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[2023] ZAGPJHC 901
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Industrial Development Corporation of South Africa v van der Merwe and Others (20420-2020) [2023] ZAGPJHC 901 (14 August 2023)

REPUBLIC OF SOUTH
AFRICA
IN THE HIGH COURT
OF SOUTH AFRICA
GAUTENG DIVISION,
JOHANNESBURG
(1)
REPORTABLE:
NO
(2)
OF INTEREST TO OTHER JUDGES:
NO
(3)
REVISED:
Date:
14
th
August 2023
Signature:
CASE
NO
:
20420/2020
DATE
:
14
th
August 2023
In the matter between:
INDUSTRIAL DEVELOPMENT
CORPORATION
OF
SOUTH AFRICA
LIMITED
Applicant
And
VAN
DER MERWE
,
BERTUS
First Respondent
NAUDE
,
MICHAEL ANDREW
Second Respondent
SONNEKUS
,
KENNETH DANIEL
Third Respondent
STEVAL
ENGINEERING (PTY) LIMITED
Fourth Respondent
Neutral
Citation
:
Industrial Development Corporation of SA v Van
der Merwe and 3 Others (20420/2020)
[2023] ZAGPJHC ---
(14
August 2023)
Coram:
Adams J
Heard
on
:     02 August 2023
Delivered:
14 August 2023 - This judgment was handed down electronically by
circulation to the parties' representatives by email, by being
uploaded to
CaseLines
and by release to SAFLII. The date and
time for hand-down is deemed to be 10:00 on 14 August 2023.
Summary:
Contract – specific contracts –
demand guarantee and performance guarantee – compliance –
guarantee in question
– consisting, as it did, of an
undertaking to make payment of amounts of money in the event of
default by the main debtor
– autonomous in nature –  it
must be paid according to its terms – only where fraud was
involved that liability
may be declined – the underlying
contract has no effect on the guarantors' liability –
Prescription of claims in
terms of guarantee – claim based on a guarantee is completely
independent from the claim based on
the main contract – the
causes of action are different and separate – each with its own
essential requisites and elements
–
Claims against guarantors
are based on the guarantee agreement in terms of which the giving of
notice, in the form of the ‘Guarantee
Claim Notice’, is a
condition precedent for a claim –
Prescription defence
raised by respondents rejected as bad in law – judgment granted
in favour of the applicant.
ORDER
(1)
Judgment is granted in favour of the
applicant against the first, the second and the third respondents,
jointly and severally, the
one paying the other to be absolved, for:
-
(a)
Payment to the applicant of the sum of
R74 786 712.21;
(b)
Payment of interest on the aforesaid sum of
R74 786 712.21 at the rate of prime per annum, compounded
monthly in arrears,
from 31 August 2020 (the date of service of the
application) to date of final payment, both days inclusive.
(c)
Payment of the applicant’s costs on
the scale as between attorney and client.
JUDGMENT
Adams J:
[1].
On the 26
th
of September 2018, the fourth respondent (‘Steval Engineering’)
was placed in final liquidation. As and at the aforesaid
date of its
final winding-up, Steval Engineering was indebted to the applicant
(‘IDC’) for amounts representing monies
lent and advanced
by the IDC to Steval Engineering in terms of and pursuant to a
revolving credit facility and a loan agreement
concluded between them
during 2016. As at 18 March 2020 the indebtedness of Steval
Engineering stood at the following amounts:
R17 437 335.69
(in terms of the revolving credit facility) and R57 349 376.52
(in terms of the loan agreement),
totalling R74 786 712.21.
According to the loan agreement, the said sum of R57 349 376.52
became repayable
by Steval Engineering to the IDC on 30 December 2016
because of the former’s breach of the said agreement, and,
according
to the revolving credit facility agreement, all the monies
owing thereunder would immediately become repayable by Steval
Engineering
to the IDC in the event of the latter being placed in
liquidation, that being, as we now know, 26 September 2018.
[2].
On 7 April
2016, the IDC and the first to third respondents (‘the
Guarantors’) concluded a guarantee agreement (as a
primary
obligation) in each of their individual capacities, in terms of which
the guarantors ‘guarantee[d] all the obligations
of [Steval
Engineering] to and in favour of the IDC, jointly and severally and
on the terms and conditions contained [therein]’.
In terms of
the ‘Master Terms and Conditions’ (clause 1.1.8) of the
guarantee agreement, the guarantors specifically
guaranteed all
liabilities of Steval Engineering under the revolving credit facility
and the loan agreement. The guarantors renounced
any benefits to
which they may be entitled in law as a result of the agreement and
that confirmed that they were fully aware of
the meaning and effects
of the benefits and the renunciation thereof.
[3].
The first to
the third respondents, as guarantors under the revolving credit
facility and the loan agreement, are therefore indebted
to the IDC to
the extent of Steval Engineering’s indebtedness to the IDC as
set out above. On the 3
rd
and the 7
th
of June 2019, the IDC, through its attorneys, issued to the
guarantors a ‘Guarantee Claim Notice’ as contemplated in

and envisaged by the guarantee agreement, calling upon the guarantors
to pay the monies as per the guarantee claim notice. However,
three
days passed without the guarantors complying with the said demands.
[4].
In this
application, which came before me in the opposed Motion Court on
Wednesday, 03 August 2023, the IDC applies to court for
a money
judgment against the first respondent, the second respondent and the
third respondent, jointly and severally, for payment
of the total
amount of R74 786 712.21, together with interest thereon
and costs of suit. In the answering affidavit,
the respondents oppose
IDC’s application for judgment on a number of grounds,
including on the basis of at least three legal
points
in
limine
relating to non-joinder of the liquidators of Steval Engineering,
this court’s lack of jurisdiction and lastly prescription.
By
the time the matter was heard before me on 30 August 2023, Counsel
for the guarantors, Ms Reddy, gave an indication that the
they would
not be pursuing the first two points
in
limine
,
leaving only the contention by the respondents that IDC’s claim
is prescribed as being time-barred. The approach adopted
by the
guarantors at the hearing of the application is, in my view, a
prudent one as there is clearly no merit – none whatsoever
–
in the other points
in
limine
raised by them.
[5].
Accordingly,
the only issue which I am required to consider in this matter is
whether the claim by the IDC against the guarantors
have become
prescribed. If so, the application falls to be dismissed.
[6].
I have no
doubt that the IDC complied with the guarantee notice requirement as
per the guarantee agreement. The important part of
the said agreement
is the ‘Guarantee’ provision, which reads as follows: -
‘
3
Guarantee
With
effect from the effective date, the Guarantor(s) hereby, irrevocably
and unconditionally guarantee(s), as a primary obligation
in favour
of the IDC the due, proper and punctual performance by the Borrower
[Steval Engineering] of the Guaranteed Liabilities
including the
full, prompt and complete payment of all the Guaranteed Liabilities
when and at the same time shall become due whether
or not any or all
of the Guaranteed Liabilities are enforceable against the Borrower,
and undertakes to IDC that each time a Guarantee
Claim Notice is
delivered to the Guarantor(s), the Guarantor(s) shall within 3
(three) Business Days after receipt thereof pay
all sums claimed in
such Guarantee Claim Notice.’
[7].
As submitted
by Mr Salani, who appeared on behalf of the IDC, the guarantee clause
provides that the guarantors irrevocably and
unconditionally
guaranteed, as a primary obligation in favour of the IDC, the due,
proper and punctual performance by Steval Engineering
of the
guaranteed liabilities. Moreover, the guaranteed liabilities would
become due whether or not any or all of the guaranteed
liabilities
were enforceable against Steval Engineering. Importantly, the
guarantors undertook to the IDC that each time a guarantee
claim
notice is delivered to them, the guarantors shall within three
business days after receipt thereof pay all sums claimed in
such
guarantee claim notice.
[8].
This is
exactly what was done by the IDC through its lawyers, and there can
accordingly be no debate about the liability of the
guarantors to the
IDC. The point is simply that the ‘guarantee claim notice’
triggers or should trigger payment to
the IDC by the guarantors.
[9].
As
was held by
Lombard
Insurance Co Ltd v Landmark Holdings (Pty) Ltd and Others
[1]
,
the obligations created by a guarantee is wholly independent of the
underlying contract and whatever disputes may subsequently
arise
between the parties to the underlying agreement is of no moment
insofar as the guarantor's obligations is concerned. Payment
by the
guarantor is due once demand is made in the form envisaged by the
guarantee.
[10].
That then
brings me to the prescription point raised by the first to third
respondents, who contend that, according to the IDC’s
own case,
the amounts payable under and in terms of the loan agreement, fell
due and therefore became repayable on 30 December
2016 and the monies
advanced under and in terms of the revolving credit facility
agreement became due and payable on commencement
on business rescue
proceedings against Steval Engineering, which occurred on 4 August
2017. Therefore, so the contention on behalf
of the guarantors goes,
the debts became due and payable on 30 December 2016 and 4 August
2017 respectively, which, in turn, means
that their indebtedness to
the IDC became prescribed on 29 December 2019 and 03 August 2020
respectively. The present application
was served only on the 31
st
of August 2020, so the argument is concluded, by which time the
claims had become prescribed. Therefore, IDC’s application

should be dismissed.
[11].
In
Lombard
,
[2]
the
court held as follows:
‘
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.’
[12].
The trite
point made by this authority is that the underlying contract has no
effect on the guarantors' liability to the IDC, unless
the existence
of fraud is demonstrated, which is not the case in this instance. A
claim based on a guarantee is completely independent
from the claim
based on the main contract and the cause of action in relation to the
claim based on the guarantee is a different
and separate cause of
action, with its own essential requisites and elements.
In
casu
those
would consist, for example, of: (1) Performance by the main debtor,
Steval Engineering, being due; (2) Default on the part
of Steval
Engineering; and (3). Guarantee claim notice having been given. The
simple point is that a guarantee establishes a contractual
obligation
on the part of the Guarantor to pay the beneficiary in accordance
with its terms.
[13].
What
is more is that any defence that Steval Engineering might have had
against a claim by the IDC, including that the claim has
prescribed,
is not available to the guarantors. In that regard see
Casey
and Another v FirstRand Bank Ltd
[3]
,
in which the appellant sought an order declaring that the debt due to
FirstRand Bank had become prescribed due to it not having
been
claimed within the three year period prescribed by the Prescription
Act. The Supreme Court disagreed and held as follows:
-
‘
The
inherent flaw in this argument is that it seeks to equate the legal
standing of a letter of credit with a suretyship. As pointed
out in
Loomcraft
and in arts 3 and 9 (a) of the UCP,
a
letter of credit is wholly independent of the underlying contract
between the customer of the bank and the beneficiary
.
It establishes a contractual obligation on the part of the issuing
bank to pay the beneficiary in accordance with its terms. An

irrevocable letter of credit is not accessory to the underlying
contract and is distinguishable in law from a suretyship which
is
accessory to the principal obligation.’
[14].
The trite
principle to be extracted from these authorities is that the IDC’s
claim against the guarantors is not affected
in any way by the
underlying contract between it and Steval Engineering, nor by the
fact that the IDC’s claim against Steval
Engineering may or may
not have prescribed. The Guarantors, being the first to the third
respondents, are obligated to pay the
guarantee in accordance with
its terms – ‘each time a “Guarantee Claim Notice”
is delivered to the Guarantors,
[they] shall within 3 (three)
business days after receipt thereof pay all sums claimed in such
Guarantee Claim Notice’. This
also implies that the IDC’s
cause of action is only completed on the date on which the ‘Guarantee
Claim Notice’
is dispatched to the Guarantors, which, in turn
means, that, from a prescription point of view, the debt only becomes
payable on
such date.
[15].
There
is a further reason why the prescription point of the Guarantors
should fail and that relates to the principle, as
De
Bruyn v Du Toit
[4]
,
in which Rogers J held as follows: -
‘
It
is only where the giving of notice is a condition precedent for a
claim, and thus a necessary ingredient of the creditor’s
cause
of action, that the running of prescription is deferred until the
giving of notice. See
Loubser Extinctive
Prescription
1996 at 53-63, where the
authorities are reviewed. The learned author concludes his discussion
thus (at 63):
“
On
account of the policy consideration that a creditor should not be
able to rely on his own failure to demand performance from
the debtor
in order to delay the running of prescription the courts will require
clear indication that the parties intended demand
to be a condition
precedent for the debt to become due, in which case prescription will
only begin to run from the date of demand.”
[16].
Applying
this principle
in
casu
,
I come to the conclusion that the IDC’s claims against the
Guarantors are based on the guarantee agreement in terms of which
the
giving of notice, in the form of the ‘Guarantee Claim Notice’,
is a condition precedent for a claim. This then
means that the
three-year prescription period of the IDC’s claims would only
have started running on the date of demand,
that being, as indicated
above, the 3
rd
and the 7
th
of June 2019. These motion proceedings were therefore instituted well
within time and well before the claims became time-barred.
I am
bolstered in this view and conclusion by the Constitutional Court in
Trinity
Asset Management (Pty) Ltd v Grindstone Investments 132 (Ply) Ltd
[5]
,
in which Mojapelo AJ, writing for the minority, held as follows: -
‘
Where
there is such a clear and unequivocal intention, the demand will be a
condition precedent to claimability, a necessary part
of the
creditor's cause of action, and prescription will only begin to run
from demand. This, in my view, is not an incident of
the creditor
being allowed to unilaterally delay the onset of prescription. It is
the parties, jointly and by agreement seriously
entered into,
determining when and under what circumstances or conditions a debt
shall become due.’
[17].
Cameron J,
writing for the majority, at para 124 makes the same point as
follows: -
‘
For
the parties to delay prescription is simple. They just have to say
so. But they must say so.’
[18].
For all of
these reasons, I am of the view that the legal point of prescription
raised by the first to the third respondents is
without merit and
falls to be dismissed.
Conclusion
and Costs
[19].
In sum, IDC
has made out a case for the relief sought by it and judgment should
therefore be granted in their favour against the
first, the second
and the third respondents.
[20].
As
regards costs, the general rule is that the successful party should
be given his costs, and this rule should not be departed
from except
where there are good grounds for doing so, such as misconduct on the
part of the successful party or other exceptional
circumstances. See:
Myers
v Abramson
[6]
.
[21].
I can think of no reason why I
should deviate from this general rule. The agreements in question
provide that costs, in the event
of litigation, should be awarded on
the scale as between attorney and own client.
Order
[22].
Accordingly, I make the following
order: -
(1)
Judgment is granted in favour of the
applicant against the first, the second and the third respondents,
jointly and severally, the
one paying the other to be absolved, for:
-
(a)
Payment to the applicant of the sum of
R74 786 712.21;
(b)
Payment of interest on the aforesaid sum of
R74 786 712.21 at the rate of prime per annum, compounded
monthly in arrears,
from 31 August 2020 (the date of service of the
application) to date of final payment, both days inclusive.
(c)
Payment of the applicant’s costs on
the scale as between attorney and client.
_________________________________
L R ADAMS
Judge of the High
Court
Gauteng Local
Division, Johannesburg
HEARD ON:
2
nd
August
2023
.
JUDGMENT DATE:
14
th
August
2023 – judgment handed down electronically
FOR THE APPLICANT:
Advocate Humbulani
Salani
INSTRUCTED BY:
Tshisevhe Attorneys
Incorporated (TGR Attorneys), Sandhurst, Sandton
FOR FIRST, SECOND,
THIRD AND FOURTH RESPONDENTS:
Advocate Kerusha Reddy
INSTRUCTED BY:
Desiré
Koch Attorneys Mbombela, Mpumalanga
[1]
Lombard
Insurance Co Ltd v Landmark Holdings (Pty) Ltd and Others
2010 (2) SA 86
(SCA) at pg 90E – H;
[2]
At
pg 90E-H;
[3]
Casey
and Another v FirstRand Bank Ltd
2014 (2) SA 374 (SCA);
[4]
De
Bruyn v Du Toit
(1162/2015)
[2015] ZAWCHC 20
(27 February 2015);
[5]
Trinity
Asset Management (Pty) Ltd v Grindstone Investments 132 (Ply) Ltd
2018
(1) SA 94
(CC) at para 47;
[6]
Myers
v Abrahamson
1951(3)
SA 438 (C) at 455