email this page

print this page

The court can order a plaintiff company to provide security for the Defendant’s legal costs in litigation

A famous judge once remarked that litigation was to be feared as much as illness and death. “As a litigant, I should dread a lawsuit beyond almost anything short of sickness and death".

Anyone should think long and hard before suing. But if you are sued by someone else, you have no choice – if you believe that you are in the right – but to defend the claim made against you.

Demanding security for costs

If you are sued by a company, you should, at the outset, demand security for your legal costs. The law recognises that it would be a travesty if a company could sue you, lose the case and be ordered to pay your costs and then turn out to have no money or assets with which to compensate you. For this reason, section 13 of the Companies Act, 1973, provides that, if a company is the plaintiff in litigation, the court may at any stage require the company to give security for the defendant’s legal costs, if it appears from credible testimony that the company would be unable to pay the defendant’s legal costs if judgment were to be given in favour of the defendant.

If the court orders a plaintiff to furnish such security, the legal proceedings are halted until the requisite security is furnished, usually in the form of a bank guarantee in an amount fixed by the court or the registrar.

The court has a discretion whether to order a plaintiff company to provide security for the defendant’s costs.

In the recent case of Sentraal Suid-Kooperasie Bpk v Bessemer Steel Construction 2004 (3) SA 552 (T) the court pointed out that it had a discretion whether or not to order the plaintiff company to furnish security for the defendant’s costs. In exercising its discretion, the court had to weigh two opposing considerations. Firstly, the injustice to the plaintiff company of being prevented, by an order to furnish security, from pursuing a proper claim. Secondly, the potential injustice to the defendant if the court declined to require the plaintiff company to give security and the defendant was subsequently unable to recover the legal costs incurred in defending the claim.

In this case, the court found that equity favoured the granting of an order that the plaintiff company furnish security for the defendant’s costs. The court estimated that the trial would run for 21 days and ordered the plaintiff to furnish security in the sum of R350 000.

email this page

print this page