South African High Court in Johannesburg has rejected a R150,000 ($9,000) guarantee issued by Standard Bank as security for legal costs in a dispute over the recognition and enforcement of a Chinese court judgment arising from a South African business venture.

Acting Judge Elliott ruled on October 28, 2026, that the guarantee obtained by Chinese businessman Lan Yan failed to meet the court’s requirements because it did not provide the respondent, Liao Zhiyuan, with reliable and enforceable access to the funds.

The court ordered Lan Yan to provide acceptable alternative security within 10 days of service of the order on his attorneys. Failure to comply could result in the dismissal of his main application.

Dispute centres on Chinese court judgment

The underlying proceedings concern Lan’s application to have a July 2022 judgment of the Zhongshan Intermediate People’s Court in China’s Guangdong Province recognised and enforced in South Africa.

The Chinese court ordered payment of RMB1.62 million, together with interest, as well as dividends of R1.8 million ($108,130) converted into Chinese yuan, also with interest. An amount of RMB316,084.40 had already been recovered through enforcement proceedings in China and credited against the outstanding judgment debt.

The security dispute began in June 2025, when Liao requested R500,000 (430,041) to cover his legal costs. Lan offered R50,000 ($3,004), but the court registrar ruled on August 13, 2025, that he must provide R150,000 ($9,000) within 20 court days.

Judge identifies defects in bank guarantee

The registrar required security in a form agreed by the parties or, failing agreement, through an irrevocable guarantee issued by a South African bank.

Lan subsequently obtained a Standard Bank guarantee backed by funds in a pledged investment account. However, Liao’s lawyers rejected the instrument, prompting the dispute over its validity.

Elliott identified several defects, including the naming of Liao’s lawyers, Chen and Lin Attorneys, rather than Liao himself as the beneficiary. This meant Liao could not directly enforce the guarantee.

The instrument also contained a demand requirement referring to a contract and court order that did not exist. In addition, it was due to expire on November 17, 2027, creating a risk that it could lapse before the legal costs were taxed.

More significantly, Standard Bank retained the right to withdraw from the guarantee on three months’ written notice. The judge therefore found that it was revocable, contrary to the registrar’s requirement for irrevocable security.

Court orders alternative security

Elliott ruled that setting aside the R150,000 ($9,000) in a pledged investment account did not resolve the problem because Liao lacked reliable access to the money without potentially pursuing further litigation.

The court directed Lan to provide security through an interest-bearing trust account operated by Chen and Lin Attorneys, an irrevocable South African bank guarantee naming Liao as beneficiary, or another arrangement agreed to in writing by both parties.

The proceedings in the main application remain stayed until the security requirements are satisfied. Elliott also dismissed Lan’s counter-application seeking acceptance of the Standard Bank guarantee and ordered him to pay costs in both applications on the party-and-party scale, including counsel’s fees on Scale C. The ruling does not determine whether the Chinese judgment should ultimately be recognised or enforced in South Africa. It addresses only the security required to protect Liao against legal costs while the substantive proceedings remain pending.