About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: South Gauteng High Court, Johannesburg
SAFLII
>>
Databases
>>
South Africa: South Gauteng High Court, Johannesburg
>>
2024
>>
[2024] ZAGPJHC 41
|
|
Hollard Insurance Company Ltd v Force Fuel (Pty) Ltd and Another (2020/34408) [2024] ZAGPJHC 41 (19 January 2024)
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
Case Number:
2020/34408
(1) REPORTABLE:
NO
(2) OF INTEREST TO
OTHER JUDGES:
NO
(3) REVISED:
NO
Date:
19/01/2024
Signature
In
the matter between:
HOLLARD
INSURANCE COMPANY LTD
APPLICANT
And
FORCE
FUEL (PTY) LTD
FIRST RESPONDENT
LABAT AFRICA
LTD
SECOND RESPONDENT
JUDGMENT
TSATSAWANE
AJ
INTRODUCTION:
1
The
applicant seeks an order in terms of which the second respondent is
directed to pay it an amount of R 20 000 000, 00 together
with
interest thereon “at the prime overdraft rate of Absa Bank
Limited, plus 2% from 10 April 2020 to repayment thereof”
and
costs of the application on an attorney and client scale
[1]
.
2
The relief which the applicant seeks is opposed by the second
respondent on grounds
set out in its affidavits filed of record.
3
The
applicant is a public company registered as a short-term insurance
company and it is also “
registered
to conduct guarantee insurance business
[2]
.”
The applicant is said to be in the business of issuing payment
guarantees on behalf of role players in the fuel procurement
industry
and secures its guarantee obligations by, amongst others, obtaining
indemnities and suretyships in its favour
[3]
.
4
On 19
August 2019, the first respondent executed a deed of indemnity as
guarantor in favour of the applicant. A copy of the deed
of indemnity
is attached to the founding affidavit as FA2. The deed of indemnity
records that the applicant has agreed to, “
at
the written request of the Guarantor … execute or procure the
execution, of a Guarantee or Guarantees
on
behalf of the Guarantors or any subsidiary, associated company or
companies … or any other entity or person mentioned
in such
written request/s
,
which request/s shall be regarded as incorporated herein
.”
5
In terms of the deed of indemnity:
“
3.
The Guarantor undertakes and agrees to pay to the Insurance Company
immediately
on first written demand any sum or sums of money which
the Insurance Company may be called upon to pay under the
Guarantee/s, whether
or not the Insurance Company at such date shall
have made such payment, and whether or not the Guarantor admits the
validity of
such claim against the Insurance Company under the
Guarantee/s.
3.1
In the event of the Insurance Company having made any payment or
incurred any costs or expenses, the
amount thereof shall bear
interest at the rate of 2% … above prime overdraft rate from
time to time charged by Absa Bank
Limited, from time of payment by
the Insurance Company to date of payment by the Guarantor to the
Insurance Company. The Guarantor’s
liability in terms hereof
shall be limited to any claim, loss, demand or liability that the
Insurance Company may be called upon
or incur by reason or in
consequence of issuing or procuring any Guarantee/s, plus interest
and cost
.”
6
On 16 August 2019, the second respondent executed a deed of
suretyship and indemnity
in favour of the applicant. A copy of the
deed of suretyship and indemnity is attached to the founding
affidavit as FA3. The deed
of suretyship and indemnity records that
the applicant has, at the first respondent’s request,
“
furnished or provided and may hereafter furnish or
provide
, at the written request of the Guarantor, certain
guarantees … in favour of certain persons, companies …
for the
due payment by the Guarantor or any other company …
mentioned in such request …
of any monies now or
from time to time hereafter owing
… under any
contract which it may have entered into or which it may thereafter
enter into
.”
7
In terms of the deed of suretyship and indemnity:
7.1
the second respondent “
hereby interpose and bind
myself/ourselves as surety/sureties for and co-principal debtor/s
jointly and severally with the Guarantor,
in solidum for the due
payment by the Guarantor to the Insurance Company of all and any
amounts which the Guarantor may be liable
to pay to the Insurance
Company under the Indemnity
”;
7.2
the second respondent further undertook
and agreed “
to pay
the Insurance Company on demand any sum or sums of money which the
Insurance Company may be called upon to pay under any
Guarantee
whether or not the Insurance Company shall, at such date, have made
such payment, and whether or not the Guarantor …
admit the
validity of such claims against the Insurance Company under the
Guarantee
.”
8
In
a letter dated 8 August 2019
[4]
,
the first respondent requested the applicant “
to
issue a guarantee, in the name of FuelEx (Pty) Ltd … in favour
of Engen, in the amount of R 20 000 000
.”
This letter is on the first respondent’s letterhead and was
signed by Gorden Walters in his capacity as the first
respondent’s
financial director
[5]
. This was
accordingly the first respondent’s request to the applicant to
issue a guarantee on behalf of “
any
other entity or person mentioned in such written request/s
”
as contemplated in the deed of indemnity. The question whether this
request was made at the behest of FuelEx (Pty) Ltd is
irrelevant to
the question whether the second respondent is liable for the first
respondent’s debts in terms of the deed
of suretyship and
indemnity.
9
Pursuant
to the aforesaid request and on 13 August 2019, the applicant issued
a guarantee in the name of FuelEx (Pty) Ltd in favour
of Engen
Petroleum Ltd in the requested amount of R 20 000 000, 00
[6]
.
10
On 6 April 2020, Engen Petroleum Ltd claimed the aforesaid amount of
R 20 000 000, 00 from the
applicant in terms of the aforesaid
guarantee. The applicant paid the amount of R 20 000 000, 00 to Engen
Petroleum Ltd on 10 April
2020.
11
In its answering affidavit,
the second respondent contends that the conclusion of the deed of
suretyship and indemnity was not authorised
and that it is not bound
by it. It further contends that the conclusion of the deed of
suretyship and indemnity would constitute
the provision of financial
assistance to the first respondent in terms of section 45 of the
Companies Act 71 of 2008 and that there
was no compliance with that
section and consequently, the deed of suretyship and indemnity is
void.
12
In its supplementary answering affidavits, the second respondent
denies liability on the basis
that:
12.1
The guarantee was issued before the execution of the
deed of
suretyship and indemnity and that it does not fall within the scope
and ambit of the deed of indemnity as a result of which
the first
respondent was not liable to the applicant. There is no merit in this
contention because the deed of suretyship and indemnity
covers the
amounts due and payable by the first respondent in terms of its deed
of indemnity, even amounts which the applicant
may not have paid out
yet.
12.2
The first respondent concluded an agreement with FuelEx
(Pty) Ltd in
terms of which it only purchased fuel in the amount of R 4 289 701,
71 and that it cannot be liable for more than
that amount. There is
also no merit in this contention because the first respondent’s
deed of indemnity covers the first
respondent’s liability for
the amounts guaranteed and paid by the applicant. In any event, the
first respondent agreed to
pay the applicant “
any sum or
sums of money
”
which the applicant may be called upon to
pay under the deed of indemnity
. In this case, that amount is R
20 000 000, 00.
13
As far as the authority point is concerned, the second respondent
says that the applicant’s
reliance on the second respondent’s
resolution authorising the conclusion of the deed of suretyship and
indemnity is wrong.
It further says the following in its heads of
argument:
“
55
… That resolution demonstrates that there were seven (7)
directors at
Labat whose signatures were sought. Only four (4) of the
seven (7) directors signed the resolution. But importantly, one (1)
of
the four (4) directors is Mr Walters, whom Labat contends was not
authorised to conclude the Surety. Mr Walters cannot grant authority
to himself. His representation as to his authority is of no moment.
56
Therefore, only three (3) of the seven (7) directors actually
attempted
to grant authority to Mr Walters to sign the Suretyship. As
a matter of fact, therefore, Mr Walters was not authorised by the
majority
(or all) of the directors of Labat …
”
14
I do not agree with the second respondent’s contention that the
conclusion of the deed of
suretyship and indemnity was not
authorised. Gordon Walters did not authorise himself to conclude the
deed of suretyship and indemnity
as contended by the second
respondent. Gordon Walters did not act in his personal capacity. The
second respondent’s resolution
expressly states that
it is
the second respondent
, not Gordon Walters, which “
shall
interpose and bind itself in favour of the Insurance Company
”
and that the second respondent’s board of directors and
shareholders have authorised the second respondent to “
provide
financial assistance to any one or more inter-related company/ies
”
and then goes on to authorise Gordon Walters and Brian Van Rooyen to
sign the deed of suretyship and indemnity. The same
resolution
further confirms that the second respondent has complied with the
provisions of section 45 of the Companies Act 71 of
2008.
15
The fact that Gordon Walters is one of the directors who signed the
necessary resolution is of
no moment. There is no suggestion that
Gordon Walters was conflicted and that he could not, for this reason,
participate in passing
the resolution. For as long as Gordon Walters
was not in law disqualified from participating in passing the
resolution, the resolution
is good in law. The resolution authorised
Gordon Walters, in his capacity as financial director to conclude the
deed of suretyship
and indemnity.
16
In addition, the resolution further provides that:
“
The Board of
Directors and Shareholders of the Company authorised the Company to
provide financial assistance to any one or more
inter-related
company/ies or corporation’s and/or any one or more juristic
persons who are members of or are related to any
such inter-related
Company. The Board confirms that the decision to provide such
financial assistance was granted pursuant to authority
granted to the
Board of Directors by the Shareholders during the past 24
(twenty-four) months
.”
17
In the premises, there was both shareholders and board approval for
the second respondent to conclude
a transaction such as the deed of
suretyship and indemnity in favour of the first respondent.
18
In
its replying affidavit, the applicant says that
[7]
:
“
Labat
provided copies of these resolutions to the Applicant
”
and that by doing this, the second respondent represented to the
applicant “
that
its shareholders had authorised it to provide financial assistance to
Force Fuels
.”
There is no evidence to contradict this version. Without this version
being contradicted, the second respondent’s
lack of authority
defence must fail.
19
On a proper interpretation of the deed of indemnity and the deed of
suretyship and indemnity the
correct position if the following:
19.1
The applicant agreed to execute guarantees at the first
respondent’s
written request and to do so on behalf of the first respondent “
or
any other entity or person mentioned in such written request/s
.”
19.2
The first respondent agreed to pay the applicant “
any sum or
sums of money which
” the applicant “
may be
called upon
to pay under the Guarantee/s
”
whether or not the applicant “
at such date shall have made
such payment
.”
19.3
The second respondent bound itself as surety for and
co-principal
debtor with the first respondent “
for the due payment by
”
the first respondent to the applicant “
of all and any
amounts which
” the first respondent “
may be liable
to pay to the
” applicant under the deed of guarantee and
indemnity.
19.4
By way of its letter dated 8 August 2019, the first
respondent made a
written request to the applicant, as it was entitled to do in terms
of the deed of indemnity, “
to issue a guarantee in the name
of FuelEx (Pty) Ltd
” in favour of Engen Petroleum Ltd. The
deed of indemnity entitled the first respondent to request the
applicant to issue
a guarantee on behalf of the first respondent
itself, the first respondent’s subsidiary, associated companies
“
or any other entity or person
.”
19.5
Upon receipt of the first respondent’s aforesaid
written
request, the applicant issued a guarantee on behalf of FuelEx (Pty)
Ltd in favour of Engen Petroleum Ltd in the amount
of R 20 000 000,
00, in accordance with the first respondent’s request and paid
that amount to Engen Petroleum Ltd.
19.6
In terms of the deed of indemnity, the first respondent
became liable
to the applicant in the amount of R 20 000 000, 00 which the
applicant guaranteed to pay and did pay to Engen Petroleum
Ltd.
19.7
In terms of the deed of suretyship and indemnity, the
second
respondent became liable to the applicant as surety for and
co-principal debtor with the first respondent for the due payment
by
the first respondent to the applicant “
of all and any
amounts which the
” first respondent “
may be liable
to pay to the
” applicant under the deed of indemnity.
20
Based on the above interpretation of the documentary evidence placed
before me and having considered
the well-presented arguments by both
parties, I am of the view that the second respondent is liable to the
applicant in terms of
the deed of suretyship and indemnity and that
the applicant has proved its case.
21
In the premises, I make the following order:
21.1
The second respondent is ordered to pay the applicant
the amount of R
20 000 000, 00 together with interest thereon at the prime overdraft
rate of Absa Bank Limited plus 2% with effect
from 10 April 2020 to
date of payment.
21.2
The second respondent is ordered to pay the applicant’s
costs
of this application on an attorney and client scale.
KENNEDY
TSATSAWANE SC
Acting
Judge of the High Court
Gauteng Division,
Johannesburg
This
judgment was prepared and authored by Acting Judge Tsatsawane. It is
handed down electronically by circulation to the parties
or their
legal representatives by email and by uploading it to the electronic
file of this matter on Caselines. The date
for hand-down is
deemed to be 19 January 2024.
Date of hearing:
25
July 2023
Date of
Judgement
:
19 January 2024.
Appearances:
FOR
APPLICANT:
Adv
A Kruger
Cell:
083 229 6478
Adrian.k@law.co.za
FOR
THE SECOND RESPONDENT:
Adv
BL Manentsa
Cell:
084 748 0286
Email:
bmanentsa@law.co.za
[1]
Paragraph
1 of the notice of motion.
[2]
Paragraph
5 of the founding affidavit.
[3]
Paragraphs
8 and 9 of the founding affidavit.
[4]
Annexure
FA4 to the founding affidavit.
[5]
Gordon
Walters was also the second respondent’s financial director, a
fact which is restated in paragraph 23 of the second
respondent’s
heads of argument.
[6]
Annexure
FA5 to the founding affidavit.
[7]
Paragraphs
12 and 25.