Consortium Comprising and Another v Ltd Santam Limited and Others (2023/009986) [2023] ZAGPJHC 187 (7 March 2023)

Consortium Comprising and Another v Ltd Santam Limited and Others (2023/009986) [2023] ZAGPJHC 187 (7 March 2023)

The guarantee in question is an 'on demand' instrument, requiring only an allegation of breach for the employer to call up any amount up to the guaranteed sum. The court found no textual basis in the guarantee to limit the amount to what is reasonably required to remedy the breach. The applicant's interpretation, seeking to read in such a limitation, was rejected as untenable. There was no prima facie evidence of fraud, as the defects were common cause and the guarantee permitted the demand as made. Accordingly, the application for interim relief restraining payment under the guarantee was dismissed.

Citation
[2023] ZAGPJHC 187
Parties
Applicant: KC Cottrell Co. Ltd; Applicant: ELB Engineering Services (Pty) Ltd (in liquidation); Applicant: ELB Educational Trust for Black South Africans; Respondent: Santam Limited; Respondent: Ngodwana Energy RF Ltd; Respondent: Nedbank Limited c/o Nedbank Incorporated
Court
South Gauteng High Court, Johannesburg
Jurisdiction
South Africa
Judgment Date
7 March 2023
Case Number
2023/009986
Procedural Posture
Urgent Application / Interim Interdict Application
Outcome
Application dismissed with costs, including costs of two counsel.
Judges
S D J Wilson
Legal Topics
Performance Guarantee, On Demand Bond, Interim Interdict, Fraud Exception, Construction Contracts
Commercial and Corporate Civil Procedure Performance Guarantee On Demand Bond Interim Interdict Fraud Exception Construction Contracts

Case Brief

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Parties

KC Cottrell Co. Ltd

Applicant

ELB Engineering Services (Pty) Ltd (in liquidation)

Applicant

ELB Educational Trust for Black South Africans

Applicant

Santam Limited

Respondent

Ngodwana Energy RF Ltd

Respondent

Nedbank Limited c/o Nedbank Incorporated

Respondent

Procedural Posture

Urgent Application / Interim Interdict Application

Legal Issues

  1. 1 Whether the applicant has established a prima facie right to restrain the first respondent from paying out on the guarantee.
  2. 2 Whether the guarantee permits the employer to call up any amount on mere allegation of breach, or only what is required to remedy the breach.
  3. 3 Whether the threatened call on the guarantee is fraudulent due to the disproportionate amount claimed.

Ratio Decidendi

The guarantee in question is an 'on demand' instrument, requiring only an allegation of breach for the employer to call up any amount up to the guaranteed sum. The court found no textual basis in the guarantee to limit the amount to what is reasonably required to remedy the breach. The applicant's interpretation, seeking to read in such a limitation, was rejected as untenable. There was no prima facie evidence of fraud, as the defects were common cause and the guarantee permitted the demand as made. Accordingly, the application for interim relief restraining payment under the guarantee was dismissed.

Court Disposition

Application dismissed with costs, including costs of two counsel.

Orders

  • The application is dismissed with costs, including the costs of two counsel.