Unlike its predecessors, the Companies Act 71 of 2008 does not
contain a specific provision to the effect that whenever an
incorporated company is plaintiff in litigation, any defendant can
demand that that the plaintiff company put up security for costs
(provided that there is reason to believe that the plaintiff
company is unable to pay the defendant's costs, if
We mentioned in our
update of January 2015 that besides the commercial value of
being able to recover some of the costs of litigation, bringing an
application for security for costs against a plaintiff company can
also be a powerful strategic tool as it often has the effect of
frustrating the litigation.
Many have argued that the statutory omission means that one can
no longer demand security from a plaintiff company. The ensuing
jurisprudence has been chaotic and inconsistent.
The Supreme Court of Appeal ("SCA") has recently had
the opportunity to pronounce on the matter in Boost Sports
Africa (Pty) Ltd v The South Africa Breweries (Pty) Ltd 
It has ruled that in the absence of a specific statutory
exemption, corporate plaintiffs must be treated in the same way as
natural plaintiffs with the result that if a defendant can show
that an action is vexatious or reckless, it can call upon a
plaintiff to put up security for costs. In other words, the same
common law remedy that applied to natural plaintiffs now applies to
Insofar as demanding security for costs from corporate
plaintiffs is concerned, the decision brings somewhat of a
sea-change as it means that the underlying merits of the case must
now be visited when applying for security. This is significantly
more cumbersome than having to prove mere inability to satisfy a
To illustrate the difficulties of availing oneself of such a
remedy, one must have regard to the definition of vexatious
litigation: in the words of Holmes JA in African Farms &
Townships v C.T. Municipality 1963 (2) SA 555 (A) at 565D-E,
"an action is vexatious and an abuse of the process of
Court ... if it is obviously unsustainable". In
Golden International Navigation SA v Zeba Maritime 2008
(3) SA 10 (C) para 18, Griesel J posited that an action is
vexatious and frivolous, "where on the face of the
pleadings it is shown that the action cannot be
One must assume that if a corporate plaintiff can demonstrate
even a hint of a plausible and, of course, that it has a real
interest in the litigation, a defendant will probably not be
allowed to call upon it to put up security for costs.
At all events, one must welcome the fact that obtaining security
is at least still possible, even if one must cross the harder
hurdle of having to prove that the action is vexatious. On any
basis, it is helpful to finally have certainty on the matter.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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