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1989
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[1989] ZASCA 10
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Odgers Foam Insulation Company (Pty) Ltd. v Standard Bank of South Africa Ltd. (525/87) [1989] ZASCA 10 (16 March 1989)
Case No. 525/87 - mp
IN THE SUPREME COURT OF SOUTH AFRICA APPELLATE DIVISION
In the matter between:
ODGERS FOAM INSULATION COMPANY
Appellant
(PROPRIETARY) LIMITED
and
THE STANDARD BANK OF SOUTH AFRICA
Respondent
LIMITED
CORAM:
HOEXTER, BOTHA, VAN HEERDEN, JJA et F H GROSSKOPF, NICHOLAS
AJJA
HEARD:
16 February 1989
DELIVERED:
16 March 1989
J
UDGMENT
HOEXTER, JA
2
HOEXTER, JA
In the Orange Free State Provincial Division two
applications in which the appellant sought an interdict against the respondent
were
refused; and in a related counter-appli-cation by the respondent the latter
was granted a declaratory order against the appellant.
With leave of the Court
below the appellant appeals against the aforesaid three orders.
The appellant
is a private company which carries on business at Welkom, and it is a customer
of the respondent bank at the latter's
Odendaalsrus branch. From a company
("Papenmeier") which carried on business in France the appellant bought goods at
a price of almost
4 /2 million French francs. By way of payment the appellant
accepted ten bills of exchange, each dated 13 February 1984, drawn by
Papenmeier
upon the appellant. Each bill was payable to the order of Papenmeier. The ten
bills were guaranteed by the respondent.
The
3
The bills were payable at six-monthly intervals, the first falling due on 1
August 1984 and the last on 1 February 1990. The ten bills
were drafted in the
French language, save that in the first two columns thereof the French headings
were rendered also in English.
The amounts were stated in French francs and (in
terms of equivalent South African currency) each bill involved a payment in
excess
of R100 000.
The acceptance of the bills by the appellant and their
guaranty by the respondent took place at a meeting in Welkom on 13 February
1984. The meeting was attended,
inter alios
, by a director of the
appellant ("Odgers"), the respon-, dent's manager at its Odendaalsrus branch
("the manager"), and two representatives
of Papenmeier. On behalf of the
appellant Odgers signed the bills to accept them and the guaranty was effected
by the signature on
each bill of the manager on behalf of the respondent. The
bills were then delivered to the
aforesaid
4
aforesaid representatives of Papenmeier.
On 2 March 1985 the manager
requested Odgers, on behalf of the appellant, to sign a document which bore the
heading "Request to issue
a Guarantee". To this document reference will be made
as "the RG". Odgers duly signed the RG on behalf of the appellant. The manager
should have procured such signature to the RG at the time of the respon-dent's
guaranty of the ten bills but, through an oversight
on his part, he omitted to
do so until 2 March 1985. Nothing turns on the fact that the RG was signed by
the appellant only after
the respóndent had already guaranteed the
bills.
The RG is couched in the following terms:-
"I/We hereby irrevocably request the Standard Bank of South Africa Limited to
become guarantor on my/our behalf in favour of the
PAPENMEIER FRANCE S.a.r.l.
for the sum FRF 4.486.180 on terms set out in the bills drawn on the company and
I/we ODGERS FOAM INSULATION
COMPANY (PTY) LIMITED hereby authorise the said Bank
without any further reference to me/us to pay or
comply
with
5
with any claim which may be made against the Bank by the
guaranteed party under the said guarantee against production of the documents,
if any, called for therein without any obligation on the part of the Bank to
ascertain the correct-ness or otherwise of any amount
claimed or the validity of
the grounds on which any such claim is based, and to charge against my/our
account, or against any separate
cover held for my/our account, any sum or sums
it may be called upon to pay by reason of the said guarantee and with any
expense
to which the Bank may be put in connection therewith including
commission payable half yearly
on at the Bank' s
rates for the issue of
guarantees, during the currency of the guarantee. I/We agree that I/We will have
no claim against the Bank
should any payment be made by the Bank under the
guarantee even if the payment is not claimable from me/us or otherwise.
I/We acknowledge that the Bank has the right at any time during the existence
of the guarantee to call upon me/us to furnish it forthwith
with cash or any
approved security(ies) for the guarantee in whole or in part and at its sole
discretion, and in the event of the
Bank calling upon me/us to do so, and upon
me/us failing to comply with its request, the Bank is hereby entitled and
authorised to
give notice to cancel or call up the guarantee and/or to determine
it and to charge against my/our account, or against any separate
cover held, any
such sums
it
6 it may be called upon to pay as a result thereof.
I/We record that this request is irrevocable and that I/We cannot instruct the
Bank not to pay any amount or amounts claimed from.the
Bank under the
guarantee."
So much for what is set forth in the body of the
RG.
I turn to the bills to which the RG refers. Each bill
has three columns. The
right-hand column reflects Papenmeier
(under the signature of its manager) as the drawer, and it
reflects the
date of issue of the bill as 13 February 1984.
It states the amount of he bill, the due date thereof; and
that the bill is payable to the order of Papenmeier. It
states that the drawee is the appellant, setting forth the
appellant's
address in Welkom and that the appellant's "domi-
ciliation" is the
respondent's Odendaalsrus branch. The
left-hand column of the bill bears a heading given in four
different
languages, including the French word "ACCEPTATION"
and the English word
"ACCEPTANCE". In the space thereunder
Odgers
7
Odgers by his signature signified the appellant's assent to the drawer's
order. The central column of the bill bears the heading "AVAL"
and below it the
word "GUARANTEE". Thereunder appears the manager's signature on behalf of the
respondent. Certified translations
of the bills were placed before the Court
below. The words "á l'orde de : nous mêmes" appearing in the
right-hand column
of each bill have been rendered in the certified translation
as "to the order of ourselves". In the central column and under the
heading
-
"AVAL GUARANTEE" the following words appear in each bill:-
"BON POUR
AVAL DU TIRE" and these have been translated as:-
"GOOD FOR DRAWEE GUARANTEE". The fourth and fifth bills fell respectively
due
on
8
on 1 February 1986 and 1 August 1986. By 1986 the bills had been negotiated
to and were held by the Societé Generale pour le
Commerce Exterieure
("the SG"). On the aforesaid due dates the appellant as acceptor failed to make
payment, and the SG claimed payment
of the amounts of the fourth and fifth bills
from the respondent. The appellant alleged that the goods delivered to it by
Papenmeier
were defective and instructed the respondent not to make payment of
the bills. The respondent considered that by reason of its guaranty
of the bills
it was obliged to make payment to the SG; and it intimated to the appellant that
it proposed to disregard the latter's
instructions not to pay.
The upshot was
that during 1986 the appellant launched two successive applications in the Court
below in an attempt to interdict the
respondent from making payment to the SG
under the fourth and fifth bills, and the bills falling
due
9
due thereafter; while in turn the respondent during May 1987 brought an
application against the appellant for an order declaring that
the
rêspondent was entitled to pay the bills in question and to debit the
appellant's account therefor or otherwise to recover
payment thereof from the
appellant. In August 1987 all three matters were argued before SMUTS, JP. The
learned Judge-President found
against the appellant and in favour of the
respondent. The rules
nisi
initially granted at the instance of the
appellant were discharged with costs; and it was declared that the respondent
was entitled
to pay the bills which had fallen due on 1 February 1986 and 1
August 1986 respectively; and to debit the appellant's bank account
in the
amounts so paid, or otherwise to recover such amounts from the appellant. The
appellant was ordered to pay the costs (including
the costs of two counsel) of
the respondent's counter-application for a declaratory order.
In
10
In terms of the RG the appellant requested
the
respondent to become a guarantor on the
appellant's behalf
in favour of Papenmeier for the total amount of the bills;
and the
appellant authorised the respondent to pay any claim
made against the
respondent:-
"... by the
guaranteed party
under the said
guarantee."
(My underlining)
In the Court below it was contended for the appellant that
upon a proper
construction of the RG the words "guaranteed
party" in the above context
signified Papenmeier and Papen-
meier alone. That contention was rejected by
the learned
Judge-President who considered that "guaranteed party"
encom-
passed not merely Papenmeier but also -
"....any other person to whom Papenmeier's rights under the bills of exchange
might be made over by endorsement."
On appeal it was
submitted on behalf of the appellant that the
Court
11
Court below had erred in so construing the RG.
In my view that submission
is untenable. The RG envisages a guaranty in favour of Papenmeier for the sum of
4 486 180 French francs
-
" on the terms set out in the bills"
drawn on the appellant. It follows that the true intent and scope of the
guaranty has to be ascertained by reference to the bills.
It is rudimentary that
the liability of a signa-tory of an aval may be transferred simply by
negotiation of the negotiable instrument.
Inasmuch as the contract of aval
partakes of the character of the bill itself, the rights of the payee as against
the signer of an
aval pass to and give the same rights to any subsequent holder
of the bill as if the signer's liability had been undertaken personally
to the
latter. It is with this essential quality of the contract of aval in mind that
the bills must be examined and the compass
of the RG must be determined.
When
12
When one looks at the bills what leaps to the eye is the fact that they are
payable to the order of Papenmeier. There being no restriction
whatever on the
negotiation of the bills by Papenmeier, a signer of an aval is here not merely a
surety in respect of the appellant's
liability to Papenmeier; in these
circumstances the signer of an aval clearly undertakes also to every subsequent
holder of the bills
that he will be liable for due payment thereof in case of
default of the original parties to the bills. In my view the meaning which
was
assigned to "the guaranteed party" by the Court below was the proper and correct
one. It follows that the appeal must fail.
A further matter requires brief
attention. In authorising the respondent to pay the guaranteed party without
further reference to
the appellant, the RG relieves the re-spondent of:-
"....any
13
any obligation.... to ascertain the correctness
or otherwise of any amount claimed or the validity
of the grounds on which
any such claim is based "
During the course of
argument the question was shortly debated
whether the respondent would be
entitled to pay pursuant to the
terms of the RG in a situation in which the
respondent had clear
and certain knowledge, or perhaps had simply reason to
believe,
that the amount being claimed was incorrect or that the claim
was
invalid. This is not an issue which arises in the present
appeal and it is
unnecessary to express any opinion thereon.
The appeal is dismissed with costs, including
the
costs consequent upon the employment of two
counsel.
G G HOEXTER, JA
BOTHA, JA )
VAN HEERDEN, JA )
GROSSKOPF, AJA ) Concur
NICHOLAS, AJA )