Fusion Properties 233 CC v Stellenbosch Municipality

The dispute arose from an invitation for proposals issued by the Stellenbosch Municipality in 2005 for the sale and development of municipal land. Fusion Properties 233 CC responded and alleged that a valid agreement of sale was concluded, which the municipality denied. After earlier litigation and failed negotiations, the municipality resolved in 2014 not to proceed with the sale. In 2015 Fusion instituted an action claiming approximately R32 million in damages for breach of contract, alleging that the municipality deliberately frustrated fulfilment of the agreement. Fusion was a dormant close corporation with no assets or business activity. Fearing it would be unable to recover its costs if successful, the municipality demanded security for costs under s 8 of the Close Corporations Act 69 of 1984 and Uniform Rule 47. Fusion resisted, arguing delay, unequal treatment compared to companies, and infringement of its constitutional right of access to courts. The High Court ordered Fusion to provide security for costs and stayed the action pending compliance. Fusion sought leave to appeal against that order.

The application for leave to appeal was dismissed with costs, including the costs of two counsel.

The case reaffirms that s 8 of the Close Corporations Act remains operative and serves the same protective purpose as the former s 13 of the Companies Act 1973. It confirms that ordering security for costs involves a narrow judicial discretion and that appellate courts will rarely interfere. The judgment provides authoritative guidance on balancing access to courts against protecting defendants from unrecoverable costs where impecunious close corporations litigate.