MAHOMED J
THE BACKGROUND
[1] The first and third respondents in this matter abide by the court’s decision.
[2] The parties before me are responsible for the management and operation of
the Gautrain, a rapid rail service, which services Johannesburg and surrounds
including the international airport. They concluded a contract in terms of which
the 2 nd respondent, known as the concessionaire, may issue a notice of
operator default on the applicant/ operator in the event of a clearly identified
default and to allow the operator 30 days to address the default. The applicant
is the operator; it is the sole operator for this critical service. A precondition to
this relationship is that the applicant is to secure a performance guarantee.
[3] The first respondent, (Nedbank) issued such guarantee in favour of the second
respondent, the concessionaire in the amount of R205 934 250.39, to secure
certain of the applicant’s performance related obligations in terms of the
operating contract. Nedbank would be obliged to pay over those monies to the
concessionaire if the concessionaire is able to demonstrate that it q ualifies for
its entitlement. There are two contracts that are in focus in the matter, the
operator performance contract and the bond guarantee contract.
[4] A default notice was served on 19 November 2025 after the second respondent
placed the applicant on terms to rectify the default, the applicant failed to do so
in the time permitted, therefore the second respondent called up payment of
the guarantee . The second respondent has been awaiting a handing over
report, as the operator contract will end in March 2026 and the contract will
again be put out to tender.
[5] Stanlianou SC appeared for the applicant and submitted the applicant seeks to
interdict Nedbank from paying out the monies on three grounds, viz it claims
the bond is not a standard bond but a conditional bond, furthermore, the
preconditions to payment had not been met and therefore Nedbank is not
obliged to pay the monies over and finally, that the second respondent acts
fraudulently in that on the facts, it could not have believed that all of the
conditions for payment had been met, notwithstanding it called up the bond.
Counsel contended that on a reading of the clauses in the operating bond it is
clear the bond is not a standard bond such as a letter of credit, he contended it
is a conditional bond which requires Nedbank to make reasonable inquiries to
determine if the second respondent/ concessionaire is entitled to payment.
[6] He relied on s 4.2.1 and 4.2.2 of the bond, he submitted Nedbank failed to do
so and must be interdicted from paying out the monies to the second
respondent. Counsel submitted that the default has been addressed, the report
which the second respondent /concessionaire required is due only on 6 January
2026, having regard to the date of the notice, the report has been delivered to
the 2nd respondent. The second respondent has downloaded the information.
[7] Cassim SC for the second respondent/concessionaire, submitted that the bond
is unconditional , and referred the court to clause 4 of the bond document ,
Clause 4 provides:
“ 4. PAYMENT
4.1 The guarantor irrevocably and unconditi onally agrees, subject to the terms of
this performance bond; ….
4.1.1 .
4.1.2 …
4.1.3 …
to forthwith make payment of the amount specified in any demand to the
account specified in clause 4.6 within 5 (five) business days of the date of
receipt of any demand.
4.2 Notwithstanding anything to the contrary contained in this performance bond,
the concessionaire and the Operator agree that the Guarantor, in evaluating or
making any payment pursuant to any demand made under this performance
bond, shall.
4.2.1 not be entitled or obliged to make any enquiry in relation to, inter alia:-
…
4.2.2 be obliged to make reasonable enquiry only in relation to whether or not the
demand is made in terms of the performance bond.”
[8] Counsel contended that his client has a clear right , it is entitled to payment on
demand, and Nedbank is obliged to pay over the guaranteed amount of
R205 934 250.30. It was submitted that clause 4 of the bond is clear in its
language and the wording expressly “disables” Nedbank fr om making any
inquires other than those set out in clause 2.2 of the bond. There is no duty on
Nedbank to inquire further once it has noted a dispute notice, a certification
from AFSA of non-referral, and that the time permitted to resolve the dispute
has expired, the dispute remains unresolved, therefore the second respondent
is entitled to demand payment.
[9] Mr Cassim referred th e court to the judgment in the Group Five case, where
Van der Linde J, stated that “the underlying dispute is required to be resolved
in the manner provided for in the contract between the parties . The court
furthermore stated that th e determination of the dispute in the underlying
contract may lead to a result that is wholly different from that of the
unconditional bond,” however the bond is open to be called up, it is independent
of the underlying contract. Mr Cassim argued that the applicant conflates the
operations contract with the performance guarantee.
[10] It was submitted that the applicant on its version was unable to provide the
information sought, he contended that on the facts in this matter the 5 days
allowed to remedy the default was reasonable, his client has requested the
information since September 2025, the applicant has known of the default and
done nothing to remedy the default. The applicant’s allegations of fraud were
rejected, and it was contended that only the clearest of cases must exist for the
applicant to succeed with this allegation. The second respondent relied on the
decision in the Eskom matter, where the court stated that the call demand is
independent of the underlying contract . Mr Cassim proferred that his client
would not have been wise to accept a guarantee for a relationship of this nature
with the applicant, linked to the operator’s performance contract.
[11] Counsel for the applicant argues that this is a conditional bond and it
incorporates the underlying contract. He referred the court to clause 4.2.2 of
the performance guarantee and submitted that the provision in the clause
requires Nedbank to make inquiries as to whether the preconditions to
payment had been met. In comparison to the language in clause 2.2 of the
same document, which requires Nedbank to conduct a tick box exercise. In
terms of clause 4 .2.2 Nedbank was to “evaluate and make reasonable
enquiry” before payment is made.
[12] Clause 4.2.2 provides:
“ be obliged to make reasonable enquiry only in relation to whether or not the
demand is made in terms of the performance bond.”
The judgments of our courts have confirmed the approach is to consider the
nature of the contract. It was contended that t his duty to enquire establishes
that the bond is a conditional one.
[13] Stanlianou SC argued that one must also have regard to what Nedbank must
do as provided for in clause 2.2 .2 of the performance bond guarantee, inter
alia, that the operator has been provided with the notice of d efault, for a
remedy of the default, that it has been remedied within the prescribed remedy
period in the operating contract. Stanlianou argued if not much more was
expected of Nedbank, clause 4.2 would be meaningless. He submitted that
on a proper interpretation of the terms Nedbank is required to satisfy itself that
the concessionaire has met the basic preconditions and is entitled to payment
on the guarantee. Counsel contended that the period for remedy is 30 days
as provided for in the operator contract and it was not disputed it expires only
on 6 January 2025 . Counsel proffered that the applicant has delivered the
report and therefore purged the default , the concessionaire has downloaded
the information.
[14] Mr Cassim reiterate that the bond guarantee makes no reference to the 30
days to resolve the dispute or the 20 days to file a remediation plan. He
submitted that the 5 days permitted to resolve the dispute was reasonable if
one had regard for the request for the information having been sought as far
back as October 2025.
[15] He argued that the applicant on its own version in correspondence dated 17
December 2025 stated that the dispute remains unresolved. Mr Cassim
rejected the applicants claim that the second respondent knew it had not met
the certifications to call the bond yet called on Nedbank for payment. He
submitted the allegations of fraud lack a basis and stand to be rejected.
URGENCY
[16] Cassim SC argued that the urgency is self-created that the applicant knew on
19 November 2025 of the default, it could have brought this application much
earlier. He further argued that the applicant’s case is that it had 30 days as per
contract, however the respondent affords him 5 days (arbitrarily), the applicant
could on that very basis have approached this court much earlier, he
contended the matter is not urge nt. Counsel furthermore argued that the
applicants have an alternate remedy and can obtain substantial redress at a
hearing in due course, approaching the urgent court is an abuse of process.
The operator performance contract provides for related disputes to be taken
to arbitration.
[17] Stanlianu contended his client provided the documents ahead of due date and
it would have been premature for it to have launched a urgent application any
earlier, moreover nothing was said on an i ntention to call on the bond . The
urgency arose as Nedbank was obliged to pay within 5 days and has no
grounds to do so. He submitted the matter is urgent and the applicant has
made out a case for interim relief. This interdict is pending the outcome at
arbitration.
[18] Addressing the merits, Cassim SC referred the court to the judgment by Van
der Linde J 1, who stated that a demand guarantee is “serving as unclouded
immediate cash despite an underlying contract.” He argued the bond is
separate from the operating contract. Nothing in the bond document obliges
Nedbank to make any inquiries, as claimed by the applicant, clause 2 of the
bond provides for an unconditional payment by Nedbank and this was signed
by both Nedbank and the applicant in favour of the second respondent.
Nedbank is only obliged to satisfy itself that clause 2 has been met. He argued
that the second respondent has a clear right to the money and the applicant
failed to remedy the default in the time permitted. Counsel submitted that our
courts have consistently held that the second respondent has only to
demonstrate it demanded payment. It was submitted that the applicant’s
failure to refer its dispute to AFSA within the time permitted was unfortunate
when it has known of its dispute since September 2025.
Judgment
[19] It was submitted that the applicant conveniently conflates the provisions of the
bond with that of the operator performance contract. In Lombard Insurance
Co Ltd, v Landmark Holdings (Pty) Ltd and Others2, the court in a construction
dispute stated: “construction guarantee is self-contained and distinct. It is not
to be interpreted in conjunction with the construction contract.”
[20] I agree with Mr Cassim, and the guarantee is the concessionaire’s security,
the language employed in clause 4.1 is clear on an unconditional obligation to
pay. I am of the view the bond guarantee is independent of the underlying
1 Group 5 2008/41068
2 2010 (2) SA 86 SCA
contract, that the second respondent has only to demonstrate that it has made
a demand to be entitled to immediate payment. The applicant was dilatory and
“missed the boat” when it failed to refer the dispute to AFSA , upon receipt of
the default notice. The opportunity of a referral is another “safety feature”
inserted to assist the operator in the face of an unconditional guarantee, where
immediate payment is guaranteed. I agree with Cassim SC his client could
not have intended to accept a guarantee which is linked to a complex operator
performance contract. The five days permitted for remedy, viewed
contextually was reasonable, the applicant has known that the information was
sought over months, it knew the purpose and significance of the requested
information and knew that the contracts are to expire within a few months.
[21] The applicant’s argument/ reasoning and linking of the two contracts, appears
to denude a “guarantee” of its very essence and value in commercial
contracts. In Loomcraft Fabrics CC v Nedbank Limited and Another 3, was
stated “ an interdict restraining a bank from paying in terms of a credit will
accordingly not be granted at th e instance of a buyer save in the most
exceptional circumstances .” It is noteworthy that the applicant is a “sole
operator” and the precondition of a guarantee to secure the concessionaire’s
interest is logical, for as long as the guarantee is given its full force and effect
in commercial transactions.
[22] Therefore, I am of the view the application must fail.
COSTS
3 1998 (1) SA 812 (a) headnote
Appearances:
For Applicant: Stanlianou SC Instructed by
Pincent Masons SA Inc
Email: Jason.smit@pinsentmasons.com
Angela.lawrence@pincentmasons.com
Thethe.mokele@pincentmasons.com
For Second Respondent: Cassim SC, with him
Advocate M Desai Instructed by LNP Beyond
Legal
Email: nikita.lalla@lnpbeyondlegal.com
Ricardo.pillay@lnpbeyondlegal.com
Danielle.giannico@lnpbeyondlegal.com
Msizi.zungu@lnpbeyondlegal.com