security for costs & and the constitution
Posted 5 September 2006

The matter of Trevor B Giddey NO vs J C Barnard and Partners concerned the question how a court should approach the exercise of the discretion in Section 13 of the Companies Act, 61 of 1973, which vests a court with a discretion to order a company that institutes action to furnish security for costs if there is reason to believe that it will be unable to pay the costs of its opponent. 

O’Regan J held that it is necessary for a court to take into account the provisions of the Constitution before granting such an order, since an order to furnish security, that cannot be met, prevents an applicant from having a dispute resolved by a court of law. In applying section 13 in a manner consistent with the Constitution, a court is obliged to balance on the one hand, the potential injustice to a plaintiff if it is prevented from pursuing a legitimate claim and on the other, the potential injustice to a defendant who successfully defends the claim but who will be unable to recover costs.

O’Regan J held that on appeal the exercise of a discretion by a court ito section 13 will only be interfered with if it was not exercised judicially or on the basis of incorrect facts or principles of law.