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ABSA BANK LIMITED Second Respondent
THE STANDARD BANK OF SOUTH AFRICA LIMITED Third Respondent
Summary:
Interim interdict – Debtor seeking to interdict payment of certain demand guarantees
Dispute as to entitlement of monies – Restatement of Law – Allegation of Fraud
Order of Court:
1. The application is dismissed.
2. The Applicant shall pay the costs of the First Respondent on scale ‘C’,
which costs shall include the costs of two counsel, where so employed.
JUDGMENT
Z KHAN AJ
BACKGROUND
[1] This is an urgent application for interdictory relief to restrain the Second and
Third Respondent banks from making payment to the First Respondent. The
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demand guarantees in question were furnished by the Second and Third
Respondents to secure transactions between the Applicant and the First
Respondent.
[2] The First Respondent is the general partner of an en commandite partnership
that previously held shareholding in Enviroserv Holdings (Pty) Ltd. The
Applicant entered into a sale agreement with the First Respondent to acquire
the shareholding and associated claims in Enviroserv. A subsidiary of
Enviroserv holds certain lucrative commercial contracts outside South Africa ,
and the benefits from the contracts accrue to Enviroserv and, ultimately, to its
shareholders. The First Respondent sought to retain future benefits arising from
these contracts. The sale agreement , including the provisions for payment of
the purchase price , was structured to accommodate the First Respondents
expectations of a future windfall.
The purchase price and related payments under the sale agreement have been
calculated and are payable in accordance with formulae based on assumptions
regarding management performance and income to be derived from
Enviroserv’ s foreign subsidiary. These payments are structured across three
payout periods, referred to as the ‘Earn Out’, and are subject to specific payout
and cashflow assumptions built into the transaction. The ‘Earn Out’ payable to
the First Respondent also contemplates scenarios in which the projected
cashflow and performance targets are not achieved.
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[3] The payments were guaranteed by the Second and Third Respondents, subject
to specified payment limits. It is common cause that the guarantees furnished
by the Second and Third Respondents are substantially identical.
[4] A dispute has arisen regarding the outstanding portion of the First Payout
Amount. The Applicant made payment of ZAR 51,835,134 in respect of the First
Earn Out Period, in accordance with an ‘Earn Out’ certificate issued. Thereafter,
the First Respondent made a demand for a Top Up Amount, based on one of
several payment formulae set out in the sale agreement, contending that the
projections had not been met.
[5] The Applicant asserts that the First Respondent is incorrect in claiming payment
of the defined ‘Top -Up Amount’ in terms of a particular formula set out in the
sale agreement, and contends instead that the First Respondent is entitled only
to an ‘Earn Out Amount’ calculated in accordance with a different payment
formula contained in the same agreement.
[6] The Applicant subsequently made payment of what it contends to be the correct
amount, namely US$ 751,470, being the equivalent of ZAR 12,224,986.
[7] The difference between the Applicant’s calculation and that of the First
Respondent amounts to ZAR 94,446,622. This amount is in dispute, and its
determination falls outside the ambit of the present litigation. It is a matter for
international arbitration, which has already commenced, and the parties are ad
idem that this Court may not interrogate the underlying agreements.
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[8] The Applicant then engaged with the Second and Third Respondent Banks,
cautioning them regarding payments made to the First Respondent and
drawing their attention to the Guarantee Limits specified in the demand
guarantees. The Second and Third Respondents were also informed that
payments had already been made.
[9] On 24 June 2025, the First Respondent made a demand for payment to the
Second and Third Respondents, based on the First Respondent’s calculation,
thus calling on each bank to pay ZAR 47 223 311.
[10] The Applicant complained that the First Respondent’s demands to the Second
and Third Respondents were defective on several grounds. These included the
failure to make full disclosure regarding payments already received by the First
Respondent, and that, wi thout this information about the payout already
received, the Second and Third Respondents would be induced to make
payments exceeding the amount to which the First Respondent is entitled.
[11] The conditions of the demand guarantees, relevant terms of which are set out
below, also prohibit the Second and Third Respondent Banks from becoming
involved in the principal dispute concerning the underlying sale agreements.
[12] Essentially, the Applicant claims that the First Respondent’s failure to disclose
the payment received to the banks constitutes fraud, as it seeks payment based
on a clearly incorrect representation. This allegation of fraud is central, as the
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Applicant aims to bring this litigation within the scope of the prevailing case law
on demand guarantees, in order to prevent a payout to the First Respondent.
[13] The Applicant describes the demand for payment as “patently defective,” made
in “bad faith,” “mala fide,” and “prima facie fraudulent,” designed to circumvent
the arbitration process by prematurely obtaining payments that are not due.
Thus, the Applicant asks this Court to find that the First Respondent attempted
to commit fraud by making a claim against the guarantees without disclosing
the payments already received.
[14] After the institution of this Application before the Urgent Court, the matter was
removed from the urgent roll. The First Respondent had resubmitted its claim
to the Second and Third Respondents to address procedural deficiencies in the
claim process, including the failure to notify both banks simultaneously. The
application was answered and set down before this Urgent Court.
[15] The Second and Third Respondents have sought independent legal advice and
have elected to abide the Court’s decision regarding this application for an
interdict.
THE WORDING OF THE GUARANTEE
[16] The individual guarantees provided to the First Respondent by the Second and
Third Respondent s records the Guarantors ’ obligations identically. The
contentious portions of the guarantee state:
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1.5 First Earn Out Amount means the ‘Earn Out Amount’ (as defined in
the Sale Agreement) as may become payable by the Purchaser to
the Beneficiary under the Sale Agreement in respect of the First Earn
Out Period.
1.6 First Earn Out Guarantee Limit means an amount of R67,500,000 less
any amount paid by the Purchaser to the Beneficiary under the Sale
Agreement in respect of the First Earn Out Amount
2.1 Subject to the terms of this Guarantee, the Guarantor hereby
guarantees to the Beneficiary the payment by the Purchaser of:
…
2.1.3 the First Earn Out Amount (subject always to the First Earn Out
Guarantee Limit), if (i) same falls due for payment under the Sale
Agreement and (ii) the Purchaser has failed to make payment thereof
to the Beneficiary in accordance with the Sale Agre ement, on the
date referred to in clause 7.4.15.1 or 7.4.15.2 (whichever may be
applicable) of the Sale Agreement.
2.4 Any demand for payment under this Guarantee must:
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2.4.2 be made simultaneously with a demand for payment under the
guarantee issue by (the other guaranteeing bank) in favour of the
Beneficiary on the same terms as this Guarantee.
2.6 The Guarantor shall not make any determination as to whether or not
the amount claimed is in fact due and payable…
[17] A particular controversy arises from the wording of clause 1.6 of the guarantee.
The Applicant argues that each individual bank must calculate the payout taking
into account the total payments already made. In contrast, the First Respondent
contends that, since the guarantees are equal and the debt is divided equally
between both banks, the payment must be reflected and apportioned equally—
half to each guarantee.
[18] Simply put, the Applicant contends that the full ‘First Earn-Out Amount’ paid to
the First Respondent must be deducted in full from each guarantee individually
to determine the remaining payable amount. The First Respondent, however,
argues that both guara ntees should be considered together, with 50% of the
amount paid by the Applicant deducted from each guarantee, and the balance
thereafter paid. The complaint is that deducting the full payment from each half
guarantee effectively reduces the overall value of each guarantee.
[19] The First Respondent claims an outstanding payment of ZAR 94,446,622, while
the Applicant contends that no monies are payable.
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[20] The core of the dispute is that an incorrect amount, which is not due and
payable, will be paid by the Guarantor due to the inability to determine the
amount payable in the First Earn-Out.
[21] In its answer, the First Respondent takes the view that the guarantees
constitute independent, self -standing obligations, and that once a demand is
properly made, payment must be made—unless the demand is tainted by fraud.
[22] The First Respondent argues that any dispute concerning the interpretation of
the sale agreement is subject to arbitration, and that the Applicant, if aggrieved,
may institute proceedings against the First Respondent to recover any monies.
It contends that this provides the Applicant with an adequate alternative
remedy, particularly given the future payments still outstanding to the First
Respondent in terms of the sale agreement.
[23] The First Respondent asserts that the Applicant is merely attempting to
frustrate the contract and the payment of monies, despite the fact that the First
Respondent has relinquished its shareholding, relying on the comfort provided
by guarantees from reputable banks.
URGENCY
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[24] The First Respondent contends that this application is not urgent and that the
time periods set out by the Applicant are unreasonable and insufficient. The
First Respondent does not explain why it did not seek an extension of time to
file papers upon tendering a delay in calling up the guarantee.
[25] This matter warranted the attention of the urgent Court on Thursday, 17 July
2025. The guarantees are payable ten business days following demand, which
falls on Friday, 18 July 2025. The First Respondent made certain limited
undertakings, and this payment window has been extended by one Court Day
to allow for the delivery of this judgment no later than Monday, 21 July 2025.
[26] During argument, I was repeatedly informed that the Second and Third
Respondents have indicated their intention to act on the demands made by the
First Respondent and an urgent interdict is thus required.
[27] I exercise my discretion to hear this matter on an urgent basis.
THE LAW
[28] The demand guarantee furnished in this matter is ‘wholly independent of the
underlying contract of sale and assures the seller of payment of the purchase
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price…whatever disputes may subsequently arise between buyer and seller is
of no moment insofar as the bank’s obligation is concerned’1 2.
[29] The Second and Third Respondents may avoid their obligations under the
guarantee agreement in the event of fraud3.
[30] The test for fraud in these circumstances, as formulated by our Court, is ‘where
the seller, for the purpose of drawing on the credit, fraudulently presents to the
confirming bank documents that contain, expressly or by implication, material
representations of fact that to his (the seller's) knowledge are untrue .’4 Such
interdicts will only be granted in the most exceptional circumstances. The legal
definition of fraud is readily available5.
[31] The inference of fraud is not lightly inferred 6. Theron JA (as she then was)
states that ‘Mere errors, misunderstandings or oversights, however
unreasonable, would not amount to fraud . Nor was it enough to show that the
beneficiary’s contentions were incorrect. A party had to go further and show
that the beneficiary knew it to be incorrect and that the contention was
advanced in bad faith’7.
1 Lombard Insurance Co Ltd v Landmark Holdings (Pty) Ltd and Others 2010 (2) SA 86 (SCA) at [20]
2 See also: Joint Venture between Aveng (Africa) (Pty) Ltd and Strabag International GmbH v South
African National Roads Agency Soc Ltd and Another 2021 (2) SA 137 (SCA)
3 Loomcraft Fabrics CC v Nedbank Ltd & Another 1996 (1) SA 812 (A) at 815G-816G
4 Loomcraft citing United City Merchants (Investments) Ltd and others v Royal Bank of Canada and
Others [1982] 2 All ER 720 (HL) at 725G
5 Ozinsky NO v Lloyd and Others 1995 (2) SA 915 (AD)
6 Loomcraft at 817E-F
7 Guardrisk Insurance Company Ltd and Others v Kentz (Pty) Ltd [2014] 1 All SA 307 (SCA) at [18]
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[32] The Court in Raubex8 dealt with the onus of proving fraud, it held that ‘What the
court a quo in effect did was to place the onus upon Raubex to prove that it did
not act fraudulently. Such a conclusion, in my view, is clearly incorrect. An
allegation of fraud is a serious charge and the onus to prove it clearly and
distinctly will always rest on the party making such allegation’.
[33] Likewise, Schippers JA held in Pepkor 9 that ‘the cases make it clear that it is
inappropriate and unwise for findings of fraud or deceit to be made on the basis
of untested allegations on motion, which are denied on grounds that cannot be
described as far -fetched or untenable. This is based not only on common
sense, but also on ‘many years of collective judicial experience’ . This dictum
speaks back to the Plascon-Evans10 test.
[34] The full bench decision of the Pretoria High Court in Bombardier11 also warrants
reference, as it consolidates the various authorities relating to the implication of
fraud in the context of a demand guarantee.
[35] The position regarding the drawing of inferences is permissible if it consistent
with all the proved facts. In S A Post Office v Delacy and Another12:
8 Raubex Construction (Pty) Ltd v Bryte Insurance Company Ltd [2019] 2 All SA 322 (SCA) at [8]
9 Pepkor Holdings Ltd and Others v AJVH Holdings (Pty) Ltd and Others; Steinhoff International
Holdings NV and Another v AJVH Holdings (Pty) Ltd and Others 2021 (5) SA 115 (SCA) at [39]
10 Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd [1984] (3) SA 623 (A)
11 2021 (1) SA 397 (GP)
12 S A Post Office v Delacy and Another 2009 (5) SA 255 (SCA) at [35]
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‘The process of inferential reasoning calls for an evaluation of all the evidence
and not merely selected parts. The inference that is sought to be drawn must
be ‘consistent with all the proved facts: If it is not, then the inference cannot be
drawn’ - and it must be the “more natural, or plausible, conclusion from among
several conceivable ones” - when measured against the probabilities.’.
[36] Where one or more inferences are possible, a court must satisfy itself that the
inference sought to be drawn is the most plausible or probable, even if that
conclusion may not be the only one13.
FRAUD
[37] In its pursuit of an interim interdict, the Applicant contends that the First
Respondent attempted to commit fraud by failing to disclose to the Second and
Third Respondents the payments it had already received from the Applicant.
This argument is reinforc ed by the Applicant’s submission that the First
Respondent’s revised demand, now before this Court, reflects a reduction of
R24 million in the amount claimed.
[38] The First Respondent’s response in argument is that fraud must be the most
plausible inference, and that an accounting error or miscalculation is an equally
plausible explanation. The difficulty faced by the Applicant is that it asks this
13 AA Onderlinge Assuransie-Assosiasie Bpk v De Beer 1982 (2) SA 603 (A)
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Court to infer an intent to commit fraud, to the exclusion of all other possible
explanations.
[39] The allegation of fraud must be considered in light of the First Respondent’s
transparency during the claim process, where the Applicant was copied in
correspondence. Such conduct is hardly indicative of fraudulent intent.
[40] Additionally, the First Respondent states that it structured its letters of demand
to align with the required wording of the demand guarantees , as it understood
it to be. The letters of demand, which are annexed to the Applicant’s papers,
are essentially identical. They call for payment of a specified amount, identify
the trigger event, but do not set out the computation of the claim amount.
[41] The First Respondent contends that, had the wording of the guarantee required
any additional information, such details would have been disclosed —as was
subsequently done when the banks made enquiries. It maintains that it acted in
accordance with its understanding of the provisions of the demand guarantee.
[42] A finding that the First Respondent acted with fraudulent intent would
necessarily imply that its directors and the attorneys who assisted in the claims
process were all complicit in promoting the alleged fraud.
[43] The Applicant’s allegation of fraud can be categorised into two main complaints:
(1) the failure to disclose payments already received, and (2) the demand for
payment of monies allegedly not due.
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[44] On the first point, the First Respondent makes no representation to the banks
that no payment has been received. The final amount claimed, as computed by
the First Respondent, is set out in the demand. This computation appears to
take into account the Firs t Respondent’s interpretation of how the two
guarantees operate. While this method of computation is disputed by the
Applicant, the determination of the correct methodology is not a matter for this
Court or the banks. This is the agreement that Applicant concluded.
[45] The First Respondent’s interpretation of the legal instruments is not so
implausible as to warrant an inference of fraudulent intent. The burden lies with
the Applicant to prove that the First Respondent acted with fraudulent intent.
The First Respondent cannot be required to prove a negative.
[46] One might consider whether the banks would have made payment without
further clarification on the computation of the claim and the payments already
received by the First Respondent. If they had, they might have breached their
obligations, and the Applicant would have a reme dy. However, this
consideration is rendered moot because the banks did, in fact, request clarity
from the First Respondent on 27 June 2025 , regarding payments made. The
banks also sought confirmation as to whether any subsequent or additi onal
payments had been made since the demand.
[47] On the remaining point, the First Respondent demands what it asserts is due.
The Second and Third Respondents are not required to make a finding on
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indebtedness. As this is a demand guarantee, payment follows provided the
conditions of the guarantee are met. If the Applicant is aggrieved, it has
remedies available to claim from the Respondents. The amount to be paid is
within the domain of the Second and Third Respondents and the y have not
sought the assistance of the Court.
[48] The Applicant’s claims of fraud are problematic for several reasons. They rely
on an assumption of malicious intent based on a limited set of facts presented
by the Applicant. These claims disregard any other plausible inferences and
speak on behalf of the Second and Third Respondents, against whom the fraud
is allegedly committed —yet these principal parties have not made any such
allegation before this Court.
[49] Furthermore, the allegation of overpayment is premature, as the guarantees
expressly provide for the deduction of any amounts paid by the Applicant to the
First Respondent. This process was interrupted and pre -empted by the
Applicant’s own correspondence before the banks sought clarification on
payments. No representation was made to the banks that no payments had
been received. Therefore, the omission to disclose payments is premature,
given that the Applicant did not allow the full claims process to unfold.
[50] The Applicant’s allegations regarding the claim process range from a defective
claim to fraud. However, there is no conclusive evidence demonstrating a wilful
intention to distort the truth for financial gain.
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[51] The allegations underpinning the Applicant’s claim of fraud do not meet the
threshold required to warrant a finding of fraud by this Court, and at this stage.
The First Respondent has made a claim against the guarantee based on a
computation it believes to be correct. An bona fidei assertion of debt, even on
an allegedly incorrect basis, is not equivalent to claiming a debt that is known
not to be due. The Applicant accepted the terms of the bargain, which precludes
interrogation of the underlying contract at this stage, and it cannot now raise
objections to the process.
[52] I am satisfied that the First Respondents presentation of demand does not
satisfy the requirement14 to establish fraud. Applicant cannot speak to the First
Respondents animus to commit fraud and it cannot overcome the contradictory
version set up by the First Respondent. The Applicant is also not assisted by
inferences.
INTERIM RELIEF
[53] The Applicant has not satisfied this Court that the requirement of fraud has been
met. Accordingly, interim relief cannot be granted in that regard.
[54] The Applicant asserts that there is a real apprehension of harm. The First
Respondent is the General Partner of a partnership, making it the public face
of several unknown downstream partners who stand to benefit from any payout.
14 Lombard Insurance Co Ltd v Landmark Holdings (Pty) Ltd and Others 2010 (2) SA 86 (SCA)
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The complaint is that there exists a real possibility that, if payment is made, any
subsequent attempts to recover monies will be futile. However, there is no merit
in this concern. The Applicant chose to contract with this entity, which was
supported by g uarantees. Nothing before me suggests that the First
Respondent would be unable to comply with any future order for payment.
[55] Similarly, the Applicant has an adequate alternative remedy and may litigate its
rights, particularly as the underlying agreements provide for future payments to
the First Respondent.
PAYMENT OF AN INCORRECT AMOUNT
[56] The Applicant complains that it will be left exposed should the Second and Third
Respondents pay out an incorrect amount. I do not agree. Acting on
independent legal advice and by interpreting the guarantee instrument, the
Second and Third Respondents must determine the amount payable to the First
Respondent based on the wording of the guarantee. They have not approached
this Court seeking any findings in that regard.
[57] The Applicant cannot, however, pre-empt the amount that the Second and Third
Respondents—well-advised by independent legal counsel —will pay, nor seek
an interdict against a payout or a payout up to a specified ceiling amount. The
Second and Third Respondent is a principal party to its guarantee with the First
Respondent. For now, what is of moment , is a proper demand not tainted by
fraud.
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ALTERNATIVE CLAIM
[58] The Applicant, with a second approach pursued in their reply, claims that two
distinct remedies are sought in the Notice of Motion: an interim interdict to
prevent payment, and a declaratory order limiting payment to a specified
amount. The Applicant also shifts focus to argue that the new demand is
defective.
[59] The issue of an interim interdict and the absence of fraud are addressed above.
Despite this, the Applicant continues to seek final declaratory relief based on a
purported clear right, even though it has failed to establish the lower threshold
of a prima facie right.
[60] It is unclear on what basis the Applicant seeks to fetter the Second and Third
Respondents’ obligations under the guarantee. It is for the Second and Third
Respondents, as principals to the guarantee, to satisfy themselves as to the
validity of the demand and the amount they intend to pay, and to bear the
consequences of their decision. The Applicant has no rights—certainly no clear
declaratory right—to further interfere with the principal obligations between the
Respondents.
[61] The Applicant has not established a cause of action for the apparently
alternative declaratory remedy it seeks.
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This judgment was handed down electronically by circulation to the parties’ and/or
parties’ representatives by email and by being uploaded to CaseLines. The date and
time for hand-down is deemed to be at 10h00 on 21 July 2025.
DATE OF HEARING: 17 and 18 JULY 2025
DATE OF JUDGMENT: 21 JULY 2025
APPEARANCES:
COUNSEL FOR THE APPLICANT:
ADV I CURRIE
ATTORNEY FOR THE APPLICANT:
DINGISWAY DU PLESSIS VAN DER MERWE
(ALCHEMY LAW)
COUNSEL FOR THE 1st RESPONDENT:
ADV CC BESTER
ADV J POTTER
ATTORNEY FOR THE 1st RESPONDENT:
DEWEY MCLEAN LEVY INC