Xmoor Transport (Pty) Ltd v Rand Merchant Bank and Another (D10687/2019) [2020] ZAKZDHC 5 (14 February 2020)

IN THE HIGH COURT OF SOUTH AFRICA

KWAZULU-NATAL LOCAL DIVISION, DURBAN

Case No: D10687/2019

In the matter between:

Xmoor Transport (Pty) Ltd

Applicant

and

Rand Merchant Bank

First Respondent

Mamlambo Construction (Pty) Ltd

Second Respondent

Judgment

Lopes J

[1] On the 17th December 2019 the applicant, Xmoor Transport (Pty) Ltd (Xmoor), brought an urgent ex-parte application before this court seeking interdictory relief to restrain the payment on a payment guarantee (‘the guarantee’) by the first respondent, Rand Merchant Bank (‘the bank’) to the second respondent Mamlambo Construction (Pty) Ltd (‘Mamlambo’). The relief was sought pending the full and proper debatement of an account between the applicant Xmoor and Mamlambo. A rule nisi with

interim relief was granted, and the bank abides the decision of this court.

[2] The context in which the application came to be launched may briefly be described as follows:

(a) In 2016 the Buffalo City Metropolitan Municipality (‘the Municipality’) concluded a civil engineering contract with Xmoor.

(b) It is now common cause that the Municipalty varied the contract to include certain works to be performed on Oxford Street.

(c) Mamlambo was a sub-contractor who carried out the civil engineering works.

(d) Because the payments made by Xmoor were perceived by Mamlambo to be erratic, Mamlambot requested the issue of a guarantee from Xmoor.

(e) The guarantee was arranged and provided on the 5th March 2018 by the bank.

(f) In 2019 Mamlambo delivered a written demand for payment in terms of the guarantee. That demand was accompanied by a number of invoices which were alleged by Mamlambo to be due owing and payable, and for which it was entitled to be paid pursuant to the guarantee, which covered amounts of up to R5 million.

(g) Xmoor then brought the urgent application on the 17th December 2019 in order to prevent the bank from paying out to Mamlambo on the guarantee. Xmoor recorded in its application

papers that the guarantee was only secured to ensure that there was sufficient security for any outstanding balance of payments due to Mamlambo upon completion of the subcontracted works. The deponent to Xmoor’s affidavits, Mr Naicker, who is the manager of its civil engineering department, recorded that the sub-contracting works had been completed.

(h) Mr Naicker, however, suggests in his founding affidavit that all amounts due in respect of the original contract were paid to Mamlambo. What Mamlambo was doing in seeking the payment of invoices which included Oxford Street was fraudulent, and done by Mamlabo for the sole purpose of redeeming the guarantee amount of approximately R5 million. He recorded that Mamlambo’s refusal to agree to a debatement of the account was evidence of its mala fides, and the violation of Xmoor’s rights to a proper debatement of account and an accurate calculation of the amount due.

(i) After the order was granted Mamlambo then applied for a reconsideration of the order and answering and replying affidavits were delivered. The matter came before me on the 11th February 2020 as an opposed application. Mr Naidoo who appeared for Xmoor submitted that there were two questions to be answered:

(i) Does the demand made by Mamlambo comply with the guarantee? and

(ii) is the inclusion of the Oxford Street invoices a fraud or misrepresentation on the part of Mamlambo?

[4] Mr Naidoo submitted that the answers to the above two questions were no and yes respectively. The guarantee itself was clear and unambiguous in its terms and identified the scope of works which would trigger a payment under the guarantee. He submitted that if, as suggested in the answering affidavits, the original contract was extended to include the Oxford Street works, in accordance with the case law, the demand made by Mamlambo to the bank had to be foursquare with the guarantee. He referred to Minister of Transport in Public Works, Western Cape, & another vs Zanbuild Construction (Pty) Ltd & another 2011 (5) SA 528 (SCA). Mr Naidoo submitted that the guarantee does not purport to include the Oxford Street works and has not been amended to do so. In those circumstances only a certificate of practical completion in respect of the Fleet Street works could trigger a payment by the bank. He submitted that the guarantee was not in the nature of a ‘surety’ guarantee but rather an ‘on demand’ guarantee as referred to in Zanbuild. The amount in the guarantee only becomes payable upon compliance by Mamlambo of the conditions set out therein. He submitted that when the guarantee was given, the Fleet Street works had already begun and the Oxford Street works did not form part of that contract.

[5] Mr Shapiro, who appeared for Mamlambo submitted the following:

(a) That the Oxford Street works were included in the original Fleet Street contract #PO19035, by virtue of a variation order. This is demonstrated by the invoices put up by Mamlambo which show that a variation order for Oxford Street had been put into place as early as the 13th December 2017. An annexure to Xmoor’s founding affidavit shows that a payment to Xmoor on the 28th February 2018 in the sum of R 2, 514 097.07 in respect of the Oxford Street works. What this demonstrates is that the Oxford Street works had been included in the original contract #PO19035 by way of a variation order, and that this had happened in 2017.

(b) All that was needed in order to trigger the guarantee was the first demand of Mamlambo that the amount of not more that R5 million was demanded and that the claimed amount was due unpayable in terms of the purchase order #PO19035. There was no suggestion that Mamlambo had not put up invoices when it submitted its demand for payment under the guarantee.

(c) A completion certificate in respect of the Oxford Street works is not required in order to activate payment in terms of the guarantee because there was only one contract which had been varied to include the Oxford Street works.

(d) The allegation in the founding papers that there had been fraudulent misrepresentations made by Mamlambo to the bank was made because it was the only method by which Xmoor could prevent the payment out under the guarantee. This is because the guarantee clearly envisages that the bank will not become involved in a debate about contractual disputes between the parties.

(e) Mr Shapiro demonstrated that in the replying affidavit put up by Mr Naicker, he had continually made reference to allegations of fraud in that Mamlambo had fraudulently included in its claims to the bank invoices generated in respect of the Oxford Street works.

(f) Mr Shapiro referred particularly to the allegation made by Mr Naicker that it was indeed correct that during or about August or September of 2018 the Oxford Street works were allocated to Mamlambo. Mr Shapiro highlighted the other documentary evidence which clearly indicates that the Oxford Street variation had been concluded in 2017 and that Xmoor had paid out in excess of R2.5 million prior to the issue of the guarantee. To be fair to Mr Naicker he was

replying to the allegations in the answering affidavit that during 2018 the Xmoor sought to vary the contract by including additional

works in respect of the resurfacing of Oxford Street. That was either a reference to a further extension of the Oxford Street works, or an error by the deponent to the answering affidavit, but either way it was relied upon and extended by Mr Naicker in referring to August / September 2018.

[6] On the affidavits it is clear that the following occurred:

(a) The original subcontract was concluded sometime in 2016 between the Xmoor and Mamlambo bearing purchase order number #PO19035.

(b) That purchase order was varied during 2017 to include the works in Oxford Street.

(c) Proof that the variation order was amended in 2017 is reflected in the certificate of practical completion submitted by the Municipality to Xmoor dated the 29th August 2017.

(d) Further evidence is to be found in the fact on the 26th February 2018 Xmoor paid Mamlambo the sum of R2 514 970.77 in respect of the Oxford Street works which themselves are described a variation order.

(e) The payment guarantee was only issued by the bank on the 5th March 2018.

[7] There is, accordingly, no doubt that the Oxford Street works were part and parcel of purchase order #PO19035 and that amounts due thereunder could validly trigger payment by the bank under the guarantee. In those circumstances Xmoor was manifestly not entitled to move the application which it did on the 17th December 2019.

[8] In addition to the aforgoing, and in so far as there is a dispute between Xmoor and Mamlambo with regard to whether the Oxford Street works were a variation of the original contract, if I am to grant a final order in favour of Xmoor, I must apply the test in Plascon-Evans Paints (Ltd) vs Van Riebeck Paints (Pty) Ltd [1984] ZASCA 51; 1984 (3) SA 623(A) at 634 H-635B – ie that the averments in the applicant’s affidavits which have been admitted by the respondents, together with the facts alleged by the respondent, justify such an order. I cannot do so in this case.

[9] With regards to costs, Mr Naidoo submitted that there was no intention on the part of the deponents to the Xmoor affidavits to mislead the court and they had a genuine belief that the Oxford Street works were not covered by the guarantee and consequently held a genuine need for a proper debatement of the account. Based on what I have stated above I cannot agree. The allegations of fraud made in the founding papers and expended upon in the replying affidavit are not established. It is a serious allegation and one which should not be made lightly. In those circumstances I would express this court’s displeasure at the making of such unfounded allegation by a punitive order for costs.

[10] In the circumstances in make the following order:

‘The application for reconsideration of the order of the 17th December 2019 is granted, and the original urgent application is dismissed. The respondent in the application for reconsideration is to pay the costs, such costs to be calculated on the scale as between attorney and client.’

Lopes J

Date of hearing:

11th February 2020

Date of Judgment:

14th February 2020

Counsel for the Applicant:

N R Naidoo (instructed by Ronette

Govender & Associates).

Counsel for the Respondent:

W N Shapiro (instructed by Cox Yeats).