Construction performance guarantee Contract Commercial Law

The Law Publisher CC CK92/26137/23

Part 8 (2016)

Commercial Law Reports

Consulting Editorial Board:The Honourable RH Zulman BCom LLB LLM, Former Judge of theSupreme Court of Appeal, The Honourable FR Malan BA LLD,Judge of the Supreme Court of Appeal, The Honourable P LevinsohnBA LLB, Former Deputy Judge President of the Kwazulu NatalProvincial Division, The Honourable S Selikowitz BA LLB, FormerJudge of the High CourtEditor:M Stranex BA LLB, Advocate of the High Court of South Africa

CONTENTSGEES v THE PROVINCIAL MINISTER OF CULTURAL AFFAIRS ANDSPORT, WESTERN CAPE (SCA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 471An appeal tribunal established under the National Heritage Resources Act (no25 of 1999) has a wide discretionMUTUAL & FEDERAL INSURANCE COMPANY v KNSCONSTRUCTION (PTY) LIMITED (SCA) . . . . . . . . . . . . . . . . . . . . . 484A performance guarantee considered in essence a suretyship agreementTAMRYN MANOR (PTY) LTD v STAND 1192 JOHANNESBURG (PTY)LTD (SCA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 493An agreement for the sale of land which records all the essential elements ofthe sale complies with section 2(1) of the Alienation of Land ActTRINITY ASSET MANAGEMENT (PTY) LTD v GRINDSTONEINVESTMENTS 132 (PTY) LTD (SCA) . . . . . . . . . . . . . . . . . . . . . . . 499A debt which is repayable on demand becomes due the moment the money islent to the debtor

Construction - performance guarantee Contract -rectification Performance guarantee - as suretyship

Prescription - demand for payment - when debtis due Property - heritage - sale of land,rectification Rectification - of written contract Sale of fixed property - compliance withAlienation of Land Act

In this issue

GEES v THE PROVINCIAL MINISTER OF CULTURALAFFAIRS AND SPORT, WESTERN CAPE

An appeal tribunal established under the National Heritage Resources Act (no25 of 1999) has a wide discretion

Judgment given in the Supreme Court of Appeal on 29 September 2016 byFourie AJA (Maya DP, Bosielo JA, Seriti JA and Dlodlo AJA concurring)

Gees was the owner of land in Cape Town on which there was a structurewhich was more than 60 years old. Section 34(1) of the National HeritageResources Act (no 25 of 1999) prohibited its demolition without a permitissued by Heritage Western Cape. Certain areas in the suburb in which the landwas situated fell within a heritage protection overlay zone (HPOZ) in terms ofthe City of Cape Town’s zoning scheme regulations, although the land itselfdid not. The City of Cape Town was then in the process of conducting aheritage survey of the suburb with a view to rendering the area in which theland was situated subject to the HPOZ.

Gees applied for a demolition permit. This was considered by Heritage’sBuilt Environmental and Landscape Permit Committee, and was refused. Geesappealed unsuccessfully to an appeals committee. He then appealed to theProvincial Minister of Cultural Affairs And Sport, Western Cape. The appealtribunal upheld the appeal and granted the demolition permit, subject to threeconditions: (a) that the new development on the site should not exceed thetown-planning envelope of the existing building, (b) that the materials used forthe façade of the new building were to be in keeping with the existing building,and (c)that building plans for the new structure were to be submitted toHeritage Western Cape for its approval prior to any work commencing on site.

Gees then brought an application in terms of the provisions of the Promotionof Administrative Justice Act (no 3 of 2000) for the review of the appealtribunal’s decision and the setting aside of the conditions attaching thereto,alternatively for an order directing the MEC to reconsider the appellant’sappeal.

Held—Section 48(2) of the Act provides that on application by any person, a

heritage resources authority may in its discretion issue to such a person apermit to perform such actions at such time and subject to such terms,conditions and restrictions or directions as may be specified in the permit,including certain specified conditions.

Gees contended that the conditions imposed in the demolition permit wereultra vires the provisions of section 48(2) of the Act. However, this was

472 GEES v PROVINCIAL MINISTER OF CULTURAL AFFAIRS AND SPORTFOURIE AJA 2016 SACLR 471 (A)

inconsistent with the wide scope of application of section 48(2). Thesubsection confers a discretion upon a heritage authority to issue a permit‘subject to such terms, conditions and restrictions or directions as may bespecified in the permit’, including the specified conditions. The word‘including’ in the context used in section 48(2), is a word of enlargement, notof limitation. The conditions which may be imposed are thus not confined tothose specified, but could include any appropriate condition.

On the plain wording of section 48(2) the appeal tribunal had a widediscretion to impose terms, conditions, restrictions or directions in the permit.The question was whether the appeal tribunal could lawfully have imposed thedisputed conditions in the demolition permit.

Although the proposed designation of the area as a heritage area requiredfurther refinement, as well as engagement between the owner and the public,the evidence showed that this was an ongoing process that would, in theforeseeable future, result in the formal protection of the area in which the landwas situated. In view thereof, it would not make sense to allow for thedemolition, in the interim, of the very resources that were intended to form thesubject of the HPOZ, without the necessary counter-balancing measures topreserve the fabric of the HPOZ, such as the conditions imposed in thedemolition permit.

The purpose and effect of the conditions imposed in the present matter wereclearly designed to enable Heritage Western Cape to fulfil its duty in terms ofthe Act, ie to conserve a heritage resource. Therefore the conditions were notaimed at controlling development as such, but constituted conditions with aconservation objective. It followed that the conditions were lawfully imposedin terms of section 48(2) of the Act.

Advocate S P Rosenberg SC and Advocate K Reynolds instructed by SmithTabata Buchanan Boyes, Cape Town, appeared for the appellantAdvocate I Jamie SC and Advocate P S van Zyl instructed by The StateAttorney, Cape Town, appeared for the respondent

Fourie AJA:[1] The issue in this appeal is whether the National Heritage ResourcesAct 25 of 1999 (the Act) authorises a provincial heritage resourcesauthority, when granting a permit for the demolition of an entirestructure which is older than 60 years, situated on a property with noformal heritage status, may lawfully impose conditions controlling

GEES v PROVINCIAL MINISTER OF CULTURAL AFFAIRS AND SPORT 473FOURIE AJA 2016 SACLR 471 (A)

future development on the property.[2] The appellant is the registered owner of all the sections in asectional title scheme comprising the land and a small block of flats(the structure) on Erf 1444, Vredehoek, Cape Town (Erf 1444), situatedat 24 Davenport Road, Vredehoek. The appellant intends to redevelopErf 1444 and this requires the demolition of the structure. As thestructure is more than 60 years old, s 34(1) of the Act prohibits itsdemolition without a permit issued by the third respondent, HeritageWestern Cape (HWC).[3] The appellant’s application for a demolition permit was consideredby HWC’s Built Environmental and Landscape Permit Committee ata meeting on 24 July 2013, and was refused. The appellant appealed toHWC’s appeals committee, which refused the appeal on 18 September2013.[4] The appellant then lodged an appeal with the first respondent, theProvincial Minister of Cultural Affairs and Sport, Western Cape (theMEC). On 21 January 2015, the appeal tribunal appointed by the MECin terms of s 49(2) of the Act, upheld the appeal and granted thedemolition permit, subject to the following conditions:

‘(a)that the new development on the site shall not exceed thetown-planning envelope of the existing building;(b) that the materials used for the façade of the new building are inkeeping with the existing building;(c) that building plans for the new structure are submitted to HeritageWestern Cape for its approval prior to any work commencing onsite.’

[5] Aggrieved by the imposition of these conditions by the appealtribunal, the appellant launched an application in terms of theprovisions of the Promotion of Administrative Justice Act 3 of 2000,in the Western Cape Division of the High Court, Cape Town for thereview of the appeal tribunal’s decision and the setting aside of theconditions attaching thereto, alternatively for an order directing theMEC to reconsider the appellant’s appeal. The application was opposedby the MEC while the City of Cape Town abided the decision of thecourt, but filed an affidavit providing the parties and the court withrelevant information, particularly with regard to the proposeddesignation of a heritage protection overlay zone for the area including


Vredehoek. [6] In the event, the matter was heard by Weinkove AJ who dismissedthe application with costs, but granted the appellant leave to appeal tothis court. The MEC opposes the appeal. The remainder of the partiesabide the decision of the court.[7] The essence of the appellant’s case is that the imposition of theconditions in the demolition permit by the appeal tribunal was notauthorised by s 48(2) of the Act and thus ultra vires HWC’s powers(via the tribunal’s ruling). It is common cause that an entity such asHWC exercising public power is confined to exercising only suchpowers as are lawfully conferred upon it - this is the principle oflegality. See Fedsure Life Assurance Ltd & others v GreaterJohannesburg Transitional Metropolitan Council & others 1999 (1) SA374 (CC); 1998 (12) BCLR 1458 (CC) para 56; PharmaceuticalManufacturers Association of SA & another: In re Ex Parte Presidentof the Republic of South Africa & others 2000 (2) SA 674 (CC); 2000(3) BCLR 241 (CC) para 50; Qualidental Laboratories (Pty) Ltd vHeritage Western Cape & another 2008 (3) SA 160 (SCA) para 9 andVorster & another v Department of Economic Development,Environment and Tourism, Limpopo Province & others 2006 (5) SA291 (T) paras 17 and 18.[8] It is accordingly necessary to consider the imposition of theconditions in the demolition permit by the appeal tribunal against thebackground of the Act. As explained in Qualidental Laboratories, para10, an overview of the Act shows that its overarching objective is theidentification, protection, preservation and management of heritageresources for posterity. This objective also finds resonance in s 24(b)of the Constitution. A heritage resource is defined in s 1 of the Act as‘any place or object of cultural significance’. Cultural significance isdefined as meaning ‘aesthetic, architectural, historical, scientific,social, spiritual, linguistic or technological value or significance’. Aplace is defined as including a site, area or region; a building or groupof buildings and other structures or groups of structures; and openspace, including a public square, street or park. In relation to themanagement of a place, a place is defined as including its immediatesurroundings.[9] In terms of s 6 of the Act, the South African Heritage Resources


Agency (SAHRA) and the provincial heritage resources authorities areempowered to prescribe principles for the management of heritageresources and to publish for general information policy relating toheritage resources management. Section 7 provides for heritageassessment criteria and grading. A three-tier system for heritageresources management is prescribed. National level functions are theresponsibility of SAHRA, while provincial level functions are theresponsibility of provincial heritage authorities. Local level functionsare the responsibility of local authorities. In s 25 of the Act the generalpowers and duties of heritage authorities are set out. These arewide-ranging powers and duties enabling and obliging heritageauthorities to comply with their conservation mandate in terms of theAct.[10] The formal protection provisions of the Act are to be found in part1 of chapter II (ss 27-33). Section 27 deals with national and provincialheritage sites, while s 28 deals with protected areas. Section 29provides for the provisional protection of protected areas and heritageresources by SAHRA and provincial heritage authorities, for amaximum period of two years, while local authorities are authorised toprovisionally protect, for a maximum period of three months, any placewhich it considers to be conservation-worthy. [11] Section 30 of the Act requires a provincial heritage authority tocompile and maintain a heritage register listing the heritage resourcesin the province which it considers to be conservation-worthy. In termsof s 30(11)(a), the special consent of the local authority is required forany alteration to or development affecting a place listed in the heritageregister. Section 31 allows for the designation by planning authorities(including municipalities) and in certain circumstances provincialheritage authorities, of heritage areas to protect any place ofenvironmental or cultural interest. [12] Part 2 of chapter II of the Act (ss 33-38) deals with generalprotection provisions, of which s 34(1) is of importance in theadjudication of this matter. It reads as follows:

‘No person may alter or demolish any structure or part of a structurewhich is older than 60 years without a permit issued by the relevantprovincial heritage resources authority.’

In terms of s 34(2), within three months of the refusal of the provincial


heritage resources authority to issue a permit, consideration must begiven to the protection of the place concerned in terms of the formaldesignations provided for in part 1 of chapter II.[13] Finally, for purposes of this matter, reference must be made to s48 of the Act, which falls within chapter III of the Act, headed ‘GeneralProvisions’. Subsection (2) provides as follows:

‘On application by any person in the manner prescribed undersubsection (1), a heritage resources authority may in its discretionissue to such a person a permit to perform such actions at such timeand subject to such terms, conditions and restrictions or directions asmay be specified in the permit, including a condition -(a) that the applicant give security in such form and such amountdetermined by the heritage resources authority concerned, havingregard to the nature and extent of the work referred to in the permit,to ensure the satisfactory completion of such work or the curation ofobjects and material recovered during the course of the work; or(b) providing for the recycling or deposit in a materials bank ofhistorical building materials; or(c) stipulating that design proposals be revised; or(d) regarding the qualifications and expertise required to perform theactions for which the permit is issued.’

[14] As the structure on Erf 1444 is more than 60 years old, itsdemolition is not permitted unless a permit has been issued by HWC interms of s 48(2) of the Act. This is the demolition permit which formsthe subject matter of the appeal.[15] It is common cause that: neither the structure nor Erf 1444 is adeclared national or provincial heritage site as contemplated in s 27 ofthe Act; neither of them enjoy provisional protection in terms of s 29;nor is either of them listed in a heritage register in terms of s 30 ordeclared as a heritage object in terms of s 32. Furthermore, Erf 1444does not fall within a protected area as contemplated in s 28 of the Act,nor within a heritage area as contemplated in s 31. While certain areasin Vredehoek fall within a heritage protection overlay zone (HPOZ) interms of the City’s zoning scheme regulations, Erf 1444 does not.However, as pointed out in the affidavit filed by the City of CapeTown, it is currently in the process of conducting a heritage survey ofVredehoek with the purpose of rendering the area in which Erf 1444 is


situated subject to the HPOZ. [16] The City has also graded Erf 1444 a proposed IIIC, as it isregarded as being of significance within its context of a well-preserved,coherent art deco streetscape spanning both sides of Davenport Road.In fact, the City has expressed the view that the large concentration ofart deco buildings in the area is probably unique in the South Africancontext and that Davenport Road is the core of the art deco area ofVredehoek. I should add that the main concern of most parties whomade submissions to the heritage authorities opposing the demolitionof the structure, was that the character of Vredehoek and this particularstreet should be preserved.[17] In considering the appellant’s submission that the conditionsimposed in the demolition permit are ultra vires the provisions of s48(2) of the Act, it is immediately apparent that the submission flies inthe face of the wide scope of application of s 48(2).

See Dibowitz vCommissioner for Inland Revenue 1952 (1) SA 55 (A) at 61B-D.Needless to say, any condition so imposed has to be a lawful condition,ie imposed by the relevant heritage resources authority exercising apower lawfully conferred upon it.[18] What the appellant contends for is a construction of s 48(2) thatlimits its wide scope of application in the event of the granting of apermit for the demolition of a structure which enjoys no formal heritageprotection. One may ask why, if this was the legislature’s intention, ithad not been conveyed by curtailing the wide ambit of s 48(2) in suchcircumstances. This could easily have been done and the failure of thelegislature to do so necessarily points to a contrary intention.


[19] As recorded earlier, it is common cause that, although the structureon Erf 1444 is not worthy of protection, the surrounding area is. TheCity of Cape Town regards the area as conservation-worthy and is inthe process of formally protecting it by incorporation in the City’sproposed HPOZ for the area of Vredehoek. The significance of Erf1444 in the context of its surrounding area, was described as follows bythe appeal tribunal:

‘Despite the building not falling within a Heritage Protection OverlayZone, the art deco area of Vredehoek is accepted by the heritagefraternity as significant and worthy of being declared a conservationarea. In broad terms and without referring to the boundaries of the artdeco area, the significance of the area is sufficient to warrantprotective measures.’

[20] It is important to note that the significance of Erf 1444 within itssurrounding area was also acknowledged by Mr C Snelling, the heritageconsultant who prepared the ‘Statement of Significance’ whichaccompanied the appellant’s application for the demolition permit. MrSnelling referred to ‘. . . the richer art deco/modernist blocks of flatswhich are common in both the street on which the property is locatedand wider area . . . .’, and emphasised that:

‘. . . the structure does sit comfortably within its environment whichis itself typical of the wider Vredehoek area which is noted for the artdeco qualities of the various blocks of flats . . . and the eclectic mixof residential buildings which although invariably are of a simple boxand hipped roof nature display variously art deco, Cape Dutch revivaland arts and crafts qualities.’

[21] The significance of the IIIC grading of Erf 1444 was recognisedby Mr A C Lillie, the heritage consultant who deposed to theappellant’s founding affidavit, as follows:

‘. . . grade IIIC heritage resources do not have intrinsic merit - theirsignificance derives from their contribution to the character ofsignificance of their surrounding areas.’

[22] It bears emphasising that a ‘place’ is defined in s 1 of the Act asincluding a street as well as the immediate surroundings of a place.Furthermore, in terms of s 3(1) of the Act those heritage resources of


South Africa which are of cultural significance or other special valuefor the present community and future generations, must be consideredpart of the national estate and fall within the sphere of operations ofheritage resources authorities. In terms of s 3(2) the national estate mayinclude places, buildings, structures and equipment of culturalsignificance, as well as places which are associated with livingheritage. Section 3(3) of the Act emphasises that a place is to beconsidered part of the national estate if it has cultural significance orother special value because of its importance in exhibiting particularaesthetic characteristics valued by a community or a cultural group. [23] In terms of s 5(1) of the Act, all heritage resources authoritiesperforming functions and exercising powers in terms of the Act for themanagement of heritage resources, must recognise, inter alia, thatheritage resources have lasting value in their own right, and that theyare valuable, finite, non-renewable and irreplaceable, and must becarefully managed to ensure their survival. In the present context, therelevant heritage resources are not confined to the structure or Erf 1444itself, but extend, on the clear wording of the Act, to the surroundingarea, including other buildings or structures in the immediate vicinityof Erf 1444. This would encompass the large concentration of art decobuildings spanning both sides of Davenport Road and its surroundingarea, which, on all the available evidence, forms part of the nationalestate and is worthy of protection. In fact, as recorded above, the Cityof Cape Town has recognised this and is in the process of rendering Erf1444 and its surrounds a protected heritage area.[24]

[25] The appellant’s construction of s 48(2), limiting the imposition ofconditions to formally declared conservation areas only, would


effectively reduce heritage resources management to a small area ofconcern and exclude major instances of possible abuse from the powerof protection by heritage resources authorities. The current is a primeexample. Where a heritage resource, such as this art deco area ofVredehoek, is potentially affected by an application brought in termsof the Act, the relevant heritage authorities should be entitled to imposesuch conditions as the Act would permit for the conservation of theaffected area. In fact, their failure to do so would constitute the shirkingof their conservation mandate to protect heritage resources forposterity.[26] Counsel for the appellant reiterated that the Act does not authoriseheritage authorities to impose conditions controlling futuredevelopment on a property when they grant a permit authorisingdemolition of the structure on a property with no formal heritage status.Therefore, the submission continued, it is impermissible to attachconditions to a demolition permit for the purpose of preservingneighbourhood characteristics unless those neighbourhoodcharacteristics have been recognised as worthy of preserving by thedesignation of the area as a protected heritage area.[27] In Qualidental this court also dealt with an appeal regarding theimposition of a condition as to future development in a demolitionpermit in respect of a structure in an unprotected heritage area. Thesame submission was made on behalf of the appellant, namely that, inthose circumstances, the Act does not clothe the HWC with the powerto impose the relevant conditions. In paragraph 20 this court made shortshrift of this submission in the following terms:

‘I may add that the purpose and effect of the condition are designedto enable the first respondent [HWC] to exercise a power vested in itin terms of the Act and which, as pointed out, is consonant with theoverall objective of the Act ie the conservation of a heritage resource.Therefore the condition, rather than being one aimed at controllingdevelopment, as contended by the appellant, was in actual fact acondition with a conservation objective.’

[28] While the facts in the present appeal differ somewhat from thosein Qualidental, this does not detract from the principle enunciatedtherein, that, even in an unprotected heritage area, the relevant heritageconservation authority may, in appropriate circumstances, when


approving a demolition, impose conditions controlling futuredevelopment to protect a heritage resource and its surrounds.[29]

[30] Counsel for the appellant also had a second string to his bow. Hesubmitted that an interpretation of the Act which authorises a heritageauthority, when it grants a permit authorising demolition of thestructure on a property not otherwise protected under the Act, to imposeconditions controlling future building or development on the property,permits the arbitrary deprivation of property contrary to the provisionsof s 25(1) of the Constitution. This line of attack was first raised in theappellant’s heads of argument on appeal. It was not alluded to in thepapers in the court below or in the judgment of Weinkove AJ. In theresult the MEC did not have the opportunity to meet a case on this basisand to present evidence which might be relevant to it. However, thereis no need to belabour this point, as I believe that there is, in any event,no merit in the appellant’s underlying submission.[31] Section 25(1) of the Constitution provides as follows:

‘No one may be deprived of property except in terms of law ofgeneral application, and no law may permit arbitrary deprivation ofproperty.’

In terms of s 25(1), all deprivations of property must meet therequirements of the section, ie they must be authorised by a generallyapplicable law and may not permit arbitrary deprivation. If theserequirements are not met, the infringement will be unconstitutional andinvalid, unless it is justifiable under s 36(1) of the Constitution. See ingeneral P J Badenhorst et al, Silberberg and Schoeman’s The Law ofProperty 5ed (2006) at 545; First National Bank of SA Limited t/aWesbank v Commissioner, South African Revenue Service & another;First National Bank of SA Ltd t/a Wesbank v Minister of Finance 2002(4) SA 768 (CC) paras 57-60.[32] It is true that the conditions imposed in the demolition permit


amount to a curtailment of the appellant’s entitlement to deal with hisproperty as he sees fit, and may therefore to a certain extent beregarded as a deprivation of property. However, it is widely recognisedthat in our present constitutional democracy an increased emphasis hasbeen placed upon the characteristic of ownership which requires thatentitlements must be exercised in accordance with the social functionof law in the interest of the community. A J van der Walt and G JPienaar Introduction to the Law of Property 7ed (2016) at 50 put it asfollows:

‘. . . the inherent responsibility of the owner towards the communityin the exercise of his entitlements is emphasised. The balancebetween the protection of ownership and the exercise of entitlementsof the owner regarding third parties, on the one hand, and theobligations of the owner to the community, on the other hand, mustbe maintained throughout. This might, in certain circumstances, evenmean that an owner’s entitlements could be limited or infringed uponin the interest of the community. In such cases the infringement mustalways be reasonable and equitable [not arbitrary].’

See also the comments of Davis J in Qualidental Laboratories (Pty) Ltdv Heritage Western Cape & another 2007 (4) SA 26 (C) at 37C-E;Corium (Pty) Ltd & others v Myburgh Park Langebaan (Pty) Ltd &others 1993 (1) SA 853 (C) at 858E-F; Diepsloot Residents’ andLandowners’ Association & another v Administrator, Transvaal 1994(3) SA 336 (A) at 349C-J and Port Elizabeth Municipality v VariousOccupiers 2005 (1) SA 217 (CC) para 23.[33] In the instant matter the partial deprivation of the appellant’sproperty rights by means of the imposition of the conditions in thedemolition permit, is authorised by the Act, in that it stems from thevery purpose of the Act viz the conservation of a heritage resource. Theimposition of the conditions also accords with the conservationmandate of HWC in terms of the Act and is directly in line with theprinciples of heritage resources management set out in the Act.[34] In these circumstances I find that there has been no arbitrarydeprivation of the appellant’s rights of ownership by HWC. On thecontrary, the imposition of the conditions, in my view, was reasonableand equitable, having regard to the inherent responsibility of theappellant towards the community in the exercise of his entitlements as


the owner of Erf 1444.[35] I therefore conclude that the court below was correct in dismissingthe application for review and accordingly the appeal has to fail.[36] The following order is made:The appeal is dismissed with costs, including the costs of two counsel.

MUTUAL & FEDERAL INSURANCE COMPANY v KNSCONSTRUCTION (PTY) LIMITED

A performance guarantee considered in essence a suretyship agreement

Judgment given in the Supreme Court of Appeal on 31 May 2016 by TsokaAJA (Lewis JA, Tshiqi JA, Willis JA and Fourie AJA concurring)

KNS Construction (Pty) Limited was awarded a contract for the constructionof road works at Ballito interchange, National Route 2, KwaZulu-Natal. KNSConstruction appointed Aqua Transport & Plant Hire (Pty) Ltd as asub-contractor. In terms of the sub-contract, Aqua was required to provide aperformance guarantee to the value of 15 per cent of the main contract. Mutualand Federal Insurance Company Limited, as guarantor, issued the guaranteeon behalf of Aqua for the due fulfilment of its obligation to KNS Constructionpursuant to the sub-contract entered into between Aqua and KNS Construction.Clause 3 of the guarantee stated that the guarantee amount was payable ‘. . . onreceipt of a written demand from KNS, which demand could be made by KNSif Aqua failed to commence or proceed with or complete the work asprescribed in the contract.

KNS Construction experienced financial difficulties. A day after it hadplaced itself under voluntary winding up, KNS Construction purported tocancel the sub-contract with Aqua, giving Aqua 14 days’ notice to rectify itsperformance, failing which it intended calling up the performance guarantee.KNS Construction was placed under provisional winding up at the instance ofone of its creditors. The provisional order was made final. The earlier threat tocall up payment of the guarantee was followed up by the liquidators. The basisfor the calling up of payment of the guarantee was alleged to be the failure tocommence, proceed with or complete the project.

KNS Construction brought an application demanding payment of theguarantee on the basis that, as the guarantee was a ‘call or on demandguarantee’ it had become payable. Aqua contended that the guarantee was a‘conditional guarantee’, inextricably linked to the sub-contract, and as it wasnot in breach of the sub-contract, the guarantee was not due and payable.

Held—The language used in the guarantee and its purpose reveal the true intention

of the parties. Although the guarantee was payable in the discretion of KNSConstruction, and payment in respect thereof could be demanded ‘at anystage’, the true purpose was to guarantee the due performance by Aqua. It wasonly payable if Aqua breached the sub-contract as expressly stated in theguarantee.

MUTUAL & FEDERAL INSURANCE CO v KNS CONSTRUCTION (PTY) LTD 485TSOKA AJA 2016 SACLR 484 (A)

The fact that the demand was at the discretion of KNS Construction did notaffect the nature of the guarantee. The discretion vested in KNS Constructionwas to be exercised arbitrio bono viri the condition being Aqua’s failure tocommence, proceed with or complete the sub-contract. It was not clear fromthe letters of demand seeking to rely on the performance guarantee which ofthe grounds it sought to rely on. They did not specify which breach Aqua isalleged to have committed. It was thus not clear on what basis KNSConstruction alleged it was entitled to payment.

The fact that the guarantee was not accompanied by any document beforepayment was demanded, but depended on breach of the sub-contract by Aquain either failing to commence, proceed with or complete the project, supportedthe contention that the guarantee was inextricably linked to the sub-contractand was therefore akin to a suretyship. The inescapable conclusion was that theguarantee was akin to suretyship, and thus a conditional guarantee and not acall or demand guarantee.

Advocate AO Cook SC and Advocate JJ Meiring instructed by Hogan Lovells(South Africa), Johannesburg, appeared for the first appellantAdvocate P Stais SC and Advocate JE Smit instructed by Cox YeatsAttorneys, Johannesburg, appeared for the second appellantAdvocate M v R Potgieter SC instructed by Senekal Simmonds Inc,Johannesburg, appeared for the respondent

Tsoka AJA:[1] This appeal concerns the interpretation of a construction guarantee.In 2011, South African National Roads Agency Limited (SANRAL)awarded to the first respondent, KNS Construction (Pty) Limited (KNSConstruction), a contract for the construction of road works at Ballitointerchange, National Route 2, KwaZulu-Natal (the main contract). Inturn, on 22 March 2011, KNS Construction appointed Aqua Transport& Plant Hire (Pty) Ltd (Aqua), as a sub-contractor. In terms of thesub-contract, Aqua was required to provide a performance guarantee(the guarantee) to the value of 15 per cent of the main contract: theguarantee was not to have an expiry date. The first appellant, Mutualand Federal Insurance Company Limited (Mutual & Federal), asguarantor, issued the guarantee on behalf of Aqua for the due fulfilmentof its obligation to KNS Construction pursuant to the sub-contract

486 MUTUAL & FEDERAL INSURANCE CO v KNS CONSTRUCTION (PTY) LTDTSOKA AJA 2016 SACLR 484 (A)

entered into between Aqua and KNS Construction.[2] On 5 April 2011, Mutual & Federal issued the guarantee, therelevant terms of which are:

‘1. . . Mutual & Federal Insurance Company Limited (Reg. No:1970/00619/06) (hereinafter referred to as “the Guarantor”) dohereby hold at your disposal the amount of R3 423 850.49 (Threemillion, four hundred and twenty three thousand, eight hundred andfifty rand and forty nine cents) for the due fulfilment by AquaTransport & Plant Hire (Pty) Ltd (Reg No. 2003/007768 (hereinafterreferred to as “the sub-contractor”) of its obligations to KNSConstruction (Pty) Ltd Reg. No: 2004/013912/07 thereafter referredto as “KNS” [Construction] in terms of the above stated contractbetween the Sub-Contractor and KNS [Construction].2. The Guarantor hereby renounces the benefits of the exceptions nonnumeratae pecuniae, non-causa debiti, excussion and division, themeaning and effect whereof we declare ourselves to be fullyconversant.3. The Guarantor undertakes to pay KNS the said amount of R3 423850.49 (Three million, four hundred and twenty three thousand, eighthundred and fifty rand and forty nine cents) or such portion as maybe demanded on receipt of a written demand from KNS[Construction] which demand may be made by KNS [Construction]if, (in your opinion and at your sole discretion), the said Contractorfails and/or neglects to commence the work as prescribed in thecontract or if he fails and/or neglects to proceed therewith or if, forany reason, he fails and/or neglects to complete the services inaccordance with the conditions of contract, or if he fails or neglectsto refund to KNS [Construction] any amount found to be due andpayable to KNS [Construction], or if his estate is sequestrated or if hesurrenders his estate in terms of the Insolvency Law in force withinthe Republic of South Africa’.

[3] Pursuant to the issuing of the guarantee, KNS Constructionexperienced financial problems with the result that it was not able toperform in terms of the main contract. In September 2011, its dieselsupplies ceased because of its inability to pay the suppliers and it wasalso unable to pay its staff. As a result, it could not continue with itsobligations which it was required to perform before Aqua could render


its services in terms of the sub-contract: the surfacing work consistingof applying prime coat and the asphalt base and surfacing. It also failedto pay Aqua its first invoice for work already performed, promising tosettle the invoice by 15 December 2011 by which date it had hoped tohave concluded an empowerment transaction. Its financial situation didnot improve and it placed itself under voluntary winding-up in terms ofa special resolution registered by the Master of the High Court on 13December 2011. By 14 December 2011 the site was closed resulting inno work being carried out. Its insurers, who had issued a performanceguarantee on its behalf to SANRAL, were informed of the dire financialsituation. This led to SANRAL cancelling the main contract and issuinga new tender for the completion of the remaining earthworks.[4] On 24 January 2012, KNS Construction was placed underprovisional winding up at the instance of one of its creditors. Theprovisional order was made final on 5 March 2012 whereafter on 8March 2012, provisional liquidators were appointed. The appointmentwas made final on 11 July 2012. Prior to the two winding upapplications, in 2010 one of its creditors had instituted a winding upapplication in the North Gauteng High Court, Pretoria, whichapplication was dismissed. The creditors in that application, beingdissatisfied with the dismissal, lodged an appeal to the full bench. On19 September 2012, the full bench upheld the appeal and placed KNSConstruction in final winding up retrospective to 8 October 2010.[5] In spite of these insurmountable difficulties, and the fact that thesite was abandoned with no work being carried on in terms of the maincontract, KNS Construction, on 14 December 2011, a day after it hadplaced itself under voluntary winding up, purported to cancel thesub-contract with Aqua, giving Aqua 14 days’ notice to rectify itsperformance, failing which it intended calling up the performanceguarantee. The threat to call up payment of the guarantee was followedup by the liquidators on 10 May 2012 and 11 July 2012. The basis forthe calling up of payment of the guarantee was alleged to be the failureto commence, proceed with or complete the project.[6] On 28 May 2012, Aqua launched an application in the SouthGauteng High Court, Johannesburg interdicting Mutual & Federal fromeffecting payment in terms of the guarantee. By agreement between theparties, Mutual & Federal was interdicted from honouring the


1 Novartis SA v Maphil Trading 2016 (1) SA 518 (SCA) paras 27.

guarantee pending resolution of proceedings to be instituted within 30days by KNS Construction. In due course, KNS Construction launchedan application which came before the court a quo demanding paymentof the guarantee on the basis that, as the guarantee was a ‘call or ondemand guarantee’ it had become payable. Aqua on the other handcontended that the guarantee was a ‘conditional guarantee’, inextricablylinked to the sub-contract, and as Aqua was not in breach of thesub-contract, the guarantee was not due and payable.[7] The Gauteng Local Division of the High Court, Johannesburg(Twala AJ) held that the guarantee was a ‘call or on demand’guarantee, and that Mutual & Federal was, on demand by KNSConstruction, obliged to pay in terms thereof as long as the lattercomplied with the terms of the said guarantee. Mutual and Federal andAqua now appeal with leave of the court a quo, while KNSConstruction cross-appeals the order with regard to the date when morainterest began to accrue.[8]

In the first alternative it iscontended that even if this court were to find that the court a quo wascorrect in holding that the guarantee was ‘a call guarantee’, the demanddid not comply with the terms of the guarantee. In the secondalternative it is submitted that the demand was mala fide or tainted byfraud.[9] In order to resolve the question whether the guarantee is ‘a callguarantee’ or ‘a conditional guarantee’, it is apt to restate what thiscourt said about interpreting documents. In Novartis SA v MaphilTrading1, this court said:

‘. . . the interpretative process is one of ascertaining the intention ofthe parties – what they meant to achieve. And in doing that, the courtmust consider all the circumstances surrounding the contract todetermine what their intention was in concluding it. . . and the courtshould always consider the factual matrix in which the contract is


2 Lombard Insurance Co Ltd v Landmark Holdings (Pty) Ltd & others [2009] ZASCA71; 2010 (2) SA 86 (SCA) paras 19 and 20.

concluded – the text to determine the parties’ intention.’[10] In assessing whether the guarantee is a call or on demandguarantee as opposed to a conditional guarantee, it is helpful to refer tosome of the previous decisions of this court.[11] In Lombard Insurance Co Ltd v Landmark Holdings (Pty) Ltd &others2, this court was required to interpret a guarantee in terms ofwhich Lombard bound itself as principal debtor. In terms of theguarantee Lombard undertook to pay, on demand, the guaranteed sumor full outstanding balance upon the happening of two eventualities.Clause 3 of that guarantee provided:

‘3. The Guarantor hereby acknowledges that:3.1 Any reference in this Guarantee to the Agreement is made for thepurpose of convenience and shall not be construed as any intentionwhatsoever to create an accessory obligation or any intentionwhatsoever to create a suretyship.3.2 Its obligation under this Guarantee is restricted to the payment ofmoney.3.3 Reference to a practical completion certificate or to a finalcompletion certificate shall mean such certificate as issued by thePrincipal Agent.’

The court in interpreting that guarantee stated:‘The guarantee creates an obligation to pay upon the happening of anevent. The guarantee itself records that reference to the constructioncontract is solely for the purpose of convenience and that there is nointention to create an accessory obligation or suretyship. Clause 14.5of the construction contract merely records that security exists inrespect of the contractor’s obligations.The guarantee by Lombard is not unlike irrevocable letters of creditissued by banks and used in international trade, the essential featureof which is the establishment of a contractual obligation on the partof a bank to pay the beneficiary (seller). This obligation is whollyindependent of the underlying contract of sale and assures the sellerof payment of the purchase price before he or she parts with the


3 Minister of Transport & Public Works, Western Cape, & another v ZanbuildConstruction (Pty) Ltd & another [2011] ZASCA 10 (SCA); 2011 (5) SA 528 para19.

goods being sold. Whatever disputes may subsequently arise betweenbuyer and seller is of no moment insofar as the bank’s obligation isconcerned. The bank’s liability to the seller is to honour the credit.The bank undertakes to pay provided only that the conditionsspecified in the credit are met. The only basis upon which the bankcan escape liability is proof of fraud on the part of the beneficiary.This exception falls within a narrow compass and applies where theseller, for the purpose of drawing on the credit, fraudulently presentsto the bank documents that to the seller’s knowledge misrepresent thematerial facts.’

[12] In Minister of Transport and Public Works, Western Cape, &another v Zanbuild Construction (Pty) Ltd & another3, this court wasalso required to interpret the terms of a performance guarantee. Unlikethe one in Lombard the court stated that the guarantee gave rise toliability akin to that of a surety and said:

‘The first indicator in that direction is the assertion at the outset thatthe guarantee provide “security for the compliance of the contractor’sperformance of obligations in accordance with the contract”. And inthe body of the document the bank guarantees “the due and faithfulperformance by the contractor”. This accords with languageassociated with suretyships.’

[13]


4 NBS Boland Bank Ltd v One Berg River Drive CC & others; Deeb & another v AbsaBank Ltd; Friedman v Standard Bank of SA Ltd (4) SA 928 (SCA) para 25.

[14]

It was only payable if Aqua breached the sub-contract asexpressly stated in the guarantee. I am fortified in my reasoning by thefact that on completion of the construction, it was to be returned toMutual & Federal (as in the case of suretyship) and once the principaldebt was discharged, the surety would be released from its obligations.The ineluctable conclusion is that the present guarantee is notautonomous, but inextricably linked to the underlying contract. [15] The fact that the demand was at the discretion of KNSConstruction does not affect the nature of the guarantee. The discretionvested in KNS Construction was to be exercised ‘arbitrio bono viri’4,the trigger event being Aqua’s failure to commence, proceed with orcomplete the sub-contract. It is not clear from the letters of demandseeking to rely on the performance guarantee which of the grounds itseeks to rely on. They do not specify which breach Aqua is alleged tohave committed. It is thus not clear on what basis KNS Constructionalleged it was entitled to payment. KNS Construction did not andcould not perform its own obligations in terms of the sub-contract andtherefore it did not meet any of the conditions imposed, before paymentcan be held to be due and payable.[16]

[17] The appellants contended, in the alternative, that in the event theguarantee is found to be a call or demand guarantee, then there was


fraud on the part of KNS Construction in seeking payment in terms ofthe guarantee. However, having concluded that the guarantee is aconditional guarantee, it is unnecessary to pronounce on this issue saveto state that the demand by KNS Construction and the Liquidators,while KNS Construction was in dire financial difficulties, after it hadplaced itself in voluntary liquidation and knowing that it would not beable to fulfil its own obligations in terms of the sub-contract with Aqua,constituted misrepresentation. The appeal must thus succeed. It followsthat the cross appeal falls to be dismissed.[18] The following order is made:

1The appeals of the first and second appellants are upheld.2The respondents are declared liable, jointly and severally, for thecosts of the appeal, including the costs of two counsel where soemployed.3The cross appeal of the first respondent is dismissed with costs,including the costs of two counsel where so employed.4The order of the court a quo is set aside and replaced with thefollowing:‘(a) The application is dismissed. (b)The first and second applicants are ordered to pay therespondents’ costs, jointly and severally, including the costs of twocounsel.’

TAMRYN MANOR (PTY) LTD v STAND 1192JOHANNESBURG (PTY) LTD

An agreement for the sale of land which records all the essential elements ofthe sale complies with section 2(1) of the Alienation of Land Act (no 68 of1981)

Judgment given in the Supreme Court of Appeal on 30 September 2016 byBosielo JA (Maya DP, Saldulker JA, Van der Merwe JA and Fourie AJAconcurring)

In terms of a written agreement, Stand 1192 Johannesburg (Pty) Ltd soldcertain fixed property to a Mr R.E. Otto. Otto did not indicate on the deed ofsale that he was signing as an agent or representative of Tamryn Manor (Pty)Ltd.

Notwithstanding the fact that Tamryn complied with the purchaser’sobligations in terms of the agreement, and the lapse of a reasonable time, Stand1192 failed or refused to do all that was necessary and sign the necessarydocuments to effect registration and the transfer of the property into Tamryn’sname. As a result, Tamryn instituted an action against Stand 1192 seeking anorder directing it to cause the transfer and registration of the immovableproperty into its name, as well as rectification of the agreement to reflect it asthe true purchaser and not Otto.

In seeking rectification, Tamryn averred that due to a bona fide mutual errorof the parties, the agreement did not reflect the common intention of the partiescorrectly as it erroneously reflected Otto as the purchaser and not itself. Itaverred that it was the common continuing intention of the parties that it wasthe true purchaser.

Stand 1192 excepted to the Tamryn’s claim by denying the existence of anyerror regarding who the real purchaser was. It asserted that the writtenagreement correctly reflected what the parties intended namely, that itcontracted with Otto and not Tamryn. It also pleaded specially that if it wastrue that the written agreement did not reflect the correct purchaser, then thisrendered the agreement invalid as it did not comply with the strictrequirements of section 2(1) of the Alienation of Land Act (no 68 of 1981). Asa result, rectification of the agreement was not permissible.

Section 2(1) provides that ‘No alienation of land shall be of any force oreffect unless it is contained in a deed of alienation signed by the parties theretoor by their agents acting on their written authority.’

Held—The first inquiry was to scrutinise the written agreement to see, if ex facie

494 TAMRYN MANOR (PTY) LTD v STAND 1192 JOHANNESBURG (PTY) LTDBOSIELO JA 2016 SACLR 493 (A)

the document, the formal requirements of section 2(1) were met.On the face of it, there was no dispute that the written agreement clearly

identified who the seller and the purchaser were, as well as what the merx andthe agreed price were. These were the essential elements for a valid contractof sale. It was not in dispute that the agreement for the sale of the immovableproperty was reduced to writing, and duly signed by the parties. Ex facie thewritten agreement, all the statutory requirements set out in section 2(1) of theAct had been met. As a result, the agreement was formally valid. It followedthat the agreement was capable of rectification. The exception could not beupheld.

The matter had to be referred back to the trial court to decide if rectificationshould be granted.

Advocate S Pincus SC instructed by Mathopo Attorneys, Johannesburg,appeared for the appellantAdvocate SJ Reinders instructed by Lingerfelder & Baloyi Attorneys, Pretoria,appeared for the respondent

Bosielo JA:[1] This appeal, brought with the leave of this court, raises a crisp legalissue: whether an agreement for the sale of land in circumstances wherethe person who signed as the purchaser is not the true purchaser, iscapable of being rectified to substitute the true purchaser. [2] The salient facts of this case relevant to the resolution of this appealcan be set out succinctly as follows: on 16 August 2007, Tamryn Manor(Pty) Ltd (the appellant) concluded a written agreement for the sale ofan immovable property, being Erf 1192, Marshalltown, Johannesburgwith Stand 1192 Johannesburg (Pty) Ltd (the respondent) for an agreedpurchase consideration of R3,2m. This agreement was reduced towriting. An agent acting on behalf of the respondent signed whilst RyanEdward Otto (Otto) signed ostensibly as the purchaser. Otto did notindicate on the deed of sale that he was signing as an agent orrepresentative of the appellant. Furthermore, on the same day, 16August 2007, Otto signed a Suretyship Agreement in terms whereof hebound himself jointly and severally as surety and co-principal debtorin solidum with the purchaser for the due and punctual performance bythe purchaser of all its obligations in terms of the agreement of sale of

TAMRYN MANOR (PTY) LTD v STAND 1192 JOHANNESBURG (PTY) LTD 495BOSIELO JA 2016 SACLR 493 (A)

the immovable property.[3] In terms of clause 2.1 of the agreement, the appellant was requiredto pay a deposit of ten per cent of the purchase price to the seller’sattorneys upon signature of the agreement. The appellant and not Otto,paid R320 000, being the agreed ten per cent deposit of the purchaseprice to the respondent’s attorneys in terms of clause 2.1 of theagreement. Furthermore, the appellant paid R278 002 representing thetransfer duty and all other costs of transfer of the immovable propertyas required by clause 7.1 of the agreement. On or about 16 October2008, the appellant furnished the respondent with guarantees in theamounts of R1 184 480,23 and R1 695 519,71 in respect of the balanceof the purchase price. It is not in dispute that the respondent haddemanded and duly accepted these guarantees. The balance of thepurchase price was to be covered by a written bank or other guaranteeacceptable against registration of the transfer of the property into theappellant’s name to be furnished by the appellant.[4] Notwithstanding the fact that the appellant had complied with itsobligations in terms of the agreement, and the lapse of a reasonabletime, the respondent failed or refused to do all that was necessary andsign the necessary documents to effect registration and the transfer ofthe property into the appellant’s name as envisaged by clause 7 of theagreement. As a result, the appellant instituted an action against therespondent seeking an order directing it to cause the transfer andregistration of the immovable property, into the appellant’s name, aswell as rectification of the agreement to reflect it as the true purchaserand not Otto.[5] In seeking rectification, the appellant averred that due to a bona fidemutual error of the parties, the agreement did not reflect the commonintention of the parties correctly as it erroneously reflected Otto as thepurchaser and not the appellant. The appellant averred that, contrary towhat appears ex facie the agreement, it was the common continuingintention of the parties that the appellant was the true purchaser. [6] The respondent filed two exceptions to the appellant’s declaration.The respondent’s main defence is a complete denial of the existence ofany error regarding who the real purchaser was. It asserted that thewritten agreement correctly reflected what the parties intended namely,that it contracted with Otto and not the appellant. Based on this, it


1Inventive Labour Structuring (Pty) Ltd v Corfe [2005] ZASCA 139; 2006 (3) SA 107(SCA) para 6.

asserted that there was no basis for the rectification of the agreement.[7] The respondent further pleaded specially that if it is true, as theappellant asserted, that the written agreement does not reflect thecorrect purchaser, then this rendered the agreement invalid as it did notcomply with the strict requirements of s 2(1) of the Alienation of LandAct 68 of 1981 (the Alienation of Land Act). As a result, rectificationof the agreement is not permissible. [8] As s 2(1) is central to this dispute I find it necessary to quote therelevant section. It reads as follows:

‘No alienation of land shall be of any force or effect unless it iscontained in a deed of alienation signed by the parties thereto or bytheir agents acting on their written authority.’

[9] In its replication to respondent’s special plea, the appellant pleadedthat the formal validity of the written agreement had to be determinedex facie the agreement. It pleaded further that if proper regard had tothe agreement and its terms, it is clear that it complied with theprovisions of s 2(1) of the Alienation of Land Act in that the agreementwas reduced to writing and signed by both parties or their agents actingon their written authority. It asserted that in the circumstances, it hadsatisfied the requirements for rectification and therefore rectificationwas permissible. It persisted with its claim as set out in its declaration.[10] The court below agreed with the respondent that the agreement asit stood, did not reflect and identify the appellant as the purchaser. Itheld that Otto was identified in unqualified terms as the purchaser inthe agreement. Crucially, it held that to correct the alleged mistake,extraneous evidence of the negotiations preceding this agreement wasnecessary. This was not permissible, so it was held. The court thenconcluded that in the circumstances the agreement was not capable ofbeing rectified.[11] As recently as 2005, this court reaffirmed the correct approach tothe question whether to grant rectification or not as follows in InventiveLabour Structuring1:

‘… As a general rule the determination whether rectification of a

TAMRYN MANOR (PTY) LTD v STAND 1192 JOHANNESBURG (PTY) LTD 497BOSIELO JA 2016 SACLR 493 (A)

2 Intercontinental Exports (Pty) Ltd v Fowles 1999 (2) SA 1045 (SCA) para 13.

3 1925 AD 282.

4 1913 AD 135.

5 1947 (3) SA 340 (T) at 354.

suretyship should be ordered or not involves a two-stage enquiry. Thefirst is to determine whether the formal requirements contained in s6 of the General Law Amendment Act 50 of 1956 are met. The focalpoint at this stage is whether the written document on its own,constitutes a valid contract of suretyship or not. If it does not, theenquiry ends there. If it does, then the enquiry moves to the secondleg which focuses on whether a proper case for rectification has beenmade out. If the answer to the latter question is in the affirmative, anorder for rectification must be granted.’ See also IntercontinentalExports2.

[12] I interpose to state that this case took an unorthodox route. Therespondent preferred to raise two special pleas to the appellant’sdeclaration. The appellant filed a replication to the respondent’samended plea. In turn, the respondent filed an exception to theappellant’s replication. It is trite that when a court is dealing with anexception, it is bound to accept the pleadings as they are. As a result,I have no choice but to determine this appeal on the pleadings as theystand.[13] As set out in Weinerlein v Goch Buildings3 the starting point iswhether this agreement meets the statutory requirements set out in s2(1) of the Alienation of Land Act. For an agreement for the sale ofland to be valid, it has to be reduced to writing and signed by the partiesthereto or by their agents, duly authorised in writing. Wilken v Kohler4.This principle was endorsed further in Dowdle’s Estate v Dowdle andothers5 where the court held:

‘Before there can be rectification of a contract of sale of a fixedproperty, there must be a written contract, which on the face of itcomplies with the requirements of s 30 of Proc 8 of 1902. It seems tobe that this is implicit in the reasoning of Weinerlein v Goch


Buildings Ltd 1925 282, the locus classicus on the law to therectification of contracts for the sale of fixed property. . . . I agreewith Mr Claasen’s contention that you cannot, by rectification, investa document which, on the face of it is null and void, with legal force.’

Evidently, this requires us to scrutinise the written agreement to see, ifex facie the document, the formal requirements are met.[14]

[19] In the result, the following order is made:1. The appeal is upheld with costs.2. The order of the court below is set aside and replaced with an orderdismissing the exception with costs.

TRINITY ASSET MANAGEMENT (PTY) LTD vGRINDSTONE INVESTMENTS 132 (PTY) LTD

A debt which is repayable on demand becomes due the moment the money islent to the debtor

Judgment given in the Supreme Court of Appeal on 29 September 2016 byWillis JA (Theron JA and Swain JA concurring, Dlodlo AJA and Bosielo JAdissenting)

In terms of a written agreement concluded between Trinity AssetManagement (Pty) Ltd and Grindstone Investments 132 (Pty) Ltd in CapeTown on 1 September 2007, Grindstone borrowed R3 050 000 from Trinity.Clause 2.3 of the agreement provided that the Loan Capital would be due andpayable to the Lender within 30 days from the date of delivery of the Lender’swritten demand.

The loan capital was paid to Grindstone in February 2008.On 9 December 2013, by service of the sheriff, Trinity delivered a letter of

demand upon Grindstone in terms of section 345(1)(a)(i) of the CompaniesAct (no 61 of 1973) claiming R4,6m. Relying on the deeming provision insection 345, that a company served with such a letter of demand and whichdoes not discharge the alleged debt within three weeks is, in fact, unable to payits debts, Trinity brought the application for a provisional order winding-upGrindstone.

Grindstone contended that the debt had prescribed three years after February2008 by reason of the operation of the Prescription Act (no 68 of 1969).

Held—The loan capital was immediately claimable from Grindstone, but it was a

term of clause 2.3 that it would only become payable once Grindstone hadreceived a written demand, and the notice period had expired.

Trinity argued that clause 2.3 established the making of a demand as acondition precedent or a suspensive condition for the obligation of Grindstoneto pay to come into being. A difficulty with this was that the section 345demand is one in which the debtor is given three weeks in which to pay. Thiswas less than the 30 days provided for in clause 2.3. If the debt became dueand payable only once the demand provided for in clause 2.3 had beendelivered to Grindstone, then the section 345 demand failed to fulfil thispurpose. This would remain the case even if more than thirty days after itsservice, the amount allegedly owing had not been paid. Accordingly, if clause2.3 was assumed, in favour of Trinity, to establish a suspensive condition forGrindstone’s obligation to pay to come into being, its absence of fulfilment at

500 TRINITY ASSET MANAGEMENT v GRINDSTONE INVESTMENTS 132WILLIS JA 2016 SACLR 499 (A)

the time that the provisional order for liquidation was sought, would justify thedismissal of that application: the amount claimed was not owing.

Trinity also argued that because the debt was repayable on demand,prescription commenced only once payment of the debt had been demanded,ie on 9 December 2013.However, this was to conflate the date when a debt becomes ‘due’ and the dateupon which repayment thereof is demanded. A debt which is repayable ondemand becomes due the moment the money is lent to the debtor.

The monies were advanced to Grindstone in February 2008. There was nointerruption of prescription. The debt therefore prescribed and wasextinguished in February 2011 –– well before any demand was made.

The application was dismissed.

Advocate W R E Duminy SC and Advocate F S G Sievers instructed byKorbers Inc, Cape Town, appeared for the appellantAdvocate J L Kaplan instructed by MJ Hood & Associates, Sandton, appearedfor the respondent

Willis JA:[1] The appellant, Trinity Asset Management (Pty) Ltd, which was theapplicant in the court a quo, sought a provisional order of liquidationof the respondent, Grindstone Investments 132 (Pty) Ltd. The court aquo (Yekiso J) dismissed the application with costs. The court a quogranted leave to appeal to this court. The parties have agreed that thecentral issue in the appeal is whether the debt in question hadprescribed.[2] In terms of a written agreement concluded between the parties inCape Town on 1 September 2007, the respondent borrowed the sum ofR3 050 000 (the loan capital) from the appellant. The relevant clause,upon which the outcome of this case depends, is clause 2.3 thereof. Itreads as follows:

‘The Loan Capital shall be due and payable to the Lender within 30days from the date of delivery of the Lender’s written demand.’

For reasons that I hope will become clear later in this judgment, theloan capital was immediately claimable from the respondent, but it was

TRINITY ASSET MANAGEMENT v GRINDSTONE INVESTMENTS 132 501WILLIS JA 2016 SACLR 499 (A)

a term of this clause that it would only become payable once therespondent had received the written demand for which provision ismade, and the notice period had expired.[3] Interest would accrue from the date of payment of the loan amountto the respondent. The agreement also provided that the respondentwould take steps to have a second mortgage bond registered overcertain immovable property, which it owned in Paarl, as security. Thisbond was never registered. The loan capital was paid by the appellantinto accounts designated by the respondent, in three separateinstalments: R1,5 million on 13 February 2008, R1 million on 15February 2008 and R500 000 on 21 February 2008, respectively.[4] On 19 September 2013, Mr Quinton George, the chief executiveofficer (CEO) of the appellant sent an email to Mr NicholasCunningham-Moorat, a director of the respondent, in which Mr Georgeenquired as follows:

‘Nick, could you confirm that you are happy to settle the outstandingamount on the property fund and give an indication as to when it willbe done? Steve, could you confirm with Nick the amount currentlyoutstanding?Regards,Quinton GeorgeCEO Trinity Asset Management (Pty) Ltd’

[5] On 25 September 2013, Mr Cunningham-Moorat replied as follows:‘Quinton, this note serves to confirm that Trinity has called theproperty fund. The current outstanding balance is R4,55 [million].We have executed on an associated asset sale to support this call. Allthings being equal we expect these funds to release within 60-90days.Thanks.Nick Cunningham-MooratChairman and Chief Executive Officer’

[6] The appellant received no payment from the respondent. On 9December 2013, the appellant, by service of the sheriff, delivered aletter of demand upon the respondent in terms of s 345(1)(a)(i) of theCompanies Act 61 of 1973 (the old Companies Act). The amountclaimed was R4,6 million. Some two weeks later, the respondent, via


1 See for example Borstlap v Spangenberg en andere 1974 (3) SA 695 (A)at 705H. See also AA Alloy Foundry (Pty) Ltd v Titaco Projects (Pty) Ltd [1999]ZASCA 82; 2000 (1) SA 639 (SCA) para 6.2 See Van Diggelen v De Bruin & another 1954 (1) SA 188 (SWA) at 192H-193G. See also Borstlap v Spangenberg & Andere (supra) at 705H.3 See Van Diggelen v De Bruin & another (supra) at 193B.

its attorneys, gave the appellant a written acknowledgement of receiptof the letter but denied liability. I shall deal first with the question ofwhether the appellant’s demand complied with the requirements ofclause 2.3. As will become more fully apparent later that is, however,a different issue from the ‘central’ one of prescription.[7] Relying on the deeming provision in s 345 of the old CompaniesAct, that a company served with such a letter of demand and whichdoes not discharge the alleged debt within three weeks is, in fact,unable to pay its debts, the appellant brought the application for aprovisional order winding-up the respondent.[8] Mr Duminy SC, counsel for the appellant, argued that clause 2.3established the making of a demand as a condition precedent or asuspensive condition for the obligation of the respondent to pay tocome into being. A difficulty that presents itself is that the s 345demand is one in which the debtor is given three weeks (ie 21 calendardays) in which to pay. This is less than the 30 days provided for inclause 2.3 of the applicable agreement between the parties. If, on theargument of Mr Duminy, the debt became due and payable only oncethe demand provided for in clause 2.3 had been delivered to therespondent, then the s 345 demand failed to fulfil this purpose. Thiswould remain the case even if more than thirty days after its service,the amount allegedly owing had not been paid. It is trite that conditionsin a contract are strictly interpreted and that fulfilment shouldordinarily be in forma specifica (in the terms as specified).1 Even abenevolent interpretation per aequipollens (by way of an equivalentthat was contemplated by the parties)2 is not permissible for the reasonthat there is a presumption in favour of the general requirement that thecondition must be fulfilled in forma specifica.3

[9] Accordingly, if for purposes of this issue, (ie whether the correctdemand had been made, rather than the issue of prescription), clause2.3 is assumed, in favour of the appellant, to establish a condition


4 Oertel en andere v Direkteur van Plaaslike Bestuur en andere 1983 (1) SA354 (A).5 At 366G-H. This may be translated as: ‘The 1969 Act however makesprovision only for strong prescription. After the lapse [effluxion] of the prescribedperiod of time, the debt as such is destroyed.’ (The translation is mine.) See alsoProtea International (Pty) Ltd v Peak Marwick Mitchell & Co [1990] ZASCA 16;1990 (2) SA 566 (A) at 568I-569A.

precedent or a suspensive condition for the obligation of the respondentto pay to come into being, its absence of fulfilment at the time that theprovisional order for liquidation of the respondent was sought, wouldjustify the dismissal of that application: the amount claimed was notowing, never mind unpaid.[10] In the alternative, Mr Duminy submitted that the appellant’s emailof 19 September 2013, referred to above, constituted a ‘demand’. Noteven the most vivid imagination can justify such a conclusion. If thecase is decided without reference to prescription, it will be decidedwithout reference to the ‘central issue’ agreed upon between the partiesor the basis upon which the court a quo disposed of the matter andindeed granted leave to appeal to this court. For these reasons, I turn tothe question of prescription.[11] In terms of s 11(d) of the Prescription Act (no 68 of 1969) (the1969 Prescription Act), prescription of this debt will have beencompleted three years after it had become ‘due’ unless, of course,prescription had been interrupted by, for example, an acknowledgementof debt in terms of s 14 of the 1969 Prescription Act or ‘judicialinterruption’ in terms of s 15 thereof. Interruption of prescription, byacknowledging liability is one thing, attempting to revive anextinguished debt by acknowledgement is another. It is now trite thatthe 1969 Prescription Act, unlike its 1943 predecessor, created ‘strong’prescription. In Oertel v Direkteur van Plaaslike Bestuur,4 it was saidthat:

‘Die 1969 Wet maak egter vir slegs sterk verjaring voorsiening. Naverstryking van die voorgeskrewe termyn gaan die skuld as sulks totniet.’5

Once there has been the necessary effluxion of time, the debt isextinguished. Accordingly, even if one accepts, in the appellant’sfavour, that Mr Cunningham-Moorat’s email of 25 September 2013,


6 See Nicholl v Nicholl 1916 WLD 10 at 12. Van Vuuren v Boshoff 1964 (1)SA 395 (T) at 400D. See also Sentrachem Ltd v Prinsloo 1997 (2) SA 1 (A) at 15I.7 Deloitte Haskins & Sells Consultants (Pty) Ltd v Bowthorpe HellermanDeutsch (Pty) Ltd [1990] ZASCA 136; 1991 (1) SA 525 (A).8 Union Share Agency & Investment Ltd v Spain 1928 AD 74.9 At 80-81. This passage was referred to with approval in List v Jungers1979 (3) SA 106 (A). That case, in turn, was approved in The Master v I L Back &Co Ltd & others 1983 (1) SA 986 (A) and Benson & another v Walters & others 1981(4) SA 42 (C). And both I L Back and Benson were followed in Deloitte. See also

constituted an acknowledgement of liability, it would serve to interruptprescription only if the three––year period had not completed its runbefore that date. Otherwise, the debt remains extinguished. [12] The appellant argued that because the debt was repayable ondemand, prescription commenced only once payment of the debt hadbeen demanded (ie on 9 December 2013). One must be careful not toconflate the date when a debt becomes ‘due’ and that upon whichrepayment thereof is demanded. A debt which is repayable on demandbecomes due the moment the money is lent to the debtor –– or, to usebanking terminology, ‘the advance is made’.6 The fact that a debtormay be given 30 days within which to repay that which has beendemanded does not, in my opinion, alter the principle that the debtbecame due the moment it was lent and therefore, in terms of s 11(d)of the 1969 Prescription Act, prescription begins to run from that date.[13] In Deloitte Haskins & Sells Consultants (Pty) Ltd v BowthorpeHellerman Deutsch (Pty) Ltd,7 this court said (at 532G-I) that for a debtto be ‘due’:

‘. . . there has to be a debt immediately claimable by the creditor or,stated in another way, that there has to be a debt in respect of whichthe debtor is under an obligation to perform immediately.’

It is easy for confusion to arise. A debt can be immediately claimableeven though a demand may be necessary for it to be payable. Thedistinction between ‘claimability’ and ‘payability’ was one of whichthis court was keenly aware in Union Share Agency & Investment Ltdv Spain8 where it said:

‘The distinction between the indebtedness being subject to thehappening of an event and the payment being so subject is a vital oneand should not be overlooked.’9


the title on ‘Prescription’ in 21 Lawsa 2 ed by J S Saner, especially para 125.10 Attorney-General Transvaal v Additional Magistrate for Johannesburg1924 AD 421 AD. 11 At 436.12 Crispette and Candy Co Ltd v Oscar Michaelis NO and Leopold AlexanderMichaelis NO 1947 (4) SA 521 (A) at 541.13 At 541. See, more recently, Natal Joint Municipal Pension Fund vEndumeni Municipality 2012 (4) SA 593 (SCA) para 18.14 See Uitenhage Municipality v Molloy [1997] ZASCA 112; 1998 (2) SA735 (SCA) at 742G-743C. See also The Master v I L Back & Co Ltd & others 1983(1) SA 986 (A) at 1004A-1005H; Kotzéé v Ongeskiktheidsfonds van die Unversiteitvan Stellenbosch 1996 (3) SA 252 (C) at 261H; Benson & another v Walters & others1981 (4) SA 42 (C) at 49G-H; Johan De Bruyn v Derick Du Toit [2015] ZAWCHC20 para 6.15 M M Loubser Extinctive Prescription (1996).16 At 63.

[14] In any event, clause 2.3 refers to the loan being ‘due and payable’.The very phrase ‘due and payable’, ie both ‘claimable’ and ‘payable’as at a point in time, indicates that ‘due’ and ‘payable’ are notcoextensive with one another. Ever since Attorney-General Transvaalv Additional Magistrate for Johannesburg10 it has been trite that, whenit comes to the interpretation of statutes, they ‘should be construed that,if it can be prevented, no clause, sentence or word shall be superfluous,void or insignificant’.11 Since Crispette and Candy Co Ltd v OscarMichaelis NO and Leopold Alexander Michaelis NO12 it has been clearthat, in general, the same principles apply to all written instruments,including wills and contracts.13

[15] Moreover, there is clear authority in this court that a creditorcannot, by its own conduct (or lack thereof), postpone thecommencement of prescription.14 Profesor Max Loubser in hisExtinctive Prescription15 contends, without referring to any authoritydirectly, that:

‘On account of the policy consideration that a creditor should not beable to rely on his own failure to demand performance from thedebtor in order to delay the running of prescription the courts willrequire a clear indication that the parties intended demand to be acondition precedent for the debt to become due, in which caseprescription will only begin to run from the date of demand.’16


17 De Bruyn v Du Toit [2015] ZAWCHC 20.18 Tamarillo (Pty) Ltd v BN Aitken (Pty) Ltd 1982 (1) SA 398 (A) at 432C-H.19 Standard Bank of SA Ltd v Oneanate Investments (Pty) Ltd 1995 (4) SA510 (C).20 Para 8.

[16] A similar view was expressed by Rogers J in De Bruyn v Du Toit.17

Mr Kaplan, who appeared for the respondent, accepted this as a correctstatement of law. For reasons that follow, it is not necessary for thiscourt to express itself finally on the correctness of this proposition byLoubser. The tension between the principle of freedom of contract andthe policy considerations of our strict, indeed rigorous, law ofprescription is both manifest and palpable. The legal community,including the courts, will benefit from yet further scholarlycontributions on the issue. It is far from clear that, in the present case,the parties intended ‘demand to be a condition precedent’ for the debtto become due. This presents the appellant with an insuperableobstacle. In this regard, it is helpful to bear in mind the salutarydistinction between a condition, properly so called, and a term of acontract canvassed in Tamarillo (Pty) Ltd v BN Aitken (Pty) Ltd.18 Inmy opinion, it is obvious that the requirement of demand being givenon 30 days’ notice was merely a procedural term of the agreement: inother words, the loan was to be repaid 30 days after written demandwas made.[17] Mr Duminy placed reliance on the following passage bySelikowitz J In Standard Bank of SA Ltd v Oneanate Investments (Pty)Ltd:19

‘A loan without agreement as to time for repayment is at commonlaw repayable on demand. Although by no means linguistically clear,the phrase “payable on demand” is used in this context in our law tomean that no specific demand for repayment is necessary and the debtis repayable as soon as it is incurred. When suing for repayment,there is no need to allege a demand and such a demand is not part ofthe plaintiff’s cause of action.’

This passage was referred to with approval in De Bruyn v Du Toit.20

This passage does not assist the appellant at all. On the contrary, itprovides a further pointer to the fact that a provision in a contract


21 Standard Bank of SA Ltd v Miracle Mile Investments 67 (Pty) Ltd &another [2016] ZASCA 91.22 Para 15.

requiring notice of demand is ordinarily a mere procedural term and nota necessary condition for the acquisition of a completed cause ofaction. It is correct, as Selikowitz J said, that a loan without agreementas to time for repayment is, at common law, repayable on demand.[18] Mr Duminy also relied on a recent decision of this court inStandard Bank of SA Ltd v Miracle Mile Investments 67 (Pty) Ltd21 tocontend that it was the delivery of the demand that triggered therunning of prescription, rather than the lending of the money itself.Miracle Mile dealt with a bank’s right to enforce an acceleration clausein a lending agreement. It also dealt with a long-term loan that had beensecured by mortgage bonds registered over immovable property. Verydifferent considerations apply in such a situation: as the judgmentpoints out, prescription runs against arrear instalments, as from dateswhen payment thereof was due, which differs from future instalments,which become due as a result of the requisite election by the creditorto accelerate payment of these future instalments, by reason of thedebtor’s breach.22

[19]

[20] I have had the benefit of reading the minority judgment preparedby Dlodlo AJA. My fundamental difficulty is that clause 2.3 is astandard notice clause appearing in innumerable loan agreementsthroughout the land. The interpretation placed on this clause by DlodloAJA could have far-reaching implications for the running ofprescription in all such everyday instances.[21] There is an inherent contradiction in the minority judgment.Dlodlo AJA describes the demand referred to in clause 2.3 as ‘anessential requirement for the appellant’s cause of action.’ As I havealready pointed out, if this is indeed the case, there must be strictcompliance therewith: precise fulfilment of such a requirement isimperative. I have also indicated that there was no such fulfilment in

508 TRINITY ASSET MANAGEMENT v GRINDSTONE INVESTMENTS 132DLODLO AJA 2016 SACLR 499 (A)

forma specifica. The appellant’s failure strictly to comply with theterms of this clause has not been addressed in the minority judgment.[22] The following order is made:The appeal is dismissed with costs.

Dlodlo AJA:[23] I am grateful to have had an opportunity to read my brother’s(Willis JA) judgment in this matter. However, I am unable to agreetherewith and am thus compelled to write separately. I differ with mylearned colleague in my approach and the conclusion I reach, for whichreason it will be necessary to recast the facts only in so far as isnecessary to facilitate my reasoning. [24] The appellant lent and advanced monies to the respondent pursuantto a written loan agreement. Clause 2.3 of the agreement (quoted inpara 2 above) provides that the loan is due and repayable within 30days from the date of delivery of the appellant’s ‘written demand’. Therespondent contends, on the one hand that prescription commencedrunning on the earliest date on which the appellant could have madesuch written demand. On the other hand, the appellant contends thatgiven all the circumstances, what the respondent contends was clearlynot the intention of the parties. [25] On 1 September 2007, the parties entered into the written loanagreement in terms of which the respondent borrowed a capital amountof R3 050 000 (the loan capital) from the appellant. The material termsof the loan agreement were thus, in summary, the following:(a) The respondent borrowed a capital amount of R3 050 000representing the loan capital from the appellant;(b) The loan capital was deemed to be lent and advanced on 1September 2007 notwithstanding the subsequent date of signature ofthe agreement;(c) The loan capital was due and repayable to the appellant within 30days from the date of delivery of the lender’s written demand (clause2.3);(d) Interest accrued on the loan capital at the market rate from the dateof payment to date of repayment (clause 2.4);

TRINITY ASSET MANAGEMENT v GRINDSTONE INVESTMENTS 132 509DLODLO AJA 2016 SACLR 499 (A)

(e) The respondent was to procure that a second mortgage bond beregistered over the property as security for the amounts due in terms ofthe agreement, (clause 3.1).[26] On 13 February 2008 the appellant paid an amount of R1,5 millioninto the bank account identified by one Deane, the then sole director ofthe respondent. The balance of the loan capital was paid by theappellant to the respondent in tranches of R1 million and R500 000 on15 February 2008 and 21 February 2008 respectively. The loan capitallent and advanced to the respondent would, as already mentioned, bedue and repayable to the appellant within 30 days from the date ofdelivery of the appellant’s written demand. [27] On 2 June 2009, one Mr Cunningham-Moorat (Moorat) became adirector of the respondent. On 6 April 2011 it was resolved by therespondent that it enters into a covering mortgage bond in favour of theappellant. On the same day, a Power of Attorney was signed on behalfof the respondent by Moorat in favour of one T M Gunston and variousothers, to register a covering mortgage bond in favour of the appellant.[28] On 19 September 2013, one Mr Quinton George (George), adirector of the appellant, sent an e-mail to Moorat reading inter alia asfollows:‘Nick, could you confirm that you are happy to settle the outstandingamount on the property fund and give an indication as to when it willbe done?’In response, Moorat responded as follows on 25 September 2013:‘Quinton, this note serves to confirm that Trinity has called theproperty fund. The current outstanding balance is R4,55 million. Wehave executed on an associated asset sale to support this call. All thingsbeing equal, we expect these funds to release within 60 –– 90 days.’It should be clear from this response that the respondent does not denythe indebtedness. In fact it confirms that the outstanding balance isR4.55 Million.[29] On 9 December 2013, Gunstons Attorneys, acting on behalf of theappellant, caused a letter in terms of s 345(1)(a)(i) of the CompaniesAct 61 of 1973 (the letter of demand claiming R4,6 million) to beserved by the sheriff at the respondent’s registered address. On 23December 2013 a letter from M J Hood & Associates, on behalf of therespondent, was received by the appellant. This letter made reference


to the letter of demand and denied the respondent’s indebtedness. [30] On 18 July 2014, the appellant caused to be issued an applicationfor the provisional liquidation of the respondent on the basis of therespondent’s failure to pay its debts within the stipulated time in termsof s 345 of the Companies Act. On 28 August 2014, in an answeringaffidavit filed in those proceedings, deposed to by Moorat, the defenceof prescription was raised in limine. [31] The court a quo held that there was no significant dispute of factin the matter. It found the defence of prescription to be valid. The courtheld that it was not required to determine the merits of the defence orwhether it (the defence) was likely to succeed at trial, but that it wasmerely required to determine whether the debt sought to be recoveredwas disputed on reasonable grounds. In the meanwhile the respondent,however, failed to register the covering bond.[32] It bears mentioning that in response to the letter of demand, therespondent claimed that clause 3 of the agreement (providing for theregistration of the covering Mortgage bond) constituted a conditionprecedent which had not been complied with. Accordingly, it wascontended that the demand was premature. The respondent’s attorney,in the letter referred to above (para 27), had also referred to clause 2.3of the agreement stating that the appellant had not yet made a properdemand to the respondent. In its answering affidavit, the respondentadmitted the conclusion of the loan agreement; the signature of theresolution and power of attorney; the exchange of e-mails; and thereceipt of and its response to the s 345 letter. However, the respondentcontends that its debt was extinguished by prescription in terms of s11(d) of the Prescription Act 68 of 1969. The respondent contendsfurther that the appellant was not entitled to postpone thecommencement of prescription by delaying the making of the writtendemand referred to in clause 2.3 of the loan agreement (which wouldhave rendered the debt due and repayable.) The respondent pleaded thatit was incumbent upon the appellant to have issued the written demandon 1 September 2007. The latter date is the deemed date for theadvancing of the loan stipulated in clause 2.7 of the loan agreement. Inthe alternative, in the heads of argument, the respondent contends thatit was incumbent upon the appellant to have issued the written demand30 days from the date on which each tranche of the loan was advanced.


This alternative contention was not argued in court though. [33] I agree with the contention advanced on behalf of the appellantthat the respondent failed to plead and prove the date of inception of therunning of prescription. The respondent’s allegation that the running ofprescription commenced on 1 September 2007 is, to my mind, difficultto accept. On 1 September 2007 the appellant had not yet advanced anymonies to the respondent. I similarly have extreme difficulty to acceptthe contention advanced in the alternative to the effect that demandshould have been made within 30 days of each tranche advance. If theparties intended that to be the case, then they would have most certainlysaid so in the loan agreement. The reading of the loan agreement makesit clear that the parties did not contemplate demand having to be madewithin 30 days of the advance being made. Nor does the loan agreementoblige the appellant to make demand at or within such time or beforeany particular date at all. [34] In my view, calling up the loan by way of demand as contemplatedin clause 2.3 of the agreement, was an essential requirement for theappellant’s cause of action. Accordingly, the running of prescriptiondid not commence until 30 days after the making of a written demand.This view is reinforced by the fact that it was the intention of theparties that the debt arising from the loan agreement was to be securedby way of a second mortgage bond. Additionally, the resolutionadopted by the director of the respondent on 6 April 2011, that therespondent register a covering mortgage bond in favour of the appellantand the signing of a power of attorney by the respondent’s director onthe same day, evidences this intention. [35] It is abundantly clear on the above articulated facts that it couldnever have been the intention of the parties that the tranches of loancapital could become due and repayable within 30 days of the dates onwhich such amounts were advanced. This too, although contained in therespondent’s heads of argument, was not argued in court. In SassoonConfirming and Acceptance Co (Pty) Ltd v Barclays National Bank Ltd1974 (1) SA 641 (A), this court held as follows (at 646B):‘The first step in construing a contract is to determine the ordinarygrammatical meaning of the words used by the parties (Jones v Anglo-African Shipping Co (1936) Ltd 1972 (2) SA 827 (AD) at 834E). Veryfew words, however, bear a single meaning, and the “ordinary”


meaning of words appearing in a contract will necessarily depend uponthe context in which they are used, their interrelation, and the nature ofthe transaction as it appears from the entire contract.’Similarly, in Privest Employee Solutions (Pty) Ltd v Vital DistributionSolutions (Pty) Ltd [2005] ZASCA 52; 2005 (5) SA 276 (SCA) thiscourt held as follows (para 21):‘The language used in the agreement is the first port of call inascertaining the common intention of the parties. In this regard thelanguage must be given its ordinary and grammatical meaning unlessthis results in absurdity, repugnancy or inconsistency with the rest ofthe agreement: Sassoon Confirming and Acceptance Co (Pty) Ltd vBarclays National Bank Ltd 1974 (1) SA 641 (A) at 646B and Coopers& Lybrand and others v Bryant 1995 (3) SA 761 (A) at 767 E-F.’(See also Natal Joint Municipal Pension Fund v EndumeniMunicipality [2012] ZASCA 13; 2012 (4) SA 593 (SCA) para 18.)[36] In Stockdale & another v Stockdale 2004 (1) SA 68 (C), the courtheld that in order to decide the issue of prescription which had beenraised, the court had to have regard, inter alia, to the backgroundcircumstances and the wording of the two acknowledgments of debt.This was an appeal against a magistrate’s judgment. The question fordetermination was whether, in the light of the specific terms of theacknowledgments of debt, and the relevant background circumstances,prescription began running on the debts immediately (ie with effectfrom 1 February 1991 –– date of signature on the acknowledgments ofdebt) or not. The court held, inter alia, that s 12(1) of the PrescriptionAct expressly required that a debt be ‘due’ before prescription couldbegin to run. The question of when a debt becomes due (the court held)has to be determined by the intention of the parties and in the light ofthe policy consideration underlying the Act that a creditor should notbe allowed to rely on its own inaction in order to delay the running ofprescription against him. The court in Stockdale thus reasoned asfollows (para 13): ‘It is clear that in determining when a debt arises and when it becomesdue (opeisbaar) different concepts are concerned. A distinction needsto be made between “the coming into existence of the debt on the onehand and recoverability thereof on the other” (List v Fungers 1979 (3)SA 106 (A) at 121C-D). The stage when a debt become recoverable,


and therefore due in the sense in which the Act speaks of it, has beendescribed as follows in Deloitte Haskins & Sells Consultants (Pty) Ltdv Bowthorpe Hellerman Deutsch (Pty) Ltd 1991 (1) SA 525 (A) at532H:“(T)here has to be a debt immediately claimable by the creditor orstated in another way, that there has to be a debt in respect of which thedebtor is under an obligation to perform immediately.”Clearly then it is essential to determine the intention of the parties asregards the “immediate” payment of the debt.’[37] I have, for instance, no quarrel with the fact that as a general ruleof law in all obligations in which a time for payment was not agreed,the debt is due forthwith. (See Lancelot Stellenbosch Mountain Retreatv Gore NO [2015] ZASCA 37 para 12, and the authorities cited in fn 7.)This, of course, clearly might be qualified in the light of the particularcircumstances of the case. Voet (12.1.19) says that in the case of a loanfor consumption where no time for repayment has been fixed themoney must be repaid ‘not forthwith, but after the passage of amoderate time, so that in the meantime the borrower will have beenable to enjoy at least some advantage out of the loan and the use of themoney.’ (See Sir Percival Gane’s translation The selective Voet beingcommentary on the Pandects Paris edition of 1829 (1955) vol 2 at 772.)In the words of Mohamed CJ in Uitenhage Municipality v Molloy 1998(2) SA 735 (SCA) at 742H-743A: ‘If creditors are allowed by their deliberate or negligent acts to delaythe pursuit of their claims without incurring the consequences ofprescription, that purpose would be subverted.’ Mahomed CJ expanded at 742G as follows:‘The rationale in the cases which have held that a creditor cannot “byhis own conduct postpone the commencement of prescription” byrefraining from satisfying the condition which would render a debt dueand payable, apply equally where the creditor has failed to take orinitiate the steps which fall within his or her power to make it possiblefor such a condition to be satisfied.’[38] The court a quo in support of its findings quoted a passage fromJ C de Wet and A H Van Wyk Die Suid-Afrikaanse Kontraktereg enHandelsreg 5 ed (1992) at 292. It is apposite to set out this quotationhereunder:


‘Uit die aard van die saak kan verjaring eers begin loop op die dagwaarop die skuldenaar moet voldoen, dit wil sêê, op die dag waaropdie skuld opeisbaar word. Hierdie benadering word, soos mens kanverwag, in die ou wet en in die nuwe wet aangetref. Soos hierbo alaangetoon, is ‘n skuld, wat uit ooreenkoms ontstaan onmiddelik nasluiting van die ooreenkoms opeisbaar, tensy anders ooreengekom.’(My emphasis.)

I emphasise the portion of the authors’ quotation which I think neededserious consideration by the court a quo. The words ‘tensy andersooreengekom’ (ie unless otherwise agreed) has serious significance. Isay so because in the present case the parties in the loan agreementindeed expressly agreed otherwise. This is pertinently set out in whatI regard as the clear terms in clause 2.3 of the loan agreement.Therefore the ‘tensy anders ooreengekom’ in the authors’ quotationbrought about an exception to the general rule spoken of by the authors.[39] Nicholl v Nicholl 1916 WLD 10, a judgment relied on by the courta quo, contains the following observation made by Mason J (at 12):

‘Mr Greenberg argued for the applicant that as the claim came withinthese sections no right of action arose until demand was made, and nodemand was made until January of this year. But even if this were aclaim payable on demand, the right of action existed as soon as theadvances were made; the rule that demand should be made so as toentitle the plaintiff to costs has never been construed to mean thatdemand is a condition precedent to the right of action.’

One must bear in mind that beside the fact that Nicholl dealt with theposition under the Transvaal pre-Union Prescription Act 26 of 1908, italso dealt with demand as a pre-requisite for mora.[40] I do agree with the judgment by Rogers J in De Bruin v Du ToitWCC case number 1162/2015 (27 February 2015) para 6 where hemade the following observation:

‘Stockdale and earlier cases dealing with amounts payable “ondemand” do not lay down a rule that such a debt becomes due forpurposes of prescription only after demand has been made. On thecontrary, and in keeping with the principle that a creditor cannotdelay the commencement of prescription by failing to take a stepwithin his power, it has been held on a number of occasions that loanrepayable on demand is immediately due for purposes of prescription.


It is only where the giving of notice is a condition precedent for aclaim, and thus a necessary ingredient of the creditor’s cause ofaction, that the running of prescription is deferred until the giving ofnotice’ (My emphasis.)

[41] The present case addresses itself to the emphasised portions of thejudgment by Rogers J. There was extensive reference to the work ofProfessor Loubser (Extinctive Prescription (1996)) in submissionsbefore us. Noticeably, Loubser contends that prescription serves toprotect the debtor from liability in a case where he is justified inassuming that the creditor no longer intends to enforce his right. (SeeM M Loubser Extinctive Prescription (1996) at 62.) But in the presentcase this is of course not the situation. In this case the agreementclearly and unequivocally, in my view, provides in clause 2.3 thatperformance is due on demand. I accept in the circumstances that thiswas intended to mean one thing and one thing only, namely thatdemand was a condition precedent for the debt to become payable. Thatbeing the case, undoubtedly prescription would only begin to run fromthe date of the demand. (See, also in this regard, Loubser op cit 63.)After reviewing the authorities on the subject-matter (op cit 53-56)Loubser concluded his discussion as follows (at 63):

‘On account of the policy consideration that a creditor should not beable to rely on his own failure to demand performance from thedebtor in order to delay the running of the prescription the courts willrequire clear indication that the parties intended demand to be acondition precedent for the debt to become due, in which caseprescription will only begin to run from the date of demand.’ (Myemphasis.)

In my view, the ‘clear indication that the parties intended demand to bea condition precedent for the debt to become due’ is contained in clause2.3 of the loan agreement and the agreed registration of a furthermortgage bond covering the loan capital stipulated in the loanagreement. [42] In the specific circumstances of the present case, to suggestdifferently would be difficult for me to accept. We must always bear inmind that this was a financial transaction entered into by twocommercial entities. One must accept that seasoned business personsmust have been involved in this loan agreement acting in the best


interests of their respective business entities. Regard being had to therespondent’s version, it was necessary for it to ‘execute on anassociated asset sale’ in order to support the appellant’s call on theproperty fund. The funds would then be released within 60 to 90 daysto pay the appellant’s debt. At the risk of repeating a point alreadymade, the fact that the debt was to be secured by a mortgage bondevidences the parties’ intention and that active steps were taken by therespondent in passing a resolution and signing a power of attorney inorder to give effect to this intention. The respondent’s response to thes 345 letter was but a denial that the debt was due. The respondentalleged that there had not been proper demand. It did not then say thedebt had prescribed. [43] Regard being had to the aforegoing I would uphold the appeal withcosts including costs of two counsel.

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