Mystic River Investments 45 (Pty) Ltd & Another v Zayeed Paruk Incorporated & Others

The first appellant, Mystic River Investments 45 (Pty) Ltd, and the second appellant, Mr Karim Issa Mawji (sole director of Mystic River), instituted an application in the KwaZulu-Natal Division of the High Court against the respondents. The appellants alleged that the respondents had 'hijacked' and were 'looting' Mystic River, seeking orders to prevent the respondents from representing Mystic River, return misappropriated funds, and provide full accounts. The second appellant brought the application in both his representative capacity and personal capacity. He is a peregrinus (foreign litigant), owns no assets in the Republic of South Africa, and had moved to Portugal in 2018. The respondents served notices under rule 47(1) of the Uniform Rules of Court requiring the second appellant to furnish security for costs, contending he would be unable to pay their costs if unsuccessful. The second appellant declined to furnish security. The high court (Vahed J) ordered the second appellant to provide security for costs and ordered the appellants jointly and severally to pay costs including wasted costs of 14 May 2021. The appellants appealed with leave of the high court.

• Whether the high court correctly exercised its discretion in ordering the second appellant to furnish security for costs under rule 47 of the Uniform Rules of Court
• What is the proper legal test for ordering a peregrinus to provide security for costs
• Whether there is a general rule that a peregrinus must provide security for costs to an incola
• Whether the high court applied the correct legal principles in exercising its discretion
• To what extent can an appellate court interfere with a discretionary decision to order security for costs
• Whether the costs order against both appellants jointly and severally was correct

1. Save to the extent set out below, the appeal is dismissed with costs to be paid by the second appellant. 2. Paragraph d of the order of the High Court is set aside and replaced with the following: 'The second applicant is directed to pay the costs of the applications, including the costs of 14 May 2021.'

The binding legal principles established are: (1) Security for costs is a discretionary remedy that requires the court to conduct a balancing exercise weighing the injustice to the plaintiff if prevented from pursuing a proper claim against the injustice to the defendant if no security is ordered and the plaintiff's claim fails. (2) There is no general rule that a peregrinus must provide security for costs when demanded by an incola. (3) A court must not fetter its discretion by adopting a predisposition either in favour of or against granting security, but must decide each case on consideration of all the circumstances. (4) The discretion to order security for costs is a discretion in the strict or true sense, meaning an appellate court can only interfere if the court exercised its discretion on wrong principles, took irrelevant considerations into account, or failed to make the decision judicially on the basis of correct facts and legal principles. (5) When a peregrinus is involved in litigation personally for their own benefit (not solely for the benefit of a local company), and does not plead poverty or that providing security would prevent pursuit of the claim, fairness and equity may dictate that security should be ordered to avoid the respondents suffering inconvenience, delay and additional costs in enforcing a foreign costs order.

The court observed that the question of how the discretion to order security for costs should be classified (as discretion in the strict or broad sense) was left open in Shepstone & Wylie but has since been settled by the Constitutional Court in Giddey NO v JC Barnard & Partners. The court noted that the second appellant could have withdrawn from the matter in his personal capacity to defeat the application for security if he was indeed litigating solely for the benefit of Mystic River. The court also noted that while it would not be impossible for the respondents to enforce a costs order against the second appellant abroad (in the UK or Portugal), this would involve increased expenses, uncertainty and inconvenience - one of the fundamental reasons why a peregrinus should provide security.

This case clarifies the legal principles applicable to applications for security for costs under rule 47 of the Uniform Rules of Court, particularly where the applicant is a peregrinus. It confirms that there is no general rule that a peregrinus must provide security for costs, and that the court must exercise a true discretion by conducting a balancing exercise considering all circumstances without predisposition. The judgment reaffirms the principles in Magida v Minister of Police and Shepstone & Wylie v Geyser NO, and clarifies that Blastrite did not establish a general rule requiring security from foreign litigants. It also demonstrates the limited circumstances in which an appellate court can interfere with a discretionary decision - only where the court exercised its discretion on wrong principles, took irrelevant considerations into account, or failed to make the decision judicially on the basis of correct facts and legal principles. The case provides guidance on the balancing exercise to be conducted when determining whether to order security for costs from a peregrinus.