Shepstone & Wylie and Others v Geyser NO

• Jurisdiction: South Africa
• Judge: Hefer JA, Howie JA, Harms JA, Schutz JA, Farlam JA
• Judgment Date: 28 May 1998
• Citation: 1998 (3) SA 1036 (SCA)
• Docket Number: 364/97
• Hearing Date: 15 May 1998
• Counsel: MJD Wallis (with him GR Thatcher) for the appellants CJ Hartzenberg (with him MG Roberts) for the respondents
• Court: Supreme Court of Appeal

Hefer JA:

This is an appeal against the judgment of Hugo J in Shepstone & Wylie and Others v Geyser NO G 1998 (1) SA 354 (N) dismissing an application for security for costs in terms of s 13 of the Companies Act 61 of 1973, as amended. The section reads 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 H 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.'

The parties are agreed that the granting of relief is discretionary once the requirements of s 13 have been satisfied. The main issue is whether Hugo J correctly exercised his discretion in favour of the respondent. I

There are three preliminary questions. The first is whether an order dismissing an application for security under s 13 is appealable. It is not necessary to deal with all the cases on which respondent's counsel rely for their submission that it is not. Some of the early ones, like Mears v Nederlandsch Zuid Afrikaansche Hypotheek Bank Ltd 1908 TS 1147 and J

Hefer JA

Lombard v Lombardy Hotel Co Ltd (in Liquidation) 1911 TPD 866, were decided on grounds which, in the A light of legislative developments and modern trends, are of little assistance in considering whether an order qualifies as a 'judgment or order' under s 20(1) of the Supreme Court Act 59 of 1959 as amended. More directly in point are Petz Products (Pty) Ltd v Commercial Electrical Contractors (Pty) Ltd 1990 (4) SA B 196 (C) and The Catamaran TNT: Dean Catamarans CC v Slupinsky (No 2) 1997 (2) SA 577 (C) in which it was held that an order relating to an application for security is not appealable under s 20(1) for lack of finality and definitiveness and because it does not dispose of any portion of the relief claimed in the main action. C In both cases (and also in Duncan NO v Minister of Law and Order 1985 (4) SA 1 (T) at 2E--3B) this kind of application was regarded as a preparatory or procedural step in the proceedings to which it relates. This, in my view, is not correct. As Van den Heever J said in Ecker v Dean 1937 SWA 3 at 4,

'(t)he usual test, ie whether the order finally disposes of portion of, or a certain phase of, the issue between the parties D does not really fit circumstances such as these, for the claim for security was a separate and ancillary issue between the parties, collateral to and not directly affecting the main dispute between the litigants . . . it is not a procedural step in attack or defence at all but a measure of oblique relief sought by one party against the other on grounds foreign to the main issue, ie the financial situation of one litigant, this relief to be effective if at all only after judgment. The order determining E this collateral dispute is therefore final and definitive for at no later stage in the proceedings can the applicant obtain the substance of what has been refused to him. If he has been prejudiced by the order his prejudice is irremediable.'

(Compare Ritch and Another v Orthopaedic Buildings (Pty) Ltd 1979 (4) SA 19 (T) at 23E--24E; Bekker NO v Total South Africa (Pty) Ltd 1990 (3) SA 159 (T) at 162I--165B; Knox D'Arcy Ltd and Others v F Jamieson and Others 1996 (4) SA 348 (A) at 356H--357E.)

Viewed in this manner, there can be no doubt that an order refusing an application for security is appealable. (Whether an order granting such an application is appealable is not necessary to decide.) Admittedly, as G respondent's counsel pointed out, there is provision in Rule 47 of the Uniform Rules of Court for the variation by the Registrar of an order granting security if he is satisfied that the amount originally furnished is no longer sufficient. But this does not affect the position where, as in the present case, the application for security is refused. H 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.

The second preliminary question relates to the ambit of s 13.

The respondent is the liquidator of Shepway Management Co (Pty) Ltd. As appears from 362A--363E of the I Court a quo's judgment some of his claims in the action in connection with which the application for security has been brought are for the recovery of amounts which the company itself could, but for its liquidation, allegedly have recovered. A liquidator may institute proceedings for the recovery of claims like these under his general powers under s 386(4)(a) of the Companies Act. The J

Hefer JA

respondent's other claims are ones which a liquidator is empowered to bring under other provisions of the A Companies Act read, where necessary, with certain provisions of the Insolvency Act 24 of 1936 (henceforth referred to as 'statutory claims'). On the authority of Trakman NO v Livschitz and Others: In re Livschitz and Another v Trakman NO 1996 (2) SA 384 (W) at 391 et seq and Henochsberg on the Companies Act 5th ed B at 27 Hugo J found (at 361E--F) that s 13 does not apply to statutory claims.

I do not think Hugo J was correct in saying (referring at 360C--D to the judgment in Trakman ) that 'Wunsh J found that s 13 does not and cannot apply' where a liquidator institutes a statutory claim. After referring, first, to C the practice in England and Wales, then to the same passage in Henochsberg on which Hugo J relied, and finally to the decision in Waisbrod v Potgieter and Others 1953 (4) SA 502 (W), Wunsh J continued as follows at...