JUDGMENT by 66pgoq

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									                                     FORM A
      FILING SHEET FOR SOUTH EASTERN CAPE LOCAL DIVISION
                          JUDGMENT


PARTIES:

FRUIT MACHINERY ENGINEERING                               Plaintiff

and

PATENSIE SITRUS LIMITED                                     Defendant

      (a)     Case Number: 2424/06
      (b)     High Court: SOUTH EASTERN CAPE LOCAL DIVISION
DATE HEARD:           22 November 2007
DATE DELIVERED: 23 November 2007


JUDGE(S): KROON, J


LEGAL REPRESENTATIVES –

Appearances:
      (a)    For the Applicant(s): P W Scott
      (b)    for the Respondent(s): M Swanepoel

Instructing attorneys:
        (a)    Applicant(s): Goldberg & de Villiers Inc
        (b)    Respondent(s): Schoeman Oosthuizen Inc



CASE INFORMATION -
      (a)     Nature of proceedings : Application
      (b)     Topic:
      (c)     Key Words:
                                    2




                                                           REPORTABLE
IN THE HIGH COURT OF SOUTH AFRICA


(SOUTH EASTERN CAPE LOCAL DIVISION)

                                                                   CASE

NO: 2424/06


IN THE MATTER BETWEEN:



FRUIT MACHINERY ENGINEERING

Plaintiff


and


PATENSIE SITRUS LIMITED
Defendant
________________________________________________________________________

                               JUDGMENT

________________________________________________________________________

KROON J:


[1]    This is an application by the defendant for the dismissal of the

plaintiff’s claim for want of compliance by the latter with an order that it

furnish security for the defendant’s costs in the action instituted by it

against the defendant.
                                       3




[2]   The plaintiff’s action is for payment of the sum of R169 290,00 being

the balance     of the purchase price of R990 000, 00 in respect of six dry

tunnels sold and delivered to the defendant.                  The latter raises the

defence that the dry tunnels are defective and not fit for their intended

purpose and in a counterclaim the defendant seeks the recovery of

alleged damages in the sum of R587 069,00 being R272 976,00 in respect

of the cost of remedying the alleged defects and R314 093,00 in respect

of consequential loss.



[3]   Pursuant to an order by Nepgen J (granted by agreement), that the

Registrar determine the amount, nature and form of the security to be

furnished by the plaintiff for the defendant’s costs incurred and to be

incurred in the action, the Chief Registrar, after hearing the parties, fixed

the security, on 30 March 2007, in the sum of R180 000,00, to be furnished

by way of a bank guarantee. The order of Nepgen J further granted the

defendant leave to        apply   to       this   court, on    the same papers

supplemented insofar as may be necessary, in the event of the security

not being furnished by the plaintiff within one month of the determination

by the Registrar, for an order dismissing the plaintiff’s claim.



[4]   The plaintiff thereafter approached this court for an order reviewing
                                      4


the Registrar’s determination, setting it aside and replacing it with a

determination in a lower amount. That review application, heard by me,

was dismissed on 6 September 2007.        I further granted the defendant

leave to apply to this court, on the same papers as were before Nepgen

J, amplified as may be necessary, for an order dismissing the plaintiff’s

claim in the event of the plaintiff failing to furnish the security determined

by the Registrar by 28 September 2007.



[5]   It may be recorded that the said date of 28 September 2007 was

fixed after I had enquired of the defendant’s then counsel whether same

would be appropriate        and received his confirmation thereof (after he

had taken instructions thereanent).



[6]   The plaintiff failed to furnish the required security, or any part

thereof, by 28 September 2007, and to date persists in such failure; hence,

the present application by the defendant for an order dismissing the

plaintiff’s claim with costs.



[7]   The application papers reflected that the grant of the order would

be moved on 23 October and were served on the plaintiff’s attorney on

16 October. According to the answering affidavit filed in opposition to

the application, deposed to by Mr de Lange, the sole member of the
                                      5


plaintiff close corporation, the application papers were immediately

communicated to him.         The answering affidavit was, however, only

deposed to on 22 October and filed on the following morning.              A

postponement of the proceedings was thereby rendered inevitable (with

additional time being afforded to the plaintiff to source funds to enable it

to furnish the security, and thereby be in a position to invoke a counter to

the application). His explanation for the delay was that he was engaged

on Wednesday/Thursday, 16/17 October in securing travel documents

and a visa for a trip to America and his tight programme prevented him

from communicating with his attorney.          Similarly, he was involved on

Friday,     18 October, in very important negotiations with a major client

who was to accompany him to America to investigate the possibility of

importing certain fruit machinery, and again was unable to communicate

with his attorney. I will revert to this overseas trip below.



[8]   Mr Swanepoel, for the defendant, placed emphasis on the fact that

the plaintiff’s financial statements for the years ending February 2005 and

February 2006, which were included in the papers before Nepgen J,

reflected a none too rosy and deteriorating financial position.     I do not

consider it necessary to set out the details: suffice it to record that the

inference is that the plaintiff’s precarious financial position was no doubt

the reason why the plaintiff consented to the order made by Nepgen J
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and is the explanation for the plaintiff’s inability at present to furnish any

security.     The plaintiff has not sought to contend in the present

proceedings that its financial position since February 2006 has improved,

and there is merit in Mr Swanepoel’s submission that, having regard to the

historical trend evidenced by the now outdated financial statements,

there is reason to apprehend that on the contrary the plaintiff’s financial

position has deteriorated further. The apprehension is increased by the

plaintiff’s failure, unexplained, to place more up to date financial

statements before me.



[9]    Indeed, Mr Scott, for the plaintiff, recognized that, as he put it, the

plaintiff “is having difficulty in providing the necessary security at this time ”, and

restricted his argument to supporting the plaintiff’s request for an

extension of the period in which to furnish security.



[10]   Rule 47(4) provides as follows:



            “The court may, if security not be given within a reasonable

            time, dismiss any proceedings instituted or strike out any

            pleadings filed by the party in default, or make such other order

            as to it may seem meet”.
                                     7


In casu, it was correctly not argued that the fixing of 28 September as the

date by which security was to be furnished, did not in the circumstances,

having regard to the history of the matter, afford the plaintiff a reasonable

period. Accordingly, in terms of the Rule I have a “discretion” whether to

order, on the ground of the plaintiff’s failure to provide the security by that

date, to make any of the orders provided for in the Rule.            The Rule

reflects the approach that obtained prior to the promulgation of the

Uniform Rules of Court:         In Excelsior Meubels Bpk v Trans Unie

Ontwikkelingskorporasie Bpk 1957(1) SA 74 (T) at 77F-G it was held that the

court had the inherent power to dismiss the action of a plaintiff

company which did not provide the security          ordered within the time

stipulated.



[11]   The nature of the discretion accorded by the use of the word “may”

in the Rule was the subject of debate at the Bar ie whether it was

discretion in the strict sense or not. The issue does not require resolution in

that whatever the true nature of the discretion the conclusion reached by

me on the application would be the same.



[12]   (a)    It has been held that strong grounds must be shown to justify

a court of justice in staying the hearing of an action, that the courts of law

are open to all, and it is only in very exceptional circumstances that the
                                              8


doors will be closed upon anyone who desires to prosecute an action.

Western Assurance Co vs Caldwell’s Trustee 1918 AD 262 at 273.                              In

noting that this dictum has been steadily adopted ever since, Foxcroft J in

Wallace NO v Commercial Union Insurance Co of SA Ltd 1999 (3) SA

804(C) (at 809I-810B) commented that it is trite that a court will be slow to

adopt the extreme measure of dismissal when another remedy is

available.



      (b)       In SA Scottish Finance Corporation Ltd v Smit                    1966 (3) SA

629 (T) at 634D-F, Trollip J, in dealing with the dismissal of an action upon

failure to provide security, said the following:



            “Generally, I do not think that the action ought to be dismissed unless

            ‘the plaintiff has recklessly disregarded his obligations, or…..the case

            appears to be hopeless, or the Court is convinced that the plaintiff

            does not seriously intend to proceed’. That was the test applied by

            Greenberg J (as he then was) in Ford v South African Mineworkers

            Union 1925 TPD 405 at 406 in determining whether to grant absolution

            from the instance under the Supreme Court Rules against a plaintiff for

            not filing a declaration timeously, and I think it is also a useful guide for

            Rule 58(2)”.




      (Rule 58(2) was the then rule relating to the provision of security in
                                       9


the magistrate’s court).



(c.f. the comments in Shepstone & Wylie & Others v Geyser NO 1998 (3)

SA 1036 (SCA) at 1046H-I that while the           probability that an order for

security would effectively terminate the litigation is not by itself sufficient

reason to refuse the order, it is a factor to be taken into account. See,

too, Giddy NO v J C Barnard & Partners 2007 (2) BCLR 125 (CC), the

headnote in which reflects the following approach: In applying s 13 of

the Companies Act 61 of 1973 in a manner consistent with the

Constitution, a court is obliged to balance on the one hand, the potential

injustice to a plaintiff if it were prevented from pursuing a legitimate claim

and on the other hand, the potential injustice to a defendant who could

successfully defend the claim, but         who would be unable to recover

costs from the plaintiff. The first consideration incorporated a recognition

of the importance of the right of access to courts.                   Relevant

considerations in performing this balancing exercise would include the

likelihood that the effect of an order to furnish security would be to

terminate the plaintiff’s action; attempts made by the plaintiff to find

financial assistance from its shareholders or creditors; the question whether

it was the conduct of the defendant that caused the financial difficulties

of the plaintiff; as well as the nature of the plaintiff’s action).
                                     10


[13]   Mr Swanepoel submitted that the correct procedure for the plaintiff

to have followed was to have launched a substantive application in terms

of Rule 27(1) for an extension of time within which to file the required

security (either by way of an application initiating proceedings, and

preferably prior to 28 September, the date fixed by which the security was

to be furnished, or by way of a counter-application in the             present

proceedings). He sought to stress that in such an application the plaintiff

would bear an onus to show good cause for the grant of relief to him.

Accepting that it was open to the plaintiff to bring such a substantive

application, it is clear that the plaintiff was entitled to adopt the course it

did, to offer resistance to the defendant’s application, including

requesting an extension of time to file the security, and it remains an

obligation on him to demonstrate good cause for the court to come to his

aid.



[14]   In his answering affidavit de Lange made the following averments.



       (c)   He was somewhat shocked at the “stiff security” required of the

             plaintiff in the light of the “small” amount of its claim;

             nevertheless, he was of the opinion that the plaintiff has a

             good case and he wished bona fide to proceed with its

             claim.
                                       11




      (d)    After the order of 6 September was made he caused a

             request to be conveyed to the defendant for an extension of

             time, until about 20 October 2007, to enable him “to generate

             funds”   to provide the security required.



             In fact, as the replying papers reflect, the approach to the

defendant’s attorneys was only made some time after the date the

security was due viz on 9 October, when it was conveyed that the plaintiff

would be able to provide the security towards the end of October.

However, no firm date by which the plaintiff would be so able was

provided, this was unacceptable to the defendant and the application

was launched.



             The failure to furnish the security in October was explained by

de Lange as follows: a client was to pay “a big account” to the plaintiff by

20 October; unfortunately, however, the payment did not materialise and

the client was still busy arranging his finances with his bank.



      (e)    On 23 October he was flying out to various overseas

             destinations viz Cairo, Spain, London and California, and

             would only return on 9 November.             The purpose of the
                                    12


            overseas visits was to generate work to acquire funds in order

            to place the plaintiff in a position at a later stage to furnish

            security and proceed with the action against the defendant.



[15]   Were the matter to have been decided only on the above

answering affidavit then, in addition to the criticisms to be levelled at the

content thereof (as to which, see below) an allied criticism would have

been the following: more than a month would have elapsed since the

alleged debt had become payable and some two weeks after de

Lange’s return from overseas; yet no leave had been sought (which

would undoubtedly have been granted if applied for) to file a further

affidavit to place further information before the court as to what had

happened in the matter of the alleged client’s indebtedness to the

plaintiff or as to what had transpired pursuant to his trip overseas; the

inference would have been that he was unable in either case to aver

that a real source of funds had eventuated.



       In fact, however, prior to the hearing yesterday morning de Lange

cause a further affidavit to be delivered to the defendant’s attorneys,

and at the hearing Mr Scott moved that the affidavit be received.

Despite objection by Mr Swanepoel I considered that the interests of

justice would be served by the receipt of the affidavit, and I ruled
                                     13


accordingly.



[16]   The further affidavit recorded the following:



       (a)   He returned from overseas on 9 November and on 13

             November he travelled (from Cape Town where he is based)

             to the Eastern Cape where he consulted with clients over a

             period of a week.

       (b)   Pursuant to his overseas trip he secured a contract with a

             local fruit company for the importation of fruit machinery from

             overseas, as also for the manufacturing of certain machinery

             for a local fruit warehouse.       The contract “amounts to”

             approximately        R6 000 000,00. He is at present engaged

             in finalising the terms and conditions of the contract and he

             anticipates that such finalisation will be achieved by the end

             of December 2007.



       (c)   Pursuant to his visit to the Eastern Cape he secured a further

             contract with a fruit warehouse for the installation of all the

             machinery in the warehouse.       The “value” of this contract

             “amounts to” about R9 000 000,00. This contract, too, was in

             the process of finalisation, anticipated to be completed early
                                      14


             in January 2008.



       (d)   A   further   contract   was   secured   in   Nelspruit   for   the

             manufacture of machinery and plant and for the importation

             of machinery from overseas.       The “value” of the contract

             “amounts to” approximately R3 200 000,00.         The project is

             scheduled for the middle of April 2008 and the envisaged

             completion date is November 2008.



       (e)   In the light of the above, so it was averred, the plaintiff will

             certainly be in a financial position to furnish the security

             required by the end of January 2008.



[17]   Factors counting against the plaintiff are the following:



       (a)   The obligation to furnish security arose when the order of

Nepgen J was issued on 7 December 2006 and the amount and form of

the security was determined on 30 March 2007. It was the good right of

the plaintiff to seek a review of the determination, but, as Mr Swanepoel

pointed out, it was only the quantum of the security that was in issue in the

review, and as yet, many months down the line, no security has been

furnished; as recorded earlier, the plaintiff is at present impecunious and
                                    15


unable to furnish security.



      (b)    In his first affidavit de Lange did not take the court into his

confidence as to what steps, if any, were taken by the plaintiff to find the

means to furnish security after judgment in the review was handed down

on 6 September: he mentioned only that it was conveyed (at a relatively

late stage) to the defendant’s attorney that he anticipated a payment

being made by a client on 20 October and that he was proceeding

overseas to endeavour to generate some income for the plaintiff.



      (c)    De Lange’s coyness in that affidavit in failing to disclose the

details relating to the two steps referred to in (b) attracts cognizable

criticism: he did not disclose the amount of the debt allegedly payable

on 20 October nor the identity of the debtor; he failed to disclose, other

than to intimate, somewhat baldly, that the trip overseas was to explore

the possibility of importing fruit machinery, what investigations were to be

conducted overseas including details of the type of machinery that might

be imported, the identity of the parties who were to be approached in

that regard, the prospects of the trip being met with success and the likely

income that might eventuate.



      (f)    The absence of any reference in the second affidavit to the
                                         16


                alleged debt payable on 20 October confirms the inference

                that nothing will come thereof.



       (g)      That affidavit, too, generally suffers from the same criticism of

                being lacking in detail as apply to the first affidavit. As to the

                fact that amounts have been mentioned allegedly reflecting

                the “values” of the contracts, it is not indicated whether the

                amounts represent alleged net or gross profit or how same

                have been arrived at.         Certain of the contracts are still

                inchoate.



       (h)      The security determined does not take account of the costs

                incurred in respect of the review proceedings or the present

                proceedings.



[18]   Factors favourable to the plaintiff are the following:



       (a) The grant of the defendant’s application would have the drastic

             result of shutting the doors of the court to the plaintiff’s pursuit of

             his claim.



       (b) As Mr Scott argued, it cannot be found that the plaintiff is in wilful
                                       17


            disregard of the court’s order nor am I able to ascribe

            recklessness to it. It must be accepted, too, that the plaintiff is

            bone fide in its desire to pursue its claim against the defendant.



      (c) Despite the criticisms to be levelled at the content of the

            plaintiff’s affidavits, they do reveal some, cognizable, prospects

            that the funds required for the security will be sourced by it.



      (d) The plaintiff’s claim is for the balance of a purchase price,

            admittedly not paid by the defendant which alleges defective

            performance founding a counterclaim.                The issues are

            interrelated and shutting the doors of the court to the plaintiff

            would not obviate the need for those issues to be ventilated as

            the defendant is clearly bent on pursuing its claim.



               The fact of such interrelation is, however, not to be overstated

and it speaks for itself that it cannot be conclusive; otherwise there could

never be talk of obliging a plaintiff to furnish security in circumstances

such as those obtaining in the present matter. It nevertheless remains a

factor.



      (e)      Mr Swanepoel did not join issue with Mr Scott’s statement
                                     18


that, having regard to the fact that no trial date has as yet been

allocated in the matter, it is unlikely that the matter would be heard within

the next six months. That does not mean, of course, that preparation for

trial must pro tempore come to a standstill.    However, regard should also

be had to the fact that the extension moved by Mr Scott was until 31

January 2008 and that the year end closed period for the business of the

court and the annual holiday season would be embraced therein.



       (f)    As Mr Scott further pointed out, the costs occasioned by the

review proceedings and the present proceedings are a fait accompli.

Mr Scott’s further concession was that it would be proper, should I be

disposed to come to the plaintiff’s aid and grant the extension sought, for

a further order to be made that should the security not be furnished by 31

January 2008 the plaintiff’s claim shall be deemed to have been dismissed

with costs (a similar order was granted in Mampudi Mining (Pty) Ltd v

President of the RSA NO and Others [2004] 4 All SA 457 (T)) and, as counsel

pointed out, any further incurring of costs by the defendant in respect of

the    dismissal of the plaintiff’s claim by reason of the latter’s failure to

furnish security would thereby be obviated.



[18]   Two further submission of Mr Swanepoel may shortly be disposed of.
                                    19


       (a)   He submitted that the papers before Nepgen J reflected that

the plaintiff had no prospects of success in its claim.     I do not find it

necessary to record the grounds invoked for the submission. Suffice it to

record that I am unable to make a finding to that effect.



       (b)   Similarly, I am unable to accept the invitation to find that the

terms of the financial statements placed before Nepgen J reflect that a

cession by the plaintiff to a bank of its receivable debts applies also to

future debts, and that therefore any amounts that become owing to the

plaintiff in terms of the alleged contracts would be hit by the cession (and

would therefore not be a source of the funds required to furnish security).

[19]   On a conspectus of the above considerations I am persuaded that

the interests of justice would be served by the plaintiff being afforded the

extension sought.



[20]   The plaintiff has achieved a measure of success today in warding

off an order for the dismissal of its claim.      On the other hand, the

extension to be granted constitutes an indulgence, the plaintiff’s conduct

in the matter and the contents of its papers attract a cognizable measure

of censure, and I am persuaded that it was reasonable for the defendant

to have persisted in its application.        In the circumstances, I am

persuaded that the defendant is entitled to its costs.
                                      20




[21]   The following order will accordingly issue:



       (c)   The plaintiff is given leave to furnish the security determined

             by the Registrar by 31 January 2008.



       (d)   In the event of the plaintiff failing to furnish the security by the

             said date the plaintiff’s claim shall be deemed to have been

             dismissed with costs.



       (e)   The costs of the application will be paid by the plaintiff.




_____________________
F. KROON

JUDGE OF THE HIGH COURT




Date of hearing:          22 November 2007



Date of judgment:         23 November 2007
                              21



For applicants:    P W Scott, instructed by
                   Goldberg & de Villiers Inc

                   13 Bird Street

                   Central, Port Elizabeth



For respondents:   M Swanepoel, instructed by
                   Schoeman Oosthuizen Inc

                   167 Cape Road
                   Port Elizabeth

								
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