Systems Applications Consultants (Pty) Ltd t/a Securinfo v Systems Applications Products AG and Others

The appellant, a local software development company, instituted action proceedings in 2008 against the respondent, a German software company, claiming damages of €609 803 145 for alleged unlawful interference with a software distribution agreement. In 2010, the respondent applied under s 13 of the Companies Act 61 of 1973 for security for costs. Although the 1973 Companies Act was repealed and replaced by the Companies Act 71 of 2008 (effective 1 May 2011) while the application was pending, the Full Court in 2012 ordered the appellant to furnish security of R4 million based on the transitional provisions. The appellant eventually furnished the security after unsuccessful appeals to the SCA and Constitutional Court. In 2018, the appellant applied to have the R4 million security released, alleging material changes in circumstances: (1) the repeal of s 13 of the 1973 Act (which had no equivalent in the 2008 Act), and (2) the joinder of its litigation funder, Ungani Investments, which allegedly had sufficient assets to cover adverse costs. The respondent simultaneously applied to confirm its right to increase the security amount and to join Ungani and its shareholder Mr Mufamadi in the main action.

• Whether a court has power to reconsider and release security for costs previously ordered, on the basis of material changes in circumstances
• Whether the repeal of s 13 of the Companies Act 61 of 1973 and enactment of the Companies Act 71 of 2008 (which has no equivalent provision) constituted a material change warranting release of security
• Whether the application of transitional provisions in Schedule 5 item 10(1) of the 2008 Companies Act affected the validity of the 2012 order for security
• Whether s 173 of the Constitution empowers courts to vary final orders relating to security for costs in changed circumstances
• Whether the joinder of a litigation funder with alleged sufficient assets constituted a material change warranting release of security
• Whether the respondent's conduct in bringing interlocutory applications constituted an abuse of court process
• The standard of review applicable on appeal from the exercise of discretion in security for costs matters

1. The respondent's application for the admission of new evidence on appeal is dismissed with costs, including the costs occasioned by the employment of two counsel. 2. The appeal is dismissed with costs, including the costs occasioned by the employment of two counsel.

The binding legal principles established are: (1) A court has inherent power under s 173 of the Constitution to reconsider orders for security for costs on the basis of material changes in circumstances, but this power should only be exercised in exceptional circumstances on a fact-specific basis to avoid undermining the finality of court orders. (2) Where express transitional provisions (such as Schedule 5 item 10(1) of the Companies Act 71 of 2008) provide that proceedings commenced under repealed legislation continue under that legislation, the repeal does not constitute a material change in circumstances warranting variation of orders made under the repealed legislation. Such transitional provisions must be given effect in accordance with s 12(2)(e) of the Interpretation Act 33 of 1957. (3) A party seeking to establish that changed factual circumstances warrant release of security for costs bears the onus of providing credible objective evidence of those changes—unsubstantiated assertions or documents are insufficient, particularly where disputed. (4) The mere joinder of a litigation funder does not, without objective proof of financial capacity to meet adverse costs orders, constitute grounds for releasing security already furnished. (5) Interlocutory applications brought in exercise of rights conferred by court orders and authorized by Rules of Court do not constitute abuse of process merely because they result in delay or are unsuccessful. (6) Security for costs is a procedural matter involving the court's regulation of its own processes under s 173 of the Constitution, even where grounded in substantive statutory rights (such as s 13 of the 1973 Act). (7) An appellate court will only interfere with a lower court's exercise of discretion in security for costs matters where satisfied the discretion was not exercised judicially, was influenced by wrong principles or misdirection on facts, or reached a decision no reasonable court could make.

The Court made several non-binding observations: (1) That it is "conceivable" that s 173 of the Constitution can be invoked in respect of orders relating to security for costs in appropriate circumstances, though what constitutes appropriate circumstances must be determined case-by-case. (2) That the transitional provisions in the 2008 Companies Act have the potentially anomalous effect that two applications for security for costs brought days apart might be adjudicated under different legal regimes—one under s 13 of the 1973 Act, the other without such provision—though the Court noted the constitutionality of the transitional provisions was not challenged. (3) That in the post-Boost era, courts must be mindful of the altered legal position and ought not approach enquiries about security for costs as if s 13 is still part of South African law when considering fresh applications. (4) That the mischief identified in MTN Service Provider v Afro Call—parties financing litigation through companies while shielding behind corporate identity to avoid liability for costs—remains relevant even after repeal of s 13. (5) That matters pertaining to security for costs, while involving procedural regulation, also raise constitutional considerations regarding access to courts under s 34 of the Constitution, requiring courts to balance potential injustice to plaintiffs prevented from pursuing legitimate claims against potential injustice to defendants facing irrecoverable costs. (6) That allowing generalized revisiting of final orders simply because their underlying legal basis has changed would not be in the interests of justice and would create legal uncertainty and potential chaos. (7) Commentary on the late filing and lack of merit in the respondent's application to adduce new evidence on appeal.

This case is significant in South African law for clarifying: (1) The limited circumstances in which s 173 of the Constitution can be invoked to reconsider final orders for security for costs, emphasizing that it should only be exercised in exceptional circumstances to avoid legal uncertainty. (2) The proper application of transitional provisions when legislation is repealed—confirming that proceedings commenced under repealed legislation continue under that legislation despite repeal, in accordance with express transitional provisions and the Interpretation Act. (3) The continued relevance of principles developed under s 13 of the 1973 Companies Act in the post-2008 Companies Act era, particularly regarding the mischief of parties shielding behind corporate identity when funding litigation. (4) The evidentiary burden on applicants seeking to vary security for costs orders—requiring credible objective evidence, not mere unsubstantiated assertions. (5) That security for costs is a procedural matter involving regulation of court processes, subject to narrow appellate review. (6) The interaction between constitutional rights (access to courts under s 34) and security for costs, confirming that where a plaintiff has access to funding, security requirements do not impermissibly restrict access to justice. The case also confirms that post-Boost Sports, despite the absence of s 13 in the 2008 Companies Act, courts retain discretion to order security for costs in cases of vexatious or abusive litigation.