The case of BP Southern Africa (Pty) Ltd v Trade Rose Investments (Pvt) Ltd revolves around an application for security for costs, a procedural safeguard embedded within South African litigation framework. A party may demand security for costs to ensure that, in the event the party making demand is successful in the litigation, the costs incurred can be recovered. The common law primarily identifies three situations where security for costs can be demanded: actions by peregrini plaintiffs, actions by insolvents, and cases where the action is vexatious, reckless, or amounts to an abuse of the court process.
Rule 47 of the Uniform Rules of Court lays down the framework by which security for costs can be demanded. The rule, however, remains silent on the grounds for such a demand, this being found primarily in common law and statutory provisions to discern the circumstances under which security for costs may be warranted. A notable common law principle is that a peregrinus (a parties outside the territorial jurisdiction of the court) may be called upon to provide security for costs, especially in the absence of unmortgaged immovable property owned within the Republic.
In the BP case, the applicants sought security for costs from the plaintiff peregrinus, emphasising its status as a peregrinus with no immovable property in South Africa and its financial instability. The peregrinus countered by asserting its ability to meet any adverse costs orders and highlighted the strength of its case against the applicants.
The court noted that decisions on such an application needs to be rooted in fairness and equity and aim to strike a delicate balance, ensuring that while the rights of the peregrinus to access the judicial system are upheld the party within the jurisdiction (the incola) is not left in a financially precarious position should the litigation tilt in their favour. On this, the court states:
“To this end two basic questions would be the focus of the court’s attention: (i) in all probability would the peregrinus be able to meet an adverse costs order? and (ii) would the peregrinus be unable to pursue its claim against the incola? The questions are not be answered in isolation from each other. They are to be considered together, and in so doing the court would ultimately have to balance the two interests in order to ensure that justice is not defeated by either granting or refusing the claim for security.”
The court granted the application for security for costs due to what it considered three primary undisputed facts: (i) the plaintiff was a peregrinus, (ii) it lacked any immovable property within South Africa, and (iii) it was facing financial difficulties. Despite assertions to the contrary by the peregrinus, it failed to provide credible evidence proving its ability to meet any adverse costs orders, later arguing that, should it be ordered to provide security for costs in the amounts sought, it would be prejudiced in its ability to proceed with the litigation.
Partially in consideration of that argument by plaintiff peregrinus, the court reduced the amount of security from the R2 million applied for to R200,000 per applicant, the initial sum being seen as excessive and potentially infringing on the plaintiff’s right to have its dispute resolved fairly in court, as per section 34 of the Constitution of South Africa. The court deemed a sum of R200,000 sufficient, with a provision for the applicant’s to seek an increase later under rule 47(6) if necessary.