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IN THE SOUTH GAUTENG HIGH COURT, JOHANNESBURG

(REPUBLIC OF SOUTH AFRICA)

Case Number: 2012/17774

DATE: 17 JANUARY 2014

In the matter between:

GLMB JOINT VENTURE.......................................................................................................Applicant

And

CONSTANTIA INSURANCE CO LTD...............................................................................Respondent

JUDGMENT

POTTERILL J.

1 The applicant is applying for the following relief:

1.1 That the respondent be directed to make payment to the applicant in the amount of two million eight hundred and thirty nine thousand and five hundred and thirty one rand (R2 839 531,00);

1.2 That the respondent pay interest on the aforesaid amount at the rate of 15,5 % calculated from the date of demand (25 July 2011) to day of payment;

1.3 That a declarator order be issued declaring that once the respondent has made payment to the applicant in accordance with the terms of prayer 1 and 2 It is absolved from all further obligations arising out of guarantee number 21^-511 issued by the respondent on 12 September 2008;

1. That the respondent be directed to pay the costs of the application.

2 The following common cause facts set out the background to this application:

2.1 The applicant is a joint venture entered into between Aveng (Africa) Limited trading as Grinaker LTA, Moseme Road Construction CC and Boitshoko Road Surfacing and Civil Works CC. All the parties to the joint venture were involved in the field of civil construction and the joint venture agreement was entered into between the parties for purposes of carrying out civil works required by the South African National Roads Agency Ltd.

2.2 The contract awarded to the joint venture included civil works which were required as part of the upgrade of the N1 and N3 highways.

2.3 The joint venture was appointed as the contractor responsible for Package C and the applicant proceeded to contract with a number of subcontractors. One of the subcontractors with whom the applicant contracted was Peter Mellor (Pty) Ltd (hereinafter referred to as “Peter Mellor). Peter Mellor was subcontracted to attend to aspects of the civil work required to be carried out on the bridges and the N1 freeway, which formed part of Work Package C.

2 A In terms of clause 5 of the written sub-contract agreement entered into between the applicant and Peter Mellor, Peter Mellor was required to provide the applicant with a sub-contract guarantee in an amount equal to 5 % of the contract sum. The contract sum agreed upon between the applicant and Peter Mellor amounted to fifty six million seven hundred and ninety thousand six hundred and twenty four rand and thirteen cents (R56 790 624,13). A sub-contract performance guarantee in the amount of two million eight hundred and thirty nine thousand five hundred and thirty one rand (R2 839 531,00) was thus required from Peter Mellor.

2.5 In terms of the sub-contract agreement between Peter Mellor and the applicant the performance guarantee was to be supplied within U+ days after the subcontract had been awarded. This conforms with standard practice in the industry not to issue any payment certificates to a sub-contractor until the sub-contractor’s performance guarantee was put in place.

2.6 On 12 September 2008 the respondent executed a performance guarantee under guarantee number 214511, The guarantee was in favour of the applicant Joint venture and provided as follows:

2.6.1 the respondent undertook to make payment to the applicant in an amount of R2 839 531,00 on its written demand and without delay;

2.6.2 payment would be made without proof any breach of contract by Peter Mellor;

2.6.3 a certificate signed by the Chief Executive of the applicant joint venture, certifying that the sub-contractor (Peter Mellor) is in breach of"its contractual obligations would be sufficient proof of a breach;

2 J On this written guaranteeafter the signatures of the authorised offlciafs there is a heading note of which number 3 is relevant to the dispute which reads as follows:

"Payment will only be made against return of this original guarantee by the Employer or the Employer's duty authorised agent. ”

2.8 Peter Mellor was cash-strapped and was carried by the applicant financially. It also became apparent that Peter Mellor had under quoted for the work it was carrying out. The result of all this was that on the V* of June 2009 Peter Mellor was placed in voluntary liquidation.

2.9 Pursuant to the liquidation of Peter Mellor the applicant appointed two new sub-contractors to attend to and complete the work previously attended to by Peter Mellor as well as the applicant itself attending to certain of the works.

2.10 in execution of the portions of the work for which Peter Mellor had sub-contracted the applicant realised that portions of the work had to be redone, the rates of the new sub-contractors were higher than the rates previously quoted by Peter Meflor, materials which had been certified and for which Peter Mellor had received payment as materials on site were no longer on the site. The applicant was also required to take over certain of the staff members previously employed by Peter Mel lor. All of the aforementioned resulted in the applicant incurring additional expenses which it would not have Incurred had Peter Mellor remained on site and had it completed the civil works at the rate agreed upon. Accordingly the claim which the applicant has against Peter Mellor by far exceeded the amount of the guarantee.

2.11 On 25 July 2011 the Chief Executive of the applicant joint venture certified that Peter Mellor is in breach of its contractual obligations and that the contract with Peter Mellor had terminated. In a letter addressed to the respondent by the Chief Executive Officer of the applicant the applicant furthermore demanded that the payment be made to it in terms of the performance guarantee.

2.12 The respondent’s attorneys responded to the demand for payment by referring to the provisions of note 3 on page 3 of the guarantee insisting that payment would only be made by the respondent against return of the original copy of the guarantee-

2.13 The applicant contended that despite search they , are unable to provide the original guarantee and can only provide a copy. In terms of clause 4.3 of the performance guarantee the applicant is not entitled to cede, assign or otherwise deal with the guarantee in any manner whatsoever which may have the effect of transferring or encumbering or alienating any of the rights afforded to the applicant in terms of the said guarantee. The applicant thus averred that payment should be made on the copy of the guarantee.

3.The issue for this court to decide is thus whether the applicant’s inability to present the original copy of a performance guarantee when demanding payment in terms of the guarantee releases the respondent from its obligation to make payment in terms of the guarantee.

U The first issue raised by the respondent was that the deponent to the application did not produce full particularity of the Circumstances under which Ihe original document had become lost, misfiled or misplaced. No primary facts pertaining to where the original agreement was, was disclosed to the court, only conclusions on secondary facts were placed before the court. Absence the facts of what the applicant did to locate the original guarantee the applicant failed to prove the loss of the document. This is amplified when cognisance is taken of the same deponent's evidence given at the insolvency enquiry held into Ihe affairs of Peter Mellor held on the 28m of October 2013. Mr.Roose there conceded that Peter Mellor was the sub-contractor and that Ihe contractor being the applicant was the employer. From this it was concluded that note 3 to the contract is correct that the applicant as the employer can only receive payment against tfie return of the original guarantee. Mr.Roose also conceded that It was a physical possibility that the original guarantee was returned to the insolvent company.

5. I am satisfied that the applicant has placed sufficient facts before the court that the original document was searched for and could not be found. In the insolvency enquiry Mr.Roose confirmed that they atom(ed) the house upside down to try and find the original document and they cannot provide an explanation as to what happened to the original guarantee. The original guarantee should have been archived. He was adamant that the original guarantee could not have been returned to Peter Mellor or the liquidators as the liquidators did not exist when the performance guarantee was obtained. He did however concede that because he did not know where the original was H was physically possible that It could have gone to Peter Mellor but that it would not have happened” In the replying affidavit he again reiterates that all attempts to find the original guarantee was unsuccessful.

6 One can hardly imagine that the applicant would not seriously attempt to find the original to avoid the situation it is in now. I am satisfied that they did in fact turn the house upside down and that they cannot find the document and cannot give a precise explanation as to what happened to the document but that it is either misplaced or lost.

7 The second issue is whether it is a term of the performance guarantee that the original guarantee be returned before payment can be made. The respondent argued that there existed a reciprocal obligation on the applicant to deliver the

original guarantee against payment and with no original copy the obligation to pay in terms of the guarantee is extinguished.

8 It is common cause that the performance guarantee created a contractual obligation on the respondent to honour payment upon the applicant complying with the requirements of the guarantee;- Firstrand Bank vBrera Investments CC 2013 (5) SA 556 (SCA). The question thus is whether note 3 is a requirement or a term of the guarantee with which the applicant must comply before it is entitled to payment.

I cannot find that note 3 is a term of the agreement. Upon an objective reading of the words actually used note 3 is just that; a note —Natal Joint Municipal Pension Fund v Endumerti Municipality 2012 (4) SA 593 (SCA) paragraph 18 at 603H- 604D. If it was to be a term of the agreement one would expect it to be incorporated in the body of the guarantee before the signatures. The notes after the signatures are advices referring to premiums, the address of the respondent and that payment would be made against the return of the original guarantee. The purpose of note 3 in seeking the return of the original guarantee was to safeguard that the claim on this guarantee could not be duplicated. It was not a term that payment would only be made if the original guarantee is provided. In terms of the guarantee the insurer will make payment to the applicant upon receipt of a certificate signed by the Chief Executive certifying that the sub “contractor in the opinion of the applicant at the date of issue of such certificate is in breach of its contractual obligations to the applicant. The note was added to provide security that no other claim can rear its ugly head. The declaratory order sought by the applicant in prayer 3 takes care of any prejudice that the respondent may suffer if payment is made in terms of a copy of the guarantee. I am satisfied that the respondent has no defence to this claim and that the applicant has complied with its contractual duties and that the respondent must make payment as claimed.

9 I accordingly make the following order:

9.1 The respondent is directed to make payment to the applicant in the amount of R2 839 531,00 (two million eight hundred thirty nine thousand five hundred and thirty one rand);

9.2 That the respondent pay interest on the aforesaid amount at the rate of 15,5 % from 25 July 2011 to date of payment;

9.3 Pursuant to payment by the respondent to the applicant of the amount set out in prayers 1 and 2 the respondent is absolved from all further obligations arising out of guarantee number 21 **511 issued on the 12 of September 2008;

9 A The respondent is ordered to pay the costs of the application.

S. POTTERILL

JUDGE OF THE HIGH COURT

CASE NO: 2012/17774

HEARD ON: 26 November 2013

FOR THE APPLICANT: ADV. R. STOCKWELL SC

INSTRUCTED BY: Bieldermanslnc

FOR THE RESPONDENT: ADV. A.O. COOK SC

ADV. A.W. PULLINGER

INSTRUCTED BY: Ryan D Lewis

DATE OF JUDGMENT: 17 January 2014

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