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June 27, 2015

Can a defendant ask a plaintiff company to put up security?


Until the arrival of the Companies Act 71 of 2008 (the Act) a defendant could request an incorporated company as plaintiff in litigation, to put up security for costs (provided that there was reason to believe that the plaintiff company was unable to pay the defendant's costs, if successful).
The Act does not provide for that any longer, so when can a Defendant call for security for costs?
The Supreme Court of Appeal ("SCA") answered that question in Boost Sports Africa (Pty) Ltd v The South Africa Breweries (Pty) Ltd [2015] ZASCA 93.
It held that corporate plaintiffs must be treated the same as natural plaintiffs, and the defendant can only call for security for costs it can show that an action is vexatious or reckless. This is a difficult onus to discharge. Our courts have attempted to define vexatious litigation:
In the words of Holmes JA in African Farms & Townships v C.T. Municipality 1963 (2) SA 555 (A) at 565D-E, "an action is vexatious and an abuse of the process of Court … if it is obviously unsustainable". In Golden International Navigation SA v Zeba Maritime 2008 (3) SA 10 (C) para 18, Griesel J posited that an action is vexatious and frivolous, "where on the face of the pleadings it is shown that the action cannot be maintained".
Thus it is possible to call for security, no longer as a right, but if the Plaintiff’s action is vexatious or reckless.


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