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IN THE NORTH WEST HIGH COURT, MAHIKENG

CASE NO: M560/2016

Reportable: No

Circulate to Judges: No

Circulate to Magistrates: No

Circulate to Regional Magistrates: No

In the matter between:

BAKUBUNG PLATINUM MINE (PTY) LTD                                   1^st Applicant

and

KELETSHEPILE TRADING ENTERPRICE CC                        1^st Respondent

GUARDRISK INSURANCE COMPANY                                           2^nd Respondent

C & G GUARANTEES (PTY) LTD                                                   3^rd Respondent

 

DATE OF HEARING: 27 OCTOBER 2016

DATE OF REASONS FOR JUDGMENT: 15 DECEMBER 2016

COUNSEL FOR APPLICANT: ADV. VAN DER MERWE

COUNSEL FOR THE RESPONDENTS: ADV. SEREMANE

 

REASONS FOR JUDGMENT

 

HENDRICKS J

[1] On the 27^th October 2016, after listening to the submissions by counsel and upon perusal of the notice of motion and other documents filed, I granted an order in the following terms:

“1. THAT:

1.1 The matter is one of urgency in terms of Rule 6 (12) of the Uniform Rules of Court and non- compliance with the Rules is condoned.

1.2 The First Respondent is directed to:

1.2.1 Instruct the Second Respondent in writing before 15H00 on Thursday, 27 October 2016 to issue an original replacement Guardrisk performance guarantee policy no CG/ 15/01207  2; and to

1.2.2 Instruct the Second Respondent to deliver such original replacement Guardrisk performance guarantee policy no CG/15/01207-2 before 16H00 on Thursday, 27 October 2016 to the receptionist at the offices of the Applicant's attorney of record in Johannesburg situated at North Wing, Block B, Rivonia Close, 322 Rivonia Boulevard, Rivonia marked "for urgent attention: Mr. R du Preez" or at such address as may be agreed with the applicant's attorney of record in Johannesburg, Mr. R du Preez of Tiefenthaler Attorneys at cell phone number 082 522 5694.

1.3 In the event of the First Respondent failing to comply with the order in prayers 1.2 above by 15H00 on Thursday, 27 October 2016, the Second Respondent, is directed to make payment to the Applicant in the amount of R5,730,573.20 stated in the Guardrisk performance guarantee policy no CG/15/01207-2 on the basis that upon such payment having been made, the guarantor is absolved from all further obligations arising from the performance guarantee towards any party who may present the original document for payment.

2. THAT: First Respondent is ordered to pay the costs of this application. 

3. THAT: If any reasons are required same must be applied for within ten (10) days from date of this order.”

[2] On 09^th November 2016 a request for reasons for the said order was filed with the Office of the Registrar of this Court, which written request eventually after the passing of some days, find it’s way to my chambers. Had it been brought to my attention earlier, the reasons for the order would have been provided much sooner. Be that as it may however, here follow the reasons for the order I made.

[3] The Applicant (Bakubung) approached this Court on a urgent basis seeking an order to direct the Second Respondent (Guardrisk Insurance) to issue an original replacement policy and to deliver it to the First Respondent’s (Keletshepile) offices, alternatively, and failing which, the Second Respondent (Guardrisk) is directed to make payment to the Applicant in the amount of R5 730 573.20 as stated in the policy. The urgency of the matter was attacked in limine and after listening to counsel’s submissions, in this regard, I ruled this matter to be sufficiently urgent to be dealth with on that basis. The events and history that led to this application is self-explanatory.

[4] The factual background to this matter can be succinctly summarized as follows. On 11 August 2016 C & G Guarantees (PTY) Ltd (Third Respondent) underwriting on behalf of Guardrisk Insurance Company issued a performance guarantee in favour of Bakubung.

The relevant part of the performance guarantee policy reads as follows:

"At the request of the Principal, We C & G Guarantees (Pty) Ltd, authorised to issue construction guarantees on behalf of Gaurdrisk Insurance Company Limited (hereinafter referred to as 'Guarantor') Gaurdrisk Insurance Company Limited as the Guarantor, hereby irrevocably undertake to pay the Employer/Beneficiary any sum or sums not exceeding in total the amount of R5 730 573.20 ('FIVE MILLION SEVEN HUNDRED THIRTY THOUSAND FIVE HUNDRED SEVENTY THREE RAND AND TWENTY CENTS) (herein after referred to as 'the guaranteed amount) upon receipt by us of your demand in writing and your written statement stating the following:

(a) that the Contractor is breach of his Obligation under the contract, and

(b) the respect in Which the Contractor is in breach.

Any demand for payment under this Guarantee shall be made in writing at the Guarantor's address and be signed on behalf of the Beneficiary by a Director duly authorised to do so. The demand and statement must be received by us, at this office on or before 30 October 2016 ('the expiry date’), when this guarantee shall expire and shell be returned to the Guarantor.”

Clause 4.2 of the particular conditions to the general conditions of the main agreement provides as follows:

“The Contractor shall deliver the original of the Performance Security to the Employer within 28 days after the signing date of the Contract Agreement and shall send a copy to the Engineer."

At the bottom of the performance guarantee policy administrative notes are recorded "PLEASE NOTE THE FOLLOWING". Paragraph 2 of the notes provides as follows:

"In the event of a call on this Guarantee, payment will only be made against the return of this original Guarantee by the Employer or, Employers of the authorised agent"

[5] The Applicant contends that these notes are of an administrative nature, which do not form part of the contractual provisions of the performance guarantee. As such the Applicant contends that the Second and / or Third respondent is obliged to make payment on demand against presentation of a copy of the guarantee under circumstances where the original guarantee cannot be traced. In any event the Applicant contends that it is a tacit term of the performance guarantee that a replacement original guarantee will be issued to a beneficiary in the event where the original guarantee cannot be traced.

[6] On 22 August 2016 G & M Financial Services sent to Keletshepile a letter enclosing what on its face seemed to
be the original performance guarantee policy and informing them that the performance guarantee expires on 30 October 2016. On 12 October 2016 Bakubung gave Keletshepile notice of Bakubung's entitlement to claim delay damages in terms of the main agreement and informed Keletshepile that Bakubung calls for a determination by the engineer appointed in terms of the main agreement, being WorleyParsons. On 14 October 2016 the engineer, WorleyParsons, consulted with both Keletshepile and Bakubung. Keletsephile confirmed that they were not disputing the basis of the claim, but only the quantum thereof. The claim for breach of Keletshepile’s contractual obligation to complete the work by the contractual completion date being 31 Augustus 2016.

[7] In WorsleyParson's determination dated 17 October 2016, it was recorded among other things that:

(i) Keletshepile failed to raise any counter argument to Bakubung's claim or to dispute Bakubung's entitlement to delay damages.

(ii) Keletshepile only disputed the quantum of the claim.

The author of the report on behalf of the WorleyParsons confirmed the correctness of the report. On 20 October 2016 the finance manager of Bakubung, wrote to C & G Guarantees requesting payment in terms of the performance policy. In response Bakubung was informed as to the requirements to properly enforce the performance guarantee. They had purportedly not complied with the requirements. For one, they could only present the original of a previous version of the performance guarantee policy. Upon having realized this, it was endeavored to obtain an original copy of the current and enforceable performance guarantee policy in respect of the performance guarantee. A document from Bakubung’s safe, which was perceived to be the original, but which was later realized only to be a copy of the relevant policy, was provided.

[8] G & M Financial Services was contacted and informed of the state of affairs and that attempts were made to find the original. Mr. Maree on behalf of the Applicant confirmed that he had given Mr. Tshepo Marengwa(‘Mr. Marengwa”) of Keleshepile the original. Mr. Marengwa was contacted to ascertain what had happened to the original. He said that he had provided the original to the Melrose Arch offices of WorleyParsons, which are also the engineers on site. WorleyParsons had purportedly delivered the document to Wesizwe’s office in Rivonia. There the document was signed for on 13 October 2016, by a Morne Pelse, the Project Controls Manager at Wesizwe. However, in as far as it could have been able to ascertain, Mr. Pelser had not in fact, received the original; he merely received a copy.  Upon further investigations been carried out tracing the path along which the document has passed, it was only succeeded in tracing a copy of the performance guarantee in Bakubung’s safe. All attempts to find the original was unsuccessful. It seems that Mr. Marangwe of Keleshepile must have been mistaken when he contended that the original was delivered to Bakubung.

[9] On 24 October 2016 Mr. Mothomogolo of Bakubung, in a letter informed C & G Guarantees that after a due and diligent search it had been unable to establish the whereabouts of the original performance guarantee policy.  On 25 October 2016 the Applicant was informed that Guardrisk is under no obligation to issue a replacement performance guarantee policy as they had not received an instruction to replace the guarantee and were accordingly not in a position to provide, procure or issue a further original guarantee. The original guarantee policy is however still nowhere to be found. A fact which is, when seen in the context of extensive efforts to find it, at best passing strange and highly suspect.

[10] On Wednesday the 26th of October 2016 around 09H00 Bakubung made a written demand on both Gaurdrisk and C & G Guarantees for payment of the performance guarantee in accordance with its terms. The only reaction on record for the Second Respondent, is the letter by Frese Moll Attorneys, in which the Second Respondent recorded that it was under no obligation to issue a replacement guarantee. It is against this backdrop that the Applicant approached this Court on an urgent basis for the relief as set out in the Notice of Motion and upon which this Court granted the order as set out in paragraph [1] above.

[11] Much have been made by counsel on behalf of the Respondent about the note [note 2] at the bottom of the performance guarantee policy which states that “in the event of a call on this Guarantee, payment will only be made against the return of the original Guarantee by the Employer or Employers of the authorised agent.” He contended that because the original policy document cannot be provided, there cannot be a call up or payment. This he said, is one of the conditions and it is of a contractual nature. On behalf of the Applicant it as contended that these notes are of an administrative nature which do not form part of the contractual provisions of the performance guarantee. As such the Applicant contends that the Second and/or Third Respondent is obliged to make payment on demand against presentation of a copy of the guarantee under circumstances where the original guarantee cannot be traced.

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 the obligation to make payment in terms of the guarantee.

[12] The first issue raised by the Respondent relates to the circumstances under which the original document had become lost, misfiled or misplaced. It was contended that the Applicant failed to prove that the original document is in fact lost and cannot be traced. Having regard to the facts and circumstances as outlined in the founding affidavit, as well as the endeavors made in order to trace the original, I am satisfied that the Applicant has placed sufficient facts before this Court to prove that the original, document was searched for and could not be found. All the attempts made in order to find the original guarantee was unsuccessful. This cannot be gainsaid.

[13] 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. 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. This is not disputed.

See:  Firstrand Bank v Brera Investment CC 2013 (5) SA 556 (SCA)

Coface South Africa Insurance Co Ltd v East London Own Haven t/a Own Haven Housing Association 2014 (2) SA 382 (SCA)

[14] The question is whether note 2, quoted in paragraph [11] above, is a requirement or a term of the guarantee with which the Applicant must comply before it is entitled to payment. In my view, note 2 is just what it states: it is a note and nothing more. Upon an objective reading there are 3 paragraphs or sentences contained under the heading “Please Note The Following”, which appears at the end of the document, which is what it purports to be- notes – if view objectively.

See:  Natal Joint Municipality Pension Fund v Endumerti Municipality 2012 (4) SA 593 (SCA).

[15] In my view, this note is not a term of the contract. If it was to be a term of the agreement / contract one would have expected it to be incorporated in the body of the guarantee before the signatures. The three (3) notes after the signatures are advices referring to premiums, that payment would be made against the return of the original guarantee and the address of the Respondent. The purpose of note 2 in seeking the return of the original guarantee was a safeguard that the claim on this guarantee could not be duplicated. It is not a term that payment would only be made if the original guarantee is provided.

[16] In terms of the performance guarantee agreement, the insurer will make payment to the Applicant upon receipt of a certificate certifying that the contractor, in the opinion of the Applicant, is in breach of its contractual obligation to the Applicant.

See:  Paragraph 4, supra

The note was added, in my view, to provide security that no other claim would be made on the same document. Paragraph [1.3] of the order of this Court (see paragraph [1] of this judgment, supra) takes care of this in that a declaratory order is made that takes care of any prejudice that the Respondent may suffer if payment is made in terms of a copy of the guarantee. The declaratory reads “… the guarantor is absolved from all further obligations arising from the performance guarantee towards any party who may present the original document for payment.’

See:  GLMB Joint Venture v Constantia Insurance Co Ltd (2012/17774) [2014] ZAGPJHC 440 (17 January 2014)

It is for the aforementioned reasons that I granted an order in the terms as set out in paragraph [1], supra.

 

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R D HENDRICKS

JUDGE OF THE HIGH COURT

NORTH WEST DIVISION, MAHIKENG

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