J U D G M E N T
DELIVERED: This judgment was handed down electronically by circulation to the
parties’ legal representatives by e -mail and publication on CaseLines. The date
and time for hand-down is deemed to be 10h00 on 23 October 2025.
F. BEZUIDENHOUT AJ:
INTRODUCTION
1. The applicant is seeking judgment against the first respondent for the
payment of a combined sum of money totalling R31 ,050,000.00, plus
interest thereon, and costs of suit.
2. According to the joint practice note filed by the parties, the following issues
are common cause between them:-
2.1 The deponent to the founding papers and his authority;
2.2 The citation of the parties;
2.3 The execution, conclusion and terms of the reciprocal deed of
indemnity and suretyship (“the indemnity”);
2.4 The guarantee;
2.5 The second respondent is under business rescue;
2.6 Demand was made on the respondents.
3. In light of the business rescue, the applicant seeks no relief against the
second respondent.
4. The first respondent’s opposition against the money judgment is that it was
not a party to the memorandum of agreement (“MOA”) and did not give any
undertaking that it would indemnify the second respondent’s obligations
under it. The first respondent submits further that it was only obliged to pay
a claim under the counter-indemnity if the claim was within the terms of the
guarantee. Since the claim did not fall within that purview, the applicant was
not obliged to pay. It was also argued that the payments of the applicant
unto the other parties to the MOA, were made in terms of that agreement
and not in terms of a formal demand as contemplated by the guarantee, and
thus the respondents ought not have to indemnify the applicant for such
payments.
5. The applicant contends that there is no merit to the opposition. This is what
the Court is called upon to determine.
SALIENT FACTS
6. On or about 4 December 2015 , at Boksburg, the first and second
respondents (collectively referred to as " the respondents") executed the
indemnity a in favour of the applicant. In terms of this instrument:-
6.1 The respondents undertook to indemnify and hold harmless the
applicant against any and all claims, liabilities, damages,
disbursements, expenses or losses of whatsoever nature, arising out
of or in consequence of the applicant having issued, or subsequently
issuing, any guarantee on behalf of the respondents;
6.2 The respondents bound themselves as co-principal debtors and
sureties in solidum, thereby assuming liability for any such exposure
incurred by the applicant.
7. Pursuant to a formal request made by the second respondent, the applicant,
on or about 8 January 2016, at Sandton, issued the guarantee in favour of
the South African National Roads Agency SOC Limited (" SANRAL"), in the
quantum of R55,549,870.48, to secure the second respondent’s contractual
obligations under a construction contract (“the contract”).
8. After encountering financial difficulties, and on the 15 th of June 2018, the
second respondent placed itself under business rescue and was unable to
complete the contract due to a lack of funds, th ereby triggering the
guarantee’s operative provisions and necessitating remedial action1.
9. As a result, the applicant , SANRAL, Raubex and the second respondent
entered into a memorandum of agreement (“MOA”) in terms whereof the
second respondent ceded and assigned, on an out-and-out basis, all of its
rights title and interest in and to the contract with S ANRAL to Raubex for
1 Clause 3 of the guarantee.
the completion of all outstanding works (“the cession”). Raubex accepted
the cession and SANRAL consented thereto.
10. In accordance with the terms of the cession, and as guarantor, the applicant
would be called upon to make payment of an amount of R26,700,000.00
plus Vat for the additional cost of completion of the outstanding works under
the contract.
11. Pursuant to MOA and in discharge of its obligations as guarantor, the
applicant effected the following payments:-
11.1 A sum of R3,450,000.00 to Raubex on or about 7 November 2019,
in part payment of the applicant’s obligations under the cession;
11.2 A sum of R27,600,000.00 to the nominee of Raubex on 14 April 2020,
in accordance with the applicant’s obligations under the cession.
12. On the 14 th of June 2021, the applicant th rough its attorneys demanded
payment from the respondent under the indemnity.
ARGUMENT ON BEHALF OF THE FIRST RESPONDENT
13. The first respondent argued that the counter-indemnity is security provided
by the applicant to secure the second respondent ’s obligations under the
construction contract with SANRAL which does not include the MOA and
Raubex’s obligations once the construction contract was ceded to Raubex
under the MOA.
14. It submitted further that is was not a party to the MOA and did not provide
any indemnity for any payments made on the second respondent ’s behalf
under the MOA. Accordingly, the claim did not fall within the purview of the
guarantee and accordingly the applicant was not obliged to make payment.
DELIBERATION
15. The indemnity expressly contemplates liability for all and any losses, costs,
or expenses of whatsoever nature incurred by the applicant by reason or in
consequence of issuing a guarantee on behalf the respondents.
16. The first respondent's obligations flow from the indemnity, not from the
MOA. Its non -participation in the MOA is of no consequence as the M OA
served merely as a loss mitigation mechanism designed to preserve value
and reduce the applicant’s exposure under the guarantee. The indemnity’s
operation is not dependent upon the MOA.
17. In any event paragraph 3.1.2 of the MOA provides:-
“Guardrisk has at the instance and request of the Contractor, issued the
Guarantee in favour of the employer, in terms of which Guardrisk
guaranteed the due fulfilment by the contractor of its obligations in terms
of the contract and undertook to pay, on de mand, costs or damages
suffered by the employer as described in the guarantee and the contract.”
18. It is trite that the legal effect of a performance guarantee is that it creates
an obligation to pay upon the happening of an event.2 The Supreme Court
of Appeal explained the workings of a guarantee as follows:3-
“[20] The guarantee by Lombard is not unlike irrevocable letters of
credit issued by banks and used in international trade, the essential
feature of which is the establishment of a contractual obligation on
the part of a bank to pay the beneficiary (seller). This obligation is
wholly independent of the underlying contract of sale and
assures the seller of payment of the purchase price before he
or she parts with the goods being sold. Whatever disputes
may subsequently arise between buyer and seller is of no
moment insofar as the bank's obligation is concerned. The
bank's liability to the seller is to honour the credit. The bank
undertakes to pay provided only that the conditions specified in the
credit are met. The only basis upon which the bank can escape
liability is proof of fraud on the part of the beneficiary. This exception
falls within a narrow compass and applies where the seller, for the
purpose of drawing on the credit, fraudulently presents to the bank
documents that to the seller's knowledge misrepresent the material
facts.” (emphasis added)
2 Lombard Insurance Co Ltd v Landmark Holdings (Pty) Ltd and Others 2010 (2) SA
86 (SCA); par [19].
3 Lombard supra par [20].
19. The effect of the guarantee in t his matter is no different. The payments
made by the applicants in terms of the MOA arose from the issuing of the
guarantee in favour of the second respondent, which liability was
compromised in order to reduce the indebtedness of the respondents.
However, the claim remains based on the indemnity and the guarantee and
not on the compromise agreement (the MOA).4
20. Further, the first respondent's co-principal and in solidum liability renders
it fully accountable for losses, irrespective of how the applicant chose to
manage or structure its exposure. Moreover, c lause 6 of the indemnity
provides an explicit waiver of legal exceptions, including cession of action.
This waiver precludes the first respondent from resisting liability on the
basis that the principal obligation has been ceded.
21. Therefore, the cession to Raubex did not extinguish the second
respondent’s liability under the indemnity. It simply reassigned
performance obligations to a third party , however, the liability for historic
default remain extant.
22. Ultimately, the indemnity expressly contemplates liability for all and any
losses, costs, or expenses of whatsoever natur e incurred by the applicant
by reason or in consequence of issuing a guarantee on behalf of either
respondent. The payments made by the applicant to Raubex were clearly
necessitated by the failure of the second respondent to perform under its
4 Bonifacio and another v Lombard Insurance Company Limited 2024 JDR 2278 (SCA)
para [16] and [24].
contract, an event which would foreseeably give rise to claims under the
guarantee.
23. In my view, that the payments were not triggered by a formal demand is
immaterial. The indemnity is engaged upon the applicant incurring any
liability, contingent or actual, arising from the issuance of the guarantee
and not solely upon receipt of a formal demand.
24. The first respondent also submitted that the application is premature
because the applicant did not com ply with Rule 41A. The applicant filed a
notice in terms of Rule 41A indicating that the dispute between the parties
is incapable of resolution by mediation as the dispute related to issues of
law.
25. A party’s election not to engage in mediation does not impact upon the
validity and correctness of a judgment granted.5
26. In the premises, I fi nd that the grounds of opp osition have no merit and
that the applicant is entitled to payment as claimed.
ORDER
I accordingly grant an order against the first respondent in the following terms: -
1. Payment in the sum of R27,600,000.00;
2. Interest on the sum of R27,600,000.00 at the prescribed legal prime
overdraft rate of ABSA Bank of South Africa Limited, plus two percent (2%)
from 16 April 2020;
5 Sibanda v Firstrand Bank Limited 2022 JDR 3520 (GJ)
Anika.dekock@nortonrosefulbright.com.
On behalf of respondent: Adv M Salukazana
Salukazana@thulamelachambers.co.za.
Instructed by:
Gwina Attorneys Inc
(010) 666 7300
pillaym@gwinattorneys.co.za/
sebatat@gwinattorneys.co.za/
Mashegove@gwinattorneys.co.za/
buthelezit@gwinaattorneys.co.za/
zhandat@gwinaattorneys.co.za