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[2023] ZAKZPHC 7
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Infiniti Insurance Co Ltd v Inkonka Civils CC and Another (9841/2021P) [2023] ZAKZPHC 7 (27 January 2023)
SAFLII
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Certain
personal/private details of parties or witnesses have been
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IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL
DIVISION, PIETERMARITZBURG
Case
No. 9841/21P
In
the matter between:
INFINITI
INSURANCE CO. LTD
APPLICANT
[Registration
Number 2005/029823/06]
and
INKONKA
CIVILS CC
FIRST RESPONDENT
[Registration
Number 2006/011823/23]
VEDANTH
AMRITHLAL
SECOND RESPONDENT
[Identity
Number [....]]
ORDER
1.
Payment of the sum of R2 508 059- 84 (two million five hundred and
eight thousand
and fifty nine rand eighty four cent).
2.
Interest on the sum of R2 508 059.84 at the prescribed legal prime
overdraft
rate of Absa Bank of South Africa limited plus two percent
(2%) from 7 May 2021 until payment in full.
3.
Costs of suit on attorney and client scale.
JUDGMENT
Delivered
on:
Mngadi,
J
[1]
The applicant seeks against the two respondents an order for payment
of R2 508 059-84,
plus interest and costs on an attorney and client
scale. The respondents oppose the application.
[2]
The applicant is Infiniti Insurance Company Limited a public company
registered and
incorporated in terms of the Company law of the
Republic of South Africa. The first respondent is Inkonka Civils CC a
close corporation
duly registered and incorporated in accordance with
the law. The second respondent is Vedanth Amrithlal an adult male.
[3]
The applicant claim that at the instance of the first respondent, it
issued a guarantee
in favour of the third party for the obligation of
the first respondent against an indemnity in its favour of which the
second
respondent stood surety. The third party in a demand called up
the guarantee and the applicant honoured the guarantee in the sum
of
R2 508 059.84, the sum is now claimed from the respondents. The third
party/employer is the Department of Rural Development
and Land Reform
Development.
[4]
The respondents admitted the guarantee, the indemnity and the
suretyship, as well
as the calling up of the guarantee and the
payment by the applicant. In my view, this makes it not necessary to
canvass in this
judgment the terms of the guarantee, the indemnity
and the suretyship in details.
[5]
The respondents rely on an answering affidavit deposed to by the
second respondent.
The second respondent states that the demand by
the third party calling up the guarantee claimed that it terminated
the contract
relationship with the first respondent due to a default
by the first respondent, which was incorrect. In fact, he claims, the
third
party repudiated the contract with first respondent. Therefore,
he claims, the third party was not entitled to be paid in terms
of
the guarantee.
[6]
The respondents in their heads of argument and orally during the
hearing raised another
defence namely, that the demand, by the third
party was not a valid demand in that it was not accompanied by a
notice of termination
of the contract. I now consider the defences
raised by the respondents.
[7]
Demand by the third party
The
applicant in the founding affidavit para 13 stated:
‘
On or about 4
February 2021, the Employer addressed a letter of demand to the
applicant for payment of the guaranteed amount of
R2 508 059.84 due
to the cancellation of the contract between the Employer and the
First Respondent. A copy of the demand is attached
hereto as FA4’.
The answering affidavit responded as follows: ’16 In terms of
the performance guarantee (FA3 to the
founding affidavit) in order to
call up the performance guarantee, the Department was required to
address a written demand to the
applicant as it physical address
indicating that the contract had been cancelled due to the
contractor’s (First Respondent)
default and to attach a
termination notice and indicate that it was calling up the
performance guarantee in terms of clause 5.
In paragraph 24 in the
answering affidavit, the respondents admitted the contents of
paragraphs 13 and 14. FA4 was the letter of
demand to the applicant.
It stated:
‘
Calling
up performance guarantee
.
Reference is made
to the above-mentioned project and your Guarantee No. PS GUA 0001
issued on behalf of Inkonka Civils CC for said
contract.
Please take note that the
contract with Inkonka Civils CC has been cancelled due to the
contractor’s default. See attached
correspondence.
In light of the above,
you are hereby requested to honour the performance Guarantee No PS
GUA 0001 as per paragraph 5.1 in the Guarantee?
[8]
The relevant clause of the Guarantee (clause 5) provides:
‘
5 subject to the
Guarantee’s maximum liability referred to in 1, the Guarantor
undertakes to pay the Employer the Guaranteed
sum or the full
outstanding balance upon receipt of a first written demand from the
employer to the guarantor at the guarantor’s
physical address
calling up this Performance Guarantee such demand stating that:
5.1 The
contract has been terminated due to the contractor’s default
and that Performance Guarantee is called
up in terms of 5 or
5. 2 ….
5.3 The
aforesaid written demand is accompanied by a copy of the notice of
termination.
[9]
The applicant’s counsel argued that the respondents were
belatedly raising as
an issue on facts admitted in the answering
affidavit, and they should not be allowed to do so. Further, she
contended that FA4
with the correspondence that accompanied
constituted a proper demand as referred by clause 5 of the guarantee
and the applicant
was bound to comply with it. She argued that the
respondents at all material times they had in their possession the
copy of the
notice of termination they have attached as VA4 to the
answering affidavit.
[10]
It is clear that the respondents in the answering affidavit admitted
that the demand calling
up the guarantee in form was proper. If they
had raised any issue relating thereto in the answering affidavit, the
applicant would
have dealt with it in the replying affidavit. In my
view, they cannot belatedly raise the issue. In addition, the issue
is a non-issue.
The demand was accompanied by correspondence relating
to the termination of the contract and it specifically stated that
the contract
with first respondent has been terminated due to the
first respondent’s default.
[11]
Applicant not entitled to pay in terms of guarantee.
The
respondents in the answering affidavit state that the contract was
terminated by the first respondent and not by the third party
and the
applicant was aware of that. Therefore, contends the respondents, the
third party due to a default by the first respondent
could not
terminate the contract. In the alternative, the respondents contend
that there is a dispute of fact on whether the contract
was
terminated by the third party due to the default by the first
respondent or whether the third party repudiated the contract
and the
first respondent accepted the repudiation and cancelled the contract.
[12]
The respondents argued that in a letter VA3 dated on 3 September 2020
they advised the applicant
that the third party repudiating the
contract and that the first respondent accepted the repudiation and
terminated the contract
on 10 September 2020. In the said letter it
is pointed out that the third party is not entitled to call on the
guarantee and that
steps to do so shall be opposed. The respondents
contend that the applicant relied on the say-so by the third party,
it failed
to make further enquiry. The respondents contend that the
third party in stating that the contract was cancelled due to first
respondent’s
default communicated a false representation, a
misrepresentation amounting to fraud
,
which relieved the
applicant from liability on the guarantee.
[13]
In my view, the issue raised by the respondents relates to a dispute
between first respondent
and the third party. The applicant was not a
party to that contract between the first respondent and the third
party. The applicant
was bound by the terms of the guarantee, the
indemnity and the suretyship. Even if the applicant was informed of
the dispute it
could not take any position relating thereto. See
Cofare South Africa Insurance Co. Ltd vs East London Own Haven t/a
Own Haven Housing Association
2014 (2) SA 382
(SCA) paras 13-16.;
Dormell Properties 282 CC v
Renasa Insurance Co. Ltd and
Others NNO
2011 (1) SA 70
(SCA) par 63.
[14]
The applicant once presented with a demand compliant with the terms
of the guarantee, it was
obliged to honour the demand. The
respondents contend that the applicant was required to investigate
but they do not specify which
clause of the guarantee required the
guarantor to investigate and they do not specify what the applicant
was required to investigate,
how and for what purpose. The
respondents contend that there is a dispute of fact relating how and
by whom the contractual relationship
between the first respondent and
the third party was terminated. In my view, that alleged dispute of
fact is irrelevant in determining
the applicant’s relief
against the respondents, therefore, it is not a real genuine dispute
of fact as far as the applicant’s
claim is concerned. I am of
the view that the matter may be decided on the papers. See
Room
Hire Co. (Pty) Ltd. V Jeppe Street Mansions
(Pty) Ltd.
1949 (3) SA 1155
(T) at 1163
[15]
The respondents without any averments establishing fraud on the part
of the third party, in the
answering affidavit contend that since the
beneficiary of the guarantee committed fraud it was not entitled to
payment in terms
of the guarantee. In my view, the respondents have
neither alleged nor shown, even
prima facie
, any case of fraud
on the part of the third party, the applicant was made aware of. The
fraud must be clear and obvious that the
guarantor has notice. See
Lombard Insurance Co. Ltd v Landmark Holdings and Others
2010
(2) SA 86
(SCA) para 20.
[16]
The respondents seek to drag the applicant to the contractual dispute
between the first respondent
and the third party to which the
applicant is not a party and which has no impact on the guarantee.
Even the payment in terms of
the guarantee has no bearing to the
alleged dispute. The respondents argues that the application be
referred for trial to enable
first respondent to consolidate it with
the action the first respondent intends to institute against the
third party for damages.
In my view, this is not necessary and it may
result in prejudice to the applicant.
[17]
The respondents in their heads of arguments listed the following as
material facts: (a) On 10 December 2018 the third party
concluded a
construction contract with first respondent. (b)
On 12 March 2019,
the applicant at the instance of the first
respondent issued guarantee in question in favour of the third party.
(c) On 12 March
2019, first respondent issued the indemnity in favour
of the applicant. (d) On 12 March 2019, the second respondent
executed the
deed of suretyship in favour of the applicant. (e)
On 10 September 2020, the third party repudiated the contract and
first
respondent accepted repudiation and cancelled the contract. (f)
On 3 January 2021, the third party issued the termination notice
of
the contract. (g) On 4 Feb 2021, the third party issued the applicant
with a demand in terms of the guarantee. (h) On 19 Feb
2021, the
applicant made a demand in terms to the Indemnity and the suretyship
to the first respondent and the second respondent
respectively.
(i) On 7 May 2021,
the applicant paid the third party in terms of
the guarantee.
[18]
In my view, the above material facts show that the respondents became
aware of the demand calling up the guarantee on or about
4 February
2021. They did not take any steps to stop the applicant to pay in
terms of the guarantee nor did they advise the applicant
not to pay
in terms of the guarantee and the reasons thereof. The applicant only
paid in terms of the guarantee on 7 May 2021.
It shows that they did
not see any reason not to pay in terms of the guarantee. The effect
of that is that at that time they did
not see any reason not to
honour the indemnity and the suretyship.
[19]
It is found that the applicant was bound to pay the third party as
per the demand issued in terms
of the guarantee. The demand complied
with the terms of the guarantee. The respondents have not established
any defence to the
claim of the applicant based on the Indemnity and
suretyship. Judgment is granted in favour of the applicant against
the first
and second respondents, jointly and severally, the one
paying the other to be absolved.
[20]
It is ordered:
1.
Payment of the sum of R2 508 059.84 (two million five hundred
and eight
thousand and fifty nine rand eighty four cent).
2.
Interest on the sum of R2 508 059.84 at the prescribed legal prime
overdraft
rate of Absa Bank of South Africa limited plus two percent
(2%) from 7 May 2021 until payment in full.
3.
Costs of suit on attorney and client scale.
Mngadi,
J
APPEARANCES
Case
Number
: 9841/2021P
Applicant
: Infiniti Insurance Company Limited
Represented
by
: Ms K Mitchell
Applicant
attorney
: Moll Quibell & Associates
RANDBURG
Respondent
: Inkonka Civils CC and Another
Represented
by
: PJ Blomkamp S.C.
Respondent’s
Attorney :
Vathers
Attorneys
PIETERMARITZBURG
Date
of Hearing
: 17 JANUARY 2023
Date
of Judgment
: 27 January 2023