THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Not reportable
Case no: 693/2021

In the matter between:

MILLENIUM ALUMINIUM AND GLASS SERVICES CC
FIRST APPELLANT

MOHANLALL BRIDGENUN
SECOND APPELLANT

FAST TRACK CONTRACTING AFRICA (PTY) LTD                   THIRD APPELLANT

and

GROUP FIVE CONSTRUCTION (PTY) LTD                             FIRST RESPONDENT

CONSTANTIA INSURANCE COMPANY LIMITED            SECOND RESPONDENT

Neutral citation:
Millenium Aluminium and Glass Services CC and Others v Group
Five Construction (Pty) Ltd and Another (693/2021) [2022]
ZASCA 180 (14 December 2022)

Coram:
ZONDI and MOTHLE JJA and NHLANGULELA, SALIE-HLOPHE and
SIWENDU AJJA

Heard:
22 November 2022

Delivered:
This judgment was handed down electronically by circulation to the
parties’ representatives by email, publication on the Supreme Court of Appeal website
and release to SAFLII. The date and time for hand-down is deemed to be 11:00 am
on 14 December 2022.

Summary:
Construction guarantee – whether the requirements were met - insurer’s
obligation to pay – failure by the subcontractor to pay the certified payment advice
triggers insurer’s liability to pay – terms of the guarantee met.

___________________________________________________________________

ORDER
___________________________________________________________________
On appeal from: Gauteng Division of the High Court, Johannesburg (Matojane J,
sitting as court of first instance):
The appeal is dismissed with costs.
___________________________________________________________________

JUDGMENT
___________________________________________________________________
Zondi JA (Mothle JA and Nhlangulela, Salie-Hlophe and Siwendu AJJA
concurring):
[1] The first respondent, Group Five Construction (Pty) Ltd (Group Five
Construction), had, in the Gauteng Division of the High Court, Johannesburg (the high
court), claimed payment of an amount of R1 490 364.09 including interest and costs,
from the second respondent, Constantia Insurance Company Limited (Constantia) and
the first appellant, Millenium Aluminium and Glass Services CC (Millenium), in terms
of the guarantee.

[2] Subsequently, Constantia had, by way of a third party notice procedure, sought
and obtained from the high court an order joining Millenium, Mr Mohanlall Bridgenun,
the second appellant, and Fast Track Contracting Africa (Pty) Ltd (Fast Track), the
third appellant, as third parties on the basis of the indemnity and the deed of suretyship
signed by these third parties in favour of Constantia.

[3] Millenium’s defence was that Group Five Construction did not comply with the
terms of the guarantee when it demanded payment from Constantia, because it
presented Constantia with a payment advice which did not, on its face, entitle Group
Five Construction to receive payment in terms of agreement.

[4] The high court ordered Constantia to pay Group Five Construction the amount
claimed, together with interest and costs. It also granted relief in a dispute between

Constantia and Millenium which did not concern Group Five Construction.1 The appeal
is before this Court with the leave of the high court and is directed at paragraphs 3-7
of the high court order.

[5] The relevant parts of the high court order read as follows:
‘3.
The First Respondent is ordered to make payment to the Applicant in the amount of
R1 419 364.09.
4.
The first respondent is ordered to pay applicant's costs.
5.
It is declared that the third parties are obliged, jointly and severally, to indemnify
Constantia Insurance Company Limited (“Constantia”) from the demand made on Guarantee
117929J by Group Five Construction Proprietary Limited (in business rescue) (“Group Five”).
6.
The third parties, jointly and severally, the one paying the other to be absolved, are
ordered to pay Constantia the sum of R 1 419 364.09 together with interest at a rate of 10%
per annum from 18 May 2020 to date of final payment.
7.
The third parties pay all costs, on an attorney and client scale, incurred by Constantia
in resisting Group Five's claim against it and pursuing the third party proceedings against the
third parties.’

[6] The issue therefore is whether Group Five Construction in making a demand
on the guarantee complied with its requirements. The facts within which the issue must
be determined are the following. During or about 26 May 2015, Group Five
Construction was appointed as a building contractor to carry out a project in Durban
known as  Pearls of Umhlanga – Pearl Sky. Group Five Coastal (Pty) Ltd (Group Five
Coastal), acting as an agent of Group Five Construction, appointed Millenium as a
subcontractor to carry out the design, supply and installation of the residential windows
and shopfronts at the sub-contract sum of R20 750 937 excluding VAT. The sub-
contract sum was fixed  and not subject to contract price adjustment for the duration
of the contract. In terms of the letter of appointment, it was agreed that the contractual
relationship between Group Five Construction and Millenium would be governed by
the provisions of the JBCC Series 2000 Nominated/Selected Sub-contract Agreement,
edition 5.0, 2007.

1 The high court granted an order which included prayers 1 and 2 of the notice of motion. The order that
was sought in prayer 1 was ‘The First Respondent’s purported cacellation of guarantee 117929J is
revoked and set aside’ and in prayer 2 was ‘The Applicant’s call on guarantee 117929J is declared valid
and enforceable’. Group Five abandoned those prayers in the high court. Therefore, to the extent that
the high court order included prayers 1 and 2, it was made in error.

[7] As part of Millenium’s contractual obligations, it was required to provide and
maintain performance guarantees in favour of Group Five Construction. Millenium
obtained and provided a guarantee2 from Constantia. The relevant terms of the
guarantee are as follows:
‘

N/S CONSTRUCTION GUARANTEE NO. 117929J
for use with the
JBCC Nominated/Selected Sub-Contract Agreement
JBCC SERIES 2000
GUARANTOR DETAILS AND DEFINITIONS
Guarantor means
:
CONSTANTIA INSURANCE COMPANY LIMITED

(Reg. No. 1952/001514/06)
. . .
Contractor means
:
GROUP FIVE COASTAL (PTY) LTD ACTING AS AGENTS
FOR GROUP FIVE CONSTRUCTION (PTY) LTD

(Reg. No. 1974/003166/07)

Subcontractor means :
MILLENIUM ALUMINIUM & GLASS SERVICES CC

(Reg. No. 2006/140485/23)
. . .
Works means
:
PEARL SKY – SUPPLY AND INSTALLATION OF
RESIDENTIAL WINDOWS & SHOPFRONTS
. . .
Agreement means the JBCC Series 2000 Nominated/Selected Subcontract Agreement
. . .
3.1
Any reference in this Guarantee to the Agreement is made for the purpose of
convenience and shall not be construed as any intention whatsoever to create an accessory
obligation or any intention whatsoever to create a suretyship.’
Clause 3.1 of the guarantee makes it clear that the reference in the guarantee to the
agreement should not be construed as an intention to create ‘an accessory obligation’
or ‘to create a suretyship’.

[8] Clause 4 regulates the circumstances under which Constantia would become
obliged to honour the guarantee. It provides as follows:

2 Guarantee 117929J.

‘4.
Subject to the Guarantor’s maximum liability referred to in clause 1. above, the
Guarantor hereby undertakes to pay the Contractor the sum certified upon receipt of the
documents identified in clauses 4.1 to 4.3 below.
4.1
A copy of a first written demand issued by the Contractor to the Subcontractor stating
that payment of a sum certified by the Contractor in a payment advice has not been made in
terms of the Agreement and failing such payment within seven (7) calendar days, the
Contractor intends to call upon the Guarantor to make payment in terms of clause 4.2.
4.2
A first written demand issued by the Contractor to the Guarantor at the Guarantor’s
domicilium citandi et executandi with a copy to the Subcontractor stating that a period of seven
(7) calendar days has elapsed since the first written demand in terms of clause 4.1 and the
sum certified has still not been paid; therefore the Contractor calls up this N/S Construction
Guarantee and demands payment of the sum certified from the Guarantor.
4.3
A copy of the said payment advice which entitles the Contractor to receive payment in
terms of the Agreement of the sum certified in clause 4.’

Further, clause 12 provides as follows:
‘12.
This N/S Construction Guarantee, with the required demand notices in terms of
clauses 4. or 5., shall be regarded as a liquid document for the purpose of obtaining a court
order.’

[9] On 25 April 2018, Group Five Coastal issued a payment certificate to Millenium
confirming that it was indebted to it in the sum of R12 239 967.24 and called upon it
to pay the certified sum within twenty-one days. Millenium failed to pay. Pursuant to
the terms of clause 4.1 of the guarantee, on 18 May 2018, Group Five Coastal sent a
written demand to Millenium calling on it to make payment within seven days. The
email sent to Millenium on 25 April 2018 was attached to this written demand. The
payment certificate and reconciliation statement which accompanied the demand was
issued by Group Five Coastal under its new  trading name, Group Five KZN (Pty) Ltd
(Group Five KZN).

[10] When payment was not forthcoming pursuant to the written demand, Group
Five Coastal on behalf of Group Five Construction on 28 May 2018, and in terms of
clause 4.2 made a demand on Constantia. Constantia refused to pay and in
consequence, on 22 October 2018, Group Five Construction  approached the high

court seeking payment in terms of the guarantee. Constantia did not oppose the
application. It is not opposing this appeal and has filed a notice to abide.

[11] Millenium opposed the application on two grounds. It contended that no proper
demand was made by Group Five Construction on Constantia in terms of the
Construction Guarantee with the result that Millenium’s obligation to pay in terms of
the indemnity in favour of Constantia was not triggered. Millenium alleged that the
payment certificate was issued by Group Five KZN, an entity that was not a party to
the construction contract or the guarantee. It contended that the payment advice was
thus not a contractual document upon which Constantia could rely. It argued that
absent a payment advice entitling Group Five Construction to receive payment, it was
not entitled to call up the guarantee, as the guarantee’s jurisdictional requirements
were not met.

[12] The high court rejected Millenium’s argument. It held, among other things, that
Group Five KZN is the same company as Group Five Coastal, which it found was
supported by the registration number 2002/011542/07 and that it changed its name on
19 July 2010. It reasoned that Group Five Coastal, acting as agents for Group Five
Construction, is listed as a contractor in the guarantee and ‘any instruction payment
[advice] or other document issued by Group Five Coastal was done in its capacity as
agents for Group Five Construction (Pty) Ltd’. The high court accordingly concluded
that Group Five Construction had presented the demand to Constantia properly and
had met all the jurisdictional requirements set out in clause 4 of the guarantee.

[13] Millennium attacked the findings of the high court. Relying on OK Bazaars
(1929) Ltd v Standard Bank of South Africa Ltd3 and Lombard Insurance Co Ltd v
Landmark Holdings (Pty) Ltd and Others,4 Millenium submitted that the high court
erred in finding that the call on the guarantee was lawful and valid in the circumstances
where the payment advice and guarantee make no reference to Group Five KZN or
its registration number. It argued that those judgments require strict compliance with
demand guarantees. Millenium submitted that the absence of a payment certificate

3 OK Bazaars (1929) Ltd v Standard Bank of South Africa Ltd 2002 (3) SA 688 (SCA).
4 Lombard Insurance Co Ltd v Landmark Holdings (Pty) Ltd and Others [2009] ZASCA 71; [2009] 4 All
SA 322 (SCA); 2010 (2) SA 86 (SCA).

and reconciliation statement in the name of the contractor identified in the guarantee
ought to have been sufficient for the high court to find that the requirements of the
guarantee were not met.

[14] This Court, in First Rand Bank Ltd v Brera Investments CC,5 had this to say
regarding a guarantee:
‘The guarantee is thus of the same nature as a performance guarantee, performance bond or
letter of credit and consists of an undertaking to make payment of an amount of money on the
happening of a specified event (see Cloete JA in Dormell Properties 282 CC v Renasa
Insurance Co Ltd & others [2011] 1 All SA 557 (SCA), 2011 (1) SA 70 para 61). A guarantee
of this nature must be paid according to its terms and liability under it is not affected by the
relationship between other parties to the transactions that gave rise to its issue, particularly
not with the question whether the sub-contractor performed in terms of his contract with the
contractor (see Lombard Insurance Co Ltd v Landmark Holdings (Pty) Ltd & others 2010 (2)
SA 86 (SCA) paras 19 and 20; Loomcraft Fabrics CC v Nedbank Ltd 2010 (2) SA 86 (SCA)
para 38 and Minister of Transport and Public Works, Western Cape & another v Zanbuild
Construction (Pty) Ltd & another 2011 (5) SA 528 (SCA) paras 11-15). The words of the
guarantee under consideration make it clear that it is not a suretyship but an independent, and
not accessory, agreement that must be performed according to its terms (see also Compass
Insurance Co Ltd v Hospitality Hotel Developments (Pty) Ltd 2012 (2) SA 537 (SCA) para 15).’

[15] In Schoeman and Others v Lombard Insurance Co Ltd,6 a defence similar to
the one raised by Millenium  was raised. In rejecting it,  this Court held:
‘The argument proceeded from the basis that a demand guarantee was, like a letter of credit,
subject to strict and precise compliance in all respects. I am in agreement with Maier-Frawley
AJ in the court below that there is “little to gain from attempts to divine the essential distinction
between letters of credit, on the one hand, and demand guarantees, on the other”: the real
issue, which involves an interpretation of this particular demand guarantee, is “simply whether
there was compliance with the terms of the guarantee under circumstances where the
beneficiary’s demands for payment were made to the guarantor at its address, rather than at
the address of the beneficiary”.’

5 First Rand Bank Ltd v Brera Investments CC [2013] ZASCA 25; 2013 (5) SA 556 (SCA) para 2.
6 Schoeman and Others v Lombard Insurance Company Ltd [2019] ZASCA 66; 2019 (5) SA 557 (SCA)
para 22.

[16] Accordingly, Millenium’s defence should fail. As I see it, the issue is about the
interpretation of the demand guarantee and the question is whether there was
compliance with the terms of the guarantee in circumstances where an entity which
made a demand on guarantee is not the same as an entity that issued a payment
certificate and the reconciliation statement. Clause 4 of the guarantee stipulates the
requirements that should be met first in order to establish the liability of guarantor
under the guarantee. Clause 4.1 states that there must be a first written demand
issued by the Contractor to the Subcontractor stating that the payment of a sum
certified by the Contractor in a payment advice was not made. The payment advice
was issued by Group Five KZN (Group Five Coastal), which was in terms of the
guarantee the appointed Group Five Construction’s agents. As required by clauses
4.2 and 4.3, the payment advice which entitled Group Five Construction to receive
payment accompanied a demand on guarantee that was made on Constantia by
Group Five Coastal.

[17] Constantia was in no doubt about the identity of the Contractor, because that
was easily ascertainable from the guarantee itself which it had issued. The demands
for payment were made to Millenium and to Constantia on the basis of the payment
advice which identified the contract in respect of which it related, namely Pearls of
Umhlanga – Pearls Sky. Millenium is identified as a subcontractor in the payment
advice. The purpose of the guarantee was to enable Group Five Construction to obtain
payment from Constantia in the event of default by Millenium.

[18] During argument, Millenium  contended for the first time that the high court
erred in granting Group Five Construction relief on a copy of the guarantee which did
not meet the requirements of clause 12 of the Construction Guarantee. Clause 12 on
which Millenium relies provides that the ‘N/S Construction Guarantee, with the
required demand notices in terms of clause 4 or 5, shall be regarded as a liquid
document for the purpose of obtaining a court order’.

[19] Millenium’s contention has no merit. In the first instance this contention does
not form part of its grounds of appeal. It is raised for the first time on appeal. When
this difficulty was pointed out to him, counsel conceded that this was indeed the case,

but he argued that it was a legal point and that the court was not precluded from
considering it.

[20] I will assume in favour of Millenium that the point it raises is a legal one and
that the court is not precluded from considering it. Millenium is however opportunistic
to argue that the high court should not have granted relief to Group Five Construction
because the guarantee on which it made a demand was a copy and not the original.
Millenium was aware of the reason why Group Five Construction did not submit the
original guarantee to Constantia. The original guarantee that was reissued after the
expiry of the initial one was returned by Mr Rakesh Chunilall, Millenium’s director and
the deponent to Millenium’s answering affidavit, to Constantia for cancellation,
purportedly on the basis that the project was practically complete. Thus, Group Five
Construction never had in its possession the reissued original guarantee and could
not be blamed for having submitted a copy of the guarantee to Constantia.

[21] The high court was therefore correct to find that Group Five Construction had
properly presented the demand to Constantia and that it had met all the jurisdictional
requirements set out in clause 4 of the guarantee. The demand triggered Millenium
obligations to Constantia to indemnify it against Group Five Construction’s demand
and to pay to Constantia an amount equal to Group Five Construction’s demand.

[22] In the result, the appeal is dismissed with costs.

_________________
D H ZONDI
JUDGE OF APPEAL

APPEARANCES

For the appellants:

A Collingwood
Instructed by:

V Chetty Incorporated, Durban

Lovius Block Attorneys, Bloemfontein

For the first respondent:

A V Voormolen SC
Instructed by:

Cox Yeats Attorneys, Durban

McIntyre Van der Post, Bloemfontein

For the second respondent:
Abides the decision of this Court
Instructed by:

Ryan D Lewis Attorneys, Sandton

Pieter Skein Attorneys, Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL
From:
The Registrar, Supreme Court of Appeal
Date:
14 December 2022
Status:
Immediate
The following summary is for the benefit of the media in the reporting of this case and
does not form part of the judgments of the Supreme Court of Appeal
Millenium Aluminium and Glass Services CC and Others v Group Five Construction (Pty) Ltd
and Another (693/2021) [2022] ZASCA 180 (14 December 2022)
The Supreme Court of Appeal (SCA) dismissed an appeal with costs against the judgment of
the Gauteng Division of the High Court, Johannesburg (the high court), which ordered that the
second respondent, Constantia Insurance Company Limited (Constantia), pay an amount of
R1 490 364.09 plus interest and costs, to the first respondent, Group Five Construction (Pty)
Ltd (Group Five Construction), in terms of a construction guarantee. The high court had further
ordered the first appellant, Millenium Aluminium and Glass Services CC (Millenium), the
second appellant, Mr Mohanlall Bridgenun, and the third appellant, Fast Track Contracting
Africa (Pty) Ltd (Fast Track), to pay Constantia, on the basis of the indemnity and the deed of
suretyship signed by these parties in favour of Constantia.

The issue before the SCA was whether Group Five Construction, in making a demand on the
guarantee, complied with its requirements.

The facts of the matter were the following. During or about 26 May 2015, Group Five
Construction was appointed as a building contractor to carry out a project in Durban known as
Pearls of Umhlanga – Pearl Sky. Group Five Coastal (Pty) Ltd (Group Five Coastal), acting
as an agent of Group Five Construction, appointed Millenium as a subcontractor to carry out
the design, supply and installation of the residential windows and shopfronts at the sub-
contract sum of R20 750 937 excluding VAT. In terms of the letter of appointment, it was
agreed that the contractual relationship between Group Five Construction and Millenium
would be governed by the provisions of the JBCC Series 2000 Nominated/Selected Sub-
contract Agreement, edition 5.0, 2007. As part of Millenium’s contractual obligations, it was
required to provide and maintain performance guarantees in favour of Group Five
Construction. Millenium obtained and provided a guarantee from Constantia.

On 25 April 2018, Group Five Coastal issued a payment statement to Millenium confirming
that it was indebted to it in the sum of R12 239 967.24 and called upon it to pay the certified
sum within twenty-one days. Millenium failed to pay. Pursuant to the terms of clause 4.1 of the
guarantee, on 18 May 2018, Group Five Coastal sent a written demand to Millenium calling
on it to make payment within seven days. The email sent to Millenium on 25 April 2018 was
attached to this written demand. The payment certificate and reconciliation statement which
accompanied the demand was issued by Group Five Coastal under its previous trading name,
Group Five KZN (Pty) Ltd (Group Five KZN). When payment was not forthcoming pursuant to

the written demand, Group Five Coastal, on 28 May 2018, and in terms of clause 4.2, made a
demand on Constantia. Constantia refused to pay and in consequence, on 22 October 2018,
Group Five Coastal approached the high court seeking payment in terms of the guarantee.

The SCA found that the issue was about the interpretation of the demand guarantee, and the
question was whether there was compliance with the terms of the guarantee in circumstances
where an entity which made a demand on guarantee was not the same as an entity that issued
a payment certificate and the reconciliation statement.

In this regard, the SCA found that the payment advice was issued by Group Five KZN (Group
Five Coastal), which was in terms of the guarantee the appointed Group Five Construction’s
agents. As required by clauses 4.2 and 4.3, the payment advice which entitled Group Five
Construction to receive payment accompanied a demand on guarantee that was made on
Constantia by Group Five Coastal. The SCA found further that Constantia was in no doubt
about the identity of the Contractor, because that was easily ascertainable from the guarantee
itself, which it had issued. The demands for payment were made to Millenium and to
Constantia on the basis of the payment advice which identified the contract in respect of which
it related, namely Pearls of Umhlanga – Pearls Sky. Millenium was identified as a
subcontractor in the payment advice. The purpose of the guarantee was to enable Group Five
Construction to obtain payment from Constantia in the event of default by Millenium.

Accordingly, the SCA held that the high court was correct to find that Group Five Construction
had properly presented the demand to Constantia and that it had met all the jurisdictional
requirements set out in clause 4 of the guarantee. The demand triggered Millenium obligations
to Constantia to indemnify it against Group Five Construction’s demand and to pay to
Constantia an amount equal to Group Five Construction’s demand.

However, the SCA also found that in the high court Group Five Construction had abandoned
orders sought in prayers 1 and 2 of the notice of motion, and thus they should not have been
granted. Accordingly, the SCA held that the high court erroneously granted paragraphs 1 and
2 of the order, and they would not be confirmed in the appeal.

~~~~ends~~~~