Set Square Developments (Pty) Ltd v Power Guarantees (Pty) Ltd and Another (099/2023; 150/24) [2025] ZASCA 64 (20 May 2025)

Set Square Developments (Pty) Ltd v Power Guarantees (Pty) Ltd and Another (099/2023; 150/24) [2025] ZASCA 64 (20 May 2025)

The Supreme Court of Appeal held that the three on-demand guarantees issued by Power Guarantees in favour of Set Square Developments were autonomous instruments, independent of the underlying construction contracts. The court found that Set Square complied with the requirements for calling up the guarantees by providing written demands and notices of termination due to contractor default. Power Guarantees' defences based on the alleged non-existence or difference of the underlying contracts were rejected, as the parties to those contracts performed their obligations and did not dispute their validity. The fraud exception was found to be inapplicable, as Power Guarantees failed to present...

Citation
[2025] ZASCA 64
Parties
Appellant: Set Square Developments (Pty) Ltd; Respondent: Power Guarantees (Pty) Ltd; Respondent: Vahva Construction (Pty) Ltd
Court
Supreme Court of Appeal
Jurisdiction
South Africa
Judgment Date
20 May 2025
Case Number
099/23; 150/24
Procedural Posture
Civil Appeal / Appeal From Gauteng Division of the High Court, Pretoria
Outcome
Set Square Developments' appeal was upheld and Power Guarantees' appeal was dismissed. The High Court's order was replaced with an order for payment under the three guarantees, together with interest and costs.
Judges
Meyer, Matojane, Unterhalter, Phatshoane, Molitsoane
Legal Topics
On Demand Guarantees, Performance Bonds, Fraud Exception, Contractual Autonomy, Mistake in Contract, Unconscionability Exception
Commercial and Corporate Civil Procedure On Demand Guarantees Performance Bonds Fraud Exception Contractual Autonomy Mistake in Contract Unconscionability Exception

Case Brief

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Parties

Set Square Developments (Pty) Ltd

Appellant

Power Guarantees (Pty) Ltd

Respondent

Vahva Construction (Pty) Ltd

Respondent

Procedural Posture

Civil Appeal / Appeal From Gauteng Division of the High Court, Pretoria

Legal Issues

  1. 1 Whether the terms of three on-demand guarantees precluded interrogation into the employer's claim that it had cancelled the underlying contracts due to breach by the contractor.
  2. 2 Whether the underlying construction contracts between Set Square and the contractor existed and were inextricably linked to the performance guarantees.
  3. 3 Whether Power Guarantees' defences of fraud and unconscionability are sustainable on the facts.

Ratio Decidendi

The Supreme Court of Appeal held that the three on-demand guarantees issued by Power Guarantees in favour of Set Square Developments were autonomous instruments, independent of the underlying construction contracts. The court found that Set Square complied with the requirements for calling up the guarantees by providing written demands and notices of termination due to contractor default. Power Guarantees' defences based on the alleged non-existence or difference of the underlying contracts were rejected, as the parties to those contracts performed their obligations and did not dispute their validity. The fraud exception was found to be inapplicable, as Power Guarantees failed to present...

Court Disposition

Set Square Developments' appeal was upheld and Power Guarantees' appeal was dismissed. The High Court's order was replaced with an order for payment under the three guarantees, together with interest and costs.

Orders

  • The appeal under case number 150/24 is dismissed with costs.
  • The appeal under case number 099/23 is upheld with costs.