Mystic River Investments Ltd and Another vs. Zayeed Paruk Incorporated and Others

South Africa

19.04.2023

Civil

Security for costs is discretionary remedy granted to Defendant on reasonable apprehension that Plaintiff will not be able to pay the costs of litigation, if plaintiffs claim fails

The issue before the Supreme was whether the high court correctly exercised its discretion by ordering the second Appellant to furnish security for costs. The first appellant, Mystic River and the second appellant, Mr. Karim Issa Mawji, instituted an application against the Respondents in the high court. On the back of allegations that the Respondents had ‘hijacked’ and were ‘looting’ Mystic River, the Appellants sought an order: preventing the respondents from continuing to unlawfully represent and make decisions purportedly on behalf of, or in the name of Mystic River; ordering the respondents to return funds belonging to Mystic River, which were misappropriated or diverted from it; compelling the respondents to provide full and proper accounts in respect of the affairs of Mystic River; for those accounts to be debated; and for Mystic River to be paid any amounts due to it pursuant to such statement and debatement of account.

The Respondents served the second appellant with notices in terms of rule 47(1) of the Uniform Rules of Court, calling upon him to furnish security for costs in the main application. Security for costs was ordered by the high court.

Security for costs is a discretionary remedy that, a court may grant to a defendant who has a reasonable apprehension that the plaintiff will not be able to pay the costs of litigation, if the plaintiffs claim fails. An incola is not, as a matter of course, entitled to demand security from a peregrinus claimant. It is at the discretion of the court to make such an order after an investigation of the circumstances and if equity and fairness to both litigants dictate that such an order be made. There is no justification for requiring the court to exercise its discretion in favour of a peregrinus only sparingly.

The high court erred in holding that, as a general rule, a peregrinus is obliged to furnish security for costs. This misdirection justified interference by this Court. That being so, this Court was at large to consider the application afresh. In considering the application, the Supreme Court found that the second appellant did not plead poverty. He did not complain that an order of security would cause an injustice in the sense that it would prevent him from pursuing the main application.

Fairness and equity dictate that the second appellant should be ordered to provide security for costs as he involved himself in the matter in his personal capacity so that when the monies due to Mystic River are returned to it, he could claim his 50 per cent share of the profit. It is fair and equitable to all the parties involved to require the second appellant to furnish security for the respondents’ costs in the main application. The high court erred in directing that the appellants pay the costs of the applications to provide security jointly and severally. There was no basis for a costs order against Mystic River. The appeal is dismissed with costs to be paid by the second appellant.

Tags : Security Furnishing of Discretion

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