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[2010] ZASCA 137
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Dormell Properties 282 CC v Renasa Insurance Company Ltd and Another (491/09) [2010] ZASCA 137; 2011 (1) SA 70 (SCA) ; [2011] 1 All SA 557 (SCA) (1 October 2010)
Links to summary
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case No: 491/09
In the matter between:
DORMELL PROPERTIES 282 CC
............................................
Appellant
and
RENASA INSURANCE COMPANY LIMITED
............................
First
Respondent
STEPHEN MALCOLM GORE NO, TREVOR PHILIP
GLAUM NO
AND MOGAMAT IGSHAAN HIGGINS NO (In
their capacities as
the joint liquidators of SYNTHESIS
PROJECTS CAPE (PTY) TD)
(in liquidation)
............................................................................
Second
Respondents
Neutral citation:
Dormell v
Renasa (491/09)
[2010] ZASCA 137
(1 October 2010)
Coram:
Mpati P, Cloete,
Cachalia, Mhlantla JJA and
Bertelsmann AJA
Heard:
13 SEPTEMBER 2010
Delivered: 1 OCTOBER 2010
Summary:
Building guarantee –
rectification of in absence of antecedent agreement – expiry
date – whether civil method
of computation applicable to date
determined in guarantee – whether payment of guarantee issued
to employer to provide cash
fund to complete building project in case
the building contract is cancelled because of contractor's default,
can be enforced against
insurer who issued guarantee by employer
after the latter has been held in arbitration proceedings against
contractor to have repudiated
the building contract – contract
validly cancelled by contractor – whether order enforcing
guarantee would be academic.
__________________________________
__________________________________
ORDER
________________________________________________________________
On appeal from: South Gauteng High
Court (Johannesburg) (Gildenhuys J sitting as court of first
instance).
1. The appeal is dismissed.
2. The respondents' application to
place new evidence relating to the arbitration award before the court
is granted.
3. The appellant is to pay the
respondents’ costs, including the costs of two counsel,
incurred in respect of the appeal from
16 October 2009.
4. The respondents are to pay the
appellant’s costs, jointly and severally, the one paying the
other to be absolved, of the
appeal until 15 October 2010.
5. The order of the court a quo is set
aside and substituted with the following: ‘The respondents are
to pay the applicant’s
costs, jointly and severally, the one
paying the other to be absolved, including the costs of two counsel.’
________________________________________________________________
JUDGMENT
________________________________________________________________
BERTELSMANN AJA
INTRODUCTION
[1] The appeal, leave having been
granted on petition by this court, concerns the validity, the terms
and the enforceability of
a building guarantee described in the
papers as a ‘JBCC Construction Guarantee for use with the JBCC
Principal Building Agreement’.
[2] The appellant, or its predecessor,
embarked upon a development project known as the Cobble Walk Retail
Development Regional
Shopping Centre. The second respondent
(‘Synthesis’) was engaged as building contractor to
construct and complete the
project. The guarantee was issued by the
first respondent (Renasa), an insurance company, in favour of a
company that was converted
into the appellant close corporation
('Dormell').
[3] The guarantee was intended to
provide the employer with a ready cash fund for the completion of the
development project in the
event of the building contract having to
be cancelled by the employer prior to its finalisation by Synthesis.
Synthesis was liquidated
prior to the launching of the appeal, but
was represented by its joint liquidators.
[4] Dormell applied for the
rectification of the guarantee so as to reflect it as the employer,
but the court below refused this
relief. It also held that the
guarantee had expired when the appellant attempted to enforce it.
Because of these findings, the
court below did not have to deal with
the terms of the guarantee, its enforceability or with any dispute
relating to the cancellation
of the building contract.
THE GUARANTEE
[5] The guarantee,
printed on Renasa’s letterhead, is couched in the standard
terminology of a JBCC Series 2000 contractor’s
guarantee.
1
The clauses
relevant to this judgment read as follows:
'GUARANTOR
DETAILS AND DEFINITIONS
Guarantor
means Renasa Insurance Company Limited
Employer
means Messrs Dormell Properties 282 (Pty) Ltd
Contractor
means Synthesis Projects (Cape) (Pty) Ltd
Principal
Agent means André Van Der Merwe Associates cc
Works
means Cobble Walk Retail Development Regional Shopping Centre
Site
means ERF 15330, Durbanville
Agreement
means The JBCC Series 2000 Principal Building Agreement
Contract
Sum means The accepted amount inclusive of tax of R89 221,957.08
Guaranteed
Sum means The maximum aggregate amount of R6 691,646.78
Amount
in words Six Million, Six Hundred and Ninety One Thousand, Six
Hundred and Forty Six Rand and Seventy Eight Cents
Construction
Guarantee (insert Variable or Fixed) Fixed (insert expiry date)
28/02/08
___________________________________________________________________
AGREEMENT
DETAILS
Sections:
Total Sections (No or n/a) N/A Last section (no/identification or
n/a) N/A
Principal
Agent issues: Interim payment certificates, Final payment
certificate, Practical completion certificate/s
___________________________________________________________________
2.
FIXED CONSTRUCTION GUARANTEE
2.1
Where a fixed Construction Guarantee in terms of the Agreement has
been selected in this 2 with 3 to 13 shall apply. The Guarantor's
liability shall be limited to the amount of the Guaranteed Sum as
follows:
GUARANTOR'S
LIABILITY
Maximum
Guaranteed Sum (not exceeding 7.5% of the contract sum) in the
amount of:
PERIOD
OF LIABILITY
From
and including the date of issue of this Construction Guarantee and
up to and including the date of the only practical
completion
certificate or the last practical completion certificate where
there are sections, upon which this Construction
Guarantee shall
expire.
R6,691,646.78
Amount
in words: Six Million, Six Hundred and Ninety One Thousand, Six
Hundred and Forty Six Rand and Seventy Eight Cents
___________________________________________________________________
3.
The Guarantor hereby acknowledges that:
3.1
Any reference in this guarantee to the Agreement is made for the
purpose of convenience and shall not be construed as any intention
whatsoever to create an accessory obligation or any intention
whatsoever to create a suretyship.
3.2
Its obligation under this Guarantee is restricted to the payment of
money.
4.
Subject to the Guarantor's maximum liability referred to in 1 or 2,
the Guarantor hereby undertakes to pay the Employer the sum
certified
upon receipt of the documents identified in 4.1 to 4.3:
4.1
A copy of a first written demand issued by the Employer to the
Contractor stating that payment of a sum certified by the Principal
Agent in an interim of final payment certificate has not been made in
terms of the Agreement and failing such payment within seven
(7)
calendar days, the Employer intends to call upon the Guarantor to
make payment in terms of 4.2.
4.2
A first written demand issued by the Employer to the guarantor at the
Guarantor's physical address with a copy to the Contractor
stating
that a period of seven (7) calendar days has elapsed since the first
written demand in terms of 4.1 and that the sum certified
has still
not been paid therefore the Employer calls up this Construction
Guarantee and demands payment of the sum certified from
the
Guarantor.
4.3
A copy of the said payment certificate which entitles the Employer to
receive payment in terms of the Agreement of the sum certified
in 4.
5.
Subject to the Guarantor's maximum liability referred to in 1 or 2,
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 on this Construction Guarantee stating that:
5.1
The Agreement has been cancelled due to the Contractor's default and
that the Construction Guarantee is called up in terms of
5. The
demand shall enclose a copy of the notice of cancellation; or
5.2
A provisional sequestration or liquidation court order has been
granted against the Contractor and that the Construction guarantee
is
called up in terms of 5. The demand shall enclose a copy of the court
order.
6.
It is recorded that the aggregate amount of payments required to be
made by the Guarantor in terms of 4 and 5 shall not exceed
the
Guarantor's maximum liability in terms of 1 or 2.
7.
Where the Guarantor is a registered insurer and has made payment in
terms of 5, the Employer shall upon the date of issue of
the final
payment certificate submit an expense account to the Guarantor
showing how all monies received in terms of the Construction
guarantee have been expended and shall refund to the Guarantor any
resulting surplus. All monies refunded to the Guarantor in terms
of
this Construction Guarantee shall bear interest and (sic) the prime
overdraft rate of the Employer's bank compounded monthly
and
calculated from the date payment was made the Guarantor to the
Employer until the date of refund (sic).
8.
Payment by the Guarantor in terms of 4 and 5 shall be made within
seven (7) calendar days upon receipt of the first written demand
to
the Guarantor.
9.
The Employer shall have the absolute right to arrange his affairs
with the Contractor in any manner which the Employer deems
fit and
the Guarantor shall not have the right to claim his release from this
Construction Guarantee on account of any conduct
alleged to be
prejudicial to the Guarantor.
10.
The Guarantor chooses the physical address as stated above for all
purposes in connection herewith.
11.
The Construction Guarantee is neither negotiable nor transferable and
shall expire in terms of either 1.1.4 or 2.1 of payment
in full of
the Guaranteed Sum or on the Guarantee expiry date, whichever is the
earlier, where after (sic) no claims will be considered
by the
Guarantor. The original of this Construction Guarantee shall be
returned to the Guarantor after it has expired.
12.
This construction Guarantee, with the required demand notices in
terms of 4 or 5, shall be regarded as a liquid document for
the
purpose of obtaining a court order.
Signed
at Johannesburg on this 5
th
day of December 2007.'
THE RELEVANT FACTS
[6] On 14 February 2007, a JBCC 2000
Series Principal Building Agreement was signed by Mr Efstathiou,
ostensibly acting for a company
Dormell Properties 282 (Pty) Ltd
(‘the company'). In this contract, the contractor undertook to
construct a shopping centre
development known as Cobble Walk in
Durbanville. The signing of this agreement was preceded by the
acceptance of Synthesis' tender
by the employer’s principal
agent. Synthesis’ representative, Mr Reid, signed the JBCC
contract on 16 December 2006,
while Mr Efstathiou did so on the later
date. The capacity in which he signed was indicated as 'director'.
[7] The planning of the shopping
centre development had been undertaken by the company. This entity
was still in existence when
Synthesis' tender was accepted. The
company was converted to Dormell on 26 January 2007.
[8] Notice was given by Dormell of
this conversion to interested parties in writing on 13 February 2007.
Dormell alleges that Renasa
was included in the list of recipients to
whom this information was disseminated, but Renasa denies any
knowledge thereof. Synthesis
was informed of the change of identity
of the employer.
[9] On 23 January 2007 Renasa received
an application form for a JBCC 2000 guarantee to be issued in favour
of the company. Renasa
did not then, or at any later stage, have
sight of the building contract. It issued a guarantee on 24 January
2007, sufficient
securities having been provided by Synthesis for
that purpose.
[10] On 27 March 2007, this guarantee
was replaced with a new guarantee because the first had incorrectly
described the company
and Synthesis as contractor and sub-contractor
respectively rather than as employer and contractor. The guarantee
issued on 27
March 2007 expired on 25 October 2007 and the guarantee
in dispute, quoted above, was issued at Dormell’s request on
the
5 December 2007. Each of these guarantees indicated the company
as being the employer.
[11] The construction of the shopping
centre did not go according to plan and considerable delays occurred
in the building process.
The completion date envisaged by the
building contract had to be extended. At the beginning of 2008,
Synthesis informed the appellant
that practical completion of the
project would not be attained before 13 March 2008.
[12] Dormell thereupon demanded,
through its attorneys, an extension of the guarantee until 15 April
2008. Synthesis refused to
provide further security.
[13] On 11 February 2008 the principal
agent sent a written demand to Synthesis, threatening on behalf of
Dormell to cancel the
agreement if the former failed to provide an
extended guarantee. The contractor was formally placed on terms by
another letter
dated 13 February 2008, demanding an extended
guarantee on or before 27 February 2008 if cancellation of the
contract and calling
up of the guarantee was to be avoided.
[14] Synthesis’ attorneys
reacted by letter disputing the existence of any obligation to extend
the guarantee, whereupon the
appellant through its principal agent
cancelled the agreement on 28 February 2008. On the same day, Dormell
demanded payment of
the sum secured by the construction guarantee
from Renasa by delivering a letter to its offices, informing the
guarantor of the
cancellation of the building contract and of its
consequent obligation to honour its undertaking. Renasa rejected the
demand on
the same day, its attorneys denying any obligation to pay
as, according to their view, the guarantee had already expired when
demand
was made.
[15] Synthesis regarded the purported
cancellation of the building agreement as repudiation thereof which
it accepted on 29 February
2008 and cancelled the contract in turn.
[16] Dormell launched an application
in the court below for a declaratory order that the guarantee was
valid for the full day of
28 February 2008, that payment was demanded
timeously and that Renasa was obliged to honour the guarantee. Renasa
raised two defences:
That the guarantee had expired on midnight of 27
February 2008; and that Dormell was not entitled to claim under the
guarantee
as it had been issued in favour of the company and not of
Dormell. Synthesis, having been joined because of its interest in the
proceedings, denied that the close corporation was the beneficiary of
the guarantee and disputed any allegation that it had been
in breach
of the building contract.
[17] Dormell, as I have mentioned,
countered with an application for the rectification of the guarantee
on the basis that all three
parties always intended to procure and
issue a guarantee in favour of the employer. The identity of the
employer was not material
to Renasa once Synthesis provided
sufficient securities to protect the former’s position. The
parties’ true intention
would be honoured by reflecting the
appellant as the beneficiary of the guarantee. Renasa and Synthesis
disputed these assertions.
[18] The court below concluded that no
case for the rectification of the guarantee had been established and
that it had in any event
expired at midnight on 27 February 2008. It
dismissed the application on these grounds. Leave to appeal was
refused on 19 June
2009, but was granted on petition to this court on
27 August 2009.
[19] In the meantime Dormell and
Synthesis referred the dispute concerning the cancellation of the
building contract to arbitration.
Synthesis was liquidated before the
arbitration was concluded, but was represented by its liquidators
thereafter.
[20] The arbitrator held that
Synthesis had not been in breach of any term of the building contract
and that Dormell had repudiated
the agreement by its purported
cancellation, which repudiation was validly accepted by Synthesis
which thereafter cancelled the
contract as it was entitled to do. The
arbitrator’s award is not subject to appeal and has not been
reviewed.
NEW EVIDENCE ON APPEAL
[21] A court of appeal may admit new
evidence, which power is given to it by s 22(a) of the Supreme Court
Act 59 of 1959. This power
should be exercised sparingly and only if
the further evidence is reliable, ‘weighty and material and
presumably to be believed’
(per Wessels CJ in
Colman v
Dunbar
1933 AD 141
at 162). In addition, there must be an
acceptable explanation for the fact that the evidence was not adduced
in the trial court.
[22] Renasa applied for leave to
introduce the arbitrator’s award as evidence on appeal. This
request was not opposed by Dormell,
although the latter adopted the
stance that events that occurred after the date of the judgment
appealed against were irrelevant
to the outcome of the appeal.
[23] In the unusual circumstances of
this case it is clear that evidence of the arbitration and its
outcome did not exist at the
time the judgment of the court below was
given. The award's authenticity and reliability are not in issue. The
arbitration award
was indeed common cause. The application to present
further evidence relating to the arbitration award on appeal was
granted. Its
effect upon the appeal is dealt with below.
THE APPEAL
[24] Dormell attacks the judgment of
the court below on the grounds that the court erred in holding that
the guarantee expired at
midnight on 27 February 2008 and also erred
in refusing the prayer for its rectification. It insists that it is
entitled to enforce
the guarantee.
[25] Renasa and Synthesis support the
judgment appealed against. In addition, they rely on the arbitration
award for the submission
that the guarantee is no longer enforceable
as a competent tribunal has found that the employer was in breach of
the building contract
and Synthesis was entitled to cancel the same.
Dormell is therefore no longer bona fide when it insists on payment
of the guarantee.
Any entitlement to call for payment has fallen
away, they submit.
THE GUARANTEE’S EXPIRY DATE
[26] The guarantee is a written
agreement. There is no suggestion of any ambiguity of any of its
provisions. The words used by the
parties must be given their
ordinary meaning. The expiry date is determined as 28 February 2008.
It may expire earlier at the happening
of a specified event. The
court below concluded that the civil method of calculation had to be
applied to determine the expiry
date and found this to be at midnight
of 27 February 2008. The terms of the contract are the decisive
criterion by which any potential
expiry of a deadline has to be
determined:
‘
These
passages show, I think, that where time has to be computed under a
contract, we must look primarily at the terms of the contract,
in
order if possible, to discover from them what the parties intended,
and that it is only, when the contract is not decisive upon
the
point, that it is admissible to introduce the rules of law with
regard to computation of time.’
Per
Solomon JA in
Joubert
v Enslin
1910 AD 6
at 46.
[27] In Roman Law, which our law has
retained in this respect, the expiry of a period of time could be
calculated either by the
natural or the civil method. The natural
method calculates ‘de momento in momentum’, from the
exact moment of the first
day upon which the period to be calculated
commences to the exactly corresponding moment of the last day. The
civil method of computation
includes the first day of the period to
be calculated and excludes the last day, see:
Cock v Cape of Good
Hope Marine Assurance Company
3 Searle 114
C, in which a marine
insurance policy that was taken out for the period or one year from
14
August 1857 to 14 August 1858, was held to have expired
at midnight of 13 August 1858. Compare: Windscheid, Pandects, 4
th
ed 1875 para 103(1). Gane, The Selective Voet, Book XLV, Title 1,
Section 19.
Lee and Honoré
The
South African Law of Obligations,
2
nd
ed p49 state:
'141
Calculation of Period
If
a contract provides that something shall be done within a stated
number of days from the date of its conclusion or from any other
event, in the absence of expression to the contrary, in calculating
the number of days the day on which the contract was concluded
or the
event took place is understood to be the first day of the period and
the last day is excluded.
The
same applies if the period is reckoned, not by days, but by months or
years.'
2
[28] With respect to the learned Judge
a quo, it is difficult to discern why the expiry date of the
guarantee, which appears clearly
from the guarantee itself should
have to be determined by a method designed to calculate a period of
days.
[29] The guarantee does not contain a
term calling for such a calculation. The printed form makes provision
for a variable and for
a fixed construction guarantee. Synthesis
chose a fixed construction guarantee. Different clauses of the
guarantee apply to each
of the two alternatives, and clauses 3 to 13
thereof apply to both. In respect of the period of liability that
applies to the fixed
guarantee, clause 2 provides that it should run
'[f]rom and including the date of issue of the Construction Guarantee
and up to
and including the date of the only practical completion
certificate or the last practical completion certificate where there
are
sections, upon which this Construction Guarantee shall expire.’
The only other clause dealing with the expiry date of the
guarantee
is clause 11, which says: 'The Construction Guarantee . . . shall
expire in terms of either 1.1.4 or 2.1, or payment
in full of the
Guaranteed Sum or on the Guarantee expiry date, whichever is the
earlier, where after (sic) no claims will be considered
by the
Guarantor. . . .'
[30] Clause 1.1.4 deals with the
variable variety of the guarantee and is therefore not relevant to
the interpretation of the document
under discussion. In clause 11 of
the guarantee the parties thereto did not agree upon a period of days
or weeks that has to be
calculated in order to establish the last
date upon which the guarantee could be called up. The date of
inception is clearly the
date of issue as set out in clause 2 quoted
above. The expiry date is not dependant upon the effluxion of a
particular number of
days or weeks, but upon the happening of a
particular event: the issue of a certificate of practical completion;
or the last certificate
of partial completion as set out in clause
2.1; or, as clause 11 reflects, the payment in full of the guarantee
or the arrival
of the guarantee expiry date reflected on the face of
the document.
[31] The expiry date is 28 February
2008 as agreed upon by the parties. The court below erred in applying
the civil method of computation
to this contract.
RECTIFICATION
[32] The court
below dismissed Dormell’s prayer for rectification of the
guarantee to reflect it as the employer on the ground
that Dormell
was unable to show that there was either a common intention or an
antecedent agreement between the parties that was
not correctly
reduced to writing as a result of a common error. Reference was made
to
Levin
v Zoutendijk
1979
(3) SA 1145
(W) at 1148A and to
Spiller
& others v Lawrence
1976
(1) SA 307
(N), where Didcott J (as he then was) said at 307 H:
‘
When
a written contract does not reflect the true intention of the parties
to it, but has been executed by them in the mistaken
belief that it
does, it may be rectified judicially so that the terms which it was
always meant to contain are attributed in fact
to it. That, as a
general principle, is well recognised by both South African and
English law.’
[33] It is correct that the appellant
and the first respondent did not agree upon the identity of the
employer prior to the signing
of any of the three guarantees. Renasa
was informed by a broker of the particulars of the party in whose
favour the guarantee had
to be issued. These instructions reflected
the company’s particulars. The insurer remained unaware of
Dormell’s existence
until the building contract was cancelled.
[34] Dormell argued that it and Renasa
had certainly intended to benefit the employer by the issuing of the
guarantee in order to
enable the employer to finalise the building
project if the contract between it and the contractor were to be
cancelled before
the work was completed. Renasa disputed that there
was ever a consensus in respect of the employer, either before or at
the time
the guarantee was signed, which, so the argument ran,
precluded any possibility of rectification.
[35] The court
below was apparently not referred to
Meyer
v Merchant’s Trust
1942
AD 244.
In that matter a guarantee was issued for the payment of
certain liabilities, without the parties having entered into a prior
agreement.
The guarantee did not reflect the parties’ intention
to limit the guarantor’s liability to a specific amount,
regardless
of the actual sum of the secured debts. A claim for
rectification was resisted on the ground that no antecedent agreement
had come
into existence. At 253 De Wet CJ. said the following:
‘
It
is therefore open to the Court to consider the question whether, in
the absence of proof of an antecedent agreement, it is competent
to
order the rectification of a written contract in those cases in which
it is proved that both parties had a common intention
which they
intended to express in the written contract but which through a
mistake they failed to express.
It
is difficult to understand why this question should not be answered
in the affirmative. Proof of an antecedent agreement may
be the best
proof of the common intention which the parties intended to express
in their written contract, and in many cases would
be the only proof
available, but there is no reason in principle why that common
intention should not be proved in some other manner,
provided such
proof is clear and convincing.’
[36] This judgment
was followed in
Soil
Fumigation Services Lowveld CC v Chemfit Technical Products (Pty) Ltd
2004
(6) SA 29
(SCA) at para 21. The absence of an antecedent agreement
does not in itself preclude rectification of a written agreement that
does not correctly reflect the parties’ intention.
[37] The facts of this matter clearly
demonstrate that Renasa was more concerned with obtaining sufficient
security from Synthesis
to back up the guarantee than with the terms
of the building contract or the exact description of the employer.
There is merit
in Dormell’s argument that all three parties,
and in particular Renasa and Dormell, intended to secure the
employer’s
position. The guarantee should therefore have been
rectified to reflect that intention.
THE GUARANTEE’S ENFORCEABILITY
[38] A guarantee
couched in the exact terms as the one under discussion, a JBCC series
2000 pre-printed guarantee, and the circumstances
under which a claim
could be made on it, was described by this court in
Lombard
Insurance Co Ltd v Landmark Holdings (Pty) Ltd & others
2010
(2) SA 86
(SCA) para 20 Navsa JA said:
‘
The
guarantee by Lombard is not unlike irrevocable letters of credit
issued by banks and used in international trade, the essential
feature of which is the establishment of a contractual obligation on
the part of a bank to pay the beneficiary (seller). This obligation
is wholly independent of the underlying contract of sale and assures
the seller of payment of the purchase price before he or she
parts
with the goods being sold. Whatever disputes may subsequently arise
between buyer and seller is of no moment insofar as the
bank's
obligation is concerned. 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. This exception falls within a narrow compass and applies
where the seller, for the purpose of drawing
on the credit,
fraudulently presents to the bank documents that to the seller's
knowledge misrepresent the material facts.
‘
In
the present case Lombard undertook to pay the Academy upon Landmark
being placed in liquidation. Lombard, it is accepted, did
not collude
in the fraud. There was no obligation on it to investigate the
propriety of the claim. The trigger event in respect
of which it
granted the guarantee had occurred and demand was properly made.’
In
Loomcraft Fabrics CC v Nedbank
Ltd & another
[1995] ZASCA 127
;
1996 (1) SA 812
(A) on 815G-J Scott AJA said:
‘
The
system of irrevocable documentary credits is widely used for
international trade both in this country and abroad. Its essential
feature is the establishment of a contractual obligation on the part
of a bank to pay the beneficiary under the credit (the seller)
which
is wholly independent of the underlying contract of sale between the
buyer and the seller and which assures the seller of
payment of the
purchase price before he parts with the goods forming the
subject-matter of the sale. The unique value of a documentary
credit,
therefore, is that whatever disputes may subsequently arise between
the issuing bank's customer (the buyer) and the beneficiary
under the
credit (the seller) in relation to the performance or, for that
matter, even the existence of the underlying contract,
by issuing or
confirming the credit, the bank undertakes to pay the beneficiary
provided only that the conditions specified in
the credit are met.
The liability of the bank to the beneficiary to honour the credit
arises upon presentment to the bank of the
documents specified in the
credit, including typically a set of bills of lading, which on their
face conform strictly to the requirements
of the credit. In the event
of the documents specified in the credit being so presented, the bank
will escape liability only upon
proof of fraud on the part of the
beneficiary.’
See further
Petric
Construction CC t/a AB Construction v Toasty Trading t/a Furstenburg
Property Development & others
2009
(5) SA 550
(ECG) para 27.
[39] In principle therefore, the
guarantee must be honoured as soon as the employer makes a proper
claim against it upon the happening
of a specified event. In the
present case there is no suggestion that Dormell did not properly
demand payment of the guaranteed
sum. In the normal course of events
payment should have been effected within seven days of demand.
[40] However, the facts of this matter
are unusual because the arbitration of the dispute between Dormell
and Synthesis resulted
in the finding that the appellant was not
entitled to cancel the building contract. The arbitration is final,
not subject to appeal
and has not been taken on review. A second leg
of the arbitration dealing with outstanding claims arising from the
building contract
was also decided in Synthesis’ favour. The
question must thus be answered whether Dormell is entitled to persist
in claiming
payment of the guarantee notwithstanding the fact that it
has been held to have repudiated the contract which was lawfully
cancelled
by the second respondent.
[41] There is no longer any dispute
about the cancellation of the underlying agreement that still has to
be resolved. The arbitration
has established that Dormell is in the
wrong. Its repudiation of the building contract was held to have been
unlawful. As a consequence,
Dormell has lost the right to enforce the
guarantee. There remains no legitimate purpose to which the
guaranteed sum could be applied.
[42] If it were to be ordered to
honour the guarantee, Renasa or Synthesis would be entitled to
repayment of the full amount guaranteed.
Hudson’s Building and
Engineering Contracts 11
th
ed para 17.078, quoted in
Cargill International SA & another v Bangladesh Sugar and Food
Industries Corp
[1966] 4 All ER 563
QBD (Commercial Court) at
570b-c states:
‘
It
is generally assumed, and there is no real reason to doubt, that the
Courts will provide a remedy by way of repayment to the
other
contracting party if a beneficiary who has been paid under an
unconditional bond is ultimately shown to have called on it
without
justification . . . In cases where there has been no default at all
on the part of the contractor, there would additionally
be a total
failure of consideration for the payment.’
See
further:
General
Surety & Guarantee Co Ltd v Francis Parker Ltd
6
BLR 18
QBD Commercial List at 20.
FURTHER WRITTEN ARGUMENT AFTER THE
HEARING
[43] In the light of the above
considerations, the court requested the parties to present further
written argument on the question
whether, if the appellant were to
succeed, the resultant judgment would have any practical effect or
not, as any payment made by
Renasa would have to be repaid by
Dormell. Reference was made to clause 7 of the Guarantee in this
regard. Counsel for Synthesis
pointed out that Renasa's or Synthesis'
claim to repayment does not arise from this clause, but from the fact
that Dormell is no
longer entitled to payment. The court is indebted
to counsel for their further heads of argument.
[44] Dormell submits that the
guaranteed sum could and should be devoted to the payment of claims
that might be found to exist once
a final certificate is prepared,
regardless of the question whether the enforcement of the guarantee
was indeed justified by a
breach on the part of the contractor or
not. Reference was made to a number of clauses in the construction
contract in this regard.
The short answer to this submission is that
the guarantee is intended to enable the employer to complete the
contract in case of
default by the contractor. Claims arising after a
breach by the employer are matters for arbitration. The guarantee is
not intended
to provide a source of funds for the payment of any
outstanding amounts that might be due by the contractor to the
employer –
of which there is no evidence in any event, apart
from an oblique reference to potential future claims by the employer
against
the contractor in correspondence.
[45] It would amount to an academic
exercise without practical effect if Dormell were to be granted the
order it seeks. It would
immediately have to repay the full amount to
Renasa or Synthesis. Such an order would, at best, cause additional
cost and inconvenience
to the parties without any practical effect.
In terms of section 21A of the Supreme Court Act 59 of 1959 the court
must exercise
its discretion against Dormell:
Port Elizabeth
Municipality v Smit
2002 (4) SA 241
(SCA).
[46] Appellant is entitled to succeed
with the appeal against the judgment in the court below in as much as
that court's order must
be set aside. Dormell is entitled to the
costs of those proceedings and to all costs incurred in the
prosecution of this appeal
until the date of the arbitration award,
15 October 2009. In the particular circumstances of this case it is
however, not entitled
to an order that the guarantee should be
enforced.
[47] The following order is made:
1. The appeal is dismissed.
2. The respondents' application to
place further evidence relating to the arbitration award before the
court is granted.
3. The appellant is to pay the
respondents’ costs, including the costs of two counsel,
incurred in respect of the appeal from
16 October 2009.
4. The respondents are to pay the
appellant’s costs, jointly and severally, the one paying the
other to be absolved, of the
appeal until 15 October 2010.
5. The order of the court a quo is set
aside and substituted with the following: ‘The respondents are
to pay the applicant’s
costs, jointly and severally, the one
paying the other to be absolved, including the costs of two counsel.’
_________________
E BERTELSMANN
ACTING
JUDGE OF APPEAL
CLOETE JA (MPATI P concurring):
Introduction
[48] I have had the advantage of
reading the judgment of my colleague Bertelsmann AJA. I would allow
the appeal, for the following
reasons. I shall first set out a
summary of the facts relevant to this judgment.
[49] (a) On 16 December 2006 a letter
of intent was issued by Dormell Properties 282 (Pty) Limited (the
'Dormell Company') to appoint
the second respondent as contractor for
the construction of the Cobble Walk Retail Shopping Centre.
(b) On 23 January 2007 the first
respondent received an application in writing from the second
respondent to issue a 'JBCC Construction
Guarantee' in favour of the
Dormell Company. In response to this application the first respondent
the next day issued a guarantee
in favour of the Dormell Company.
(c) On 26 January 2007 the Dormell
Company was converted, in terms of s 27 of the Close Corporation Act,
1984, from a private company
to a close corporation with the name
Dormell Properties 282 CC. The close corporation was the applicant in
the court a quo and
is the appellant in these proceedings.
(d) On 14 February 2007 the second
respondent, as contractor, and the Dormell Company, as employer,
concluded a building contract
in the form of the JBCC standard
agreement. The 'employer' was expressly defined in the contract as
being the Dormell Company ─
not the applicant.
(e) On 15 February 2007 the applicant
notified various persons, but not the first respondent, that the
Dormell Company had been
converted to a close corporation. It is not
in dispute that the first respondent was never informed at any
material time of the
conversion, and remained unaware of it.
(f) On 5 December 2007 the first
respondent issued a new construction guarantee in favour of the
Dormell Company. The guarantee
provided that it would expire at the
end of the period of liability (defined as up to and including the
date of practical completion),
or upon payment in full of the
guaranteed sum, or on the guarantee expiry date, whichever would be
the earlier. The guarantee expiry
date was 28 February 2008. This
guarantee is the subject of the present proceedings.
(g) On 28 February 2008, ie on the
stated expiry date of the construction guarantee, the appellant
purported to cancel the building
contract with the second respondent
and demanded payment of the guaranteed sum, an amount of
R6 691 646,78, from the
first respondent. The first
respondent refused to pay.
[50] There are three issues on appeal:
(a) Whether the appellant is entitled
to rectification of the guarantee to reflect itself and not the
Dormell Company as the employer
and therefore the beneficiary under
the guarantee;
(b) whether demand for payment under
the guarantee was made timeously; and
(c) whether the award by an
arbitrator, given in proceedings between the appellant and the first
respondent, which became known
after the matter had been heard in the
court a quo and in terms of which the arbitrator found that the
appellant was not entitled
to cancel the agreement between itself and
the first respondent, would either (i) mean that this appeal would
have no practical
effect or result as contemplated in s 21A of the
Supreme Court Act, or (ii) would preclude the appellant from
enforcing payment
of the guarantee against the first respondent
because to do so would be contrary to the dictates of good faith.
Rectification
[51] The court a quo non-suited the
appellant on the basis that it was not entitled to rectification of
the construction guarantee
to reflect that it and not the Dormell
Company was the employer. The court a quo reasoned that the first
respondent was unaware
of the existence of the appellant and that
there could accordingly have been no antecedent agreement between
them. Furthermore,
so the court a quo reasoned, there can be no
question of a common intention because the parties' intention must be
gleaned from
the building agreement, which requires that a guarantee
be issued in favour of the employer; and the 'employer' was defined
as
the Dormell Company.
[52] The fallacy in
the court a quo's approach is this. The common continuing intention
of the appellant, the beneficiary under
the guarantee, the second
respondent, that procured the guarantee, and the first respondent,
that gave the guarantee, was quite
obviously that the guarantee
should be issued in favour of whoever was the employer in terms of
the building contract ─ not
who was defined as the employer,
but who was in fact the employer. The mistake that the first
respondent made was that, contrary
to its belief, the Dormell Company
was not the employer as (unbeknown to the first respondent) the
Dormell Company had been converted
to a close corporation, the
appellant. The mistake made by the appellant and the second
respondent was that they thought that the
appellant's conversion into
a close corporation was irrelevant. But all parties concerned
intended that the guarantee should be
in favour of the employer under
the building contract; and the appellant was in fact the employer.
That suffices for rectification:
Meyer
v Merchant's Trust
.
3
Expiry of the guarantee
[53] The guarantee contained the
following provisions in regard to the period of liability:
'2.1
The Guarantor's liability shall be limited . . . as follows:
.
. .
From
and including the date of issue of this Construction Guarantee and up
to and including the date of the only practical completion
certificate . . . upon which this Construction Guarantee shall
expire.'
'11.
The Construction Guarantee . . . shall expire in terms of . . . 2.1,
or payment in full of the Guaranteed Sum or on the Guarantee
expiry
date, whichever is the earlier, where after no claims will be
considered by the Guarantor.'
No practical completion certificate
was issued before the guarantee expiry date. As I have said, the
guarantee was issued on 5 December
2007 and the 'guarantee expiry
date' was specified as '28 February 2008.'
[54] The court a quo held that the
guarantee had expired when the claim was lodged for payment by the
appellant with the first respondent
on 28 February 2008. The court
formulated the question to be decided as follows:
'At issue is
exactly
when
on
28 February 2008 was the guarantee intended to expire.'
4
The court a quo
went on to consider 'cases in which it was held that, for purposes of
determining from when to when a period expressed
in days runs, the
ordinary civilian method of computation must be followed'. The court
then referred to submissions made by counsel
for the first respondent
that 'in terms of clause 11 of the construction guarantee it would
expire either
in
terms of²
clause
2.1 or
on²
the
expiry date'; that 'the period of liability in terms of clause 2.1
runs from
and
including²
the
date of issue of the guarantee up to
and
including²
the
date of the practical completion certificate'; and accepted the
submission of counsel that 'where the parties to the guarantee
intended to include the
whole
of²
a
specific day into its operative period, they did so expressly;' and
that 'they did not expressly include the day of 28 February
2008'.
Consequently, held the court a quo, it was not the intention of the
parties that the appellant be given the whole day of
28 February 2008
and the agreement therefore expired immediately after midnight on 27
February 2008.
[55] The approach
of the court a quo is fundamentally wrong. It is based on the fiction
contained in the civilian method of computation
of a period of time
in accordance with which the first day of the period is initially
excluded and the last day determined; but
because the last day is
deemed to have concluded immediately it began (
ultimus
dies coeptus pro completa habetur
)
the last day is excluded and so, to give the full period, the first
day is included. But here, no period of time requires computation.
The civilian and all other methods of computation for a period of
time are accordingly not applicable. The relevant contractual
provision states that the guarantee 'shall expire . . . on the
guarantee expiry date' ie 28 February 2008. To state the obvious,
the
guarantee accordingly expired on that date. The present matter may be
contrasted with
Cock
v Cape of Good Hope Marine Insurance Co
.
5
In that case the
insurance cover was for a period of 12 calendar months from January
14
th
1857 to January
14
th
1858. There, a
calculation of the period of time was required and the court, in
applying the civilian method for computation of
time, held that the
twelve months expired at midnight on 13 January 1858. Here, no period
of time has to be calculated and the
guarantee expired on 28 February
2008. Once that is so, there is ancient and modern authority in
support of the proposition that
the guarantee could be called up at
any time, or at least during business hours, on 28 February 2008.
[56] Paul is quoted
as follows in the
Digest
:
6
'By
Roman custom, a day begins at midnight and ends in the middle of the
succeeding night. And so whatever is done in these twenty-four
hours,
that is, in two half nights with the intervening daylight, is done
just as if it were done at any hour of the daylight.'
The Institutes
7
contain the
following proposition:
'As
an instance of a stipulation "
in
diem
",
as it is called where a future day is fixed for payment, we may take
the following: "Do you promise to give ten
aurei
on
the first of March?" In such a stipulation as this, an immediate
debt is created, but it cannot be sued upon until the arrival
of the
day fixed for payment: and even on that very day an action cannot be
brought, because the debtor ought to have the whole
of it allowed to
him for payment; for otherwise, unless the whole day on which payment
was promised is passed [sic], it cannot
be certain that default has
been made.'
[57] These principles were received
into the Roman-Dutch Law.
Grotius
8
says:
'Where
something is promised to be fulfilled at a certain time, the right
vests at once, but cannot be enforced before the time
arrives; nay,
the year, month or day mentioned in the promise must have ended
before the demand is made.'
Voet
9
says:
'But
if they [stipulations] are framed against a day, the vesting day
indeed of the obligation arrives at once so that what was
promised
starts to be due, but the due day has not arrived. Thus no suit can
be brought thereon unless the day has come round,
and unless also the
whole day has elapsed since the whole of that day ought to be allowed
at the discretion of the payor [sic].
In like manner one who has
stipulated for something to be given "this year" or "this
month" does not correctly
claim unless all parts of this year or
month have gone past.'
[58] In the modern
South African law Maasdorp JP in a concurring judgment in this court
said in
National
Bank of SA Ltd v Leon Levson Studios Ltd
:
10
'The
rent was due on 1 December, and could have been paid at any time
during that day and the tenant was not in arrear till after
the close
of that day.'
Lansdown
JP held in
Davies
v Lawlor
:
11
'Ordinarily
a debtor required to pay on a certain day has the whole of that day
for payment ─
Voet
45.1.19.'
Because the question does not arise in
the present appeal, it is not necessary to consider the immediately
following statement by
Lansdown JP:
'But
the time up to which payment may be made on that day may be limited
by the hours of business of the place at which the payment
is to be
made. Where, for instance, the office of a professional man or the
house of a mercantile business is appointed as the
place of payment,
the parties must be held to contemplate that payment shall be made
within the hours during which in accordance
with practice business is
transacted there.'
12
[59] I therefore hold the proposition
to be self-evident and backed by centuries of authority that where a
contract does not require
a period of time to be calculated, but
provides that the entitlement to exercise a right or the obligation
to perform a duty ends
on a specific day ─ as in the present
case, where the guarantee provides that it will expire on 28 February
2008 ─
the right may be exercised, or the obligation performed,
on that day. The appellant in fact called up the guarantee on 28
February
2008 and the court a quo was wrong in non-suiting it on the
basis that the guarantee had expired at midnight on the previous day.
Relevance of the arbitrator's award
[60] Then finally, there is the
question whether the appellant should now be allowed to enforce
payment under the guarantee in view
of the award by the arbitrator
(contained in evidence which the respondents sought to adduce on
appeal) that it was not entitled
to cancel the building contract,
that its attempt to do so constituted a repudiation and that the
building contract was cancelled
by the second respondent. There are
two arguments in this regard:
(a) that an award on appeal would have
no practical force or effect as contemplated in s 21A of the Supreme
Court Act; and
(b) that the appellant's attempt to
enforce the guarantee constitutes fraud in the sense of bad faith.
It is here that I part ways with my
learned colleague Bertelsmann AJA.
[61] It is important to bear in mind
that in cases such as the present there are three separate legal
relationships:
(a) one between the employer and the
contractor, usually termed a building contract, pursuant to which the
contractor undertakes
to perform building works for the employer;
(b) one between the employer and a
financial institution which the employer requires the contractor to
procure to protect the employer
against possible default by the
contractor under the building contract, which is variously called a
performance guarantee, a performance
bond or a construction
guarantee, and in terms of which the financial institution undertakes
to the employer that it will make
payment to the employer on the
happening of a specified event; and
(c) one between the contractor and the
financial institution for the provision by the latter of a guarantee
to the employer.
The construction guarantee which the
appellant seeks to enforce in the present appeal is an example of the
second type of contract.
[62] In terms of clause 5 of the
guarantee, the first respondent undertook to pay to the appellant the
guaranteed sum 'upon receipt
of a first written demand' from the
appellant to the first respondent at the latter's physical address
'calling up on this Construction
Guarantee stating that . . . The
Agreement [between the appellant and the second respondent] has been
cancelled due to the Contractor's
default and that the Construction
Guarantee is called up in terms of 5'. The clause further provided
that 'The demand shall enclose
a copy of the notice of cancellation.'
[63] The appellant
complied with the provisions of clause 5. It was not necessary for
the appellant to allege that it had validly
cancelled the building
contract due to the second respondent's default. Whatever disputes
there were or might have been between
the appellant and the second
respondent were irrelevant to the first respondent's obligation to
perform in terms of the construction
guarantee. That is clear from
the passages quoted by my learned colleague in para 38 of his
judgment from
Lombard
Insurance Co Ltd v Landmark Holdings (Pty) Ltd
and
Loomcraft
Fabrics CC v Nedbank Ltd
,
and also from the following passage in the judgment of Lord Denning
MR in
Edward
Owen v Barclays Bank International
:
13
'A
bank which gives a performance guarantee must honour that guarantee
according to its terms. It is not concerned in the least
with the
relations between the supplier and the customer; nor with the
question whether the supplier has performed his contracted
obligation
or not; nor with the question whether the supplier is in default or
not. The bank must pay according to its guarantee,
on demand if so
stipulated, without proof or conditions. The only exception is when
there is a clear fraud of which the bank has
notice.'
My learned colleague reasons that a
valid demand on the construction guarantee is subject to a bona fide
claim that an event has
occurred that is envisaged in the guarantee
as triggering the guarantor's obligation to pay. Put more accurately,
a valid demand
on the construction guarantee can only be defeated by
proof of fraud. In the present matter there was a valid demand. There
was
no suggestion of fraud.
[64] Once the
appellant had complied with clause 5 of the guarantee, the first
respondent had no defence to a claim under the guarantee.
It still
has no defence. The fact that an arbitrator has determined that the
appellant was not entitled to cancel the contract,
binds the
appellant ─ but only vis-à-vis the second respondent. It
is
res
inter alios acta
so
far as the first respondent is concerned. As the cases to which I
have referred above make abundantly clear, the appellant did
not have
to prove that it was entitled to cancel the building contract with
the second respondent as a precondition to enforcement
of the
guarantee given to it by the first respondent. Nor does it have to do
so now.
[65] For these reasons, it is not in
my view bad faith for an employer, who has made a proper demand in
terms of a construction
guarantee, to continue to insist on payment
of the proceeds of the guarantee, when the basis upon which the
guarantee was called
up has subsequently been found in arbitration
proceedings between the building owner and the contractor to have
been unjustified.
I would add that the fact that the arbitrator's
award is final as between the appellant and the second respondent
does not mean
that it is correct, or that the appellant would have to
set it aside before calling up the guarantee, much less that the
appellant
is acting in bad faith in seeking to enforce payment under
the guarantee against the first respondent.
[66] I turn to
consider the question whether the order sought by the appellant on
appeal would have no practical effect or result
as contemplated in s
21A of the Supreme Court Act. My learned colleague states in para 42
of his judgment that if the first respondent
were to honour the
guarantee, it or the second respondent would be entitled to repayment
of the full amount. In support of this
conclusion, my learned
colleague refers to parts of para 17.078 in the 11
th
edition of
Hudson's
Building and Engineering Contracts
.
It is important to note that Hudson in that particular paragraph is
dealing with the rights of the contractor. It would be convenient
to
quote the paragraph in full as in my respectful view nothing in the
paragraph supports the proposition for which my learned
colleague
cites it:
'It
is generally assumed, and there is no real reason to doubt, that the
Courts will provide a remedy by way of repayment to the
other
contracting party [ie the contractor] if a beneficiary who has been
paid under an unconditional bond is ultimately shown
to have called
on it without justification: "I do not doubt that in such an
event the money would be repayable, but it is
not so certain it would
be repayable with interest". (
General
Surety and Guarantee Co Ltd v Francis Parker Ltd
(1977)
6 BLR 16
, 21,
per
Donaldson
J.)
In
cases where an owner or buyer is claiming damages against the seller
or contractor which exceed the amount of the bond there
is little
difficulty in holding that he must give credit for the "cash in
hand" received by him if he has made a call
under any
unconditional guarantee arrangements. Where, however, there is no
defence or counterclaim to the contractor's claim for
moneys due,
other than sufficient payment in full, or where the sum already
received from the bank or guarantor exceeds the set-off
or damages
ultimately awarded, the contractor's or seller's claim for repayment
of the whole or any balance of the sums called
and paid can be put,
it is submitted, in two ways. First, the payment by the bank or
guarantor, being required in most cases under
the principal
construction contract itself, or sometimes by a side-contract, must
be regarded as being made by the bank as agent
for the contractor and
subject, it is submitted, to an implied term for repayment if not in
fact due. Secondly, it has been seen
that in the case of a
conditional
bond,
equity would not permit recovery of a sum in excess of the true debt
or damages, as being a penalty, so that by analogy in
a case where
the payment under the bond was obligatory and unavoidable, and indeed
brought about by the owner's own act in making
the call, it would be
only logical to order repayment for the same reasons. Such a claim
could also be based in quasi-contract
on wider principles of unjust
enrichment and unconscionability, it is submitted. In cases where
there has been no default at all
on the part of the contractor, there
would additionally be a total failure of consideration for the
payment.
14
Questions
of interest and costs pose considerable difficulties, however.'
Hudson therefore suggests that where,
in the case of an unconditional guarantee, the contractor, after the
adjustments at the end
of the building contract, claims repayment of
the whole or any balance of the sums called by the employer and paid
by the bank
under the guarantee, the payment must be regarded as a
payment by the bank as agent for the contractor subject to what in
South
Africa would be called a tacit term for repayment if not in
fact due. There is no suggestion in the paragraph quoted from Hudson
that the bank or guarantor can recover anything. Nor is there any
suggestion that the contractor can, as a matter of course, recover
the full amount of the guarantee from the owner where the latter is
ultimately shown to have called upon it without justification.
[67] I agree with the submission on
behalf of the appellant that the guaranteed sum could and should be
devoted to the payment of
claims that might be found to exist once a
final certificate is prepared, regardless of the question whether the
enforcement of
the guarantee was indeed justified by a breach on the
part of the contractor or not. My learned colleague counters in para
44 of
his judgment that the construction guarantee is to enable the
contractor to complete the contract in case of default by the
contractor,
and that the guarantee is not intended to provide a
source of funds for the payment of any outstanding amounts that might
be due
by the contractor to the employer. But if this was so, then an
employer who has validly cancelled the building contract could never
use the proceeds of a performance guarantee to satisfy amounts owing
to it by the contractor prior to and as at cancellation, and
would be
left with a claim against the contractor. That is simply not what
happens in practice. The proceeds of a construction
guarantee are not
ring-fenced in this way.
[68] What would have to be found, as a
positive conclusion of fact, in order to support a conclusion that an
order on appeal in
favour of the appellant would have no practical
effect or result, is that there is nothing on which the guarantee
could operate
if it were paid out now. That finding simply cannot be
made on the papers before this court. The appellant's attorneys wrote
a
letter to the respondents' attorneys dated 24 August 2010 in which
they said inter alia:
'Subsequent
to the issuing of the final arbitration award, correspondence ensued
between the appellant's attorneys and the second
respondent's
attorneys in which it was conveyed that the appellant . . . intends
referring to a fresh arbitration it claims in
respect of amounts paid
by it direct to sub-contractors, and which the arbitrator found was
not a dispute capable of adjudication
by him in the arbitration. The
appellant's claim in this regard amounts to R1 417 940.00
(VAT inclusive).'
That is hardly 'an oblique reference
to potential future claims by the employer against the contractor in
correspondence' as my
learned colleague would have it in para 44 of
his judgment. The point is, however, that it cannot be said with
certainty that there
is nothing on which the construction guarantee
could operate, as this question was not properly ventilated in the
application to
lead further evidence on appeal and it was obviously
not even touched upon in the original application papers.
[69] Finally, it is
necessary for me to say something about the application by the
respondents to place further evidence before
this court on appeal,
which was met with a response by the appellants. It is a requirement
for the admission of evidence on appeal
that the evidence should be
materially relevant. The law in this regard has recently been
reviewed by this court in a criminal
context in
Britz
v S
,
15
but the principle
applies equally in a civil context. In my view, the finding by the
arbitrator is entirely irrelevant and I would
accordingly disallow
the respondents' application to place evidence of this fact before
the court and order the respondents to
pay the costs occasioned by
the application, which would include the reply thereto by the
appellant.
[70] For these reasons I would allow
the appeal; dismiss the respondents' application to place further
evidence before this court;
rectify the construction guarantee to
reflect the appellant as the employer; order the first respondent to
pay the guarantee amount
of R6 691 646,78 to the appellant
together with mora interest; and order the respondents jointly and
severally to pay
the appellant's costs of the proceedings in this
court and in the court a quo, in both cases including the costs of
two counsel.
______________
T D CLOETE
JUDGE OF APPEAL
CACHALIA JA (MHLANTLA JA concurring):
[71] I concur in the judgment of
Bertelsmann AJA and the order made by him, and also in paragraphs 48
to 59 of the judgment of Cloete
JA.
________________
A CACHALIA
JUDGE OF APPEAL
APPEARANCES:
For
appellant: H M Scholtz SC
Instructed
by:
Cliffe
Dekker Hofmeyr Inc, Cape Town
Claude
Reid Inc, Bloemfontein
For
respondent: 1
st
C E Puckrin SC
C
J McAslin
2
nd
C W Jordaan SC
G
D Doubell
Instructed
by:
Frese,
Moll & Partners, Johannesburg
Webbers,
Bloemfontein
1
The
Joint Building Contracts Committee Inc. is composed of
representatives of the Association of Construction Project Managers,
the Association of South African Quantity Surveyors, the Building
Industries Federation South Africa, the South African Association
of
Consulting Engineers, the South African Institute of Architects, the
South African Property Owners Association and the Specialist
Engineering Contracts Committee. It prepares and updates
standardised contracts for the building industry.
2
(An
illustrative example of such a calculation is
Kleynhans
v Yorkshire Insurance Co. Ltd
1957
(3) 544 (A), where Schreiner ACJ said at 550A-B:‘Coming back
to the words "upon the expiration of a period of
two years"
or "na verloop van 'n tydperk van twee jaar", the reason
why I cannot draw from them an inference that
the ordinary civil
rule is to be excluded is that they seem to mean nothing more than
that the period of prescription is to be
two years from the date
when the claim arose. Different expressions having identical
meanings would be "at the end of a
period of two years" or
"after a period of two years" or "after two years"
or even simply "two
years". Similarly in the Afrikaans,
the unsigned, text equivalent expressions would be "na 'n
tydperk van twee jaar"
or "na twee jaar" or simply
"twee jaar").
3
1942
AD 244
at 253 and 258.
4
Emphasis
in the original judgment.
5
3
Searle 114
, approved in
Joubert v
Enslin
1910 AD 6.
6
2.12.8.
Translation taken from
The Digest of
Justinian
, Mommsen, Krueger and
Watson, eds; vol 1 p 58.
7
3.15.2;
Moyle's translation 5
th
ed p 133.
8
Introduction
to Dutch Jurisprudence
3.3.50,
Maasdorp's translation (1888) (2
nd
ed) p 219.
9
Commentary
on the Pandects
45.1.19 Gane's translation
vol 6 p 647.
10
1913
AD 213
at 220.
11
1941
EDL 128
at 132; see also
Whittaker v
Kiessling
1979 (2) SA 578
(SWA) at
582A-E.
12
See
in this regard the three judgments in the
National
Bank of SA Ltd v Leon Levson Studios Ltd
above, n 7, and
Davis v Pretorius
1909 TS 868
at 871-2.
13
[1978]
1 All ER 976
(CA) at 983b-d.
14
The
reliance by my learned colleague on this sentence is, with respect,
misplaced as it has been clear since
Conradie
v Rossouw
1919 AD 279
that
the English law of consideration forms no part of the law of South
Africa.
15
(613/09)
[2010] ZASCA 71
(21 May 2010).