Petric Construction CC t/a AB Construction v Toasty Trading t/a Furstenburg Property Development and Others

• Jurisdiction: South Africa
• Citation: 2009 (5) SA 550 (ECG)

Petric Construction CC t/a AB Construction v Toasty Trading t/a Furstenburg Property Development and Others
2009 (5) SA 550 (ECG)

2009 (5) SA p550

Citation	2009 (5) SA 550 (ECG)
Case No	123/09
Court	Eastern Cape High Court, Grahamstown
Judge	Sandi J
Heard	February 17, 2009
Judgment	March 30, 2009
Counsel	N Schultz for the applicant.; MJ Lowe SC (with SH Cole) for the respondents.

Flynote : Sleutelwoorde F

G Engineering and construction law — Building contract — Construction guarantee — Payment — Contractor, as non-party to guarantee, not entitled to restrain payment of guarantee pending resolution of dispute relating to contract — Developer entitled to payment upon compliance with provisions of guarantee.

Headnote : Kopnota

H The applicant, a building contractor, entered into a written agreement with a property developer (the first respondent) for the construction of a residential development. Pursuant to the agreement, the applicant furnished a construction guarantee, issued on applicant's behalf by the second respondent, an insurance company (the third respondent being the underwriter). I A dispute arose between the applicant and the first respondent as to the validity and legality of the first respondent's purported termination of the principal building agreement which was referred to arbitration. Pending resolution of the dispute, the applicant approached the High Court on

2009 (5) SA p551

motion for an order restraining the second and third respondents from A paying the first respondent any amount claimed by the first respondent in terms of the construction guarantee. The application was granted in the form of a rule nisi. On the return day, the first respondent raised the point in limine that it was entitled to payment of the construction guarantee by virtue of having complied with the conditions specified in the guarantee for receiving payment and that the disputes raised by the applicant did not B constitute a ground for non-payment or for delaying payment.

Held, that the alleged disputes between the applicant and the first respondent were irrelevant to the construction guarantee. The second respondent, the guarantor, was not taking part in the proceedings and had not alleged any reason why it should not pay the guarantee to the first respondent. It was the applicant that invited the court to go behind the terms of the guarantee. C The court could not do so. The parties to the guarantee were the first and second respondents. The applicant played no part in it. (Paragraph [27] at 556F - G.)

Held, further, that the first respondent had complied with the provisions of the construction guarantee, and, there being no evidence that the first respondent had committed fraud, the second respondent was obliged to comply D with the terms thereof. (Paragraph [28] at 556J - 557A.) Rule discharged.

Cases Considered

Annotations

Reported cases

Basil Read (Pty) Ltd v Beta Hotels (Pty) Ltd and Others 2001 (2) SA 760 (C): distinguished E

Ex parte Sapan Trading (Pty) Ltd 1995 (1) SA 218 (W): referred to

Loomcraft Fabrics CC v Nedbank Ltd and Another 1996 (1) SA 812 (A) ([1996] 1 All SA 51): referred to

Phillips and Another v Standard Bank of South Africa Ltd and Others 1985 (3) SA 301 (W): referred to. F

Unreported cases

Federated Insurance Guarantee Brokers (Pty) Ltd v Johannesburg Development Agency (Pty) Ltd (NPD case No AR 9/8): dictum in para [13] applied.

Case Information

Application for an interim interdict. The facts appear from the G judgment of Sandi J, East London Circuit Local Division.

N Schultz for the applicant.

MJ Lowe SC (with SH Cole) for the respondents.

Cur adv vult. H

Postea (April 3).

Judgment

Sandi J:

[1] On 30 March 2009 I issued an order in the following terms: I

'The rule is discharged with costs, such costs to include the costs of two counsel.'

I intimated that my reasons would follow. These are the reasons.

[2] By agreement between the parties, on 17 February 2009 the following order was issued by a judge of this division: J

2009 (5) SA p552

Sandi J

'1.

A That a Rule Nisi issues herewith calling upon the Respondents to show cause on 17 March 2009, why a final order should not be made in the following terms:

1.1

The Second Respondent and Third Respondent be and are hereby interdicted and restrained from paying the First Respondent any amount claimed by the First Respondent from B the Second and/or Third Respondent in terms of construction guarantee number 813550J, issued by the Second Respondent on 30 August 2007 pending the final determination of the dispute between the Applicant and the First Respondent, relating to the validity and legality of the First Respondent's purported termination of the principal building agreement C entered into between the Applicant and the First Respondent on 16 May 2007.

1.2

The First Respondent pays the costs of suit.

1.3

That the provisions of paragraph 1.1 above shall operate as an interim interdict with immediate effect.'

D [3] The applicant seeks confirmation of the rule, which is opposed by the first respondent.

[4] The applicant, Petric Construction CC t/a AB Construction, is a building contractor, and the first respondent is a property developer. The second respondent, Constantia Insurance Company Ltd, is the company E that issued a construction guarantee in favour of the first respondent. The third respondent, SGI Guarantee Acceptance (Pty) Ltd, carries on business as management underwriters to the second respondent.

[5] The applicant seeks no order against the second and third respondents, and these respondents are not opposing the relief sought herein.

F [6] On 16 May 2007 the applicant and the first...