The applicant, Trevor B Giddey NO, acting as liquidator of Sadrema Explorations Ltd (in liquidation), instituted an action in the Johannesburg High Court against the respondent, J C Barnard and Partners, claiming approximately US$100 million plus interest. The claim was based on allegations that the respondent, an accounting firm, had received the funds on behalf of Sadrema and failed to hold them in trust, conduct allegedly contributing to Sadrema’s liquidation. The respondent applied under section 13 of the Companies Act 61 of 1973 and Rule 47 of the Uniform Rules of Court for an order compelling the applicant to furnish security for costs on the basis that the company in liquidation would be unable to pay costs if unsuccessful. The High Court granted the order and stayed the action pending provision of security. Leave to appeal was refused by the High Court and the Supreme Court of Appeal, prompting the applicant to seek leave to appeal to the Constitutional Court.
Leave to appeal was granted, but the appeal was dismissed. The High Court’s order requiring the applicant to furnish security for costs and staying the action pending such security remained in force.
The case is a leading authority on the constitutional dimensions of security for costs in South African law. It clarifies how section 13 of the Companies Act must be applied in light of the constitutional right of access to courts and confirms that the discretion to order security for costs is a discretion in the strict sense. The judgment provides authoritative guidance on the balancing exercise required and on the limited circumstances in which appellate courts may interfere.