Cape Cash and Carry (Pty) Ltd and Others v Xtreme Works (Pty) Ltd and Others

The First Applicant, Cape Cash and Carry (Pty) Ltd, is a company in liquidation, and the Second to Fourth Applicants are its joint liquidators. The Applicants launched motion proceedings against the Respondents on 21 November 2023. They sought to set aside certain dispositions of property and to recover payments. The claim against the Fourth Respondent was for R1,512,500, based on section 29 of the Insolvency Act 24 of 1936 (read with section 339 of the Companies Act 61 of 1973), arising from alleged dispositions made to the Fourth Respondent within six months before the winding-up commenced. The Fourth Respondent demanded security for his costs in the main application, and when this was refused, he launched the present application for security in terms of Rule 47 of the Uniform Rules. The grounds were, first, that the First Applicant is insolvent and unable to satisfy a costs order; and second, that the main application was vexatious, reckless, or an abuse of process.

• Whether an incola applicant in liquidation should be ordered to provide security for costs under Rule 47 of the Uniform Rules.
• What test applies for ordering security for costs against an incola company after the repeal of section 13 of the Companies Act 61 of 1973.
• Whether the main proceedings were 'vexatious, reckless or an abuse of process' so as to justify an order for security for costs.
• Whether the joinder of the Fourth Respondent in the same application under Uniform Rule 10(3) was proper.
• Whether the High Court had territorial jurisdiction over the Fourth Respondent in terms of section 21(2) of the Superior Courts Act 10 of 2013.

The application for security for costs was dismissed. No order was made as to costs.

For an incola applicant to be ordered to provide security for costs, it is not enough to show that the applicant may be unable to satisfy a costs order. The court must additionally be satisfied that the main proceedings are vexatious, reckless, or otherwise amount to an abuse of process. Even where an applicant's procedural steps are ill-advised, misguided, or negligent, this does not necessarily meet the high threshold of being vexatious, reckless, or an abuse required to order security. The power to order security for costs must be exercised sparingly and only in very exceptional circumstances.

The court provided guidance on the meaning of 'reckless' in the context of security for costs applications, stating that it connotes at least a very high degree of negligence (culpa lata), or a wanton disregard for the legitimate interests of the other party, or an obviously inappropriate or extraordinary harnessing of the process of litigation. The court also expressed the view that the Fourth Respondent had a strong jurisdictional objection, as section 21(2) of the Superior Courts Act does not extend to joinder of actions under Rule 10(3) where the court lacks jurisdiction over the person.

The judgment clarifies the legal test for ordering security for costs against incola applicants following the repeal of section 13 of the Companies Act 61 of 1973 and in light of the Supreme Court of Appeal's decision in Boost Sports Africa (Pty) Ltd v South African Breweries Ltd 2015 (5) SA 38 (SCA). It reinforces the high threshold of 'vexatious, reckless or an abuse of process' and provides an interpretation of the term 'reckless' in this context. The case also addresses the limits of joinder of actions under Rule 10(3) and the territorial extension of jurisdiction under section 21(2) of the Superior Courts Act, and demonstrates that procedural irregularities do not necessarily justify an order for security.