Civil procedure:

Applications for security for costs

Danie van Loggerenberg SC, Leon Dicker and Jacques Malan

In certain limited circumstances, a party to litigation may demand security for costs from his opponent. In order to determine these instances, recourse must be had to the common law, as well as to the relevant statutory provisions. In the Magistrates’ Courts, r 62(1) defines the categories of plaintiffs and applicants who may be required to furnish security (Jones & Buckle, The Civil Practice of the Magistrates’ Courts in South Africa, Vol II, Rule 62-2).

At common law a plaintiff or applicant may be required to give security for the defendant’s or respondent’s costs if the plaintiff or applicant is a peregrinus (Witham v Venables (1928) 1 Menz 291); where the plaintiff or applicant is an insolvent (Ecker v Dean 1938 AD 102); if the action is vexatious (Western Assurance Co v Caldwell’s Trustee 1918 AD 262); or where the plaintiff or applicant has no substantial interest in the action or application (Mears v Brook’s Executor and Mears’ Trustee 1906 TS 546 at 550).

The relevant statutory provisions are, inter alia, s 29 of the Supreme Court Act 59 of 1959, s 3 of the Companies Act 61 of 1973, s 8 of the Close Corporations Act 69 of 1984, and s 21 of the Arbitration Act 42 of 1965.

The procedure to be followed in applications for security for costs is provided for in r 47 of the Uniform Rules of Court and r 62 of the Magistrates’ Courts’ Rules. It basically entails two steps. The party entitled to and desiring security for costs delivers a notice calling upon the other party to furnish security. If the party from whom security is demanded contests his liability to give security or refuses to furnish security, 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.

It should be noted that there are important differences between r 47 and r 62. These may be summarised as follows:

Rule 47

Rule 62

The rule does not indicate the types of cases in which a party is entitled to demand security for costs from another: Regard must be had to the categories provided for in the common law.

The rule defines the categories of plaintiffs or applicants who may be required to furnish security.

As the rule simply refers to ‘ a party ' to proceedings who is entitled and desiring to demand security for costs, it applies equally to plaintiffs and applicants in reconvention. However, it was held in Van Zyl v Euodia Trust (Edms) Bpk 1983 (3) SA 394 (T) at 400A, with reference to s 13 of the Companies Amendment Act 59 of 1978, that the section did not provide for security for costs to be furnished by a plaintiff company in reconvention.

Security for costs may not be sought from a plaintiff or applicant in reconvention. Section 8 of the Close Corporations Act 69 of 1984, however, provides that security for costs may be called for where a close corporation is the plaintiff or applicant in reconvention.

Security for costs should be demanded ‘as soon as practicable after the commencement of proceedings'. Delay in demanding security is not, however, necessarily fatal ( Drakensbergpers Bpk v Sharpe 1963 (4) SA 615 (N) at 618A-619E and SA Iron and Steel Corporation v Abdulnabi 1989 (2) SA 224 (T) at 236D-F), but does constitute a relevant factor to be taken into account by the court when exercising its discretion where security is sought in terms of s 13 of the Companies Act 61 of 1973 ( ICC Car Importers (Pty) Ltd v A Hartrodt SA (Pty) Ltd 2004 (4) SA 607 (W) at 616H; 617F-G).

Security for costs may be required ‘after service of the summons and before the closing of pleadings'.

The notice demanding security must set forth ‘the grounds upon which such security is claimed, and the amount demanded'.

The defendant or respondent may call for security to be provided ‘for the costs of the action'.

If only the amount of security is contested, the registrar must determine the amount and his decision is final. The normal practice is that security takes the form of a suitable bank, institutional or personal guarantee (Erasmus, Superior Court Practice , B1-346).

The defendant or respondent may call for security ‘in a form which is acceptable to him' for the costs of the action. Security is defined in r 2(1)(b) as including ‘the giving of a security bond either by the party or by someone as his surety or by two or more persons'. The object of r 62(1) appears to be that the plaintiff or respondent must lodge security for the costs of the action, not in a fixed amount, but rather in a form acceptable to the defendant, the amount of which will be determined after judgment by way of taxation of a bill of costs (Jones & Buckle, The Civil Practice of the Magistrates' Courts in South Africa , Vol II, Rule 62-7).

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 fixed by the registrar within 10 days, the other party may apply to court on notice for an order that such security be given and the proceedings be stayed until such order is complied with. It is usual practice in an application under r 47(3) to include a prayer that in the event of security not being furnished within the time stipulated, the applicant be given leave to apply on the same papers, amplified as may be necessary, for the dismissal of the proceedings ( SA Television Manufacturing v Jubati 1983 (2) SA 14 (E) at 20B).

If the plaintiff or applicant does not comply with the request timeously, the defendant or respondent may bring an application in accordance with the provisions of r 55(1) and (2). If the defendant or respondent wishes to place evidence before the court in support of an allegation in the application, it should be done by affidavit. If there is a dispute that cannot be resolved on the papers, the magistrate should receive evidence or order that the issue be tried by way of action as provided for in r 55(2)(a) and (b) (Jones & Buckle, supra , Rule 62-8). The court may either stay the proceedings until such request is complied with; order that the plaintiff need not furnish security; dismiss the action; or make such other order as it may deem fit.

A defendant does not have an unfettered or absolute right to security in terms of r 62 (Firstrand Bank v Pather 2005 (4) SA 429 (N) at 432G and Computer Brilliance CC v Swanepoel 2005 (4) SA 433 (T) at 444A).

In Firstrand it was held (at 432G-H) that a defendant may by notice call upon a limited liability company to furnish security in accordance with r 62(1), but when approaching the court under r 62(2), the defendant has to put up evidence by way of affidavit to satisfy the requirements of s 13 of the Companies Act. In Computer Brilliance it was found (at 443I-444A) that rr 62(1)(c) and 62(2) were ultra vires s 8 of the Close Corporations Act and it was, accordingly, held (at 444D-E) that s 8 should be complied with by placing credible testimony before the court on application in terms of r 55(1).

Notice of motion

We suggest that the prayers in the notice of motion be framed, mutatis mutandis, (as was done in Shepstone & Wylie v Geyser NO 1998 (1) SA 354 (N), reversed on appeal but not on this point, in 1998 (3) SA 1036 (SCA)) as follows:

  1. the respondent is directed to furnish security to the applicant for costs incurred and to be incurred by him in the action instituted by the respondent against the applicant in this court under case number ____________;

  2. the form, amount of and manner in which the security is to be furnished shall be fixed by the Registrar of this honourable court;

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

  4. the action under case number _____________ is stayed until the respondent has furnished the security for costs in the form, amount and manner directed by the Registrar;

  5. in the event of the security not being furnished as ordered, the applicant is 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 number_____________;

  6. the respondent is directed to pay the costs of this application;

  7. such further and/or alternative relief be granted to the applicant as the court may deem meet.’

The authors are all advocates in Pretoria . Jacques Malan BCom LLB (UP) is a former lecturer at the University of Pretoria and an attorney, Danie van Loggerenberg SC BIur LLB (PU for CHE) LLD (UPE) is a former professor of law at the University of Port Elizabeth , while Leon Dicker BIur (UPE) LLB (Unisa) is a former magistrate and lecturer at the Justice College .

back