Shepstone & Wylie and Others v Geyser NO

• Jurisdiction: South Africa
• Judge: Hugo J
• Judgment Date: 02 May 1997
• Citation: 1998 (1) SA 354 (N)
• Docket Number: 1568/96
• Hearing Date: 18 April 1997
• Counsel: M J D Wallis (with him G Thatcher) for the applicants C J Hartzenberg (with him G Roberts) for the respondent
• Court: Natal Provincial Division

Hugo J:

Shepway Management Co (Pty) Ltd ('Shepway') was liquidated by resolution of its members in a hopelessly insolvent state.

The respondent was appointed as liquidator of Shepway. In this capacity he has claimed: H

(a)

as against the second, third, fourth and fifth applicants jointly and severally, payment of the sum of R40 000 together with interest thereon from the date of judgment to the date of payment thereof and costs, pleading alternative causes of action; I

(b)

(i)as against the first, second, third, fourth and fifth applicants jointly and severally, payment of R372 407,54, alternatively, R2 439 702 together with interest thereon from the date of judgment to the date of payment; alternatively

(ii) a declaratory order in terms of s 424(1) of the Companies Act 61 of 1973, that the first applicant, alternatively, the first, second, J

Hugo J

third, fourth and fifth applicants jointly and severally, alternatively, the second, third, A fourth and fifth applicants jointly and severally, to be personally responsible without limitation, for any of Shepway's debts and liabilities arising from the recovery by Shepway of excessive amounts from various other companies during B the period May 1990 to May 1993 in connection with the management by Shepway of a number of farms.

The Pleadings in that Action Have Closed.

In this application the applicants seek an order in the following terms:

'(a)

the respondent is directed to furnish security to the applicants for costs incurred and to be C incurred by them in the action instituted by the respondent against the applicants in this honourable Court under case No 1568/96;

(b)

the form and amount of and the manner in which the security is to be furnished shall be fixed by the registrar of this honourable Court; D

(c)

the security for costs in the form, amount and manner directed by the Registrar shall be furnished by the respondent within four weeks of its being so determined by the Registrar;

(d)

the action under case No 1568/96 is stayed until the respondent has furnished the security for costs in the form, amount and manner directed by the Registrar; E

(e)

in the event of the said security not being furnished within the aforementioned period of four weeks, the applicants are given leave to apply to this Court, on the same papers, supplemented insofar as may be necessary, for the dismissal of the action instituted by the respondent under case No 1568/96; F

(f)

the respondent is directed to pay the costs of this application, including the costs consequent upon the employment by the applicants of two counsel.'

It is estimated that when the matter comes to trial it may take some 20 Court days with two counsel on each side. G

The pleadings as they stand are extremely bulky and there are, I believe, cabinets full of documents that will have to be perused, discovered and perused again. The costs attendant on all this will be enormous, and may well reach a figure approaching R1m on each side I am told.

It is common cause that as things stand now the respondent has nowhere near that sum to pay H the applicants' costs should he be required to do so. He has by now somewhat less than R100 000 cash on hand to finance the litigation, but he has instituted claims against various debtors the outcome of which is and will remain for some time, speculative. Even if he is totally I successful in recovering these claims, they will not yield sufficient to deal with an order for costs of the order postulated above. I do not know how far these actions have gone or when they go to trial. For present purposes the proceeds thereof must remain at best for respondent, contingent and speculative.

The claim for security for costs is based upon the provisions of s 13 of the Companies Act 61 of 1973, which reads: J

Hugo J

'13 Security for costs in legal proceedings by companies and bodies corporate A

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 B 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.'

There can be little doubt that there is credible testimony that there is reason to believe that respondent would be unable to pay the applicants' costs if they are successful in their defence. C

The mere fact that he could notionally do so by levying contributions on the proved creditors is no answer, as was found in Trust Bank van Afrika Bpk v Lief and Another 1963 (4) SA 752 (T) at 755 et seq. While on the subject of that case, I respectfully associate myself with the following passage from the judgment of Hiemstra J at 754--5:

'The Court will not deprive a defendant who is being sued by a company of the benefit of the D section unless special circumstances exist. The Court will lean towards security. The Court will consider what the financial position of the company will be when it loses the action. In that regard its position at the time of the application is also relevant. The Court will not enquire fully into the merits of the contemplated litigation and form an opinion of the plaintiff's prospects of success, but the nature of the claim and the defence are not irrelevant.' E

The only other requirement of s 13 is that the 'company or other body corporate' must be the plaintiff.

Mr Hartzenberg SC for the respondent has argued that one needs only look at the pleadings to see that the plaintiff is not a company or body corporate but the liquidator of a company. That is so, but does it...