Article

Note: The applicant of a lease (demand) guarantee applied for a final interdict (injunction) ordering the guarantor of the guarantee (third respondent) to credit the applicant’s bank account held with the guarantor with an amount of ZAR 2 313 671.

The first respondent (“Pangbourne Properties”), as lessor, and the applicant (“Sena Trucking”), as lessee, entered into a lease agreement on 24 February 2012 (“underlying contract”) in respect of a certain immovable property. Sena Trucking leased the property from Pangbourne Properties (the first respondent) for a period of three years from 1 February 2012 to 31 January 2015. A deposit of ZAR 2 313 671 in the form of a bank guarantee was required from Sena Trucking. The lease (demand) guarantee was furnished by the third respondent (“Standard Bank”) in favour of Pangbourne Properties (beneficiary). The lease guarantee contained the following clauses (para 17 (my emphasis)):

“1. The third respondent held the guaranteed amount on behalf of the applicant at the disposal of the first respondent.

  1. The guaranteed amount would be paid to the first respondent unconditionally upon receipt by the third respondent of a first written demand.
  2. The third respondent’s responsibility under the guarantee was principal in nature and was not subject to the lease or any other agreement.
  3. The third respondent would pay on demand and would not determine the validity of the demand or become party to any claim or dispute of any nature which any party might allege.
  4. Payment under the guarantee would only be made at the Sandton branch of the third respondent against return of the original guarantee by the first respondent or the first respondent’s duly authorised agent.”

In terms of the lease agreement Pangbourne Properties would have the right of applying the whole or portion of the deposit towards payment of rent, water, electricity, gas or other charges, key replacements or any other liability of whatever nature for which the applicant would be liable, including damages attributed to the cancellation of the lease. The deposit would be retained by Pangbourne Properties (ie, the beneficiary and lessor) and/or its designated person free from interest until Sena Trucking, the lessee, vacated the property and was completely discharged from its obligations to Pangbourne Properties arising from the lease. The lease provided that Sena Trucking upon termination of the lease, was to return and redeliver the leased premises to the lessor (Pangbourne Properties) in good order and repair and make good and repair at its own cost on demand any damage, breakages or in the alternative, at the lessor’s written election, reimburse the lessor for the cost of replacing, repairing or making good any broken, damaged or missing articles howsoever caused (paras 1 and 2).

The lease between Sena Trucking and Pangbourne Properties was due to expire on 31 January 2015. The lease guarantee was initially also due to expire on 31 January 2015 or upon payment of the guaranteed amount, whichever event occurred first, but was later extended to 30 April 2015 (para 4). JHI Properties (Pty) Ltd, the second respondent, acted as the management agent for the Pangbourne Properties at all relevant times (para 5).

The lease between Sena Trucking and Pangbourne Properties was concluded as a result of a Storage Agreement which Sena Trucking CC and Hitachi Power Africa (Pty) Ltd had entered into during December 2009 and that would terminate on 17 February 2015 (para 3).

The lease between Sena Trucking and Pangbourne Properties was due to expire on 31 January 2015 while the Storage Agreement was due to expire only on 17 February 2015 which would have been seventeen days after the expiry of the lease. This necessitated negotiations between Sena Trucking and Pangbourne Properties so that Sena Trucing would vacate the property only on 17 February 2015. Consensus was reached and Sena Trucking vacated the property on 17 February 2015.

A dispute of fact arose between Sena Trucking and Pangbourne Properties and latter’s management agent, JHI Properties (Pty) Ltd, relating to whether or not the property was properly reinstated. Pangbourne Properties, by way of its attorney, addressed a letter to Sena Trucking calling on them to reinstate the property “as provided for in the agreement of lease within a period of seven (7) days” from 3 March 2015 failing which Pangbourne Properties would “in accordance with the provisions of the agreement of lease carry out the required reinstatement works” and then hold Sena Trucking liable for the reinstatement costs. Sena Trucking denied any wrongdoing and/or obligation to effect any further remedial measures and indicated that any legal action which Pangbourne Properties intended taking would be opposed.

On 12 March 2015 Pangbourne Properties’ management agent, JHI Properties (Pty) Ltd, addressed two letters to Standard Bank, the guarantor of the lease guarantee (third respondent). The first letter enclosed a letter of claim to Sena Tracking CC; the original lease guarantee; and a letter confirming that JHI Properties (Pty) Ltd was the management agent. The second letter advised Standard Bank that Sena Trucking had failed to comply with its obligations in respect of the lease and that JHI Properties (Pty) Ltd, the managing agent, requested Standard Bank to pay the amount of ZAR 2 313 671 which was then due, owing and payable into their bank account held with First National Bank in the name of JHI: Capital property Trust Account. The branch code and the reference number were also supplied. Standard Bank obliged and paid into the bank account of the management agent.

Sena Trucking instituted legal action and eventually sought a final interdict (injunction) ordering Standard Bank to credit Sena Trucking’s bank account held with the Standard Bank with the amount of ZAR 2 313 671. Sena Trucking argued that Standard Bank had issued a lease guarantee in favour of Pangbourne Properties. The lease guarantee clearly stipulated that Standard Bank was holding the guaranteed amount on behalf of Sena Trucking for the benefit of Pangbourne Properties in respect of the underling lease agreement between Sena Trucking and Pangbourne Properties which amount would be paid to Pangbourne Properties unconditionally upon receipt by Standard Bank of a first written demand. However, pursuant to the letters from JHI Properties (Pty) Ltd addressed to Standard Bank, Standard Bank rather made the payment as directed in those letters. Therefore, the payment made by Standard Bank in terms of the lease guarantee was erroneous and incorrect, according to Sena Trucking. Sena Trucking contended that this payment was in breach of the strict stipulations provided for in the lease guarantee, because the payment should have been made into Pangbourne Properties’ bank account and not into the account of JHI Properties (Pty) Ltd. Furthermore, the payment was also required to be made at the Sandton branch of Standard Bank and not at any other branch.

Standard Bank and Sena Trucking agreed that the lease guarantee involved in this case was an independent (demand) guarantee (para 15). The court (per Msimeki J) also agreed that the lease guarantee clearly revealed that Standard Bank’s payment obligation towards Pangbourne Properties was wholly independent from the lease (underlying) agreement.

Standard Bank argued that Sena Trucking had failed to satisfy the essential requirements for obtaining a final interdict (injunction) and that, as a result, the application at this level of enquiry should fail. For instance, that it had no right under the guarantee; had failed to demonstrate any injury or prejudice to itself as a result of Standard Bank making payment to Pangbourne Properties (the first respondent) through JHI Properties (Pty) Ltd, the management agent ( second respondent) under the guarantee; and it had failed to demonstrate the absence of another satisfactory remedy. The court agreed with these arguments (paras 16–26).

Sena Trucking contended that Standard Bank had breached the strict stipulations in the lease guarantee. Sena Trucking argued that the payment should have been made only into Pangbourne Properties’ account held with Standard Bank. It argued that the beneficiary was not entitled to payment if it neglected to present a document specified by the guarantee or presented a document that did not meet all the requirements of a guarantee or if the demand was not made in a manner and within the prescribed period of the guarantee. Even very slight deviations would disentitle the beneficiary to receive payment. It was even worse, where it was “not the beneficiary that requests payment of the guarantee, and a party with whom there is absolutely no legal relationship as between the guarantor, beneficiary and principal, then and in those circumstances, no payment should be made” (para 30). For that reason, Standard Bank was not entitled to make payment in respect of the lease guarantee because there was no strict compliance with the terms of the lease guarantee as required.

Standard Bank disagreed and felt there was no breach of the strict stipulations of the lease guarantee. As support for its view, Standard Bank argued that the guarantee did not stipulate that payment should be made into Pangbourne Properties’ bank account. The court agreed with this argument. Standard Bank also stressed that JHI Properties (Pty) Ltd, at all material times, acted as the managing agent of Pangbourne Properties. It added that there was nothing wrong in the managing agent instructing Standard Bank as to how and where to effect payment given the fact that the lease guarantee was silent regarding the account into which payment had to be made (paras 27 and 28). Standard Bank argued that the place where the lease guarantee was to be called was not a material term. The place of payment clause, according to Standard Bank, was for the benefit of Standard Bank and not Pangbourne Properties, the beneficiary. Standard Bank could have declined payment unless same was made at its Sandton branch. However, there was nothing wrong in discharging an obligation pursuant to a demand as long as the beneficiary was happy to receive performance as demanded and where it preferred. Had the beneficiary wanted to receive performance at Standard Bank’s Sandton branch Standard Bank would have had to oblige. The parties to the lease guarantee, according to Standard Bank, waived the right to make payment and receive payment respectively at the Sandton branch of Standard Bank. The waiver, according to Standard Bank, had nothing to do with Sena Trucking, the applicant of the lease guarantee. The court agreed with Standard Bank’s contentions in this regard and found Sena Trucking’s arguments to be flawed (paras 28 and 29).

The court dismissed Sena Trucking’s application with costs on the scale as between attorney and client (para 36).

* Professor of Law, Department of Mercantile Law, School of Law, University of South Africa.

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