SA Rugby, with a budget of R350-million, has taken the Southern Spears to the Cape High Court for R200 000 to cover the company's legal costs if the franchise loses its bid to be included in the Currie Cup and Super 14 tournaments.
But the franchise told the court it was penniless and the counsel for Southern Spears, Norman Arendse, accused SA Rugby of "bully-boy tactics" and of wanting to "browbeat them into submission".
The Spears are asking for an order that SA Rugby make good on agreements of financial backing and their participation in the Currie Cup and next year's Super 14.
But SA Rugby wants the Spears to pay R200 000 security for costs up front, should the franchise lose its case.
"The R200 000 sought is a drop in the ocean for SA Rugby," Arendse said.
The Spears allege in papers before court that SA Rugby was in breach of its own constitution and had reneged on the decision to include the team in the two tournaments.
The Spears are also demanding that the company continue its financial obligations to the franchise. The Spears say they were promised R12 million over a year.
Michael Osborne, counsel for SA Rugby, argued that the company had already given the Spears R5,6-million and that the franchise was in financial difficulties because of lack of proper financial controls.
"We hotly dispute that we made an obligation of R12-million.
"It would appear they've used their resources in unjustified expenditures."
Osborne said it would appear that Spears managing director Tony McKeever had been given "carte blanche to run up costs and then the invoices were sent to SA Rugby".
"It was only in March that we realised the expenditure had reached R5-million. It became apparent that Mr McKeever was wasteful and did not maintain proper control," Osborne said.
Arendse argued that the Spears had been formed by SA Rugby and likened the relationship to that of a father supporting his children and then wanting to get out of that arrangement.
He said the Spears would not be in a financial position to pay the R200 000.
"The amounts spent thus far are in accordance with the budget and the accounts were all paid for by SA Rugby."
Osborne told the court the Spears had a duty to ask their shareholders for assistance.
"There should be backers who can help them out, such as their shareholders, which include three rugby organisations in the Eastern Cape, who are in turn owned by the Sail group, who are in turn owned by the Rembrandt Group.
"There is no indication that Rembrandt is unwilling and unable to furnish security for costs or parts thereof," Osborne said.
Arendse said: "The reality is that the Spears are not in a position to provide security for costs and are not in a position to require or persuade anyone else to do so.
"The result is that if we are ordered to provide this, we will not have our day in court.
Judgment is expected on Friday.