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[2012] ZAGPPHC 309
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Procprops 60 (Pty) Ltd v Nedbank Ltd (41976/2011) [2012] ZAGPPHC 309 (29 November 2012)
NOT
REPORTABLE
IN
THE NORTH GAUTENG HIGH COURT, PRETORIA
REPUBLIC
OF SOUTH AFRICA
CASE
NO: 41976/2011
DATE:
29 November 2012
IN
THE MATTER BETWEEN:
PROCPROPS
60 (Pty)
Ltd
....................................................
Plaintiff
and
NEDBANK
LIMITED
...............................................................
Defendant
and
TOP
CD (MENLYN) (PTY)
LTD
............................................
Third
Party
JUDGMENT
LEDWABA
J:
[1]
The plaintiff (Procprops) issued summons against the defendant
(Nedbank) for payment of R241 151,87 alternatively R145 387,32
in
terms of a guarantee issued by Nedbank in favour of Procprops.
[2]
Nedbank joined its customer Top CD (Menlyn) (Pty) Ltd (Top CD), at
whose request the guarantee was issued, as a third party
to the
proceedings.
[3]
The summary of the background facts which are common cause between
the parties are the following:
3.1
On or about 1 July 2009 Top CD and Procprops entered into a written
lease agreement which agreement has been attached to the
particulars
of claim as ‘annexure A’.
3.2
Nedbank issued a letter of guarantee number 497/29911400 dated 27
September 2009 for R313 845,53 (three hundred and thirteen
thousand
eight hundred and forty five rand and fifty three sent) on behalf of
Top CD in favour of Procprops, see ‘annexure
B’ to the
particulars of claim. The contents of the guarantee will be referred
to and discussed later in this judgment.
3.3
Top CD vacated the leased premises on 26 December 2010, after the
negotiations to cancel the lease failed and it did not make
further
payments in respect of the rental from January 2011.
3.4
On 13 January 2011 Procprops’s previous attorneys. Van Der
Merwe Du Toit Inc delivered a letter of demand by hand at Nedbanks
address set out in the guarantee demanding payment of R72 693,66
(seventy two thousand six hundred and ninety three rand and sixty
six
sent) because of Top CD s failure to pay Procprops rent for January
2011, see annexure C’ to the particulars of claim.
The last
paragraph in the said letter of demand reads as follows:
“
Could
you also please consider the fact that this letter calls upon you to
perform only partially in terms of the guarantee and
accordingly our
clients rights in respect thereof are not extinguished. Could you
please in view thereof return the original guarantee
to us to enable
our client to call on the guarantee should it become necessary in
future. "(Own underlying)
3.5
Nedbank paid the amount claimed on 21 January 2011.
3.6
Procprops again through its previous attorneys addressed other
letters of demand to Nedbank on 7 February 2011,14 February 2011,
21
February 2011 and 1 March 2011 demanding the rentals for February and
March.
3.7
Nedbank only responded on 14 March 2011 via an e-mail as follows:
“
Please
note that Nedbank did perform in terms of the guarantee in favour of
your client, when we received your first written demand
dated 13
January 2011. accepted return of the original guarantee and duly paid
the amount demanded. The guarantee has been cancelled
and we are of
the opinion that all obligations in term thereof have been
extinguished."
3.8
The guarantee was not returned to Procprops.
3.9
Procprops through its attorneys of record in May 2011 addressed a
letter of demand to The Manager of Nedbank Corporate, P .0
Box 455
Pretoria and faxed it to the number ‘0866088268’
demanding payment of the balance outstanding of R241 151,87
(two
hundred and forty one hundred and fifty one rand and eighty seven
sent) in terms of the guarantee.
3.10
Nedbank did not comply with the demand and Procprops issued summons
in July 2011.
[4]
Nedbank in its plea raised the following defences:
“
4.1
That upon a proper construction of the terms of the guarantee.
further alternatively a tacit, alternatively implied term of
the
guarantee, that the guarantee would lapse, and or Defendants
obligations thereunder discharged upon payment of the amount
guaranteed, or any lesser portion thereof.
4.2
That upon payment by the Defendant of the amount of R72 693,66 on 21
January 2011, the guarantee lapsed and/ or the defendants
obligations
thereunder.
4.3
That demands, marked annexure “D" and the demand of 1
March 2011 do not comply with the express terms of the guarantee,
namely that it shall inter alia be accompanied by the original
guarantee."
[5]
Only one witness Mr Christodoulou testified on behalf of Procprops.
The plaintiff thereafter closed its case. Nedbank and Top
CD closed
their cases without calling any witnesses.
[6]
I think it is not necessary to summarize the evidence of the
plaintiff’s witness because it is clear that the issue to
be
determined is based on the interpretation of the contents of the
guarantee in particular clause 4 thereof which reads as follows:
“
Payment
shall be made upon receipt by the bank, at its address stated in
clause 3 above, of the landlord's first written demand,
which written
demand shall be accompanied by this original guarantee and which wilt
state that the lessee has failed to comply
with its obligations in
respect of the lease and that, accordingly, the amount of R313S45,53
( THREE HUNDRED AND THIRTEEN THOUSAND
EIGHT HUNDRED AND FORTY FIVE
RAND, FIFTY THREE CENTS), or any lesser portion thereof, is now due
and payable. In the event that
the branch mentioned in clause 3 above
closes for whatsoever reason, this guarantee may be presented at any
other branch of the
bank."
[7]
The defendant in its plea pleaded , inter alia, as follows:
‘
7.1...It
was further material term of the guarantee that it be returned to the
defendant upon payment or expiry;
7.2
The defendant pleads that upon a proper construction of the terms of
the guarantee...that it would lapse, and/or defendant’s
obligations thereunder discharged upon payment by the defendant of
the amount guaranteed, or any lesser portion thereof.
5.2
The defendant admits the subsequent demands marked "D" and
the demand of 1 March 2011 and its failure to return the
guarantee,
but denies it was obliged to return same or make payment of the
amount demanded.
5.3
The defendant avers that, upon payment by the defendant of the amount
of R72 693,66 on 21 January 2011 the guarantee lapsed
and/or the
defendant s obligations thereunder were discharged, in terms of the
guarantee.
5.4The
demands, marked “D’\ and the demand of 11 March 2011 do
not comply with the express terms of the guarantee, namely
that it
shall inter alia be accompanied by the original guarantee.
5.5
In the premises, the defendant denies that it ivs liable, whether
under the demands referred to herein, or at all.
5.6
These allegations are denied. Without derogating from the generality
of the aforegoing denial, the defendant denies that it
is liable
under the guarantee fGr want of compliance under its express terms,
in particular that a demand made thereunder shall
be accompanied by
the original guarantee."
[6]
The issues that have been raised by Nedbank and Top CD relate to:
i.
The interpretation of the guarantee;
ii.
Whether proper demand has been made to comply with the terms and
conditions of the guarantee;
iii.
Whether the demand was proper, even if it was not accompanied by the
original guarantee.
[7]
Advocate Girdwood and Advocate Oosthuizen representing Nedbank and
Top CD, respectively, submitted that the words “first
written
demand", in clause 4 of the guarantee are very clear and not
ambiguous. They further submitted that in the guarantee
there is no
obligation on Nedbank to return the guarantee after making part
payment of the full guarantee amount. Advocate Oosthuizen
argued that
the word ‘first’ emphasizes the fact that Nedbank can
only be obliged to comply only once with its obligation
in terms of
the guarantee otherwise the word first would not have been used.
[10]
Advocate Gibbs, representing Procprops submitted that the wording of
paragraph 4 of the guarantee is ambiguous insofar as the
phrase
“landlords first written demand” is concern. The phrase
could mean that payment would be effected immediately
on the first
written demand and that it would not be necessary for the landlord
(Procprops) to make more that one demand to obtain
payment, but that
it may make as many demands as is necessary.
[11]
After careful perusal of clause 4 of the guarantee I think that the
first part of clause 4 viz “payment shall be made
upon receipt
by the bank, ...of the landlords first written demand” and
“first written demand” is ambiguous.
[12]
For the proper understanding of the terms of the guarantee the
clauses should not be read in isolation but all the contents
of the
guarantee should be considered, interpretation was a matter of law
and not fact and accordingly interpretation was a matter
for the
court and not witness, see KPMG Charted Accountants (SA) v Securefin
Ltd
2009 (4) SA 399
("SC/AJ.In Cooper and Lybrand and Others v
Brynt
[1995] ZASCA 64
;
1995 (3) SA 761
AD at page 767 paragraph E-F the court said:
“According to the ‘golden rule’ of interpretation
the language in
the document is to be given its grammatical and
ordinary meaning, unless this or some repugnance or inconsistency
with the rest
of the instrument. ”
[13]
I should hasten to mention that in the guarantee in casu to interpret
same it should not be looked at as a contract between
Procprops and
Nedbank. it was issued on instructions of Top CD which instructed
Nedbank to issue it to comply with the terms of
the lease agreement.
Clause 49.1 of the lease agreement triggered Top CD to seek the
guarantee and it reads as follows:
“
The
tenant shall furnish to the landlord a Bank Guarantee to the amount
equal to 2 (TWO) month’s rental, to which VAT must
be added,
and any other costs e.g. operating costs, parking, marketing fund,
security and standby generator, if
applicable,
in the last month of the lease period set out herein (being year 10).
which will be retained by the landlord during
the currency of this
Agreement of Lease, as a deposit and guarantee for prompt payment by
the tenant of all amounts that are payable
by the tenant for any
cause whatsoever in terms of this Lease. No personal surety required.
The Bank Guarantee is to be provided
to the Landlord by not later
than 60(sixty) days after signing of this lease agreement."
[14]
Advocate Girdwood to support his submission that the bank had to pay
only once referred the court to the word ‘payment’
and
NOT 'payments’ in clause 4 and 5 of the guarantee. However, one
must also have regard to clause 9 which reads as follows:
“
The
banks obligations under this guarantee shall be restricted to the
payment of money only."
This
means that the bank has obligations NOT obligation to pay money This
is contrary to the interpretation that the bank had to
pay only once.
[15]
The guarantee is for R313 845,53( three hundred and thirteen thousand
eight hundred and forty five rand and fifty three sent).
The terms
and conditions in the guarantee are there to prescribe the procedure
before the bank can pay the maximum amount of R313
845,53( three
hundred and thirteen thousand eight hundred and forty five rand and
fifty three sent). For the guarantee to lapse
after only about 25% of
the guaranteed amount has been paid is absurd and inconsistent with
the document. If the bank on instruction
of its client intends to pay
only once even if a lesser amount is claimed, I think the guarantee
would have clearly reflected same.
[16]
It is common cause that the letter of demand dated 16 May 2011 was
not addressed to the address in clause 3 and that the original
guarantee was not attached.
[17]
Advocate Girdwood submitted that Procprops should strictly comply
with the terms and conditions of the guarantee before the
bank can be
compelled to pay. He supported his case by referring me to Compass
Insurance Co Ltd v Hospitality Hotel Development
(Pty) Ltd
2012 SA
537
(SCA) (Compass Insurance case).
[18]
I carefully read the Compass Insurance case. The court did not
finally decide on whether there should be strict compliance
or not
with the terms of the guarantee.
[19]
In casu the guarantee states that the bank should receive the letter
of demand at its physical address mentioned in clause
3. The letter
of demand was addressed to the Postal Office box number reflected on
the letter of Nedbank which noted the guarantee.
I am not sure about
the correctness of the fax number but Nedbank acknowledged receipt of
the demand dated 16 May 2011.
[20]The
other issue raised is that there was no proper demand, because the
original guarantee was not attached to the demand. The
issue of non
attachment of the guarantee was not raised in the e-mail from Nedbank
addressed to Procprops dated 14 March 2011.
[21]
Nedbank stated that it 'accepted return of the original guarantee'.
However, it decided not to deal with what Procprops stated
in its
first letter of demand dated 13 January 2011 that the letter clearly
stated that Nedbank was called upon to perform only
partially in
terms of the guarantee and that Procprops rights were not
extinguished. Procprops further requested the return of
the original
guarantee.
[22]
Nedbank did not object or comment on the condition’ in the
letter that the demand was for partial performance. Procrops
clearly
wanted the original guarantee to be returned, however Nedbank
responded as if Procprops was returning the guarantee with
no strings
attached.
[23]
I think Procprops accepted payment on the basis that there is no
objection to the contents of the last paragraph of its first
letter
of demand dated 13 January 2011.
[24]
In my view, it is opportunistic to pay and consider the rights of
Procprops extinguishing without challenging what Procprops
stated in
the first letter of demand.
If
Procprops was informed how Nedbank interpreted clause 3 of the
guarantee, maybe it could have considered its first demand and
not
pursue the demand. Be that as it may, it is my considered view that
considering the context of the guarantee the strict interpretation
of
reading the words ‘first written demand' to extinguishes other
obligations is repugnant with the guarantee.
[25]
The guarantee clearly states that the demand shall be accompanied by
the original guarantee. However, in casu it was impossible
for
Procprops to attach the original guarantee because same is in
possession of Nedbank. There is definetly no prejudice to Nedbank
because the document is in its possession.
[26]
In the Compass Insurance case, Compass Insurance issued a guarantee
to Hospitality Hotel for work undertaken by a subcontractor.
The
expiry date was 30 April 2008. The subcontractor was provisionally
wound up on 23 April 2008. On 25 April 2008 a letter of
demand was
sent for the guaranteed amount. Compass Insurance refused to pay on
the basis that the demand did not comply with the
terms of the
guarantee which state that a copy of the court order was to be
enclosed or attached. The court order was delivered
months after the
expiry of the guarantee.
[27]
The subcontractor was provisionally liquidated prior to the issue of
the letter of demand. In paragraph 13 of the Compass Insurance
case
the court said the
“
In
my view, it is not necessary to decide whether 'strict compliance' is
necessary for performance guarantees, since in this case
the
requirements to be met by Hospitality Hotel in making demand were
absolutely clear, and there was in fact no compliance, let
alone
strict compliance. The guarantee expressly required that the order of
liquidation be attached to the demand. It was not.”
[28]
In paragraph 14 the court further said: 11 it is the terms of the
guarantee itself that will determine its nature. The guarantee
in
this case is an independent contract that must be fulfilled on its
terms. There is no justification for departure and indeed
allowing
the furnishing of the copy of the court order months after the
guarantee had expired would have defeated its very purpose.
”
[29]
In casu the guarantee states the address where the letter of demand
is to be sent and what should accompany it. In my view,
the terms and
conditions are to assist the guarantor should there be an issue
whether the letter was received or not.
Nedbank
admitted to have received the letter I think strict compliance is
therefore not necessary.
[30]
The attachment of the guarantee is to assist the guarantor to verify
the terms of the guarantee and to check whether there
is no fraud.
Obviously Procprops could not attach the guarantee to the letter
because the original was with Nedbank. In annexure
“D”
the number of the guarantee is mentioned. Nedbank is specifically
informed that the original guarantee has been
forwarded to them.
[31]
When Nedbank was informed about the letters of the 7th of February
and the 1st of March it managed to retrieve or trace the
letters, I
see no reason why it could not retrieve the original guarantee in May
2011 when it received annexure “D. Strict
compliance, in my
view, would not be necessary because the document is in their
possession.
[32]
Importantly, in the Compass Insurance case the court also considered
that the guarantee has expired. In casu the guarantee
would expire in
April 2020. In Compass Insurance the meaning of ‘first written
demand’ was not raised as an issue.
[33]
f therefore make the following order:
1.
The defendant (Nedbank) is ordered to pay the plaintiff the sum of
R241 151,87 plus interest thereof at the rate of 15.5% per
annum from
May 2011.
2.
The defendant and the third party are jointly and severally ordered
to pay the plaintiff’s costs.
A
P LEDWABA
JUDGE
OF THE HIGH COURT
HEARD
ON: 22 November 2012
FOR
THE PLAINTIFF: Adv W W Gibbs
INSTRUCTED
BY: Gross Papadopulo & Associates, Pretoria
FOR
THE FIRST DEFENDANT: Adv G W Girdwood
INSTRUCTED
BY: Cliffe Dekker Hofmeyer Inc, Pretoria
FOR
THE THIRD PARTY: Adv H F Oosthuizen
INSTRUCTED
BY: Eloff Brink Attorneys, Pretoria