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[2009] ZAGPJHC 85
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ABSA Bank Limited v Zurich Risk Financing SA Limited (09/26823) [2009] ZAGPJHC 85 (18 November 2009)
IN
THE SOUTH GAUTENG HIGH COURT
CASE
NO: 09/26823
DATE:
18/11/2009
In
the matter between:
ABSA
BANK LIMITED
…...................................................................................
Applicant
and
ZURICH
RISK FINANCING SA LIMITED
…..................................................
Respondent
JUDGMENT
BLIEDEN,
J
:
[1]
By way of motion proceedings ABSA Bank Ltd (ABSA) sues Zurich Risk
Financing SA Ltd (Zurich) for R50 million as a guarantor
in respect
of the indebtedness of Teejay Motors (Pty) Ltd (in liquidation)
(Teejay).
[2]
ABSA's case is based on a document which is common cause between the
parties. The document is Annexure FA1 to ABSA's founding
papers. It
is at page 26 of the record and is reproduced below; (emphasis added)
FUSION
Z
Guarantee
Underwriting Agency
ZURICH
POLICY
NUMBER: CONSAE50019JHB GUARANTEE NUMBER: ZUR500185JHB
LETTER
OF GUARANTEE No. ZUR500185JHB FOR R50 OOP 000.00 ON BEHALF OF TEE J A
Y MOTORS (PTY) LTD
.
We,
Use Becker and Eugene Louis Becker in our capacities as Directors of
Valuline 155 (Pty) Ltd t/a Fusion Guarantee Underwriting
Agency
(Registration number 2006/027372/07) (hereinafter referred to as the
'Guarantor')
acting
with full binding authority for and on behalf of Zurich Risk
Financing SA Limited (Registration number 1997/006545/06) (hereafter
called
Zurich'),
do hereby guarantee and bind the Guarantor to ABSA Bank Limited
(Registration number 1986/004794/06) (hereafter called
the 'Company')
jointly and severally as surety and co-principal debtor with Zurich
for the due payment by TEEJAY MOTORS (PTY) LTD
(Registration number
2000/028910/7) (hereafter called the 'Customer') of all amounts due
and payable or which may become due and
payable by the Customer to
the Company from any cause whatsoever and/or in terms of any
agreement(s) between the Customer and the
Company, provided that the
total amount to be recovered from the Guarantor hereunder shall not
exceed the whole sum of R50 000
000.00 (Fifty Million Rand Only).
We
hereby renounce the benefits of the exceptions of division and
excussion, non numeratae pecuniae, non causa debiti, errors in
calculation and revision of accounts, de duobus vel pluribus res
debendi with the meaning, effect and significance whereof we declare
ourselves to be fully acquainted. We agree that any amount claimable
from the Guarantor hereunder will be payable on demand on
receipt of
a
Certificate
from the Company that such amount is payable by the Customer to the
Company
This
guarantee is neither negotiable nor transferable and must be returned
to the Guarantor upon payment or expiration whichever
event occurs
first.
This
guarantee will expire on the 7
th
April 2009.
This
done and signed at Alberton on this 8
th
DA Y OF April 2008 for and on behalf of Valuline 155 (Pty) Ltd t/a
Fusion Guarantee Underwriting Agency (Registration number
2006/027372/07).
(Sgd)
Mrs. Use Becker
(Sgd)
Mr Eugene Louis Becker
As
witnesses:
1-
(Sgd)
2.
(Sgd)
Valuline
155 (Pty) Ltd t/a Fusion Guarantee Underwriting Agency Company
Registration number 2006/027372/07 Authorised Financial
Service
Provider FSP 17604
Johannesburg
Office: 18 Hennie Alberts Street. Brackenhurst, Alberton, Tel: (011)
867-2746 Fax (011) 867-2745
Directors:
EL.
Becker B.A. B.Ed M.Ed. MBA I. Becker ARMSA. B.Com. MBA
Zurich
Risk Financing SA Limited DIRECTORS: NV Beyers (Chairman) DM Burton,
C Schmidt, P Stols"
[3]
It is common cause between the parties that prior to the execution of
FA1, S A Eagle Financing Ltd of which Zurich is the
successor-in-title
had provided Valuline 155 (Pty) Ltd t/a Fusion
Guarantee Underwriting Agency (Fusion) with the following document
which is FA4
to the papers and which is reproduced below.
"SA
Eagle Risk
Financing
Limited
Registration
No. 1997
Authorised
Financial Services Provider No.
SA
EAGLE
Head
Office
5
th
Floor SA Eagle House 70 Fox Street Johannesburg 2001 PO Box 61489
Marshalltown 2107
Telephone
011 370 9111 Facsimile 011 370 9610
Our
reference
Your
reference
Date
22 June 2007
TO
WHOM IT MAY CONCERN
We
hereby confirm that Fusion Guarantee Underwriting Agency has a Cell
Captive Facility with SA Eagle Risk Financing Limited, and
is duly
authorized to issue guarantees on behalf of SA Eagle Risk Financing
Limited to a maximum limit of R50 000 000 on any one
guarantee, any
one facility. Share Reference No.: A57.
Trust
you find this to be in order.
Yours
faithfully.
(Sgd)
pp
STEPHEN
ANDERSON
EXECUTIVE
MANAGER - MARKETING
cc.
Use Bekker
Fax:
(011) 867-2745
Directors:
NV Beyers (Chairman), DM Burton. C Schmidt, PJ Stols
Company
Secretary: I Mabutha
INSURANCE
FRAUDLINE
A
member of the Z Zurich Financial Services Group
0850
002526"
[4]
It is not in dispute that the two Beckers who signed FA1 on behalf of
Fusion were authorised to do so on behalf of that entity.
It is also
not in issue between the parties that as at the date the present
application was launched and as at today's date Teejay
is liable to
ABSA in an amount in excess of R50 million and is not in a position
to pay any portion of this amount to it, as it
has been wound up in
the hands of the Master of this Court.
[5]
The real issue in the case between the parties is whether Zurich is
liable to ABSA for R50 million in terms of FA1. In this
regard the
nature of the liability created by FA1 as regards Zurich, 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.
[6]
The first issue to be.decided is whether FA1 can be said to impose
any liability on Zurich as opposed to Fusion, and if so what
is the
nature of this liability.
[7]
On behalf of Zurich it was submitted that it is only Fusion that has
attracted any liability in terms of FA1. Counsel's argument
in this
regard can be summarised as follows:
7.1
All linguistic
indiciae
are
that Annex FA1 is intended to impose liability on Fusion alone. These
indiciae
are:
7.1.1
Annex
FA1's only signatories (the Beckers) are said to act "as
directors
of Fusion"
not
Zurich.
7.1.2
The
Beckers append their signatures at the foot of FA1
"for
and on behalf of Fusion".
7.1.3
According
to FA1, the Beckers
"do
hereby guarantee and bind
the
guarantor
to ABSA"
(emphasis
added). Fusion -only Fusion - is defined as
"the
guarantof.
Zurich
is separately defined as
"Zurich".
So
the instrument does not make Zurich a guarantor of any obligation. It
founds no claim against Zurich
qua
guarantor
- the only capacity on which ABSA places any reliance. Hence the
significance of the definition of
"the
guarantor"
cannot
be overstated.
7.1.4
In
seeking to cap any liability
"hereunder"
(i.e.
based on Annex FA1) the language envisages recovery from, and only
from,
"the
guarantor".
There
is no contemplation in the wording of Annex FA1 of any recovery from
Zurich. At least there is no contemplation of any recovery
under
Annex FA1.
7.1.5
The
Beckers acknowledge that any amount
"claimable
from the guarantor hereunder"
is
payable on demand. The instrument is thus about what can be claimed
from Fusion; and when. There is no suggestion that Annex
FA1 imposes
any other liability on any other person. Certainly there is no
indication in the language of the instrument that Zurich
is liable
under a
"demand
guarantee" -
the
very foundation of ABSA's case.
7.1.6
There
is stipulated that Annex FA1 is to be returned to Fusion (not Zurich)
on
"payment
or expiration".
[8]
The above argument loses sight of the explicit wording in FA1 that
Fusion (as opposed to the Beckers) binds Zurich as surety
and
co-principal debtor for the due payment by Teejay to ABSA of all
amounts due to it. As such Zurich is bound by its undertaking
if
Fusion's authority is proved. The words in FA1 underlined by me make
it plain beyond doubt that Fusion was acting
"for
and on behalf of Zurich".
FA1
is a hybrid between a
"demand
guarantee"
and
a
"suretyship".
What
is said in [5] above is apposite. On a reading of FA1 Zurich,
represented by Fusion, is bound to honour the obligation contained
in
FA1 when called on to do so, as has occurred in this case, if Fusion
had authority to bind it.
[9]
It is Zurich's further argument that such authority has not been
proved. In this regard counsel has argued that as ABSA relies
on
Zurich being a guarantor and not a surety as I have found, it is
confined to proving a guarantee on the part of Zurich and not
a
suretyship. In my view there is no substance in this argument in the
present case.
[10]
The Appellate Division in
List
v Jungers
1979
(3) SA 106
at 117D-G dealt with the meaning of the word
"guarantee"
in
a document. Diemont JA speaking for the court said the word
"guarantee"
was:
"...
a word which had several meanings but it was commonly and most
properly used in the sense of an undertaking to stand surety for
the
performance of, or to make good, someone else's obligation. For this
there was ample authority, both in the case law and in
standard
lexicons, such as the Shorter Oxford English Dictionary (at 840 of
the 1934 edition). Almost a century ago the Privy Council
had held in
The Heirs Hiddingh v De Villiers, Denyssen and Others
(1887) 5 SC 298
at 311 that:
'The
very notion of a guarantee requires that there shall be two sources
of security to the creditor, the original source and the
guarantor.'
Coming
to more recent times STRATFORD CJ had stated in Hazis v Transvaal &
Delgoa Bay Investment Co Ltd
1939 AD 372
at 384 that:
'The
word (guarantee) is usually and more properly employed by a surety
who promises to saddle himself with an obligation if the
principal
obligator defaults.'
It
was further submitted that the ordinary meaning of a word was an
important factor in determining what was meant by its use and
there
should not be a departure from the sense in which it was commonly
used without cogent reason."
[11]
On page 118 of
List
v Jungers (supra)
the
learned Judge added the following dangers in placing too much
emphasis on the meaning of particular words. The
dictum
in
this regard is in paragraph D-H, it reads:
"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 - so for example STRATFORD
CJ and GREEN BERG J gave
differing 'ordinary meanings' to the word 'guarantee' in the cases
noted above - it is clear that the
context in which the word is used
is of prime importance. I find the words of Kriek J as reported in
Hermes Ship Chandlers (Pty)
Ltd v Caltex Oil (SA) Ltd
1973 (3) SA 263
(D) at 267 apposite:
'The
passages from the various judgments I have mentioned deal with the
popular or ordinary meaning of the word 'guarantee', but
it seems to
me that they demonstrate only that the word is capable of bearing
different meanings depending upon the context in
which it is used. It
seems to me also that when the meaning of the word in a particular
document is being considered, it is undesirable
to commence the
enquiry on the basis that any one of its possible meanings
predominates, and that the proper approach to the question
is to be
alive to the various meanings which it can bear and by a
consideration of the context in which it is used (together with
such
other circumstances as may be permissible) to decide which meaning
must be attributed to it in that context.'
More
recently RUMPFF CJ emphasised that, in seeking to interpret a
contract, words must not be examined in isolation and divorced
from
the context in which they are used:
'Wat
natuurlik aanvaar moet word, is dat, wanneer die betekenis van woorde
in 'n kontrak bepaal moet word, die woorde onmoontlik
uitgeknip en op
'n skoon stuk papier geplak kan word en dan beoordeel moet word om
die betekenis daarvan te bepaal. Dit is vir
my vanselfsprekend dat 'n
mens na die betrokke woorde moet kyk met inagmening van die aard en
opset van die kontrak, en ook na
die samehang van die woorde in die
kontrak as geheel.'
(Swart
en 'n Ander v Cape Fabrix (Pty) Ltd
1979 (1) SA 195
(A) at 202)."
[12]
One should further bear in mind that the modern dictionary meaning of
the word
"guarantee"
is
"a
formal
promise or assurance especially that an obligation will be fulfilled
..."
(Concise Oxford Dictionary 10
th
edition). In Chambers 20
th
Century Dictionary (Revised Edition) the word is defined as a
contract in which a person agrees to see performed what another has
undertaken - a surety or warrant.
[13]
A reading of FA1 makes it plain that Fusion, duly authorised, acts on
behalf of Zurich in this context and has bound Zurich
as a surety and
co-principal debtor for the indebtedness of Teejay, being payment of
R50 million to ABSA.
[14]
Zurich's further argument is that if it is found that FA1 constitutes
a suretyship undertaking, as I have found, it was not
signed by or on
behalf of Zurich and therefore falls foul of the requirements of
section 6 of General law Amendment Act, Act 50
of 1956 which reads:
"No
contract of suretyship entered into after the commencement of this
Act shall be valid, unless the terms thereof are embodied
in a
written document signed by or on behalf of the surety ..."
As
has already been stated Fusion signed for and on behalf of Zurich in
FA1, and this submission is therefore without merit. One
must bear in
mind that it was Fusion, represented by the Beckers, who signed on
behalf of Zurich, as it claimed it was authorized
to do. This
authority is confirmed by Zurich in FA4, which is an undisputed
letter of authority.
[15]
The next contention raised by Zurich is that Fusion had no authority
to bind Zurich as it did. A great deal was made of the
relationship
between Fusion and Zurich. However, as there is no suggestion that
ABSA was privy to this relationship, the only relevant
document in
this regard is FA4. This document, which is addressed
"TO
WHOM IT MAY CONCERN"
makes
it plain that Fusion acting on behalf of Zurich is
"duly
authorized to issue guarantees ... to a maximum limit of R50 000 000
on any one guarantee, any one facility".
It
was submitted on behalf of Zurich, that there was a dispute of fact
in regard to this authority, as the authority given to Fusion
did not
include suretyships for bank overdrafts, as ABSA's present claim is.
[16]
In my view, without deciding whether FA4 constitutes a statement of
actual authority, ABSA is entitled to rely on the principle
of
ostensible authority in this regard. This principle was explained by
Denning MR in
Hely-Hutchinson
v Brayhead Ltd and Another
[1968]
1 QB 549
(CA) at 583A-G as follows:
"Ostensible
or apparent authority is the authority of an agent as it appears to
others. It often coincides with actual authority.
Thus, when the
board appoint one of their number to be managing director, they
invest him not only with implied authority, but
also with ostensible
authority to do alt such things as fall within the usual scope of
that office. Other people who see him acting
as managing director are
entitled to assume that he has the usual authority of a managing
director. But sometimes ostensible authority
exceeds actual
authority. For instance, when the board appoints the managing
director, they may expressly limit his authority by
saying he is not
to order goods worth more than £500 without the sanction of the
board. In that case his actual authority
is subject to the £500
limitation, but his ostensible authority includes all the usual
authority of a managing director.
The company is bound by his
ostensible authority in his dealings with those who do not know of
the limitation. He may himself do
the 'holding-out'. Thus if he
orders goods worth £1,000 and signs himself 'Managing
Director
for and on behalf of the company', the company is bound to the other
party who does not know of the £500 limitation.
…"
[17]
The above
dictum
has
been accepted as being part of our law in
NBS
Bank Ltd v Cape Produce Co (Pty) Ltd and Others
2002
(1) SA 396
at 411F-412B (paragraph [25], where Schutz JA speaking for
the court described the position as follows:
"[25]
As Denning MR points out, ostensible authority flows from the
appearances of authority created by the principal. Actual
authority
may be important, as it is in this case, in sketching the framework
of the image presented, but the overall impression
received by the
viewer from the principal may be much more detailed. Our law has
borrowed an expression, estoppel, to describe
a situation where a
representor may be held accountable when he has created an impression
in another's mind, even though he may
not have intended to do so and
even though the impression is in fact wrong. Where a principal is
held liable because of the ostensible
authority of an agent, agency
by estoppel is said to arise. But the law stresses that the
appearance, the representation, must
have been created by the
principal himself. The fact that another holds himself out as his
agent cannot, of itself, impose liability
on him. Thus, to take this
case, the fact that Assante held himself out as authorized to act as
he did is by the way. What Cape
Produce must establish is that the
NBS created the impression that he was entitled to do so on its
behalf. This was much stressed
in argument, and rightly so. And it is
not enough that an impression was in fact created as a result of the
representation. It
is also necessary that the representee should have
acted reasonably in forming that impression: Connock's (SA) Motor Co
Ltd v Sentraal
Westeiike Ko-operatiewe Maatskappy Bpk
1964 (2) SA 47
(T) at 50A-D. Although an intention to mislead is not a requirement
of estoppel, where such an intention is lacking and a course
of
conduct is relied on as constituting the representation, the conduct
must be of such a kind as could reasonably have been expected
by the
person responsible for it, to mislead. Regard is had to the position
in which he is placed and the knowledge he possesses."
[18]
More recently the Supreme Court of Appeal in
South
African Broadcasting Corporation v Coop and Others
2006
(2) SA 217
at 234-235 repeated its acceptance of the above
dictum
as
being part our law.
[19]
The unchallenged evidence adduced by ABSA is that its representative,
Lawrence Booysen, relied on FA4 as a document which authorized
Fusion
to represent Zurich in a guarantee or suretyship undertaking as
described in FA1. In my view this reliance was justified.
There can
be no question but that ABSA was entitled to look to Zurich for
payment of the R50 million referred to in FA1.
[20]
In the circumstances of this case the meaning of the word
"guarantee"
that
is whether it be an original undertaking, or an accessory one such as
a suretyship is not relevant. FA1 is a document which
binds Zurich to
pay the debt of Teejay to ABSA in an amount which is limited to R50
million. It authorized Fusion in writing to
bind its credit to this
effect in FA4, which was published
inter
alia
to
ABSA. It cannot now be heard to rely on limitations of this authority
which were privy to it and Fusion. It is therefore liable
to pay ABSA
what it claims.
[21]
Counsel for both parties in this matter were in agreement that each
of their clients was entitled to employ two counsel to
represent them
in this matter because of its importance to them. I agree. The
following order is made:
There
will be judgment for the applicant against the respondent in the
following terms:
1.
The
respondent is ordered to make payment
of
the
sum of R50 million to the applicant.
2.
The
respondent is ordered to pay interest
a
tempore morae
on
the said sum of R50 million at the rate of 15,5 per cent per annum
from date of demand being 17 October 2008 to date of payment.
3.
The
respondent is ordered to pay the applicant's costs, such costs are to
include the costs of two counsel.
P
BLIEDEN
JUDGE
OF THE HIGH COURT
COUNSEL
FOR APPLICANT
............
ADV
P N LEVENBERG SC
…
.......................................................
ADV
G KAIRINOS
INSTRUCTED
BY
….........................
JAY
MOTHOBI INC
COUNSEL
FOR RESPONDENT
…..
ADV
A E BHAM SC
…
.......................................................
ADV
R PEARSE
INSTRUCTED
BY
…..........................
BELL
DEWAR & HALL
…
........................................................
c/o
R G ROBINSON ATTORNEY
DATE
OF HEARING
DATE
OF JUDGMENT