Compass Insurance Company Ltd v Cobus Smit Projekbestuur CC and Another

• Jurisdiction: South Africa
• Citation: 2019 (1) SA 413 (WCC)

Compass Insurance Company Ltd v Cobus Smit Projekbestuur CC and Another
2019 (1) SA 413 (WCC)

2019 (1) SA p413

Citation	2019 (1) SA 413 (WCC)
Case No	14667/2014
Court	Western Cape Division, Cape Town
Judge	Meer J
Heard	September 10, 2018
Judgment	September 10, 2018
Counsel	IC Bremridge SC for the applicants/defendants.; T Crookes for the respondent/plaintiff.

Flynote : Sleutelwoorde

Engineering and construction law — Building contract — Construction guarantee — Rectification — A (as guarantor) issuing guarantee to B (as beneficiary), to cover C's (contractor's) performance in terms of contract between C and B — Rectification of guarantee may be sought at instance C of contractor, even though not signatory to guarantee, on basis that guarantee intended to reflect common intention of guarantor, beneficiary and contractor.

Headnote : Kopnota

The plaintiff, as guarantor, had issued a construction guarantee to the Malik Trust, D as beneficiary, for the purposes of covering the performance of the first defendant (the contractor) under the latter's construction contract with the Malik Trust. After paying out to the beneficiary, the plaintiff sought to recover such amount from the first defendant. The first defendant delivered a plea, and subsequently, in the present application, sought to amend it to advance a case for rectification of the guarantee, on the grounds that the guarantee did not reflect the parties' common intention. The plaintiff E objected on the basis that the first defendant was not a party to the guarantee sought to be rectified, such a contract being viewed in law as an autonomous, independent contract between the guarantor and the beneficiary. The defendants accepted the plaintiff's characterisation of the guarantee contract as being autonomous, but added that it was founded on F the common intention of the guarantor, the beneficiary and the contractor.

Held, that the present guarantee contract was intended to reflect the common intention of the plaintiff (guarantor), the Malik Trust (beneficiary), and the first defendant (contractor), even though the latter was not a signatory to the guarantee. This was so, given the following circumstances: The guarantee contract arose as a result of the underlying construction contract G between Malik Trust and the first defendant, the guarantee providing that the Malik Trust would be able to claim from the plaintiff a specific amount should the first defendant not carry out its obligations in terms of the construction contract; further, the guarantee contract was drafted at the instance, and under the instructions, of the first defendant (which desired cover for its construction contract). (See [22] – [24].) Further, to say that the H guarantee contract reflected this common intention did not detract from its autonomous nature (see [24]).

Held, further, that a guarantee contract could be rectified to reflect the common intention of the guarantor, beneficiary and contractor (see [11] – [13] and [25]).

Held, in the circumstances, that nothing barred the first defendant from seeking I to rectify the guarantee contract to reflect what it alleged to be the common intention of the parties. Amendment granted. (See [26] – [27].)

Cases cited

Compass Insurance Co Ltd v Hospitality Hotel Developments (Pty) Ltd 2012 (2) SA 537 (SCA): dictum in para [14] applied J

2019 (1) SA p414

Dormell Properties 282 CC v Renasa Insurance Co Ltd and Others NNO A 2011 (1) SA 70 (SCA) ([2011] 1 All SA 557): dicta in paras [37] and [51] – [52] approved

Hollard Insurance Co Ltd v Jeany Industrial Holdings (Pty) Ltd 2016 JDR 1300 (GJ): dicta in paras [27] and [32] applied

Lombard Insurance Co Ltd v Landmark Holdings (Pty) Ltd and Others B 2010 (2) SA 86 (SCA): dictum at 90E – G applied

Meyer v Merchants' Trust Ltd 1942 AD 244: dictum at 253 applied

Molebatsi t/a Tswelelopele Building Construction v Aegis Insurance Co BAD 4/92: considered

Netherlands Bank of South Africa v Stern, NO and Another 1955 (1) SA 667 (W): dictum at 672C – D applied

Steelmetals Ltd v Truck and Farm Equipment (Pty) Ltd C 1961 (2) SA 372 (T): dictum at 376A – C applied

Turnbull-Jackson v Hibiscus Coast Municipality and Others 2014 (6) SA 592 (CC) (2014 (11) BCLR 1310; [2014] ZACC 24): dictum in para [56] applied

Union Government (Minister of Finance) v Chatwin 1931 TPD 317: dictum D at 320 – 321 applied.

Case Information

IC Bremridge SC for the applicants/defendants.

T Crookes for the respondent/plaintiff.

Application by defendants for amendment of their plea to plaintiff's E action.

Order

1.

The first and second defendants' plea is amended in the manner set out in the first and second defendants' notice of amendment dated 14 May 2018, being annexure MBM2 to the founding affidavit in F support of the application.

2.

The first and second defendants shall pay the costs of the application, whilst the plaintiff shall pay the costs of opposing the application.

Judgment

Meer J: G

[1] The defendants applied for the amendment of their plea in case No 14667/2014, in accordance with their notice of amendment dated 14 May 2018. The plaintiff in that matter, Compass Insurance Company Ltd, has objected to the proposed amendment by way of notice of H objection dated 28 May 2018.

[2] The objection is limited to the amendment contemplated by paras 3 – 7 of the notice of amendment, in which the defendants seek to advance a case for rectification of a guarantee issued by the plaintiff on behalf of the first defendant.

The I grounds of objection

[3] Whilst the notice of objection raises no objection that the amendment is out of time or late, the answering affidavit refers to the prejudice suffered by the plaintiff due to the ongoing delay in bringing this matter to trial. It is contended that, despite having been declared trial-ready in J February 2017, the matter has not been able to come to trial. With

2019 (1) SA p415

Meer J

regard to the delay occasioned by the amendment, it is contended that, A despite a long series of pre-trial conferences dealing with the trial-readiness of the matter, it was not until 25 April 2018 that the defendants decided to bring this amendment.

[4] However, it is noted that, when the notice of amendment was delivered, no trial date had been allocated and the matter had not yet B been declared trial-ready. The parties agreed a timetable for the filing of papers in this application, and the matter has since been declared trial- ready and a preferent date has been granted for the hearing of this application; and the Judge President has indicated that he could be approached for a preferent trial date. Given these circumstances, I am C inclined to agree with the defendants that there is no basis for the plaintiff to allege prejudice which would warrant this application being refused. The application is accordingly not refused on the basis of the alleged delay.

[5] The plaintiff's objection in the notice of objection, on the merits, is on two grounds: D

[5.1]

Firstly, that the defendants have failed to allege an antecedent agreement that has been reduced to writing; and

[5.2]

secondly, that the first defendant is not a party to the guarantee contract sought to be rectified, it being a contract between the plaintiff and the...