay the costs of the appeal, including the
costs occasioned by the employment of two counsel. In considering
an
appropriate order of costs,
this
Court must be mindful of the fact that a court determining whether an
order for security should be made is essentially making
a decision on
a constitutional matter.
[47]
[54]
As regards this appeal, it must be borne in mind that the
appellant
repeatedly stated that its litigation funder, Ungani, has more than
sufficient assets with which to satisfy any adverse
costs made
against it and that there was no risk that the respondent’s
costs in the action would not be covered. Thus, its
ability to pursue
the main action was not at risk. In
Giddey
,
the Constitutional Court observed that if an order pertaining to
security for costs
could
be appealed on the standard of correctness each time, it might result
in lengthy delays and considerable costs.
[48]
It
is thus ironic that h
aving
bemoaned the delay in the finalisation of the main action, which has
been pending for 12 years, the appellant ultimately decided
to pursue
the appeal only in relation to the release of security that it had
already furnished. Having considered all the circumstances
of this
case, I find that it is not in the interests of justice to depart
from the general rule that costs should follow the result.
[49]
Order
[55] The following order
is made:
1. The respondent’s
application for the admission of new evidence on appeal is dismissed
with costs, including the costs occasioned
by the employment of two
counsel.
2. The appeal is
dismissed with costs, including the costs occasioned by the
employment of two counsel.
_________________
MOLEMELA JA
JUDGE OF APPEAL
Appearances:
For
appellant: C D A Loxton SC (with him A J D’Oliveira)
Instructed
by: Robin Twaddle & Associates Inc, Midrand
c/o
Honey Attorneys, Bloemfontein
For
first respondent: C H J Badenhorst SC (with him K Spottiswoode)
nstructed
by: Werksmans Attorneys, Johannesburg
c/o
Symington & De Kok Attorneys, Bloemfontein
[1]
Section
13
(Security for costs in legal proceedings by companies and bodies
corporate) of the 1973 Companies Act (now repealed) provided as
follows:
‘
Where
a company or other body corporate is plaintiff or applicant in any
legal proceedings, the Court may at any stage, if it
appears by
credible testimony that there is reason to believe that the company
or body corporate or, if it is being wound up,
the liquidator
thereof, will be unable to pay the costs of the defendant or
respondent if successful in his defence, require
sufficient security
to be given for those costs and may stay all proceedings till the
security is given.’
[2]
Notably,
the 2008
Companies Act has
no provision analogous to s 13 of the
1973
Companies Act.&nbs
p;
[3]
See
paragraph 10 below.
[4]
The
second respondent in this appeal.
[5]
The
third respondent in this appeal.
[6]
Item
10(1) reads: ‘Any proceedings in any court in terms of the
previous Act immediately before the effective date are continued
in
terms of that Act, as if it had not been repealed.’
[7]
Paragraph
1 of the appellant’s notice of application (before the court a
quo) sought the following relief:
‘
1.
Ordering that the R 4 million held as security for the respondent’s
costs in the action (“the current amount”)
be released.’
[8]
Shepstone
and Wylie and Others v Geyser NO
[1998]
ZASCA 48
;
1998
(3) SA 1036
(SCA).
[9]
1978
(1) SA 928
(A) at 939E.
[10]
Rule
47 provides as follows:
“
(1)
A party entitled and desiring to demand security for costs from
another shall, as soon as practicable after the commencement
of
proceedings, deliver a notice setting forth the grounds upon which
such security is claimed, and the amount demanded.
(2) If the
amount of security only is contested the registrar shall determine
the amount to be given and his decision shall be
final.
(3) If
the party from whom security is demanded contests his liability to
give security or if he fails or refuses to furnish security
in the
amount demanded or the amount fixed by the registrar within ten days
of the demand or the registrar’s decision,
the other party may
apply to court on notice for an order that such security be given
and that the proceedings be stayed until
such order is complied
with.
(4) The court may, if security be not given within a
reasonable time, dismiss any proceedings instituted or strike out
any pleadings
filed by the party in default, or make such order as
to it may seem meet.
(5) Any security for costs shall, unless the
court otherwise directs, or the parties otherwise agree, be given in
the form, amount
and manner directed by the registrar.
(6) The
registrar may, upon the application of the party in whose favour
security is to be provided and on notice to interested
parties,
increase the amount thereof if he is satisfied that the amount
originally furnished is no longer sufficient; and his
decision shall
be final.”
[11]
In
Boost
,
this Court confirmed, at para 15, that Rule 47 of the Uniform Rules
of Court, which
deals
with the procedure to be followed and applies to all cases where
security is sought in the high court, deals with procedure
and not
with substantive law.
[12]
See
Zondi
v Member of the Executive Council for Traditional and Local
Government Affairs and Others
[2005]
ZACC 18
;
2006
(3) SA 1
(CC)
paras 28-30.
[13]
Molaudzi
v The State
[2015]
ZACC 20; 2015
(2)
SACR 341
(CC)
para
33.
[14]
Phillips
and Others v National Director of Public Prosecutions
[14]
[2005] ZACC 15
;
2006 (1) SA 505
(CC) para 52.
[15]
Compare
Firstrand
Bank Ltd t/a First National Bank v Fondse and Another
[2017]
ZAGPJHC 184.
[16]
[2006] ZACC 13; 2007 (5) SA 525 (CC); 2007 (2) BCLR 125 (CC).
[17]
Giddey
para 22. In that paragraph, the court approved the
dictum
in
Bookworks
(Pty) Ltd v Greater Johannesburg Transitional Metropolitan Council
and Another
1999
(4) SA 799
(W),
where Cloete J said: ‘
When
s 13 is combined with the provisions of Rule 47,
as
it must be to give it practical effect
,
the Court
is
regulating its own procedure
by deciding not only whether a litigant should be ordered to provide
security for costs
…
but
also, where it grants such an order, whether the litigant should be
allowed to proceed until such security has been provided.’
(Own emphasis.)
[18]
Boost
Sports Africa (Pty) Limited v South Africa Breweries (ty) Limited
[2015]
ZASCA 93; 2015 (5) SA 38 (SCA); [2015] 3 All SA 255 (SCA).
[19]
[2006] ZACC 15
;
2007 (1) SA 523
(CC) PARA 35-36.
[20]
Boost
para 16.
[21]
Giddey
para
22.
[22]
Giddey
para
1.
[23]
See para 19 of this judgment.
[24]
Phillips
and Others v National Director of Public Prosecutions
para
49.
[25]
SABC
Ltd v National Director of Public Prosecutions
[2006]
ZACC 15
;
2007
(1) SA 523
(CC).
[26]
Molaudzi
para 34.
Compare
Phillips
and Others v National Director of Public Prosecutions
para
52.
[27]
Giddey
para
8.
[28]
Ibid
para 30.
[29]
Boost
para
13.
[30]
The 2008
Companies Act came
into operation on 1 May 2011.
[31]
This court in
Boost
stated the following at para 15: ‘
Absent
s 13
, there can no longer be any legitimate basis for
differentiating between an
incola
company
and an
incola
natural person. And as our superior courts have a residual
discretion in a matter such as this arising from their inherent
power to regulate their own proceedings, it must follow that the
former can at common law be compelled to furnish security for
costs.
Accordingly, even 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.’
[32]
Ibid para 15.
[33]
Compare
Giddey
para 18.
[34]
The
appellant relied on
Northbank
Diamonds Ltd v FTK Holland BV
2003 (1) SA 189
(NmS), for its proposition.
[35]
MTN
Service Provider v Afro Call (Pty) Ltd
[2007]
ZASCA 97
;
[2008] 1 ALL SA 329
(SCA) para 20.
[36]
Boost
para 26.
[37]
SABC
Ltd v National Director of Public Prosecutions
[2006]
ZACC 15
;
2007
(1) SA 523
(CC)
para 90.
[38]
See
Ramsamy
NO and Others v Maarman NO and Another
2002 (6) SA 159 (C).
[39]
[1999]
2 All SA 127
(A);
1999 (3) SA 389
(SCA) at 416D-E.
[40]
The issue initially raised before the court a quo pertaining to the
interpretation of the 2012 Order in relation to the respondent’s
entitlement to an increase in the amount of security was abandoned
in the court a quo and is not an issue for this court’s
determination.
[41]
Compare
Boost
para 25.
[42]
Boost
para 16.
[43]
Giddey
para 19.
[44]
Giddey
para 20-21;
Trencon
Construction (Pty) Limited v Industrial Development Corporation of
South Africa Limited and Another
[2015]
ZACC 22
;
2015 (5) SA 245
(CC);
2015 (10) BCLR 1199
(CC)
para 85.
[45]
Ibid para 88.
[46]
See
Rail
Commuters Action Group and others v Transnet Ltd t/a Metrorail and
others
[2004] ZACC 20
;
2005
(2) SA 359
(CC) para 41-43.
[47]
Giddey
para
4.
[48]
Ibid para 22.
[49]
Compare
Lawyers
for Human Rights v Minister in the Presidency and Others
2017
(1) SA 645
CC.