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[2013] ZASCA 153
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Nedbank Ltd and Another v Procprops 60 (Pty) Ltd (108/13) [2013] ZASCA 153 (20 November 2013)
THE SUPREME COURT OF APPEAL OF
SOUTH AFRICA
JUDGMENT
Case No: 108/13
Reportable
In the matter between:
NEDBANK
LTD
..........................................................................
FIRST
APPELLANT
TOP
CD (MENLYN) (PTY) LTD
.............................................
SECOND
APPELLANT
and
PROCPROPS
60 (PTY) LTD
..............................................................
RESPONDENT
Neutral
citation:
Nedbank v Procprops
(108/13)
[2013] ZASCA 153
(20 November 2013).
Coram:
Brand, Maya, Bosielo and Leach JJA and Van
der Merwe AJA
Heard:
5 November 2013
Delivered:
20 November 2013
Summary: Banker ─ payment guarantee ─
interpretation ─ provision requiring delivery to bank of
original guarantee
with first demand for payment ─ only one
payment by bank provided for.
______________________________________________________________
ORDER
______________________________________________________________
On appeal from:
North Gauteng High Court,
Pretoria (Ledwaba J sitting as
court of first instance):
1 The appeal is upheld and the respondent is ordered to
pay the costs of appeal of both the appellants.
2 The order of the court a quo is set aside and replaced
with the following:
‘
The
plaintiff’s action is dismissed and the plaintiff is ordered to
pay the costs of the defendant and the third party.’
______________________________________________________________
JUDGMENT
______________________________________________________________
VAN DER MERWE AJA (BRAND, MAYA, BOSIELO AND LEACH JJA
CONCURRING):
[1] This appeal concerns the interpretation of a letter
of guarantee (the guarantee). The guarantee was issued by the first
appellant,
Nedbank Ltd (Nedbank) to the respondent, Procprops 60
(Pty) Ltd (Procprops) at the instance of the second appellant, Top CD
(Menlyn)
(Pty) Ltd (Top CD).
[2] The relevant factual background of the matter is
common cause. On 7 May 2009 Procprops and Top CD concluded a written
agreement
(the lease) in terms of which the premises situated at shop
G75 and G77, Ground Floor, Parkview Shopping Centre, Corner of
Garsfontein
and Netcare Roads, Moreleta Park Extension 80, Pretoria
were let by Procprops to Top CD for a period of ten years and seven
months
commencing on 1 July 2009. Clause 49 of the lease obliged Top
CD to furnish a bank guarantee to Procprops in an amount calculated
in terms of that clause. Clause 49.3 entitled Procprops, in its sole
and absolute discretion at any time during the period of the
lease or
its renewal, to call up the guarantee for payment of any amount which
Top CD was indebted to it.
[3] In consequence Top CD arranged with Nedbank for the
issue of the guarantee to Procprops. As required by Nedbank, Top CD
indemnified
Nedbank in respect of any payment made in terms of the
guarantee. Nedbank issued the guarantee on 28 July 2009. The
guarantee records
that Procprops and Top CD had entered into the
lease and that in terms thereof Top CD was required to furnish
Procprops with a
letter of guarantee. It then proceeds as follows:
‘
3. At
the instance of the lessee we, the undersigned DAVID ALEXANDER WATSON
and ANNELI TERBLANCHE in our respective capacities as
CREDIT MANAGER
and BUSINESS MANAGER of NEDBANK LIMITED REG NO 1951/000009/06
(hereinafter referred to as the “bank”)
of
Nedhill
Office Park, 665 Duncan Road, Cnr Duncan and Lunnon Streets,
Hillcrest, 0083
,
duly authorised thereto, hold at the landlord’s disposal and
undertake to pay to the landlord an amount not exceeding
R313 845,53
(
THREE
HUNDRED AND THIRTEEN THOUSAND EIGHT HUNDRED AND FORTY FIVE RAND,
FIFTY THREE CENTS
),
subject to the terms and conditions stated below.
4. Payment shall be made upon
receipt by the bank, at its address stated in clause 3 above, of the
landlord’s first written
demand, which written demand shall be
accompanied by this original guarantee and which will state that the
lessee had failed to
comply with its obligations in respect of the
lease and that, accordingly, the amount of
R313 845,53
(
THREE
HUNDRED AND THIRTEEN THOUSAND EIGHT HUNDRED AND FORTY FIVE RAND,
FIFTY THREE CENTS
),
or any lesser portion thereof, is now due and payable. In the event
that the branch mentioned in clause 3 above closes for whatsoever
reason, this guarantee may be presented at any other branch of the
bank.’
[4] In terms of the lease the rental was payable monthly
in advance on the first day of each calendar month. Top CD paid
rental
in terms of the lease up to 1 December 2010 but vacated the
premises during December 2010 and made no further payment of rental.
Top CD alleged that it cancelled the lease either as a result of
fraudulent misrepresentations on the part of Procprops or by
accepting Procprops’s repudiation. According to Procprops it
cancelled the lease only at the end of December 2011 as a result
of
the breach of the lease by Top CD. These allegations are issues in
separate litigation between Procprops and Top CD.
[5] By letter dated 13 January 2011 Procprops demanded
payment of the amount of R72 693.66 from Nedbank in terms of the
guarantee.
In this letter of demand it was stated that Top CD had
failed to comply with its obligations in respect of the lease and
that accordingly
the said amount was due and payable. This amount
represented only the rental payable on 1 January 2011. The letter was
accompanied
by the original guarantee and concluded as follows:
‘
Could
you also please consider the fact that this letter calls upon you to
perform only partially in terms of the guarantee and
accordingly our
client’s rights in respect thereof are not extinguished. Could
you please in view thereof return the original
guarantee to us to
enable our client to call on the guarantee should it become necessary
in future.’
[6] On 21 January 2011 Nedbank duly paid the amount of
R72 693.66 to Procprops, but did not respond to the request for
the
return of the original guarantee. On 7 February 2011 Procprops
sent a further letter of demand to Nedbank. In this letter payment
in
terms of the guarantee of a further amount of R72 693.66 was
demanded. Apart from the fact that payment of a further amount
was
claimed, the contents of this letter were identical to that of the
first demand of 13 January 2011. This letter of demand was
of course
not accompanied by the original guarantee. Without having received
any response from Nedbank, Procprops demanded payment
of yet a
further amount of R72 693.66 in terms of the guarantee by letter
dated 1 March 2011. To both letters of demand dated
7 February 2011
and 1 March 2011, Nedbank responded on 14 March 2011 in the following
terms:
‘
Please
note that Nedbank did perform in terms of the guarantee in favour of
your client, when we received your first written demand
dated January
2011, accepted return of the original guarantee and duly paid the
amount demanded. The guarantee has been cancelled
and we are of the
opinion that all obligations in terms thereof have been
extinguished.’
[7] Despite this, on 16 May 2011 Procprops made written
demand for payment under the guarantee from Nedbank in the amount of
R241 151.87,
representing the difference between the amount
mentioned in the guarantee (R313 845.53) and the amount of the
payment (R72 693.66).
When Nedbank did not make payment of this
amount, Procprops instituted action in the North Gauteng High Court
against Nedbank for
payment in accordance with the letter of demand
of 16 May 2011. Nedbank’s plea to this claim was essentially
that when it
made payment to Procprops on the first demand, its
obligation in terms of the guarantee had been discharged. Nedbank
also joined
Top CD as a third party to the action, relying on the
aforesaid indemnification. Top CD in turn admitted that it was liable
to
indemnify Nedbank for any amount that Nedbank might be ordered to
pay to Procprops, but joined forces with Nedbank on the question
of
the interpretation of the guarantee.
[8] The matter was heard by Ledwaba J. At the end of the
trial he gave judgment for Procprops against Nedbank in the amount
claimed
as well as interest thereon, and ordered Nedbank and Top CD
jointly and severally to pay the costs of Procrops. He however
granted
leave to both Nedbank and Top CD to appeal to this court.
[9] It is clear that the guarantee has the features
described by Scott AJA in
Loomcraft Fabrics CC v Nedbank Ltd &
another
[1995] ZASCA 127
;
1996 (1) SA 812
(A) at 815G-J. It established a
contractual obligation on the part of Nedbank to pay to Procprops
which is wholly independent of
the underlying lease between Procprops
and Top CD. Disputes arising between Nedbank’s customer (Top
CD) and Procprops in
relation to the lease, did not detract from
Nedbank’s obligation to make payment to Procprops provided only
that the conditions
for payment specified in the guarantee were met.
These conditions were the receipt by Nedbank at its specified branch
of a written
demand with the contents set out in paragraph 4 of the
guarantee and the original guarantee. In the event of these documents
being
so presented, Nedbank could escape liability only upon proof of
fraud on the part of Procprops. See also
Lombard Insurance Co Ltd
v Landmark Holdings (Pty) Ltd & others
2010 (2) SA 86
(SCA)
para 20 and
Firstrand Bank Ltd v Brera Investments CC
2013 (5)
SA 556
(SCA).
[10] The central issue is whether on a proper
interpretation of the guarantee it provided for more than one payment
by Nedbank.
The provision that the demand must be accompanied by the
original guarantee strongly indicates that only one payment was
envisaged.
The purpose of this provision could not have been to
provide Nedbank with an original guarantee or to have a record of its
terms.
In all likelihood, it already had one of its own. The purpose
of the provision must therefore have been for Procprops to give up
the security of the guarantee to ensure that it could not be
presented for payment again. In addition, a meaning must be ascribed
to the phrase ‘first demand’. In my view the phrase
excludes further demands. In context it therefore means that there
could be no second or subsequent demand in terms of the guarantee. In
my judgment the guarantee is unambiguous and clear. Nedbank
was only
entitled and obliged to make payment of the amount of R313 845.53
or any lesser portion thereof upon receipt at its
prescribed branch
of Procprops’ first written demand and the original guarantee.
It follows that Nedbank’s obligation
in terms of the guarantee
was discharged when it made payment of a lesser amount of R72 693.66
on 21 January 2011 pursuant
to demand and the return of the
guarantee.
[11] Counsel for Procprops attempted to save the day by
relying on the last part of the demand quoted in para 5 above, namely
the
request by Procprops that after payment of the first demand
Nedbank should return the guarantee to enable Procprops to call on
the guarantee should it become necessary in future. Counsel wisely
disavowed any reliance on the proposition that a new contract
was
entered into. As I understood it, the argument was that both
Procprops and Nedbank understood the guarantee in this manner
and
that it should therefore be given this meaning.
[12] This argument is untenable. Evidence of subsequent
conduct of parties to an agreement is only admissible when the
document
is ambiguous on the face of it. See
Coopers
and Lybrand & others v Bryant
[1995] ZASCA 64
;
1995 (3) SA
761
(A) at 768C-E. As I have said, the meaning of the guarantee is
plain and unambiguous. There is in any event no evidence that Nedbank
ever held the belief that Procprops attempts to ascribe to it. The
evidence is to the contrary. By 19 January 2011, that is after
receipt of the first demand but before actual payment thereof, an
internal instruction to cancel the guarantee had been issued
by
Nedbank. There was no duty on Nedbank to advise Procprops of the
correct interpretation of the guarantee but it nevertheless
did so on
14 March 2011.
[13] It follows that the appeal must succeed. Counsel
were agreed that in this event Procprops should be ordered to pay the
costs
of both Nedbank and Top CD, both in this court and in the court
below. Although Nedbank was represented before us by two counsel,
it
did not ask that the costs of two counsel be allowed.
[14] In the result the following order is issued:
1 The appeals are upheld and the respondent is ordered
to pay the costs of appeal of both the appellants.
2 The order of the court a quo is set aside and replaced
with the following:
‘
The
plaintiff’s action is dismissed and the plaintiff is ordered to
pay the costs of the defendant and the third party.’
_______________________
C H G VAN DER MERWE
ACTING JUDGE OF APPEAL
APPEARANCES:
For First Appellant: G W Girwood (with him M Seape)
Instructed by:
Cliffe Dekker Hofmeyr, Pretoria
Webbers Attorneys, Bloemfontein
For Second Appellant: H F Oosthuizen
Instructed by:
Eloff Brink Attorneys, North Wing
Symington & De Kok, Bloemfontein
For Respondent: W W Gibbs
Instructed by:
Gross Papadopulo & Associates, Pretoria
Lovius Block, Bloemfontein