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[2016] ZAGPJHC 175
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Hollard Insurance Co. Ltd v Jeany Industrial Holdings (Pty) Ltd and Others (2015 / 17231) [2016] ZAGPJHC 175 (24 June 2016)
REPUBLIC
OF SOUTH AFRICA
IN THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
CASE
NO:
2015
/ 17231
DATE:
24 JUNE 2016
In
the matter between:
HOLLARD
INSURANCE CO.
LTD
.......................................................................................
Applicant
And
JEANY
INDUSTRIAL HOLDINGS (PTY)
LTD
..........................................................
1
st
Respondent
SPARE
PARTS PROPERTIES (PTY)
LTD
.................................................................
2
nd
Respondent
KEYWORD
INVESTMENTS (PTY)
LTD
...................................................................
3
rd
Respondent
DON
CAPITAL (PTY)
LTD
............................................................................................
4
th
Respondent
PETROL
ENGINEERING (PTY)
LTD
.........................................................................
5
th
Respondent
SPARE
PARTS MANUFACTURING (PTY)
LTD
.......................................................
6
th
Respondent
LEE
SPENCE
DONJEANY
............................................................................................
7
th
Respondent
VINCENT
CHETTY
........................................................................................................
8
th
Respondent
IAN
LAVERNE
DONJEANY
.........................................................................................
9
th
Respondent
JUDGMENT
MASHILE
J
[1] For purposes of convenience, the words hereunder
shall be referred to as follows:
1.1 The ‘reciprocal indemnity and suretyship
agreements’ - The indemnity;
1.2 Elgin Engineering (Pty) Ltd - Elgin;
1.3 The Second, Third and Fourth
Respondents - Indemnity Respondents;
1.4 The Seventh and Ninth Respondents – The
sureties;
1.5 Demand performance guarantee - Guarantee;
1.6 Sunrise Energy (Pty) Ltd - Sunrise;
1.7 Contract between Elgin and Sunrise - The
contract.
[2] Following the conclusion of the indemnity
in favour of the Applicant on 20 September 2013 by Elgin and the
indemnity Respondents,
which was at the instance and request of
Elgin, the Applicant issued a guarantee on 7 October 2013 in favour
of Sunrise, for the
obligations of, and on behalf of, Elgin under the
contract.
[3] On 20 November 2013, the sureties executed
a suretyship in favour of the Applicant in terms whereof they
intervened, binding
themselves as sureties and co-principal debtors,
jointly and severally, the one paying the others to be absolved,
with Elgin
and the indemnity Respondents, for the due payment
by any of them to the Applicant of all amounts which they may be
liable to pay
to the Applicant under the indemnity and for any
claims, losses, liabilities, costs and expenses which the Applicant
may sustain
as a consequence of having executed a guarantee on behalf
of Elgin and the indemnity respondents.
[4] Elgin has failed to perform in terms of the
contract that it had concluded with Sunrise, eliciting Sunrise to
issue a demand
calling upon the Applicant to pay as contemplated in
the guarantee. The Applicant, as it was obliged to do, honoured
the
demand by settling the amount demanded. The Applicant has in turn
demanded payment of what it had paid to Sunrise plus interest
and
other ancillary amounts. The Respondents have persistently
refused to pay as per the demand of the Applicant.
[5] Against that backdrop, the Applicant launched
this application seeking relief against all the Respondents jointly
and severally,
the one paying the others to be absolved for:
5.1 Payment of the amount of
R33 951 466.00;
5.2 Interest on the
above amount at a rate equal to the prime overdraft rate of ABSA Bank
Ltd plus 2% being 11.25%
from 31 March 2013 to date of final payment;
5.3 Costs of
suit on the scale as between attorney and client.
[6] The above relief sought by the Applicant is
now only against the Second, Third, Fourth, Seventh and Ninth
Respondents.
The Applicant cannot persist with the relief
against the remaining respondents because the Fifth and Sixth
Respondents have since
been placed under business rescue while it has
made an arrangement with the eighth Respondent. Elgin too could
not be sued
because it, like the Fifth and the Sixth Respondents, is
under business rescue.
[7] The application owes its genesis to the
following factual background:
7.1 The indemnity to which I
have alluded above, which was executed by the indemnity Respondents
in favour of
the Applicant on 20 September 2013 provides that the
indemnity Respondents:
7.1.1 Undertook to indemnify the Applicant and hold
it harmless against all claims, losses, payments, liabilities, costs
and expenses
which the Applicant may incur by reason of having
executed a guarantee on behalf of Elgin and the indemnity
Respondents;
7.1.2 Undertook and agreed to pay the Applicant, on
demand, any sums of money which it may be called upon to pay under
any guarantee
issued for and on behalf of Elgin (and the indemnity
Respondents) whether or not the particular respondent, on whose
behalf the
applicant has furnished a guarantee, admits the validity
of such claims under such guarantee;
7.1.3 Bound themselves as surety and co-principal
debtors, jointly and severally in
solidum
with any respondent
on whose behalf the Applicant has furnished a guarantee for the due
payment by that respondent to the applicant
on demand of any amount
which that respondent is liable to pay the Applicant under the
indemnity;
7.1.4 Agreed that their liability to the Applicant,
in terms of the indemnity, is unlimited and any certificate of such
liability
shall be prima facie evidence of the amount owing;
7.1.5 Agreed that the obligations of Elgin and the
indemnity Respondents shall continue and remain in force as
continuing covering
security until such time as the Applicant has
been entirely and finally released from its obligations, contingent
or otherwise,
under all guarantees issued on their behalf;
7.1.6 Expressly consented to the jurisdiction
of this Court.
[8] The suretyship that was concluded by the
sureties in favour of the Applicant on 20 November 2013 Provides that
the sureties:
8.1 Interposed and bound themselves
as sureties and co-principal debtors, jointly and severally with
Elgin and
the indemnity Respondents, for the due payment by any of
them to the Applicant of all amounts which they may be liable to pay
to
the Applicant under the indemnity and for any claims, losses,
liabilities, costs and expenses which the Applicant may sustain as
a
consequence of having executed a guarantee on behalf of Elgin and the
indemnity Respondents;
8.2 Undertook and agreed to pay the
Applicant, on demand, any sums of money which the Applicant may be
called
upon to pay under any guarantee issued on behalf of Elgin and
the indemnity Respondents whether or not the particular surety admits
the validity of such claims under such guarantee;
8.3 Renounced the legal exceptions
or benefits of excussion, division, cession of action,
non causa
debiti
and no value received;
8.4 Agreed that their liability under the
surety shall continue to remain in force as an unlimited continuing
covering security
until such time as Elgin and/or the indemnity
Respondents have been entirely and finally released from their
obligations, contingent
or otherwise, to the Applicant.
[9] On 7 October 2013, The Applicant issued a
guarantee in favour of Sunrise at the instance and request of Elgin,
for the obligations
of, and on behalf of, Elgin under the contract.
That guarantee was issued subsequent to the indemnity Respondents
concluding
the indemnity in favour of the Applicant on 20 September
2013.
[10] In terms of the guarantee, the
Applicant undertook to pay to Sunrise on the first written demand of
Sunrise, an amount
not exceeding R33 951 466.00, upon receipt of a
written demand and a certificate executed by Sunrise’s
representative certifying
that Elgin is in breach of its obligations
under the contract (and giving details thereof).
[11] It is not disputed that Sunrise
prepared a written demand for payment and forwarded it to the
Applicant. The Applicant
received the demand on 20 February
2015. The demand was accompanied by the original guarantee and
a certificate (hereinafter
“the certificate”) executed by
a Sunrise representative. The certificate confirmed that Elgin
was in breach of
the contract and gave details of the breach thereby
demanding payment from the Applicant in the amount of R33 951 466.00
in terms
of the guarantee.
[12] On 5 March 2015, the Applicant in
turn delivered written demands for payment to the indemnity
respondents and the sureties
thereby demanding payment of the amount
with interest and costs, which amount it was obliged to pay to
Sunrise under the guarantee.
In observance of its obligations
under the guarantee, the Applicant made payment to Sunrise of the
amount of R33 951 466.00 in
four payments during the period of 17 and
31 March 2015 in accordance with the terms of the guarantee.
The indemnity respondents
and the sureties have until now refused to
repay the amounts paid by the Applicant to Sunrise under the
guarantee.
[13] On the basis of the above facts,
which are largely common cause, this Court is called upon to
determine whether or not
the indemnity Respondents and the sureties
are liable to the Applicant jointly and severally, the one paying the
others to be absolved,
in the amount of R33 951 466.00
plus interest and costs being what it paid to Sunrise in terms of the
guarantee. The respondents
justify their refusal to pay on the
grounds that:
13.1 This Court lacks jurisdiction to hear the
matter notwithstanding the consent to jurisdiction by both the
indemnity Respondents
and the sureties;
13.2 The authority upon which the deponent to
the founding affidavit relies is limited to claims in respect of
business rescue,
liquidation or other process or to institute any
legal action against companies or individuals for the recovery of
monies paid
by the company in terms of any guarantees or policies”.
Accordingly, these proceedings being by way of motion are not
sanctioned by the resolution of the Applicant;
13.3 The Eighth Respondent, the person
responsible for the execution of the contract, did so without
following the correct
internal procedures of Elgin whose performance
was guaranteed and payment was made against demand without
interrogating the breaches.
[14] Conversely, the Applicant’
asserts that both the indemnity Respondents and the sureties have
specifically consented
to the jurisdiction of this Court in writing.
In addition, the court must be alive to the fact that the following
happened
within the jurisdiction of this Court:
14.1 Execution of the guarantee;
14.2 Sunrise made Demand to the Applicant
against the guarantee;
14.3 The Applicant made Payment to
Sunrise pursuant to the demand.
[15] Insofar as failure of the Eighth
Respondent to follow internal processes of Elgin is concerned, the
Applicant contends
that it is completely irrelevant to the cause of
action relied on by it in circumstances where the guarantee, demand
thereunder
and payment constitute a complete and separate cause of
action to the underlying
causa
.
[16] The essence of the Applicant’s
counter argument on the lack of authority is that the resolution
authorising the
deponent to the founding affidavit is flawless and
requires no elaboration.
[17] The legal position on jurisdiction is as
articulated by the Applicant and the Respondents do not and cannot
take issue
with it. It is trite that where a jurisdictional
ground is present but the court has no jurisdiction over the person
of the
defendant, jurisdiction can be conferred or extended by
consent of the defendant to the jurisdiction of the court. A
High
Court has jurisdiction in relation to all causes arising within
its jurisdiction although it does not have jurisdiction over the
person of the defendant and whether a cause arose in the area of
jurisdiction at common law depends on whether that court is regarded
as a proper forum. A contractual cause arises where the
contractual cause was to be performed, wholly or in part, within
the
jurisdiction of a particular court.
See
Bid Industrial
Holdings (Pty) Ltd v Strang & Others (615/06)
[2007] ZASCA 144
,
Coface South Africa Insurance Co Limited
2014
(2) SA 382
(SCA)
Richman v Ben-Tovin (674-05)
(2006) ZASCA 121
[18] The parties are agreed that this
Court does not have any of the usual standard grounds of jurisdiction
over the Respondents.
That is because the indemnity and the
suretyship, which triggered the Applicant’s claim were all
signed in Durban and all
the Respondents reside in Durban. The
performance on the contract was not within the jurisdiction of this
Court. Demand
against Elgin and all the sureties for payment by
the Applicant was made in Durban.
[19] This Court admits all of the above
because the Respondents are correct. The High Court in Durban
unquestionably
has CONCURRENT jurisdiction. Where the
Respondents’ assertion on jurisdiction loses favour with this
Court is the suggestion
that the court in Durban has exclusive
jurisdiction and that the execution and performance in terms of the
guarantee is
res inter alios acta
insofar as the Respondents are concerned.
[20] The contention above cannot be right
because it loses sight of the fact that the contracts that were
performed in Durban
prompted the Applicant to perform in terms of the
guarantee that was executed in the area of jurisdiction of this
Court.
Moreover, demand to the Applicant and payment occurred
in Johannesburg.
[21] The Respondents also sought to argue
that since Elgin is not part of these proceedings, the Applicant
cannot sue the
Respondents out of this Court. In doing this,
the Respondents seek to undo the inextricable knot between the
indemnity and
the guarantee. It must be borne in mind that the
indemnity Respondents and the sureties signed as sureties and
co-principal
debtors with Elgin and that makes them susceptible to
being sued independently of Elgin.
[22] It is apparent that the indemnity
and the suretyship although signed in Durban gave rise to the
Applicant’s performance
in terms of the guarantee which was
executed in Johannesburg. It is this Court’s view
therefore that the Applicant
could have launched this application
either in Durban or Johannesburg it being irrelevant that Elgin is
not part of the proceedings.
[23] Apart from the cause of action on
the guarantee arising in Johannesburg, Counsel for the Respondents
argued that the
introduction of the words, ‘non-exclusive’
and ‘exclusive’ in the consent clauses of the indemnity
and
the suretyship were meant to denote meaning different to the
ordinary. If the author of the agreement wanted this Court to
have jurisdiction, so he argued, would have said so without employing
those words.
[24] This Court agrees with the
elucidation that Counsel for the Respondents assigns to the two words
but it is beyond my
comprehension why it leads him to conclude that
their use signifies that the Applicant does not have jurisdiction.
The use
of ‘non-exclusive’ in the case of the indemnity
Respondents simply recognizes that there could be other courts with
jurisdiction and the Applicant has a choice. In this instance
he had the liberty of either launching the application in Durban
or
in Johannesburg.
[25] In the case of the word, ‘exclusive’
used in the suretyship signed by the Seventh and the ninth
Respondents,
the meaning is straightforward – the jurisdiction
of this Court is predetermined and the Applicant lacks choice.
In
both instances this Court has jurisdiction.
[26] Insofar as the guarantee itself is
concerned and as it is evident from the defences raised, the
Respondents do not take
issue with the fact that the Applicant has
complied with the formalities. Where applicable, the Applicant
has also observed
and performed in terms of the obligations imposed
on it by the guarantee. The law regarding guarantees is not
challenged
thus, to the extent necessary, I set out below the legal
position applying to guarantees.
[27] Generally, guarantees create a
self-contained and primary obligation between the guarantor and the
beneficiary and must
be honoured by payment when a demand is made
that complies with the formalities as recorded in the demand.
Payment may only
be refused in the most perfect cases of fraud.
In the absence of an allegation that payment was demanded
fraudulently and
in bad faith, payment must be made. Disputes
regarding and arising from the underlying contract (to which the
guarantor is
inevitably not a party) will not relieve the guarantor
of its obligations under the guarantee. See in this regard, the
case
of
Coface South Africa Insurance Co
Limited supra and Lombard Insurance Company Ltd v Landmark Holdings
(Pty) Ltd
2010 (2) SA 86
(SCA)
and
cases therein referred.
[28] The facts in this case are a perfect
fit to the law as described in the preceding paragraph. It
follows that any
problems that probably arose between the parties to
the contract would have been extraneous to the Applicant. The
aforesaid
statement is subject to demand for payment having not been
made fraudulently or in bad faith. Such is not the case in this
current matter and the Applicant was therefore right to honour the
terms of the guarantee.
[29] The Respondents have argued that the
clause upon which the Applicant seeks to rely for the authority of
the deponent
to the founding affidavit, Mr Peter David Holmes, to
institute proceedings is centered upon the proving of claims in
business rescue
liquidations. The Respondents conclude that the
affidavits referred to therein relate to the claim forms in
insolvency proceedings.
The Respondents’ argument in this
regard is probably based upon Paragraph 5 of the resolution, which
reads:
“…
.sign any documents required
to prove a claim in business rescue, insolvency or against any other
person (juristic or natural) and
to sign any affidavit to proceed to
prove any claim or institute any legal action for the recovery of any
monies due to the Company
arising from or relating to guarantee
policies;”
[30] The Respondents’ construal of
that paragraph is misguided especially in view of the overall
objective of the resolution.
The purpose of the resolution is
captured in the pre-amble of the resolution in the following terms:
“
WHEREAS:
The
Hollard Guarantees Division is in the business of issuing guarantee
policies to various 3rd parties for construction projects.
The
Company would like to institute legal action to recover as much as
possible from the securities of companies in whom securities
are
held.” (sic)
[31] It is evident that the pre-amble is
general as it is not restricting the purpose to claims relating to
business rescue
and insolvency. Moreover, paragraph five itself
lists a number of things that the deponent is authorized to do.
One
of those is where he is authorized to “…
.sign
any affidavits to proceed to prove any claim or institute any legal
action for the recovery of any monies due to the Company
arising from
or relating to guarantee policies
.”
In my opinion, the Applicant is doing precisely what paragraph five
of the resolutions empowers him to do.
Accordingly, there is no
merit in the Respondents’ assertion and it is rejected.
[32] Turning to the Respondents’
contention that the eighth Respondent failed to observe certain
internal processes
of Elgin when executing the contract. The
Applicant is undoubtedly correct to regard this as being completely
irrelevant
insofar as it is concerned. For as long as the
transaction was not tainted by fraud the Applicant was legally
obliged to
perform in terms of the guarantee regardless of the
disputes that might emerge between the parties to the contract,
Sunrise and
Elgin. Perhaps it could be instructive to refer to
the following passage that I uplifted from the
Lombard
case supra:
“…
..This obligation is wholly
independent of the underlying contract of sale and assures the seller
of payment of the purchase price
before he or she parts with the
goods being sold. Whatever disputes may subsequently arise between
buyer and seller is of no moment
insofar as the bank's obligation is
concerned. The bank's liability to the seller is to honour the
credit. The bank undertakes
to pay provided only that the conditions
specified in the credit are met. The only basis upon which the bank
can escape liability
is proof of fraud on the part of the
beneficiary……”
[33] That approach has been restated in
numerous cases and it continues to hold to date. In the
circumstances, the defence
cannot avail any of the Respondents and as
such it fails.
[34] Counsel for the Respondents believes that
the Respondents have challenged the amount that they are alleged to
be owing to the
Applicant in paragraph 37 of the answering
affidavit. This is not correct. The Respondents are
complaining about not
having been afforded opportunity to challenge
the amount they are called upon to pay. Even if that were so,
it would have
been irrelevant insofar as the Applicant is concerned.
Again, it is helpful to bear in mind what was stated in the Lombard
case supra and many others. The Respondent’s reference to
Gruhn v M Pupkewitz & Sons (Pty)
Limited
1973 (3) SA 49
(AA) at 56 F
is,
in the circumstances, misplaced.
[35] Against that background, the application
succeeds and the Respondents are jointly and severally, the one
paying the others
to be absolved, ordered to:
1. Make payment of the amount of R33
951 466.00 to the Applicant;
2. Pay interest on the above amount
at a rate equal to the prime overdraft rate of ABSA Bank Ltd plus 2%
being 11.25% from 31 March
2013 to date of final payment;
3. Pay costs of suit on the
scale as between attorney and client.
B
A MASHILE
JUDGE
OF THE HIGH COURT
GAUTENG
LOCAL DIVISION, JOHANNESBURG
COUNSEL FOR THE APPLICANT: CT VETTER
INSTRUCTED BY: FRESE, MOLL &
PARTNERS
COUNSEL FOR THE RESPONDENTS: GM
HARRISON
INSTRUCTED BY: ZEILER JANKEY
INCORPORATED
DATE OF HEARING: 09 MAY 2016
DATE OF
JUDGMENT:
24 JUNE 2016