SUMMARY
| MB and his parents (“Plaintiffs” in the court a quo) are permanent residents of the United Kingdom, owning no assets in South Africa. They instituted a claim for damages against the Respondents for injuries that MB sustained in 2005, whilst he was an exchange student in South Africa. As peregrini (persons domiciled or resident outside the jurisdictional area of a court) the Plaintiffs furnished security for the Respondents’ costs but refused to increase it at a later stage of litigation. The Respondents brought an application in terms of Rule 47(3) for an order directing the Plaintiffs to furnish additional security. The application was opposed by the Plaintiffs based on lack of means, stating that if they are compelled to furnish security, they would be precluded from pursuing their claims, and thus their rights under s 34 of the Constitution would be infringed. The court a quo ordered the Plaintiffs (collectively) to furnish security for the costs, in the manner directed by the registrar and that, pending such security being furnished, the Plaintiffs’ action be stayed. Only MB appealed to a full bench (the present appeal). MB denies his obligations to furnish security. He maintains that his position should have been considered separately, not jointly with those of his parents and he submits that, contrary to the court’s finding, he furnished sufficient evidence of his inability to provide security. He alleges that the prejudice to himself, if he was required to furnish security, failing which he cannot pursue his claim, outweigh any prejudice to the Respondents. The court a quo held that the Plaintiffs had not made adequate disclosure of their financial affairs and/or had not set out the facts of their financial position to sufficiently demonstrate that it would not be possible for them to furnish security, or that the requirement to furnish security would permanently halt the litigation that they instituted. The court confirmed that one’s impecuniosity will be determined in line with evidence establishing the relevant financial situation on a balance of probabilities and accordingly the Plaintiffs had an obligation to disclose their financial position and relevant supporting documentation in this regard. Failure to disclose same may lead to the inference that allegations of impecuniosity are unfounded. MB did not dispute the court’s findings that the family dealt with their financial position in an inadequate manner or that the court erred in finding that the family failed to show security would end their litigation, but argues that his financial position should have been considered separately to that of his parents. However, the court in this appeal held that this argument is inconsistent with the approach adopted by the Plaintiffs, who dealt with the litigation as a family and failed to indicate in their answering affidavit that they wish to be considered separately or provided evidence of MB’s personal financial position. MB also failed to indicate that he will not be able to receive funding from a source other than his parents, inferring that he is and will continue to be supported by his parents. In line with the aforesaid, the court also referred to the case of Keary Developments Ltd v Tarmac Construction Ltd and Another [1995] 3 All ER 534 (CA), which held that the courts should not only consider, whether a company can provide security from its own resources to continue with litigation, but also whether it can raise the required amount from ‘its directors, shareholders or other backers or interested persons’. The court held that generally, peregrini are obliged to provide security for costs in litigation as opposed to incolae (persons domiciled or resident within the jurisdictional area of a court). The reason for same being that a Defendant will have to proceed against a Plaintiff abroad if he obtains a costs order in his favour, and such proceedings will be associated with more uncertainty, inconvenience and expense. The case of Blastrite (Pty) Ltd v Genpaco Ltd 2016 (2) SA 622 (WCC) underlined this principle and held that the purpose of providing security is to ensure equality between litigants and that this is neither irrational nor does it amount to unfair discrimination if peregrini are called upon to give security and same is consistent with the Constitution. In the case of Magida v Minister of Police 1987 (1) SA 1 (A) it was held that at common law an incola had no right to claim security from a foreign litigant. It is a question of practice and the judge has a judicial discretion in this regard. This appeal court also underlined that even if the court a quo found that MB established his impecuniosity and that the requirement for security would stifle his claim, this aspect still only remains a factor to consider when deciding if security should be provided, it is not a given that the court will definitively refuse the order for security in such circumstances. When deciding if to order security for costs, same will be determined on a case to case basis whilst conducting a balancing exercise. The courts must take into account considerations of equity and fairness and weighing the injustice to the Plaintiffs if prevented from pursuing his claim by an order for costs in comparison to the possible prejudice to the Respondent if no security is ordered. It was held that courts on appeal must be reluctant to interfere with the exercise of a discretion by a court a quo, and not substitute same for its own discretion simply because it would have preferred a different result. It will only do so if the court a quo failed, through a misdirection, to exercise its discretion properly or if persuaded that the discretion was not exercised judicially. Accordingly, the present appeal turned on whether MB has made out a case for interference with the exercise of the court a quo’s discretion. It is noted that the court a quo was not persuaded that a security order would effectively deprive MB of the opportunity to proceed with his claim. The court a quo conducted the required balancing exercise, however was faced with difficulty in that to facilitate the balancing exercise, the court needed to be apprised of all relevant information to ascertain if a party will ultimately be unable to pay costs, and the probability that the Plaintiff may be unable to pursue the litigation if ordered to pay security. Therefore, the appeal court held that the court a quo was correct in considering MB’s financial position together with that of his parents, both as a matter of principle and because of how they advanced their litigation. In any event, even if the appellant’s financial position had been considered in isolation, it would have made no difference as the court a quo would have had regard to MB’s other sources of funding, including his parents. MB’s parents failed to prove their inability to put up security. |
HELD
MB failed to show that the court a quo did not act in a judicial manner, or that it based its decision on wrong facts or legal principles, or that it did not act for substantial reasons. MB failed to show that he was unable to furnish security if considered separately from his parents, and accordingly, equity and fairness dictate MB should be required to furnish security. Accordingly, it was held that the court a quo was justified in finding that MB is liable to furnish the additional security and the appeal was dismissed with costs.
VALUE
In an application for security of costs, the court will conduct a balancing exercise, considering equity and fairness and weighing up the possible prejudice to all parties if such order is given or refused. A litigant opposing a security order must provide documentation to support allegations of impecuniosity, and a failure to do so might lead to the inference that the allegations were unfounded.
Written by Danmari Bouwer and Stefan Bezuidenhout
