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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 24 August 2026.
BEZUIDENHOUT AJ:
Introduction
[1] On 23 October 2025 I handed down judgment in the main application, in
which the applicant, Guardrisk Insurance Company Limited (“Guardrisk”),
sought payment from the first respondent, Basil Read Holdings Limited (“BR
Holdings”), in its capacity as indemnif ier and as surety and co -principal
debtor in terms of a reciprocal indemnity and suretyship (“the indemnity”)
executed at Boksburg on 4 December 2015.1 I granted an order against the
first respondent for payment of the sum of R27,600,000.00 together with
interest thereon from 16 April 2020, payment of the sum of R3,450,000.00
together with interest thereon from 8 November 2019, and costs of the
application on the attorney and client scale, including the costs of counsel
where so employed, on Scale B.
[2] The first respondent now applies for leave to appeal against the whole of
that judgment and order. Leave is sought to the Supreme Court of Appeal,
alternatively to the Full Court of this Division. The application is opposed.
[3] For ease of reference I retain in this judgment the designations employed
in the main judgment. Guardrisk is accordingly referred to as the applicant,
1 Annexure “FA2”, 02-15 to 02-24. The instrument is headed “Reciprocal Indemnity
and Suretyship”. It is described in the founding affidavit as a “Reciprocal Deed of
Indemnity and Suretyship” and in the answering affidavit as “the Counter -
Indemnity”.
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BR Holdings as the first respondent, and Basil Read Limited (in business
rescue) as the second respondent. No relief was sought against the second
respondent in the main application and it takes no part in these
proceedings.
[4] Heads of argument, a practice note, a chronology and a list of authorities
were delivered on behalf of the applicant, being the respondent in the
application for leave to appeal. No heads of argument were delivered on
behalf of the first respondent. I have considered the grounds of appeal as
they are formulated in the notice dated 14 November 2025, together with
the argument advanced at the hearing, and I deal with each of those
grounds below.
The test to be applied
[5] Section 17(1)(a) of the Superior Courts Act 10 of 2013 provides that leave
to appeal may only be given where the judge concerned is of the opinion
that the appeal would have a reasonable prospect of success, or that there
is some other compelling reason why the appeal should be heard, including
conflicting judgments on the matter under consideration.
[6] The use of the word "would" has been held to have raised the threshold for
the granting of leave above that which obtained under the repealed
Supreme Court Act 59 of 1959. That much was said in Mont Chevaux Trust
(IT 2012/28) v Tina Goosen and others 2 at para 6, and the sentiment has
been echoed by the Supreme Court of Appeal in S v Notshokovu3 at para 2.
2 2014 JDR 2325 (LCC)
3 2016 JDR 1647 (SCA)
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[7] In Member of the Executive Council for Health, Eastern Cape v Mkhitha and
another4 at paras 16 to 17 the court put the matter as follows:
"Once again it is necessary to say that leave to appeal,
especially to this Court, must not be granted unless there truly
is a reasonable prospect of success. Section 17(1)(a) of the
Superior Courts Act 10 of 2013 makes it clear that leave to
appeal may only be given where the judge concerned is of the
opinion that the appeal would have a reasonable prospect of
success; or there is some other compelling reason why it should
be heard. An applicant for leave to appeal must convince the
court on proper grounds that there is a reasonable prospect or
realistic chance of success on appeal. A mere possibility of
success, an arguable case or one that is not hopeless, is not
enough. There must be a sound, rational basis to conclude that
there is a reasonable prospect of success on appeal. "
[8] In Ramakatsa and others v African National Congress and another [2021]
ZASCA 31 at para 10 Dlodlo JA explained that the test of reasonable
prospects of success postulates a dispassionate decision, based on the facts
and the law, that a court of appeal could reasonably arrive at a conclusion
different to that of the trial court. The prospects must not be remote; there
must exist a reasonable chance of succeeding, and a sound, rational basis
for the conclusion that such prospects exist must be shown.
[9] As to the second leg, a compelling reason contemplated by section
17(1)(a)(ii) will ordinarily be present where the appeal raises a substantial
question of law, or a discrete legal issue of public importance that will affect
matters in the future, or where there are conflicting judgments on the
4 2016 JDR 2214 (SCA)
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question under consideration: Caratco (Pty) Ltd v Independent Advisory
(Pty) Ltd5.
The grounds of appeal
[10] The grounds upon which leave is sought are, in summary, the following:
10.1 that I erred in failing to find that the payments made by the applicant
pursuant to the memorandum of agreement concluded between the
South African National Roads Agency SOC Limited (" SANRAL"),
Raubex Construction (Pty) Ltd (" Raubex"), the applicant and the
second respondent ("the MOA") did not fall within the ambit of the
performance guarantee issued to secure the second respondent's
obligations under the construction contract for the N1 -29 Musina
Ring-Road project, and that on that premise the indemnity was not
triggered;
10.2 that I erred in failing to find that the first respondent was not a party
to the MOA and undertook no obligation to indemnify the second
respondent in respect of any liability arising under that agreement;
10.3 that I erred in failing to find that the indemnity could be invoked only
if the applicant had been called upon to perform under the
performance guarantee itself, which it was not, the applicant having
elected to make payment under the MOA; and
10.4 that I erred in failing to find that the first respondent's obligation to
indemnify the applicant could arise only in respect of a claim falling
5 2020 (5) SA 35 (SCA) at para 2
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within the terms of the performance guarantee, and that because the
payments made did not fall within that purview the applicant had no
entitlement to recover under the indemnity.
[11] Those grounds are, in substance, indistinguishable from the defences raised
in the answering affidavit and argued before me in the main application.
They are summarised at paragraph 4 of the main judgment and were dealt
with at paragraphs 15 to 22 thereof. No new issue of fact or of law is raised,
and no misdirection is identified beyond the assertion that I ought to have
decided the same points differently.
[12] That a party disagrees with the outcome, and repeats the argument which
produced it, does not of itself disclose reasonable prospects of success. The
question is not whether the argument was arguable, but whether another
court, applying the same law to the same facts, would reasonably come to
a different conclusion. I am not persuaded that it would, for the reasons
that follow.
The scope of the indemnity
[13] The first, third and fourth grounds all rest on a single premise, namely that
the first respondent’s liability under the indemnity is engaged only by a
payment made pursuant to a demand under the performance guarantee.
That premise is not supported by the language of the instrument which the
first respondent signed and the terms of which it admits.6
6 Answering affidavit, para 46, 02-84: “I admit that the applicant and the respondents
concluded the Counter -Indemnity. The terms of the Counter -Indemnity are in
annexure ‘FA2’ to the founding affidavit. I admit the terms as set out in annexure
‘FA2’.”
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[14] Clause 1 of the indemnity binds each principal which signs it, the first
respondent among them, to keep the applicant indemnified and to hold it
harmless from and against:7
“all and any claims, losses, payments, liabilities, costs or
expenses of whatsoever nature which the Insurer may sustain
or incur by reason or in consequence of having executed or
hereafter executing any Guarantees as aforesaid on behalf of a
Principal.”
[15] Clause 3.1 imposes a further indemnity, jointly and severally, in the same
causal terms. The signatories thereby indemnify the applicant and hold it
harmless from and against:8
“all and any claims, losses, demands, liabilities, costs and
expenses of whatsoever nature, including legal costs as between
attorney and client, which the Insurer may at any time sustain
or incur by reason or in consequence of having furnished and/or
provided a Guarantee on behalf of a Debtor together with
interest thereon at the prime overdraft rate of Absa Bank
Limited, plus 2%, from the time of payment by the Insurer to
date of repayment by the Principal(s) and Surety(ies) to the
Insurer.”
[16] It is clause 3.1 which founds both the rate at which, and the date from
which, interest was awarded in the main application, and the award of costs
as between attorney and client. Clause 3.2 goes further. The signatories
undertake to pay the applicant on demand any sum which it “may be called
upon to pay under any Guarantee whether or not the Insurer shall, at such
7 Clause 1 of annexure “FA2”, 02-15.
8 Clause 3.1 of annexure “FA2”, 02-16.
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date, have made such payment, and whether or not the Debtor … admits
the validity of such claim against the Insurer under such Guarantee” .9
Liability under the indemnity is thus not made to depend upon the
mechanics by which the applicant’s exposure is discharged, nor upon the
debtor’s acceptance that the claim against the applicant is good.
[17] The operative words in each of these clauses are words of causation, not of
mechanism. What must be established is that the loss was sustained or
incurred “by reason or in consequence of” the execution of the guarantee.
Neither clause says, and neither can be read to say, that the loss must have
been incurred pursuant to a written demand under the guarantee. Had the
parties intended so material a limitation upon an indemnity cast in the
widest terms, they would have said so.
[18] On the common cause facts, the causal link is plain. Guarantee no
CG/16/01736 was issued at Sandton on 8 January 2016, at the instance
and request of the second respondent, in the sum of R55,549,870.48
including value added tax, for the due fulfilment of the second respondent’s
obligations to SANRAL under contract NRA N.001 -290-2005/1 for the
construction of the Musina Ring-Road.10 The second respondent was placed
under business rescue on or about 15 June 2018 and was unable to
complete the outstanding work. That default triggered the applicant’s
exposure under the guarantee and rendered a demand inevitable. The MOA
was concluded, a nd the payments were made, precisely because that
9 Clause 3.2 of annexure “FA2”, 02-16.
10 Annexure “FA3”, 02-25 to 02-26.
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exposure had arisen. But for the guarantee, no payment would have been
made at all.
[19] Clause 3.1.2 of the MOA records the position expressly, in terms that admit
of no other construction:11
“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 demand, costs or damages suffered by the Employer as
described in the Guarantee and the Contract;”
[20] The complaint that the first respondent was not a party to the MOA is
answered by the indemnity itself. Clause 5 provides that the applicant shall
be entitled, without reference to a signatory and without in any way
affecting the liability of a signatory, “to consent to any arrangements
between the Creditors and the Debtor and to make any arrangements or
compound with the Creditors or the Debtor or to release the Debtor from
any liability to it” .12 The arrangement of which the first respondent
complains is precisely such an arrangement: one between the creditor,
SANRAL, and the debtor, the second respondent, to which the applicant
consented and in which it participated in order to limit its exposure . The
first respondent agreed in terms that its liability would be unaffected by any
such arrangement, and it therefore contracted for the very eventuality of
which it now complains. Its non -participation in the MOA is of no
consequence, because its obligations flow from the indemnity and not from
11 Annexure “FA4”, clause 3.1.2, 02-32.
12 Clause 5 of annexure “FA2”, 02-16 to 02-17.
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the MOA. The MOA served as a loss -mitigation mechanism designed to
preserve value and to reduce the applicant’s exposure under the guarantee,
and the operation of the indemnity was never dependent upon it.
[21] Clause 9 puts the matter beyond argument. The applicant is entitled to
waive or abandon any right of contribution, to release or absolve any real
or personal security, to grant extensions of time or any other indulgence,
and to “enter into compromises and/or to accept settlements”, and to do all
of this “without affecting the obligations of the Signatories hereunder”. The
clause continues that, despite any such waiver or abandonment, the
applicant remains entitled to require the signatories to repay or to pay to it
“any amount which the Insurer may be called upon to pay or any loss it
may suffer or incur as aforesaid” .13 An indemnity in those terms cannot
sensibly be read as forfeiting the indemnified party’s recourse at the
moment it compromises a claim instead of paying it in full.
[22] Far from having been prejudiced by the compromise, the first respondent
was the principal beneficiary of it. A guarantee exposure of R55,549,870.48
was discharged for R31,050,000.00. The first respondent's argument, if
accepted, would mean that a guaranto r who acts prudently to reduce the
loss forfeits its recourse, while one who awaits a formal demand and pays
the full amount retains it. Commercial sense does not admit of such a result.
The authorities
[23] The proposition contended for by the first respondent has, moreover,
already been considered and rejected by the Supreme Court of Appeal in
13 Clause 9 of annexure “FA2”, 02-17 to 02-18.
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Bonifacio and another v Lombard Insurance Company Limited14, upon which
I relied in the main judgment. That court held, at paras 17, 19 and 24, that
the guarantor's claim throughout remained based on the indemnity contract
and not on the settlement agreement, and that the only impact of the
settlement agreement was that the amount to be paid was reduced. I am
bound by that decision. Nothing in the notice of application for leave to
appeal seeks to distinguish it, and I am unable to discern any basis upon
which it could be distinguished.
[24] The same conclusion follows from Lombard Insurance Co Ltd v Landmark
Holdings (Pty) Ltd and others15, in which it was held that the legal effect of
a performance guarantee is to create an obligation to pay upon the
happening of an event, independently of the underlying contract. The effect
of the guarantee in this matter is no different.
[25] As to the cession of the second respondent’s obligations to Raubex, in clause
6 the signatories renounced “the legal exceptions or benefits of excussion,
division, cession of action, non causa debiti and no value received” ,
declaring themselves fully acquainted with the meaning and effect of those
exceptions.16 In clause 2 the first respondent bound itself as surety for and
co-principal debtor jointly and severally in solidum with the second
respondent for the due payment on demand of all amounts owing to the
applicant under the indemnity. 17 It is accordingly fully accountable for the
14 2024 JDR 2278 (SCA)
15 2010 (2) SA 86 (SCA)
16 Clause 6 of annexure “FA2”, 02-17.
17 Clause 2 of annexure “FA2”, 02-16.
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losses sustained, irrespective of how the applicant chose to manage or
structure its exposure. Clause 7 records, further, that the obligations and
liability of the signatories continue as a continuing covering security until
the debtor is entirely and fina lly released and discharged from all its
obligations, contingent or otherwise, to the applicant.18 The cession did not
extinguish liability for the second respondent’s historic default; it reassigned
the performance of future obligations to a third party, and the liability which
had already accrued remained extant.
Some other compelling reason
[26] The first respondent asserts, without elaboration, that there is some other
compelling reason why the appeal should be heard. None is identified. No
conflicting judgments were placed before me, and the position in this
Division and in the Supreme Court of Appeal is settled. The dispute turns
upon the construction of particular contractual instruments concluded
between these parties, applying established principles of interpretation, and
raises no discrete question of law of importance to others. The magnitu de
of the amount involved, standing alone, is not a compelling reason within
the meaning of section 17(1)(a)(ii).
Costs
[27] There is no reason why costs should not follow the result. Having regard to
the complexity of the matter and the amounts at stake, and to the basis
upon which costs were awarded in the main application, an award of costs
18 Clause 7 of annexure “FA2”, 02-17.
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including the costs of counsel where so employed, on Scale B, is
appropriate.
Conclusion
[28] Taking a dispassionate view of the facts and the law, I am not persuaded
that another court would reasonably come to a conclusion different to the
one at which I arrived. The prospects of success are not merely remote; on
the terms of the indemnity and on binding authority, they are absent. Nor
is there any other compelling reason why the appeal should be heard. The
application must accordingly fail.
ORDER
[29] In the result, I make the following order:
1. The application for leave to appeal is dismissed.
2. The first respondent is ordered to pay the costs of the application for
leave to appeal, including the costs of counsel where so employed,
on Scale B.
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