23247/2019-ng 2 JUDGMENT
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stated to be works under contract T2015 -03 with the
description of the works describing construction of a raw
water steel pipeline from the G aywood area to the Greyton
Water Works. The dispute itself hinges around the
defendant’s liability or otherwise under the Performance
Guarantee with material question s to be answered as to
whether the plaintiff has complied with what is necessary to
call up payment on the Guarantee .
2.
Although, and while not specifically pleaded , there is 10
alleged non -compliance of the plaintiff with paragraph 4 of
the Guarantee which has been raised in the defendant ’s
heads of argument in addition to the alleged non -
compliance with paragraph 5 of the Guarantee . Plaintiff
contends that it has complied with all that is required under
the Guarantee while defendant contends that it is not liable.
The parties at commencement of the trial agreed that there
are various issues that are not in dispute and which are set
out in paragraph 3 of the 2023 practice note found at
CaseLines , section 6, item 2. There is also a further 20
practice note found in section 11 of CaseLines . T he Court
was advised that the parties had scrapped this particular
practice notice at commencement of the trial.
3.
Liability under thes e performance guarantees is no stranger

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to this Court with courts having come across them
repeatedly and there is defi nite ly , ample authority in
relation thereto. Both parties did a good job of articulating
the important princip le s relevant to this matte r, this both in
the heads of argument and in the list of authorities that
were provided . T he Court is appreciative of these efforts.
4.
While not all strictly relevant to these proceedings, the
Court was given the opportunity to peruse all the case law
that was placed before it. The Court was also afforded the 10
opportunity of perusing the very recent Supreme Court of
Appeal judgment of Set Square Developments (Pty ) Limited
V Power Guarantees and Vah va Construction which was
handed down recently on the 20 th of May 2025. It is in
consideration of all of the above that this judgment is
delivered.
5.
The Court will start by dealing with the issues which were
found not to be in dispute and as stated previously , most of
which was set out in the practice note of 2023 and in 20
paragraph 3. The Court will read these into the judgment
as follows . P aragraph 3 of the practice note states that:
3. The issue s not in dispute are the following,
3. 1 The citation of the parties ;
3.2 The total value of the contract awarded by the

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plaintiff to the Sou ndrite Construction and Plant
Hire, being R4 3 556 513.60;
3.3 That an allowance for the contingency of 10
percent amounting to R4 35 6 651.36 , an
escalation of eight percent amounting to
R3 485 312.09 to be added to the total value of
the contract referred to above at the discretion
of the plaintiff ;
3.4 That annexure B to the plaintiff ’s summons is
indeed a copy of the Performance Guarantee 10
with Guarantee number FUS501583JHB, issued
by the defendant to Sound rite Construction and
Plant Hire pursuant to the conclusion of the
agreement between the plaintiff and Sound rite .
3.5 The plaintiff has presented an original of the
aforesaid Performance Guarantee at the
defendant ’s attorney’s offices for inspection ;
3.6 That Annexure E1 to the plaintiff ’s summons is
indeed a copy of the first written demand by the
plaintiff to the defendant for payment in terms 20
of paragraph 5 of the aforesaid Performance
Guarantee dated 6 June 2015.
3.7 That no payment or undertaking to pay was
made by the defendant to the plaintiff in terms
of the aforesaid Performance Guarantee.

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3.8 That the defendant’s liability in terms of the
Performance Guarantee is autonomous from
the underl ying contract , and that the
defendant’s obligation to make payment is to
be construed strictly in terms of the
Performance Guarantee .
6.
In addition to these issues which were not in dispute, the
parties agreed on further common cause facts or issues
which were not in dispute and which were added. 10
7.
Firstly, there was no admission by the defendant that the
plaintiff cancelled the contract with S oun drite and
concluded a new contract with the joint venture.
8.
Secondly, it was admitted by the defendant that the first
letter of demand , being Annexure E1 to plaintiff particulars
of claim was in fact delivered to the defendants.
9.
Lastly, that there was a certificate of completion issued to 20
the joint venture, found at Annexure Plea1 to defendant ’s
plea . P laintiff did not dispute that the certificate of
completion is what it purports to be.
10.
Plaintiff closed its case without leading any evidence,

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relying instead on the various admitted or common cause
facts, and the balance of documentation. The plaintiff
contended that it was entitled to judgment on this basis.
11.
The defendant , subsequent to initially noting its intention
to apply for absolution from the instance, changed its mind
and instead also closed its case without leading any
evidence when the hearing resumed on the 22 nd of May
2025.
12. 10
The issues in dispute , on listening to the parties and on
perusal of the heads of argument and all the papers in the
matter , crystalise somewhat and there were issues of law
which were required to be determined.
13.
The Court will start by noting there to be two distinct
trigger events to payment becoming due and payable under
the Guarantee. The first is set out in paragraph 4 of the
Guarantee , and the second is set out in paragraph 5. It is
patently clear to this Court that these two paragraphs 20
operate independently of each other and in the case before
this Cour t, it is very clear that the events triggering
liability of the defendant as claimed by the plaintiff are
based on those set out in paragraph 5 of the Guarantee.
14.

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Nowhere in the Guarantee is it stated , nor is it implied that
these two paragraphs are connected in any way or that the
requirements set out in the one paragraph are dependent
upon compliance with that set out in the other.
In this regard the defendant ’s contention that the plaintiff
failed to comply with paragraph 4 of the guarantee , does
not figure in the Court ’s judgment. The plaintiff was simply
not obligated to comply with paragraph 4 in the face of
compliance with paragraph 5. Paragraph 5 cannot be
considered to be “additional compliance ” necessary over 10
and above that which is set out in paragraph 4.
Compliance with paragraph 5 of itself triggers liability
under the Guarantee . It should also be noted that non -
compliance with paragraph 4 as a defence is not
specifically pleaded.
15.
The final payment certificate and the issues raised in
relation thereto, again do not find application here . I t
pertains to a contract which in no way falls within the
ambit or operation of th e particular Guarantee which forms 20
the basis of the dispute before Court. The Guarantee
before Court, and this will be stated more than once in this
judgment, is autonomous and exists completely
independently.
16.

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It is noted, and I think I noted it before, that the parties
provided constructive and helpful authority in this matter
all of which has been considered in the formulation of this
judgment.
17.
The Court is going to start with the first issue, relating to
whether the plaintiff is obliged to prove a cancellation of
the contract with Soundrite . The Court would like to read
the requirements of paragraph 5 of the Performance
Guarantee into the record, and these state the following : 10
“Subject to the guarantor ’s maximum liability referred
to in 1, the Guarantor undertakes to pay the employer
the guaranteed sum of 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 this Performance Guarantee, such
demands stating that :
5.1 The Contract has been terminated due to the
Contractor’s default and that this Performance
Guarantee is called up in terms of 5;or 20
5.2 A provisional or final sequestration or
liquidation order has been granted against the
Contractor and that the Performance Guarantee
is called up in terms of 5 ; and
5.3 The aforesaid written demand is accompanied

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22-05-2025
by a copy of the notice of determination and or
the provisional final sequestration order, and /or
the provisional liquidation order.”

18.
It is clear that paragraph 5.2 in relation to this Guarantee
does not find application in the matter before Court. The
Court again emphasise s the principle of autonomy in that it
is important in the context of these Guarantee s, with the
case law being amply clear and with both parties making 10
reference thereto.
19.
The Guarantee operates independently from any underlying
contracts. To suggest that the contract was not cancelled
as alleged by the defendant, is to the Court ’s mind , by
necessity to claim fraud on the part of the plaintiff. The
plaintiff has , in compliance with paragraph 5 of the
Guarantee, confirmed cancellation of the contract on the
basis of default of the contractor. Further, a certificate of
completion which is to be found on CaseLines at section 9, 20
item 32 would to the mind of th is Court , make it abundantly
clear that the contract wa s indeed cancelled as the work in
question , which is described similarly in this certificate , was
performed by a different contractor, namely Cerimele -
Mantombana joint venture. The certificate refers to a
different contract number, that being T2017 -11. The

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22-05-2025
reasonable, rational conclusion that the Court can reach,
bearing in mind the fact that the different contract referred
to therein describes the same work as that described under
contact T 2015 -03 for which the Performance Guarantee was
issued - the only conclusion the Court can reach in this
regard is that the certificate of completion relates to
another contract and in relation to work performed by
another contractor. This is supportive of the contention by
the plaintiff that the contract was indeed cancelled. This is
now stated for the sake of completeness, that the Court 10
again must reinforce the recognition of the autonomy of the
Gu arantee itself, and the Guarantee itself does not require
proof of cancellation.
20.
To the Court ’s mind , the defendant’s scope to dispute the
cancellation would be limited to a claim of fraud on the part
of the plaintiff, fraud which is most certainly not pleaded
and at the request of clarification by this Court, the
defendant confirm ed is not claimed. The Court cannot take
the inquiry any further in relation to this. 20
21.
Moving on to the next issue in need of address or in need of
finding, is whether the defendant was released from liability
when the completion certificate was issued or whether this
can result in defendant escaping liability on th is

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Performance Guarantee. Defendant contends that the
Completion Certificate issued to another contractor ,
confirming completion of work performed under a different
contract , releases it from liability. The Court has already
noted that the Completion Certificate pertains to a contract
number T2017 -11, a different contract to that which the
Performance Guarantee in question pertains to. In this
regard, it is somewhat mischievous of the defendant to then
suggest that the one can have a bearing on the other. The
Court simply cannot accept this to be the case. 10
22.
If one was to follow this trail of thought through to its
conclusion, it would mean that any employer constrained to
cancel a contract due to the default of a contractor , and
who then subsequently employs an alternative contractor to
complete the uncompleted work, would be precluded from
claiming on a Performance Guarantee based on the
defaulting contractor. The Court can find no logic in this
train of though t. I t flies in the face of the very purpose of a
Performance Guarantee and what it seeks to achieve. In 20
any situation where a contractor defaults and the slack is
then picked up by another contactor at a later stage, the
employer would then be unable to call up performance or
should I say call up payment on a Performance Guarantee.
The Court cannot accept such notion and finds that the

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Completion Certificate as uploaded to CaseLines has no
bearing on the defendant’s liability under this Guarantee in
question.
23.
In relation to the issue of the Performance Guarantee being
returned to the defendants, the Court finds that there is
sufficient compliance on the part of the plaintiff to satisfy
what is required in order for it to call up payment on the
Guarantee. In this regard the Plaintiff did two things .
Firstly , it tendered return of the Guarantee and secondly, it 10
returned the Guarantee to the defendant’s offices for
inspection or the defendants attorneys for inspection.
While tender of return of the Guarantee may not satisfy the
requirements under paragraph 5, presentation by the
plaintiff of the Guarantee at the offices of the defendant or
defendants attorneys most certainly constituted a return.
The defendant was already placed in possession of a copy
of the document, and it was returned to its offices albeit for
inspection. The Court on considering the papers in the
matter, the heads of argument by the parties, and the 20
arguments presented , finds that such return satisfies what
is required under paragraph 9 of the Guarantee, and what is
required for payment under the Guarantee.

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24.
The next issue , relating to the contract value as mentioned
in paragraph 40 of the defendants’ heads of argument
needs to be addressed by this Court. The Court again
reinforces that the Performance Guarantee operates
independently of the underlying contracts. This Court is not
placed to delve into the underlying contract . I t is 10
constrained to determine defendant ’s liability based on the
Guarantee, independently. Again, argument that the
Guarantee refers to a different contract or work cannot be
sustained. The works referred to in the Guarantee relate to
contract T2015 -03. It is pertinent to note, and the Court
does note , that the letter of award found under the
pleadings section 001 on CaseLines as item 3 , being
Annexure A 1, similarly states the contract number to be
T2015 -03, and lists the same work as follows,
“Construction of a 10 kilometre long 450 by 450 20
millilitre diameter , raw water steel pipeline from
Gay woo d area to Greyto wn Water Works.”

25.
There can be absolutely no confusion or doubt that the
award and the work contracted is the same contract for

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which the Guarantee was issued. The Court simply cannot
be placed to delve into what may or may not have
transpired or agreed to result in the Guarantee sum under
the Guarantee being different to that set out on the award.
26.
The Court can not find support for the defendant’s
contention that there is any uncertainty or ambiguity in this
matter. The Court further cannot find on the basis of any
defences or contentions put forward by the defendant that it
is not liable under this Guarantee. 10
27.
In relation to costs, the Court notes the issue for decision in
this matter , or the issues for decision in this matter are not
new, nor are the y overwhelming complicated with these
types of performance guarantee s having come before the
Court repeatedly. The Cou rt does not go so far as to
suggest that senior counsel was misplaced. The
contentions of the Court are reflected in the award made for
costs.
28. 20
After careful consideration of the heads of argument and
the argument s put forward by both plaintiff and defendant,
after consideration of the case law and after perusal of the
documentation that has been made available to this Court,
the Court makes the following order,