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[2023] ZAKZPHC 153
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Standard Bank of South Africa Ltd v Wardkiss Property Holdings (Pty) Ltd (9324/22) [2023] ZAKZPHC 153 (19 December 2023)
IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL
DIVISION, PIETERMARITZBURG
Case
No: 9324/22
In
the matter between:
STANDARD
BANK OF SOUTH AFRICA LTD
APPLICANT
and
WARDKISS
PROPERTY HOLDINGS (PTY) LTD
RESPONDENT
(Reg
No. 2015/421528/07)
ORDER
The
following order is granted:
1.
Judgment is granted against the respondent for:
1.1
Payment of the sum of R3 000 000.
1.2
Payment of interest on R3 000 000 from the date of service to the
date of payment at the
prevailing legal rate.
2.
The respondent is directed to pay the applicant’s costs of
suit.
JUDGMENT
E
Bezuidenhout J
Introduction
[1]
The applicant, Standard Bank of South Africa Ltd, seeks judgment
against the respondent,
Wardkiss Property Holdings (Pty) Ltd, for
payment of the amount of R3 million, together with interest at
the legal rate of
7,75% from date of service of the application to
date of payment. It also seeks its costs of suit.
[2]
It is common cause that the applicant was approached by, and
subsequently approved
the banking facilities in respect of another
entity, Wardkiss (Pty) Ltd (Wardkiss), providing it with
inter
alia
an overdraft facility limited to R6 million, a business
revolving credit plan in the amount of R2,5 million and a Covid-19
loan
for the amount of R3 million. Wardkiss is now in liquidation.
[3]
The respondent, represented by Mr AH Palmer, executed what appears to
be a guarantee
in favour of the applicant for the due, punctual and
full payment of all the debts which Wardkiss has or may have in the
future.
[4]
The parties are in agreement that the only issue that requires
determination is whether
annexure ‘K’, titled
‘Guarantee’, and upon which the applicant relies as its
security, is a suretyship
or a guarantee. For the sake of
convenience, I will continue to refer to it as ‘the guarantee’.
[5]
It is common cause that the guarantee has been signed electronically
by Mr Palmer,
duly authorised on behalf of the respondent, on 21 July
2020.
Background
[6]
Mr Palmer is a 50% shareholder of the respondent. Another entity,
Global Property
Investments (Pty) Ltd, is the shareholder of the
remaining 50% interest. Mr Palmer approached the applicant during
February 2020,
requesting banking facilities for Wardkiss.
[7]
The applicant attached a number of emails to its founding affidavit
which set out
the applicant’s requirements for the approval of
the banking facilities in respect of Wardkiss. In an email dated 25
February
2020, attached as annexure ‘A’, written by Mr V
Naidoo, the collateral required was
inter alia
a guarantee by
Mr Palmer, restricted to R11 million, and a guarantee by the
respondent, restricted to R6 million.
[8]
In a further email dated 4 March 2020, attached as annexure ‘B’,
dealing
again with the collateral required, the initial guarantee by
Mr Palmer was amended to be restricted to R6 million and the
guarantee
in respect of the respondent was amended to be restricted
to R3 million.
[9]
In an email dated 6 March 2020, written by Mr Palmer to Mr Naidoo,
and attached as
annexure ‘C’, the proposals regarding the
guarantees in respect of Mr Palmer, restricted to R6 million, and the
respondent,
restricted to R3 million, were agreed to.
[10]
The respondent, in its answering affidavit attested to by Mr Palmer,
does not take issue with
the content of the annexures.
[11]
The applicant alleges that the terms of the contract entered into
between the applicant and Wardkiss
is contained in a so-called
banking facilities letter dated 20 July 2020, attached as annexure
‘D’. It was signed by
Mr Naidoo on behalf of the
applicant and by Mr Palmer on behalf of Wardkiss, although Mr Palmer
alleges that he cannot recall the
manner in which the document was
signed. During argument it was however clear that it was accepted
that he signed it electronically.
He did not dispute the content of
annexure ‘D’.
[12]
In terms of clause 1 of annexure ‘D’, an overdraft
facility of R6 million was made
available to Wardkiss. It was also
granted a business revolving credit plan for R2,5 million.
[13]
Clause 3 of annexure ‘D’ sets out the collateral
required. It included
inter alia
a guarantee restricted to
R8,5 million by Mr Palmer and a guarantee restricted to R3 million
by the respondent, an unrestricted
cession of book debts and a
notarial general bond for R6 million over certain movable assets.
[14]
The terms and conditions, which were accepted by the signatory on
behalf of the respondent, defined
‘collateral’ as ‘any
security provided to us to secure payment of your loan obligations in
terms of the Overdraft
Agreement’. It did not contain a
definition for ‘guarantee’ but did define surety as ‘a
person who undertakes
to pay, in full or in part, the amount owing in
terms of this Overdraft Agreement in the event of default by you’.
[15]
The respondent, in its answering affidavit, and in response to the
terms of annexure ‘D’,
states that the guarantee to be
executed by the respondent for R3 million was not a principal
obligation but an ancillary
obligation which was nothing more than a
suretyship sought from the respondent for the debts of Wardkiss.
There is no indication
that this point or issue was raised by Mr
Palmer during the negotiations with the applicant for the facilities
of Wardkiss.
[16]
The applicant also attached the business revolving credit plan
agreement as annexure ‘E’.
Its content was not disputed
by the respondent. It was signed by Mr Naidoo. In clause 12, with the
heading ‘Collateral’
printed in bold, it was stated that
‘we hold the following Collateral’. Reference was made
inter alia
to the same two guarantees as referred to in
annexure ‘D’. The document, on page 6, contained an
acceptance by the
borrower, where the signatory on behalf of the
respondent, Mr Palmer, confirmed
inter alia
that they were
aware of the importance of all the wording printed in bold, that they
have been free to secure independent advice
in respect of the
agreement, and that they were aware that they must not accept the
agreement unless they understood their rights
and obligations and the
risks and costs of the loan.
[17]
Part B of annexure ‘E’ contained the terms and
conditions. In clause 1, with the
heading ‘Definitions’,
it defined collateral as ‘any security and undertaking provided
to us to secure the repayment
of your loan obligations in terms of
this Agreement’. It further defined ‘collateral provider’
as ‘each
person and/or entity who is to provide collateral to
the Bank in respect of the due performance by you of your payment and
other
obligations in terms of this Agreement’. It also defined
‘guarantor(s)’ as ‘a person(s) who undertake (s)
to
pay, in full or in part, the amount owing in terms of the Agreement
in the event of a default by you under this Agreement’.
There
was no definition for ‘surety’.
[18]
The respondent raised the same issue as before, namely that the
guarantee was nothing more than
a suretyship. The respondent did not
attach any correspondence to its affidavit to gainsay or elaborate on
what was contained in
the email correspondence between Mr Palmer and
Mr Naidoo, leading up the agreements being signed.
[19]
The applicant also described and attached annexure ‘F’
which contained the terms
of a Covid-19 emergency loan agreement
concluded, in terms of which the applicant lent and advanced to
Wardkiss an amount of R3
million. Clause 11 dealt with the collateral
required, which included a guarantee restricted to R3,3 million by Mr
Palmer. Mr Palmer
signed the document on 10 September 2020. The
document was not signed on behalf of the applicant. The applicant
did, however, advance
the money to Wardkiss.
[20]
It is common cause that Wardkiss placed itself in voluntary
liquidation on or about 5 February
2021. On 24 January 2022, the
amount due in respect of Wardkiss’ overdraft facility was
R6 501 440.98, together
with interest. On 25 January 2022,
the amount due in respect of the revolving credit plan was R2
477 159.27, together with
interest. On 31 January 2022, the
amount due in respect of the Covid-19 loan was R3 542 677.95,
together with interest.
The applicant wrote a letter containing a
notice in terms of sections 344 and 345 of the Companies Act 61 of
1973 to the respondent
on 7 February 20222. The respondent’s
attorney replied on 22 February 2022. The letter is attached as
annexure ‘M1’
to the founding affidavit. It appears from
the letter that some settlement proposals and negotiations had been
anticipated but
then the section 344 notice was received. It
nonetheless contained a number of proposals but the following was
stated at para 8:
‘
In
regard to the alleged guarantee obligation of Wardkiss Property
Holdings (Pty) Limited for Wardkiss (Pty) Limited (In Liquidation),
our client denies that this guarantee or suretyship complies with
either the provisions of the General Law Amendment Act 50 of
1956 or
the Electronic Communications Act 25 of 2002 and denies that it is
either binding or enforceable….’
The
applicant, through its attorney, issued a formal written demand on 10
May 2022, calling upon the respondent to pay the amount
owed in terms
of the guarantee.
The
guarantee
[21]
The applicant attached, as annexure ‘K’, the guarantee
executed by Mr Palmer on behalf
of the respondent on 24 July 2020. It
is common cause that it was signed electronically by Mr Palmer. The
guarantee did not contain
an advanced electronic signature.
[22]
The applicant contends that annexure ‘K’ is a guarantee
and that it is accordingly
not necessary that there should be
compliance with sections 1 and 13(1) of the Electronic Communications
and Transactions Act 25
of 2002 (the ECTA). Section 13 of the ECTA
makes provision for two types of electronic signatures, namely an
advanced electronic
signature and an electronic signature. An
advanced electronic signature is required where a signature is
required by law. Section
13(1) reads as follows:
‘
Where
the signature of a person is required by law and such law does not
specify the type of signature, that requirement in relation
to a data
message is met only if an advanced electronic signature is used.’
[23]
The respondent contends that the security upon which the applicant
relies is not a guarantee
but a suretyship. Section 6 of the General
Law Amendment Act 50 of 1956 sets out the formalities in respect of
contracts of suretyship.
It requires
inter alia
that the
written document which contains the terms of the contract, must be
signed by or on behalf of the surety. The security
signed by Mr
Palmer was only signed electronically and not by way of an advanced
electronic signature. If it is found that the
security provided by
the respondent was a suretyship, then it is not binding as it does
not contain an advanced electronic signature
but only the electronic
signature of Mr Palmer.
[24]
Annexure ‘K’ deserves closer scrutiny. The document is
titled ‘Guarantee’.
Clause 1 bears the heading ‘Liability
and Obligations of the Guarantor’. Clause 1.1 reads as
follows:
‘
1.1
I/We Wardkiss Property Holdings (Proprietary) Limited Reg Number
2015/421528/07 the undersigned
(“Guarantor”) hereby
unconditionally:
1.1.1
guarantee and undertake as a principal and independent obligation
(and not merely as ancillary obligation)
to and in favour of the
Standard Bank of South Africa Limited (registration number:
1962/000738/06) (the “Bank”) or
to anyone who takes
transfer of the Bank’s rights under this guarantee
(“Guarantee”):
1.1.1.1
the due, punctual and full
payment of all the debts which
Wardkiss (Proprietary) Limited Reg Number 1999/007635/07 (the
“Debtor(s)”), now owes
or may in the future owe to the
Bank in terms of or arising in connection with agreements concluded
or to be concluded between
the Debtor(s) and the Bank (“Debts”);
and to pay the Bank, on first written demand from the Bank and
without delay,
any and all amounts which are or may become due and
payable in respect of the Debts.’
[25]
Clause 2 bears the heading ‘Continuing Security’. Clause
2.1 reads as follows:
‘
For
its duration, this Guarantee is a continuing covering guarantee and
shall remain in full force and effect notwithstanding any
temporary
fluctuation in or extinction of the Debts or any prior payment under
this Guarantee.’
[26]
Clause 2.4 is of particular significance, and reads as follows:
‘
Without
derogating from clause 2.3, this Guarantee shall be effective
regardless of the validity or enforceability of the Debts,
any
related documentation, and any collateral security for the debts.’
[27]
Clause 4, with the heading ‘Warranties’, deals with the
warranties, representations
and undertakings by the Guarantor. In
terms of clause 4.1, the Guarantor warrants, represents and
undertakes
inter alia
in favour of the Bank that the
obligations expressed to be assumed by the Guarantor under the
guarantee are valid and binding on,
and enforceable, against the
Guarantor (clause 4.1.3) and that all the provisions and restrictions
contained in the guarantee are
fair and reasonable in the
circumstances and part of the overall intention of the parties in
connection with the guarantee (clause
4.1.4). It was further recorded
in clauses 4.1.4.1 and 4.1.4.2 that the Guarantor understands and
appreciates the risks, costs
and obligations and was given the
opportunity to read and understand the guarantee and is aware of all
the terms printed in bold.
[28]
Clause 5 deals with the Bank’s rights, and reads as follows:
‘
5.1
The Bank shall be entitled, at any time, in its sole and absolute
discretion, whether before or
after the due dates for payment of the
Debts, without reference or notification to the guarantors and
without affecting its right
and the Guarantor’s liabilities
hereunder, to:
5.1.1 release
(or omit to perfect) any other securities of whatsoever nature
(including, but not limited to guarantees,
suretyships and
indemnities) held by it (or given to it) in respect of the Debts;
5.1.2 grant
the debtor (or any surety, guarantor or indemnifier in terms of an
agreement referred to in clause 5.1.1)
extensions of time for
payment; and
5.1.3
compound, or to make any other arrangements with the debtor (or any
surety, guarantor or indemnifier in terms
of an agreement referred to
in clause 5.1.1) for the reduction or discharge of the debtor’s
indebtedness.
5.2
The rights of the Bank under the Guarantee shall in no way be
affected or diminished if
the Bank at any time obtains additional
guarantees, suretyships, securities or indemnities in connection with
the Debts or to the
extent that the Bank has already obtained any
guarantees, suretyships, securities or indemnities in connection with
any of the
Debts.’
[29]
Clause 6 deals with the renunciation of benefits and the right to
deduct any amount. In terms
of clause 6.1, the Guarantor (without
prejudice to or limitation of any other provision of the guarantee)
‘and to the extent
permissible in law’, renounces the
benefits of ‘all otherwise applicable legal immunities,
defences and exceptions
to the extent that they will be applicable in
the absence of this renunciation, including the defences and
exceptions of “cession
of actions”, “excussion”,
“division”…’.
Submissions
[30]
Ccounsel for the applicant as well as the respondent filed helpful
heads of argument, for which
I express my appreciation. Counsel for
the applicant submitted further comprehensive supplementary heads of
argument to deal specifically
with the issue to be determined, and
included references to numerous authorities.
[31]
Both counsel referred me to
Caney’s:
The Law of Suretyship in South Africa
,
[1]
where a suretyship is defined as:
‘…
an
accessory contract by which a person (the surety) undertakes to the
creditor of another (the principal debtor), that the
principal
debtor, who remains bound, will perform his obligation to the
creditor and that if and so far as the principal debtor
fails to
do so, the surety will perform it or, failing that, indemnify the
creditor.’ (Footnotes omitted.)
For
‘there to be a valid suretyship, there has to be a valid
principal obligation between the debtor and the creditor’.
[2]
A ‘surety only takes upon himself the risk of a breach of
contract by the principal debtor for the surety is not liable for
any
non-performance based upon the invalidity or extinction of the
obligation in question’.
[3]
In discussing the relationship between a suretyship and the contract
of guarantee, the following is stated:
[4]
‘
It is clear that
the word “guarantee” in common parlance and in many
contractual contexts means (and is intended by
the parties to mean)
simply to undertake the obligations of a surety. This is not
what is meant by guarantee in this context,
for the contract of
guarantee is distinct from suretyship . . . With a contract of
guarantee, on the other hand, the guarantor
undertakes a principal
obligation to indemnify the promisee on the happening of certain
events . . . Difficulties begin to arise,
however, when the event on
which the guarantor becomes bound to indemnify the promisee is in
fact the performance by a third party
of some obligation which that
third party owes to the promisee.’ (Footnotes omitted.)
[32]
The authors proceed to discuss the differences between a guarantee
that a debtor will perform
and a suretyship, with reference to
various authorities. The first point of distinction mentioned is with
reference to a guarantor’s
obligation, which is independent
from that of the debtor, and which ‘is to indemnify the
creditor in respect of losses suffered
through the debtor’s
non-performance’.
[5]
A
surety, on the other hand, is only liable for any
‘
losses
resulting from the debtor’s breach of contract. Thus if the
creditor suffers grave losses when it turns out that the
debtor’s
contract is invalid, the guarantor’s obligation remains in
force and he will have to pay those losses but
a surety’s
obligation falls away and he will not have to pay [anything].’
[6]
This
is very much in line with what is contained in clause 2.4 of the
guarantee. The second point of distinction mentioned is that
‘a
surety undertakes that the debtor himself will perform, and only that
if he fails to perform that the surety will do so’.
A
guarantor, on the other hand, ‘undertakes to pay on the
happening of a certain event but does not promise that that event
will not happen’. In conclusion, it was stated that ‘it
remains difficult to tell them apart particularly where the
event
guaranteed is the performance of a contractual obligation. As Hahlo
and Kahn remark “the distinction often turns on
a knife
edge”’.
[7]
(Footnotes omitted.)
[33]
Counsel for the applicant referred me to
Standard
Bank of South Africa Ltd v Essa and others
[8]
where Binns-Ward J stated the following:
‘
In
contending that the suretyships do not qualify as “credit
guarantees” within the meaning of the Act the defendants
rely
on the distinction in law between a guarantee, which imposes a
self-standing principal obligation on the guarantor, and
a
suretyship, which creates an obligation which is entirely accessory
to that of a principal debtor. While the distinction
between
these types of contracts is easy to state in the abstract, in
practice it can sometimes be difficult to determine into
which of the
types a particular agreements falls. It is also a not infrequent
occurrence for parties to describe what is unquestionably
a contract
of suretyship as the provision of a guarantee.’ (Footnotes
omitted.)
The
court
inter alia
referred to the same passages from
Caney’s
which were quoted above. It was, however, seized with deeds of
suretyships executed by the defendants.
[34]
It was submitted on behalf of the applicant, with reference to
Natal
Joint Municipal Pension Fund v Endumeni Municipality
,
[9]
that when interpreting a document such as a guarantee, ‘the
inevitable point of departure’ is the language used in
the
guarantee. A court furthermore has to take the context and purpose
into account when interpreting a contract.
[10]
[35]
Counsel for the applicant also referred to
Capitec
Bank Holdings Ltd and another v Coral Lagoon Investments 194 (Pty)
Ltd and others
[11]
where Unterhalter AJA held that:
‘
[25] . . . The
much-cited passages from
Natal Joint Municipal Pension Fund v
Endumeni Municipality (Endumeni
) offer guidance as to how to
approach the interpretation of the words used in a document. It is
the language used, understood
in the context in which it is used, and
having regard to the purpose of the provision that constitutes the
unitary exercise of
interpretation. I would only add that the triad
of text, context and purpose should not be used in a mechanical
fashion. It is
the relationship between the words used, the concepts
expressed by those words and the place of the contested provision
within
the scheme of the agreement (or instrument) as a whole that
constitute the enterprise by recourse to which a coherent and salient
interpretation is determined. As
Endumeni
emphasised,
citing well-known cases, “(t)he inevitable point of departure
is the language of the provision itself”.
[26]
. . .
Endumeni
is not a charter for judicial
constructs premised upon what a contract should be taken to mean from
a vantage point that is
not located in the text of what the parties
in fact agreed. Nor does
Endumeni
license judicial
interpretation that imports meanings into a contract so as to make it
a better contract, or one that is ethically
preferable.
’
(Footnotes omitted.)
[36]
The applicant, in support of its views, places reliance on the
wording of clause 1 of the guarantee,
which, as mentioned above, is
titled ‘Guarantee’ and also relies on the exchange of
emails between the applicant’s
employee, Mr Naidoo, and Mr
Palmer, to provide the context and purpose of the guarantee.
[37]
It was submitted on behalf of the respondent, with reference to
List
v Jungers,
[12]
that one should be cautious not to place reliance on individual
words. Diemont JA held as follows:
[13]
‘
It
is, in my view, an unrewarding and misleading exercise to seize on
one word in a document, determine its more usual or ordinary
meaning,
and then, having done so, to seek to interpret the document in the
light of the meaning so ascribed to that word. Apart
from the fact
that to decide on the more usual or ordinary meaning of a word may be
a delicate task . . . it is clear
that the context in which
the word is used is of prime importance.’
[38]
I was also referred to
Absa
Bank Ltd v Zurich Risk Financing SA Ltd
[14]
where Blieden J noted that the nature of the liability created by a
document
‘…
turns not on what the
document is named or styled as. Its label is unimportant. What
matters is the kind of liability sought to
be created by the parties,
as evidenced by the language they elected to employ in the context in
which their wording appears.’
[39]
It was further submitted by the respondent that it is clear from the
wording of the guarantee
as a whole, that the respondent’s
obligations are in respect of ‘the due, punctual and full
payment of all debts’
which Wardkiss owes the applicant in
terms of the agreements concluded between the applicant and Wardkiss.
As the obligation of
the respondent was dependent on the due,
punctual and full payment by Wardkiss of its obligations to the
applicant in terms of
the agreements, the obligation of the
respondent was argued to clearly be accessory to that of Wardkiss.
The guarantee did not
give rise to an independent obligation and is
therefore a suretyship and not a guarantee.
[40]
In response to this submission, it was argued on behalf of the
applicant that the existence of
a contractual debt of a third party,
as the event for which the guarantee is provided, does not mean that
it is a suretyship instead
of a guarantee. Reference was made to
Jungers
,
Hermes
Ship Chandlers (Pty) Ltd v Caltex Oil (SA) Ltd
[15]
and
Cazalet
v Johnson
[16]
where in each case the document relied upon contained an undertaking
to pay the debt of a third party if the latter did not pay
it. In
each instance, the court interpreted the document to be a guarantee,
a principal obligation, and not a suretyship.
[41]
It was also submitted on behalf of the respondent that the guarantee
makes provision for the
renouncing of benefits, which defence is only
afforded to a surety, and which demonstrates that the parties
intended to conclude
a suretyship. Reliance was placed on
Caney’s
[17]
where it was stated that ‘if a contract is one of suretyship,
the surety will be entitled to the suretyship benefits . .
. but
otherwise not’.
[42]
In response to this last submission, the applicant submitted that the
existence of clause 6.1.1
does not transform the guarantee into a
suretyship. It simply closes the door on the respondent opposing a
claim for payment under
the guarantee by contending that the
applicant is obliged to first seek payment from (or excuss against)
Wardkiss.
Discussion
and analysis
[43]
There is a saying that if it looks like a duck, walks like a duck and
quacks like a duck, then
it just may be a duck. It later became known
as the duck test, a humorous term for a form of inductive
reasoning.
[18]
It has not been
easy to find a clear and exact definition of a guarantee. In most
instances, it is described by comparing it with
a contract of
suretyship. Carl Hugo, a professor in banking law at the University
of Johannesburg, provided the following description:
[19]
‘
When
dealing with guarantees it is important to emphasise that the term
"guarantee" can in law refer to two distinctly
different
instruments, namely an independent guarantee (often referred to as a
demand guarantee) and an accessory guarantee (akin
to suretyship). In
the case of the former the beneficiary's right to be paid by the
guarantor is to be determined solely with
reference to the guarantee
itself (and not with reference to the underlying debt secured by the
guarantee). In the case of the
accessory guarantee, however, the
beneficiary will only be entitled to be paid by the guarantor if, in
terms of the underlying
debt relationship, it is indeed entitled to
payment; the guarantor is entitled to raise any defence against the
beneficiary that
the principal debtor would have been able to raise
against the beneficiary in the underlying debt relationship. From a
legal perspective
this is a fundamental difference which is often not
properly understood or appreciated by the parties concerned.’
(Footnote
omitted.)
[44]
Counsel for the applicant referenced a number of cases and submitted
that the cases will only
be helpful to the extent that they
demonstrate a uniform approach to interpret a contract in accordance
with the rules for interpreting
contracts. The obvious problem with
looking at other cases is that the facts and the wording of the
contracts in each case would
differ from case to case and from
contract to contract.
[45]
Annexure ‘K’ is titled ‘Guarantee’, but as
mentioned in
Absa
, the label of a document is not important. I
will instead concentrate on the content of the guarantee. It is clear
from the wording
of clause 1.1 of the guarantee that the respondent
undertook, as a principal and independent obligation, the due,
punctual and
full payment of the debts of Wardkiss and to pay to the
applicant on first written demand, without delay, all amounts due and
payable.
[46]
The guarantee also clearly states that it is not merely an ancillary
obligation, as would be
the case in respect of a suretyship (see
clause 1.1.1). The guarantee also makes it clear that it shall be
effective regardless
of the validity or enforceability of the debts
of Wardkiss (see clause 2.4).
[47]
The guarantee contains no provision that the respondent will only be
liable to perform in the
event that Wardkiss fails to do so, which
would fall squarely within the accessory nature of a suretyship, as
described in
Caney’s
and
Essa
.
[48]
In my view, looking at what has been established as the three legs or
triad in respect of the
interpretation of a contract, namely, the
language used, the context, and the purpose, it is clear, firstly,
that the language
of the guarantee is consistent with that of a
guarantee, bearing in mind the characteristics of a guarantee as set
out above.
[49]
As far as the context is concerned, the applicant placed reliance on
the various emails exchanged
between the parties. The applicant,
through Mr Naidoo, at all times referred to, and requested, that
collateral be provided in
the form of guarantees, one by Mr Palmer
and one by the respondent. Mr Palmer accepted these proposals, which
culminated in the
signing of annexures ‘D’, ‘E’
and ‘K’. At no stage did Mr Palmer counter with a
proposal that
he would rather provide a suretyship instead of a
guarantee. He was asked to sign the guarantee and then proceeded to
sign it,
again with no indication that he would have preferred to
sign a suretyship instead or that the guarantee was incorrectly
worded
or wrongly described. The respondent did not take issue with
the content of the emails attached and the documents signed, relying
instead only on the legal submission that the nature of the guarantee
was an ancillary obligation and not a principal obligation.
[50]
The purpose of the guarantee is, in my view, rather obvious. The
applicant wanted to ensure that
it had sufficient collateral as
security for the facilities it was providing to Wardkiss. As
mentioned above, the collateral required
consisted of more than just
the guarantees by the respondent and Mr Palmer. Annexure ‘D’
did not only refer to collateral
but also made reference to further
‘supporting security’ which included a further continuing
covering mortgage bond
by the respondent in respect of a property in
Sydney Road and a cession of life cover by Mr Palmer, restricted to
R6 million. The
applicant was clearly intent on ensuring that it had
sufficient collateral, which led to the guarantee being signed by Mr
Palmer.
[51]
In my view, bearing in mind the principles as set out in
Endumeni,
Capitec
and
Caney’s
, I have no doubt that annexure
‘K’ is indeed a guarantee, and that its wording, clearly
distinguishes it from that
of a suretyship. There is furthermore
nothing in my view that supports the suggestion that the parties
intended to conclude a suretyship
instead of a guarantee, bearing in
mind the clear words of the document, the context and its purpose. It
looks like a guarantee,
it behaves like a guarantee, and in my view
it is a guarantee.
[52]
It follows that it was not necessary for the guarantee to have been
signed by Mr Palmer by way
of an advanced electronic signature, as
required by section 13 of the ECTA. The applicant is therefore
entitled to judgment against
the respondent.
Costs
[53]
As far as costs are concerned, I have no reason to deviate from
the general rule, namely
that costs follows the result. The
applicant, represented by both senior and junior counsel, has not
asked for costs of two counsel
in its Notice of Motion. At the
hearing I was however requested to award costs of two counsel due to
the complexity of the matter
and its importance to the applicant.
Counsel for the respondent was opposed to such an order. Whilst I
understand the importance
of the matter I am not convinced that the
costs of two counsel is justified. I will accordingly not include
that in the costs order.
Order
[54]
I accordingly make the following order:
1.
Judgment is granted against the respondent for:
1.1
Payment of the sum of R3 000 000.
1.2
Payment of interest on R3 000 000 from the date of service to the
date of payment at the
prevailing legal rate.
2.
The respondent is directed to pay the applicant’s costs of
suit.
E
BEZUIDENHOUT J
Date
of hearing:
12 June 2023
Date
of judgment:
19 December 2023
Appearances:
For
the applicant:
GR
Thatcher SC
R van
Rooyen
Instructed
by:
Shepstone
& Wylie ATTORNEYS
24
Richfond Circle
Ridgeside
Office park
Umhlanga
Rocks
Tel:
031 575 7000
c/o
Shepstone & Wylie
1
st
Floor , ABSA Building, 15 Chatterton Road
Pietermaritzburg
Tel
033 355 1780
Ref
Josette Manuel /mm
Email:
afd@wylie.co.za
jmanuel@wylie.co.za
For
the respondent:
DW
Eades
Instructed
by:
Lester
Hall, Fletcher Inc
44
Old Main road
Kloof
Ref:
Mr Chris De Beer/Roslyn
Tel:
031 818 7280
Email:
chris@lesterhall.co.za
roslyn@lesterhall.co.za
c/o
Viv Greene Attorneys
132
Roberts Rod
Clarendon
Pietermaritzburg
Tel:
033 342276
Email:
pa@vglaw.co.za
[1]
C F Forsyth and J T Pretorius
Caney’s:
The Law of Suretyship in South Africa
6 ed (2010) at 28-29 (‘
Caney’s
’).
[2]
Ibid at 29.
[3]
Ibid at 30.
[4]
Ibid at 32.
[5]
Ibid at 33.
[6]
Ibid.
[7]
Ibid at 34.
[8]
Standard
Bank of South Africa Ltd v Essa and others
[2012] ZAWCHC 265
para 13 (‘
Essa
’).
[9]
Natal
Joint Municipal Pension Fund v Endumeni Municipality
[2012] ZASCA 13
;
2012 (4) SA 593
(SCA) at 604C D (‘
Endumeni
’).
[10]
University
of Johannesburg v Auckland Park Theological Seminary and another
[2021] ZACC 13
;
2021 (6) SA 1
(CC) para 66.
[11]
Capitec
Bank Holdings Ltd and another v Coral Lagoon Investments 194 (Pty)
Ltd and others
[2021] ZASCA 99
;
2022 (1) SA 100
(SCA) paras 25-26 (‘
Capitec
’).
[12]
List v
Jungers
1979 (3) SA 106
(A) at 118D (‘
Jungers
’).
[13]
Ibid at 118D-E.
[14]
Absa
Bank Ltd v Zurich Risk Financing SA Ltd
[2009] ZAGPJHC 85 para 5 (‘
Absa
’).
[15]
Hermes
Ship Chandlers (Pty) Ltd v Caltex Oil (SA) Ltd
1973 (3) SA 263 (D).
[16]
Cazalet
v Johnson
1914 TPD 142
[17]
Caney’s
at 26.
[18]
https://en.wikipedia.org/wiki/Duck_test
(accessed 18 December 2023).
[19]
C Hugo ‘Letters of credit and demand guarantees: a tale of two
sets of rules of the International Chamber of Commerce’
(2017)
1
TSAR
1
at 14.